text,label
"The Prague Stock Exchange's 1997 bull run, as expected, ground to a halt on Thursday as investors took profits, and analysts predicted little change in the bourse's fortunes over the short-term.
The PX50 index, which has shot up over 16 percent since trading began this year to a two-year high on Tuesday of 629.0, retreated 9.0 points, or 1.43 percent, at the bourse's daily price fixing to 618.6.
Leading the bourse lower were losses to its three biggest issues -- SPT Telecom, CEZ and Komercni Banka -- each of which fell more than 2.2 percent at the fix.
""It's a very thin market and when you see a little profit-taking like we are, the market kind of collapses,"" said Jan Sykora of Wood and Company. ""I am afraid that the trend will probably continue.""
Analysts said they expected Komercni to be hardest hit of the blue chips, after rising more than 600 crowns, or over 25 percent, since the start of the year.
They added that SPT, which has gained over 500 crowns, or more than 12 percent, in 1997, also looks expensive at current levels.
""The blue chips should cool off now and pull the market a bit lower, but they will not fall completely out of favour since they are the only shares on the market that are liquid enough to buy or sell when you want,"" said one local trader.
After a disappointing 1996 which saw the PSE underperform its rivals in Budapest and Warsaw, the Prague bourse has been revitalised this year as foreign investors begin to return to a market they once abandoned because it was too ""murky"".
But Czech authorities, seeking to improve the tarnished image of the country's capital markets, are taking steps to increase transparency and boost investor confidence.
The Central Securities Registry (SCP) began from February 4 to publish, with one day's delay, the price and other information about each stock trade it registers. The SCP is where some 60 percent of share transactions are executed.
The Prague Stock Exchange's governing chamber has also agreed to publish the prices of off-market trades conducted by its members from March 3.
And, as a first step towards setting up an independent securities commission, the Finance Ministry's markets supervision department has been transformed into a Bureau for the Control of Securities with an 11-strong advisory board, including market players.
The moves appear to be working with many investors finding it time to stop neglecting the market by adding Czech weight to their investment portfolios.
""We are seeing a lot of new money coming into the country and a lot of investors buying. I think this will continue,"" said Dan Gladis of Atlantik Financi Trhy.
""I don't think the correction will be that deep because of this and after a period of stabilisation we should see the market rise again,"" he added.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech annual average consumer inflation eased slightly in 1996, not as much as original government forecasts but still pleasing analysts.
The Czech Statistical Bureau said on Thursday that its key sliding average inflation figure, which uses 1993 as a base, closed the year at 8.8 percent, down from 9.1 percent for 1995.
Despite missing the government's original eight percent forecast, analysts said they were optimistic the central bank's tight monetary policies were hitting the mark, bringing inflation back under control after a strong first half surge.
""The final outcome on average inflation is a success because of its favourable development in the second half of the year,"" Martin Kupka, an economist at investment bank Patria Finance told Reuters.
""Of course in the longer run, we still need to see a more rapid decrease in inflation,"" he added.
The CSU said month-on-month inflation for December was 0.5 percent, unchanged from November, putting consumer prices 8.6 percent higher, year-on-year, steady with the previous month.
CSU chairman Edvard Outrata told Reuters that 1996 core inflation remained around five percent with government price dergeulations comprising the rest.
But he said 1997 inflation would rest on whether or not the government decides to take further, stronger steps on freeing up energy and housing prices.
The CSU said that price increases in foodstuffs, leisure and textile sectors accounted for some 80 percent of the monthly CPI rise.
The CSU said industrial output slowed in November to an increase of only 1.4 percent, year-on-year, from a 5.3 percent rise in output in October while industrial wages were 17.1 percent higher for the first 11 months of the year.
After the release of the figures, Industry and Trade Minister Vladimir Dlouhy said wage growth without productivity increases stemmed from a lack of industrial restructuring.
""We thought it (inflation) would be lower, and what I see, aboveall, is a fundamental wage problem,"" he said.
""The slower restructuring in some companies...is also a source of inflation, because it is generating of inflationary money, mainly through rising wages, without a respective effect (in output)"" Dlouhy added.
The government battled wage growth throughout the economy with wage controls, ended in 1995, which tied rising wages to correspnding increases in industrial output.
Pay rises in 1996, not matched by an increase in productivity, have accelerated an already large trade deficit, by sparking domestic demand which has in turn caused higher inflation and made exported goods less competitive.
Boris Gomez of ING Barings Capital Markets warned attempts to further force down inflation in 1997 may be thwarted if wage growth cannot be brought under control.
""The December CPI figure was positive since even though there a strong Christmas shopping spree by Czechs...But we still are concerned about the effects of wage growth since it will be tough for the government to cap it,"" he said.
Most analysts agreed that the central bank would continue its tight monetary policies at least for the first quarter of 1997, in order to keep a lid on inflationary pressures.
The Czech crown too is expected to remain stable in the short-term despite lingering problems in forcing inflation down. Traders said the crown was unaffected by December's CPI figures since they were in line with forecasts.
The crown was fixed by the cental bank on Thursday at 3.72 percent above its dollar/mark basket midpoint, slightly stronger than its +3.57 percent fixing the previous day.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech Republic has recorded its first budget deficit despite last ditch efforts by the government, which has staked its reputation on fiscal responsibility, to achieve a fourth consecutive surplus.
The Finance Ministry said on Friday that definitive data showed the budget ending 1996 with a deficit of 1.56 billion Czech crowns ($57.28 million).
Modest though the budget may be by Western standards, it was the first shortfall since the Czech Republic became a sovereign nation in 1993 following the demise of Czechoslovakia.
The centre-right government made a final effort to balance the books in December when the budget seemed to be heading for a deficit of more than five billion crowns.
It postponed some spending until 1997, and required early repayment of credit granted to a deposit insurance fund.
Finance Ministry spokeswoman Ludmila Nutilova said revenues for 1996 totalled 482.8 billion crowns, while expenditures were 484.3 billion.
Ministry officials have said the deficit might edge up even further since more bills might be delivered after the deadline.
The budget has been hampered continually by lower than expected tax revenue and delayed repayment of credits to Russia.
The original 1996 budget was balanced with spending and revenue at 497.6 billion crowns, but an autumn round of cuts knocked the forecast expenditure down to 491 billion crowns.
Parliamentary budget committee chairman Jozef Wagner, a member of the opposition Social Democrats, said the 1996 deficit was not troublesome. But he was concerned about the effects that government payment adjustments might have on the 1997 budget.
Part of the December stop-gap measures included postponing payment of 800 million crowns in state subsidies for housing loans which had been due to the partially-privatised banks Ceska Sporitelna a.s. and IPB a.s.
Prime Minister Vaclav Klaus, who calls balanced budgets the ""alpha and omega"" of his government, hailed initial reports of a 1996 budget surplus made by the finance ministry soon after the New Year, as a sign of continued fiscal responsibility.
Parliament approved a fifth straight balanced budget plan in December, with both expenditures and revenues forecast at 549.1 billion crowns in 1997.
But the 1997 budget was based on economic growth of 5.4 percent, and many independent analysts have forecast growth for this year at under five percent, after growth between 4.0 and 4.5 percent for the whole of 1996.
Many have voiced concern that slower than expected economic growth might force the government to consider major changes in the 1997 budget to keep a much larger deficit at bay.
-- Prague Newsroom, 42-2-2423-0003 ($1=27.27 Czech Crown)
",1
"The Prague Stock Exchange slipped on Monday from last week's year high on a round of profit taking, but analysts said sentiment remains bullish for the coming weeks.
After a strong rise last week, market heavyweights SPT Telecom, CEZ and Komercni Banka, which together account for almost half of the PX50 index, all fell sharply to drag the index down 0.28 percent to 598.0 points.
""The market has corrected a little bit, but there seems to be good support at this level,"" Marco Anderegg of Patria Finance told Reuters.
""Foreign investor interest remains solid and towards the end of last week broader issues were gaining interest so it looks solid for a lot of the market,"" he added.
SPT Telecom shares, which account for 20 percent of the PSE's market capitalisation, closed down 75 crowns at 3,700, while power company CEZ, which accounts for 14 percent, was off 28 crowns to 1,202 and commercial bank Komercni (11 percent) lost 25 crowns to 2,620.
""We saw some of the blue chips such as Komercni and SPT rebound in late deals, which could show that the market's weakness will be short-lived. I expect to see prices begin rising again soon,"" said one local trader.
The PSE has been climbing steadily since a slump in the fourth quarter 1996 took 25 percent off the index. Analysts blamed a lack of government commitment to strengthen minority shareholder rights and increase market transparency for the dive.
The index has gained 9.7 percent so far in 1997, and a new commitment from officials to clean up the market is slowly luring back many disgruntled foreign investors.
Bram Buring of Brno Broker Group said the correction could last for several weeks as lower than expected company results began to flood in, possibly taking as much as five percent from the index before it rebounds.
But he added: ""Foreign investors are definitely interested and kick starting the market...We expect that to continue but things have overheated a little at the moment.""
Analysts added that the recent strong performance of the crown should also boost the equities market since investors are shielded from wide currency fluctuations.
The crown has gained over three percent against its dollar/mark basket since the beginning of the year, and analysts have predicted it will hold its value or strengthen further in the coming weeks.
In late afternoon trading on Monday it was holding steady at 5.32 percent above its basket mid-point, up slightly from the central bank's daily fixing at 5.28 percent over the mid-point. The crown was fixed on Friday at 5.23 percent above the mid-point.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange, as expected, backed off last week's year-high on a round of profit taking on Monday, but analysts said market sentiment remains bullish for the coming weeks.
After a strong rise last week, market heavyweights SPT Telecom, CEZ and Komercni Banka, which combined account for over one-half of the PX50 index, all fell sharply to drag the index down 0.28 percent to 598.0.
""The market has corrected a little bit, but there seems to be good support at this level,"" Marco Anderegg of Patria Finance told Reuters.
""Foreign investor interest remains solid and towards the end of last week broader issues were gaining interest so it looks solid for a lot of the market,"" he added.
SPT Telecom shares, which account for 20 percent of the PSE's market capitalisation, closed down 75 crowns at 3,700, while CEZ, which accounts for 14 percent, was off 28 crowns to 1,202 and Komercni, with market cap of 11 percent, lost 25 crowns to 2,620.
""We saw some of the blue chips such as Komercni and SPT rebound in late deals, which could show that the market's weakness will be short-lived. I expect to see prices begin rising again soon,"" said one local trader.
The PSE has since a steady uptrend in 1997 after a fourth quarter 1996 slump took 25 percent off the index after a lack of commitment on the part of government officials to strengthen minority shareholder rights and increase market transparency undermined the market.
The index has gained 9.7 percent so far in 1997, and a new commitment from officials to clean up the market is slowly luring back many disgruntled foreign investors.
Bram Buring of Brno Broker Group said the correction could last for several weeks as lower-than-expected company results begin to flood in, possibly taking as much as five percent from the index before it rebounds.
But, he added: ""Foreign investors are definitely interested and kicking starting the market...and we expect that to continue on but things have overheated a little at the moment.""
Analysts added that the recent strong performance of the crown should also boost the equities market since investors are shielded from wide currency fluctuations.
The crown has gained over three percent against its dollar/mark basket since the beginning of the year, and analysts have predicted it will hold its value or strengthen further in the coming weeks.
In late afternoon trading on Monday it was holding steady at 5.32 percent above its basket mid-point, up slightly from the central bank's daily fixing at +5.28 percent. The crown was fixed on Friday at 5.23 percent.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech crown, battered down by central bank comments in recent days, rebounded on Friday bolstered by a wave of foreign currency selling though dealers cautioned the market remains very nervous.
In late afternoon trading, the crown was at 4.70 percent above its mark/dollar basket parity, up more than 50 basis points from the open but still some 80 basis points from Tuesday's record fixing at +5.51.
""Some bigger foreign players pushed the crown up, selling hard currency for crowns,"" said Jiri Ubry of ING Bank.
Added Martin Strauch of Citibank: ""There were some break-even sellers in the market and the crown has now rebounded to near its peak before the central bank's comments.""
One of post-Communist Europe's most stable currencies, the crown has consistently reached record highs in recent weeks, fuelled by demand brought about from a wave of more than 30 billion crowns in Eurobond issues since the start of the year.
But the market made an about face on Wednesday after the central bank said it has the option of intervening on the market when necessary.
The crown fell over 200 basis points against parity as many London traders bailed out over the next two days.
Petr Korous of bank CSOB said some profit taking was also pushing the crown higher, and that there still appeared to be a large number of traders with long positions of hard currency against Czech crowns that may now sell off.
""When there were these comments from the central bank, a couple of big players may have bought hard currency because they had never held a long position before and got nervous,"" Korous said.
""It looks like now they are slightly losing patience and getting rid of their positions at slightly higher than what we saw just three days ago,"" he added.
Dealers said they have seen few indications that the central bank was again on the verge of intervening, adding that they did not expect any action since the crown was not likely to rise above the five percent parity level.
The CNB has not intervened directly on the market since last February when it propped up the crown after widening the fixing corridor to plus/minus 7.5 percent against the basket from 0.5 percent.
Few dealers predicted the crown would rise much further since the market was so nervous, but noted the crown appeared to have good support at around 4.5 percent above parity.
""It's tough to predict the crown's direction right now becuase it's so volatile in relation to any comments about it,"" said Citibank's Strauch.
Korous also noted that the current stalemate in parliament where the ultra-right Republican and Communist opposition deputies have used stalling tactics to drag out debate for four days over a sensitive post-World War Two reconciliation agreement with Germany could create more instability.
""I feel that we won't go to the levels we saw recently because there is some nervousness over the political scene here,especially when the ruling politicians have no idea how to eliminate the obstructions they are causing,"" he said.
",1
"The Budapest Stock Exchange hit a record high on Friday, leading a foreign-buying induced bull run through eastern Europe this week.
Markets across the region rose, led by Budapest and Warsaw, which recorded a year-high. Romania and Slovenia also moved strongly higher, while Bratislava and Prague edged up with little upward momentum.
WARSAW
The Warsaw Stock Exchange set four consecutive 33-month highs in heavy turnover this week and post-fixing buying on Friday was seen pushing them to another highs next week. Analysts said a profit-taking correction was likely later.
The bourse has risen 25 percent since December 10.
""...I think next week investors will start taking profits after such a surge,"" said Maciej Matusiak, an analyst at PKO BP brokerage. Analysts expected 16,000 points to provide strong support for the WIG index next week.
Some analysts said the profit-taking correction was likely to be brief and the market could return to its uptrend later on, possibly on growing foreign interest in Polish stocks, which were luring new investors.
BUDAPEST
The Budapest bourse continued its bull run this week, setting record highs in the four of the week's five sessions.
Propelled primarily by oil and gas company MOL shares, the BUX index wiped out Thursday's half percent fall, finishing the week at a record high of 5,438.35 points, up 405.49 points or 8.05 percent.
Traders said they still believe the market must endure a correction after gains of around 30 percent so far this year, but they are convinced any new downturn will be limited.
""After substantial rises, a natural correction could come but no major fall should be expected,"" Laszlo Baranyai of Gog Securities said. ""We might move a little lower next week.""
With little fresh news on the macroeconomic side, preliminary annual corporate results, to be published by February 15 could give clues to the future direction, traders said.
PRAGUE
The Prague Stock Exchange edged up this week in moderate trading. Analysts said investors have been heartened by recent talk of strengthening market oversight but it may take several months before strong flows of money return.
The PX50 index closed on Friday at 557.5, up 0.1 points, on the week. ""We're still seeing a lot of interest in funds, but some of the other major shares are flat,"" said Alex Angell of Wood and Company.
Several funds have attracted heavy investor interest after declaring they would transform their closed-ended unit trusts into open-ended funds, making it possible that the shares would rise much closer to their net asset value.
The Finance Ministry is still creating guidelines for the funds, but at least one fund manager, Harvard, has said it plans to begin buying units from current holders in anticipation that it would receive approval to transform.
BRATISLAVA
The Bratislava Stock Exchange (BSE) edged higher in a quiet week, and brokers said the market was stabilising after a slow start to the year.
But they said the growth was still fragile due to generally weak investor interest. ""There is constant demand for only a few issues, which could stop virtually any time,"" said Peter Lachkovic of Slovenska Sporitelna.
The 12-share SAX index rose mainly on gains to oil refiner Slovnaft, closing at 187.42 points on Friday, up 1.85 from Monday's open at 185.57.
ZAGREB
Croatian stocks were firmer with blue chips posting new records on Friday, and seen as extending their strong gains next week.
Traders said drug firm Pliva and Zagrebacka Banka -- closing at 513 and 1,870 kuna respectively -- would continue to pull the market up. But investor interest was expected to turn increasingly to hotel issues and food stocks such as Podravka, which topped its issued 300-kuna price to end at 305 kuna.
BUCHAREST
The bulk of Bucharest prices jogged higher this week as bullish sentiment which has gripped the market since the start of the year pushed stocks higher for the sixth consecutive session, sending the two indices to year-highs.
Analysts said the bull run has been fuelled by higher 1996 inflation and a depreciating leu.
LJUBLJANA
Slovenian shares jumped 11.8 percent this week, pushed up by foreign buying. The 10-share SBI index soared 156.6 points to 1,479.4.
		  CLOSE    WEEK'S CHANGE  1996/97 HIGH 1996/97 LOW
		 JAN 23	NET    PCT
 CESI	  1,626.46   +31.59   +1.98    1,626.46     936.21
 WARSAW     16,628.1   +653.5    +4.1    16,628.1    7,725.2
 BUDAPEST    5,438.35  +405.49   +8.05    5,438.35   1,557.91
 PRAGUE	  557.5     +2.4    +0.43	582.0	425.9
 BRATISLAVA    187.42    +1.85   +0.99	226.34     150.4
 BUCHAREST
 VAB-Index     334.8    +36.1   +12.0	 334.8	262.0
 BIG-Index     334.32   +36.1   +12.1	 334.32     266.43
 LJUBLJANA   1,479.4   +156.6   +11.8     1,589.18     891.93
All-time high: CESI 1,604.54 (Jan 16/1997); BUX 5,438.35 (Jan 24/1997); WIG 20,760.3 (March 8/1994); PX50 1,002.4 (April 7/1994); SBI 1,598.02 (June 28/1994); SAX 402.3 (February/1994).
",1
"Britain's Bass plc has added to its already substantial holdings in the Czech Republic by increasing its stake in brewer Pivovar Radegast a.s..
Radegast Director Jan Sikora told Reuters on Tuesday that Bass had raised its stake in the company -- one of the ""Big Four"" Czech brewers -- by about 10 percent to 30.07 percent, but would not say from whom the stake had been purchased.
The Czech news agency CTK, quoting unnamed sources, reported earlier that Bass had bought 9.97 percent of Radegast from Raiffeisen Capital and Investment Praha.
But Raiffeisen and Bass officials would not confirm the report and Sikora would not disclose any further details.
The Prague-based bank Investicni a Postovni Banka a.s. is Radegast's largest shareholder with a 34 percent stake while a fund managed by the investment arm of Czech insurer Ceska Pojistovna a.s. holds 30 percent.
In July, Bass took an initial 20 percent stake in Radegast, augmenting Bass's Czech portfolio which includes a majority holding in Prague Breweries (Prazske Pivovary) and two smaller provincial beer makers.
Since buying shares in 1993 in Prague Breweries, makers of the flagship lager Staropramen, Bass has aggressively marketed Czech beer abroad and especially in Britain.
Radegast, which brews a popular lager with the same name and which was a major sponsor of the Czech national football team in the European championships last year, is based near the northeastern city of Ostrava.
In the first nine months of 1996, it posted a gross profit of 281.5 million crowns ($10.35 million), up from 230 million for the same period in 1995. ($1=27.19 Czech Crown)
",1
"The Czech trade deficit for December widened beyond forecasts, but analysts said the crown should hold steady on Monday despite some nervous moments immediately after the figures were released.
The Czech Statistical Bureau (CSU) said the trade deficit for December hit 18.0 billion crowns ($650 million), putting the full year 1996 shortfall at a record 160.33 billion crowns.
A Reuters survey of economists had forecast a December deficit of about 16 billion crowns, following a 14.3 billion crown trade gap for the same month in the previous year. The overall 1995 deficit was 95.7 billion crowns.
The CSU said in a statement that imports for 1996, spurred by constant growth of machinery imports, totalled 755.3 billion crowns, a year-on-year rise of 12.7 percent.
Meanwhile, the CSU said exports faltered, hampered in part by a downturn in western European economies and a strengthening crown, rising only 3.5 percent year-on-year to total 594.95 billion crowns in 1996.
The CSU added that machinery imports alone for the year hit 288.5 billion crowns, an increase of 16.1 percent over 1995.
Raw materials, unprocessed goods and chemical products imports also showed strong growth, totalling 327.9 billion crowns, a 10.2 percent year-on-year increase.
The same sector also dominated exports, reaching 280.6 billion crowns. But the CSU said exports in this area contracted by some 4.2 percent year-on-year.
Despite the poorer than expected result for December, analysts said the overall figure should have little impact on the crown after some nervous moments in early Monday trading.
""It's quite nervous, spreads are wide...(but) bad figures were expected and the figures are not seasonally adjusted,"" said Petr Tomek of Zivnostenska Banka.
The crown dipped to around 27.888 against the dollar and 17.057 against the mark implying +4.07 percent against its mark/dollar basket mid-point immediately after the figures were released, but it subsequently recovered to around +4.2 percent.
The crown was fixed on Friday by the central bank at 4.4 percent above the basket mid-point. ($1=27.84 Czech Crown)
",1
"The Prague Stock Exchange's 1997 bull run ground to a halt on Thursday as investors took profits, and analysts predicted prices would continue falling in the short-term.
The PX50 index, which has shot up over 16 percent  this year to a two-year high on Tuesday of 629.0, retreated 14.0 points, or 2.23 percent, to close at 613.6 on Thursday.
Leading the bourse lower were its three biggest issues -- SPT Telecom a.s., power utility CEZ a.s. and Komercni Banka a.s. -- each of which fell more than 2.2 percent at the fix.
The profit-taking came as little surprise.
""It's a very thin market and when you see a little profit-taking like we are, the market kind of collapses,"" said Jan Sykora of brokers Wood and Company. ""I am afraid that the trend will probably continue.""
Analysts said they expected Komercni to be hardest hit of the blue chips, after rising more than 600 crowns ($20), or over 25 percent, since the start of the year. Komercni closed down 4.9 percent on Thursday.
They added that SPT, which has gained over 500 crowns, or more than 12 percent, in 1997, also looks expensive at current levels.
""The blue chips should cool off now and pull the market a bit lower,"" said one local trader. ""But they will not fall completely out of favour since they are the only shares on the market that are liquid enough to buy or sell when you want.""
After a disappointing 1996 which saw the PSE underperform its rivals in Budapest and Warsaw, the Prague bourse has been revitalised this year as foreign investors begin to return to a market they once abandoned because it was too ""murky"".
Czech authorities, seeking to improve the tarnished image of the country's capital markets, are taking steps to increase transparency and boost investor confidence.
The Central Securities Registry (SCP) began from February 4 to publish, with one day's delay, the price and other information about each stock trade it registers. The SCP is where some 60 percent of share transactions are executed.
The Prague Stock Exchange's governing chamber has also agreed to publish the prices of off-market trades conducted by its members from March 3.
As a first step towards setting up an independent securities commission, the Finance Ministry's markets supervision department has been transformed into a Bureau for the Control of Securities with an 11-strong advisory board, including market players.
The moves appear to be working with many investors finding it time to stop neglecting the market by adding Czech weight to their investment portfolios.
""We are seeing a lot of new money coming into the country and a lot of investors buying. I think this will continue,"" said Dan Gladis of Atlantik Financi Trhy.
""I don't think the correction will be that deep because of this and after a period of stabilisation we should see the market rise again,"" he added.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange, battered and bruised in 1996, should recover next year as officials implement plans to shore up confidence in the sagging bourse, analysts said.
Many an analyst had predicted similar bullish fortunes for the bourse in 1996, only to be undermined by lack of commitment on the part of government officials to strengthen minority shareholder rights and increase market transparency.
But a new commitment from Prime Minister Vaclav Klaus and bourse officials to clean up the market has once again triggered an optimistic outlook for the coming year.
""Because most foreign investors have such a poor view of this market, they are under-invested here,"" said Jan Sykora of Wood and Company.
""Once you start to create better conditions, you should see it translate into a strong positive trend next year,"" Sykora said.
The bourse started 1996 with a bang, rising 36 percent over the first three quarters to put the PX50 index at a year-high of 582.0 in September.
But it went out with a whimper as investors stepped up criticism of the lack of transparency in Czech markets and particularly of the failure of the Central Securites Registry (SCP) to release detailed price information. Most off-market trades are registered at the SCP.
While smaller exchanges in Budapest and Warsaw built on earlier gains, the PX50 dropped by nearly a quarter to just above 500 points, a level where it continues to linger at.
After months of decline, government officials finally threw their support behind the creation of an independent supervisory body for the market, but it will take months to develop it.
Until then, the finance ministry is supposed to transfer its market oversight department into a separate office which will get more resources from the government to do its job.
Until recently, Prime Minister Klaus had showed little enthusiasm for a plan by PSE chairman Tomas Jezek to create a body modelled on the U.S. Securities and Exchange Commission (SEC).
Klaus has long believed market regulation, now conducted by the finance ministry, should be minimal.
But he capitulated in mid-December saying an independent body was needed, and then surprisingly announced that all prices of OTC deals registered at the Securities Centre would be published from February 1.
""An absolute priority for 1997 is the creation of an SEC-type body,"" Jezek told Reuters. ""It is a positive step in the development of our market. I hope it will show our commitment to making the market more transparent.""
Though it may not be a panacea to the market woes, analysts agree that the oversight commission would be the most important step the PSE could take in 1997.
""The lack of regulation was one of the main reasons for the bourse's fall and with improved market regulation, the stable political situation and good corporate earnings growth, the PSE should perform well,"" said Miroslav Nosal of Patria Finance.
He added that Patria expects the PX50 index to rise by about 20 percent next year to ""around the 600 level"".
But transparency is not the only issue that will effect the bourse in 1997, analysts say.
Once the toast of post-Communist Europe's transformation process, the Czech economy has, like the market itself, underperformed this year.
Growth in industrial production has slowed, compared with 1995, amid a broader slowing in GDP growth which stood at 4.0 percent year-on-year for the first three quarters, putting full year original estimates of 5.1 percent virtually out of reach.
In addition, the central bank's constant struggle to keep inflation in check has pushed interest rates up sharply, cooling private consumption and hurting the bottom lines at many Czech firms.
""Investment costs have been significantly higher for a lot of companies, and we are seeing this eat into the bottom lines of smaller firms that can't raise money abroad,"" said one foreign analyst.
But many blue chip firms such as telephone monopoly SPT Telecom have continued to invest heavily this year, and according to Anna Bosong, an Eastern European equities analysts at ING Barings, should show a marked improvement next year.
She said that ING has forecast a contraction in earnings per share (EPS) of 4.9 percent for the Czech market in 1996, but sees a turnaround in 1997 to an increase of 10.9 percent.
""Czech firms have been investing heavily in improving capacity and basic infrastructure and this should come back to help in the coming year, improving earnings performance as well,"" she said.
",1
"The Prague Stock Exchange, boosted by strong blue chip gains, hit a year-high on Thursday, but analysts said any strong bullish sentiment was tempered by a lack of liquidity and low foreign investor interest.
At the heart of the bourse's rise has been a resurgence of the market's two most-capitalised issues -- SPT Telecom and CEZ -- which account for over one-third of the PX50 index.
Both hits 52-week highs at the daily price fixing on Thursday to push the index 1.1 percent higher to 586.5, but analysts cautioned that the market was still plagued by a lack of liquidity, which was distorting price movements.
""Volumes are very thin, when you come to the market looking for a bigger parcel of shares it doesn't take much interest to move the prices. But the truth is, not a lot of foreign money is flowing in,"" said Jan Sykora of Wood and Company.
SPT Telecom shares, which account for 20 percent of the PSE's market capitalisation, jumped 85 crowns to 3,660, while CEZ, which account for 14 percent, rose 34 crowns to 1,193.
Dealers said they did not see any fundamental reasons for SPT shares to rise much further, but that CEZ could climb another two or three percent.
The PSE has recently showed signs of life after a fourth quarter 1996 slump took 25 percent off the index after a lack of commitment on the part of government officials to strengthen minority shareholder rights and increase market transparency undermined the market.
The index has gained a modest 8.7 percent so far in 1997, and a new commitment from Prime Minister Vaclav Klaus and bourse officials to clean up the market is slowly luring back many disgruntled foreign investors.
Though it may not be a panacea to the market woes, most analysts agree that the oversight commission could be the most important step the PSE could take in 1997.
""Foreign investors have definitely been heartened by official movement on cleaning up the market,"" said one foreign broker.
""The market will probably edge up slightly with such low liquidity. Hopefully when 1996 earnings begin to come in the bourse will have a new impetus,"" he added. Company results are expected to begin flowing in at the beginning of March.
Factors outside the bourse floor are also contributing to the market's rise.
Radek Vavra of Citicorp Securities in Prague said that given the current strength of the currency, the crown, and several other technical factors, the market should continue firming.
He added that he was seeing strong foreign investor interest, giving the rally potential ""to continue over the next week before it levels off in two to three weeks"".
The crown has gained some three percent against its dollar/mark basket since the beginning of the year, and analysts have predicted it will hold its value or strengthen further in the coming weeks.
At midday on Thursday it was trading at 5.16 percent above its basket mid-point, upslightly from the central bank's daily fixing at +5.12 percent.
",1
"Czech industrial output growth slowed in 1996, but analysts said they were more concerned with a sharp rise in wages that is dulling the country's competitive edge and exacerbating the impact of a widening trade deficit.
The Czech Statistical Bureau (CSU) said on Monday that industrial output, in real terms, rose 1.5 percent in December, putting output 6.8 percent higher for the whole of 1996, down from 9.2 percent for the previous year.
It also said nominal industrial wages grew 17.4 percent last year, after 17 percent growth in 1995.
While analysts said they were not surprised by the output figures due to a continued slowdown in the economies of the Czechs' biggest trading partners, they said wages were growing far too fast.
""I think the slowdown in output is not a big surprise given the problems with economies abroad and the stronger than expected crown,"" said Vladimir Kreidl, an economist at Patria Finance, who said he expects output to remain steady in 1997.
""The wage growth and trade deficits are by far the two most troublesome developments in the economy. Nominal wages should not be growing by more than 12 or 13 percent, which would be in line with productivity,"" he added.
The crown has strengthened by some three percentage points against its currency basket since the beginning of the year, pushed higher mainly by demand from some 30 billion crowns worth of crown-denominated Eurobond issues.
The strength of the crown has also negatively effected the trade deficit, stifling exports as the gap grew to a record of more than 160 billion crowns for 1996.
""The Czech Republic is a strong country but it's got to deal with some of the sypmtoms of success such as these very large capital inflows that have driven the currency too high,"" said Jonathan Garner, director of research at Robert Fleming.
Added Patria's Kreidl: ""Wage growth could effect inflation but foreign competition is so strong that we haven't seen that impact yet, and probably won't. But at the same time, Czech companies are losing competitiveness.""
The Czech crown is fixed daily at up to plus or minus 7.5 percent of the mid-point of a basket comprising 35 percent dollars and 65 percent marks.
On Monday, the central bank fixed the crown at 28.357 to the dollar and 16.737 to the mark putting the currency 4.65 percent above the mid-point.
Many investors have flocked to the crown given the Czech Republic's stable political and economic climate, and its high interest rates.
Most analysts agree, however, that the central bank can ill afford to cut rates at the present, given the necessity to keep inflation and the money supply in check.
""There has to be some break in the development of nominal wages in industry. It will be difficult to do. Monetary policy must remain tight...there is no place for lower rates,"" said one analyst.
In the middle of 1996 the CNB raised the discount rate to 10.5 percent from 9.5 percent and increased minimum reserve requirements on primary deposits to 11.5 percent from 8.5 percent. Interbank money market rates up to three months in the Republic hover around 12.5 percent.
Though rates eased some 60 basis points in January, the central bank ond government officials have both expressed reluctance officially to lower rates because of strong demand for money and investments.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange continued its strong performance in 1997, rising for the sixth consecutive session as investors turn their attention to shares of blue chip utility CEZ.
CEZ, which fell out of investor favour over the past few months, is finding fresh legs as investors, especially from abroad, consider CEZ significantly undervalued compared with other blue chip issues.
The Prague-based utility closed up 24 crowns at 1,070, to help boost the PX50 index 2.6 points, or 0.47 percent, to 560.4.
""CEZ has been very much lagging behind other blue chips...during the last three months but it's very liquid and it has a positive profit outlook for the next few years,"" said Radim Bajgar of ING Barings.
""For me at the moment, CEZ seems to be one of the stocks that has good potential...I think that CEZ might definitley go to 1,100...by the end of the week or maybe even today,"" he added.
Engineering concern Skoda also performed well, rising 32 crowns to 1,020, following comments by Director Lubomir Soudek that Skoda's gross profit should rise in 1996 to about one billion crowns after a 166 million gross loss the previous year.
He said the heavy machinery group, based in the western city of Plzen, which makes everything from trucks to tin cans and nuclear components, recorded a 40 billion crown turnover last year after 27 billion in 1995.
Skoda's core companies, which exclude joint ventures of the group, reached turnover of 28 billion crowns and exports worth 10 billion crowns.
Blue chips Komercni Banka and SPT Telecom did not fare as well, however, easing slightly on modest volumes.
In broader issues, brewer Pivovar Radegast continued to surge ahead following an announcement by Britain's Bass Plc last week that it had increased its stake in the firm to 33 percent, and was mulling the possibility of eventually merging it with Prazske Pivovary (PP).
Bass holds a majority stake in the Prague-based PP.
Overall, 190 issues gained ground on the day, while 132 fell and 55 held steady. Total volume was average at 941,202 shares on turnover of 1.144 billion crowns.
",1
"Czech blue chip shares closed mostly higher on the Prague Stock Exchange on Wednesday, helping spur the bourse to its third consecutive advancing session.
CEZ, Komercni Banka, Chemopetrol and Ceska Sporitelna all gained ground to boost the PX50 index 3.1 points, or 0.57 percent, to 550.4. Overall, 184 of the 375 issues trading gained ground, while 131 lost and 60 held steady.
CEZ, which crossed the 1,000 barrier on Tuesday for the first time since October, moved further ahead with a 13 crown rise to 1,024. Komercni Banka closed up 56 crowns at 2,356 and Chemopetrol gained 27 crowns to 1,200.
Tobacco company Tabak continued its uptrend with a 43 crown gain to 7,050.
Brewers Prazske Pivovary and Pivovar Radegast both record strong sessions, rising 55 crowns and 83 crowns respectively on the heels of British brewer Bass's announcement that it had increased its stake in Radegast by 10 percent to 33 percent.
Bass's Czech country manager, Mervyn Childs, said the British firm wants to further raise its stake in Radegast and set up a possible merger with Prazske in which it holds a majority stake.
""In the medium to longer term we would like to increase our stake (in Radegast) but we'll do that hopefully through discussion and agreement with other major shareholders,"" Childs told Reuters.
""In the medium to longer term yes we would like to consider a merger of Radegast and Prague Breweries group,"" he added.
Analysts said Bass's announcement could push both issues higher in the coming weeks, as investors look to cash in on Bass's hunger to expand in the sector.
""Bass appears to be serious about raising its stakes, especially in Radegast, and this could add as much as five percent to its share price,"" said one analyst.
",1
"The often-praised Czech economy may be starting to show cracks, as slower growth highlights concern over a widening trade gap and the pace of industrial restructuring, analysts said on Monday.
Over the years, economists have hailed Prime Minister Vaclav Klaus and his policies which have produced one of the lowest inflation rates in the region, good GDP growth and an unemployment rate of about three percent.
Many of those same analysts, however, are now saying that while the economy is not yet in serious trouble, much remains to be done, particularly in industrial restructuring.
The latest round of bad news came on Monday, when the Czech Statistical Bureau released figures showing the trade balance finished 1996 with a record deficit of 160.33 billion crowns, up from a 95.7 billion crown shortfall the previous year.
While most economists, after several mid-year revisions, had predicted the deficit, some are beginning to voice concerns over Czech industry's export competitiveness.
""As far as the export of our raw materials and semi-finished products are concerned, (the development) is very unfavourable over the last year,"" Kamil Janacek, chief economist at Komercni Banka said.
""We are undergrowing competition from other transforming economies. More and more we are unable to compete with some semi-finished products from Ukraine, for example, having in mind the average cost level with the Czech Republic,"" he added.
Since 1992 the economy has moved from recession to 4.8 percent consumption-driven real growth in 1995, as inflation fell from double digits to below nine percent.
Unemployment remains around three percent, and official statistics say nearly 70 percent of the economy is made by companies in, at least nominally, private hands.
Most Czechs are fully employed, buying truckloads of western goods, and living in state-controlled housing.
But real economic growth has begun to wane, with third quarter GDP slowing to 3.6 percent, year-on-year, from 4.0 percent growth in the second quarter.
And the spiralling trade deficit has put pressure on the current account, which showed a deficit of $3.1 billion crowns for the first three quarters according to the latest figures, while the capital account was in surplus by some $2.0 billion.
Most analysts agree that a flood of funds since the beginning of the year -- an estimated 25-30 billion crowns have entered the country in crown-denominated Eurobonds alone -- should keep the situation from deteriorating this year.
And, they add, foreign reserves are adequate.
But, said Janacek: ""The problem is if in the medium-term a continuing current account deficit of about eight percent of GDP is financeable or not.""
Boris Gomez of ING Barings said one problem is the lack of reliable data to chart whether the wave of imports, spurred mainly by raw material and machinery imports, will translate into economic restructuring.
He expects exports to become stronger this year as key west European markets wake up from their recent slumber, and other central European economies gain strength.
""The key period will be the end of this year when the trade deficit will have to have stabilised or there will be a lot of pressure,"" he said.
Added one London-based economist: ""You can get all of the imports you want, but then you have to do something with them.
""There are a lot of people who talk about how this (the imports) will help down the road, but the assumption here is huge -- that management actually knows what it is doing with all of its structural advantages,"" he said.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech Prime Minister Vaclav Klaus has thrown his support behind the creation of an independent market regulator, but analysts said on Monday it will take more than that to revive confidence in the embattled Prague bourse.
Klaus, speaking after a meeting on financial market regulation on Sunday, said the market was moving from its first phase, when it was created under the mass voucher privatisation programme of 1992-95, towards becoming a standard market.
He added that everybody understood that this process would happen gradually.
But analysts and traders said that while the moves are a welcome start, only concrete results will now be able to lure investors back to the market.
""It shows a trend that the government knows there is a problem and is working on solutions,"" said Jan Sykora, a broker at Wood and Company.
""But confidence in the Czech market has been decimated and there is a strong lack of confidence, especially among foreign investors...who now want to see real results, and not just proclamations.""
Added Radim Bajgar of ING Barings: ""It's positive, but we have heard these announcements before -- results will be the best medicine for the market.""
While markets in Poland and Budapest have posted solid gains this year, the Prague Stock Exchange has sputtered, especially since the beginning of September when a bear run triggered by a foreign investor selloff took some 20 percent out of the ailing bourse.
These investors, and some local players, have been highly critical of the lack of transparency on Czech markets, and particularly about the failure of the Securites Centre, where the overwhelming majority of trades are registered, to release detailed price information.
""A lot international clients shudder when you mention the Czech market. They just don't know what real prices here are because so little information comes from the Securities Centre, where so much of the trading occurs,"" said one fund manager.
Until now, Klaus has showed little enthusiasm for a plan by PSE Chairman Tomas Jezek to create a body modelled on the U.S. Securities and Exchange Commission (SEC).
Klaus has long believed market regulation, now conducted by a department in the Finance Ministry, should be minimal.
But he capitulated on Sunday, saying ""there is a dominant opinion that there is little transparency on the our capital market"".
""As a long-term solution we want to create an independent capital supervision (body). That requires legislation and an number of other things,"" said Klaus following the meeting.
He also announced that all prices of OTC deals registered at the central securities centre (SCP) would be published from February 1. He gave no indication of whether the names of buyers and sellers would also be released.
Jezek wants to create a Czech SEC by 1998 but Klaus gave no indication of when he thought it could be set up.
Klaus said that as a first step the market supervision department of the Finance Ministry would be transformed into a ""Securities Bureau"" also from February 1, 1997.
It would remain under the ministry but would have more staff and an 11-member advisory commission for the bureau would also be set up including market participants. The bureau would intensify control of investment funds and companies, he said.
Analysts said that once more regulation did find its way to the market, those same investors who have shunned Czech shares will probably return.
""Because most foreign investors have such a poor view of this market, they are under-invested here. So once you start to create better conditions, you should see it translate into a strong positive trend next year,"" Sykora said.
-- Prague Newsroom, 42-2-2423-0003
",1
"A wave of high-yielding Czech crown Eurobonds that has flooded the debt market since the beginning of the year has begun to ebb, as interest rates ease and arbitrage opportunities decline, analysts said on Tuesday.
""The Euro-madness is definitely over. We may see a couple more issues but those will be mainly by issuers who are active in the Czech Republic,"" Ota Otepka, chief bond trader at ING Barings, told Reuters.
Since the start of the year, issuers have rushed to take advantage of a stable, strong currency and interest rates above 11 percent, flooding the market with nearly 30 billion crowns ($1.1 billion) worth of Eurobonds in just over four weeks.
Dealers said that with interest rates so high, and a crown that is 65 percent linked to the mark but yielding seven to eight percentage points above it, the appetite for crown Eurobonds had appeared insatiable.
But interest rates have eased some 60-70 basis points since the start of the year and yields have dropped, spoiling the appetite for many investors.
""Maybe lead managers were overly optimistic about the potential placing capabilities and appetite of foreign investors,"" said Jan Pudil of WoodCommerz.
""Of course this hunger has been filled quite substantially. At this stage we are at the level where these investors are now satisfied,"" he added.
More than 20 bond issues were launched in crowns by a host of top-rated, retail-friendly names, lured by its reputation as one of Europe's most stable currencies.
German media group Bertelsmann AG launched on Tuesday a one billion crown one-year bond with a 10.5 percent coupon, but the rate of issuance has slowed.
Analysts estimate about 90 percent of the crown bonds were bought by retail investors from Germany, the Benelux countries and Switzerland.
Investors saw a great chance of picking up high-yield, low-risk paper but issuers and managers were presented with an easy arbitrage opportunity since rates were so high.
But Pudil said that issuers, once awash in opportunities for currency swaps, were now hard pressed to find advantageous rates allowing many to place bonds with coupons above 10 percent, a psychological minimum level.
""You have a three-year swap now at 10.25 percent and if you were to bring a cross-currency swapped three-year Eurobond, you get a coupon below 10 percent and you can't sell something to west European retail investors at below 10 percent,"" he said.
Another trader added: ""A lot of the issues were swap driven, but swap prices have fallen below the Eurobond yields and this has stopped the arbitrage possibility.""
""We also may see declining interest in buying Czech Eurobonds because the crown is so strong that its security is declining,"" he added.
The crown was fixed at a record high against its dollar/mark basket on Tuesday at 5.51 percent above the parity midpoint, some three percentage points higher than at the beginning of the year.
Traders added that two and three-year bonds are almost impossible to launch now, given the lack of arbitrage options. Most issuers had preferred short-dated bonds anyway due to an inverted yield curve which meant higher coupons are available at shorter maturities.
-- Prague Newsroom, 42-2-2423-0003 ($ = 27.92 Czech Crowns)
",1
"Czech annual average consumer inflation eased slightly in 1996, pleasing analysts even though the rate overshot original government forecasts.
The Czech Statistical Bureau said on Thursday that its key sliding average inflation figure closed the year at 8.8 percent, down from 9.1 percent in 1995.
Despite missing the government's original eight percent forecast, analysts said they were optimistic the central bank's tight monetary policies were bringing inflation back under control after a first half surge.
""The final outcome on average inflation is a success because of its favourable development in the second half of the year,"" said Martin Kupka, economist at investment bank Patria Finance.
""Of course in the longer run, we still need to see a more rapid decrease in inflation,"" he told Reuters.
The Bureau said month-on-month inflation for December was 0.5 percent, unchanged from November. This put consumer prices 8.6 percent higher than the same month last year, also unchanged from November.
Bureau chairman Edvard Outrata told Reuters that 1996 core inflation remained around five percent, with government price deregulation accounting for the rest.
But 1997 inflation would depend on whether the government took further, stronger steps on freeing up energy and housing prices, he said.
Price increases in the foodstuffs, leisure and textile sectors accounted for about 80 percent of the monthly CPI rise.
Other Bureau data showed that industrial output slowed in November to an increase of only 1.4 percent year-on-year, from a 5.3 percent rise in output in October, while industrial wages were 17.1 percent higher for the first 11 months of the year.
After the release of the figures, Industry and Trade Minister Vladimir Dlouhy said wage growth without productivity increases stemmed from a lack of industrial restructuring.
""We thought it (inflation) would be lower, and what I see, above all, is a fundamental wage problem,"" he said.
""The slower restructuring in some companies...is also a source of inflation, because it is generating inflationary money, mainly through rising wages, without a respective effect (in output),"" Dlouhy added.
The government battled wage growth throughout the economy with wage controls, ended in 1995, which tied rising wages to corresponding increases in industrial output.
Pay rises in 1996, not matched by an increase in productivity, have accelerated an already large trade deficit, by sparking domestic demand which has in turn caused higher inflation and made exported goods less competitive.
Boris Gomez of ING Barings Capital Markets said that attempts to force inflation down further in 1997 might be thwarted if wage growth could not be brought under control.
""The December CPI figure was positive even though there was a strong Christmas shopping spree by Czechs...But we still are concerned about the effects of wage growth since it will be tough for the government to cap it,"" he said.
Most analysts agreed that the central bank would continue its tight monetary policies at least for the first quarter of 1997 to keep a lid on inflationary pressures.
The Czech crown is expected to remain stable in the short-term despite the problems in cutting inflation. Traders said the crown was unaffected by December's CPI figures since they were in line with forecasts.
The central bank fixed the crown on Thursday at 3.72 percent above its dollar/mark basket midpoint, slightly stronger than its +3.57 percent fixing the previous day.
-- Prague Newsroom, 42-2-2423-0003
",1
"The United States on Tuesday upped the ante in the battle to supply NATO aspirants in central Europe with advanced fighter aircraft, by offering the Czechs free use of seven Navy Hornet aircraft for five years.
Representatives of the U.S. Navy, on behalf of the U.S. Government offered to lease the Czech Republic seven McDonnell Douglas F/A-18 ""Hornet"" fighter planes under a no-cost, five-year agreement, McDonnell Douglas said in a statement.
""The offer (to the Czech government) is for the no-cost, five-year leasing of six single-seat F/A-18A and one two-seat F/A-18B aircraft,"" said the statement, issued by the Prague representative of McDonnell Douglas Corp .
The offer included the supply, at cost, of replacement parts, pilot and ground personnel training programmes and support equipment.
Also competing for post-Cold War business in central Europe are U.S. Lockheed Martin , which makes F-16's primarily for the U.S. airforce, the Anglo-Swedish consortium of SAAB and British Aerospace , which makes the ""Gripen"", and France's Dassault Aviation makers of the ""Mirage"".
It was not yet clear whether the aircraft in the U.S. offer would be used or new, and the Prague spokesman for McDonnell Douglas was not immediately available for further comment.
""Supply and service costs will be the subject of further discussions,"" the statement said.
Czech pilots could begin training in the planes in six months, with delivery of the aircraft 18 months after the contract is signed, the statement said.
To strengthen its bid, McDonnell Douglas also said that it is preparing to locate production of components for the Hornet at Czech light jet maker Aero Vodochody a.s. ""regardless of whether new or leased aircraft are chosen to re-equip the Czech Air Force"".
Cooperation could also include Czech engineering concern Skoda a.s. , it added.
The Czech government, seeking to prepare for eventual membership in NATO, has been debating decisions on buying any aircraft as proposed cuts in defence spending have clouded the debate over the upgrading of the fleet.
The Czechs, along with Poland and Hungary, are seen as leading candidates for early NATO membership, when the western security alliance expands.
Czech defence officials have said they have the will but not the wallet to buy brand new western-made advanced fighters, but are keeping their options open as a battle over the long-term military budget goes on.
They have said they would need about 24 fighters to replace their ageing Soviet made MiG-21s to be more compatible with NATO, but at more than $20 million per fighter, new western planes are too pricey.
",1
"The Czech Republic may have reached the final of Euro '96 but the supporters are far from happy.
""It wasn't like this under Communism,"" they say.
Once a refrain uttered only by those longing for the old days of planned economies and a four-hour workday, the phrase has been heard with alarming regularity since the country's football union announced plans to cancel live broadcasts of matches on public television beginning in 1998.
Instead, the Czech-Moravian Football Association (CMFS), will begin broadcasting only pay-per-view first division matches in its 1998-99 season as part of a marketing agreement signed recently with the Dutch firm Nethold.
For once the supporters are not complaining about the quality of the football, simply the fact that they can no longer watch their national team in action.
""Soccer is not public entertainment anymore, but pure business,"" Jaroslav Vacek, of STES, the CMFS's marketing partner, was quoted as saying in the weekly newspaper, Prague Post.
Vacek did not discuss specific details of the deal but it is believed to be worth about 100 million crowns ($3.7 million) annually, which should translate into a rise in television revenues of about 80 percent for each of the first division's 16 clubs.
But that is not a view which goes down well with the millions of fans in a soccer-crazed country who crowd around televisions on Fridays to watch the cream of Czech soccer.
There is increasing bitterness that goal line now means bottom line, that Czech soccer now means cheque soccer.
""The game must evolve, but this is a little too much. Money and profit aren't the only things in the world,"" said Dusan Suchanek, an accountant in Prague.
""I think a lot of fans are tired of hearing about economics in their daily lives and now it's invaded soccer. This is one of the strongest ties we have as a nation and without television access many may leave the game behind.""
Since the fall of communism in 1989, Czech sport in general, and soccer in particular, has been hit by a mass exodus of athletes in search of greater wealth and opportunity in the West.
This summer, they stunned the soccer world when they reached the final of Euro '96 with a band of relatively unknown players and only lost to Germany in extra-time.
Soon, the likes of Patrik Berger, now with Liverpool, and Karel Poborsky, signed by Manchester United, were capitalising on a flood of money into English soccer brought about, in large part, by lucrative television contracts.
Indeed, with the creation of the Premier League four years ago and the decision by satellite broadcaster British Sky Broadcasting Plc to make football one of its core programming focuses, Britain's top 20 clubs are now among the richest in Europe.
With each club expected to receive 10 million pounds ($16.7 million) a year out of a total 670 million pound BSkyB package from next year onwards, television rights alone will help bankroll the further expansion of plush, all-seater stadiums and lucrative player signings.
""We hope that the pay-per-view system, which has been successfully implemented in western Europe, will develop in the Czech Republic too and that the local market with television rights will expand. Soccer should only profit from it,"" Vacek said.
But patience is running short after the German firm UFA, which holds the rights to televise Czech World Cup qualifying games, put a $1 million price tag on the team's away games, a move which meant that Czech viewers missed the first live broadcast of a key national team game in 21 years.
It ended in a 1-0 loss to Yugoslavia but, even so, the complaints from disappointed fans were heard up and down the country.
""This would never have happened under communism. Since we won the European Championship in 1976, I have not missed a game. This is progress?"" said Jan Krupka as he sat glumly on a bar stool watching an old soccer video.  REUTER
",1
"Britain's Bass plc has added to its already substantial holdings in the Czech Republic by increasing its stake in the northeastern brewer Pivovar Radegast a.s..
Radegast Director Jan Sikora told Reuters on Tuesday that Bass had raised its stake in the Czech firm by about 10 percent to 30.07 percent, but would not say from whom the stake was purchased.
The CTK news agency, quoting unnamed sources, reported earlier on Tuesday that Bass had purchased 9.97 percent of Radegast from Raiffeisen Capital and Investment Praha.
But Raiffeisen and Bass officials said they were unable to confirm the report. Sikora would not disclose any further details of the sale.
The Prague-based bank Investicni a Postovni Banka a.s. is Radegast's largest shareholder with a 34 percent stake while a fund managed by the investment arm of the Czech insurer Ceska Pojistovna, holds 30 percent.
In July, Bass took an initial 20 percent stake in Radegast, one of the country's four largest brewers, augmenting Bass's Czech portfolio which includes a majority stake in the Prague Breweries (Prazske Pivovary) and two smaller provincial brew houses.
Since acquiring shares in the Prague Breweries, makers of the flagship lager Staropramen, in 1993, Bass has moved agressively to market Czech beer, namely Staropramen, abroad and especially in Britain.
Bass has said it hopes to integrate their Czech operations with the other breweries which have merged with the Prague plant.
Radegast, which brews a popular lager with the same name and which was a major sponsor of the Czech national football team in the European championship, is based near the northeastern city of Ostrava.
Over the first nine months of 1996, the firm posted a gross profit of some 281.5 million crowns, up from 230 million for the same period in 1995.
",1
"East European markets moved
higher across the board this week, as key foreign investors
continued to push prices higher.
Bourses in Warsaw and Budapest led the way, both hitting
year-highs, while exchanges in Romania, and Ljubljana also made
strong moves higher.
Shares in Bratislava and Prague edged up slightly, but both
are seen drifting with little upward momentum.
WARSAW
The Warsaw Stock Exchange set three consecutive 33-month
highs in heavy turnover this week, with post-fixing buying on
Thursday seen pushing them to another high on Friday. But
analysts said a profit-taking correction was likely next week.
""After today's session I believe there might be more growth
tomorrow, but I think next week investors will start taking
profits after such a surge,"" said Maciej Matusiak, an analyst
at PKO BP brokerage.
The bourse has risen 23 percent since December 10.
Analysts expected 16,000 points to privide strong support
for the WIG index next week.
Some said the profit-taking correction was likely to be
brief and the market could return to its uptrend later on,
possibly on growing foreign interest in Polish stocks, which
were luring new investors.
BUDAPEST
The Budapest bourse continued its bull run this week,
setting successive record highs in the first three sessions,
though profit-taking on Thursday trimmed earlier gains.
""The fact that the market is coming a little lower is to be
regarded as a normal reaction to serious price rises,"" one
trader said.
On Thursday the BUX index -- which has risen some 30
percent this year -- closed at 5,370.15 points, up 322.55
points on the week.
The trader said some foreign investors may reduce their
presence on the Hungarian market but there were no signs of
them leaving it completely.
""Key foreign investors are reducing their exposure on the
market but they aren't turning away from it,"" he said.
PRAGUE
The Prague Stock Exchange edged up this week in moderate
trading, but analysts said that while investors have been
heartened by recent talk of strengthening market oversight, it
may take several months before strong flows of money return.
The PX50 index closed on Thursday at 559.8, up 2.4 points,
or 0.43 percent, on the week.
""We're still seeing a lot of interest in funds, but some of
the other major shares are flat,"" said Alex Angell of Wood and
Company.
Several funds have attracted heavy investor interest after
declaring they would transform their closed-ended unit trusts
into open-ended funds, bringing about the possibility that the
shares would rise much closer to their net asset value.
The finance ministry is still creating guidelines for the
funds to open, but at least one fund manager, Harvard, has said
it plans to begin buying units from current holders in
anticipation that it would receive approval to transform.
BRATISLAVA
The Bratislava Stock Exchange (BSE) edged higher on a week
of quiet, and brokers said the market was stabilising after an
slow start to the year.
They cautioned, however, the growth was still fragile due
to generally weak investor interest. ""We see there is constant
demand for only a few issues, which could stop virtually
anytime,"" Peter Lachkovic of Slovenska Sporitelna said.
The 12-share SAX index rose mainly on gains to oil refiner
Slovnaft, closing 189.74 points on Thursday, up 4.17 from
Monday's open at 185.57.
BUCHAREST
The bulk of Bucharest prices jogged higher this week as
bullish sentiment which has gripped the market since the start
of the year pushed prices higher for the sixth consecutive
session on Thursday sending the two indices to year-highs.
Analysts said the bull run has been fuelled by higher 1996
inflation and a depreciating leu.
LJUBLJANA
Slovenian shares jumped seven percent this week, pushed up
by foreign buying. The ten-share SBI index jumped 92.6 points
to 1,415.4.
Trader Kovinotehna was the top gainer, rising 22.2 percent,
while ordinary shares of Hipotekarna banka Brezice were the
leading decliners, falling 8.4 percent.
		  CLOSE    WEEK'S CHANGE  1996/97 HIGH 1996/97 LOW
		 JAN 23	NET    PCT
 CESI	  1,613.08   +18.21   +1.14    1,613.08     936.21
 WARSAW     15,846.7   +427.8    +2.8    15,846.7    7,725.2
 BUDAPEST    5,370.15  +322.55		5,398.52   1,557.91
 PRAGUE	  559.8     +2.4    +0.43	582.0	425.9
 BRATISLAVA    189.74    +4.17   +2.25	226.34     150.4
 BUCHAREST
 VAB-Index     334.8    +36.1   +12.0	 334.8	262.0
 BIG-Index     334.32   +36.1   +12.1	 334.32     266.43
 LJUBLJANA   1,415.4    +92.6    +7.0     1,589.18     891.93
All-time high: CESI 1,604.54 (Jan 16/1997); BUX 5,398.52
(Jan 22/1997); WIG 20,760.3 (March 8/1994); PX50 1,002.4 (April
7/1994); SBI 1,598.02 (June 28/1994); SAX 402.3
(February/1994).
",1
"The Czech crown fell sharply on Thursday following central bank comments that it was not satisfied with the currency's recent rise, but dealers said the crown remains attractive and should stabilise by week's end.
One of post-Communist Europe's most stable currencies, the crown has consistently reached record highs in recent weeks, fuelled by demand brought about from a wave of more than 30 billion crowns in Eurobond issues since the start of the year.
But while the crown was still well above its mark/dollar basket trading at 3.48 percent above parity, it was down over 60 basis points from its opening and some 200 points lower from Tuesday's record fixing at +5.51.
Analysts said, however, that the country's high interest rate differential and the country's overall economic stability should limit any further drop.
""For this week, we may see the crown slightly weaker, but the crown is still very attractive and I do not see space for much furthening weaking of it,"" said Jiri Becvar of BNP-Dresdner in Prague.
The central bank's repo rate remains solidly at 12.4 percent, while its discount rate has been at 10.5 percent since it was raised a full percentage point last June.
The fall comes on the heels of Wednesday's comment by the central bank it has the option of intervening on the market when necessary.
""Intervention (on the market) is our normal instrument, and we can use it whenever we are not satisfied (with the crown's exchange rate),"" CNB spokesman Martin Svehla told Reuters.
""The other question is whether we are satisfied? You heard (CNB) governor (Josef Tosovsky) saying there is 'no reason' for the crown to be like this. It signals that the central bank is not fully satisfied with this development,"" he added.
He declined to elaborate, and said these were just ""general"" comments.
Breta Tichanek of ING Barings said he expected the crown to trade within the range plus four to plus five percent from the basket midpoint throughout the day.
""I think it's partially because of yesterday's comment (by the CNB) and the closing of some postions and speculative flows,"" he said.
The depth of the fall also took the market by surprise initially, with many dealers saying they had been prepared for an early attack on +4.25 percent, but expected London dealers to take profits and then stabilise.
""In fact there were new buyers after some brief consolidation and the index dropped to +3.45,"" said Petr Korous of CSOB.
""There are a lot of long positions and they have to be covered so the market may squeeze them. If there is nothing special I am very sceptical that we can see the crown index weaken much more than to around +3.00,"" he added.
Some crown dealers have said the central bank had been putting out feelers in the market recently, though most did not expect to see any intervention, especially after the weakening on Thursday.
The CNB has not intervened since last February when it propped up the crown after widening the fixing corridor to plus/minus 7.5 percent against the basket from 0.5 percent.
",1
"Czech consumer inflation continued its gradual downtrend in January, but analysts said they do not expect a loosening of the central bank's tight monetary policy in the short-term.
The Czech Statistical Bureau (CSU) on Monday said January inflation, month-on-month, was 1.2 percent, putting the year-on-year rate at 7.4 percent, down from 8.6 percent the previous month.
The key sliding average inflation figure, which uses 1993 as a base, edged down to 8.7 percent from 8.8 percent in December, and was down from 9.1 percent in January 1996.
""The January number is very good, about one percentage point lower than a year ago,"" Kamil Janacek, cheif economist at Komercni Banka told Reuters.
""If prices and some deregulations develop accoridng to plan in the next months, and thanks to producer prices being under five percent...there is a high probability that 1997 inflation could end at around, or just under, eight percent,"" he added.
The CSU said in a report that the biggest influences on the January inflation rate were food, drinks and tobacco products which rose 1.3 percent in the month, transportation which rose 3.6 percent and housing which rose by 1.3 percent.
It added that of the 1.2 percent month-on-month rate, seasonal influences accounted for 0.23 percent, putting the seasonally-adjusted monthly rate at 0.97 percent.
CSU figures show price deregulation influenced the seasonally-adjusted rate by 0.63 percent, while seasonally-adjusted core inflation was 0.34 percent.
Despite the downtrend, most analysts agreed that there seems little chance the Czech National Bank (CNB), the central bank, will ease its tight monetary policy in the near future despite the sustained downtrend in CPI.
Curbing inflation has been at the heart of almost all of the CNB's policies, and both CNB and government officials have said they expect rates to remain high, at least over the near term.
""The month-on-month rate appears favourable,"" Boris Gomez, an analyst at ING Barings, said.
""While there may be some room for it, I doubt the central bank will lower rates immediately -- maybe in the second quarter at the earliest,"" he added.
Last summer the CNB raised its key discount rate one percentage point to 10.5 percent, and hiked minimum reserve requirements to 11.5 percent from 8.5 percent of deposits to squeeze off surging domestic demand.
The moves have appeared to signficantly slow growth in the money supply, which is now at the lower end of the central bank's 13 to 17 percent growth target.
But central bank officials have warned that wage growth -- which was up 21.2 percent in nominal terms in December according to preliminary figures -- and its influence on inflation is a growing concern.
""The government has to somehow limit wage growth. It's just too high and this must be addressed before the central bank will move rates,"" said one London-based economist.
Foreign exchange traders said the crown was unaffected by January's CPI figures since they were in line with forecasts.
The crown was fixed by the central bank on Monday at 5.28 percent above its dollar/mark basket midpoint, slightly stronger than its +5.14 percent fixing from last Friday.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech consumer inflation continued its gradual downtrend in January, but analysts said they do not expect a loosening of the central bank's tight monetary policy in the short-term.
The Czech Statistical Bureau (CSU) on Monday said January inflation, month-on-month, was 1.2 percent, putting the year-on-year rate at 7.4 percent, down from 8.6 percent the previous month.
The key sliding average inflation figure, which uses 1993 as a base, edged down to 8.7 percent from 8.8 percent in December, and was down from 9.1 percent in January 1996.
""The January number is very good, about one percentage point lower than a year ago,"" Kamil Janacek, cheif economist at Komercni Banka told Reuters.
""If prices and some deregulations develop according to plan in the next months, and thanks to producer prices being under five percent...there is a high probability that 1997 inflation could end at around, or just under, eight percent,"" he added.
The CSU said in a report that the biggest influences on the January inflation rate were food, drinks and tobacco products which rose 1.3 percent in the month, transportation which rose 3.6 percent and housing which rose by 1.3 percent.
It added that of the 1.2 percent month-on-month rate, seasonal influences accounted for 0.23 percent, putting the seasonally-adjusted monthly rate at 0.97 percent.
CSU figures show price deregulation influenced the seasonally-adjusted rate by 0.63 percent, while seasonally-adjusted core inflation was 0.34 percent.
Despite the downtrend, most analysts agreed that there seems little chance the Czech National Bank (CNB), the central bank, will ease its tight monetary policy in the near future despite the sustained downtrend in CPI.
Curbing inflation has been at the heart of almost all of the CNB's policies, and both CNB and government officials have said they expect rates to remain high, at least over the near term.
""The month-on-month rate appears favourable,"" Boris Gomez, an analyst at ING Barings, said.
""While there may be some room for it, I doubt the central bank will lower rates immediately -- maybe in the second quarter at the earliest,"" he added.
Last summer the CNB raised its key discount rate one percentage point to 10.5 percent, and hiked minimum reserve requirements to 11.5 percent from 8.5 percent of deposits to squeeze off surging domestic demand.
The moves have appeared to signficantly slow growth in the money supply, which is now at the lower end of the central bank's 13 to 17 percent growth target.
But central bank officials have warned that wage growth -- which was up 21.2 percent in nominal terms in December according to preliminary figures -- and its influence on inflation is a growing concern.
""The government has to somehow limit wage growth. It's just too high and this must be addressed before the central bank will move rates,"" said one London-based economist.
Foreign exchange traders said the crown was unaffected by January's CPI figures since they were in line with forecasts.
The crown was fixed by the central bank on Monday at 5.28 percent above its dollar/mark basket midpoint, slightly stronger than its +5.14 percent fixing from last Friday.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange slipped on Monday from last week's year high on a round of profit taking, but analysts said sentiment remains bullish for the coming weeks.
After a strong rise last week, market heavyweights SPT Telecom, CEZ and Komercni Banka, which together account for almost half of the PX50 index, all fell to drag the index down 0.77 percent to 595.1 points.
""The market has corrected a little bit, but there seems to be good support at this level,"" Marco Anderegg of Patria Finance told Reuters.
""Foreign investor interest remains solid and towards the end of last week broader issues were gaining interest so it looks solid for a lot of the market,"" he added.
SPT Telecom shares, which account for 20 percent of the PSE's market capitalisation, closed down 75 crowns at 3,700, while power company CEZ, which accounts for 14 percent, was off 28 crowns to 1,202 and commercial bank Komercni (11 percent) lost 25 crowns to 2,620.
""We saw some of the blue chips such as Komercni and SPT rebound in late deals, which could show that the market's weakness will be short-lived. I expect to see prices begin rising again soon,"" said one local trader.
The PSE has been climbing steadily since a slump in the fourth quarter 1996 took 25 percent off the index. Analysts blamed a lack of government commitment to strengthen minority shareholder rights and increase market transparency for the dive.
The index has gained nearly 10 percent so far in 1997, and a new commitment from officials to clean up the market is slowly luring back many disgruntled foreign investors.
Bram Buring of Brno Broker Group said the correction could last for several weeks as lower than expected company results began to flood in, possibly taking as much as five percent from the index before it rebounds.
But he added: ""Foreign investors are definitely interested and kick starting the market...We expect that to continue but things have overheated a little at the moment.""
Analysts added that the recent strong performance of the crown should also boost the equities market since investors are shielded from wide currency fluctuations.
The crown has gained over three percent against its dollar/mark basket since the beginning of the year, and analysts have predicted it will hold its value or strengthen further in the coming weeks.
In late afternoon trading on Monday it was holding steady at 5.32 percent above its basket mid-point, up slightly from the central bank's daily fixing at 5.28 percent over the mid-point. The crown was fixed on Friday at 5.23 percent above the mid-point.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech December trade deficit should rise to 16 billion crowns ($575 million) from 14.3 billion in the last month of 1995, ending the worst Czech trading year on another sour note, a Reuters poll of economists showed on Friday.
Czech 1996 trade figures are to be released by the Czech Statistical Bureau (CSU) at 9 a.m. (0800 GMT) on Monday.
Most economists surveyed said they expected steady growth in the deficit but few surprises. ""I expect that the figures will be in line with the development throughout 1996,"" Martin Kupka, an economist at Patria Finance, told Reuters.
Whatever the December deficit, the full-year trade gap is guaranteed to be a record given that the January-November figure reached 140.1 billion crowns, already far beyond 1995's record total shortfall of 95.7 billion crowns.
Most analysts agreed a 15-17 billion crown December gap, after a 16.6 billion crown shortfall in November, would match prevailing trends and the consensus forecast of a 1996 deficit of 155-165 billion crowns.
The foreign exchange and money markets are expected to show little reaction to the figures -- the worsening Czech trade balance has been long built into crown rates -- as long as the results do not vary greatly from the estimates.
Analysts say the trade balance has been hurt by a downturn in western European economies. Effects of a recovery in demand have yet to help Czech exports.
CSU figures consistently show the rate of import growth exceeding export growth, although the gap has narrowed in recent months.
Czech exporters told the CSU in a survey released earlier this month that, among other suggestions, they would want a 20 to 25 percent devalution of the crown against a mark/dollar basket to help boost lagging exports in 1997.
The exporters said that if there were no devaluation of the strong Czech currency, then they expected the government to adopt administrative measures such as higher tariffs and surcharges to regulate imports.
The government and central bank, however, have repeatedly ruled out a devaluation of the crown to boost exports.
Analysts point to mid-1997 as a crucial time in which the import wave -- which is aimed at modernising industries -- must show results in productivity growth and competitiveness.
""There are concerns of the effect this has on the current account deficit,"" said one London-based economist.
""There is a question of the sustainability of the current account deficit. If you have a significantly higher (trade) figure than 15 or 16 billion crowns for December, I think people will get a little bit edgy,"" he added.
The current account ran a deficit of $3.1 billion for the first three quarters of the year, in the latest available figures, spurred by the spiralling trade deficit which stood at the time at $4.1 billion.
Economists have said the current account deficit for 1996, forecast at roughly seven percent of gross domestic product, could be financed in the short to medium term through the capital account surplus and strong central bank reserves.
However, the deficit might start putting pressure on reserves in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003 ($1=27.84 Czech Crown)
",1
"Czech consumer inflation continued its gradual downtrend in November, but analysts said they do not expect a loosening of the central bank's tight monetary policy in the short-term.
The Czech Statistical Bureau (CSU) on Monday said November inflation, month-on-month, was 0.5 percent, the same as in October, putting the year-on-year rate at 8.6 percent, down from 8.7 percent the previous month.
The key sliding average inflation figure, which uses 1993 as a base, edged up slightly to 8.8 percent from 8.7 percent in October, but is down from 9.3 percent in November 1995.
""The year-on-year figures basically look good. There is a very moderate but still further decrease and it appears the year's average inflation will land just below nine percent,"" Martin Kupka, an economist at Patria Finance told Reuters.
The CSU said in a report that the biggest influence on the November inflation rate was food, drinks and tobacco products which rose 0.4 percent in the month, along withy clothing, up 0.9 percent, and transportation, which rose 1.3 percent.
Together these three categories accounted for 80 percent of the inflation figure, it said.
Most analysts agreed that there seems little chance the Czech National Bank (CNB), the central bank, will ease its tight monetary policy in the near future despite the sustained downtrend in CPI.
Curbing inflation has been at the heart of almost all of the CNB's policies. This summer the CNB raised its key discount rate one percentage point to 10.5 percent, and hiked minimum reserve requirements to 11.5 percent from 8.5 percent of deposits to squeeze off surging domestic demand.
The moves have appeared to signficantly slow growth in the money supply, which is now at the lower end of the central bank's 13 to 17 percent growth target.
""These (inflation) figures may give the CNB some room to move rates, but I doubt they will do it immediately. The CNB seems to like to set its policies in January,"" said Boris Gomez, an analyst at ING Barings.
""The key question remains how the government will limit wage growth, until this is answered, I doubt the central bank will make any major policy changes toward inflation.""
Added another local economist: ""I think this slow downtrend is sustainable since the central bank's measures may be seen even more in the coming months, though it must be careful to ensure GDP growth which has been lagging lately.""
Czech GDP grew 4.0 percent year-on-year in the second quarter of this year according to preliminary data, slowing from a 4.3 percent growth in the first quarter.
The CSU originally forecast 5.1 percent growth this year after 4.8 percent last year, but lowered the estimate to 4.8 percent in November due in large part to the central bank measures.
Another signal inflation will continue to ease, and in turn push rates down, is the favourable development of industrial producer prices, which stood 4.1 percent higher, year-on-year, in October, down from 7.8 percent in October 1995.
""Of course the central bank may ease rates, but I would be cautious. I would expect it to wait until maybe halfway through next year,"" said Patria's Kupka.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech Republic recorded its first budget deficit, despite last ditch efforts by its fiscally-hawkish government to achieve its fourth consecutive surplus.
The government a final effort in December when the budget looked headed for a more than five billion crown deficit, by freezing some outlays until 1997, and requiring early repayment on credit granted to a deposit insurance fund.
But the measures were not enough and the Finance Ministry announced on Friday that definitive results show the budget ending 1996 with a deficit of 1.562 billion crowns.
Ministry spokeswoman Ludmila Nutilova said revenues for the year totalled 482.8 billion crowns, while expenditures were 484.3 billion.
The Czechs have had three year-end budget surpluses since Czechoslovakia split in 1993.
Fiannce ministry officials have said that the deficit may edge up even further since more bills may be delivered after the deadline.
The budget has been hampered continually by lower-than-expected tax revenue and delayed repayment on credits to Russia.
The 1996 budget was originally approved as a balanced budget totalling 497.6 billion crowns, but an autumn round of spending cuts knocked the forecast expenditure down to 491 billion crowns.
Parliamentary budget committee chairman Jozef Wagner, a member of the largest opposition party, the Social Democrats, said the 1996 deficit was not troublesome, but he was concerned with the effects government payment adjustments may have on the 1997 budget.
Part of the December stop-gap measures included postponing payment of 800 million crowns in state subsidies for housing loans which was due to the partially-privatised banks Ceska Sporitelna a.s. and IPB a.s.
Prime Minister Vaclav Klaus, who calls balanced budgets the ""alpha and omega"" of his government, hailed initial reports of a 1996 budget surplus, made by the finance ministry soon after the new year, as a sign of the country's continued fiscal responsibility.
Parliament approved a fifth straight balanced budget plan in December, with both expenditures and revenues forecast at 549.1 billion crowns in 1997.
But the 1997 budget was based on economic growth of 5.4 percent, and many independent analysts have forecast growth for this year at under five percent, after growth between 4.0 and 4.5 percent for the whole of 1996.
Many have voiced concern that slower than expected economic growth might force the government to consider major changes in the 1997 budget to keep a much larger deficit at bay.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech Statistical Bureau (CSU) issued forecasts for 1997 on Monday predicting a slight economic upturn, but analysts issued warnings about the rapidly growing trade and current account deficits.
After a sluggish 1996, the CSU said it expected real gross domestic product (GDP) growth for 1997 of 4.0-5.0 percent following an estimated 4.1 percent in 1996. Average annual inflation should ease to 7.5-8.0 percent from 8.8 percent, it forecast.
The CSU added in its wide range of forecasts that the current account deficit, spurred by a spiralling trade gap, should grow to 137-145 billion crowns from an estimated 110.6 billion crown ($4 billion) shortfall in 1996.
Analysts said the figures were more or less in line with expectations, but said that the widening current account and trade deficits -- both seen growing to record levels in 1997 -- could undermine the economy.
""I think they are credible forecasts, but not very encouraging,"" said David Lubin, an economist at HSBC Midland.
""It's okay for a country to run a current account deficit of nine percent of GDP but only if you believe in the future the economy will generate trade surpluses big enough to repay the debt that's being accumulated to finance the deficits,"" he told Reuters.
According to the CSU estimates, the current account shortfall should be 8.6-9.1 percent of GDP in 1997. It forecast the trade deficit would widen to 202-212 billion crowns from a deficit of 160.3 billion last year.
At the heart of the trade gap was a 12.7 percent rise in imports in 1996, due largely to firms investing in new machinery and materials which are badly needed for post-communist economic restructuring.
Exports stagnated, rising only 3.5 percent for the year. But the CSU said it expected them to grow 4.5-6.5 percent in 1997, while import growth should ease slightly to 9-12 percent.
""Some improvement (in imports) can be expected only in the second half of 1997 due to the influence of investment in new technologies and some pro-export measures,"" the CSU said.
But analysts say it is still too soon to know if the vast imports of machinery and materials in 1996 will be properly put to use, and whether managers can make their new capital goods translate into a more competitive industrial sector and cover the deficit currently being run up.
""I'm not sure that the Czech economy is making sufficient progress at the corporate level, the micro-economic level, to generate those trade surpluses,"" said one local economist.
""It seems to me that the Czech economy still has a sort of fundamental competitiveness problem,"" he added.
After fighting through a recent downturn, the Czech Republic's largest trading partner, Germany, appears poised to make a recovery in 1997. Government officials have often said that this should help sagging Czech exports.
But if the German economy does warm up, the Bundesbank may raise interest rates to keep it from overheating, attracting back funds which have flooded into the Czech Republic and bolstered its capital account.
""What they gain on the current account on the balance of payments from the German upturn, they might lose somewhat on the capital account,"" Lubins said.
The CSU said growth in average nominal wages -- a factor the central bank has said must be brought under control if inflation targets are to be met -- is expected to be 14.5-16.5 percent, down from the 1996 forecast increase of 18.4 percent.
Some analysts, however, said the drop might not be enough to stem inflationary pressures.
""This (wage growth) is much more than this economy can afford -- maybe around 12 percent is acceptable,"" said Vladimir Kriedl, an economist at Patria Finance.
-- Prague Newsroom, 42-2-2423-0003 ($ = 27.65 Czech Crowns)
",1
"The Prague Stock Exchange, boosted by strong blue chip gains, hit a year-high on Thursday, but analysts said any strong bullish sentiment was tempered by a lack of liquidity and low foreign investor interest.
At the heart of the bourse's rise has been a resurgence of the market's two most-capitalised issues -- SPT Telecom and CEZ -- which account for over one-third of the PX50 index.
Both hits 52-week highs to push the index 1.93 percent higher to 591.3, but analysts cautioned that the market was still plagued by a lack of liquidity, which was distorting price movements.
""Volumes are very thin, when you come to the market looking for a bigger parcel of shares it doesn't take much interest to move the prices. But the truth is, not a lot of foreign money is flowing in,"" said Jan Sykora of Wood and Company.
SPT Telecom shares, which account for 20 percent of the PSE's market capitalisation, jumped 169 crowns to 3,744, while CEZ, which accounts for 14 percent, rose 51 crowns to 1,210.
Dealers said they did not see any fundamental reasons for SPT shares to rise much further, but that CEZ could climb slightly higher since it lagged other blue chips during last year's mid-summer rally.
The PSE has recently showed signs of life after a fourth quarter 1996 slump took 25 percent off the index after a lack of commitment on the part of government officials to strengthen minority shareholder rights and increase market transparency undermined the market.
The index has gained 9.6 percent so far in 1997, and a new commitment from Prime Minister Vaclav Klaus and bourse officials to clean up the market is slowly luring back many disgruntled foreign investors.
Though it may not be a panacea to the market woes, most analysts agree that the oversight commission could be the most important step the PSE could take in 1997.
""Foreign investors have definitely been heartened by official movement on cleaning up the market,"" said one foreign broker.
""The market will probably edge up slightly with such low liquidity. Hopefully when 1996 earnings begin to come in the bourse will have a new impetus,"" he added. Company results are expected to begin flowing in at the beginning of March.
Factors outside the bourse floor are also contributing to the market's rise.
Radek Vavra of Citicorp Securities in Prague said that given the current strength of the currency, the crown, and several other technical factors, the market should continue firming.
He added that he was seeing strong foreign investor interest, giving the rally potential ""to continue over the next week before it levels off in two to three weeks"".
The crown has gained some three percent against its dollar/mark basket since the beginning of the year, and analysts have predicted it will hold its value or strengthen further in the coming weeks.
In late afternoon trading on Thursday the crown was 5.16 percent above its basket mid-point, upslightly from the central bank's daily fixing at +5.12 percent.
",1
"The Czech Statistical Bureau (CSU) on Monday issued forecasts for 1997 predicting a slight economic upturn, but analysts warned burgeoning trade and current account deficits are clouds looming on the horizon.
After a sluggish 1996, the CSU said it expects real GDP growth for 1997 of 4.0-5.0 percent following an estimated 4.1 percent growth rate for 1996 while average annual inflation should ease to 7.5-8.0 percent from 8.8 percent.
The CSU added in its wide range of forecasts that the current account deficit, spurred by a spiralling trade gap, should grow to 137-145 billion crowns from an estimated 110.6 billion crown shortfall in 1996.
Analysts said the figures were more or less in line with expectations, but warned widening current account and trade deficits -- both seen growing to record numbers in 1997 -- could undermine the economy.
""I think they are credible forecasts, but not very encouraging,"" David Lubin, an economist at HSBC Midland told Reuters.
""It's okay for a country to run a current account deficit of nine percent of GDP but only if you believe in the future the economy will generate trade surpluses big enough to repay the debt that's being accumulated to finance the deficits.""
According to the CSU estimates, the current account shortfall should be between 8.6-9.1 percent of GDP in 1997. It forecast the trade deficit to widen to 202-212 billion crowns from a deficit of 160.3 billion crowns last year.
At the heart of the trade gap was a 12.7 percent rise in imports in 1996, due in large part to firms investing in new machinery and materials, badly-needed as part of the country's economic restructuring.
Meanwhile exports stagnated, rising only 3.5 percent for the year. But the CSU said it expects exports to grow 4.5-6.5 percent in 1997, while import growth should ease slightly to 9-12 percent.
""Some improvement (in imports) can only be expected in the second half of 1997 due to the influence of investment into new technologies and some pro-export measures,"" the CSU said.
But analysts say it is still too soon to know if the vast imports of machinery and materials in 1996 will be properly put to use, and whether managers can make this newly-acquired capital translate into a more competitive industrial sector and cover the deficit currently being run up.
""I'm not sure that the Czech economy is making sufficient progress at the corporate level, the micro-economic level, to generate those trade surpluses,"" said one local economist.
""It seems to me that the Czech economy still has a sort of fundamental competitiveness problem,"" he added.
After fighting through a recent downturn, the Czech Republic's largest trading partner, Germany, appears poised to make a recovery in 1997. Government officials have often said that this should help bolster sagging Czech exports.
But if the German economy does warm up, the Bundesbank may raise interset rates to keep it from overheating, attracting a flood of funds that has entered the Czech Republic bolstering its capital account.
""What they gain on the current account on the balance of payments from the German upturn, they might lose somewhat on the capital account,"" Lubins said.
The CSU said growth in average nominal wages -- a factor the central bank has warned must be brought under control if inflation targets are to be met -- is expected to be 14.5-16.5 percent, down from the 1996 forecast increase of 18.4 percent.
Some analysts, however, said the drop may not be enough to stem inflationary pressures.
""This (wage growth) is much more than this economy can afford -- maybe around 12 percent is acceptable,"" said Vladimir Kriedl, an economist at Patria Finance.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech central bank, for the second time in a week, said on Tuesday that it was prepared to intervene to stop the crown from strengthening further, pushing the crown lower and prompting a sell-off by London traders.
""Our starting point is that parity is a base, and this is the right level (for the crown),"" Jiri Pospisil, the head of the Czech National Bank's (CNB) monetary department, told an economic conference.
After the comment, the crown was still well above its mark/dollar basket midpoint at 28.750/dollar 16.873/mark, or 3.68 percent over parity with the basket, but down nearly 100 basis points from the CNB's daily fixing at +4.65 percent.
""There is a debate going on at the central bank over the nature of the appreciation of the exchange rate, and on the most suitable way to react to it,"" Pospisil, who is also on the CNB board, said.
""The debate has not been finished but our possibilities are clear: either we can react through interest rates or through direct intervention on the market,"" he added.
One of post-Communist Europe's most stable currencies, the crown consistently reached record highs in late January and early February, fuelled by demand brought about by a wave of more than 30 billion crowns in Eurobond issues since the start of the year.
The crown's surge has also been boosted by investors taking advantage of interest rate spreads against major currencies and an inverted yield curve.
Dealers said Pospisil's comments had shaken the market, especially some foreign investors, and could force the crown down further before it finds support.
""This has really shaken the market badly,"" said one London analyst. ""I think a sell-off could push it down to as low as three percent above parity before finding some support.""
It was the second time in the past week that central bank comments have pushed the crown sharply lower.
Last Wednesday the central bank said it had the option of intervening on the market when necessary, prompting London dealers to bail out over the next two days and pushing the crown down some 200 basis points against parity.
Despite Pospisil's words, dealers said that it did not appear that any intervention was imminent as it could not lower rates due to concerns over controlling the money supply and inflation.
""I think the central bank is trying to make the crown more volatile by its comments, but I'm not sure if it is ready to do anything real such as intervene,"" said Breta Tichanek of ING Bank. ""They are just trying to push the crown back to parity by letting the market do it in its own way,"" he added.
The CNB has not intervened since last February when it propped up the crown after widening the fixing corridor to plus/minus 7.5 percent against the basket from 0.5 percent.
The CNB's repo rate remains solidly at 12.4 percent, while its discount rate has been at 10.5 percent since it was raised a full percentage point last June. Meanwhile, inflation in January slowed to 7.4 percent, year-on-year, from 8.6 percent in December.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange continued to gain ground on Thursday, but analysts said they are not convinced the beleaguered bourse's fortunes have turned around, attributing the rise to thin domestic buying.
The PSE sputtered its way through most of autumn, losing close to 20 percent as key investors sold off positions, tired of a market characterised as unregulated and murky.
The bourse has showed signs of rebounding recently -- gaining in 15 of the past 16 sessions -- but analysts said they saw little change in market sentiment, and mostly domestic trading as investment funds settle positions before year-end.
The PX50 index was up 0.25 percent at 519.5 at its daily price fixing on Thursday, putting the bourse 8.3 percent higher than its low in mid-November.
""This doesn't really look like a rebound to me. (Mainly) there's a bit of domestic buying and some of the local brokers are just bidding up the market,"" Alex Angell of the brokerage Wood and Company told Reuters.
Despite being eastern Europe's most-capitalised bourse, the Czech market has long been plagued by inadequate legislation that investors complain fails to provide protection for minority shareholders.
Under the Czech Republic's Securities Act, which was devised to handle the logistics of the government's massive voucher privatisation scheme, the Securities Registry (SCP) is bound by law to provide services such as moving securities to and from client accounts.
Since the SCP does not reveal any details of transactions, including prices and volumes, brokers have taken to the SCP because of its privacy and faster settlement process.
The problems have restrained the PSE which sees on average $4-$6 million of stock changing hands each day, compared with $15 million turnover in Warsaw, a much smaller market.
""There are clearly investors who have decided to stay away from this market because of its opaqueness and are still on the sidelines,"" said one international trader.
""This is the case especially at the end of the year when a lot of local funds push prices all over the place in order to get a desired result on their books for the year,"" he added.
But many analysts said that all hope is not lost for the bourse.
With the market near, or at its bottom, many shares are looking quite cheap, and a lot of larger foreign and domestic investors that have waited out the current downtrend will probably start to get back into the market, though maybe not not before year's end.
""I expect most of the buying to come in the New Year, but I think it means that investors already familiar with the market should do something now,"" said Danial Gladis, head of the brokerage Atlantik Financni Trhy.
Market officials have also begun taking steps to correct the problems which should slowly lure back disenchanted investors.
In April, parliament approved a series of market reforms to compel companies and fund managers to be more open and accountable. A key element tackles the chronic problem of slow and irregular reporting of company earnings and actions.
The PSE itself has taken several steps to brings more transparency to the market, stressing in particular the need for the early creation of an independent watchdog, though analysts said a lack of political will to establish the body remains.
They added that the often-mentioned mid-June launch target for an oversight commission probably will not be met.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Czech December trade deficit should rise to 16 billion crowns from 14.3 billion in the last month of 1995, ending the worst Czech trading year on another sour note, a Reuters poll of economists showed on Friday.
Czech 1996 trade figures are to be released by the Czech Statistical Bureau (CSU) at 9 a.m. (0800 GMT) on Monday.
Most economists surveyed said they expect steady growth in the deficit but few surprises.
""I expect that the figures will be in-line with the development throughout 1996,"" Martin Kupka, an economist at Patria Finance told Reuters.
Whatever the December deficit, the full-year trade gap is guaranteed to be a record given that the January-November figure reached 140.1 billion crowns, already far beyond 1995's record total shortfall of 95.7 billion crowns.
Most analysts agreed a 15-17 billion crown December gap, after a 16.6 billion crown shortfall in November, would match prevailing trends and the concensus forecast of a 1996 deficit of 155-165 billion crowns.
The foreign exchange and money markets are expected to show little reaction over the figures -- as the worsening Czech trade balance has been long built into crown rates -- as long as the results do not vary greatly from the estimates.
Analysts say the trade balance has been hurt by a downturn in western European economies. Effects of a recovery in demand have yet to make an impact on Czech exports.
CSU figures consistently show the rate of import growth exceeding export growth, though the gap has narrowed in recent months.
Czech exporters told the CSU in a survey released earlier this month that, among other suggestions, they would want a 20 to 25 percent devalution of the crown against a mark/dollar basket to help boost lagging exports in 1997.
In comments to the CSU survey, the exporters said that if there would not be a devaluation of the still strong Czech currency, then they expect the governmnet to adopt administrative measures such as higher tariffs and surcharges to regulate imports.
The government and central bank, however, have repeatedly ruled out a devaluation of the crown to boost exports.
Analysts point to mid-1997 as a crucial time in which the import wave -- which is aimed at modernising industries -- must show results in productivity growth and competitiveness.
""There are concerns of the effect this has on the current account deficit,"" said one London-based economist.
""There is a question of the sustainability of the current account deficit. If you have a significantly higher figure than 15 or 16 billion crowns for December, I think people will get a little bit edgy,"" he added.
The current account stood at a deficit of $3.1 billion for the first three quarters of the year, in the latest available figures, spurred by the spiralling trade deficit which stood at the time at $4.1 billion.
Economists have said the current account deficit for 1996, forecast at roughly seven percent of gross domestic product, could be financed in the short to medium term through the capital account surplus and strong central bank reserves.
However, the deficit might start putting pressure on reserves in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003
",1
"The United States on Tuesday raised the stakes in a battle to supply NATO aspirants in central Europe with advanced fighter aircraft by offering the Czechs free use of seven Navy Hornet aircraft for five years.
Representatives of the U.S. Navy on behalf of the U.S. government offered to lease the Czech Republic seven McDonnell Douglas F/A-18 ""Hornet"" fighter planes under a no-cost, five-year agreement, McDonnell Douglas said in a statement.
""The offer (to the Czech government) is for the no-cost, five-year leasing of six single-seat F/A-18A and one two-seat F/A-18B aircraft,"" said the statement, issued by the Prague representative of McDonnell Douglas Corp.
The offer included the supply, at cost, of replacement parts, pilot and ground personnel training programmes and support equipment.
Also competing for post-Cold War business in central Europe are U.S. Lockheed Martin, which makes F-16's primarily for the U.S. airforce, the Anglo-Swedish consortium of SAAB and British Aerospace, which makes the ""Gripen"", and France's Dassault Aviation makers of the ""Mirage"".
The Czech government, seeking to prepare for eventual membership in NATO, has been debating decisions on buying any aircraft as proposed cuts in defence spending have clouded the debate over the upgrading of the fleet.
The Czechs, along with Poland and Hungary, are seen as leading candidates for early NATO membership, when the western security alliance expands.
Czech defence officials have said they have the will but not the wallet to buy brand new western-made advanced fighters, but are keeping their options open as a battle over the long-term military budget goes on.
They have said they would need about 24 fighters to replace their ageing Soviet made MiG-21s to be more compatible with NATO, but at more than $20 million per fighter, new western planes are too pricey.
It was not yet clear whether the aircraft in the U.S. offer would be used or new, and the Prague spokesman for McDonnell Douglas was not immediately available for further comment.
""Supply and service costs will be the subject of further discussions,"" the statement said.
Czech pilots could begin training in the planes in six months, with delivery of the aircraft 18 months after the contract is signed, the statement said.
To strengthen its bid, McDonnell Douglas also said that it is preparing to locate production of components for the Hornet at Czech light jet maker Aero Vodochody a.s. ""regardless of whether new or leased aircraft are chosen to re-equip the Czech Air Force"".
Cooperation could also include Czech engineering concern Skoda a.s., it added.
",1
"The Prague Stock Exchange continued to gain ground on Thursday, but analysts said they were not convinced the beleaguered bourse's fortunes had turned around, attributing the rise to thin domestic buying.
The bourse has showed signs of rebounding recently -- gaining in 15 of the past 16 sessions. But analysts saw little change in market sentiment amid mostly domestic trading as investment funds settled positions before the end of the year.
""This doesn't really look like a rebound to me. (Mainly) there's a bit of domestic buying and some of the local brokers are just bidding up the market,"" Alex Angell of the brokerage Wood and Company said.
The PX50 index closed up 0.56 percent at 521.1 at its daily price fixing on Thursday, putting the bourse about nine percent higher than its low in mid-November.
The PSE stumbled through most of the autumn, losing close to 20 percent as key investors sold positions, tired of a market characterised as unregulated and murky.
Although eastern Europe's most-capitalised bourse, the Czech market has long been plagued by poor legislation that investors say fails to provide protection for minority shareholders.
Under the Czech Republic's Securities Act, devised to handle the logistics of the government's massive voucher privatisation scheme, the Securities Registry (SCP) is bound by law to provide services such as moving securities to and from client accounts.
Since the SCP does not reveal any details of transactions, including prices and volumes, local brokers have taken to the SCP because of its privacy and faster settlement process.
But this has restrained activity on the PSE which sees on average $4-6 million of stock turnover each day, compared with $15 million in Warsaw, a much smaller market.
""There are clearly investors who have decided to stay away from this market because of its opaqueness and are still on the sidelines,"" said one international trader.
""This is the case especially at the end of the year when a lot of local funds push prices all over the place in order to get a desired result on their books for the year,"" he added.
But many analysts said that hope is not lost for the bourse.
They expected investors to buy back into the market as the downtrend bottoms out, although maybe not before the end of the year.
""I expect most of the buying to come in the New Year, but I think it means that investors already familiar with the market should do something now,"" said Danial Gladis, head of the brokerage Atlantik Financni Trhy.
Market officials have also begun taking steps to correct the problems which should slowly lure back disenchanted investors.
In April, parliament approved a series of market reforms to compel companies and fund managers to be more open and accountable. A key element tackles the chronic problem of slow and irregular reporting of company earnings and actions.
The PSE itself has taken several steps to brings more transparency to the market, stressing in particular the need for the early creation of an independent watchdog, though analysts said a lack of political will to establish the body remains.
",1
"The Czech Republic took both reverse singles matches from India on Sunday clinching a berth in the second round of the Davis Cup, but lost its number one player, Petr Korda in the process.
Jiri Novak gave the Czechs a 3-2 victory with a straight set 6-1 6-4 6-3 victory over Mahesh Bhupathi after Korda, who announced he was retiring from Davis Cup play, had brought his team level with a 5-7 6-3 6-4 6-1 win over Leander Paes.
Novak barely broke a sweat against Bhupathi, who is ranked more than 400 places lower, needing just 90 minutes to dispatch the Indian number two.
Jumping out to a quick start, Novak, ranked 67th in the world, took the first set 6-1 and went up 5-0 in the second before losing his rythmn, and four consecutive games. But he regrouped to hold serve in the tenth game for the set.
He then broke Bhupathi twice in the third set to clinch the tie. ""This is one of the biggest matches I have won in my life,"" said an elated Novak following the match.
Korda, ranked 33rd in the world, also had little trouble in his matchup with Paes, overpowering the Indian at the net and unleashing powerful groundstrokes from the baseline.
He squandered five break points in the first set, while Paes, ranked 105th in the world, took advantage of the only one he had to take the first set in 53 minutes.
But Korda showed no signs of a cold that has plagued him throughout the week, quickly getting back on track to take the next three sets.
""Overall though, I am still really happy both myself and the team performed,"" said Olympic bronze medalist Paes.
After the win, Korda said he would no longer play for the Czechs in the Davis Cup, complaining of the demands it put on a player.
""There was a lot of pressure on me for this match, but I showed the kind of player I am,"" he said.
""I have thought about retiring (from Davis Cup) for a while and it's time to leave. It is a very tiring, draining experience and I think you should leave at the top. Now is the right time.""
Korda, who was once ranked as high as fifth in the world, has been the anchor of the Czech team since his debut in 1988, compiling a 30-12 overall record, including three wins against India this weekend.
The loss of Korda is the second setback for last year's semifinalists, after Czech number two Daniel Vacek bowed out of action to concentrate more on his performance on the ATP tour.
",1
"The Czech Republic's trade deficit nearly doubled in January, year-on-year, as exports stagnated, and analysts said they saw little change in the trend of the burgeoning trade shortfall.
The Czech Statistical Bureau (CSU) on Monday said the January trade deficit hit 13.6 billion crowns compared with a 7.86 billion crown deficit in January 1996.
The CSU added that imports, led by continued strong inflows of machinery and raw materials, grew by 8.2 percent year-on-year, while exports contracted by 2.5 percent, spurred by a sharp 11.8 percent decrease in raw material exports.
""The figures are better than expected...the market expected above 15 billion crowns...but I don't think it will mean any change in the trade (balance's) development,"" said Petr Tomek of Zivnostenska Banka.
The bureau did not issue a revised end-year 1996 figure for the trade balance, which hit a record 160.3 billion crowns. It has forecast the 1997 trade deficit to rise to about 215 billion crowns.
The CSU said overall nominal imports for January firmed to 60.04 billion crowns from 55.5 billion for the same month last year, while exports totalled 46.45 billion, down from a previous 47.63 billion.
Boris Gomez of ING Barings said that while January's trade figures were an improvement from December, where the monthly figure was 17.996 billion crowns, the beginning of the year is traditionally a period of slowing trade.
""We're not overly encouraged since historically the first two months of the year we usually see relatively lower deficits because of generally weaker trade flows,"" he said.
""We are hoping for a stabilisation of the deficit. If what happened last year when the deficit picked up pace in the second quarter, it's not good, though we are banking on import growth slowing a bit given the tight monetary environment.""
Last summer the central bank tightened its monetary policy, raising its discount rate one full percentage point to 10.5 percent, and minimum reserve requirements on primary deposits to 11.5 percent from 8.5 percent. Interbank money market rates up to three months in the Republic hover around 12.5 percent.
Analysts added that the trade figures were also influenced by the strengthening of the currency, the crown, which gained some three percentage points against its dollar/mark basket in January, boosted by demand brought about by a wave of over 35 billion crowns worth crown-denominated Eurobonds.
""If the Bundesbank sees it policy down the road of keeping the mark relatively weak to help the economy, that's not good news for the Czechs, nor are the rumblings that the economic recovery of the EU may be slower than expected,"" Gomez said.
CSU figures showed EU countries accounted for more than 60 percent of both imports and exports with the Czech Republic.
-- Prague Newsroom, 42-2-2423-0003
",1
"Profit-taking and changing market sentiment pulled the Czech crown lower on Thursday, and dealers said they expected a further weakening of the currency since there were few fundamentals to support it.
Once one of Europe's most stable currencies, confidence in the crown has been shaken badly in the past two weeks as the market became nervous following central bank comments that it was overvalued and that interest rate cuts may be in the air.
In late afternoon trading, the crown was at 28.873 against the dollar and 17.090 to the mark, implying +2.74 against basket midpoint after opening at +3.53 percent.
Dealers said it had been pushed lower as thoughts turned to actions and investors ran to take profits while they could.
""The fall is part profit-taking, and part change in market sentiment,"" said Breta Tichanek of ING Bank in Prague.
""We are really seeing an outflow of investment from the crown at this moment, but I don't think it will last for more than a couple of weeks,"" he added.
At midday the central bank followed the early trend with its daily fixing, putting the crown/dollar at 28.784, and the crown/mark at 17.040, or +3.03 against the basket.
The pullout follows recent media reports that German banks see the crown moving lower and are advising clients to stay away from Czech bonds.
The crown had strengthened since the beginning of the year by about three percent against the basket as demand from a wave of over 35 billion crowns worth of crown-denominated Eurobonds.
""The market has been very nervous and I think the German media reports were the last straw for some investors. They have decided to take their profits now and run,"" said a London-based trader.
At the crown's peak earlier this month -- before talk of possible central bank intervention on the market -- it rose to +5.5 percent over parity.
Many investors had boosted the crown as they looked to take advantage of a high interest rate differential with western Europe but the central bank comments, coupled with an easing of interbank market rates have taken away much of the crown's lustre.
""I think the market is on a calm wave...we expect further tests for the Czech crown weakening. We see also movement on the money market and money market derivatives,"" said Petr Korous of Ceskoslovenska Obchodni Banka.
Prague Interbank Offered Rates (PRIBOR) on Thursday traded in a range of 11.5-12.5 percent, down about 60-70 basis points from the beginning of the year.
ING's Tichanek said there was little chance the currency would come close to returning to its highs earlier this month, adding the crown was having trouble finding strong support at current levels.
Further damaging confidence in the crown is the country's burgeoning trade deficit.
The Czech Statistical Bureau has forecast a 1997 shortfall of between 211-219 billion crowns after last year's record deficit of 160.3 billion crowns and analysts say that later in the year the crown will find itself under increasing depreciation pressure because of this.
-- Prague Newsroom, 42-2-2423-0003
",1
"East European markets moved higher across the board this week, with Poland and Hungary leading the way on foreign buying.
Warsaw and Budapest both hit year-highs, while Romania and Slovenia also moved strongly higher. Bratislava and Prague edged up, but both are seen drifting with little upward momentum.
WARSAW
The Warsaw Stock Exchange set three consecutive 33-month highs in heavy turnover this week, with post-fixing buying on Thursday seen pushing them to another high on Friday. But analysts said a profit-taking correction was likely next week.
""After today's session I believe there might be more growth tomorrow, but I think next week investors will start taking profits after such a surge,"" Maciej Matusiak, an analyst at PKO BP brokerage, said on Thursday.
The bourse has risen 23 percent since December 10.
Analysts expected 16,000 points to privide strong support for the WIG index next week. Some said the correction was likely to be brief and the market could return to its uptrend later, possibly on growing foreign interest in Polish stocks which was luring new investors.
BUDAPEST
The Budapest bourse continued its bull run this week, setting successive record highs in the first three sessions, although profit-taking on Thursday trimmed earlier gains.
""The fact that the market is coming a little lower is to be regarded as a normal reaction to serious price rises,"" one trader said.
On Thursday the BUX index, which has risen some 30 percent this year, closed at 5,370.15 points, up 322.55 on the week.
The trader said some foreign investors might reduce their presence on the Hungarian market but there were no signs of them leaving it completely.
""Key foreign investors are reducing their exposure on the market but they aren't turning away from it,"" he said.
PRAGUE
The Prague Stock Exchange edged up this week in moderate trading. Analysts said investors have been heartened by recent talk of strengthening market oversight but it may take several months before strong flows of money return.
The PX50 index closed on Thursday at 559.8, up 2.4 points, or 0.43 percent, on the week. ""We're still seeing a lot of interest in funds, but some of the other major shares are flat,"" said Alex Angell of Wood and Company.
Several funds have attracted heavy investor interest after declaring they would transform their closed-ended unit trusts into open-ended funds, making it possible that the shares would rise much closer to their net asset value.
The Finance Ministry is still creating guidelines for the funds to open, but at least one fund manager, Harvard, has said it plans to begin buying units from current holders in anticipation that it would receive approval to transform.
BRATISLAVA
The Bratislava Stock Exchange (BSE) edged higher in a quiet week, and brokers said the market was stabilising after a slow start to the year.
But they said the growth was still fragile due to generally weak investor interest. ""There is constant demand for only a few issues, which could stop virtually any time,"" said Peter Lachkovic of Slovenska Sporitelna.
The 12-share SAX index rose mainly on gains to oil refiner Slovnaft, closing at 189.74 points on Thursday, up 4.17 from Monday's open at 185.57.
BUCHAREST
The bulk of Bucharest prices jogged higher this week as bullish sentiment which has gripped the market since the start of the year pushed stocks higher for the sixth consecutive session on Thursday, sending the two indices to year-highs.
Analysts said the bull run has been fuelled by higher 1996 inflation and a depreciating leu.
LJUBLJANA
Slovenian shares jumped seven percent this week, pushed up by foreign buying. The 10-share SBI index jumped 92.6 points to 1,415.4.
Trader Kovinotehna was the top gainer, rising 22.2 percent, while ordinary shares of Hipotekarna banka Brezice were the leading decliner, falling 8.4 percent.
		  CLOSE    WEEK'S CHANGE  1996/97 HIGH 1996/97 LOW
		 JAN 23	NET    PCT
 CESI	  1,613.08   +18.21   +1.14    1,613.08     936.21
 WARSAW     15,846.7   +427.8    +2.8    15,846.7    7,725.2
 BUDAPEST    5,370.15  +322.55		5,398.52   1,557.91
 PRAGUE	  559.8     +2.4    +0.43	582.0	425.9
 BRATISLAVA    189.74    +4.17   +2.25	226.34     150.4
BUCHAREST
 VAB-Index     334.8    +36.1   +12.0	 334.8	262.0
 BIG-Index     334.32   +36.1   +12.1	 334.32     266.43
 LJUBLJANA   1,415.4    +92.6    +7.0     1,589.18     891.93
All-time high: CESI 1,604.54 (Jan 16/1997); BUX 5,398.52
(Jan 22/1997); WIG 20,760.3 (March 8/1994); PX50 1,002.4 (April
7/1994); SBI 1,598.02 (June 28/1994); SAX 402.3 (February/1994).
",1
"The often-praised Czech economy may be starting to show cracks, as slower growth highlights concern over a widening trade gap and the pace of industrial restructuring, analysts said on Monday.
Over the years, economists have hailed Prime Minister Vaclav Klaus and his policies which have produced one of the lowest inflation rates in the region, good GDP growth and an unemployment rate of about three percent.
Many of those same analysts, however, are now saying that while the economy is not yet in serious trouble, much remains to be done, particularly in industrial restructuring.
The latest round of bad news came on Monday, when the Czech Statistical Bureau released figures showing the trade balance finished 1996 with a record deficit of 160.33 billion crowns ($5.75 billion), up from a 95.7 billion crown shortfall the previous year.
While most economists, after several mid-year revisions, had predicted the deficit, some are beginning to voice concerns over Czech industry's export competitiveness.
""As far as the export of our raw materials and semi-finished products are concerned, (the development) is very unfavourable over the last year,"" Kamil Janacek, chief economist at Komercni Banka said.
""We are undergrowing competition from other transforming economies. More and more we are unable to compete with some semi-finished products from Ukraine, for example, having in mind the average cost level with the Czech Republic,"" he added.
Since 1992 the economy has moved from recession to 4.8 percent consumption-driven real growth in 1995, as inflation fell from double digits to below nine percent.
Unemployment remains around three percent, and official statistics say nearly 70 percent of the economy is made by companies in, at least nominally, private hands.
Most Czechs are fully employed, buying truckloads of western goods, and living in state-controlled housing.
But real economic growth has begun to wane, with third quarter GDP slowing to 3.6 percent, year-on-year, from 4.0 percent growth in the second quarter.
And the spiralling trade deficit has put pressure on the current account, which showed a deficit of $3.1 billion crowns for the first three quarters according to the latest figures, while the capital account was in surplus by some $2.0 billion.
Most analysts agree that a flood of funds since the beginning of the year -- an estimated 25-30 billion crowns have entered the country in crown-denominated Eurobonds alone -- should keep the situation from deteriorating this year.
And, they add, foreign reserves are adequate.
But, said Janacek: ""The problem is if in the medium-term a continuing current account deficit of about eight percent of GDP is financeable or not.""
Boris Gomez of ING Barings said one problem is the lack of reliable data to chart whether the wave of imports, spurred mainly by raw material and machinery imports, will translate into economic restructuring.
He expects exports to become stronger this year as key west European markets wake up from their recent slumber, and other central European economies gain strength.
""The key period will be the end of this year when the trade deficit will have to have stabilised or there will be a lot of pressure,"" he said.
Added one London-based economist: ""You can get all of the imports you want, but then you have to do something with them.
""There are a lot of people who talk about how this (the imports) will help down the road, but the assumption here is huge -- that management actually knows what it is doing with all of its structural advantages,"" he said.
($1=27.86 Czech Crown)
",1
"The Czech crown, boosted recently by demand brought about by a wave of Eurobond issues, is showing no sign of losing strength, prompting market speculation on Wednesday of possible central bank intervention.
The Czech National Bank (CNB) has said it is monitoring the development of the crown, but is prepared to allow the market to decide its rate within the fluctuation band.
Since the start of 1997 the currency has gained some three percentage points against its fixing basket, mainly on foreign buying to finance a wave of some 30 billion crowns ($1.1 billion) in new crown Eurobond issues.
Analysts said that while the crown may hold steady over the next day or two, it should again test 5.5 percent above its parity level next week.
""I don't expect much of a move higher this week, but next week the crown could again test +5.5 percent,"" said Martin Strauch, a dealer at Citibank.
Jakub Perina of Ceskoslovenska Obchodni Banka added: ""A lot depends on London traders because they are very interested right now.""
The Czech crown is fixed daily at up to plus or minus 7.5 percent of the mid-point of a basket comprising 35 percent dollars and 65 percent marks.
On Wednesday, the Czech National Bank (CNB) fixed the crown at 27.712 to the dollar and 16.846 to the mark, putting the currency 5.05 percent above the mid-point.
""If the crown does not exceed its fluctuation band, the central bank will not intervene,"" CNB Spokesman Martin Svehla told the econoimc daily Hospodarske Noviny on Wednesday.
Last February the CNB widened the corridor within which it fixes the crown each day to plus or minus 7.5 percent of parity, from plus/minus 0.5 percent.
Since then the foreign exchange market, and not the central bank, has been much more of a force in determining the crown's rate within this controlled float.
Several dealers, however, confirmed to Reuters that the CNB had contacted them on Tuesday when the crown hit 5.3 percent above parity, and said they took the move as a signal that intervention was possible whn the currency hit plus 6.0 percent.
""The market was a little spooked by this move, and the crown fell immediately,"" said one London-based analyst. ""But it regained its strength today, and I think many people now expect some intervention if it moves much higher.""
CSOB's Strauch said: ""They (the CNB) could be ready to intervene at some point, possibly +6.0 percent, but it depends on whether it appears to have strength to move even higher at that point.""
The main underlying reason for foreign interest in the Czech crown is the large interest rate differential between the Czech Republic and western countries.
In the middle of 1996 the CNB raised the discount rate to 10.5 percent from 9.5 percent and increased minimum reserve requirements on primary deposits to 11.5 percent from 8.5 percent. Interbank money market rates up to three months hover around 12.5 percent.
Though interbank market rates eased some 60 basis points, or 0.6 percentage points, in January, the central bank and government officials have both expressed reluctance to officially lower rates because of strong demand for money and investments.
Analysts said rates are still high enough, howeer, to continue attracting large inflows of capital.
-- Prague Newsroom, 42-2-2423-0003 ($ = 27.68 Czech Crowns)
",1
"Czech economic growth is expected to continue slowing down in the third quarter, but analysts said the central bank's fight against inflation still comes first, and interest rates will remain untouched.
The Czech Statistical Bureau (CSU) is scheduled to release third quarter real GDP figures at 0900 local time (0800 GMT) on Thursday.
A Reuters survey of local economists showed growth was expected to ease to about 4.2 percent for the first three quarters of the year, year-on-year.
That compares with a rise in gdp of 4.8 percent for the same period in 1995. GDP growth for the first half of 1996 was 4.3 percent.
But analysts said that even though the central bank's tight monetary policy is restricting the economy, they saw no chance of a loosening in interest rates in the near future.
""Interest rates have been very high and that has taken its toll...but I don't think we're going to see a move in base rates yet,"" Susanne Hallergard, an economist at ING Barings told Reuters on Wednesday.
""It's an inflation versus growth battle and the central bank appears much more willing to sacrifice growth to push inflation down.""
Added Martin Kupka of Patria Finance: ""Whether the central bank touches rates will depend on inflation, and not GDP, especially in the first few months of next year.""
Analysts said they expected a sharp year-on-year drop in GDP growth for the third quarter alone, since last year's 6.3 percent figure was skewed by the resumption of production at Skoda Auto after a break to retool for its new Felicia model.
They added, however, that while the CSU was recently forced to cut its original year-end forecast of 4.8 percent growth from 5.1 percent, the economy should accelerate in the fourth quarter to meet the target.
""Given private consumption developement and fixed capital investment, I expect fourth quarter growth to be greater, and put the full year figure at close to five percent,"" said Kamil Janacek, chief economist at Komercni Banka.
He added that an economic upturn in Germany, a major trading partner, could also begin to show some effects in GDP later in the year.
CSU officials have blamed lower foreign capital inflows, lower profits of domestic companies and higher costs of credit following central bank tightening moves earlier this year which have resulted in the lower growth of investment demand.
In the summer, the central bank hiked its key discount rate by one full percentage point to 10.5 percent, and implemented a series of measures incluing repo rate hikes and raising minimum reserve requirements to choke a burgeoning money supply.
The moves have shown their effects recently, with the M2 money supply, which measures currency, demand deposits, time and savings deposits, and foreign currency deposits, easing to 9.8 percent in October from 11.6 percent in September.
In addition, inflation has continued its gradual easing, dippping to 8.6 percent year-on-year from 8.7 percent the previous month, its fourth straight monthly decline.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange continued to gain ground on Thursday, but analysts said they are not convinced the beleaguered bourse's fortunes have turned around, attributing the rise to thin domestic buying.
The bourse has showed signs of rebounding recently -- gaining in 15 of the past 16 sessions. But analysts saw little change in market sentiment amid mostly domestic trading as investment funds settled positions before the end of the year.
""This doesn't really look like a rebound to me. (Mainly) there's a bit of domestic buying and some of the local brokers are just bidding up the market,"" Alex Angell of the brokerage Wood and Company said.
The PX50 index was up 0.25 percent at 519.5 at its daily price fixing on Thursday, putting the bourse 8.3 percent higher than its low in mid-November.
The PSE stumbled through most of the autumn, losing close to 20 percent as key investors sold positions, tired of a market characterised as unregulated and murky.
Although eastern Europe's most-capitalised bourse, the Czech market has long been plagued by poor legislation that investors say fails to provide protection for minority shareholders.
Under the Czech Republic's Securities Act, devised to handle the logistics of the government's massive voucher privatisation scheme, the Securities Registry (SCP) is bound by law to provide services such as moving securities to and from client accounts.
Since the SCP does not reveal any details of transactions, including prices and volumes, local brokers have taken to the SCP because of its privacy and faster settlement process.
But this has restrained activity on the PSE which sees on average $4-6 million of stock turnover each day, compared with $15 million in Warsaw, a much smaller market.
""There are clearly investors who have decided to stay away from this market because of its opaqueness and are still on the sidelines,"" said one international trader.
""This is the case especially at the end of the year when a lot of local funds push prices all over the place in order to get a desired result on their books for the year,"" he added.
But many analysts said that hope is not lost for the bourse.
They expected investors to buy back into the market as the downtrend bottoms out, though maybe not not before year's end.
""I expect most of the buying to come in the New Year, but I think it means that investors already familiar with the market should do something now,"" said Danial Gladis, head of the brokerage Atlantik Financni Trhy.
Market officials have also begun taking steps to correct the problems which should slowly lure back disenchanted investors.
In April, parliament approved a series of market reforms to compel companies and fund managers to be more open and accountable. A key element tackles the chronic problem of slow and irregular reporting of company earnings and actions.
The PSE itself has taken several steps to brings more transparency to the market, stressing in particular the need for the early creation of an independent watchdog, though analysts said a lack of political will to establish the body remains.
",1
"Czech Prime Minister Vaclav Klaus has thrown his support behind the creation of an independent market regulator, but analysts said on Monday it would take more than that to revive confidence in the embattled Prague bourse.
Klaus, speaking after a meeting on market regulation on Sunday, said the Czech bourse was moving towards becoming a normal market after its creation under the mass voucher privatisation programme of 1992-95.
Everybody understood this process would happen gradually, he said. But analysts and traders said that while the moves were a welcome start, only concrete results would be able to lure investors back to the market.
""It shows a trend that the government knows there is a problem and is working on solutions,"" said Jan Sykora, a broker at Wood and Company.
""But confidence in the Czech market has been decimated and there is a strong lack of confidence, especially among foreign investors...who now want to see real results, and not just proclamations.""
While markets in Poland and Budapest have posted solid gains this year, the Prague Stock Exchange has suffered. Since the beginning of September, a bear run triggered by a selloff by foreign investors has wiped about 20 percent off the market.
Radim Bajgar of ING Barings called Klaus' comments positive, but results would be the best medicine for the market.
Foreign investors and some local players have been highly critical of the lack of transparency in Czech markets -- particularly the failure of the Securites Centre, where the overwhelming majority of trades are registered, to release detailed price information.
""A lot international clients shudder when you mention the Czech market. They just don't know what real prices here are because so little information comes from the Securities Centre, where so much of the trading occurs,"" said one fund manager.
Until now, Klaus has showed little enthusiasm for a plan by PSE Chairman Tomas Jezek to create a body modelled on the U.S. Securities and Exchange Commission (SEC).
Klaus has long believed market regulation, now conducted by a department in the Finance Ministry, should be minimal. But he capitulated on Sunday.
""As a long-term solution we want to create an independent capital supervision (body). That requires legislation and an number of other things,"" Klaus said after the meeting.
He also announced that all prices of OTC deals registered at the Central Securities Centre (SCP) would be published from February 1. He gave no indication of whether the names of buyers and sellers would also be released.
Jezek wants to create a Czech SEC by 1998 but Klaus gave no indication of when he thought it could be set up.
Klaus said that as a first step the market supervision department of the Finance Ministry would be transformed into a ""Securities Bureau"" with more staff from February 1, 1997.
Analysts said that once more regulation was imposed, investors who have shunned Czech shares would probably return.
""Because most foreign investors have such a poor view of this market, they are under-invested here. So once you start to create better conditions, you should see it translate into a strong positive trend next year,"" Sykora said.
",1
"Czech trading firms saw the trade deficit nearly doubling, year-on-year, in the first quarter of 1997, while analysts said the figures were in line with forecasts and the crown firmed on the news.
A survey of importers and exporters by the Czech Statistical Bureau (CSU), released on Wednesday, showed the trade deficit should rise to about 45 billion crowns ($1.6 billion) for the quarter, up from a 27.1 billion crown gap for the first quarter 1996.
Analysts said the survey figures were realistic given the January shortfall of 13.6 billion crowns, adding the first quarter was usually a slow period for trade and the deficit should grow substantially after the quarter.
""It's more or less in line with our forecasts, but I think the deficit situation will gradually worsen throughout the year,"" Martin Kupka, an economist at Patria Finance told Reuters.
The CSU itself has issued a forecast for the overall 1997 trade deficit to rise to between 211-219 billion crowns after last year's record shortfall of 160.3 billion crowns, but it has not issued its own quarterly estimate.
The CSU said in a statement the survey included estimates from firms which accounted for 20 percent of all import business last year, and 36 percent of exports.
It said 170 firms were polled in the survey, of which 67 percent responded.
""The real question lies in how much the deficit will accelerate after the first quarter,"" said one London-based analyst. ""Last year we saw a sharp increase in the pace of growth in the deficit and if that occurs again, it could be a problem.""
The survey showed total imports were expected to rise in the first quarter by some 10 percent, year-on-year, with raw materials, foodstuffs and machinery imports accounting for most of the growth. Total imports in the first quarter of 1996 were 174.3 billion crowns.
Import prices were expected to edge about two percent higher overall, though prices of chemicals and related products, beverages and tobacco should ease slightly.
It said total exports for the quarter should remain static at last year's 147.2 billion crown level. Export prices should rise by about 2.5 percent, year-on-year.
Ironically, the forecast reassured the foreign exchange (forex) market, after the crown lost ground on reports that several German banks were expecting a weakening of the currency and were not recommending clients to buy Czech state debt.
Forex dealers said the crown fell by as much as 50 basis points against its dollar/mark basket midpoint because of the reports, but recovered some 30 basis points to 3.55 percent above the midpoint, or 28.430 to the dollar and 17.017 to the mark after the forecast.
""I think 45 billion crowns is the amount that probably all economists were expecting...The crown began to rebound right after the forecast was released,"" said Jiri Ubry of ING Bank. ($ = 28.46 Czech Crowns)
",1
"The United States on Tuesday raised the stakes in a battle to supply NATO aspirants in central Europe with advanced fighter aircraft by offering the Czechs free use of seven Navy Hornet jets for five years.
Representatives of the U.S. Navy, on behalf of the U.S. government, offered to lease the Czech Republic seven McDonnell Douglas F/A-18 ""Hornet"" fighter planes under a no-cost, five-year agreement, McDonnell Douglas Corp.said.
Czech officials reacted warmly to the offer, saying the support of the U.S. government was welcome, but that it did not guarantee success for the bid.
""We welcome the U.S. government's support but we will look at all bids. We have experts who will examine all of them and investigate which is the best,"" said Petr Necas, chairman of the parliamentary defence committee after a meeting with U.S. Navy vice-admiral John Allen Lockard.
On offer are six single-seat F/A-18A and one two-seat F/A-18B aircraft currently used by the U.S. Navy.
The offer also includes the supply, at cost, of replacement parts, pilot and ground personnel training programmes and support equipment. ""Supply and service costs will be the subject of further discussions,"" a company statement said.
""The advantage of the lease is that it allows the Czechs to quickly obtain the Hornets, and they would gain almost immediate operational and maintenance experience with these aircraft,"" McDonnell Douglas spokeswoman Barbara Anderson told Reuters.
""As opposed to purchasing, they can take that experience and then make a more sound purchase decision later,"" she added.
Also competing for post-Cold War business in central Europe are U.S. Lockheed Martin, which makes F-16s primarily for the U.S. Air Force, the Anglo-Swedish consortium of SAAB and British Aerospace,, which makes the Gripen, and France's Dassault Aviation makers of the Mirage.
Necas expressed disappointment that governments from other competing countries had failed to step forward formally to lend their support, saying it appeared the U.S. was far more active in the pursuit of a contract.
""I have to say that it's too bad for the Czech side that the activity of the French, Swedish or British governments from the perspective of cooperating (with their companies)...isn't comparable with that of the U.S.,"" he said.
The Czech government, seeking to prepare for eventual membership in NATO, has been debating whether to buy any aircraft as proposed cuts in defence spending have clouded the debate over the upgrading of the fleet.
The Czechs, along with Poland and Hungary, are seen as leading candidates for early NATO membership, when the western security alliance expands.
Czech defence officials have said they have the will but not the wallet to buy brand new Western-made advanced fighters, but are keeping their options open as a battle over the long-term military budget goes on.
They have said they would need about 24 fighters to replace their ageing Soviet made MiG-21s to be more compatible with NATO, but at more than $20 million per fighter, new western planes are too pricey.
Czech pilots could begin training in the planes in six months, with delivery of the aircraft 18 months after the contract is signed, the statement said.
To strengthen its bid, McDonnell Douglas also said that it is preparing to locate component production for the Hornet at Czech Aero Vodochody a.s. regardless of whether new or leased aircraft are chosen to re-equip the Czech Air Force.
Cooperation could also include Czech engineering concern Skoda a.s., the firm added.
",1
"Markets across Eastern Europe remained mired in an autumn slump this week, with analysts seeing little on the horizon to break the bearish trend.
Stock Exchanges in Warsaw, Prague, Bratislava, Bucharest, Zagreb and Ljubljana all lost ground on the week. Budapest bucked the trend, rising slightly, although it appeared to lose steam by the end of the week.
PRAGUE
Not even a strong showing by the centre-right governing coalition in Senate elections at the weekend could break the Prague Stock Exchange out of its current slump, as the PX50 index dipped 0.8 points on the week to close on Thursday at 509.3.
Analysts said that while the coalition of Prime Minister Vaclav Klaus may feel heartened by the showing which gave him a majority to the Czech upper house, which will have little power, investors remain put off by poor market regulation.
""I'm a little sceptical about the possibility that the Senate will help bring changes to the market,"" said Pavel Sobisek of Zivnostenska Banka.
""I think there will be a lot of pressure from market participants on the government to do something...but I have not seen any signs of a change in attitude of the coalition with respect to this topic.""
Investors have long complained that market regulation and legislation in the Czech Republic is weak, providing little protection for minority shareholders.
WARSAW
The Warsaw Stock Exchange stayed virtually flat this week and analysts were divided over the market's direction.
Some said the bourse could extend its three-week sideways trend as no fresh signals were in sight. ""We are still in a horizontal trend and...I see no factors which could help create a clear direction for the market,"" said Mateusz Andrzejewski, an analyst at Pekao SA brokerage.
Others saw the generally positive economic climate as a strong enough impulse that it could help the bourse climb above 14,000 points next week.
Analysts said a senior central bank official's comment on Tuesday about a possible rise in interest rates next year was bringing some uncertainty to the bourse but was unlikely to signficantly hurt prices.
BUDAPEST
Hungarian shares started off the weekend strongly, boosted by a government decision to hike energy prices, but they ran out of steam by the middle of the week.
Oil and gas company MOL led the charge, but dealers said its weakening on Thursday could be a harbinger.
""MOL turned around today (on Thursday), that is a warning sign,"" said New York Broker's Kalman Schuszter. ""Sellers are stronger now."" The BUX index closed on Thursday at 3,674.61, up 3.1 percent from Monday's open.
BRATISLAVA
Slovak share prices continued their freefall on the Bratislava Stock Exchange which has lost about 25 percent since the end of August.
The 12-share SAX index fell 12.49 points on the week to close at 161.82 on Thursday.
Dealers said the silver lining to the bourse's woes may be that prices are becoming so cheap that foreign investors will soon be lured back.
BUCHAREST
Scant demand kept volumes modest at both weekly sessions in Bucharest, with turnover low and most prices edging down or staying flat.
The unofficial VAB index inched down from the previous session by 1.1 percent to 294.2 points, while the BIG index eased 1.07 percent to 293.41.
Fertiliser maker Azomures SA dominated trading, while newcomer, an oilfield equipment maker, put on a poor show.
ZAGREB
Croatian stocks were mostly lower in dwindling trade and analysts said they could see no end to the bearish period as big buyers continue to shy away from the market because of political developments.
Croatia has been shaken by a wave of strikes, and last week Zagreb saw its biggest protest in years.
LJUBLJANA
Political concerns were also apparent in Ljubljana this week, with investors waiting for a new prime minister to be named, probably in the second half of December.
""The market will be uneasy until it is clear who will form the new government,"" one trader said. The SBI index fell 6,7 points from Monday's open to close on Thursday at 1,145.5.
Although the Liberal Democrats of current Prime Minister Janez Drnovsek were the strongest single party in the general election, winning 25 out of 90 parliamentary seats, they are facing a loose alliance of rightist ""Spring"" parties, who got 45 seats.
		  CLOSE     WEEK'S CHANGE    1996/HIGH    1996/LOW
		  NOV 28	NET     PCT
 CESI	  1,391.77   - 11.12  -0.79   1,544.70     959.24
 PRAGUE	  509.3	-0.8   -0.16     582.0	425.9
 WARSAW     13,696.7     -26.4   -0.2   15,078.7    7,725.2
 BUDAPEST    3,674.61   +110.66  +3.1    3,728.58   1,557.91
 BRATISLAVA    161.82    -12.49  -7.17     226.34     150.4
 VAB-Index     294.2	-4.83  -1.6	879.29     285.3
 BIG-Index     293.41     -4.96  -1.6	820.9	284.29
 LJUBLJANA   1,145.5	-6.7   -0.6    1,589.18     891.93
All-time highs: CESI 1,544.70 (Sept 2/1996); WIG 20,760.3 (March 8, 1994); SBI 1,598.02 (June 28/1994); PX50 1,002.4 (April 7/1994); BUX 3,728.58 (Oct 17/1996); SAX 402.3 (Feb/1994). ($=3,570 lei)
",1
"ITT Corp will have a difficult time convincing investors that a sale of its non-core assets would be more valuable than a $6.5 billion hostile bid from rival Hilton Hotels Corp, Wall Street analysts said.
Although ITT would certainly be a better-focused company without assets like Madison Square Garden and world telephone directories, the move may come too late for shareholders who have seen the stock price erode in recent months.
""It begs the question:  Why didn't they do it sooner?"" said Daniel Davila of Rodman & Redshaw Inc.  
As expected, ITT earlier rejected Hilton's $6.5 billion takeover offer as inadequate and not in the best interest of shareholders.  The hotel, casino and entertainment giant will review options to increase shareholder value, including the potential sale of non-core assets.
Industry experts have estimated those assets could generate more than $2 billion that ITT could use to buy back stock or issue a special dividend to shareholders.
Meanwhile, Hilton is widely expected to raise its $55 per share offer for ITT, perhaps as much as another $10 per share.  
""If Hilton comes back with $65, I think ITT will have trouble making a strong case to its shareholders,"" said Bruce Raabe of Collins & Co.
Shares of ITT jumped 1-3/4 to 57-3/4 in afternoon trading on views of a higher bid.
Analysts also said that stockholders will not want to wait for ITT to sell holdings while a Hilton offer is on the table.
Analysts and sources close to ITT have indicated the company would move quickly if it decides to sell assets and the stakes in Madison Square Garden and Alcatel Alsthom would be among the first to be sold.  
French telecommunications company Alcatel said it has been approached by ITT for permission to sell some of its five percent stake before an agreed-upon July deadline. ITT signed a shareholders agreement with Alcatel in 1992 that called for it to retain the stake until July 3.
And Cablevision, which owns the Madison Square Garden properties with ITT, reiterated that it has an excellent relationship with ITT and its chairman Rand Araskog.
Cablevision declined to comment on speculation that it would buy ITT's 50 percent of Madison Square Garden. It has rights of first refusal if ITT decides to sell the stake.  
Although the strategy may be a tough sell with shareholders, some industry experts noted that ITT's rejection was aggressive, well-planned and issued before Friday's response deadline.
""ITT has put the burden back on Hilton,"" said Bjorn Hanson of Coopers & Lybrand, adding that ITT may still pursue an acquisition to stave off Hilton.
Meanwhile, Hilton had little reaction to ITT's rejection, saying only that the response does not change its plans or its intent.
",39
"The union of CVS Corp and Revco D.S. Inc creates a drugstore powerhouse that will dominate the U.S. Northeast and Southeast and likely marks the near-term end of mergers between the industry's biggest players.
But dozens of small publicly held and private chains still exist and are expected to get scooped up or join forces to combat industry leaders such as Walgreen Co, Rite Aid Corp, J.C. Penney's Thrift and the new CVS.  
""A number of companies in the sector are coming to us and asking us what they should do strategically,"" said Marty Murrer, managing director at Donaldson, Lufkin & Jenrette, which advised CVS in the Revco deal and has been a key player in the sector's biggest transactions.
Arbor Drug Inc, Genovese Drug Stores Inc and  Duane Reade Inc have been cited as candidates likely to participate in the consolidation sweeping the drugstore sector.
The union of Revco and CVS signals the final move in a tumultuous year for Twinsburg, Ohio-based Revco.  
A $1.8 billion friendly merger agreement between Revco and Rite Aid collapsed last April after state and federal regulators contended a combination would create antitrust issues and potentially drive up consumer prices.
Then in September, Revco launched a hostile offer for Big B Inc, which initially rejected its bid. But Big B, a southeastern chain, was unable to rebuff Revco for long, and the companies struck a friendly, $380 million deal in October.
Shareholders reacted positively to the Revco-CVS union, bidding Revco shares up 2-1/2 to 40-1/2 by Friday afternoon. The $2.8 billion deal values Revco at about 40 per share.  
The transaction will solidify CVS's position in the sector and allow it to expand significantly. Analysts said the companies have little geographic overlap, and the union is not expected to generate significant antitrust concerns.
On Friday, CVS also disclosed an aggressive growth plan that calls for 300 new stores or relocations each year.
""It's a great deal for CVS. The structure (of the deal) is going to allow it to be additive to earnings immediately. (CVS and Revco) are the two most dominant market share players in the industry, and market share is really the name of the game,"" said Eric Bosshard of Midwest Research-Maxus Group.  
Industry experts and Wall Street sources said Revco could have remained a viable company on its own. Revco and CVS last month confirmed their merger talks.
""I don't view this as a forced marriage. I view it as a marriage of great opportunity for the shareholders. Nobody has to do this,"" Murrer said.
Two shareholders likely to prosper from the merger are Revco Chief Executive Dwayne Hoven and Revco Co-chairman Sam Zell. Zell's Chilmark Fund LP holds a 19.2 percent stake in Revco. Hoven, who will not be joining the merged company, also has large holdings in Revco.
",39
"Conrail Inc. said Tuesday it planned to proceed with a crucial shareholder meeting Friday despite Norfolk Southern Corp.'s latest effort to thwart the railroad's planned $9.2 billion merger with CSX Corp.
CSX Chairman John Snow described Norfolk Southern's effort as a ""desperate act"" that may be confusing shareholders.
""They had suffered two stinging defeats. They were probably reeling and felt the need to do something,"" Snow said in a telephone interview.
He was referring to setbacks last week in which a federal judge and a regulatory agency denied Norfolk Southern's attempt to block the Conrail-CSX transaction.
Norfolk, Va.-based Norfolk Southern, whose $10.3 billion bid for Conrail has been rejected, said late Monday it would buy 9.9 percent of Conrail stock if the Philadelphia-based railroad's shareholders defeated a key measure that would allow the proposed Conrail-CSX transaction to proceed.
Wall Street sources had speculated the new development in the three-month takeover battle could prompt Conrail to delay the shareholder meeting.
Conrail will be asking shareholders to waive a Pennsylvania law that would essentially require Richmond, Va.-based CSX to pay for Conrail in cash. The proposed Conrail-CSX transaction is a mixture of cash and stock.
Norfolk Southern has offered to buy Conrail for cash.
Snow said he was ""reasonably confident, but guarded"" Conrail shareholders would approve the measure Friday.
Votes are expected to be tallied by early next week.
Wall Street analysts said Norfolk Southern might win some new allies with its plans, but said its efforts to derail the merger may not succeed.
""It might have some influence on (the shareholders), but it looks to me like it may be too late. This has been a tough battle for Norfolk Southern,"" said Thom Brown, managing director of investment firm Rutherford, Brown and Catherwood Inc., adding that Norfolk Southern was ""trying to win over any uncommitted shareholder they can find.""
If shareholders defeat the measure, Conrail has the right to call another meeting.
""If we lose it, I think it's going to be 'shame on us' for not having communicated fully the benefits of this merger,"" Snow said. ""What I propose doing, if we lost it ... would be to take our time, and patiently go around and talk to the shareholders -- that may take three months, that may take six months -- until they really understood the merger.""
Snow said he spoke earlier Tuesday to Conrail Chairman David LeVan.
""They're firmly committed to us. We're firmly committed to them,"" Snow said. ""We certainly hope we win the vote. If we don't win the vote, we're still committed to each other. We have a contract that's binding for two years.""
Under the proposed deal, Conrail and CSX are prohibited from entering another merger until 1999.
Separately, a U.S. appellate court scheduled arguments for Wednesday afternoon on a Norfolk Southern request to block the shareholders meeting.
",39
"Rubbermaid Inc, hurt badly by skyrocketing costs of raw materials used to make key products, is hoping to limit its dependence on plastic with the acquisition of Graco Children's Products Inc.
The move to diversify its raw material base is critical for Rubbermaid, which earlier said third quarter earnings will fall short of expectations due to rising prices for resins.
""They are so reliant on this one raw material and its been obvious that resin costs have been going against them,"" said Eric Bosshard of Midwest Rsearch-Maxus Group.  
Rubbermaid sought to soften the bad earnings news by announcing plans to buy privately held Graco for $320 million in cash. Graco products, which include strollers and high chairs, are made of textiles and metals, as well as plastic.
But Rubbermaid shares extended morning losses in afternoon trade, tumbling 4 to 22-1/2 on fears it will feel the impact of the rising raw material costs beyond the third quarter.
The Wooster, Ohio-based company said third quarter sales and earnings will be flat with year-ago levels. Analysts had expected both sales and earnings to rise.  
The Graco acquisition also will extend Rubbermaid's move into juvenile products. It already is positioned in that market through its Little Tikes division, which makes plastic toys.
""We plan to grow and expand Graco. It will not be folded into Little Tikes,"" said Rubbermaid spokeswoman Lorrie Crum.
Like other divisions of Rubbermaid, Little Tikes is experiencing a disappointing third quarter. In addition to the higher raw material costs, Crum attributed weaker sales to competition from industry player Fisher-Price, which is owned by Mattel Inc.  
Crum also cited unusual summer weather in much of the U.S., which kept retail inventories high.
But the rising resin prices are considered the main issue Rubbermaid must combat in coming months even as the company moves forward with a restructuring announced last December. Strong demand for resins, combined with some supply problems, have triggered several price hikes and another is slated to take effect in October.
""We are looking at a number of options before us that can be done to address the resin situation,"" Crum said, adding that market prices have risen from about 32 cents per pound in April to 47 cents.
She did not elaborate on those options.
But analysts are not expecting the company to accelerate its restructuring, which already calls for intensive cost-cutting.
""I don't think there's any slash-and-burn strategy at this point,"" said one analyst who did not want to be identified.
",39
"The bidding war for Conrail Inc appears to be drawing to a close, but big legal and regulatory battles are right around the corner.
Industry analysts said rival bidders CSX Corp and Norfolk Southern Corp are unlikely to offer much more for Conrail, but both sides will pursue the fight elsewhere.
""That is the whole process that takes place over the course of 1997 - the battle for market share as opposed to Conrail shares,"" said Anthony Hatch, analyst at NatWest Securities Corp.  
CSX on Thursday revised its friendly merger pact with Conrail to give shareholders an extra $870 million in the cash and stock transaction. Based on Friday's stock activity, the deal is worth $9.3 billion, or about $102 per Conrail share.
A source close to CSX told Reuters Thursday that CSX and Conrail hoped the revised deal would end the bidding war.
""If someone were to start to bid higher than this, they probably wouldn't get the economies out of the deal to make it work so the bidding war, I think, has come to the end,"" said Charles Vincent of PNC Asset Management Group.  
Just hours after CSX and Conrail unveiled the new terms of their planned merger, rebuffed bidder Norfolk Southern increased its all-cash offer by $500 million to $10.5 billion, or $115 per share.
Although Norfolk Southern's bid has been higher throughout the two-month takeover fight, Conrail contends the union with CSX is a better strategic fit.
Industry experts said Norfolk Southern, which has the financial power to bid more than $10.5 billion, merely wants to preserve the spread between the two offers while it fights a key aspect of the Conrail-CSX pact in court.  
Norfolk Southern is challenging part of the transaction that prohibits either CSX or Conrail from seeking another merger partner before 1999.
Norfolk Southern last month lost a court fight in which it challenged previous terms of the deal, including a exclusivity provision that ruled out other talks before July 1997.
""This is a sign that they're not going to go bananaas (with a very high offer). If they're able to break the lock-up provision, they have a good bid,"" Hatch said.  
""It was the right thing to do to keep pressure on the (Conrail) board,"" said one takeover stock trader, referring to investors who are unhappy with the Conrail board's decision to pursue the lower of the two bids.
A hearing on the exclusivity provision is scheduled for Jan 9 in U.S. District Court in Philadelphia.
Few security analysts are predicting the hearing's outcome, but the takeover fight for Conrail is expected to continue no matter which company wins in court.
After the court fight, the next battle site will likely be in Washington where the losing bidder is expected to vehemently challenge the merger. The deal already is expected to face intense scrutiny from the Surface Transportation Board, the federal agency that oversees railroads.
""You're going to have a lot of opposition to this,"" Vincent said, citing railroads, shippers and state agencies that are expected to express their opinions when the transaction reaches the regulatory stage.
Last week, the Port Authority of New York and New Jersey said it would intervene in any merger involving Conrail.
",39
"CSX Corp's sweetened bid for Conrail Inc makes the deal more appealing to Conrail shareholders than its previous offer, but it may not be strong enough to clinch the deal.
Although the new terms are financially more attractive and reduce investor risk, members of the Wall Street investment community blasted a provision that prohibits either company from pursuing another partner until the end of 1998.
Furthermore, rival Norfolk Southern Corp, which still has a higher offer, is expected to raise its bid.  
The new pact ""definitely doesn't lock it up because you've got to wait for Norfolk Southern to come back. It definitely makes it more attractive and more equitable across the board,"" said Peter Gleason, an analyst at Institutional Shareholder Services, an shareholder advisory firm that last week recommended investors reject a key provision of the deal.
The new terms raise the previous bid by about $870 million by offering shareholders convertible preferred shares valued at $16 each. CSX already has bought 19.9 percent of Conrail in a cash tender offer and is seeking to buy another 20.1 percent. It has proposed buying the rest of Conrail for stock.  
Based on Thursday's trading, analysts said the new terms value Conrail at about $104 per share, or $9.5 billion in cash and stock, still less than Norfolk Southern's $10 billion, $110-per-share all-cash offer.
The new terms also sets a voting trust for Conrail shareholders to guarantee speedy payment for their shares. Under the previous offer, shareholders would not receive payment until the deal cleared regulatory hurdles.
The establishment of the voting trust is likely to encourage some shareholders to tender their stock to CSX and exit the controversial transaction, experts said.  
A source familiar with the talks said the CSX board decided to add another $16 per share to the offer and hammered out the details of the strategy Wednesday night.
The source also defended the extension of the pact's exclusivity agreement, saying that it would prevent a continued bidding war.
""The message to the world is, take this deal or wait an awful long time for an alternative,"" said the source, who did not want to be identified.  
Still, Wall Street experts expect Norfolk Southern to challenge the exclusivity period in court. An attorney for Norfolk Southern said legal action was likely forthcoming.
Norfolk Southern also earlier said it expected to respond promptly to a new CSX offer.
Meanwhile, Anthony Hatch of NatWest Securities noted that the deal was becoming less financially attractive to the prospective buyers as the bidding war continued.
""We're bumping up against the point at which this is getting pricey. It still makes some sense, but for CSX it's getting close,"" Hatch said, adding that Norfolk Southern can well afford to raise its offer.
By 1430 EST/1930 GMT Thursday, shares of Conrail were 1-1/2 higher at 100-1/2 in trading on the New York Stock Exchange, amid expectations that Norfolk Southern would raise the stakes in the battle.
",39
"A top executive of Tyco International Ltd on Monday vowed that the company would not pursue a hostile takeover of American Standard Cos Inc, which last month rejected its unsolicited merger offer.
""Tyco historically has not done hostile takeovers, and we are not going to do a hostile takeover here. We're off and doing other things. As far as we're concerned, it's past history,"" Senior Vice President David Brownell told Reuters in a telephone interview.  
However, Brownell said Tyco would still welcome friendly talks with American Standard.
""If the American Standard management would like to speak with us, we would be happy to speak with them,"" he said.
Brownell said that Tyco has not tried to contact American Standard since its December offer was rejected.
American Standard earlier disclosed that it had received the offer from Tyco but had determined that it wanted to remain independent. It also said it did not plan to hold any discussions with Tyco.
Tyco had offered $50 per share, or about $3.9 billion, for American Standard in a combination of stock and cash.
Shares of American Standard, which had rallied more than 4 in early trade, were up 3-1/4 to 43-1/2 by midafternoon.
Tyco shares were unchanged at 54-5/8.
",39
"Conrail Inc. on Friday spurned a sweetened $10.5 billion takeover offer from hostile suitor Norfolk Southern Corp. amid speculation that a 2-month-old bidding war for the railroad was drawing to a close.
As expected, Conrail rejected the offer and contended that its proposed friendly $9.3 billion merger with CSX Corp. would be a better corporate combination.
""The Conrail board has again confirmed that a merger of equals with CSX and not a sale to Norfolk Southern is in the best interests of Conrail and its constituencies, including shareholders, employees, suppliers, customers and communities served,"" Conrail Chairman David LeVan said in a statement.
The rejection came just one day after both CSX and Norfolk Southern raised their bids for Conrail.
Industry analysts said CSX and Norfolk Southern were unlikely to offer much more for the Philadelphia-based railroad, but both sides will pursue the fight in court, before regulators and in the marketplace.
""That is the whole process that takes place over the course of 1997 -- the battle for market share as opposed to Conrail shares,"" said NatWest Securities Corp. analyst Anthony Hatch.
On Thursday, Richmond, Va.-based CSX raised its offer for Conrail to give shareholders an extra $870 million in the cash-and-stock merger. Based on Friday's stock activity, the deal is worth $9.3 billion, or about $102 per Conrail share.
A source close to CSX told Reuters then that CSX and Conrail hoped the revised deal would end the bidding war.
But just hours after CSX and Conrail unveiled the new terms of their planned merger, Norfolk Southern raised its all-cash offer by $500 million to about $10.5 billion, or $115 a share.
""If someone were to start to bid higher than this, they probably wouldn't get the economies out of the deal to make it work, so the bidding war, I think, has come to the end,"" said Charles Vincent of PNC Asset Management Group.
Although Norfolk Southern's bid has been higher throughout the two-month takeover fight, Conrail contends the union with CSX is a better strategic fit.
Industry experts said Norfolk, Va.-based Norfolk Southern, which has the financial power to bid more than $10.5 billion, merely wants to preserve the spread between the two offers while it fights a key aspect of the Conrail-CSX pact in court.
Norfolk Southern is challenging part of the transaction that prohibits either CSX or Conrail from seeking another merger partner before 1999.
Some analysts and investors said that if the exclusivity provision is not thrown out after a Jan. 9 hearing before a federal judge in Philadelphia, it could guarantee a victory for CSX because shareholders would not wait two years for a deal with Norfolk Southern.
Norfolk Southern last month lost a court fight in which it challenged previous terms of the deal, including an exclusivity provision that ruled out other talks before July 1997.
""This is a sign that they're not going to go bananas (with a very high offer). If they're able to break the lock-up provision, they have a good bid,"" Hatch said.
""It was the right thing to do to keep pressure on the (Conrail) board,"" said one takeover stock trader, referring to investors who were unhappy with Conrail's decision to pursue the lower of the two bids.
The court case is expected to hinge on whether Conrail's agreeing to the extended exclusivity period falls within the broad discretion allowed a board under Pennsylvania law, said Charles Yablon, a professor of corporate law at Cardozo University in New York.
""They're pushing the outside of the envelope and trying to take maximum advantage of the leeway that Pennsylvania law gives them,"" Yablon said. But if they can legally justify the move, CSX will probably prevail in court, he said.
Few Wall Street analysts were predicting the outcome, but the war was expected to drag on no matter which company wins in court.
After the court fight, the next battle site will be Washington where the losing bidder is expected to vehemently challenge the merger. The deal already is expected to face intense scrutiny from the Surface Transportation Board, the federal agency that oversees railroads.
""You're going to have a lot of opposition to this,"" PNC's Vincent said, citing railroads, shippers and state agencies which are expected to express their opinions when the transaction reaches the regulatory stage.
Last week, the Port Authority of New York and New Jersey said it would intervene in any merger involving Conrail.
Conrail stock fell 87.5 cents to $99.875 on the New York Stock Exchange. CSX stock fell 50 cents to $43.25 and Norfolk Southern shares rose $1.125 to $89.50, also on NYSE.
",39
"ADT Ltd. Wednesday rejected a $3.5 billion takeover bid from Western Resources Inc. as inadequate, but the security services company said it would consider a new offer from the utility or another bidder.
""The board will consider all bona fide offers presented to it (including one by Western) and may recommend a proposal if it reflects the full and fair value of the company, including its favourable prospects going forward,"" ADT said in a statement mailed to shareholders.
North America's largest security services company also set a July 8 date for a special meeting at which shareholders will vote to determine control of its board. Western is seeking to gain control of the board as part of its acquisition attempt.
Western, which owns 27.1 percent of ADT and spent much of last year laying the groundwork to take over the company, vowed to pursue its offer, which was disclosed last month.
""We still intend to move forward with our offer, which we believe is a fair offer,"" a Western spokeswoman said. She did not elaborate, saying the company was reviewing ADT's statements.
Boca Raton, Fla.-based ADT provides continuous monitoring of commercial and residential security systems to over 1.7 million customers. It is also the nation's second-largest provider of vehicle auction services, with 27 auction centres.
In a letter to shareholders, ADT said the ""preliminary view"" of its board of directors was that the offer was inadequate. The cash and stock transaction values ADT at about $22.50 a share.
Long considered one of the premier properties in the highly fragmented security sector, most industry analysts value ADT at between $25 and $30 a share.
ADT was slated to be acquired last year by Republic Industries Inc. in a transaction that valued it at about $29 a share, but the deal fell apart due to uncertainty over Republic's volatile stock price.
The electronic security business has grown increasingly attractive to utilities and telecommunications companies in recent months as they face heightened competition in a new era of deregulation.
""ADT believes that its ability to capitalise on a range of growth opportunities currently available to ADT would be impaired by an amalgamation with Western,"" the company said, adding it expects partnership opportunities in telecommunications, consumer electronics and insurance.
It also contended that the Western offer was subject to numerous conditions that ""ADT believes have a high risk of not being fulfilled.""
ADT also questioned the benefits of a transaction to its shareholders, saying, ""Western has offered no support for the notion that ADT's nationwide customer base would have any interest in buying electric power from a Kansas utility.""
It said Western does not have the regional and market positioning, range of services or cost structure that would make it a desirable partner.
ADT raised questions about Western's ability to finance the proposed transaction or finance the growth of the security business.
ADT also said it expects to take a one-time charge of about $110 million after taxes and report a $50 million gain from the sale of its remaining interest in Limelight Plc.
The charge was for the integration of the security businesses that ADT acquired recently as part of Automated Security Holdings Plc and for enhancing its technological infrastructure. ADT said the integration of the businesses into ADT should bring about ""significant future cost savings.""
ADT stock gained 25 cents to $23 while Western Resources rose 50 cents to $31.50 on the New York Stock Exchange.
",39
"A Conrail Inc. director abstained from a key vote on the railroad's proposed $9.1 billion merger with CSX Corp. due to a controversial provision prohibiting both parties from seeking another deal until 1999.
In a filing late Friday with the Securities and Exchange Commission, Conrail disclosed that board member David Lewis abstained from the vote ""in light of the provision... extending the exclusivity period to December 31, 1998.""
Conrail did not disclose any other details, but noted that Lewis still fully supported the proposed transaction.
Lewis, a partner in Detroit law firm Lewis Clay & Munday, could not be reached for comment.
CSX and Conrail last week revised terms of their merger to give shareholders another $870 million in the transaction and establish a voting trust to accelerate payment to investors.
The exclusivity period, which was extended from July 1997, is one of the most controversial aspects of the proposed deal.
Rival bidder Norfolk Southern Corp. has challenged the exclusivity period in court, contending that Conrail's board has violated its duties and misled shareholders.
A hearing on the issue has been set for Jan. 9 in U.S. district court.
Takeover stock traders speculated that Norfolk Southern would seek testimony from Lewis at the hearing about the reasons for his abstention.
CSX and Norfolk Southern have been locked in a two-month bidding war for Conrail. Although Norfolk Southern's $10.5 billion offer is higher, Conrail has rejected its advances and contends that its planned $9.3 billion merger with CSX is a better fit.
A Conrail spokesman declined to comment on Lewis' abstention. Conrail's other 11 board members reportedly voted in favour of the revised cash and stock CSX deal.
Shares of Conrail gained 12.5 cents to $100 on the New York Stock Exchange. CSX stock fell 25 cents to $43 and Norfolk Southern shares fell $1.125 to $88.375, also on the NYSE.
Legal experts last week noted that Pennsylvania corporate law grants broad discretion to corporate boards when they are considering a transaction.
In addition to the legal battle, industry sources widely anticipate any proposed transaction with Conrail will generate opposition at the regulatory level from the losing bidder, shippers and state agencies.
",39
"Western Resources Inc. on Wednesday offered to buy ADT Ltd. in a $3.5 billion cash and stock transaction that would transform the Kansas utility into the nation's top provider of electronic security services.
The move marks the latest step in Western's aggressive strategy to dominate the highly fragmented security industry, which has grown increasingly attractive to utilities and telecommunication companies.
Topeka, Kansas-based Western Resources, which already holds a 27 percent stake in ADT, said it would take its unsolicited offer directly to ADT shareholders. It also said it would call a special meeting of shareholders to replace the existing ADT board of directors.
""We have demonstrated our belief in ADT's future through our investment. The benefits of this transaction are compelling, offering a natural extension of our respective businesses,"" Western Resources Chairman John Hayes said in a statement.
Hayes advised ADT of its offer in a letter in which he noted that ADT previously said it was not interested in a transaction with Western Resources.
""Now, after careful study and consideration, we have determined that the potential benefits to ADT, Western Resources and ADT's other shareowners from a combination of Western Resources and ADT are simply too compelling to ignore,"" Hayes wrote to ADT Chairman Michael Ashcroft. ""We firmly believe that this combination will provide significant benefits to our respective shareowners, customers and employees not available to either company on its own.""
Western said it would pay $22.50 for each share of ADT, consisting of $15 in Western Resources common stock and $7.50 cash. The offer would give ADT holders a 12 percent premium over Tuesday's closing stock price of $20.125 on NYSE.
ADT climbed $2.625 to $22.75 in afternoon trading on the New York Stock Exchange, where Western Resources' stock was unchanged at $31.25.
Western's proposal also calls for ADT shareholders to receive the equivalent of a 99 cents per ADT share annual dividend. ADT does not presently pay a dividend.
Boca Raton, Fla.-based ADT said it would review the offer in due course and advised shareholders to await a recommendation from its board.
The offer for ADT marks the second security acquisition proposal made this week by Western Resources. On Monday, Western Resources announced plans to buy the security business of Westinghouse Electric Corp. for $368 million in cash.
Long considered a premier property in the electronic security industry, ADT earlier this year was to be acquired by Republic Industries Inc. for $5 billion. But that transaction collapsed in September after months of uncertainty due to stock price volatility.
Western Resources has been aggressively pursuing deals in other areas. It has mounted a $1.9 billion takeover bid for Kansas City. Mo.-based Kansas City Power & Light Co.
Last week, Western Resources agreed to sell its natural gas assets to Oklahoma-based Oneok Inc. in a $660 million deal in which Western Resources will take a large stake in Oneok, the parent of Oklahoma Natural Gas Co. The utility's customers could become clients for Western Resources' other services, such as home security.
",39
"CVS Corp., the nation's fifth-largest chain of drug stores, said Friday it will acquire rival Revco D.S. Inc. for $2.8 billion in stock and the assumption of $900 million of debt.
The planned union will create the nation's second largest drug store chain, dominating the eastern half of the country. It will have about 4,000 stores and annual sales of $13 billion, making it the largest in terms of outlets and second-largest behind Walgreen Co. in terms of total sales.
While the announcement did not state how many jobs might be eliminated in the merger, the companies said that Revco's Twinsburg, Ohio, headquarters would be phased out. Sources familiar with the companies said that most of the 1,000 people employed at the headquarters were likely to lose their jobs.
CVS Chief Operating Officer Thomas Ryan did not dispute those estimates, saying ""it's unfortunate,"" but he said the company will retain about 98 percent of Revco employees.
CVS said the new company, which will keep the name CVS, will be led by its existing senior management and retain the CVS headquarters in Woonsocket, R.I.
Revco Chief Executive Officer Dwayne Hoven will leave the company after the merger is completed.
""He will stay through the transition. He is intently interested in seeing to it that his people in Twinsburg are well taken care of,"" a Revco spokeswoman said.
The merger is the latest in the drugstore chain sector, which has seen intense consolidation in the past year.
The transaction will solidify CVS's position in the sector and allow it to expand significantly. Analysts said the companies have little geographic overlap and the combination is not expected to generate significant antitrust concerns.
CVS stores are located primarily in the Northeast and Middle Atlantic regions while Revco stores are mostly in Midwest and Southeast.
The merger calls for CVS to pay the equivalent of $40.64 in its shares for each share of Revco, based on Thursday's closing stock prices.
CVS stock closed Thursday at $44 a share and Revco at $38, both on the New York Stock Exchange, but moved higher Friday.
Revco added $3.375 to close at $41.375 in heavy trading while CVS gained $3.125 to $47.125, both on the New York Stock Exchange.
Ryan of CVS said the transaction would add to earnings slightly this year and would add another 10 cents to 15 cents per share in 1998.
""What we're trying to be is more than just a growth company -- a world-class healthcare retailer. And that's what I think this combination will do,"" he said in a telephone interview.
Analysts agreed.
""It's a great deal for CVS. The structure (of the deal) is going to allow it to be additive to earnings immediately,"" Eric Bosshard of Midwest Research-Maxus Group said.
""(CVS and Revco) are the two most dominant market share players in the industry and market share is really the name of the game,"" he said.
Both companies acknowledged last month that they were discussing a combination of their businesses. Ryan said that the two companies began holding discussions in October.
Ryan said CVS also had considered an acquisition of Eckerd Corp., but decided that Revco was a better fit. J.C. Penney Co. Inc., which owns Thrift drug stores, announced a $3.3 billion acquisition of Eckerd in November.
Two shareholders likely to prosper from the merger are Revco CEO Hoven and Revco co-Chairman Sam Zell. Zell's Chilmark Fund LP holds a 19.2 percent stake in Revco and Hoven also has large holdings in the company.
CVS said the new company plans to open or relocate 300 stores a year after the merger is completed.
Analysts said the CVS-Revco union likely marks at least a near-term end to big mergers in the industry, although dozens of small chains still exist and are expected to get scooped up or join forces with bigger operators.
Revco had agreed in November, 1995, to merge with Rite Aid Corp. in a $1.8 billion deal, but that merger collapsed last April after federal and state regulators raised antitrust concerns.
Analysts said the companies have little goeographic overlap, and the union of CVS and Revco was not expected to generate significant antitrust concerns.
""A number of companies in the sector are coming to us and asking us what they should do strategically,"" said Marty Murrer, managing director at Donaldson, Lufkin & Jenrette, which advised CVS in the Revco deal and has been a key player in the sector's biggest transactions.
Arbor Drug Inc., Genovese Drug Stores Inc. and privately held Duane Reade Inc. have been cited as likely candidates to participate in the consolidation sweeping the sector.
",39
"Healthcare and oil companies are expected to be bigger players in 1997's corporate merger boom, although most of the activity is likely to remain dominated by telecommunications, utilities and insurance.
Several other sectors, including airlines and railroads, also are on the verge of participating in the deal frenzy that has gripped corporate America for nearly two years.
Mergers show no sign of slowing in 1997 from the record pace in 1996, said investment bankers and merger experts.
""We see no reason why the (merger and acquisition) cycle should slow down. We think the boom will continue through (1997),"" said Philip Keevil, managing director at Salomon Brothers.
A record $658.8 billion worth of transactions was announced in 1996, far surpassing initial expectations for the year, according to figures compiled by Securities Data Co., a Newark, N.J.-based firm that tracks deals.
The key driver in the current merger trend has been the high-flying stock market, coupled with corporate trends that stress consolidation and cost-cutting.
""At the beginning of 1996, it looked like it would be another good year for mergers. That got blown to pieces. It's hard to know if (1997) will be better, but it feels real good,"" said Steven Wolitzer, managing partner and co-head of mergers and acquisitions at Lehman Brothers.
Industry experts said the pipeline for potential deals appears full for at least the first six months of 1997.
""We're at a really high level of activity. There is good corporate profitability and people are using their money for share buybacks and acquisitions,"" said Robert Lovejoy, managing director at Lazard Freres.
And investors like to see acquisitions.
""Shareholders expect managements to be taking pro-active steps to generate value-enhancing transactions. And the management of these corporations realise they can't count on the stock market"" to boost profitability, said Bruce Nolop, managing director at Wasserstein Perella & Co.
Federal deregulation is expected to drive more consolidation in telecommunications and utilities, two of the most active sectors in 1996. The telecommunications sector rang up the biggest deals of 1996, and the utilities industry also played a large role in the year's transactions.
Merger experts predict energy companies, which spent much of 1996 forming alliances and divesting properties, will become more aggressive buyers and sellers in 1997. The nation's refiners, plagued with poor profit margins, especially are expected to participate in the merger trend.
Meanwhile, the prospect of mergers are hovering over the nation's airlines. Industry experts believe a consolidation of the airline industry is inevitable, especially as American Airlines and British Airways Plc pursue a wide-reaching partnership.
Similarly, a resolution of the takeover battle for Conrail Inc. will likely trigger other railroad mergers, experts said. CSX Corp. and Norfolk Southern Corp. are locked in a bidding war for Conrail and the losing railroad is likely to seek another partner, they said.
",39
"CSX Corp and Conrail Inc were expected Thursday to announce sweetened terms for their proposed friendly $8.5 billion merger, according to sources familiar with the transaction.
The new terms were expected to include a richer exchange ratio in the stock portion of the cash and stock transaction and a speedier payment to investors by setting up a voting trust for all shares, the sources said.
Conrail and CSX have been discussing a sweetened deal for weeks in an attempt to appease shareholders who favour Norfolk Southern Corp's $10 billion all-cash bid for Conrail.
Specific details of the new terms were not immediately available. The CSX board reportedly met on Wednesday night to discuss the new terms.
A spokesman for CSX declined to comment. Conrail could not be reached for comment.
Early on Wednesday evening, a source close to the talks said the two companies were on the verge of reaching new terms.
""It's very close,"" said the source who did not want to be identified, adding the boards were pursuing revisions that would give shareholders ""more value and quicker payment"".
Upon announcing new terms for the controversial transaction, Conrail is expected to cancel a December 23 meeting in which shareholders were set to vote on a key provision of the deal.
CSX already has bought 19.9 percent of Conrail for $110 per share in a cash tender offer and is seeking to buy another 20.1 percent in a second cash tender offer.
CSX plans to buy the remaining 60 percent of Conrail shares in stock at an exchange ratio of 1.85619 CSX shares for each Conrail share.
Norfolk Southern has offered to buy Conrail for $110 per share in cash. Conrail has rejected the offer, contending that a transaction with CSX is a better fit.
But the Conrail-CSX merger needs shareholders to waive a Pennsylvania law in order for CSX to buy another 20.1 percent of Conrail. A U.S. judge on Tuesday ordered Conrail to conduct the December 23 meeting even though it contended that it could delay the vote if it didn't have enough shareholder support.
Conrail would be permitted to delay the meeting if it revised the existing merger agreement.
Shareholders have expressed concern that they would not receive payment for the stock portion of the transaction until the deal clears regulatory hurdles.
The proposed merger of Conrail and CSX, first announced on October 15, would create an powerhouse railroad on the U.S. East Coast.
But a revision of terms might not signal an end to the battle for Conrail. Industry experts have widely expected Norfolk Southern to quickly raise its bid if Conrail and CSC sweeten the terms of their proposal.
A spokesman for Norfolk Southern declined to comment on whether it will be prepared to raise its offer, noting only ""we have said that, whatever they do, we will respond appropriately"".
",39
"Healthcare and oil companies are expected to be bigger players in 1997's corporate merger boom, although most of the activity is still likely to be dominated by telecommunications, utilities and insurance.
Several other sectors, including airlines and railroads, also are on the verge of participating in the deal frenzy that has gripped corporate America for nearly two years.
And the merger pace shows no sign of slowing in 1997 from 1996's record, said investment bankers and merger experts.  
""We see no reason why the (merger and acquisition) cycle should slow down.  We think the boom will continue through (1997),"" said Philip Keevil, managing director at Salomon Brothers.
A record $658.8 billion worth of transactions was announced in 1996, far surpassing initial expectations for the year, according to figures compiled by Securities Data Co, a Newark, N.J.-based firm that tracks deals.
The key driver in the current merger trend has been the high-flying stock market, coupled with corporate trends that stress consolidation and cost-cutting.  
""At the beginning of 1996, it looked like it would be another good year for mergers.  That got blown to pieces. It's hard to know if (1997) will be better, but it feels real good,"" said Steven Wolitzer, managing partner and co-head of mergers and acquisitions at Lehman Brothers.
Industry experts said the pipeline for potential deals appears full for at least the first six months of 1997.
""We're at a really high level of activity.  There is good corporate profitability and people are using their money for share buybacks and acquisitions,"" said Robert Lovejoy, managing director at Lazard Freres & Co.  
And investors like to see acquisitions.
""Shareholders expect managements to be taking pro-active steps to generate value-enhancing transactions.  And the management of these corporations realize they can't count on the stock market"" to boost profitability, said Bruce Nolop, managing director at Wasserstein Perella & Co.
Federal deregulation is expected to drive more consolidation in telecommunications and utilities, two of the most active sectors in 1996.  The telecommunications sector rang up the biggest deals of 1996 and the utilities industry also played a large role in the year's transactions.  
Although healthcare companies already have participated in the merger boom, experts anticipate more consolidation among pharmaceutical companies, hospitals and health maintenance organizations.
Merger experts also predict energy companies, which spent much of 1996 forming alliances and divesting properties, will become more aggressive buyers and sellers in 1997.  The nation's refiners, plagued with poor profit margins, especially are expected to participate in the merger trend.
Meanwhile, the prospect of mergers is hovering over the nation's airlines.
Industry experts believe airline industry consolidation is inevitable, especially as AMR Corp's American Airlines subsidiary and British Airways Plc pursue a wide-reaching partnership.
Similarly, a resolution if the takeover battle for Conrail Inc will likely trigger other railroad mergers, experts said. CSX Corp and Norfolk Southern Corp are locked in a bidding war for Conrail and the losing railroad is likely to seek another partner.
",39
"Chief executives of Conrail Inc., CSX Corp. and Norfolk Southern Corp. are expected to hold a crucial meeting this week that could help put a giant railroad merger back on track.
Although final details still had not been set by late Monday, sources familiar with the plans said the meeting of the three executives was likely to occur by the end of the week.
""They are working on a date to meet in the next few days,"" said one source close to the railroads who did not want to be identified.
Conrail's David LeVan, CSX's John Snow and David Goode of Norfolk Southern last week agreed to hold discussions about the planned $9.5 billion merger of Conrail and CSX.
First announced in October, the planned transaction has been fraught with troubles due to a rival $10.3 billion bid from Norfolk Southern. Philadelphia-based Conrail has rejected the Norfolk Southern offer, contending that the CSX deal was a better fit.
Earlier this month, however, Conrail shareholders rejected a key measure needed for the CSX transaction to move forward.
Sources said that attorneys for the three railroads over the weekend hammered out terms of draft confidentiality pacts.
Only LeVan, Snow and Goode are expected to participate in the meeting.
Two other sources familiar with the companies' plans said the three railroads may announce as soon as Tuesday that a meeting has been scheduled, but likely will not provide any Like most industry experts, the sources involved in the transaction warned that any agreement between the three railroads will not be quick.
""I don't think this is an easy thing to resolve. It's a long way from saying this is a done deal,"" said one.
""I think everyone agrees its resolveable, but certainly the parties are starting out far apart,"" said another.
Some Wall Street experts have speculated that the ultimate conclusion will call for a splitting up of Conrail's assets.
But one of the sources close to Conrail stressed that LeVan still opposes carving up the railroad and distributing the pieces to Richmond, Va.-based CSX and Norfolk, Va.-based Norfolk Southern.
Meanwhile, Norfolk Southern executives will be in New York on Wednesday for a quarterly meeting with Wall Street analysts.
",39
"The chairman of ITT Corp has rejected an offer to meet the top executive of Hilton Hotels Corp, which last week launched a $6.5 billion hostile takeover of the hotel, casino and entertainment giant, sources close to the companies said.
In a letter faxed to Hilton chairman Stephen Bollenbach on Saturday, ITT chairman Rand Araskog said it would be inappropriate for the executives to meet or for Bollenbach to address the ITT board on Tuesday as he had requested, the sources said.
The sources described Araskog's letter as brief and formal.
An ITT spokesman declined to comment and a Hilton spokesman in Los Angeles could not be immediately reached for comment.
Bollenbach's request to ITT was disclosed in a January 31 filing with the U.S. Securities and Exchange Commission.
Hilton, which is trying to buy ITT in a cash and stock deal valued at $55 per share, formally launched a hostile takeover of ITT on Friday. Hilton also has proposed acquiring about $4 billion of ITT debt for a total transaction worth $10.5 billion.  
Wall Street experts widely expect ITT to reject the offer, which is considered to be too low. Although its stock has declined sharply in recent months, most experts estimate ITT is worth at least $65 per share.
ITT's advisers have spent the past few days poring over the formal bid filed with the SEC on Friday. The advisers are expected to present an in-depth analysis of the offer when ITT holds a regularly scheduled board meeting on Tuesday.
The ITT board, which has until February 14 to respond to the Hilton offer, is not expected to make a decision at the Tuesday meeting.
Sources close to ITT told Reuters that the analysis was likely to focus on Hilton's proposed financing for the transaction and a preliminary agreement with HFS Inc to license the Sheraton franchise. Hilton, which has estimated it will need about $3.5 billion to buy ITT, said its offer is not conditioned on obtaining financing.
Hilton has estimated the proposed union would generate more than $100 million in cost savings.
Hilton also has said that while it would prefer to negotiate a transaction with ITT, it would be prepared to launch a proxy fight to replace the ITT board of directors.
",39
"ITT Corp. said Thursday it sold nearly half of its 5 percent stake in Alcatel Alsthom, the big French telecommunications company, the first of several asset sales aimed at thwarting a $6.5 billion takeover bid from Hilton Hotels Corp.
The sale of the 2.2 percent stake to an unidenified U.S. investment fund came one day after ITT rejected Hilton's offer and announced a plan to consider the sale of non-core assets and focus on its Sheraton hotel and Caesars casinos.
ITT and Alcatel declined to discuss the sale price, but a source close to ITT estimated it to be near the market value of about $300 million.
For its part, Hilton launched a fresh attack on ITT's plan.
""A fire sale of these assets will bring significantly less value than an orderly sale process,"" Hilton Chief Executive Stephen Bollenbach wrote in a letter to ITT Chairman Rand Araskog.
Industry analysts said Hilton would probably have to raise its $55-a-share bid for its takeover attempt to succeed but that was not expected anytime soon.
While sources close to ITT said the company was in no rush to sell off non-core assets, Alcatel granted special permission for ITT to sell part of the stake before July 3, a date that had been part of the original agreement.
ITT still holds 2.8 percent of Alcatel, though it was unclear if the French company had given permission for the sale of that portion.
The Alcatel stake had been considered the easiest of ITT's non-core assets for it to sell. The next asset to be sold is likely to be its Madison Square Garden properties, which include the world-famous arena, the New York Knicks basketball team and the New York Rangers hockey team.
Sources said ITT has held high-level talks with Cablevision about a transaction but that no deal has been struck. ITT partnered with Cablevision in 1995 to buy the properties.
Cablevision is ""the primary potential acquirer,"" said one source close to ITT who declined to be identified.
Cablevision declined to comment, referring to a statement Wednesday in which it said it does not comment on rumoured deals and noted it has a good relationship with ITT.
The ITT sources said it may take up to six months to sell the other non-core assets. Although ITT has held discussions with potential buyers about those properties, the talks are not in advanced stages, the sources said.
That was partly because ITT is not in a rush to sell non-core assets despite the looming Hilton bid, sources close to ITT said.
""The programme is to demonstrate to shareholders over the next couple of months that this management team and this plan will create greater value than the Hilton offer could provide,"" one source said.
""I don't think people should be looking for a single big bang here, but rather value creation over the course of the next few months,"" the source said.
ITT's other non-core assets include international telephone directories business.
Other people familiar with ITT's strategy said the company is unlikely to sell assets for less than a fair price.
""They're not going to give anything away. It's not their style,"" said one industry expert who did not want to be identified.
Meanwhile, sources also said ITT has hired Morgan Stanley to assist with the asset sales. ITT also is being advised by Lazard Freres and Chase Manhattan.
ITT declined to comment on the potential sales or the hiring of Morgan Stanley, which also declined to comment.
ITT's stock rose 62.5 cents to $58.25 in consolidated trading on the New York Stock Exchange.
",39
"When ITT broke into three companies in 1995, top executives said the move would increase value for stockholders, fuel growth and make the separate businesses more competitive.
But independence has come at a high price for the former conglomerate's hotel, casino and entertainment division known as ITT Corp. Industry competition is fiercer than ever before, a huge expansion plan has been unexpectedly difficult, and the company's stock price has eroded dramatically in the past few months.  
And now, rival Hilton Hotels Corp is prepared to launch a $6.5 billion hostile takeover of the company whose assets include some of the world's best-known properties - from the New York Knicks to Sheraton hotels to Madison Square Garden.
""ITT has always bought the highest-quality assets. When they go out and buy something, they always buy the best and they've always paid a lot of money for those assets - maybe too much - but the bottom line is they own some top quality assets,"" said Bruce Raabe of Collins & Co.  
It is the appeal of those assets and the view that they should be contributing more to the company's bottom line that may make ITT vulnerable, industry experts said.
So far, ITT has said little about the Hilton offer other than it will consider it. A source familiar with ITT said its board has a regularly scheduled meeting next Tuesday.
An ITT spokesman could not be reached for comment.
But industry analysts widely believe the $55 cash and stock offer made by Hilton undervalues the company. Shares of ITT soared 14-1/4 to 56-7/8 on views that any transaction will come at a higher price than the Monday offer.  
Wall Street sources knowledgeable about ITT's operations admit the giant company has faltered in recent months even as it has pursued an aggressive path of expansion. The company, which has earmarked $2.5 billion for expansion, lost out to Hilton in a bid for Bally Entertainment Corp and has suffered construction project setbacks and losses from its high-stakes bacarrat tables in Las Vegas.
""Remember, this company has only been public for a year. The company gets a lot of attention and it doesn't shrink from doing aggressive things,"" said one Wall Street source who did not want to be identified.  
But others said the company's acquisition strategy is not well focused, the construction problems were avoidable and the company's management does not have a strong background in operating casinos. Chief executive Rand Araskog ran the conglomerate since 1979 and took control of the new ITT Corp after overseeing the three-way split. President Robert Bowman is considered to be an extremely savvy financier, but does not comes from the gaming industry.
""This is a team that isn't working very well together. Araskog is the behind-the-desk kind of CEO instead of the kind of guy who's out living and breathing his business. Bowman is working with intellect and energy, but without a good perspective of the business,"" said one industry expert who did not want to be identified.
ITT, which is expected to rebuff the takeover effort, is likely to tout its future plans as an enticement for shareholders.
""The less-than-favorable publicity, some of which has been unfair, that the officers of ITT have received, has overshadowed the fact that management is looking at long-term plans, but fast management is now more respected than long-term planning,"" said Bjorn Hanson, hospitality industry chairman at Coopers & Lybrand.
",39
"The chairman of French holding company CGIP said Thursday he wants to sell a 20 percent stake in information technology company Cap Gemini and would consider several options for the proceeds of the potential sale, including a share buyback.
""We have known that we would not be a shareholder for the future. It is time for us to pass the baton,"" Ernest-Antoine Seilliere told Reuters in an interview.
CGIP has indicated a willingness to sell to Germany's Daimler-Benz AG, which holds 24.4 percent of Cap Gemini.  
Seilliere said CGIP has not held any discussions with the German company about the potential sale, but would be willing to entertain other offers if Daimler-Benz does not make a decision on its strategy.
CGIP has held the stake for 15 years.
""We cannot stay forever in this situation, but for the time being, it is wait-and-see. There is a limited time this can go on,"" he said, but declined to identify a timetable.
In November, CGIP sold four percent of its investment in Cap Gemini.  
Discussing the reasons that the holding company wants to sell the Cap Gemini stake, Seilliere noted CGIP's criteria to retain a strong role in its investments.
""We are not the powerful shareholder that can dedicate all its means to the company,"" he said.
CGIP would weigh several options for proceeds, including a share buyback, Seilliere said, adding the stock is trading at a discount despite a 51 percent jump since October.
The company would also consider expanding its 33 percent investment in private biological diagnostic firm BioMerieux Alliance.  
""It's a niche in the diagnostic world. It's a field where you can converge all sorts of information technology,"" he said.
Other considerations include building its current involvement in abrasive pellet firm  Wheelabrator-Allevard or quality control company  Bureau Veritas, he said.
Earnings for 1996, which are slated to be issued in early April, are expected to be strong, Seilliere said.
""They are going to be good because all the companies of the group are increasing their results,"" he said.
CGIP ended months of speculation in November when it signed a deal to acquire a 20 percent stake in French car parts maker Valeo SA from an investment company controlled by Italian businessman Carlo de Benedetti.
",39
"Ending a fierce bidding war for one of the last big merger prizes in the defense industry, General Motors Corp. said Thursday it will sell its Hughes Aircraft unit to Raytheon Co. in a $9.5 billion stock-and-debt deal.
The deal, a major setback to losing bidder Northrop Grumman Corp., will create a new missile and electronics giant with about $21 billion in annual revenues and 127,000 employees.
The merged company, which will retain the Raytheon name, will become the third-largest U.S. defense contractor, after the merger of Boeing Co. and McDonnell Douglas Corp. and Lockheed Martin Corp.
""We are truly creating another defense electronics powerhouse,"" Raytheon Chairman Dennis Picard said in a statment.
GM Chairman Jack Smith said the deal was aimed at unlocking value for GM shareholders and was a response to ""the rapidly changing landscape in the defense industry.""
After swallowing the Hughes assets, Raytheon will dominate the U.S. missile and radar businesses and will look a lot like the defense specialist it was in the 1970s, before it began diversifying, analysts said.
Hughes and Raytheon make similar products, including missiles, radar, air traffic control systems and other defense electronics.
Hughes, based in El Segundo Calif., makes the Tomahawk cruise missile, air-to-air missiles for fighter jets and the Stinger anti-aircraft missile, among others.
Raytheon, based in Lexington, Mass., makes the Patriot air defense missile system and competes with Hughes on many other missile contracts. Earlier this month it agreed to buy Texas Instruments Inc.'s defense electronics business for $2.95 billion.
Raytheon also makes Amana appliances and Beech business aircraft. Picard said the company was taking a ""hard look"" at the future of its commercial businesses and will reveal specific plans in the next couple of months.
To help pay for the Hughes deal, Edward D. Jones & Co analyst William Fiala said Raytheon ""will look to spin off or outright sell one of three businesses -- appliances, aircraft and/or Engineering and Construction.""
Under the deal, Raytheon will contribute $5.1 billion in stock and assume $4.4 billion in newly created Hughes debt.
The deal involves a complicated tax-free spin-off of Hughes Aircraft to holders of GM's Class H common stock and its automotive stock, known as $1-2/3 par-value common stock. When it is finished, GM-related shareholders will own about 30 perent of the post-merger Raytheon.
Raytheon executives said the deal will dilute earnings per share slightly in 1997, but will add to earnings in 1998.
The transaction does not include the non-defense businesses of GM's Hughes Electronics Corp. subsidiary, which the automaker acquired in 1985 for $5.1 billion.
GM plans to move Delco Electronics, Hughes' automotive electronics business, back into its Delphi Automotive Systems parts operation.
Delco was brought under the Hughes umbrella in the 1980s as part of then-GM Chairman Roger Smith's grand and controversial scheme to fuse aerospace technology into automobiles, which produced mixed results at best.
GM CEO Jack Smith, no relation to Roger Smith, told reporters at a news conference in New York Thursday that the automaker will consider a future public offering or spin-off of the new Delphi-Delco unit, but declined to offer a timetable for that transaction.
Hughes Electronics will retain its lucrative telecommunications and space unit, which builds satellites and operates the fast-growing DirecTV satellite broadcasting service.
GM Vice Chairman Harry Pearce said in an interview that the automaker had no plans to sell any interest in those operations, which are poised for rapid growth in the next several years. Hughes Chairman C. Michael Armstrong will continue to run them.
Proceeds from the $4.4 billion in new debt to be assumed by Raytheon as part of the deal will be transferred to the Hughes telecommunications and space unit to fund future growth.
The telcom unit's operating profit for the first nine months of 1996 increased 35.2 percent from a year earlier to $193.5 million, on revenues of $2.89 billion. For all of 1995, it earned $189.2 million on revenues of $3.09 billion.
The Hughes defense units posted 1995 operating earnings of $688 million on revenues of about $6 billion.
The deal was announced in the last hour of trading on the New York Stock Exchange. Raytheon shares closed up $1.50 to $48.50, while GM shares closed up 25 cents $60.375.
GM's Class H shares, which are tied to Hughes' performance but do not represent ownership in the company, ended unchanged at $62.625.
As part of the transaction, GM also plans to recapitalize its Class H stock to link it solely to the telecommunications and space business.
""In the past we have felt the market imposed a conglomerate discount to Class H stock because it tracked three businesses,"" Jack Smith told reporters. ""Now the recapitalized Class H stock will track only one high-growth area, telecommunications.""
",39
"ITT Corp. moved forward on Monday with preparations for its Tuesday board meeting at which it will consider a $6.5 billion unsolicited takeover bid from Hilton Hotels Corp.
The meeting, to be held in New York, will be the first board session since Hilton launched its offer last week. The board, which has until Feb. 14 to respond to Hilton's offer, is not expected to make a decision right away.
ITT spokesman Jim Gallagher declined to disclose the time of the meeting. A source close to the company indicated that the session is likely to last most of the day.
On Saturday, ITT Chairman Rand Araskog turned down a request from Hilton's top executive to meet. Hilton Chief Executive Officer Stephen Bollenbach had asked to meet Araskog before Tuesday's board meeting or be permitted to make a presentation to the ITT board.
Araskog rejected the offer in a faxed letter to Bollenbach, saying it would be inappropriate.
The cash and stock transaction values ITT at $55 per share.
ITT stock, which rose sharply last week on views that Hilton will be forced to raise its bid, lost 25 cents to $56.875 in Monday trading on the New York Stock Exchange.
As ITT was preparing for the meeting, Bollenbach flew to London on Monday to meet with Hilton's European partner. Hilton Hotels owns the rights to the Hilton brand in the United States and Ladbroke Group Plc. holds them in the rest of the world.
Hilton officials said Bollenbach, who was named to the Ladbroke board last month as part of the expanded alliance between the two companies, would attend a Ladbroke board meeting. He was due to return to the United States by mid-week.
Shares of Ladbroke traded in London rose on Monday amid speculation that ITT may bid for Ladbroke as part of its anticipated defense against a Hilton takeover. London analysts downplayed the speculation, which was fueled by a U.S. Securities and Exchange Commission filing that disclosed Ladbroke and ITT had discussed a possible joint venture or merger a year ago.
Meanwhile, Hilton said Monday that it expects soon to announce other hotel acquisitions.
""There are a lot of things on our plate. We've got things working on the hotel side,"" Senior Vice President of Corporate Affairs Marc Grossman told reporters at an industry conference sponsored by Montgomery Securities. He declined to discuss details.
Separately, HFS Inc. Chairman Henry Silverman said in an interview that his company had been searching for a new hotel brand when it reached its latest agreement with Hilton. The Hilton offer for ITT includes a pact in which HFS would license ITT's Sheraton trademark, franchise system and management agreements.
Silverman said the preliminary agreement was struck with Hilton several days before it announced its offer for ITT and evolved from previous discussions between the two companies.
HFS is a consumer services company with hotel franchise, automotive and real estate holdings.
",39
"The top executive of Norfolk Southern Corp admitted talks aimed at resolving a stalemate over the future of Conrail Inc will be difficult but said he remains optimistic about the outcome.
""I go prepared, on my own part, to negotiate hard, to negotiate fairly and to negotiate to reach a reasonable solution.  I am confident others will do the same,"" chief executive officer David Goode told reporters at a press conference after a meeting with Wall Street analysts.  
A $9.5 billion planned merger between Conrail and CSX Corp has been fraught with problems due to a rival $10.3 billion bid from Norfolk Southern.  Conrail has rejected the Norfolk Southern offer, saying the CSX deal is a better fit.
Conrail shareholders earlier this month defeated a key provision that would have permitted the planned merger to move forward.  At the same time, Norfolk Southern is in the process of buying 9.9 percent of Conrail's stock.
Speaking in a raspy voice, Goode said he would meet with Conrail and CSX on Friday.  
Goode was extremely tight-lipped about details of the meeting, declining to disclose the location or who would attend.  He also said it was premature to discuss a timetable for the possible resolution of the stalemate.
However, sources close to the companies earlier this week said that only Goode, Conrail chief executive David LeVan and CSX chief executive John Snow were expected to attend.
Goode reiterated that Norfolk Southern would not accept any type of settlement that values Conrail at less than its offer of $115 per share, but added ""I'm going in with a completely open mind.""  
Indications that negotiations were forthcoming developed last week when Goode offered to sit down with LeVan and Snow. The two executives quickly responded in a letter saying that they would be willing to meet.
Although he initially spoke only with Snow by telephone, Goode said at the press conference that he has since spoken with LeVan.  He did not discuss the nature of the conversation.
The meeting with analysts focused on Norfolk Southern's fourth quarter results, issued Wednesday, but most of the questions coming from the audience dealt with Conrail.
Conrail and CSX could not immediately be reached to comment on the meeting or to confirm that their executives would attend.
",39
"Norfolk Southern Corp. on Monday launched a new effort to derail a planned $9.1 billion merger between Conrail Inc. and CSX Corp., proposing to buy a stake in Conrail even though its takeover bid has been rejected several times.
Norfolk Southern made its offer in a direct appeal to Conrail shareholders, many of whom are unhappy with the proposed Conrail-CSX transaction.
The Norfolk, Va.-based railroad said it would buy 9.9 percent of Conrail stock for $115 per share if investors defeated a key provision that would allow the proposed Conrail-CSX union to move forward. Conrail shareholders are scheduled to vote on that measure Friday at a special meeting in Philadelphia.
Philadelphia-based Conrail has rejected Norfolk Southern's $10.3 billion cash offer, saying that the $9.1 billion cash and stock transaction with CSX provides more strategic benefits.
Conrail is asking shareholders to waive a Pennsylvania law that effectively requires CSX, which already owns 19.9 percent of Conrail shares, to pay $110 per share in cash for the rest.
If shareholders waive that provision, Richmond, Va.-based CSX will buy another 20 percent of Conrail shares for $110 per share and acquire the rest of Conrail in stock.
Norfolk Southern asked shareholders to reject the measure, saying it would amend its existing all-cash offer in order to buy about 8.2 million Conrail shares. The purchase of the shares would represent the maximum number of shares that Norfolk Southern can buy without triggering Conrail's ""poison pill"" anti-takeover defense plan.
Once completed, Norfolk Southern would then begin a second offer for all remaining Conrail shares.
Norfolk Southern said the 9.9 percent offer would not be subject to termination of the merger agreement between Conrail and CSX and would not require any action by Conrail's board.
""Conrail shareholders have an opportunity to reassert control over their corporation and reject the coercive tactics being used to pressure them into approving CSX's inferior offer,"" Norfolk Southern Chief Executive Officer David Goode said in a statement.
In a joint statement, Conrail and CSX said the offer made by Norfolk Southern would not affect their planned merger.
""Today's announcement by Norfolk Southern changes nothing. The fact is the CSX-Conrail merger is the only transaction where Conrail shareholders can receive value for 100 percent of their shares,"" the railroads said.
But a Wall Street analyst said the new offer would likely sway some shareholder votes.
""It seems like a pretty savvy thing to do. They're actually putting money on the table. I think it swings momentum back their way a little bit,"" said Anthony Hatch of NatWest Securities Corp.
The stock of Norfolk Southern, which announced its plan after the close of trading on the New York Stock Exchange, rose 50 cents to $89 per share. Conrail stock closed up $1 at $101.50 per share and CSX shares gained 37.5 cents to $44.375, both on the NYSE.
Earlier Monday, an independent advisory firm also urged Conrail shareholders to reject the key provision in the railroad's proposed merger.
Maryland-based Institutional Shareholder Services (ISS) said investors should defeat the measure in order to force Conrail to renegotiate the CSX pact and potentially consider Norfolk Southern's bid.
ISS urged shareholders last month urged shareholders to defeat the critical measure. But a Dec. 23 shareholder meeting was delayed when CSX raised its offer. Norfolk Southern also raised its bid, which Conrail again rejected.
The most controversial part of the proposed Conrail-CSX transaction is an exclusivity pact that prohibits either party from talking with another suitor until 1999. A U.S. district court judge last week upheld that provision, which was challenged by Norfolk Southern.
But ISS said a shareholder defeat of the waiver could keep the door open for a Norfolk Southern bid.
Meanwhile, Conrail shareholders were wooed in opposing newspaper advertisements bought by Conrail and Norfolk Southern.
""CSX-Conrail -- the right merger at the right time with the right companies,"" read the Conrail ad, which said the proposed transaction offered Conrail shareholders value at the high end of what has ever been paid in a railroad merger.
Norfolk Southern attacked the proposed union, saying Conrail and CSX are asking shareholders to settle for a lower value than it has offered and assume equity risks.
",39
"The bidding war for Conrail Inc. appears to be drawing to a close, but big legal and regulatory battles are right around the corner.
Industry analysts said Friday rival bidders CSX Corp. and Norfolk Southern Corp. were unlikely to offer much more for Philadelphia-based Conrail, but both sides will pursue the fight elsewhere.
""That is the whole process that takes place over the course of 1997 -- the battle for market share as opposed to Conrail shares,"" said Anthony Hatch, analyst at NatWest Securities Corp.
CSX, based in Richmond, Va., Thursday revised its friendly merger pact with Conrail to give shareholders an extra $870 million in the cash and stock transaction. Based on Friday's stock activity, the deal is worth $9.3 billion, or about $102 per Conrail share.
A source close to CSX told Reuters Thursday that CSX and Conrail hoped the revised deal would end the bidding war.
But just hours after CSX and Conrail unveiled the new terms of their planned merger, rebuffed bidder Norfolk Southern increased its all-cash offer by $500 million to about $10.5 billion, or $115 per share.
""If someone were to start to bid higher than this, they probably wouldn't get the economies out of the deal to make it work so the bidding war, I think, has come to the end,"" said Charles Vincent of PNC Asset Management Group.
Although Norfolk Southern's bid has been higher throughout the two-month takeover fight, Conrail contends the union with CSX is a better strategic fit.
Industry experts said Norfolk, Va.-based Norfolk Southern, which has the financial power to bid more than $10.5 billion, merely wants to preserve the spread between the two offers while it fights a key aspect of the Conrail-CSX pact in court.
Norfolk Southern is challenging part of the transaction that prohibits either CSX or Conrail from seeking another merger partner before 1999.
Norfolk Southern last month lost a court fight in which it challenged previous terms of the deal, including a exclusivity provision that ruled out other talks before July 1997.
""This is a sign that they're not going to go bananaas (with a very high offer). If they're able to break the lock-up provision, they have a good bid,"" Hatch said.
""It was the right thing to do to keep pressure on the (Conrail) board,"" said one takeover stock trader, referring to investors who are unhappy with the Conrail board's decision to pursue the lower of the two bids.
A hearing on the exclusivity provision is scheduled for Jan. 9 in U.S. District Court in Philadelphia.
Few security analysts were predicting the hearing's outcome, but the takeover fight for Conrail is expected to continue no matter which company wins in court.
After the court fight, the next battle site will be Washington where the losing bidder is expected to vehemently challenge the merger. The deal already is expected to face intense scrutiny from the Surface Transportation Board, the federal agency that oversees railroads.
""You're going to have a lot of opposition to this,"" Vincent said, citing railroads, shippers and state agencies that are expected to express their opinions when the transaction reaches the regulatory stage.
Last week, the Port Authority of New York and New Jersey said it would intervene in any merger involving Conrail.
Conrail stock fell 75 cents to $100 in afternoon trading on the New York Stock Exchange. CSX stock lost 37.5 cents to $43.375 and Norfolk Southern shares rose 87.5 cents to $89.25, also on NYSE.
",39
"Norfolk Southern Corp was preparing Monday to buy nearly 10 percent of Conrail Inc. in a move that would further cement a stalemate in the three-month-old fight for control of the railroad giant.
The steps were taking place as Conrail and CSX Corp. assessed their strategy following Friday's shareholder defeat of a key measure in their proposed $9.4 billion merger.
""We've entered a stage where no one has ever been before. We're sailing in uncharted waters,"" said one source close to Conrail and CSX who did not want to be identified.  
Spurned bidder Norfolk Southern last week promised to acquire 9.9 percent of Conrail for $115 a share if the railroad's stockholders defeated the provision that would have allowed the Conrail-CSX transaction to proceed. Preliminary results showed that about 53 percent of Conrail's outstanding shares were voted against the measure.
The 9.9 percent investment is the maximum amount of Conrail stock that Norfolk Southern can purchase without triggering Conrail's poison pill anti-takeover defense.
""We will move without delay on our tender offer,"" said Norfolk Southern spokesman Robert Fort.  
The formal process was not expected to begin until later in the week when Conrail released final vote results.
Once it buys the stake, both Norfolk Southern and CSX will hold sizable investments in Conrail without any imminent opportunity to buy the rest of the company.
CSX, which bought 19.9 percent of Conrail in November as part of the planned friendly deal, needs to win approval of Conrail shareholders to proceed with the cash and stock transaction. Many shareholders favor Norfolk Southern's $10.3 billion cash offer, which has been rejected by Conrail.  
Under its pact with CSX, Conrail is prohibited from merging with another company until 1999.
""Right now, it's a standoff,"" said one Wall Street trader.
Conrail has vowed to convince shareholders that the proposed transaction with CSX is a better fit than the Norfolk Southern offer and plans to schedule another shareholder vote. No meeting date has been set yet.
""The next step in the strategy hasn't been determined. I don't think that there's any rush. We're not going anywhere,"" said a source close to the situation.  
But Conrail apparently plans to keep a low profile for the next few days. Sources said the railroad has cancelled a traditional meeting with analysts to discuss fourth quarter earnings, due to be released Wednesday.
Meanwhile, speculation abounds about the eventual outcome of the three-way battle. Wall Street analysts and traders have theorized that CSX may be forced to sweeten its offer for Conrail, despite repeated statements from CSX that no higher bid is forthcoming.
And other experts speculate Conrail's board may pursue a three-way deal among the railroads at some point, especially if Conrail's stock price erodes from current levels of about $103 per share.
",39
"Hicks, Muse, Tate & Furst Inc., a private investment firm, said Friday it has signed a definitive agreement to acquire the food business of American Home Products Corp. for about $1.3 billion.
The business, which will be renamed American Home Food Products, sells packaged convenience foods primarily in the United States, with projected sales of about $1 billion in 1996.
Its products include Chef Boyardee prepared pasta products, pizza mixes, and dinner kits; PAM cooking spray, Franklin Crunch 'n Munch glazed popcorn; Polaner fruit spreads and spices; Gulden's mustard; Ranch Style Brand beans; Dennison's chili; Luck's beans; Ro-Tel tomato and chilies products; Jiffy Pop popcorn; Maypo and Wheatena hot cereals; and G. Washington broth. It also has strong foodservice and private label businesses.
American Home Products will receive about $1.2 billion in cash and will retain 20 percent of the common stock of its food unit, Hicks Muse said.
""Consistent with our proven approach of acquiring and building quality companies with exceptional management teams, this transaction provides a superb platform to execute a buy-and-build strategy in the branded food products business,"" said Michael Levitt, managing director of Hicks Muse.
The seven-year-old company, which has been gobbling up food businesses for several years, plans to buy two Mexican food firms this year, CEO Thomas Hicks said in a telephone interview.
""Our plan is to use this as a platform. We intend to start with this and grow both internally and through additional acquisitions of branded products,"" Hicks said of the Dallas-based firm's latest and largest transaction.
Hicks Muse bought dairy firm Morningstar Group in 1991 and took the company public in 1992. It also owns Campfire marshmallows and Angela Marie's. In March, it bought Ghirardelli Chocolate Co. from Boston buyout specialist Thomas Lee.
""We like established brands because we think they offer the most ability of cash flow and long-term growth potential,"" Hicks said.
An American Home spokesman said the company will use money from the sale to pay down debt and provide funds for ""future strategic uses."" The Madison, N.J.-based company had said in May that it was seeking buyers for the food unit.
""In general it's going to help them focus more on their pharmaceutical business and help them raise their gross margin,"" said Rodman & Renshaw analyst Mario Corso.
""For (American Home) to sell a business that's probably growing at 2-5 percent over the next several years, they did very well,"" said Cowen & Co. analyst Ian Sanderson.
American Home Products' stock rose $1.125 to $60.125 on the New York Stock Exchange in late trading.
Sanderson said the food business was a ""laggard,"" with an estimated pretax profit margin of 11 percent. This compared with 18 percent to 22 percent for the rest of American Home's businesses, which include drugs such as Premarin hormone replacement therapy, medical devices, and consumer healthcare products including Advil pain reliever.
The company has said it has six new drugs it expects can generate over $500 million each in peak annual sales, including Rapamune for preventing organ rejection, a bone growth hormone factor and the Effexor line of anti-depressants.
""A year down the road maybe they'll have to reassess things, and if the pipeline projects haven't worked out, then they have to think about another big acquisition or something like that,"" Salomon Brothers analyst Robert Uhl said.
",39
"Long-troubled solid waste company Mid-American Waste Systems Inc filed for bankruptcy on Wednesday and said it signed an agreement to sell most assets to fast-growing rival USA Waste Services Inc.
The Ohio-based firm had suffered a string of financial losses stemming from a huge appetite for acquisitions and development projects, said people familiar with the company.
""They were highly leveraged and got into a situation where they were losing money,"" said Melville Cody of Williams MacKay Jordan & Co Inc.  
In a statement, Mid-American said it would sell nearly all its assets to Houston-based USA Waste Services for $180 million in cash and stock. The transaction is subject to bankruptcy court approval.
Mid-American chief executive Gene Meredith was meeting with staff on Wednesday and was unavailable for comment.
The company was been trying desperately to cut costs, but was unable to stem the flow of losses, analysts said. It sold its Atlanta assets nearly a year ago to Republic Industries Inc, the diversified Florida company led by billionaire Wayne Huizenga.  
The sale of Mid-American's assets comes amid intense consolidation in the highly-fragmented solid waste industry.
For USA Waste, the transaction with Mid-American marks the latest in a string of acquisitions that has taken the company from annual revenue of about $4 million in 1990 to an estimated $2 billion in 1997.
""I think USA Waste has clearly shown they can maintain the momentum of consolidation at this juncture,"" said Michael Hoffman of CS First Boston, who rates the stock a buy and raised 1997 earnings estimates to $1.70 per share from $1.65 and increased 1998 estimates to $2.15 per share from $2.05.  
USA Waste anticipates the Mid-American acquisition will add $115 million in annualized revenues, according to analysts who participated in a telephone conference call with the firm.
USA Waste did not return a phone call and analysts said executives were involved with a sales and marketing pitch for an upcoming offering of 10 million common shares.
Analysts also said that USA Waste has targeted $400 million in acquisitions this year, excluding the Mid-American asset purchase and last week's announced $518 million acquisition of the Canadian assets of Allied Waste Industries Inc.  
Analysts also anticipate cost savings from some overlap of the Mid-American assets.
""They have been so effective in integrating large acquisitions,"" Cody said about USA Waste.
In September, USA Waste bought Sanifill Inc in a $1.6 billion stock transaction that solidified its position as the nation's third-largest waste management company. The two top posts are held by Allied Waste and Browning-Ferris Industries Inc.
""They're moving up fast and there are still a lot of acquisition opportunities,"" Cody said.
",39
"ITT Corp expects the sale of its non-core assets to take up to six months, although the Madison Square Garden properties are likely to be sold more quickly, according to sources close to the company.
The hotel, casino and entertainment company has held high-level talks with Cablevision Systems Corp about acquiring its 50 percent stake in Madison Square Garden, but no deal has been struck, the sources said.
Cablevision is ""the primary potential acquirer,"" said one source close to ITT who declined to be identified.  
Although ITT has held discussions with potential buyers about the other properties, which include its profitable international telephone directories business, those talks are not in advanced stages, the sources said.
Sources also said on Thursday that ITT has hired Morgan Stanley to assist with the asset sales. ITT also is being advised by Lazard Freres and Chase Securities.
ITT declined to comment on the potential sales or the hiring of Morgan Stanely. A Morgan Stanley spokeswoman also declined to comment.  
ITT rejected a $6.5 billion hostile takeover bid from Hilton Hotels Corp on Wednesday and said it would consider selling non-core assets to boost shareholder value.
ITT partnered with Cablevision in 1995 to buy the Madison Square Garden properties, which include the world-famous arena, the New York Knicks professional basketball team and the New York Rangers professional hockey team.
Cablevision declined to comment again today, referring to a Wednesday statement in which it said it does not comment on rumored deals and also noted it has a good relationship with ITT.
",39
"Long-troubled solid waste firm Mid-American Waste Systems Inc. said Wednesday it filed for bankruptcy and said it had signed an agreement to sell most of its assets to fast-growing USA Waste Services Inc.
Canal Winchester, Ohio-based Mid-American had suffered a string of financial losses stemming from a huge appetite for acquisitions and development projects, said people familiar with the company.
""They were highly leveraged and got into a situation where they were losing money,"" said Melville Cody of Williams MacKay Jordan & Co. Inc.
In a statement, Mid-American said it would sell nearly all its assets to Houston-based USA Waste Services for $180 million in cash and stock. The transaction is subject to court approval of its Chapter 11 bankruptcy filing.
Mid-American's proceeds of the sale, combined with retained assets, are expected to total about $227 million, compared with approximately $323 million of long-term debt.
Mid-American Chief Executive Gene Meredith was meeting with staff Wednesday and was unavailable for comment. The company said there will be no interruption of waste collection and related services during the bankruptcy process.
The company has been cutting costs continually, but was unable to stem the flow of losses, analysts said. It sold its Atlanta assets nearly a year ago to Republic Industries Inc., the diversified Florida company led by billionaire Wayne Huizenga.
The sale of Mid-American's assets come amid intense consolidation in the highly fragmented solid waste industry.
For USA Waste, the transaction with Mid-American marks the latest in a string of acquisitions that has taken the company from annual revenue of about $4 million in 1990 to an estimate of more than $2 billion this year.
""I think USA Waste has clearly shown they can maintain the momentum of consolidation at this juncture,"" said Michael Hoffman of CS First Boston. He recommends the stock to investors, and raised his 1997 earnings estimates to $1.70 per share from $1.65 and increased his 1998 estimates to $2.15 per share from $2.05.
USA Waste anticipates the Mid-American acquisition will add $115 million in annualized revenues, according to analysts who participated in a telephone conference call with the company.
USA Waste did not return a phone call and analysts said executives were involved with a sales and marketing pitch for an upcoming offering of 10 million common shares.
Analysts also said that USA Waste has targeted $400 million in acquisitions this year, excluding the Mid-American asset purchase and last week's announced $518 million acquisition of the Canadian assets of Allied Waste Industries Inc.
Analysts also anticipate cost savings from some overlap of the Mid-American assets. ""They have been so effective in integrating large acquisitions,"" Cody said of USA Waste.
In September, USA Waste bought Sanifill Inc. in a $1.6 billion stock transaction that solidified its position as the nation's third-largest waste management company. The two top posts are held by Allied Waste and Browning-Ferris Industries Inc.
""They're moving up fast and there are still a lot of acquisition opportunities,"" Cody said.
Shares of USA Waste rose $2 to $34.125 on the New York Stock Exchange. Shares of Mid-American, which closed Tuesday at 43.75 cents on NYSE, did not trade Wednesday.
",39
"Service Corp International said the decision to withdraw its $2.9 billion hostile bid for Loewen Group Inc won't temper its acquisition appetite.
The Houston-based funeral services company plans to pursue acquisitions in Europe and elsewhere, hoping to bring in at least the approximately $200 million in new revenues in 1997 that it reaped from acquisitions in 1996, president William Heiligbrodt told Reuters in a telephone interview.
""We've always been in the acquisition business...We're not changing any strategy,"" he said.  
Late Tuesday, Service Corp unexpectedly withdrew the four-month-old offer that had been fiercely opposed by Loewen, its chief competitor in the highly-fragmented and consolidating funeral service sector.
Heiligbrodt said Service Corp, North America's biggest funeral home operator, expects to incur minimal costs from the takeover attempt of its rival.  He did not elaborate.
Heiligbrodt declined to talk about specific acquisition targets, although he said the $200 million estimate would not include a large strategic acquisition.  
Other prime properties in the funeral services industry include Toronto-based Arbor Memorial Services Inc and New Orleans-based Stewart Enterprises Inc.
""We have an investment in Arbor and it's a very fine company.  That's really all.  We don't have any other intentions at this time,"" Heiligbrodt said.
In withdrawing its bid, Service Corp cited several actions taken by Loewen, including its aggressive acquisition program, and costs associated with Loewen's severance programs.  
Heiligbrodt also said Loewen's torrid pace of acquisitions, combined with the intense regulatory scrutiny of the proposed transaction, ""probably put us in a position where (Service Corp) would have to sell more properties than we originally anticipated.""
Heiligbrodt also cited Loewen's  Rose Hills and  Prime Succession Inc transactions, in which it partnered with merchant bank  Blackstone Capital Partners.  ""There were just a whole myriad of factors that affected value,"" he said.
Shares of Service Corp rose sharply to reflect the removal of uncertainty that had surrounded the proposed acquisition of Loewen.  By late morning, Service Corp stock was up 1-7/8 to 29-1/2.
""I think it was prudent.  The word to use is 'discipline,'"" Dean Witter analyst Todd Richter said of Service Corp's decision to withdraw its offer.  ""You've got to applaud them for not getting caught up in this and just walking away.""
",39
"CVS Corp on Friday said it expected its proposed $2.8 billion acquisition of Revco D.S. Inc to be slightly accretive in 1997 and add 10 to 15 cents to earnings per share in 1998.
""What we're trying to be is more than just a growth company -- a world-class health-care retailer. And that's what I think this combination will do,"" Chief Operating Officer Thomas Ryan told Reuters in a telephone interview.  
Ryan said that CVS had also considered an acquisition of Eckerd Corp but the transaction with Revco was determined to be a better fit. J.C. Penney Co Inc announced a $3.3 billion acquisition of Eckerd in November.
He said CVS and Revco had held talks since early October, adding that key criteria for strategic acquisitions pursued by CVS included leadership in new markets, growth potential in pharmacy operations and earnings accretion.
""We think combining these two entities across the largest retail store base in the country positions us pretty well for the managed-care environment going forward,"" Ryan said.  
""This will make us a stronger company on the retail side, and it also will strengthen us as a health-care player,"" he said, referring to CVS' patient benefit management company and Revco's mail-order operations.
The planned acquisition of Revco is expected to result in about 1,000 layoffs at the company's Twinsburg, Ohio, headquaters. CVS and Revco did not specifically cite those figures but did not dispute the estimates.
""It's unfortunate, but I like to think about the 98 percent of the people that we are employing at Revco,"" he said, adding that CVS would honor Revco severance packages.
Ryan said CVS might consider other acquisitions, although most of its attention was likely to be focused on Revco in the near term.
""We're always looking for the right opportunity, but obviously our focus is on maintaining the productivity and the customer service we've established at CVS and to begin to work on the transition at Revco,"" he said.
",39
"Conrail Inc. and CSX Corp. raised the stakes Thursday in the bidding war for Conrail, amending their $8.5 billion merger agreement to provide Conrail shareholders with another $870 million.
The new agreement would give Conrail shareholders another $16 per share, payable in CSX convertible preferred shares, as part of the stock portion of the cash and stock transaction.
CSX and Conrail are battling with Norfolk Southern Corp., which has bid $10 billion, or $110 per share in cash, for Conrail.
An industry analyst estimated the value of the new CSX-Conrail deal at $104 per share, or $9.5 billion.
Norfolk Southern Corp. said after the amended deal was announced that it remained determined to acquire Conrail, was studying its options and would respond on Thursday or Friday.
Conrail has rejected Norfolk Southern's offer, contending that a transaction with CSX is a better fit.
Other aspects of the Conrail-CSX agreement are unchanged. They include $110 per share for 40 percent of the outstanding Conrail shares and 1.85619 shares of CSX common stock for each Conrail share.
The proposed merger of Conrail and CSX, first announced on Oct. 15, would create a giant that would dominate the rail freight industry on the East Coast.
In early trading on the New York Stock Exchange, Conrail shares traded at $100.375, up $1.375, and CSX traded at $44, down $1.25. Norfolk Southern traded at $86.375, down 12.5 cents, also on the NYSE.
CSX and Conrail also established a voting trust to permit payment to Conrail shareholders by 1997.
The companies said a Conrail shareholder meeting slated for Dec. 23 would be rescheduled for Jan. 17 and the CSX tender offer would be extended to Jan 22.
The revised pact prohibits Conrail and CSX from entering into an agreement with a third party until Dec 31, 1998. The previous transaction set a July 1997 date.
""In every respect this merger holds great potential and clearly offers the best result for Conrail. This amendment to the merger agreement reaffirms the decision of the Conrail board that it is not willing to agree to the sale of Conrail to Norfolk Southern,"" Conrail chairman David LeVan said in a statement.
CSX already has bought 19.9 percent of Conrail in a cash tender offer at $110 per share and is seeking to buy another 20.1 percent.
""The actions taken by the CSX and Conrail boards allow us to move on to the next stage of the process, the filing of our merger application with the (Surface Transportation Board),"" the federal regulatory agency overseeing railroads, said CSX chairman John Snow.
",39
"Hicks, Muse, Tate & Furst Inc will soon own Chef Boyardee, Polaner fruit spreads and PAM cooking spray, but the leveraged buy-out firm still has a big appetite for food companies.
The Dallas-based group, which announced on Friday a $1.3 billion acquisition of American Home Products Corp's food unit, plans to buy two Mexican food firms this year and does not intend to stop there, Chief Executive Officer Thomas Hicks told Reuters in a telephone interview.  
""Our plan is to use this as a platform,"" he said of the American Home Products deal, the biggest ever for Hicks Muse. ""We intend to start with this and grow both internally and through additional acquisitions of branded products.""
Seven-year-old Hicks Muse has been digesting food businesses for several years. It bought dairy firm Morningstar Group in 1991 and took the company public in 1992.
In March it bought Ghirardelli Chocolate Co from Boston buy-out specialist Thomas Lee.
It also owns Campfire marshmallows and Angela Marie's.  
""We like established brands because we think they offer the most ability of cash flow and long-term growth potential,"" Hicks said.
He said his firm had been searching for a large food acquisition and was alerted to the American Home Products food business about six months ago. Most Wall Street analysts had expected the unit to be bought by another food company.
The devotion to the food industry by Hicks Muse comes as U.S. food companies undergo major cost-cutting and restructuring programs due to the maturation of key products and intense competition for supermarket shelf space.  
On Thursday Campbell Soup Co unveiled a plan to repurchase stock, cut jobs and expand overseas in an effort to boost profits in the mature industry. And Nabisco Holdings Corp announced in June that it would cut 4,200 jobs as part of a cost-cutting program.
Hicks said the buy-out firm will finalize plans to integrate American Home Products's food business by the time the deal closes in 60 to 90 days.
""We have a vision of what we are going to do,"" Hicks said, but declined to be specific.  
One of Hicks's savviest investments was in the 1980s when he and fellow Dallas investor Robert Haas built a beverage powerhouse through acquisitions of soda brands A&W, Seven-Up, Dr. Pepper and Squirt.
But the Hicks Muse group ran into trouble with its 1994 $390 million purchase of G. Heileman Brewing Co, maker of Lone Star beer and other brands. In July it sold the brewer to Stroh Brewery Co for an estimated $275-$300 million.
Other Hicks Muse investments include radio stations and a foam company.
",39
"ITT Corp. moved forward on Monday with preparations for its Tuesday board meeting at which it will consider a $6.5 billion unsolicited takeover bid from Hilton Hotels Corp.
The meeting, to be held in New York, will be the first board session since Hilton launched its offer last week. The board, which has until Feb. 14 to respond to Hilton's offer, is not expected to make a decision right away.
ITT spokesman Jim Gallagher declined to disclose the time of the meeting. A source close to the company indicated that the session is likely to last most of the day.
On Saturday, ITT Chairman Rand Araskog turned down a request from Hilton's top executive to meet. Hilton Chief Executive Officer Stephen Bollenbach had asked to meet Araskog before Tuesday's board meeting or be permitted to make a presentation to the ITT board.
Araskog rejected the offer in a faxed letter to Bollenbach, saying it would be inappropriate.
The cash and stock transaction values ITT at $55 per share.
ITT stock, which rose sharply last week on views that Hilton will be forced to raise its bid, lost 25 cents to $56.875 in Monday trading on the New York Stock Exchange.
As ITT was preparing for the meeting, Bollenbach flew to London on Monday to meet with Hilton's European partner. Hilton Hotels owns the rights to the Hilton brand in the United States and Ladbroke Group Plc. holds them in the rest of the world.
Hilton officials said Bollenbach, who was named to the Ladbroke board last month as part of the expanded alliance between the two companies, would attend a Ladbroke board meeting. He was due to return to the United States by mid-week.
Shares of Ladbroke traded in London rose on Monday amid speculation that ITT may bid for Ladbroke as part of its anticipated defence against a Hilton takeover. London analysts downplayed the speculation, which was fuelled by a U.S. Securities and Exchange Commission filing that disclosed Ladbroke and ITT had discussed a possible joint venture or merger a year ago.
Meanwhile, Hilton said Monday that it expects soon to announce other hotel acquisitions.
""There are a lot of things on our plate. We've got things working on the hotel side,"" Senior Vice President of Corporate Affairs Marc Grossman told reporters at an industry conference sponsored by Montgomery Securities. He declined to discuss details.
Separately, HFS Inc. Chairman Henry Silverman said in an interview that his company had been searching for a new hotel brand when it reached its latest agreement with Hilton. The Hilton offer for ITT includes a pact in which HFS would license ITT's Sheraton trademark, franchise system and management agreements.
Silverman said the preliminary agreement was struck with Hilton several days before it announced its offer for ITT and evolved from previous discussions between the two companies.
HFS is a consumer services company with hotel franchise, automotive and real estate holdings.
",39
"Norfolk Southern Corp may win new allies with its latest plan to thwart Conrail Inc's planned $9.2 billion merger with CSX Corp, but Wall Street experts are not convinced the effort will succeed.
They said the outcome of Friday's crucial Conrail shareholder vote, already considered a tight race before Norfolk Southern disclosed its effort, is now even closer.
Norfolk Southern is ""trying to win over any uncommitted shareholder they can find,"" said Thom Brown, managing director of investment firm Rutherford, Brown and Catherwood Inc.  
Conrail needs shareholder support in order to proceed with the planned cash and stock CSX deal.  The railroad is asking investors to waive a Pennsylvania law that would essentially require CSX to pay for Conrail in cash.
Conrail has rejected Norfolk Southern's $10.3 billion cash bid in favor of the CSX transaction.
Late Monday, Norfolk Southern launched a new attack on the Conrail-CSX deal, telling Conrail shareholders it would buy 9.9 percent of Conrail shares for $115 each if they defeated Friday's measure.  
""It might have some influence on (the shareholders), but it looks to me like it may be too late.  This has been a tough battle for Norfolk Southern,"" Brown said.
Sources close to CSX and Conrail said the vote tally is expected to take a couple of days.
""Our sense is that Conrail may well lose that vote...Norfolk's strategy here appears to be to try to build on the momentum it began by aggressively courting Conrail's shareholders last week,"" wrote James Higgins of Donaldson Lufkin & Jenrette in a report issued Tuesday.  
Although some analysts had speculated that the plan disclosed by Norfolk Southern could prompt Conrail to delay the shareholder meeting, the railroad earlier confirmed that the meeting will take place Friday.
Norfolk Southern's offer is higher than CSX's, but a merger of the two railroads could not happen any time soon. According to its pact with CSX, Conrail would be prohibited from entering a partnership with Norfolk Southern or any other party until 1999.  Norfolk Southern challenged the exclusivity pact in court, but a federal judge last week upheld the terms of the Conrail-CSX merger.
Analysts said that the latest move by Norfolk Southern is an effort to convince shareholders that it is willing to take the risk of buying a stake in Conrail even though it would be prohibited from buying the railroad for two years.
""I think it's going to be very close.  This tells shareholders that (Norfolk Southern is) deadly serious and willing to commit,"" said Charles Vincent of PNC Asset Management Group.
",39
"CSX Corp. raised the stakes in the bidding war for Conrail Inc. on Thursday, amending its friendly merger agreement with the railroad to give unhappy shareholders another $870 million and bringing the total value of its offer to $9.5 billion.
Richmond, Va.-based CSX and Conrail of Philadelphia are battling with Norfolk, Va.-based Norfolk Southern Corp., which has bid $10 billion, or $110 per share in cash, for Conrail. Conrail has rejected Norfolk Southern's offer, contending that a transaction with CSX is a better fit.
The new agreement would give Conrail shareholders another $16 per share, payable in CSX convertible preferred shares, as part of the stock portion of the cash and stock transaction.
Based on Thursday trading in CSX shares, an industry analyst estimated the value of the new CSX-Conrail deal at $104 per share, or $9.5 billion. The value of the stock portion of the deal changes daily as the stocks of the companies rise and fall.
""In every respect this merger holds great potential and clearly offers the best result for Conrail. This amendment to the merger agreement reaffirms the decision of the Conrail board that it is not willing to agree to the sale of Conrail to Norfolk Southern,"" Conrail Chairman David LeVan said in a statement.
Norfolk Southern immediately indicated that it was not walking away from its hostile effort. Industry experts widely expect it to raise its bid soon.
""There should be no doubt that Norfolk Southern remains as determined as ever to acquire Conrail and will use any and all appropriate financial means to accomplish that objective,"" Norfolk Southern said in a statement.
In a further enticement to investors, CSX and Conrail established a voting trust to accelerate payment to Conrail shareholders by 1997. Previously, shareholders would have not been paid until the transaction received required regulatory and other approvals.
The establishment of the voting trust is likely to encourage some shareholders to tender their stock to CSX and exit the controversial transaction, experts said.
One of the most controversial portions of the revised deal prohibits both CSX and Conrail from pursuing a merger with another company before the end of 1998. Shareholders, who had opposed the previous deadline of mid-1997 on the grounds that it prevented Conrail from considering a potentially higher offer, blasted the extension.
Members of the investment community also expect Norfolk Southern to challenge the exclusivity period in court. An attorney for Norfolk Southern said legal action was probably forthcoming.
Other aspects of the Conrail-CSX agreement are unchanged. They include $110 per share for 40 percent of the outstanding Conrail shares and 1.85619 shares of CSX common stock for each Conrail share.
CSX already has bought 19.9 percent of Conrail in a cash tender offer at $110 per share and is seeking to buy another 20.1 percent.
Conrail also delayed a special shareholder meeting to Jan. 17 from Dec. 23, and CSX extended its tender offer to Jan. 22. At the meeting, shareholders are to consider a key provision that would effectively permit CSX to proceed with the acquisition.
Many members of the investment community had predicted shareholders would defeat the provision.
While the new terms were widely considered to be more attractive, Wall Street and industry sources said they may not be strong enough to clinch the deal.
The new pact ""definitely doesn't lock it up because you've got to wait for Norfolk Southern to come back. It definitely makes it more attractive and more equitable across the board,"" said analyst Peter Gleason of Institutional Shareholder Services, a shareholder advisory firm that last week recommended investors defeat the provision at the special shareholder meeting.
The proposed merger of Conrail and CSX, first announced Oct. 15, would create a giant that would dominate the rail freight industry on the East Coast.
In afternoon trading on the New York Stock Exchange, Conrail shares rose $1.875 to $100.875, CSX shares fell $1.25 to $44 and Norfolk Southern rose $2.25 to $88.50.
""The actions taken by the CSX and Conrail boards allow us to move on to the next stage of the process, the filing of our merger application with the (Surface Transportation Board),"" the federal regulatory agency overseeing railroads, said CSX Chairman John Snow.
Anthony Hatch of NatWest Securities noted that the deal was becoming less financially attractive to the prospective buyers as the bidding war continues.
""We're bumping up against the point at which this is getting pricey. It still makes some sense, but for CSX it's getting close,"" Hatch said, adding that Norfolk Southern can well afford to raise its offer.
",39
"Tyco International Ltd. said Monday that it had made a $4 billion bid for American Standard Companies Inc. but would not pursue a merger after the maker of plumbing supplies and air conditioners rejected its offer.
""Tyco historically has not done hostile takeovers and we are not going to do a hostile takeover here,"" Senior Vice President David Brownell said in a telephone interview.
Brownell added that Tyco, a diversified manufacturing company, had not had any further contact with American Standard since its offer was rejected in early December, a day after it was made.
""We're off and doing other things. As far as we're concerned, it's past history,"" Brownell said.
In a letter dated Dec. 5, Tyco offered $50 a share, or about $4 billion, to acquire American Standard, which became a public company in February 1995.
Tyco said that under its proposal American Standard shareholders would have received $50 a share either in Tyco stock or cash, or a combination of both.
American Standard, however, rejected the offer almost immediately, believing it was in the best interest of its shareholders for it to remain independent.
""American Standard's board of directors reviewed the proposal and concluded that strategies already in place are working and the best way to increase earnings and shareholder value is to stay focused on carrying out the strategies as an independent company,"" the company said in a statement Monday.
""Accordingly, the company declined any interest in that proposal, has not had any discussions with Tyco concerning it and no discussions are contemplated.""
American Standard noted in its statement that its stock price had doubled since it went public in 1995 and it planned to proceed with an announced secondary public offering and repurchase of shares next month.
American Standard, based in Piscataway, N.J., is the parent of companies that produce Trane and American Standard air conditioning products, American Standard, Ideal Standard, and Standard plumbing products and WABCO commercial and utility vehicle brake and control systems.
Tyco, based in Exeter, N.H., had said in its proposal that a combination of the companies would benefit both and produce annual cost savings of at least $150 million to $200 million.
Brownell also said Tyco would still welcome friendly talks with American Standard.
""If the American Standard management would like to speak with us, we would be happy to speak with them,"" he said.
American Standard, however, insisted Monday that it was determined to remain independent.
Tyco's offer of $50 a share would have meant paying a steep premium for American Standard, whose shares closed Friday at $40.25 on the New York Stock Exchange.
Both company's shares were suspended from trading early Monday on the New York Stock Exchange after the Wall Street Journal reported Tyco's offer in its Monday issue.
In afternoon trading, American Standard was up $2.375 to $42.625, while Tyco rose 12.5 cents to $54.75.
",39
"Conrail Inc. on Friday spurned a sweetened $10.5 billion takeover offer from hostile suitor Norfolk Southern Corp. amid speculation that a 2-month-old bidding war for the railroad was drawing to a close.
As expected, Conrail rejected the offer and contended that its proposed friendly $9.3 billion merger with CSX Corp. would be a better corporate combination.
""The Conrail board has again confirmed that a merger of equals with CSX and not a sale to Norfolk Southern is in the best interests of Conrail and its constituencies, including shareholders, employees, suppliers, customers and communities served,"" Conrail Chairman David LeVan said in a statement.
The rejection came just one day after both CSX and Norfolk Southern raised their bids for Conrail.
Industry analysts said CSX and Norfolk Southern were unlikely to offer much more for the Philadelphia-based railroad, but both sides will pursue the fight in court, before regulators and in the marketplace.
""That is the whole process that takes place over the course of 1997 -- the battle for market share as opposed to Conrail shares,"" said NatWest Securities Corp. analyst Anthony Hatch.
On Thursday, Richmond, Va.-based CSX raised its offer for Conrail to give shareholders an extra $870 million in the cash-and-stock merger. Based on Friday's stock activity, the deal is worth $9.3 billion, or about $102 per Conrail share.
A source close to CSX told Reuters then that CSX and Conrail hoped the revised deal would end the bidding war.
But just hours after CSX and Conrail unveiled the new terms of their planned merger, Norfolk Southern raised its all-cash offer by $500 million to about $10.5 billion, or $115 a share.
""If someone were to start to bid higher than this, they probably wouldn't get the economies out of the deal to make it work, so the bidding war, I think, has come to the end,"" said Charles Vincent of PNC Asset Management Group.
Although Norfolk Southern's bid has been higher throughout the two-month takeover fight, Conrail contends the union with CSX is a better strategic fit.
Industry experts said Norfolk, Va.-based Norfolk Southern, which has the financial power to bid more than $10.5 billion, merely wants to preserve the spread between the two offers while it fights a key aspect of the Conrail-CSX pact in court.
Norfolk Southern is challenging part of the transaction that prohibits either CSX or Conrail from seeking another merger partner before 1999.
Norfolk Southern said in court documents that directors of Conrail had violated their duties to the company and misled shareholders by agreeing to that provision.
""Put simply, Conrail's directors have agreed to take a two-year leave of absence during what may be the most critical period in Conrail's history,"" Norfolk Southern said.
Some analysts and investors said that if the exclusivity provision is not thrown out after a Jan. 9 hearing before a federal judge in Philadelphia, it could guarantee a victory for CSX because shareholders would not wait two years for a deal with Norfolk Southern.
Norfolk Southern last month lost a court fight in which it challenged previous terms of the deal, including an exclusivity provision that ruled out other talks before July 1997.
The latest court case is expected to hinge on whether Conrail's agreeing to the extended exclusivity period falls within the broad discretion allowed a board under Pennsylvania law, said Charles Yablon, a professor of corporate law at Cardozo University in New York.
""They're pushing the outside of the envelope and trying to take maximum advantage of the leeway that Pennsylvania law gives them,"" Yablon said. But if they can legally justify the move, CSX will probably prevail in court, he said.
Few Wall Street analysts were predicting the outcome, but the war was expected to drag on no matter which company wins in court.
After the court fight, the next battle site will be Washington where the losing bidder is expected to vehemently challenge the merger. The deal already is expected to face intense scrutiny from the Surface Transportation Board, the federal agency that oversees railroads.
""You're going to have a lot of opposition to this,"" PNC's Vincent said, citing railroads, shippers and state agencies which are expected to express their opinions when the transaction reaches the regulatory stage.
Last week, the Port Authority of New York and New Jersey said it would intervene in any merger involving Conrail.
Conrail stock fell 87.5 cents to $99.875 on the New York Stock Exchange. CSX stock fell 50 cents to $43.25 and Norfolk Southern shares rose $1.125 to $89.50, also on NYSE.
",39
"ITT Corp. met with financial advisers on Thursday to assess an unsolicited $6.5 billion bid from Hilton Hotels Corp., while some Wall Street analysts said the company's best defence might be to pursue an acquisition.
Industry experts said ITT might be able to stave off the takeover if it made a large casino or hotel purchase.
""ITT is a company with a lot of friends on Wall Street and a lot of investment bankers and there are a lot of players in the gaming industry who would like to trade up to a higher quality,"" said Thomas Ryan of Bankers Trust.
Although ITT is widely expected to reject the offer, sources close to the company said no decision had been made and no acquisition talks were being held. ITT's board will consider the bid at a regularly-scheduled board meeting next Tuesday.
ITT declined to comment.
On Monday, Hilton offered to buy ITT in a stock and cash transaction that values the company at $55 per share. The offer also includes the assumption of $4 billion in debt.
The stock of New York-based ITT, which soared most of the week on views Hilton would be forced to raise the bid, fell 75 cents to $56.875.
On Friday, ITT's financial advisers are expected to pore over Hilton's official bid documents that are to be filed with the Securities and Exchange Commission.
An acquisition ""certainly would be in keeping with the company's history. (ITT Chairman Rand Araskog) has either got to be a buyer or he's got to let the company go,"" said Gerry Shapiro, managing director at KPMG Peat Marwick.
Industry experts said a sizable acquisition by ITT would thwart Hilton's takeover plan by making the purchase price too costly. In a telephone conference call with reporters earlier this week, Hilton Chief Executive Officer Stephen Bollenbach vowed the Beverly Hills, Calif.-based company would only pursue transactions that added to earnings.
Industry experts speculated that one of the most attractive acquisition candidates would be Harrah's Entertainment Inc. which has long been considered ripe to participate in industry consolidation.
A spokesman for Harrah's declined to comment.
An acquisition would also further solidify Araskog's role at the company he has run since 1979. He ran the ITT conglomerate and then took over the hotel, entertainment and gambling portion of the company when it split into three pieces in 1995.
""I think Rand Araskog doesn't want to give up his job.,"" said Forum Capital Markets analyst Philip Platek, who also speculated that ITT could buy a gambling or lodging company.
",39
"The pace of U.S. bank mergers, which has slowed significantly from last year's record levels, may heat up again as other firms seek to emulate NationsBank's expansion into a major national force.
Norwest Corp. and Banc One Corp. have been cited as other ""super-regional"" firms that may be shopping for regional banks, said bank and merger experts.
NationsBank Corp. on Friday announced plans to buy Boatmen's Bancshares Inc. in a $9.5 billion transaction viewed as pricey and daring.
""This is going to cause a couple of people to go into action. Those who want to be national players recognize there are only a few opportunities out there,"" said Michael Turillo, partner in charge of the capital strategies group at KPMG Peat Marwick LLP.
Neither Norwest or Banc One would discuss potential interest in regional acquisitions.
""Our strategy is to add value to shareholders and acquisitions are one avenue to reach that goal,"" said Norwest spokesman Lawrence Haeg.
The aggressive move by NationsBank to buy Boatmen's is somewhat unusual in the latest wave of banking mergers because it will greatly extend the reach of the North Carolina-based bank. Many of the other transactions seen in the past two years have been in-market acquisitions that have resulted in large cost savings and branch closings.
Experts noted that serious questions remain about the success rate of major geographical expansion through acquisitions. For example, First Union Corp.'s acquisition last year of First Fidelity, which employed the same strategy as NationsBank, has fallen short of expectations.
Indeed, bank merger activity has already been capped this year by high prices and widespread concern that expansion will reduce the ability to cut costs -- a strategy that has been key to corporate mergers in the mid-1990s.
""There aren't so many obvious combinations left,"" said Ed Dillon, banking merger analyst at SNL Securities.
In the first half of 1996, bank merger activity tumbled 54 percent to $9.7 billion from $21 billion in the first half of 1995, according to Mergerstat Review, a unit of Los Angeles-based investment bank Houlihan Lokey Howard & Zukin.
""With so many huge deals from last year, a lot of banks are just now coming up for air,"" said Susan Michaelson, managing director of Michaelson Kelbick Partners Inc., a New York-based firm that assists banks with post-merger marketing and communications.
Shares of regional banks rose sharply Friday on views that some of those banks may once again be acquisition targets. In a broadly lower market, U.S. Bancorp rose 1-9/16 to 38-1/2,, First Tennessee National gained 1 to 34-3/8 and First Commerce Corp. rose 1/4 to 35-3/4.
U.S. Bancorp ""has been and remains a very interesting acquisition candidate if somebody wants into the Northwest,"" said Scott McAdams of Ragen MacKenzie.
But analysts also noted that potential buyers are likely to be extremely sensitive about investor response to acquisition opportunities. Shares of NationsBank tumbled 7-1/8 to 85-1/4 on Friday on views the deal dilute earnings next year.
",39
"Western Resources Inc, which has spent much of 1996 laying the groundwork to buy ADT Ltd, is widely expected to sweeten its unsolicited $3.5 billion offer for the electronic security giant.
Industry experts said the bid, which values ADT at 22-1/2 per share, is deliberately low and merely reflects an opening salvo in a hostile transaction.
""The price is a low-ball price. There is a very good chance this deal will be done at a higher price,"" said Andrew Jeffrey, analyst at Robertson Stephens & Co.
Long considered one of the premier properties in the highly-fragmented electronic security industry, most industry analysts value ADT at significantly more than the Western Resources offer announced earlier Wednesday.
""I feel this stock will go to 25 to 30 on earnings in 1997. Anything below that range is not acceptable,"" said Rosario Ilacqua of Rothschild Inc.
Furthermore, ADT's proposed acquisition by Republic Industries Inc, which collapsed in September, valued the company at about 29 per share. That deal fell apart due uncertainty from Republic's volatile stock price.
Shares of ADT jumped 2-3/4 to 22-7/8 on Wednesday.
In a telephone interview, Western president Dave Wittig declined to discuss a potential higher bid, noting only that shares of ADT have appreciated considerably in recent months.
""I think that what we're putting on the table is a fair and full price,"" Wittig said.
Western Resources has long been considered a potential buyer of ADT, but the company was not yet expected to pursue a transaction. Western holds a 27 percent stake in ADT and earlier this year opposed ADT's proposed transaction with Republic.
Wittig said Western Resources did not pursue an offer for ADT during the Republic deal because it was consumed with its hostile bid for Kansas City Power and Light. That transaction is still not resolved, but Western Resources is holding merger talks with the Kansas utility.
The proposed acquisition of ADT also holds problems for Western, which is taking its offer directly to shareholders in an attempt to install its own board of directors. ADT has a poison pill anti-takeover defense that would be triggered if Western bought more shares of ADT.
Wittig said he is hopeful that ADT's management will come to the bargaining table, but noted the company previously was not interested in a business transaction with Western. Wittig said Western executives last spoke with ADT in June.
Western Resources has actively expanded its role in the security business as it built its stake in ADT. It has signed six letters of intent to buy security companies this year, including Monday's proposed $368 million acquisition of the security division of Westinghouse Electric Corp.
And last week, Western Resources announced plans to divest its natural gas assets as part of a strategy to focus on its electricity and security businesses.
""They've got a lot on their plate, but as far as wanting to run the electronic security business, this is the way to do it,"" Jeffrey said.
The electronic security business has grown increasingly attractive to utilities and telecommunications companies in recent months as they prepare to enter new markets that previously were off-limits due to government regulation. The phone companies and utilities hope to add protection to their menu of services and expand their presence in homes and businesses.
",39
"ITT Corp. on Wednesday rejected Hilton Hotels Corp.'s unsolicited $6.5 billion takeover offer and said it would consider a plan to sell non-core assets in an attempt to boost shareholder value.
New York-based ITT said the potential sale of the properties -- which could include its 50 percent stake in the famed Madison Square Garden arena and the New York Rangers hockey and New York Knicks basketball teams based there -- would be put into effect in order to focus on its Sheraton hotel and Caesars casino businesses.
Wall Street sources immediately estimated ITT could generate some $3 billion from asset sales and use the proceeds to buy back stock or issue a special dividend to investors.
They also warned the plan might not be effective enough to pacify ITT shareholders who have seen the company's stock price eroded in recent months.
""The issue is creating shareholder value, both short- and long-term,"" ITT Chairman Rand Araskog said in a news release. ""We plan to deploy our financial resources only to those assets that produce superior current and future earnings growth.""
ITT said Hilton's offer of $55 per share did not reflect the inherent value of ITT, which owns and operates Sheraton hotels and Caesars casinos in Las Vegas, Reno, Nev., and Atlantic City, N.J.
ITT also said keeping the company independent would be in the best interests of its shareholders and other constituents, and that it would seek various options to increase the company's value.
In rejecting Hilton's offer, ITT also cited potential antitrust implications. It said there were ""serious business conflicts which have always confronted a (potential) Sheraton/Hilton combination,"" adding that owning and managing multiple hotels under each brand in dozens of the same cities would create material conflicts of interest.
The ITT rejection came one day after Hilton announced plans to take control of ITT by ousting its board of directors. It proposed 11 candidates for ITT's current board seats, and named 14 others who could be added if ITT attempts to thwart Hilton's bid by boosting the number of board members.
Hilton said its plans would not be altered by ITT's rebuff, adding its $55 bid was a solid offer.
Wall Street analysts widely expect Hilton to raise its bid, perhaps by as much as $10 per share.
""If Hilton comes back with $65, I think ITT will have trouble making a strong case to its shareholders,"" said Bruce Raabe of brokerage Collins & Co.
An ITT spokesman said the company had no comment on what it might do if Hilton sweetened its offer. ""We will see what happens,"" he said.
Meanwhile, it appeared ITT was already moving forward with plans to sell some assets.
French telecommunications company Alcatel Alsthom said it has been approached by ITT for permission to sell some of its 5 percent stake before an agreed-on July deadline. ITT signed a shareholders agreement with Alcatel in 1992 that called for it to retain the stake until July 3.
An Alcatel spokesman declined to comment further, and an ITT spokesman could not be reached for comment on the issue.
Cablevision Systems Corp., which owns the other half of Madison Square Garden and has the first right to buy ITT's stake, declined to comment on speculation about a transaction. However, the company noted it previously has said it has an excellent relationship with ITT and Arkasog.
The Madison Square Garden properties include the New York Knicks professional basketball team, the New York Rangers professional hockey team, and other properties.
""It begs the question: why didn't they do it sooner?"" said Daniel Davila of brokerage Rodman & Redshaw Inc. of the potential non-core asset sales.
As part of its response to Hilton's offer, ITT also said it was filing counterclaims to litigation Hilton filed against it in a federal court in Nevada.
ITT said it was seeking to block the offer and seeking other relief because of Hilton's ""misappropriation and misuse of confidential ITT information, including information obtained in violation of a 1996 confidentiality agreement between ITT and Bally Entertainment, now part of Hilton.""
Alternatively, ITT said, it was seeking to compel Hilton to disclose information about its offer required under federal securities laws.
Hilton said Wednesday it believed ITT's legal charges were ""without merit.""
ITT's stock rose $1.625 to $57.625 on the New York Stock Exchange while Hilton shares slipped 50 cents to $27.625, also on the NYSE.
",39
"The chairman of CSX Corp said he is ""reasonably confident, but guarded"" that Conrail shareholders will approve a key provision of the planned $9.2 billion railroad merger, adding that CSX will remain committed to the union even if the measure is defeated.
John Snow also described rival bidder Norfolk Southern Corp's latest attempt to thwart the transaction as ""a desperate act.""
Snow spoke to Reuters in a telephone interview.  
Conrail shareholders will vote Friday on a provision that essentially will enable CSX to pay cash and stock for Conrail.
Rival bidder Norfolk Southern, whose $10.3 billion offer was rejected by Conrail, late Monday offered to buy 9.9 percent of the railroad if shareholders defeat the measure.
""It seems to me like it's a desperate act. I can't imagine it's going to affect very much,"" Snow said.
However, he admitted that the offer is probably creating some confusion in the market.  
Snow said the Norfolk Southern offer likely resulted from two setbacks last week. A U.S. district court judge and the Surface Transportation Board both denied Norfolk Southern's attempt to block the merger.
""They had suffered two stinging defeats. They were probably reeling and felt the need to do something,"" Snow said. He declined to speculate on the outcome of Friday's vote, which is expected to be tallied by early next week.
Under the proposed merger, neither Conrail or CSX can enter a partnership with another party before 1999.  
Snow also reiterated court testimony that CSX will not raise the bid for Conrail.
""Once the Street becomes convinced that this is the deal, that there isn't any other deal, that this is the price, it seems to me that we'll ultimately win the vote,"" Snow said.
If Conrail shareholders defeat the Friday vote, Conrail has the ability to call a new meeting.
""If we lose it, I think it's going to be shame on us for not having communicated fully the benefits of this merger. What I propose doing, if we lost it...would be to take our time and patiently go around and talk to the shareholders -- that may take three months, that may take six months -- until they really understood the merger,"" he said.
Snow said he spoke earlier on Tuesday with Conrail chairman David LeVan.
""They're firmly committed to us. We're firmly committed to them. We certainly hope we win the vote. If we don't win the vote, we're still committed to each other. We have a contract that's binding for two years,"" Snow added.
",39
"ITT Corp. met with financial advisers on Thursday to assess an unsolicited $6.5 billion bid from Hilton Hotels Corp., while some Wall Street analysts said the company's best defense might be to pursue an acquisition.
Industry experts said ITT might be able to stave off the takeover if it made a large casino or hotel purchase.
""ITT is a company with a lot of friends on Wall Street and a lot of investment bankers and there are a lot of players in the gaming industry who would like to trade up to a higher quality,"" said Thomas Ryan of Bankers Trust.
Although ITT is widely expected to reject the offer, sources close to the company said no decision had been made and no acquisition talks were being held. ITT's board will consider the bid at a regularly-scheduled board meeting next Tuesday.
ITT declined to comment.
On Monday, Hilton offered to buy ITT in a stock and cash transaction that values the company at $55 per share. The offer also includes the assumption of $4 billion in debt.
The stock of New York-based ITT, which soared most of the week on views Hilton would be forced to raise the bid, fell 75 cents to $56.875.
On Friday, ITT's financial advisers are expected to pore over Hilton's official bid documents that are to be filed with the Securities and Exchange Commission.
An acquisition ""certainly would be in keeping with the company's history. (ITT Chairman Rand Araskog) has either got to be a buyer or he's got to let the company go,"" said Gerry Shapiro, managing director at KPMG Peat Marwick.
Industry experts said a sizable acquisition by ITT would thwart Hilton's takeover plan by making the purchase price too costly. In a telephone conference call with reporters earlier this week, Hilton Chief Executive Officer Stephen Bollenbach vowed the Beverly Hills, Calif.-based company would only pursue transactions that added to earnings.
Industry experts speculated that one of the most attractive acquisition candidates would be Harrah's Entertainment Inc., which has long been considered ripe to participate in industry consolidation.
A spokesman for Harrah's declined to comment.
An acquisition would also further solidify Araskog's role at the company he has run since 1979. He ran the ITT conglomerate and then took over the hotel, entertainment and gambling portion of the company when it split into three pieces in 1995.
""I think Rand Araskog doesn't want to give up his job.,"" said Forum Capital Markets analyst Philip Platek, who also speculated that ITT could buy a gambling or lodging company.
",39
"The bidding war for Conrail Inc. appears to be drawing to a close, but big legal and regulatory battles are right around the corner.
Industry analysts said Friday rival bidders CSX Corp. and Norfolk Southern Corp. were unlikely to offer much more for Philadelphia-based Conrail, but both sides will pursue the fight in court, before regulators and in the marketplace.
""That is the whole process that takes place over the course of 1997 -- the battle for market share as opposed to Conrail shares,"" said Anthony Hatch, analyst at NatWest Securities Corp.
CSX, based in Richmond, Va., on Thursday raised its offer for Conrail to give shareholders an extra $870 million in a friendly cash-and-stock merger. Based on Friday's stock activity, the deal is worth $9.3 billion, or about $102 per Conrail share.
A source close to CSX told Reuters on Thursday that CSX and Conrail hoped the revised deal would end the bidding war.
But just hours after CSX and Conrail unveiled the new terms of their planned merger, Norfolk Southern raised its all-cash offer by $500 million to about $10.5 billion, or $115 a share.
""If someone were to start to bid higher than this, they probably wouldn't get the economies out of the deal to make it work so the bidding war, I think, has come to the end,"" said Charles Vincent of PNC Asset Management Group.
Although Norfolk Southern's bid has been higher throughout the two-month takeover fight, Conrail contends the union with CSX is a better strategic fit.
Industry experts said Norfolk, Va.-based Norfolk Southern, which has the financial power to bid more than $10.5 billion, merely wants to preserve the spread between the two offers while it fights a key aspect of the Conrail-CSX pact in court.
Norfolk Southern is challenging part of the transaction that prohibits either CSX or Conrail from seeking another merger partner before 1999.
Some analysts and investors said that if the exclusivity provision is not thrown out after a Jan. 9 hearing in federal judge in Philadelphia, it could guarantee a victory for CSX because shareholders could not wait two years for a deal with Norfolk Southern.
Norfolk Southern last month lost a court fight in which it challenged previous terms of the deal, including an exclusivity provision that ruled out other talks before July 1997.
""This is a sign that they're not going to go bananaas (with a very high offer). If they're able to break the lock-up provision, they have a good bid,"" Hatch said.
""It was the right thing to do to keep pressure on the (Conrail) board,"" said one takeover stock trader, referring to investors who were unhappy with the Conrail board's decision to pursue the lower of the two bids.
The court case is expected to hinge on whether Conrail's agreeing to the extended exclusivity period is within the broad discretion allowed a board under Pennsylvania law, said Charles Yablon, a professor of corporate law at Cardozo University in New York.
""They're pushing the outside of the envelope and trying to take maximum advantage of the leeway that Pennsylvania law gives them,"" Yablon said. But if they can legally justify the move, CSX will probably prevail, he said.
Few analysts were predicting the outcome, but the war was expected to continue no matter which company wins in court.
After the court fight, the next battle site will be Washington where the losing bidder is expected to vehemently challenge the merger. The deal already is expected to face intense scrutiny from the Surface Transportation Board, the federal agency that oversees railroads.
""You're going to have a lot of opposition to this,"" PNC's Vincent said, citing railroads, shippers and state agencies that are expected to express their opinions when the transaction reaches the regulatory stage.
Last week, the Port Authority of New York and New Jersey said it would intervene in any merger involving Conrail.
Conrail stock fell 87.5 cents to $99.875 trading on the New York Stock Exchange. CSX stock fell 50 cents to $43.25 and Norfolk Southern shares rose $1.125 to $89.50, also on NYSE.
",39
"The top executives of Conrail Inc., CSX Corp. and Norfolk Southern Corp. met Friday in a critical session aimed at resolving a stalemate in the three-month takeover battle for Philadelphia-based Conrail.
The three companies declined to comment on the session, but hinted that future meetings could be forthcoming.
""Conrail, CSX and Norfolk Southern have concluded their meeting and have agreed that no further details on this meeting or timing of future meetings will be announced,"" the railroads said in a joint statement.
The long-awaited meeting between chief executives David LeVan of Conrail, John Snow of CSX and David Goode of Norfolk Southern is viewed as critical to railroad consolidation on the East Coast.
Conrail has rejected a $10.3 billion cash offer from Norfolk, Va.-based Norfolk Southern in favour of a $9.6 billion cash and stock transaction with Richmond, Va.-based CSX.
The deal ran into trouble earlier this month when Conrail shareholders defeated a key provision that would have permitted the planned merger with CSX to move forward. Meanwhile, Norfolk Southern is now in the process of buying 9.9 percent of Conrail's stock.
The three executives agreed last week to hold a meeting to discuss competitive issues in the railroad industry. Conrail and CSX have stressed they are committed to their transaction and Norfolk Southern has said it would not accept any resolution that would value Conrail at less than its $115 per share offer.
Wall Street analysts expressed cautious optimism about the meeting, but warned that any end to the stalemate would be difficult and lengthy. On Wednesday, Goode also said that negotiations would likely be tough.
""We would suggest it is the first of many meetings, but it's a step in the right direction,"" said Thomas Galvin of Deutsche Morgan Grenfell, noting that East Coast railroad consolidation has been discussed for the past 10 years.
Separately, the head of the federal agency that oversees railroads, reiterated her support of private sector negotiations to resolve competitive access issues in railroad mergers.
""What history has shown us is that private sector negotiations do result in the benefit to the parties involved and the public at large,"" said Linda Morgan, chairwoman of the U.S. Surface Transportation Board, in a speech at the National Mining Association's annual transportation conference being held in Florida.
Although Morgan did not address the Conrail case specifically, she said the board would look to preserve competition in the nation's rail network.
Shares of Conrail dipped 12.5 cents to $107.25 on the New York Stock Exchange. CSX stock also fell 12.5 cents to $48.50 and Norfolk Southern shares fell 50 cents to $88.625, also on NYSE.
",39
"ITT Corp is expected to battle an unsolicited bid from Hilton Hotels Corp with an arsenal of defenses that include its well-known franchise name, its ""poison pill"" anti-takeover plan and the promise of future earnings power.
Wall Street takeover experts said the 29 percent premium offered by Hilton in its $6.5 billion offer for ITT is not enough to win the company.
""The franchise value alone is worth more than what they're offering,"" said one trader who did not want to be identified.  
Hilton earlier announced the cash and stock offer for ITT and kept open the possibility of a higher offer if it is permitted to look at ITT's financial data.
ITT could not be reached for comment.
Owner of properties such as Madison Square Garden, Caesar's World and the New York Knicks professional basketball team, ITT's stock price has been hurt recently by gaming construction disruptions and competition. Shares of ITT, which were trading at about 65 in June, closed Monday at 42-5/8.
But traders expect the stock price to rebound as a $2.5 billion capital expenditure program starts to pay off.  
""It's a company with a potentially very high value. Right now, the deck is stacked in favor of the target,"" said Eric Longmire of Wyser-Pratte & Co Inc.
ITT is gambling much of its future on the $2.5 billion capital spending program, which will expand and update its casino operations. It opened the Las Vegas Desert Inn resort last month after a $160 million renovation.
In December, Standard & Poor's downgraded its outlook on the company to negative from stable, saying that the capital spending plan would result in higher debt.  
""Since the break-up, they've been on an expansion binge. The excitement of the break-up is over and now the company has to perform,"" said the takeover trader.
Last week, chief operating offer Robert Bowman told Reuters in an interview that ITT may pursue hotel acquisitions this year. The company reportedly last year sought to buy Bally Entertainment Corp, but the hotel company eventually was sold to Hilton for $3 billion.
It also is expected this year to sell its $550 million stake in French telecommunications firm Alcatel Alsthom.
ITT was part of a huge conglomerate until 1995, when it spun off its manufacturing operations as ITT Industries and its insurance division as ITT Hartford Group Inc.
ITT Corp chief executive officer Rand Araskog has run the company since 1979 and took over as top executive of the entertainment and gaming company after the spin-off.
",39
"Norfolk Southern Corp. Monday launched a new effort to derail a planned $9.1 billion merger between Conrail Inc. and CSX Corp., proposing to buy a stake in Conrail even though its takeover offer has been rejected.
The Norfolk, Va.-based railroad said it would buy 9.9 percent of Conrail stock for $115 per share if investors defeat a key provision that would allow the proposed Conrail-CSX union to move forward. Norfolk Southern made its offer in a direct appeal to Conrail shareholders, many of whom are unhappy with the proposed Conrail-CSX transaction.
Conrail shareholders are scheduled to vote on the provision Friday at a special meeting in Philadelphia.
Philadelphia-based Conrail has rejected Norfolk Southern's $10.3 billion cash offer, saying that the $9.1 billion cash and stock transaction with CSX provides more strategic benefits.
Conrail is asking shareholders to waive a Pennsylvania law that effectively requires CSX, which already owns 19.9 percent of Conrail shares, to pay $110 per share in cash for the rest.
If shareholders waive that provision, Richmond, Va.-based CSX will buy another 20 percent of Conrail shares for $110 per share and acquire the rest of Conrail in stock.
Norfolk Southern asked shareholders to reject the measure, saying it would amend its existing all-cash offer in order to buy about 8.2 million Conrail shares. The purchase of the shares would represent the maximum number of shares that Norfolk Southern can buy without triggering Conrail's ""poison pill"" anti-takeover defence plan.
Once completed, Norfolk Southern would then begin a second offer for all remaining Conrail shares.
Norfolk Southern said the 9.9 percent offer would not be subject to termination of the merger agreement between Conrail and CSX and would not require any action by Conrail's board.
""Conrail shareholders have an opportunity to reassert control over their corporation and reject the coercive tactics being used to pressure them into approving CSX's inferior offer,"" Norfolk Southern Chief Executive Officer David Goode said in a statement.
Officials from Conrail and CSX could not immediately be reached for comment.
Norfolk Southern announced its plan after the close of trading on the New York Stock Exchange.
It also said a vote to reject the CSX/Conrail measure would signal the beginning of the process to unseat Conrail directors at Conrail's next annual meeting.
",39
"Oil giant Texaco Inc. said Tuesday it would complete its exit from the chemicals business by selling a Texas facility to privately-held Huntsman Corp. for about $600 million.
White Plains, N.Y.-based Texaco, which sold the bulk of its chemicals business to Huntsman in 1994 for more than $1 billion, said the sale will allow it to concentrate on its core oil and natural gas businesses.
Salt Lake City, Utah-based Huntsman is the nation's largest privately-held chemicals company.
Huntsman has operated the Texaco propylene oxide/methyl tertiary butyl ether (PO/MTBE) plant at Port Neches, Texas since 1994 and owns an adjacent facility. The plant has a production capacity of about 400 million pounds per year of propylene oxide and about 15,000 barrels per day of MTBE, a gasoline additive.
Propylene oxide is a petrochemical used in home furnishings, construction, appliance, packaging and transportation. Huntsman consumes propylene oxide for the production of specialty chemicals.
Huntsman also said it has entered a long-term agreement with BASF AG under which BASF will receive a significant portion of the Port Neches propylene oxide production.
MTBE is a key gasoline additive used in the production of cleaner-burning blends. Texaco and Huntsman said they have have negotiated a long-term MTBE supply agreement.
As part of the agreement, Huntsman also will acquire Texaco's PO/MTBE manufacturing technology, including the right to license the technology around the world.
""This acquisition will greatly enhance our product integration and diversification by allowing us to add propylene oxide to our list of core products. It also will make us the nation's second-largest producer of MTBE, with capacity of more than 27,000 barrels per day,"" Jon Huntsman, chairman of the family-owned business, said in a statement.
The transaction is expected to be completed in the first quarter of 1997.
Huntsman's 1994 transaction with Texaco included a right to buy the Port Neches facility, but that option expired in April without an agreement between the two companies.
""While we have always had an abiding interest in the PO/MTBE facility, we were consumed with some other projects at the time,"" Jon Huntsman Jr., vice chairman and eldest son of the chairman, said in a telephone interview.
A Texaco spokesman said other potential buyers had expressed interest in the facility.
Huntsman said the purchase of the propylene oxide facility will fit well with its existing propylene production. The company makes more than 1 billion pounds per year of propylene.
""PO is a pretty robust market in terms of growth,"" he said, noting that growth is projected at more than 5 percent per year.
Huntsman also said he was optimistic about the growth potential for MTBE despite some market concerns that European demand may fall short of expectations. Global production of MTBE has exploded in the past five years due to environmental mandates for cleaner-burning fuels.
""We're believers in the future of MTBE. (The growth rate) is not at the 7, 8 or 9 percent that people were talking about earlier, but I think that was a bit overblown,"" he said, adding that more realistic projections call for MTBE to grow at a rate of 4 to 5 percent.
",39
"America Online Inc chairman and chief executive Steve Case said at this time he cannot estimate the financial impact of AOL's plan to provide refunds to customers experiencing problems with its system.
Earlier, AOL announced a plan to provide refunds and credit, upon request, to its members as a result of its recent negotiations with dozens of state attorneys general. AOL said that it hopes to have a formal agreement in place shortly.
""We are not going to estimate any numbers at this point,"" Case told Reuters in an interview.  
Case said the company is focusing on meeting the needs of its members.
""We are doing what is right to meet the needs of our members. We believed consumers wanted unlimited pricing, the reaction was very enthusiastic,"" he said. ""Unfortunately, that created a situation where we had more demand than supply.""
Since last week, AOL has been in talks with dozens of state attorneys general over how to resolve the ""busy signal"" problem its members have had since AOL switched to unlimited access for a flat rate of $19.95 a month on December 1.  
At least one state, New York, threatened to file a consumer fraud lawsuit against AOL. Other states were considering their options.
Case said that AOL's current $350 million program to upgrade its network should be completed by June, but that some cities will be able to handle increased capacity sooner.  
Case said that AOL had planned on issuing this refund and credit plan Wednesday to address its members needs and questions, and to respond to the recent requests by the attorneys general. The attorneys general then decided to hold their own press conferences in support of it.
""We felt like today we had to move forward with our program, with or without an agreement,"" Case said. ""We were pleased at the final hour that the attorneys general are supporting it...It was a concern that our members were waiting for us to respond. If there hadn't been so many states involved, we could have responded a few days ago.""
",46
"The unexpected departure of CompuServe Corp's CEO Robert Massey may portend further woes at the second largest online service, and deeper-than-expected financial losses are one possibility, analysts said Tuesday.
On Monday, a holiday in the U.S., CompuServe said that Massey had resigned, effective immediately, and that Massey wants to ""pursue other interests."" The troubled online service is expected to report a loss on Thursday, when it is due to report third quarter earnings.
The First Call consensus is for a loss of $0.16 a share.  
""When a top guy leaves right before earnings, you can expect a disappointment or a restructuring,"" said Abhishek Gami, an analyst with Nesbitt Burns Securities. ""Maybe it will be worse than expected, but I think the expectations are already low."" CompuServe shares were off 7/16 to 10-3/8.
CompuServe has had a rough year, with increasingly intense competition from the leader America Online Inc.
""It is unfortunate timing, in that it was so close to earnings, because that always encourages people to connect the dots,"" said a CompuServe spokesman. ""But in this case, the dots aren't really there. It's all really speculation.""  
CompuServe said that Massey decided to leave for personal reasons, saying it has been a tough year, and that he wants to take a break from the prodigious hours he has been working.
""Clearly there are also pressures for CompuServe to return to profitability, that's no secret,"" the spokesman added. ""But there is no direct cause and effect there.""
The CompuServe spokesman also said that the Columbus, Ohio-based company has in the past issued a warning when its earnings will come in below Wall Street's expectations. It has not issued any such warnings in recent weeks. Earlier this month, Massey said its financial position had improved.  
But Massey declined to say when CompuServe might return to profitability.
Still, analysts said more bad news could come in the form of flat or even slower subscriber growth, at a time when rival AOL's subscriber base continues to soar, or perhaps from a disappointment in its successful network services division.
""He jumped before he got pushed,"" said Gary Arlen, an analyst with Arlen Communications in Bethesda, Md. ""Their membership base is pretty flat. Their growth has been negligible, especially in a world where beleaguered AOL was adding hundreds of thousands of subscribers.""  
Arlen said that CompuServe has gained new members as a direct result of AOL's recent network problems, but that these new members are ""negligible.""
In November, CompuServe exited its Wow! consumer business, a flat-rate, family-oriented service that it had unveiled with much fanfare. CompuServe said that the flat-rate pricing was not profitable and it will continue to focus on the hobbyists, small businesses and corporate users of its online service.
""Now at least they are focused on the business market,"" said Kate Delhagen, a Forrester Research analyst. ""H&R Block seems to think they need an overhaul.""  
H&R Block Inc still owns about 80 percent of CompuServe, since it went public last April at $30 a share.
Frank Salizzoni, president and CEO of H&R Block, will act as an interim CEO of CompuServe, until another executive is found. CompuServe said that it has hired an executive search firm to help it locate external candidates, but it is also looking inside the company.
""We want to proceed at a brisk pace,"" the spokesman said, when asked if CompuServe has a specific deadline to replace Massey. ""It's more important to get the right person than to get someone quickly.""  
Salomon Brothers analyst Marc Usem said in a report to clients that while the short-term effect of Massey's departure is negative, it may work to CompuServe's advantage.
""A more aggressive, marketing oriented CEO may improve the company's online service prospects,"" Usem wrote in a note to clients, where he reiterated a buy rating on CompuServe. He said that CompuServe's Network Services unit alone is worth $8.50 to $10.20 a share.
Analysts said that while CompuServe has been hurt by AOL's success, many of the proprietary online services have closed or have seen problems as the Internet becomes more popular.
",46
"Some of Microsoft Corp.'s biggest corporate foes  -- including International Business Machines Corp. and Netscape Communications Corp. -- said Tuesday they were collaborating on network computing standards that will enable their products to work together seamlessly.
The companies, which also include Oracle Corp. and Sun Microsystems Inc., said the standards resulting from the collaboration would allow software developers to build diverse software to connect computers via corporate networks, business-to-business networks and the Internet.
They said their collaboration was open to broad industry participation.
""This initiative starts with four companies, but our goal is for an industry groundswell to develop,"" said Steve Mills, general manager of IBM Software Solutions.
Microsoft, the world's No. 1 software company, has been criticised by others in the industry and computer users for trying to extend its domination in various areas by developing software based on closed, proprietary standards.
This is a particularly sensitive issue for the Internet, which for many years has operated according to so-called open standards.
IBM, Oracle, Sun and Netscape said the results of their collaboration would be submitted to an industry standards group later this year. Microsoft is part of the industry standards group as well.
Each company pledged to make their next major products adhere to the standards this year.
The goal of the collaboration is to have a unified approach to an Internet development architecture -- called CORBA, or common object request broker architecture -- so that software from these companies can use objects developed by others.
For example, Netscape's Communicator software will be able to access objects, or pieces of reusable code, stored in a big IBM or Oracle database.
Microsoft's stock dropped $1.625 to $98.375 on Nasdaq, while IBM dipped 12.5 cents to $146 in consolidated trading on the New York Stock Exchange. Oracle was down 25 cents at $35.75, Sun Microsystems rose 50 cents to $31.75 and Netscape dropped $1.875 to $27.75, all on Nasdaq.
",46
"Software giant Microsoft Corp. Thursday unveiled the highly anticipated version of its next-generation software for office computers, called Office 97.
Office 97 -- a package of software that includes popular programmes such as Microsoft Word for word processing, the Excel spreadsheet programme, Access database software and the PowerPoint presentation programme -- has many new features, including document collaboration and the ability to jump seamlessly from a document or spreadsheet to the Internet.
""Office is a centrepiece of Microsoft's Internet strategy,"" Microsoft Chairman Bill Gates said at a New York news conference.
The software giant, which has 55 million users of Microsoft Office applications, said it had already received advance orders from nearly 10,000 retail outlets for Office 97. The software became available in stores Thursday.
The company said 3 million copies had been sold through corporate licensing agreements.
Industry analysts noted, however, that many large business users of Microsoft's Office software have not upgraded to the Windows 95 or Windows NT operating systems required by Office 97.
Microsoft, based in Redmond, Wash., said more than 80 percent of the improvements in Office were a result of customer feedback.
""Our investments in understanding the needs of customers and our continued ability to deliver exciting enhancements are the cornerstone of Office's ongoing success,"" Gates said.
Gates launched the software at a media event at New York's Lincoln Centre.
Microsoft dominates the office suite category of software, with a 90 percent market share, according to International Data Corp., a market research firm based in Framingham, Mass.
But it faces increasingly aggressive competition from Canada's Corel Corp. and International Business Machines Corp.'s Lotus unit and its SmartSuite software.
Corel, which uses WordPerfect word-processing software as the core of its office software, made a significant dent in Microsoft's retail market share in the second half of last year, according to industry analysts.
""While SmartSuite and Corel are eating away at things like price and Internet features, Microsoft's message to corporations is, 'Guys, it's the ease of use and the cost of ownership,'"" said Eric Brown, a Forrester Research analyst.
Microsoft said with some of its new features in Office 97, such as the Office Assistant, users can easily get answers from a built-in software ""guru"" without burdening their information systems managers. Tools such as Network Installation Wizard, Office Resource Kit and others make it easier for information system managers to install and manage the software.
""I'd not be surprised if we reduced the cost of ownership by one-third to one-half,"" said Dennis Tevlin, Microsoft's director of product marketing, desktop applications.
Since Sun Microsystems Inc., International Business Machines Corp., and others have introduced lower-cost network computers, one feature they have touted is the low cost of ownership of these new devices vs. the higher cost of maintaining PCs and their hefty software.
Office is a huge cash generator for Microsoft. Its desktop applications group, which is dominated by Office, is expected to bring in about $5 billion of the company's fiscal 1997 revenues, which are estimated at slightly over $10 billion, according to Wall Street analysts.
The standard edition of Office 97 for upgrades from earlier versions of the software has an estimated retail price of $209. It will sell for $249 for upgrading from non-Microsoft suites and $499 for new users.
One new component in Office 97 is called Microsoft Outlook, a desktop information manager. Outlook helps users manage information, track documents and communicate.
By integrating e-mail, scheduling, contact management, task management and a module for tracking documents and events, Outlook acts as a central ""hub"" for Office 97.
Gates said one of his favourite features of Outlook is its e-mail filtering capability, which enables him to immediately read and answer important e-mail amid the flood of e-mail messages he receives daily from around the world.
Other features include Internet technologies that make it easy for users to create ""hyperlinks"" linking their documents to a World Wide Web site, for example. Users can also search Office and Web-style documents on a corporate network and they can navigate documents using the familiar tools of a Web browser.
""We like to call this activating the Web,"" Tevlin said. ""1996 was the year of the lots of Internet infrastructure products. Office 97 is the first in this new wave of Web applications.""
Microsoft's stock gained $1.375 to $86 on Nasdaq.
",46
"America Online Inc signed a hefty marketing pact with little-known long distance provider Tel-Save Holdings Inc, immediately giving AOL a big chunk of cash and Tel-Save access to eight million AOL users.
AOL and Tel-Save signed a deal to offer AOL members lower-cost long distance telephone service through Tel-Save, which AOL will promote and market to its members. AOL will get an upfront payment of $100 milllion in cash from Tel-Save, a telecommunications service provider based in New Hope, Pa.
AOL will also get warrants to buy Tel-Save shares.  
Analysts and AOL said that the deal was a boost for the company because it showed that AOL was able to put a big value on its growing subscriber base and that it can derive revenues from sources other than subscriber fees.
""This is a proof of promise,"" said Bob Pittman, chief executive of AOL Networks. ""This is not a deal a search engine could do because they don't have the assets. We have put a number on it and we have another $100 million in our coffers.""
While AOL has ""plenty of cash"" for its business plan, the Tel-Save deal will provide funds for general corporate purposes, though AOL must pay the $100 million back, he said.  
Analysts said that the first $43 million must be paid back over ten quarters, beginning in its fourth quarter. That is when the online company will start marketing the Tel-Save long-distance service to its members, thruogh pop-up screens asking them if they wish to enroll. A sampling will begin this summer.
Tel-Save currently offers long-distance and wireless service to about 500,000 small and medium-sized businesses. Tel-Save said its long-distance service featured lower costs than services offered by AT&T Corp, MCI Communications Inc and Sprint Corp.
""These subscribers are the cream of the crop,"" said Dan Borislow, chief executive of Tel-Save. ""This is a great use of our cash."" He declined to estimate how many AOL members may sign up for its long-distance service.
AOL's warrants will let the company buy shares of Tel-Save at strike prices ranging from $14.00 to $15.50, for up to 12 million shares, if the total number of AOL members using Tel-Save reaches 3.5 million subscribers.
""They (AOL) could wind up owning over a third of this company,"" said Jamie Kiggen, a Cowen & Co analyst.
Tel-Sav's shares jumped 7-3/8 to 20-1/2 on Tuesday.  
To be sure, some analysts cautioned that AOL will have to compete against long-distance companies that spend billions of dollars on marketing.
""This will be the ultimate test of AOL's marketing prowess,"" said David Simons, managing director of Digital Video Investments. ""It's AOL against 'the dime lady,'"" he added, referring to Sprint's popular television commercials featuring actress Candice Bergen.
",46
"International Business Machines Corp. Tuesday reported fourth-quarter earnings that were slightly better than expected, bolstered by its service business, growth in software sales and tight expense controls.
The world's largest computer maker said net income rose about 18 percent to $2.02 billion in the quarter from $1.71 billion in the 1995 quarter.
Earnings per share rose faster, to $3.93 from $3.09, since IBM had 7 percent fewer shares outstanding in the quarter due to stock buybacks. Wall Street analysts had expected profits of $3.88 a share on average, according to First Call, which tracks earnings estimates.
Analysts and investors said the results looked good, but some said IBM stock might come under profit-taking pressure on Wednesday.
""It's an excellent number, it's an excellent quarter. You really can't say anything bad about it. But I think it may cause a brief period of selling because Wall Street (sells) on that kind of news,"" said Thom Brown, managing director of Rutherford Brown and Catherwood.
""They were mixed results, software and services were great"" and European results were somewhat encouraging, said David Takata, a Gruntal & Co. analyst.
But he said weak mainframe computer revenues were disappointing. Some analysts had been predicting mainframe revenues rose in the quarter due to strong new products.
The Armonk, N.Y.-based computer maker said service revenues jumped 22 percent in the quarter and personal computer sales rose, but sales of mainframes fell and RS/6000 minicomputers were flat.
Software revenues rose 4 percent in the quarter, and hardware sales increased 2 percent.
Revenues overall rose 5.6 percent to $23.14 billion from $21.92 billion. Expenses fell 2 percent in the quarter from the 1995 period, IBM said.
""We showed good growth in the fourth quarter despite a difficult year-over-year comparison, continued weakness in Europe and a greater-than-expected currency impact,"" IBM Chairman Louis Gerstner said in a statement.
""Although we still face many challenges, IBM is a much different company than it was only a few years ago,"" he said, noting IBM's services business accounted for 21 percent of revenues at the end of 1996 compared to 13 percent in 1993.
The impact of converting revenues received in foreign currencies into dollars erased three percentage points from the fourth-quarter revenue gain, IBM said. That compared with about a two point positive impact in the 1995 quarter.
Net earnings for the year rose to $5.4 billion, or $10.24 a share, from $4.2 billion, or $7.23 a share, in 1995. The 1996 results included a charge for research and development from the acquisition of Lotus Development Corp.
Full-year revenues rose 5.6 percent to $75.95 billion from $71.94 billion.
In a break with tradition, IBM released its results after the stock market closed rather than before the market opened.
Analysts said there was no particular significance to IBM reporting after the close. IBM was trying to avoid the drastic swings in its stock that have come during a conference call with analysts it hosts after the earnings are released.
The stock closed up $1 at $168 in consolidated trading on the New York Stock Exchange.
By region, revenues in North America rose 11 percent to $9.6 billion in the fourth quarter, Asia-Pacific rose 6 percent to $4.3 billion and Latin America gained 4.0 percent to $1.1 billion. Revenues in Europe, Middle East and Africa were $8.1 billion, little changed year over year.
",46
"International Business Machines Corp is expected to report solid fourth quarter earnings on Tuesday, but some negative impact from currency is also expected. It will report earnings after the U.S. stock market closes, for the first time in recent memory.
According to First Call, Wall Street estimates range from $3.13 to $4.32, with a consensus of $3.88 a share, versus reported earnings of $3.09 a year ago, including charges.
""I think it will be a good quarter,"" said Steve Milunovich, a Morgan Stanley analyst.  
""I'm not looking for a blowout quarter,"" Milunovich added, adding that the U.S. dollar strengthened in the fourth quarter, and that IBM could see as much as a $0.25 negative impact on earnings from currency fluctuations.
Analysts also expect IBM to have bigger expenses this quarter for its restructuring, which it does not write off as a charge anymore. In the third quarter, IBM had restructuring costs of about $200 million for employee buyouts.
""They will have an expense for restructuring and it could be twice as much as the September quarter,"" said Jay Stevens, a Dean Witter analyst.  
Analysts said IBM's employees in Europe have been much slower to accept its buyout plans and John Jones, a Salomon Brothers analyst, is expecting IBM will have costs of about $700 million in 1997 for organizational changes in Europe.
""Europe remains a slow grower which has led to a number of organizational and planned efficiency changes, which we expect will require over $700 million in 1997,"" Jones said in a report. He said these expenses are included in his 1997 earnings estimates of $11.20 a share.
For 1996, analysts expect IBM to earn between $10.30 to $11.50 a share, according to First Call.  
Analysts said that there are several bright spots in IBM's fourth quarter, with computer services and personal computers among the stand outs. Even though industry PC sales at the consumer/retail level have been sluggish and disappointing, analysts said that IBM saw strong quarterly growth in PCs.
""PCs had probably in excess of 25 percent growth, with decent profits,"" said Milunovich.
IBM also had strong sales of its new models of mainframe computers, but Gary Helmig, a SoundView Financial analyst, said that IBM did not sell out the new systems, as some had previously forecast.  
Analysts said that sales of its midrange computers, the AS/400, should post about 10 percent growth, and added they expect a big improvement in RS/6000 workstations.
The Armonk, N.Y.-based computer giant will host its quarterly analyst meeting/conference call sometime after its earnings are released late Tuesday.
Analysts said that the computer giant is releasing its earnings after the close to avoid volatility in its stock, which in recent quarters has climbed or fallen as much as $10 on the days it reports earnings, during its conference call with analysts.
",46
"New York state Attorney General Dennis Vacco said Friday that he planned to sue America Online Inc. if the company's negotiations with prosecutors from 20 states over consumer issues broke down.
Vacco told a news conference he would sue the world's largest online service, with more than 8 million subscribers, to halt allegedly deceptive business practices and to win refunds for the company's frustrated customers.
The New York attorney general and other prosecutors or their aides from 20 states met with America Online Thursday in Chicago, either in person or via conference call, to discuss a barrage of complaints by subscribers who have experienced difficulty accessing the service from their computers.
Vacco said he sent notification Thursday of New York state's proposed litigation to America Online's headquarters in Dulles, Va. He said a lawsuit would allege the company engaged in deceptive sales practices, false advertising and fraud in selling online services.
America Online, or AOL, has five business days after receving the notice. Company officials were not immediately available to comment on a possible New York lawsuit, but late Thursday, AOL said it was cooperating with the 20 states.
The online service, which enables subscribers to send electronic mail, browse the World Wide Web and view proprietary content; has seen an upsurge in the number of subscribers -- and busy signals -- since it switched to a flat-rate, unlimited use pricing plan Dec. 1.
Previously, the service had billed subscribers according to how long they were online.
AOL moved to placate angry customers last week, telling them it would spend $350 million to upgrade its network and asking them to try to cut their use of the service during peak hours.
Vacco said, ""We want to give the consumers a choice that gives them a refund if they want it. Don't just say 'Hang on;' give them a choice, which includes getting out with their money.
""I'm not interested in contrition, I'm interested in restitution,"" he said ""They paid for a service they are not getting.""
AOL already has been hit with at least four class-action lawsuits by subscribers.
Vacco would not comment on what happened at Thursday's meeting.
""I'm not going to characterise it except to say ... that AOL fully appreciated where we were coming from,"" he said.
The move to unlimited access itself incurred the ire of many of the same attorneys general. Last month, AOL reached an agreement with 19 state attorneys general over the flat-rate pricing, with AOL agreeing to pay automatic refunds to subscribers who did not want to pay $19.95 a month.
",46
"The stock of networking software company Citrix Systems Inc. lost almost 60 percent of its value Thursday amid concerns that its core product might face competition from industry behemoth Microsoft Corp.
Citrix shares tumbled $15.625 to $10.625 in heavy trading, with over 13.8 million shares changing hands.
Late Wednesday, Citrix said it was told by Microsoft that Microsoft was looking to develop multi-user features in its increasingly popular Windows NT operating system that would compete with Citrix's WinFrame software that lets users of multiple computers acccess Windows NT.
Microsoft later said it does have a product team working on such a software project, Microsoft Senior Vice President Jim Allchin said Thursday.
""We have a development team under way,"" Allchin said in a phone interview. He also said Microsoft is ""always talking"" to other companies about licensing technology.
Allchin said Microsoft will end up offering the multi-user capability to its users in Windows NT, but it has yet to decide if the technology will come from its own development, from Citrix, or from another company.
Fort Lauderdale, Fla.-based Citrix said Wednesday that if Microsoft decided to develop features that would compete with its WinFrame technology, it would hurt Citrix's finances, but it did not give any specifics.
A Citrix spokeswoman said the licensing talks were continuing and that its relationship with Redmond, Wash.-based Microsoft ""remains strong."" A Microsoft spokeswoman said that the talks between the two are continuing and nothing is final.
Microsoft Treasurer Greg Maffei is a member of Citrix's board of directors, and Microsoft owns an equity stake of about 6 percent of Citrix.
Microsoft's Allchin said, ""Customers are asking for this.... It's a natural extension of the family that we already have. It should not be a surprise to anyone. It's just another part of the Windows family.""
Last year Microsoft introduced Windows CE, a slimmed-down version of Windows and applications for personal digital assistants and consumer devices in the future.
Allchin said Microsoft already has a team of ""reasonable"" size working on developing multi-user capability, which would allow, with remote access, users on multiple devices ranging from personal digital assistants, PCs, so-called network computers, laptops and other devices, to access a server running Windows NT and applications.
Last month, Citrix reported record revenues of $15.6 million in the fourth quarter, up from $5.2 million in the year-ago quarter. The company said that its strong quarter reflected the momentum in the Windows NT marketplace.
",46
"America Online Inc. is under the gun again, amid growing member outrage due to its network overload and analysts said AOL risks losing the new users it worked hard to gain, once they cannot sign onto the service.
Last week, AOL said it would spend more to upgrade its network, as class action suits were filed against the world's largest online service in at least four states, as users complained that they are not getting the service AOL touted, when it switched members to unlimited usage for a flat fee.
Now, AOL has asked users to cut back on prime-time usage.
""If you sit there and think about it, this is an absolutely unbelievable strategy,"" said Roger McNamee, a partner at Integral Partners, a fund in Menlo Park, Calif, at a conference last week. ""Every customer is now dissatisfied.""
Last week, as it tried to address its growing problems, AOL also said it would add customer service personnel, decrease its marketing such as its advertising campaign featuring the music from ""The Jetsons"" cartoon and mailing out free disks.
Chief Executive Steve Case made an unusual plea to subscribers, asking them to curb usage during peak hours and use ""flash sessions"" to read and write electronic mail offline.
""It seems like it's an admission that they are overcharging for the service,"" said Edward Labaton, a partner at Goodkind Labaton Rudoff & Sucharow, one of the law firms that has filed a class action suit against AOL in New York.
""If you are an AOL user, you know it's a lottery now. The chances of getting online during peak hours are as good as your chances of getting four numbers in the lottery,"" he said.
Since AOL switched to unlimited access for $19.95 on Dec. 1, it has had record numbers of subscribers join the service, including 500,000 in December alone. Last week, its stock jumped as it reported its membership passed 8 million.
""Yes, I think they will lose some (members), but still it is a very good deal, if you want any of the proprietary content,"" said Gary Arlen, president of Arlen Communications Inc., a market research firm in Bethesda, Md.
He said that national Internet access providers, such as AT&T Corp.'s WorldNet service, Netcom Online Communications Inc., Mindspring Enterprises Inc. in Atlanta, may gain some users at AOL expense.
""But it won't be a stampede,"" Arlen said. ""Do you go to the little guy with a dozen unlimited lines, or companies that have had regional overloads, like Netcom?""
""We are seeing something,"" said an AT&T WorldNet spokesman. ""In about the last three weeks, we have seen our subscriber rates double ... and we cannot account for this on the basis of our ad programs in place."" The AT&T spokesman said that AT&T was trying to determine if the spike in subscribers was due to AOL's woes or other factors.
Currently, AT&T WorldNet has 600,000 users.
Recently, on one Internet newsgroup, users complained in postings that they could not cancel their AOL accounts, because the 800 numbers were busy for hours, and e-mail requests to cancel were told to call these 800 numbers.
AOL and all the online services face a difficult economic model, analysts said, as they spend millions to build out their networks to support growing demand, because it is difficult to estimate what will be the real demand level.
""They are not totally to blame,"" said Lise Buyer, an analyst with T. Rowe Price. ""No one has seen this kind of membership ramp-up before, they are pioneers in this area.""
",46
"Former NBC executive Brandon Tartikoff was named chairman of the board of America Online Inc.'s original content division, Greenhouse Networks, the online giant announced Monday.
The world's No. 1 online service also said it was buying LightSpeed Media, a pioneer producer of Internet soap operas and shows. Terms of the deal were not disclosed.
As part of the deal, Vienna, Va.-based Greenhouse Networks said it would develop an interactive entertainment network, slated for launch this fall.
The entertainment network will be based in Los Angeles and will capitalise on Lightspeed's and Tartikoff's relationships in the entertainment industry.
America Online's deal with Tartikoff expands a previous arrangement announced last fall for the executive to develop original interactive brands to be launched simultaneously online, on television and as books.
Tartikoff, who was president of NBC Entertainment from 1980 to 1991, currently heads his own television and production company, H. Beale Co., in Los Angeles.
Tartikoff will continue to head his own production company and act as a consultant and adviser to America Online as chairman of Greenhouse, America Online said.
LightSpeed was behind the first so-called ""episodic"" show on the Internet, called ""The Spot,"" which it sold to American Cybercast early last year. ""The Spot,"" an interactive soap opera about five people sharing a house on a California beach, is still on the Web site of American Cybercast, which filed for Chapter 11 bankruptcy protection in January.
LightSpeed was founded in May 1996 by the creators of ""The Spot"" after American Cybercast bought the programme. Founder Scott Zakarin will be named president of programming.
Zakarin and his team launched another Internet soap -- -- ""GrapeJam"" -- last August.
America Online executives said Internet soap operas will be only one small part of its broad entertainment network, which will feature celebrity hosts, live events, news and other information about the entertainment industry.
""The focus (of the network) is on the entertainment industry and the entertainment business,"" said Greenhouse President Danny Krifcher. He declined to say how big the venture will be.
America Online plans to make money from the entertainment network through advertising revenues, licensing and through transactions, such as selling tickets to entertainment events, selling merchandise and offering premium information at a surcharge. But Krifcher declined to make any forecasts.
The closest competition America Online said it has on the Internet to the entertainment network are sites such as Mr. Showbiz, E! Online and a People magazine site devoted to entertainment.
""This is a very big opportunity,"" Krifcher said. ""This is the beginning of what we think will be a series of exciting announcements and developments for us.""
America Online stock rose $3 to $45 in consolidated afternoon trading on the New York Stock Exchange.
",46
"Wall Street's year-old love affair with IBM showed signs of fraying Wednesday after investors felt jilted by the computer maker's fourth-quarter earnings report.
International Business Machines Corp. stock tumbled $13 in early trading and closed $10 lower at $158 on the New York Stock Exchange, where it was the most active issue with more than 12.2 million shares changing hands.
The drop contributed accounted for most of the decline of nearly 34 points in the Dow Jones industrial average, which includes IBM in its 30 stocks. It had some market pundits wondering if the issues affecting IBM's profits in the quarter point to a broader slowdown in corporate earnings this year that could mean an end to the stock market's stellar rally.
The world's largest computer maker late on Tuesday said fourth quarter earnings rose 18 percent to $2 billion, or $3.93 a share, beating the average Wall Street estimate of $3.88 a share but falling short of more optimistic forecasts.
In fact, several analysts said they were disappointed with the results, which were boosted by a lower tax rate and lower-than-expected restructuring costs, but hurt by sluggish mainframe sales and currency fluctuations.
""This quarter took the wind out of their sails,"" said Daniel Ries, a Nomura Research analyst.
""Rather than easily achieve (Wall) Street estimates, IBM appeared to be huffing and puffing,"" Morgan Stanley analyst Steve Milunovich said in a note to clients.
IBM stock more than doubled in the last year, aided late in the year by Merrill Lynch analyst Daniel Mandresh, who in November raised his price target for IBM stock to $195.
On Wednesday Mandresh cut his 1997 earnings estimate for IBM to $13 a share from $13.40, traders said. Mandresh did not return calls seeking comment. But traders said he reiterated his buy rating on the stock and the $195 price target.
For all of 1996, IBM earned $5.4 billion, or $10.24 a share.
While IBM's service business continued to perform well in the fourth quarter -- revenues there grew 22 percent -- mainframe sales were disappointing and its microelectronics unit was hurt by a drop in computer memory chip prices.
In addition, sales of RS/6000 workstations were flat.
""It was disappointing in a number of dimensions, partly hardware growth and the gross margin being low,"" said Painewebber analyst Stephen Smith, who reiterated what he called a controversial ""unattractive"" rating on IBM.
Smith said he expected less profits from mainframes, IBM's traditional stronghold, in 1997 than in 1996.
John Jones of Salomon Brothers said mainframe sales fell 12 percent in the quarter, with 10 percent of those revenues coming from IBM's older less profitable machines that are being discontinued.
Not every analyst saw the earnings report as negative.
""Hardware is the thing that was off the mark,"" said SoundView Financial analyst Gary Helmig, who cited ""some good news underneath"" and reiterated a buy rating on IBM.
Bear Stearns analyst Andrew Neff said he held his attractive rating on IBM shares and kept his 1997 estimate of $12.75 a share unchanged.
Some market analysts said the issues surrounding IBM could foreshadow problems for corporate earnings, and stock prices, down the road.
One issue is the strength of the dollar, which IBM said ate into fourth quarter revenue growth by 3 percentage points.
""The strong dollar is something I think is going to impact earnings for many multinationals,"" said Edgar Peters, chief investment strategist at PanAgora Asset Management. ""That's something that hasn't been talked about much before today.""
The strong dollar can hurt U.S. companies in two ways: profits from overseas are worth less when translated into dollars and companies have a harder time raising prices since foreign competitors have the advantage of a weaker currency.
""It means the pricing power of domestic corporations is hurt,"" said Michael Metz, chief investment strategist at Oppenheimer & Co. ""This foreshadows the real problem of 1997 because one of the pillars of this market has been earnings growth.""
The dollar, recently at its highest level in years against the German mark and Japanese yen, shows few signs of retreating.
Still, some said Wednesday's IBM sell-off was overdone.
""I think there was a lot of retail panic selling,"" Soundview's Helmig said, referring to sales by customers of retail brokerages as opposed to institutional investors.
David Takata of Gruntal & Co. raised his price target on IBM to $200. ""1997 looks like IBM's year of execution,"" he said.
",46
"America Online Inc. signed a hefty marketing pact Tuesday with little-known long-distance provider Tel-Save Holdings Inc., immediately giving the online service a big chunk of cash and Tel-Save access to 8 million America Online subscribers.
The two companies signed a deal to offer America Online members lower-cost long-distance telephone service through Tel-Save, which America Online will promote and sell to its members.
America Online will get an upfront payment of $100 million in cash from Tel-Save, a telecommunications provider based in New Hope, Pa. The online service will also get warrants to buy Tel-Save shares.
The announcement fuelled a rally by Tel-Save stock, which climbed $7.375 to $20.50 on Nasdaq, making it one of the biggest percentage gainers on the exchange.
America Online stock rose $1.125 to $36.625 in consolidated trading on the New York Stock Exchange.
Analysts and America Online said the deal was a boost for the world's No. 1 online service because it showed the company was able to put a big value on its growing subscriber base and that it could derive revenues from sources other than subscriber fees.
""This is a proof of promise,"" Bob Pittman, chief executive officer of AOL Networks, said in an interview. ""This is not a deal a (Web) search engine could do because they don't have the assets. We have put a number on it and we have another $100 million in our coffers.""
Pittman said that while Dulles, Va.-based America Online currently has ""plenty of cash"" for its business plan, this is additional cash for general corporate purposes. But America Online must pay the $100 million back.
Analysts said the first $43 million must be paid back over 10 quarters, beginning in its fourth quarter, when America Online begins to market the Tel-Save long-distance service to its members, through pop-up screens which will ask members if they wish to enroll. A sampling will begin this summer.
Tel-Save currently offers long-distance and wireless service to about 500,000 small and medium-sized businesses. Tel-Save said its long-distance service costs less than that from giants like AT&T Corp., MCI Communications Inc. and Sprint Corp.
""These subscribers are the cream of the crop,"" said Dan Borislow, chief executive of Tel-Save. ""This is a great use of our cash."" He declined to estimate how many America Online members may sign up for long-distance service.
America Online's warrants will allow it to buy shares of Tel-Save at prices ranging from $14 to $15.50, for up to 12 million shares, if the total number of America Online members using Tel-Save reaches 3.5 million subscribers. ""They (AOL) could wind up owning over a third of this company,"" said Jamie Kiggen, a Cowen & Co. analyst.
However, some analysts pointed out that America Online will be competing against the long-distance companies, which spend billions of dollars on marketing.
""This will be the ultimate test of AOL's marketing prowess,"" said David Simons, managing director of Digital Video Investments.
""It's AOL against 'The Dime Lady,'"" he added, referring to Sprint's popular television commercials featuring actress Candice Bergen.
",46
"New York State Attorney General Dennis Vacco said Friday that he planned to sue America Online Inc. if the company's negotiations with prosecutors from 20 states over consumer complaints about its service broke down.
Vacco told a news conference he would sue the world's largest online service, with more than 8 million subscribers, to halt allegedly deceptive business practices and to win refunds for the company's frustrated customers.
""I'm not interested in contrition, I'm interested in restitution,"" Vacco told reporters in Manhattan.
AOL has been hit by a slew of consumer complaints, including several class-action lawsuits, since switching to a new pricing plan because many frustrated users cannot get on the service or are dropped after they manage to log on.
America Online Chairman Steve Case said on the CNBC cable television channel that he was not considering subscriber refunds. He said the company was doing all it could to fix the problems and that he understood the frustrations.
""It is not something we are considering,"" Case said on CNBC. ""Most customers have seen a tremendous price cut, they have doubled their usage"" with the new plan, which costs $19.95 a month for unlimited access.
Vacco and other attorneys general or their aides from 20 states met with America Online officials on Thursday in Chicago, in person or via conference call, to discuss a barrage of complaints by subscribers who have experienced difficulty accessing the service from their computers.
Vacco said he sent notification Thursday of New York state's proposed litigation to America Online's headquarters in Dulles, Va. He said a lawsuit would allege the company engaged in deceptive sales practices, false advertising and fraud in selling online services.
""Getting some sort of rebate or refunds from consumers is one of our primary concerns in this issue,"" said a spokesman for Attorney General Vacco, when asked about Case's comments. He said that New York State would file this lawsuit alone.
Washington state, one of the 20 states, said it was considering a range of options.
""Obviously one of the options is to file a lawsuit and obtain relief through the courts,"" senior assistant attorney general Sally Gustafson said in Seattle. Another was to negotiate a settlement, she said.
A spokeswoman for Dulles, Va.-based AOL said the company was still in discussions with all the attorneys general.
""We are likely to reach an understanding that will allow us to best meet the needs of our members,"" she said.
America Online stock fell 50 cents to $36.75 on the New York Stock Exchange. Wall Street remains largely unfazed by the swirl of legal and media attention surrounding AOL.
AOL moved to placate angry customers last week, telling them it would spend $350 million to upgrade its network, $100 million more than it had announced in December.
It also asked them to try to cut use during peak hours, an unprecedented plea to its subscribers. Case even told members in his monthly newsletter to learn how to write and receive electronic mail offline, in so-called ""flash sessions.""
But New York's Vacco called AOL's attitude disingenuous.
""We want to give the consumers a choice that gives them a refund if they want it. Don't just say 'Hang on;' give them a choice, which includes getting out with their money."" There are 600,000 AOL users in New York state.
AOL has been hit with at least four class-action lawsuits by subscribers, including two in New York.
Vacco would not comment on Thursday's meeting.
Case also was reluctant to talk about the meeting.
""I'm not going to discuss what is on the table with the attorneys general,"" he said on CNBC, adding that the meeting was ""constructive"" and that the attorneys general asked AOL not to talk about it. ""Our interests are really in parallel.""
The move to unlimited access itself incurred the ire of many of the same attorneys general. Last month, AOL reached an agreement with 19 states over the flat-rate pricing, with AOL agreeing to pay automatic refunds to subscribers who did not want to pay $19.95 a month.
But analysts noted AOL had already told subscribers, before the agreements with the states, that it would give refunds to those who were switched to unlimited usage without their consent, if they wished to continue at a lower cost plan.
",46
"International Business Machines Corp.'s $23 billion Global Services business will become a separate IBM group, the company announced Wednesday, acknowledging the significance of the fast-growing business.
In a related development, IBM Chairman Louis Gerstner reiterated in the company's annual report an earlier statement that it planned to hire ""thousands more"" employees to fuel growth, most of them in Global Services.
IBM told analysts earlier this year it will probably add as many new employees in 1997 as it did in 1996, with a big chunk in Global Services.
In 1996, the Armonk, N.Y.-based computer giant's worldwide head count grew to 241,000, up from 225,000 in 1995, mostly due to the expanding services business, an IBM spokesman said. In 1995, employment grew from 220,000 in 1994, the first time employment grew in 10 years.
""I'd like to add here that I am very happy -- and proud -- that our transformation has created job growth,"" Gerstner said in his letter to shareholders, in which he described 1996 overall as ""a solid year.""
When Gerstner first took over the then-struggling computer giant in April 1993, one of his first actions was to take a whopping restructuring charge and cut 25,000 jobs from IBM.
The Global Services unit -- which designs, installs and services computers, including running entire corporate computer systems -- was formerly part of IBM's Sales and Services group.
Sales and Services will be renamed the Sales and Distribution Group, still headed by IBM Senior Vice President Ned Lautenbach.
IBM also said Dennie Welsh, who was general manager of Global Services, will be promoted to a senior vice president and report directly to Gerstner.
Welsh was also named an IBM group executive and will join IBM's executive committee, which makes strategic decisions.
""The time is right for this change,"" Gerstner said in an IBM memo announcing the reorganization. ""He (Welsh) and his colleagues on the services team have done an outstanding job building a great new business for IBM. This change not only reflects a logical adjustment in our organisational structure, but also a recognition of their success.""
IBM's services business has been its fastest growing in recent quarters. In the fourth quarter, IBM said services revenues jumped 22 percent to $5 billion. In comparison, IBM's total revenues grew 6 percent in the fourth quarter.
""This is a transformation of the IBM company,"" said Sam Albert, a Scarsdale, N.Y.-based consultant. ""The major revenue stream is not coming from hardware, it will come from software and services ..."".
""This has some impact on the way IBM sees its future,"" Albert added. ""Anything this important demands direct oversight by Gerstner.""
Wednesday's move follows changes in December when IBM consolidated computer services under the IBM Global Services brand. IBM's services organisation had been operating in some countries outside the United States under different names.
The addition of Global Services now gives IBM five major corporate divisions. The others are the Software Group, the Server Group, which makes the computers that run networks; the Personal Systems Group; and Sales and Distribution.
With Welsh's promotion to IBM senior vice president, the company now has a total of 10 senior vice presidents.
IBM stock fell $1.50 to $137.857 on the New York Stock Exchange.
",46
"International Business Machines Corp. Tuesday introduced its next generation mainframe computer family, with systems twice as fast as currently available models, in a product launch widely anticipated by its customers.
""The feedback is phenomenal,"" said Ross Mauri, vice president of System 390 hardware developnment, in a phone interview. ""We have seen quite a bit of demand out there.""
""Customers have been enthusiastic about embracing the new server,"" Mauri said, adding that it is likely that IBM will be ""sold out of what we can produce this year,"" based on the initial customer reaction.
Mainframes are giant computers that store the data of the biggest corporations around the world. They are used by banks for transactions, by airlines for reservations systems, and by insurance companies for claims processing.
While many analysts have predicted the demise of these giant computers as more companies move to PC-based networks, mainframes have staged somewhat of a comeback as huge repositories of data that is accessible via the Internet and internal networks known as intranets.
The new mainframe servers use the third generation of IBM's lower-cost processor technology, called CMOS. The CMOS (complementary metal oxide semiconductor) technology is a process that uses microprocessor technology that is less costly to build and less expensive for customers to maintain.
IBM introduced two new lines of System 390 servers, or computers that manage networks.
One family, called the IBM S/390 Parallel Entreprise Server, has 13 models designed specifically for heavy data storage and for transaction intensive companies.
The second server line, the IBM S/390 Multiprise 2000, is aimed at medium-sized customers who are currently using IBM S/390 mainframes, but wish to increase their computing power. The Multiprise is also aimed at customers who wish to buy an entire package, with software and storage systems.
So far, IBM has installed about 14 of the S/390 Parallel Enterprise Servers - Generation 3 in an early customer program. IBM has also installed three of the S/390 Multiprise.
IBM also said it introduced an upgrade of its mainframe operating system, called OS/390 Release 2, which provides more connectivity for customers to computer networks such as the Internet and UNIX based systems. IBM also introduced other software products for better network computing over the S/390.
IBM also introduced new mainframe disk storage products for improved data reliabilty.
IBM declined to give any price details on the new models, saying that it tailors each systems to unique customer needs and that customers are now familiar with the lower prices of CMOS-based mainframes.
""As you make the transition from bipolar to CMOS, you see a significant price reduction,"" said Mauri. ""Customers already have an understanding of that.""
Bipolar refers to the process technology that IBM used in its older mainframe models. Three years ago, IBM began preparing its customers for a big transition to a new, lower-cost machine, designed around microprocessors.
Analysts said the new mainframes run at speeds of around 45 million instructions per second (MIPS), twice as fast as the currently available speeds of 22 million instructions per second for the fastest CMOS models, bringing the systems up to the speeds of the older bipolar machines, and at a lower cost.
Even with the prices of these huge milllion dollar systems falling, mainframes are still IBM's biggest revenue producing hardware. Analysts are hoping for a big uptick in fourth quarter earnings, in part due to mainframes, because the lower-cost models are more profitable to IBM.
""These are all necessary announcements for IBM,"" said Gary Helmig, a SoundView Financial Group analyst, adding that the products are important to IBM's future earnings.
IBM said the new models will be available next month.
""The mainframe as we once knew it, where MIPS were expensive, we are never going to see that again,"" said Sam Albert, an industry consultant in Scarsdale, N.Y. ""IBM has re-engineered the mainframe, they don't even want to call it a mainframe anymore, they call it a server.""
",46
"America Online Inc., besieged by complaints by frustrated customers unable to log on and facing the threat of a lawsuit by at least one state, agreed Wednesday to give some members refunds or credit.
The world's largest online service, with 8 million subscribers, agreed in principle to give customers their choice of a free month online or up to $39.90 -- the cost of two months of its unlimited service -- as a result of its recent negotiations with dozens of state attorneys general.
AOL also said it planned to hold its membership at 8 million members for the short term, until it was confident it could meet the needs of its current members.
America Online Chairman Steve Case said the company had been working out a refund offer to its members and that the attorneys general in several states agreed Wednesday afternoon to support its proposed plan to members.
""We felt like today we had to move forward with our programme, with or without an agreement,"" Case said in an interview. ""We were pleased at the final hour that the attorneys general are supporting it... It was a concern that our members were waiting for us to respond. If there hadn't been so many states involved, we could have responded a few days ago.""
Illinois Attorney General Jim Ryan held a news conference in Chicago, to announce the preliminary deal with the company and 36 states including Illinois, before AOL's announcement.
Ryan said he expected the Dulles, Va.-based company would formally sign the agreement by Thursday.
""We're comfortable with it. We think it's a good deal for consumers,"" he said.
America Online, which since Dec. 1 has been struggling to deal with an unexpectedly big surge in subscribers, also agreed to halt for a month advertising aimed at attracting new customers.
The proposed settlement headed off, for now, consumer fraud lawsuits threatened by at least one state, New York and under consideration by several other states. Several class action lawsuits have been filed against AOL, and AOL said this agreement has nothing to do with the class action lawsuits.
The agreement calls for customers to receive graduated refunds of up to $39.90 based on how much time they spent over the past two months logged onto AOL, Ryan said.
Any customer can demand a free month's service, no questions asked, but the consumer must request the credit.
""It's a way of saying thank you to our members for their support,"" said an AOL spokeswoman.
Case declined to estimate the cost of the refunds, but New York state Attorney General Dennis Vacco told a Manhattan news conference he expected the refunds will cost the company several million dollars in his state alone. There are 600,000 AOL members in New York state.
Wall Street analysts said they did not expect the refunds to have much of a financial impact on AOL, because it will be cutting way back on its quarterly marketing expenses, which average about $120 million to $130 million a quarter.
""Even if you make some pretty aggressive assumptions about how many people will call for refunds, then you have the number who will qualify,"" said Jamie Kiggen, a Cowen & Co. analyst. ""I come up with $10 to $15 million in terms of cash cost, which will be offset by reduced marketing expenses.""
AOL moved to placate angry customers on Jan. 16, telling them it would spend $350 million to upgrade its network, $100 million more than it had announced in December.
Ryan said the pact originally covered 37 states, but said Missouri's attorney general backed out at the last minute to take a closer look at the proposed refunds.
AOL ran into capacity troubles after it switched its customers from a subscription plan based on the number of hours online to a flat $19.95 monthly rate for unlimited use.
Under the agreement announced Wednesday, AOL agreed to cease all new advertising for the month of February unless already contracted for. Vacco said any ads must include a disclaimer that congestion may prevent customers from getting online.
The prosecutors had complained America Online was continuing to advertise and sign up new customers even as it could not deliver the service to existing users.
AOL also agreed to hire additional operators to field calls from customers seeking to cancel the service, and will set up facilities to accept cancellations via mail or fax, in addition to telephone requests. Members had complained they could not cancel the service.
Customers in the 36 states also could contact the attorney general's office in that state to file a refund request.
Attorneys general or their aides from 20 states met last week in Chicago with the company.
""If there are fresh complaints, we can still file a lawsuit under the consumer fraud laws,"" Ryan said. ""This does not preclude us from acting on behalf of consumers.""
",46
"International Business Machines Corp. Tuesday reported fourth-quarter earnings that were slightly better than expected, bolstered by its service business, growth in software sales and tight expense controls.
The world's largest computer maker said net income rose 17.6 percent to $2.0 billion in the quarter from $1.7 billion in the year-ago period.
Earnings per share rose faster, to $3.93 from $3.09 a share, since IBM had 7 percent fewer shares outstanding in the quarter due to stock buybacks.
Wall Street analysts had expected earnings of $3.88 a share, on average, according to First Call, which tracks earnings estimates.
While analysts and investors said the results looked good, some said IBM stock might come under profit-taking pressure on Wednesday.
""It's an excellent number, it's an excellent quarter. You really can't say anything bad about it. But I think it may cause a brief period of selling because Wall Street (sells) on that kind of news,"" said Thom Brown, managing director of Rutherford Brown and Catherwood.
""They were mixed results, software and services were great"" and European results were encouraging, said David Takata, a Gruntal & Co. analyst.
But Takata said weak mainframe computer revenues were disappointing. Some analysts had been predicting mainframe revenues rose in the quarter due to strong new products.
The Armonk, N.Y.-based computer maker said service revenues jumped 22 percent in the fourth quarter and personal computer sales rose, but sales of mainframes fell.
Software revenues grew 4 percent in the quarter, and hardware sales grew 2 percent.
Revenues overall rose 5.6 percent to $23.14 billion from $21.92 billion. Expenses fell 2 percent in the quarter from the 1995 period, IBM said.
""We showed good growth in the fourth quarter despite a difficult year-over-year comparison, continued weakness in Europe and a greater-than-expected currency impact,"" IBM Chairman Louis Gerstner said in a statement.
Currency fluctuations cut revenues by about 3 percentage points in the quarter, compared with about a two point positive impact in the 1995 quarter, IBM said.
Net earnings for the year rose to $5.4 billion, or $10.24 a share, from $4.2 billion, or $7.23 a share, in 1995. The 1996 results included a charge for research and development from the acquisition of Lotus Development Corp.
Full-year revenues rose 5.6 percent to $75.95 billion from $71.94 billion.
In a break with tradition, IBM released its results after the stock market closed rather than before the market opened.
Analysts said there was no particular significance to IBM reporting after the close. IBM was trying to avoid the drastic swings in its stock that have come during a conference call with analysts it hosts after the earnings are released.
The stock closed up $1 at $168 in consolidated trading on the New York Stock Exchange.
",46
"After two years of hype and euphoria about the Internet and its sweeping impact on the computer industry, a reality check is setting in as investors are asking: Where's the money?
A Tucson, Ariz., industry conference this week called PC Forum -- a ""schmooze fest"" once populated mostly by the upper echelon of the computer industry -- brought together telecommunications and media company leaders as well as those from computer behemoths and start-ups.
Many attendees said there is more concern now about profits and business models.
""It's now coming to practical terms,"" said Ed Bennett, former president of the Prodigy Services online service. ""Where is the money coming from? ... But the raw potential of the industry hasn't changed, and that's a good thing.""
So far, it is still not clear what type of business plan will lead to hefty revenues and profits from the Internet, whether it be advertising-based, subscription-based or some other way of making money.
Recent failures or financial problems at Web-based ventures, such as the Chapter 11 bankruptcy filing of American Cybercast, one of the first Web soap opera sites, are causing concern.
Executives also pointed to the recent Securities and Exchange Commission filing by Amazon.com, which pioneered bookselling on the Internet, for its anticipated initial public offering (IPO).
Seattle-based Amazon.com, known as one of the most successful ventures and best-known examples of Internet commerce, said it lost $5.8 million in 1996, mostly due to increased investments in technology and marketing.
""There is no question that there is an increased focus on the part of analysts and investors on when are they going to make money,"" said Sheldon Laube, chief technology officer of U.S. Web., a privately held Santa Clara, Calif. company which franchises Web development, training and consulting services.
""It's a healthy part of the evolution of the business,"" Laube said. ""The hype is now evolving into reality and ultimately that is what technology is all about.""
While the conference is a forum for discussing industry issues and exchanging ideas -- sometimes lofty and intellectual ones such as the use of metaphors and language to describe this new medium -- a number of small start-up companies come to make their debut before their peers. Industry executives, analysts and investors come to meet and make deals in the hallways.
This year, in the so-called ""debutantes"" presentations, many venture capitalists, Wall Street analysts and fund managers checked out 12 early start-ups.
The PC Forum, run by industry guru Esther Dyson, is considered such an important part of a start-up company's debut that Fast Company magazine followed around executives of two small companies to chronicle their participation at the conference.
""This is the 'Lollapalooza' of the Internet,"" Bennett said, who remains on Prodigy's board, referring to the alternative music festival. ""Not every band is going to get signed.""
This year, questions about business models dominated many start-up presentations more than the technology. During a presentation by a start-up called NetBot Inc., whose Internet ""shopping assistant"" made its debut, one attendee interrupted to ask about the Seattle-based firm's business model, even before the company demonstrated its software called Jango.
""People are much more pragmatic when they look at these companies,"" said Bruce Smith, a Merrill Lynch Internet analyst. ""You like to look at companies that have thought through their business model and how they will compete with the 800-pound gorilla (Microsoft Corp.).""
And as the stocks of other publicly traded companies such as Internet search engines firms like Yahoo! Inc., Excite Inc., and Lycos Inc. ; Internet access providers; online services and other Internet software companies continue to drop on Wall Street, start-ups compete for fewer and fewer venture capital dollars.
Some promising IPO candidates are also mulling being acquired, such as PointCast Inc.'s much-rumoured discussions two weeks ago to be acquired by Rupert Murdoch's News Corp., the owner of the Fox television network and newspapers such as the New York Post.
PointCast, a pioneer in so-called push technology, said last week its present intention was to remain independent.
""In the venture capital business, you can see the transition from a seller's market to a buyer's market,"" said Roger McNamee, general partner at Integral Partners in Menlo Park, Calif. ""Entrepreneurs are beginning to wonder where their next dollar of capital will come from.""
Even in its new-found pragmatism, the industry remains ever optimistic about the future. Conference leader Dyson and many of the speakers gathered together at the end of the conference with the creator of the World Wide Web Tim Berners-Lee, who now heads up the World Wide Web Consortium.
""The competition is what produces the incredible rate of development,"" Berners-Lee said.
",46
"International Business Machines Corp. and 15 U.S. and Canadian banks announced Monday that they had formed a company to offer a broad range of electronic banking services in North America, the latest in several ventures seeking to jump start banking from home PCs.
The company, the Integrion Financial Network, will offer interactive banking and electronic commerce services to U.S. and Canadian banks beginning early next year.
""With this new venture, electronic commerce will take its biggest step to date,"" IBM Chairman Louis Gerstner told a news conference, in a rare public appearance. ""Integrion is the customer pathway to an array of services ... that no bank could provide alone.""
Integrion will develop an electronic bill payment system and provide software to connect to its network for member banks' customers. Consumers will also be able to access the network via the Internet or any commercial online service.
Electronic commerce, in which consumers buy goods and services via computer, could grow to $600 billion a year within 10 years, Gerstner said. By contrast, electronic commerce now runs at only about $700 million a year, he said.
""The demand is there,"" Barnett Banks Inc. Chief Executive Charles Rice told the news conference.
""There is a very important parallel here,"" said Gerstner, who was once also the president of American Express. ""A group of banks created a product called credit cards... That is exactly what I think will happen here.""
Gerstner said he believed Integrion was providing a system and a platform for a whole new banking service opportunity.
Gerstner said he hoped that companies like Intuit Inc., which has its own set of deals with banks for electronic banking software, would develop versions of its popular Quicken personal financial software for Integrion.
In addition to Barnett, banks teaming up with IBM include BankAmerica Corp., the Royal Bank of Canada, Fleet Financial Group Inc. and Banc One Corp.
Integrion will be owned and operated by the member banks and IBM. It will be open to all banks in North America.
Gerstner said his company would make money from the venture by selling the services of its Global Network and other services. He said Integrion is a for-profit company but that the companies involved will make money through electronic banking services.
Gerstner was not specific on what kind of revenues IBM or any of the companies involved were expecting from the venture.
The companies said they will use the IBM Global Network as the base network for electronic banking, a proprietary network maintained by IBM and used by many corporations as their own network or to conduct commerce with other companies.
Several bankers attending the news conference said the partnership with IBM would lower the cost of developing technology for electronic banking.
The companies said the most sensitive banking transactions will run over the IBM network, which they said is more secure than the Internet, but with connections to the Net.
Gerstner said while the Internet has become a totally new communications medium in the past two years, it is still not yet the ""holy grail"" companies have hoped for.
""The payoff is what these institutions do with this,"" Gerstner said.
Some analysts, however, said if the alliance took too long to get its software out the door, it could run the risk of being overshadowed by recent developments in Internet security, such as the use of longer encryption codes and digital signatures which verify the author of a transaction.
""The marketplace has changed a lot in the past two years,"" said Karen Epper, an analyst at Forrester Research. ""There has been a marked change in the perception of the Internet. The security options that are coming into existence now will make online banking more secure than even private dial-up.""
""The Internet seems best suited for sharing information and not for conducting (business) because of the lack of security,"" Robert Gillespie, chief executive of KeyCorp, one of the bank partners with IBM said. ""We think the reason its grown rather slowly in terms of commerce being conducted is because of the lack of a private secure network to do transactions on.""
Epper pointed out that some banks, such as Wells Fargo Co. and BankAmerica Corp. already offer customers the ability to pay bills and access their accounts, via the banks' Web sites.
Other banks teaming up with IBM are ABN AMRO Bank NV, Comerica Inc., First Bank System Inc., First Chicago NBD Corp., KeyCorp., Mellon Bank Corp., Michigan National Corp., NationsBank Corp., PNC Bank and Washington Mutual Savings Bank.
",46
"America Online Inc. stock tumbled Friday, a day after the online computer service reported a bigger-than-expected second-quarter loss and after some analysts downgraded its stock.
America Online stock dropped $2.25 to $35.875 in consolidated trading on the New York Stock Exchange.
The world's biggest online service Thursday reported a second-quarter loss of $56 million before one-time charges, or 60 cents a share, for its fiscal second quarter ended Dec. 31.
Analysts on average had predicted a loss of 55 cents a share, according to First Call, which tracks analyst estimates.
After the extraordinary items, which included a charge of $74.3 million related to a restructuring, America Online reported a loss of $154.8 million, or $1.64 a share.
The company also took an unexpected $24 million charge in estimated refunds and credits for subscribers stemming from its recent network woes.
The company's switch in December to flat-rate pricing caused an unexpected upsurge in the number of subscribers and the amount of time they spent online. That led to repeated busy signals for customers trying to log on from their personal computers, angering them and drawing attention from state attorneys general in 37 states.
Under pressure from the attorneys general, the Dulles, Va.-based company agreed last month to provide refunds and usage credits.
America Online has nearly 8 million subscribers.
Smith Barney analyst Jonathan Cohen on Friday lowered his rating on America Online stock to underperform from neutral, saying that, excluding the charges, operating results fell below his expectations.
""In our view, many of America Online's extraordinary charges during the quarter were somewhat less than extraordinary and would have been more appropriately recognised as regular operating results,"" Cohen said.
He pointed out that America Online chose to recognise as revenues subscriber payments while at the same time treating the refund of those same payments as a non-recurring charge.
Morgan Stanley analyst Mary Meeker also downgraded America Online, to outperform from buy but details of her comments were not available.
Other analysts said the quarter was not a disappointment, but that they believed the stock fell because it became clear America Online will not break even until the quarter ended in June, as opposed to the third quarter ending in March, as previously hoped.
""They aren't going to do it because of the modems, said Nesbitt Burns analyst Abhishek Gami, who reiterated a strong buy rating. ""But by doing what they are doing with the modems, they are accelerating the healing process.""
America Online said Thursday it will spend $10 million to $15 million to lease 50,000 modems from a computer network provider that it declined to name. It said the move will enable it to expand its network to meet subscriber demand by April, two months ahead of schedule.
",46
"America Online Inc. was hit with two more lawsuits Wednesday when two New York law firms said they filed class actions on behalf of their clients and AOL members frustrated with the world's largest online service.
The two lawsuits, both filed in New York state court this week, come on the heels of a class-action lawsuit filed Tuesday in Los Angeles on behalf of five subscribers, seeking damages for what they call fraudulent and malicious representation.
In addition, at least two state attorney generals have confirmed they are in discussions with America Online, seeking some resolution to complaints they have received from consumers about the continuing problem of network access.
New York state Attorney General Dennis Vacco and Wisconsin state Attorney General Jim Doyle are in discussions with AOL, spokesmen said.
Since AOL switched its more than $7 million members to unlimited access for $19.95 a month, its network has been deluged by subscribers, many of whom cannot log onto the system during peak evening hours or on weekends.
A spokeswoman for the Dulles, Va.-based company could not immediately comment on the New York lawsuits, but on Tuesday, AOL said it was upgrading its network and that it understood its users' frustration.
""Although we understand the frustration some members are experiencing ... the average AOL member gets more value under unlimited pricing than ever before,"" AOL said in response to the Los Angeles lawsuit.
One of the New York lawsuits, filed by the law firm of Goodkind Labaton Rudoff & Sucharow LLP, represents four AOL members.
""Anyone who has tried to access AOL and its Internet service recently knows there is an interminably long wait and that the company is not providing what it has promised to its subscribers,"" attorney Edward Labaton said in a statement.
""It is particularly damaging to the millions of those who have been promised unlimited access on AOL for $19.95 per month and cannot benefit from the contractual obligation America Online has with them,"" he continued.
The lawsuit claims breach of contract, unjust enrichment, deceptive trade practices and false advertising by AOL. An AOL spokeswoman said she had not yet seen the lawsuit.
The other lawsuit was filed Monday by Wechsler Harwood Halebian and Feffer in New York, representing one user, Ezra Graber. This lawsuit seeks to recover damages due to breach of contract for failure to provide services.
Peter Zinman, an attorney for Goodkind Labaton Rudoff & Sucharow, said their lawsuit is separate from the one filed in Los Angeles but that all the cases could be consolidated into one class action.
""I would predict that there would be many suits filed all over the country,"" said Zinman.
",46
"America Online Inc., beset with network overload problems and angry subcribers, said Thursday it will spend even more than planned to shore up its network, amid another soaring subscriber growth report.
The Dulles, Va.-based company has experienced growing pains in the United States in the form of service outages -- including a partial outage of nearly four hours Wednesday -- since it switched its members to unlimited usage for $19.95 a month in December.
The largest online services company in the world said it will now spend $350 million to upgrade its network, instead of $250 million as previously planned, to add new modems and build an 180,000 square foot data centre. It also will add new customer service representatives and halt its nationwide television advertising campaign for the time being.
AOL said the current usage of its network was exceeding its most aggressive forecasts, much of it due to the unlimited pricing plan. In December, its usage skyrocketed to more than 100 million hours, up from 60 million hours in November.
In his monthly letter to members, AOL Chairman Steve Case addressed the problems.
""We all dial in from our homes at night, just like you do, so we see the problems firsthand. And we're working day and night to fix them,"" he wrote.
Case also made an unusual plea to AOL members, many of whom are clogging up the system by staying on all day or for long periods of time, to cut back on their usage.
""There is something you can do to help and that is to moderate your own use of AOL a bit, during our peak evening periods,"" Case said. ""Use AOL as much as you want during the day, but try to show some restraint at night during the next few months when we're in this transitional mode.""
Peter Krasilovsky, an analyst with Arlen Communications in Bethesda, Md., said he thought the network problems would be solved in about three months.
""The letter was very contrite, and as usual Steve's communications are very good, it was just overdue,"" Krasilovsky said. ""It's a difficult economics issue, you don't want to overbuild and be stuck with a bunch of extra modems and extra capacity.""
But at the rate AOL is growing, it may need all the 150,000 modems it is adding.
AOL said that its worldwide subscriber growth, fuelled by the unlimited plan, boomed to more than 8 million members, with 500,000 new members in December alone, a record. AOL added 1.2 million members in the quarter ended December.
AOL also said its local services launched in Britain, Canada, Germany and France had grown to more than half a million, since they were launched in the past 14 months.
Wall Street was impressed by the faster-than-expected growth in U.S. membership, fuelling a $3.375 jump in AOL's stock to $41.50, most of it at the end of the day.
Analysts said the good news was a much-needed boost for AOL, which was hit this week by three class-action lawsuits, by angry members frustrated by their inability to get online.
Their allegations range from breach of contract for failure to provide services to false advertising. Attorneys general in several states confirmed they were in talks with AOL to seek some remedy to the growing consumer complaints.
To add to AOL's problems, late Wednesday afternoon, it had to shut down half its system when it noticed around 3 p.m. EST that more people could not sign on. The system ran at 50 percent capacity until 7:30 p.m. EST and full capacity was not reached until 8 p.m.
The company said it will sharply reduce the number of mailings of free trial disks, especially to cities where its customers were experiencing the most busy signals.
AOL said that between now and June it planned to increase by 75 percent the current total of 200,000-plus modems in its AOLNet system. More modems will allow more customers to dial in at the same time.
AOL said it will add 600 additional customer support people over the next six months, bringing the total to 4,500.
",46
"The stock of International Business Machines Corp. fell in heavy trading on Thursday, hit by renewed fears about its first-quarter earnings after a published report focused on recent analysts' estimate cuts.
The sell-off fuelled the overall stock market's fourth sharp sell-off in five days as investors were already scared that Friday's March employment report, if robust, could prompt the Federal Reserve to raise interest rates again soon.
IBM fell as low as $128.875 before ending down $2.375 at $131.375 on the New York Stock Exchange, where it was the third most-active issue on volume of 4.6 million shares.
IBM shares began their tumble in London, where investors first read a Wall Street Journal article that said analysts may not be through cutting IBM's earnings estimates.
The report talked about a recent spate of analysts' estimate cuts, citing fears that a stronger dollar and a mainframe product transition will hurt IBM's first-quarter earnings, due April 23, and depress the stock even further. A strong dollar makes sales overseas worth less in dollar terms.
As previously reported, two weeks ago three Wall Street firms made negative comments and two lowered their estimates on IBM, fuelling a drop in IBM's shares in late March.
The report, which appeared as a ""Heard on the Street"" column in Thursday's Journal, also dredged up an almost two-week old rumour that IBM was going to pre-announce that its earnings would come in below analysts' estimates.
""The Wall Street Journal article today is a summation of old news,"" said John Jones of Salomon Brothers. ""We talked to IBM today and they have no plans for a pre-announcement.""
One trader said of the newspaper article: ""They are a bit late to the party here.""
""I heard the rumour but I wouldn't put any credence to it,"" said another trader.
An IBM spokesman declined to comment on the quarter.
As previously reported, on March 21, Morgan Stanley analyst Steve Milunovich cut IBM's 1997 earnings estimate to $12.30 a share from $12.50. For all of 1996, IBM earned $5.4 billion, or $10.24 a share.
On March 20, Dean Witter Reynolds analyst Jay Stevens lowered his first-half earnings estimates for IBM, saying customers might hold off purchases of mainframes until an anticipated upgrade. Some analysts are expecting initial shipments in June.
Stevens added to his estimates for the second half of the year, however, saying the year would be more back-end loaded, as customers make purchases in the second half of the year.
Also in March, Merrill Lynch analyst Daniel Mandresh said it would be tough for IBM's first-quarter earnings, which it estimated at $2.32 a share, to compare to the year-ago period's. The analysts' consensus estimate is $2.31 a share for the first quarter, according to First Call, which tracks estimates.
For the first quarter of 1996, IBM posted earnings of $1.4 billion, or $2.48 a share, excluding charges associated with software acquisitions and other special items.
Gary Helmig, a SoundView Financial analyst, said he is maintaining his first-quarter earnings estimate of $2.32 a share, which he has had since February.
""It's going to be tough to make that number and I doubt that they can overachieve it,"" Helmig said. But he added that foreign currency exchange rates have not changed drastically since February, so he sees nothing new to affect his estimates.
The IBM drop caused the Dow Jones industrial average to lose 39.66 points to end at 6,477.35 after an initial plunge of more than 80 points.
",46
"International Business Machines Corp. will unveil Tuesday its third generation of its low-cost mainframes, which are almost twice as fast as current models and much-anticipated by Wall Street and IBM customers.
The computer giant, defending its still dominant position in the mainframe market, is also expected to unveil very aggressive pricing of the new systems and analysts expect mainframe prices to continue to decline even further.
""They are coming out with a very aggressive offering,"" said Carl Greiner, a vice president at the Meta Group.
Three years ago, IBM unveiled this lower-cost CMOS (complementary metal oxide semiconductor) technology as the future and gradually its big corporate users have been moving to the new systems, which are less expensive to make. But the CMOS systems were not as powerful as IBM's older bipolar line.
""The big users need something bigger,"" Greiner said. ""We are now getting into the power where most people can use this machine. It will provide for 90 percent of users' needs.""
Mainframes still generate the biggest bulk of IBM's product revenues, even though a few years ago they were declared the dinosaurs of computers by many analysts.
But in the past two to three years, the mainframe has indeed enjoyed a big resurgence, with growing unit volumes, although prices are still in great decline.
Helping fuel the continued interest in the mainframe as the keeper of corporate data are both the lower prices and more software being developed to enable broader access to the giant warehouses of data, including software gateways from the Internet. With IBM's help, mainframes are also being positioned as the biggest servers, or computers that manage a network, in a corporate ""intranet.""
So users have kept buying mainframes with lower prices amid a price war among the main vendors.
Hitachi Ltd. and its new Skyline mainframes have been gaining share at IBM's expense, because Skyline combines the older mainframe technology and the newer low-cost CMOS technology in one system, giving users more processing power.
According to the Meta Group in Stamford, Conn., in 1996, IBM will have about 73 percent of the world mainframe market, down from 81 percent in 1995. Hitachi is expected to jump to 20 percent this year, up from 7 percent last year, while Amdahl's share falls to 7 percent from 12 percent.
""Skyline is more powerful than what IBM ships today,"" said Steve Milunovich, a Morgan Stanley analyst.
""About half the installed mainframe base hasn't bought CMOS because it wasn't powerful enough.""
So customers have been widely anticipating this latest upgrade of IBM's System 390, as well as Wall Street, which is hoping for a strong fourth quarter, fueled in part by strong mainframe volumes.
Even though the prices continue to fall, analysts said that the CMOS products are more profitable to IBM and its rivals, because they are less costly to make.
""It allows them to address more of the customer base with a more profitable product,"" Milunovich said. ""It's well anticipated by customers.
As part of IBM's announcement, it will also unveil an upgrade of its mainframe operating system, called OS/390, Release 2.0, which will include higher security for software applications using the Internet's World Wide Web.
IBM also plans to introduce Internet gateways to its DB2 database software, the dominant database software for IBM and compatible mainframes, analysts said.
IBM also is expected to unveiled a mainframe version of its high capacity storage system, the Ramac storage device. IBM is hosting conference calls Tuesday for the announcements.
",46
"Progressive Networks Inc., whose RealAudio software has become a popular way to listen to music on the Internet, Monday unveiled RealVideo, which adds sights to the sounds, and announced support from major entertainment and media companies.
RealVideo became available for free, beginning Monday, by downloading Progressive Networks' RealPlayer software from its Web site (http://www.realaudio.com). A more fully featured version can be purchased from the site for $29.99.
RealVideo delivers live, on-demand video over the Internet and the corporate, Internet-like networks known as intranets.
Privately held, Seattle-based Progressive Networks said it believed that RealVideo will do for video on the Internet what RealAudio did for audio.
Lining up to support the new software were more than 50 entertainment, media and computer companies, including Walt Disney Co.'s ABC, Time Warner Inc., Cable News Network, News Corp.'s Fox News and MSNBC, the cable TV and Web site venture of Microsoft Corp. and General Electric Co.'s NBC.
The news conference held to announce the software included an appearance by film director Spike Lee, who premiered three short films developed using RealVideo.
One of the films, which last three to five minutes and can be viewed from Progressive Network's Web site, features dancer Savion Glover of the Broadway show ""Bring in Da Noise, Bring in Da Funk"" talking about tap dancing and showing his 13 pairs of tap dancing shoes.
The RealPlayer software also will include RealAudio version 3.0. There are now more than 10 million users of RealAudio, the company estimates.
Progressive Networks said it planned to make money by selling the software to content developers that will use the software to transmit video over the Internet.
Video over the Internet has been problematic because of the lack of bandwidth -- that is, a data ""pipeline"" big enough to handle the relatively large amount of information video involves. Video over the Internet still resides on only a small part of the computer screen, with some jerkiness and at a slower rate than full-motion video.
""We are boldly going where we haven't gone before,"" Progressive Networks Chief Executive Officer Rob Glaser said in an interview.
The RealPlayer is designed to run on PCs with an Intel Corp. Pentium processor at speeds of 75 megahertz and above and using Microsoft Corp.'s Windows 95 or NT.
One content developer who is using the software said his firm has embraced RealVideo because it believes it will become the de facto standard in Internet video, in the same manner that RealAudio has become the audio standard.
""It gives us another tool we can use,"" said Ken Locker, an executive producer at MGM Interactive. ""But the Internet is not television. When I say video, it's not even full-motion video, which is 30 frames per second.""
Locker said RealVideo averages about seven to 12 frames per second. ""It works very well and Progressive Networks is positioned to make theirs the standard.""
RealVideo works by sending packets of video in a stream from a server, or network computer. If a personal computer receives only 90 percent of the packets, it sends a message back to the server asking for a retransmission.
The process, called video streaming, is not new and has been available on the Internet from companies such as privately held VXtreme and VDONet. But analysts said that, because of RealAudio's widespread adoption, they expect RealVideo to dominate.
""They have a reputation with over 40,000 content developers, which use RealAudio-equipped servers,"" said Jae Kim, an analyst at Paul Kagan & Associates, in Carmel, Calif.
",46
"International Business Machines Corp. Tuesday introduced its next generation mainframe computer family, with systems twice as fast as currently available models, in a product launch widely anticipated by its customers.
""The feedback is phenomenal,"" said Ross Mauri, vice president of System 390 hardware developnment, in a phone interview. ""We have seen quite a bit of demand out there.""
""Customers have been enthusiastic about embracing the new server,"" Mauri said, adding that it is likely that IBM will be ""sold out of what we can produce this year,"" based on the initial customer reaction.
Mainframes are giant computers that store the data of the biggest corporations around the world. They are used by banks for transactions, by airlines for reservations systems, and by insurance companies for claims processing.
While many analysts have predicted the demise of these giant computers as more companies move to PC-based networks, mainframes have staged somewhat of a comeback as huge repositories of data that is accessible via the Internet and internal networks known as intranets.
The new mainframe servers use the third generation of IBM's lower-cost processor technology, called CMOS. The CMOS (complementary metal oxide semiconductor) technology is a process that uses microprocessor technology that is less costly to build and less expensive for customers to maintain.
IBM introduced two new lines of System 390 servers, or computers that manage networks.
One family, called the IBM S/390 Parallel Entreprise Server, has 13 models designed specifically for heavy data storage and for transaction intensive companies.
The second server line, the IBM S/390 Multiprise 2000, is aimed at medium-sized customers who are currently using IBM S/390 mainframes, but wish to increase their computing power. The Multiprise is also aimed at customers who wish to buy an entire package, with software and storage systems.
So far, IBM has installed about 14 of the S/390 Parallel Enterprise Servers - Generation 3 in an early customer programme. IBM has also installed three of the S/390 Multiprise.
IBM also said it introduced an upgrade of its mainframe operating system, called OS/390 Release 2, which provides more connectivity for customers to computer networks such as the Internet and UNIX based systems. IBM also introduced other software products for better network computing over the S/390.
IBM also introduced new mainframe disk storage products for improved data reliabilty.
IBM declined to give any price details on the new models, saying that it tailors each systems to unique customer needs and that customers are now familiar with the lower prices of CMOS-based mainframes.
""As you make the transition from bipolar to CMOS, you see a significant price reduction,"" said Mauri. ""Customers already have an understanding of that.""
Bipolar refers to the process technology that IBM used in its older mainframe models. Three years ago, IBM began preparing its customers for a big transition to a new, lower-cost machine, designed around microprocessors.
Analysts said the new mainframes run at speeds of around 45 million instructions per second (MIPS), twice as fast as the currently available speeds of 22 million instructions per second for the fastest CMOS models, bringing the systems up to the speeds of the older bipolar machines, and at a lower cost.
Even with the prices of these huge milllion dollar systems falling, mainframes are still IBM's biggest revenue producing hardware. Analysts are hoping for a big uptick in fourth quarter earnings, in part due to mainframes, because the lower-cost models are more profitable to IBM.
""These are all necessary announcements for IBM,"" said Gary Helmig, a SoundView Financial Group analyst, adding that the products are important to IBM's future earnings.
IBM said the new models will be available next month.
""The mainframe as we once knew it, where MIPS were expensive, we are never going to see that again,"" said Sam Albert, an industry consultant in Scarsdale, N.Y. ""IBM has re-engineered the mainframe, they don't even want to call it a mainframe anymore, they call it a server.""
",46
"America Online Inc.'s massive refund plan, part of its effort to appease angry customers, will be offset by related cuts in its hefty marketing expenses that mgiht actually improve its near-term financial results, some analysts said Thursday.
On Wednesday, the world's largest online service -- under pressure from 36 state attorneys general -- announced a plan to give refunds and credits to subscribers fed up with repeated busy signals when they try to log on.
The refund plan is part of a preliminary deal with the state prosecutors. At least one state, New York, had threatened to sue America Online if no relief was offered to consumers.
Wall Street analysts said the moves by America Online removed a cloud that has been hanging over the Dulles, Va.-based company's stock in recent weeks.
America Online's stock Thursday rose 25 cents to $37.875 on the New York Stock Exchange.
On Wednesday, America Online Chairman Steve Case declined to estimate how much the refunds would cost his company.
Analysts said restrictions on the refunds and the requirement that customers have to request them will limit the financial impact.
""A lot of people can request refunds, but that doesn't mean they will get them,"" said Jamie Kiggen, an analyst at brokerage Cowen & Co. He estimates the refunds will cost the company $10 million to $15 million, using ""pretty aggressive assumptions"" on the number of members getting refunds.
Lehman Brothers analyst Brian Oakes' worst-case estimate for the cost of refunds was $16 million.
America Online's refund plan is two-pronged. Any America Online member can request a credit of one free month online, no questions asked.
But, if they want a full $39.90 monetary refund for December and January, based on their usage, they must have used the service for less than two hours during that time.
Subscribers who were able to log on to the service for two to eight hours in December and January can request a 50 percent refund and those who were on for eight to 15 hours a 25 percent refund. Customers who used America Online for more than 15 hours will not get a refund.
Oakes said the refund expense will have no impact on his earnings estimates because it will be funded by America Online's $500 million annual marketing budget.
As part of the proposed settlement, America Online will not do any new advertising in February and ads already in the works will carry a disclaimer that users may have problems accessing America Online.
So, as America Online cuts way back on its marketing expenses, it will hold its subscriber count at 8 million. Abhishek Gami, a Nesbitt Burns Securities analyst, said this will assure America Online will be profitable in the quarter ended in June.
Gami said America Online had been expected to return to profitability in the quarter under its new accounting measures, but said the marketing cuts now give him more confidence.
""It costs them a lot of money to support new users,"" Gami said, because new customers get the first month free.
In November, America Online reported a net loss for its first quarter ended Sept. 30 of $353.7 million, including a charge of $385.2 million to defer its costs for acquiring subscribers, in a major revamp of its accounting practices.
Most analysts decline to estimate how many subscribers may have left America Online or how many will leave because of its problems. America Online's rivals have already begun crowing about their gains in subscribers, some of whom are dissatisfied America Online users.
Analysts are not unanimously bullish on America Online.
""They will be lucky to retain their 8 million subscribers throughout this whole fiasco,"" said Kate Delhagen, an analyst with Forrester Research in Cambridge, Mass.
""I think there will be a huge attrition, even with their plans"" to increase network capacity, she said. "" ... Unless they double their network plan, there will still be a lot of unhappy people.""
",46
"JAMtv, a six-month-old online company started by a Chicago music promoter, hopes to turn the personal computer into a personalized jukebox.
As a first step, the company will unveil on Monday a music network on the Internet using multimedia technology from Intel Corp.
JAMtv plans to broadcast live concerts, link with radio stations for other programming, sell CDs and other merchandise and provide daily news and reviews.
The company is also working with privately held BackWeb, one of the leading ""push"" technology companies, which broadcasts personalized news and information directly to a person's PC.
""The goal is that you will have your own personal jukebox on your computer,"" Howard Tullman, chief executive of JAMtv, said.
JAMtv spun out from Jam Productions Ltd, a well-known concert producer and promoter in Chicago whose co-founder, Jerry Mickelsen, is chairman.
The company hopes its network will become the main source of music on the Internet, featuring contemporary and alternative rock arists and eventually country and jazz.
But JAMtv is not trying to be the MTV of the Internet, Tullman stressed.
He noted that in recent years MTV has had to change its programming to offer more shows and features, like the ""Real World"" soap opera, because MTV viewers tired of someone else making their programming decisions for them.
""It's a network of one,"" Tullman said of the planned JAMtv service.
""Anytime you go there, you can listen to what you want. You don't have to wait for someone to make these programming decisions for you,"" he said. ""We will let you design your profile and what you want.""
He said the JAMtv site on the World Wide Web will have daily events, with a calender of more than 1,500 events already planned for this year based on upcoming Jam Productions events, such as a U2 concert in Soldier Field in Chicago as part of the group's tour.
Users of the JAMtv site can also buy from a catalog of more than 140,000 music CDs, 70,000 music and entertainment videos and access an archive of images, audio, video and other data on hundreds of artists.
Tullman also said JAMtv was talking to computer makers and to Microsoft Corp. and Netscape Commuications Corp. in an effort in get a spot on the Windows desktop and a part of the Netscape browser, so that users will be able to simply click on an icon and have their JAMtv.
JAMtv is also embracing Intel's ""hybrid"" method of sending fat audio and video files over the Internet, by providing users with compact disks of some audio and video, which is then supplemented by updated audio and video streams sent over the Internet.
The company hopes to make money is several ways, by selling merchandise over the Internet, by selling advertising and licensing fees to radio affiliates for programming and through compiling databases on subscribers which it could sell to record companies.
Ultimately, Tullman said, a big JAMtv revenue stream will come from a ""pay-per-view"" distribution of live concerts on the Internet.
""At the end of the day, when you can truly go home at night and click on your PC and watch any concert you want, there will be pay per view revenues in this business,"" Tullman said.
",46
"As the bad news continues to swirl around America Online Inc, some of its competitors are now swooping in, hoping to gain new members from the growing number of disgruntled AOL users who are fed up with its woes.
On Sunday, CompuServe Corp, the second largest online service, plans to run its first-ever Super Bowl ad, a 30-second television spot, called the ""Busy Signal.""
CompuServe said it will not specifically mention AOL, but the ad is clearly a jab at AOL's current woes, since it has been besieged with users since it switched to unlimited use.  
CompuServe also plans a print campaign with the theme of reliability in accessing the Internet without frequent connectivity problems. The company declined to say how much it is spending for the total campaign.
""We are doing the print compaign and the spot simply because our competitors problems have been so widely reported and so widely known, we think the public feels that all online service providers are having the same problems,"" said Gail Walls, an acting vice president at CompuServe. ""We don't have these problems. Our network is our strength.
Two months ago, CompuServe exited the consumer business.  
When asked why CompuServe is advertising during one of the most expensive advertising time slots aimed at consumers, Walls said CompuServe is not changing its strategy.
""We are interested in the serious Internet customer, we are not pursuing the mass consumer,"" she said. ""The point is to raise awareness about our strength...When you need to make a point, it's a great venue.""
CompuServe's move comes on the heels of comments made by the head of AT&T Corp's WorldNet Internet access service. Late Wednesday, Tom Evslin told Reuters that AT&T is gaining new subscribers who are dissatisfied AOL members.  
He also said that AT&T WorldNet plans a new advertising campaign, one that will focus more on the reliability of its network, in print, television, radio and on the Internet. AT&T does not plan any advertising during the Super Bowl, however.
""This is predatory marketing. They are in a very competitive marketplace,"" said Kate Delhagen, a Forrester Resarch analyst. ""It's not surprising that (many of) the ISPs (Internet service providers) are going right for the jugular. They see consumers who are frustrated and they are capitalizing on this opportunity."" AOL is the world's largest online service with over eight million members.  
AT&T said it will not refer directly to AOL in its new advertising, which will begin sometime in February.
""Rather than targeting AOL users, I think we will make a point about our reliability and let people make their own conclusions,"" Evslin said.
But Microsoft Corp, usually known for its hardball marketing tactics, is taking a kinder, gentler approach to AOL's problems, knowing full well that AOL is not alone in the industry with outages or capacity problems. Just Monday, AT&T said it had a 19-hour outage at WorldNet's managed Internet service, its service for corporate users.  
""We don't think it's a healthy thing for the industry to do anything other than actions which try to expand the market,"" said Jeff Sanderson, general manager of marketing for the Microsoft Network, which is now the third-largest online service with over two million subscribers.
""The message is you should get on the Internet, and MSN is the easiest way to the coolest stuff that is there, including AOL,"" Sanderson said. He said that Microsoft is doing significant marketing for MSN in general, but added that when the software giant mails out the CDs for its service, it tries to target the cities where it has the most capacity available.
""Meeting the unprecedented demand will be a continuing problem for the industry as a whole,"" said Adam Schoenfeld, a Jupiter Communications analyst. ""The twist here is that Internet access in this very competitive market will not be profitable for everyone.""
",46
"CompuServe Corp is in talks to be acquired by America Online Inc, a move that would bring new members to AOL, beef up its network and expand its corporate and international presence, industry sources said on Wednesday.
Earlier, CompuServe and H&R Block Inc confirmed market rumors that they were in discussions for a possible ""business combination"" involving CompuServe. Neither CompuServe nor H&R Block, which owns about 80 percent of the computer online service, would provide further details.  
Industry sources said AOL was involved in talks to buy its beleaguered competitor, possibly in an all-stock transaction.
""It's part of the consolidation mechanism that is taking place in the marketplace,"" said Frank Dzubeck, president of Communications Network Architects in Washington. ""They have had conversations off and on....Probably this conversation has gotten reasonably heavy since AOL got into problems having to spend all sorts of money on its network.""  
An H&R Block spokeswomen said she could not elaborate on a statement that confirmed Block and CompuServe were engaged in external discussions regarding a possible business transaction with CompuServe.
AOL declined to comment on the market rumors of talks with CompuServe.  
While AOL shares jumped on Tuesday as rumors circulated in the market, the stock retreated 1-1/8 on Wednesday to 44-5/8, as some analysts said such a deal would prove distracting and costly for AOL, given its current problems achieving profitability.
""There is not a lot of value to the CompuServe subscriber base,"" said Jamie Kiggen, a Cowen & Co analyst.
""There is no guarantee they would stay with AOL. It would be a very dilutive and distracting acquisition for AOL,"" he said. ""AOL is just about to turn profitable here, and we don't need them to buy a money-losing company.""  
""There is no good reason for AOL to buy CompuServe,"" said Abhishek Gami, a Nesbitt Burns Securities analyst. ""If AOL does buy them, it would be a major negative for AOL.""
He said a merger would raise the eyebrows of antitrust regulators at the U.S. Justice Department because it would result in a big gain in AOL's share of the U.S. online services market.
AOL, the No.1 online service, currently has eight million members. CompuServe is second with 3.1 million in the United States and Europe and 2.2 million licensed members in Japan, where it receives royalty payments.  
However, AOL and CompuServe both provide Internet access, and that market has many more players than the proprietary online service business, where there are only four main providers.
Analysts said AOL would have to pay for any deal with stock because of its cash position is low. Its cash and equivalents were listed at $130 million at the end of 1996. Using AOL's stock to pay for the 92.6 million CompuServe shares outstanding (of which H&R Block owns about 74 million) would dilute AOL's shares.
Despite the negative reactions, some analysts said a CompuServe merger could be appealing to AOL.  
Integration of the contrasting images of AOL and CompuServe could also present a big problem. AOL is mainly seen as a consumer online service, while CompuServe is more oriented to business customers and users with more technical sophistication.
Indeed, some analysts said it would be difficult to convert die-hard CompuServe users to AOL.
""Domestically, being a CompuServe user is almost a positive statement that one is not an AOL user,"" said Adam Schoenfeld, a Jupiter Communications analyst. ""AOL has probably already poached every CompuServe user possible.""     Some analysts said
that CompuServe might be a better match for one of the regional Bell operating companies, some of whom are still seeking to enter the Internet access business.
""It has a national network and a well-known brand name that could be reinvigorated,"" said Peter Krasilovsky, an analyst with Arlen Communications Inc in Bethesda, Maryland. ""You don't want to count out the telcos.""
",46
"International Business Machines Corp. Thursday unveiled its first network computer, one of the first major personal computer makers to deliver the hyped low-cost computers for accessing the Internet and corporate networks.
IBM's network computer, a scaled down PC, will be priced at under $700, without a monitor.
IBM said the new computer, called the Network Station, is the first in a series of network devices it plans and will be out by the end of the year.
It will put IBM among the first computer companies to offer an inexpensive device that will link people to the Internet as well as provide typical applications such as word processing and spreadsheets.
Unlike the devices touted by other companies, including those that access the Internet and use a television screen for the display, IBM is targeting corporations and corporate networks with its Network Station.
The computer is eight by 10 inches by 1-1/4 inches and weighs 2.5 pounds. It has an IBM PowerPC microprocessor, with a minimum of eight megabytes of memory, going up to 32 megabytes, a network adaptor card, keyboard and mouse, with the monitor optional.
IBM said its Network Station offers more than a ""dumb terminal"" -- the name for the disk-less terminals used to access mainframes -- because it offers graphical interfaces, programming capability in Sun Microsystems Inc.'s Java language, the popular Netscape browser to access the Internet, corporate intranets and server networks.
The machine will be manufactured by IBM and Network Computing Devices Inc. of Mountain View, Calif.
IBM first talked about developing its own version of the network computer at the Fall Comdex trade show last November. It was the first major U.S. PC maker to adopt the vision promulgated by Oracle Corp. Chairman Larry Ellison, whose company is now developing software for the devices.
IBM's Network Station is based on the common standards announced earlier this year by Oracle, Sun Microsystems Inc., Netscape Communications Corp., and others.
Analysts said that IBM's move to target the business market is more practical and realistic than aiming these devices at the home, where telephone lines offer sluggish and sometimes unpredictable Internet access.
""We believe the market for network computers is much more likely to take off among corporations than it is among consumers,"" said Josh Bernoff, a Forrester Research analyst. ""It appears IBM is taking on the right strategy by creating a corporate machine as opposed to attempting to target television set top boxes.""
Analysts said corporations, many of which have higher speed network lines, also have more internal data to be accessed over their own corporate networks, instead of just accessing the Internet.
""The bonanza is to get more access to the network,"" said Nicholas Donofrio, an IBM senior vice president and group executive in a telephone interview. ""It's what doors it opens -- more services, more servers, more software ... that's why we think the network computer model makes so much sense.""
On Wednesday, while holding a customer meeting in New York, Oracle's Ellison made more bullish predictions about the Network Computer, telling reporters that he expected such machines to have ""explosive growth"" after a possibly rocky start-up period of between six to 12 months after the first products come out.
""I believe by the year 2000, we will sell 100 million network computers,"" Ellison told reporters.
""I think Larry Ellison is talking about things that are too much in the future,"" said Eileen O'Brien, an analyst at International Data Corp. in Framingham, Mass. ""To target a device to the consumer market to just use it for Internet access is not a very compelling reason. There needs to be another feature of the device.""
The Network Station will support network access via corporate intranets using Ethernet and Token Ring technology connections.
The system can access Sun Microsystems' Java language, Microsoft Corp.'s Windows NT software, UNIX, IBM's OS/2 operating system, and IBM's AS/400 minicomputers, RS/6000 workstations and System 390 mainframe computers.
",46
"JAMtv, a six-month-old online company started by a Chicago music promoter, hopes to turn the personal computer into a personalized jukebox.
As a first step, the company will unveil on Monday a music network on the Internet using multimedia technology from Intel Corp..
JAMtv plans to broadcast live concerts, link with radio stations for other programming, sell CDs and other merchandise and provide daily news and reviews.
The company is also working with privately held BackWeb, one of the leading ""push"" technology companies, which broadcasts personalized news and information directly to a person's PC.
""The goal is that you will have your own personal jukebox on your computer,"" Howard Tullman, chief executive of JAMtv, said.
JAMtv spun out from Jam Productions Ltd, a well-known concert producer and promoter in Chicago whose co-founder, Jerry Mickelsen, is chairman.
The company hopes its network will become the main source of music on the Internet, featuring contemporary and alternative rock arists and eventually country and jazz.
But JAMtv is not trying to be the MTV of the Internet, Tullman stressed.
He noted that in recent years MTV has had to change its programming to offer more shows and features, like the ""Real World"" soap opera, because MTV viewers tired of someone else making their programming decisions for them.
""It's a network of one,"" Tullman said of the planned JAMtv service.
""Anytime you go there, you can listen to what you want. You don't have to wait for someone to make these programming decisions for you,"" he said. ""We will let you design your profile and what you want.""
He said the JAMtv site on the World Wide Web will have daily events, with a calender of more than 1,500 events already planned for this year based on upcoming Jam Productions events, such as a U2 concert in Soldier Field in Chicago as part of the group's tour.
Users of the JAMtv site can also buy from a catalog of more than 140,000 music CDs, 70,000 music and entertainment videos and access an archive of images, audio, video and other data on hundreds of artists.
Tullman also said JAMtv was talking to computer makers and to Microsoft Corp. and Netscape Commuications Corp. in an effort in get a spot on the Windows desktop and a part of the Netscape browser, so that users will be able to simply click on an icon and have their JAMtv.
JAMtv is also embracing Intel's ""hybrid"" method of sending fat audio and video files over the Internet, by providing users with compact disks of some audio and video, which is then supplemented by updated audio and video streams sent over the Internet.
The company hopes to make money is several ways, by selling merchandise over the Internet, by selling advertising and licensing fees to radio affiliates for programming and through compiling databases on subscribers which it could sell to record companies.
Ultimately, Tullman said, a big JAMtv revenue stream will come from a ""pay-per-view"" distribution of live concerts on the Internet.
""At the end of the day, when you can truly go home at night and click on your PC and watch any concert you want, there will be pay per view revenues in this business,"" Tullman said.
",46
"America Online Inc., besieged by complaints by frustrated customers unable to log on and facing the threat of a lawsuit by at least one state, agreed Wednesday to give some members refunds or credit.
The world's largest online service, with 8 million subscribers, agreed in principle to give customers their choice of a free month online or up to $39.90 -- the cost of two months of its unlimited service -- as a result of its recent negotiations with dozens of state attorneys general.
AOL also said it planned to hold its membership at 8 million members for the short term, until it was confident it could meet the needs of its current members.
America Online Chairman Steve Case said the company had been working out a refund offer to its members and that the attorneys general in several states agreed Wednesday afternoon to support its proposed plan to members.
""We felt like today we had to move forward with our programme, with or without an agreement,"" Case said in an interview. ""We were pleased at the final hour that the attorneys general are supporting it... It was a concern that our members were waiting for us to respond. If there hadn't been so many states involved, we could have responded a few days ago.""
Illinois Attorney General Jim Ryan held a news conference in Chicago, to announce the preliminary deal with the company and 36 states including Illinois, before AOL's announcement.
Ryan said he expected the Dulles, Va.-based company would formally sign the agreement by Thursday.
""We're comfortable with it. We think it's a good deal for consumers,"" he said.
America Online, which since Dec. 1 has been struggling to deal with an unexpectedly big surge in subscribers, also agreed to halt for a month advertising aimed at attracting new customers.
The proposed settlement headed off, for now, consumer fraud lawsuits threatened by at least one state, New York and under consideration by several other states. Several class action lawsuits have been filed against AOL, and AOL said this agreement has nothing to do with the class action lawsuits.
The agreement calls for customers to receive graduated refunds of up to $39.90 based on how much time they spent over the past two months logged onto AOL, Ryan said.
Any customer can demand a free month's service, no questions asked, but the consumer must request the credit.
""It's a way of saying thank you to our members for their support,"" said an AOL spokeswoman.
Case declined to estimate the cost of the refunds, but New York state Attorney General Dennis Vacco told a Manhattan news conference he expected the refunds will cost the company several million dollars in his state alone. There are 600,000 AOL members in New York state.
Wall Street analysts said they did not expect the refunds to have much of a financial impact on AOL, because it will be cutting way back on its quarterly marketing expenses, which average about $120 million to $130 million a quarter.
""Even if you make some pretty aggressive assumptions about how many people will call for refunds, then you have the number who will qualify,"" said Jamie Kiggen, a Cowen & Co. analyst. ""I come up with $10 to $15 million in terms of cash cost, which will be offset by reduced marketing expenses.""
AOL moved to placate angry customers on Jan. 16, telling them it would spend $350 million to upgrade its network, $100 million more than it had announced in December.
Ryan said the pact originally covered 37 states, but said Missouri's attorney general backed out at the last minute to take a closer look at the proposed refunds.
AOL ran into capacity troubles after it switched its customers from a subscription plan based on the number of hours online to a flat $19.95 monthly rate for unlimited use.
Under the agreement announced Wednesday, AOL agreed to cease all new advertising for the month of February unless already contracted for. Vacco said any ads must include a disclaimer that congestion may prevent customers from getting online.
The prosecutors had complained America Online was continuing to advertise and sign up new customers even as it could not deliver the service to existing users.
AOL also agreed to hire additional operators to field calls from customers seeking to cancel the service, and will set up facilities to accept faxed or online requests to cancel the service. Members had complained they could not cancel.
Customers in the 36 states also could contact the attorney general's office in that state to file a refund request.
Attorneys general or their aides from 20 states met last week in Chicago with the company.
""If there are fresh complaints, we can still file a lawsuit under the consumer fraud laws,"" Ryan said. ""This does not preclude us from acting on behalf of consumers.""
",46
"Former NBC executive Brandon Tartikoff Monday was named chairman of the board of America Online Inc.'s original content developer, Greenhouse Networks, as part of a major initiative to create specialized online networks. The company's stock soared.
The world's No. 1 online service also said it was buying LightSpeed Media Inc., a pioneer producer of Internet soap operas and shows. Financial terms were not disclosed.
As part of the deal, Vienna, Va.-based Greenhouse Networks said it would develop an interactive entertainment network, slated for launch this fall on AOL and the Internet.
America Online stock rose $5, or more than 11 percent, to $47 in consolidated trading on the New York Stock Exchange, where it was seventh leading percentage gainer for the day.
AOL's entertainment network will be based in Los Angeles and will capitalize on Lightspeed's and Tartikoff's relationships in the entertainment industry.
America Online's deal with Tartikoff expands a previous arrangement announced last fall for the executive to develop original interactive brands to be launched simultaneously online, on television and as books.
Tartikoff, who was president of NBC Entertainment from 1980 to 1991, currently heads his own television and production company, H. Beale Co., in Los Angeles. During his tenure at NBC, the network made its rise to the No. 1 network with shows such as ""Hill Street Blues,"" ""Cheers,"" ""L.A. Law,"" and ""Family Ties.""
From 1991 to 1992, he was chairman of Paramount Pictures when that studio released hit movies such as ""Wayne's World"" and ""Patriot Games.""
Analysts called the expansion of Tartikoff's role a ""major coup"" for the online service, as it hopes to move toward developing its own content instead of just investing in companies that develop content for AOL.
The Greenhouse Network's Motley Fool personal finance area is one of the most successful of the over 30 Greenhouse investments. The founders of Motley Fool have authored books, articles and the Motley Fool is now a logo found on baseball hats, T-shirts and other merchandise.
Tartikoff ""developed NBC into the powerhouse of the 1980s,"" said Peter Krasilovsky, an analyst with Arlen Communications Inc. in Bethesda, Md. ""He has these concepts and he gets them down. ... They are hoping to get a major hit that is so big they will be able to merchandise it.""
Tartikoff's first project with Greenhouse and AOL will be called ""Beggars and Choosers,"" a serial about a struggling TV network, which is being developed to launch simultaneously on AOL and as a made-for-TV movie for the Showtime cable channel.
Tartikoff will continue to head his own production company and act as a consultant and adviser to America Online as chairman of Greenhouse, America Online said.
LightSpeed's founders were behind the first so-called ""episodic"" show on the Internet, called ""The Spot,"" which it sold to American Cybercast in early 1996. ""The Spot,"" an interactive soap opera about five people sharing a beach house in California, is still on the Web site of American Cybercast, which filed for Chapter 11 bankruptcy protection in January.
LightSpeed was founded in May 1996 by the creators of ""The Spot,"" after American Cybercast bought the program. Founder Scott Zakarin will be named president of programming.
Zakarin and his team launched another popular Internet soap -- ""GrapeJam"" -- last August.
America Online executives said Internet soap operas will be only one small part of its broad entertainment network, which will feature celebrity hosts, live events, news and other information about the entertainment industry.
""The focus (of the network) is on the entertainment industry and the entertainment business,"" said Greenhouse President Danny Krifcher. He declined to say how many staffers it will have, or what its projected revenues will be.
America Online plans to make money from the entertainment network through advertising revenues, licensing and through transactions, such as selling tickets to entertainment events, selling merchandise and offering premium information at a surcharge. But Krifcher declined to make any forecasts.
The closest competition America Online said it has on the Internet to its entertainment network are sites such as Mr. Showbiz, E! Online and a People magazine site devoted to entertainment. Analysts said AOL's biggest competition is Microsoft Corp.'s MP3 multimedia studio.
""This is a very big opportunity,"" Krifcher said. ""This is the beginning of what we think will be a series of exciting announcements and developments for us.""
Greenhouse also plans to launch other programming networks specializing in sports, romance, young adults, health and women. The networks will include content of current Greenhouse properties and new ones, to be distributed over AOL, the Internet and other platforms such as TV and books.
""Greenhouse is no longer just a venture capital company,"" Krasilovsky said. ""They are hoping to develop full media properties in their own right.""
",46
"New York state Attorney General Dennis Vacco said Friday that he planned to sue America Online Inc. if the company's negotiations with prosecutors from 20 states over consumer issues broke down.
Vacco told a news conference he would sue the world's largest online service, with more than 8 million subscribers, to halt allegedly deceptive business practices and to win refunds for the company's frustrated customers.
But America Online Chairman Steve Case said in an interview with the CNBC cable television channel that he was not considering subscriber refunds. He said the company was doing all it could to alleviate problems and said he understood customers' frustration.
Vacco and other attorneys general or their aides from 20 states met with America Online Thursday in Chicago, either in person or via conference call, to discuss a barrage of complaints by subscribers who have experienced difficulty accessing the service from their computers.
Vacco said he sent notification Thursday of New York state's proposed litigation to America Online's headquarters in Dulles, Va. He said a lawsuit would allege the company engaged in deceptive sales practices, false advertising and fraud in selling online services.
Company officials did not immediately comment on a possible New York lawsuit.
America Online stock dipped $1 to $36.25 in afternoon trading on the New York Stock Exchange.
The online service, which enables subscribers to send electronic mail, browse the World Wide Web and view proprietary content, has seen an upsurge in the number of subscribers -- and busy signals -- since it switched to a flat-rate, unlimited use pricing plan Dec. 1.
Previously, AOL had billed subscribers according to how long they were online.
AOL moved to placate angry customers last week, telling them it would spend $350 million to upgrade its network. It also asked them to try to cut their use during peak hours.
Vacco said, ""We want to give the consumers a choice that gives them a refund if they want it. Don't just say 'Hang on;' give them a choice, which includes getting out with their money.""
But Case, asked on CNBC about customer refunds, said, ""It's not something we are considering.""
AOL already has been hit with at least four class-action lawsuits by subscribers.
Vacco would not comment on Thursday's meeting.
Case also was reluctant to talk about the meeting.
""I'm not going to discuss what is on the table with the attorneys general,"" he said. He said the meeting was ""constructive"" and that the attorneys general asked AOL not to talk about it.
""Our interests are really in paraellel,"" Case told CNBC.
""Most customers have seen a tremendous price cut (with the change in pricing), they have doubled their usage,"" he said.
Case said he understood the frustration users feel when they cannot log onto AOL, saying he, too, experiences the same problem when he tries to log on from home in the evening.
""The reason we went to unlimited pricing is because our customers asked for it,"" he said. ""Once they are online, they don't have to worry about the clock ticking. We did say there will be a surge in demand and there will be some busy signals. It will probably take us a few months to build out our capacity. That's our intent and we are doing everything we can to do it as soon as possible.""
The move to unlimited access itself incurred the ire of many of the same attorneys general. Last month, AOL reached an agreement with 19 state attorneys general over the flat-rate pricing, with AOL agreeing to pay automatic refunds to subscribers who did not want to pay $19.95 a month.
",46
"IBM shares fell in heavy trading Friday after three Wall Street firms made negative comments about the giant computer maker in the past two days, saying a stronger dollar and a product transition will hurt earnings.
The stock of International Business Machines Corp. fell $4.25 to $132.375 on the New York Stock Exchange, where it was the fourth most-active issue with more than 5.3 million shares traded.
""People are beginning to realise that it's going to be a bleak quarter,"" said Jay Stevens, analyst at Dean Witter. But he continued to recommend accumulating IBM stock.
Analysts said two main factors were hurting IBM's earnings prospects. Even though the world's largest computer maker will have a lower tax rate and fewer shares outstanding due to its share buyback plan, currency fluctuations and expected weakness in mainframe sales will hurt the first half of 1997, they said.
Morgan Stanley on Friday cut its earnings estimates for IBM, saying that the Armonk, N.Y.-based company will make more money toward the end of the year instead of earlier. It also said results will be affected by currency fluctuations and the transition to a new mainframe model.
""Some users may wait for the new one,"" said Steve Milunovich, a Morgan Stanley analyst.
Morgan Stanley cut its earnings per share estimate to $2.80 from $2.97 for the second quarter and to $12.30 from $12.50 for all of 1997.
IBM earned $2.02 billion, or $3.93 a share, on revenues of $23.1 billion in the 1996 fourth quarter. For full-year 1996, it reported profits of $5.4 billion, or $10.24 a share, on revenues of $75.95 billion.
Morgan Stanley continued to rate IBM's stock as an outperformer.
Analysts said IBM is expected to upgrade its low-cost mainframes to a processor with speeds that match its older bi-polar line that is being phased out.
""This is a major product transition,"" Stevens said.
Analysts have been expecting initial shipments of the new processors in the third quarter. Milunovich said he expects a few models will be shipped in June.
Merrill Lynch said on Thursday in a note to clients that it expects demand will be extremely good for the new machines and expects IBM to beat Wall Street's expectations of initial shipments in the third quarter.
But until then, the stronger dollar overseas will continue to weigh on earnings, the brokerage said.
Merrill did not change its current first-quarter estimate of $2.32 a share. But it expects 3 percent revenue growth in the first quarter and a tough comparison vs. a year ago.
Late Thursday, Dean Witter also lowered its 1997 earnings estimates for IBM, saying its operating income was expected to fall by 11 percent in the first quarter.
However, this is expected to be offset by a lower tax rate of 35 percent vs. a previous 39 percent, along with IBM's current stock repurchase plan, it said.
Dean Witter raised its earnings estimate for the second half of the year and kept its 1997 profit estimate at $14.25 per share.
",46
"International Business Machines Corp. and 15 U.S. and Canadian banks announced Monday that they had formed a company to offer a broad range of electronic banking services in North America.
The company, the Integrion Financial Network, will offer interactive banking and electronic commerce services to U.S. and Canadian banks beginning early next year, IBM and the banks said.
""With this new venture, electronic commerce will take its biggest step to date,"" IBM Chairman Louis Gerstner told a news conference. ""Integrion is the customer pathway to an array of services ... that no bank could provide alone.""
Integrion will develop an electronic bill payment system and provide software to connect to its network for member banks' customers. Consumers will also be able to access the network via the Internet or any commercial online service.
Electronic commerce, in which consumers buy goods and services via computer, could grow to $600 billion a year within 10 years, Gerstner said. By contrast, electronic commerce now runs at only about $700 million a year, he said.
""The demand is there,"" Barnett Banks Inc. Chief Executive Charles Rice told the news conference.
Gerstner said he hoped that companies like Intuit Inc., which has its own set of deals with banks for electronic banking software, will develop versions of its popular Quicken personal financial software for Integrion.
In addition to Barnett, banks teaming up with IBM include BankAmerica Corp., the Royal Bank of Canada, Fleet Financial Group Inc. and Banc One Corp.
Integrion will be owned and operated by the member banks and IBM. It will be open to all banks in North America.
Gerstner said his company would make money from the venture by selling the services of its Global Network and other services. He said Integrion is a for-profit company but that the companies involved will make money through electronic banking services.
Gerstner was not specific on what kind of revenues IBM or any of the companies involved were expecting from the venture.
The companies said they will use the IBM Global Network as the base network for electronic banking, a proprietary network maintained by IBM and used by many corporations as their own network or to conduct commerce with other companies.
Several bankers attending the news conference said the partnership with IBM would lower the cost of developing technology for electronic banking.
The companies said the most sensitive banking transactions will run over the IBM network, which they said is more secure than the Internet, but with connections to the Net.
Gerstner said while the Internet has become a totally new communications medium in the past two years, it is still not yet the ""holy grail"" companies have hoped for.
""The payoff is what these institutions do with this,"" Gerstner said.
Other banks teaming up with IBM are ABN AMRO Bank NV, Comerica Inc., First Bank System Inc., First Chicago NBD Corp., KeyCorp., Mellon Bank Corp., Michigan National Corp., NationsBank Corp., PNC Bank and Washington Mutual Savings Bank.
",46
"International Business Machines Corp. is expected to report solid fourth-quarter earnings Tuesday, but analysts expect the stronger dollar will hurt the computer giant's profits.
The Armonk, N.Y.-based company will report earnings after the stock market closes, the first time it has done so in recent memory.
Wall Street analysts are predicting earnings of $3.13 a share to $4.32 per share, with a consensus of $3.88 a share, according to First Call, which tracks analyst estimates.
A year ago, IBM earned $3.09 a share, or $1.7 billiion, including special charges, in the fourth quarter.
""I think it will be a good quarter,"" said Morgan Stanley analyst Steve Milunovich.
""I'm not looking for a blowout quarter,"" Milunovich said, adding that the dollar strengthened in the fourth quarter and that IBM could see as much as a 25-cent-per-share negative impact on earnings from currency fluctuations.
The earnings report comes amid mixed results from the computer industry for what is traditionally its biggest quarter of the year.
Apple Computer Inc. reported a bigger-than-expected loss, but Sun Microsystems Inc. had stronger-than-anticipated second-quarter earnings and Digital Equipment Corp. reported a slightly better-than-expected profit in its second quarter.
Analysts also expect IBM to report bigger expenses in the fourth quarter for its restructuring, which it no longer writes off as a charge. In the third quarter, IBM had restructuring costs of about $200 million for employee buyouts.
""They will have an expense for restructuring, and it could be twice as much as the September quarter,"" said Dean Witter analyst Jay Stevens.
Analysts said IBM's employees in Europe have been much slower to accept its buyout plans. John Jones, a Salomon Brothers analyst, predicts IBM will have costs of about $700 million in 1997 for organisational changes in Europe.
""Europe remains a slow grower, which has led to a number of organisational and planned efficiency changes, which we expect will require over $700 million in 1997,"" Jones said in a report. He said these expenses are included in his 1997 earnings estimate of $11.20 a share.
For 1996, analysts expect IBM to earn between $10.30 to $11.50 a share, with a consensus of $11.05, according to First Call.
Analysts said sales of IBM's midrange computers, the AS/400, should post growth of about 10 percent and that there should be a big improvement in RS/6000 workstations.
IBM will host its quarterly analyst meeting and conference call sometime after its earnings are released late Tuesday.
Analysts said the company was releasing its earnings after the close to avoid the recent volatility in its stock -- which has climbed or fallen as much as $10 on the days it reports earnings -- during its conference call with analysts.
IBM stock was down $1 at $164.50 in afternoon trading on the New York Stock Exchange.
",46
"Some of Microsoft Corp.'s biggest corporate foes -- including International Business Machines Corp. and Netscape Communications Corp -- said they were collaborating on network computing standards that will enable their products to work together seamlessly.
The companies, which also include Oracle Corp and Sun Microsystems Inc, said on Tuesday the standards resulting from the collaboration would allow software developers to build diverse software to connect computers via corporate networks, business-to-business networks and the Internet.
They said their collaboration was open to broad industry participation.
""This initiative starts with four companies, but our goal is for an industry groundswell to develop,"" said Steve Mills, general manager of IBM Software Solutions.
Microsoft, the world's No. 1 software company, has been criticised by others in the industry and computer users for trying to extend its domination in various areas by developing software based on closed, proprietary standards.
This is a particularly sensitive issue for the Internet, which for many years has operated according to so-called open standards.
IBM, Oracle, Sun and Netscape said the results of their collaboration would be submitted to an industry standards group later this year. Microsoft is part of the industry standards group as well.
Each company pledged to make their next major products adhere to the standards this year.
The goal of the collaboration is to have a unified approach to an Internet development architecture -- called CORBA, or common object request broker architecture -- so that software from these companies can use objects developed by others.
For example, Netscape's Communicator software will be able to access objects, or pieces of reusable code, stored in a big IBM or Oracle database.
",46
"America Online Inc., which is under siege by an onslaught of consumer complaints and scrutiny by 20 state attorneys general, is facing a major dilemma as it continues its negotiations with the states.
On Friday, New York threatened to sue the world's largest online service for allegedly deceptive business practices and false advertising if its negotiations with America Online seeking relief for consumers break down.
Other states could follow and at least one, Washington, said it is considering its options.
The Dulles, Va.-based online service has been besieged with complaints by subscribers who began encountering repeated busy signals when they tried to log on after the company switched to a pricing plan offering unlimited access for $9.95 a month.
New York state Attorney General Dennis Vacco said his priority is getting refunds or free time for frustrated consumers, something America Online Chairman Steve Case said he is not willing to do.
New York said America Online, or AOL, had five business days to respond and show why such a legal proceeding against it should not be instituted.
New York's announcement came one day after prosecutors from 20 states met in Chicago with AOL, in person or via conference call, to discuss consumers' complaints. While AOL is talking to the attorneys general to try and show it is doing all it can to help solve the congestion problem on its service, it is also trying to appease Wall Street and keep its stock propped up. AOL stock fell 50 cents to $36.75 Friday, not much by technology standards. So far, Wall Street is not worried because most analysts do not think that AOL will have to cough up any refunds, or if it does, they will not be ""onerous,"" said Jamie Kiggen, a Cowen & Cod. analyst.
""The attorneys general have looked at AOL on a number of issues in the last couple of years and the settlements have not been onerous from a financial standpoint,"" Kiggen said. ""By the time the legal machine grinds here, the overcapacity will not be an issue anymore.""
But still, amid the storm of bad publicity and busy signals, AOL is losing the new subscribers it has been spending millions of dollars to gain. It said it was cutting back on its television advertising campaign and mailings of floppy disks to curtail interest in its service while it upgrades its network with more modems, spending $350 million.
Already, both Prodigy Services Co. and AT&T Corp.'s WorldNet Internet service have said they gained new subscribers this month, at a faster pace than normal. Both attribute the upsurge in their memberships to frustrated AOL subscribers.
""I would not be surprised if they are seeing a lift,"" said Kate Delhagen, an analyst with the Forrester Research firm. ""This is a land-grab opportunity they did not expect.""
Delhagen predicted that many AOL users may go into an inactive mode for a few weeks and see if the service improves with the new modems.
The next quarterly announcement of AOL's subscriber data will be a closely watched number on Wall Street. Many analysts predict that other pricing changes will occur in the not-too-distant future.
Some analysts said pricing can only go down because more and more of AOL's future revenues will come from advertising and transactions, even though the ""all-you-can-eat"" subscription model is not expected to be profitable.
""You have a very large subscriber base, but they are not going to throw off much in earnings, there are no economies of scale,"" said Steve Harmon, a senior investment analyst for iWorld, an Internet news Web site. ""In the future ... they want AT&T and other access providers to direct people to AOL. It will be a destination instead of a network. This is the rough period in between.""
So, as AOL continues to talk to the attorneys general, analysts also predict it could come up with some other agreements with other network providers, to further improve direct access to its service.
AOL already has a cheaper version of AOL, for $9.95 a month unlimited access, if you ""bring your own access"" to get to AOL, from any Internet access provider. But analysts said AOL could also share some space on these vast networks, which are underutilized compared with AOL's, to host parts of its proprietary content.
""They have to put a network in faster than they can build it and any way they can affordably do it, and that is a big question, (how they will do it),"" said Gary Arlen, president of Arlen Communications Inc.
In the past few days, analysts said it has been easier to get online and they have not been getting busy signals as much as before, already a sign that either the bad publicity is scaring away users or the new modems are helping users sign on faster.
In the past two weeks, AOL suffered a partial outage of almost four hours of its entire service and another one when users could not access e-mail, for a total of almost three hours.
",46
"The deal that started out as a shocking hostile takeover by the lumbering giant International Business Machines Corp of Lotus Development Corp almost 18 months ago has turned into a happy marriage, Lotus's top executive said.
""It really has been a marriage made in heaven,"" said Jeff Papows, president of Lotus, in an interview at Lotusphere, a conference for its business partners and developers.  ""I think we spent the first year manically fixating on our own foxholes...Now there is enough trust established.""  
Papows said that IBM kept its promise to leave Lotus alone and that IBM tried hard to make the deal work.  The two companies gradually began to trust each other and the synergies between them have emerged slowly but surely.
After an initial flurry of employee exits when Lotus reluctantly agreed to be acquired by IBM for $3.5 billion in June 1995, staff defections eventually stabilized to a normal industry attrition rate.  Lotus's worst fear -- that most of its intellectual capital, its employees, would quit -- was not realized.  
""There are more disastrous mergers in this business,"" Papows said. ""I don't think anyone would have predicted this would go as well as it has.""
The Technology sector has been fraught with mergers gone awry, such as AT&T Corp's purchase of NCR Corp, which it just spun out again as a separate unit.  And IBM had its own unsuccessful deal, when it purchased Rolm Corp in the 1980s.
IBM chairman and CEO Louis Gerstner echoed Papows's view.  
In a brief speech at Lotusphere, Gerstner also said the merger was now working, with ""irrefutable"" evidence, such as the doubling of the number of seats of Lotus Notes sold in 1996, when the number of users reached 9.5 million.
Papows said that besides IBM's big financial pockets and its vast research laboratories, the computer giant also has an incredible global reach through its world-class sales force.
And Gerstner, Papows said, has become ""my single best sales person.""  
Papows said Gerstner recently picked up the phone to speak to the CEO of Rockwell International Corp, and after he explained how important Notes was to IBM's strategy, Rockwelll made a big investment in Notes for its corporate network.
The combination of IBM's clout and reach and Lotus's technology will help it maintain leadership in groupware, as the turf is under siege by Netscape Communications Corp and Microsoft Corp, Papows said.  
Another plus to having IBM as an owner is that the companies can work together to link corporate networks running Lotus Notes to the vast arrays of information stored in IBM mainframes and minicomputers around the world.
""There is a tremendous opportunity to unlock this data,"" Papows said.  ""Netscape doesn't understand this.""  On Wednesday, IBM and Lotus will unveil versions of the Notes Domino server for the IBM AS/400 minicomputer and the S/390 mainframe lines as part of this strategy.
Domino, Lotus's Notes server designed using Internet standards, has become Lotus's crown jewel.  
Users applauded Lotus' move to embrace the open architecture of the Internet, after many skeptics said after IBM bought Lotus that Notes was dead because of the industry's jump to the Web.
""We all heard the refrain, 'Notes is dead,'"" Papows told the conference, adding that it was nothing less than masterful what Lotus has done with Notes and with Sun Microsystems Inc's Java programming language, which is used to develop applications for the Internet that will run anywhere.  
Lotus will introduce a new client version of Notes, Version 4.6 (code-named Lookout) in the first half of this year with a simplified user interface and seamless integration of Microsoft's Internet Explorer and other Web products.
The code name Lookout is a jab at Microsoft, which just introduced a feature called ""Outlook"" in its Office 97 suite. Another upgrade will come in the fourth quarter with Version 5.0, code-named Maui.  Maui will feature even more support of Internet protocols.
Lotus is also working on a set of so-called ""applets"" developed in Java, including a spreadsheet, a calendar, text editor and other pieces, to run on the stripped-down networked computers.  These applications are much less code intensive, with much of the software residing on the severs that run networks.
",46
"Computer makers are expected to report solid fourth-quarter earnings in what is normally the strongest quarter of the year, but the stronger dollar will hurt some big systems makers.
Despite all the negative reports from computer retailers about lackluster personal computer sales, analysts said most U.S. PC makers -- with the exception of Apple Computer Inc. and AST Research Inc. -- will show strong sales growth, fuelled by hefty corporate buying.
Apple is the first to report, with first-quarter results late Wednesday.
Earlier this month, Cupertino, Calif.-based Apple forecast it would report an operating loss for its first quarter ended last month, citing weak U.S. demand for its Performa consumer PC and continued shortages of notebook computers.
""Most of the indications are that business throughout the (PC) sector, other than Apple, was strong,"" said Dean Witter analyst Eugene Glazer. ""With all the negative comments you are hearing from retailers, some of that market was going to the direct marketers"" like Dell Computer Corp. and Gateway 2000 Inc.
Analysts said the world's largest PC maker, Compaq Computer Corp., was likely to report strong earnings, especially after semiconductor giant Intel Corp. reported a blowout fourth quarter, surpassing Wall Street predictions.
Compaq gets about 20 percent or so of its revenues via store sales to consumers and the rest of its revenues from sales to corporate customers, which were booming.
""The consumer business didn't hurt them,"" said Jim Poyner, an Oppenheimer & Co. analyst. ""Dell and Compaq are benefiting from the same forces, the transition to the Pentium Pro (chip), a hot notebook (computer) market and progress in the server (network computer) business.""
On the larger systems side, companies like International Business Machines Corp., Digital Equipment Corp. and Unisys Corp. are expected to see some negative impact from a stronger dollar overseas and sluggish sales in Europe, while business in the United States remains strong.
""Business is quite good in the U.S.,"" said Jay Stevens, another Dean Witter analyst. ""Where it's slower, or where the concerns have been expressed, is overseas, mostly in Europe.""
Digital is expected to report a slight profit as it slowly recovers from sales force problems in Europe and a money-losing PC business. PCs are expected to break even.
""I think it will be a good quarter,"" said Morgan Stanley analyst Steve Milunovich.
Analysts said that they expected IBM's earnings to be a bit better than expected, but that its expenses for job cuts will be greater than previous quarters.
""Europe remains a slower grower, which has led to a number of organisational and planned efficiency changes,"" said John Jones, a Salomon Brothers analyst. IBM reports its earnings next Tuesday.
",46
"America Online Inc. was hit with two more lawsuits Wednesday from frustrated subscribers, and the world's largest online service also suffered a computer glitch that led it to shut down half of its system for nearly four hours.
Late Wednesday, AOL's system suffered a partial outage when system problems led it to shut down half of its system from 3:45 p.m. EST until about 7:30 p.m. to find the problem.
""The system was able to accommodate 124,000 subscribers,"" an AOL spokeswoman said. Normally AOL, which has more than 7 million subscribers, accommodates about 258,000 users simultaneously.
The problem was with an interface board in a router device, which manages the flow of data in a network, the company said. AOL said its network was back to full capacity by 8 p.m. EST.
The spokeswoman said the outage was not related to the onslaught of member usage since AOL switched to unlimited use for a flat rate of $19.95 a month.
AOL suffered another much more massive network outage in August last year, when the entire AOL network was down for almost 19 hours due to a software glitch.
That outage drew front-page headlines around the world, as millions of users were unable to access electronic mail, the Internet, and a variety of services and publications online, for almost a day.
While AOL said the latest network outage was not due to the influx of users, the current demand for its service is clearly testing the patience of some subscribers, who have begun filing lawsuits against AOL.
On Wednesday, two more lawsuits were disclosed, both filed in New York state court this week, claiming breach of contract, deceptive trade practices and false advertising.
Those suits came on the heels of a class-action lawsuit filed Tuesday in Los Angeles on behalf of five subscribers, seeking damages for what they call fraudulent and malicious representation.
In addition, at least two state attorneys general have confirmed they are in discussions with America Online, seeking some resolution to complaints they have received from consumers about the continuing problem of network access.
New York state Attorney General Dennis Vacco and Wisconsin state Attorney General Jim Doyle are in discussions with AOL, spokesmen said.
Since AOL switched its more than 7 million members to unlimited access for $19.95 a month, its network has been deluged by subscribers, many of whom cannot log onto the system during peak evening hours or on weekends.
The spokeswoman for the Dulles, Va.-based company could not immediately comment on the New York lawsuits, but on Tuesday, AOL said it was upgrading its network and that it understood its users' frustration.
""Although we understand the frustration some members are experiencing ... the average AOL member gets more value under unlimited pricing than ever before,"" AOL said in response to the Los Angeles lawsuit.
Many Wall Street and industry analysts said they are not worried about the lawsuits, which they consider frivolous.
",46
"Software giant Microsoft Corp. Thursday unveiled the highly anticipated version of its next-generation software for office computers, called Office 97.
Office 97 -- a package of software that includes popular programmes such as Microsoft Word for word processing, the Excel spreadsheet programme, Access database software and the PowerPoint presentation programme -- has many new features, including document collaboration and the ability to jump seamlessly from a document or spreadsheet to the Internet.
""Office is a centrepiece of Microsoft's Internet strategy,"" Microsoft Chairman Bill Gates said at a New York news conference.
The software giant, which has 55 million users of Microsoft Office applications, said it had already received advance orders from nearly 10,000 retail outlets for Office 97. The software became available in stores Thursday.
The company said 3 million copies had been sold through corporate licensing agreements.
Industry analysts noted, however, that many large business users of Microsoft's Office software have not upgraded to the Windows 95 or Windows NT operating systems required by Office 97.
Microsoft, based in Redmond, Wash., said more than 80 percent of the improvements in Office were a result of customer feedback.
""Our investments in understanding the needs of customers and our continued ability to deliver exciting enhancements are the cornerstone of Office's ongoing success,"" Gates said.
Gates launched the software at a media event at New York's Lincoln Centre.
Microsoft dominates the office suite category of software, with a 90 percent market share, according to International Data Corp., a market research firm based in Framingham, Mass.
But it faces increasingly aggressive competition from Canada's Corel Corp. and International Business Machines Corp.'s Lotus unit and its SmartSuite software.
Corel, which uses WordPerfect word-processing software as the core of its office software, made a significant dent in Microsoft's retail market share in the second half of last year, according to industry analysts.
""While SmartSuite and Corel are eating away at things like price and Internet features, Microsoft's message to corporations is, 'Guys, it's the ease of use and the cost of ownership,'"" said Eric Brown, a Forrester Research analyst.
Microsoft said with some of its new features in Office 97, such as the Office Assistant, users can easily get answers from a built-in software ""guru"" without burdening their information systems managers. Tools such as Network Installation Wizard, Office Resource Kit and others make it easier for information system managers to install and manage the software.
""I'd not be surprised if we reduced the cost of ownership by one-third to one-half,"" said Dennis Tevlin, Microsoft's director of product marketing, desktop applications.
Since Sun Microsystems Inc., International Business Machines Corp., and others have introduced lower-cost network computers, one feature they have touted is the low cost of ownership of these new devices vs. the higher cost of maintaining PCs and their hefty software.
Office is a huge cash generator for Microsoft. Its desktop applications group, which is dominated by Office, is expected to bring in about $5 billion of the company's fiscal 1997 revenues, which are estimated at slightly over $10 billion, according to Wall Street analysts.
The standard edition of Office 97 for upgrades from earlier versions of the software has an estimated retail price of $209. It will sell for $249 for upgrading from non-Microsoft suites and $499 for new users.
One new component in Office 97 is called Microsoft Outlook, a desktop information manager. Outlook helps users manage information, track documents and communicate.
By integrating e-mail, scheduling, contact management, task management and a module for tracking documents and events, Outlook acts as a central ""hub"" for Office 97.
Gates said one of his favourite features of Outlook is its e-mail filtering capability, which enables him to immediately read and answer important e-mail amid the flood of e-mail messages he receives daily from around the world.
Other features include Internet technologies that make it easy for users to create ""hyperlinks"" linking their documents to a World Wide Web site, for example. Users can also search Office and Web-style documents on a corporate network and they can navigate documents using the familiar tools of a Web browser.
""We like to call this activating the Web,"" Tevlin said. ""1996 was the year of the lots of Internet infrastructure products. Office 97 is the first in this new wave of Web applications.""
Microsoft's stock gained $1.50 to $86.125 in afternoon trading on Nasdaq.
",46
"International Business Machines Corp. Tuesday reported higher fourth quarter profits, bolstered by its strong services and software sales, but some analysts were disappointed about sluggish mainframe sales and lower-than-expected restructuring costs.
The world's largest computer maker said net income rose about 18 percent to $2.02 billion in the quarter from $1.71 billion in the 1995 quarter. Revenues were up 6 percent, to $23.1 billion, from $21.9 billion a year ago.
Earnings per share rose to $3.93 from $3.09, since IBM had 7 percent fewer shares outstanding in the quarter due to stock buybacks. Wall Street analysts had expected profits of $3.88 a share on average, according to First Call, which tracks earnings estimates.
""They were mixed results, software and services were great,"" said David Takata, a Gruntal & Co. analyst.
He said weak mainframe computer revenues were disappointing. Some analysts had been predicting better mainframe revenues in the quarter due to strong new products.
The sluggish mainframe sales and lower-than-expected restructuring costs, however, lead some analysts to call the quarter a disappointment after attending a meeting of IBM executives and analysts in New York.
""It was disappointing, but not disastrous,"" said Barry Bosak, a Smith Barney analyst. ""They are facing challenges, (but) it is not pulling the company down like it was in the late 1980s and early 1990s. We'd like to see more growth and we are not getting it.""
""The quarter looked a little light,"" said Daniel Ries, a Nomura Securities analyst. ""They took a smaller than expected charge... and the tax rate was lower than what everyone was using. I think they missed the number slightly.
For the quarter, IBM's restructuring costs were $200 million, less than previous estimates of between $300-$400 million. IBM said restructuring costs in 1997 would reach about the same level as total costs of $720 million in 1996.
G. Richard Thoman, IBM's chief financial officer, told analysts IBM spent less than planned on restructuring mostly because of its European operations. ""In Europe once again, we were unable to achieve success in voluntary (staff) reductions,"" he said referring to IBM's employee buyout plans.
The Armonk, N.Y.-based computer maker said service revenues jumped 22 percent in the quarter and personal computer sales rose, but sales of mainframes fell and RS/6000 workstations were flat.
Software revenues rose 4 percent in the quarter, and hardware sales increased 2 percent. IBM said its sales of Lotus Notes reached a record of 1.5 million licenses in the quarter, bring the total of Notes licenses to 9 million.
Personal computers were also a bright spot for IBM, but they carry lower product margins.
Thoman said IBM's PC business showed continued improvements, with its profit margin closing in on Compaq Computer Corp.'s margins, which are about 23 percent of revenues, the best in the industry. But he declined to give provide specifics about unit shipments or gross margins.
IBM's total gross profit margins fell in the quarter to 40.3 percent of revenues vs. 41.7 percent a year ago.
""We showed good growth in the fourth quarter despite a difficult year-over-year comparison, continued weakness in Europe and a greater-than-expected currency impact,"" IBM Chairman Louis Gerstner said in a statement.
""Although we still face many challenges, IBM is a much different company than it was only a few years ago,"" he said, noting IBM's services business accounted for 21 percent of revenues at the end of 1996 compared to 13 percent in 1993.
The impact of converting revenues received in foreign currencies into dollars erased 3 percentage points from the fourth-quarter revenue gain, IBM said. That compared with about a two point positive impact in the 1995 quarter.
Net earnings for the year rose to $5.4 billion, or $10.24 a share, from $4.2 billion, or $7.23 a share, in 1995. The 1996 results included a charge for research and development from the acquisition of Lotus Development Corp.
Full-year revenues rose 5.6 percent to $75.95 billion from $71.94 billion.
In a break with tradition, IBM released its results after the stock market closed rather than before the market opened.
The stock closed up $1 at $168 in consolidated trading on the New York Stock Exchange.
By region, revenues in North America rose 11 percent to $9.6 billion in the fourth quarter, Asia-Pacific rose 6 percent to $4.3 billion and Latin America gained 4.0 percent to $1.1 billion. Revenues in Europe, Middle East and Africa were $8.1 billion, little changed year over year.
",46
"The stock of International Business Machines Corp fell in heavy trading on Thursday, hit by renewed fears about its first-quarter earnings after a published report focused on recent analysts' estimate cuts.
The sell-off fueled the overall stock market's fourth sharp sell-off in five days as investors were already scared that Friday's March employment report, if robust, could prompt the Federal Reserve to raise interest rates again soon.
IBM fell as low as $128.875 before ending down $2.375 at $131.375 on the New York Stock Exchange, where it was the third most-active issue on volume of 4.6 million shares.
IBM shares began their tumble in London, where investors first read a Wall Street Journal article that said analysts may not be through cutting IBM's earnings estimates.
The report talked about a recent spate of analysts' estimate cuts, citing fears that a stronger dollar and a mainframe product transition will hurt IBM's first-quarter earnings, due April 23, and depress the stock even further. A strong dollar makes sales overseas worth less in dollar terms.
As previously reported, two weeks ago three Wall Street firms made negative comments and two lowered their estimates on IBM, fueling a drop in IBM's shares in late March.
The report, which appeared as a ""Heard on the Street"" column in Thursday's Journal, also dredged up an almost two-week old rumor that IBM was going to pre-announce that its earnings would come in below analysts' estimates.
""The Wall Street Journal article today is a summation of old news,"" said John Jones of Salomon Brothers. ""We talked to IBM today and they have no plans for a pre-announcement.""
One trader said of the newspaper article: ""They are a bit late to the party here.""
""I heard the rumor but I wouldn't put any credence to it,"" said another trader.
An IBM spokesman declined to comment on the quarter.
As previously reported, on March 21, Morgan Stanley analyst Steve Milunovich cut IBM's 1997 earnings estimate to $12.30 a share from $12.50. For all of 1996, IBM earned $5.4 billion, or $10.24 a share.
On March 20, Dean Witter Reynolds analyst Jay Stevens lowered his first-half earnings estimates for IBM, saying customers might hold off purchases of mainframes until an anticipated upgrade. Some analysts are expecting initial shipments in June.
Stevens added to his estimates for the second half of the year, however, saying the year would be more back-end loaded, as customers make purchases in the second half of the year.
Also in March, Merrill Lynch analyst Daniel Mandresh said it would be tough for IBM's first-quarter earnings, which it estimated at $2.32 a share, to compare to the year-ago period's. The analysts' consensus estimate is $2.31 a share for the first quarter, according to First Call, which tracks estimates.
For the first quarter of 1996, IBM posted earnings of $1.4 billion, or $2.48 a share, excluding charges associated with software acquisitions and other special items.
Gary Helmig, a SoundView Financial analyst, said he is maintaining his first-quarter earnings estimate of $2.32 a share, which he has had since February.
""It's going to be tough to make that number and I doubt that they can overachieve it,"" Helmig said. But he added that foreign currency exchange rates have not changed drastically since February, so he sees nothing new to affect his estimates.
The IBM drop caused the Dow Jones industrial average to lose 39.66 points to end at 6,477.35 after an initial plunge of more than 80 points.
",46
"Wall Street's renewed love affair with International Business Machines Corp cooled abruptly after its disappointing fourth quarter, and IBM must show more growth next quarter to recapture investors' hearts.
IBM's stock, which was rather moribund for most of 1996, got a big boost from a Merrill Lynch analyst in mid-November, fueling a surge of renewed interest in IBM. Many on Wall Sreet endorsed his view that IBM was becoming a growth engine again.
But Tuesday, IBM's fourth quarter earnings quashed any hopes of double-digit revenue growth and its shares tumbled.  
On Wednesday, IBM was off 10-3/8 in heavy midafternoon New York Stock Exchange trading to 159, as many momentum players exited the stock.  Before Wednesday's drop, IBM's shares had surged 23 percent since mid-November, when Daniel Mandresh of Merrill Lynch raised his IBM price target to $195.
During 1996, IBM's shares traded at a 200-moving day average that ranged from $96 to $116.  Its shares later consolidated around $135 before breaking out.
""There has been some froth in the stock, with many people thinking they are finally back on a growth trend,"" said Daniel Ries, a Nomura Research analyst.  
""This quarter took the wind out of their sails,"" Ries said, adding that the next round of impatient investors will judge IBM by its first quarter's performance.  ""But others will say one quarter does not a trend make,"" he said.
While IBM reported fourth quarter earnings of $3.93 a share -- better than the First Call consensus number of $3.88 a share -- analysts said IBM's results were boosted by an unexpectedly lower tax rate that added between $0.20 and $0.30 a share.  IBM also had lower restructuring costs of $200 million versus the $300-$400 million Wall Street had forecast.
Analysts had also included a negative currency impact.  
""Rather than easily achieve Street estimates, IBM appeared to be huffing and puffing,"" said Steve Milunovich, a Morgan Stanley analyst, in a note to clients.
Some negatives from the fourth quarter will continue into the first quarter and other quarters of 1997.  Currency is expected to be one, as is the drop in prices of dynamic random access memory chips (DRAMs), which IBM sells in great quantities through its IBM Microelectronics business.
But the most disappointing results came from its hardware business, which was especially under pressure from a decline in mainframe computers and flat RS/6000 workstations.  
""It was disappointing in a number of dimensions, partly hardware growth and the gross margin being low,"" said Stephen Smith, who reiterated what he says is a controversial rating on IBM, an ""unattractive"" rating.
Smith said his concerns stem from the current strength in mainframe revenues and whether it will continue.  He expects less profits to come from mainframes in 1997 than in 1996.
IBM's total hardware revenues were $11.7 billion, up two percent. Gross hardware profit margins dropped to 36.6 percent of revenues, from 39.6 percent a year ago. IBM attributed part of its margin drop to higher volumes of lower-margin products.  
Lower margin products include personal computers, which had another great quarter and closed in on Compaq Computer Corp's margins, which are the highest in the industry. Compaq's margins were around 24 percent this quarter.
Analysts hoped that the higher margin mainframe computers would contribute more to the quarter, even though many had predicted it would be a tough comparison with a year ago.
IBM told analysts that the number of MIPS (millions of instructions per second) shipped, its measure of mainframe computing capacity, grew 35 percent in the fourth quarter, down from an 80 percent jump in fourth quarter 1995.  
John Jones of Salomon Brothers said that mainframe sales fell 12 percent in the quarter, with 10 percent of those revenues still coming from IBM's older less profitable bi-polar line, which IBM is close to discontinuing.
""Hardware is the thing that was off the mark,"" said Gary Helmig, a SoundView Financial analyst, who reiterated a buy rating on IBM, citing ""some good news underneath"" the earnings, such as its strong services growth and better than expected software performance.
""The thing that gets it going again is refocusing on what is IBM, a hardware business or a services business?"" he said.
",46
"International Business Machines Corp said its $23 billion Global Services business is to become a separate IBM group, acknowledging the significance of the fast-growing business.
In a related development, IBM Chairman Louis Gerstner reiterated in the company's annual report on Wednesday that the company planned to hire ""thousands more"" employees to fuel growth, most of them in Global Services.
IBM told analysts earlier this year it would probably add as many new employees in 1997 as it did in 1996, with a big chunk in Global Services.
In 1996, the computer giant's worldwide headcount grew to 241,000, up from 225,000 in 1995, mostly due to the expanding services business, an IBM spokesman said. In 1995, employment grew from 220,000 in 1994, the first time employment had grown in 10 years.
""I'd like to add here that I am very happy -- and proud -- that our transformation has created job growth,"" Gerstner said in his letter to shareholders, in which he described 1996 overall as ""a solid year.""
When Gerstner first took over the then-struggling computer giant in April 1993, one of his first actions was to take a big restructuring charge and cut 25,000 jobs from IBM.
The Global Services unit -- which designs, installs and services computers, including running entire corporate computer systems -- was formerly part of IBM's Sales and Services group.
Sales and Services will be renamed the Sales and Distribution Group, still headed by IBM Senior Vice President Ned Lautenbach.
IBM also said Dennie Welsh, who was general manager of Global Services, will be promoted to a senior vice president and report directly to Gerstner.
Welsh was also named an IBM group executive and will join IBM's executive committee, which makes strategic decisions.
""The time is right for this change,"" Gerstner said in an IBM memo announcing the reorganisation. ""He (Welsh) and his colleagues on the services team have done an outstanding job building a great new business for IBM. This change not only reflects a logical adjustment in our organisational structure, but also a recognition of their success.""
IBM's services business has been its fastest growing in recent quarters. In the fourth quarter, IBM said services revenues jumped 22 percent to $5 billion. In comparison, IBM's total revenues grew 6 percent in the fourth quarter.
""This is a transformation of the IBM company,"" said Sam Albert, a Scarsdale, N.Y.-based consultant. ""The major revenue stream is not coming from hardware, it will come from software and services ..."".
""This has some impact on the way IBM sees its future,"" Albert added. ""Anything this important demands direct oversight by Gerstner.""
Wednesday's move follows changes in December when IBM consolidated computer services under the IBM Global Services brand. IBM's services organisation had been operating in some countries outside the United States under different names.
The addition of Global Services now gives IBM five major corporate divisions. The others are the Software Group, the Server Group, which makes the computers that run networks; the Personal Systems Group; and Sales and Distribution.
With Welsh's promotion to IBM senior vice president, the company now has a total of 10 senior vice presidents.
IBM stock fell $1.50 to $137.857 on the New York Stock Exchange.
",46
"AT&T Corp. -- a year after the much-hyped launch of its Internet access service had consumers clamouring for software -- said Wednesday it will end its introductory offer of free Internet access to long-distance customers.
The telecommunications giant said that after March 31 a revised pricing plan for its WorldNet Service will go into effect, but that it will continue to offer its flat-rate pricing plan of $19.95 a month for unlimited access.
AT&T also said it began posting statistics about the reliability and performance of WorldNet. It challenged other service providers to match its performance, a jab at America Online Inc., which has experienced major congestion problems when its members swamped the service after it switched to flat-rate pricing in December.
""We always said it would be a one-year promotion,"" Tom Evslin, vice president of WorldNet, told reporters in a conference call. ""It served its purpose of introducing many people to the Internet.
""Things were very different a year ago. Now, you can't turn on a sports event without seeing the URL of each team,"" he said, referring to World Wide Web site addresses known as uniform resource locators (URLs).
WorldNet has more than 750,000 members and said it is the largest ""pure Internet"" access provider in the United States. ""Pure Internet"" services offer Internet access only and little or no proprietary content like that provided by America Online Inc. and CompuServe Corp.
Starting March 31, AT&T will offer long-distance customers who sign up for WorldNet and anticipate lower usage a monthly rate of $4.95 for their first five hours.
Long-distance customers who signed up before March 31 will continue to get their first five hours for free for a year and will be enrolled under the revised pricing after that.
Customers of long-distance carriers other than AT&T can receive the service for $4.95 for the first three hours.
All hourly plan customers pay $2.50 for each additional hour and pay separately for phone access or toll-free 800 number access to reach the service.
When AT&T introduced WorldNet with flat-rate pricing a year ago, it shocked the online services industry, which feared competition from the telecommuniations giant with access to so many long-distance telephone customers.
But still, analysts said that AT&T must be disappointed with its current subscriber count of over 750,000, since its entry into the online services was so feared and analysts estimated it would rapidly gain millions of users.
By contrast, No. 1 online service AOL has over 8 million subscribers.
""It's safe to say they must be disappointed with their subscriber growth,"" said Gregory Wester, a research director at the Yankee Group. ""They have a 60 percent share of the long-distance market and a single-digit share of Internet access mareket."" Wester uses 18 million users as the current number of the total Internet access market.
AT&T stock dropped 37.5 cents to $40.75 in consolidated trading on the New York Stock Exchange.
",46
"Britain's United Utilities may wait two to three years before it earns profits from a contract it won as part of a consortium for water and sewerage services in Manila on Thursday, analysts said.
They said it was difficult to assess likely profits until further details of the deal were released, although one who asked not to be named said they could be around five million pounds ($8.17 million) a year.
The Manila Water Company (MWC), which comprises United Utilities, Bechtel Corp of the U.S. and local conglomerate Ayala Corp won a contract on Thursday for water supply and sewerage in Manila's east zone. The Philippines government awarded the deal after MWC submitted the lowest water tariff of 2.32 pesos per litre, or 26.3886 percent of the existing fee of 8.78 pesos.
Analysts said other groups had bid upwards of 60 percent of the existing tariff in the contract.
MWC also posted the lowest bid in the west zone, but that contract was awarded to France's Lyonnaise des Eaux SA and Benpres Holdings Corp, another leading Philippines business group, as the contracts must go to different bidders.
United Utilities said in a statement that capital expenditure on the project was expected to be $1.7 billion, while Manila officials are expecting both groups to invest a total of around $7 billion.
The concession runs for 25 years and calls on MWC to serve 4.6 million of Manila's population of some 12 million through operating, upgrading and extending the city's water and wastewater systems, United Utilities said.
The current clean water system suffers nearly 50 percent losses, United Utilities said.
Analysts said the MWC group might be aiming to make cost reductions through staff cuts in order to make the concession profitable, as well as squeezing the amount of water lost.
Antonino Aquino, a senior official at Ayala, said the key to making the project economically viable would be to reduce the portion of non-revenue water, caused by leaks or pilfering, which is currently estimated at 58 percent.
But analysts said that as United Utilities would focus on running the system once it was upgraded and extended, any benefits would have to wait for a few years.
""United will probably see the benefits after the investment has been made...it could be three to four years before there is any significant contribution,"" said one sector analyst.
Shares were down 6-1/2 pence at 671.25 pence by 1441 GMT, while shares in Anglian, which was in a consortium that failed to win either contract were up 7.5 pence at 622 pence.
Analysts said that cost cutting and reducing leakage and stolen water could help MWC to wring increasing profits from the deal, even though price tariffs are reportedly fixed for 10 years.
""There are huge savings to be made...the numbers don't look that attractive but the cost savings could help the revenue stream,"" the sector analyst said.
The move also fits with UU's aim of developing its non-core businesses, analysts said, where the company hopes international projects could boost profits by 40 million pounds in 2000.
But UBS analyst Lakis Athanasiou said on Wednesday that the company could struggle to find extra profits needed to fulfill its promise of 11 percent real dividend growth per year to 2000.
""We think the targets are ambitious,"" he said, adding that UBS expects dividend growth of around six percent per year.
($1=.6119 Pound)
",16
"British super-utility Scottish Power surprised investors on Wednesday by promising a 19 percent jump in its final dividend after strong half year results and savings from its takeover of Southern Water.
Scotish Power's reported first half pretax profits rose 47 percent before 21.2 million pounds in exceptional charges for restructuring Southern Water.
Its shares jumped to a high of 350 pence before edging back to 345 for a net gain of 3.5 pence after its earnings of 188 million pounds ($310.5 million), up from 127.7 million pounds a year ago, came in above forecast.
""Clearly the most impressive feature is the dividend forecast...it is promising more in the future than was expected,"" said Marshall Whiting, analyst at Societe Generale Strauss Turnbull.
The company, which serves one in five British households across its three strong regional bases, paid out an interim dividend of 6.17 pence a share compared with 5.17 pence previously and said the final dividend would be 18.5 pence.
""That was well above the trend,"" said Andy Stone, utilities analyst at brokers Daiwa.
Scottish Power said it expected to be able to boost pretax profits at Southern Water, the water and sewerage utility it bought for 1.68 billion pounds in August, by 52 million pounds a year. Total job losses are expected to be 2,050.
It said some 100 million pounds of cash should be released, with 70 million from disposals of businesses such as vehicle leasing and landfill sites and 30 million from property sales.
""We are very pleased with what we have found (at Southern Water)...we are now focusing back on the core business,"" chief executive Ian Robinson said in a telephone interview.
Scottish Power, which became the only British utility to span electricity generation and supply when it bought regional electricity company Manweb last year, also has interests in gas and telecommunications.
Later bids for similar power utilities from generators National Power and PowerGen were blocked by the government on anti-competitive grounds.
Scottish Power said it aimed to provide customers with quality service at a competitive rate as electricity and gas markets head for liberalisation in 1998.
Robinson said the purchase of Southern Water after a battle with rivals Southern Electric would benefit both shareholders and customers.
""We would expect to improve customer service...Scottish Power shareholders will strongly benefit as well,"" he said.
Scottish Power gained government approval for its takeover of Southern by promising cuts in prices to water customers by one percent next year and then by three percent for two years.
Robinson said that between 200 and 300 jobs could be created over a couple of years as Scottish Power expands its retail business and positions itself to compete in the gas and electricity markets.
""It is our view that successful utility companies of the future will be those able to provide a high level of customer service while, at the same time, enhancing cost efficiency,"" the company said in a statement. ($1=.6054 Pound)
",16
"British regional electricity company (Rec) London Electricity, recently a focus of bid speculation, turned in a dip in half year profits on Thursday but hiked its dividend spurring its shares.
London, which supplies power to the capital, saw pretax profits for the six months to September 30 dip to 69.3 million pounds ($114.4 million), down from 84.5 million a year ago, hit by a pricing review which came into effect earlier this year.
It paid out an interim dividend of 14.3 pence per share, up from 11.5 pence previously and towards the top end of expectations.
""That was better than we expected for the dividend rise and that seems to have boosted shares,"" said one analyst who asked not to be identified. Shares had jumped 15 pence to 655 pence by 1315 GMT.
Chairman Sir Bob Reid said in the statement that ""looking ahead, our priority remains our distribution network.""
London said both regulated and private networks would see investment with an emphasis on cost efficiency aimed at maximising shareholder value.
But it warned that recent tax changes on capital allowances proposed in the British budget in November would necessitate a re-examination of long-term investment strategy.
""We would hope that elements within our programmes...which provide environmental and social benefits to London are excluded from the (budget) proposals and that long-term investment is not discouraged,"" the company said in a statement.
London said it ""remained committed to seeking profitable and mutually beneficial alliances in supply as a means of improving long-term returns through economies of scale.""
Newspaper reports earlier this week had suggested London was the Rec cited by Northern Electric as a potential partner for merging its supply business as part of its defence against a 650 pence per share bid from U.S. group CE Electric.
Northern said the proposed move could mean joint cost savings of over 28 million pounds a year.
Neither Northern nor London would comment on the newspaper reports, but in its statement on Thursday, London said its approach to supply was ""pragmatic.""
London, one of three remaining Recs which are independent and without a pending bid, saw talks with U.S. energy group Entergy called off last month.
It made no reference to those discussions in its results statement but is still considered a potential bid target although any offers are likely to wait until the British government decides whether two pending bids can go ahead, analysts said.
Trade Secretary Ian Lang is expected to decide by December 16 whether to allow the bid for Northern by CE Electric, which is 70 percent owned by CalEnergy of the U.S., should go ahead. A decision is also awaited for an agreed $2.15 billion bid for East Midlands Electricity from U.S. group Dominion Resources. ($1=.6056 Pound)
",16
"U.S. utility group CE Electric upped the stakes in its hostile bid for British power company Northern Electric on Friday, raising its offer to a final 650 pence a share and setting a December 20 deadline.
But CE's hopes that Northern would recommend the raised 782 million pound ($1.29 billion) bid were dashed as Northern rejected the offer after carefull consideration.
CE Electric chairman David Sokol's said earlier he hoped Northern would recommend the bid after it was raised from 759 million pounds.
CE Electric, the bid vehicle for CalEnergy of the United States, said the new offer represented ""compelling value.""
""This is an overwhelmingly strong offer,"" Sokol said in an interview.
But Northern Electric chairman David Morris responded with a statement saying: ""CE Electric has failed to recognise Northern Electric's true value in its revised offer.""
""It (CE) has ignored the new information provided and it is still looking to buy Northern Electric too cheaply. Shareholders should reject this revised offer.""
CE Electric has already snapped up nearly 30 percent of its target as Northern's share price has languished under concerns that the British government would block the bid.
Trade and Industry Secretary Ian Lang is expected to decide by December 16 whether or not to refer the takeover to the Monopolies and Mergers Commission (MMC) for review.
Northern's shares lost 1p to 600 pence by the close as the overall market slid by more than two percent.
""The latest offer probably still undervalues Northern but I think it will succeed...I think shareholders will (accept),"" said one analyst who asked not to be identified.
Northern rushed out half year results last week as part of its efforts to push up CE Electric's offer and said gearing should have fallen to 95 percent by March 1997 against earlier forecasts of 175 percent.
Northern has claimed that talks between the two companies before CE Electric launched its bid indicated a price of 700 pence per share but the Americans have consistently denied this.
Sokol said Northern had not produced any new information in its defence documents but added CE Electric had been holding back ""a certain amount of dollars"" in hopes of a recommendation.
""But given that Northern's board has not wanted to talk, we felt it was not fair to withhold the cash from shareholders,"" Sokol said.
He said the final deadline had been brought forward to December 20 from early January because it would give certainty to employees and shareholders ahead of the holiday season.
Northern, one of only a handful of independent power companies remaining, has called on the government to let the bid go ahead and made clear its only dispute with CE Electric is on price. ($1=.6082 Pound)
",16
"CalEnergy Inc. upped the ante in its hostile pursuit of British power company Northern Electric Plc Friday, raising its offer to 782 million pounds ($1.29 billion) and setting a Dec. 20 deadline.
Northern Electric said it rejected the offer, formally being made by Omaha-based CalEnergy's British subsidiary, CE Electric UK Plc, after carefull consideration.
CE Electric Chairman David Sokol said earlier he hoped Northern would endorse the bid after it was raised to 782 million pounds ($1.29 billion), or 650 pence ($10.55) a share, from 759 million pounds ($1.23 billion), or 630 pence ($10.23) a share.
""This is an overwhelmingly strong offer,"" Sokol said in an interview.
But Northern Electric Chairman David Morris responded with a statement saying, ""CE Electric has failed to recognise Northern Electric's true value in its revised offer.
""It has ignored the new information provided and it is still looking to buy Northern Electric too cheaply. Shareholders should reject this revised offer.""
CE Electric has already snapped up nearly 30 percent of its target as Northern's share price has languished amid concerns that the British government would block the bid.
Trade and Industry Secretary Ian Lang is expected to decide by Dec. 16 whether to refer the takeover to the Monopolies and Mergers Commission for review.
Northern Electric's shares closed at 600 pence ($9.87) as the overall London stock market slid by more than 2 percent.
""The latest offer probably still undervalues Northern but I think it will succeed ... I think shareholders will (accept),"" said one analyst who asked not to be identified.
Northern Electric has claimed that talks between the two companies before CE Electric launched its bid indicated a price of 700 pence ($11.36) a share but CalEnergy has consistently denied this.
Sokol said Northern had not produced any new information in its defence documents but added CE Electric had been holding back ""a certain amount of dollars"" in hopes of a recommendation.
""But given that Northern's board has not wanted to talk, we felt it was not fair to withhold the cash from shareholders,"" Sokol said.
He said the final deadline had been brought forward to Dec. 20 from early January because it would give certainty to employees and shareholders ahead of the holiday season.
Northern, one of only a handful of independent power companies remaining in Britain, has called on the government to let the bid go ahead and made clear its only dispute with CE Electric is on price.
",16
"British regional power company Yorkshire Electricity is still a hot favourite for a bid after a rash of takeovers at the end of 1996 left just two independent firms in the sector.
But every day that passes without an offer emerging dampens expectations of a possible takeover, analysts said on Friday.
""Over the next three to four weeks is really a final window before a general election,"" said Nigel Hawkins, analyst with Yamaichi.
The Conservative government, which must call an election by May, has nodded through bids for 10 regional electricity companies (Recs) so far of the original 12 set up at privatisation in 1990.
But there are concerns that the centre-left Labour party, ahead in current opinion polls, might be less amenable to takeovers in a sector which has been fiercely criticised for fat executive pay packets and hefty shareholder payouts.
""Labour would not necessarily wave any bids through in the way the current government has,"" said one analyst who asked not to be named. Yorkshire, which could carry a price of around 1.4 billion pounds ($2.35 billion), is seen as a more likely target for any bid than its colleague Southern.
Southern is the only other independent Rec left after a flurry of bids late last year mopped up three more Recs.
Southern, which could cost up to 2.4 billion pounds or around 9.50 pounds per share, the analyst said, could prove too expensive for a predator on its own.
""It is less digestible (than Yorkshire) but not impossible,"" he said. As a result, a takeover of Southern might involve more than one company working in collaboration.
Yorkshire was trading at 795 pence, up 6.5 pence, in a lower overall market on Friday, compared with expectations of a takeover price around nine pounds. Southern gained five to 779.
Potential buyers are seen as U.S. firms, with six of the original 12 firms now in American hands. The three Recs which succumbed late last year all fell to American buyers.
London and East Midlands agreed to takeovers from Entergy and Dominion Resources respectively, while Northern lost by a whisker its hotly contested battle against CalEnergy.
London's takeover still awaits approval from the British government but analysts expect a go-ahead now that Dominion and CE Electric, CalEnergy's bid vehicle, have had a green light.
American companies are seen as eager to gain the expertise of working in a competitive market with a relatively friendly regulatory environment and see Britain as a useful springboard for expansion into continental Europe, analysts said.
Among rumoured potential predators are Houston Industries, which failed to secure control of Rec Norweb with Central & South West Corp in October 1995.
Central & South West eventually bought Rec Seeboard but speculation continues that Houston might still be interested in the sector.
Florida Power & Light and Pacific Gas & Electric also appear in speculation on potential buyers.
But the failure of any bids to emerge is gradually sapping confidence that the sector will see any more takeover activity among some analysts.
""I would now be surprised if there is a bid. Many predators have now been satisfied and the longer we wait the less likely a bid seems,"" said one analyst who asked not to be named. ($1=.5950 pound)
",16
"British utility Northern Electric pumped up its defence against a takeover bid by Omaha, Neb.-based CalEnergy Inc. Tuesday with promises of higher dividends and unit mergers.
Last week, CalEnergy raised its bid to 782 million British pounds ($1.29 billion) or 650 pence ($10.55) a share, from 759 million pounds ($1.23 billion), or 630 pence ($10.23) a share.
Northern Electric rejected the offer, formally being made by CalEnergy's 70-percent owned British subsidiary, CE Electric UK Plc, after carefull consideration.
CE Electric has also set a deadline of Dec. 20, just four days after Trade Secretary Ian Lang is expected to decide whether the bid may proceed.
Northern Electric said in a statement Monday that it expected a 17 percent rise in its annual dividend to 50 pence (82 cents) per share next year with growth of more than 7 percent from then to the year 2000.
Northern Electric added that it planned to merge its electricity supply business with another regional electricity company for cost savings of more than 28 million pounds ($46 million) a year.
""It's a fairly aggressive statement from Northern Electric,"" said Yamaichi utilities analyst Nigel Hawkins.
The utility, based in Newcastle-upon-Tyne, England, spent 560 million pounds ($920 million) a year ago on a package of shareholder benefits to fight off a takeover bid by construction company Trafalgar House, and has strived to reduce its debt since.
""We are saying the company is worth at least as much as we said before ... and clearly it is worth more than 650 pence per share,"" Northern Electric Chairman David Morris said in an interview.
Morris said Northern Electric would have a ""broadly equal partnership"" in its plans for merging its electricity supply business with another firm. He declined to name the utility involved in talks but said it ""may well not be a nearby one.""
Neighbouring Yorkshire Electricity earlier Tuesday said in an interview that it had not held talks with Northern on the issue.
Northern Electric has said a price of 700 pence ($11.50) was indicated before CE Electric launched its bid, a claim which the Americans have consistently denied.
Northern Electric rushed out half-year results at the end of November and said its debt position should ease to around half previous expectations by March 1997 as it pushed for an increase in CE Electric's bid price.
""This is an exercise in re-arranging the deckchairs on the good ship 'Scorched Earth,'"" said a spokesman for CE Electric, which has already secured 33.27 percent of its target.
Northern Electric is just the latest British regional electric company to become a takeover target.
Seven of the original 12 cash-rich regional electricity companies set up in a 1990 privatisation have already been snapped up by predators, three going to U.S. companies.
Of the remaining five, East Midlands Electricity has agreed to a $2.15 billion takeover by Dominion Resources Inc. of Richmond, Va., while talks between U.S.-based Entergy Corp. of New Orleans and London Electric were called off last month.
",16
"British electronics retailer Dixons Group Plc showed the benefit of strong personal computer (PC) sales on Wednesday with a 53 percent jump in first half profits and an eight percent increase in sales.
But profit taking and concern over the impact of planned tax increases affecting extended warranties took the shine off its shares, which fell 20 pence to 518 pence by 1130 GMT.
""Bearing in mind the sort of out-performance we have seen lately (in Dixons shares), the shares are running into some profit-taking,"" said one analyst who asked not to be named.
Pretax profits in the six months to November 9, 1996 soared to 57.5 million pounds ($97.4 million), at the top end of expectations, from 37.5 million pounds previously. The company paid out a dividend of 2.4 pence, up from 2.05 pence.
Dixons said sales from existing stores were up eight percent in the first half, a figure maintained in the first eight weeks of the second half which covers the key Christmas period.
""Christmas trading was highly satisfactory,"" chairman Sir Stanley Kalms said in a statement.
Managing director John Clare told Reuters that consumer spending was growing but there was no boom, adding that if the economy was managed well, ""we can't see any reason why it should not continue"".
PCs and accessories including software accounted for around 26 percent of the group's total sales in the first half, inching towards 30 percent over the Christmas period, he added.
""I expect personal computer sales to grow...household penetration is still very low in the UK,"" Clare said.
The PC World division, which specialises in PC sales in out-of-town superstores, saw total sales rocket 96 percent in the first half, or by 21 percent when the effect of new selling space is stripped out.
Dixons opens around 10 PC World superstores each year and Clare said this expansion rate was expected to continue.
Gross margins in the early weeks of the second half were ""at similar levels year-on-year,"" Kalms said in the statement, after increasing slightly in the first half.
Dixons said it could not predict the full effect of the government's plans to raise insurance premium tax to 17.5 percent from 2.5 percent on its extended warranty business.
""There is a bit of worry over what the impact might be,"" one share trader said.
Kalms, however, told Reuters Financial Television, ""I don't expect it (the tax change) to be of much consequence to our overall profitability.""
Clare said future margins were hard to predict, with a ""swings and roundabouts"" pull between lower margins on PC hardware and the benefits of less competition in promoting credit.
Shops belonging to regional electricity companies have been trimmed, for example, as a result of takeovers and consolidation in the sector.
Clare said digital technology was likely to provide another growth market for the company with wide-screen digital television likely to debut in 1998. ""Digital technology is generally coming in in a big way...(but) I don't think it will replace PCs, because PCs will continue to grow,"" he said.
Capital investment in the current financial year is expected to be over 100 million pounds and at similar levels the year after.
($1=.5904 Pound)
",16
"British electricity company Northern Electric brought forward half year results and gave year forecasts on Friday in a bid to prove it is undervalued by CE Electric's 630 pence a share bid.
The regional electricity company, or Rec, said pretax profits for the six months ending September 30 slipped to 50.7 million pounds ($85.12 million) from 58.7 million pounds and an interim dividend of 12.85 pence was paid out, up from 12 pence.
Full year pretax profits would be above 112 million pounds, the company said, with a final dividend forecast of 29.85 pence.
Northern, which last year fended off a bid from Trafalgar House, now part of Kvaerner, with a 560 million pound benefit package, said gearing should fall to 95 percent by March 31 compared with forecasts last year of 175 percent.
""Gearing is falling and that is good news...today's results were not about profits but about the financial state of Northern Electric,"" said one trader.
Northern's chairman David Morris told Reuters there would be more information to come, pointing out prospects and highlighting areas of value.
He said talks with CE Electric, which is 70 percent owned by CalEnergy of the U.S., would be based on a share price of around 700 pence, a level it claims the American company indicated before the bid was launched in October.
CE Electric denied that claim and went on to snap up nearly 30 percent of Northern as its shares languished, weighed by concerns that the U.K. government will block the bid.
A spokesman for CE Electric described Northern's results as ""lacklustre.""
""I do not think they have announced anything that is going to make CE Electric put its price up,"" said one sector analyst who asked not to be identified. Shares in the Rec slipped one penny to 589 pence by 1100 GMT.
Northern said gearing, without payment of a special dividend of 56.5 pence due in February under last year's defence package, would be roughly in line with other electricity companies.
It argued that based on the forecast cash flow for 1997, it should be valued at 745 pence a share to balance the current agreed bid for Rec East Midlands Electricity from Dominion Resources of the U.S.
That bid valued East Midlands at 670 pence per share but its stock was also dampened by government approval worries and was trading at 609 pence, up 1.5 pence.
""We are simply pointing out the value of Northern Electric,"" Morris said, adding that if the government approved the bid, the figures would be more fully appreciated.
""You will see a vast change then,"" Morris said.
Northern has said it felt the government should approve the bid but maintained that 630 pence did not represent its true value.
""These results and forecasts help to demonstrate that there is significant further value within Northern Electric, value which CE Electric's offer fails to reflect,"" Morris said.
Some analysts said the results and forecasts underlined the judgement that CE Electric's bid undervalued the company.
""The company is worth something around 670 pence, if you exclude the bid premium and shareholders should hold out for something nearer 700 pence,"" said one analyst, anonymously.
($1=.5956 Pound)
",16
"The fate of an acrimonious battle for British utility Northern Electric was still in the balance on Saturday after the panel supervising a bid by U.S. predator CE Electric extended its offer until Tuesday.
The outcome of the bitterly fought two-month contest had been expected by midnight on Friday, eleven hours after CE's deadline for investors to accept its 782 million pound ($1.30 billion) offer.
But a brief statement by CE's advisors said that following a full hearing of Britain's takover panel the 650 pence a share offer was being extended until 1300 GMT on Christmas Eve.
Officials at the Takeover Panel declined to comment, but the Financial Times reported in its Saturday editions that the watchdog had effectively stopped the clock amid allegations of irregularities in the conduct of the bid.
The paper said it was beleived CE Electric, which is 70 percent owned by CalEnergy of the United States, had been close to declaring victory when the takeover panel launched a late-night inquiry into the allegations.
The nail-biting bid has sparked furious arguments, with both companies protesting to the panel about each other's tactics.
Prior to Friday's deadline, CE Electric already held nearly 30 percent of Northern, bought on the open market, and had previously declared acceptances that brought its holding up to around 34 percent.
Northern has claimed it has the backing of its largest institutional investor, the Prudential, which holds around 11 percent, as well as other funds including M&G and Foreign & Colonial.
The bid is the second hostile takeover that Northern has faced -- it spent 560 million pounds fending off Trafalgar House, now owned by Norway's Kvaerner, last year.
Northern has consistently claimed the CE bid undervalued it and called for a higher price.
It said 700 pence per share was indicated in talks before CE Electric launched the offer on October 28, a claim that the U.S. bidder denied. It says it is offering a fair price.
If Northern falls to CE, it would be the tenth of the 12 cash-rich Regional Electricity Companies (Recs) set up at privatisation in 1990 to be taken over since the government's protective golden share expired in March 1995.
It would also be the fourth to be taken over by an American company with two further agreed bids from U.S. firms Dominion Resources and Entergy for East Midlands and London respectively currently under way.
American companies are hotly tipped as the most likely buyers for the remaining Recs as they find the British regulatory environment more relaxed and see them as a useful English-speaking springboard for expansion into Europe.
",16
"Confusion mounted on Monday as British regional electricity company Northern Electric's fight against a hostile takeover from the U.S. prompted the Takeover Panel watchdog to launch a probe into the bid.
Just one day before a new bid deadline, the Takeover Panel said it was investigating the circumstances in which it had received information from Northern's advisers during the 782 million pound ($1.3 billion) bid by CE Electric.
""Following the investigation, the executive will consider what, if any, further action is appropriate,"" it said in a brief statement.
The role of Northern's adviser, investment bank BZW, has been under scrutiny since it failed to disclose until last Friday a 250,000 pound payment from Northern for its services in addition to its 1.5 million pound fixed fee.
BZW has denied any wrongdoing. A spokesman told Reuters: ""It was put to Northern at the outset that we could earn a discretionary fee relating to the quality of our advice.""
The Panel noted that it may also look into the acquisition by BZW and investment bank Schroders of 2.32 percent of Northern Electric's shares last week.
Although U.S. energy group CE Electric complained about the share purchases, the Panel cleared the deals last week. Advisers are allowed to buy shares under British takeover rules despite the move being aimed at defeating takeover bids.
Newcastle-based Northern Electric's independence has been on a knife-edge since last Friday, when the 60-day bid timetable ticked to a close and CE Electric, which is controlled by energy utility CalElergy, fell fractionally short of winning control.
But in an unusual twist, the Takeover Panel, ruled that it would extend the bid until 1300 GMT on Tuesday.
Gallingly for Northern Electric, CE Electric had by Monday boosted shareholder acceptances for its bid to just over the 50 percent mark needed for victory from 49.77 percent on Friday.
Consequently, Northern Electric on Monday launched an appeal into the decision to extend the bid deadline and requested that its shares be temporarily suspended.
Immediate details were unavailable about whether the Takeover Panel's decision to investigate the bid indicated that it was willing to reconsider its decision to extend the offer. ""We are not able to clarify anything at the moment,"" a spokeswoman said, adding that comments would be available ""in due course"".
London officials for CE Electric declined to comment.
Northern, which says institutional investors including the Prudential, Foreign & Colonial and M&G support the board, was not immediately available for comment.
Meanwhile, Northern's shares have stopped trading at 638 pence, 12 pence short of the 650-pence-per-share that CE Electric is offering for control of the electricity company.
It is the second time that Northern's fate hangs in the balance since it was privatised along with its 11 regional electricity company (REC) peers in 1990.
It was the first of the cash-rich RECs to face a takeover in 1994 and became the only one to successfully fight off, partly with the help of an extraordinary 560 million pound defence package, a bid by conglomerate Trafalgar House, now owned by Norway's Kvaerner.
Three U.S. utilities, attracted by Britain's regulatory regime that curbs prices rather than profits, have already snapped up RECs. Two other bids have yet to be completed.
If CE Electric wins control of Northern, only two of the 12 original RECs will remain independent -- Yorkshire Electricity Group and Southern Electric. ($1=.5973 Pound)
",16
"British supermarket group J. Sainsbury Plc dropped a profits warning bombshell into the market on Friday, sending its own shares plummeting by 13 percent and bringing other stocks under pressure.
Sainsbury said pretax profits for the current year before a provision of 50 million pounds ($81.7 million) would be 640-650 million pounds, well below consensus forecasts of over 700 million, as it admitted the cost of improving sales would hurt.
It said sales from existing supermarket stores rose 4.4 percent in the eight weeks to January 11, an improvement on the three percent gain seen in October but still behind market leader Tesco's 7.5 percent jump, reported on Monday.
Sainsbury shares slumped 53 pence to 339 pence by 1600 GMT, falling below arch-rival Tesco's share price for the first time. Tesco shares shed eight to 360 pence.
""Sainsbury's fall has destabilised the whole sector and there are worries margins will be under pressure if competition hots up,"" said one analyst who asked not to be identified.
ASDA, which prides itself on being the cheapest of the big four supermarkets, eased 2.75 pence to 121-1/2 pence while Safeway dropped 13 to 389-1/2.
""I'm amazed that (Sainsbury's) price hasn't fallen further,"" said Nick Bubb, analyst at Mees Pierson, adding that Sainsbury still looked overpriced compared with the rest of the sector.
Before profit downgrades, Sainsbury was on a forecast price to earnings ratio of 14, according to Reuters 3000 data from Edinburgh Financial, towards the top end of the food retailing sector, ahead of Safeway and ASDA.
""The shares have quite rightly been marked down to a market rating but a discount rating would be more appropriate,"" said one sector analyst who asked not to be identified.
Some observers suggested Sainsbury might be prompted to cut prices in an effort to move sales ahead, but analysts said it was more likely to look at boosting offers and advertising.
""Price is not in vogue at the moment,"" added one analyst who asked not to be named.
But Dave Stoddart at Henderson Crosthwaite pointed out that ""any cost-additive or gross margin-reducing activity will worry the market and pressure other shares.""
Analysts downgraded Sainsbury profit forecasts for 1997/98 as well, with Bubb looking for pretax profits of 673 million pounds from a previous forecast of 780 million pounds.
""I had no idea (sales growth) would have cost them so much...the cost benefit of the sales improvement is way out of line,"" Bubb said.
Sainsbury chairman David Sainsbury said in a statement that he was ""disappointed that the costs of building sales across the businesses have impacted group profit.""
Sainsbury's chief executive of Homebase do-it-yourself and U.S. businesses David Bremner said the company's Reward loyalty card accounted for ""probably the majority of the impact"" on sales growth but admitted there was a short-term cost.
He told Reuters the task facing management next year was ""to improve profits,"" adding that ""obviously, we would always like to improve sales."" Sainsbury was forced to launch Reward after the success of ClubCard helped Tesco to boost sales and leap ahead of Sainsbury as market leader.
($1=.6119 Pound)
",16
"British utility Northern Electric Plc made a last-ditch attempt Monday to remain independent by trying to overturn the extension of an offer by CE Electric that gives the U.S. company a majority of its shares.
Britain's takeover panel was meeting Monday to consider an application by Northern and its advisers BZW to appeal the board's unusual decision to extend the bid. The panel extended the deadline on the 782 million British pound ($1.3 billion) bid from Dec. 20 until Dec. 24.
The panel extended the fiercely fought bid on Friday in what newspaper reports said was a reaction to BZW's initial failure to disclose an extra 250,000 pound ($417,000) fee related to its performance in the bid.
""Following the investigation, the executive will consider what, if any, further action is appropriate,"" the panel said in a brief statement.
BZW has denied any wrongdoing. A spokesman said, ""We have absolutely nothing to hide from an investigation and we expect to be fully exonerated.""
But asked whether the investigation may last into the New Year, the spokesman added: ""I would think so, yes.""
The panel noted it may also look into the acquisition by BZW and investment bank Schroders of 2.32 percent of Northern Electric's shares last week.
As the initial deadline expired, CE had obtained control of only 49.77 percent of Northern. But after the deadline was extended until Christmas Eve, CE notched that total up to 50.13 percent, a majority that would have given it victory.
But acceptances after the initial deadline require consent from the Takeover Panel. Northern is now fighting to appeal the extension to try to make the late acceptances null and void and to retain its independence.
""If the panel rejects the right to appeal, or the appeal fails, then Northern will be taken over. If the appeal committee says the panel was wrong to extend the bid, then Northern stays independent,"" said one analyst who declined to be identified.
At Newcastle-based Northern's request, dealing in its shares was temporarily suspended from Monday morning, standing at 638 pence ($10.68), pending the conclusion of the appeal process.
CE, which is 70 percent owned by Omaha-based CalEnergy, then complained to the panel last week about share purchases made by BZW and Schroders. The panel said there was nothing wrong with those share purchases but did rule out further buying by BZW and Schroders when it extended the deadline.
A BZW official told Reuters that the fee from Northern was not in any way linked to BZW buying of Northern shares.
Northern had fought hard to fend off CE Electric's 650 pence ($10.88) per share bid, which it claimed undervalued the company, promising a 17 percent rise in its final dividend and lower than expected debt.
CE Electric, which raised its original 630 pence ($10.55) offer on Dec. 6, maintained that it was offering a fair price and has already bought nearly 30 percent of Northern on the market. It has said it will hang on to that stake even if its bid fails, which analysts said could depress Northern's shares.
The bid is the second hostile takeover that Northern has faced -- it spent 560 million pounds ($933 million) fending off Trafalgar House, now owned by Norway's Kvaerner, last year.
",16
"British regional electricity company (Rec) Yorkshire Electricity Group Plc saw half year profits hit on Tuesday by a pricing review, but hiked its dividend by 33 percent as expected.
Yorkshire turned in pretax profits for the six months ending September 30 of 80.8 million pounds ($132.7 million), down from 110.6 million pounds previously. It paid out a dividend of 15.8 pence.
Yorkshire also promised to give out further benefits to shareholders despite recent tax changes to capital allowances and plans by the opposition Labour party to introduce a one-off ""windfall"" levy if it wins power at the next election.
Taking those scenarios into account, Yorkshire said, ""we have the financial capability to grow our competitive energy supply and generation businesses and to return further value to shareholders, and we intend to do both.""
Chief executive Malcolm Chatwin said the group expected to implement a return of value to shareholders by the end of the current financial year but declined to speficy what move would be made.
Shares in the company slipped three pence to 758.5 pence by 1054 GMT, off a high of 766 pence.
""The results were exactly what we were expecting. There was a faint disappointment that the company did not do more for shareholders now, but we will just wait,"" said one analyst who asked not to be identified.
Chatwin said half year profits were ""generally speaking indicative"" of the likely full year performance with a couple of upsides such as property disposals.
Costs were likely to be ""level pegging,"" he said, with investment in information technology and staff training ahead of liberalisation of the market in 1998 offsetting any savings.
Chatwin said Yorkshire, one of only three remaining Recs which have not been taken over or attracted bids, is ""happy being independent,"" and has had no serious bid approaches.
He said there were no plans to further cooperation with its counterpart in the water sector, Yorkshire Water.
""At the current time there are no plans to do anything further,"" he said.
Yorkshire's chairman Christopher Hampson said in a statement that company strategy was to be ""highly competitive in our core energy businesses whilst continuing to provide value for all of our stakeholders.""
($1=.6087 Pound)
",16
"British utility Northern Electric Plc made a last-ditch attempt Monday to remain independent by trying to overturn the extension of an offer by CE Electric that gives the U.S. company a majority of its shares.
Britain's takeover panel was meeting Monday to consider an application by Northern and its advisers BZW to appeal the board's unusual decision to extend the bid. The panel extended the deadline on the 782 million British pound ($1.3 billion) bid from Dec. 20 until Dec. 24.
The panel extended the fiercely fought bid on Friday in what newspaper reports said was a reaction to BZW's initial failure to disclose an extra 250,000 pound ($417,000) fee related to its performance in the bid.
""Following the investigation, the executive will consider what, if any, further action is appropriate,"" the panel said in a brief statement.
The panel noted it may also look into the acquisition by BZW and investment bank Schroders of 2.32 percent of Northern Electric's shares last week.
As the initial deadline expired, CE had obtained control of only 49.77 percent of Northern. But after the deadline was extended until Christmas Eve, CE notched that total up to 50.13 percent, a majority that would have given it victory.
But acceptances after the initial deadline require consent from the Takeover Panel. Northern is now fighting to appeal the extension to try to make the late acceptances null and void and to retain its independence.
""If the panel rejects the right to appeal, or the appeal fails, then Northern will be taken over. If the appeal committee says the panel was wrong to extend the bid, then Northern stays independent,"" said one analyst who declined to be identified.
At Northern's request, dealing in its shares was temporarily suspended from Monday morning, standing at 638 pence ($10.68), pending the conclusion of the appeal process.
CE, which is 70 percent owned by Omaha-based CalEnergy, then complained to the panel last week about share purchases made by BZW and Schroders. The panel said there was nothing wrong with those share purchases but did rule out further buying by BZW and Schroders when it extended the deadline.
A BZW official told Reuters that the fee from Northern was not in any way linked to BZW buying of Northern shares.
Northern had fought hard to fend off CE Electric's 650 pence ($10.88) per share bid, which it claimed undervalued the company, promising a 17 percent rise in its final dividend and lower than expected debt.
CE Electric, which raised its original 630 pence ($10.55) offer on Dec. 6, maintained that it was offering a fair price and has already bought nearly 30 percent of Northern on the market. It has said it will hang on to that stake even if its bid fails, which analysts said could depress Northern's shares.
The bid is the second hostile takeover that Northern has faced -- it spent 560 million pounds ($933 million) fending off Trafalgar House, now owned by Norway's Kvaerner, last year.
",16
"The remaining independent British regional electricity companies (Recs) could become fair game for predators as the British government approved on Friday a hostile bid for Northern Electric from U.S.-based CE Electric.
Shares in the only three remaining Recs which are not currently subject to bids -- Southern, London and Yorkshire -- gained strongly as the market speculated further offers would emerge.
The government cleared CE Electric's 650 pence per share bid earlier on Friday with some conditions aimed at clearing up financial queries, lifting a cloud of uncertainty which had kept Northern's shares languishing around 600 pence.
""This is the green light for other bids to emerge,"" said Fraser McLaren, analyst at Greig Middleton.
Northern shares closed 42-1/2p higher at 641p after peaking at 650 pence and analysts said the 782 million pound ($1.3 billion) bid from CE, which is 70 percent-owned by CalEnergy, was likely to be successful.
London rose 28-1/2 pence to 680 and Southern gained 25-1/2 pence to 778 with Yorkshire putting on 17-1/2 pence to 760.
East Midlands Electricity, which has agreed to a $2.15 billion takeover by Dominion Resources of the U.S. at 670 pence per share, strode 28-1/2 pence higher to 655 as the market assumed approval for this less contentious bid.
Seven of the original 12 cash-rich Recs have fallen to predators since they came up for grabs in March 1995 when the government's protective golden share expired, five years after privatisation in 1990.
Three of these -- South Western, Seeboard and Midlands -- have already been sold to U.S. companies and American firms are hotly tipped to be potential buyers of other Recs as they are attracted by easier regulation and expertise in supply.
""The regulator has acknowledged there is not a problem in terms of loss of yardsticks by virtue of it being an outside takeover,"" said McLaren, adding that a takeover from inside the industry might still find obstacles.
Of the three remaining Recs, London and Yorkshire are considered the most likely takeover targets as they are smaller and less expensive to swallow than Southern, which analysts said could carry a price tag of over two billion pounds.
Southern, which had an agreed takeover by generator National Power blocked by the government and then failed to win a bid battle for Southern Water with Scottish Power, appears to be aiming to stay independent.
It has a strong balance sheet and could mount a hefty defence against any hostile advance, they added.
""Southern has formidable firepower and so any bid would probably have to be agreed and could be a joint effort by two companies,"" said Nigel Hawkins of Yamaichi.
London and Yorkshire would cost a predator up to around 1.5 billion pounds each, analysts added, at levels of above 700 pence and 830 pence per share respectively.
""That's a price which could be contemplated by a company if it were to want a foothold in the UK supply market,"" said one analyst who asked not to be named. London has already had discussions with U.S. group Entergy, which called off talks in November but said it still considered Britain an ""attractive market.""
Houston Industries of the United States, which tried but failed to secure control of Rec Norweb with Central & South West Corp in October 1995.
Central & South West eventually bought Seeboard but speculation continues that Houston might still be interested in a British Rec.
($1=.6043 Pound)
",16
"Northern Electric Plc Tuesday lost its bitterly fought battle to stay independent, finally falling victim to a 782 million British pound ($1.31 billion) hostile bid from Omaha, Neb.-based CalEnergy Co. Inc.
CalEnergy's CE Electric won control of the privatised British regional electricity company with a wafer-thin majority, gaining the support of only 50.3 percent of shareholder votes. The margin was a mere 300,000 shares.
The bid was so closely fought it ran over its original deadline, and the outcome was in doubt right down to the wire.
Insurer Prudential Corp. stepped in at the 11th hour to try to thwart CE's efforts by buying up nearly 1 million Northern shares from investors who had previously accepted CE's bid.
CE Electric Chairman David Sokol said, ""We look forward to working with Northern Electric's management to put in place a smooth transition.
""We are delighted by the outcome of the final offers for Northern Electric's shareholders,"" he said in a statement.
Northern said it would not make an immediate statement.
""We will give a recommendation to shareholders after Christmas,"" a Northern spokesman said.
CalEnergy stock rose 37.5 cents to $30.125 in abbreviated trading on the New York Stock Exchange.
Last Friday's original bid deadline was extended to 8 a.m. EST Tuesday after CE protested about stock purchases by Northern's advisers, merchant bank Schroders and Barclays Plc's BZW, and a 250,000 pound ($417,000) fee to BZW not disclosed until Friday.
On Monday, an appeal by Northern to reverse the deadline extension was rejected by Britian's Takeover Panel, which polices mergers and acquisitions in London's financial district.
Analysts said the takeover battle will leave a number of questions to be answered over the role of advisers.
The bid was the second hostile takeover that Northern had faced -- it spent 560 million pounds ($937 billion) fending off Trafalgar House, now owned by Norway's Kvaerner.
Northern, the first privatised power company to become a takeover target, initially received a billion-pound ($1.67 billion) bid from Trafalgar House at the end of 1994.
But the offer was scuttled when an industry regulator, Professor Stephen Littlechild, announced plans for more stringent price controls, sending electricity stock prices tumbling.
Northern's demise was the 10th takeover of one of the 12 cash-rich regional electric companies that were privatised in 1990 and became available when the government's ""golden share"" expired in March 1995.
It is also the fourth to be taken over by an American company. Two more bids -- by Richmond, Va.-based Dominion Resources Inc. for East Midlands Electricity and by Entergy Corp. of New Orleans for London Electricity -- are under way.
American companies are heavily favoured as the most likely buyers for the remaining regional electric companies as they find the British regulatory environment more relaxed and see them as a useful springboard for expansion into Europe.
Among potential bidders, analysts named Houston Industries Inc., which failed in its attempt to secure control of Norweb with Central & South West Corp. in October 1995.
Florida Power & Light Co. and Pacific Gas & Electric Co., which have both been rumoured previously to be interested in regional electricity companies, are again being eyed as possible buyers.
Entergy has just clinched an agreed 1.267 billion-pound ($2.12 billion) deal to take over London Electricity, which provides power to the capital and its financial heart, the City.
The electricity companies have attracted harsh criticism from lobbying groups and the British media over fat executive pay packages, shareholder payouts and spiraling takeover prices.
",16
"Northern Electric Plc on Tuesday lost its bitterly-fought battle to stay independent when it finally fell victim to a 782 million pound ($1.31 billion) hostile bid from U.S. utility CalEnergy Co Inc.
CalEnergy's CE Electric won control of the privatised British regional electricity company (REC) with a wafer-thin majority, gaining the support of only 50.3 percent of the votes. The margin was a mere 300,000 shares.
The bid was so closely fought it ran over its original deadline and the outcome was in doubt right down to the wire.
Insurer Prudential Corp stepped in at the eleventh hour to try and thwart CE's efforts, by buying up nearly one million Northern shares from investors who had previously accepted CE's bid.
CE Electric's chairman and chief executive David Sokol said, ""We look forward to working with Northern Electric's management to put in place a smooth transition.""
""We are delighted by the outcome of the final offers for Northern Electric's shareholders,"" he said in a statement.
Northern Electric had no comment to make immediately after the result was published.
Last Friday's original bid deadline was extended to 1300 GMT on Tuesday after CE protested about share buys by Northern's advisers Schroders and BZW and a 250,000 pound fee to BZW not disclosed until Friday.
On Monday an appeal by Northern to reverse the deadline extension was rejected by the Takeover Panel, which polices mergers and acquisitions in the City of London.
Analysts said the takeover battle will leave a number of questions to be answered over the role of advisors.
The bid was the second hostile takeover that Northern had faced -- it spent 560 million pounds fending off Trafalgar House, now owned by Norway's Kvaerner.
Northern, the first privatised power company to become a takeover target, initially received a billion pound bid from Trafalgar House at the end of 1994.
But the offer was scuppered when industry regulator, Professor Stephen Littlechild, announced plans for more stringent price controls, sending electricity share prices tumbling.
Northern's demise marks the tenth of the 12 cash-rich RECS privatised in 1990 to be taken over since they became available when the government's golden share expired in March 1995.
It is also the fourth to be taken over by an American company with two further agreed bids from U.S. firms Dominion Resources and Entergy for East Midlands and London respectively currently underway.
American companies are hotly tipped as the most likely buyers for the remaining RECs as they find the British regulatory environment more relaxed and see them as a useful springboard for expansion into Europe.
Among potential bidders, analysts named Houston Industries, which failed in its attempt to secure control of Norweb with Central & South West Corp in October 1995.
Florida Power & Light and Pacific Gas & Electric, which have both been rumoured previously to be interested in Recs, are again being eyed as possible buyers.
Entergy of the U.S. has just clinched an agreed 1.267 billion pound deal to take over London Electricity, which provides power to the capital and its financial heart, the City.
The electricity companies have attracted harsh criticism from lobby groups and the British media over fat executive pay packets, shareholder payouts and spiralling takeover prices.
Lang's decision to clear CE Electric's bid on December 6 lifted a cloud from Northern's shares, which had been languishing around 600 pence. It also indicated that other bids might not face any regulatory hurdles.
($1=.5977 Pound)
",16
"British supermarket group Tesco Plc has put price back on top of the agenda with a new campaign and, although analysts played down fears of a price war on Thursday, loyalty cards could take a back seat to value for money.
""Loyalty is a factor but price is the most important factor,"" said analyst Richard Perks of Verdict Research.
After markets had closed on Wednesday, Tesco said it would invest 30 million pounds ($47 million) in its ""Unbeatable Value"" campaign, promising to offer the lowest prices on 600 items in addition to regular monthly offers on 2,000 lines.
It said customers who found the items cheaper at other stores would be refunded twice the difference and Tesco would lower its own prices immediately.
Its shares, which had fallen earlier this week on worries of an aggressive campaign, rebounded on Thursday to be up seven pence to 298 by 1445 GMT. Arch-rival J. Sainsbury was down 3-1/2 at 373.
""These are budgeted cuts, not panic price-cutting, there's no reason to reduce forecasts,"" said one sector analyst who declined to be named.
Sainsbury launched its own autumn campaign, targeting 700 items in a continuation of regular monthly moves, on September 1. A spokeswoman declined to comment on Tesco's move.
""A war has to have two sides. We are not fighting anyone. We are here for our customers,"" a Tesco spokesman said.
Analysts questioned why the market leader would want to prompt a price war, particularly as there are glimmering signs that the economy might be improving.
The Confederation of British Industry (CBI) on Thursday said retail sales volume was up again in August and the balance of firms reporting an increase in business was the largest since November 1988.
In addition, latest market share figures for supermarkets from AGB research suggest Tesco turned in a creditable performance in August after seeing its slice of the cake dip marginally in July.
""I am not particularly concerned...you always get autumn promotional campaigns of some sort and (Tesco's) may be just a bit more aggressive than we have seen in the past,"" said Dave Stoddart, sector analyst at Henderson Crosthwaite.
But BZW was reported to be concerned that Tesco's move could precipitate cuts elsewhere.
Supermarkets are largely keen to avoid a full-blown price war which would shrink margins and eat into profits. The focus recently has been on loyalty cards to boost sales.
The latest launch was the Reward card from Sainsbury, which capitulated in June after the success of Tesco's ClubCard had helped to tip it off the market leader slot last year.
It now has six million subscribers and has generated a boost of around two to three percent in sales, deputy chief executive Dino Adriano said last week.
""Clearly we needed to launch a Reward card. It's become a way of doing business within this marketplace,"" Adriano said.
Among the big four British supermarket groups, only ASDA has so far held back from launching a loyalty card. It is running trials in 18 stores and has not ruled it out.
But the indications are that loyalty cards are largely just breaking even for supermarkets and providing a means of retaining customers rather than adding extra shoppers, analysts said.
If Tesco, which leads the market and has 8.5 million subscribers to its ClubCard, feels the need to focus on price, other supermarkets may find it hard not to follow. ($1=.6373 Pound)
",16
"British regional electricity company (REC) Northern Electric Plc on Tuesday lost a bitter battle to stay independent, finally falling to a 782 million pound ($1.31 billion) bid from U.S. utility CalEnergy Co Inc.
CalEnergy's CE Electric won control with a wafer-thin majority, gaining the support of 50.3 percent of the votes, a margin of just 300,000 shares.
The bid was so closely fought that it ran over its original deadline and the outcome was uncertain right down to the wire.
Insurer Prudential Corp stepped in at the eleventh hour to try to thwart CE's move by buying up nearly one million Northern shares from investors who had previously accepted CE's bid.
""We look forward to working with Northern Electric's management to put in place a smooth transition,"" CE Electric's chairman and chief executive David Sokol said in a statement.
Northern said it would not make an immediate statement.
""We will give a recommendation to shareholders after Christmas,"" a Northern spokesman said.
Last Friday's original bid deadline was extended to 1300 GMT on Tuesday after CE protested about share purchases by Northern's advisers Schroders and BZW and a 250,000 pound fee to BZW not disclosed until Friday.
On Monday an appeal by Northern to reverse the deadline extension was rejected by the Takeover Panel, which polices mergers and acquisitions in the City of London.
Analysts said the takeover battle would leave a number of questions to be answered over the role of advisers.
The bid was the second hostile takeover that Northern had faced -- it spent 560 million pounds fending off Trafalgar House, now owned by Norway's Kvaerner.
Northern, which was then the first privatised British power company to become a takeover target, initially received a billion pound bid from Trafalgar House at the end of 1994.
But the offer was scuppered when electricity industry regulator Stephen Littlechild announced plans for more stringent price controls, sending electricity share prices tumbling.
Northern's fall marks the tenth of the 12 cash-rich RECS privatised in 1990 to be taken over since they became available when the government's golden share expired in March 1995.
It is also the fourth to be taken over by a U.S. company with two further agreed bids from U.S. firms Dominion Resources and Entergy for East Midlands and London Electricity, respectively, currently under way.
American companies are hotly tipped as the most likely buyers for the remaining RECs as they find the British regulatory environment more relaxed and see them as a useful springboard for expansion into Europe.
Among potential bidders, analysts named Houston Industries, which failed in its attempt to secure control of Norweb with Central & South West Corp in October 1995.
Florida Power & Light and Pacific Gas & Electric, which have both been rumoured previously to be interested in RECS, are again being eyed as possible buyers.
Entergy of the U.S. has just clinched an agreed 1.267 billion pound deal to take over London Electricity, which provides power to the capital and its financial heart, the City.
The electricity companies have attracted harsh criticism from lobby groups and the British media over fat executive pay packets, shareholder payouts and spiralling takeover prices. ($1=.5977 Pound)
",16
"British regional electricity company (Rec) Northern Electric pumped up its defence against a 650 pence per share bid from CE Electric of the U.S. on Tuesday with promises of higher dividends and unit mergers.
The company expected a 17 percent rise in its year dividend to 50 pence per share with growth over seven percent from then to the end of the century, it said in a statement, adding it planned to merge its supply business with another Rec to find cost savings of over 28 million pounds ($46 million) a year.
""It's a fairly aggressive statement from Northern Electric showing they're preparing yet again to gear up to the gunwales,"" said Yamaichi utilities analyst Nigel Hawkins.
Northern spent 560 million pounds a year ago on a package of shareholder benefits to fight off Trafalgar House, now part of Kvaerner, and has strived to reduce its debt since.
""We are saying the company is worth at least as much as we said before...and clearly it is worth more than 650 pence per share,"" Northern chairman David Morris told Reuters.
CE Electric, which is 70 percent-owned by CalEnergy, decided to raise its bid from 630 pence per share on Friday and drew a deadline of December 20, just four days after UK Trade Secretary Ian Lang is expected to decide whether the bid may proceed.
Morris said Northern Electric would have a ""broadly equal partnership"" in its plans for merging its electricity supply business with another firm. He declined to name the Rec involved in talks but said it ""may well not be a nearby one.""
Neighbouring Yorkshire Electricity earlier on Tuesday told Reuters it had not held talks with Northern on the issue.
Northern has said a price of 700 pence was indicated before CE Electric launched its bid, a claim which the Americans have consistently denied.
The Rec rushed out half year results at the end of November and said its debt position should ease to around half previous expectations by March 1997 as it pushed for an increase in CE Electric's bid price.
""This is an exercise in re-arranging the deckchairs on the good ship scorched earth,"" said a spokesman for CE Electric, which has already secured 33.27 percent of its target.
Northern had also said it was in talks with a possible partner in its Sovereign upstream gas business, after it bought out its previous colleague Neste Oy last year.
Morris said this deal would be ""imminent were there not a bid,"" but declined to name the company.
Shares in Northern struggled higher, up 8.5 pence to 614 pence by 0934 GMT, after touching a peak of 620 pence, as concerns the government might block the bid continued to weigh.
Seven of the original 12 cash-rich Recs set up at privatisation in 1990 have already been snapped up by predators, three to U.S. firms.
Of the remaining five, East Midlands Electricity has agreed to a $2.15 billion takeover by Dominion Resources of the U.S. while talks between U.S.-based Entergy and London Electric were called off last month.
Only two bids for Recs have so far been blocked by the UK. Generators National Power and PowerGen were banned from buying into the supply and distribution business through Southern Electric and Midlands Electricity respectively.
But there are concerns that the ruling pro-privatisation Conservative party might turn about face on current bids and block them in a bid for popularity. It trails the opposition Labour party in polls with a general election due by May 1997.
Privatised electricity companies have come under heavy criticism from lobby groups and politicians for hefty handouts to shareholders, bulging pay packets for executives and spiralling takeovers.
($1=.6087 Pound)
",16
"British retail chain Kingfisher Plc said on Friday it would axe 1,200 jobs from the Norweb retail chain it bought in November 1996 and shut stores to integrate the purchase with its Comet electrical chain.
In a statement, Kingfisher said it would close 28 Norweb retail stores, which also sell electrical goods, along with 26 Comet stores and upgrade Comet out-of-town stores to raise the total number nationwide to 250 from a current 225 sites.
A further 26 Norweb retail stores in locations new to Comet would become Comet stores, Kingfisher said in a statement.
It added that Comet would go ahead with plans announced by Norweb retail last year before it was taken over to close all the chain's 57 high street sites at the beginning of March.
A further 26 Norweb retail stores in locations new to Comet will become Comet stores, Kingfisher said in a statement.
Norweb's total workforce before the job cuts numbers about 2,800.
""This acquisition is a good strategic move and will provide Comet with a significant number of first class retail locations and experienced people,"" said Kingfisher chief executive Sir Geoffrey Mulcahy.
Kingfisher bought Norweb retail for 51 million pounds ($85.30 million) from United Utilities, which had taken over regional electricity company Norweb around a year ago.
Kingfisher also announced on Friday that it had issued a 200 million pound bond, which analysts said was likely to be used for restructuring debt.
But some said the issue could focus attention again on reports earlier this week Kingfisher might increase its stake in French electrical retailer BUT, although BUT described an article in Thursday's Financial Times as ""unfounded.""
""The bond issue doesn't surprise me as it will help to restructure debt. But it will certainly focus attention on the BUT stake again,"" said one analyst who declined to be named.
Kingfisher declined to comment on the report on Thursday and there was no-one available to comment on Friday.
Kingfisher already holds a 26 percent stake in BUT and the Financial Times said on Thursday it was planning to mount a takeover offer, which the newspaper estimated could cost up to 300 million pounds.
Kingfisher bought the stake in BUT, which is France's second biggest furniture chain and fourth largest electricals group last year for 59 million pounds.
Under the deal, it should have to wait until 1998 before making any offer but analysts suggested this might be adjusted if Kingfisher were interested in raising its stake.
Analysts said such a move would be beneficial to Kingfisher.
""It would certainly be earnings enhancing in the first year,"" the analyst said.
He said Kingfisher would reap benefits from integrating BUT stores with its French electrical retailer Darty, which is the market leader. ""Darty is star quality on electricals with higher returns on sales than Dixons,"" the British electrical retail chain, said the analyst.
""Combining the two could boost returns on BUT's electricals, which has turnover of around 500 million pounds but makes little profit,"" he added.
But analysts remained cautious that such a deal might be in the offing. ""I don't think it will happen this year, I think they might have to wait until 1998,"" said one sector analyst.
($1=.5979 Pound)
",16
"British supermarket group Safeway said on Friday that sales growth had slowed since early January and inflation was around zero, prompting fears that consumer belt-tightening could hit the sector, analysts said.
""What has spooked the sector is the comment that things have slowed since the start of the new year,"" said one trader as supermarket shares dived after the Safeway comments.
Safeway said in a statement that same store sales were up 5.2 percent in the five weeks to January 4 but over the first 16 weeks of the second half of the financial year, growth slowed to a 4.5 percent rise.
Deputy chairman David Webster told Reuters that inflation, excluding petrol, was currently running around zero after a modest 0.3 percent rise over the key Christmas period, and the company said lower inflation and slower sales could hit profits.
Safeway, seen as the most technologically innovative of the supermarkets with electronic scanners and automated checkouts, said its experience was ""in common with the sector"".
The company, which has some 7.8 percent of Britain's grocery market, saw its shares slump 25-1/2 pence by 1052 GMT to 363-1/2 pence, making it the third largest loser on the London exchange.
Market leader Tesco, which last month said Christmas sales rose 7.5 percent, fell 16-1/2 pence to 347-1/2.
""What Safeway is saying is that there is a lack of food price inflation and it does not look as if any is on the way,"" said one analyst who asked not to be identified.
""In the last four weeks the sector and Safeway have come off quite sharply in terms of overall sales performance,"" Webster said. It was hard to judge whether the slowdown in sales would continue but he added that the company was still seeing ""significant deflation in produce, which is 10 percent of sales"".
Profit forecasts for Safeway had been shaved by 10 million pounds ($16.40 million) to 430 million pounds, the trader said, compared with pretax profits of 401 million pounds (corrects from 429.4 million pounds) a year ago.
The analyst suggested year profit forecasts for Safeway, Tesco and the two other majors J. Sainsbury and ASDA could be marked down 2-5 percent.
Shares in Sainsbury, which has its own problems -- last week it admitted its profits would be hit by investment in boosting sales as it promotes its loyalty card, dropped seven pence to 321-1/2 pence while ASDA, keeping silent on trading, fell 5-1/2 pence to 115-1/2 pence.
But analysts ruled out a price war among the big four despite the squeeze on profits, as companies are expected to focus on improving margins. ""The last thing you want to do if sales are slowing and inflation is flat is to give away margins,"" the analyst said.
Webster said a price war was very unlikely, adding that if any of the majors launched such an initiative, there would be swift reactions from competitors.
""This is not about price, it is about brand quality,"" the analyst said, adding that Safeway's statement was particularly disappointing after its efforts to restructure and refresh its image over the last two or three years.
Safeway's warning on sales and prices comes hot on the heels of an upbeat report on retailers from the Confederation of British Industry (CBI), which said high street sales picked up in January and exceeded expectations.
But the CBI added that retailers in its survey expected sales to moderate in February.
Britain's overall inflation rate has slowed to a 2.5 percent rise year-on-year in December, according to latest official figures, while food prices were up a restrained 0.8 percent. ($1=.6097 Pound)
",16
"Tesco Plc became the latest British supermarket chain to put banking on its shopping list Thursday with plans for a venture with Royal Bank of Scotland.
Tesco said it will form the 50-50 joint venture in financial services with Royal Bank of Scotland, which will take over Tesco's interest-paying ClubCard Plus account for shoppers and launch a credit card as a first move over the summer.
Tesco expects the two companies to invest around 40 million British pounds ($65 million) during the first year in the venture.
Analysts said the move may help lessen rampant price-cutting by supermarkets competing for customers.
""With more supermarkets investing in financial services, there is less likelihood of a price war,"" said one industry analyst who asked not to be identified.
The new venture will most likely post a small loss in its first year but should turn a profit in the second or third year, marketing director Tim Mason said.
Mason said Tesco hoped to see similar profits eventually to those gained by retailer Marks & Spencer from its financial services, which have been running for 15 years and brought in about 61 million pounds ($99 million) last year.
""If we didn't feel we could do that sort of level medium term, then we would not be as interested as we are,"" Mason said.
Tesco, which eclipsed J. Sainsbury as market leader in late 1995, becomes the third of Britain's four big supermarket chains to enter financial services.
Sainsbury, which was forced to launch its own ""frequent shopper"" card last year after the success of ClubCard, surprised the market by becoming the first of the big four supermarkets to plunge into banking when it announced plans for Sainsbury's Bank last year.
Sainsbury holds 55 percent in the bank while partner Bank of Scotland has 45 percent.
Safeway , the third largest grocery group, teamed up with Abbey National bank in November to launch banking services through its ABC loyalty card.
",16
"British electronics retailer Dixons Group Plc on Wednesday said strong personal computer sales helped profits jump 53 percent and sales rise eight percent in the first half.
But profit taking and concern over the impact of planned tax increases affecting extended warranties took the shine off its shares, which fell 27 pence to close at 511 pence.
""Bearing in mind the sort of out-performance we have seen lately (in the shares), the shares are running into some profit-taking,"" said one analyst who asked not to be named.
The group said pretax profits in the six months to November 9, 1996, soared to 57.5 million pounds ($97.4 million), at the top end of expectations, from 37.5 million pounds previously, and paid out a dividend of 2.4 pence, up from 2.05 pence.
On the turnover front, Dixons said sales from existing stores were up eight percent in the first half, a figure maintained in the first eight weeks of the second half which covers the key Christmas period.
""Christmas trading was highly satisfactory,"" chairman Sir Stanley Kalms said in a statement.
Managing director John Clare told Reuters that consumer spending was growing but there was no boom, adding that if the economy was managed well, ""we can't see any reason why it should not continue.""
PCs and accessories including software accounted for around 26 percent of the group's total sales in the first half, inching towards 30 percent over the Christmas period, he added.
""I expect personal computer sales to grow...household penetration is still very low in the UK,"" Clare added.
Dixons said its PC World division, which specialises in PC sales in out-of-town superstores, saw total sales rocket 96 percent higher in the first half, or 21 percent stripping out the effect of new selling space.
Dixons opens around ten PC World superstores each year and Clare said that expansion rate was expected to continue.
Gross margins in the early weeks of the second half were ""at similar levels year on year,"" Kalms said in the statement, after increasing ""slightly"" in the first half.
Dixons said that it could not predict the full effect of the government's plans to raise insurance premium tax to 17.5 percent from a previous 2.5 percent on its extended warranty business.
""There is a bit of worry over what the impact might be,"" one share trader said.
Kalms, however, told Reuters Financial Television, ""I don't expect it (the tax change) to be of much consequence to our overall profitability.""
Clare said future margins were also hard to predict, with a ""swings and roundabouts"" pull between lower margins on PC hardware and the benefits of reduced credit promotion competition.
""There are two contrary forces at work...PCs are taking a higher share of the product mix...(but) there are benefits from reduced competitive activity, particularly in credit promotions,"" he said.
Retail outlets of regional electricity companies have been trimmed, for example, as a result of takeovers and consolidation in the sector.
Clare said digital technology was likely to provide another growth market for the company with wide-screen digital television likely to debut in 1998.
""Digital technology is generally coming in in a big way...(but) I don't think it will replace PCs, because PCs will continue to grow,"" he said.
Capital investment during the current financial year is expected to be over 100 million pounds and at similar levels for the year after. ($1=.5904 Pound)
",16
"Electricity generator Scottish Hydro-Electric Plc turned in lower than expected half year profits on Thursday but hiked its dividend by 11 percent.
""We aim to keep on delivering dividend improvement...doing it by expanding the business,"" chief executive Roger Young told Reuters in an interview.
Pretax profits edged down to 61.3 million pounds ($101.6 million) from 61.7 million previously, below expectations of 63 to 70.7 million. The dividend was 5.28 pence per share.
The shares were down 1-1/2 pence at 316.5p at 1145 GMT.
Scottish Hydro said low rainfall had hit profits, as hydro-electric generation had been replaced in part by coal at a cost of 6.3 million pounds.
But chairman Lord Wilson said in a statement that the second half had started well and he was confident of ""an encouraging result for the full 12 month period.""
Scottish Hydro said it was preferred bidder for the 50 percent stake in Keadby power station, northeast England, owned by United Utilities, its joint venture partner there, and aimed to complete the deal by the end of the current financial year.
Young said the plan would ""increase costs but also increase profits"", adding an extra 340 megaWatt of generation capacity to the company's existing portfolio.
Scottish Hydro said the deal should increase gearing to around 50 percent if it went ahead and added that together with existing expenditure commitments, gearing should peak at 65 percent in 1998-99.
""We are confident of the prospects for Keadby and look forward to the opportunity to exploit its capabilities in the market place,"" the company said in a statement.
Young said the company aimed to boost market share to seven percent from a current four percent by 1999 with a total investment in combined heat and power (CHP) plant for commercial customers of over 150 million pounds.
The company said that action taken to raise output and cut costs would improve performance over the next two to three years and added that raising standards was a key aim.
Scottish Hydro said that changes proposed to capital allowances in the British budget in November were expected to reverse a trend of falling tax rates but added it would not be possible to predict the impact accurately until full details were known.
The company will be looking to expand its domestic business, Young said, but a resumption of talks with British Gas on the sale of the latter's supply interests was unlikely, he added.
""I would not be optimistic of a resumption,"" he said.
British Gas announced in September that talks on the sale of its domestic gas supply business in England and Scotland to Scottish Hydro had been called off, scotching newspaper reports that the sale would bring in around 250 million pounds.
Young said the breakdown was for administrative rather than commerical reasons.
""There was no serious commercial difficulty that caused the project to be dropped...British Gas had a lot of competition for its (administrative) resources,"" he said.
But he said the moment for the deal might now have passed. ""Deals tend to have their day,"" he said, adding that there . were other discussions around, ""but nothing that we can talk about."" ($1=.6034 Pound)
",16
"U.S. group Entergy finally agreed a 1.267 billion pound ($2.11 billion) takeover of British regional electricity company (Rec) London Electricity on Wednesday, after talks between them were called off in November.
London's chairman Sir Bob Reid ""did an excellent job of extracting a generous price out of us,"" Entergy chairman and chief executive officer Ed Lupberger told Reuters.
Entergy and London, which supplies power to the capital and the City financial district, said in a joint statement that the bid valued London shares at 705 pence each and that shareholders would retain the right to receive a 14.3 pence interim dividend.
Reid said the offer ""represents fair value for London Electricity and is in the best interests of London Electricity's shareholders, customers and employees.""
London's shares leapt to a high of 690 pence but later eased back to be up three pence at 685 pence by 1135 GMT.
Lupberger declined to comment on the process leading up to the bid.
The two companies conceded in a statement in November that talks between them had broken down after the Wall Street Journal Europe reported that Entergy was considering a 1.2 billion pound bid at around 700 pence per share.
Entergy said Wednesday's offer, made through bid vehicle Entergy Power UK Plc, would ""create a partnership through which both companies can pool expertise and working practices to further improve operating efficiencies.""
Entergy joins two other U.S. companies which are currently pursuing Recs. Dominion Resources has agreed a $2.15 billion takeover of East Midlands Electricity and CalEnergy's CE Electric unit has made a hostile 650 pence per share bid for Northern which closes on Friday.
The floodgates for further bids in the sector were opened last Friday when the British government decided CalEnergy's bid, which the market had seen as more contentious than the agreed offer, could go ahead with some conditions.
Dominion's bid still awaits UK approval but analysts said there were no immediate reasons why this offer or Entergy's bid should be blocked after approval of CalEnergy's offer.
Entergy's bid sparked gains in shares of Yorkshire and Southern, the only two Recs which remain independent and currently unsolicited of the original 12 cash-rich Recs created at privatisation in 1990.
Yorkshire was up six pence to 765 pence on Wednesday morning while Southern gained four pence to 768.
Entergy's Lupberger said taking over London Electricity would enable the U.S. firm to ""build a new opportunity in the European marketplace.""
Reid said Entergy's plans to use London as a platform for expansion into Europe were particularly exciting, adding that the deal would offer opportunities all round.
Entergy said the bid would also enable it to ""gain experience for the development of its U.S. business after deregulation.""
Entergy, like many U.S. companies, sees the UK electricity supply sector as an attractive area to gain experience of deregulation and supply markets.
Entergy is based in New Orleans and has interests there in both generation and supply of electricity.
($1=.6003 Pound)
",16
"British utility Northern Electric Plc made a last-ditch attempt Monday to remain independent by trying to overturn the extension of an offer by CE Electric that gives the U.S. company a majority of its shares.
Britain's takeover panel was meeting Monday to consider an application by Northern and its advisers BZW to appeal the board's unusual decision to extend the bid. The panel extended the deadline on the 782 million pound ($1.3 billion) bid from Dec. 20 until Dec. 24.
The panel extended the fiercely fought bid on Friday in what newspaper reports said was a reaction to BZW's initial failure to disclose an extra 250,000 pound ($417,000) fee related to its performance in the bid.
As the initial deadline expired, CE had obtained control of only 49.77 percent of Northern. But after the deadline was extended until Christmas Eve, CE notched that total up to 50.13 percent, a majority that would have given it victory.
But acceptances after the initial deadline require consent from the Takeover Panel. Northern is now fighting to appeal the extension to try to make the late acceptances null and void and to retain its independence.
""If the panel rejects the right to appeal, or the appeal fails, then Northern will be taken over. If the appeal committee says the panel was wrong to extend the bid, then Northern stays independent,"" said one analyst who declined to be identified.
At Northern's request, dealing in its shares was temporarily suspended from Monday morning, standing at 638 pence, pending the conclusion of the appeal process.
CE, which is 70 percent owned by Omaha-based CalEnergy, then complained to the panel last week about share purchases made by BZW and Schroders. The panel said there was nothing wrong with those share purchases but did rule out further buying by BZW and Schroders when it extended the deadline.
A BZW official told Reuters that the fee from Northern was not in any way linked to BZW buying of Northern shares.
Northern had fought hard to fend off CE Electric's 650 pence per share bid, which it claimed undervalued the company, promising a 17 percent rise in its final dividend and lower than expected debt.
CE Electric, which raised its original 630 pence offer on Dec. 6, maintained that it was offering a fair price and has already bought nearly 30 percent of Northern on the market. It has said it will hang on to that stake even if its bid fails, which analysts said could depress Northern's shares.
The bid is the second hostile takeover that Northern has faced -- it spent 560 million pounds ($933 million) fending off Trafalgar House, now owned by Norway's Kvaerner, last year.
",16
"Britain's Chemical Industries Association (CIA) added its voice on Monday to growing criticism of the electricity wholesale market or ""pool,"" calling for urgent reforms.
""Electricity prices for industrial consumers should have fallen much further...The answer is reform of the pool and urgently,"" the CIA told Reuters.
The association's members account for around 20 percent of Britain's industrial electricity use.
Industry observers said pressure could be mounting for an investigation of the way the pool operates by the Monopolies and Mergers Commission (MMC).
""Our view is that the pool is not structured to deliver competitive pricing,"" a CIA spokesman said.
The pool is a complex system used to set electricity wholesale prices which many users say gives unfair market control to big generators such as National Power and PowerGen.
Many large industrial users buy electricity directly from the pool rather than through regional electricity companies (Recs).
Criticisms of the system have come from a variety of sources over the past year including the British Retail Consortium (BRC), consumer watchdog the Electricity Consumers Committee and one of Britain's largest electricity users, RJB Mining Plc.
A year ago, the Energy Intensive Users Group (EIUG), which includes members of the CIA, called for an MMC inquiry into the pool during a review which eventually decided to ban planned takeovers of Recs by National Power and PowerGen.
The CIA claimed that prices paid for energy through the pool were 10 percent higher in the first half of the current financial year over the same period a year ago while delivered electricity prices were trending down.
The group said cost savings made by generators should be passed on to downstream customers.
""Despite falling raw material costs, and improvements in efficiency, generators have been able to manipulate the price of electricity and avoid passing a fair share of these gains on to customers,"" the CIA said.
-- London Newsroom +44 171 542 7717
",16
"CE Electric claimed 50.03 percent of British target Northern Electric in a fiercely fought bid on Saturday but, in an unusual twist, needs takeover panel approval on crucial extra acceptances to declare victory.
A spokesman for the U.S. company said additional acceptances were still being counted. CE Electric held 49.77 percent of the regional electricity company (Rec) by its own 1300 GMT deadline on December 20, just short of control, but in an unprecedented move the British takeover panel stepped in to extend final deadlines.  
The panel said late on Friday that the deadline for the 782 million pound ($1.30 billion) contentious offer had been extended to 1300 GMT on Christmas Eve and said any acceptances arriving after CE's Friday deadline must have its consent.
No one at the takeover panel was immediately available for comment, nor was Northern Electric.
The Financial Times newspaper said on Saturday that the extension of the deadlines suggested the panel felt shareholders had not been treated fairly in the last days of the 650 pence per share bid.
CE Electric said in a statement earlier on Saturday that the panel had ""prohibited Northern's advisers from purchasing Northern Electric shares at anytime prior to the close of CE Electric's final offers.""
The American energy group had complained to the takeover panel earlier this week over share buying by Northern's advisers, brokers BZW and Schroders, which it claimed was ""frustrating action"".
But the panel cleared the purchases, which amounted to 2.32 percent of Northern, late on Thursday.
It said in a statement then that at a hearing of the panel BZW and Schroders had ""accepted that there was no doubt about their intention -- it was to defeat the bid. However, they denied that there had been any breach of the code.""
The panel said such purchases have ""long been accepted.""
The bid, which was raised from an original 630 pence per share offer on December 6, has been hotly contested by Northern, which claims the price undervalues it.
Northern had claimed it had the backing of its largest institutional investor, the Prudential, which holds around 11 percent, as well as other funds including M&G and Foreign & Colonial.
But prior to Friday's deadline, CE Electric already held 30 percent of Northern, bought on the open market, and had previously declared acceptances which brought its holding up to around 34 percent.
Northern is the only one of the original 12 cash-rich Recs to have successfully fought off a takeover bid, spending 560 million pounds on shareholder benefits to fend off Trafalgar House, now part of Norway's Kvaerner, last year.
Nine of the 12 Recs have been sold or agreed to takeovers since they came up for grabs when the government's protective golden share expired in March 1995, just five years after privatisation.
If CE Electric wins control of Northern, only two of the original 12 Recs will remain independent -- Yorkshire and Southern.
Analysts see Yorkshire, which could carry a price tag of around 1.4 billion pounds, as the more vulnerable of the two, as Southern could cost a predator over two billion pounds and has firepower to mount a fierce defence.
American companies already own three Recs with two others in agreed takeovers, Dominion Resources with East Midlands and Entergy with London Electricity.
U.S. companies are hotly tipped as potential buyers for remaining Recs as they are attracted to the UK's friendly regulatory environment and see the country as a good English-speaking springboard into continental Europe.
",16
"British water company Wessex Water turned in a 10 percent rise in half year pretax profits on Tuesday and raised its dividend by 14 percent.
""We are actively pursuing other options that will deliver higher returns to our shareholders,"" the company said in a statement.
Wessex said pretax profits for the six months ending September 30 rose to 75.5 million pounds ($127.2 million) from 68.4 million previously.
The company declared a dividend of 5.7 pence a share, but Wessex stock slipped three pence to 351 pence as the market registered its disappointment that the company had not handed out the promised extra benefits immediately.
""The shares have fallen on the lack of any shareholder benefits,"" said one analyst who asked not to be named.
Wessex' balance sheet has net cash of 75 million pounds and analysts had looked for greater shareholder benefits after a planned bid for South West Water was blocked by the government in October along with a rival proposal from Severn Trent.
""We are not going to sit with that ungeared balance sheet,"" chief executive Colin Skellett said in an interview.
He said Wessex would announce its plans, which could range from an acquisition to a share buyback or a mix of moves in the the next six months.
Skellet said any potential acquisitions would be ""relevant to our business...we are not going to go into anything that we do not understand.""
He said Wessex was doing two things well -- its regulated water supply business and its non-regulated waste management firm UK Waste, a joint venture with Waste Management International.
Skellett said some 20-30 jobs would be cut at a senior level, with a knock-on effect for the rest of the company, as a result of the aborted bid for South West Water helping to cut operational costs.
These costs were cut four percent at the water business in the first six months and should maintain that momentum for the second half, Wessex said.
Lower waste paper and cardboard prices in the first half bit into UK Waste's turnover to the tune of three million pounds. But Wessex said the unit continued to make a growing contribution to its overall results, with profits of 12.4 million pounds.
Skellett said the fall in prices appeared to be halting and the underlying business was growing well.
Wessex said it would be consulting with customers in order to direct investment in line with their choices.
One of the first findings was that 90 percent of customers wanted service improvements rather than short-term price cuts. $1=.5936 Pound)
",16
"British utility stocks rose on Friday on hopes for shareholder benefits after Southern Electric said it would make a complicated share buy back worth up to 156 million pounds ($252.8 million).
Analysts said Southern's move, which followed a similar Yorkshire Water plan announced on Thursday, could provide tax benefits and might bolster arguments against the opposition Labour Party's plans for a one-off levy on utilities.
Southern followed a trail blazed on Thursday by Yorkshire Water by offering a share consolidation which will give all holders free B shares.
It will then offer to buy back these shares at a fixed price, in Southern's case 60 pence per existing ordinary share.
Southern's shares were up 13 pence to 800-1/2 pence by early afternoon and other shares in the water and electricity sectors followed their lead, with South West gaining 10 pence to 672-1/2 pence and Anglian up 11-1/2 pence to 637 pence.
""All the utilities are up on the back of this, everyone is talking about buy-backs,"" said one trader.
Analysts said the moves by Southern and Yorkshire Water would decrease reserve capital and help the companies to avoid paying excess interest on Advanced Corporation Tax (ACT), which they can claim back from the government in two years' time.
The proposals are open to all shareholders and were seen by analysts as a tax-efficient way of returning value. At the same time, the measures will increase the level of debt for companies, which could provide a bolster to arguments against a one-off ""windfall"" tax proposed by Labour, analysts said.
Labour, which is ahead of the ruling Conservatives in polls before a general election due by May, has said it will impose a windfall levy on excess profits of utilities but has given no details of the tax's size or scope.
""Southern is gearing up ahead of an election, which might reduce its exposure to a windfall tax,"" the analyst said.
""A Labour government would find it hard to press them if they claimed there was no spare cash to pay the tax. I'm just surprised Southern has got rid of so little cash,"" the analyst added.
Other companies seen likely to pursue similar moves include Severn Trent, which is waiting to complete a 10 percent share repurchase after picking up 4.9 percent on the market and a small stake from the government in December last year.
South West has a mandate to buy back up to 10 percent of shares and finance director Ken Hill said when half year results were announced in November that the balance sheet was strong enough to handle such a move if appropriate.
Wessex Water announced a 10 percent buyback in December which attracted responses for around 3.2 percent and has also said it will buy around 87 percent of a 19.5 percent stake held by Waste Management International.
Analysts have also suggested Yorkshire Electricity, one of two independent regional electricity companies (Recs) along with Southern left after a spate of takeovers, might have funds for a buyback. ($1=.6172 Pound)
",16
"Shares in British supermarkets fell on Monday after a study said they were closer to a price war than they have been for 15 years.
But analysts remain sceptical that stores will risk such a move, and supermarkets themselves appeared reluctant to sacrifice their profit margins.
The study by research group Verdict adding to market worries after J. Sainsbury Plc, now replaced as Britain's favourite supermarket chain by Tesco Plc, warned last Friday that its profits would be hit by efforts to boost sales.
Verdict said in a report prepared before Sainsbury's warning that profits would be 50 million pounds ($81.2 million) below expectations that risks of a price war were greater than at any time since 1982.
Verdict analyst Clive Vaughan said Sainsbury's comments increased the probability to ""closer to 50 percent.""
But Sainsbury ""is not planning to start a price war,"" a spokeswoman for the company said, adding that ""we are already very competitive.""
Market leader Tesco ""continues to offer unbeatable value,"" the campaign which it launched in September 1996, a Tesco spokesman said.
Analysts said the big four supermarkets, which also include Safeway and ASDA, were unlikely to want to risk the damage to margins which cutting prices would entail.
""A price war remains on the horizon rather than imminent,"" said one analyst who asked not to be named.
Sainsbury is struggling to gain the initiative snatched by arch-rival Tesco which leapt into the market lead just over a year ago and is seeing sales growth of 7.5 percent.
Sainsbury's sales were up 4.4 percent over the key Christmas trading period, an improvement over three percent gains seen in October 1996 but still not enough to threaten Tesco.
Shares in the company, which is 40 percent owned by the Sainsbury family, fell 10 pence on Monday to trade at 331 pence after plunging more than 10 percent on Friday.
Tesco saw its shares slip 5-1/2 to 354-1/2 pence while Safeway, the fourth largest store group, was down 12 pence at 377 pence and ASDA, which prides itself on being the cheapest of the big four, eased 1-1/2 to 120 pence.
""The market is right to mark shares down as a precaution...(but) no-one would ever dream"" of launching a full-scale price war, said Nick Bubb of Mees Pierson.
British supermarkets generally obtain gross margins of 20-26 percent, analysts said, giving them flexibility to battle on price but with the leading four holding a majority of the market, there is little inclination to give up healthy profits.
""The supermarkets are in a state of relative equilibrium and Sainsbury is the last one to offer more margin at this stage,"" said the analyst.
Tesco is in a stronger position ""and could be tempted to enforce that,"" he added, but suggested any move would fall short of a full price war where retailers might make hefty cuts on several thousand items, costing a couple of points on margins.
""Tesco might be tempted to stick the boot in, but...the more (it) forces Sainsbury into further problems, the more it would have to face retaliation,"" Bubb said.
Analysts said supermarkets were more likely to push ahead with initiatives such as loyalty cards, improved customer services and marketing in order to increase sales and profits.
""I think at this stage a price war is unlikely, but if sales fall substantially for any of the big four, that situation could change,"" the analyst said. ($1=.6161 Pound)
",16
"The bid battle for British regional electricity company (Rec) Northern Electric was on a knife edge on Friday as predator CE Electric won an extension to 2400 GMT for an announcement of the result.
CE, which is 70 percent owned by CalEnergy of the U.S., had slapped a deadline of 1300 GMT on Friday for acceptances of its 650 pence-a-share bid which values Northern at 782 million pounds ($1.3 billion) and the result was expected by 1700 GMT.
But the authorities later agreed to allow the extension under British bidding rules as counting and matching of share acceptance forms continued.
CE Electric already held nearly 30 percent of Northern, bought on the open market, and had previously declared acceptances which brought its holding up to around 34 percent.
Northern has claimed it has the backing of its largest institutional investor, the Prudential, which holds around 11 percent, as well as other funds including M&G and Foreign & Colonial.
The bid is the second hostile takeover that Northern has faced -- it spent 560 million pounds fending off Trafalgar House, now owned by Norway's Kvaerner, last year.
That left it with depleted resources to fight this time, but it has promised a 17 percent hike in its dividend and vowed its gearing will be down to 95 percent by March 1997 compared with previous forecasts of 175 percent.
Northern has consistently claimed that the bid undervalued it and called for a higher price.
It said 700 pence per share was indicated in talks before CE Electric launched the offer on October 28, a claim which the Americans have denied, saying that the bid is fair value.
Northern's share price closed in London up 2-1/2 pence at 640 pence in a generally firm market on Friday.
Northern is the only Rec to have fought off a takeover after it spent 560 million pounds to fend off Trafalgar House, now owned by Norway's Kvaerner, last year.
If it falls to CE, it would be the tenth of the 12 cash-rich Recs set up at privatisation in 1990 to be taken over since they came up for grabs when the government's protective golden share expired in March 1995.
It would also be the fourth to be taken over by an American company with two further agreed bids from U.S. firms Dominion Resources and Entergy for East Midlands and London respectively currently underway.
American companies are hotly tipped as the most likely buyers for the remaining Recs as they find the British regulatory environment more relaxed and see them as a useful English-speaking springboard for expansion into Europe.
Among potential bidders, analysts named Houston Industries, which failed in its attempt to secure control of Norweb with Central & South West Corp in October 1995.
Florida Power & Light and Pacific Gas & Electric, which have both been rumoured previously to be interested in Recs, are again being eyed as possible buyers.
The UK Trade and Industry Secretary Ian Lang has made it clear that he will consider bids on a case by case basis and only judge whether they should be referred to monopoly investigation on competition grounds.
CE Electric's bid had been clouded by worries that Lang might block the move because of political concerns or to avoid reducing the number of benchmarks in the sector used by the industry regulator Offer.
There had been worries that the ruling pro-privatisation Conservative party, which lags the opposition Labour party in the polls and must call a general election by May, might not want further takeovers in the unpopular sector.
Electricity companies have increasingly attracted harsh criticism from lobby groups and the media over hefty executive pay packets, huge shareholder payouts and spiralling takeover prices.
Lang's decision to clear CE Electric's bid on December 6 lifted a cloud from Northern's shares, which had been languishing around 600 pence.
It also indicated that other bids might not face any regulatory hurdles.
In less than a week, Entergy of the U.S. clinched an agreed 1.267 billion pound deal to take over London Electricity, which provides power to the capital and its financial heart, the City. ($1=.6002 Pound)
",16
"British supermarket group J. Sainsbury aims to regain the lead position it lost to Tesco by emphasising traditional strengths of choice, quality and value, deputy chief executive Dino Adriano said.
""The aim will be to have got (the supermarket business) back to its rightful position,"" Adriano, who is set to take over running the group's supermarket operation next year, said.
""The emphasis is very much -- going forward -- going to be on our traditional strengths of...choice, quality and therefore better value,"" he said in an interview.
Sainsbury was toppled from its pre-eminent position among British supermarkets last year as the launch of a loyalty card helped boost arch-rival Tesco's sales.
Sainsbury turned in its first drop in profits for 22 years in May, with pre-tax profits for the year ending March 9 touching 764 million pounds ($1.19 billion) from 808 million pounds previously.
It has undertaken a comprehensive strategy review and Adriano admitted the group had failed to communicate its message to customers. ""We are sorry we have not actually shouted louder about it in the past,"" he said.
In June, Sainsbury bowed reluctantly to pressure from Tesco's success and launched its own loyalty card.
Adriano said sales had seen a two to three percent uplift from the Reward card, covering its costs, although assessments were approximate at this early stage.
""It's having the necessary impact at this point,"" he said.
He said Reward was an important factor in future strategy. ""We have always had strong customer loyalty at Sainsbury and we are now seeking to reward that and build on it,"" Adriano said.
Sainsbury said it had around six million customers signed up to Reward with around 4.75 million using it regularly.
Adriano said the retail environment remained very competitive and that Sainsbury would try not to be beaten on price for key items. But he added that the group felt its offer of choice and quality could not always mean lowest prices.
""We do not feel it is possible to offer great quality and at very low prices,"" he said.
""Quality improved, price maintained will be one of our strap lines"" particularly for own-brand product, he said.
He said own-brand goods were very important and would be ""an area of great innovation and development...in years to come.""
Own-brand goods traditionally give retailers a better margin than branded products.
Adriano said petrol retailing remained very tough for supermarkets as a result of price wars triggered by oil major Esso's launch of its PriceWatch campaign earlier this year.
""Most (supermarkets) are into petrol stations and no one's making any money on this at present,"" he said.
He said some companies were losing money but added that ""hopefully, the situation will stabilise before long.""
Adriano added that the group would be looking to increase square footage, both through new stores and refurbishments of existing premises.
""In retailing, the key thing is adding new square footage,"" he said, adding that there was still scope to develop sales per square foot in much of the chain.
Sainsbury is also eyeing expansion overseas, particularly in the U.S., Adriano said, and would be happy to clinch a deal currently under discussion to acquire 12 stores there from Royal Ahold of the Netherlands.
Industry sources suggest a $50 million price tag for the stores if the deal is secured.
Adriano said the size of the U.S. market meant that ""the opportunity for getting a formula right and then rolling it out...is quite significant."" ($1=.6412 Pound)
",16
"Confusion mounted on Monday when British electricity company Northern Electric's fight against a hostile takeover from the U.S. prompted the Takeover Panel watchdog to launch an inquiry into the bid.
Just one day before a new bid deadline, the Takeover Panel said it was investigating the circumstances in which it had received information from Northern's advisers during the 782 million pound ($1.3 billion) bid by America's CE Electric.
""Following the investigation, the executive will consider what, if any, further action is appropriate,"" it stated.
The role of Northern's adviser, investment bank BZW, has been under scrutiny since it failed to disclose until last Friday a 250,000 pound payment from Northern for its services in addition to its 1.5 million pound fixed fee.
BZW has denied any wrongdoing. A spokesman told Reuters: ""We have absolutely nothing to hide from an investigation and we expect to be fully exonerated.""
But asked whether the investigation may last into the New Year, the spokesman added: ""I would think so, yes.""
The Panel noted that it may also look into the acquisition by BZW and investment bank Schroders of 2.32 percent of Northern Electric's shares last week.
Although U.S. energy group CE Electric complained about the share purchases, the Panel cleared the deals last week. Advisers are allowed to buy shares under British takeover rules despite the move being aimed at defeating takeover bids.
Newcastle-based Northern Electric's independence has been on a knife-edge since last Friday, when the bid timetable ticked to a close and CE Electric, which is controlled by energy utility CalElergy, fell fractionally short of winning control.
But in an unusual twist, the Takeover Panel decided to extend the bid until 1300 GMT Tuesday for unspecified reasons.
Gallingly for Northern Electric, CE Electric had by Monday boosted shareholder acceptances for its bid to just over the 50 percent mark needed for victory from 49.77 percent on Friday.
Consequently, Northern Electric launched an appeal on Monday into the decision to extend the bid deadline and requested that its shares be temporarily suspended.
Immediate details were unavailable about whether the Takeover Panel's decision to investigate the bid indicated that it was willing to reconsider its decision to extend the offer -- or may allow late bid acceptances.
""We are not able to clarify anything at the moment,"" a spokeswoman said, adding that comments would be available ""in due course.""
CE Electric officials declined to comment. Northern, which says institutional investors including the Prudential, Foreign & Colonial and M&G support the board, said it was awaiting the Panel ruling more ""in ignorance"" rather than ""in confusion.""
""We are in uncharted territory,"" a spokesman told Reuters, adding that it remained unclear whether the Panel had decided to allow Northern's appeal or not.
Meanwhile, Northern's shares have stopped trading at 638 pence, 12 pence short of the 650-pence-per-share that CE Electric is offering for control of the electricity company.
It is the second time that Northern's fate hangs in the balance since it was privatised along with its 11 regional electricity company (REC) peers in 1990.
It was the first of the cash-rich RECs to face a takeover in 1994 and became the only one to successfully fight off, partly with the help of an extraordinary 560 million pound defence package, a bid by conglomerate Trafalgar House, now owned by Norway's Kvaerner.
Three U.S. utilities, attracted by Britain's regulatory regime that curbs prices rather than profits, have already snapped up RECs. Two other bids have yet to be completed.
If CE Electric wins control of Northern, only two of the 12 original RECs will remain independent -- Yorkshire Electricity Group and Southern Electric. ($1=.5973 Pound)
",16
"Britain's Northern Electric challenged predator CE Electric on Friday to raise its 630 pence per share bid as it paraded results and forecasts which it claimed proved it was worth more.
""They need to get their cheque book out if they are going to further this bid at all,"" Northern chairman David Morris told a news conference.
But CE Electric, the British bid vehicle for U.S. energy group CalEnergy, said in a statement that Northern's results were ""lacklustre"" and below its expectations.
The regional electricity company, or Rec, said pretax profits for the six months ending September 30 slipped to 50.7 million pounds ($85.12 million) from 58.7 million pounds and an interim dividend of 12.85 pence was paid out, up from 12 pence.
Full year pretax profits would be more than 112 million pounds, the company said, with a final dividend forecast of 29.85 pence.
Northern, which last year fended off a bid from Trafalgar House, now part of Kvaerner, with a 560 million pound shareholder benefit package, said gearing should fall to 95 percent by March 31 compared with forecasts last year of 175 percent.
Morris said CE Electric ""is clearly going to have to pay a great deal more than 630 pence per share"" to win control.
He said the company would be willing to talk with CE Electric ""on the basis of more than 700 pence"", but executives said at 630 pence there was nothing to discuss.
Northern has claimed that CE Electric, which is 70 percent owned by CalEnergy of the U.S., had indicated a price of 700 pence before it launched its hostile bid in October.
CE Electric denied that claim and went on to snap up nearly 30 percent of Northern as its shares languished, weighed by concerns that the U.K. government might block the bid.
""I do not think they (Northern) have announced anything that is going to make CE Electric put its price up,"" said one sector analyst.
But a second analyst said he thought there was ""clearly value there in excess of 630 pence,"" and suggested the two sides might be able to come to an agreed bid at a higher level.
Shares in the Rec fell one penny to 589 pence by 1415 GMT.
Northern said gearing, without payment of a special dividend of 56.5 pence due in February under last year's defence package, would be roughly in line with other electricity companies.
It argued that, based on the forecast cash flow for 1997, it should be valued at 745 pence a share to balance the current agreed bid for a fellow Rec, East Midlands Electricity, from Dominion Resources of the U.S.
That bid valued East Midlands at 670 pence per share but its stock was also dampened by government approval worries and was trading at 609 pence, up 1.5 pence.
""We are simply pointing out the value of Northern Electric,"" Morris said, adding that if the government approved the bid, the figures would be more fully appreciated.
Northern has said it felt the government should approve the bid but maintained that 630 pence did not represent its true value.
""These results and forecasts help to demonstrate that there is significant further value within Northern Electric, value which CE Electric's offer fails to reflect,"" Morris said.
Some analysts said the results and forecasts underlined the judgement that CE Electric's bid undervalued the company.
""The company is worth something around 670 pence, if you exclude the bid premium and shareholders should hold out for something nearer 700 pence,"" said one analyst, anonymously. ($1=.5956 Pound)
",16
"British supermarket group J. Sainsbury stunned markets on Friday and sent its shares reeling as it admitted the cost of improving sales will hit profits, wiping some 60 million pounds ($98 million) off forecasts.
Sainsbury said in a statement that pretax profits for the year were expected to be 640-650 million pounds excluding a 50 million pound provision on its Texas do-it-yourself business, compared with analysts' forecasts of over 700 million.
Shares tumbled as analysts raced to downgrade forecasts, losing 43 pence, or almost 11 percent, to 349 pence.
""I had no idea (sales growth) would have cost them so much...the cost benefit of the sales improvement is way out of line,"" said Nick Bubb, analyst at Mees Pierson.
Sainsbury said sales from existing supermarkets rose 4.4 percent in the eight weeks ending January 11 and that trend has continued, compared with a three percent rise in October 1996.
Arch-rival Tesco, which pushed Sainsbury off the market leader slot over a year ago, earlier this week reported sales growth of 7.5 percent over the key Christmas period.
""We are disappointed that the costs of building sales across the businesses have impacted group profit,"" chairman David Sainsbury said in a statement.
Bubb said he was ""amazed that the share price has not fallen further,"" adding that Sainsbury still looked overpriced compared to the rest of the supermarket sector.
Before profit downgrades, Sainsbury was on a forecast price to earnings ratio of 14, according to Reuters 3000 data from Edinburgh Financial, towards the top end of the food retailing sector, ahead of Safeway and ASDA.
""The shares have quite rightly been marked down to a market rating but a discount rating would be more appropriate,"" said one sector analyst who asked not to be identified.
Sainsbury's chief executive of Homebase do-it-yourself and U.S. businesses David Bremner said the company's Reward loyalty card accounted for ""probably the majority of the impact"" on sales growth but admitted there was a short-term cost.
He told Reuters the task facing management next year was ""to improve profits,"" adding that ""obviously, we would always like to improve sales.""
Sainsbury was forced to launch Reward after the success of ClubCard helped Tesco to boost sales and leap ahead of Sainsbury as market leader at the end of 1995.
Reward's costs have edged up to around 0.75 percent of sales compared with 0.4 percent in the first half, the analyst said, which could imply a need for sales growth nearer five percent.
""The costs of loyalty are clearly greater than they thought,"" he said.
Analysts were concerned that Sainsbury might have to sink more investment to improve sales and profits and forecasts for 1997/98 were also cut, with Bubb slashing estimates to 673 million pounds from 780 million previously.
Sainsbury said that management was now focused ""on turning increased sales into profit growth,"" but analysts questioned how this could be achieved.
""What do they have to do next, what more costs need to go in?"" asked one sector analyst.
Bubb added that despite Homebase's strong sales, which bounced 7.8 percent from existing stores in the 16 weeks to January 11, the 50 million pound provision was a concern.
Sainsbury said it aimed to convert an extra 25 Texas stores, which it bought from Ladbroke in 1995, to its Homebase format, which has given an uplift of 40 percent in sales at stores already given the new format.
""The full store conversion process remains the key to unlocking the potential of the Texas acquisition,"" Sainsbury said. ($1=.6119 Pound)
",16
"The British government is unlikely to block U.S. group CE Electric's 650 pence per share bid for regional electricity company Northern Electric on competition grounds, industry sources said on Thursday.
But this view has not stopped concern that Trade Secretary Ian Lang might block the takeover for political reasons, dampening Northern's share price, they added.
Lang is widely expected to announce his decision by next Monday, December 16, and CE Electric has put a self-imposed deadline of December 20 on acceptances for its bid.
Northern's shares were down 3.5 pence at 598 pence by 1400 GMT, well below the 650 pence level to which CE Electric, which has already snapped up just under 30 percent of its target on the market, raised its original 630 pence offer on December 6.
""Logically, the bid should be cleared. If it does not go through, it will be for entirely political reasons,"" said one analyst who asked not to be identified.
Utilities have come under heavy public criticism over hefty executive pay packets, large shareholder dividends and spiralling takeover prices.
Approval of the Northern bid and for the less contentious agreed $2.15 billion offer by U.S. group Dominion Resources for East Midlands Electricity would leave just three independent regional electricity companies (Recs) out of an original 12.
East Midlands was due to report half-year results on Monday, but has postponed them until after the decision on Northern.
With the ruling Conservatives lagging the opposition Labour Party in polls and an election looming within five months, Lang might defer a potentially unpopular decision by a referral to the Monopolies and Mergers Commission (MMC), analysts said.
""A referral to the MMC would delay a decision, possibly until after the next election, and if Lang thinks it is enough of a hot potato, he might do that,"" one analyst said.
CE Electric, 70 percent owned by CalEnergy, has said it is confident the bid ""has nothing but pro-competitive aspects.""
Northern's chairman David Morris, fighting for a higher bid, is also keen to see the offer approved as he felt the regulatory uncertainty was keeping the company's share price down.
Northern, which last year spent 560 million pounds ($924.7 million) to fight off a hostile bid from Trafalgar House, now part of Kvaerner, has consistently said the bid undervalues.
It has claimed a price of 700 pence per share was indicated in talks between the two firms before the bid was launched on October 28, but the Americans have denied such a price was discussed and analysts said although approval would see shares rising, it was unlikely Northern could secure a higher price.
""I would not think it will go much above 650 pence. Northern has promised dividend increases but investors may well opt for jam today instead of jam tomorrow,"" said one sector analyst.
Britain has already nodded through sales of seven of the 12 cash-rich Recs originally privatised, with three going to U.S. companies in a flurry of takeovers in the last two years.
But Lang shocked the market in April when he blocked bids by generators National Power and PowerGen for Recs Southern Electric and Midlands Electricity respectively, saying they might pose detriments to competition.
Analysts said Lang might opt to approve the bids with conditions, possibly calling for financial guarantees to assuage concerns over CE Electric's debt position, or he might call for ring-fencing of the regulated electricity supply business.
Analysts said approval for the current bids could open the floodgates for bids on the remaining Recs -- Southern, Yorkshire and London, which dropped talks with U.S. group Entergy only last month.
""Although there is not a clear, tight policy on these bids, I feel Lang will work more on logic than politics,"" the sector analyst said. ($1=.6056 Pound)
",16
"Tesco became the latest British supermarket to put banking on its shopping list on Thursday with plans for a venture with Royal Bank of Scotland, shifting the focus further from price, analysts said.
""With more supermarkets investing in financial services, there is less likelihood of a price war,"" said one analyst who asked not to be named.
Tesco said it will set up a joint venture in financial services with Royal Bank which will take over Tesco's interest-paying ClubCard Plus account and launch a credit card as a first move over the summer.
The two companies, which will be equal partners in the venture, said the link-up would stretch over Direct Line telephone banking and Scottish Widows fund and life assurance group, which already has a strategic alliance with Royal Bank.
Tesco expects the two companies to invest around 40 million pounds ($65 million) during the first year in the venture, which does not need a banking licence.
The new venture could make a loss of between five and 10 million pounds in the first year, marketing director Tim Mason told Reuters, but should move to profits in the second or third.
Mason said Tesco hoped to see similar profits eventually to those gained by retailer Marks & Spencer from its financial services, which have been running for some 15 years and brought in around 61 million pounds last year.
""If we didn't feel we could do that sort of level medium term, then we would not be as interested as we are,"" Mason said.
""Tesco views it as its chance to make Marks & Spencer style financial services profits...the worry I have is that everybody is dashing in to this and as competition increases, prices could fall,"" said Dave Stoddart of Henderson Crosthwaite.
Tesco, which tipped rival J. Sainsbury off the market leader perch in late 1995, helped by the launch of its ClubCard loyalty scheme, is the third of the big four supermarkets to commit to financial services.
Tesco's partner in ClubCard Plus, National Westminster Bank, declined a further link-up because it did not need Tesco's distribution given its strong presence in Britain and wanted to keep a clear separate identity, a spokesman said.
Tesco's chairman Sir Ian MacLaurin resigned his place on NatWest's board on Thursday after over 15 years of tenure.
Sainsbury, which was forced to launch its own loyalty card last year after the success of ClubCard, surprised the market by becoming the first of the big four supermarkets to plunge into banking when it announced plans for Sainsbury's Bank last year.
Sainsbury holds 55 percent in the bank while partner Bank of Scotland has 45 percent.
Safeway, the third largest grocery group, teamed up with high street bank Abbey National in November to launch banking services through its ABC loyalty card.
But the intensifying battle on services and loyalty has triggered profits warnings at both Sainsbury and Safeway in the last month, as loyalty offers to attract more customers hurt margins while inflation and sales growth remain slow.
Shares in Tesco, whose 7.5 percent sales growth over the key Christmas period was ahead of both Sainsbury and Safeway, gained two pence to 340 pence by 1154 GMT while Sainsbury nosed up half a penny to 314-1/2 pence and Safeway rose 3-1/2 pence to 360.
ASDA, which prides itself on being the cheapest of the big four and has no nationwide loyalty card nor financial services link, saw shares slip a penny to 114 pence.
ASDA's strong sales growth has kept management reassured the company does not need to plunge into financial services while it focuses on price, but analysts said the shift in focus by its rivals could add pressure for ASDA to join in.
""It certainly seems to throw the ball into ASDA's court. They pride themselves on a simple price message but I think they will have to offer similar service extras at some time,"" the analyst said. ($1=.6128 Pound)
",16
"The British supermarket group ASDA racked up a gain in first half results and sales on Thursday and analysts said there were signs of more to come.
""We thought this recovery story would come to an end sooner but there is still more upside, it seems,"" said one analyst who asked not to be identified.
ASDA, known for innovation and cheeky marketing initiatives, said pretax profits before exceptionals were 160.1 million pounds ($267 million), up from 138.3 million pounds ($230 million) a year ago, and paid out a dividend of 0.81 pence per share, up from 0.72 pence.
Sales from existing stores in the first half were 10.2 percent up on a year ago and ASDA edged up its market share by 0.5 points to 10.6 percent.
""Keeping it simple has been the key to our success. These results show we are on course to deliver...our (strategy) programme for 1998,"" chairman Archie Norman said in a statement.
ASDA's shares touched a high of 125 pence before edging back to be down 1/2 pence at 123.1/4 pence by 1103 GMT.
ASDA's sales gain is the highest in the industry for the period and comes on top of a strong rise a year ago.
""That is an extraordinary performance, double digit on double digit,"" said the analyst.
""One thing the market seems to have underestimated is how low the point was that ASDA recovered from,"" he added.
ASDA implemented a three-year ""Renewal"" strategy in the early 1990s aimed at turning the group round from huge debts and slow sales, which was followed this year by the start of a three-year ""Breakout"" strategy.
""I think the market thought Renewal was the recovery and it was over but that is not the case at all, they are carrying on the gains into Breakout,"" the analyst said.
ASDA said its aim to be the lowest on price had been achieved ""with only a modest investment in our gross margn,"" as it moved to cut operating and distribution costs.
Leighton, who took over as chief executive from the entrepeneurial Norman in August, said second half margins were likely to be similar to those in the first six months, ""down a bit, a smidgeon.""
He said much of the impact in the first half had come from petrol, where a fierce price war has raged between supermarkets and oil companies, but pressures now seem to be easing.
ASDA is also trying to push its total sales to include more own-brand products where margins are generally higher.
It said own-brand goods now accounted for 35 percent of total sales, adding it was ""well on our way to achieving our...objective of 40 percent ASDA brand penetration by 1998.""
The company aims to open seven stores in the second half, which will all be large, ""market hall"" style, Leighton said, with similar opening levels on the cards for a couple of years..
Leighton said the company wanted the ""critical mass"" to drive growth markets of fresh food, entertainment, clothing and healthcare.
But he said the group was ""under no pressure"" to launch a loyalty card throughout the country, even though the other three major supermarkets -- J. Sainsbury, Tesco and Safeway -- have all started schemes nationwide.
ASDA is testing a card in several stores but Leighton said ASDA customers tended to focus on price, quality and service. ($1=.6003 Pound)
",16
"British electricity generator PowerGen spent 202 million pounds ($328 million) on Thursday buying back five percent of its own shares at 605 pence each in one of the first such moves since rules were changed in October.
PowerGen said in November with its half year results that it would buy back up to 10 percent of shares ""when appropriate"".
PowerGen's purchase price was the high of the day and shares had eased back to be up 17.5 pence at 588 pence by 1400 GMT.
The British Treasury moved in October to tighten up legislation around some capital restructurings in order to cut back on tax credits.
""The market had expected PowerGen to flex its muscles and return excess value to shareholders,"" said analyst Nigel Hawkins of Yamaichi.
Earlier this week, water and sewerage company Severn Trent bought 2.5 million of its shares or just under one percent from ABN AMRO Hoare Govett.
These shares had been sold by the government earlier on the same day as part of a move to sell off its remaining stakes in a slew of utilities.
PowerGen's decision to go ahead with its buy back spurred shares in other stocks which are seen as likely to be considering similar moves.
Banking group Barclays Plc gained 15.5 pence to 1,031.5 pence while PowerGen's fellow generator National Power strode 16.5 pence higher to 464 pence.
The premium set in PowerGen's buy back should help to boost the company's share price, analysts said, while at the same time enabling short-term investors to move out of the company.
""People left in should be those who see higher value in the company,"" said one analyst who asked not to be identified.
The move also indicated that PowerGen was not looking to diversify or prepare for any major acquisitions in the near term, analysts said.
""Investors are probably reassured that PowerGen is giving back value to them instead of diversifying outside their core businesses,"" the analyst said.
PowerGen was frustrated in its attempt to buy regional electricity company Midlands Electricity by the government's decision to block the bid earlier this year.
It bought back 10 percent of its shares in May and June for around 400 million pounds.
The latest buyback should also improve prospects for dividend growth, one analyst said, as it will boost PowerGen's earnings per share profile.
""Reducing the number of shares in relation to earnings should enable PowerGen to maintain a stronger outlook for its dividend,"" the analyst said. ($1=0.6161 Pound)
",16
"British supermarket retailer J. Sainsbury Plc tried to steal a march on its competitors on Friday by launching insurance products through its Homebase do-it-yourself subsidiary.
The deal, which sees Sainsbury teaming up with brokers Willis Corroon, will offer home and contents insurance, garden insurance and personal accident insurance with details to be released to the public in early February.
Sainsbury became the first supermarket to announce plans to break into banking in October when it teamed up with Bank of Scotland to set up Sainsbury's Bank, which awaits a licence from UK authorities.
The insurance service will be offered to all Homebase customers which are thought to total around 12 million, with initial marketing aimed at the unit's two million loyalty card holders.
The service will be provided by a panel made up of Royal & Sun Alliance, Guardian Royal Exchange, Norwich Union, Eagle Star and Lloyds of London.
""We believe that the Homebase brand values can make a real difference in the home insurance market,"" Mike Samuel, Homebase head of marketing, said in a statement.
Sainsbury said the major features of the products would be 250 pounds ($420.2) emergency cover, cover for home removal, Christmas, birthdays and accidental damage to televisions and satellites.
In addition, discounts of over 50 pounds would be offered on Homebase security products when a policy is taken out.
""The product chosen by Sainsbury's Homebase encompasses all the expected features of home insurance but with a safety net of cover not usually available with standard market products,"" said Richard Fry, head of business development at Willis Corroon.
Sainsbury shares had closed down five pence at 387.5 pence before the announcement was made.
Analysts said they were encouraged when Sainsbury moved into banking as there had been concerns that it was losing more and more ground to arch-rival Tesco.
Tesco was the first of the big four supermarket groups to launch a loyalty card and its success forced Sainsbury to bring out its own version around a year later in June 1996.
Safeway also has a loyalty card while ASDA is now testing its own version in selected stores.
Meanwhile Tesco has added a ClubCard Plus credit account for customers while Safeway teamed up with high-street bank Abbey National in November to offer banking services through its ABC loyalty card. ($1=.5950 Pound)
",16
"If British regional electricity company (Rec) Northern Electric succumbs to a hostile 782 million pounds ($1.3 billion) bid from U.S. group CE Electric, it will be the tenth Rec of the 12 privatised in 1990 to be taken over.
Northern is the only Rec to have fought off a takeover, thwarting a bid from Trafalgar House, now part of Norway's Kvaerner, with a 560 million pound defence last year.
The bid from CE Electric, controlled by CalEnergy, has been vigorously opposed by Northern and closes at 1300 GMT on Friday. If the bid succeeds, it would take to six the number of Recs already in or due to move into U.S. hands.
Only two independent Recs would remain if Northern fell -- Southern and Yorkshire, which is the only one never to have attracted a firm bid.
Southern agreed to a takeover by generator National Power but this was blocked by the British government in April, along with fellow generator PowerGen's planned bid for Midlands.
Two Recs -- Norweb and South Wales Electricity (Swalec) -- were swallowed by their local water and sewerage firms to form multi-utilities while Manweb was taken over by generator Scottish Power, which later added Southern Water to its fold.
Eastern Electricity was bought by conglomerate Hanson, which intends to spin it off as part of its energy group.
Three Recs -- South Western, Seeboard and Midlands -- have already been bought by American firms and two more, London and East Midlands, have agreed to bids from U.S. companies.
The following table details bids in the electricity sector so far:
 Rec		   Bidder		 Value (stg)   Status
 Eastern	     Hanson		 2.4 bln	Completed
 Manweb		Scottish Power     1.1 bln	Completed
 South Western     Southern Co	  1.1 bln	Completed
 Norweb		North West Water   1.8 bln	Completed
 Seeboard	    Central and South  1.6 bln	Completed
			 West Corp
 Midlands	    PowerGen	     1.95 bln     Blocked
 Southern Elec     National Power     2.8 bln	Blocked
 SWALEC		Welsh Water	  872 mln	Completed
 Midlands Elec     General Public     1.73 bln     Completed
			 Utilities/CINergy
 Northern Elec     CE Electric	  782 mln	Contested but
								   Cleared
 East Midlands     Dominion	    $2.15 bln     Agreed and
								   Cleared
 London Elec	 Entergy		1.27 bln     Agreed,
								   awaiting
								   clearance
($1=.5982 Pound)
",16
"British supermarket group Safeway Plc is currently seeing a zero inflation rate excluding petrol, deputy chairman David Webster told Reuters in an interview.
""Inflation excluding petrol is now probably zero,"" he said.
But Webster said the fall in prices was ""nothing to do with a price war.""  
Webster said he felt shoppers ""are pulling in their belts a little more than usual,"" and added he felt it was ""a sector issue.""
But he said he thought a price war remained ""very unlikely.""
Safeway said in a statement that price inflation had fallen in the early weeks of the new year from a modest 1.1 percent gain seen in the five weeks to January 4.
It said sales growth over the key Christmas trading period had been 5.2 percent but over the first 16 weeks of the second half that had slowed to a 4.5 percent gain.
""In the last four weeks the sector and Safeway have come off quite sharply in terms of overall sales performance,"" Webster said.
Safeway said in its statement that if current rates of sales growth and inflation continued, profits in the final eight weeks of its year, which ends in March, might be affected.
Webster said it was ""very hard to judge"" whether the slowdown in sales would continue. ""We continue to see significant deflation in produce, which is 10 percent of total sales,"" he said.
He declined to give details of the impact on margins, however.
-- London Newsroom +44 171 542 7717
",16
"Electricity generator Scottish Hydro-Electric Plc turned in lower than expected half year profits on Thursday but hiked its dividend by 11 percent.
""We aim to keep on delivering dividend improvement...doing it by expanding the business,"" chief executive Roger Young told Reuters in an interview.
Pretax profits edged down to 61.3 million pounds ($101.6 million) from 61.7 million previously, below expectations of 63 to 70.7 million. The dividend was 5.28 pence per share.
The shares were down 1-1/2 pence at 316.5p at 1145 GMT.
Scottish Hydro said low rainfall had hit profits, as hydro-electric generation had been replaced in part by coal at a cost of 6.3 million pounds.
But chairman Lord Wilson (corrects name of chairman from Bob Reid) said in a statement that the second half had started well and he was confident of ""an encouraging result for the full 12 month period.""
Scottish Hydro said it was preferred bidder for the 50 percent stake in Keadby power station, northeast England, owned by United Utilities, its joint venture partner there, and aimed to complete the deal by the end of the current financial year.
Young said the plan would ""increase costs but also increase profits"", adding an extra 340 megaWatt of generation capacity to the company's existing portfolio.
Scottish Hydro said the deal should increase gearing to around 50 percent if it went ahead and added that together with existing expenditure commitments, gearing should peak at 65 percent in 1998-99.
""We are confident of the prospects for Keadby and look forward to the opportunity to exploit its capabilities in the market place,"" the company said in a statement.
Young said the company aimed to boost market share to seven percent from a current four percent by 1999 with a total investment in combined heat and power (CHP) plant for commercial customers of over 150 million pounds.
The company said that action taken to raise output and cut costs would improve performance over the next two to three years and added that raising standards was a key aim.
Scottish Hydro said that changes proposed to capital allowances in the British budget in November were expected to reverse a trend of falling tax rates but added it would not be possible to predict the impact accurately until full details were known.
The company will be looking to expand its domestic business, Young said, but a resumption of talks with British Gas on the sale of the latter's supply interests was unlikely, he added.
""I would not be optimistic of a resumption,"" he said.
British Gas announced in September that talks on the sale of its domestic gas supply business in England and Scotland to Scottish Hydro had been called off, scotching newspaper reports that the sale would bring in around 250 million pounds.
Young said the breakdown was for administrative rather than commerical reasons.
""There was no serious commercial difficulty that caused the project to be dropped...British Gas had a lot of competition for its (administrative) resources,"" he said.
But he said the moment for the deal might now have passed. ""Deals tend to have their day,"" he said, adding that there . were other discussions around, ""but nothing that we can talk about.""
($1=.6034 Pound)
",16
"Dixons Group Plc became the latest British retailer to report a boost in Christmas sales on Wednesday but market watchers said there was no 1980s-style boom as discriminating buyers kept shops competitive.
""There isn't a big consumer boom but there is growth in the consumer economy,"" Dixons managing director John Clare told Reuters as the electronic goods firm reported sales up eight percent in the period over Christmas.
""There is certainly a return to the ""feel good' factor, but it isn't a return to the spend, spend, spend culture of the eighties,"" said Clive Vaughan, retail consultant at research group Verdict.
Analysts pointed out that as Christmas fell on a Wednesday in 1996, many shoppers left purchases to the last minute and retailers were likely to have seen a late flurry of buying.
At the same time, consumers are more discerning than in past years, preferring to pay for quality and investing in durables, which has favoured the higher end of the retail sector.
""Consumers are more discerning, so the high street is still very competitive on price and quality,"" said Hugh Clark of the British Retail Consortium, which represents over 90 percent of retailers and will release its December sales figures next week.
British money supply data released on Monday showed a higher than expected increase in December month-on-month figures, suggesting continuing buoyancy on the high street, analysts said.
Leading British department store Harrods, kicking off its January sale, said on Wednesday sales during the Christmas period were up 10 percent and two percent ahead of budget.
""It was a very strong, very consistent Christmas,"" said Michael Cole, Harrods director of public affairs.
On the Monday before Christmas, Harrods had sales of three million pounds ($5 million), compared with average daily intake of 1.2 to 1.5 million, he said, record Monday takings for the group.
Meanwhile, Merchant Retail Group said on Wednesday its specialist Perfume Shop chain saw same store sales soar 18.6 percent in the Christmas period.
Department store chain John Lewis said last week that sales in the week ending December 28 were up 8.8 percent on a year ago, while jewellers Goldsmiths said sales from existing stores jumped 9.8 percent in the Christmas period.
Aspreys, jewellers to the Royal Family, told a newspaper last week that Christmas sales had been ""substantially better than last year, a double-digit increase.""
Clothing retailer Next Plc is expected to report Christmas sales by mid-January but analysts pointed out that its strong brand image should bolster performance.
""Indications are that the polarisation of stronger versus weaker retailers continues,"" said Roy Maconochie, analyst at Henderson Crosthwaite. ""The consumer is more discriminating so stronger brands win out,""
Verdict's Vaughan said consumer demographics were also influencing product sales as the youthful buyers of the eighties become the more cautious over-30-year-old consumers of the nineties and have more disposable income. ($1=.5922 Pound)
",16
"Troubled British stores group Sears Plc warned on Thursday that annual profits would fall below last year's levels and reported disappointing Christmas trading.
The news hit Sears shares and prompted analysts to say the group should be broken up.
""The corpse has clearly not responded to treatment and now they should do the decent thing, which is to break it up,"" said one analyst who asked not to be named.
Sears said in a statement that full-year pretax profits before exceptional items would be significantly below last year's 100.1 million pounds ($169 million) and added that Christmas same store sales slipped 0.5 percent from a year ago.
Shares, which had already fallen after The Guardian newspaper had said that profits would fall, closed down 4p, or 4.4 percent, at 87-1/2p after a low of 83.
Analysts said annual profit forecasts could now be trimmed back to around 80-90 million pounds from previous levels of around 110-120 million pounds.
But Sears's flagship London department store Selfridges performed well, with sales in the second half to January 6 up 8.6 percent, comparable with other retailers who have reported trading over the key Christmas period so far.
Clothing sales were also up, by eight percent in the period, with womenswear, which includes high street chains Wallis, Warehouse and Miss Selfridge, boosting sales by 14.3 percent.
But childrenswear saw turnover down four percent and footwear, Sears's persistent problem area, fell 2.8 percent at the start of the second half.
Sales at Sears's home shopping business Freemans slid 6.5 percent early in the second half and it said it expected to make an announcement soon on talks about selling the business to the privately-owned mail order-to-pools group Littlewoods.
Analysts have suggested that Freemans could be worth around 350 million pounds in such a deal, with some looking for a price of as much as 500 million.
""It is now all about the break-up value,"" said the analyst.
The company tried to ditch part of its British Shoe business last year but this was scuppered when the stores had to be taken back from retailer Facia after Facia's collapse in June 1996.
Analysts said Selfridges could be worth over 500 million pounds while a conservative valuation of one times turnover for the clothing business would mean a price of 600 million pounds.
""That means that the British Shoe business is seen by the market as a liability to the tune of around 200-300 million pounds,"" the analyst said.
He put a valuation of around 101-102 pence per share on Selfridges, the clothing business and the revenue from any sale of Freemans, around 19 percent above current share levels.
""I would hope they are going to do something radical, getting rid of British Shoe, even for a nominal sum, would free the company of that liability,"" the analyst said.
A flotation or sale of Selfridges is also seen as an option, or potentially a bid for the company although analysts said there were few likely buyers.
The company's poor performance could increase pressure for chief executive Liam Strong to quit, analysts said, after some five years at the helm trying to mend the group's fortunes.
Strong faced calls for his resignation in June from shareholders angry at the lack of progress in turning the sprawling retail business around. ($1=.5922 Pound)
",16
"British supermarkets will be looking for ways to improve profitability in 1997.
Price will remain an important factor, analysts say, but the year will be dominated by a hunt for higher margins.
""We are keen to see whether supermarkets are planning to drive sales further or improve margins,"" said Dave Stoddart, analyst at Henderson Crosthwaite.
""Any fool can get sales growth, getting profitable sales growth is the trick,"" said one analyst who asked not to be named.
Analysts said ASDA, which prides itself on being the cheapest against major chains Tesco, J. Sainsbury and Safeway, could set a trend if it moves to underpin sales growth outperformance by raising margins.
An ASDA spokesman told Reuters that ""margins are obviously important but there's no way our focus will move away from price.""
In 1996, supermarkets entered a fierce petrol price war with oil majors which saw margins squeezed and some chains selling at a loss, but there are indications that this might have abated and margins might recover, analysts said.
ASDA's 10.2 percent sales growth from existing stores in the first half is the strongest of the big four and latest figures from research group Taylor Nelson/AGB suggest its market share was 14.8 percent at the end of 1996, putting it in third place.
""ASDA needs to start consolidating on good profits and that could make it less inclined to slash profits,"" the analyst said.
LOOKING AT DIVERSIFICATION
That could ease competitive pressures for the other three majors, analysts said, allowing them to look increasingly at diversification, such as financial services and loyalty cards.
Sainsbury chairman David Sainsbury said in October 1996 that he thought the current year was about getting the basics right while next year would be about improving profits.
Tesco's ClubCard loyalty scheme rocketed the group into the lead on market share a year ago and prompted arch-rival Sainsbury to change its mind and launch its own card in 1996.
In October 1996, Sainsbury went a step further to team up with Bank of Scotland to set up a bank and has also launched insurance services through its Homebase do-it-yourself subsidiary in partnership with brokers Willis Corroon.
FINANCIAL SERVICES ADD VALUE
""Financial services is an example of an area where supermarkets can add value for existing customers,"" said Clive Vaughan of Verdict Research.
ASDA is the only one of the big four which does not have a nationwide loyalty card, seeing little need for one while sales remain strong, but it is testing a scheme in selected stores.
Analysts say there could be a marked increase in the sophisticated use of the database provided by loyalty cards this year, allowing better targeting of product offers at specific customer groups.
Supermarkets are also expected to explore the possibilities of home shopping, including via the Internet, although a spokeswoman for Sainsbury said the group was concerned about the network's slow speed.
Sainsbury is also looking at other home shopping ideas such as ""Order and Collect,"" where shoppers telephone or fax an order to the store and collect the whole package at an appointed time.
This is currently being being tested at its Watford branch, just north of London, and is likely to be rolled out to more stores in March, the spokeswoman said.
EXPANDING INTO NON-FOOD RANGES
Supermarkets are also expected to diversify their product range, both in food where the search will be on for added value products which bring higher margins, and non-food products such as clothing and home entertainment, analysts said.
""The larger supermarkets will have the advantages here,"" Vaughan said, such as ASDA which mostly has out-of-town hypermarkets where it offers its ""George"" own-brand clothing range alongside produce, videos, televisions and a wide range of non-food items.
ASDA's chief executive Allan Leighton has said he would like to boost clothing sales to around 10 percent of total or some 600 million pounds ($1 billion) of sales per year.
OPPORTUNITIES ABROAD
Diversification could also mean eyeing opportunities overseas, where both Sainsbury and Tesco already have interests.
Sainsbury could look to expand in the U.S., analysts said, where it already holds a 20 percent stake in Giant, while its U.S. unit Shaw's bought 12 stores and two sites from Royal Ahold for 52 million pounds in September, 1996.
Tesco has said it is interested in expanding in France after its 1993 purchase of the Catteau chain but ruled itself out of the bidding last year for Docks de France, which was taken over by the private retailer Auchan.
Tesco increased its stake in the Hungarian retail chain Global TH Rt to 95 percent last week.
Analysts said supermarkets could be looking at takeovers and store purchases domestically as well, as the sector looks ripe for some consolidation.
William Morrison, the regional chain based in northern England, was cited as a potential bid target but analysts said there could be competition problems in such an acquisition for any of the big four store groups. ($1=.5979 Pound)
",16
"British paper and packaging group Arjo Wiggins Appleton Plc saw half-year profits crumple on Thursday and said although there was some pick-up in demand and margins, prospects for the second half remained fragile.
Arjo's first half pre-tax profits slid to 32.3 million pounds ($50.6 million) from 135.3 million pounds a year ago but maintained its interim dividend at 2.9 pence per share.
The company said in a statement the first half of 1996 and the second half of 1995 was ""the worst period the group has experienced since its flotation"", because of adverse market conditions. Arjo was demerged from B.A.T Industries in 1990.
Speaking of prospects for the second half, finance director Andrew Shaw told Reuters in an interview: ""It is fragile, but there should be better volumes and a bit more stability in margins.""
Arjo's shares were down 4-1/2 pence by 1000 GMT to 181-1/2 pence having touched a low of 180 pence earlier in the day.
""There were weak volumes and pressure on margins"" in the first half, Shaw said.
Pulp prices, the raw material for paper, collapsed from the end of 1995, after nearly two years of steady rises, dragging paper levels down with them, he said.
In Europe particularly, for carbonless and coated paper, margins were squeezed, he said, ""but it looks as if that is over and that could make a big difference,"" he added.
In the U.S., the group's business ""should see quite a pick-up,"" Shaw said.
But he warned that any improvement ""will be driven by economic growth and the prospects in Europe are not very exciting.""
Shaw said it was too early to say if the second half would really see an upturn, but added that the company would like to see ""a nice gentle rise in prices and some steady volumes.""
He said the group should also start to get some benefit from its restructuring in the second half and that savings were likely to be ""more than expected rather than less.""
The group embarked on its restructuring last year, taking an exceptional charge of 120.6 million pounds, and Shaw said the timeframe was 18 months to two years for results to show.
The company expects costs of carbonless paper production to fall by around 100 pounds a tonne as a result of restructuring, Shaw said, while coated paper productivity should gain 25 percent.
Though the outlook for the second half remained fragile, the company was more upbeat about longer term prospects. ""Longer term, however, we are confident in the consolidation of our strong position in European merchanting, the development of our North American businesses and the benefits of the restructuring programme in European manufacturing,"" the company said in a statement.
($1=.6382 Pound)
",16
"London-based international bank HSBC Holdings Plc Monday posted a 23 percent rise in 1996 profits, but Chief Executive John Bond predicted a challenging year ahead with increasing competition.
Despite the prospect of tougher conditions, Bond said the banking group, which is one of the biggest in the world, had a strong capital position and a balance sheet that made it ready to meet competition head-on.
""We see 1997 as a challenging year wherever we look, whether it be Asia or the UK, the competition continues to increase,"" Bond said in an interview.
Earlier, HSBC announced a 23 percent rise in pretax profits for 1996 to 4.52 billion pounds ($7.3 billion) -- around the middle of market expectations.
Bond said HSBC's British unit Midland Bank would continue to grow organically as the price of acquisitions was impossible to justify to shareholders.
Midland put in a strong performance with pretax profits up more than 20 percent and costs held to a rise of less than 1 percent.
Bond said HSBC's capital ratios were strong, though he did not see surplus capital being generated.
""As long as we're making a respectable return on capital, we regard capital strength as an asset in our business,"" Bond said. ""It helps you with the ratings, it helps with deposits in Asia and to have a strong capital position shows in the bottom line.""
HSBC had a 21.3 percent return on capital in 1996 compared with 20.7 percent in 1995.
Bond said HSBC continued to be confident about Hong Kong's transition from British to Chinese rule in July.
Last year, HSBC was granted a licence to trade in the Chinese yuan and Bond said the bank was talking to the Chinese authorities to see how this would work in practice.
Bond said HSBC was looking at this massive potential business opportunity in the long term.
""I think it will take time, of course it will, but the signs are all positive.""
He said the rise of sterling against the dollar had not had a great effect on the group's results in 1996, with the average rate for the pound against the dollar below that of 1995. But he said that, very roughly, for every cent the pound goes up against the dollar, the bank loses 13 million pounds in profit ($21 million).
",17
"Northern Rock Building Society said on Monday that 900,000 of its members would get 500 free shares when the society floats on the stock exchange later this year.
The estimated market price of the shares will be between 260p and 295p, valuing the society at a maximum of 1.3 billion pounds ($2.1 billion).
The value of the shares will be between 1,300 and 1,475 pounds based on a valuation by the society's advisers J. P. Morgan. The flotation day is expected to be October 1.
The society has assets of 13.7 billion pounds and is the seventh largest in the country with roots going back to the 1850s.
Adam Applegarth, Northern Rock executive director, said the society could remain independent and would grow organically. ""We don't plan to make any acquisitions,"" he said. ""We have a good track record of organic growth and plan to take that forward.""
Draft legislation before parliament means that converting societies which make acquisitions in the financial sector will lose their five-year protection from takeover.
The bill could become law before an election which must take place by May and is, in any case, supported by the Labour Party which is expected to form the next government.
Applegarth said the new law would hit societies which had based their conversion strategy on growth by acquisition. ""Those converters who have a strategy based on acquisition are going to find life a lot harder,"" he said in an interview.
At a special general meeting to be held in the northeastern city of Newcastle upon Tyne on April 15, 75 percent of investing members must vote in favour of the proposal for it to go forward while a simple majority is required from borrowing members.
Newcastle-based Northern Rock said it would also pay a statutory cash bonus of around 8.8 percent of balances held in accounts on December 31, 1996 to those members who are not entitled to vote including those under 18 years of age.
Northern Rock confirmed it planned to set up a foundation to receive five percent of the company's pretax profits which would have been the equivalent of eight million pounds in 1996.
This money will be used to support charitable causes mainly, but not exclusively, in the northeast of England.
The Northern Rock Foundation has been asked to pay a donation of one million pounds to disabled charities to compensate for the loss of benefit from the flotation to those disabled members who are second-named on accounts and do not get shares. ($ = 0.615 British Pounds)
",17
"Britain's big banks look set to raise profits by some two billion pounds in 1997, taking the aggregate above 14 billion pounds ($22.6 billion), but volume-based revenue growth could be storing up problems, analysts said on Thursday.
The big six -- Lloyds TSB, Barclays, HSBC Holdings, National Westminster, Abbey National and Standard Chartered -- drove profits up to 12.6 billion pounds in 1996 from 10.8 billion in 1995 but analysts were still a little disappointed.
John Aitken, banking analyst at UBS, expressed concern at a loss of momentum in underlying profit growth in the second half of 1996.
""Operating profit grew by an aggregate 17 percent in 1996 but there was a worrying loss of momentum in the second half which saw growth of only 12 percent, compared to 22.5 percent in the first,"" Aitken said.
Aitken does not anticipate a similar dip in the first half of this year but expects the momentum to continue to be lost as banks see their margins under pressure in 1997.
""There will be downward pressure on underlying margins in 1997 but growth in higher-margin business such as credit cards and consumer finance will largely offset that,"" said David Poutney, banking analyst at Panmure Gordon.
But, as Aitken noted, high-margin business has high margins for a reason -- it carries a higher risk, which is likely to result in an increase in bad debt charges in years to come.
Also affecting margins in the second half of 1997 will be the end of a so-called ""deposits lock-in"".
Large amounts of money are currently tied up in accounts at four mutally-owned building societies which are floating on the stock exchange this year. This has meant that banks and building societies have been able to pay lower rates for deposits because the market has been less competitive than normal.
Faster loan growth of the last three years will also mean that bad debt charges will begin to edge higher this year.
Analysts see even greater pressure on margins in 1998 when the lock-in effect is over.
While many sectors would be keen to have the ""problems"" of the banks, the warning signs look to be building up.
""All the major components of the profit and loss account are headed the wrong way,"" Aitken said. ""The only thing that is higher is volume growth and that carries both a capital cost and a potential risk cost.""
Some banks will show a sharp acceleration in pre-tax profit growth but their underlying performance will need watching, they said.
NatWest, for example, could see profits rise to two billion pounds from 1.12 billion, the latter figure heavily affected by losses associated with its sale of Bancorp, analysts forecast.
Abbey National will have a full-year contribution from National & Provincial, while Lloyds TSB is expected to continue its surge, said John Leonard of Salomon Brothers.
Costs look to be fairly stable with certain major exceptions.
Barclays and NatWest will continue to spend money on their investment banking operations, which still provide low relative returns, and Standard Chartered has signalled a major boost to its investment programme, widely welcomed by analysts.
StanChart and HSBC, with their large Asia/Pacific region franchise, will continue to be dependent on those economies.
Both continue to be relaxed about the return of Hong Kong to Chinese rule. The Hong Kong economy looks to be improving after a slowdown although problems in Thailand seem set to persist, analysts said.
For the future, both banks are well placed for the potentially huge Chinese market. But they are not letting market expectactions get out of control, Leonard added. ($ = 0.620 British Pounds)
",17
"British bank Abbey National plc on Thursday posted a 20 percent rise in 1996 pretax profit and said it would make a formal bid on Friday for mutually-owned life assurance firm Scottish Amicable.
The profits of 1.228 billion pounds ($2 billion) were at the top end of analysts' expectations and up from 1.026 billion in 1995.
Abbey National, Britain's fifth largest bank, also announced a dividend payout of 26.1 pence per share compared to 21.75p in 1995.
Its shares were initially boosted to a session high of 781p, up 17.5p on the day. But by 1145 GMT, the share had fallen back to 767p.
The bid for Scottish Amicable is part of its plans to tap the potential of the British life assurance and pensions unit market, chief executive Peter Birch said.
""We are very confident that our proposition will be attractive to the ScotAm board and its policyholders,"" Birch said, declining to comment further on the details of the revised bid.
Abbey sparked a bidding war for ScotAm in January when it made a preliminary offer of up to 1.4 billion pounds and was followed by a larger bid by insurance giant Prudential Corp.
ScotAm, which had been planning to shed its mutual status and eventually float on the stock exchange, then started a formal bidding process and offers have to be in on Friday.
Abbey is known to be keen to diversify further away from its traditional mortgage lending and savings activities and profits from these other sources now amount to 40 percent of the total.
Birch noted that Abbey's life assurance units raised profit 44 percent in 1996 from a standing start after the purchase of Scottish Mutual five years ago.
""That business has been a very strong earner for us,"" Birch said, ""and as one looks at the future of the country and the need for the private sector to provide benefits in healthcare and pensions, we're still very small...for an organisation that's the 17th largest company in the UK.""
Acquisitions are constantly being looked at in other areas of the business, Birch said, as a means of continuing expansion into personal retail financial services.
Birch said Abbey's core mortgage market, where its share rose to a record 14.7 percent, was showings signs of life.
""All the indications in the housing market are that recovery is getting under way,"" Birch said. ""It has a long way to go, a lot of people want to move house...and the market is now stirring in the rest of the country (outside London). We see transactions increasing by seven to 10 percent this year.""
Birch said an expected rise in interest rates after the election would not put a break on the market since this would be offset by low inflation and confidence boosted by a strong economy.
Abbey saw its mortgage margin ease slightly last year with net interest spread at 2.08 percent from 2.15 percent in 1995.
""That doesn't really concern me too much,"" Birch said, ""because we are seeing volume come through. Last year we devoted a lot of time to integrating National & Provincial -- this year, just watch our market share."" ($ = 0.613 British Pounds)
",17
"SBC Warburg, the investment banking arm of Swiss Bank Corp, said on Wednesday it had been forced to take a loss on a 300 million pound ($478 million) share deal which is being investigated by Britain's financial markets watchdog.
The deal, the liquidation of part of the Kleinwort European Privatisation Investment Trust(KEPIT), is thought to have lost SBC Warburg around two million pounds and led to the resignation of Peter Corrigan, head of French equities, who left the firm last Friday.
Britain's Securities and Futures Authority (SFA) confirmed on Wednesday that it is probing the deal.
""I can confirm that SFA is formally investigating SBC Warburg,"" an SFA spokesman said, adding he could make no further comment.
SBC, which announced its 1996 results on Wednesday, did not include a special provision for the loss but executive Marcel Ospel said in Basle that the bank was supporting the investigation ""in every way.""
An SBC Warburg spokesman told Reuters the firm  had ensured that KEPIT had not been disadvantaged as a result of a share sale.
The spokesman said that in connection with a bid for three of KEPIT's portfolios last October, ""the bank sought to sell into the market"" and that this had contributed to adverse price movements of the shares in the portfolios.
The fall in the share prices meant KEPIT might have received less than it had expected for the sale but SBC Warburg said it had ensured that the client did not lose out -- effectively taking the loss, thought to be around two million pounds, onto its own book.
Banking sources said the SFA investigation centred on the sharp fall of several European share prices on October, after SBC Warburg carried out the share sales for KEPIT.
The sources said SBC Warburg is denying allegations of market manipulation and is putting the loss down to an error in its attempt to hedge itself.
It appears this operation was mis-timed and Warburg was punished by the market, later agreeing to book the deal at the price which KEPIT had expected to receive.
Share markets on the day in question, October 30, 1996, were volatile after the Bank of England had raised British interest rates.
The Warburg spokesman said its compliance officials had been notified at once of the deal and had started their own internal investigation.
Sources said the SFA has a duty to investigate the background to such market events, usually as a result of being notified by one of the parties involved.
($ = 0.627 British Pounds)
",17
"London-based international bank HSBC Holdings Plc on Monday posted a 23 percent rise in 1996 profits but chief executive John Bond said it saw a challenging year ahead amid increasing competition.
Bond said HSBC, which gets 55 percent of its profits from the Asia-Pacific region, had a strong capital position and balance sheet, making it ready to meet that competition head-on.
""We see 1997 as a challenging year wherever we look whether it be Asia or the UK, the competition continues to increase,"" Bond said in an interview.
He also told a news conference that HSBC, one of the world's largest banking groups, wanted to make insurance an international core activity.
""We see the biggest growth potential in the Asia-Pacific region, we are already doing it in Hong Kong and we want to roll it out to other countries,"" Bond told reporters.
HSBC announced a 23 percent rise in pretax profits for 1996 to 4.52 billion pounds ($7.3 billion) -- around the middle of market expectations. A hefty nine pence per share rise in the annual dividend to 41 pence bettered most forecasts.
Bond said HSBC's British unit Midland Bank would continue to grow organically, as the price of acquisitions was impossible to justify to shareholders.
Midland, one of Britain's big four clearing banks, put in a strong performance with pretax profits up more than 20 percent and costs held to a rise of less than one percent, Bond said.
HSBC's capital ratios were strong with tier one capital rising to 9.9 percent from 9.5 percent at the end of 1995 and Bond said he did not see surplus capital being generated.
""As long as we're making a respectable return on capital, we regard capital strength as an asset in our business,"" Bond said. ""It helps you with the ratings, it helps with deposits in Asia and to have a strong capital position shows in the bottom line.""
HSBC had a 21.3 percent return on capital in 1996 compared with 20.7 percent in 1995.
Bond said HSBC continues to be confident over Hong Kong's transition from British to Chinese rule in July.
Last year, HSBC was granted a licence to trade in the Chinese yuan and Bond said the bank talking to the Chinese authorities to see how this would work.
HSBC was looking at this massive potential business opportunity in the long-term, he said.
""I think it will take time, of course it will, but the signs are all positive.""
Bond said the rise of sterling against the dollar had not had a great effect on the group's results in 1996 where the average rate for the pound against the dollar was below that of 1995.
He said that, very roughly, for every cent the pound goes up against the dollar, the bank loses 13 million pounds in profits.
Analysts said the results held few surprises and were not expecting to change their forecasts for 1997 in any major way.
Nick Collier of Morgan Stanley who expects 1997 pre-tax profits of 4.94 billion pounds said he might raise this estimate marginally. John Leonard of Salomon Brothers, who has been forecasting 4.87 billion pounds, sees a change of just 50 million pounds either way.
HSBC shares ended 30.5p lower at 1,551.5p in a generally lower bank sector.
In Hong Kong dollar terms, attributable profit rose by 25 percent to HK$37.59 billion. ($ = 0.615 British Pounds)
",17
"Just when they thought their strategy had been accepted by the market, British banks which are heavily involved in investment banking, are seeing their policy fundamentally questioned again.
Barclays and NatWest, who both have aspirations to build global investment banks to compete with the ""bulge-bracket"" Wall Street firms, have had a tough month.
First, BZW, the Barclays unit, posted a massive 29 percent fall in profits for 1996 -- a year which, especially in the bond markets, saw large profits for the big American houses.
Barclays' chief executive Martin Taylor, who has staked a lot on dragging BZW into the top league, vigorously defended the large cash injection into the investment bank.
""You have to be careful not to be frightened of your own shadow,"" he told Reuters in an interview last month. ""The reason that the returns are depressed this year is that we're spending so much,"" adding that BZW would be weaker without the investment.
Taylor has brought in some big and expensive names, like Bill Harrison of Flemings, to lead BZW through its next development stage but the markets may be running out of patience.
Meanwhile, at NatWest Markets, which has followed an acquisitive strategy over the past year, reputation and morale has suffered a direct hit from a stunning 90 million pound ($142.8 million) loss on derivatives.
This laid bare problems of control in what had been considered a tight ship steered by chief executive Martin Owen.
Owen has publicly admitted that the affair has holed NatWest Markets but only ""above the waterline"".
Its strategy was already being questioned before the derivatives debacle in much the same terms as that of BZW -- that it was buying units to bolt onto its core at the height of the market cycle.
Compared to banks like Lloyds TSB, firmly entrenched in a UK bancassurance strategy, analysts question how investment banking will add to shareholder value.
Panmure Gordon banking analyst David Poutney has described the banks' commitment to investment banking as ""lemming-like"" and the returns from the business as ""paltry"".
Analysts are dismayed at the commitment to cost growth in the investment banks but have been reassured that both are making continuing strides in restructuring and reprofiling their retail business though this is likely to become even more fiercely competitive in the near-term,.
At the moment, the jury still seems to be out but one analyst, who declined to be named, said the market will probably give BZW and NatWest Markets a couple of years to start showing what they can do.
The danger is that the market cycle could be against them.
""They have taken on a lot of staff and invested and acquired at the top of the cycle,"" the analyst said. ""If the market correction which people have been predicting happens in the second half of this year it will mean that profits will be hard to come by in 1997 and 1998.""
Already, rumours circulate that Barclays is looking to unload BZW and concentrate on improving the already highly respectable return produced by the retail banking side. But the bank dismisses this talk.
However, Panmure's Poutney said in a recent note, ""(A sale or demerger) would be massively bullish, and cynics who share our view should buy the shares.""
After nailing their colours so firmly to the investment banking mast, Taylor and Wanless would have a lot of explaining to do if they came, belatedly, to the same conclusion that Lloyds TSB chairman Sir Brian Pitman has been expounding for years.
Pitman has never liked the cyclical nature of investment banking profits and has presided over a stunning performance by Lloyds TSB which has better returns than any UK retail bank.
""Soon, people are going to demand a pay-back from all this investment,"" said another banking analyst. ""When that happens, there had better be some good answers or the market will not like it."" ($ = 0.630 British Pounds)
",17
"An army of financial market regulators were poised on Sunday to descend on NatWest Markets, the investment banking arm of National Westminster Bank, which on Friday announced a 50 million pound ($81.4 million) hole in its options trading book.
The Securities and Futures Authority, which licenses options traders, and the Bank of England, which regulates banks generally, both said they would be working closely together to establish what had gone wrong at NatWest Markets.
""Supervisors work closely together and there is no doubt that we will talking about what has happened at NatWest,"" a Bank of England spokesman told Reuters.
But the spokesman could not confirm a formal joint investigation with the SFA, reported in some newspapers on Sunday.
The Serious Fraud Office, which investigates large fraud cases in Britain said it was not yet involved.
""We are not investigating the case, it has not been referred to us and it's not appropriate to speculate about whether it will be, "" an SFO spokesman said on Sunday.
It also remained unclear on Sunday whether the operations of interest rate options trader, named by banking sources as Kyriacos Papouis, who now works for U.S. securities house Bear Stearns, included any element of fraudulent behaviour.
""At the moment, this looks like a trader trying to trade his way out of a loss,"" a banking source said, ""but it's not clear how or why, or how it took so long to discover.""
A spokeswoman for NatWest Markets said the deals had taken place over a period of time in 1996 and had come to light only in the last few days.
She confirmed the suspension of a senior options trader at NatWest Markets, named by sources as Neil Dodgson. A spokesman for Dodgson said he could not comment on the case but would be co-operating fully with any investigations.
The case is sure to raise again the question of supervision of derivatives trading, especially as all City firms went through an apparently exhaustive review of their risk management control systems in the wake of the Barings collapse in 1995.
Investment bank Barings collapsed under losses of 800 million pounds after rogue trader Nick Leeson embarked on a spree of unauthorised derivatives trading.
While the current case does not compare in terms of scale and does seem to have been nipped in the bud, it will still cause major waves around the City.
""We are making a very thorough review of our control systems -- both internal and external,"" the NatWest Markets spokeswoman said. ""This is a business that requires constant scrutiny, you can never be complacent about the control procedures.""
The question in the NatWest case is whether the ""mis-pricing"" of the options was done for personal gain or to hide the real position or was just hopelessly bad trading.
NatWest is also likely to face criticism in the coming days over the suspicion that it already knew of the loss when it announced its 1996 results last week.
NatWest has vigorously denied this, saying it brought the matter to light as soon as possible and has kept regulators fully informed.
NatWest also said no client has been affected. Some sources said Natwest should perhaps have said no client has been ""adversely affected"" since the 50 million pounds must be showing up as a gain in a trading book somewhere.
($ = 0.614 British Pounds)
",17
"London-based banking giant HSBC Holdings Plc, will on Monday announce pre-tax profits for 1996 of above 4.6 billion stg, with analysts confident the bank will continue to produce profitable growth.
In 1995, pre-tax profits were 3.672 billion and HSBC is expected to raise its dividend to around 40p per share from 32p for the previous year.
HSBC is the parent of Hongkong Bank, Hang Seng, Britain's Midland and Marine Midland in the U.S.
Analysts expect HSBC's margin in its key Hong Kong market to have come under some downside pressure in the second half after a 25 basis points improvement in the first six months.
But most expect the overall margin to have been maintained and the bank's Hong Kong mortgage business to have continued to flourish.
UK Mortgage business is also being pursued aggressively although there may have been some erosion in margin and analysts will be looking to Midland Bank for cuts in its cost income ratio.
Marine Midland has already reported, weighing in with a 34 percent increase in net income to $380 million for the year.
One item that could affect the headline profit figure for the group is the level of realised stock market gains at Hang Seng which could provide a swing of as much as 100 million stg.
Analysts do not expect any strategic changes with investment banking continuing to occupy a secondary role and HSBC refusing to be drawn into competing with the large US houses but positioning itself for growth in its Asian core.
In terms of capital, HSBC is thought unlikely to perform share repurchases and analysts expect it maintain a progressive dividend policy.
-- London Newsroom +44 171 542 8864
",17
"National Westminster Bank Plc on Tuesday reported a jump in operating profit but the bank's shares dipped after it warned of an economic slowdown in 1998 and did not perform an expected share repurchase.
Underlying profit rose by 27 percent and NatWest, one of Britain's biggest banks, said the headline profits figure was hit by one-off items.
Profit before tax was 1.12 billion pounds ($1.8 billion) after exceptional items, with operating profit from continuing operations up by 339 million to 1.61 billion pounds.
The bank said it expected the pace of  British economic growth to slow in 1998, however, and as a consequence was adopting a more cautious approach to lending.
""We don't want people to get carried away by 3.5 percent (economic ) growth this year which is what me might still see,"" NatWest chief executive Derek Wanless told Reuters in an interview.
""Our belief is that whoever wins the election, rates will rise and the fiscal position could well be tighter.""
He added that NatWest was putting the lending policies in place now for people who will be paying back in that economic climate.
Wanless said NatWest expected British base rates to rise to 7-1/4 percent by the end of the year compared to their current six percent level.
NatWest increased its general provisions against bad debts by 50 million pounds and made specific provisions of 499 million pounds.
Analysts said the market would be disappointed that NatWest had not performed a further repurchase of shares following its 451 million pounds buyback last July.
Wanless said NatWest will perform further share repurchases if it generates more surplus capital.
Some analysts had expected NatWest to use its remaining shareholder authority to buy back 28 million shares which would have cost it some 220 million pounds but the bank made no announcement.
""If we've got surplus capital we will return it to shareholders,"" Wanless said. ""That's still the policy and will remain the policy.""
He said NatWest would ask shareholders to return its buy-back mandate to 100 million shares at its AGM in April but declined to give any clues on when a repurchase might actually be performed.
NatWest's pre-tax profit figure came after a loss of 719 million pounds on sale of businesses such as its U.S. banking operation Bancorp, costs of 186 million on the redesign of its UK retail bank and a gain of 224 million on the sale of its stake in venture capital company 3i.
Pre-tax profits at NatWest Markets, its investment banking arm, rose to 462 million pounds from 304 million, although this included a fall in bad debt provisions to 18 million pounds from 114 million.
Wanless said the group would not bid in the auction currently under way for mutually-owned life insurer Scottish Amicable but added that it was still on the look out to bolster its operations in the area of long-term savings.
Wanless said NatWest UK saw a six percent rise in income and a two percent fall in costs despite the fact that it was spending large amounts on new systems.
He said an additional 100 million pounds would be spent on this in 1997.
NatWest is paying a final dividend of 19.4 pence, raising the total for the year by 14.6 percent to 29.0p.
By 1130 GMT, NatWest shares were 25-1/2 pence lower at 787 having rallying from a low earlier of 762. ($ = 0.611 British Pounds)
",17
"Prudential Corp Plc on Tuesday beat off rivals to win control of mutually-owned insurance group Scottish Amicable and reinforced its position as Britain's number one fund manager.
By beating bids from Abbey National Plc and Australian Mutual Provident (AMP), Prudential's takeover of ScotAm will raise its funds to more than 100 billion pounds ($160 billion).
Prudential shares rose as analysts saw the company as deriving strategic and earnings benefits from the deal. At 1315 GMT, Pru was up 17 pence at 557p. ""Pru has not gone crazy and paid a stupid price,"" said Michael Lindsay, analyst at Lehman Brothers. ""The acquisition looks to be earnings neutral in the first year and enhancing thereafter.""
ScotAm said with-profits policyholders would benefit from cash and additional policy benefits worth more than 1.5 billion pounds ($2.4 billion).
These include 600 million pounds from Prudential shareholders' and policyholders' funds in compensation for loss of membership rights and a special bonus from ScotAm's life fund worth 470 million pounds which will go into policies.
In addition, the entire remaining ScotAm life fund will be distributed, estimated to have a current value of 500 million pounds. On this basis, ScotAm with profits policy holders should receive total benefits of around 1,400 pounds, varying according to the size and age of the policy. Policyholders will also benefit from financial support to the tune of 1.3 billion pounds to boost ScotAm's life fund which will be closed.
ScotAm's original plan was to end its mutual status  and float on the stock exchange in two or three years time. But the plan was thrown into confusion after Abbey National made a bid for the firm last month.
The injection into the life fund had probably clinched its bid for the mutually-owned life company, Prudential chief executive Sir Peter Davis told Reuters. ""Our offer used the strength of our balance sheet and the Prudential life fund,"" Davis said in an interview. ""We've put together an imaginative structure with the key difference being the capital injection or support we've offered of up to 1.3 billion pounds to the (ScotAm) life fund.""
Davis said the boost to ScotAm's fund -- the company will be run as a completely separate entity under the Prudential umbrella -- will mean that it will be able to have a more flexible investment policy. This could include a greater proportion of investments in equities and higher returns.
The 1.3 billion pound investment comes from Prudential's life fund, which totals 51 billion pounds, and will be provided to ScotAm at a commercial rate.
The merger, creating Scottish Amicable Life, is subject to the approval of policyholders at a special general meeting to be held in June. The proposals will be subject to a 75 percent vote in favour by eligible members.
Davis said ScotAm will develop more successfully with Prudential's capital backing and is expected to show a larger rate of growth.
Roy Nicolson, managing director of ScotAm, told Reuters that the Prudential's offer of high up-front payments plus a reversionary bonus added to the capital support had swung the auction in Prudential's favour.
He said the new capital would allow greater investment in equities, providing the opportunity for better returns for policyholders in the future. Prudential's strong investment track record had also been a major factor.
""We're very excited about the business going forward,"" Nicolson said. ""We'll be able to expand our presence dramatically particularly in the IFA (independent financial adviser) market."" Nicolson said the deal would remove any doubt about ScotAm's financial strength. He said Prudential had pledged to maintain the number of jobs in the ScotAm head office for three years. Talks were already underway about the possibility of using the expertise in ScotAm's investment management arm in Prudential Portfolio managers. Nicolson said it was far too early to know if there would be job losses outside the head office ($ = 0.627 British Pounds)
",17
"British private client stockbroker and fund manager Capel-Cure Myers Capital Management said on Thursday it is in talks with Dutch banking giant ABN AMRO's ABN AMRO Hoare Govett which may lead to an offer for CCM.
Capel-Cure is controlled by Canadian Insurance Group and chief executive John Henderson confirmed the talks but declined to give any of the financial details of the offer.
Capel-Cure has 4.5 billion pounds under management and employs around 450 staff.
Canadian Insurance, a consortium of banks, bought its stake in Capel-Cure-- the rest is owned by the management -- when Central Capital Corp of Canada went bust in 1992. It had previously been owned by Australia & New Zealand Banking Corp.
Henderson said the management of Capel-Cure had been involved at every stage and denied press reports that there had been a disagreement between the Capel-Cure management and Canadian Insurance on whether the fund manager should be sold and how.
ABN AMRO is known to have wanted to expand its London operations with a fund management acquisition.
In January, Jan Vroegop, director of ABN AMRO's global asset management operation said the bank wanted to make ""big steps"" in the lucrative London fund management arena.
ABN AMRO Hoare Govett was involved in a controversial attempt to poach star fund manager Nicola Horlick from Deutsche Morgan Grenfell in January.
Horlick was suspended and later resigned from DMG and ABN admitted that it had talked to her but denied trying to poach her entire team from DMG.
Nick Bannister, head of ABN AMRO Hoare Govett, was unavailable for comment.
",17
"Britain's securities market watchdog said on Tuesday it had disciplined former Barings executive James Bax -- completing the cases of managers blamed for the bank's collapse.
Barings went bust in February 1995 under the weight of some 800 million pounds ($1.3 billion) of losses racked up in unauthorised derivatives trades by trader Nick Leeson, currently languishing in a Singapore jail.
The SFA started proceedings against nine former senior executives of Barings but did not proceed against Peter Baring and Andrew Tuckey, chairman and deputy chairman respectively of Barings group.
The nine were former chief executive Peter Norris, Ron Baker, Bax, Geoff Broadhust, Tony Gamby, Tony Hawes, Ian Hopkins, George Maclean and Mary Walz.
Of these nine, only Hopkins and Baker have any outstanding business with the SFA.
After its spectacular collapse, Barings was taken over by Dutch financial services group Internationale Nederlanden Groep NV and now operates as ING Barings.
The spotlight now turns to Britain's Department of Trade which this week confirmed it has started legal proceedings which could ban the Barings nine plus Tuckey from being directors of any British company for up to 15 years.
The DTI said it would hold preliminary hearings and then would set a timetable for a final hearing of the cases.
And as if that wasn't enough, Norris, Tuckey, Baker, Walz, Hopkins, Gamby, Broadhurst and Bax also face writs from accountancy firm Cooper's & Lybrand in third party proceedings after it was sued by Barings administrator Ernst & Young for what is thought to be around 1.0 billion pounds.
Hopkins was recently banned for three years from being a director in the City and required to pay 10,000 pounds of costs. Though technically he is still able to appeal against his sentence, he is thought unlikely to do so.
Meanwhile, Baker, who as head of financial products played a central role in the Barings affair, is appealing against a reprimand handed out to him in November even though more serious charges had not been proved.
Baring and Tuckey left Barings after giving assurances that they would never seek top management jobs in the financial markets.
Penalties handed out to the others have ranged from reprimands to three year bans with costs of up to 10,000 pounds.
Bax was suspended from being a City director for 21 months and will also pay costs of 10,000 pounds after the SFA found some mitigating circumstances for his conduct.
The SFA said it had taken into account, among other matters, that Bax had no product responsibility for the trading activities of Leeson nor any knowledge of futures and options trading.
Bax's suspension will run from March 1996, the date when the SFA started proceedings against him.
($ = 0.611 British Pounds)
",17
"Prudential Corp. Plc Tuesday beat out rivals to win control of mutually owned insurance group Scottish Amicable and reinforced its position as Britain's No. 1 fund manager.
By beating bids from Abbey National Plc and Australian Mutual Provident, Prudential's takeover of ScotAm will raise its funds to more than 100 billion pounds ($160 billion).
""Pru has not gone crazy and paid a stupid price,"" said Michael Lindsay, analyst at Lehman Brothers. ""The acquisition looks to be earnings neutral in the first year and enhancing thereafter.""
ScotAm said policy-holders would benefit from cash and additional policy benefits worth more than 1.5 billion pounds ($2.4 billion). These include 600 million pounds ($957 million) from Prudential shareholders' and policy-holders' funds in compensation for loss of membership rights and a special bonus from ScotAm's life fund worth 470 million pounds ($750 million), which will go into policies.
In addition, the entire remaining ScotAm life fund will be distributed, estimated to have a current value of 500 million pounds ($797 million).
On this basis, ScotAm with profits policy holders should receive total benefits of around 1,400 pounds ($2,232), varying according to the size and age of the policy.
Policy-holders will also benefit from financial support to the tune of 1.3 billion pounds ($2.07 billion) to boost ScotAm's life fund which will be closed.
ScotAm's original plan was to end its mutual status  and float shares on the stock exchange in two or three years. But the plan was thrown into confusion after Abbey National made a bid for the firm last month.
""Our offer used the strength of our balance sheet and the Prudential life fund,"" Prudential chief executive Sir Peter Davis told Reuters. ""We've put together an imaginative structure with the key difference being the capital injection or support we've offered of up to 1.3 billion pounds ($2.07 billion) to the (ScotAm) life fund.""
Davis said the boost to ScotAm's fund -- the company will be run as a completely separate entity under the Prudential umbrella -- will mean that it will be able to have a more flexible investment policy. This could include a greater proportion of investments in equities and higher returns.
The merger, creating Scottish Amicable Life, is subject to the approval of policyholders at a special general meeting to be held in June.
Roy Nicolson, managing director of ScotAm, told Reuters the new capital would allow greater investment in equities, providing the opportunity for better returns for policy-holders in the future.
He said Prudential had pledged to maintain the number of jobs in the ScotAm head office for three years. He said it was far too early to know if there would be job losses outside the head office.
",17
"Britain's markets watchdog banned former Barings treasury head Ian Hopkins on Tuesday from being a director in the City for at least three years for his part in the 1995 collapse of the investment bank.
In addition, the Securities and Futures Authority (SFA) ordered Hopkins to pay 10,000 pounds ($16,000) towards the SFA's costs after an independent tribunal found that he was no longer a ""fit and proper person"" to be a director of an SFA-regulated City firm.
Hopkins, one of nine Barings executives to have been disciplined by the SFA, has always protested that he attempted to ""blow the whistle"" on irregularities in the Singapore operation but that other managers ignored his warnings.
But this interpretation of his role was rejected by SFA chairman Nick Durlacher. ""The facts do not support this suggestion. An impartial tribunal has scrupulously considered all the available evidence and judged (he) did not 'blow the whistle' with any clarity, force or urgency,"" said Durlacher.
Hopkins was ultimately responsible at Barings Investment Bank for funding the group's international activities. He provided funds to Barings's futures operation in Singapore where trader Nick Leeson ran up losses of 800 million pounds after massive unauthorised trading which led to the collapse of the bank in February 1995.
Barings, its capital spent, was put under administration and later bought by Dutch financial services company Internationale Nederlanden Groep and now trades as ING Barings.
Durlacher added that the tribunal had found that Hopkins's actions ""fell far short of the standards expected of a prudent man in such a senior position"". Hopkins did not offer a formal defence against the allegations but the tribunal took into account written evidence from Hopkins and others.
The SFA announced the result of its last case against a Barings manager last month when it banned James Bax for 21 months and ordered him to pay costs of 10,000 pounds.
The penalty handed out to Hopkins was at the high end of the range of those imposed on former Barings managers after the tribunal found that he failed to control or reconcile funding to Singapore, acting without ""due skill, care and diligence"".
Following the collapse of Barings, the SFA started proceedings against nine former senior executives but did not proceed against Peter Baring and Andrew Tuckey, chairman and deputy chairman respectively of Barings group.
The nine were former chief executive Peter Norris, Ron Baker, Bax, Geoff Broadhust, Tony Gamby, Tony Hawes, Hopkins, George Maclean and Mary Walz. The tribunal has yet to hear an appeal by Baker against the reprimand he received.
Baring and Tuckey left Barings after giving assurances that they would never again seek top management jobs in the financial markets.
Britain's Department of Trade has started legal proceedings which could ban the Barings nine plus Tuckey from being directors of any British company for up to 15 years.
The DTI is to hold preliminary hearings and then would set a timetable for a final hearing of the cases.
Norris, Tuckey, Baker, Walz, Hopkins, Gamby, Broadhurst and Bax also face writs from accountancy firm Cooper's & Lybrand in third party proceedings after it was sued by Barings administrator Ernst & Young for what is thought to be around one billion pounds.
",17
"National Westminster Bank Plc will perform further share repurchases if it generates more surplus capital, its chief executive Derek Wanless said on Tuesday.
Some analysts had expected NatWest to use it remaining shareholder authority to buy back 28 million shares which would have cost it some 220 million stg but the bank made no announcement when it posted its 1996 results earlier.
""If we've got surplus capital we will return it to shareholders,"" Wanless told Reuters in an interview. ""That's still the policy and will remain the policy.""  
Wanless said NatWest would ask shareholders to return its buy-back mandate to 100 million shares at its AGM in April but declined to give any clues on when a repurchase might actually be performed.
Wanless noted that NatWest's tier one capital ratio stood at 6.7 percent at the end of 1996, ""which is in the range we talk about for tier one -- 6.5 to 6.7 -- obviously we are generating capital which isn't being used in the balance sheet.""
He also pointed out that NatWest generated and used a large amount of capital -- on improving systems and technology in NatWest UK and on acquisitions to add to NatWest Markets, its investment banking arm -- in 1996.
Wanless said NatWest UK saw a six percent rise in income and a two percent fall in costs despite the fact that it was spending large amounts on new systems.
He said an additional 100 million pounds would be spent on this in 1997.
Earlier, NatWest posted a pre-tax profit of 1.12 billion stg, down from 1.75 billion in 1995, but this included 719 million stg disposal loss, 186 million stg charged for the restructuring of its retail bank and a 224 million stg gain from the sale of shares in venture capital firm 3i.
On the operating level, profits were up 27 percent at 1.61 billion stg.
Wanless noted that NatWest UK saw a six percent rise in income while costs were down two percent and said that the investment banking arm, NatWest Markets performed well.
NatWest Markets raised it pre-tax profit to 462 million stg from 304 million stg but Wanless admitted that much of this was down to a sharp fall in bad debt provisions which in 1995 were dominated by a large specific hit, generally understood to be have been against Eurotunnel debt.
In a statement with the figures, NatWest said it expected the pace of UK economic growth to slow in 1998 and as a consequence was adopting a more cautious approach to lending.
""Although the UK economic environment remains positive, we see the pace of growth slowing in 1998 and are adopting a more cautious approach to lending,"" said NatWest chairman Lord Alexander.
Wanless said NatWest expected UK base rates to rise to 7-1/4 percent by the end of the year compared to their current six percent level.
""We don't want people to get carried away by 3.5 percent (economic )growth this year which is what me might still see,"" Wanless said. ""Our belief is that whoever wins the election, rates will rise and the fiscal position could well be tighter.""
He added that NatWest was putting the lending policies in place now for people who will be paying back in that economic climate.
NatWest increased its general provisions against bad debts by 50 million stg and made specific provisions of 499 million stg.
The latter included a sharp rise at Lombard which Wanless said was a largely a function of its increasing consumer finance business.
-- London Newsroom +44 171 542 8864
",17
"The Halifax Building Society, Britain's largest home loan lender, on Tuesday posted a 6.6 percent rise in pre-tax profits to 1.43 billion pounds ($2.3 billion) in 1996, the last time it will report before its stock market flotation in June.
The Halifax, which is expected to float for some 12 billion pounds after converting from mutual status, also hinted at further acquisitions to increase its 20 percent share of the total mortgage market.
Its chief executive Mike Blackburn told Reuters he saw some headroom before Britain's competition authorities became concerned.
""We do have some headroom before we would excite the attention of the OFT,"" Blackburn said in reference to competition watchdog the Office of Fair Trading. ""We have said to ourselves that we could certainly go to 25 percent (mortgage market share) before any anti-competitive issues arise.""
But Blackburn said in an interview the Halifax was not engaged in any acquisition discussions at the moment.
If more than 25 percent of a market is at stake in a proposed merger, British competition authorities usually investigate.
Blackburn said the Halifax was unlikely to want to add another mutually-owned life assurance company to its portfolio since the purchase of Clerical Medical last year had met its need for distribution of long-term savings products through Independent Financial Advisers (IFA).
Clerical Medical would be expanded and this explained the society's lack of interest in Scottish Amicable, an independent life insurer up for sale.
Blackburn said the Halifax would continue to target long-term savings products -- life assurance, pensions and investments -- for expansion because he believed they had strong growth potential.
""With an ageing population and governments unable to look after people as they have historically been able to do in retirement, the requirement on the private individual to provide for the long-term will be accentuated.""
The mortgage market had returned to a more normal position in the second half of 1996, he said, following the cut-throat competition of the first half from which the Halifax largely stood aloof.
There was now much less re-mortgaging and the number of transactions was seen rising by around 10 percent in 1997. House prices are set to rise around seven percent on average but more in some areas like London.
""We are seeing regional markets like London looking strong and this is leading to a repeat of the ripple effect we have seen historically,"" Blackburn added.
He said prices were being squeezed by the shortage of stock on the market with the Halifax's estate agencies reporting they could sell far more houses than were coming onto the market.
The Halifax, which saw total assets grow to more than 115 billion pounds in 1966 from just under 100 billion. It's gross mortgage lending was 11.5 billion pounds, but that represented a drop in market share to 16 percent from 17 the previous year.
Net mortgage lending stood at 2.1 billion pounds and mortgage balances grew to 81 billion pounds from 78 billion at the end of 1995.
Blackburn said any apprehension that the character of the Halifax would change after its conversion from a building society owned by its members into a publicly-owned bank was misplaced.
""Customers are our key focus and if we don't provide a competitive range of products then we won't be able to please shareholders, but we have to please customers first,"" he added.
The Halifax said its 1996 profits were before 502 million pounds of exceptional charges, made up of 298 million pounds in reorganisation costs and 153 million for the cost of converting into a public company which members approved last month. ($ = 0.619 British Pounds)
",17
"British insurance and financial services company Legal & General Plc on Thursday posted a larger-than-expected rise in operating profit to 134.3 million pounds ($208.9 million) after 111.1 million in the first half of last year.
The insurer also weighed in with a 13.6 percent rise in its interim dividend to 8.75p per share after 7.7p last time.
Legal & General said it could also benefit from the recent investment management problems at Morgan Grenfell Asset Management (MGAM).
Chief executive David Prosser told Reuters he did not expect the negative impact of the debacle at MGAM, a unit of Deutsche Bank, to be very great.
""I don't think there will be much (negative impact),"" Prosser said. ""It's a well-regulated market and IMRO will make sure investors don't lose out.""
The Investment Management Regulatory Organisation has launched an enquiry into how investment funds at MGAM were managed following their temporary suspension last week after MGAM said it had found possible irregularities.
Prosser added that Legal and General could actually benefit.
""We could have some benefit,"" Prosser said. ""We are a strong company with a triple-A (credit) rating, one of the few life houses to have one.""
He added that, given Legal & General's strong brand name, it could see some positive backlash from the affair.
Prosser said the first half results had been achieved in a market which remains highly competitive.
""The strong increase in new business, especially in life and pensions income, enhances the group's future profit potential.""
The company's pre-tax profit was inflated to 1.51 billion pounds compared with 119.1 million last time by changes in reporting standards as required by a European Union directive.
The figure for the first half of this year includes 1.402 billion pounds reclassified from its shareholders' retained capital within its UK long-term fund.
The operating result was at the high end of analysts' forecasts and the dividend higher than expected and L&G shares stood 16.5 pence higher at 745p per share by 1000 GMT.
Looking to the future, Prosser reiterated that growth by acquisition does not form part of Legal & General's strategy.
""I would never say ""never"" but an acquisition is not part of the strategy,"" Prosser said.
He said Legal & General's strategy consists of organic growth from multi-channel selling approach which, in turn, is based on good value for money products and advice-based selling.
""The strategy is not dependent on buying anyone or merging with anyone,"" Prosser added.
Prosser said second half trading had continued the good results but noted that the very good performance of the company's bulk annuity business is unlikely to be repeated in the second six months.
L&G said it would perform a five-for-two share split of its ordinary shares subject to shareholder approval, which a spokeman said was being done to aid market liquidity. ($1=.6430 Pound)
",17
"Martin Owen, under intense pressure as his NatWest Markets operation admitted a 90 million pound ($144 million) loss on derivatives trading, is at first glance an unlikely character to lead an investment bank with global aspirations.
The investment banking unit of British banking giant National Westminster Bank plc is run by a friendly, talkative man with a soft Welsh accent who trained as an accountant and takes an active role in the Salvation Army.
Doubts have persisted about NatWest's investment banking strategy which has expanded aggressively in the last 18 months through several acquisitions which some analysts have criticised as too expensive.
The big spending has included major expansion in the United States with the purchase of Greenwich Capital, a bond trading house, for $590 million and mergers and acquisitions specialist Gleacher for $135 million.
But by all accounts, Owen, 49, has made a good job of bringing the disparate parts of NatWest Markets together although, like its investment banking peers, this has meant a big rise in costs with more to come.
Some market observers say Owen does have difficulty with the mergers and acquisitions side of the business.
His background would support this view as Owen came to the top via NatWest's treasury and capital markets operations.
After working for American company Dow Corning Corp in Wales, Owen joined Welsh independent TV company HTV before starting his own accountancy and insurance business which he sold in 1979.
Three years of full-time work for the Salvation Army followed although Owen did manage to squeeze in an external doctorate in, ironically enough, risk management from the University of Southern California.
Thus qualified for the financial markets, Owen joined NatWest in 1983 only pausing for a short stint as a financial supervisor in the Isle of Man.
Analysts do not doubt Owen's ability to make the business bigger but they do question the wisdom of trying to emulate the big Wall Street investment banks.
Even under 1996's relatively favourable market conditions, NatWest Markets profits rose by 158 million pounds to 462 million. But when a big 96 million drop in provisions is taken into account, the 62 million pounds left have been more than wiped out by the options loss.
Owen, who has headed NatWest Markets since 1992, appears genuinely shocked that the options problem could have begun as long ago as the end of 1994.
""That is clearly unacceptable against the background of incidents at other firms as well,"" Owen said on Thursday. ""Fortunately it does seem to be isolated to this area.""
Some would say that fortune should not really come into the equation but at least these losses -- 77 million pounds after provisions and bonus cuts are taken into account -- are dwarfed by those posted by Deutsche Morgan Grenfell or Barings.
Owen will perhaps sleep more soundly after NatWest Group chief executive Derek Wanless expressed his confidence in him.
Wanless told Reuters in an interview that he had complete confidence in Owen, who will give up 200,000 pounds of a 500,000 pound bonus because of the options affair.
""It is a set-back for Martin in one area. We'll learn a lot from it, get those lessons put into practice and that will make us much stronger,"" Wanless said.
($ = 0.626 British Pounds)
",17
"Asia-Pacific specialist bank Standard Chartered Plc will boost investment in 1997 and beyond to take advantage of business opportunities, its chief executive Malcolm Williamson said on Wednesday.
""We're giving a signal that we do expect over the next year to increase costs because we're investing more in the business to really get it into good shape for the next millennium,"" Williamson told Reuters in an interview.
Williamson said he expects Standard Chartered's cost base to rise by seven percent in 1997 after a two percent rise in 1996.  
And Williamson added that the investment was likely to continue after 1997. ""It will go on for a period of years,"" he added.
""We need to step up that investment to give more power to our elbow.""
Williamson said that since quitting the businesses which Standard Chartered felt were not favourable in the long-term, the investment will be used to boost its core areas of operation.
He said these are retail banking, which provides around one third of the bank's profits, consumer banking, where credit cards are a burgeoning area and corporate and institutional banking.  
Earlier, Standard Chartered announced a 32 percent rise in pre-tax profits in 1996 to 870 million stg and raised its dividend the same amount to 14.5p per share for the year.
Williamson said the increased investment would not jeopardise the bank's progressive dividend policy.
Williamson said the Standard Chartered strategy does not include major acquisitions but added that in-fill buys could be a possibility.
He said major banking acquisitions in Asia were difficult for practical reasons such as legal constraints on foreign ownership. ""So, we're probably stuck with in-fill,"" he said.  
Williamson said economic prospects in the Asia-Pacific region were fairly bright, adding that both the Hong Kong and Chinese economies were doing well as the handover approaches.
He said that Standard Chartered did not expect the death of Deng Xiaoping or the handover of Hong Kong to China to disrupt the bank's business.
Williamson also pointed out that while some growth rates in Asia were not as strong as they have been, they were still stronger than anything seen in OECD countries.
-- London Newsroom +44 171 542 8864
",17
"News that HSBC Holdings is to follow its recent Mexican investment by dipping a rather bigger toe in Brazilian waters was greeted with enthusiasm by analysts tinged only with the caution that the words ""Latin America"" still engender.
But they recognised that the economic and political strides made by the major countries in Latin America -- Mexico, Argentina and Brazil and in the smaller economies like Chile, Peru and Ecuador -- make the continent a hotbed of opportunity.
""It's a large and growing market where a well-run bank with a large franchise can make money,"" said one analyst.
HSBC's purchase of Bamerindus has involved the London-based banking giant which has major interests in the UK, Asia and the U.S., in spending 1.0 billion reais ($945 million) in a move which came after the Brazilian central bank closed the loss-making Bamerindus down.
Of this amount, 400 million reais has been paid out on goodwill, infrastructure and other intangible assets.
Douglas Flint, HSBC's finance director, told Reuters in an interview that the money had been paid in cash and denied speculation that the transaction had included any form of discounted Brazilian debt paper.
He said Banco HSBC Bamerindus, as it now known, will take the assets that it wants from the old bank with the rest remaining with the shell.
Flint said Bamerindus would be expanded but would first have to be re-established following the liquidity problems which had dogged it. He said it would be bold to predict when the investment would prove to be positive for HSBC's earnings but added that this was unlikely to be beyond the short-term.
Among few concerns expressed by London analysts was the durability of Brazil's economic and political stability and the quality of management HSBC could count on at Bamerindus.
Flint said the question of management was the first thing HSBC had addressed, already putting in 50 executives.
""We have got managers and executives who have experience of taking on many-branched operations with large workforces, instilling our operating practices and culture and making a success of it,"" Flint said, adding that HSBC had given no guarantees on staffing.
The buy is seen as typical for HSBC which has made a speciality of buying in what might be termed opportunistic circumstances. Analysts say this was the case with its purchase of Hang Seng Bank in the Sixties, the UK's Midland Bank and Marine Midland in the U.S.
Last month, HSBC paid around $300 million for a 19.9 percent stake in Mexico's Grupo Financiero Serfin, another previously loss-making institution, and has involvement in Chile, Argentina, Panama and Peru.
Analysts say that a few years ago, Latin America did not seem central to HSBC's strategy but the improving macro-economic and political climate coupled with the continent's growing ties with HSBC's heartland in the Pacific Rim have made the bank reconsider its strategy.
""We are very bullish on Brazil both as an economy and in terms of banking profitability,"" said Nick Collier, banking analyst at Morgan Stanley. ""It's a growth market with a highly bankable population.""
Analysts agreed that for a country of its size and population Brazil is under-banked and its history of economic mismanagement has meant that banks are little trusted and general poorly run with the major exception of its largest private bank Bradesco which posted record profits in 1996.
Even Britain's conservative Lloyds TSB Group is expanding its interests in Brazil. It recently bought the consumer finance business of its 50 percent-owned associate Banco Multiplic and is known to be cautiously weighing up further overseas expansion.
This desire may stem from the fact that margins in domestic banking are likely to come under increasing pressure in a market which many regard as over-populated and which, if anything, is likely to become even more so with ever more institutions aggressively chasing the same type of business.
""Around the world, financial markets are consolidating and new competitive threats are arising from non-traditional participants in those markets,"" said HSBC chairman Sir William Purves recently.
That's just how some Brazilian banks must be feeling this week.
($ = 1.058 Brazilian Reais)
",17
"British insurance and asset management company Prudential Corp Plc said on Wednesday it is interested in buying a building society but chief executive Peter Davis refused to be drawn on the names in the frame.
""We are interested in buying a building society but for its branch network and its customer base rather than its mortgage book,"" Davis told Reuters in an interview.
Davis was speaking after Prudential raised first half operating profit, a measure it prefers to pre-tax profit, by 8.0 percent to 421 million stg compared to 390 million last time.  
Davis said he would not comment on any specific names that have been linked to Prudential which have recently included Lloyds Abbey Life, currently controlled by LLoyds TSB Plc.
But industry sources say it is extremely unlikely that the Prudential would be interested in Lloyds Abbey.
Davis was upbeat about the prospects of the Prudential's telephone banking operation which is launched on October 1 and will see its direct sales force selling products like mortgages to its existing customer base.  
Customers will also be introduced to the company's deposit products.
The start-up has cost the Prudential around 33 million stg which was included as a charge in the calculation of operating profit.
Davis said that Prudential's funds under management have risen by four percent since the end of 1995 to 85 billion stg while profit rose to 14 million stg from eight million in the first half of last year.  
Davis hoped there would be no lasting knock-on effect on the fund management industry from recent events at Morgan Grenfell Asset Management but said the affair was sure to make investors look closely at the standing of the institution with which they have their money invested.
""It's likely to be a swings and roundabouts thing,"" Davis said. ""There will probably be a general loss of confidence but we will also see some flight to quality and security.""
Davis said the Prudential's insurance business was benefiting from a general upturn in consumer confidence in the UK.  
""Customers are feeling a little more confident and are more willing to make commitments,"" Davis said.
But he noted that single contribution products were still showing far more growth than those where a longer-term commitment or regular contributions have to be made.
Illustrating this, the Prudential's single contribution sales rose by 50 percent in the first half of the year compared to a gain of 15 percent for regular contribution sales.
Davis said the personal pensions industry had still not completely thrown off the stigma of the pensions mis-selling scandal but he said consumers were starting to realise more that they must make adequate pension provisions.
-- London Newsroom +44 171 542 8864
",17
"Lloyds TSB Group, Britain's largest retail bank, has started an in-depth review of business opportunities overseas, its chief executive Peter Ellwood said on Tuesday.
""(Overseas expansion) has been a bit of a disaster area for British banks, so I think one approaches it with extreme caution,"" Ellwood said, ""but if you look at our potential for growth in the coming years, it does behove us to look very carefully at different parts of the world and ask to what extent we can invest.""
Which part of the world Lloyds would invest in would depend on which products and services the bank thought it could sell and the kind of distribution channels that would be available.
Ellwood said Lloyds was thinking about which markets and whether to enter organically or by acquisition.
""We're asking ourselves, what are the risks of expanding in Australia or Latin America, North America or Europe?,"" Ellwood said. ""We want to be in a strong position, a proactive position.""
Lloyds has historic connections with Latin America and is known to want to expand into consumer finance products in Brazil.
It has also been linked with an expansion into Australia to add to its interests in New Zealand.
But Ellwood refused to be drawn on any specific area of interest.
Lloyds TSB has been seen as a candidate to enter Australia where restraints on overseas entrants are expected to be eased shortly.
He said the bank had not reached a stage of specific interest, adding that the review of international opportunities was something that he had begun relatively recently.
""I want a very comprehensive analysis of where we might expand but that doesn't mean we're going to rush out and buy something,"" Ellwood added. ""But it will mean that we can say we are definitely ruling these countries out or say these could be areas of opportunity.""
Ellwood said some countries in Latin America, for example, have made phenomenal progress with economic reform, naming Brazil and Argentina in particular.
""The challenge for any European bank is to decide whether this is sustainable. If you decide it is, and go on the heavy acquisition trail then your risk will be higher but your rewards will also be higher if you're right.""
Ellwood said Lloyds TSB would never rule anything out in an area where it has skills and experience.
Lloyds took big hits on sovereign lending in Latin America as a result of the 1980s debt crisis and consequently cut down its involvement there.
But in its 1996 results, Lloyds reported a pretax profit of 127 million stg from its Emerging Markets Debt portfolio including 86 million stg of releases from provisions set earlier. -- London Newsroom +44 171 542 8864
",17
"London-based international bank HSBC Holdings Plc on Monday posted a 23 percent rise in 1996 profits but chief executive John Bond predicted a challenging year ahead with increasing competition.
Despite the prospect of tougher conditions, Bond said the banking group, which is one of the biggest in the world, had a strong capital position and a balance sheet that made it ready to meet competition head-on.
""We see 1997 as a challenging year wherever we look, whether it be Asia or the UK the competition continues to increase,"" Bond said in an interview.
Earlier, HSBC announced a 23 percent rise in pretax profits for 1996 to 4.52 billion pounds ($7.3 billion) -- around the middle of market expectations. A hefty nine pence per share rise in annual dividend to 41 pence bettered most forecasts.
Bond said HSBC's British unit Midland Bank would continue to grow organically as the price of acquisitions was impossible to justify to shareholders.
Midland put in a strong performance with pretax profits up more than 20 percent and costs held to a rise of less than one percent.
Bond said HSBC's capital ratios were strong, with tier one capital rising to 9.9 percent from 9.5 percent at the end of 1995. He did not see surplus capital being generated.
""As long as we're making a respectable return on capital, we regard capital strength as an asset in our business,"" Bond said. ""It helps you with the ratings, it helps with deposits in Asia and to have a strong capital position shows in the bottom line.""
HSBC had a 21.3 percent return on capital in 1996 compared with 20.7 percent in 1995.
Bond said HSBC continued to be confident about Hong Kong's transition from British to Chinese rule in July.
Last year, HSBC was granted a licence to trade in the Chinese yuan and Bond said the bank was talking to the Chinese authorities to see how this would work in practice.
Bond said HSBC was looking at this massive potential business opportunity in the long term.
""I think it will take time, of course it will, but the signs are all positive.""
He said the rise of sterling against the dollar had not had a great effect on the group's results in 1996 where the average rate for the pound against the dollar was below that of 1995.
But he said that, very roughly, for every cent the pound goes up against the dollar, the bank loses 13 million pounds in profit. ($ = 0.615 British Pounds)
",17
"Banking analysts said on Friday that Lloyds TSB Group Plc's 52 percent headline rise in 1996 pretax profits was rather flattering and expressed some concern for future income growth.
The pretax profit figure of 2.505 billion stg was just above top expectations although these had been expected to be bettered after some components of the group -- Lloyds Abbey Life and Cheltenham & Gloucester -- recently reported higher than expected gains.
""There's nothing really wrong with the results,"" said John Leonard, banking analyst at Salomon Brothers. ""But they are not as glorious as they look on the surface.""
Analysts pointed out that the large drop in bad debt provisions -- 44 percent down to 327 million stg -- was a surprise, even though improvement was expected given the fact that the bank has increased higher quality assets such as mortgages.
Leonard and Panmure Gordon analyst David Poutney said they would likely not be increasing their profit forcasts for 1997 which stand at 2.825 billion stg and 2.940 billion stg respectively.
But Poutney, who has been advising clients to hold the shares but take profits, said he was now a seller.
""Overall, they are good figures but then it comes down to the valuation of the shares,"" Poutney said, ""and they are looking a bit expensive. I can't see them making much headway from here.""
Lloyds TSB shares stood 5-1/2p lower at 496-1/2p at 0900 GMT.
Poutney expressed concern that costs, which were down in the first half, had ended the year virtually flat and also noted that income growth had slowed in the second six months.
All analysts pointed out that the 20 percent rise in the group's total dividend for 1996 to 13.2p per share was more than the market had been expecting with Lloyds continuing to pass value to shareholders via the dividend.
""Bad debts were much lower than expected,"" said Nick Collier, banking analyst at Morgan Stanley, ""and there was a bigger return from problem country debt.""
Specific provisons for bad and doubtful debts were down to 357 million stg from 459 million in 1995 while profit from its problem country debt portfolio, mainly in Latin America, jumped to 127 million stg from 50 million.
Lloyds said ""problem country debt"" had improved so much that it is renaming the portfolio ""emerging markets debt.""
Other concerns in the figures included a sharp rise in general insurance claims to 107 million stg from 70 million in 1995 although analysts were happy that the group has increased its provision against claims from the pensions mis-selling debacle by 39 million stg to 200 million.
Dealing profits were also sharply lower at 96 million stg compared to 175 million in 1985.
Despite their concerns, analysts were generally positive, though, given the shares' outperformance last year, they said this would now be difficult to maintain in 1996. -- London Newsroom +44 171 542 8864.
",17
"Prudential Corp said on Tuesday its injection of funds into Scottish Amicable's life fund had probably clinched its bid for the mutually-owned life company, Prudential chief executive Sir Peter Davis told Reuters.
""Our offer used the strength of our balance sheet and the Prudential life fund,"" Davis said. ""We've put together an imaginative structure with the key difference being the capital injection or support we've offered of up to 1.3 billion stg to the (ScotAm) life fund.""  
Davis said the boost to ScotAm's fund -- the company will be run as a completely separate entity under the Prudential umbrella -- will mean that it will be able to have a more flexible investment policy which could include a greater proportion of investments in equities.
This in turn could raise returns.
The 1.3 billion stg investment comes from Prudential's life fund, which totals 51 billion stg, and will be provided to ScotAm at a commercial rate.
The merger, creating Scottish Amicable Life, is subject to the approval of policyholders at a special general meeting to be held in June. The proposals will be subject to a 75 percent vote in favour by eligible members.  
Davis said that on an embedded value or accruals basis, the merger would be earnings enhancing straight away but that on a modified accounting basis, which only takes account of profits on a new policy as bonuses start to be paid, the merger would be slightly dilutive for a couple of years.
The Prudential is paying 850 million stg from its shareholders' funds and its life fund. Coupled with the injection of up to 1.3 billion stg, this will allow the release of around 900 million stg over time from the ScotAm life fund to its policyholders.
Davis said ScotAm will develop more successfully with Prudential's capital backing and is expected to show a larger rate of growth.
",17
"Britain's largest retail financial services group, Lloyds TSB, on Friday reported a 52 percent surge in 1996 profits, but analysts said the figure was somewhat flattering and included lower than expected bad debt provisions.
Pretax profits in the first full year following the merger between Lloyds Bank and TSB rose to 2.505 billion pounds ($4.1 billion), and the bank, which has been the star performer in a booming British banking sector, said ""the best is yet to come.""
""We had a good year in 1996 but the combination of Lloyds, TSB and Cheltenham & Gloucester is not fully into its swing,"" Lloyds TSB chairman Sir Brian Pitman told reporters at a news conference.""
Pitman expects cost savings of 400 million pounds every year from the merger and from the purchase of the 38 percent minority interest in Lloyds Abbey Life completed last year.
The 1996 profit figure followed 1.650 billion pounds the previous year. Lloyds TSB raised its dividend by 20 percent to 13.2 pence per share from 11p, while earnings per share soared by 63 percent to 31.2p from 21.3.
But banking analysts said the headline data flattered the bank's underlying performance somewhat and expressed some concern for future income growth. Lloyds shares eased 7p to 485 but later improved to stand a net 2p higher by 1600 GMT at 504p.
""There's nothing really wrong with the results,"" said John Leonard, banking analyst at Salomon Brothers. ""But they are not as glorious as they look on the surface.""
Analysts pointed out that the large drop in bad debt provisions -- 44 percent down to 327 million pounds -- was a surprise, even though some improvement was expected given that the bank has increased higher quality assets such as mortgages.
""Bad debts were much lower than expected,"" said Nick Collier, banking analyst at Morgan Stanley, ""and there was a bigger return from problem country debt.""
Specific provisons for bad and doubtful debts were down to 357 million from 459 million pounds in 1995 while profit from its problem country debt portfolio, mainly in Latin America, jumped to 127 million from 50 million.
Leonard and Panmure Gordon analyst David Poutney both said they would likely not be increasing their profit forcasts for 1997 which stand at 2.825 billion pounds and 2.94 billion respectively.
But Poutney, who has been advising clients to hold the shares but take profits, said he was now a seller.
""Overall, they are good figures but then it comes down to the valuation of the shares,"" Poutney said, ""and they are looking a bit expensive. I can't see them making much headway from here.""
Lloyds said it made a restructuring provision of 75 million pounds following its purchase of insurer Lloyds Abbey Life and said it was raising its provision against possible redress from the mis-selling of pensions by 29 million pounds to 200 million, a move welcomed as prudent by analysts.
Pitman said Lloyds was comparing itself with the ""best U.S. companies"" such as Coca Cola and GE and like them has adopted the ""economic profit"" measure as the best guide to its performance as it reflects growth in investment and return.
Broadly speaking, economic profit represents the difference between earnings on a company's equity and the equity cost.
Lloyds TSB said that, after excluding restructuring provisions, economic profit for 1996 was 69 percent higher at 1.055 million pounds compared with 623 million in 1995.
Pitman said the bank is likely to spend surplus capital on growth, both organic and by aquisition, or increasing dividends rather than on buying back shares like some of its competitors.
Pitman said shareholders had urged the bank not to buy back shares but to continue to provide them with high returns.
""Our capital ratios are greatly restored,"" Pitman said, ""and if we can, we would like to continue to grow (both) organically and by acquisition and increase dividends."" ($1=.6128 Pound)
",17
"An army of financial market regulators were preparing Sunday to descend on NatWest Markets, the investment banking arm of National Westminster Bank, which said Friday it found a 50 million pound ($81.4 million) hole in its options trading books.
The Securities and Futures Authority, which licenses options traders, and the Bank of England, which regulates banks generally, both said they would be working closely together to establish what had gone wrong at NatWest Markets.
""Supervisors work closely together and there is no doubt that we will talking about what has happened at NatWest,"" a Bank of England spokesman said.
The spokesman could not confirm, however, the existence of a formal joint investigation with the Securities and Futures Authority, as reported in some British newspapers Sunday.
The Serious Fraud Office, which investigates large fraud cases in Britain said it was not yet involved in the case.
""We are not investigating the case, it has not been referred to us and it's not appropriate to speculate about whether it will be,"" a Fraud Office spokesman said Sunday.
It also remained unclear Sunday whether the operations of an interest rate options trader, named by banking sources as Kyriacos Papouis, who now works for U.S. securities house Bear Stearns, included any element of fraudulent behaviour.
""At the moment, this looks like a trader trying to trade his way out of a loss,"" a banking source said. ""But it's not clear how or why, or how it took so long to discover.""
A spokeswoman for NatWest Markets said the deals had taken place over a period of time in 1996 and had come to light only in the past few days.
She confirmed the suspension of a senior options trader at NatWest Markets, named by sources as Neil Dodgson. A spokesman for Dodgson said he could not comment on the case but would be cooperating fully with any investigations.
The case is sure to raise again the question of supervision of derivatives trading, especially as all London firms went through an apparently exhaustive review of their risk management control systems following the collapse of the Barings investment bank in 1995.
Barings collapsed under losses of 800 million pounds ($1.3 billion) after rogue trader Nick Leeson embarked on a spree of unauthorised derivatives trading.
While the current case does not compare in terms of scale and does seem to have been nipped in the bud, it will still cause major waves around London's financial circles.
""We are making a very thorough review of our control systems -- both internal and external,"" the NatWest Markets spokeswoman said. ""This is a business that requires constant scrutiny, you can never be complacent about the control procedures.""
The question in the NatWest case is whether the ""mis-pricing"" of options was done for personal gain or to hide the real position or was just hopelessly bad trading.
NatWest is also likely to face criticism in the coming days over the suspicion that it already knew of the loss when it announced its 1996 results last week.
NatWest has vigorously denied this, saying it brought the matter to light as soon as possible and has kept regulators fully informed.
NatWest also said no client had been affected.
Some sources said Natwest should perhaps have said no client had been ""adversely"" affected since the 50 million pounds ($81 million) must be shown as a gain in a trading book somewhere.
",17
"Financial services group Cater Allen said on Friday its purchase of Glasgow-based stockbroker Aitken Campbell from Union Plc would complement its existing activities in share dealing and stock lending.
""We already have a number of allied operations like City Deal and in Cater Allen we have a significant stock lending operation,"" Cater's managing director David White said in an interview.
White declined to divulge the price of Aitken Campbell but said the amount was not significant and that, while contracts remained to be signed, both sides had sought to reassure both the market and Aitken staff by making an announcement.
""Aitken fits in quite nicely with City Deal and will be a sister company, we're not merging it into anything,"" White added.
He also noted one of the attractions of Aitken Campbell was that it runs one of only four electronic trading systems in the market -- the others belong to BZW, Kleinwort Benson and Merrill Lynch.
Cater still maintains its discount house and other money market activities and has also moved into fund management.
Union announced on February 25 that it was at an advanced stage in talks to sell Aitken Campbell as part of a major reorganisation, which saw the historic firm give up its role as a money market counterparty to the Bank of England.
Union is thought to have received a bid approach for the rest of the company, mainly an asset play based on its banking licence and desirable headquarters building in the heart of the City, from millionaire Joe Lewis who already owns 24 percent of Union.
Caribbean-based Lewis recently hit the headlines by investing 40 million stg in football club Glasgow Rangers.
Acting executive chairman of Union, Graeme Knox was not available for comment on reports that Lewis's English National Investment Company is offering a 110p cash and shares deal for Union whose shares currently stand at 96p.
-- London Newsroom +44 171 542 8864.
",17
"Britain's largest retail financial services group, Lloyds TSB, on Friday reported a 52 pct jump in 1996 profits, but analysts said the figure was somewhat flattering and included lower than expected bad debt provisions.
Pretax profits in the first full year following the merger between Lloyds Bank and TSB Group rose to 2.505 billion pounds ($4.1 billion), and the bank, which has recently been the star performer in a booming British banking sector, said it still has ""unique opportunities for future profitable growth.""
The profit figure followed 1.650 billion the previous year. Lloyds TSB raised its dividend by 20 percent to 13.2p per share from 11p, while earnings per share soared by 63 percent to 31.2p from 21.3.
Banking analysts said the headline data flattered the bank's underlying performance, however, and expressed some concern for future income growth. Lloyds shares eased 7p to 485 but later improved to stand unchanged by 1045 GMT at 502p.
""There's nothing really wrong with the results,"" said John Leonard, banking analyst at Salomon Brothers. ""But they are not as glorious as they look on the surface.""
Analysts pointed out that the large drop in bad debt provisions -- 44 percent down to 327 million pounds -- was a surprise, even though some improvement was expected given that the bank has increased higher quality assets such as mortgages.
""Bad debts were much lower than expected,"" said Nick Collier, banking analyst at Morgan Stanley, ""and there was a bigger return from problem country debt.""
Specific provisons for bad and doubtful debts were down to 357 million stg from 459 million in 1995 while profit from its problem country debt portfolio, mainly in Latin America, jumped to 127 million stg from 50 million.
Lloyds said ""problem country debt"" had improved so much that it is renaming the portfolio ""emerging markets debt"".
Leonard and Panmure Gordon analyst David Poutney both said they would likely not be increasing their profit forcasts for 1997 which stand at 2.825 billion pounds and 2.94 billion pounds respectively.
But Poutney, who has been advising clients to hold the shares but take profits, said he was now a seller.
""Overall, they are good figures but then it comes down to the valuation of the shares,"" Poutney said, ""and they are looking a bit expensive. I can't see them making much headway from here.""
Lloyds said it made a restructuring provision of 75 million pounds following its purchase of the minority interest in Lloyds Abbey Life and expects to make cost savings of 50 million pounds per year from the acquisition to add to the 350 million pounds its expects to save from the TSB merger.
It also said it was raising its provision against possible redress from the mis-selling of pensions by 29 million pounds to 200 million, a move welcomed as prudent by analysts.
In a joint statement, Lloyds TSB chairman and its new chief executive Peter Ellwood said the high quality of the bank's earnings should enable it to produce consistently higher returns than the industry average.
Lloyds TSB's total revenue rose seven percent to 6.75 billion pounds and net interest margin was maintained at end-1995 levels despite erosion in some areas.
Other concerns in the figures included a rise in general insurance claims to 107 million stg from 70 million in 1995 and a sharp fall in currency dealing profits which dropped to 96 million stg compared to 175 million in 1995.
Despite these concerns analysts were generally positive, although, given the shares' outperformance last year, they said this would be more difficult to maintain in 1996. ($1=.6128 Pound)
",17
"Shares in Standard Chartered, the London-based bank which specialises in the Asia-Pacific region, rose sharply on Wednesday after it raised 1996 profits by 32 percent and said it would give a major boost to business investment.
StanChart's pretax profit rose to 870 million pounds ($1.43 billion) including exceptional items of 45 million pounds, from 661 million in 1995.
By 1030 GMT, StanChart shares were 21.5p higher at 791.5p, having touched a high earlier of 797p.
It also raised its dividend by 32 percent to 14.5 pence per share from 11 pence in 1995 and said trading profit rose to 818 million pounds from 654 million.
""We're giving a signal that we do expect over the next year to increase costs because we're investing more in the business to really get it into good shape for the next millennium,"" chief executive Malcolm Williamson told Reuters in an interview.
Williamson said he expects Standard Chartered's cost base to rise by seven percent in 1997 after a two percent rise to 1.09 billion pounds in 1996.
He added that the investment was likely to continue after 1997. ""It will go on for a period of years,"" he said.
""We need to step up that investment to give more power to our elbow.""
Williamson said that since quitting the businesses which Standard Chartered felt were not favourable in the long term, such as private banking which it sold last year, the investment will be used to boost its core areas of operation.
He said these are retail banking, which provides around one third of the bank's profits, consumer banking, where credit cards are a burgeoning area, and corporate and institutional banking.
The bank said it sees positive economic signs in the region.
""The Asia Pacific region remains key to our future. There was a slight slowdown in Singapore and other economies during 1996 but indications are positive for 1997,"" Chairman Patrick Gillam said in a statement.
The profits figure hit the top end of analysts' forecasts that were mostly in a tight 860 to 870 million pounds range.
At the half-way stage, StanChart tried to temper market exuberance by warning that it expected to see slower growth in mortgage lending and analysts had expected profits to be hit by the firm pound and dull foreign exchange markets in 1996.
Stanchart said the lower foreign exchange profits were compensated for by better returns from asset and liability management.
Williamson said the increased investment would not jeopardise the bank's progressive dividend policy, adding that the Standard Chartered strategy does not include major acquisitions but added that in-fill buys could be a possibility.
He said major banking acquisitions in Asia were difficult for practical reasons such as legal constraints on foreign ownership. ""So, we're probably stuck with in-fill,"" he said.
Williamson said Standard Chartered did not expect the death of Deng Xiaoping or the handover of Hong Kong to China to disrupt the bank's business.
He also pointed out that while some growth rates in Asia were not as strong as they have been, they were still stronger than anything seen in OECD countries.
",17
"Interest rates on British home loans may rise this year due to upward pressure on savings rates, even if a new government does not immediately tighten monetary policy, analysts said on Thursday.
This is a separate issue from the question of whether the government should raise interest rates to nip inflation in the bud after the general election on May 1, they said.
The flotation of four building societies and the takeover of another will free as much as 140 billion pounds ($225 billion) of savings locked in nearly 30 million accounts in the societies, which provide home mortages.
This is around 25 percent of British retail savings and analysts expect a good proportion of this to be moved.
""I expect 15 billion pounds to be moved as a conservative estimate,"" said UBS building societies analyst Rob Thomas. ""The effect will be to push up savings rates and, since mortgage lending is largely funded from savings, mortgage margins will come under pressure and rates may rise.""
Halifax, Britain's largest mortgage lender with 20 percent of the market; Woolwich ; Alliance & Leicester and Northern Rock are ending their mutual society status and floating on the stock market.
Savers had to deposit money in these building societies to qualify for free shares. But once the societies have floated, savers can move their money where they want.
The societies will have to fight hard to keep hold of the money as other institutions such as Abbey National and Cheltenham & Gloucester, part of the Lloyds TSB Group want to grab a big chunk of the cash.
Analysts expect a fair proportion of the money to flow into pure spending or to other financial products such as unit trusts. But they also expect a large amount to be up for grabs within the savings and loan industry.
On Wednesday, Abbey National, which converted to bank status and floated in 1990, pointedly noted that much of the money can already be moved as members have already qualified for shares.
The Bradford & Bingley Building Society, proclaiming its continued mutual ownership, said it would effectively raise savings rates and cut mortgage rates.
Thomas of UBS said the spread between mortgage rates and base rated was low historically following mortgage rate cuts in 1995 which outstripped an easing base rate.
Pressure on savings rates could trigger a rise for borrowers if institutions want to maintain margin which has already been difficult to do. ""This might even result in a round of mortgage rate rises not associated with a base rate rise,"" Thomas said.
David Poutney, banking analyst at Panmure Gordon expects the situation to be an opportunity for banks such as Abbey National. ""While competitive pressure will increase, the freeing up of the market will increase new business opportunities for the likes of the Abbey,"" he said. ($ = 0.624 British Pounds)
",17
"Barclays Plc shares dived on Tuesday as the bank reported 1996 pretax profits at the lower end of expectations and a slump in its investment banking unit BZW.
Barclays shares were down 55-1/2 pence at 1144p in afternoon trade, having hit a low of 1131p, after the news that pretax profits at the bank rose by 13 percent to 2.36 billion pounds ($3.8 billion), including an exceptional 70 million pounds gain on disposals.
The shares took a further tumble as analysts returning from meeting the company moved to downgrade the stock. Analysts at SBC Warburg cut the stock to ""hold"" from ""buy"", market sources said, and others were cautious on the outlook for the share.
The profits were at the lower end of forecasts and included a 29 percent fall in operating profits at BZW to 204 million pounds.
The company, which has repurchased over one billion pounds of shares in the last 18 months, said it would return 500 million pounds to shareholders in the next twelve months, and raised its dividend by 21 percent to 31.5 pence, in line with forecasts.
But even the buy-back news failed to cheer the market.
""The basic message is that there was disappointment about the headline profits and dividend, the mix of profits and the potential size of any buyback,"" said Michael Lever, analyst at HSBC James Capel.
""The figures were disappointing relative to expectations and everyone will be pulling their numbers back. I don't think they will make much more in 1997 than they did in 1996.""
Market sources said estimates for Barclays pre-tax profit in 1997 were being trimmed by about 200 million pounds.
Barclays chief executive Martin Taylor mounted a spirited defence of the results and his strategy at BZW, saying that the UK banking figures were ""cracking"" and that Barclays was investing for the future at BZW.
""You have to be careful not to be frightened by your own shadow,"" Taylor told Reuters in an interview. ""The reason that the returns are depressed (at BZW) this year is that we're spending so much.""
BZW chief executive Bill Harrison said he plans to improve links between BZW's key areas to build profitable business. He added that the bank's markets division had needed a ""significant upgrade"", but had now been ""re-tooled...and is strongly placed to make a significant earnings contribution.""
In a statement earlier, Barclays admitted underperformance by BZW in the fixed income market, with the exception of sterling, and foreign exchange area.
Taylor said BZW would continue to incur quite high costs in the first half of the current year and would then face the disruption of moving its offices to Canary Wharf in London's Docklands.
""I would hope that the second half would be a lot better,"" he added.
BZW has had had a turbulent time in the past year which started with the death of its chief executive David Band and has included high-level management shake-ups.
On top of this, BZW has also been involved in what have been perceived as some high-profile disasters with its clients. The biggest of these was its takeover defence for Northern Electric against U.S. energy group CE Electric which is being investigated by Britain's Takeover Panel. The late disclosure by BZW of a 250,000 sterling discretionary fee clause meant that CE's offer was extended and it captured Northern by the slimmest of margins.
But Taylor said that well-publicised events last year such as the Northern Electric defence had not done BZW damage.
""I think Northern Electric showed BZW behaving very energetically to try and prevent a client being taken over and almost succeeding,"" Taylor said. ""We very nearly saved it.""
But the head of quity sales at another investment house said, ""The trials and tribulations at the investment banking arm look as if they will probably be continuing into the next year.""
Taylor said Barclays was looking for the best way to return the bank's excess capital to shareholders but rejected the idea of a special dividend, saying that share repurchases help non-sellers to concentrate their position.
He noted that earnings per share had risen by 25 percent to 104.2p per share.
Taylor also rejected the notion that Barclays was devoid of ideas because it wanted to return capital.
He said the bank would make acquisitions if they added to shareholder value but could see none on the horizon at the moment.
",17
"Royal Bank of Scotland has seen its corporate and institutional banking (CIB) unit show good growth in recent years using a strategy which rejects any idea of competing in the increasingly crowded investment banking world.
Its managing director Iain Robertson told Reuters in an interview that CIB now produces some 30 percent of the banks profits, a figure expected to rise to around 40 percent.
""We are not an investment bank and we're not a securities house,"" Robertson said, ""and frankly, I don't have the billion pounds that I would actually have to spend to become one, nor have I any desire to do so.""
Royal Bank's strategy contrasts with some others which have been devoting large amounts of capital, investment and other resources in fully-fledged investment banking with, to say the least, questionable returns.
Royal Bank's success has been based on its traditional features which have been updated by Robertson who insists that it will persist along its current profitable line.
CIB has seen those profits rise to 207 million stg last year from 43 million in 1991 and they are expected by analysts to rise again in the 1996/97 results to be announced soon.
These figures produce a return of over 20 percent on risk adjusted equity -- highly respectable and a lot better than some higher profile investment banking operations.
Since October 1 last year, Royal Bank has been running all of its corporate relationships, big and small in CIB whereas previously only large corporates, financial institutions and companies with a turnover of over 100 million stg, were grouped there.
The transfer of small and medium corporates will immediately raise CIB's share of profits of the group to 40 percent and Robertson sees this staying fairly stable given that the retail side will also grow.
The move to bring in the small and medium corporate sectors into CIB stemmed from the fact that Royal Bank's retail operation has developed a much stronger personal focus in the last few years and managers perceived that the smaller corporate customers no longer identified with the retail side.
Robertson, a Glaswegian who came to Royal Bank after being deputy chief executive at County NatWest, the forerunner of NatWest Markets, is delighted that, in the homogenous world of modern banking, CIB has some ""unique"" features to offer.
He said Royal Bank was well known among its clients for having probably the shortest management lines in the business and has brought in staff with a big diversity of experience outside banking.
""In areas like property, we have brought in professionals who know the terms and conditions of property investment -- what will stick and what will not stick.""
Robertson says he wanted CIB to be the leading independent provider of corporate banking services in the UK.
""We have no axe to grind in terms of providing equity or securities or anything else. We will tell them what we think they can achieve in the debt markets and we'll put our corporate reputation behind what we say,"" he added.
CIB's major business groupings are Treasury and Capital Markets including foreign exchange; bond sales; securitisation, Structured Finance, which includes syndicated loans; project finance; and credit trading and Risk Finance which includes acquisition finance and development capital and Trust Bank which is substantial investor services business.
The group has main offices in Edinburgh and Manchester as well as London.
Robertson said the bank wanted to develop its niche products outside the UK possibly with joint ventures such as that in project finance with Banco Santander in South America.
Royal Bank has a high quality book of around $1.0 billion in the US but sees little opportunity for indigenous major growth.
In the core business, he also sees the opportunity to grab market share from competitors by adopting the same strategy seen in its large corporate business of cross-selling products.
",17
"A leasing unit of HSBC Holdings Plc said on Wednesday it would buy recently-privatised British train rolling stock leasing company Eversholt in a politically controversial deal worth 726.5 million pounds ($1.2 billion).
HSBC said its Forward Trust Group financing unit, part of retail banking group Midland Bank plc, would buy Eversholt's shares from their venture capital-backed management owners for 453.4 million pounds and repay debt of 273.1 million pounds.
The widely-leaked Eversholt deal has been heavily criticised by opposition politicians. Labour Party leader Tony Blair on Tuesday said the profits likely to flow to some members of its management was ""entirely unjustified"".
Blair, who is preparing to fight a general election due in the next three months, said in Parliament that the level of gains anticipated for managers after just 14 months as owners of the company could be seen as ""profiteering"".
However, Blair's allegations were based on claims that the deal would be done for 900 million pounds rather than the 726.5 million disclosed today. Eversholt was bought from the government for 580 million pounds.
The Labour party said it would publish a dossier showing how ""fat cats have hit the rail privatisation jackpot"" at a news conference later on Wednesday.
Graham Picken, chief executive of Forward Trust, said it had paid a fair market price for Eversholt and refused to comment on how much money Eversholt's directors might have made on the deal.
""As far as we are concerned, we were presented with the opportunity late last year,"" Picken said in an interview, ""and, after due diligence, we are paying a fair market price.""
Venture capital backer Candover Investments plc said in a separate statement that its 17.7 million pound investment in Eversholt had increased in value to 100.4 million pounds as a result of the sale.
Blair attacked the large sums that Eversholt directors would make on the, saying that its managing director Andrew Jukes was set to make 20 million pounds on an investment of 110,000 pounds.
Picken said the purchase of Eversholt was a natural expansion and excellent fit for Forward Trust which has been providing finance to the automotive and rail industries since 1928.
He said there were substantial opportunities for growth in the business, especially in the area of new rolling stock which the train operating companies will require.
""We believe that the combination of our financial skills and the railway and engineering expertise of Eversholt will make this work,"" Picken added.
Picken foresaw healthy competition in the sector and said new entrants could emerge, although Forward Trust was not planning any further acquisitions.
""We are not opportunistic, leasing is a core area and we are making a long-term commitment,"" Picken said.
",17
"The Halifax Building Society, which will float for around 12 billion stg on the stock exchange this June, has headroom for increasing its mortgage market share by acquisition, its chief executive Mike Blackburn said on Tuesday.
""We do have some headroom before we would excite the attention of the OFT (competition watchdog -- The Office of Fair Trading),"" Blackburn said in an interview. ""We have said to ourselves that we could certainly go to 25 percent (mortgage market share) before any anti-competitive issues arise.""
But Blackburn said the Halifax was not engaged in any acquisition discussions at the moment.
",17
"Barclays chief executive Martin Taylor on Monday defended the high level of costs at its investment banking unit BZW which contributed to a sharp fall in its 1996 profits.
""You have to be careful not to be frightened by your own shadow,"" Taylor told Reuters in an interview. ""The reason that the returns are depressed this year is that we're spending so much.""
Taylor said that if Barclays had invested less in BZW, the unit's profits would have been higher than the 204 million stg it reported earlier, a 29 percent fall on the previous year.  
Taylor said that without the investment, BZW would be a weaker firm.
In a statement earlier, Barclays admitted underperformance by BZW in the fixed income, with the exception of sterling, and foreign exchange areas.
In foreign exchange, the bank said BZW had performed poorly in an increasingly competitive area.
Taylor said Barclays had decided in 1995 that BZW would not be able to break through and compete without a lot of upgrading.
""There are two phases to that,"" Taylor said. ""First of all, assembling a new team, and then getting that team to build the business. The first part has gone quicker than I could have hoped, but it has cost a lot of money.""
Taylor said BZW would continue to incur quite high costs in the first half of the current year and would then face the disruption of moving its offices to Canary Wharf in London's Docklands.
""I would hope that the second half would be a lot better,"" he added.
",17
"Britain's takeover watchdog on Friday handed out its strongest sanction to BZW, investment banking arm of Barclays Bank, over its conduct of a bid defence for Northern Electric last year.
The Takeover Panel ""criticised"" BZW for failing to disclose all the relevant facts, including a performance fee, during hearings over the conduct of the deal last December.
""This is the strongest sanction the panel can take and there is no further action intended,"" Alistair Defriez, director general of the panel told Reuters. ""We have no power to impose a fine.""
BZW said it was pleased that the Panel had found it had not deliberately concealed the performance fee and that there was no suggestion that the fee was an inducement for BZW to buy Northern shares which would have been in breach of the Code on Takeovers and Mergers.
The case stemmed from a 782 million pound ($1.2 billion) bid for regional electricity company Northern by CE Electric, a unit of CalEnergy Co Inc of the U.S. which proved to be hotly contested and the result extremely close.
Northern failed in its defence against CE, after the British company lost an appeal to the panel to reverse an extension of the offer period which enabled CE to narrowly win the bid.
The offer extension came after CE raised concerns about the purchase of Northern Electric shares by its advisers British merchant bank Schroders and BZW and a discretionary payment of 250,000 pounds to BZW which was a performance fee.
Northern in turn launched its own appeal against the extension of the deadline because at the time of the first cut-off date, CE had fallen short of the total needed to win.
But the panel finally ruled against Northern and BZW was heavily criticised in the press for effectively losing the bid for its client.
On Friday, the panel said it accepted that BZW had not deliberately concealed the fee but that the firm recognised that it should have considered the fee relevant to the panel's deliberations.
The criticism of BZW comes hot on the heels of a 90 million pound derivatives loss at its rival NatWest Markets and is bound to rekindle discussion of the conduct of British investment banks.
BZW has consistently defended its actions, saying that the performance fee was not based on the outcome of the bid and had nothing to do with its relatively unusual plan to aid the defence by purchasing nearly 20 million pounds worth of Northern shares.
But insiders accept that BZW made errors of judgement that undoubtedly led to Northern losing its independence. ($ = 0.627 British Pounds)
",17
"The Woolwich Building Society, which on Wednesday announced its last set of results before a planned stock market flotation, said it sees growth in all its businesses.
But Chief Executive John Stewart said that if draft building societies legislation is passed in its current form, the Woolwich would have to consider expansion by acquisition very carefully.
This is because in its current form the law would take away a building society's five-year immunity from takeover, which they enjoy under present legislation, if they take over another financial sector company.
",17
"Britain's Woolwich Building Society, which will float on the stock exchange this summer, said on Wednesday its pretax profit rose by 18 percent to a record 392 million pounds ($629.5 million) in 1996.
Woolwich chief executive John Stewart said he wanted to see growth in all the company's businesses following its conversion into a listed company.
While its net mortgage lending jumped 50 percent to 1.4 billion pounds, the society said its administrative expenses rose by less than one percent and its cost-to-income ratio edged down to 45.8 percent from 48.9 percent.
Stewart said that if draft building societies legislation were passed in its current form, the Woolwich would have to consider expansion by acquisition very carefully.
This is because in its current form the law would take away a building society's five-year immunity from takeover if it takes over another financial sector company.
""If the bill is passed in its present form, it would make us think twice about acquisitions,"" Stewart said. ""We would have to weigh the strategic importance of the acquisition against the loss of protection.""
But Stewart added that, whatever the legislation, the Woolwich would be ""out there doing business"".
The Woolwich had an excellent record not only in organic growth but also in joint ventures and cold starts. ""We have a lot more clubs in our bag, there are a lot more ways to develop the business if we have to think twice about making an acquisition,"" he said.
The Woolwich, which will be quoted in the FTSE 100 index after flotation and is Britain's third largest building society, sees itself as a low-cost provider.
Stewart said he wanted costs to get even lower. ""We think we're efficient, we've got a track record of reducing our cost-to-income ratio and we're not finished, by no means,"" he said.
The Woolwich wanted to increase its business in areas such as unit trusts, life and general insurance and in the core mortgage business and personal loans.
He said he especially wanted to see growth in its French and Italian companies -- Banque Woolwich and Banca Woolwich -- which he said were already doing well.
Asked if Woolwich would grow organically in Europe, Stewart said, ""Oh no, it may well be by acquisition, if the right one comes along.""
",17
"What would a bank do if it woke up one morning and found that all its customers were dead?
Hopefully it would realise that it was Jan. 1, 2000, but, more hopefully still, it will have taken action to make sure the turn of the century does not turn out to be the biggest computer disaster ever.
It takes something like the ""millennium bug"" to make people even think about how dependent most of us are on the internal workings of the financial system.
Doomsday scenarios of what the bug might do go as far as to predict the destruction of the financial system. It's not really a bug at all but purely the fact that up to now computers have represented the date year in two digits rather than four.
Needless to say, bankers and information technology experts deny any possibility of this with the British banking system insisting it will be ""millennium-compatible"" by the end of 1998 -- leaving a year for any last minute tweaking.
Though when questioned about specifics, the answers start to take on a worrying vagueness akin to that seen when they are asked about their preparations for European monetary union (EMU).
Left unresolved, computers might treat the date Jan. 1, 2000 as Jan. 1, 1900 and if asked to calculate the period between 1995 and 2000 would then come up with the answer ""minus 95 years"" -- not much use to anyone and potentially dangerous.
Britain's major banks are busily trying to solve the problem and one of the biggest, NatWest, said recently that it will spend as much as 100 million British pounds ($163 million) over the next couple of years to get its systems in line.
One of the complications in banking and finance is that none of the computer systems work in isolation, they all have to interrelate extensively with systems in other banks and in other companies and with the clearing and payments systems.
Indeed, the problems have already started, with computers in stores refusing to recognise credit cards with an expiry date after the end of 1999.
""The main issue that has emerged is that banks are so reliant on each other,"" said Will Mason of the British Bankers' Association (BBA). ""There is work going on to develop standards for people using networks to be compatible.""
In Britain, the BACS (bankers' automated clearing system) receives inputs from all sorts of companies. The system processes salary checks and the payment of bills and dividends, for example.
Banks have to be sure corporate customers using this system have their own systems in order and this must all be done by the end of 1998 to leave time for last-minute changes.
Investment banking is, if anything, even more susceptible to date problems as nearly every transaction will carry a value date or involve the difference in price or interest rate between two dates. The potential for problems is huge.
""The problem is that you're likely to get something that doesn't work properly rather than doesn't work at all,"" Mason said. ""Which is even worse.""
Banks are finding the task of altering their systems a highly detailed piece of work. They have to find out what the system will do in a highly complex series of transactions and then make it do the right thing. They often are using already existing back-up systems to test what might happen on their main system.
Among other wrinkles that are becoming apparent is that users have been using the date field in a programme to denote things other than just a specific date.
If for example, loans have no fixed term, this may have been denoted by using ""99"" in the date box or dead customers may have been denoted by using ""00.""
When we get there, the system will kill off all the customers.
A lot of systems in banking are relatively old. They have lasted a lot longer than was originally expected and are often written in computer languages that are no longer much used.
",17
"Barclays Plc shares slid lower on Tuesday after the bank announced 1996 pretax profits at the lower end of market expectations, including a slump in its investment banking unit BZW.
The shares were quoted 25p lower at 1174.5p at 1150 GMT, having hit a low of 1131p, after news that pretax profits rose by 13 percent to 2.36 billion pounds ($3.82 billion), including an exceptional 70 million pounds gain on disposals.
This was at the low end of analysts' forecasts and included a 29 percent fall in operating profits at BZW to 204 million pounds.
The group, which has already performed more than one billion pounds of share repurchases in the last 18 months, said it would return 500 million pounds to shareholders in the next 12 months and raised its dividend by 21 percent to 31.5 pence, in line with forecasts.
Chief executive Martin Taylor mounted a spirited defence of the results and his strategy at BZW, saying that the British banking figures were ""cracking"" and that Barclays was investing for the future at the investment bank.
""You have to be careful not to be frightened by your own shadow,"" Taylor told Reuters in an interview. ""The reason that the returns are depressed (at BZW) this year is that we're spending so much.""
Taylor said that if Barclays had invested less in BZW, the unit's profits would have been higher, but that without the investment, BZW would be a weaker firm.
In a statement earlier, Barclays reported underperformance by BZW in the fixed income market, with the exception of sterling, and in foreign exchange, in which said it had performed poorly in an increasingly competitive market.
Taylor said BZW would continue to incur quite high costs in the first half of the current year and would then face the disruption of moving its offices to Canary Wharf in London's Docklands.
""I would hope that the second half would be a lot better,"" he added.
BZW has had a turbulent time in the past year, which started with the death of its chief executive, David Band, and has included high-level management shake-ups.
It has also been involved in what have been perceived as some high-profile problems with clients. The biggest of these was its takeover defence for Northern Electric against U.S. energy group CE Electric, which is being investigated by Britain's Takeover Panel.
The late disclosure by BZW of a 250,000 stg discretionary fee clause meant that CE's offer was extended and it captured Northern by the slimmest of margins.
But Taylor said that well-publicised events last year, such as the Northern Electric defence, had not done BZW damage.
""I think Northern Electric showed BZW behaving very energetically to try and prevent a client being taken over and almost succeeding,"" Taylor said. ""We very nearly saved it.""
On the share price reaction, one broker's head of equity sales said, ""The results were very disappointing and there will be some downgrades as a result.
""The trials and tribulations at the investment banking arm look as if they will probably be continuing into the next year,"" he said.
Taylor said Barclays was looking for the best way to return the bank's excess capital to shareholders but rejected the idea of a special dividend, saying that share repurchases help non-sellers to concentrate their position.
He noted that earnings per share had risen by 25 percent to 104.2p.
Taylor also rejected the notion that Barclays was devoid of ideas because it wanted to return capital.
He said the bank would make acquisitions if they added to shareholder value but could see none on the horizon at present.
""We're already growing very quickly right across our personal sector business,"" Taylor said. ""Both the personal bank and the business bank have had a cracking year.""
",17
"British insurance and asset management giant Prudential Corp Plc on Wednesday beat analysts' forecasts with an eight percent rise in first half profits to 421.0 million pounds ($655 million).
Prudential chief executive Peter Davis said the company wanted to buy a home loan lender to build its customer base but he refused to be drawn on which building society, if any, the Prudential was talking to.
""We are interested in buying a building society but for its branch network and its customer base rather than its mortgage book,"" Davis said in an interview.
The Prudential, which next month will launch a telephone banking business, raised its interim dividend by 9.4 percent to 5.8 pence per share.
The first-half data included 33 million pounds of start-up costs for the new banking operation, which chief executive Peter Davis said was on course for launch on October 1.
Davis said the life insurance business was benefiting from a general upturn in consumer confidence in Britain.
""Customers are feeling a little more confident and are more willing to make commitments.""
But Davis noted that single contribution products were still showing far more growth than those that require a longer-term commitment or regular contributions.
Prudential's single contribution sales rose by 50 percent in the first half of the year compared with a gain of 15 percent for regular contribution sales.
Davis said the personal pensions industry had still not completely thrown off the stigma of a private pensions scandal in the late 1980s and early 1990s, but he said consumers were starting to realise they must make adequate pension provision.
Prudential said funds under management had risen by four percent since the end of 1995 to 85 billion pounds. Profit from this business rose to 14 million pounds from eight million in the first half of last year.
Davis hoped there would be no lasting knock-on effect on the fund management industry from recent events at Morgan Grenfell Asset Management (MGAM), but said the affair was sure to make investors look closely at the standing of the institution with which they have their money invested.
""It's likely to be a swings and roundabouts thing,"" Davis said. ""There will probably be a general loss of confidence but we will also see some flight to quality and security.""
MGAM last week suspended three of its unit trust funds for three days after the discovery of alleged irregularities but trade resumed after a casj injection from the company's German parent Deutsche Bank. ($1=.6430 Pound)
",17
"London-based international bank HSBC Holdings Plc sees 1997 as a challenging year amid increasing competition, its chief executive John Bond said on Monday.
But Bond said HSBC's strong capital position and balance sheet makes it feel as able to compete as anyone.
""We see 1997 as a challenging year wherever we look whether it be Asia or the UK, the competition continues to increase,"" Bond told Reuters in an interview.
Earlier, HSBC announced a 23 percent rise in pretax profits for 1996 to 4.52 billion stg -- around the middle of market expectations -- and a hefty 9p rise in annual dividend to 41p which bettered most forecasts.
Bond said the bank's capital ratio's were strong with tier one capital rising to 9.9 percent from 9.5 percent at the end of 1995 and said he did not see surplus capital being generated.
""As long as we're making a respectable return on capital, we regard capital strength as an asset in our business,"" Bond said. ""It helps you with the ratings, it helps with deposits in Asia and to have a strong capital position shows in the bottom line.""
HSBC had a 21.3 percent return on capital in 1996 compared to 20.7 percent in 1995.
Bond said HSBC continues to be confident over the transition from British to Chinese rule of Hong Kong.
Last year, HSBC was granted a license to trade in the Chinese yuan and Bond said the bank was in talks with the Chinese authorities to see how this would work in practise.
Bond said HSBC was looking at this massive potential business opportunity in the long-term, ""I think it will take time, of course it will, but the signs are all positive.""
Bond said the rise of sterling against the dollar had not had a great effect on the group's results in 1996 where the average rate for the pound against the dollar was below that of 1995.
He said that, very roughly, for every cent the pound goes up against the dollar, the bank loses 13 million stg in profits.
Bond said HSBC's UK unit Midland Bank would continue to grow organically as the price of acquisitions was impossible to justify to shareholders.
Bond said the unit had put in a strong performance with pretax profits up over twenty percent and costs controlled to a rise on less than one percent.
-- London Newsroom +44 171 542 8864
",17
"Members of the Halifax Building Society, Britain's largest mortgage lender, on Monday voted overwhelmingly to convert the mutually-owned financial giant into a public company and float it on the stock exchange.
Of the eight million Halifax members eligible to vote, more than 97 percent of both borrowers and investors voted in favour of the conversion.
For the investors' resolution to be carried, 50 percent of those eligible to vote needed to do so and of these, 75 percent were needed to vote in favour.
The flotation, expected to value the society at some 12 billion pounds ($19.5 billion), is now expected to go ahead in June.
Little more than 1,000 of the Halifax's members actually attended Monday's meeting since most mailed in their votes, but many expressed dismay that the society was losing its mutual status.
However, they were assured by Halifax chairman Jon Foulds that the conversion to a bank would be in the customers' best interest.
""If we convert to a public limited company (Plc) we will be best placed to fulfil your needs,"" Foulds told the meeting, adding that bank status would give the Halifax better access to the equity and debt capital markets and to wholesale funding from the money markets.
But Peter Judge, co-founder of the Halifax Action Group, which has campaigned against the conversion, called on the board to resign over its proposals and had a fierce exchange with Foulds from the floor of the meeting, accusing the board of engaging in a privatisation exercise.
Halifax members will get a basic 200 shares which on early estimates would be worth around 1,000 pounds but which, by the time of the flotation is likely to be worth near an average of 1,500 pounds.
The conversion proposal has not been without controversy with many Halifax members wanting the society to retain its mutual roots and others complaining about the treatment of some disabled members.
Foulds said the board had sympathy for the case of the disabled and other groups whose accounts are held in trust but said the whole flotation could not be put at risk in order to meet their needs.
Other groups to have their case put before the meeting included the blind, children, and members living in some countries, like Canada, the United States and Australia, who have been excluded from the share pay-out for technical reasons.
The action group vowed to continue its struggle against the conversion, saying that the Halifax transfer document was biased and did not give the arguments against conversion.
Halifax vice chairman John Wood denied that its directors would become ""fat cats"". He noted that the directors had waived the right to free shares and that the Halifax had no executive share scheme. Wood said that any future share scheme for directors would have to gain the approval of shareholders.
The action group says Halifax members will get less interest on their deposits and pay more for their mortgages than account holders at societies that remain mutual.
""If it were not for the fact that people are being bribed with their own money we believe no one would vote for conversion,"" said the group's co-founder Serge Lourie.
Lourie said the action group plans fight its case with the Building Societies Commission, the industry regulator, which will meet in April to approve the conversion before it goes ahead.
($ = 0.614 British Pounds)
",17
"Prudential Corp Plc on Tuesday beat off rivals to win control of mutually-owned insurance group Scottish Amicable and reinforced its position as Britain's number one fund manager.
By beating bids from Abbey National Plc and Australian Mutual Provident (AMP), Prudential's takeover of ScotAm will raise its funds to more than 100 billion pounds.
Prudential shares rose as analysts saw the company as deriving strategic and earnings benefits from the deal. At 1315 GMT, Pru was up 17 pence at 557p.
""Pru has not gone crazy and paid a stupid price,"" said Michael Lindsay, analyst at Lehman Brothers. ""The acquisition looks to be earnings neutral in the first year and enhancing thereafter.""
ScotAm said with-profits policyholders would benefit from cash and additional policy benefits worth more than 1.5 billion pounds ($2.4 billion).
These include 600 million pounds from Prudential shareholders' and policyholders' funds in compensation for loss of membership rights and a special bonus from ScotAm's life fund worth 470 million pounds which will go into policies.
In addition, the entire remaining ScotAm life fund will be distributed, estimated to have a current value of 500 million pounds.
On this basis, ScotAm with profits policy holders should receive total benefits of around 1,400 pounds, varying according to the size and age of the policy.
Policyholders will also benefit from financial support to the tune of 1.3 billion pounds to boost ScotAm's life fund which will be closed.
ScotAm's original plan was to end its mutual status  and float on the stock exchange in two or three years time. But the plan was thrown into confusion after Abbey National made a bid for the firm last month.
The injection into the life fund had probably clinched its bid for the mutually-owned life company, Prudential chief executive Sir Peter Davis told Reuters.
""Our offer used the strength of our balance sheet and the Prudential life fund,"" Davis said in an interview. ""We've put together an imaginative structure with the key difference being the capital injection or support we've offered of up to 1.3 billion pounds to the (ScotAm) life fund.""
Davis said the boost to ScotAm's fund -- the company will be run as a completely separate entity under the Prudential umbrella -- will mean that it will be able to have a more flexible investment policy. This could include a greater proportion of investments in equities and higher returns.
The 1.3 billion pound investment comes from Prudential's life fund, which totals 51 billion pounds, and will be provided to ScotAm at a commercial rate.
The merger, creating Scottish Amicable Life, is subject to the approval of policyholders at a special general meeting to be held in June. The proposals will be subject to a 75 percent vote in favour by eligible members.
Davis said ScotAm will develop more successfully with Prudential's capital backing and is expected to show a larger rate of growth.
Roy Nicolson, managing director of ScotAm, told Reuters that the Prudential's offer of high up-front payments plus a reversionary bonus added to the capital support had swung the auction in Prudential's favour.
He said the new capital would allow greater investment in equities, providing the opportunity for better returns for policyholders in the future. Prudential's strong investment track record had also been a major factor.
""We're very excited about the business going forward,"" Nicolson said. ""We'll be able to expand our presence dramatically particularly in the IFA (independent financial adviser) market.""
Nicolson said the deal would remove any doubt about ScotAm's financial strength.
He said Prudential had pledged to maintain the number of jobs in the ScotAm head office for three years. Talks were already underway about the possibility of using the expertise in ScotAm's investment management arm in Prudential Portfolio managers.
Nicolson said it was far too early to know if there would be job losses outside the head office operation. ""We want to expand the sales side,"" Nicolson said.""As for the rest, we'll be having talks.""
ScotAm employs just over 2,000 people in Britain plus around 150 in an offshore and cross-border operation in Dublin which, Davis told a news conference, would also be expanded.
($ = 0.618 British Pounds)
",17
"The potential expansion of the British life and pensions market means Abbey National Plc needs to boost its involvement and lies behind its offer for Scottish Amicable, Abbey chief executive Peter Birch said on Thursday.
Birch was speaking in an interview after Abbey posted an underlying 1996 pre-tax profit 20 percent higher at 1.229 billion stg and raised its dividend a similar amount to 26.1p per share.
""We are very confident that our proposition will be attractive to the ScotAm board and its policyholders,"" Birch said.  
The bank earlier confirmed it would be making a formal bid for ScotAm on Friday but Birch declined to comment on any of the details of the revised bid.
Abbey sparked a bidding war for ScotAm in January when it made a preliminary offer of up to 1.4 billion stg and was followed by a larger bid by insurance giant Prudential Corp.
ScotAm, which had been planning to shed its mutual status and eventually float on the stock exchange, then started a formal bidding process and offers have to be in on Friday.
Abbey is known to be keen to diversify further away from its traditional mortgage lending and savings activities and profits from these other sources now amount to 40 percent of the total.
Birch noted that Abbey's life assurance units raised profit 44 percent in 1996 from a standing start after the purchase of Scottish Mutual five years ago.
""That business has been a very strong earner for us,"" Birch said, ""and as one looks at the future of the country and the need for the private sector to provide benefits in healthcare and pensions, we're still very small...for an organisation that's the 17th largest company in the UK.""
Birch said adding Scottish Amicable makes a lot of sense and provides a great opportunity for Abbey to build on its Scottish-based life business.
Acquisitions are constantly being looked at in other areas of the business, Birch said, as a means of continuing expansion into personal retail financial services.
Birch said Abbey's core mortgage market, where its share rose to a record 14.7 percent, was showings signs of life.
""All the indications in the housing market are that recovery is getting under way,"" Birch said. ""It has a long way to go, a lot of people want to move house...and the market is now stirring in the rest of the country (outside London). We see transactions increasing by seven to 10 percent this year.""
Birch said an expected rise in interest rates after the election would not put a break on the market since this would be offset by low inflation and confidence boosted by a strong economy.
Abbey saw its mortgage margin ease slightly last year with net interest spread at 2.08 percent from 2.15 percent in 1995.
""That doesn't really concern me too much,"" Birch said, ""because we are seeing volume come through. Last year we devoted a lot of time to integrating National & Provincial -- this year, just watch our market share.""
-- London Newsroom +44 171 542 8864
",17
"The Halifax Building Society's massive war chest of capital could prove to be problem as well as an opportunity after its 12 billion stg market flotation in June, analysts said on Tuesday.
Chief executive Mike Blackburn said he sees regulatory headroom for the society to boost its mortgage market share from a dominant 20 percent to around 25 percent and with a massive tier one capital ratio of 14 percent, he will have no shortage of cash with which to do it.
But analysts say this could be a double-edged sword because the market will not give the Halifax the benefit of the doubt for too long and it will have to prove that it can make the capital gear up to get a decent return on equity (ROE).
Hugh Pye, banking analyst at BZW estimates that the Halifax will have to get rid of some 3.0 billion stg of capital if it is to see its capital ratios down at a more normal eight percent.
""It's both an opportunity and a problem,"" Pye said. ""If they go for acquisitions, the whole world will see them coming.""
The Halifax, along with other major players, is already known to be balking at the price that is being asked for financial sector assets but is still very keen to bolster its long-term savings operation and its core mortgage market.
Blackburn said the Halifax would continue to target long-term savings products -- life assurance, pensions and investments -- for expansion because he believed it had strong growth potential.
""With an ageing population and governments unable to look after people as they have historically been able to do in retirement, the requirement on the private individual to provide for the long-term will be accentuated,"" Blackburn said.
Analysts say the Halifax will be given the chance to see what it can do but will then have to return some capital unless it can spend it either on buys or on judicious organic growth and to exploit what they see as a seriously under-utilised brand name.
The Halifax could buy back shares but that would be difficult when, after the flotation, most of the shares will be owned by individuals. It might also look a bit odd so soon after paying a lot of money to be floated.
Additionally, the tax position has changed and, as Barclays recently found out, it can be difficult to get your shareholders to part with their shares.
That leaves a massive special dividend to its new ex-member shareholders but before that happens analysts expect to see the liberated Halifax flexing its powerful muscles.
-- London Newsroom +44 171 542 8864.
",17
"Members of the Halifax Building Society, Britain's largest mortgage lender, met on Monday to decide whether to convert the mutually-owned financial giant into a public company and float it on the stock exchange.
Thousands of the Halifax's members attended the meeting, which is expected to support the 12 billion pound ($19.5 billion) conversion proposal by an overwhelming majority, probably already present through postal votes from the society's eight million account holders.
Halifax members will get a basic 200 shares which on early estimates would be worth around 1,000 pounds ($1,620) but which, by the time of the flotation is likely to be worth near an average of 1,500 pounds.
The conversion proposal has not been without controversy with many Halifax members wanting the society to retain its mutual roots and others complaining about the treatment of some disabled members.
The Halifax Action Group last week vowed to continue its struggle against the conversion, saying that the Halifax transfer document was biased and did not present arguments against conversion.
The action group says that Halifax members will get less interest on their deposits and pay more for their mortgages than account holders at societies that remain mutual.
""If it were not for the fact that people are being bribed with their own money we believe no one would vote for conversion,"" said action group co-founder Serge Lourie.
Lourie said the action group plans to lodge its case with the Building Societies Commission, the industry regulator, which must approve the conversion before it goes ahead.
But members arriving at the meeting were almost unanimous in their support for the conversion process.
""The reason for coming was to cast my vote in support of the float and I think there will be very little said against it,"" said one Halifax member who declined to be named.
The result of the vote is expected at around 1830 GMT when votes in the hall and the proxy votes will have been counted. Half of the Halifax's savers must vote with three-quarters in favour of the scheme to be approved.
The only other building society to float on the U.K. stock exchange has been the Abbey National. Since it came to market in 1989, it has become a successful bank and has diversified away from its core mortgage lending business.
The Halifax is one of four building societies to float this year, the others being the Woolwich, the Alliance and Leicester and the Northern Rock.
($ = 0.614 British Pounds)
",17
"British private client stockbroker and fund manager Capel-Cure Myers Capital Management said on Thursday it is in talks with Dutch banking giant ABN AMRO's ABN AMRO Hoare Govett which may lead to an offer for CCM.
Capel-Cure is controlled by Canadian Insurance Group and chief executive John Henderson confirmed the talks but declined to give any of the financial details of the offer.
In Amsterdam, ABN AMRO confirmed that ABN AMRO Hoare Govett planned to buy CCM. ""Yes we're talking to Capel-Cure Myers about a takeover,"" ABN AMRO spokesman Tanno Massar told Reuters.
Massar said the planned deal was in line with ABN AMRO's declared goal of expanding in the field of asset management.
He declined to give details but said the two sides expected to reach agreement within a few weeks.
Capel-Cure has 4.5 billion pounds under management and employs around 450 staff.
Canadian Insurance, a consortium of banks, bought its stake in Capel-Cure -- the rest is owned by the management -- when Central Capital Corp of Canada went bust in 1992. It had previously been owned by Australia & New Zealand Banking Corp.
Henderson said the management of Capel-Cure had been involved at every stage and denied press reports that there had been a disagreement between the Capel-Cure management and Canadian Insurance on whether the fund manager should be sold and how.
ABN AMRO is known to have wanted to expand its London operations with a fund management acquisition.
In January, Jan Vroegop, director of ABN AMRO's global asset management operation said the bank wanted to make ""big steps"" in the lucrative London fund management arena.
ABN AMRO Hoare Govett was involved in a controversial attempt to poach star fund manager Nicola Horlick from Deutsche Morgan Grenfell in January.
Horlick was suspended and later resigned from DMG and ABN admitted that it had talked to her but denied trying to poach her entire team from DMG.
Nick Bannister, head of ABN AMRO Hoare Govett, was unavailable for comment.
",17
"Regional Baby Bell phone companies appear to have triumphed over their long-distance rivals in a crucial regulatory battle that would leave some customers paying less and others more for their monthly bill.
The Federal Communications Commission has decided against ordering a precipitous cut in the $23 billion long-distance carriers such as AT&T Corp. pay the Bells each year for access to the local phone network, said FCC and industry officials.
Bell executives at one point feared such cuts could cost their companies as much as $10 billion in revenues. Consumer groups and long-distance companies advocate immediate cuts in the range of $2 billion to $3 billion, saying that would mean a similar cut in long-distance rates.
""The Bells have dodged a bullet,"" said analyst Scott Cleland of Schwab Washington Research Group. ""They may get grazed. But they dodged a bullet that was aimed at them during the last six months.""
Instead of a big FCC-imposed cut, the agency plans to rely on competition to lower access charges over time, said FCC and industry officials. That could mean an FCC-imposed loss of Bell revenues of no more than $1 billion the first year.
Less clear was the impact on phone customers.
Those who make lots of long-distance calls would see a sizeable drop in their bills, said FCC officials.
But wireless phone subscribers could pay anywhere from 1 percent to 2 percent more a month through new fees. Customers with more than one phone line for a computer or the kids and who make few long-distance calls would see a monthly rate rise of around $1 or more.
""We're cutting away the frills,"" FCC Chairman Reed Hundt said in an interview.
""We're talking about a $1 subsidy per month that we're eliminating for somebody who's connecting a $2,500 computer to that line and purchasing $20 a month of unlimited access,"" said Hunt, a big advocate of the rules under consideration.
They are set to be voted on next week. Details may change.
FCC officials, meanwhile, say the plan would yield a cut in long-distance charges of more than $1 billion in the first year.
FCC officials oppose a steep cut for several reasons.
Citing rate hikes by AT&T and MCI Communications Corp. late last year, they fear long-distance carriers may not fully pass on a major reduction to consumers and pocket some of the money. Long-distance executives vow to pass on the reductions.
FCC officials also fear a sharp cut would unleash a rise in local phone rates by carriers trying to recoup lost money.
""We're keeping basic residential dial tone at today's price,"" said Hundt.
Critics charge the plan would mean higher rates. AT&T says long-distance customers will see a $1.5 billion jump at the outset in July. ""Regulators appear unlikely to squeeze the fat out of the Bells' prices, leaving consumers paying for inflated rates,"" said Gene Kimmelman of Consumers Union.
But Hundt says that over the next five years at least $10 billion ""will be transferred to consumers"" via access cuts.
The plan also would pay for $3 billion to connect schools, libraries and rural hospitals to the Internet and provide cheap phone service for the poor.
Access charges were created after the 1984 breakup of Ma Bell. Experts agree the $23 billion is more than the cost of providing local access. But they cannot agree on the amount.
FCC officials said 85 percent of the nation's 80 million residential phone customers would see a lower monthly bill.
Those who make lots of long-distance calls would benefit the most, because the agency plans to replace some of the existing per-minute access charges with a monthly flat rate.
The 15 percent of residents who do not make long-distance calls would see their bills stay the same.
But customers with more than one line and who make few long-distance calls are likely to see a rate rise.
That's because the ceiling, or cap, on the existing ""subscriber line charge"" is expected to rise to $5 a month from $3.50 for each additional residential line, and to roughly $7 a line for multi-line business customers from $6.
One possible way around the charge may be for customers to list their additional lines in a different name or use another local carrier, said industry officials.
",40
"Under pressure from President Bill Clinton to quit pitching hard liquor on the airwaves, the nation's distillers urged the president on Friday to gather the beer, wine and spirits industries together to develop a common advertising code.
But the White House showed little enthusiasm and the wine and beer industries rejected the move, scoffing at the suggestion that their products were similar to hard liquor.
""Common usage tells us all drinks are not the same,"" the Wine Institute said in a statement.
The Distilled Spirits Council of the United States (DISCUS), in a letter to Clinton, urged the president to use his ""bully pulpit"" and bring the industries -- along with broadcasters -- ""to the table"" to develop and adopt within 90 days a common code for alcohol ads.
The initiative came after Clinton asked the Federal Communications Commission on Tuesday to study ways to prevent the hard liquor industry from selling its products over television and radio.
The hard-liquor industry last year abandoned a decades-old voluntary ban on such promotions, and Clinton called on the industry's executives to renew their moratorium.
""This code would set the same responsible standard for all beverage alcohol advertising and would provide uniform guidelines for the broadcasters,"" DISCUS President Fred Meister told a news conference, without going into specifics.
""This common code would send a strong message that alcohol is alcohol is alcohol,"" he said. DISCUS contended it was unfair to draw a distinction between advertising for hard liquor and for beer and wine, whose ads were not covered by the voluntary ban and have run on television and radio for decades.
The industry's voluntary ban has been in effect for TV ads since 1948 and radio ads since 1936.
Responding to the liquor industry's proposal, a White House spokesman said: ""What the president is trying to do is prevent backsliding"" on the part of liquor companies.
Meister declined to discuss details of what his industry would seek in a common code, saying he did not want to ""preempt the process."" But beer and wine industry officials signalled they would have no part of such a process.
""There are obvious, significant differences between beer and hard liquor. For these reasons an advertising code covering both types of products is neither practical nor workable,"" the Beer Institute said in a statement.
A spokeswoman for the National Association of Broadcasters said: ""We haven't seen any details on what they're asking for. ""Until we have a chance to see what exactly they're asking for and what's involved, we can't really respond.""
",40
"The House approved legislation Wednesday to usher in the largest overhaul of the federal public housing programme since its creation in the New Deal era of President Franklin Roosevelt.
The bill, approved 293-132, ends many federal rules and is meant to give local housing authorities more power and leeway to run the nation's 13,200 public housing developments.
Officials would have more authority to raise and lower rents and select who occupies low-income housing. The legislation would scrap the landmark Housing Act of 1937.
The Clinton administration opposes the measure, saying it would throw the very poor out of public housing and replace them with moderate-income residents. Administration officials hope to craft a compromise between the bill and a less-deregulatory version in the Senate closer to their liking.
Supporters of the House bill say it would help make public-housing residents less reliant on government programmes. And they argue it would encourage tenants to assume a greater role in their community. Unemployed tenants would have to perform community service without pay -- a provision Democrats liken to slavery.
Opponents also charge the legislation would punish the poor, abandon the government's commitment to the needy, and possibly swell the ranks of the homeless.
""The Republicans over the next 10 years will throw 80 percent of the very poor out of public housing,"" said Massachusetts Democrat Representative Joseph Kennedy.
But New York Republican Representative Rick Lazio, argued: ""The House has taken a bold and decisive step to reverse the failed federal housing policies of the last 60 years. We are transforming public housing from a way of life into a way to a better life.""
The House and Senate passed separate bills in 1996 but failed to iron out a compromise before Congress adjourned.
The new bill covers the nearly seven million people living in public housing or receiving rental aid. Today, the federal government contracts with the nation's 3,400 public housing authorities, which own and operate the housing developments.
In exchange for federal dollars, housing authorities run the programmes under close scrutiny from the federal government.
The House bill would:
-- Combine about a dozen spending programmes into two block grants to be administered by local public-housing authorities.
-- Mandate that 35 percent of public housing residents be among the very poor with incomes of no more than 30 percent of a community's median income. Current law has a 75 percent ceiling on the number of extremely poor residents.
-- Require able-bodied, unemployed persons who live in public housing or who receive rental assistance to perform eight hours a month of community service or get job training.
-- Allow tenants to pay either a flat rent or an amount up to 30 percent of their income. Supporters argue the existing system, which links a tenant's rent to income, creates a disincentive to work because rent increases with income.
-- Make it easier to evict drug dealers and criminals from public housing, and demolish and replace decrepit housing.
-- Require speedy improvement of troubled public housing authorities or the ouster of their management.
-- Let local governments enter pacts with HUD to receive public housing money and rental assistance funds directly from the federal government. Local officials would have to adhere to certain standards, but would get more flexibility to spend the money in ways tailored to their individual needs.
The legislation would authorise spending of $6.1 billion for the 1998 fiscal year beginning Oct. 1, and a total of $29.5 billion through 2002.
",40
"Plans for a new type of radio service that could be heard coast-to-coast faced a potential new snag Monday after a top regulator said any company should be allowed to bid for the two available licenses.
Federal Communications Commission Chairman Reed Hundt said he opposed an existing FCC plan to limit a government auction of the licenses to the four applicants that filed with the agency several years ago. The agency is split over the matter.
""The auction should be open to anyone who thinks they can make a business out of"" Digital Audio Radio Service (DARS), he told a meeting of the National Association of Broadcasters.
An open auction could net the government a tidy sum.
Hundt noted that MCI Communications Corp. last year paid $683 million to win the last remaining satellite slot to beam television programmes nationwide.
The four DARS applicants are: CD Radio Inc. ; American Mobile Radio Corp., a unit of American Mobile Satellite Corp. ; Digital Broadcast Satellite Corp.; and Primosphere.
""We're not pleased to have heard (Hundt's) remark this morning,"" said CD Radio Chairman David Margolese. But he cautioned, ""We can't read too much into it just yet.""
An American Mobile Radio spokeswoman said the company hoped the FCC would limit the applicants to the current four. She also said the company hoped the four would have the chance to decide how to allocate the two licenses ""rather than go to auction.""
Unlike conventional radio, the new digitally based radio service would offer listeners CD-quality sound and would be broadcast nationwide via satellite.
Listeners would have to purchase a special radio and antenna. It is likely the service will be subscription-based.
Aside from Hundt, Commissioner Susan Ness also favours opening the auction. But she is willing to back the existing plan, if necessary, to allow the FCC to move forward promptly.
The FCC's other two commissioners -- James Quello and Rachelle Chong -- oppose opening the auction.
Chong last week publicly called on her colleagues to move as quickly as possible to complete action on the matter.
The auction issue is the latest controversy to dog the new radio service, which the FCC has been mulling for years.
The four commissioners already were split over whether to require digital audio radio service operators to meet specific public-interest obligations in return for the radio licenses -- much as TV stations now do. The FCC plan faced delays last fall after members of Congress voiced their own concerns.
",40
"The judge who oversaw the dismantling of the old Ma Bell is worried that a corporate marriage involving the new AT&T Corp. could create the kind of ""monolith"" the historic breakup was supposed to do away with.
Federal Judge Harold Greene in 1982 ordered that the Bell system monopoly be split up. For more than a decade he then presided over the consent agreement that created the seven regional Baby Bell phone companies and the new AT&T, the nation's No. 1 long-distance carrier.
AT&T now is in talks to merge with SBC Communications Inc. -- currently the largest provider of local phone service -- in what would be an estimated $50 billion-plus transaction. It would by far and away be the biggest such deal in history.
""The basic assumption of the breakup was that you couldn't have competition, fair competition, as long as there was this massive company that encompassed all areas of the country and all types of service,"" Judge Greene told Reuters.
""And the same theory that led to the breakup,"" he added, ""could lead one to be suspicious at least of the reemergence of the same monolith.""
Judge Greene -- now more of an observer of the telecom business rather than an overseer -- frets that market conditions have not changed that much since the breakup of the Bell monopoly and the consent decree that took effect in 1984. The decree set limits on how the phone industry operated.
He believes competition has yet to take full root, despite last year's telecommunications act that tore down decades-old barriers and let the local and long-distance phone companies and cable-television operators enter each other's business.
""There are lots of things that need to be done yet -- both to get the long-distance companies into local service, and local companies into long-distance service. Nothing is perfected yet,"" Judge Greene said.
""It seems kind of surprising that they would now reconstitute the AT&T empire, at least in one part,"" he added.
""I would hope that regulators -- the Federal Communications Commission and the antitrust division of the Department of Justice -- will be very cautious in approving something like that.
Judge Greene's policing duties in the telecom business ended with the new communications act. Since the law's passage, there has been an explosion in merger activity.
SBC recently acquired former Baby Bell Pacific Telesis Group. Bell Atlantic Corp. is in the process of acquiring NYNEX Corp. And British Telecommunications Plc is in the midst of buying No. 2 long-distance carrier MCI Communications Corp.
It's reported that a merger of AT&T and San Antonio, Texas-based SBC would have combined revenues of some $80 billion and a workforce of 240,000.
SBC's regional phone system includes California and Texas, following the carrier's purchase of PacTel.
""I'm surprised that somebody wants to put Humpty Dumpty back together,"" said Judge Green, adding that any new corporate monolith would run counter to the intent of the new telecom law.
""Certainly I think it was the spirit of the act that there not be a return to monopoly conditions,"" he said.
",40
"A year after the ValuJet Inc. crash, the top airline regulator suggested Thursday it would be impractical to force air carriers to install fire-safety equipment in passenger cargo holds in less than three years.
Under fire for not moving more quickly to promote airline safety, the Federal Aviation Administration plans next month to propose the installation of smoke detectors and fire suppressors in all passenger cargo holds over three years.
House lawmakers, however, accused the agency of dragging its feet on the installation issue, despite years of warnings from safety regulators on the need to do so. Lawmakers raised the possibility of a speedier timetable.
""It could be done in a very short period of time if we want to ground the fleet,"" Barry Valentine, acting head of the Federal Aviation Administration, told a House panel.
""That's the decision. How much disruption do we citizens want to have in our air transportation,"" he said.
But Representative John Fox, a Pennsylvania Republican, responded, ""I think we want to have as safe as flights as possible. And if they have to be a little slower, the public probably would like them to be a little slower.""
Airline executives on Wednesday announced plans to place both smoke detectors and fire-suppression systems in their aircraft, after initially balking at the dual requirement.
FAA officials came under attack at the hearing -- from both lawmakers and the chairman of the National Transportation Safety Board -- for not moving more aggressively to implement new safety rules in the wake of the ValuJet crash.
""This is pathetic. The FAA is pathetic. The industry is pathetic,"" said Representative Peter DeFazio, an Oregon Democrat. ""Any more needless deaths and we're going to crucify you.""
The FAA announced six months ago plans to issue the fire-safety equipment rules, which will affect about 3,000 aircraft. But it has yet to unveil a formal proposal.
""Six months from now are we going to come back and be in the same situation that we're in today? Or is there really going to be improvement this time?"" asked Representative John Duncan, a Tennessee Republican who heads the transporation subcommittee.
Valentine responded that in six months the rules would be in the ""final assembly.""
ValuJet flight 592 crashed into the Florida Everglades last May, killing 110 people, because of a fire in the cargo hold. Oxygen generators were blamed for the fire. Regulators have since banned their transport on commercial airliners.
The head of the NTSB disclosed this week, however, that Continental Airlines last month unknowingly carried a shipment of generators similar to those in the ValuJet accident.
NTSB Chairman Jim Hall also complained at the hearing that the FAA had been slow to inform his agency of the Continental incident. Hall said it was reported to the FAA on April 24.
""It did not come to the attention of our agency until this week. You would think that in light of the ValuJet accident that if someone knew that something like this had taken place, that that information would be extremely important to the flying public of the United States,"" Hall said.
An FAA spokesman later said the FAA is under no requirement to forward such information to the NTSB.
",40
"Congress is gearing up to try and make changes to the way the government auctions the airwaves, following a recent sale that fell flat and a new Justice Department investigation into possible bid-rigging.
Lawmakers said Thursday they are eyeing bills or offering legislation to maximize the money the federal government raises through spectrum sales. That comes after some wireless communications licenses auctioned last week feteched just $1 apiece, and the antitrust probe put a further tarnish on the sales.
Bills being offered would set minimum bidding levels or slow the flow of airwave slices into the market by holding federal auctions only at selected intervals. The Clinton administration is studying the measures.
Congress has relied heavily on the Federal Communications Commission auctions as a one-time way to help cut the deficit. ""We had a great success with the early auctions that raised over $23 billion. But it became like candy. And the budgeteers just couldn't put it down,"" Representative Mike Oxley, an Ohio Republican who first introduced auction legislation in 1993, said in an interview.
""At the very least, we ought to have some hearings and try to educate members (of Congress), the public, and particularly the budgeteers, that they're really playing with fire here."" Sen. John McCain, an Arizona Republican who chairs the commerce committee, wants the FCC to pay ""more attention to the market forces"" when it auctions spectrum for uses ranging from a new generation of cellular phones to satellite television.
""The last thing we want to do is have a distortion of the marketplace which would then cost people involved in the free enterprise system and the taxpayers,"" he said in an interview. McCain is preparing to offer a bill to keep spectrum from being dumped on the market.
But some analysts are wary of tinkering with the process. ""The idea that Congress can figure whether there's too much or too little spectrum -- or the right price -- I find arrogant and presumptuous,"" said Bill Bane, director at Mercer Management Consulting Inc.
The importance of airwave sales to the budget process was driven home by last week's disappointing auction. The sale -- for a piece of spectrum that will let users gain access to the Internet or create wireless local telephone networks -- raised just $13.6 million. That was a far cry from the $1.8 billion Congress was counting on to cut the deficit. FCC officials blamed the results on lawmakers' requirement to hold the auction by mid-April and to end it in time to help reduce red ink in the current 1997 fiscal year. They said companies did not have enough time to develop business plans.
""This was a good example of one that was ordered prematurely,"" Representative W. J. Billy Tauzin, chairman of the telecommunications subcommittee, said in an interview.
    ""It's a problem that has to do with our budgeteers ordering auctions that may be inappropriate, not with the auction process itself,"" added the Louisiana Republican.     Sen. Robert Kerrey, a Nebraska Democrat, offered a bill this week to set a minimum price for each airwave parcel sold. ""With a reserve pricing system, taxpayers will be guaranteed that national assets are not sold for a song,"" he said.
    Meanwhile, lawmakers are in no hurry to offer bills in response to the Justice Department probe of possible bid-rigging at auctions for advanced cellular-phone licenses. But the news put a further spotlight on the auctions.     ""This whole topic of spectrum auctions has become -- crazily enough -- kind of sexy,"" quipped House Commerce Committee aide Dennis Fitzgibbons.
",40
"Regulators are considering ways to make it easier for cash-strapped winners at last year's $10.2 billion wireless phone auction to pay Uncle Sam for their licenses, government and industry officials said.
Congress is counting on the proceeds to trim the deficit.
But many of the companies that won licenses to offer a new generation of cellular phone service are now in financial hot water, raising doubts over whether the government will collect all the money owed.  
Any steps the Federal Communications Commission takes will send a message to future bidders and affect future airwave sales. The FCC ""is going to be setting a new precedent,"" a government official said.
Government and industry officials said the FCC is considering restructuring the payments that last year's auction winners must make to the government. The agency is expected to seek public comment soon on various proposals.
The bids have become loans from the government, with the winners paying interest on the money that's due for licenses to offer ""personal communications services"" (PCS).  
The companies paid what were considered high prices. Many have since found it tough to raise financing.
The options under study at the FCC include:
-- Handling each company in a case-by-case manner. That way, payments could be restructured on an individual basis.
-- Deferring payments for a number of years -- say five, for example -- after which companies would make their interest payments and then pay off the remaining principal amount due. The breathing space would give companies time to build their PCS networks and make some money.  
-- Letting winners pay, up front, a discounted lump sum based on interest payments otherwise due in the future.
The FCC also has been negotiating with the Treasury Department for help and advice. The FCC is ""not particularly expert in this area and never expected to be in it,"" the government official said.
In addition, several winners -- including top bidder NextWave Telecom Inc. -- have asked the FCC for permission to make interest payments yearly, instead of quarterly.  
Last month, the FCC suspended the quarterly payments while it mulled the request -- a move that, according to one estimate, is costing the government $1.5 million daily.
Government and industry officials said the FCC is in a tough spot, especially because Congress is depending on the auction revenues to help balance the government's books.
If companies were to default on their payments and the FCC were to reauction the licenses, the new prices probably would be far less than the original amounts bid, analysts agreed.  
Many of the auction winners ""will soon face financial crises if the FCC does not act swiftly and decisively to change the license payment terms,"" MCI Communications Corp. told the FCC earlier this month.
The No. 2 long-distance company -- which has signed a deal to lease NextWave's PCS network to provide wireless services to MCI customers -- wants the FCC to handle the companies' problems on a case-by-case basis.
But others urge the FCC to reject that approach. They want the agency to develop a general rule -- through its usual rulemaking process -- that would apply to all companies.  
""We are concerned that whatever the FCC does, it does it fairly and equally across the board,"" attorney Mark Tauber of Piper & Marbury said. ""It's bad 'PR' for the commission if they give the idea that special deals are available.""
AirGate Wireless, which won four PCS licenses at an auction that ended early this year, wants the FCC to take more aggressive action: reinstate the quarterly interest payments; declare companies in default if they fail to make payments; and reauction the licenses of those in default.
""Anything less sends a message to existing licensees and future auction bidders that the FCC will provide a financial safety net for bidders that bid beyond their financial capabilities,"" the Washington-based firm told the FCC.
Meanwhile, the companies are expected to get some help from a recent global trade agreement that will make it easier for foreign communications companies to invest in U.S. carriers. The FCC is developing a proposal to implement the agreement, which could pave the way for foreign sources of money.
",40
"Media mogul Rupert Murdoch treks to Capitol Hill Thursday to make a public pitch for his $1 billion Sky satellite-broadcast venture as a powerful new competitor to cable television.
""He's going to sound like the savior. He's going to present himself like the savior. Members of Congress will watch and applaud. But we'd better watch our wallets,"" said Stephen Effros, president of the Cable Telecommunications Association, a trade group representing cable operators.
Murdoch has been lobbying Congress to pass legislation that would benefit his new venture, to be formed through a 50 percent stake in Colorado-based EchoStar Communications Corp.
On Thursday he is expected to appeal to a Senate Commerce Committee hearing for help to make Sky a potent force to cable operators, whose subscription rates have leaped at more than double the rate of inflation over the past year.
Cable companies are worried -- insiders have dubbed Sky ""Deathstar"" -- and the industry is rallying to battle the Murdoch venture on the legislative and regulatory fronts.
Effros complained that Murdoch is trying to ""violate every public policy in this country to protect against the power he's accumulating.""
A spokesman for Murdoch's News Corp. was not available to comment.
Sky is set to be running in early 1998. It is expected to offer more than 500 channels of high-quality digital TV, Internet services, and retransmission of local TV broadcasts representing more than 75 percent of U.S. TV households.
Direct broadcast satellite operators -- whose customers receive the service over a pizza-sized dish -- have nearly 5 million subscribers, up from practically zero three years ago.
Murdoch and other satellite broadcast companies want a big chunk of the cable industry's 65 million subscribers. Industry analysts believe Murdoch is in a position to do so.
""He comes in with a lot of motivation, a lot of capital, a lot of experience, and a lot of chutzpah,"" said analyst Jimmy Schaeffler of The Carmel Group in Carmel, Calif.
Murdoch also is using his political weight to convince lawmakers to pass legislation to clarify the copyright laws so Sky can retransmit local TV station signals to its customers. Other satellite broadcast companies do not provide the broadcasts.
To outflank opponents, Murdoch wants to attach the measure to a must-pass $4 billion spending package that appropriates money for U.S. peacekeeping troops in Bosnia and disaster relief, according to congressional and industry sources.
The effort has run into opposition from lawmakers such as Rep. Thomas Bliley, R-Va. The commerce committee chairman wants the measure to go through the normal -- and longer -- legislative channels involving committee hearings and votes.
""Bliley has dug in his heels. And it doesn't sound like its negotiable,"" said a congressional aide.
In any event, Murdoch's testimony Thursday could get a sympathetic reception from lawmakers anxious to jump-start competition after last year's big communications bill.
Competition in the cable business suffered after big phone companies scaled back plans to offer cable TV. Meanwhile, cable rates jumped 8.2 percent in the 12 months ended in February -- vs. a 3 percent rise in consumer prices.
""There's no competing service that has functioned at a level to cause cable rates to decrease,"" said Mark Buse, an aide to Sen. John McCain, an Arizona Republican.
Buse said McCain, who chairs the commerce committee, has met with Murdoch and ""believes there is an an awful lot of validity to what Mr. Murdoch is trying to achieve.""
In a preview of Thursday's hearing, cable industry officials insist they face competition from the likes of satellite broadcasters, regional Baby Bell Ameritech Corp. and now Murdoch's Sky. ""Cable is facing some very real competition already,"" said Torie Clarke of the National Cable Television Association.
",40
"Two Washington-area firms bid a total of $173 million at a government auction Wednesday for the rights to provide a new breed of radio service that can be heard coast-to-coast and offers CD-quality reception.
American Mobile Radio Corp., a unit of American Mobile Satellite Corp. of Reston, Va., placed a winning bid of $89.9 million at a Federal Communications Commission sale for one of two licenses to offer digital audio radio.
Washington-based CD Radio Inc. put down a top bid of $83.3 million for the other license in a long-delayed -- and controversial -- auction limited to four companies.
Digital radio, expected to be up and running by the latter half of 1999, will be beamed via satellite nationwide and will allow listeners to tune in anywhere in the country. It will be subscription-based and will offer listeners anywhere from 25 to 50 stations of music, news and other specialised programmes.
The small satellite antenna need to tune in the broadcasts could be installed in cars, trucks and homes. People who drive a lot -- or who live in remote areas with few existing radio channels -- are considered prime candidates for the new service.
""We believe this is a better way to listen to radio,"" said CD Radio Chairman David Margolese. ""What we have is the birth of the future of radio.""
CD radio expects to begin its service in the second half of 1999, offering 50 channels of programming. Most channels will be commercial-free and offer music.
Margolese said non-music channels could carry ads. Such programming could include all-news, talk and sports formats. He said the cost of the service will probably be $10 or less a month, depending on consumer demand.
To get the service, Margolese said it would cost about $150 to add a chip to a new radio with a digital band.
Lon Levin, vice president at American Mobile Satellite and head of the company's radio unit, said his company expects to offer 25 to 35 channels of news, sports and music. He expects the service to be operational in at least three years.
The auction occurred only after the FCC settled a long-running dispute among its commissioners in early March by limiting the auction to the four companies that had applied by the end of 1992 to offer digital radio.
Two commissioners -- Chairman Reed Hundt and Susan Ness -- favoured opening the sale to any bidder. But in the end, the two agreed reluctantly to limit the auction so that the launch of digital radio would not be delayed further.
Hundt warned that closing the auction could cost taxpayers ""millions of dollars"" in lost revenues because more bidders could have generated higher prices.
Broadcasters worry that the new service will sap existing radio stations of listeners and ad revenues.
""That weakens a station's ability to do local news, sports, weather, traffic and public service,"" said a spokesman for the National Association of Broadcasters.
CD Radio's stock surged on news of its auction victory, climbing $5.25 to $12.625 in early afternoon Nasdaq trading. American Mobile Satellite's stock was up 69 cents to $11.50, also on Nasdaq.
",40
"Regulators will host an auction Tuesday that supporters promise will usher in a new breed of nationwide radio service but critics charge may cost U.S. taxpayers millions of dollars in lost revenue.
Up for grabs are two licenses to provide radio programming that will be beamed coast-to-coast via satellite. Digital radio will offer listeners CD-quality sound and specialized programming that can be tuned in anywhere in the nation.
""Americans will be able to travel anywhere in the country, including remote rural areas where radio reception is poor, and enjoy the same high-quality audio and wide selection of programs the entire trip,"" said William Caldwell, president of Seattle-based Digital Satellite Broadcasting Corp., one of the bidders at the Federal Communications Commission sale.
The FCC resolved a long-standing dispute among its four commissioners in early March by limiting the auction to the four companies that had applied by the end of 1992 to offer digital radio.
Two of the commissioners -- Chairman Reed Hundt and Susan Ness -- favored opening the sale to any company wanting to bid. But in the end they agreed reluctantly to limit the auction so the launch of digital radio would not be delayed further.
""The decision to keep the auction door closed may needlessly cost the public millions of dollars,"" Hundt said when the agency announced its decision.
Hundt said that if other companies value the digital radio airwaves but are ""arbitrarily excluded from the auction, it is safe to predict that the auction winners will simply sell their licenses to those companies.""
Aside from DBSC, the other three bidders are: CD Radio Inc. of Washington, D.C.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp. of Reston, Va.; and Primosphere LP of New York.
Commissioner Rachelle Chong contended that opening the bidding would have been unfair to the four.
""These applicants have been ready and willing to move forward for some time. The have expended considerable rsources in developing this technology,"" she said, adding that the first application was filed seven years ago.
Digital radio is unlikely to be on the air for at least three years -- if not longer -- owing to the time it takes to get satellites built and deployed into orbit.
The service will probably be subscription-based, with an expected cost of about $10 a month. Listeners will have to buy a special radio receiver that will cost about $200, on top of the price of a regular radio.
The credit-card sized satellite antenna could be installed in cars, trucks and homes.
If it wins a license, DBSC plans to deliver regional programming throughout the country. It would offer, among other things, children's programming, foreign-language, classical music, opera, all-news, all-sport and educational programs to targeted demographic groups.
The programming would be offered as an advertising-supported service and as a commercial-free subscription service.
",40
"The government's latest auction of the airwaves concluded Friday after raising a disappointing $13.6 million for Uncle Sam, with licenses for some wireless communications markets fetching just $1 apiece.
The total was way short of the $1.8 billion that Congress was banking on to help eliminate the deficit. The results also buttressed the view that spectrum sales cannot be counted on as big money raisers -- as they have been in the past.
""The spectrum is being managed in a willy-nilly, haphazard fashion,"" complained Ken Johnson, a spokesman for Representative Billy Tauzin, R-La., the telecommunications subcommittee chairman.
""The budget crunchers are playing with monopoly money and we're playing with real dollars.""
The Federal Communications Commission sold the rights for a piece of spectrum that will allow users to hook up to the Internet over the airwaves, set up wireless local telephone networks and operate location services to pinpoint vehicles.
Top bidders were units of BellSouth Corp., which bid $6.2 million for 22 licenses in Atlanta, Miami, New Orleans and elsewhere; a Bell Atlantic Corp.-Nynex Corp. joint venture, which bid $1.6 million for eight licenses in Boston, New York, Washington and other cities; and Comcast Corp., which plunked down $1.5 million for 17 licenses around the nation.
Analysts and FCC officials blamed the poor results on the speedy timetable Congress required for the sale, the difficult times wireless companies now face raising money, and a flood of new companies into the wireless business.
Seven licenses -- in Milwaukee, St. Louis, Minneapolis-St. Paul, Des Moines, Iowa, and Omaha, Neb. -- sold for just $1. Licenses for Guam and American Samoa drew zero bidders.
""The climate surrounding the auction was awful,"" said Mark Lowenstein of Yankee Group Inc., a Boston consulting firm. ""It's not going to make much of a dent in the national debt.""
The FCC put 128 licenses on the block in a sale that began April 15. It was the 14th airwaves sale.
The auctions have netted the government about $23 billion over the past three years, far more than expected. But prices have begun to slide as more spectrum is sold, contributing to financial woes among wireless carriers and raising doubts over whether the government will collect all the money it is owed.
""This sends the strongest signal possible to the FCC, Congress and the White House to reassess their spectrum plans for future auctions,"" said Elliott Hamilton, an analyst at Strategis Group, a Washington-based consulting firm.
To help balance the budget, Congress last year forced the FCC to hold the auction by April 15 and to collect the proceeds by Sept. 30, the last day of the 1997 fiscal year.
FCC officials said the timetable did not give potential bidders time to develop rational business plans and drum up financing.
The nation's broadcasters -- who are in the transition to digital television and must return their existing analogue licenses to the FCC for auction -- point to the poor results as a reason for scuttling future auctions.
But FCC chairman Reed Hundt disagreed.
""Anybody who says this auction was a failure is basing it on budget predictions that we never bought into. Anybody from the lobbying community who says it's a failure is probably somebody who wants no more licenses because they want no more competition,"" he said in an interview.
",40
"Opponents of U.S. trade concessions to China are expected to mount the fiercest congressional battle in years to overturn President Bill Clinton's decision to renew China's favored trading status.
While supporters of the president's decision on Monday to renew China's most favored nation (MFN) status for another year remain confident of victory, opponents -- ranging from social conservatives to organized labor -- are revving up for a fight.
The unusual coalition is blasting the move from both sides of the political spectrum, hitting China's policies on human rights, labor rights, religious rights, trade and abortion.
Opponents are also gathering strength from worries over the transfer this summer of Hong Kong to China, as well as the brouhaha over charges that Beijing tried to sway U.S. elections through illegal campaign contributions.
""With Hong Kong and campaign finance lurking in the background, it will definitely be a tougher fight,"" a congressional aide, who requested anonymity, said. ""A lot depends on what happens between now and the vote.""
Another congressional aide said, ""The coalition of the AFL-CIO and social conservatives makes for a potent force.""
House of Representatives Speaker Newt Gingrich said this year's decision would be closer than last year's 286-141 vote in the House to back Clinton on MFN. But advocates and even opponents expect the president's policy ultimately to survive.
Gingrich, in a toughly worded statement, said he supported MFN status for China, but blasted Clinton for not using his announcement to press China for advances on human rights, democratic freedoms and religious tolerance.
Even if lawmakers muster enough votes to reject the president's decision -- which is considered unlikely -- opponents doubt they could round up the two-thirds vote needed to override an expected veto from Clinton.
Congress later this summer will vote on whether to overturn Clinton's decision, with the House voting first.
""The opponents have a better chance than they have had in the past several years. But it still may not be enough of a margin to withstand a veto,"" said Thea Lee, international expert at the AFL-CIO, which opposes MFN status for China.
But even a defeat for MFN's opponents could amount to a sort of victory if the vote is close enough.
""It represents an important turning point in the growing uneasiness among both Democrats and Republicans over the current China trade policy,"" Lee said.
Gary Bauer, president of the conservative Family Research Council, said: ""The president's action represents the high-water mark of the pro-MFN forces. As the truth of the human rights violations in China reaches the American public, the case for MFN collapses.""
A sign Clinton will face tougher sledding emerged a week ago, when an influential House Republican leader urged the president to revoke China's MFN status, citing Beijing's record on human rights, weapon sales and trade.
Rep. Bill Paxon of New York, a Gingrich ally who chairs meetings of the Republican House leadership team, said current U.S. policy had yielded only ""a Chinese regime which thumbs its nose at the United States and places its heel on the neck of freedom.""
Another Republican, Sen. John Chafee of Rhode Island, introduced a bill in Congress on Monday that would give China permanent MFN status.
Democratic lawmakers are also critical of China.
Since Clinton ""delinked trade from human rights three years ago, the human rights situation in China and Tibet has deteriorated, the U.S. trade deficit with China has soared, and China's authoritarian government has continued its sale of nuclear, chemical, missile and biological weapons technology to dangerous countries, including Iran,"" Rep. Nancy Pelosi, a California Democrat, said.
But supporters of the administration's policy remain confident. ""In the end, the votes will be there for MFN,"" said Calman Cohen of the Emergency Committee for American Trade, representing the heads of big U.S. corporations.
",40
"A year after the ValuJet Inc. crash, the top airline regulator suggested Thursday it would be impractical to force air carriers to install fire-safety equipment in passenger cargo holds in less than three years.
Under fire for not moving more quickly to promote airline safety, the Federal Aviation Administration plans next month to propose the installation of smoke detectors and fire supressers in all passenger cargo holds over three years.
House lawmakers, however, accused the agency of dragging its feet on the installation issue, despite years of warnings from safety regulators on the need to do so. Lawmakers raised the possibility of a speedier timetable.
""It could be done in a very short period of time if we want to ground the fleet,"" Barry Valentine, acting head of the Federal Aviation Administration, told a House panel.
""That's the decision. How much disruption do we citizens want to have in our air transportation,"" he said.
But Representative John Fox, a Pennsylvania Republican, responded, ""I think we want to have as safe as flights as possible. And if they have to be a little slower, the public probably would like them to be a little slower.""
Airline executives on Wednesday announced plans to place both smoke detectors and fire-suppression systems in their aircraft, after initially balking at the dual requirement.
FAA officials came under attack at the hearing -- from both lawmakers and the chairman of the National Transportation Safety Board -- for not moving more aggressively to implement new safety rules in the wake of the ValuJet crash.
""This is pathetic. The FAA is pathetic. The industry is pathetic,"" said Representative Peter DeFazio, an Oregon Democrat. ""Any more needless deaths and we're going to crucify you.""
The FAA announced six months ago plans to issue the fire-safety equipment rules, which will affect about 3,000 aircraft. But it has yet to unveil a formal proposal.
""Six months from now are we going to come back and be in the same situation that we're in today? Or is there really going to be improvement this time?"" asked Representative John Duncan, a Tennessee Republican who heads the transporation subcommittee.
Valentine responded that in six months the rules would be in the ""final assembly.""
ValuJet flight 592 crashed into the Florida Everglades last May, killing 110 people, because of a fire in the cargo hold. Oxygen generators were blamed for the fire. Regulators have since banned their transport on commercial airliners.
The head of the NTSB disclosed this week, however, that Continental Airlines last month unknowingly carried a shipment of generators similar to those in the ValuJet accident.
NTSB Chairman Jim Hall also complained at the hearing that the FAA had been slow to inform his agency of the Continental incident. Hall said it was reported to the FAA on April 24.
""It did not come to the attention of our agency until this week. You would think that in light of the ValuJet accident that if someone knew that something like this had taken place, that that information would be extremely important to the flying public of the United States,"" Hall said.
An FAA spokesman later said the FAA is under no requirement to forward such information to the NTSB.
",40
"The nation's top communications regulator said Tuesday he will resign as head of the Federal Communications Commission.
Saying he wanted to spend more time with his family and complete two books, FCC Chairman Reed Hundt said he asked President Bill Clinton to begin looking for a replacement. Hundt's term does not expire until June 30, 1998.
The new FCC chief must be cleared by the Senate. Hundt, who said he does not yet have future professional plans, will remain a voting member of the five-member FCC in the meantime.
He said he will remain as FCC chairman until a successor is installed.
""I expect that I'll be here for some time yet,"" Hundt, 49, told a news conference. ""I don't have any plans with anybody whatsoever.""
Hundt, a close ally of Vice President Al Gore, became chairman in November 1993. During his controversial 3-1/2-year tenure to date, he has presided over implementing last year's big communications law and requiring television broadcasters to air 3 hours a week of educational TV for children.
Among those considered possible successors are Susan Ness, a current FCC commissioner, and the agency's general counsel, William Kennard. Clinton nominated Kennard last Friday to fill one of two commissioner slots already vacant.
Other possible replacements include: Kathy Wallman, now a senior White House economic aide and formerly the head of the FCC's common carrier bureau; and Ralph Everett, a Washington attorney and former Senate staff member.
""Chairman Hundt has been a strong and visionary leader of the FCC during this historic period in telecommunications policy,"" Clinton said in a statement.
Clinton praised Hundt's ""steadfast commitment to the public interest and to bringing the benefits of competition to consumers.""
Hundt's departure -- and the arrival of new commissioners in coming months -- are expected to generate new uncertainties about federal communications policy.
""It could potentially be a huge change,"" said analyst Scott Cleland of Legg Mason Precursor, a unit of the brokerage firm Legg Mason Inc. ""If it's anything like previous transitions, (FCC) chairmen can reinvent the wheel.""
Hundt has moved aggressively to implement last year's communications law and pry open local phone monopolies to competition -- although a key part of that effort is embroiled in a court fight against regional Baby Bell phone companies.
Hundt also has overseen the granting of free licenses to TV stations for the introduction of high-definition digital TV and moved to open foreign markets to competition.
""He is in no small part responsible for the pro-competitive revolution in telecommunications that is sweeping the globe,"" said attorney Scott Harris of Gibson, Dunn & Crutcher.
But Hundt often clashed with key members of Congress and the Baby Bells, who complained that his FCC policies amounted to micro-managing of the communications industry.
""His departure is fitting and timely,"" said Representative W.J. ""Billy"" Tauzin, R-La., adding that Hundt ""remains a good friend and a person I deeply respect"" despite policy differences between the two.
Tauzin, the head of the powerful House Telecommunications Subcommittee, told Reuters that under the next chairman the FCC has ""got to be an agency that tries to downsize itself and its influence on the industry.""
Broadcasters also have criticised Hundt's policies.
But consumer advocates generally have praised Hundt's stands on issues ranging from children's TV to opening the $100 billion local phone market to competition.
",40
"Regulators are considering ways to make it easier for cash-strapped winners at last year's $10.2 billion wireless phone auction to pay Uncle Sam for their licenses, government and industry officials said.
Congress is counting on the proceeds to trim the deficit.
But many of the companies that won licenses to offer a new generation of cellular phone service are now in financial hot water, raising doubts over whether the government will collect all the money owed.
Any steps the Federal Communications Commission takes will send a message to future bidders and affect future airwave sales. The FCC ""is going to be setting a new precedent,"" a government official said.
Government and industry officials said the FCC is considering restructuring the payments that last year's auction winners must make to the government. The agency is expected soon to put out different proposals for public comment.
The bids have become loans from the government, with the winners paying interest on the money that's due for licenses to offer ""personal communications services,"" or PCS.
The companies paid what were considered high prices. Many have since found it tough to raise financing.
The options under study at the FCC include:
-- Handling each company in a case-by-case manner. That way, payments could be restructured on an individual basis.
-- Deferring payments for a number of years -- say five, for example -- after which companies would make their interest payments and then pay off the remaining principal amount due. The breathing space would give companies time to build their PCS networks and make some money.
-- Letting winners pay, up front, a discounted lump sum based on interest payments otherwise due in the future.
The FCC also has been negotiating with the Treasury Department for help and advice. The FCC is ""not particularly expert in this area and never expected to be in it,"" the government official said.
In addition, several winners -- including top bidder NextWave Telecom Inc. -- have asked the FCC for permission to make interest payments yearly, instead of quarterly.
Last month, the FCC suspended the quarterly payments while it mulled the request -- a move that, according to one estimate, is costing the government $1.5 million daily.
Government and industry officials said the FCC is in a tough spot, especially because Congress is depending on the auction revenues to help balance the government's books.
If companies were to default on their payments and the FCC were to reauction the licenses, the new prices probably would be far less than the original amounts bid, analysts agreed.
Many of the auction winners ""will soon face financial crises if the FCC does not act swiftly and decisively to change the license payment terms,"" MCI Communications Corp. told the FCC earlier this month.
The No. 2 long-distance company -- which has signed a deal with NextWave to lease the company's PCS network to provide wireless services to it own customers -- wants the FCC to handle the companies' problems on a case-by-case basis.
But others urge the FCC to reject that approach. They want the agency to develop a general rule -- through its usual rulemaking process -- that would apply to all companies.
""We are concerned that whatever the FCC does, it does it fairly and equally across the board,"" attorney Mark Tauber of Piper & Marbury said. ""It's bad 'PR' for the commission if they give the idea that special deals are available.""
AirGate Wireless, which won four PCS licenses at an auction that ended early this year, wants the FCC to take more aggressive action: reinstate the quarterly interest payments; declare companies in default companies that fail to make payments; and reauction the licenses of those in default.
""Anything less sends a message to existing licensees and future auction bidders that the FCC will provide a financial safety net for bidders that bid beyond their financial capabilities,"" the Washington-based firm told the FCC.
Meanwhile, the companies are expected to get some help from a recent global trade agreement that will make it easier for foreign communications companies to invest in U.S. carriers. The FCC is developing a proposal to implement the agreement, which could pave the way for foreign sources of money.
",40
"Media mogul Rupert Murdoch treks to Capitol Hill Thursday to make a public pitch for his $1 billion Sky satellite-broadcast venture as a powerful new competitor to cable television.
""He's going to sound like the saviour. He's going to present himself like the saviour. Members of Congress will watch and applaud. But we'd better watch our wallets,"" said Stephen Effros, president of the Cable Telecommunications Association, a trade group representing cable operators.
Murdoch has been lobbying Congress to pass legislation that would benefit his new venture, to be formed through a 50 percent stake in Colorado-based EchoStar Communications Corp.
On Thursday he is expected to appeal to a Senate Commerce Committee hearing for help to make Sky a potent force to cable operators, whose subscription rates have leaped at more than double the rate of inflation over the past year.
Cable companies are worried -- insiders have dubbed Sky ""Deathstar"" -- and the industry is rallying to battle the Murdoch venture on the legislative and regulatory fronts.
Effros complained that Murdoch is trying to ""violate every public policy in this country to protect against the power he's accumulating.""
A spokesman for Murdoch's News Corp. was not available to comment.
Sky is set to be running in early 1998. It is expected to offer more than 500 channels of high-quality digital TV, Internet services, and retransmission of local TV broadcasts representing more than 75 percent of U.S. TV households.
Direct broadcast satellite operators -- whose customers receive the service over a pizza-sized dish -- have nearly 5 million subscribers, up from practically zero three years ago.
Murdoch and other satellite broadcast companies want a big chunk of the cable industry's 65 million subscribers. Industry analysts believe Murdoch is in a position to do so.
""He comes in with a lot of motivation, a lot of capital, a lot of experience, and a lot of chutzpah,"" said analyst Jimmy Schaeffler of The Carmel Group in Carmel, Calif.
Murdoch also is using his political weight to convince lawmakers to pass legislation to clarify the copyright laws so Sky can retransmit local TV station signals to its customers. Other satellite broadcast companies do not provide the broadcasts.
To outflank opponents, Murdoch wants to attach the measure to a must-pass $4 billion spending package that appropriates money for U.S. peacekeeping troops in Bosnia and disaster relief, according to congressional and industry sources.
The effort has run into opposition from lawmakers such as Representative Thomas Bliley, R-Va. The commerce committee chairman wants the measure to go through the normal -- and longer -- legislative channels involving committee hearings and votes.
""Bliley has dug in his heels. And it doesn't sound like its negotiable,"" said a congressional aide.
In any event, Murdoch's testimony Thursday could get a sympathetic reception from lawmakers anxious to jump-start competition after last year's big communications bill.
Competition in the cable business suffered after big phone companies scaled back plans to offer cable TV. Meanwhile, cable rates jumped 8.2 percent in the 12 months ended in February -- vs. a 3 percent rise in consumer prices.
""There's no competing service that has functioned at a level to cause cable rates to decrease,"" said Mark Buse, an aide to Sen. John McCain, an Arizona Republican.
Buse said McCain, who chairs the commerce committee, has met with Murdoch and ""believes there is an an awful lot of validity to what Mr. Murdoch is trying to achieve.""
In a preview of Thursday's hearing, cable industry officials insist they face competition from the likes of satellite broadcasters, regional Baby Bell Ameritech Corp. and now Murdoch's Sky. ""Cable is facing some very real competition already,"" said Torie Clarke of the National Cable Television Association.
",40
"Facing financial strains, companies that won wireless phone licenses at last year's $10.2 billion federal auction are urging the government to take steps to make it easier for them to pay off their bids, industry and government sources say.
Top bidders NextWave Telecom Inc. and Pocket Communications Inc., plus several other winners, have asked regulators for a more lenient timetable to pay the government for licenses to offer a new generation of cellular service, the sources said this week.
NextWave's winning bids totaled $4.7 billion, while Washington-based Pocket's added up to $1.4 billion.
The bids have become loans from the government, with the winners paying interest on the money owed for the licenses.
They want to make the hefty interest payments annually, instead of quarterly. The added time would help the companies, which face rough sledding on Wall Street, drum up money to build ""personal communications services,"" or PCS, systems.
The winners at the 1996 Federal Communication Commission auction, reserved for small firms, paid a price more than double that paid by big carriers like AT&T Corp. in 1995.
""These guys have a ticking time bomb on their hands,"" a Wall Street source said of the existing payment schedule.
Industry officials also want the FCC to clarify certain repayment rules. And they want the Treasury Department to take over from the FCC the job of payment collection, hoping the department's financial expertise will spell relief for cash-strapped firms.
""Anything that makes it easier for companies to pay is going to make the companies more attractive to investors,"" said attorney Lynn Charytan of Wilmer, Cutler and Pickering, who represents Pocket Communications.
FCC officials are mulling their options. ""Our existing rules provide some flexibility. Whether that's enough flexibility is under consideration,"" said one agency official.
PCS technology is expected to make the wireless phone a mass-market product, allowing consumers to use different communications services -- such as phone, paging, fax and Internet access -- through a single handheld device.
Earlier this month, NextWave, Pocket and seven other PCS winners asked the FCC to permit annual interest payments.
The companies, in a letter to the FCC's wireless bureau obtained by Reuters, said annual payments would give them more flexibility to tap the stock and bond markets when conditions are favorable.
And they said such payments would let them capitalize on the new World Trade Organization pact on telecommunications. The agreement is expected to make it easier for foreign investment in U.S. communications companies.
The companies said the competitive pressure to build their PCS systems quickly ""places a strain"" on new entrants to the business, ""whose challenge is further complicated by an increasingly cautious domestic investment climate.""
Investors are wary of betting on wireless carriers out of fear the market is becoming flooded with competitors.
""I see no reason why the capital markets will be any kinder to wireless companies in '97 than in '96,"" said analyst Johathan Atkin of BIA Consulting Inc. in Chantilly, Va.
Industry officials also want the FCC to clarify whether a company would be in default on all of their licenses if it misses an interest payment on just one of the permits.
The FCC's rules do not address that issue. The agency is seeking comment on whether to issue a clarification.
FCC Chairman Reed Hundt two weeks ago broached the idea of making the Treasury responsible for payment collection. He cited a ""tension created by the FCC's present dual role as regulator of and creditor to the wireless industry.""
Advocates argue the changes -- including the more lenient payment schedule -- are in the FCC's interest.
For one, they would mean less paperwork for the agency.
And they said it would be counterproductive for several companies to default on payments. That could hurt the bidding at future airwave auctions and lower the potential price for any PCS licenses the FCC re-auctions after a default.
Some industry officials suggested the FCC may not want to appear too willing to change the rules and be accused of catering to industry interests.
",40
"The Justice Department is investigating possible bid rigging during airwaves auctions held by the federal government for wireless phone licenses.
Justice Department documents obtained Wednesday by Reuters showed the department's antitrust division also is looking into whether bidders schemed illegally to divvy up the licenses being sold.
The Federal Communications Commission has raised more than $20 billion since 1995 by selling licenses to companies offering a new generation of cellular phone service known as ""personal communications services,"" or PCS.
A Justice Department spokeswoman confirmed the investigation. She said the antitrust division was ""looking into the possibility of anticompetitive conduct by bidders in connection with the FCC's auctioning of spectrum for PCS.""
She declined to comment on whether the investigation covers all three of the big PCS auctions that have been held. But sources familiar with the matter said the department is seeking information from companies about all of the sales.
The department documents focus on the PCS auction that ended in mid-January and raised $2.5 billion. It involved dozens of bidders.
At that auction, the FCC sold 1,479 PCS licenses nationwide in three different blocks, making it the most licenses sold at once. A third of the licenses were reserved for small-company bidders.
Top bidders were units of Sprint Corp., AT&T Corp. and BellSouth Corp.
A spokesman for Atlanta-based BellSouth said the company had not been informed by the government of any investigation.
A spokesman for New York-based AT&T said the No. 1 long-distance carrier had received a request for information from the Justice Department and intended to coperate fully.
A spokeswoman at Westwood, Kan.-based Sprint had no immediate comment.
Attorneys familiar with the investigation said the department has sent out ""numerous"" letters requesting information and documents from auction participants.
The ""civil investigative demand"" seeks information about companies' bids, their bidding strategies and communications about the auction with other telecommunications firms.
In a sign that the investigation is looking into the possibility of bid ""signaling"" among participants, the department requested documents showing the last three digits of company bids.
One attorney familiar with the investigation said it was evident during the bidding that companies used the last three digits of their dollar bidding figure to signal their intentions to other auction participants.
""It's clear a certain amount of this was taking place,"" said the attorney, who spoke on condition of not being identified.
Attorneys expect antitrust investigators will focus on whether companies used such practices to stay out of each other's markets during bidding, or to influence prices.
In particular, investigators are expected to probe whether some of the bidding practices merely represented bluffing, or were indeed antitrust violations, said attorneys.
Companies hired academics and game theorists to help advise during the PCS sales.
FCC officials declined to comment on the investigation.
But sources said the agency had been alerted about the practice of ""signaling.""
Attorneys said a company involved in the January PCS auction, High Plains Wireless LP, had asked the FCC to take away Mercury PCS II LLC's licenses. High Plains accused Mercury of improper signalling involving licenses in Texas.
Mercury has denied the charge.
The Justice Department investigation comes at a rocky time for the FCC's airwaves sales. An auction that ended last week raised a disappointing $13.6 million, with licenses for some wireless communications markets fetching just $1 apiece.
The total was way below the $1.8 billion that Congress was banking on to help eliminate the federal deficit.
",40
"The Clinton administration Thursday threw its support behind legislation to prevent state and local governments from slapping new taxes on the Internet, giving a boost to a bill opposed by state and local officials.
The bill would impose an indefinite moritorium during which state and local governments could not tax the Internet, companies that provide access to the global computer netowrk, as well as electronic commerce conducted in cyberspace.
The legislation -- introduced in the House and the Senate -- would not affect existing taxes on goods and services ordered through the Internet, as long as the taxes are the same as those on mail-order transactions.
The moratorium is intended to give the Clinton administration time to develop a broad plan to address the issue of taxes on electronic commerce.
""Treasury wholeheartedly supports the goals and underlying objectives of the Internet Tax Freedom Act,"" Deputy Treasury Secretary Lawrence Summers told the Senate Commerce Subcommittee on Communications.
""Unreasonable taxation of the Internet, or even the fear of unreasonable taxation, could be a significant impediment to the growth of the Internet and electronic commerce.""
But state and local officials said the bill would intrude on their powers and create budget problems.
""We believe that an indefinite moratorium on state and local taxes on Internet or on-line services would be a significant infringement on state and local sovereignty, create considerable budgetary problems for local governments and lead to unfair competition in the marketplace,"" said Timothy Kaine, a council member from Richmond, Va., who spoke on behalf of a variety of state and local organizations.
The National Governors Association also opposes the bill.
Key lawmakers in both houses of Congress have signaled a willingness to move quickly on the legislation.
The bill comes as state and local tax collectors have been eyeing the rapidly growing Internet computer network as a source of revenue to bolster their coffers.
Some states already are imposing taxes on companies that link consumers or businesses to the Internet, or that offer computer bulletin boards and electronic mail.
In Microsoft Corp.'s home state of Washington last year, the city of Tacoma decided to impose a six percent tax on companies that link residents to the Internet. But the city council later voted to repeal the plan.
""The present pattern of taxes on electronic commerce can best be described as a crazy quilt. The Internet may be the new frontier, but the way it's taxed looks like Dodge City before the marshals showed up,"" said Sen. Ron Wyden, an Oregon Democrat who is sponsoring the bill.
Added the bill's sponsor in the House, Rep. Christopher Cox, a California Republican: ""That taxes might drive the Internet to an early grave is not hyperbole, but a very real possibility.""
",40
"The No. 2 bidder at the government's high-flying wireless phone auction last year has filed for bankruptcy protection from its creditors, underscoring the problems besetting the auction's winners.
Pocket Communications Inc. -- which bid $1.4 billion for 43 licenses to offer a new generation of cellular service -- said Tuesday it took the step voluntarily to protect its assets from a group of creditors after defaulting on $80 million in loans.
Pocket is one of several top bidders in the government's $10.2 billion auction that have come under pressure from the hefty interest payments required to pay for the ""personal communication services"" (PCS) licenses.
The companies also have come under strain because of a reluctance on Wall Street to finance PCS ventures. Pocket is the first from the high-priced 1996 auction known to have filed for bankruptcy protection.
The sale was reserved for small companies.
Privately-held Pocket's big creditors include a group of Asian entrepreneurs and communications-equipment makers Siemens AG of Germany and L.M. Ericsson of Sweden.
""It enables the company to develop a plan to improve our financial health"" while continuing to build a wireless phone system, Pocket Chairman Daniel Riker said of the company's filing Monday under Chapter 11 of the federal bankruptcy code.
Pocket, based in Washington, said it would take ""several months"" to restructure its finances and business affairs before the company would emerge from the Chapter 11 process on firm financial footing.
The Federal Communications Commission on Monday gave PCS companies from last year's auction some breathing space when it suspended indefinitely a March 31 deadline for them to make payments to the agency for their licenses.
The FCC took the step while mulling a request from No. 1 bidder NextWave Telecom Inc., Pocket and seven other winners for permission to make the payments annually instead of quarterly.
The bids have become loans from the government, with the winners paying interest on the money owed for the licenses.
""When you're out trying to raise capital, investors don't like to see their money go toward interest,"" said Kevin Inda, a Pocket vice president.
The company's bankruptcy filing is expected to send a shudder through the ranks of the other auction winners who are trying to drum up money from wary investors.
""Pocket was a respected company that was considered to have put together a sensible plan,"" said Edward Warner, Washington bureau chief of Wireless Week magazine. ""It won't make financing more available.""
",40
"Alcohol and tobacco companies are capitalising on the Internet's popularity and flashy graphics to promote products in cyberspace in ways that appeal to underage youth, said a report issued Thursday.
The Centre for Media Education (CME), a children's advocacy group, called on Congress, federal regulators and health officials to probe the promotions, saying some may be illegal. The Federal Trade Commission already is probing television liquor and beer ads.
""Urgent action is needed to ensure that effective safeguards are put in place to protect young people from the harmful effects of online marketing of alcohol and tobacco,"" said the report.
""Many of these new forms of advertising, of particular appeal to youth, appear to be inherently unfair and deceptive."" Industry officials deny they are targeting youth.
""There's nothing on the Budweiser Web site that a family wouldn't see on an Anheuser-Busch brewery tour,"" countered Jack Dougherty, spokesman for Anheuser-Busch Cos. Inc. BUD.N , which produces Budweiser beer. He said the company's Web site targets beer drinkers age 21 and older.
The study said alcoholic beverage companies, in particular, have moved to establish sites on the World Wide Web, the multimedia portion of the Internet. It said more than 35 major brands are represented, including Moet & Chandon champagne, Smirnoff's vodka, Dewars scotch whiskey, Samuel Adams beer, Captain Morgan rum, and other products.
The study cited marketing and promotion techniques that use the colourful, interactive features of the Web in ways that appeal to young people. It identified the following:
-- The Budweiser online radio network, ""KBUD,"" which weaves music, rock-star interviews, and music reviews together with beer promotions.
-- Web sites offering interactive games that feature brand characters, including Molson Breweries' ""Berserk in Banff"" and Jose Cuervo tequila's ""J.C. Roadhog Adventure."" Molson is owned 40 percent by Molson Cos. Ltd.  MOLa.TO, 40 percent by Foster's Brewing Group Ltd., and 20 percent by Philip Morris Cos. Inc.
The Cuervo site involves an off-road ride with a ""cyberrodent"" who drives across a desert strewn with empty tequila bottles and other Curevo merchandising icons.
-- Liquor sites with ""bridge drink"" recipes that disguise alcohol's taste and are more appealing to novice drinkers.
-- Numerous sites offering wine, beer, distilled spirits and tobacco products for sale with few or no questions asked.
Regulatory curbs and fears of political backlash have kept most big tobacco companies from launching advertising Web sites, according to the study. But that may change, it added.
Brown & Williamson Tobacco Corp., a subsidiary of B.A.T Industries Plc, recently began running print ads for its Lucky Strike cigarettes in the San Francisco area in a bid to entice new visitors to the Web site for ""Circuit Breaker,"" an online magazine that collects data on smoking habits and offers free T-shirts.
Brown & Williamson, in response, said the Web site ""promotes awareness of events in the San Francisco Bay Area, such as bar nights and adult-oriented concerts.""
""The Web site does not contain tobacco advertising or cigarette logos because we're promoting awareness of the events, not cigarettes,"" the company added.
The study also said some tobacco companies have launched Web sites in other countries, such as Germany, that can be accessed easily from the United States.
""The cigarette industry should refrain from moving onto the Internet to market and promote its products,"" said the CME's Jeffrey Chester. ""If companies fail to comply with the Cigarette Act, appropriate legal action should be taken.""
The 1971 law bars cigarette ads on TV and radio and, according to the CME, is applicable to the Internet.
",40
"Regulators Wednesday approved a landmark overhaul of domestic telephone charges that they said will lower costs for residential and business customers who make plenty of long-distance calls.
Federal Communications Commimssion officials said basic local phone rates will stay the same. But consumers and businesses will pay more for extra phone lines and would see see their bills rise if they seldom dial long distance.
The FCC also voted to set aside about $2.3 billion a year to wire the nation's schools and libraries to the Internet at discounted rates. Another $400 million a year will be used to connect rural hospitals to the global computer network.
The new rates stem from last year's communications law and generally were praised by consumer advocates. Regional Baby Bell phone companies criticised the rules. And small-business advocates complained they will receive higher phone bills.
The matter ultimately is expected to land in court.
According to the FCC, the overhaul will mean that:
-- Residential customers with one phone line will see their long-distance bill drop to $20.65 a month from $22.50 by 1998, on average.
-- A couple with two phone lines in Charleston, S.C., and a long-distance bill of $60 a month, under a special calling plan, would save a total of about $2.50 a month.
-- But a funeral-parlour operator or other small business with three phone lines and just 15 minutes in long-distance calls would see their phone bill rise about $13, to $170.
""This is the single best day that business and residential customers have had since the (1984) breakup of AT&T,"" said FCC Chairman Reed Hundt.
""We are not raising local rates. We are not making it a necessity to raise local rates,"" he added. ""Long-distance prices are going down.""
But BellSouth Corp. warned that the rules would lead to higher local rates. It and other Bells said the FCC went too far in ordering cuts in the $23 billion that long-distance carriers pay for access to their networks each year.
AT&T Corp. called the plan a ""good compromise."" But No. 2 long-distance carrier MCI Communications Corp. said the FCC did not cut access charges enough. The carriers have vowed to pass on rate reductions to their customers.
Wall Street analysts, meanwhile, disputed the impact on Baby Bell and long-distance phone stocks.
The overhaul, in particular, will:
-- Keep the monthly ""subscriber line charge"" customers pay the local phone company at $3.50.
-- Boost the line charge for household customers with more than one line to $5 a month per additional line from $3.50, and to more than $7.50 from $6 for multi-line businesses.
Further increases will be capped at $9. But the average is expected to be below that ceiling. The average residential fee is expected to be no more than $7.60.
-- Impose a new monthly charge on long-distance carriers that is expected to be passed on to customers. The charge will be $1.50 a line for multi-line residential customers and $2.75 a line for businesses with more than one line.
-- Cut by $1.7 billion the $23 billion in annual charges long-distance carriers pay local companies to access their networks, effective July 1.
-- Reduce access charges by a total of $18.5 billion over the five years.
In a move that broke a logjam at the FCC, AT&T promised to pass on the access-charge reductions to customers through long-distance price cuts of 5 percent to 15 percent. Other long-distance carriers have signalled they will follow suit.
Debra Berlyn of the Competition Policy Institute, a consumer group, praised the FCC ""for its resolve to avoid any increase"" in basic local phone rates.
But few carriers were happy with the plan -- possibly a sign that the FCC had achieved the balance it was seeking.
MCI called the $1.7 billion access-charge reduction ""a first step."" ""Much more needs to be done,"" MCI President Timothy Price said.
GTE Corp. -- which filed suit against the FCC's sweeping rules last fall to pry open local phone monopolies -- said: ""It is difficult to understand public policy which penalises consumers for hooking up to the information superhighway by increasing the price of second lines.""
Analyst George Reed-Dellinger at HSBC Washington Analysis predicted the FCC's decision would benefit long-distance phone stocks and hamper local phone stocks.
But analyst Scott Cleland of Schwab Research Group said: ""There was a lot of huffing and puffing, but this is incremental change and not revolutionary change.""
",40
"The bold advice some Baby Bells gave foreign regulators on how to open overseas phone markets now haunts the regional phone companies in the struggle over their own monopolies here at home.
Consumer advocates and long-distance carriers such as AT&T Corp. have jumped on the statements as ammunition in their high-stakes effort to pry open the $100 billion local phone market controlled by the regional Bell phone companies.
They said the comments, to European and Asian governments in recent years, not only contradicted the Bells' current views on key matters in the United States but also backed the position of the Bell companies' rivals.
""It's an amazing example of hypocrisy,"" said Gene Kimmelman, co-director of the Washington office of Consumers Union, a consumer group. ""Everywhere they're in as a challenger, they make the very same arguments that consumer advocates and competitors make against their monopoly status in this country.""
Overseas units of BellSouth Corp. and U S West Inc., for example, endorsed in 1995 an arcane but important method for putting a price on an existing phone network.
The price applies when a new competitor wants to hook up to the network to create their own phone service. But the Bells oppose that method when it comes to pricing their own networks for long-distance companies and others seeking to offer local phone service under the 1996 communications law.
The Bells are asking a U.S. court to overturn landmark Federal Communications Commission rules designed to spur competition through a similar pricing system, saying the rules are counterproductive and would hurt them financially.
AT&T Vice President Mark Rosenblum said the overseas comments ""underscore"" that the FCC's rules ""reflect sound economic and public policies.""
But the Bells called the statements ""ancient history"" -- some go back more than five years -- and argued it was like comparing apples and oranges. Telecommunications markets and regulation abroad can differ sharply from practices at home.
""The arguments were made at a time before there was a need for a single corporate policy,"" says BellSouth spokesman Bill McCloskey.
McCloskey said new laws and rules to open the local phone market here -- such as last year's communications act -- were not on the books at the time. ""They're digging pretty deep,"" he said of the critics.
Billions of dollars in profits are at stake in the fight.
Here's a sampling of some of the advice:
-- BellSouth's New Zealand unit warned in 1995 that if a monopoly ""fails to accept the benefits"" of competition, it ""can and will"" use the negotiations on opening its local network ""to delay and restrict the benefits of competition.""
Ironically, consumer advocates, AT&T, MCI Communications Corp. and other potential rivals charge that the Bells have been dragging their feet in the United States.
-- BellSouth Europe the same year urged European officials to require monopolies to price their networks to competitors at levels based on the cost of new, more efficient facilities. Competitors would use the network, or parts of it, to complete their own phone system.
The Bells, by contrast, oppose the FCC's endorsement of ""forward-looking"" prices. Instead, the Bells have said they should receive payments that take account of the higher cost of their existing phone facilities.
-- U S West told British regulators in 1995 that the use of forward-looking costs was a ""fair basis."" The carrier said the formula means new competitors do not have to pay for ""inefficiencies"" in the local company's phone network.
""We're comparing apples and oranges,"" countered U S West spokeswoman Nanci Bernstrom. She said the accounting rate structure in Britain was ""vastly different"" from the one here.
Ameritech Corp. spokesman George Stenitzer called comments the company made to Australian regulators in 1990 or 1991 ""pretty irrelevant."" Critics have cited the statements.
""Anything we said before 1993 does not reflect our position today,"" he said. ""This was a time when AT&T said it had no interest in offering local service,"" he added dryly.
",40
"Regulators are expected Wednesday to adopt a landmark overhaul of the nation's telephone charges to better spread the financial pain of ensuring affordable phone service for Americans.
The Federal Communications Commission also hopes its controversial revamp will spur the $200 billion phone industry to compete more fiercely for residential customers -- and not just wealthy businesses.
""We're trying to reform the system of charges and subsidies to make it more compatible with competition,"" said FCC Chief Economist Joseph Farrell.
The new rules, which stem from last year's communications law, are designed to keep basic residential phone rates at current levels. Businesses and residences who make plenty of long-distance calls would see their monthly phone bill drop the most, according to industry officials.
Residential and business customers with more than one phone line but who make few or no long-distance calls are expected to see their costs rise. That would mean an added $1 or more a month to maintain a home computer on a second line.
Aside from jump-starting competition, the rejigging in charges is meant to cover the $2 billion to $3 billion cost of wiring schools, libraries and rural hospitals to the Internet, while also keeping phone service affordable for the poor.
Progress occurred this past weekend after AT&T Corp. promised to lower its long-distance rates 5 percent to 15 percent if the FCC agreed to a hefty cut in the charges long-distance carriers pay to access the local phone network.
AT&T Corp. sought a $1.7 billion upfront reduction in the $23 billion a year in access charges long-distance carriers pay the Baby Bells and other local phone companies.
Industry officials expect the FCC to ratify the reduction, paving the way for AT&T to offer its first big rate cut since 1992. Other long-distance carriers are likely to follow suit.
The AT&T pledge -- while drawing criticism from members of Congress and small businesses -- was applauded by consumer groups who until then had attacked the FCC's plans.
""This calms the waters more than otherwise,"" said analyst Scott Cleland of Schwab Washington Research Group.
Industry executives also expect the rules will:
-- Keep the monthly ""subscriber line charge"" customers pay to the local phone company at $3.50.
-- Boost the charge for residential customers with more than one line to $5 a month from $3.50, and to roughly $7 from $6 for for multi-line businesses.
-- Require long-distance companies to pay local carriers a new ""pre-subscribed line charge"" for each long-distance customer. The charge could be passed on to customers and is expected to range from 75 cents a month for single-line residents to $4.50 for multi-line businesses.
""Second phone lines for home-based business or Internet use and small businesses will be saddled with the brunt of these increases,"" complained the Small Business Survival Committee, a small business advocacy group.
The FCC plan also is drawing flak from members of Congress anxious to see that local phone rates do not rise -- especially in reaction to AT&T's weekend announcement.
""Any local telephone rate increases resulting from the (FCC's) actions to modify access charges would be sharply contrary to congressional intent in passing (last year's law),"" Sen. John McCain (R-Az.) and Reps. W.J. ""Billy"" Tauzin (R-La.) and John Dingell wrote FCC Chairman Reed Hundt.
Analysts said that Congress, in passing last year's bill, saddled the FCC with a mammoth task. ""They're trying to bring about a system that will be more conducive to competition while navigating around some very perilous political shoals,"" said Dwight Allen of Deloitte & Touche Consulting Group.
",40
"The judge who oversaw the dismantling of the old Ma Bell is worried that a corporate marriage involving the new AT&T Corp could create the kind of ""monolith"" the historic break-up was supposed to do away with.
Here's the advice U.S. Judge Harold Greene would give regulators who must approve any merger of AT&T and SBC Communications Inc : ""Be very cautious.""
Judge Greene brings a lot of history to the matter.  
In 1982, he ordered that the Bell system monopoly be split up. For more than a decade, he then presided over the consent agreement that created the seven regional Baby Bell phone companies and the new AT&T, the nation's No. 1 long-distance carrier.
AT&T now is in talks to merge with San Antonio, Texas-based SBC -- currently the largest provider of local phone service -- in what would be an estimated $50 billion-plus transaction. It would far and away be the biggest such deal in history.  
""The basic assumption of the break-up was that you couldn't have competition, fair competition, as long as there was this massive company that encompassed all areas of the country and all types of service,"" Judge Greene told Reuters.
""And the same theory that led to the break-up,"" he added, ""could lead one to be suspicious at least of the reemergence of the same monolith.""  
Judge Greene -- now more of an observer of the telecom business rather than an overseer -- frets that market conditions have not changed that much since the break-up of the Bell monopoly and the consent decree that took effect in 1984. The decree set limits on how the phone industry operated.
He believes competition has yet to take full root, despite last year's telecommunications act that tore down decades-old barriers and let the local and long-distance phone companies and cable-television operators enter each other's business.  
""There are lots of things that need to be done yet -- both to get the long-distance companies into local service, and local companies into long-distance service. Nothing is perfected yet,"" Judge Greene said.
""It seems kind of surprising that they would now reconstitute the AT&T empire, at least in one part,"" he added.
""I would hope that regulators -- the Federal Communications Commission and the antitrust division of the Department of Justice -- will be very cautious in approving something like that.""  
Judge Greene's policing duties in the telecom business ended with the new communications act. Since the law's passage, there has been an explosion in merger activity.
SBC recently acquired former Baby Bell Pacific Telesis Group. Bell Atlantic Corp is in the process of acquiring NYNEX Corp. And British Telecommunications Plc is in the midst of buying No. 2 long-distance carrier MCI Communications Corp.
It's reported that a merger of AT&T and SBC would have combined revenues of some $80 billion and a workforce of 240,000.
SBC's regional phone system includes California and Texas, following the carrier's purchase of PacTel.
""I'm surprised that somebody wants to put Humpty Dumpty back together,"" said Judge Green, adding that any new corporate monolith would run counter to the intent of the new telecom law.
""Certainly I think it was the spirit of the act that there not be a return to monopoly conditions,"" he said.
",40
"Following years of delay, regulators are set to announce approval of plans to create a new type of radio service that offers CD-quality sound and can be heard coast-to-coast, government officials said Friday.
The four members of the Federal Communications Commission have resolved long-standing differences over allocating the two available radio licenses to the four companies seeking to offer so-called Digital Audio Radio Service, or DARS.
The four are: CD Radio Inc.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp.; Digital Broadcast Satellite Corp.; and Primosphere.
Unlike conventional radio, the new digitally based service will offer listeners extra-clear sound and will be broadcast nationwide via satellite.
Listeners will have to buy a special radio and antenna. It is likely the service will be subscription-based.
The officials, who requested anonymity, said the FCC's approval is expected to be announced soon, possibly as early as Monday.
Despite reservations from two commissioners, the agency has in effect agreed to limit an auction of the two licenses to the four companies -- which had filed applications with the FCC in the early 1990s. The sale is expected by mid-April.
On Monday, FCC Chairman Reed Hundt raised the specter of a potential snag. He insisted an auction should be open to any company that wants to bid, instead of the existing four.
But two other commissioners -- James Quello and Rachelle Chong -- had opposed opening the auction.
The fourth commissioner, Susan Ness, favoured opening the bidding, but was willing to back a limited auction to allow the FCC to move forward promptly.
An open auction could have raised a sizeable sum for the government by attracting more bidders.
Hundt had noted pointedly that MCI Communications Corp. last year paid $683 million to win the last remaining satellite slot to beam television programmes nationwide.
In the end, the government officials said, Hundt and his colleagues allowed the limited auction to proceed, given that the applicants have been waiting years.
""These people applied many years ago,"" said one official.
""At the end of the day, you can't hold this thing up forever,"" said another.
An auction date must still be set. But the bidding is expected to be held before April 15.
The commissioners, in resolving another dispute, agreed to require the eventual license winners to provide discounted advertising rates and equal time to political candidates running for federal office.
The commission also put the applicants on notice that the winners could be subject to other public-interest obligations in the future.
",40
"The newest breed of cellular telephones is less secure than previously thought, a researcher said Wednesday.
Researchers have uncovered a flaw used in the technology designed to ensure a caller's privacy over advanced digital cellular phones. The results are expected to be announced Thursday.
The problem allows a sophisticated eavesdropper to figure out the number a caller dials on a cellular handset -- be it the phone number itself; a personal identification number, or PIN number, used to access a bank account or activate a calling card; or a credit card number.
""The digital cellular safeguards are still stronger than the analogue safeguards. But they are not as strong as previously thought,"" David Wagner, a graduate student at the University of California at Berkley, said in an interview.
The system was meant to guard the privacy of the dialed digits. But the encryption technology used to scramble information and render it unreadable is weak enough that the digits are accessible to eavesdroppers with a digital scanner, according to the researchers.
The researchers -- at Berkley and Counterpane Systems, a Minneapolis counsulting firm -- said their findings are a setback to the U.S. cellular phone industry.
These are not the first problems uncovered with the new digital phones. Researchers already have uncovered flaws in the safeguards meant to ensure that what a caller says over the phone is not heard by others.
Some experts argue that the flaws reflect shortcomings in the ""closed-door"" process used to develop privacy measures.
They point to the U.S. government's efforts to control cryptography, out of national security concerns. These critics single out the National Security Agency, saying that the U.S. agency in charge of monitoring foreign powers is holding back efforts to develop cellular security technology.
That flaws that have been uncovered ""are symptomatic of broad underlying problems in the design process,"" said Wagner.
The findings come as the debate over cellular phone privacy has picked up in Washington.
Lawmakers and law-enforcement officials have called for tougher laws to bar eavesdropping on cellular calls, following the uproar over a recently intercepted call by House Speaker Newt Gingrich.
What's more, lawmakers and the Clinton administration are sparring over encryption export policy. The administration has a new policy in place allowing freer export of encryption products.
The policy, enacted through executive order in November and in effect since Jan. 1, allows export of stronger encryption than previously allowed. But it requires companies to incorporate features within two years allowing the government to crack the codes by getting access to the software ""keys.""
The government says it needs the ability to crack strong encryption to catch criminals and terrorists.
However, some lawmakers -- with the backing of high-tech companies -- want to remove nearly all export curbs.
A senior Commerce Department official said Wednesday the Clinton administration plans to introduce a bill soon that would clearly affirm that encryption users in this country can use any type or strength of encryption technology.
But such a bill is unlikely to calm critics.
",40
"Opponents of U.S. trade concessions to China are expected to mount the fiercest congressional battle in years to overturn President Bill Clinton's decision to renew China's favored trading status.
While supporters of the president's decision on Monday to renew China's most favored nation (MFN) status for another year remain confident of victory, social conservatives, organized labor and other opponents are preparing for a fight.
The unusual coalition is blasting the move from both sides of the political spectrum, hitting China's policies on human rights, labor rights, religious rights, trade and abortion.
Opponents are also gathering strength from worries over the transfer this summer of Hong Kong to China, as well as the brouhaha over charges that Beijing tried to sway U.S. elections through illegal campaign contributions.
""With Hong Kong and campaign finance lurking in the background, it will definitely be a tougher fight,"" a congressional aide, who requested anonymity, said. ""A lot depends on what happens between now and the vote.""
House of Representatives Speaker Newt Gingrich said this year's decision would be closer than last year's 286-141 vote in the House to back Clinton on MFN. But advocates and even opponents expect the president's policy ultimately to survive.
Gingrich, in a toughly worded statement, said he supported MFN status for China, but blasted Clinton for not using his announcement to press China for advances on human rights, democratic freedoms and religious tolerance.
Even if lawmakers muster enough votes to reject the president's decision -- which is considered unlikely -- opponents doubt they could round up the two-thirds vote needed to override an expected veto from Clinton.
Congress later this summer will vote on whether to overturn Clinton's decision, with the House voting first.
""The opponents have a better chance than they have had in the past several years. But it still may not be enough of a margin to withstand a veto,"" said Thea Lee, international expert at the AFL-CIO, which opposes MFN status for China.
But even a defeat for MFN's opponents could amount to a sort of victory if the vote is close enough.
Gary Bauer, head of the Family Research Council, said: ""The president's action represents the high-water mark of the pro-MFN forces. As the truth of the human rights violations in China reaches the American public the case for MFN collapses.""
A sign Clinton will face tougher sledding emerged a week ago, when an influential House Republican leader urged the president to revoke China's MFN status, citing Beijing's record on human rights, weapon sales and trade.
Rep. Bill Paxon of New York, a Gingrich ally who chairs meetings of Republican House leaders, said current U.S. policy had yielded only ""a Chinese regime which thumbs its nose at the United States and places its heel on the neck of freedom.""
But not all Republicans oppose MFN status for China, including Sen. John Chafee of Rhode Island, who has introduced a bill in Congress to make China's MFN status permanent.
""I believe we should move toward ending the annual MFN roller coaster ride altogether,"" Chafee said on Monday.
Some Democratic lawmakers are also critical of China.
Rep. Nancy Pelosi, a California Democrat, said the situation had worsened considerably since Clinton ""delinked"" trade from human rights three years ago, citing worsening human rights conditions, a widening U.S. trade gap with China, and China's continued weapon sales to countries like Iran.
But supporters of the administration's policy remain confident. ""In the end, the votes will be there for MFN,"" said Calman Cohen of the Emergency Committee for American Trade, representing the heads of big U.S. corporations.
The American Farm Bureau Federation welcomed Clinton's decision and said it would allow the farm industry to expand its favorable trade balance with China.
",40
"Regional Baby Bell phone companies appear to have triumphed over their long-distance rivals in a crucial regulatory battle that would leave some customers paying more and others less for their monthly bill.
The Federal Communications Commission has decided against ordering a precipitous cut in the $23 billion long-distance carriers such as AT&T Corp pay the Bells each year for access to their local phone networks, said FCC and industry officials.  
Bell executives at one point feared such cuts could cost their companies as much as $10 billion in revenues. Consumer groups and long-distance companies more recently advocate immediate cuts in the range of $2 billion to $3 billion, saying that would mean a similar cut in long-distance rates.
""The Bells have dodged a bullet,"" said analyst Scott Cleland of Schwab Washington Research Group. ""They may get grazed. But they dodged a bullet that was aimed at them during the last six months."" The rules are set to be voted on next week.
Less clear is the impact on phone customers.
Those who make lots of long-distance calls would see a sizeable drop in their bill, said FCC and industry officials.
But wireless phone subscribers could pay anywhere from one percent to two percent more a month through new fees. Customers with more than one phone line for a computer or the kids and who make few long-distance calls would see a monthly rate rise of around $1 or more.  
""We're cutting away the frills,"" FCC Chairman Reed Hundt said in an interview. He is a big advocate of the rules under consideration that are expected to be voted on next week.
""We're talking about a $1 subsidy per month that we're eliminating for somebody who's connecting a $2,500 computer to that line and purchasing $20 a month of unlimited access,"" Hunt said.
Instead of a government-imposed cut, the FCC plans to rely on market powers to lower access charges over time, said FCC and industry officials. That could mean an FCC-imposed loss of Bell revenues of no more than $1 billion the first year.
FCC officials, meanwhile, say the plan would yield a cut in long-distance charges of more than $1 billion in year one.  
FCC officials are against a steep cut for several reasons.
Citing rate hikes by AT&T and MCI Communications Corp late last year, they fear long-distance carriers may not fully pass on the cut to consumers and pocket some of the money. Long-distance executives vow to pass on the cuts.
FCC officials also fear a sharp cut would unleash a rise in local phone rates by carriers trying to recoup lost money.
""We're keeping basic residential dial tone at today's price,"" said Hundt.
Critics charge the plan -- which could still change before next week -- would mean higher rates. AT&T says long-distance customers will see a $1.5 billion jump at the outset in July.
""Regulators appear unlikely to squeeze the fat out of the Bells' prices, leaving consumers paying for inflated rates,"" said Gene Kimmelman of Consumers Union.
But Hundt says that over the next five years at least $10 billion ""will be transferred to consumers"" via access cuts.
The plan also would pay for $3 billion to connect schools, libraries and rural hospitals to the Internet and provide cheap phone service for the poor.  
Access charges were created after the 1984 breakup of Ma Bell. Experts agree the $23 billion is more than the cost of providing access to the local phone network. But they cannot agree on the amount.
FCC officials said 85 percent of the nation's 80 million residential phone customers would see a lower monthly bill.
Those who make lots of long-distance calls would benefit the most, because the agency plans to replace some of the existing per-minute access charges with a monthly flat rate.
The 15 percent of residents who do not make long-distance calls would see their bills stay the same. The monthly flat rate ""subscriber line charge"" customers pay to the local phone company is likely to remain $3.50.
But customers with more than one line and who make few long-distance calls are likely to see a rate rise.
That's because the ceiling, or cap, on the subscriber line charge is expected to rise to $5 a month from $3.50 for each additional residential line, and to roughly $7 a line for multi-line business customers from $6 a month.
One possible way around the charge may be for customers to list their additional lines in a different name or use another local carrier, said industry officials.  
Meanwhile, large businesses or consumers who make a lot of long-distance calls could well see a drop in their phone bill because the FCC plans to lower the permanent access charge to about two cents a minute from about 5.4 cents.
To make up the lost revenues, the FCC plans to require long-distance carriers to pay local carriers a new monthly ""pre-subscribed line charge"" for each long-distance customer.
The charge -- which will range from 75 cents a month for single-line residents to $4.50 a month a line for multi-line businesses -- are intended to better reflect the actual costs of using the local phone network.
",40
"Regulators Wednesday approved a sweeping overhaul of domestic telephone charges that they said will lower costs for residential and business customers who make a lot of long-distance calls.
Federal Communications Commimssion officials said basic local phone rates will stay the same. But consumers and businesses will pay more for extra phone lines and may see their bills rise if they make few long-distance calls.
The FCC also voted to set aside about $2.3 billion a year to wire the nation's schools and libraries to the Internet at discounted rates. Another $400 million a year will be used to connect rural hospitals to the global computer network.
The new rates mean residential customers with one phone line will see their long-distance bill drop to $20.65 a month from $22.50 by 1998, on average, according to FCC calculations.
""This is the single best day that business and residential customers have had since the (1984) breakup of AT&T,"" said FCC Chairman Reed Hundt.
The overhaul also will:
-- Keep the monthly ""subscriber line charge"" customers pay to the local phone company at $3.50.
-- Boost the line charge for residential customers with more than one line to $5 a month from $3.50, and to more than $7.50 from $6 for multi-line businesses. Those increases will take effect next year and be followed by additional rises that ultimately will be capped at $9.
-- Impose a new monthly charge on long-distance carriers that is expected to be passed on to customers. The charge will be $1.50 a line for multi-line residential customers and $2.75 a line for businesses with more than one line.
-- Reduce by $1.7 billion the $23 billion in annual charges long-distance carriers pay local companies to access their networks, effective July 1.
-- Reduce access charges by a total of $18.5 billion over the next five years.
AT&T Corp. has promised to pass on the savings in access charges to customers through long-distance price cuts of 5 percent to 15 percent. Other long-distance carriers have signalled they will follow suit.
Phone companies gave the rate overhaul mixed ratings.
AT&T generally praised the plan, but No. 2 long-distance carrier MCI Communications Corp. said the access charge reductions did not go far enough.
Regional phone compannies Bell Atlantic Corp. and Nynex Corp., which are merging, questioned the access-charge rate cut.
Industry analysts, meanwhile, also offered mixed views.
""There was a lot of huffing and puffing, but this is incremental change and not revolutionary change,"" said Scott Cleland of Schwab Research Group.
",40
"The Federal Trade Commission said on Thursday it approved Time Warner Inc.'s $6.5 billion purchase of Turner Broadcasting System Inc. after the deal was restructured to meet antitrust laws.
The FTC, in a 3-2 vote, agreed to permit the revised transaction after the agency had alleged the original merger proposal would have allowed Time Warner unilaterally to raise cable-TV prices and limit the choice of programmes.
The two commissioners who voted against the agreement -- Mary Azcuenaga and Roscoe Starek -- said there was no reason to order the deal to be restructured in the first place because it did not violate antitrust laws.
Once formally completed, the merger would create the world's largest media and entertainment concern.
The Federal Communications Commission is expected soon to give its approval. Time Warner and Turner have scheduled separate meetings for Oct. 10 to allow their shareholders to approve the transaction, first announced nearly a year ago.
In response to FTC charges, the merger was restructured to curb cable-TV giant Tele-Communications Inc.'s influence over the new company that is to be formed.
TCI, the nation's largest cable-TV operator, now owns 21 percent of Turner stock and would own about 7.5 percent of a combined Time Warner-Turner under the merger, said the FTC. Time Warner is the No. 2 cable-TV operator.
Under the FTC accord, TCI must spin off its Turner stake to shareholders of Liberty Media Corp., a TCI subsidiary. The spin-off is contingent on a tax-free ruling from the government. Otherwise, TCI's stake would be capped at a 9.2 percent non-voting interest in Time Warner.
TCI's chief, John Malone, and other top TCI officials would be barred from participating in the management of the new Liberty Media corporate entity that is to control the shares.
The accord requires Time Warner to carry a second all-news channel to compete with Turner's Cable News Network.
It also bars Time Warner from discriminating in how much it charges competitors for Turner programmes.
""This settlement would preserve competition and protect consumers from higher cable service prices and reduced programming choices by ensuring that competing cable operators, new technologies and future programmers can gain access to Time Warner/Turner's customers and programming,"" said FTC Chairman Robert Pitofsky.
Aside from being the No. 2 cable-TV operator, Time Warner owns the Warner Bros. movie studios and Time, People, Sports Illustrated and Fortune magazines. In addition to CNN, Turner also owns film and TV studios, a cartoon cable-TV channel and the Atlanta Braves and Atlanta Hawks sports teams.
""We're disappointed that the FTC didn't block the overall deal,"" said Gene Kimmelman of Consumers Unions. But he added that he was ""encouraged"" by certain provisions of the agreement ""that should limit anti-competitive behaviour.""
",40
"Regulators Tuesday began auctioning a slice of spectrum that will let users gain access to the Internet over the airwaves or create wireless local phone networks that compete with traditional wired networks.
Twenty-four companies -- including units of BellSouth Corp., Pacific Telesis Group, Comcast Corp. and a Bell Atlantic Corp./Nynex Corp. joint venture -- are bidding for the rights to offer ""wireless communications service,"" or WCS.
The first day of bidding in the multi-day sale totalled $5.3 million. Analysts said recent financial problems among wireless carriers will put downward pressure on prices. It is the Federal Communication Commission's 14th airwave sale.
""I expect prices to go very low for this type of spectrum,"" said Elliott Hamilton, analyst at Strategis Group, a Washington-based consulting firm.
The FCC is auctioning 128 licenses. Of that total, 104 are 10 megahertz licenses that roughly cover state-wide areas. The remaining 24 permits are for 5 MHz of spectrum and cover larger regional areas.
The FCC is not dictating what services companies can offer over this portion of the spectrum.
Potential applications include broadband wireless access to the Internet, wireless local phone networks, and location services for pinpointing trucks and other vehicles.
The value of wireless spectrum has fallen after last year's $10.2 billion auction of licenses for a new generation of cellular phones known as ""personal communications services,"" or PCS.
Edward Warner, Washington bureau chief of Wireless Week magazine, said FCC officials ""should be ecstatic"" if the agency can net $2 billion from the lastest auction.
Several top bidders at the PCS sale are under financial strain after bidding high prices. Wall Street has been reluctant to invest in the ventures.
Also, FCC officials doubt wireless service providers can offer anytime soon the kind of mobile phone service available through PCS.
FCC officials cite restrictions on the use of the wireless service airwaves that are meant to prevent interference among users of an upcoming digital radio service that will be broadcast coast-to-coast via satellite. The wireless service and digital radio airwaves are adjacent to one another.
The FCC has raised some $23 billion through its airwave sales. But the financial problems among last year's PCS winners has raised doubts over whether the government will ever collect all the money it is owed.
",40
"Opponents of U.S. trade concessions to China are expected to mount the fiercest congressional battle in years to overturn President Bill Clinton's decision to renew China's favoured trading status.
While supporters of the president's decision on Monday to renew China's most favoured nation (MFN) status for another year remain confident of victory, opponents -- ranging from social conservatives to organised labour -- are revving up for a fight.
The unusual coalition is blasting the move from both sides of the political spectrum, hitting China's policies on human rights, labour rights, religious rights, trade and abortion.
Opponents are also gathering strength from worries over the transfer this summer of Hong Kong to China, as well as the brouhaha over charges that Beijing tried to sway U.S. elections through illegal campaign contributions.
""With Hong Kong and campaign finance lurking in the background, it will definitely be a tougher fight,"" a congressional aide, who requested anonymity, said. ""A lot depends on what happens between now and the vote.""
Another congressional aide said, ""The coalition of the AFL-CIO and social conservatives makes for a potent force.""
House Speaker Newt Gingrich said this year's decision would be closer than last year's 286-141 vote in the House to back Clinton on MFN. But advocates and even opponents expect the president's policy ultimately to survive.
Even if lawmakers muster enough votes to reject the president's decision -- which is considered unlikely -- opponents doubt they could round up the two-thirds vote needed to override an expected veto from Clinton.
Congress later this summer will vote on whether to overturn Clinton's decision, with the House voting first.
""The opponents have a better chance than they have had in the past several years. But it still may not be enough of a margin to withstand a veto,"" said Thea Lee, international expert at the AFL-CIO, which opposes MFN status for China.
But even a defeat for MFN's opponents could amount to a sort of victory if the vote is close enough.
""It represents an important turning point in the growing uneasiness among both Democrats and Republicans over the current China trade policy,"" Lee said.
Gary Bauer, president of the conservative Family Research Council, said: ""The president's action represents the high-water mark of the pro-MFN forces. As the truth of the human rights violations in China reaches the American public, the case for MFN collapses.""
A sign Clinton will face tougher sledding emerged a week ago, when an influential House Republican leader urged the president to revoke China's MFN status, citing Beijing's record on human rights, weapon sales and trade.
Representative Bill Paxon of New York, a Gingrich ally who chairs meetings of the Republican House leadership team, said current U.S. policy had yielded only ""a Chinese regime which thumbs its nose at the United States and places its heel on the neck of freedom.""
Democratic lawmakers echo that view.
Since Clinton ""delinked trade from human rights three years ago, the human rights situation in China and Tibet has deteriorated, the U.S. trade deficit with China has soared, and China's authoritarian government has continued its sale of nuclear, chemical, missile and biological weapons technology to dangerous countries, including Iran,"" Representative Nancy Pelosi, a California Democrat, said.
But supporters of the administration's policy remain confident. ""In the end, the votes will be there for MFN,"" said Calman Cohen of the Emergency Committee for American Trade, representing the heads of big U.S. corporations.
",40
"Regulators Monday approved long-delayed plans to auction two airwave licenses to create new nationwide radio services that will be beamed coast-to-coast via satellite and offer CD-quality reception.
The Federal Communications Commission, in resolving a long-standing dispute among its four comissioners, said it will limit the April 1 sale to the four companies that had applied by the end of 1992 to offer digital audio radio -- instead of opening the auction to any company.
The four are: CD Radio Inc. of Washington, D.C.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp. of Reston, Va.; Digital Broadcast Satellite Corp. of Seattle; and Primosphere LP of New York.
To receive the service -- which is at least three years away -- listeners will have to buy a special radio receiver that will cost about $200, in addition to the price of a regular radio, according to industry estimates.
It is likely the service will be subscription-based, with an expected cost of about $10 a month. Operators will be able to offer specialised programming.
CD Radio, which pioneered the digital radio concept, plans to provide 30 channels of commercial-free music programming if it wins one of the two licenses up for grabs.
The company would target persons who drive a lot or live in rural areas and do not have access to many radio stations.
Industry officials say it will take anywhere from three to six years to get the new service operating. ""It's a long lead time in building satellites and getting rocket-launch assignments,"" said Primosphere's Cliff Burnstein.
FCC Chairman Reed Hundt and Commissioner Susan Ness had favoured opening the auction of the licenses to any bidders, instead of limiting it to the four.
But they were unable to get the other two commissioners at the FCC -- Rachelle Chong and James Quello -- to agree.
""I would prefer to assign spectrum licenses through an auction open to all. Closing the auction is the wrong result,"" Hundt said in a statement.
An open auction could have raised a larger sum for the government by attracting more deep-pocketed bidders.
Hundt noted recently that MCI Communications Corp. last year paid $683 million to win the last remaining satellite slot to beam television programmes nationwide.
The commissioners, in resolving another dispute, agreed to require the license winners to offer discounted advertising rates and equal time to political candidates running for federal office.
The agency also told the applicants that the winners could be subject to other public-interest obligations in the future.
The FCC is ready to unveil plans to auction a separate valuable airwave slice that will be home to a wireless technology that could offer new competition to local phone companies and cable-television operators.
A government official said the FCC plans to announce soon its long-awaited auction plans for local multipoint distribution service, or LMDS, a wireless technology that allows users to zap voice, pictures and data over high-speed networks that also can hook up to the Internet.
""All the issues have been resolved,"" said the official.
The FCC is expected to bar local carriers and cable firms from bidding for LMDS licenses in their home territories in a bid to bar them from snuffing out potential competition.
",40
"Regulators want more time to overhaul the vast web of subsidies that keeps phone service affordable, creating a new obstacle in their efforts to spawn new competition and lower prices in the telephone business.
Federal Communications Commission and industry officials said Tuesday the FCC is running into difficulties calculating the multi-billion dollar cost of paying for ""universal"" phone service to rural and other high-cost communities.
""We've been working hard for a year to try and reconcile this,"" said FCC Chief Economist Joseph Farrell. ""It would be a mistake to hurry it and do it wrong.""
Last year's communications law set a May 8 deadline for the FCC to tally the costs and to lay out a plan for a new fund to bankroll the subsidies. Phone carriers are supposed to pay for the fund.
FCC Chairman Reed Hundt told the Wall Street Journal he wants to implement key provisions next year and use an interim plan in the meantime.
The FCC will work with state regulators to determine the costs of the subsidies.
Industry analysts and officials say the new uncertainty is likely to deter phone companies from rushing to compete in new areas of business or upgrade their existing lines of business.
""We need to know what the rules of the game are before we're willing to commit a lot of money to new projects,"" said Robert Blau, BellSouth Corp. vice president.
Schwab Washington Research Group analyst Scott Cleland put it this way, ""When the playing field remains clouded, prudent competitors don't rush into the fog.""
The phone business already has a huge cloud overhanging it after a U.S. appeals court last fall suspended a key FCC order designed to break open the $100 billion local phone market to long-distance carriers and other new competitors.
The FCC is trying to calculate the size of the universal service subsidies and make them explicit, as stipulated by the telecommunications law. Estimates range anywhere from $5 billion to $20 billion.
The existing subsidies are buried in the $23 billion in charges that long-distance companies such as AT&T Corp. now pay to access the local phone network.
The FCC's desire to take more time on universal service has raised concern and questions among lawmakers anxious to ensure competition takes root after passage of the telecommunications law.
""If one of the implications (of the added time) is that it does delay competition, it's a problem for us,"" said Representative W.J. Billy Tauzin, a Louisiana Republican.
""We're beginning to see some concerns about rising phone rates and cable rates. And we're beginning to be asked at town meetings when we're going to see the benefits of this highly touted deregulatory act.""
Meanwhile, the FCC's Hundt does want to proceed with one prized piece of universal service -- a $2.3 billion plan to link schools and libraries to the Internet at discounted rates.
But Tauzin worries that Hundt, in his desire to keep basic phone rates from rising, will expand obligations under universal service ""that somebody is going to have to pay for.""
",40
"Age-based ratings like those recently adopted by the United States' television industry entice children to watch programs with a restrictive rating for sex, violence or foul language, according to a study released on Wednesday.
""Restricted ratings seem to produce a 'forbidden fruit' effect,"" said Joanne Cantor of the University of Wisconsin, referring to motion-picture ratings such as ""PG-13"" and ""R"" meant to alert parents to material unsuitable for children.
The TV industry adopted a similar system at the start of 1997 that has come under attack from critics who say it does not go far enough.
The study -- the second of three annual reports conducted by researchers from four universities -- also said the level of TV violence has remained about the same for the past two years.
President Clinton said the study showed that even though steps have been taken to protect children from unsuitable programs, ""there is still more to do.""
""We cannot transform the system overnight, but each of us -- parents the entertainment industry, government -- has a responsibility to help bring about change for the better,"" Clinton said in a statement.
The study, funded by the cable-TV industry, covered the 1995-96 season. It focused on 3,235 programs on 23 channels. Over the past two seasons, the report has covered more than 6,000 shows carried by network and independent stations, cable operators and public broadcasters.
The National Cable Television Association commissioned the study three years ago after former U.S. Sen. Paul Simon, an Illinois Democrat, urged the TV and entertainment industries to develop an independent annual report card on TV violence.
The study found that 61 percent of programs contained some violence during the past year, little changed statistically from 58 percent in the prior year's study.
""There is a striking persistence in both the overall amount and style of violent material on television,"" said Barbara Wilson of the University of California at Santa Barbara.
The study was conducted before the TV industry adopted its age-based ratings, which include TV-PG for parental guidance suggested and TV-M for mature audiences only. It focused on eight ratings system, including the movie industry's ratings.
The study, involving 374 children, found that older kids ages 10-15 were much more interested in seeing a program rated PG-13 or R, which stand for ""parents strongly cautioned"" or ""restricted"" audiences, respectively. They were much less keen to watch shows rated G for ""general audiences.""
""Ratings that urge parental control based on age considerations make restricted programs more attractive, but content labels do not,"" said Cantor.
Advocates of a content-based ratings system for TV -- such as V for violence, S for sex and L for coarse language -- immediately seized on the findings. Cable networks such as HBO already use a content-based system.
Rep. Edward Markey, D-Mass., said the age-based rating system ""leaves parents in the worst of both worlds.
""They are asked to accept an age-based system that they not only don't want, but which they are likely to find makes their job of parenting even tougher than it already is.""
But Jack Valenti, head of the Motion Picture Association of America and a key developer of TV ratings, shot back:
""Now let's get this straight. A program rated PG-13 entices children to watch, but a program rated 'sex, nudity, violence' does not. This kind of a survey will give research a bad name.""
Valenti added that after 28 years, 79 percent of parents found the movie rating system ""very useful to fairly useful.""
The TV study also revealed that:
-- 58 percent of violent incidents did not show the victim suffering pain. Only 16 percent showed long-term negative consequences from violence.
-- Three out of four violent scenes contained no remorse, criticism or penalty for violence.
-- ""Bad"" characters went unpunished in 37 percent of programs.
",40
"Regulators will host an auction Tuesday that supporters promise will usher in a new breed of nationwide radio service but critics charge may cost U.S. taxpayers millions of dollars in lost revenue.
Up for grabs are two licenses to provide radio programming that will be beamed coast-to-coast via satellite. Digital radio will offer listeners CD-quality sound and specialised programming that can be tuned in anywhere in the nation.
""Americans will be able to travel anywhere in the country, including remote rural areas where radio reception is poor, and enjoy the same high-quality audio and wide selection of programmes the entire trip,"" said William Caldwell, president of Seattle-based Digital Satellite Broadcasting Corp., one of the bidders at the Federal Communications Commission sale.
The FCC resolved a long-standing dispute among its four commissioners in early March by limiting the auction to the four companies that had applied by the end of 1992 to offer digital radio.
Two of the commissioners -- Chairman Reed Hundt and Susan Ness -- favoured opening the sale to any company wanting to bid. But in the end they agreed reluctantly to limit the auction so the launch of digital radio would not be delayed further.
""The decision to keep the auction door closed may needlessly cost the public millions of dollars,"" Hundt said when the agency announced its decision.
Hundt said that if other companies value the digital radio airwaves but are ""arbitrarily excluded from the auction, it is safe to predict that the auction winners will simply sell their licenses to those companies.""
Aside from DBSC, the other three bidders are: CD Radio Inc. of Washington, D.C.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp. of Reston, Va.; and Primosphere LP of New York.
Commissioner Rachelle Chong contended that opening the bidding would have been unfair to the four.
""These applicants have been ready and willing to move forward for some time. The have expended considerable rsources in developing this technology,"" she said, adding that the first application was filed seven years ago.
Digital radio is unlikely to be on the air for at least three years -- if not longer -- owing to the time it takes to get satellites built and deployed into orbit.
The service will probably be subscription-based, with an expected cost of about $10 a month. Listeners will have to buy a special radio receiver that will cost about $200, on top of the price of a regular radio.
The credit-card sized satellite antenna could be installed in cars, trucks and homes.
If it wins a license, DBSC plans to deliver regional programming throughout the country. It would offer, among other things, children's programming, foreign-language, classical music, opera, all-news, all-sport and educational programmes to targeted demographic groups.
The programming would be offered as an advertising-supported service and as a commercial-free subscription service.
",40
"Federal regulators and television broadcasters Thursday moved closer to agreeing on a stepped-up timetable for TV stations to begin providing high-definition digital broadcasts within 18 to 24 months.
The issue has been a stumbling block in the Federal Communications Commission's plans to dole out to stations free digital TV licenses in the next two weeks. The new service promises crystal-clear pictures and CD-quality sound.
Under pressure to jump-start the digital age, the National Association of Broadcasters and another industry group, the Association for Maximum Service Television, proposed that 31 stations in the 10 largest metropolitan areas begin broadcasting digital signals in 18 to 24 months.
In some markets, up to four stations would be on the air in the shortened time frame. The top 10 markets include New York, Los Angeles, Chicago, Philadelphia and other cities.
Broadcasters previously had suggested more time was needed, with many stations saying it would take six years to install the needed equipment and put the digital signals on the air.
""I welcome the increased level of commitment for launching digital television,"" said Commissioner Susan Ness, who is trying to broker a pact between the FCC and the broadcasters. She said the broadcasters' plans ""move the ball forward in a very substantial manner.""
FCC officials stressed, however, that key details must be worked out -- in particular, how many digital broadcasts would begin over 18 to 21 months, something that is important to TV makers trying to offer digital sets in the key Christmas buying season. Twenty-four months would fall after Christmas 1998.
TV set makers have said they would postpone offering digital sets an extra year if stations delayed significant introduction of digital broadcasts until 1999.
Ness, as a result, said she has asked broadcasters to better detail TV stations' plans to be offering digital transmission by Christmas of next year.
The roll-out schedule has been a key hurdle. FCC Chairman Reed Hundt had proposed that big network-owned stations in the top 10 markets start providing digital signals within the next year. That would translate into 26 large stations.
Broadcasters said that was too quick. Hundt's office gave the broadcasters' latest plan a cautiously upbeat response.
""We're evaluting it. But obviously this is a very healthy dialogue between us and the industry,"" said Hundt's chief of staff, Blair Levin.
Earlier this week Hundt sharply criticised broadcasters, questioning their commitment to digital TV.
""I'm beginning to wonder if broadcasters really want these licenses,"" Hundt told a meeting of the National Cable Television Association in New Orleans. ""A cynic would think that broadcasters just don't want someone else to have them.""
An official in Commissioner James Quello's office endorsed the new proposal as an ""agressive roll-out."" Officials with Commissioner Rachelle Chong's office could not be reached for comment.
Meanwhile, the FCC still must determine the level of public-interest obligations to impose on TV stations in exchange for the digital licenses, as well as other issues.
",40
"Facing financial strains, companies that won wireless phone licenses at last year's $10.2 billion federal auction are urging the government to take steps to make it easier for them to pay off their bids, industry and government sources say.
Top bidders NextWave Telecom Inc. and Pocket Communications Inc., plus several other winners, have asked regulators for a more lenient timetable to pay the government for licenses to offer a new generation of cellular service, the sources said this week.
NextWave's winning bids totalled $4.7 billion, while Washington-based Pocket's added up to $1.4 billion.
The bids have become loans from the government, with the winners paying interest on the money owed for the licenses.
They want to make the hefty interest payments annually, instead of quarterly. The added time would help the companies, which face rough sledding on Wall Street, drum up money to build ""personal communications services,"" or PCS, systems.
The winners at the 1996 Federal Communication Commission auction, reserved for small firms, paid a price more than double that paid by big carriers like AT&T Corp. in 1995.
""These guys have a ticking time bomb on their hands,"" a Wall Street source said of the existing payment schedule.
Industry officials also want the FCC to clarify certain repayment rules. And they want the Treasury Department to take over from the FCC the job of payment collection, hoping the department's financial expertise will spell relief for cash-strapped firms.
""Anything that makes it easier for companies to pay is going to make the companies more attractive to investors,"" said attorney Lynn Charytan of Wilmer, Cutler and Pickering, who represents Pocket Communications.
FCC officials are mulling their options. ""Our existing rules provide some flexibility. Whether that's enough flexibility is under consideration,"" said one agency official.
PCS technology is expected to make the wireless phone a mass-market product, allowing consumers to use different communications services -- such as phone, paging, fax and Internet access -- through a single handheld device.
Earlier this month, NextWave, Pocket and seven other PCS winners asked the FCC to permit annual interest payments.
The companies, in a letter to the FCC's wireless bureau obtained by Reuters, said annual payments would give them more flexibility to tap the stock and bond markets when conditions are favourable.
And they said such payments would let them capitalise on the new World Trade Organisation pact on telecommunications. The agreement is expected to make it easier for foreign investment in U.S. communications companies.
The companies said the competitive pressure to build their PCS systems quickly ""places a strain"" on new entrants to the business, ""whose challenge is further complicated by an increasingly cautious domestic investment climate.""
Investors are wary of betting on wireless carriers out of fear the market is becoming flooded with competitors.
""I see no reason why the capital markets will be any kinder to wireless companies in '97 than in '96,"" said analyst Johathan Atkin of BIA Consulting Inc. in Chantilly, Va.
Industry officials also want the FCC to clarify whether a company would be in default on all of their licenses if it misses an interest payment on just one of the permits.
The FCC's rules do not address that issue. The agency is seeking comment on whether to issue a clarification.
FCC Chairman Reed Hundt two weeks ago broached the idea of making the Treasury responsible for payment collection. He cited a ""tension created by the FCC's present dual role as regulator of and creditor to the wireless industry.""
Advocates argue the changes -- including the more lenient payment schedule -- are in the FCC's interest.
For one, they would mean less paperwork for the agency.
And they said it would be counterproductive for several companies to default on payments. That could hurt the bidding at future airwave auctions and lower the potential price for any PCS licenses the FCC re-auctions after a default.
Some industry officials suggested the FCC may not want to appear too willing to change the rules and be accused of catering to industry interests.
",40
"Regulators were set Thursday to give broadcasters free licenses to provide revolutionary high-definition digital television that will begin reaching viewers in the nation's top 10 markets within 18 months.
After late-night talks Wednesday, Federal Communications Commission officials agreed on rules detailing the roll-out of digital TV broadcasts, which promise the biggest change in TV viewing since colour pictures were introduced in the 1950s.
Officials said the FCC scheduled a public meeting Thursday at which the agency's four commissioners were expected to approve the rules, overriding objections from critics who say broadcasters are getting a multi-billion dollar giveaway through free use of the airwaves.
The decision by Congress to allow broadcasters to be given the new licenses free of charge has provoked uproar from the likes of former Senate Majority Leader Bob Dole, other key lawmakers, consumer advocates and others. The FCC has valued the digital airwaves at up to $70 billion.
""This is, indeed, one of the largest federal giveaways of the century,"" said Gigi Sohn, executive director of the Media Access Project, a public interest law firm.
Broadcasters would be required to return their existing analogue licenses to the government by 2006. The government is expected to auction those licenses for other uses.
Digital TV offers crystal-clear pictures and CD-quality sound. It is expected to promote a ""computer friendly"" TV system allowing viewers to watch programmes while surfing the Internet over the same ""smart box.""
Already, its pending introduction has started a race between computer makers and TV manufacturers to woo viewers.
The FCC rules are expected to require stations affiliated with the major networks -- ABC, CBS, NBC and Fox -- to begin broadcasting digital signals in the top 10 metropolitan areas within two years, according to officials.
Network affiliates within the top 30 markets would be required to transmit in digital format within 2-1/2 years.
Under pressure from FCC officials, at least two dozen stations have agreed to initiate broadcasts in the top 10 markets within 18 months, according to Commissioner Susan Ness, who was a key participant in brokering the rules.
That would give manufacturers leeway to ship digital sets in time for the important Christmas shopping season in 1998.
Ness said Wednesday the voluntary commitment of major broadcasters to be on air by then and the commitment of TV makers to have sets ready for consumers in those markets at the time ""will fuel the rapid rollout of digital television.""
The top 10 markets are: New York, Los Angeles, Chicago, Philadelphia, San Francisco, Boston, Washington, Dallas-Fort Worth, Detroit and Atlanta.
""Broadcasters are prepared to voluntarily transition to digital and high-definition TV faster than we converted from black and white to colour TV,"" said Dennis Wharton, spokesman for the National Association of Broadcasters.
""Consumers will be the big winners once they experience the wonders of high-defition TV.""
Digital technology is expected to allow broadcasters to squeeze as many as six channels through an existing channel, or TV stations could offer a single high-definition signal.
Digital TV also is expected to hasten the convergence of TV and computer technologies. Sports fans would be able to watch a baseball game and split their screen to receive up-to-the-minute scores of other games over the Internet.
",40
"In a major victory for television broadcasters, the Supreme Court on Monday upheld a federal law forcing cable-TV operators around the country to carry local TV station broadcasts.
The high court, in a 5-4 decision that surprised many legal experts, affirmed a ruling by three federal judges that the so-called ""must-carry"" provisions of a 1992 cable-TV law do not violate the cable industry's free-speech rights.
Cable operators, who reach 64 percent of U.S. households, charged that the law amounted to illegal censorship and violated their right to select programming.
But broadcasters and the Justice Department defended the law, arguing that many cable operators would otherwise dump local stations in favour of cable programmes that could generate more advertising dollars.
Solicitor General Walter Dellinger, arguing on behalf of the Clinton administration, told the high court last fall it was ""critical"" for the government to maintain a ""robust array of quality"" broadcast programming.
The law -- implemented by the Federal Communications Commission -- requires cable systems to devote up to a third of their channels to local public and private stations that offer such fare as home-shopping, religious and ""infomercial"" programmes. The shows are beamed via low-power stations.
Writing for the high court, Justice Anthony Kennedy said the must-carry provisions are consistent with the First Amendment and agreed that they promote ""important"" government interests.
He also agreed with the government that the law's provisions ""do not burden substantially more speech than necessary to further those interests.""
But Justice Sandra Day O'Connor, in a dissenting opinion, charged that the majority's legal analysis was flawed.
She also argued that the majority showed ""an extraordinary and unwarranted deference"" for judgments by Congress, ""a profound fear of delving into complex economic matters, and a willingness to substitute untested assumptions for evidence.""
The decision came as a shock to many. Most legal experts had expected the high court to rule against the broadcasters, based on the scepticism voiced by several justices toward the government's oral agrument before the court last fall.
""We're obviously disappointed, and frankly a little surprised,"" said Decker Anstrom, president of the National Cable Television Association.
Anstrom said that even before the 1992 law, ""cable systems carried virtually every local broadcast station.""
Broadcasters were ecstatic.
""We're elated the Supreme Court has recognised the historic importance of preserving free over-the-air television for all Americans,"" said Edward Fritts, president of the National Association of Broadcasters.
Jim Popham, of the Association of Local Television Stations, said that in the absence of the must-carry provisions, ""it was clear that there were stations at risk.""
Andrew Schwartzman, president of Media Access Project, a public interest law firm that represents citizens groups, said the decision ""underscores the special privileges broadcasters receive.""
It also strengthens the Federal Communications Commission's power to force broadcasters to provide free time for political candidates -- among other public-interest obligations -- in exchange for digital-TV licenses the FCC is expected to dole out free of charge to TV stations later this week, Schwartzman added.
",40
"The high-energy debate over the television industry's new ratings system moved Thursday to Capitol Hill, where several lawmakers argued the system is flawed -- and some warned a government fix may be necessary.
Industry executives, in an apparent softening of their own position, stressed that the system, barely two months old, is ""a work in progress"" and that they are not immune to change.
""I have no line in the sand,"" Motion Picture Association of America President Jack Valenti told reporters after the Senate Commerce Committee held the first congressional hearings on the age-based ratings. They began airing on network and cable-TV on Jan. 1 at the beginning of programmes.
""We will probably make changes as we go down the line,"" added Valenti, who headed the effort to develop the ratings.
He said some shows probably will be rerated to provide more consistency and that some tinkering is possible, like lengthening the time a rating is shown for a programme. But he did not suggest major revisions as demanded by many lawmakers.
The latest criticism -- backed up with the threat of legislation -- is sure to put pressure on the TV industry.
Lawmakers from both parties contended the ratings are inadequate and that industry executives should adopt a content-based system that spells out the level of sex, violence and strong language in a programme.
They complained that the vast majority of shows receive a middle-of-the road TV-PG rating -- parental guidance suggested -- even though the amount of sex, violence and foul language varies greatly from show to show within that category.
""The current TV ratings system is a little bit like putting a sign up in front of shark-infested waters that says: 'Be careful when swimming,'"" Sen. Joe Lieberman, a Connecticut Democrat, told the Senate Commerce Committee.
Training his sights on Hollywood and TV executives, he warned, ""Don't force us to legislate again in this area.""
The ratings stem from last year's big communications law.
In December, a group of industry executives adopted six categories: TV-G, suitable for all ages; TV-PG, parental guidance suggested; TV-14, parents of children under 14 strongly cautioned; TV-M, mature audiences only; and two categories applying to children's shows: TV-Y, suitable for all children; TV-Y7, suitable for kids age seven and older.
Already, some lawmakers are pushing new laws to alter the system and TV programming.
Sen. Dan Coats, an Indiana Republican, said he will offer a bill to require the TV industry to adopt a content-based system -- a move that industry executives have vowed to fight in court ""in a nanosecond"" on First Amendment grounds.
""We don't want Hollywood telling parents what is age-appropriate. We just want Hollywood telling parents what is in their shows,"" Coats told the hearing. His bill also would bar the government from giving TV stations a free channel in the transition to high-definition digital TV.
Others want a law to impose a ""safe harbour"" period, so that violent shows could be shown only later in the evening unless they carried a specific content-based rating.
But some lawmakers warned against government meddling with the ratings system and said it should be given a chance.
""There are ways to improve what we have here,"" said Sen. John Breaux, a Louisiana Democrat. He said it should not be government's job to replace parents in the role of screening shows for children.
Valenti likened the system's criticism to judging the career of a new senator ""by the performance of his first 56 days in office.""
Eddie Fritts, president of the National Association of Broadcasters, indicated the system could be changed in the face of major grass-roots criticism. ""It's a work in progress.""
",40
"The Justice Department is investigating possible bid-rigging during airwaves auctions held by the federal government for wireless phone licenses.
Justice Department documents obtained by Reuters Wednesday showed the department's antitrust division also was looking into whether bidders schemed illegally to divvy up the licenses being sold.
The Federal Communications Commission has raised more than $20 billion since 1995 by selling licenses to companies offering a new generation of cellular phone service known as ""personal communications services,"" or PCS.
A Justice Department spokeswoman confirmed the investigation. She said the antitrust division was ""looking into the possibility of anti-competitive conduct by bidders in connection with the FCC's auctioning of spectrum for PCS.""
She declined to specify which auctions were being investigated or provide additional details.
The department documents focus on the PCS auction that ended in mid-January and raised $2.5 billion.
At that auction, the FCC sold 1,479 PCS licenses nationwide in three different blocks, making it the most licenses sold at once. A third of the licenses were reserved for small companies.
Top bidders were units of Sprint Corp., AT&T Corp. and BellSouth Corp.
A spokesman for BellSouth said the company had not been informed by the government of any investigation. It was not immediately known whether the other two companies were targets or had been contacted regarding the probe.
An attorney familiar with the investigation said the department has sent out ""numerous"" letters requesting information and documents from auction participants.
The ""civil investigative demand"" seeks information about companies' bids, their bidding strategies and communications about the auction with other telecommunications firms.
In a sign that the investigation was looking into the possibility of bid ""signaling"" among participants, the department requested documents showing the last three digits of company bids.
One attorney familiar with the investigation said it was evident during the bidding that companies used the last three digits of their dollar bidding figure to signal their intentions to other auction participants.
""It's clear a certain amount of this was taking place,"" said the attorney, who spoke on condition of not being identified.
",40
"After years of delay, regulators are set to announce approval of plans to create a new type of radio service that offers CD-quality sound and can be heard by listeners coast-to-coast, government officials said Friday.
The four members of the Federal Communications Commission have resolved long-standing differences over allocating the two available radio licenses to the four companies seeking to offer so-called Digital Audio Radio Service, or DARS.  
The four are: CD Radio Inc.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp.; Digital Broadcast Satellite Corp.; and Primosphere.
An official who requested anonymity said the FCC approval is expected to be announced soon, possibly later Friday or on Monday.
Despite reservations from two commissioners, the agency has decided to limit an auction of the two licenses to the four companies -- which had filed applications with the FCC in the early 1990s.  
On Monday, FCC Chairman Reed Hundt had raised the specter of a potential snag. He insisted an auction should be open to any company that wants to bid, instead of the existing four.
Such a wide-open auction could have raised a more money for the government by attracting more bidders.
Hundt noted that MCI Communications Corp last year paid $683 million to win the last remaining satellite slot to beam television programs nationwide.
But the government officials said that the commissioners finally decided to allow the limited auction to proceed, given that the applicants have been waiting for years.
",40
"Regulators Monday approved long-delayed plans to auction two airwave licenses to create new nationwide radio services that will be beamed coast-to-coast via satellite and offer CD-quality reception.
The Federal Communications Commission, in resolving a long-standing dispute among its four comissioners, said it will limit the April 1 sale to the four companies that had applied by the end of 1992 to offer digital audio radio -- instead of opening the auction to any company.
The four are: CD Radio Inc. of Washington, D.C.; American Mobile Radio Corp., a unit of American Mobile Satellite Corp. of Reston, Va.; Digital Broadcast Satellite Corp. of Seattle; and Primosphere LP of New York.
To receive the new service, listeners will have to buy a special radio receiver that will cost about $200, in addition to the price of a regular radio, according to industry estimates.
It is likely the new service will be subscription-based, with an expected cost of about $10 a month. Operators will be able to offer specialised programming.
CD Radio, which pioneered the digital radio concept, plans to provide 30 channels of commercial-free music programming if it wins one of the two licenses up for grabs.
The company would target persons who drive a lot or live in rural areas and do not have access to many radio stations.
FCC Chairman Reed Hundt and Commissioner Susan Ness had favoured opening the auction of the licenses to any bidders, instead of limiting it to the four.
But they were unable to get the other two commissioners at the FCC -- Rachelle Chong and James Quello -- to agree.
""I would prefer to assign spectrum licenses through an auction open to all. Closing the auction is the wrong result,"" Hundt said in a statement.
An open auction could have raised a larger sum for the government by attracting more deep-pocketed bidders.
Hundt noted recently that MCI Communications Corp. last year paid $683 million to win the last remaining satellite slot to beam television programmes nationwide.
The commissioners, in resolving another dispute, agreed to require the license winners to offer discounted advertising rates and equal time to political candidates running for federal office.
The agency also told the applicants that the winners could be subject to other public-interest obligations in the future.
The FCC is ready to unveil plans to auction a separate valuable airwave slice that will be home to a wireless technology that could offer new competition to local phone companies and cable-television operators.
A government official said the FCC plans to announce soon its long-awaited auction plans for local multipoint distribution service, or LMDS, a wireless technology that allows users to zap voice, pictures and data over high-speed networks that also can hook up to the Internet.
""All the issues have been resolved,"" said the official.
The FCC is expected to bar local carriers and cable firms from bidding for LMDS licenses in their home territories in a bid to bar them from snuffing out potential competition.
",40
"The government's latest airwaves auction looks likely to generate far less money for Uncle Sam than the $1.8 billion Congress was counting on to help balance the budget, regulators said over the weekend.
By late Friday, the auction -- for a slice of spectrum that will allow users to gain access to the Internet over the airwaves or create wireless local phone networks -- had raised just $12.1 million.
""It's definitely not going to meet budget expectations,"" Federal Communications Commission Chairman Reed Hundt said in an interview Friday.
The sale began Tuesday. FCC officials said bidding among the 23 companies -- including units of BellSouth Corp., Comcast Corp. and a Bell Atlantic Corp./Nynex Corp. joint venture -- appears to be winding down.
Analysts argued that the low total underscores the point that spectrum sales will probably not be the ""golden goose"" that lawmakers and the Clinton administration have looked to for eliminating the budget deficit.
""It's nice to think of it as government property that would earn the country some money,"" said analyst David Roddy of Deloitte & Touche Consulting Group. ""But the sale of the spectrum was too much and too fast.""
Said Elliott Hamilton, an analyst at Strategis Group, a Washington-based consulting firm: ""It's not an endless supply of gold out there at the end of the rainbow.""
""Congress, the White House and the FCC have to sit down and start rationalising their approach to spectrum.""
The ""wireless communications services"" or WCS auction is the FCC's 14th airwaves sale. Potential applications for the spectrum include broadband wireless access to the Internet, wireless local phone networks, and location services for pinpointing trucks and other vehicles.
The auctions have netted the government about $23 billion, far more than expected. But prices have begun to slide as more spectrum is sold, contributing to financial problems among wireless carriers and raising doubts over whether Uncle Sam ever will collect all the money it is owed.
Looking ahead, the Clinton administration proposed in its 1998 budget to raise $36.1 billion by selling licenses to firms wanting to sell new ways to link to the Internet or send video images through the air, among other possible services.
""They're not going to make that,"" predicted Roddy of Deloitte & Touche.
Indeed, the WCS sale offered a new twist. In its zeal to balance the budget, Congress last year required the FCC to hold the auction by April 15 and to collect the proceeds by Sept. 30, the last day of the 1997 fiscal year.
FCC officials said the timetable has contributed to the meagre returns. Potential bidders, communications-equipment manufacturers and wireless investors were not given enough time to fully analyse the auction, they said.
""This is exactly why we told Congress we should always have at least a year's advance notice,"" said Hundt, adding that his agency was given less than five months.
Some on Capitol Hill are eyeing the problem.
Sen. John McCain, an Arizona Republican who heads the commerce committee, plans to offer a bill soon to try and maximize the money the government raises in auctions.
To prevent spectrum from being dumped on the market, the bill would allow for a ""reasonable time lag"" between the allocation of the spectrum and its sale by the FCC.
The nation's broadcasters, in the transition to digital television, are using recent auction woes as evidence that they should not have to hand back their analogue TV licenses by the year 2006. The permits would be auctioned for other uses.
""Such proposals will undermine our ability to meet the challenges of moving our nation into the digital future, and will simply not be achievable on the revenue side,"" the National Association of Broadcasters told lawmakers.
Hundt disagrees. ""Everyone who has spectrum wants to make sure that no one else ever gets any.""
",40
"Regulators Tuesday began auctioning a slice of spectrum that will let users gain access to the Internet over the airwaves or create wireless local phone networks that compete with traditional wired networks.
Twenty-four companies -- including units of BellSouth Corp., Pacific Telesis Group, Comcast Corp. and a Bell Atlantic Corp./Nynex Corp. joint venture -- are bidding for the rights to offer ""wireless communications service,"" or WCS.
The first day of bidding in the multi-day sale totaled $5.3 million. Analysts said recent financial problems among wireless carriers will put downward pressure on prices. It is the Federal Communication Commission's 14th airwave sale.
""I expect prices to go very low for this type of spectrum,"" said Elliott Hamilton, analyst at Strategis Group, a Washington-based consulting firm.
The FCC is auctioning 128 licenses. Of that total, 104 are 10 megahertz licenses that roughly cover state-wide areas. The remaining 24 permits are for 5 MHz of spectrum and cover larger regional areas.
The FCC is not dictating what services companies can offer over this portion of the spectrum.
Potential applications include broadband wireless access to the Internet, wireless local phone networks, and location services for pinpointing trucks and other vehicles.
The value of wireless spectrum has fallen after last year's $10.2 billion auction of licenses for a new generation of cellular phones known as ""personal communications services,"" or PCS.
Edward Warner, Washington bureau chief of Wireless Week magazine, said FCC officials ""should be ecstatic"" if the agency can net $2 billion from the lastest auction.
Several top bidders at the PCS sale are under financial strain after bidding high prices. Wall Street has been reluctant to invest in the ventures.
Also, FCC officials doubt wireless service providers can offer anytime soon the kind of mobile phone service available through PCS.
FCC officials cite restrictions on the use of the wireless service airwaves that are meant to prevent interference among users of an upcoming digital radio service that will be broadcast coast-to-coast via satellite. The wireless service and digital radio airwaves are adjacent to one another.
The FCC has raised some $23 billion through its airwave sales. But the financial problems among last year's PCS winners has raised doubts over whether the government will ever collect all the money it is owed.
PAC.N
",40
"Regulators are considering extending consumer safeguards for 900-number phone calls to other pay-per-call services that have zapped unwitting consumers with sky-high phone bills for overseas calls.
The Federal Trade Commission Wednesday said it will seek public comment on whether to apply the rules to information and entertainment services that callers dial though a prefix other than ""900."" The 900-number rules require clear cost disclosures and a means for settling billing disputes.
The newer services offer callers astrological and travel information, psychic advice and phone sex, among other things. Scams among ""audio information"" or ""audio entertainment"" services are a growing problem, according to one official.
Officials say providers of the services evade the 900 rules, adopted in 1992, by diverting calls to numbers in such countries as Guyana, the Dominican Republic, the tiny African country of Sao Tome, or the former Soviet Republic of Moldova.
In some cases the first three digits of the number -- such as 809, 758 or 664 -- resemble area codes in this country.
The difference: The overseas calls wind up in countries where the local phone company levies a charge of more than $2 a minute for completing the call. The rate far exceeds costs.
Government officials said this allowed the overseas phone company to provide a ""kickback"" to the pay-per-call service for each call sent abroad, payments that can drum up business.
""It has probably helped them to establish a modern telephone system,"" one FTC official said of the foreign phone companies.
Last year's overhaul of U.S. telecommunication law gave the FTC the authority to expand its 900-number rules to cover similar services not accessed by dialing 900.
Those rules give consumers three seconds to hang up after listening to a message disclosing the cost of the service.
A service also must spell out its costs. Calls that cost more than $2 must start with a message disclosing the price and identifying the name of the service.
The rules also ensure that consumers will not lose their phone service if they fail to pay for a 900 call. They also establish a mechanism for settling billing disputes.
The FTC recently brought a number of cases against alleged international pay-per-call schemes and has issued consumer alerts warning of the costs and risks of such services.
Last month it closed three steamy sites on the Internet after consumers complained of huge phone bills to Moldova.
The agency alleged that Audiotex Connection of Long Island, N.Y., and others distributed a sophisticted computer programme that -- unbeknownst to consumers -- caused a computer user's modem to disconnect from their local Internet access company and dial an overseas pay-per-call number to the former Soviet Republic. A lawyer for those involved denied wrongdoing.
Tim Elliott, president of the TeleServices Industry Association, said new rules were not necessarily needed for his industry. ""We police ourselves. It's pretty effective.""
He conceded, ""There are a lot of folks involved in the industry that are -- I don't want to say shady -- but who push the envelope.""
",40
"The No. 2 bidder at the government's high-flying wireless phone auction last year has filed for bankruptcy protection from its creditors, underscoring the problems besetting the auction's winners.
Pocket Communications Inc., which bid $1.4 billion for 43 licenses to offer a new generation of cellular service, said Tuesday it took the step voluntarily to protect its assets from a group of creditors after defaulting on $80 million in loans.
Pocket is one of several top bidders in the government's $10.2 billion auction that have come under pressure from the high prices and hefty interest payments required to pay for the ""personal communication services"" (PCS) licenses.
The companies, including No. 1 bidder NextWave Telecom Inc., also have come under strain because of a reluctance on Wall Street to finance PCS ventures.
Pocket is the first company from the pricey 1996 auction known to have filed for bankruptcy protection. The sale was reserved for small companies.
Privately-held Pocket's big creditors include a group of Asian entrepreneurs and communications-equipment makers Siemens AG of Germany and L.M. Ericsson of Sweden.
""It enables the company to develop a plan to improve our financial health"" while continuing to build a wireless phone system, Pocket Chairman Daniel Riker said of the company's filing Monday under Chapter 11 of the federal bankruptcy code.
Pocket, based in Washington, said it would take ""several months"" to restructure its finances and business affairs before the company would emerge from the Chapter 11 process on firm financial footing.
The Federal Communications Commission on Monday gave PCS companies from last year's auction some breathing space when it suspended indefinitely a March 31 deadline for them to make payments to the agency for their licenses.
The FCC took the step while mulling a request from NextWave, Pocket and seven other winners for permission to make the payments annually instead of quarterly.
The bids have become loans from the government, with the winners paying interest on the money owed for the licenses.
""When you're out trying to raise capital, investors don't like to see their money go toward interest,"" said Kevin Inda, a Pocket vice president.
The company has had to postpone initial public stock and bond offerings until the market for PCS stocks improve.
Analysts foresee a shakeout in the industry as a host of new players engage in a city-by-city battle for market share with established cellular providers typically owned by big regional Baby Bell companies and long-distance carriers.
Pocket's bankruptcy filing is expected to send a shudder through the ranks of the other auction winners who are trying to drum up money from wary investors.
""Pocket was a respected company that was considered to have put together a sensible plan,"" said Edward Warner, Washington bureau chief of Wireless Week magazine. ""It won't make financing more available.""
Pocket said it has about $1 billion in assets, largely the value of its licenses, and about $1.5 billion in liabilities. The latter is largely the long-term debt owed to the FCC.
The company's 43 licenses cover 35 million potential U.S. customers in markets such as Chicago, Detroit, Dallas-Ft. Worth, St. Louis, New Orleans, Las Vegas and Honolulu.
Pocket's financing plans had hinged on an initial public offering planned for last fall. It was postponed because of delays in the FCC auction process, said Riker.
A second shot at an IPO in January fell apart when Wall Street soured on initial offerings in the wireless sector.
",40
"Canada's TrizecHahn Corp and German businessman Dieter Bock on Wednesday unveiled a European property alliance which analysts said underlined increasing confidence in the market.
""This shows further faith being expressed in the UK and European property market,"" a property analyst at one major European investment bank said.
Toronto-based TrizecHahn, which has $6.0 billion in assets and $1.2 billion in uncommitted capital, said it would buy British and German property projects from Bock's Advanta Management AG for around $147 million.
It said it would pay for the acquisitions by issuing subordinate voting shares to Bock, as well as by assuming development liabilities and through construction financing.
Steve Mallen, head of research at property consultants Knight Frank, praised the timing of the move, saying: ""This is a wise strategic move, I think their timing is perfect.""
Bock will become president of TrizecHahn Europe and a director of the company, with an equity stake of around four percent. At the same time Bock announced he would resign as non-executive deputy chairman of Lonrho Plc and also as a director of the British- based trading and hotels conglomerate.
""The opportunity at TrizecHahn will demand my full attention,"" Bock said.
Both parties said the partnership represented an important strategic move, reflecting its commitment to expanding outside North America. Under the terms of the deal, which is expected to close in April, TrizecHahn's existing European operations will be merged with its new German and British development projects under Bock's leadership.
Peter Munk, TrizecHahn's chairman and chief executive, told a telephone news conference he was excited by the deal, which would allow the marriage of the firm's asset base and experience with Bock's ""experience, presence and credibility"" in Europe.
Munk said the deal would widen TrizecHahn's horizons beyond Eastern Europe to the whole of the European market. He said the company's involvement would encompass both development and investment in property in Europe.
He had not done business with Bock before, he said, but the two had become good friends out of a common interest in gold mining.
Bock said he was bringing in expertise built up in Europe and would strengthen the European management capacity.
The projects being taken over by TrizecHahn were a commercial property, Number 1 Poultry in London's City financial district, two commercial developments in Berlin, one in Dresden and a Baltic Sea project.
TrizecHahn, one of North America's largest publicly traded real estate developers, was formed from the merger last November of Horsham Corporation and Trizec Corporation Ltd.
It owns, develops and manages office buildings and regional shopping centres in the U.S., Canada and Central Europe.
",2
"The head of Britain's financial markets watchdog the Securities and Futures Authority (SFA) said on Tuesday that former Barings treasury chief Ian Hopkins had broken precendent in refusing to be bound by SFA rules.
Last week the SFA banned Hopkins from being a director in the City for at least three years for his part in the 1995 collapse of the blue-blooded British merchant bank. Nick Leeson, the Singapore-based trader whose unauthorised trading led to losses of nearly $1.4 billion, is currently serving a jail sentence for his role in the affair.
Hopkins was also ordered to pay 10,000 pounds ($15,800) towards the SFA's costs after an independent tribunal found that he was no longer ""a fit and proper person"" to be a director of an SFA regulated firm.
""Its been difficult for us because it has been without precedent. We've never had to confront this before when someone signed a contract with us to be bound by our rules and then in effect ignored them,"" Nick Durlacher, the SFA's chairman, told Reuters.
Hopkins, one of nine Barings executives to have been disciplined by the SFA, has always protested that the attempted to ""blow the whistle"" on irregularities in the Singapore operation but that other managers ignored his warnings.
""I think the tribunal judged that if Mr Hopkins was a whistle blower he didn't have much of a pea in his whistle,"" Durlacher said, adding that Hopkins ""had lived with an unreconciled balance of 100 million pounds for three months"".
Durlacher said he was ""not vitriolic"" about Hopkins although he said it had not been easy. But if anyone adopted the same approach in the future, the SFA ""would adopt the same process of being as scrupulously fair as we can"".
He strongly denied that Hopkins had been dealt with more harshly than others because of his refusal to recognise the SFA's authority over him. Hopkins told British newspapers after the ruling that it had been vindictive.
Durlacher also denied that he had offered Hopkins a deal as it would not have been up to him to do so anyway. He said he had only had one telephone conversation with him and had been very careful about what he said.
""What I did say to Mr Hopkins was that I encouraged him to argue his case in front of us rather than to ignore us,"" he said, adding this could either have involved arguing his case at a tribunal or to considering settling with the SFA, as seven of the other Barings executives disciplined by the SFA had done.
Only one Barings case is now outstanding. Ron Baker, who was head of financial products at the firm, is appealing against an SFA tribunal's decision to reprimand him over his monitoring of one part of Barings' proprietory trading activities. ($ = 0.630 British Pounds)
",2
"NatWest Markets said on Monday that its senior management did not know about the interest rate options pricing problem until three days before the losses were made public.
""Senior management did not know until February 25 that there was potentially something of significance,"" a NatWest spokeswoman told Reuters.
She denied a weekend newspaper report suggesting that NatWest, the investment banking arm of Britain's National Westminster Bank Plc knew of the losses some time before they were revealed.
The mispricings, which on Thursday NatWest revealed had totalled 90 million pounds ($144 million), had come to light during the course of normal pricing reviews and it had not been able to put a price on the loss until February 28, when NatWest estimated it at 50 million pounds.
The initial discovery of the loss came to light through a more intensive review across the investment bank's trading areas, but it was a month or so before the extent of the mispricings became clear.
The options losses have been a painful and embarrassing episode for NatWest Markets and its chief executive Martin Owen, who on Thursday said he would forgo 200,000 of a 500,000 pound bonus as a result of the affair.
NatWest confirmed a report that the girlfriend of Kyriacos Papouis, the former NatWest options trader whom NatWest wants to interview about the losses, also worked for the bank but was employed in derivatives marketing and had nothing to do with Papouis's work.
She had been given a holiday period because of the situation, the spokeswoman added.
Papouis, who left NatWest for U.S. investment bank Bear Stearns, has not commented on the losses. Since the affair came to light he has also resigned from Bear Stearns.
He and five others have been reported to British financial watchdog the Securities and Futures Authority (SFA) and the Bank of England is also looking into what went wrong at the bank.
NatWest Markets' global head of options, Neil Dodgson, who was suspended from the firm more than two weeks ago when the losses first came to light, is among those who will come under SFA scrutiny.
The others suspended last week were Ian Gaskell, head of swaps options trading for Britain and Europe, Christophe Lanson, global head of rate risk management, Jean-Francois Nguyen, managing director of debt derivatives, and Phil Wise, chief administrative officer and formerly senior managing director of capital markets.
While the group has maintained that it does not believe any of its clients suffered losses as a result of the options mispricing, which went back as far as 1994, the spokeswoman declined to comment on whether NatWest would try to recoup any gains made by counterparties to any wrongly priced deals.
""We haven't determined that that is an issue,"" she said.
She dismissed suggestions that morale was low at the bank following last week's revelation that the loss was nearly twice as large as initially thought, the suspension of four senior staff and the cutting of bonuses to a handful of individuals.
""We are doing really good business here, and we continue to do good business. Everybody wants this to be dealt with properly and put behind us,"" she said.
Britain's Serious Fraud Office (SFO), which investigates and prosecutes major and complex financial crime, has been contacted by NatWest but has not begun an investigation.
($ = 0.624 British Pounds)
",2
"Investment banking giant Merrill Lynch on Wednesday took another step in building up its presence in the European equities markets with the purchase of an equities research and sales boutique in Italy.
The U.S. powerhouse's takeover of the Milan-based Carnegie Italia SpA follows a similar but larger move earlier this year in Spain when it bought FG Inversiones, the country's largest independent brokerage, for 3.7 billion pesetas ($29.5 million).
Merrill, which last year bought British equities specialist Smith New Court, said in a statement that the head of Carnegie Italia's team Tony Morrongiello would ""spearhead Merrill Lynch's local institutional equity sales presence in Milan"".
This would be in partnership with Merrill's existing Italian equity sales, research and trading teams in London, it added.
Paul Roy, Merril's head of equity sales and trading in Europe, said the move would give the firm ""tremendous leverage in this important market"" and enable better client service.
""We will also be better placed to offer strategic advice to Italian companies on local and international equity markets,"" Roy said in a statement.
The chairman of Merrill Lynch Europe, Christopher Reeves, said Italy had been identified as a growth area for the firm in equities, debt markets, private and investment banking.
Swedish stockbroker Carnegie said it had agreed to sell Merrill its Italian operations because it needed capital to expand in the Nordic region. It recently sold its operations in Spain and said it would also pull out of Portugal.
Neither party disclosed what Merrill would pay for the Italian operation, although given the small size of the operation the amount was not believed to be large.
Along with other investment banks, Merrill has until now ""parachuted"" relevant people in from London and New York when it has needed to wrap-up investment banking deals in European countries where it does not have an equity broking presence.
Analysts said that buying small firms in Europe and building local bases rather than employing a top-down approach from one core centre underlined the need for local relationships, particularly in areas such as corporate finance, mergers and acquisitions and initial public offerings (IPOs). ($1=125.5 Peseta)
",2
"Members of Britain's third largest building society, the Woolwich, on Tuesday voted overwhelmingly in favour of ditching the mortgage lender's 150-year-old mutual status in favour of becoming a publicly listed bank.
After a special general meeting the proposals, which will give individual members a share windfall worth an average 1,200 pounds ($1,961), were approved by more than 95 percent of both the savers and borrowers who voted.
""...We probably weren't too surprised but it's pleasant that our members feel exactly the same way because quite frankly we've put a lot of thought into trying to get this right,"" said John Stewart, Woolwich chief executive.
Last month the Woolwich said the handout of at least 450 shares to qualifying members would go to around 2.57 million people, including qualifying members and pensioners.
Around 1,200 members, many unhappy with the conversion, turned up at the meeting but the vote was decided by a large postal vote.
Stewart told Reuters that Woolwich Plc, as it will be known when the 3.0 billion pound flotation goes ahead in July, wanted to offer ""a full range of personal financial services"" and planned to expand into areas such as pensions.
""That's an area we will either grow into organically or we might make an acquisition..."" he said, adding that the group was ""a bit light in weight"" in other areas such as life assurance and unit trusts.
He did not rule out the possibility of acquisitions to expand the Woolwich's business, but he stressed that if they happened these were likely to be friendly mergers, not hostile takeovers. ""The Woolwich's history is as a white knight, most people come to us because someone else is threatening them.""
Stewart said the Woolwich, founded in 1847 in south London and set to become a FTSE-100 company and one of Britain's 10 largest banks, would also press ahead with building up relatively high-margin business in France and Italy.
He said the Woolwich would not be looking at other European countries unless ""it was the right opportunity"" because it was already established and doing very well in France and Italy.
But there are plans to develop so-called ""telebanking"" and electronic banking, the latter probably starting this year and telephone banking in 1998.
The Woolwich is one of four building societies planning stock market flotations during 1997. The others are Britain's biggest mortgage lender, the Halifax, the Alliance & Leicester and Northern Rock.
Some members protested at the Woolwich's plans to shed its mutual status -- where the building society is owned by its savers and borrowers -- in favour of being a publicly listed company with shareholders who expect dividends.
A number argued that this would reduce the favourable savings rates which building societies have traditionally paid compared with their bank counterparts and increase make loans to house-buyers more expensive.
But Stewart said this would not be the case as Britain's increasingly competitive financial services market and the economies of scale from conversion meant the Woolwich would have to offer not only top quality service but also competitive lending and savings rates.
Stewart told the meeting that Woolwich members should not ""get too hung up about being a bank"", adding it had no intention of moving into commercial lending, international lending or investment banking but would continue to focus on housing finance and retail savings.
",2
"Regent Pacific, the Hong-Kong based fund which last month took a three percent stake in Britain's Hambros, said it was reassured by a meeting with chief executive Sir Chips Keswick that its profits would improve.
""It was useful to sit down and spend a little time with them. I left with the impression that the company's profits will improve,"" Julian Mayo, director of Regent Pacific Corporate Finance in London told Reuters.
A spokesman for British investment bank Hambros Plc declined to comment on the meeting but Mayo said it was ""friendly, business-like and constructive.""
Regent, often called a ""vulture fund,"" received widespread attention last month when it made the Hambros buy.
Its chief Jim Mellon was widely quoted as saying the bank, one the last few British independent investment banks, was undervalued and undermanaged. He was also reported to have said the bank's shares had been ""diabolical"" over the last 10 years.
This attack got a cool response from Hambros, which said it would meet Regent but would not otherwise comment on its new shareholder or its intentions.
Mayo said he had gone into the meeting wanting to hear what Hambros' strategy was going forward, how the bank was planning to coninue its policy of rationalisation and restructuring and when shareholders would see the fruits of it.
Asked if he was happy with the answers he received, Mayo said ""Yes, in broad terms.""
But he was less clear about Regent Pacific's long term aims in buying into Hambros, which like other British merchant banks has been the subject of takeover speculation in the past.
""Our motives are to make a good return from this investment, whether it is short or long term remains to be seen,"" Mayo said, adding that the group liked to have good relations with a company in which it invests and this was not a one-off meeting.
""We were left with the impression that the door is always open,"" Mayo said.
Regent Pacific's action had, he said highlighted what a number of analysts had been saying for some time about Hambros' performance. Undervaluation of the shares and discussions with analysts had prompted the decision to buy into Hambros, he said.
He said some analysts thought the bank's shares could rise to between 300 and 325 pence, closer to its potential value.
Hambros shares closed at 260.5 pence on Tuesday, up a penny. There was speculative buying late in August after Regent Pacific's holding became public with the share price reaching a year high of 280 pence.
But talk of a takeover or a possible break-up of the bank was dismissed by analysts at the time as unlikely in the near term, although some said it had a better break-up value.
Mayo said Regent could not launch a bid for Hambros but said a greater holding in the company was ""not out of the question,"" although it would have to notify both the bank and the stock exchange if it did buy a more significant stake.
""Whether we increase our position is something we will have to decide upon,"" he said.
In 1995 Hambros' pre-tax profits fell to 20.6 million pounds from 37.1 million the year before. Bad debt provisions grew to 36.2 million from 13.5 million pounds during the period.
",2
"British estate agency and financial products group Hambro Countrywide Plc has capitalised on the housing market recovery and is prepared for further growth.
The company said on Thursday it had turned around a pre-tax loss of 3.9 million pounds for 1995 into a pre-tax profit of 30.8 million pounds for 1996 and promised there was more to come.
""I think we are only half way there yet...if we get to anything like the volumes that we anticipate this year...the prospects are obviously very exciting,"" managing director Harry Hill told Reuters. Hill said the British housing market was improving across the country, although there were still regional differences. He said London and the south east were outpacing other areas, but added he did not believe prices would rise unsustainably.
""I suspect it will find a level,"" he said. ""There's an enormous momentum that will probably sustain the market this year and next before it even starts to draw breath,"" he added.
All the factors were in place for a long, sustained recovery in Britain and within that context house prices would increase.
Hambro Countrywide, which is 52 percent owned by British merchant bank Hambros Plc, also announced that it had broken with tradition and made a move into the burgeoning London market by buying an estate agency and letting business for 7.45 million pounds.
Faron Sutaria & Co has five existing branches in London and plans to expand in the west, south and north west of the capital. ""From the middle of this year we will have nine offices under Faron's banner and we would hope in the next two years to have another seven,"" Hill said. Hambro Countrywide said the entire management team at Faron wanted to stay with the business, adding that the acquisition offered the opportunity to generate additional revenue by offering mortgages and financial services to new clients. Hill does not see the impending British election slowing Hambro Countrywide's business and said a victory for the opposition Labour party could in fact benefit the firm's clients. ""I don't think it will make much difference either way,"" he said.
He said Hambro Countrywide had sold more mortgages and retail financial services during February than in any other month in its history.
And there was no sign of change to the direct correlation between people buying houses and financial products from the group. ""Most people want to do most things if they can, easily and comfortably under one roof,"" Hill said.
While there are a growing number of competitors in the market-place, Hill said he did not see Hambro Countrywide's margins being pinched as a result.
Asked if Hambro Countrywide planned to make any further acquisitions, Hill said ""We aren't talking to anyone today"". But the group said it was in discussions with a ""number of leading law firms"" as part of a move to set up a conveyancing operation.
""We believe this will bring significant benefits to all our clients in smoothing and speeding up the home buying process,"" the group said, adding it expected to open its first centre in April 1997.
As for Hambro Countrywide's own future, chairman Christopher Sporborg said there was little chance of a change in the current shareholding by Hambros.
Shares in Hambro Countrywide, which also announced a final dividend of 1.5 pence to make a total dividend of 2.0 pence, were down 4.0 pence at 1100 GMT at 123.5 pence.
",2
"Deutsche Morgan Grenfell's dispute with suspended star fund manager Nicola Horlick highlights a ""merry-go-round"" hiring system started by investment banks, banking sources said on Wednesday.
""One of the industry's failings is that it doesn't bring people up through the system. When a firm needs someone, it steals people from a competitor. This creates a destructive merry-go-round which can't be in anyone's interests,"" one banker said.
Newspapers said DMG suspended Horlick on Tuesday because she allegedly tried to lure colleagues at Morgan Grenfell Asset Management, where she was head of UK pension fund business, to join her in a move to Dutch bank ABN AMRO.
ABN AMRO itself denied reports that the 35-year-old Horlick was poised to lure a team with her and DMG has declined to comment on the details of Horlick's suspension, except to say it centred on a potential breach of contract.
While the term ""poaching"" is widely used to describe the movement of teams from one firm to another, loyal colleagues following a key player to a new employer is nothing new, the banking sources said.
Most moves involve a significant salary and bonus rise and often swiftly follow payment of bonuses by the firm which an individual is leaving.
Banking sources said U.S. investment bank Goldman Sachs, reported to have paid record bonuses last year, had lost a handful of staff since the payments were made.
In suspending Horlick, DMG, the investment banking arm of Germany's Deutsche Bank, has brought back into the open a subject often seen as a normal part of the rough and tumble associated with investment banking -- but which might be relatively new to the more staid world of fund management, the sources said.
""We are surprised to be mentioned in the context of poaching which would, by its nature, imply you are planning to take a whole team, which we are not,"" ABN AMRO chief spokesman Jules Prast told Reuters.
But he said he preferred not to discuss whether ABN AMRO had talked to or planned to talk to Horlick, who newspaper reports said had earned more than 500,000 pounds ($835,000) a year.
""She (Horlick) had certainly led a number of people in the (MGAM) division to think that she had ABN AMRO lined up,"" one banking source told Reuters.
But if Horlick was about to take a team of up to 20 fund managers with her to ABN AMRO, which is expanding its fund management activities in London, she might have given DMG a dose of its own medicine.
The investment bank has gained a reputation in recent years for an aggressive hiring spree aimed at top performers at other firms, which led to widespread suggestions that DMG was offering guaranteed bonuses -- some for up to two years -- to ensure that it got the staff it wanted.
This came to a head last July when DMG reached agreement with another Dutch firm, ING Barings, the investment banking division of Internationale Nederlanden Groep, over a separate poaching dispute.
ING Baring's chief executive, Hessel Lindenbergh, said at the time there was ""growing resistance and irritation in the industry towards firms which deliberately poach whole teams"" and that ""poaching teams pushes up pay unduly"".
Last year, DMG's global bonds chief Edson Mitchell said the firm had hired around 500 people since he left his previous firm Merrill Lynch. Many of the new staff came from Merrill, while others moved from the then S.G. Warburg arm of SBC Warburg. ($1=.5976 Pound)
",2
"Germany's Dresdner Bank and Dutch bank ABN AMRO Holding NV may covet a larger slice of lucrative British fund management business, but analysts warned on Wednesday their shopping lists will be limited.
""Some of the smaller quoted firms might get snapped up,"" one banking analyst told Reuters, adding the price range for quoted asset management companies varied from between around 125 million pounds ($207.6 million) to several billion pounds.
""There's a large range of value out there, but nothing is on offer,"" he said.
Well-known top performers such as Mercury Asset Management (MAM) are likely to be prohibitively expensive and none of the major players have indicated they are up for grabs.
And the weaker fund firms are not likely to be of such great interest to European banks trying to make an immediate impact on the market rather than turn around a non-performer.
""There's an active trading market for these businesses but some banks feel the prices are too high,"" John Leonard, banking analyst at Salomon Brothers said.
Banks are not alone in their desire to grab more asset management business, with insurance companies also in the frame. And as with other areas of financial services completely new entrants to the field are also expected.
Retailers like Marks and Spencer have been selling personal financial products for some time but supermarkets and companies such as Richard Branson's Virgin may begin to take on the dual roles of selling products and managing assets by linking up with life assurance or asset management firms.
Last November Dresdner, Germany's second largest commercial bank, announced a restructuring of its global fund management business to bring non-German funds under the management of its newly acquired San Francisco-based RCM Capital Management.
The new group, which incorporates London's Kleinwort Benson International Management and Thornton & Co and is due to be named in March, will have assets under management of more than $50 billion, a quarter of the $200 billion managed asset volume of the whole Dresdner group.
Dresdner said on Wednesday it was interested in taking over a British fund manager and was also looking at expanding its asset management in France and Italy.
This came on top of comments by ABN AMRO this week that it too would buy in the right circumstances.
One analyst said ABN AMRO would regret it had not outsmarted Britain's National Westminster Bank Plc which captured British fund manager Gartmore almost a year ago for 472 million pounds.
Analysts said the problem for both ABN and Dresdner would be satisfying their desire for increased market share without sacrificing shareholder value by paying over the odds for an acquisition.
And because everyone wants a piece of the action, prices are likely to rise further. Shares in British fund management firms rose on Wednesday after the Dresdner comments.
MAM shares were up five pence at 1,260 pence in the early afternoon while Edinburgh Fund Managers shares were up five pence at 607.5 pence and Henderson shares were up 32.5 pence to 1,277.5 pence.
Analysts singled out Edinburgh Fund Managers and Ivory and Sime as two of the weaker share performers in the sector. ""There are some asset management companies with quite depressed share prices,"" said one.
($1=.6021 Pound)
",2
"Britain's commercial property market may be improving but it has not yet got a clean bill of health, a senior Bank of England official said on Wednesday.
""It would be rash to conclude that the market is now unambiguously healthy in all respects. There are still several factors which will continue to pose challenges to the investment, banking and valuing communities,"" said Pen Kent, executive director at the Bank of England.
Kent said that while lease lengths had temporarily stabilised, clauses by which tenants could break leases were becoming more common and many would need less space.
""It is clear too that many occupiers will continue over the long-term to reduce their needs for space and to demand greater flexibility,"" Kent told the Investment Property Forum in a speech.
A combination of factors were making it ""less straightforward to form a view of the quality of cashflow likely to stem from a particular building"", he added.
There was a sizeable overhang of unlet secondary property. ""The pool of such property increases every time that a major user of space moves into new offices and releases its former premises,"" he said.
Kent called for solutions to the problems of much secondary stock not being suitable for conversion to alternative uses or never being able to be relet. ""This will continue to exert a dampening influence on the market and imaginative solutions will be needed.""
Kent also outlined his views on the future for the market. While institutional investors were attracted to the sector in the short-term ""they could easily resume their longer-term departure from property in a couple of years"", he said.
This could occur if the property market's performance waned as the economic cycle progressed and other assets began to look Banks might also become disillusioned with property again ""particularly if they relax their lending criteria too far in the current exceptionally competitive lending market"".
Kent also warned that while healthy competition between lenders was a good thing, ""history suggests that the seeds of tomorrow's losses are sown when lenders relax the basics such as loan to value ratios and income cover; or when they take very bullish views on the likely strength of cashflows"".
The BoE had heard some lenders were seeking to pressurise valuers into higher valuations. ""This is not a healthy practice and we hope both the lenders and the valuing profession will be strong enough to resist,"" he said.
On a more positive note, Kent said there had been welcome progress on the development of property derivatives and securitisation as well as improving the quality of market information. He said he supported suggestions that commercial transaction prices should be made public.
",2
"""Superwoman"" fund manager Nicola Horlick announced her resignation on Thursday from Deutsche Morgan Grenfell (DMG), leaving what she called a feeling of ""turmoil"" among fund managers at the German-owned bank.
A spokesman for Horlick, who had been head of British pension fund business at DMG's Morgan Grenfell Asset Management (MGAM), told Reuters she had quit and was planning legal action against her former employer over ""constructive dismissal"".
Horlick had been suspended on Tuesday pending the outcome of an internal investigation into what Deutsche Morgan Grenfell described as ""a potential breach of her contract"".
The dispute was believed to revolve around allegations Horlick was looking to move and take staff with her. It follows a scandal last year at MGAM over misvaluations in three of its funds and the subsequent sacking of fund manager Peter Young.
The suspension of Horlick, dubbed superwoman in financial circles because of her ability to hold a high-powered job while looking after five children, prompted reports of unease among large pension fund clients at the firm.
The row erupted only days after Horlick received news of a promotion to managing director from MGAM chief executive Robert Smith, a banking source said. ""They shook hands on it last Friday,"" the source said.
Horlick, in an interview with the Financial Times published on Friday, described disquiet at MGAM over the Young affair. She said the promotion came after a group of fund managers who worked under her said they would leave the company unless she be given more authority.
""They demanded that I be given more authority. They felt that things were in turmoil following the Peter Young affair.""
Young, currently under investigation by Britain's Serious Fraud Office, has denied any involvement in criminal activity.
The Horlick saga is said to have unsettled pension fund clients at DMG, but the company said earlier on Thursday that it did not expect any exodus of its pension fund clients.
Banking sources also said DMG was confident other fund managers would not follow in Horlick's footsteps and that there was a climate of loyalty to MGAM's Smith.
But DMG has been in the spotlight for months over the Peter Young affair, which has been costly as well as embarassing. In December Deutsche Bank agreed to a compensation package of around 200 million pounds ($335 million) to make good losses suffered by investors. Deutsche also saw its coveted triple-A credit rating from Moody's dropped last month.
In October Deutsche named Rolf Breuer, a 58-year-old investment banker, as its new head. Breuer will take over on May 20 and is expected to fight hard to avoid the criticism and mistrust that dogged his predecessor Hilmar Kopper.
Kopper never managed to shrug off the ""peanuts"" tag attached to him in 1994 after he used the word to describe losses caused by the collapse of the Schneider property empire, with which Deutsche was closely involved.
Peanuts are just about the last word the British press have been using in connection with Horlick. She was reported to have earned one million pounds ($1.68 million) a year.
In the newspaper interview, she tells of a last attempt to solve things with DMG when she met with Smith on Wednesday. ""The meeting ended up with me in tears and Robert Smith very depressed,"" she was quoted as saying. Horlick said a request to be reinstated was rejected by Smith on Thursday, the FT said.
There has been press speculation Horlick was preparing a move to Dutch bank ABN AMRO with others in her team, but ABN has denied any attempt of poaching a fund manager team. It declined to say whether it had tried to hire Horlick.
In the interview Horlick said, ""ABN AMRO is a red herring,"" adding: ""I completely concur with what ABN AMRO have said.""
--London Newsroom +44 171 542 6784
",2
"A proposed reform of Britain's state pensions system would revolutionise the financial services industry, market participants said on Thursday.
The ruling Conservative government on Wednesday unveiled proposals which aim to prevent huge burdens falling on future taxpayers by making workers take responsibility for providing for their old age.
Roger Taylor, deputy chairman of composite insurer Royal & Sun Alliance, described the plans as ""the biggest shift in financial services in the last 50 years"".
Taylor said it would encourage other governments to follow suit, adding that if the proposals were enacted they would start to generate additional business in three to four years time.
""For the industry as a whole it is good news,"" Tony Baker, deputy director general of the Association of British Insurers (ABI), told Reuters.
Prime Minister John Major must call an election by May and the opposition Labour Party is well ahead in the opinion polls.
Labour wants to retain the basic state pension and develop a new range of second pensions for those not already in occupational pension schemes.
But the banking and life insurance industry is gearing up for change whatever the outcome of the election, arguing that demographic changes mean additional pension provisions are essential for economic and social stability beyond 2000.
Banking analyst John Leonard of U.S. investment bank Salomon Brothers agreed that the British government's decision to address the problem was an opportunity for the industry.
""Anything giving rise to privately managed assets must introduce interesting products for banks and the insurance sector,"" he said.
He said a large additional pool of privately managed money to fund the pensions was a particularly big opportunity for the ""large volume, efficiently managed providers with good distribution networks.""
But the shift from state to privately held pensions could also spawn a major marketing war between the firms most likely to win business.
This in itself would be costly, at least at the outset. The start of any such scheme would be particularly important as once individuals had chosen a provider with which to invest their pension contributions, it would be difficult for other companies to persuade them to move.
Baker said there would still be plenty of business for existing players in the market which were not able to sell the new scheme, labelled Basic Pension Plus.
He said there would have to be regulations governing matters such as maximum charges, transferability, reporting and investment returns, while not all insurance companies would necessarily be included on the approved list of providers.
While the desirability of involvement for companies would depend on the rules set out by the government, Baker said the scheme could lead to further consolidation in the industry, where only the big, efficient providers could meet the criteria.
He said the scheme could hit smaller players and other elements of the industry, particularly independent financial advisors (IFAs), who could lose out if individuals chose to top up basic contributions with their main pensions provider rather than other companies.
""The need for a middle man might be much less than at the present time,"" he said.
Baker added that the government had underlined that it wanted simplicity and lower costs to result from the changes, factors which he said would mean individuals ""buying"" their pensions rather than being sold them.
The importance of the move was underlined by Royal & Sun Alliance's Taylor, who said self-provision would become the biggest single transaction an individual would make.
Mike Blackburn, chief executive of Britain's Halifax Building Society, said earlier this week that the group would target long-term savings products -- life assurance, pensions and investments -- because of their growth potential.
""With an ageing population and governments unable to look after people as they have historically been able to do in retirement, the requirement on the private individual to provide for the long-term future will be accentuated,"" Blackburn said.
",2
"Britain's opposition Labour party has no plans to revolutionise the regulatory structure governing the financial services industry if it wins the election, which the ruling Conservative government must call by May.
""We are talking about a developmental process - reform rather than revolution,"" Mike O'Brien, Labour's shadow economic secretary, told Reuters in a telephone interview.
O'Brien said Labour planned a number of changes, the most obvious being a shift in Britain's regulatory structure whereby top regulator the Securities and Investments Board (SIB) would merge with the existing Self-Regulatory Organisations (SROs).
At present the SIB supervises these ""frontline regulators"" which authorise firms to conduct investment business, monitor them, handle complaints and punish rule-breakers. O'Brien believes this system to be overly bureaucratic and expensive.
""What we have to do is to put in place a system that is flexible enough to adapt the changes in the market. We've got a rapidly changing global market out there and we have to have a regulator in Britain that can respond quickly,"" he said.
But Labour does not intend setting up an equivalent to the U.S. Securities and Exchange Commission (SEC), which O'Brien said would not be appropriate to Britain. ""As soon as the SEC phones, you phone your lawyer -- we want a system where if you have a problem you phone the regulator,"" he added.
Labour also intends altering the nature of regulation in Britain's all-important financial services sector. ""We'd rather have four rules that worked than 400 which tried to catch every eventuality but just succeeded in confusing everyone.""
And consultation is king when it comes to Labour's approach to regulation, including the Bank of England's future as a regulator, an unresolved area requiring more industry input.
This process is likely to last more than a year and Labour would state its own view on the issue before it was completed.
Labour is also talking to industry participants about the provision of financial services to people on low pay.
""We have to find a means by which there can be continued sale of financial services products of a good quality to lower income groups,"" he said. This has to happen without sacrificing quality of advice while reducing the regulatory burden involved.
Discussions have so far been fairly informal but firms have been to him and assisted by giving opinions and advice and O'Brien is confident this approach will prove a success.
""We believe the City has a major contribution to make in terms of our thoughts on how these issues can be resolved. I've been tremendously encouraged by the response so far.""
Rather than ""firing from the hip"", Labour has adopted a cautious approach which will ultimately ensure ""a sensible policy which can command support in the City.""
O'Brien points out that working with the City -- shorthand for London's financial services sector -- is crucial because the sector produces 18 percent of GDP and employs around three-and-a-half million people.
He denied suggestions that altering the structure that has evolved from the Financial Services Act of 1986 will lead to in-fighting among the SROs and less effective supervision.
For within the new regulatory organisation, likely still to be called the Securities and Investments Board, ""there will always be a place for good regulators"".
O'Brien said he could not give a timescale for the changes as this would depend on other legislation Labour would enact if it forms a government, but they would come within five years.
A clear distinction will remain between the professional and the retail markets under Labour with a ""lighter touch"" in the wholesale area, dominated by the principle of ""caveat emptor"", and a greater degree of openness in the retail area.
O'Brien said under Labour there would be ""a much more arm's length approach"" with minimum political interference in the work of the regulator and confidence in the watchdog's ability.
",2
"A British firm believes it has developed a computer programme which could prevent other financial firms getting into the sort of situation Morgan Grenfell Asset Management (MGAM) is currently trying to resolve.
Numerous risk management systems already exist, but Frasin Limited says its Windows-based SOFWIN is the first to address operational risk management rather than financial risk.
""We believe it will prompt senior management to ask the right questions, which will create a more disciplined and controlled environment,"" Frasin's chief executive Philip Martin told Reuters on Tuesday.
MGAM is attempting to unscramble a complicated web of investments in three of its funds. These led to the funds being temporarily suspended last week after it revealed ""suspected irregularities"" in the them.
A fund manager for two of the funds was suspended at the same time and had his assets frozen by a High Court injunction.
Ironically, Martin says he took the product to show Deutsche Morgan Grenfell, the investment banking arm of Deutsche Bank, some months ago with a view to selling it to them.
He says he will still offer it to the firm, freely admitting that his prospects may have been boosted by publicity surrounding MGAM and a recent fine for fund management firms in the Robert Fleming group over so-called ""rat-trading"" by a fund manager in a Hong Kong joint venture with Jardine Matheson.
""I have to thank Morgan Grenfell and Jardine Fleming because their timing has been impeccable,"" he says with a grin.
Martin believes the software could also help banks avoid another Barings situation, where so-called ""rogue trader"" Nick Leeson, was able to run both the front and back offices, effectively monitoring his own trading.
Leeson is currently serving a long jail sentence in Singapore for fraudulent trading which led to losses of around $1.4 billion and culminated in the blue-blooded bank's collapse.
While Martin admits it will never be possible to eradicate rogue individuals, he says closer monitoring by senior management of all an institution's operations is essential.
If a chief executive, chief financial officer or other top official wants to avoid criticism in the event of a problem within the firm, then a programme such as that offered by Frasin, which is part of the HSBC group, should ensure they have adopted every measure possible to avoid such events.
SOFWIN, which costs 12,000 pounds ($18,640) a year and must be signed up to for three years, takes the institution through a detailed questionnaire, with a possible 3,600 different questions.
The collated results, after any subsidiaries or branches have also been through the process, then gives a clear picture of where any potential weaknesses lie, Martin said. It can also compare the standards of different branches and how they each match up with an ""ideal"" set-up.
Much of the programme is devoted to dealing activities, as this has been found to be a major area of concern.
""The largest part revolves around dealing activities. I have spoken to senior managers who are scared to death about what their traders are up to,"" he added.
But however thorough the programme, Martin says the buck stops with senior management and they are the main target of his marketing.
""It takes commitment by senior management. If they are not committed to it (assessing the company's organisational risk), then it's a waste of time. But they are opening themselves up to criticism,"" he said. ($1=.6436 Pound)
",2
"Elizabeth Forsyth, former aide to Polly Peck Plc head Asil Nadir, left court on Friday still awaiting the outcome of her appeal against a money-laundering conviction but enjoying her first taste of freedom in 10 months.
The London Court of Appeal reserved judgment her appeal after a two-day hearing. Forsyth, 60, spent the last 10 months in jail after being found guilty last year on two counts of dishonestly handling a total of 400,000 pounds ($640,000).
She was freed on bail on Thursday when the court quashed her original five-year sentence, which it said was disproportionate, and concluded she had already served long enough in prison.
But after the conclusion of Forsyth's appeal and arguments by the prosecution that the conviction should stand, the court said it could not make an immediate ruling on whether it would also quash the conviction which would clear Forsyth.
""We desire to reserve our judgment in this matter...we will give our decision as soon as we can,"" Lord Justice Beldam told the court. The three judges said they were unable to give an immediate result as the appeal had raised complex issues.
The prosecution said the money Forsyth was convicted of handling had been stolen by Nadir from fruits-to-electronics firm Polly Peck, which collapsed in 1990 under massive debts.
Nadir still faces fraud and theft charges in Britain after he fled to his native northern Cyprus in 1993, jumping bail of 3.5 million pounds.
Forsyth's barrister, Geoffrey Robertson, argued during the appeal hearing that her conviction was unsafe on a number of grounds, including the fact that Nadir had not been questioned via a video-link from northern Cyprus and the money Forsyth had transferred in Geneva was not in fact stolen.
""It involves so many complex issues of law it was inevitable that judgement should be reserved,"" Peter Krivinskas, Forsyth's lawyer, told Reuters after the judge's announcement.
Krivinskas said the appeal was a case ""which could set legal precendent,"" adding that it was difficult to gauge how the appeal had been received by the court. ""We don't want to tempt providence,"" he said.
Forsyth, who on Thursday described her period in jail as ""an experience,"" told Reuters she would be returning her mother's home. ""I'm going to go home and just relax for the weekend. I enjoy the countryside and will go for a long walk,"" she added.
Her 90-year-old mother, Margaret Macalpine, was in court to hear the second day of the appeal. She told Reuters outside the courtroom she had been ""stunned"" when her daughter had been released. ""We just couldn't take it in. We were very excited,"" she said, adding the telephone had not stopped ringing since.
""I've had a quiet time while she was in prison. It's going to be hectic now,"" she said, adding that Forsyth had many friends who had supported her throughout.
Lawyers said the appeal court's judgement could take as long as a month to be decided.
",2
"A small but fast-growing bank which lends only to socially and environmentally-friendly projects said on Wednesday it had more than doubled in size in its first full year in Britain.
Independently-owned Triodos Bank, which was founded in the Netherlands in 1980 and now has offices in Britain and Belgium, lends only to what it describes as projects ""with social and environmental objectives"".
It said its level of savings in Britain had grown by 111 percent in 1996 to 20.2 million pounds ($32.1 million) from 11.3 million pounds in 1995 and its loan portfolio by 117 percent to 10.2 million pounds from 5.6 million pounds.
""We are delighted with our first year's results in the UK. We are continuing to see substantial interest from both savers and borrowers looking for a positive ethical approach to banking,"" said Glen Saunders, the bank's managing director in Britain.
While Britain's big six high street banks have reported combined profits of 12.6 billion pounds in 1996, up from 10.8 billion pounds in 1995, Triodos earlier said its net profit for the year was a mere 342,000 pounds, up from 262,000 the previous year.
But Triodos now has 2,598 savings accounts in Britain compared to 1,358 at the end of 1995. It has attracted British media interest after launching new types of savings accounts and funds promoting fair trade during 1996.
The bank, whose British operation was started in Bristol in the west of England in July 1995, said the growth had been secured on a threefold increase in its capital base, following a share issue in the Netherlands.
A significant proportion of the new shareholding came from Dutch and Belgian financial institutions, including Rabobank Nederland and Commercial Union subsidiary Delta Lloyd.
Saunders said this influx of non-voting shareholders had shown ""increasing mainstream recognition"" of the bank's ""experience in lending to the social economy"".
The bank has so far lent to projects including a wind farm in Cumbria, north-west England, and organic milk suppliers co-operative, an environmentally-friendly housing development in a Welsh national park and a housing association which provides homes for people with special needs.
Triodos has also become involved in so-called ""microcredit"" programmes in developing countries, where it lends to impoverished people to develop projects which then generate income, helping them to work their way out of poverty.
""Microcredit is sensitive to the local economy, does not create dependency and is self-sustaining as the money repaid is 'recycled' to other borrowers,"" Triodos said in a background statement.
The bank, which had only 62 staff at the end of 1996, has also branched out into specialised fund management, including funds managed on behalf of charities and governments.
Its Green Investment Fund, established last year, has raised 8.0 million pounds for investment in recognised ""green"" enterprises while the Wind Fund has raised around 4.0 million for investment in wind farms and other renewable energy projects.
The bank's combined balance sheet, which includes its Dutch and Belgian operations, grew by 54 percent in 1996 to reach 161.9 million pounds at the end of the year.
($ = 0.628 British Pounds)
",2
"British investment bank Close Brothers said on Monday its enlarged corporate finance business was exceeding expectations and helping strong fee earnings.
""The corporate finance business has gone much better than we ever dreamt,"" Rod Kent, Close Brothers' managing director, told Reuters.
The group earlier today announced a 30 percent increase in first half pre-tax profits to 28.2 million pounds ($45.8 million), from 21.7 million the previous year.
Close Brothers enlarged its corporate finance division last May when it bought Hill Samuel's corporate finance department from Britain's Lloyds TSB Group Plc.
It said the integration had been very successful, with no material loss of clients or staff and had led to a leap in activity and profits in the corporate finance area. Kent said Close Brothers now had ""well over 80 quoted clients"", adding it was focusing on giving advice to growth companies.
""It is quite clear from the figures that we have got off to a good start on our corporate finance side,"" he said, adding the majority of an increase in fees and commissions from 9.0 million stg to 19 million stg had come from this quarter.
Kent was also upbeat about Close Brothers' other main business areas, including other aspects of what it calls ""City Merchant Banking"".
He said the asset finance division had grown to new records in advances and profits. The division accounted for 41 percent of operating profits during the period, down from 44 percent for the same period a year earlier.
And WINS, the former Winterflood Securities market-making arm, had ""a very good half"" retaining its position in the market place where it benefited particularly from high levels of activity in smaller company stocks.
Kent said WINS' small retail order gilts business had moved into profitability during the period, adding that worries about an order driven system were unlikely to materialise.
Market-making accounted for 33 percent of operating profits during the period, down from 34 percent, while merchant banking accounted for 26 percent, up from 22 percent. Kent said he was happy with the overall mix of business.
Within the merchant banking arm, Kent said the insurance premium finance division PROMPT was ""going like a train"" and the group was making steady progress in its other specialist business.
Asked about the likelihood of Close Brothers making acquisitions to grow its business, Kent said the firm would be patient when it came to buying other companies.
""We have clearly signalled our intentions to get something on the investment management side,"" he said, adding that on the basis of the high valuations of investment management companies at the moment, it would be difficult to buy.
And Kent said he was not worried by the trend for smaller merchant banks such as Close Brothers to be gobbled up by larger expanding foreign investment banks.
""I have never been concerned about it. Our best asset is our performance. Ownership is in the public arena,"" he said.
Close Brothers said it would continue to see organic growth in its activities but warned the forthcoming election in Britain could cause a temporary slow-down in some of its businesses.
The group announced an increased interim dividend of 3.8 pence, up from 3.2 pence, while earnings per share for the period rose 21 percent to 15.31 pence from 12.64 pence. ($ = 0.615 British Pounds)
",2
"NatWest Bank  admitted on Thursday that its multi-million pound derivatives losses totalled nearly twice the amount initially thought and revealed the problem had begun as long ago as December 1994.
As a result of initial findings of a wide-ranging internal probe into the loss, the bank also took drastic action to restore confidence by suspending four senior members of staff and cutting millions of pounds from bonuses.
NatWest said the total loss was 90 million pounds ($144 million) but that five million had already been provisioned and eight million had been clawed back by not paying the bonuses, making a loss of 77 million pounds in the accounts.
It also said Martin Owen, chief executive of the NatWest Markets investment banking division, would forego 200,000 pounds of his 500,000 pounds 1996 bonus.
""It is extremely regrettable that the losses and the mis-pricing have gone undetected for so long. Although confined to one area this is a significant setback for NatWest Markets,"" Derek Wanless, NatWest's chief executive, said.
The bank said the losses had started in late 1994 and were confined to its interest rate options area. It said it had suspended four more members of staff, appointed an acting head of global debt derivatives and would not pay bonuses totalling 8.0 million pounds to certain members of staff.
The bank said the initial findings of an inquiry into the losses, which were first revealed nearly two weeks ago, had found no flaws in the models used to calculate valuations of the derivatives in question.
Neil Dodgson, global head of options, has already been suspended and options trader Kyriacos Papouis left the firm in December.
It said the further suspensions were Ian Gaskell, head of swaps options trading for Britain and Europe, Christophe Lanson, global head of rate risk management, Jean-Francois Nguyen, managing director of debt derivatives and Phil Wise, chief administrative officer and formerly senior managing director of capital markets.
Peter Hall, President and Chief Operating Officer of NatWest Markets, will temporarily take on the additional responsibilities of Chief Administrative Officer.
Vincent Tomasi currently Senior Vice President and Head of US Debt Capital Markets at NatWest Markets in New York will take over as acting Head of Global Debt Derivatives.
Owen said he was disappointed by the ""serious deficiency revealed in the interest rate options area.""
NatWest said the second stage of the review being undertaken by lawyers Linklaters & Paines and accountants Coopers & Lybrand will involve the further investigation of the areas where the losses happened.
It said it would also mount an investigation of the management issues associated with the deficiencies in these areas.
The bank said that a new management structure it had intended to put into place following its 1996 acquisition of U.S. bond trading house Greenwich Capital and the creation of a Global Debt Markets division would now be accelerated.
Britain's markets watchdog the Securities and Futures Authority will investigate the actions of individuals in the affair while bank regulator the Bank of England is likely to have something to say on the wider implications of the losses.
($1= 0.626 British Pounds)
",2
"Britain's opposition Labour party said on Monday that it believed problems at Morgan Grenfell Asset Management (MGAM) could have been uncovered earlier and warned other financial institutions to be more vigilant.
""The preliminary indications are the problem was not determined as soon as it should have been,"" said Alistair Darling, shadow chief secretary to the Treasury.
""Alarm bells ought to be ringing in all major institutions. They should ask themselves if something similar could have happened,"" Darling said in a telephone interview.
Trading in the three funds, which were worth an estimated 1.4 billion pounds ($2.18 billion), was suspended last week when MGAM, part of the giant Deutsche Bank group, disclosed suspected irregularities in the funds and began a probe.
The problems centre on the valuation of the high proportion of speculative unlisted high-technology stocks held in the funds.
Trading in the three funds resumed last Thursday after a 180 million pound cash injection by Deutsche.
Peter Young, the fund manager of two of the funds, was suspended and an injunction obtained by MGAM and Royal Bank of Scotland, trustee of the funds, to freeze his assets.
An in-depth probe spearheaded by investment watchdog the Investment Management Regulatory Organisation (IMRO) is underway, and it has brought in accountants to work out how much compensation may be due to the 90,000 investors in the funds.
Darling said the problems at MGAM showed the regulatory system was not perfect and there were still problems to be addressed, both by regulators and businesses.
""Good regulatory sense and good business sense go hand-in-hand,"" Darling said, adding that every large organisation should be asking itself if similar irregularities could occur within their own structures.
While the Labour party stood by its proposals to make the Securities and Investments Board (SIB) directly responsible for regulating Britain's financial community, it would not make any recommendations on the latest episode until IMRO had completed its investigation into the matter.
""The central question which IMRO needs to look at is how was it possible for these problems to arise,"" Darling said.
The fact that a succession of such problems were blamed on a so-called ""rogue trader"" or dealer was also a concern, as it raised the question of how those charged with compliance or those in senior management could miss such dealings.
""I'm concerned that when things go wrong the finger is pointed at a rogue activity. Ideally we want a system where it is simply not possible for one or two people to stray off the path,"" Darling said.
He also said the role of trustees of funds was a matter of concern, adding it was important to find a way of ensuring they are not only independent but constantly vigilant.
The role of a trustee is to represent the interests of investors and to ensure a fund is managed according to its mandate.
""The public needs to be confident that these funds are properly managed,"" he said.
($1=.6412 Pound)
",2
"Martin Owen, chief executive of NatWest Markets, said on Thursday it was unacceptable that the investment bank had lost 77 million stg through the systematic mispricing of interest rate options since 1994.
""It has gone on (during) a long period; that is clearly unacceptable against the background of incidents in other firms as well. Fortunately, it does seem to be isolated to this area,"" Owen told Reuters in response to a question on why the problem had not been unearthed in the wake of the collapse of Barings in February 1995.  
Owen said details of how the mispricings went unnoticed for so long would be examined in the second phase of an internal inquiry.
The first stage found that a loss initially put at 50 million stg two weeks ago was in fact 90 million stg, although this was before a 5.0 million stg provision and 8.0 million NatWest said it would claw back in bonuses which would not be paid.
Owen said he was adamant NatWest Markets, the investment banking arm of Britain's National Westminster Bank Plc, would learn lessons from it.  
He said the next phase would examine information flows, internal controls and the responses of individuals to internal and external audit reports.
""All of these things will be examined now in some detail. I clearly do not want to have a debate in the public arena about it. These are going to be internal issues,"" Owen added.
A total of five members of staff have now been suspended as a result of the options loss and one trader has already left the firm.
Owen said he could not say if the initial options loss was the result of an individual's actions and could not comment on whether the subsequent mispricings had been intentional.  
""I don't want to prejudge the second phase of the report because we are really deep into the examination of all the individuals associated with it. The degree to which there was collusion or not is something which is being examined,"" he said.
But further disciplinary action could follow from the report's second stage, he said.
Owen said the suspensions so far were ""a normal process, not intended to imply guilt"", adding that they would put people in a position where they were free to cooperate with the inquiry team.
""You can imagine in a business such as NatWest Markets that people hold significant delegations of authority. Therefore we must be absolutely sure of their role before we can restore them,"" he added.  
Owen said NatWest was continuing to keep the Bank of England closely informed and had received the initial report, adding that the firm was ""driving the situation as a management issue"".
He said the second phase of the inquiry would take place as quickly as possible. Accounting records and pricing methodology had already been examined in some depth but the motivation of individuals still had to be examined.
Options trader Kyriacos Papouis, who left NatWest Markets last December, had not yet been interviewed by the firm. Papouis left for U.S. investment bank Bear Stearns, but last week resigned from his position there too.
""We have made requests to interview him and have received no response,"" Owen said, adding that Neil Dodgson, global head of options, had been interviewed as part of the inquiry.  
Owen said the losses, which were first announced only days after NatWest 1996 results but had apparently not been noticed for more than two years, had surfaced as part of ongoing process of examining trading positions and book valuations.
""It was revealed as part of the process of looking at that. There were certain procedural changes that occurred which then this particular issue to our attention. Unfortunately it came to our attention after the group's results were announced,"" he added.
Asked if NatWest Markets would take action against its auditors, Owen said the role of individuals, both internally and externally, would be examined in the next stage of the probe.
Owen acknowledged the loss was a set-back and that confidence in a proper system of controls was a core competency for a complex investment bank. he said he was committed to learning valuable lessons across the organisation, adding there was no evidence that any NatWest client had suffered losses as a result.
-- London newsroom +44 171 542 7719
",2
"London will defend its share of foreign exchange trading once a single European currency comes into being, according to Judith Mayhew, who became the new head of the Corporation of London on Thursday.
""We must maintain our market share at all costs,"" Mayhew, who was elected as chairman of the Corporation's policy and resources committee, told Reuters in an interview. The body is the local authority for London's traditional financial hub.
Mayhew, a 48-year-old New Zealander who has lived and worked in the City of London since 1976, said the Corporation faces three main challenges. She sees the first as the body's survival to make sure it continues to represent the views of the City.
Her second challenge is to ensure that ""when the euro is introduced the City of London is the primary market (for it)"" while the third is to ensure LIFFE, the London International Financial Futures and Options Exchange, dominates the derivatives market for the European single currency.
While Mayhew did not give her view on whether she would rather see the pound in or out of a the single currency, she said it was important for Britain to remain at the negotiating table for as long as possible while deciding its own approach.
And whatever Britain's attitude, the Corporation will work closely with Europe on technical aspects of its introduction.
If the trading of the euro is split more evenly between Europe's main financial centres, the only places to benefit will be New York and Tokyo which will lap up London's business, she said. And one of the Corporation's main aims is to increase the number of global banking headquarters within the Square Mile.
Mayhew said that regardless of the colour of the next British government -- the ruling Conservative party must hold an election by May -- the Corporation will continue to lobby for the right taxation levels and employee costs.
It will also look closely at the outflow of its revenue to the rest of Britain.
""Perhaps the balance is not right,"" she said. The body keeps only a tenth of its 700 million pound ($1.18 billion) revenue.
She believes London's strength comes from its international business, not from its domestic business and this makes it the ideal site for Europe's financial capital. She would have liked the future European Central Bank to have been here rather than Frankfurt but noted London already has the European Bank for Reconstruction and Development (EBRD).
Mayhew said the Corporation would continue to support the local authorities in surrounding boroughs, both through charitable work and other projects in deprived areas.
""It is an irony that we have got perhaps the richest part of Europe surrounded by some of the poorest parts,"" she said.
As long as there remained a threat of bomb attacks on the City of London, Mayhew said the so-called ""ring of steel"" erected to deter attacks by IRA guerillas would continue.
She described competition for prime investment banking tenants with the Docklands area to the east of the City as a healthy rivalry and welcomed the extra office space provided by the vast modern redevelopment of the former docks site.
""The City would like to remain dominant in keeping the primary markets together,"" Mayhew said, adding such close proximity was important to the way people worked.
And she welcomed a recent resurgence in London's property market, ""It is very good that the cranes are overhead in the City again and there is more development. Modern cities need modern office space,"" she said.
($1=.5958 Pound)
",2
"A threatened overhaul of Britain's Securities and Investments Board (SIB) by a future Labour government and news it must find a new chairman will make the next few months uncertain for the top financial watchdog.
The opposition Labour Party has said that if it wins power in elections this year it would streamline London's regulatory bodies, giving the SIB greater responsibility.
But insiders at the SIB, which was set up in 1985 and is charged with ensuring regulatory system works efficiently, said on Friday it was business as usual at the watchdog.
While surprised by chairman Sir Andrew Large's decision on Thursday to give up his post at the end of May, industry sources said they believed his successor would not necessarily be plucked from the ranks of Britain's frontline regulators.
""They will not only have to have the intellect and leadership qualities, but also the gravitas and authority that must accompany the role,"" one told Reuters.
The SIB supervises the so-called ""frontline"" regulators which independently authorise firms to conduct investment business in Britain. These self-regulating organisations also monitor firms, handle complaints and punish rule-breakers.
Large said the bulk of the changes he had been charged with overseeing had been completed but pointed out that the main unfinished business was the unsatisfactory rate of progress on a a long-running review of pensions mis-selling.
This saga is likely to bedevil whoever takes over from Large as insurance companies seek to resolve outstanding pensions cases.
Newspapers said the job might go to Phillip Thorpe at the Investment Management Regulatory Organisation (IMRO), Colette Bowe of the Personal Investment Authority (PIA) or former Securities and Futures Authority head Christopher Sharples.
""It (the job) has not gone to professional regulators before,"" the first source said.
Given the prospect of a new government, and possibly a new ruling political party, regulatory sources agree the appointment of 54-year-old Large's successor will be particularly significant.
The ruling Conservative Party must call an election by May 22 and opinion polls suggest a Labour victory may be the likely outcome.
A new SIB chairman may be named before the election but he or she will take over the reins in early June.
The choice of a new chairman is made jointly by the Treasury and the head of the Bank of England, but because of the timing of the appointment, the Labour party is also expected to be canvassed for its views on the individuals to be short-listed.
But the Treasury declined to comment on any of the names mentioned or how exactly the vacancy would be filled. ""We are not detailing the procedure but at this stage no one is ruled in and no one is ruled out,"" a Treasury spokesman said.
A factor which could limit those wanting to be considered for the role is money, especially when compared with the sort of salaries paid in the private sector.
While top-quality bankers or financiers can expect large pay packets, the money on offer for the SIB job is expected to be relatively little by comparison. During the year 1995-96, Large was paid just over 175,000 pounds.
""The money could turn out to be the sticking point,"" one regulatory source said, adding that the selectors would not rush to find a replacement for Large. ""Its a big job and its important to get the right person,"" he said.
",2
"British hotels and betting group Ladbroke Group Plc announced on Tuesday the closure of its property arm and sale of its remaining properties to allow it to concentrate on core areas.
""The closure of the property division will allow us to focus upon our core businesses of hotels and betting and gaming,"" said Brian Wallace, Ladbroke's group finance director.
Ladbroke said the cost of the closure would be 52.3 million pounds ($84.4 million) and would mainly cover losses arising on the sale of property and a provision ""to write down the remaining portfolio to net realisable value upon an accelerated sale"".
The firm said its 1996 accounts, due to be released on Thursday, would also include a non-operating exceptional charge of 17.6 million pounds ""mainly representing losses on disposals of investment properties previously announced during 1996"".
Analysts said that although the cost was larger than expected, the closure and property sales removed one element of uncertainty for the group during 1997.
Dresdner Kleinwort Benson's Greg Freehely said in a research note that Ladbroke's 1996 results would now include exceptional items totalling more than 100 million pounds, including property disposals and closure of the division.
The investment bank said other exceptional items were the settlement of a rent dispute at the Paris Hilton and a settlement to cover an adjustment on the price of DIY retailer Texas Homecare which Ladbroke sold to J. Sainsbury Plc two years ago.
Ladbroke is expected to report a profit rise of around 30 percent for 1996, with analysts forecasting pre-tax, pre-exceptional profits in the 155-165 million pound range, against 121.3 million pounds a year ago. Net dividend is forecast at between 6.0 and 6.2 pence per share, compared with 6.0 pence.
Freehely said the discount on the sale of properties to Britain's Minerva Plc for 25 million pounds was larger than anticipated. But he adde that ""the decision to provide for the closure of the division and take further write downs is the correct one..."".
The portfolio of around 10 commercial and residential properties sold to Minerva had a book value of about 34.6 million pounds and were mostly in London and southern England.
Ladbroke said its property arm had also sold a stake in a Boston office building to HN Gorin Inc for $23.0 million in cash, about equal to book value.
It also expects to make a further U.S. property disposal this week for about $13 million and use the proceeds from the sales to pay down debt.
Ladbroke said the net book value of commercial property at January 1, 1996 was 373.4 million pounds. A property analyst at one British firm said it was no great surprise that Ladbroke had finally withdrawn from the property market as it had not performed in this sector for some time.
""They used to be good at what they did in property, but they rather lost their way,"" he said. ""They are retrenching into
",2
"Kyriacos Papouis, the trader allegedly linked to NatWest Markets' 50 million pound ($80 million) options loss, has resigned from U.S. investment bank Bear Stearns.
""We have accepted the resignation of Kyriacos Papouis, an interest rate trader in our derivatives department,"" a Bear Stearns spokeswoman told Reuters.
""We have conducted a thorough review of his open trading positions and are satisfied that they are all booked and valued properly. We have notified the Securities and Futures Authority (SFA) of his resignation,"" she added.
The spokeswoman declined to give any further details of Papouis' resignation.
Earlier this week, Bear Stearns said Papouis was ""on leave, pending further information"".
Papouis could not be contacted for comment on Friday.
Papouis left NatWest Markets, the investment banking arm of Britain's National Westminster Bank, late last year and moved to Bear Stearns.
Last week NatWest disclosed mispricing errors in its interest rate options book and said it had suspended a senior trader, named by banking sources as Neil Dodgson, for alleged ""failure to supervise"". It also reported a former options trader, allegedly Papouis, to financial markets watchdog the SFA.
Options are contracts which give buyers the right, but not the obligation, to buy or sell an underlying security at a set price on a set date in the future.
The SFA said it had been notified of the NatWest probe into the loss and had opened a file while the Bank of England has said it is cooperating with the SFA.
The episode was especially embarrassing to NatWest coming only days after it announced its 1996 results.
On Thursday, a senior NatWest Markets official said that compared with the size of losses run up from derivatives trading at some other banks, it had got off relatively lightly.
""If that is all it costs us to learn the value of a tight infrastructure, then it could turn out to be a blessing in disguise,"" Nick Riley was reported by Britain's Press Association agency as saying.
Riley is administrative officer for NatWest Markets' global foreign exchange business. His comments were made during a conversation at a charitable function on Thursday night, banking sources said.
The PA said Riley had pointed out that other banks such as Barings, which crashed in 1995 owing around $1.4 billion as a result of losses run up by Singapore-based trader Nick Leeson, paid far more to find out that their internal controls were inadequate.
But a NatWest spokeswoman distanced the firm from Riley's comments.
""He is not a spokesman for NatWest and his comments are not therefore attributable to the company. This was a personal view,"" she told Reuters.
",2
"Britain lost another independent corporate finance adviser on Tuesday with the sale of Phoenix Group to U.S. investment bank Donaldson Lufkin & Jenrette (DLJ).
Neither party would comment on how much the deal was worth, but there was widespread speculation that ""boutique"" operation Phoenix had cost around 50 million pounds ($81 million).
This would make multi-millionaires of Phoenix's top directors who are its major shareholders, banking sources said.
""What's 50 million pounds to an American bank,"" said one corporate finance expert, adding that DLJ was buying Phoenix's British mergers and acquisitions expertise and hoping to use it as a springboard for building up its European business.
Others said this was a big price to pay given Phoenix's relatively slim revenues and profits. ""Most people would say it was a pretty racy number,"" one corporate financier said, adding that DLJ was buying a relatively small number of deal-makers.
Phoenix, whose clients include mutual life insurer Scottish Amicable, was set up in 1981 and was bought by Morgan Grenfell in 1987. But it regained its independence in 1990 through a management buyout led by chairman Martin Smith and the other founders, Philip Seers and David Reid Scott.
The firm has gained a reputation for expertise in financial services. In 1996 it advised on transactions worth around 2.5 billion pounds and in August last year was ranked second by industry magazine Acquisitions Monthly in a league table of British-based independent corporate finance houses.
Philip Healey, editor of the magazine, said the sale last October of Hambro Magan -- which came top of the table -- was the catalyst for the Phoenix sale.
""That was when boutiques like Phoenix decided to put themselves up for sale,"" he said. Hambro Magan, whose founder George Magan had said it wanted to remain independent, was sold to NatWest Markets for an estimated 80 to 150 million pounds.
Healey said while other boutiques might try to take a similar route, there was nothing of a comparable size to Hambro Magan or Phoenix on offer.
Healey said Phoenix's directors, who own 60 percent of the company, could be seen as getting out at the top of the booming mergers and acquisitions market.
The new firm, to be called DLJ Phoenix, would play a leading role in developing DLJ's investment banking business in Europe and Asia. Smith will be chairman and all of Phoenix's 25 directors and staff will be retained, the two groups said.
Phoenix's three founding directors will be tied in to the new venture for four years, while middle management have signed agreements for a two-year period.
Corporate financiers said this might go some way to ensuring client relationships were maintained, but some pointed out that clients would have opted for Phoenix's independent advice over larger product-led firms and this could be at threat.
New York-based DLJ employs 5,900 people worldwide and describes itself as the leading distributor of U.S. equity securities to institutional investors outside the United States.
DLJ chairman and chief executive John Chalsty said Phoenix could help the group develop high-yield business and target newly emerging companies in eastern Europe and Russia.
He said DLJ had been operating in London for 20 years and was not looking for further acquisitions in the capital. ($1=.6199 Pound)
",2
"Volatile markets, a scramble for profits and the emergence of new financial tools have all contributed to recent investment banking failures, the head of Britain's financial markets watchdog said on Tuesday.
""We've got a very volatile market, people (are) spending a lot of time on profitability and market share but we are saying you have got to spend as much time also concentrating on control and compliance,"" Nick Durlacher, chairman of the Securities and Futures Authority (SFA) told Reuters.
Earlier the SFA said it would not publish controversial changes to its rules -- making top executives more responsible for a major failure -- until it was clear they were in line with standards being proposed by the Securities and Investments Board (SIB), the top financial regulator under Britain's complicated system.
Durlacher said the growth of derivatives over the last 10 years had posed new management problems as those now ""sitting on top of the pile"" had no first-hand experience of these instruments.
""These are without doubt posing control problems,"" Durlacher said, adding that senior managers were also making ""old fashioned mistakes"".
A ""booming industry"" and a very volatile job market compounded these problems. ""We're just saying 'don't forget about the controls',"" he added.
Bonuses and the problems inherent in the so-called ""star system"" were also factors which firms needed to think about, Durlacher said.
Durlacher said the SFA's outline proposals, first announced last September, to make senior executive officers take greater responsibility in the event of a ""catastrophic failure"" in their firm had prompted other regulators to address the issues.
He admitted that Tuesday's announcement that the SFA would wait for the SIB to catch up before pursuing its proposals had slowed the watchdog down but said it had done as much as it could.
""Under normal circumstances we would either have published a rule change, or we might have done this given the weight of comment, had one further and last consultation with a clear indication of when we would publish a rule change.
Durlacher said there had been ""an awful lot of comment"" on the proposals and it was now happy about how it would like the changes to be made, although there could be a final brief consultation on it.
He said he hoped the proposals would be finalised by the end of April, adding that he was reminded daily of the urgency for changes by newspaper reports indicating ""how important it is that management pay attention to control and compliance in their businesses"".
Durlacher said the SFA's disciplining of senior executives at Barings, the British merchant bank which collapsed under huge derivatives losses in February 1995, had been ""a long and difficult process"" and in one case had set a precendent.
It was the SFA's decision not to pursue Barings' chairman Peter Baring and deputy chairman Andrew Tuckey which prompted it to revise its rules on management responsibility.
Durlacher said that regardless of the role of Singapore-based trader Nick Leeson whose unauthorised trades crippled the bank, the demise of Barings was ultimately due to the fact that its executives ""had forgotten how to bank"".
He said the question of reversing the burden of proof, so that senior executive officers would have to show that they had done everything they could to avoid a disaster, was the hardest thing for the SFA to resolve and had received most criticism.
But he was confident it would ultimately go through. ""We believe there remains a requirement that we do concentrate people's minds on the responsibilities they hold in these very important positions,"" he said.
",2
"Electronic components group Premier Farnell's criticism of BZW over a profits warning has again thrust the investment banking arm of British banking giant Barclays Plc into an unwelcome spotlight.
Premier chief executive Howard Poulson's suggestion that its stockbroker had mishandled a Premier Farnell profits warning on Wednesday is damaging in the short-term. But it may not have longer term implications.
""Who's to say? Everybody has occasional problems with client relationships,"" a banking analyst at a rival firm told Reuters.
BZW's problems with Premier follow another embarrassing episode for the bank, which is building up its investment banking, over a takeover defence for British regional electricity company Northern Electric.
The Takeover Panel, which polices mergers and acquisitions, is investigating BZW's role in the failed defence against U.S. energy group CE Electric, concentrating on the late disclosure by the firm of a 250,000 pound ($405,000) discretionary fee clause.
Rival corporate financiers said the fee fiasco, which led to an extension of CE's offer for Northern and the loss of the electricity company's independence by the slimmest of margins, would make potential BZW clients think twice and lead others to reassess their relationship.
There does not appear to have been any immediate fall-out, but industry sources point out such moves do not happen overnight. ""It has been damaging (to BZW) but it will be even more so if they lose a client as a result,"" one said.
BZW has made little comment on the Northern affair except to say it acted in good faith and did not break any rules. Earlier this month Barclays's chairman said it would bounce back.
""BZW has a very strong underlying business and I am quite confident it can overcome temporary setbacks of this kind,"" chairman Andrew Buxton said.
The investment bank has also played down the current troubles with Premier Farnell. In a statement released on Thursday it said it had decided to advise its client to issue a statement only after a brief meeting with its analysts.
They had decided that despite despite a ""relatively small percentage profits downgrade for the year 1996-97...the share price might react adversely"". A statement had therefore been prepared as quickly as possible with the company, and had been agreed by its board of directors, BZW said.
Premier's Poulson was quoted in British newspapers on Friday as having said the profits warning, which pushed the shares down 25 percent in two days, had been ""extremely badly handled"". BZW had reversed a view it had given only 10 days before, when it had said a warning was not needed, he said.
Poulson did not say whether the company would end its relationship with its brokers but banking sources said the two sides were still in talks on the matter on Friday.
One financier, who declined to be named, stressed it was premature to blame BZW until it became clear exactly how detailed earlier talks with Premier had been.
""The crucial thing is what was discussed 10 days ago,"" he said, adding it would have been better off consulting its banking adviser rather than its broker in the first place.
As the first results of the combined Premier Farnell, which merged last year, would be ""super-sensitive"", even an eight percent fall in forecast profits was something which should have been disclosed, he said.
",2
"British investment bank Schroders Plc said on Wednesday it was working towards an improvement in returns from its merchant banking business.
""Our objective is to see...returns from that business improve,"" Schroders' vice-chairman Peter Sedgwick told Reuters.
He said Schroders had been through a year of ""very substantial structural changes"" and had built up and invested in its securities business.  
Earlier the group reported pre-tax profits for 1996 of 238.7 million stg, at the top of analyst's expectations and an increase on 197.3 million stg in 1995.
Sedgwick said the investment in securities was not the reason for an increase in costs at Schroders. ""The increase in costs is not down to securities, it is across the board,"" he said.
He said there had been some restructuring of the group's corporate finance business in South East Asia and an expansion of its geographical exposure in continental Europe, particularly Spain and Germany.  
""We have been integrating corporate finance with securities throughout the world...we are looking for what has been taking place in the last year to pay off for us to a greater extent over the next year or two,"" he added.
But he felt the investment and merchant banking side of the business ""has performed reasonably well against the changes in strategy that have been taking place here"".
Sedgwick said the bulk of the cost of this strategy change had been borne in 1996. ""We would not expect to see the same increase in costs this year,"" he said.  
Schroders said in its results statement that other factors driving up costs had been increased volumes, the cost of regulation and ""not least by competitive conditions for staff"".
Sedgwick pointed out that staff costs per employee had risen to 93,300 stg from 78,500 stg the previous year. Schroders' cost/income ratio was 75 percent, compared to 75.4 pct in 1995.
He said Schroders' profits, both pre and post tax, were up by over 20 percent but bonuses had risen slightly below this in total.  
Spiralling bonuses in the industry as a whole were, he said, the result of a battle going on between a number of major investment banking players to become one of the five or six global powerhouses.
""Sooner or later the damage that some will suffer (means) they will withdraw and the cycle will change,"" he said, adding that Schroders did not count itself among this group.
He said many were desperate to get into asset management, where Schroders posted an improved return in 1996, as they did not have the balanced portfolio Schroders did.
Sedgwick said the firm was an ""advisory-relationship type investment bank"" and was not heavily dependent on proprietory trading, has a strong balance sheet, no borrowing, cash reserves and a good asset management business.
He said Schroders was not aiming to be a Merrill Lynch or a Goldman Sachs. ""It is not our strategy to be in that game.""
And commenting on long-standing speculation that Schroders could be involved in a merger or a takeover by a larger firm, Sedgwick said ""There is absolutely no intention of changing Schroders as is. We are not up for sale, we are not out for merger, we do not want a big brother and we are not in the acquisition stakes.""
""We are not in the business of losing our independence,"" he said, adding that Schroders would grow organically.
-- London newsroom +44 171 542 7719
",2
"Britain's NatWest Bank revealed on Thursday its multi-million pound derivatives losses were nearly twice as large as first thought and that they began in 1994.
A wide-ranging probe into the loss also led to drastic action, including suspension of four senior employees and the withdrawal of millions of pounds in staff bonuses.
NatWest said the total loss was 90 million pounds ($144 million) but that five million had already been provisioned and eight million had been clawed back by not paying the bonuses, making a loss of 77 million pounds in the accounts. And Martin Owen, chief executive of the NatWest Markets investment banking division, will forego 200,000 of his 500,000 pounds 1996 bonus in a gesture to the industry.
""He has waived his bonus in recognition of his overall responsibility for the business. He believes he has made the gesture as an example to the industry,"" a NatWest spokeswoman told Reuters.
Owen said it was unacceptable that the losses, which had resulted from options being wrongly priced systematically but stemmed from an initial interest rate options loss, had not been unearthed earlier. He said the problem came to light as a result of procedural changes to the way trading positions and valuations are checked. ""It has gone on (during) a long period; that is clearly unacceptable against the background of incidents in other firms as well. Fortunately, it does seem to be isolated to this area,"" Owen said. Although his role has come under scrutiny, NatWest's overall head Derek Wanless told Reuters he had complete confidence in Owen but the loss had been a setback for him in one area. The bank would learn lessons and emerge stronger, he added.
The staff suspensions, which have been notified to Britain's financial watchdog the Securities and Futures Authority (SFA), followed the suspension of global head of options Neil Dodgson when the problem first came to light nearly two weeks ago.
A former NatWest options trader, Kyriacos Papouis, has also been reported to the SFA, which confirmed it was examining the conduct of all six. NatWest said its requests to interview Papouis had so far been ignored.
The initial findings of NatWest's inquiry, carried out by accountants Coopers & Lybrand and law firm Linklaters & Paines, found no flaws in the models used to calculate valuations.
Owen said details of how the mispricings went unnoticed for so long would be examined in the second phase of an internal inquiry.
He could not say if the initial options loss was the result of an individual's actions and could not comment on whether the subsequent mispricings had been intentional. ""I don't want to prejudge the second phase of the report because we are really deep into the examination of all the individuals associated with it. The degree to which there was collusion or not is something which is being examined,"" he said.
But further disciplinary action could follow from the report's second stage, he said.
Those suspended were Ian Gaskell, head of swaps options trading for Britain and Europe, Christophe Lanson, global head of rate risk management, Jean-Francois Nguyen, managing director of debt derivatives and Phil Wise, chief administrative officer and formerly senior managing director of capital markets. NatWest stressed these suspensions were normal practice in such cases and did not imply guilt. Peter Hall, President and Chief Operating Officer of NatWest Markets, will temporarily take on the additional responsibilities of Chief Administrative Officer. Vincent Tomasi currently Senior Vice President and Head of US Debt Capital Markets at NatWest Markets in New York will take over as acting Head of Global Debt Derivatives. The bank said that a new management structure it had intended to put into place following its 1996 acquisition of U.S. bond trading house Greenwich Capital and the creation of a global debt markets division would now be accelerated. NatWest is continuing to keep bank regulator the Bank of England closely informed, and the second phase of the inquiry would take place as quickly as possible, concentrating on the role of individuals, Owen said. ($1= 0.626 British Pounds)
",2
"A high profile dispute between investment bank Deutsche Morgan Grenfell and ousted star fund manager Nicola Horlick has highlighted how crucial the lucrative asset management business has become to banks eyeing a share of the growing market.
""The attraction of asset management is the quality of earnings is far better than virtually any of the other areas of business the banks are involved in,"" a banking analyst at one major European investment bank said.
Relatively low risk and a growing market are other key factors driving banks' sometimes aggressive interest in building up funds under management, according to John Leonard, banking analyst at Salomon Brothers in London.
""The overall driver seems to be that it's a good growth business for relatively low risk,"" Leonard told Reuters.
He pointed out that once customer relationships were established, particularly on the retail side, they lasted -- although the institutional market could be more volatile.
Widespread media coverage of 35-year-old Horlick's dramatic resignation last week as head of British pension fund business at MGAM has brought home to the general public -- many of whom have pensions or savings with such firms -- just how much top performing individuals and their employers earn.
Horlick was suspended from the asset management arm of Deutsche Morgan Grenfell, part of the mighty Deutsche Bank group, amid accusations she had tried to lure a group of colleagues to leave with her for rival firm ABN AMRO.
Horlick, who was reported to have earned one million pounds ($1.66 million) a year and was at the top of the industry in London, continues to deny allegations that she was leading a breakaway group.
Dutch bank ABN AMRO has also denied it tried to poach Horlick's team or was planning to back a management buy-out of its British pension fund business but on Tuesday told Reuters it would consider buying a large British fund manager and was keen to make ""big steps"" in London fund management.
The Horlick saga has demonstrated that banks are willing to match and substantially improve on the pay of such stars if it means they can gain ground in the battle for relationships with major pension funds and the fees they bring with them.
This high-quality fee and commission income promises to grow as the pool of funds in need of management is swelled by demographic changes and an increasing reliance on individuals making their own provision for old age rather than relying on diminishing state resources, analysts said.
Asset management, usually looking after other people's money rather than a firm's own, is not a capital-intensive business and margins remain attractive for those controlling the billions of pounds of pension fund and investment assets now swirling around the mature markets of Britain, the United States and Japan.
The British pension fund market alone is worth around 600 billion pounds, one analyst said, adding that the longer-term opportunities in Europe were good but that both Germany and France would have to persuade people to make their own provisions for their retirement before the market took off.
Compared to an increasingly competitive lending market, where margins are wafer thin and banks have to provide shareholder value while meeting stringent capital requirements on their loans, such business is another indication of banks being cut adrift from their traditional business.
""They are trying to replace revenues they are losing elsewhere. Asset management is seen as a growth business,"" Martin Cross, banking analyst at UBS said. ($1=.6021 Pound)
",2
"Michael Marks, chairman of British stockbroking firm Smith New Court before it was taken over by Merrill Lynch, was on Thursday elevated to a new European role in a restructuring of the U.S. investment bank.
Marks, who according to recent newspaper reports was paid a bonus of four million pounds ($6.4 million), has been made chief operating officer for Europe, the Middle East and Africa.
He was most recently co-head of global equities and will remain as deputy chairman of Merrill Lynch International. His appointment comes into force on June 16.
Marks told Reuters the ""realignment"" emphasised the importance of London as a financial centre.
""We run the Europe, Middle East and Africa region from London and the City (of London) is becoming of increasing importance. This move further underlines the importance of London in the region,"" he said.
Marks said the business has previously been run along global product lines and Merrill was now attempting to run it by global products and regionally.
Merrill Lynch International will still have a co-ordinating role to make sure clients are being well served, he added.
Under the new structure there will now be five chief operating officers for Merrill's international regions. The others are Asia-Pacific, Latin America and Canada, Japan and finally Australia and New Zealand.
Kevin Watts, who was head of investment banking for Europe, the Middle East and Africa, has been made chief operating officer for the Asia-Pacific region.
The changes mean Merrill will now be made up of a U.S. private client group, an international private client group, an asset management group and a corporate and institutional client group.
It was previously divided into two main areas, private client and corporate and institutional client.
Merrill said the ""organisational realignment"" was designed to ""enhance services provided to a diverse global client base and position the company for the substantial worldwide growth opportunities in financial services"".
Marks, 55, who began his career in the City of London with Smith Brothers in 1960, became chief executive of Smith New Court in 1987 and chairman early in 1995.
He joined Merrill when it took over Smith New Court in September 1995 and has widely been viewed as central to attempts to integrate the two firms and their differing cultures.
This culture clash has led to staff leaving the firm. Last year Marks said 100 employees had left Merrill's investment banking division over the year. But others have suggested the number of defections was much larger.
Merrill is on the look-out for a new London headquarters to bring together the former Smith New Court operations which are situated northwest of the City and its own which are closer to the capital's traditional financial heartland.
The firm has not confirmed its final choice for a new home but recent reports said it had settled on an imposing former post office building close to St Paul's Cathedral.
Other options which it has considered are a move to Docklands, the former docks to the east of the City, or an expansion of Merrill's existing Ropemaker Place building to an adjacent site. Insiders say senior executives at the firm favour staying in the City.
Marks has been a member of the board of the London Stock Exchange since 1994.
",2
"Morgan Grenfell and its former fund manager Nicola Horlick appeared no nearer settling their differences on Monday as more pension fund clients signalled they would be reassessing their relations with the group.
Horlick, who last week resigned her lucrative job after she was suspended by Morgan Grenfell Asset Management (MGAM) for an alleged breach of contract, was locked in an all-day meeting with legal representatives in London's financial heartland.
Earlier her lawyers said she wanted an amicable settlement with her ex-employer but that the 35-year-old mother-of-five, one of the most prominent fund managers in London, was prepared to sue if they could not strike a deal.
""She is still hopeful that there might be an amicable resolution. If she is not able to get a quick and amicable resolution then she is still looking at legal action on the grounds that she was constructively dismissed,"" said John Farr, a partner at law firm Herbert Smith.
Precise details of what precipitated Horlick's sudden departure from MGAM, depicted by the firm as an attempt by her to lure colleagues with her to a rival, have yet to emerge and former colleagues refused to comment on newspaper reports.
""Basically I just want to get on with my job and look after my clients,"" one, who declined to be named, told Reuters. Others also appeared to have rallied behind MGAM chief executive Robert Smith, arguing they were getting on with the business of reassuring clients and managing their funds.
MGAM has run an intensive damage-limitation campaign, writing to all clients of its 18 billion pound ($29.89 billion) British pension fund business and set up meetings with some.
But this did not prevent two more from voicing their concerns over events at the firm, still reeling from last year's revelations of irregularities at three of its retail investment funds which led to the sacking of fund manager Peter Young.
Young, who denies any involvement in criminal activity, is now under investigation by Britain's Serious Fraud Office (SFO).
The London Borough of Lewisham, which has 300 million pounds under sole management with MGAM, said it was concerned at recent developments and would decide at a meeting in March whether to continue with MGAM or to put the contract out to tender.
And Norfolk County Council, which has some 390 million pounds with MGAM adopted a similar tone, saying it was ""naturally concerned by recent events...and is keeping a close watch upon developments"" but it was not taking any action.
Meanwhile Farr said Horlick's first priority was to get her job back as head of British pension fund business at MGAM but if this did not happen she wanted compensation.
Earlier his client said the issue was not about money but about clearing her name. Farr did not quantify the level of compensation Horlick would be seeking but said she was entitled to a year's notice and her bonus was ""still open to discussion"".
Horlick, who only days before her suspension was promoted to managing director by chief executive Robert Smith, wanted the matter resolved as quickly as possible, Farr said, adding he hoped this could be ""within the week or the next few days"".
MGAM is owned by Deutsche Morgan Grenfell, the investment banking arm of Germany's powerful Deutsche Bank.
Horlick has strenously denied allegations that she was about to move with her team to a rival firm, widely rumoured to have been Dutch bank ABN AMRO, but said she met a friend from the bank in December at what she insists was a personal lunch.
MGAM declined comment on the latest developments except to repeat that it had no plans for any action of its own as Horlick was no longer one of its employees.
($1=.6021 Pound)
",2
"Lawyers acting for Peter Young, the fund manager suspended last week by Morgan Grenfell Asset Management (MGAM), said on Monday there were no grounds for allegations of criminality and there had been no such allegation in the proceedings which had been served on him.
""There is no allegation of criminality in the proceedings which have been served on Peter Young and there would be no grounds whatsoever for any such allegation,"" solicitors Peters & Peters said in a statement.
Young was suspended when MGAM, a subsidiary of German banking giant Deutsche Bank AG, said it had found ""suspected irregularities"" in three of its funds, two of which were managed by him.
Young, whose personal assets were frozen after MGAM and fund trustee Royal Bank of Scotland obtained an injunction, has not been available for comment.
Trading in the funds was halted last Monday but resumed on Thursday after a 180 million pounds ($280.7 million) cash injection by Deutsche Bank and reassurances that investors would not lose out.
The problems centre on the valuation of the high proportion of unlisted high-technology stocks held in the funds. They are being investigated by British investments watchdog the Investment Management Regulatory Organisation (IMRO).
Britain's Serious Fraud Office (SFO), which prosecutes major financial crimes has taken no official action. It has been in contact with IMRO, but has so far only been kept briefed on developments and denies a criminal investigation is underway.
The probe into what took place within MGAM is widely expected to take some time, with a complex web of holdings and companies around the world to be unravelled.
Both MGAM and IMRO have drafted in forensic accountants to look into the fund management business of the three funds, MGAM has enlisted Ernst & Young and IMRO Deloitte Touche.
MGAM has also appointed law firm Slaughter & May to help untangle a labyrinth of investments. Slaughter & May confirmed its appointment but would not comment on the investigation.
The fall-out of the episode for Deutsche Bank continued on Monday with the news from credit rating agency Moody's that it is looking at the bank's rare and treasured triple-A credit rating in the light of the MGAM situation.
Deutsche Morgan Grenfell, the bank's investment banking arm, said redemptions from the funds had dropped by over half on Monday compared to the 83 million pounds redeemed last Friday and the 110 million pounds which flooded out last Thursday.
""Just under 39 million pounds was redeemed today,"" DMG spokesman James Murray told Reuters. ""As expected the redemptions have slowed down significantly. There is still enough cash left in the funds.""
""What we are seeing is a stabilisation.""
He said there had been just over 300 million pounds in the funds after the Deutshe cash injection and there would be sufficient cash.if redemptions continued to drop.
Murray confirmed that investors would be compensated, but that the amount would only be decided after the investigation. ""If compensation is found to be due then it will be paid by us,"" he said, adding that it would be calculated by an independent accountant appointed by IMRO.
He said the preliminary part of MGAM's investigation would take between four and six weeks. ($1=.6412 Pound)
",2
"A turbulent week for NatWest Markets ended on Friday with a shake-up of its global debt markets arm and the departure of three senior staff.
But the investment banking arm of British banking giant National Westminster Bank Plc (NatWest) stressed that there was no link with 90 million pounds ($144 million) in losses also reported this week.
These were built up over two years in interest rate options after systematic mispricings of the derivatives.
Britain's Serious Fraud Office said it was monitoring the options situation but was not investigating the losses, which the Bank of England and the financial markets watchdog, the Securities and Futures Authority, are scrutinising.
The management shake-up in NatWest's debt markets division marks a shift in power to managers from Greenwich Capital, the U.S. bond house it bought last year.
""The co-chief executives of the new global debt markets division are Gary Holloway and Chip Kruger,"" a NatWest spokeswoman told Reuters. Both joined NatWest when it bought Greenwich Capital.
Two casualties of the reshuffle were senior NatWest managers, Johan Hattingh and Alby Cator. The firm has also had to cope with the departure of its European equity derivatives head Roger Nagioff to Lehman Brothers and reports that staff morale is low.
Hattingh was European fixed income head and Cator managing director of European primary markets. Hattingh had been at NatWest Markets since 1993 when he joined from Japan's IBJ.
""Their departures are as a result of the restructuring of the debt markets division,"" the spokeswoman said when asked if the two had been made redundant by NatWest.
NatWest said Holloway would be based in Greenwich in the United States and would be responsible for the U.S. and Asian operations. Kruger would be London-based and responsible for European debt market operations.
Greg Bowes, who built up Greenwich's London business before the NatWest takeover, becomes head of government bonds, repos and futures and options.
Other key appointments are Frank Canelas, who will head corporate bonds origination, sales, trading and research, Bruce Snider who becomes head of asset-backed origination, structuring and trading and Phil Lotz, chief administrative officer for operations, IT and finance.
The NatWest spokeswoman said the shake-up played to both NatWest's and Greenwich's strengths. The changes, which were announced internally on Thursday, have created 10 main areas of responsibility within the debt markets division.
A number of NatWest managers kept key roles within the new framework. These included Graham Rendell in acquisition finance, housing finance and syndicated loans, and Simon Collins, who continues as head of debt structuring and structured finance.
Gary Mulgrew and Gordon McKechnie jointly head project finance, structured trade finance, and leasing and asset finance. George Trott and Martin Jaskel head debt origination for corporates and all financial institutions. Neil Coulbeck remains responsible for business management and portfolio administration.
NatWest's embarrassing losses in its global debt derivatives division have led to the suspension of five senior employees, bonus cuts totalling eight million pounds for a handful of staff and chief executive Martin Owen cutting his own bonus.
One banking source described the $590 million Greenwich purchase as being ""effectively a reverse takeover"" aimed at imposing Greenwich's bond expertise and experience over parts of NatWest's existing team, which had been struggling to build up its business in some areas.
The source also said the discovery of the options losses, which were first revealed two weeks ago, had been a result of auditing changes made by Greenwich managers.
On Thursday NatWest's Owen told Reuters that the interest rate options losses, which began in late 1994, had surfaced as a result of ""certain procedural changes"".
At the time of the Greenwich purchase, NatWest's Owen said it plugged a major gap in the group's investment banking strategy and would meet demand from clients for firms able to offer the broadest possible range of global fixed income products.
",2
"NatWest Bank admitted on Thursday that its multi-million pound derivatives losses totalled nearly twice the amount initially thought and revealed the problem had begun as long ago as December 1994.
As a result of initial findings of a wide-ranging internal probe into the loss, the bank also took drastic action to restore confidence by suspending four senior members of staff and cutting millions of pounds from bonuses.
NatWest said the total loss was 90 million pounds ($144 million) but that five million had already been provisioned and eight million had been clawed back by not paying the bonuses, making a loss of 77 million pounds in the accounts.
It also said Martin Owen, chief executive of the NatWest Markets investment banking division, would forego 200,000 pounds of his 500,000 pounds 1996 bonus.
""It is extremely regrettable that the losses and the mis-pricing have gone undetected for so long. Although confined to one area this is a significant setback for NatWest Markets,"" Derek Wanless, NatWest's chief executive, said.
The bank said the losses had started in late 1994 and were confined to its interest rate options area. It said it had suspended four more members of staff, appointed an acting head of global debt derivatives and would not pay bonuses totalling 8.0 million pounds to certain members of staff.
The bank said the initial findings of an inquiry into the losses, which were first revealed nearly two weeks ago, had found no flaws in the models used to calculate valuations of the derivatives in question.
Neil Dodgson, global head of options, has already been suspended and options trader Kyriacos Papouis left the firm in December.
It said the further suspensions were Ian Gaskell, head of swaps options trading for Britain and Europe, Christophe Lanson, global head of rate risk management, Jean-Francois Nguyen, managing director of debt derivatives and Phil Wise, chief administrative officer and formerly senior managing director of capital markets.
Peter Hall, President and Chief Operating Officer of NatWest Markets, will temporarily take on the additional responsibilities of Chief Administrative Officer.
Vincent Tomasi currently Senior Vice President and Head of US Debt Capital Markets at NatWest Markets in New York will take over as acting Head of Global Debt Derivatives.
Owen said he was disappointed by the ""serious deficiency revealed in the interest rate options area.""
NatWest said the second stage of the review being undertaken by lawyers Linklaters & Paines and accountants Coopers & Lybrand will involve the further investigation of the areas where the losses happened.
It said it would also mount an investigation of the management issues associated with the deficiencies in these areas.
The bank said that a new management structure it had intended to put into place following its 1996 acquisition of U.S. bond trading house Greenwich Capital and the creation of a Global Debt Markets division would now be accelerated.
Britain's markets watchdog the Securities and Futures Authority will investigate the actions of individuals in the affair while bank regulator the Bank of England is likely to have something to say on the wider implications of the losses.
($1= 0.626 British Pounds)
",2
"Morgan Stanley's surprise merger with Dean Witter Discover will create a more competitive force in the European investment banking market.
""Other banks will look at this and think they have got a stronger competitor than they had before,"" a banking analyst at one European firm told Reuters on Wednesday.
Earlier the two U.S. firms said they had agreed to form a financial giant called Morgan Stanley, Dean Witter, Discover & Co, with a market capitalisation of $21 billion.
Both U.S. and European investment banks have been pushing for more business in continental Europe and Britain, but analysts pointed out the merger would give Morgan Stanley's European aspirations considerable backing.
Not only would it increase the amount of capital at the firm's disposal for building its European presence, Dean Witter's U.S. retail network could also provide an additional distribution network for Morgan Stanley products.
The firms stressed there would be little overlap as a result of the merger, although they did not specify if there would be any staff cuts. A Morgan Stanley spokesman in London said he could not comment on the implications for the firm in Europe.
A Dean Witter official said it was still early days. ""We've only just seen the news. It was kept extremely quiet,"" Graham Elliot, sales manager at Dean Witter International told Reuters.
Elliot said Dean Witter employs about 120 people in London, with around 35 working in institutional equities sales. This business was, he said, consistently profitable and had been expanding. ""We talk to over 300 institutions,"" he said.
The firm already has significant placing power and its European business is extremely focused, he added.
Dean Witter, founded in 1924, has a presence on London futures and options exchange LIFFE, but it was not immediately clear how its operations there would be merged.
In Eurobonds, there will be no immediately obvious gains to Morgan Stanley. It has led 16 international bond issues deals worth $2.5 billion this year, putting it in 14th place in the league table compiled by Capital DATA Bondware.
Dean Witter is not active in the Eurobond market, while in 1996 Morgan Stanley ranked fifth in the league table.
Banking sources said the merger would be largely complementary in London, adding that the firms would have to search fairly hard to find room for cutting staff.
""But they don't usually look to take people on in this sort of situation,"" one said.
Morgan Stanley, founded in 1935, employs around 2,000 people in its Canary Wharf headquarters in the docklands area in east London and has just over 2,500 employees in Europe as a whole. Dean Witter's London offices are in the Broadgate development to the north of London's financial heartland.
Some said there could be a fall-out of key personnel if there was a significant change in corporate culture or a management restructuring of the European operation.
But the idea of a merger is not new to Morgan Stanley, which in 1994 engaged in unsuccessful talks with British merchant bank S.G. Warburg. Warburgs was later bought by Swiss Bank Corp.
A joint statement by Morgan Stanley and Dean Witter detailed the new senior management structure but gave no indication of the position of Morgan Stanley's executive chairman in Europe Sir David Walker or other senior European personnel.
Morgan Stanley insiders in London said the first they had heard of the merger was an address by Richard Fisher, the firm's chairman, over the internal communications system.
",2
"National Westminster Bank Plc said on Monday it would complete an internal probe into a 50 million pound ($81 million) trading hole as quickly as possible.
""Our internal inquiry is continuing...we are trying to do it as quickly as possible,"" a NatWest spokeswoman told Reuters.
But the bank, which on Friday revealed mispricing errors in the interest rate options book at its investment banking arm NatWest Markets, is also employing an outside firm.
""We are using internal resources and also external advisors,"" the NatWest official said, although she declined to say which firm had been appointed to help the bank unravel what went wrong.
The investigation, which will include a thorough review of NatWest's control systems, is expected to take several weeks.
British financial regulator the Securities and Futures Authority (SFA), which licenses options traders, has been informed of the errors. But NatWest would not say whether it had meetings with the watchdog over the weekend.
""We are keeping our regulators informed,"" the NatWest spokeswoman said. SFA officials were not immediately available for comment but the Bank of England, which regulates banks generally, on Sunday said it would be looking at what happened.
Options are contracts giving buyers the right, but not the obligation, to buy or sell an underlying security at a set price on a set date in the future.
Banking sources said mispricing was a general term which did not necessarily imply there had been any fraudulent intention but could have resulted from pricing errors.
But they added that if such errors occurred on an on-going basis, it would suggest that the trader involved had been aware of a discrepancy between actual and book price of the derivatives in which he was dealing.
Banking sources named the interest rate options trader at the centre of the affair as Kyriacos Papouis, who now works for U.S. securities firm Bear Stearns, but NatWest would not confirm this.
Papouis, who left NatWest Markets last year, could not be reached at Bear Stearns in London and the firm said it was referring all calls to the trader to its press office in New York.
A spokeswoman there was not immediately available for comment.
Bankers questioned why it had taken NatWest several months to uncover the mispricings, which it said had taken place over a period during 1996 but had only come to light in the last few days.
The NatWest spokeswoman said this time lapse was one aspect of the affair it would be addressing in its internal probe. She said the inquiry would also aim to uncover the motivation of whoever was responsible for what had occurred.
In addition to reporting one trader to the SFA, NatWest said it had suspended a senior trader, named by banking sources as Neil Dodgson, for ""failure to supervise"", pending the conclusion of its probe.
A spokesman for Dodgson said he could not comment on the case but would co-operate fully with any investigations.
While the banking community awaited further details of precisely what precipitated the 50 million pound loss, NatWest's shares were marked lower, dropping 41 pence to 717.5 pence by early afternoon.
Around 24 pence of this fall was attributable to the impact of the shares going ex-dividend while the sector as a whole was weaker following the announcement of HSBC Holdings' results. ($ = 0.615 British Pounds)
",2
"Britain's Serious Fraud Office (SFO) was on Thursday drawn closer to the probe into alleged irregularities in three Morgan Grenfell investment funds.
At the same time it emerged the investigation had cast its net overseas, as City regulatory sources confirmed newspaper reports that the inquiry extended beyond Britain. The SFO said it was involved but was not mounting its own investigation.
A spokeswoman for the SFO said the office was in contact with Britain's investment watchdog the Investment Management Regulatory Organisation (IMRO) which would share any relevant material with the office. The SFO investigates and prosecutes major financial crimes in the City of London.
The Times newspaper said in its Friday edition that a senior SFO lawyer had been briefed officially by IMRO. It added that overseas authorities, in the U.S., Luxembourg and Switzerland, had also been involved in the process.
""We have been in contact with IMRO. IMRO are investigating and will share anything of relevance with us,"" the SFO spokeswoman told Reuters on Thursday.
And after the funds, which were suspended on Monday, resumed trading, Deutsche Morgan Grenfell, the UK-based investment banking arm of Germany's Deutsche Bank, said nearly eight percent of three Morgan Grenfell investment funds being investigated for alleged irregularities had been redeemed.
The funds, run by Morgan Grenfell Asset Management (MGAM), were suspended due to suspected ""irregularities,"" but resumed trading after Deutsche Bank spent 180 million pounds ($282.4 million) removing certain unlisted securities from the funds.
""This is good news because people were predicting they would be selling lots...but there has been no panic selling,"" said Deutsche Morgan Grenfell spokesman James Murray.
Industry sources, however, said that redemptions of eight percent in one day was a major reverse.
IMRO's own probe into MGAM has already led to the suspension of two fund managers and briefly saw trading halted in three MGAM funds, which have around 90,000 small investors.
Sources in both the British banking and fund management industries said the probe appeared to be focusing on links between suspended MGAM fund manager Peter Young and a UK-based broker, Fiba Nordic Securities.
Young was not immediately available for comment.
And a spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM. Fiba has been a broker and valuer for funds managed by MGAM.
British regulatory sources said the UK's Securities and Futures Authority (SFA) had previously been examining the activities of Fiba over another matter. This had subsequently led to the unofficial investigation by IMRO into MGAM which prompted Young's suspension.
Young, whose personal assets were frozen as a result of a high-court injunction last night, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Stewart Armer, had also been suspended.
DMG said Armer was suspended on Wednesday evening ""following the discovery of a suspected breach of personal account dealing rules."" A source close to the investigation said Armer's assets would not be frozen and he was not a central focus of the probe. Armer was not available for comment.
In Frankfurt, a spokesman for Deutsche Bank said neither Young nor Armer had committed an obvious breach of regulations. ""But both were hovering on the brink of a grey area,"" spokesman Detlev Rahmsdorf told Reuters.
According to sources close to the investigation, the probe is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth.
The fall-out spread to Sweden where Young had invested substantially in unlisted stocks. Stocks held in his portfolio fell amid concerns from Swedish officials about the impact of the probe on Sweden's alternative stock market.
In Britain the saga is likely to lead to a reappraisal of how funds are managed.
""We will be reviewing our collective investment scheme rules, in particular, the valuation of unquoted securities and the position of prelisted stocks,"" a spokesman at Britain's Securities and Investments Board (SIB) told Reuters.
",2
"NatWest Markets detailed on Friday a shake-up of its global debt markets wing, shifting power to managers from Greenwich Capital, the U.S. bond house it bought last year.
The changes, which are not linked to revelations of 90 million pound ($144 million) losses by the investment banking arm of Britain's National Westminster Bank Plc in its options business, have established Greenwich managers in key positions.
""The co-chief executives of the new global debt markets division are Gary Holloway and Chip Kruger,"" a NatWest spokeswoman told Reuters, adding that two senior NatWest managers, Johan Hattingh and Alby Cator, had left as part of the changes.
Holloway and Kruger are from Greenwich Capital. Holloway will be based in Greenwich in the United States and will be responsible for the U.S. and Asian operations. Kruger will be London-based and responsible for European debt market operations.
Greg Bowes, who built up Greenwich's London business before the NatWest takeover, becomes head of government bonds, repos and futures and options.
Other key appointments are Frank Canelas, who will head corporate bonds origination, sales, trading and research, Bruce Snider who becomes head of asset-backed origination, structuring and trading and Phil Lotz, chief administrative officer for operations, IT and finance.
The NatWest spokeswoman said the shake-up played to both NatWest's and Greenwich's strengths. The changes, which were announced internally on Thursday, have created 10 main areas of responsibility within the debt markets division.
A number of NatWest managers kept key roles within the new framework. These included Graham Rendell in acquisition finance, housing finance and syndicated loans, and Simon Collins, who continues as head of debt structuring and structured finance.
Gary Mulgrew and Gordon McKechnie jointly head project finance, structured trade finance, and leasing and asset finance. George Trott and Martin Jaskel head debt origination for corporates and all financial institutions. Neil Coulbeck remains responsible for business management and portfolio administration.
NatWest said Hattingh, who was European fixed income head, and Cator, who was managing director of European primary markets, had left as part of the reshuffle.
""Their departures are as a result of the restructuring of the debt markets division,"" the spokeswoman said when asked if the two had been made redundant by NatWest.
Hattingh had been at NatWest Markets since 1993 when he joined from Japan's IBJ. With the integration of Greenwich, Hattingh was joined in European fixed income by Greg Bowes.
NatWest's embarrassing losses in its global debt derivatives division have led to the suspension of five senior employees and bonus cuts totalling eight million pounds for a handful of staff.
Chief executive Martin Owen cutting his own bonus and the Securities and Futures Authority (SFA) and Bank of England are looking into what went wrong at the firm.
One banking source described the effect of the $590 million Greenwich purchase as being ""effectively a reverse takeover"" for debt markets aimed at imposing Greenwich's bond expertise and experience over parts of NatWest's existing team, which had been struggling to build up its business in some areas.
The source also said the discovery of the options losses, which were first announced two weeks ago, had been a direct result of auditing changes implemented by Greenwich managers.
On Thursday NatWest's Owen told Reuters that the interest rate options losses, which began in late 1994, had surfaced as a result of ""certain procedural changes"".
At the time of the Greenwich buy, NatWest's Owen said it plugged a major gap in the group's investment banking strategy and would meet demand from clients for firms able to offer the broadest possible range of global fixed income products.
Owen said Greenwich would give NatWest access to the world's biggest market -- U.S. Treasuries -- and the growing asset backed area. NatWest already had U.S. mergers and acquisitions advisory capacity in the form of Gleacher NatWest.
",2
"A group of U.S. and European firms on Tuesday revealed they had developed a system for money transactions over the Internet.
The team, which includes AT & T Corp Unisource, Apple Computer Inc, Nokia Oy and Mondex UK, will run the project on a pilot basis.
""We have developed protocols for shopping and banking that allow users to pay for electronic services via the Internet,"" Julian Wilson, Unisource's director of service development told a briefing.
Wilson said he believed the system, involving the transfer of electronic cash from one device to another, was ""a world first"".
The developers of the system said it was the world's first trial of ""an innovative concept for fast and safe money transactions over the Internet"" and would use the GSM network for Internet access.
The system aims to allow Internet users to buy services and access information using so-called ""smart cards"" such as that developed by Mondex the electronic cash-card company.
Wilson said banks were top of the list of possible users for the system, pointing out the economies of internet banking compared to traditional retail banking which has to pay the cost of maintaining a branch network.
""The economic justification for banks is significant,"" he said, adding that the system would give users a direct connection to their bank and cash could then be issued onto the card.
The initial pilot is being carried out with National Westminster Bank Plc, he said.
As well as banking, another key use for this system was to pay for information, anonymously, on the Internet, without having to reveal credit card details.
Wilson said the project was effectively putting cash registers and ATMs (Automated Teller Machines) onto the Internet.
Users will be able to use handheld network computers, such as Apple's MessagePad 2000 with built-in GSM and Internet access, to make use of the system.
Craig Sears-Black, head of Apple's information appliances division, said ""The project is going to be a trial which tells us what the future holds for this type of transaction over the Internet"".
He said the protocols developed were the first to make very low cost transactions, such as retrieving restaurant reviews or individual newspaper articles, viable.
In Britain, the trial is teaming up with London listings magazine Time Out, which will sell on-line information on restaurants and entertainment.
It is also going to be connected to a map service provided by Multimedia Mapping which will give users precision maps directly relating to the Time Out information.
",2
"Britain's Serious Fraud Office said on Thursday it had become involved in a probe into alleged irregularities at Morgan Grenfell Asset Management, the funds arm of Deutsche Bank's UK-based investment bank.
A spokeswoman for the SFO said the office was in contact with British investment watchdog IMRO, which would share any relevant material with the office. The SFO investigates and prosecutes major financial crimes in the City of London.
IMRO's own probe into MGAM has already led to the suspension of two fund managers and briefly saw trading halted in three MGAM funds, which have around 90,000 small investors.
""We have been in contact with IMRO. IMRO are investigating and will share anything of relevance with us,"" the SFO spokeswoman told Reuters.
Trading in the three funds resumed on Thursday after a 180 million pound ($280 million) bail-out by parent company Deutsche Bank.
Sources in both the British banking and fund management industries said the probe appeared to be focusing on links between suspended MGAM fund manager Peter Young and a UK-based broker, Fiba Nordic Securities.
Young was not immediately available for comment.
A spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM.
Fiba Nordic Securities has been a broker and valuer for funds managed by MGAM.
British regulatory sources said the UK's Securities and Futures Authority (SFA) had previously been examining the activities of Fiba over another matter.
This had subsequently led to the investigation by IMRO into MGAM which prompted Young's suspension.
Young, whose own assets were frozen as a result of a high court injunction late on Wednesday, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Stewart Armer, had also been suspended.
Young had managed two of the three suspended funds.
MGAM said Armer was suspended on Wednesday evening ""following the discovery of a suspected breach of personal account dealing rules"".
A source close to the investigation said Armer's assets would not be frozen and he was not a central focus of the probe. Armer was not available for comment.
But in Frankfurt a spokesman for Deutsche Bank said neither Young nor Armer had committed an obvious breach of regulations. ""But both were hovering on the brink of a grey area,"" spokesman Detlev Rahmsdorf told Reuters.
According to sources close to the investigation, the probe is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth.
British brokers said they had had few redemptions in the three Morgan Grenfell funds after trading in them resumed but the full extent of any exodus would only become apparent after a few weeks.
""We are not seeing any panic selling. Redemption levels look modest at this stage,"" an MGAM spokesman told Reuters.
However, banking analysts in Frankfurt said Deutsche had to tighten up internal controls to prevent a repeat crisis at its UK fund management division.
""Something like this can never be allowed to happen again. If Deutsche really wants to be a global player in investment banking, then its control mechanisms must keep in step with its growth,"" said Vereinsbank analyst Natalia Grasegger.
The fall-out from the MGAM investigation also spread to Sweden, where Young had invested substantially in unlisted stocks. Stocks held in his portfolio fell amid concerns from Swedish officials about the impact of the probe on the country's alternative stock market. ($1=.6373 Pound)
",2
"Britain's Serious Fraud Office said on Thursday it had become involved in a probe into alleged irregularities at Morgan Grenfell Asset Management, the funds arm of Deutsche Bank's British-based investment bank.
A spokeswoman for the SFO said the office was in contact with British investment watchdog IMRO, which would share any relevant material with the office. The SFO investigates and prosecutes major financial crimes.
IMRO's own probe into MGAM has already led to the suspension of two fund managers and briefly saw trading halted in three MGAM funds, which have around 90,000 small investors.
""We have been in contact with IMRO. IMRO are investigating and will share anything of relevance with us,"" the SFO spokeswoman told Reuters.
Trading in the three funds resumed on Thursday after a 180 million pound ($280 million) bail-out by parent company Deutsche Bank.
Sources in both the British banking and fund management industries said the probe appeared to be focusing on links between suspended MGAM fund manager Peter Young and a British-based broker, Fiba Nordic Securities.
Young was not immediately available for comment.
A spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM.
Fiba Nordic Securities has been a broker and valuer for funds managed by MGAM.
British regulatory sources said the Securities and Futures Authority (SFA) had previously been examining the activities of Fiba over another matter.
This had subsequently led to the investigation by IMRO into MGAM which prompted Young's suspension.
Young, whose own assets were frozen as a result of a high court injunction late on Wednesday, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Stewart Armer, had also been suspended.
Young had managed two of the three suspended funds.
MGAM said Armer was suspended on Wednesday evening ""following the discovery of a suspected breach of personal account dealing rules"".
A source close to the investigation said Armer's assets would not be frozen and he was not a central focus of the probe. Armer was not available for comment.
But in Frankfurt a spokesman for Deutsche Bank said neither Young nor Armer had committed an obvious breach of regulations. ""But both were hovering on the brink of a grey area,"" spokesman Detlev Rahmsdorf told Reuters.
According to sources close to the investigation, the probe is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth.
British brokers said they had had few redemptions in the three funds after trading resumed but the full extent of any exodus would only become apparent after a few weeks.
The fall-out from the MGAM investigation spread to Sweden, where Young had invested substantially in unlisted stocks. Stocks held in his portfolio fell amid concern about the impact of the probe. ($1=.6373 Pound)
",2
"British banks have developed a greater understanding of the needs of small firms, but much remains to be done to finance the sector, the Bank of England (BoE) said in a report released on Wednesday.
""Relationships between small firms and their banks have improved greatly from a low point four years ago. The question is -- how much of this improvement is due simply to economic recovery, and how much to structural change,"" Howard Davies, the central bank's deputy governor, said in a statement.
Davies said while there had been genuine changes and banks did now better understand the needs of their small firm customers, there was ""a lot more to do"".
He said two areas that would receive particular attention were the financing of small exporters and the problems faced by ethnic minority businesses.
The report found that while bank finance continued to be the main form of external finance used by small firms -- described by the bank as small businesses with a turnover up to and including a million pounds a year -- asset-backed finance accounted for ""a steadily increasing proportion"".
Factors and invoice discounters reported strong growth during 1996 and there was an increase of 19 percent in the number of firms using the services they offer.
Factoring is a credit collection service whereby a company sells its receivables, the outstanding debts due to it, to a factor at a discount. The factor then collects the funds owed and earns a profit via the discount while the company benefits from an improved cash flow.
In the field of bank finance, the report found there was more reliance on the business proposition and less on collateral as well as a rebuilding of relationships between banks and small business customers -- a move from overdrafts to term loans.
Such loans ""now account for around two thirds (by value) of the total of 35 billion pounds of bank lending to small firms,"" the report said.
Despite these changes, the bank's report found that the range of margins paid on small business borrowing did not change significantly during 1996. ""Most fell within a range of two to between five and seven percent over base rate,"" it said, adding that average margins were between three and four percent.
Other changes noted by the report, the fourth in the bank's series of annual surveys, included increased availability of telephone banking, an increase of 23 percent in the number of reported investments by ""business angels"" and a 38 percent increase in the value of these investments.
Small firms remain concerned by late payment of trade debt despite the introduction of a British standard on payment, although ""problems sometimes reflect a lack of attention to credit management by small businesses themselves"".
And technology-based firms may have particular difficulty in raising finance ""they need at seed, start-up and early stages"".
For smaller firms seeking to enter export markets, the most important issue is the availability of focused information and advice, the bank said, adding it intends to further explore this issue during 1997.
",2
"Lawyers acting for Peter Young, the fund manager suspended last week by Morgan Grenfell Asset Management (MGAM), said on Monday there were no grounds for allegations of criminality and there had been no such allegation in the proceedings which had been served on him.
""There is no allegation of criminality in the proceedings which have been served on Peter Young and there would be no grounds whatsoever for any such allegation,"" solicitors Peters & Peters said in a statement.  
Young was suspended when MGAM, a subsidiary of German banking giant Deutsche Bank AG, said it had found ""suspected irregularities"" in three of its funds, two of which were managed by him.
Young, whose personal assets were frozen after MGAM and fund trustee Royal Bank of Scotland obtained an injunction, has not been available for comment.
Trading in the funds was halted last Monday but resumed on Thursday after a 180 million pounds ($280.7 million) cash injection by Deutsche Bank and reassurances that investors would not lose out.  
The problems centre on the valuation of the high proportion of unlisted high-technology stocks held in the funds. They are being investigated by British investments watchdog the Investment Management Regulatory Organisation (IMRO).
Britain's Serious Fraud Office (SFO), which prosecutes major financial crimes has taken no official action. It has been in contact with IMRO, but has so far only been kept briefed on developments and denies a criminal investigation is underway.  
""Weekend reports that the SFO was about to get involved were wholly speculative. The director must have reasonable grounds to suspect that serious or complex fraud offences have taken place,"" SFO spokesman James O'Donoghue told Reuters on Monday.
The probe into what took place within MGAM is widely expected to take some time, with a complex web of holdings and companies around the world to be unravelled.
Both MGAM and IMRO have drafted in forensic accountants to look into the fund management business of the three funds, MGAM has enlisted Ernst & Young and IMRO Deloitte Touche.  
MGAM has also appointed law firm Slaughter & May to help untangle a labyrinth of investments. Slaughter & May confirmed its appointment but would not comment on the investigation.
The fall-out of the episode for Deutsche Bank continued on Monday with the news from credit rating agency Moody's that it is looking at the bank's rare and treasured triple-A credit rating in the light of the MGAM situation.
And investment bank Salomon Brothers said the worry that Deutsche Bank might return to its accident prone image of the early 1990s may be the most serious concern stemming from problems at the bank's asset management arm.  
But Deutsche Morgan Grenfell, the bank's investment banking arm, said redemptions from the funds had dropped by over half on Monday compared to the 83 million pounds redeemed last Friday and the 110 million pounds which flooded out last Thursday.
""Just under 39 million pounds was redeemed today,"" DMG spokesman James Murray told Reuters. ""As expected the redemptions have slowed down significantly. There is still enough cash left in the funds.""
""What we are seeing is a stabilisation,"" he added.  
He said there had been just over 300 million pounds in the funds after the Deutshe cash injection and if redemptions continued to drop there would be sufficient cash.
Murray confirmed that investors would be compensated, but that the amount would only be decided after the investigation. ""If compensation is found to be due then it will be paid by us,"" he said, adding that it would be calculated by an independent accountant appointed by IMRO.
He said the preliminary part of MGAM's investigation would take between four and six weeks. ($1=.6412 Pound)
",2
"British property group Hammerson Plc's chief executive Ron Spinney said on Monday he expected the British market to perform well over the next two years.
""I think the market will perform well over the next two years,"" Spinney told Reuters.
Earlier the group announced a 21.3 percent rise in pre-tax profit for 1996 to 70.0 million stg from 1995's 57.7 million stg. Net asset value (NAV) per share rose 3.2 percent to 388 pence from 376 pence.  
Spinney said Hammerson had had ""another good year"", including turning over 15 percent of the portfolio, investing 50 million stg on improving existing properties and embarking on an 800 million stg development programme.
He said the group would be spending around 115 million stg on its existing portfolio and its developments.
""We have taken steps to ensure growth in the future...The UK market for shopping centres and offices is bouyant,"" he added.  
Spinney said there were signs the French market was in a similar position to where the British market had been about two years before, adding he was confident there had been rises in values since the end of the year in Britain.
Hammerson's gearing is currently ""relatively modest"" at 58 percent, Spinney said, adding that the group itended acquiring more properties over the year, this would be split between areas and sectors.
""We are generally happy with it (the split) as it is at the present time,"" he said.
",2
"""Superwoman"" pension fund manager Nicola Horlick announced her resignation on Thursday from Morgan Grenfell Asset Management (MGAM) only days after she was reported to have been offered a promotion at the firm.
A spokesman for Horlick, who had been head of British pension fund business at Deutsche Morgan Grenfell's MGAM, told Reuters she had quit and was planning legal action against her former employer over ""constructive dismissal"".
Horlick, dubbed superwoman in financial circles because of her ability to hold a high-powered job while looking after five children, was suspended at MGAM on Tuesday, prompting reports of unease among large pension fund clients at the firm.
The suspension was pending the outcome of an internal investigation into what Deutsche Morgan Grenfell described as ""a potential breach of her contract"".
""She has resigned,"" a spokesman for Horlick said. ""She will be taking (legal) action against DMG.""
The dispute with MGAM was believed to revolve around allegations that Horlick tried to take a number of her MGAM team with her in a move to Dutch bank ABN AMRO.
But the row erupted only days after Horlick received news of a promotion to managing director from MGAM chief executive Robert Smith, a banking source said.
""They shook hands on it last Friday,"" the source said.
MGAM last year was rocked by revelations of misvaluations in three of its funds and the subsequent sacking of fund manager Peter Young, who is currently under investigation by Britain's Serious Fraud Office. Young has denied any involvement in criminal activity.
Horlick, in an interview with the Financial Times published on Friday, described disquiet at MGAM over the Young affair, She said the promotion came after a group of fund managers who worked under her said they would leave the company unless she be given more authority.
Around six MGAM fund managers and a senior executive met for dinner on Thursday last week, she said in the newspaper interview. ""They demanded that I be given more authority. They felt that things were in turmoil following the Peter Young affair.""
Pension fund clients of DMG, the investment banking arm of Germany's Deutsche Bank, are said to be unsettled by the Horlick saga. But DMG said on Thursday that it did not expect any exodus of its pension fund clients.
--London Newsroom +44 171 542 6784
",2
"Britain's Serious Fraud Office (SFO) was on Thursday drawn closer to the probe into alleged irregularities in three Morgan Grenfell investment funds.
At the same time it emerged the investigation had cast its net overseas, as City regulatory sources confirmed newspaper reports that the inquiry extended beyond Britain.
British newspapers said a number of holding companies listed in Luxembourg were under the microscope of investigators.
A spokeswoman for the SFO said the office was in contact with Britain's investment watchdog the Investment Management Regulatory Organisation (IMRO) which would share any relevant material with the office. The SFO investigates and prosecutes major financial crimes in the City of London.
The Times newspaper said in its Friday edition that a senior SFO lawyer had been briefed officially by IMRO. It added that overseas authorities, in the U.S., Luxembourg and Switzerland, had also been involved in the process.
""We have been in contact with IMRO. IMRO are investigating and will share anything of relevance with us,"" the SFO spokeswoman told Reuters on Thursday.
And after the 1.4 billion pound funds, which were suspended on Monday, resumed trading, Deutsche Morgan Grenfell, the UK-based investment banking arm of Germany's Deutsche Bank, said nearly eight percent had been redeemed.
The funds, run by Morgan Grenfell Asset Management (MGAM), were suspended due to suspected ""irregularities,"" but resumed trading after Deutsche Bank spent 180 million pounds ($282.4 million) removing certain unlisted securities from the funds.
""This is good news because people were predicting they would be selling lots...but there has been no panic selling,"" said Deutsche Morgan Grenfell spokesman James Murray.
Industry sources, however, said that redemptions of eight percent in one day was a major reverse.
IMRO's own probe into MGAM has already led to the suspension of two fund managers and briefly saw trading halted in three MGAM funds, which have around 90,000 small investors.
Sources in both the British banking and fund management industries said the probe appeared to be focusing on links between suspended MGAM fund manager Peter Young and a UK-based broker, Fiba Nordic Securities.
Young was not immediately available for comment.
And a spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM. Fiba has been a broker and valuer for funds managed by MGAM.
British regulatory sources said the UK's Securities and Futures Authority (SFA) had previously been examining the activities of Fiba over another matter. This had subsequently led to the unofficial investigation by IMRO into MGAM which prompted Young's suspension.
Young, whose personal assets were frozen as a result of a high-court injunction last night, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Stewart Armer, had also been suspended.
DMG said Armer was suspended on Wednesday evening ""following the discovery of a suspected breach of personal account dealing rules."" A source close to the investigation said Armer's assets would not be frozen and he was not a central focus of the probe. Armer was not available for comment.
In Frankfurt, a spokesman for Deutsche Bank said neither Young nor Armer had committed an obvious breach of regulations. ""But both were hovering on the brink of a grey area,"" spokesman Detlev Rahmsdorf told Reuters.
According to sources close to the investigation, the probe is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth.
The fall-out spread to Sweden where Young had invested substantially in unlisted stocks. Stocks held in his portfolio fell amid concerns from Swedish officials about the impact of the probe on Sweden's alternative stock market.
In Britain the saga is likely to lead to a reappraisal of how funds are managed.
""We will be reviewing our collective investment scheme rules, in particular, the valuation of unquoted securities and the position of prelisted stocks,"" a spokesman at Britain's Securities and Investments Board (SIB) told Reuters.  
Sources in both the British banking and fund management industries said the probe appeared to be focusing on links between suspended MGAM fund manager Peter Young and a British-based broker, Fiba Nordic Securities.
Young was not immediately available for comment.
A spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM. Fiba has been a broker and valuer for funds managed by MGAM.
British regulatory sources said Britain's Securities and Futures Authority (SFA) had previously been examining the activities of Fiba over another matter. This had subsequently led to the unofficial investigation by IMRO into MGAM which prompted Young's suspension.
Young, whose personal assets were frozen as a result of a high-court injunction, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Stewart Armer, had also been suspended.  
DMG said Armer was suspended on Wednesday evening ""following the discovery of a suspected breach of personal account dealing rules."" A source close to the investigation said Armer's assets would not be frozen and he was not a central focus of the probe. Armer was not available for comment.
In Frankfurt, a spokesman for Deutsche Bank said neither Young nor Armer had committed an obvious breach of regulations. ""But both were hovering on the brink of a grey area,"" spokesman Detlev Rahmsdorf told Reuters.
According to sources close to the investigation, the probe is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth.
In Britain the saga may lead to a reappraisal of how funds are managed, with the Securities and Investments Board promising to review collective investment scheme rules, valuations of unquoted securities and the status of prelisted stocks.
",2
"NatWest Markets is expected to deal firmly with anyone found to have been responsible for its 50 million pound ($80.2 million) loss on interest rate options.
Sackings, demotions and bonus cuts are among the penalties banking sources have suggested NatWest could hand down when it releases a preliminary report into the affair on Thursday.
NatWest Markets, the investment banking arm of Britain's National Westminster Bank Plc, revealed the embarrassing hole in its interest rate options book nearly two weeks ago.
A NatWest Markets spokeswoman declined to comment on the precise timing of the early findings of its internal probe, which have been widely expected to emerge this week.
She said she could not comment on a newspaper report suggesting bonuses could be cut but confirmed the results of the inquiry ""may have a financial impact on certain individuals"".
NatWest has hired accountants Coopers & Lybrand and law firm Linklaters & Paines to assist it in finding out how the options ""mispricing errors"" went unnoticed for so long.
Options are contracts which give buyers the right, but not the obligation, to buy or sell an underlying security at a set price on a set date in the future.
A former NatWest trader, widely believed to be Kyriacos Papouis, has been reported by NatWest to British financial markets regulator the Securities and Futures Authority (SFA).
And a senior NatWest trader, Neil Dodgson, has been suspended for allegedly ""failing to supervise"", pending the outcome of the probe.
Dodgson, who has not spoken about the case, was not immediately available for comment.
Papouis left NatWest in December last year for U.S. investment bank Bear Stearns. He resigned from Bear Stearns last week and has not commented on his role in the NatWest affair. There has been no suggestion there was any personal gain involved, but the affair has raised deep concerns about NatWest's internal risk management.
Bear Stearns last week declined to give any details of the Papouis resignation, except to say it had conducted a thorough review of his open trading positions and was satisfied they were all booked and managed properly.
Britain's SFA has been notified of the NatWest internal inquiry and has opened a file, while the Bank of England has said it is co-operating with SFA.
On Tuesday the Bank of England, which supervises the NatWest group, said it was being kept informed of developments by NatWest.
NatWest Markets said it was undertaking a thorough review of its control systems, both internal and external.
Banking sources and British newspaper reports said this has involved examining the workings of both its interest rate derivatives department and its compliance division.
Jean-Francois Nguyen is head of interest rate derivatives at NatWest Markets. At the time of the mispricing errors, he reported to the then head of debt capital markets Phil Wise.
The Times on Thursday reported that NatWest's computer-based risk models had not been fed with accurate information which would have enabled any excessively risky positions to be identified.
A key question likely to be asked of senior NatWest officials is why the firm did not reveal the loss when it announced its 1996 results only days before it made the surprise announcement.
NatWest said it had brought the loss to the market's attention as soon as it came to light, but some banking sources questioned why the loss had not been picked up when the firm prepared its 1996 accounts.
($ = 0.623 British Pounds)
",2
"Deutsche Morgan Grenfell was unlikely to offer Nicola Horlick her job back, despite the former fund manager's continuing call for reinstatement, banking sources said.
""The ball's in her court,"" a banking source said late on Sunday, adding that Horlick's resignation last week meant that DMG's Morgan Grenfell Asset Management (MGAM) was no longer obliged to discuss reinstatement with her.
Deutsche Morgan Grenfell was preparing to launch an intensive campaign to shore up its pension fund business in the wake of Horlick's resignation at MGAM after she was suspended for allegedly trying to lure staff with her to another firm.
The investment banking arm of Germany's mighty Deutsche Bank was to meet key clients, but DMG spokesman James Murray denied pension firms were considering moving from its 18 billion pound ($30.11 billion) funds.
""We've had absolutely no indication that our institutional pension fund clients have plans at this stage to move their business,"" he said.
Morgan Grenfell Asset Management (MGAM), the fund management arm of DMG, has already written to all its pension fund clients to limit any fall-out from the suspension and later resignation last week of senior British fund manager Horlick.
Some clients, including London's Westminster City Council, Scotland's Dumfries and Galloway County Council and the Merchant Navy Officers' Pension Fund, have expressed individual concern about recent events at MGAM.
And the Railway Pension Trustee Company, which has 1.25 billion pounds with MGAM, said it had met MGAM officials and would be in close contact with its asset managers.
Meanwhile, Horlick continued to deny the allegations that she had tried to lure staff away from MGAM.
""I think my colleagues know that's not the case,"" she told BBC television as reporters swarmed around her on Sunday.
Horlick was suspended from the firm only days after she had been promoted to managing director at MGAM.
Her subsequent resignation as head of MGAM's British pension fund business and dramatic dash to Frankfurt on Friday to plead with Deutsche Bank for her reinstatement received widespread coverage in British media.
""These people who I spoke to in Germany were very, very serious about all of this. And I want to give them a chance to sort this out,"" Horlick said on BBC television.
""What I really want is a proper resolution. And I still think that that means either reinstatement -- and I mean that, I like doing my job. Reinstatement or compensation,"" she added.
MGAM is still trying to regain an even keel after last year's revelations of irregularities at three of its retail investment funds, the sacking of fund manager Peter Young, a 180 million pound cash injection to bolster the funds and the announcement of a 200 million pound compensation package.
Young, who denies any involvement in criminal activity, is now under investigation by Britain's Serious Fraud Office (SFO).
Much of the media coverage of Horlick's case has focused on the ""human interest"" angle with pictures of the 35-year-old -- dubbed Superwoman by British newspapers -- with her children at their luxury home in Kensington, west London.
Fund management sources said Horlick, who stated she managed between three-and-a-half and four billion pounds worth of the firm's business, had talked about a management buy-out.
But they said that even if this had been discussed informally it would have had no hope of success as DMG, along with many other firms, was keen to build its strength in this lucrative area and would not dismantle its business.
Horlick, who during a whirlwind campaign on Friday entered MGAM's London headquarters in an attempt to meet management and loudly proclaimed ""Justice will be done"", has said she wants to settle her differences as quickly as possible and is pinning her hopes on further talks with a Deutsche legal official.
She has said she plans legal action over what she claims was her ""constructive dismissal"" by the firm. But banking sources said it had not yet been served with any legal papers.
Horlick's spokesman distanced her from reports a December lunch meeting had marked the start of talks with Dutch bank ABN AMRO on a move there. He said it had been a personal engagement and ""there was nothing culpable about meeting a friend...for lunch"".
ABN AMRO has denied it tried to poach any MGAM staff. ($1=.5979 Pound)
",2
"Morgan Grenfell Asset Management, part of the giant Deutsche Bank group, has frozen the personal assets of fund manager Peter Young as a probe into suspected irregularities in three of its funds continues.
""We have obtained an injunction against Peter Young in order to freeze his assets,"" a spokesman for Deutsche Morgan Grenfell, Deutsche's investment banking arm, told Reuters on Thursday.
The injunction was obtained jointly with the Royal Bank of Scotland, trustee for the two funds managed by 38-year-old Young, who has been suspended and was on Wednesday reported to be at his home in Amersham, west of London.
The DMG spokesman confirmed a newspaper report that the injunction also covered the assets of a company called Russ Oil & Technology, but declined to give any further details.
On Monday trading in three European funds -- the 788 million stg ($1.24 billion) MG European Growth Trust, the 134 million stg MG Europa and 445 million stg Dublin-listed MG European Capital Growth -- was suspended pending investigation.  
This is being undertaken unofficially by British investments watchdog IMRO, along with the company, and centres on the valuations of holdings of unquoted and pre-listed (those to be quoted within a year) stocks within the funds.
While few details of the alleged irregularities have emerged, a complex web which includes Swedish crown-denominated warrants in a Canadian mining company and shares in obscure Norwegian firms is beginning to surface.
The Financial Times said on Thursday the investigation into the Morgan Grenfell funds followed a Securities and Futures Authority (SFA) examination in April of a London-based broker.
This led it to look at the funds managed by Young and it had then made contact with IMRO, which had kept a ""watching brief"" on the funds until last week, the FT added.
The funds are due to resume trading on Thursday after Deutsche Bank said on Tuesday it would meet liabilities related to any irregularities that might be identified. The bank also said the prices at which the funds trade should not be hit.
On Tuesday it emerged Deutsche Bank had injected between 150 and 200 million stg into the funds, buying some of the securities for its own account to protect investors' interests.  
Despite this, fund managers say many of the 90,000 investors are expected to bail out of the funds when the suspension on them is lifted because of a loss of confidence. The full scale of the flight from the funds will not be known until later.
Analysts have already said that despite Deutsche's attempts to move quickly to limit damage at the British fund management subsidiary, its credibility and earnings are likely to be hit.
The impact on the asset management business will only become clear once the extent of investors' reaction is known.
But while the problems are confined to only three funds run by Morgan Grenfell Asset Management, the embarrassing and potentially damaging incident comes at a time when Germany's biggest bank is attempting to stamp its authority on the highly competitive world of global investment banking.
Taking on the tough competition of Wall Street firms in a bid to become a premier global investment house has involved a high-profile, and reportedly costly, recruitment drive to ensure the bank has the top people. At one stage this led to a threat of court action for poaching by rival ING Barings.  
Some banking sources say Deutsche Bank's own reputation should not be tarnished by investigations into the funds, adding its swift action and the bank's top-rating by credit rating firms should ensure there is little long-term damage.
But other firms are unlikely to show the bank any mercy and will do their best to capitalise on its current predicament.  
Stewart Armer, manager of MG Europa Fund was meanwhile suspended from his duties on Wednesday evening following the discovery of a suspected breach of personal account dealing rules. He has been replaced by Julian Johnston, head of the European equities team which includes UK equities.
Trading in the three European funds was suspending on Monday pending an investigation into possible irregularities, which is being undertaken officially by British investments watchdog IMRO. Last night, MGAM won a High Court injunction freezing the personal assets of fund manager Peter Young.
While few details of the alleged irregularities have emerged, a complex web which includes Swedish crown-denominated warrants in a Canadian mining company and shares in minor, unlisted Norwegian firms is beginning to surface.
The Financial Times newspaper said on Thursday that the investigation into the Morgan Grenfell funds followed a Securities and Futures Authority (SFA) examination in April of a London-based broker.
",2
"San Jose was a bustling mountain village in this northwest region of Colombia until a dreaded right-wing death squad passed through a few weeks ago and ordered everyone to leave.
The 40-strong paramilitary gang shut down the weekly market and forbade shopkeepers from selling all but small quantities of food, fearing the village was a supply post for leftist guerrillas.
Just to push the point home they dragged off four villagers, riddled them with bullets and threw their corpses into a shallow grave.
Today, San Jose is a virtual ghost town. Only 11 families defied the marching order while most gathered up what few belongings they could carry and fled.
""They told us to leave but maybe it's better to wait to die here in our homes and not go elsewhere and die of hunger,"" said peasant farmer Dario Alvarez.
The tragedy of San Jose is mirrored in scores of other remote villages and communities in the central region of Uraba -- the so-called banana belt -- which has been thrust into the eye of a hurricane as right-wing paramilitaries seek to destroy pockets of suspected rebel activity.
FOUR-WAY BATTLE FOR CONTROL
For the last decade, guerrillas, paramilitaries, the army and banana companies have been battling for political and economic control of Uraba, a region with huge natural wealth strategically located around an enormous natural bay close to Colombia's border with Panama.
The Saturday market in San Jose, 7 miles (12 km) from the regional centre of Apartado, was traditionally a magnet for hundreds of peasants from the surrounding Serrania de Abibe mountains seeking to sell avocados, cocoa and plantains.
Now the village square is deserted and 76-year-old Jose Joaquin Barrera sits at a stall unable to sell his wares to the few people that remain.
""The men that came were very heavily armed. They took off friends and people we knew well. By the time I got to the square they were just dragging them off. But what can you do? It's sad, very sad and leaves you with a lot of pain,"" he said.
Police believe the murders and threats carried out by the paramilitary gang in San Jose were in retailation for a massive car bomb attack in Apartado which killed 11 people and injured at least 60 others two days earlier. The blast was blamed on the Revolutionary Armed Forces of Colombia (FARC), Colombia's oldest and largest rebel group set up as a pro-Soviet force in 1964.
The army, which some critics accuse of backing the paramilitaries, describes San Jose as a village ""under the total control of the FARC"" and claims uniformed rebels openly patrol the central square.
EVEN A PRIEST IS SUSPECTED
Anybody spotted making the journey along a rough dirt road is suspected of ties to the guerrillas -- even the parish priest.
""The priest has an excellent excuse -- that he's a priest and must attend to the faithful,"" said Col. Mario Correa, of the 17th Brigade based in nearby Carepa.
There is no apparent sign of rebel activity in San Jose, although a church worker, who did not wish to be named, said both guerrillas and paramilitaries regularly set up road blocks on the outskirts of the village.
Peasants say the sight of armed groups criss-crossing the hillsides is common. But giving out a glass of water or a handful of beans is considered more a means of survival than collaboration with the enemy.
""The person who has the gun is the law for the poor peasant. A lot of people pass through -- we just don't ask where they've come from nor where they're going ... this is a very dirty thing,"" said a 60-year-old peasant, who did not wish to be named.
More than 110 families have abandoned San Jose since the first paramilitary group appeared there six months ago. Some moved to Apartado, others used their scant funds to get as far away as they could.
In one of the newest squatter colonies in Apartado, called 20 De Enero, dozens of children play amid the wood shacks and hastily dug open drains.
""When I left I just took what I could carry. I don't really spend anything on food, just what I find. A plantain, a bit of yucca. Beans are too expensive at 1,000 pesos ($1) a pound. I don't see any hope,"" said a mother of two who fled six months ago after an army helicopter strafed her home in a community a day's walk away.
""Somebody once came and gave us a sheet of zinc for the roof but we haven't really had what you can call government help,"" said neighbour Nicolasa Goez, 72, who lives with her blind grandson.
Local authorities estimate at least 7,000 people have been displaced by violence throughout the region. Government organisations calculate some 920,000 people have been displaced by the long-running guerrilla war across Colombia.
""The problem of the displaced will cause us huge problems of crime, prostitution and social breakdown in the medium term. It makes me shudder,"" said Maria Girlesa Villegas of the human rights ombudsmen's office in Apartado.
",20
"BOGOTA, May 14 Reuter - Colombia's coffee czar finally admitted this week what private exporters have been saying for months -- that the country will have ""enormous difficulties"" meeting export schedules.
Jorge Cardenas, head of the powerful National Coffee Growers' Federation, blamed the situation on supply worries caused by a best-case forecast of a 10.2 million 60-kg bag crop for the 1996/97 coffee year -- compared to 12.9 million bags last year.
Implicit in his admission was that the federation's inventories, currently at 4.8 million bags according to latest federation figures, contain insufficient fresh coffee to meet this year's 11 million bags of export commitments.
The situation has left the federation battling with private exporters at home in a bid to cash in on booming international prices.
""There's very strong competition for fresh coffee,"" Cardenas said. He added that in some areas, 125-kg loads of coffee were being sold for more than $400 compared to the benchmark domestic price of 388,375 pesos (about $360), set each week by the federation.
As early as February, some private exporters said the federation's crop estimate of 10.4 million bags was overblown.
Expert analysts at Merill Lynch issued a forecast of about 9.5 million bags and one private exporter consulted over the weekend said it could even come in as low as 9.3 million bags based on an April crop of about 824,000 bags compared to the 1 million bags initially forecast.
The exporter added that figures obtained from federation sources showed federation stocks of fresh coffee amounted to just 800,000 bags, with the remainder affected by the berry borer, or ""broca"", or old crop coffee dating from between 1991 and 1995.
""We've known about this situation for a long time. The only thing that was left was for Jorge Cardenas to say it,"" the private exporter told Reuters.
He stopped short of accusing the federation of lying about its stocks to avoid panicking the markets. Instead, he argued that the federation had played down the magnitude of the shortfall in the hope of lulling Colombia's exporters into a false sense of security while frantically trying to snap up all the available fresh crop.
""The federation hoped that by restricting us it would be able to buy more coffee but it hasn't been able to do that,"" the exporter said.
Until this week Cardenas said the federation would be fully able to meet its commitments by drawing on its stockpile. But at the end of the federation's weekly meeting Cardenas said the shipment of about 100,000 bags of April exports alone had been delayed because of supply shortfalls.
Worries about short coffee supplies are prompting speculation that major coffee producers may delay a decision over tighter export quotas at an Association of Coffee Producing Countries ACPC meeting in London next week.
The export program currently in force is aimed at capping the 14 member nations' exports at 25.48 million bags in the first half of 1997. But Cardenas hinted this week that he would be ready to put any fresh decision on hold.
""The producers' desire is to send a signal to the markets and there's no question of having prices at a certain level just for the sake of it or of creating artificial conditions,"" Cardenas said.
Smaller than expected crops in many Latin American countries -- most notably second-largest producer Colombia, the onset of winter in Brazil and low inventory levels in consumer countries have all contributed to fuel a five-month upswing in coffee futures.
	 (--Bogota newsroom, 571 610 7944)
",20
"The Colombian government said on Tuesday that 16 soldiers and as many as 15 leftist guerrillas were killed in a fierce four-day battle in a mountainous area near the capital city.
The fighting, in which the Defence Ministry said 13 to 15 Revolutionary Armed Forces of Colombia (FARC) rebels were killed, began late on Friday when about 50 soldiers were airlifted into the area in pursuit of what was initially thought to be a small band of insurgents.
The battle was the worst and longest to erupt near Bogota in recent memory as what turned out to be hundreds of FARC rebels made their presence felt with a bang on the doorstep of the nation's capital.
Defence Minister Guillermo Alberto Gonzalez, who announced the army casualty figure with ""deep regret"" in a national radio interview, denied reports that dozens of soldiers were missing or unaccounted for in the rugged combat area around this mountain town just 30 miles (50 km) east of the capital.
""There are no missing soldiers,"" Gonzalez said.
He said 21 soldiers were stranded in the early stages of the firefight. But he said all had been plucked to safety by their fellow troops and most were rescued unharmed.
Army chief Gen. Manuel Jose Bonett told foreign journalists last week that Bogota was among the strategic targets of the FARC and National Liberation Army, Colombia's second-largest guerrilla group.
Earlier on Tuesday Colombia's army said it was pouring hundreds of reinforcements into the mountainous area.
Army sources in Villavicencio, capital of Meta province, told Reuters up to 1,000 troops were set to be ferried into the combat zone.
Military sources also confirmed that intense aerial bombardments of the area had been under way since Sunday in a bid to crush the rebels.
The latest bombardments came just after dawn on Tuesday and lasted nearly 90 minutes. Later in the day helicopter gunships buzzed an outlying settlement and strafed hillsides.
One chopper later touched down in an area known as El Tablon and picked up at least three bodies of dead soldiers, witnesses said. No further gunfire was heard from mid-afternoon but an army officer said combat could restart at any moment.
""I'm sure the FARC hasn't got away. We have the exit routes out of the area blocked, they're just lying low,"" he said.
At least 400 people have fled to San Juanito from outlying villages since late on Friday, pouring into the streets of the normally quiet farming town of about 1,200 people.
""I was about half a mile from the fighting, at night I saw the bullets flying past my door and windows,"" said Jose Angel Munoz, who said he fled his village on Sunday with his wife and seven children.
""I've never known such fear, the fighting has never been this bad,"" he said.
""It made me so sad to see the bombings this morning,"" added Litia Gutierrez, another displaced villager. ""I just don't know when I can go home again or what I will find when I get there.""
The combat zone was cordoned off by troops late on Tuesday. But there was no indication that FARC forces were fleeing in the face of the government's firepower.
Gonzalez said combat continued in the zone late on Tuesday and said ""it will continue as long as necessary.""
",20
"Colombian Finance Minister Jose Antonio Ocampo termed ""bizarre"" and ""prejudicial"" a court decision on Wednesday overturning the government's state of economic emergency, but pledged to respect the ruling.
However, he said the government would go ahead with plans to submit bills to Congress as early as next Tuesday covering measures in emergency decrees issued by President Ernesto Samper in mid-January to rein in the country's yawning fiscal deficit.
Opposition politicians and business leaders welcomed the ruling by the Constitutional Court, which hours earlier declared the economic emergency unconstitutional, and said the verdict would discourage the government from abusing special powers.
""We will respect this ruling even though it is bizarre and prejudicial...the government has no other way of quickly making up the shortfall in income,"" Ocampo told a news conference shortly after a closed-door meeting with Samper and government ministers.
""What happens now will depend on how fast Congress considers new legislation that we will submit,"" he said.  
Samper declared a state of economic emergency on Jan. 13 against the backdrop of a sharp economic slowdown in 1996 coupled with huge inflows of dollars that strengthened Colombia's peso but severely undermined export income.
The fiscal deficit also burgeoned to 4 percent of gross domestic product (GDP) last year compared to just 0.2 percent in 1995.
The emergency plan aimed to shore up tax revenues and combat tax evasion, estimated to deprive the government of $2 billion per year.
It also clamped a 16 percent sales tax on previously exempt services provided in Colombia by foreign-based companies, slashed the government's planned debt program and introduced a 6 percent tax on all new loans contracted abroad by private and public-sector companies.
The government had hoped the measures would save about 800 billion pesos. But economic analysts say the government has spent at least half that on a February public-sector pay rise.
State workers staged a seven-day strike and won increases well above the weighted 13.5 percent first offered by Ocampo.  
Private-sector industrialists bridled at the emergency program, claiming that such measures were usually only applied in the case of natural disasters. They argued that the tax on foreign loans would drive up import prices and feul inflation.
After Wednesday's court ruling, Luis Carlos Villegas, head of the influential National Industrialists' Association, said: ""This ruling fills us full of confidence because it will indicate to the government what measures it can reasonably use and what it cannot do.""
In announcing the ruling, Vladimiro Naranjo, a Constitutional Court judge, said the decision was based on the perception that the economic problems were not the result of abrupt and unforeseen circumstances -- the requirement needed to declare an emergency.
""This decision gives us great satisfaction. It re-establishes the rule of law,"" said Sen. Juan Camilo Restrepo of the opposition Conservative Party.
Samper was to give a televised speech on Thursday concerning the court decision, local media said. Both houses of Congress voted to support the economic emergency measures in sessions Tuesday and Wednesday.
--Bogota newsroom, 571 610 7944
",20
"Manuel de Jesus Pena does not want to know who blew his legs off in an indiscriminate grenade attack last year -- he just wants the dirty war to stop.
Like thousands of other civilians in this northwest region of Uraba -- the most violent corner of Colombia -- Pena is caught in the crossfire of a bitter conflict between Marxist rebels, right-wing death squads and the army.
""I don't know if it was the guerrillas, the army or the paramilitaries. The important thing is that I survived and that I carry on living,"" Pena told Reuters as he sat in his one-room home in the regional center of Apartado. ""I would just tell the men of violence to stop this madness because those who are suffering are not directly involved in the war.""
In the last year alone, more than 2,000 people were killed in tit-for-tat political violence across Uraba. At least 350 of those deaths were in Apartado.
Of the dead, 51 were slain by gunmen of the left and right in seven cold-blooded massacres last year, according to figures compiled by Maria Girlesa Villegas, head of the Human Rights Ombudsman's office in Apartado.
Foreigners have not completely escaped the violence. A Russian cyclist was killed last year and a German and an Austrian tourist were kidnapped this year and later killed by guerrillas in the western part of the region.
PARAMILITARIES WAGE SCORCHED EARTH OFFENSIVE
The upsurge in violence in Uraba coincided with the political rise of the leftwing Patriotic Union (UP) party a decade ago, culminating in its victory in mayoral elections in the region's main towns in 1992.
Spawned from a failed government peace process, the UP was seen by detractors on the right as the political wing of the Revolutionary Armed Forces of Colombia (FARC), the country's largest rebel army, formed as a pro-Soviet force in 1964.
In a ""fire and blood"" offensive, paramilitaries drove the UP and what they saw as other potential rebel sympathizers from the north and south of Uraba. For the past year they have focused on the central zone, known as the ""banana belt.""
Jose Herman, a UP leader who fled Apartado last October, is convinced the paramilitaries have forged a covert pact with the army and the banana companies to spearhead a scorched earth policy aimed at annihilating leftists in the region.
""There's strong links between the banana companies and the paramilitaries. Their theory was to take the water away from the fish and they began to kill us, calling us guerrilla collaborators,"" he said, adding that although UP and the FARC shared many ideals their command structures were separate.
REBELS IN IDEOLOGICAL ABOUT-FACE
In a confusing ideological about-face, the FARC's former allies, the Maoist-inspired People's Liberation Army (EPL), are now their bitter enemies. Most EPL fighters laid down their arms in 1991 and went on to form the Hope, Peace and Liberty political movement, which now dominates the main banana workers' union Sintrainagro.
But some former EPL rebels joined the ranks of the paramilitary death squads, sparking reprisals by the FARC against all Hope, Peace and Liberty members. ""The abuses were committed by the FARC and now they're paying the price,"" said Hernan Correa, a Sintrainagro leader and former EPL insurgent.
Underlying the bitter sectarian rivalry is the battle for economic control of this strategic region nestled between the Pacific and Atlantic oceans near the border with Panama. The military say it is a key transit route for drugs and arms.
Some local experts believe the only real hope for an end to the killing is for one side or the other to drive its rival out of the area. But for the moment none of the armed actors has the firepower to fight a classic war of positions and hold on to the territory it gains -- not even the army.
""We lack mobility. We need more budget for arms, ammunition and helicopters. We only have three helicopters here. If they just gave me 10 more then I'm sure that within less than six months we would finish this problem,"" regional army commander Gen. Rito Alejo del Rio said.
But no argument will convince one 18-year-old police rookie, who arrived in the town the day before the FARC killed 11 people with a massive car-bomb in February, that this is a war worth fighting and even less one that can be won.
""This is war of the mad, the demented and the psychopaths,"" he said.
",20
"Protesters armed with rocks, sticks and bottles clashed with police at a demonstration in Bogota's main plaza on Tuesday on the first day of a massive nationwide strike by state workers.
Tensions heightened after leftist rebels announced their support for the indefinite work stoppage, vowing to back workers' demands with force and calling for violent action.
The Bogota-based 13th Army Brigade said at least 42 people were arrested in and around Bogota on ""terrorist charges"" and more than 50 guns were seized as part of the army's round-up of ""agitators.""
Union bosses said the strike, billed as the biggest in 20 years, had won the ""total"" support of an estimated 800,000 public sector employees and severely disrupted airports, telecommunications, oil production, government administration, and all but emergency health services. Coffee industry transport also broke down.
Running battles erupted in one corner of Bogota's historic Plaza Bolivar as 200 young protesters, with faces covered by scarves and bandanas, tore up chunks of pavement to hurl at police crouching behind plastic riot shields.
There were no immediate reports of injuries and the rioters dispersed after repeated baton charges by police. The rally of about 30,000 striking workers outside Congress broke up shortly after the violence flared.
State workers called the strike to press for a 21.5 percent wage hike and an end to what they said was repressive labour legislation. The government, struggling to slash its fiscal deficit, has vowed to hold workers' to a weighted 13.5 percent increase. The strike began at midnight on Monday (0500 GMT on Tuesday).
""The strike is total. Workers have observed the call en masse and some social sectors are also joining in,"" said Hernando Hernandez, head of the oil workers' union USO, known for its combative, fiercely nationalistic stance.
A communique issued by Cuban-inspired National Liberation Army (ELN) rebels heightened authorities' fears of imminent rebel attacks. ""We support our union comrades. But simply making demands (through a strike) is not sufficient,"" it said.
""These actions must go hand-in-hand with effective pressure tactics and expressions of violence and grassroots disobedience as the only method to resolve the real problems of the nation,"" the communique added.
It said its backing for the strike was a preamble to what it termed a ""national armed strike."" In the past, the ELN has used so-called armed strikes to shut down vast regions of the country, blockading major highways, setting fire to vehicles and threatening people who show up for work.
Hernandez said state oil company Ecopetrol had been severely affected by the strike but a senior company official told Reuters it had no effect whatsoever since administrative employees were filling in as part of a contingency plan.
In the coffee industry, John Naranjo, commercial manager of the powerful National Coffee Growers' Federation, said truckers had refused to transport coffee for fear of guerrilla blockades. He said cargoes at dockside amounted to about 10 truckloads in each of the main ports -- well below average.
State-run schools and universities across the country were shut down by the government as a security measure.
Local radio reports said a walk-out by airport technicians had created a heavy backlog of flights into Bogota's El Dorado international airport. Some carriers, including Continental and American Airlines, suspended operations.
",20
"Colombian public sector workers began a nationwide strike on Tuesday, disrupting air traffic, transportation, telecommunications and other services.
Security was tight in the capital Bogota in what union leaders said could be the country's biggest labour dispute in 20 years. About 800,000 public sector workers were expected to join the protest action, union leaders said.
The government warned that leftist guerrilla groups were planning a wave of attacks to coincide with the strike.
But apart from the pre-dawn torching of a bus outside the central city of Ibague, there were no immediate reports of violence or serious acts of vandalism.
National radio said that except for serious public transport shortages, services appeared to be functioning at or close to normal.
However, the traffic flow in the capital was light, resembling a quiet Sunday afternoon rather than the usual hectic pace of a weekday.
All state-run universities and schools were closed and long lines of people could be seen stranded at bus stops in working-class districts on the southern end of the capital.
""There's very little transportation this morning,"" said a woman waiting for a bus in the suburb of Soacha to take her to a cleaning job in the north of the city.
Heavy detachments of riot police and army troops guarded public offices in the city centre -- where workers were expected to stage protest marches late on Tuesday. Police manned checkpoints along key roads in the capital.
Ismael Enrique Arenas, a senior official with the state oil company Ecopetrol, said there was no immediate effect on exploration or production activity and administrative workers were filling in for trade unionists who joined the stoppage.
Private oil companies working under association contracts with Ecopetrol were also unaffected, he told Reuters.
State workers called the strike, which began at midnight Monday (0500 GMT on Tuesday) to press for a 21.5 percent wage hike. The government, struggling to cut its deficit, has vowed to hold workers' to a weighted 13.5 percent increase.
Bogota police chief Gen. Teodoro Campo stressed ""absolute normalcy"" in the capital in an interview with national radio.
Police helicopters clattered over the north end of Bogota, apparently on the lookout for urban rebel commandos, and a column of four light tanks and two armoured personnel carriers was spotted by a Reuters television cameraman heading for the southern gateway to the capital.
Francisco Hernandez, a spokesman for Bogota's El Dorado international airport, said operations were ""more or less normal"" early on Tuesday. ""I only hope we'll be able to say the same by this evening,"" he told Caracol news radio.
But some carriers, including Continental and American Airlines, suspended flights to Colombia as a security precaution since firemen had threatened to disrupt operations at the airport.
Elizabeth Fuentes, a union leader heading a picket line outside a Bogota administrative building, said the strike would last indefinitely -- until the government bowed to demands for the wage hike and cancelled plans for the privatisation of national and regional industries.
""This strike is a protest against Samper's economic policy,"" she told Reuters. ""Those policies are anti-popular, they're policies against workers and against the Colombian people.""
",20
"Union leaders restarted talks with government ministers on Thursday morning in a bid to end a strike by public sector workers, now in its third day.
Interior Minister Horacio Serpa said he hoped for ""serene and sincere"" negotiations but admitted the government, battling to rein in a burgeoning fiscal deficit, did not have much room for manoeuvre.
Union representatives expressed mild optimism but insisted the strike by an estimated 800,000 state workers would not be lifted until there was firm agreement on demands, including a 21.5 percent pay hike and an end to the planned privatisation of regional and national industries.
""We hope these talks will be serene and sincere. We will look into workers' demands in the broadest and most generous form but they must understand we have problems,"" Serpa tolds reporters.
The last round of negotiations broke up without agreement last Sunday when the government stuck to its original weighted 13.5 percent pay offer and refused to budge on privatisation plans.
Hernando Hernandez, leader of the main oil workers' union known for its combative and fiercely nationalistic stance, feared there was little chance of a rapid breakthrough.
Unitary Workers' Confederation leader, Luis Eduardo Garzon, meanwhiile, said state workers may bend on some of their demands if the government was prepared to compromise.
""I think there's a positive atmosphere. We're ready to look for alternatives if the government is prepared to do the same,"" he said.
There have been conflicting reports on the impact of the industrial action. President Ernesto Samper said just 10 percent of state workers had heeded the strike call while unions said they had severely disrupted key economic and social sectors, including oil, telecommunications, education and all but emergency health care and long-distance road freight.
In parallel with talks, unions are scheduled to stage the biggest protest marches of the strike so far in Colombia's five largest cities.
A demonstration on Tuesday ended in running battles between riot police and a 200-strong group of protesters hurling bricks and bottles.
About 40 buses bringing demonstrators from Colombia's eastern plains region to the capital were detained early on Tuesday morning at a military roadblock near Villavicencio, about 60 miles (100 km) east of Bogota. An army spokesman said the convoy was later allowed to continue.
The spokesman said a strong security presence would be maintained throughout the country as long as the labour action lasted.
Despite threats from National Liberation Army (ELN) rebels and government warnings that leftist guerrillas were trying to infiltrate the strike movement, no serious violence has been reported since the start of the work stoppage at midnight on Monday.
",20
"In a last-ditch attempt to avoid threatened U.S. economic sanctions, the Colombian government railroaded legislation through Congress on Wednesday that will mete out dramatically stiffer jail terms for drug traffickers.
The law, which had been bogged down in Congress for six months, was pushed through both houses in back-to-back sessions on Tuesday and Wednesday. It increases the maximum penalty for drug-related offences to 60 years from the current maximum of 24.
President Ernesto Samper hailed the passage of the bill, which he will sign into law before the end of the week, as proof of Colombia's ""resolute commitment to fight all aspects of the drug trade"".
The vote came a week before the United States is due to announce whether to ""certify"" Colombia as a trustworthy ally in the global fight against drugs. So-called decertification for a second consecutive year could trigger economic sanctions for the country's perceived failure to crack down hard enough on the booming trade in cocaine and heroin.
""This is a historic step. Colombia may produce drugs, but we also produce strong laws to combat drug trafficking and crime,"" said Justice Minister Carlos Medellin.
U.S. Ambassador Myles Frechette -- a vocal critic of Colombian anti-drug policy and of Samper's alleged ties to drug kingpins -- said the new sentencing guidelines failed to meet U.S. standards, under which major traffickers such as Mexico's Juan Garcia Abrego have been convicted to up to 11 life terms.
But Frechette said the new penalities constituted a marked improvement over Colombia's lenient jail sentences in the past and raised the country's penal code to ""an international level""
In another last-minute bid to escape possible sanctions, which some Colombian officials already believe are in the pipeline, Colombia is due to sign a maritime accord with the United States on Thursday that will facilitate the interdiction of drug shipments at sea.
The United States, which already has such an agreement with Venezuela and handful of Caribbean nations, has been pursuing a similar deal with Colombia for the last six years.
""This is a great agreement ... we're very pleased with it,"" Frechette said. When asked whether the accord would help avert the threat of U.S. sanctions against Colombia, he added: ""We cannot ignore something as important as this.""
Tough new jail sentences come too late, however, for Colombia's most notorious drug kingpins -- Gilberto and Miguel Rodriguez Orejuela, the billionaire chieftains of the Cali cartel. Both were sentenced to very light sentences in January that will see them walk free in as little as five years.
",20
"Pools of blood stain a dirt track that winds through the lush banana plantations of this central region, Uraba.
The bodies of two slain workers are unceremoniously dumped in the back of a truck and shipped off to the morgue, leaving heavily armed police to search for the killers amid trees laden with fruit destined for the United States and Europe.
For the last decade the banana has been synonymous with the bullet as rightwing paramilitaries and leftist guerrillas vie for the shifting allegiance of the people of this violence-torn corner of northwest Colombia. The dirty war now in full swing is just the latest chapter in the history of an industry which, for the last 30 years, has shaped politics, the economy and society in the four municipalities that make up Colombia's ""banana belt.""
""When people enjoy a banana in Europe, remember there's the pain of a whole people behind it,"" said Gloria Cuartas, mayor of the regional center of Apartado.
In the past banana workers' unions were inextricably tied to two guerrilla groups, the Maoist People's Liberation Army (EPL) and pro-Soviet Revolutionary Armed Forces of Colombia (FARC), creating open conflict with plantation bosses.
But most EPL fighters laid down their arms under a government-backed peace initiative in 1991 and went on to form a political movement called Esperanza, Paz y Libertad (Hope, Peace and Liberty). That movement now controls the union Sintrainagro with 13,000 members, an estimated 95 percent of banana workers in the area.
RELATIONS WITH BOSSES RARELY BETTER
Relations between the bosses of the 380 plantations spread across more than 69,000 acres (28,000 hectares) and their workers have rarely been better. Labor protest has been muted and the workers have won vastly improved contract terms enabling them to earn up to $300 per month, almost twice the minimum wage, as they harvest the more than 1 million tonnes of bananas exported annually from the region.
But the FARC's power in the plantations has plummeted with the demise of the union it once sponsored and in the face of the burgeoning influence of Hope, Peace and Liberty. In a bid to regain a foothold, the rebels have targeted banana workers and Hope, Peace and Liberty members in particular.
""Now instead of having the support of the guerrillas we're their target,"" said Hernan Correa, a Sintrainagro leader whose brother was assassinated by suspected FARC gunmen last year. Correa, a former EPL guerrilla, has himself been the target of at least one assassination attempt and now rides around in an armor-plated pickup truck.
But the movement has not stood by and watched its members die. ""Some members of Hope, Peace and Liberty took the personal decision to take up arms to defend themselves ... the guerrillas committed the abuses and now they're paying the price,"" Correa said.
MORE THAN 3,000 DEAD SINCE 1989
Since 1989, 20 Sintrainagro leaders and more than 3,000 rank and file party members have been killed, Correa said. The names of banana estates Bajo El Oso, Osaka, Los Cunas and Mapana toll like a church bell in the minds of many residents of the banana belt. Almost everyone had a relative or friend among the 51 people slaughtered in a string of massacres on those estates between August 1995 and February 1996.
Critics say Hope, Peace and Liberty has gone beyond self-defense and forged a pact with the army and banana growers, specifically the region's seven main banana exporters including Banadex, a subsidiary of the multinational Standard Fruit, to create right-wing death squads.
""In Apartado they want us to end up in the hands of the multinationals and they want the peasants out (to gain access to) the oil, coal and bananas and the right to the humble peasants' land,"" Cuartas said.
Regional army commander Gen. Rito Alejo del Rio rejects claims of any such covert plot. ""Hope, Peace and Liberty has strengthened the banana industry and the regional economy through excellent labor and business relations. With the links between the union, the growers and the army there is no interest apart from the stability of the zone,"" he said.
He accuses Cuartas of being an ally of the FARC and the Patriotic Union (UP), widely seen as the rebels' political wing. He believes that while the rebels wage a military campaign Apartado's mayor is waging a potentially disastrous war of economic attrition aimed at encouraging banana importing nations to clamp sanctions on Uraba.
""In 1997 NGOs (non-government organizations) will try to convince importing countries not to buy Colombian bananas on the grounds that they're financing paramilitary groups. Cutting down the sale of bananas will lead the community to the border of chaos,"" Del Rio said.
",20
"A fresh wave of political violence swept across Colombia leaving at least 24 people dead and dozens injured in massacres and guerrilla raids within a 48-hour period, authorities said on Monday.
One of the bloodiest incidents occurred in the notoriously violent northwest banana-growing region of Uraba, where suspected leftist guerrillas massacred nine civilians late on Sunday in what a local police chief called ""acts of desperation.""
Marxist rebels also launched bloody attacks in central Cundinamarca and eastern Meta provinces in what army commanders said was a bid to relieve pressure on other fronts, particularly a ""strategic corridor"" from the eastern plains to the capital.
""This massacre was a terrorist act. The guerrillas are carrying out these acts of desperation because they know they haven't got the support of the local community,"" Uraba police chief Col. Anatolio Correa told Reuters.
He said a 20-strong gang of Revolutionary Armed Forces of Colombia (FARC) rebels stormed into Currulao, near the port of Turbo on the Gulf of Uraba, and opened fire on villagers on the main street, in an ice-cream parlour and in a bar.
The dead included a 14-year-old student, a local funeral parlour owner, a butcher and peasant farmers. Six people were wounded. Two weeks ago a massive car bomb ripped through nearby Apartado, killing 11 people and injuring more than 50 in an attack that also was blamed on FARC guerrillas.
Rebels and right-wing paramilitaries have killed with impunity in Uraba for a decade. Some political analysts attribute the violence to a struggle for control of lucrative arms and drug smuggling routes, while others say it surged after right-wing death squads and the military struck a covert pact to drive rebels and leftist sympathisers out of the area.
Heavy fighting flared earlier on Sunday around the town of Uribe in Meta, formerly the site of the FARC's national headquarters. Five soldiers were killed and 12 wounded in a day-long battle. In Puerto Gaitan in the same province, two soldiers were killed in separate clashes with the FARC.
The fighting in Meta was preceded by two guerrilla raids on Saturday night on the mountain towns of Une, 15 miles (25 km) south of Bogota, and Gutierrez, 25 miles (40 km) from the capital. One policeman died in Gutierrez as more than 200 FARC fighters stormed the town.
""There was heavy fog but I could see the guerrillas running all through the town,"" said parish priest Victor Moreno. ""One even climbed into the bell tower of the church to fire at the police post.""
""These attacks are part of a tactic to get publicity and to relieve pressure on other fronts,"" regional army commander Gen. Euclides Sanchez told Reuters. The army has been carrying out operations in the area since 16 soldiers were killed in five days of fighting in San Juanito, Meta, in February.
Unidentified gunmen killed four people in San Pedro de los Milagros, in Antioquia province, late on Sunday, and a bomb exploded early on Monday in Monteria, the capital of Cordoba province, injuring five people, police said.
Three soldiers died over the weekend when National Liberation Army (ELN) rebels ambushed a light tank near the town of Saravena in northeast Arauca province.
Government estimates put the combined strength of the FARC and ELN at about 12,000, but analysts say the real figure may be much higher. The FARC was formed as a pro-Soviet guerrilla force in 1964 while the Cuban-inspired ELN was set up shortly afterward by radical Roman Catholic priests.
",20
"Moves to secure the release of about 60 Colombian soldiers held by leftist guerrillas could be hampered by failure to agree on the international character of a team to mediate the handover, a Red Cross spokesman said on Monday.
""Perhaps the most complicated element (of creating a mediation commission) is whether to view it as a national or an international issue,"" a spokesman for the International Committee of the Red Cross said.
""The important thing for us is that these people are released as quickly as possible and in good health.""
Just one day before the deadline set by the Revolutionary Armed Forces of Colombia (FARC) for creation of the commission, the guerrillas have still not nominated their own delegates to oversee the release of the prisoners, captured during a raid in southern Putumayo province on Aug. 30.
In a telephone interview on Monday, Marco Leon Calarca, part of the FARC's general secretariat based in Mexico, said they would propose Guatemalan Nobel prize winner Rigoberta Menchu.
But it was uncertain how far the government would allow the FARC to use the release of the prisoners as a chance to publicise its guerrilla war to an international audience. Some analysts believe the FARC wants to use the release to show it is a genuine guerrilla army, not terrorists and drug traffickers as charged by Colombia's government and military.
But the government is keen to treat its fight against left-wing guerrillas as a largely domestic affair and it has insisted there is nothing to negotiate when it comes to the prisoners' release.
""We want to set up a commission that carries real weight so that the government is forced to create the right conditions for the handover,"" Leon Calarca said. ""We want both an international and national presence.""
Once the commission is formed it will negotiate the timetable for the soldiers' release and witness the handover.
The troops were seized in an attack on a jungle camp in Las Delicias in which 27 soldiers were killed. It marked the start of one of the bloodiest guerrilla offensives in decades.
The government has nominated three people to the panel, Bishop of Bogota Monsignor Pedro Rubiano, former Foreign Minister Augusto Ramirez Ocampo and ex-Sen. Alvaro Leyva.
",20
"The promised release of 70 captured troops this weekend could be the first step to ending Latin America's longest guerrilla insurgency -- or the start of an all-out war -- political analysts say.
Sixty soldiers have been held by the Revolutionary Armed Forces of Colombia (FARC) for more than nine months in the jungle of southern Colombia, along with 10 marines captured in combat in January. They are scheduled to be released on Sunday in the town of Cartagena del Chaira at the heart of a 5,000 square mile (13,000 sq km) demilitarized zone in Caqueta province.
President Ernesto Samper, ignoring hawks in the military who want tough action against the rebels, bowed to the FARC's demands and ordered 5,000 troops to pull out of the area for 32 days. The accord on releasing the troops has the rebels and the government talking for the first time in six years and could jumpstart broader peace talks, the head of the International Committee of the Red Cross in Colombia said.
""This is the first time that government and guerrilla representatives have sat down face to face since 1991. They didn't talk about peace but the fact they've sat down at the same table is very positive,"" ICRC official Pierre Gassmann told Reuters on Thursday.
But other analysts say the army is thirsty for revenge against the FARC, a Cuban-inspired rural guerrilla force that took up arms against the state in 1964.
Capturing the troops was the most important political and military victory the FARC has had in many years, Eduardo Pizarro, a political violence expert at Bogota's National University, said. ""This defeat forced the army to carry out a deep self-examination and in the coming months the conflict will become much more bitter; the army has been humiliated.""
The FARC forced the government to order the military out of a huge swathe of Caqueta, the first time the army has ceded so much to the rebels. But government officials say the release of the troops is a victory for democracy and peace.
The 60 soldiers were captured and 27 of their colleagues were killed when the FARC overran an army base at Las Delicias in southern Putumayo province last Aug. 30. The marines were captured in a separate fight in northwest Choco province.
The FARC commander who led the attack on the Las Delicias base, Joaquin Gomez, will preside over the handover ceremony on Sunday. Gomez, magnamimous in victory, told reporters: ""We cannot speak of victors and the vanquished. But the whole world has at last realised the magnitude of this conflict.""
Army commander Gen. Manuel Jose Bonett has hidden his anger at having to cede territory, albeit temporarily, calling it a ""political not a military decision."" But Pizarro believes Bonett will fight hard to dent the FARC's mushrooming military ego when the demilitarization accord ends on June 23.
Other experts agree Colombia's guerrilla war will drag on.
""These soldiers are the forgotten ones that nobody outside Colombia remembers,"" said Eduardo Gamarra, an academic at Florida International University. ""This is just another episode in a long war.""
",20
"Government officials flew to northern Colombia on Friday in a bid to persuade prisoners to lay down their weapons and release hostages seized in a bloody jail riot, which left four guards confirmed dead.
A crack anti-kidnap force, meanwhile, took up positions around the jail and a local police chief raised the possibility of launching a lightning operation to rescue the hostages.
A group of 10 hardened convicts heading the revolt refused to budge on earlier demands for two helicopters to airlift them out of the jail in Valledupar, in Cesar province, and take them to an undisclosed location, the city mayor said.
At least one of the men, a former leader of the now-defunct M-19 leftist rebel movement, called for political asylum in Cuba.
""I would urge the prisoners to be patient and avoid any further bloodshed. We are on our way to the jail (from Bogota) and want to look for a peaceful solution to this grave problem,"" said government human rights ombudsman Jose Fernando Castro, who is heading the mediation team.
About 550 inmates went on a rampage on Thursday evening and seized control of the jail after overpowering 18 guards and confiscating their pistols and nightsticks. Police said leftist guerrillas and four former policemen jailed for kidnapping and extortion are heading the disturbance.
A spokeswoman for the National Prisons Institute originally said five guards were reported killed in the shoot-out and a handful of convicts had been injured. By Friday morning, Valledupar mayor Tito Pumarejo confirmed that four bodies, all prison guards, had been ferried out of the jail compound by Red Cross workers.
The INPEC spokeswoman said the final death toll may be higher, adding that security forces were still unable to enter the jail.
A Valledupar police commander, Col. Alvaro Becerra, said about 100 police and troops had formed three security cordons around the jail and said there was a ""tense but calm stand-off.""
""It would be difficult to mount an operation to rescue the hostages. It would require a great deal of planning. But an elite GAULA (anti-kidnap) squad is in place and a combined police and army strike is a possibility,"" he told Reuters by phone.
""But the inmates' demands are absolutely absurd and I don't think they will be granted,"" he added.
The inmates are holding at least 15 hostages, including a 14-year-old girl who was visiting the jail when the riot erupted, and the prison's deputy director. The majority of the prisoners restricted their demands to an end to overcrowding and better conditions.
The riot in Valledupar jail, built for 200 inmates and not the current 550 it houses, is the latest in a series of disturbances in Colombian jails.
Three provincial prisons were rocked by riots earlier this year. In the last 10 days, 2,000 inmates, led by convicted guerrillas, smashed part of Bogota's La Modelo jail while an inmate died in Bogota's top-security La Picota facility when a bomb he was making in his cell accidentally exploded.
Chronic overcrowding is broadly considered to be the main cause of the riots. More than 40,000 prisoners are crammed into facilities designed for 30,000 people, the INPEC spokeswoman said.
",20
"News that Colombia's largest truck drivers' association is preparing its second nationwide stoppage in five months has set alarm bells ringing among private coffee exporters.
The Colombian Truckers' Association (ACC), which comprises 5,000 owner-operators and at least 180,000 drivers -- an estimated 80 percent of all truck drivers in the country -- will set the start date for the strike at a meeting on March 22, one of the organization's senior officials told Reuters this week.
One private exporter said he feared the action could delay 250,000 60-kg bags of coffee scheduled for April shipment if the stoppage begins as predicted after Easter week.
Another described the strike threat as ""very serious"" and said it may also delay the tail end of March exports if these are held up by the Easter bank holiday.
A fax sent to ACC members this week stated: ""In the meeting of the association's national directorate to be held March 22 we will definitely be setting the zero hour for the start of a new stoppage by all our members and affiliates at national level with the aim of demanding the fulfillment (of the earlier accord).""
National directorate member Mario Quiroga told Reuters that initial plans were to begin the strike before Easter. He said, however, that realistically it would probably start later but was unable to give an exact date.
The ACC staged a crippling 11-day strike last October which paralyzed virtually all road freight across the country and delayed the shipment of at least 250,000 60-kg bags of key coffee exports, according to a statement by the National Coffee Growers' Federation at the time.
One private exporter predicted the impact of a new stoppage would be similar.
""If this strike starts in the last week of March I believe it could delay 200,000 bags and if it doesn't begin until April then we would be talking about 250,000 bags of export commitments in the first two weeks,"" the exporter, who did not wish to be named, said.
The truckers have renewed their strike call, arguing that transport companies and cargo owners have not fulfilled the 19-point deal which was hammered out to end the October stoppage.
The accord, underwritten by the government, included an agreement for an immediate 16 percent hike in freight rates with a further 14 percent rise at the start of this year. It also included provisions for cuts in the cost of highway tolls, operating licenses and other associated taxes as well as a pledge to review maximum load restrictions.
""There has been a lack of seriousness on the part of the government. There has been a total lack of commitment. None of the points have been fulfilled,' said Quiroga.
If there is no 11th-hour deal to avert the stoppage it will be the fourth strike to hit the coffee sector in five months.
In addition to the first truckers' strike in October, industrial action by dock workers in the main Pacific coast port of Buenaventura paralyzed an estimated 300,000 60-kg bags of export coffee for nine days in January and a week-long national strike by public sector workers in February interrupted road freight -- including coffee -- in the first few days.
""It's difficult to put a figure on how much coffee would be delayed by a new truckers' strike but this is very serious. It could delay March and April commitments,"" another private exporter said.
Fabio Trujillo, chairman of the National Coffee Growers' Unit, which represents coffee growers in 100 towns across nine provinces, branded the strike threat ""irresponsible"".
""This is an irresponsible attitude, especially on the part of those who have not fulfilled the previous agreement. Last time this type of strike paralyzed exports and cost the nation such a great amount,"" he said.
""What we really have to do now is to be exporting all we can to take advantage of the high international prices,"" he added.
Trujillo, however, doubted the strike would have an impact on the so-called Mitaca harvest which provides about 40 percent of Colombia's total production. He said the harvest was late and would likely begin toward the end of April.
The National Coffee Growers' Unit has been at the forefront of the fight to win debt relief for coffee growers.
Finance Minister Jose Antonio Ocampo announced Monday that those growers who had contracted less than 5 million pesos debt before December 1994 would be excused. Trujillo welcomed the move but called for a debt moratorium for medium-sized growers with larger debts.
((--Bogota newsroom, 571 610 7944))
",20
"Police and military forces were recalled to barracks on Sunday and all school and university classes canceled as Colombia prepared for a threatened national strike on Tuesday that promised to be the largest in 20 years, the authorities said.
Talks between union chiefs and government ministers aimed at averting the indefinite stoppage by more than 800,000 state workers broke down in the early hours on Sunday.
Armed forces chiefs issued repeated warnings that leftist guerrillas were trying to infiltrate the strike and planning a wave of attacks to coincide with the labor action. Labor leaders said they feared the government was using the claim of rebel assaults as a pretext for a violent crackdown on striking workers.
State workers declared the strike to press for a 21.5 percent pay hike, compared to the weighted 13.5 percent government pay offer, and are protesting at what they call the whittling away of labor rights and government plans for the privatization of state-run industries.
The government issued a communique on Sunday saying: ""The salary demands far exceed the government's current financial capacity ... The suspension of national and regional privatization processes would affect the improvement of efficiency of public services.""
The unions began drawing up last-minute plans for the nationwide shutdown that could paralyze all but essential public services.
As part of the beefed-up security measures to curb radical protest and what they say is the possibility of Marxist rebel action, army and police began roadside checkpoints across the country and at key entry points into the capital.
""All leave has been canceled and all forces have been ordered to report to barracks. This is a grade one alert,"" said a Bogota police spokesman.
Education Minister Jaime Nino, meanwhile, canceled all classes for one week to ""prevent any risk that could face children or teachers."" As state employees, most teachers may be out on strike.
Wilson Borja, head of the main public sector union FENALTRASE, warned the tough security measures could be the prelude to a clampdown on the protest.
""Because of the arbitrary behavior of the police and the military, we believe the security forces will try and stir up trouble against the workers,"" he said.
The last major national strike took place in September 1977. In that strike, 20 workers were killed in a single day of violent street protests in Bogota.
Newspaper columnists drew tentative parallels on Sunday between the Colombian strike call and Ecuador's political crisis, which began with a 48-hour general strike and ended with the ouster of President Abdala Bucaram.
""I don't think anything similar to Ecuador will happen here. It would be strange that citizens who have not mobilized in two years of political crisis did so now ... but one cannot completely rule out the possibility that the union protest could be the detonator for the ill-feeling that has built up in many sectors of society,"" wrote Enrique Santos in Colombia's leading El Tiempo newspaper.
",20
"Horacio Serpa, Colombia's Interior Minister and the strongman of President Ernesto Samper's administration, resigned on Tuesday to prepare his bid for the presidency.
In accepting Serpa's public letter of resignation, Samper wished his right-hand man ""every success in your new activities"" in a laudatory reply made available to the media.
""Long ago, I took the commitment to serve the country in public office and I wish to continue that task ... I present my resignation from my current post,"" Serpa said in his letter to Samper that revealed the pair's close political and personal friendship.
The move comes less than a week before the May 31 deadline by which prospective candidates must step down from public office if they wish to run in the May 1998 elections to choose Samper's successor.
Serpa, 53, a ruling Liberal Party member, has been at the helm of the Interior Ministry since Samper took office in August 1994. An able politician and fiery public speaker, Serpa earned himself a reputation as the president's staunchest ally, defending him against accusations that he financed his 1994 election campaign with drug money from the infamous Cali cartel.
Samper was cleared of wrongdoing in a congressional inquiry last year. But Serpa, one of the campaign organisers, is still under investigation on suspicion of knowingly accepting illicit donations.
""These years have been a great and difficult experience. There has never been so much controversy or such acute confrontations,"" Serpa said in his letter, in reference to the drug-funding scandal that has dogged most of Samper's rule.
In addition to rounding on Samper's opponents at home, Serpa launched outspoken attacks against the president's fiercest international critic -- the United States.
He recently dubbed U.S. Ambassador Myles Frechette, a ""sick gringo"" for what he claimed was the envoy's constant meddling in Colombia's internal affairs, especially those relating to anti-drug policy.
In the letter accepting his minister's resignation, Samper wrote: ""In these times devoid of values and ideals, your brave attitudes against violence, corruption ... or in defence of sovereignty are refreshing examples of a clean career.""
Recent opinions polls show Serpa lagging behind the former Chief Prosecutor turned presidential candidate Alfonso Valdivieso, a thorn in the side of Samper's administration for his pursuit of political corruption.
But Valdivieso, also a Liberal, shunned his party's backing and announced that he would run as an independent. Serpa, meanwhile, is likely to be able to count on the full political and financial support of the well-greased party machinery, which political analysts believe will greatly strengthen his hand as the presidential campaign gets into full swing.
",20
"President Ernesto Samper appealed to Colombian workers on Monday evening not to support the ""dark forces of chaos"" as the countdown began to the start of a nationwide strike, which threatens to be the biggest in 20 years.
The last major national strike took place in Colombia in September 1977. At least 20 workers died in a single day of protest in Bogota.
The army spent the day stationing troops in strategic areas of the country as union leaders warned that the indefinite public sector work stoppage, due to begin midnight Monday (0500 GMT Tuesday), could unleash widespread civic protest.
The government warned that leftist guerrilla movements were planning a wave of attacks to coincide with the strike and said rebels could try to infilitrate demonstrations.
""I call on (state workers) not to join the dark forces which -- concealed behind a legitimate social protest -- aim to sow chaos and violence,"" Samper said in a televised broadcast to the nation.
""We will not permit the protest to affect the legitimate rights of citizens to peace, nor even less that it ends up in abuses or terrorist attacks,"" he added, repeating threats to declare the strike illegal if it paralysed basic services.
State workers called the strike to press for a 21.5 percent wage hike, compared to the government's weighted 13.5 percent wage offer. They are also protesting at what they say is the whittling away of labour rights and plans for the privatisation of national and regional industries.
Education Minister Jaime Nino cancelled all classes in state-run schools and universities to ""prevent risk"" to pupils and teachers. The strike threatens to disrupt air traffic, oil production, telecommunications and all non-emergency health services, labour leaders said on Monday.
""It has been a long time since the unions have really fought against the government and it's difficult to say how long this strike will last,"" said Gustavo Triana, one of the heads of the main oil workers' union USO, known for its combative, fiercely nationalistic stance.
""I think what we're building up to is a nationwide civic protest, which will involve not only state workers but also the private sector and social groups,"" he added.
Government ministers and defence chiefs spent much of Monday morning huddled in an emergency security summit to discuss measures to combat street protests and the possible blockade of major highways.
""Orderly public demonstrations will be permitted but we will take firm measures to stop subversive elements taking part in the strike,"" Defence Minister Guillermo Alberto Gonzalez told reporters.
All members of the armed forces, including police, were ordered back to barracks on Sunday. Gonzalez said police and troops would be sent in to boost security at airports and to set up roadside checkpoints across the country, including at the main entry points to the capital.
A heavy military presence was also planned for the main oil production centre of Barrancabermeja -- the power centre of the USO, one of the most radical of Colombia's unions.
Political analysts said the public sector strike could spark a groundswell of social unrest but ruled out direct parallels with the political chaos in Ecuador, which began with a general strike and ended in the ouster of President Abdala Bucaram.
",20
"Oil giant British Petroleum Co Plc is involved in a ""conspiracy of silence"" over human rights abuses in eastern Colombia, European legislator Richard Howitt alleged on Friday.
But the British Labor Party representative to the Euro- Parliament admitted, after a week-long fact-finding mission to the country, that he had no evidence directly linking the multinational to the deaths of social leaders in Casanare province close to BP's operations.
BP's Colombian subsidiary, British Petroleum Exploration (BPX), has consistently denied charges of links to rights abuses committed by right-wing paramilitaries and the army. In a statement issued on Friday, it ""energetically"" condemned all violations carried out against civic leaders in the area.
""BP is involved in a conspiracy of silence and should take a more active stance in favor of human rights ... it may be that BP staff have a direct liability in these actions or it may not be the case,"" Howitt, a member of the Euro-Parliament South American affairs delegation, told a news conference.
""But I find it impossible to believe that BP managers are not aware of these human rights abuses committed in their name if not by them directly,"" he added.
The claims against BP were fueled by a series of articles in the British press in the last year based on a multi-agency report drawn up in 1995. That report documented the murders of seven peasant or social leaders, most of whom had protested against BP's operations in the area since they began in 1991.
BP is not mentioned by name in the report's conclusions, and the killings were attributed to paramilitaries and the army.
A statement issued by BP Thursday said: ""BP rejects energetically human rights abuses from whatever quarter and has publicly condemned the deaths of civic leaders and others in Casanare.""
""BP categorically rejects the accusations made by Howitt. He has a great responsibility to make sure that these claims are fully founded,"" it added.
BPX head John Doust asked Colombia's Chief Prosecutor Alfonso Valdivieso to investigate the claims fully to show it had nothing to hide. Valdivieso opened an inquiry last month but told Doust in a letter that he had no grounds to suspect any wrongdoing by the British company.
Howitt also accused BP of failing to spend enough on the local community in Casanare. BP figures show it spent more than $17 million between 1991 and 1996 on social, education, education, environmental and infrastructure programs.
",20
"A judge who ordered the arrest of Colombia's army chief was criticised on Thursday for giving in to pressure from leftist guerrillas mounting their most serious offensive in decades.
The judge in southern Caqueta province served the warrant against Gen. Harold Bedoya after the army refused to lift barricades blocking a demonstration by thousands of peasants opposed to the compulsory eradication of coca plantations.
Colombian landowners and political commentators said leftist rebels linked to cocaine traffickers had leaned on the judge to order the general's arrest.
""Who was behind the warrant? It's not difficult to guess because it's no secret that these are regions where the local authorities and the peasants are operating under pressure from the narcoguerrillas,"" the influential Colombian Cattlemen's Federation said in a statement.
Alejandro Ramirez, the local judge in the town of Albania, issued the arrest warrant against Bedoya last week. The general faces 30 days in prison for defying an earlier order to remove the barricades.
President Ernesto Samper ordered an inquiry on Wednesday into the judge's decision, which was under review by a higher court.
The government said the Revolutionary Armed Forces of Colombia (FARC), the country's largest left-wing guerrilla organisation, was behind the peasant demonstration.
The legal controversy came in the middle of one of the bloodiest offensives since the FARC and another rebel group, the National Liberation Army, were founded in the mid-1960s.
In two weeks of rebel attacks more than 120 people were killed, most of them soldiers. More than 60 soldiers were being held as ""prisoners of war"" by the FARC.
El Tiempo, Colombia's leading daily, attacked the judge decision as absurd.
""What could be more inconceivable and absurd than jailing the commander of the army in the middle of this war?"" the newspaper's deputy director Enrique Santos said in a column.
""... of all the Machiavellian plots by drug traffickers and guerrillas, the sanction ordered by the judge of Albania beats all previous records by far,"" he wrote on Thursday.
The Colombian Cattlemen's Federation said the country's economy and legal system should be put on a war footing to meet the demands of an effective counterinsurgency campaign.
The government, buffeted by the wave of leftist guerrilla violence, has called for a hefty increase in defence spending in its 1997 budget, government sources said on Thursday.
They said most of the increase would go toward military spending, with more than $420 million coming from a proposed sale of war bonds to rich Colombians next year.
",20
"Foreign and Colombian journalists have received death threats from suspected drug gangsters claiming to be ""extraditables,"" a source at Colombia's national intelligence service said on Tuesday.
Extraditables was a name used by the late cocaine kingpin Pablo Escobar and members of his now-defunct Medellin cartel as they waged a campaign of bombings and kidnappings in the late 1980s and early 1990s in a successful bid to force the government to ban the extradition of drug traffickers.
In letters sent to some newspaper editors and foreign press agencies in the last week, the group pledged to kill journalists who backed renewed government efforts to overturn Colombia's 6-year-old ban on sending its citizens abroad to stand trial.
""With your 'yes' to extradition you have signed the death penalty. Because from today, you, your families and your companies have been declared military targets,"" said the letter, a copy of which was obtained by Reuters. ""Now you will feel the meaning of power ... Remember this sentence has no time limit.""
The document ended with ""We prefer a tomb in Colombia than a jail in the United States,"" a phrase coined by Escobar's extraditables at the height of their war, which ended with the government banning the extradition of all Colombians in 1991.
Intelligence officials are investigating the threats and do not yet know if surviving members of the Medellin mob or other drug traffickers such as the rival Cali cartel may be involved.
""We're analysing these letters sent to newspaper editors and foreign journalists but at the moment we have not been able to determine how serious the risk is,"" an intelligence service spokesman said. He declined to name the journalists who received the threats.
The threats come after Justice Minister Carlos Medellin said he would press to lift the ban on extradition with retroactive effect. If he succeeds it would raise the possibility that the Rodriguez Orejuela brothers, the jailed capos of the Cali drug cartel, could eventually face trial in the United States.
Washington has been pressing Colombia to restore extradition, saying Colombian anti-drug laws are too lax and traffickers continue running their criminal empires from behind bars.
The new threats also follow recent attacks against journalists. In December, a car bomb exploded near the home of a regional newspaper editor in Medellin and last month gunmen murdered Gerardo Bedoya, a leading journalist with El Pais newspaper in Cali, home to the drug mob that replaced the Medellin cartel as the world's leading cocaine supplier.
",20
"Hundreds more families are continuing to flee violence through the jungles of northwest Colombia, adding to a burgeoning refugee crisis in the town of Mutata, its mayor said on Tuesday.
At least 2,500 people arrived in a village close to Mutata in the violence-torn Uraba region over Easter, and Mayor Luis Renteria said another 1,500 mostly women and children were expected to arrive in the next few days.
In the first international response to the drama, a British embassy official said on Tuesday that Britain's Overseas Development Agency had approved an $80,000 emergency aid package of tents and food supplies, due to be sent to the region before the weekend.
The army has accused Revolutionary Armed Forces of Colombia (FARC) guerrillas of ordering the peasants to abandon their homes in the Rio Salaqui basin of neighbouring Choco province in order to create ""social disorder"" in the main towns of Uraba.
But a FARC spokeswoman said the people had fled in the face of ""indiscriminate"" aerial bombardments by the army and threats from right-wing paramilitary groups.
""These people say they will not return home until they have guarantees from the government that paramilitary groups will be forced out of their communities,"" Renteria said.
He said one-third of the refugees in Pavarando, in the municipality of Mutata, were children, and that more than 80 women who spent up to four weeks walking from their homes along treacherous jungle tracks were pregnant.
A British embassy official said tents and food would be purchased locally and channelled to the refugees via the International Committee of the Red Cross.
The human tide of refugees has drawn an angry response from army commander Gen. Manuel Jose Bonett, who said: ""The guerrilla strategy is to force these people to move out and occupy towns to create a huge social problem.""
But a FARC spokeswoman told Reuters: ""We have been in contact with our people in the area and they say there has been intense fighting with the army. Because the army has not been able to wipe out the guerrilla it has staged indiscriminate aerial bombardments of the area.""
Interior Minister Horacio Serpa and provincial governor Alvaro Uribe are scheduled to visit the refugees in Mutata on Wednesday.
Uraba, which covers parts of Choco, Antioquia and Cordoba provinces, is the scene of bitter conflict between the army and the guerrillas. The army says it is a key arms and drug smuggling route for the rebels, while the guerrillas say right-wing forces are trying to force peasants out of the strategically important, resource-rich region close to the border with Panama.
There are an estimated 7,000 internal refugees spread across Uraba and more than 900,000 people have been displaced in the last decade by Colombia's long-running guerrilla war.
",20
"The explosion that killed an inmate in Bogota's top-security La Picota prison points to a brewing internecine war between jailed members of the notorious Medellin drug cartel, a prison source said on Monday.
William Infante, a convicted contract killer formerly in the pay of the now-defunct Medellin mob, died late on Saturday when a bomb he was making in his cell exploded.
A source in the National Prison Institute (INPEC) said investigators believe Infante, who was serving a 25-year term for the murder of a leftist politician, was preparing an attack on fellow prisoner Leonidas Vargas, an ally of the late head of the Medellin cartel's ""military wing.""
""We are investigating the possibility of vendettas between former members of the Medellin cartel jailed in La Picota. It seems the bomb may have been intended for Leonidas Vargas,"" the source said. He ruled out press speculation the bomb may have been destined for the Rodriguez Orejuela brothers and other capos of the Cali cartel jailed in an adjoining wing of La Picota.
""There is no way this device could have been used against Cali cartel members because there is no way the Medellin convicts can get through to where the Cali cartel chiefs are held. The two wings are completely separate,"" he said.
Investigations are under way to find out what type of explosive was used and how it was smuggled into the jail, supposedly the most secure in Colombia.
The prison source said the reason for the dispute between Infante and Vargas was not yet clear. Both had once been close to Gonzalo Rodriguez Gacha, alias The Mexican, the strategist behind a bloody campaign of bombings and killings that infamous cartel chief Pablo Escobar waged against his rivals and the state.
Rodriguez Gacha died in a shootout with police in 1989. The Medellin cartel was effectively destroyed with the death of Escobar in a roof-top shootout four years later.
In a radio interview on Monday, Justice Minister Carlos Medellin warned that chronic overcrowding in Colombia's jails had created a ""seedbed"" for corruption and disorder. Last week, 2,000 inmates led by convicted leftist rebels rioted in La Modelo prison, Bogota's other top-security jail, and there have been at least three other serious riots in provincal prisons this year.
""The National Prisons Institute's inability to control the situation has created a seedbed for corruption and disorder ... it would not be surprising to see problems flaring in other jails,"" Medellin told the Caracol radio network.
He said President Ernesto Samper may declare a state of internal emergency, which would allow the government to push through new laws to beef up prison security and cut overcrowding.
In addition to the lack of security in Colombian prisons, as evidenced by the recent riots, U.S. anti-drug officials allege that corruption among prison guards is rife. They say Colombia's jailed drug lords continue to run their multibillion-dollar criminal empires from behind bars.
",20
"Colombia's main truck drivers' union has voted to stage a nationwide strike from April 20 but the move has failed to unnerve the country's normally jumpy private coffee exporters.
The Colombian Truck Drivers' Association (ACC), which represents about 80 percent of the nation's truckers, has called the stoppage to protest transport companies' failure to fulfill an agreement to raise freight rates, which was hammered out at the end of a crippling 11-day strike last October.
That strike paralyzed all the country's road freight including 200,000 60-kg bags of coffee.
But one private coffee exporter, who did not wish to be named, said he was confident his firm would be able to fulfill its April export schedule before the latest strike hit.
""Most people will try and move their coffee quickly so that we don't have problems with the truckers,"" he said.
He estimated Colombia's total export commitments for April, including private and National Coffee Growers' Federation exports, amounted to about 520,000 60-kg bags.
Another private exporter, who declined to be named, even doubted the ACC strike would materialize. He believed it had been set a month in advance as a means of pressuring the transport companies and the government into seeking a negotiated solution.
""This is a joke, setting a strike one month in advance. If they were going to strike I think they would have gone out straight away,"" he said.
""Even if there is a strike then we're already preparing April shipments, the coffee is currently being processed and it should all be shipped by April 20,"" he added.
The exporter calculated that a strike starting April 20 could last for at least 10 days before it began to have the slightest impact on coffee export schedules.
On voting the strike last weekend, one of the ACC leaders Mario Quiroga said it had been necessary to set the strike date a month in advance in order to inform members and prepare the action.
When asked about the possible impact of the stoppage on coffee, he said: ""Of course it will have an impact on coffee and everything else because we will not be moving a single kilo of freight along Colombia's roads.""
In addition to higher freight rates, the October deal, which the ACC says was not fulfilled by transport companies, included extra payments to truckers waiting to on- and off-load goods and a pledge from the government to revise vehicle licensing fees and highway tolls.
In further strike news, Colombia's main dock workers' union SINTRAMARITIMO is threatening to call a fresh stoppage at the main pacific coast port of Buenaventura. In similar circumstances to the truck drivers, the dockers say that cargo operators never fulfilled the deal hammered out to end their January strike, which would have granted them an increase in wages and sickness, injury and social security entitlements.
The nine-day strike by dockers in January wreaked havoc with coffee exports -- about 60 percent of Colombia's coffee is shipped out through Buenaventura. More than 300,000 60-kg bags were locked in port.
In a fresh twist, Nelson Amaya, the regional head of the Unitary Workers' Confederation (CUT), to which SINTRAMARITIMO is affiliated, warned a new port strike could have more serious consequences than that in January.
In a whirlwind recruitment drive last week, Amaya signed up an additional 5,000 hitherto non-unionized members in the Atlantic coast ports of Cartagena, Barranquilla and Santa Marta, and said they too would heed any strike call.
Dock workers are scheduled to meet on April 1 to vote on whether to call a new strike. Amaya said the atmosphere in Buenaventura was ""healthy"" but said the dockgo operators' failure to keep their side of the bargain.
((--Bogota newsroom, 571 610 7944))
",20
"Colombia prepared on Sunday for the start of a nationwide strike on Tuesday that promises to be the largest in 20 years, according to labor leaders and the security forces.
Talks between union chiefs and government ministers aimed at averting the stoppage by more than 800,000 state workers broke down in the early hours on Sunday.
State workers were demanding a 21.5 percent pay hike, compared to the weighted 13.5 percent government pay offer, and were protesting at what they say are the whittling away of labor rights and government plans for the privatization of state-run industries.
The government issued a communique on Sunday saying: ""The salary demands far exceed the government's current financial capacity ... The suspension of national and regional privatization processes would affect the improvement of efficiency of public services.""
The unions began drawing up last minute plans for the nationwide shutdown that could paralyze all but essential public services.
The police and armed forces, meanwhile, announced beefed-up security measures to curb radical protest and what they say is the possibility of leftist guerrilla attacks, timed to coincide with the industrial action.
A police spokesman said roadside checkpoints would be set up across the country and at key entry points to the capital. In many cities, local authorities imposed blanket bans on carrying firearms and banned motorcyclists from carrying passengers.
Colombian contract killers sometimes gun down their victims from the back of a motorcycle.
""The government's lack of respect and claims of guerrilla infiltration show it is trying to discredit the labor movement,"" said Wilson Borja, head of the main public sector union FENALTRASE.
""Because of the arbitrary behavior of the police and the military, we believe the security forces will try and stir up trouble against the workers,"" he added.
A decision by the chief prosecutor's office to reopen investigations against 16 telephone workers for actions during a strike four years ago and the recent arrest of more than 10 oil workers, accused of links to the National Liberation Army (ELN), Colombia's second largest guerrilla force, further incensed union bosses.
Political analysts and newspaper columnists drew tentative parallels with Ecuador's reigning political crisis, which began with a 48-hour general strike and ended with the ouster of President Abdala Bucaram.
""I don't think anything similar to Ecuador will happen here. It would be strange that citizens who have not mobilized in two years of political crisis did so now ... but one cannot completely rule out the possibility that the union protest could be the detonator for the ill-feeling that has built up in many sectors of society,"" wrote Enrique Santos, one of the heads of Colombia's leading El Tiempo newspaper.
",20
"Colombia's lower house of Congress on Wednesday approved a law that will almost triple maximum jail terms for drug traffickers.
The bill, passed unanimously without debate, was approved by the Senate late on Tuesday and is set to be put on the statute books after presidential signature by next week.
The vote is likely to please the United States, which is due to announce shortly whether it will again blacklist Colombia for failing to crack down hard enough on drug trafficking.
The legislation effectively eliminates what the U.S. government has termed Colombia's ""lax"" anti-narcotics laws and raises the maximum jail term for drug-related crimes to 60 years from the current maximum of 24.
""We have just approved the toughest anti-drug penalties in Colombian history. Those taffickers who continue committing crimes from jail now see that we have got serious,"" legislator Roy Barreras told Congress.
He denounced U.S. pressure to rush the law through Congress and urged fellow politicians not to debate a new bill to overturn Colombia's five-year ban on extradition until the annual U.S. decision on so-called ""certification"" is known.
President Bill Clinton is scheduled to announce Feb. 27 whether Colombia should be certified as a trustworthy ally in the drug war.
Government officials have said in the past that tougher prison sentences could help Colombia win back certification, which was withdrawn last March.
""This is a historic step. Colombia may produce drugs but we also produce strong laws to combat drug trafficking and crime,"" said Justice Minister Carlos Medellin.
U.S. Ambassador Myles Frechette expressed satisfaction at the tougher sentencing guidelines but said they still had not reached U.S. standards.
""This is a great agreement ... we're very pleased with it,"" Frechette said. When asked whether the accord would help avert the threat of U.S. sanctions against Colombia, he added: ""We cannot ignore something as important as this.""
",20
"Tens of thousands of government workers took to the streets in Colombia's capital on Thursday on the third day of a nationwide strike to press demands for a sharp public sector wage hike.
At least 50,000 workers took part in the peaceful demonstration in Bogota, which involved a march down 7th Avenue, the city's main thoroughfare, to historic Plaza Bolivar in the city's colonial centre.
Similar demonstrations -- and the resulting traffic jams -- were planned in four other leading cities, as union leaders stepped up demands for the government to lift a ceiling on public sector pay rises that would hold most workers to a 13.5 percent increase -- despite inflation of more than 21.6 percent last year.
A demonstration in Bogota on Tuesday, on the first day of the strike, ended in running battles between riot police and a 200-strong group of protesters hurling bricks and bottles. But there was no immediate report of any strike-related violence on Thursday.
Mauricio Guzman, mayor of the southwest city of Cali, said several ""agitators"" planning to join in street protests there had been arrested for possession of explosives. A small bomb blast rocked the city, Colombia's second biggest, early on Thursday but there were no reports of injuries or serious damage.
Government officials restarted talks with union leaders on Thursday morning in a bid to end the strike by an estimated 800,000 workers nationwide.
But no progress was reported when the talks adjourned for two hours shortly before noon.
Before heading into the talks, Interior Minister Horacio Serpa said he hoped for ""serene and sincere"" negotiations. But he stressed that the government, which is battling to rein in a burgeoning fiscal deficit, did not have much room for manoeuvre.
Union representatives expressed mild optimism but insisted the strike would not be lifted until there was firm agreement on demands, including a 21.5 percent pay hike and an end to the planned privatisation of regional and national industries.
An earlier round of negotiations ended in deadlock on Sunday when the government stuck to its original weighted 13.5 percent pay offer and refused to budge on privatisation plans.
Unitary Workers' Confederation leader Luis Eduardo Garzon said state workers may bend on some of their demands if the government was prepared to compromise.
""I think there's a positive atmosphere. We're ready to look for alternatives if the government is prepared to do the same,"" he said.
There have been conflicting reports on the impact of the industrial action. President Ernesto Samper said just 10 percent of state workers had heeded the strike call while unions said they had severely disrupted key economic and social sectors, including oil, telecommunications, education and all but emergency health care and long-distance road freight.
Despite threats from National Liberation Army (ELN) rebels and government warnings that leftist guerrillas were trying to infiltrate the strike movement, no serious violence has been reported since the start of the work stoppage at midnight Monday.
",20
"A former justice minister said on Monday that Colombia's moves to lift a six-year extradition ban were a smokescreen designed to appease the United States while protecting the country's drug barons.
""This government has no real desire to push extradition through but it wants to give the impression that it does ... We must not underestimate (President Ernesto) Samper's bad faith and capacity for trickery,"" former justice minister Enrique Parejo told Reuters.
Samper reiterated on Monday his commitment to seeing an end to the constitutional ban on sending Colombians to stand trial abroad, saying ""it forms part of our policies in the international struggle against drugs"".
But Parejo believes Samper is merely paying lip service to the idea of extradition to placate the United States, which blacklisted Colombia for a second consecutive year for its perceived failure to crack down on drug trafficking.
A Senate committee is due to re-open a government- sponsored debate on extradition on Tuesday following a confusing session last week, which ended in a hung vote and left legislators and ministers arguing over congressional rules.
Even if one of three extradition proposals due for debate clears all congressional hurdles and makes it onto the statute books, Parejo believes it would be so complex as to be unworkable.
The alternatives range from the simple abrogation of Article 35 from the constitution -- the one banning extradition of Colombian nationals -- to one that includes widespread restrictions on when extradition could be applied.
""This is all part of a manoeuvre by the government. Even if some form of extradition is passed then it will really amount to nothing because there will be so many regulations that these would frustrate the whole process,"" Parejo said.
Extradition was banned in 1991 after Pablo Escobar, the late head of the notorious Medellin drug cartel, launched a spate of bombings and kidnappings against the state.
When Samper took office in August 1994, amid allegations that he financed his election campaign with donations from the Cali drug mob, he said restoration of extradition was not on his political agenda.
Samper and his top ministers have reversed that position in the face of increasing pressure from the United States, which has consistently pressed for extradition of the jailed Rodriguez Orejuela brothers, former chiefs of the notorious Cali cartel.
But Parejo believes Samper is now giving verbal backing to the restoration of extradition safe in the knowledge that Colombian law makes it virtually impossible to apply new legislation retroactively.
",20
"Thousands of people who fled violence and were camped out in the jungles of northwest Colombia may soon run out of food and the risk of epidemics was on the rise, a Red Cross aid worker said on Wednesday.
More than 3,000 people, mostly women and children, were sleeping under hastily constructed shelters or in the open air in a village close to the town of Mutata, in the violence-torn Uraba region.
Many worried about the fate of as many as 1,500 relatives believed to making their way along treacherous jungle tracks, fleeing the fighting between leftist guerrillas, right-wing paramilitaries and the army in the Rio Salaqui basin of neighbouring Choco province, the aide said.
""We are rationing food for these displaced people because of the lack of supplies. We just don't know how long the food we have will last,"" said Adalberto Arrieta, of the Red Cross in the regional centre of Apartado.
""We're carrying out preventative work but in these kinds of conditions of poor hygiene, epidemics inevitably follow. There are just too many people in one place,"" he said.
Multiple cases of diarrhoea and fever were reported and Arrieta said the refugees also risked malaria and cholera.
The British government was sending $80,000 in emergency aid, including food and tents, to Uraba, which covers parts of Choco, Antioquia and Cordoba provinces. But Colombian officials admitted they were ill-prepared to deal with the human tide.
Interior Minister Horacio Serpa and provincial governors travelled to Mutata on Wednesday to plan government relief aid.
The army, meanwhile, was trying to persuade the people to return home or at least prevent them from moving from the village of Pavorando to the main town of Mutata.
Army commander Gen. Manuel Jose Bonett accused the Revolutionary Armed Forces of Colombia (FARC) guerrillas of ordering the mass mobilisation of peasants to create ""social chaos"" in the main towns of the area.
A FARC spokeswoman said this week that the peasants were fleeing in the face of indiscriminate aerial bombardments by the army coupled with threats from right-wing death squads.
""We want everything back to normal but we cannot go home until all those paramilitary groups leave,"" Robinson Polo, one of the displaced, told the NTC TV news programme.
Across the Uraba region, some 7,000 people have been displaced by fighting. In the last decade, the government said more than 900,000 people were forced to abandon their homes as a result of the country's long-running guerrilla war.
The army has waged an offensive against the guerrillas in Uraba in a bid to disrupt what it claims are key arms and drug trafficking routes in and out of nearby Panama.
The guerrillas, however, say the army and the paramilitaries are waging a joint scorched earth policy to force peasants out of the strategic, resource-rich region.
",20
"Leftist guerrillas appeared on Wednesday to have eluded government troops and melted into the mountains after a four-day battle in which 16 soldiers and at least 13 rebels were killed.
Bombers flew over the combat zone 30 miles (50 km) east of Bogota late on Tuesday, but first light on Wednesday brought no repeat of the massive air strikes of the day before. The rattle of sporadic gunfire had died down and villagers displaced by the fighting were considering returning home.
The clash between the army and Revolutionary Armed Forces (FARC) rebels began late last Friday and ended in one of the worst defeats for the military since the FARC overran a military base in southern Colombia in August, killing 27 soldiers and taking 60 as prisoners.
The FARC, which was still holding the soldiers, sent the Caracol radio network proof of their survival on Wednesday, including recent photographs of each of the 60 soldiers and letters from 59 of them to their families.
The Defence Ministry on Tuesday said 16 soliders died in the San Juanito fighting and 13 to 15 rebels were killed. Most of the army casualties came as soldiers disembarked from two helicopters in an area known as El Tablon in search of a rebel column and were met by a hail of guerrilla gunfire.
Bogota's El Tiempo newspaper said the soliders quickly ran out of ammunition and some preferred committing suicide with hand grenades to being taken prisoner by the rebels.
There was no confirmation from the troops in and around San Juanito on Wednesday but many voiced discontent with their commanding officers and what they described as the unnecessary bloodshed in El Tablon.
""It was madness for our officers to fly helicopters into that area. The soldiers were hardly out of the door before they were gunned down,"" one soldier said.
Some of the 400 villagers displaced by the fighting were preparing to return home on Wednesday. Most were worried about feeding the chickens and guinea pigs they keep for food and some wondered if they would still have homes after recent heavy aerial bombardment.
Ligia Gutierrez, a mother of seven, was among the displaced villagers who said she feared reprisals by the military. ""The army is bound to come looking and trying to find out which of us have been feeding the guerrillas.""
",20
"President Ernesto Samper on Friday called on prisoners who seized a jail in northern Colombia to lay down their weapons and release their hostages following a bloody riot that left four guards dead.
He warned that negotiations to end the prison siege in Valledupar in northern Cesar province could not begin until a group of 10 hardened convicts heading the revolt by 550 prisoners, surrendered.
A crack anti-kidnap force was in place near the jail and a local police chief did not rule out the possibility of launching a lightning operation to rescue the hostages.
""The national government will not begin to look for the solution to this situation until the hostages are released and the inmates lay down their arms,"" Samper told reporters after an official event in the industrial city of Medellin.
""I call on the prisoners not to make the situation more difficult and to contribute to a rapid end to this conflict with the guarantee that their lives will be respected,"" he said.
The prisoners released a 14-year-old girl and a prison administrator earlier on Friday, but were still holding 13 hostages by nightfall.
The inmates went on a rampage on Thursday evening and took control of the jail after overpowering 18 guards, confiscating their pistols and nightsticks. Police said leftist guerrillas and four former policemen, jailed for kidnapping and extortion, were leading the disturbance.
Four prison guards were confirmed dead. A national Prisons' Institute official said the death toll could be higher but security forces had been unable to enter the compound to check.
The ringleaders refused to budge on demands for two helicopters to airlift them out of the jail to an undisclosed location, city mayor Tito Pumarejo said. At least one of the men has called for political asylum in Cuba. The majority of the prisoners restricted their demands to an end to overcrowding and better conditions.
Valledupar police commander Col. Alvaro Becerra said 100 police and troops had formed three security cordons around the jail and said there was a ""tense, but calm stand-off.""
The riot in Valledupar jail, built for 200 inmates, not the 550 it houses, comes against the backdrop of a string of disturbances in Colombian jails. Three provincial prisons have been rocked by riots this year.
",20
"Sergio Cabrera laid down his rebel's rifle years ago but he still draws on the lessons of guerrilla warfare to carve out his role as Colombia's premier movie director.
In the face of the big budget imperialism of Hollywood and the European film world's lingering cinematographic colonialism he is convinced that he and his Latin American counterparts can conquer audiences by launching surprise attacks consisting of modestly priced movies with a refreshingly new focus.
""We Latin American directors must be like guerrilla fighters -- striking with surprise films -- and find a different way of telling stories with different actors and in a different language,"" Cabrera told Reuters.
Few are better qualified than the director of ""Estrategia Caracol (Snail Strategy)"" and the recently released ""Ilona Llega Con La Lluvia (Ilona Arrived In The Rain)"" to talk of guerrilla tactics. At the age of 15, during a lengthy stay in China with his father Fausto, a Spanish Civil War refugee, Cabrera became one of Chairman Mao's Red Guards at the height of the Cultural Revolution. Three years later, back in his native Colombia, he took up arms with the Maoist-inspired People's Liberation Army (EPL) -- currently the third largest rebel group in Colombia.
During his four years battling government troops in the jungles and mountains around the northwestern city of Medellin, Cabrera followed Mao's dictum that ""political power grows from the barrel of a gun."" Now, at 46, he is becoming increasingly aware that a different sort of power is growing from the lens of his movie camera.
NOT WIDELY KNOWN OUTSIDE ART CINEMAS
Like many non-English language directors Cabrera is not widely known outside select art filmhouses in the United States and Britain. His first full-length feature ""Snail Strategy"" was released in the United States but no date has been set for the release of ""Ilona"" there.
""Ilona"" did draw favourable reviews at the Toronto film festival last September and was warmly received at the Sundance film festival in Utah in January. The movie has also scored notable successes in festivals in Biarritz and Havana. In the next few weeks it will go on general release in much of mainland Europe, a spokeswoman at Cabrera's film company said.
Based on a novel by Colombian author Alvaro Mutis, ""Ilona"" is set mainly in Panama at the start of rainy season. It focuses on a three-way relationship, based on friendship, solidarity and sex, among Ilona (Margarita Rosa), an international wanderer named Maqroll (Humberto Dorado) and an Arab seaman, Abdul Bashur (Imanol Arias). Ilona and Maqroll set up a high-class brothel to raise funds, which they send to their absent friend Abdul to buy a cargo ship -- a symbol of their desire to sail the high seas unfettered by society's bonds.
Ilona never lives to see Abdul's arrival in Panama at the helm of the new ship. She develops a strong bond with one of her prostitute employees, who lives in the rusting hull of a tug boat, and the pair die when the ship's gas cooker explodes.
FILM A POLITICAL ACT
""In these times of violence and troubles this was a way of looking at our political problems. Colombia is built on hatred and rancour and so choosing to make a film like 'Ilona,' a film about love, is a political act,""  Cabrera explained.
""I fought with the EPL for four years. But my dream of changing the country collapsed when I realised we were destroying not creating. Now I see it is more important for me to influence people through smaller things.""
""Ilona"" cost $3.2 million to make. Cabrera is aware that a film about Colombia's armed guerrillas or its all-powerful drug cartels may have been a bigger box office smash in the U.S. and European marketplaces, but he has taken the decision not to foster the outside world's view of his homeland. He has already rejected two offers to work in Hollywood.
""I don't want Hollywood-style success, I'm looking to explore new frontiers of thought. Cinema must open the way to new experiences.""
That is not to say that Cabrera, due to start filming his next movie in August, chooses to ignore the current crisis facing Colombia, torn apart by drug trafficking and endemic corruption and in the grip of one of the bloodiest guerrilla offensives in three decades of armed uprising.
""When we were filming the abandoned (tug) boat I thought that was like our country -- both were full of ghosts. Colombia is still fighting to free itself from the specters that haunt it -- violence, drugs, corruption -- and our struggle against them is much more difficult than we first thought,"" he said.
",20
"A new generation of drug lords is growing up in Colombia around the booming production and export of heroin, anti-narcotics chief Col. Leonardo Gallego said on Friday.
""There are indications of an emergent trend of new groups becoming involved in the heroin trade,"" Gallego told Reuters. But he said this did not rule out participation in the lucrative trade by ""existing groups combining or switching the traffic of one substance with another.""
Colombian and U.S. authorities, celebrating last weekend's surrender of the last Cali Cartel kingpin, were hit by figures this week showing that 62 percent of the heroin on U.S. streets comes from South America, much of it from Colombia.
That means that in addition to dominating the U.S. cocaine market, Colombia, and to a lesser extent Venezuela and Peru, have displaced southeast Asia as the major source of heroin.
Gallego, who has headed the anti-narcotics division of the National Police for two years, believes the new U.S. Drug Enforcement Administration estimates are high, but he conceded the emerging pattern is worrying and calculated Colombia could be producing as much as five tonnes of heroin a year.
About 12,000 acres (5,000 hectares) of Colombia's rural drug farms are now sown with opium poppies, anti-narcotics intelligence shows. Some of the crop is in the traditional coffee-producing province of Tolima in central Colombia and in neighbouring Huila and Cauca. Significant harvests are also expected in the northern provinces of Cesar and Guajira.
Poppy cultivation is a recent phenomenon in Colombia, where the export of heroin was unknown before 1991. Gallego said domestic social and economic conditions along with the success of the war on drugs in Southeast Asia had helped displace production to South America.
He said Pakistanis and Afghans had travelled to Colombia to teach cultivation and processing techniques but, judging by discoveries of two clandestine laboratories last month, he said methods did not yet appear too sophisticated.
But the report issued by the DEA in Washington Tuesday said South American heroin flooding the streets of cities across the northeastern United States was 30 percent more pure than the traditional Asian variety.
Colombian authorities have agreed to destroy 9,885 acres (4,000 hectares) of poppy and 44,500 acres (18,000 hectares) of coca leaf this year under a deal signed with the United States in July. Heavy rains and strong winds have hampered the spraying of illegal plantations in the south and east but Gallego said he was confident the target of Latin America's most ambitious eradication programme could be achieved.
Last weekend, tense U.S.-Colombian relations received a boost when Helmer Herrera, the only leader of the Cali-based cocaine cartel still at large, gave himself up. But Gallego warned against overoptimism, saying: ""There must be a decrease in the operational capacity of the (Cali) network but results cannot be expected in the short term.""
U.S. drug experts say Cali cartel kingpins continue to run much of their criminal empire from jail. Gallego said there were signs Colombian cartels were even diversifying supply routes away from the United States. Intelligence reports, as yet unconfirmed, say cocaine is being shipped from Colombia to Angola and then transferred to Europe and the Far East.
",20
"The United States appears to be getting sucked ever deeper into Colombia's drug war, where the lines between counternarcotics and counterinsurgency are increasingly blurred, political analysts say.
U.S. officials, who will announce this week whether to ""certify"" Colombia as a trustworthy ally in the anti-drug fight, are publicly critical of its failure to crack down hard enough on the twin scourges of cocaine and heroin.
But Western diplomats and analysts say it is not Colombians but a ""massive"" contingent of U.S. advisers, both military and civilian, who have dictated counternarcotics strategy behind the scenes since the early 1970s.
Those advisers have long known they were battling an elusive enemy of peasant farmers who tend illicit plantations, money-laundering bankers and corrupt politicians as well as the drug kingpins themselves.
Now for the first time Washington appears to be taking seriously claims by Colombian authorities that leftist guerrillas have become major drug traffickers. The guerrillas deny the allegation and say it is being used as a pretext for increasingly direct U.S. intervention on Colombian soil.
""We must recognise the decisive role played by some elements of Colombia's insurgent guerrilla groups,"" Assistant Secretary of State Robert Gelbard told the U.S. Congress on Feb. 14. ""Those groups constitute a real threat to Colombian anti-drug forces deployed to eradicate (drug) fields and the American personnel who support them.""
Allegations of rebel ties to the drug trade date back to the late 1980s, when then U.S. envoy Lewis Tambs coined the phrase ""narco-guerrillas."" It may be no coincidence that U.S. officials are reviving the issue at a time when the Colombian military faces growing criticism over its human rights record.
In an annual report, U.S. President Bill Clinton will announce this week whether Colombia should remain on a list of countries subject to possible economic sanctions because of their perceived failure to fight drugs hard enough.
If Colombia is decertified again diplomats say the move will be directed more at President Ernesto Samper and his allegedly drug-financed election than at Colombia's police and military -- the natural U.S. allies on the frontlines of the drug war. And with or without certification, American counternarcotics aid will not be affected, U.S. officials say.
Gelbard's department has already doubled anti-drug funding for Colombia to $44 million for 1997 and another $37.5 million has been allocated from a separate discretionary fund. In addition Washington has pledged a multimillion-dollar package of material aid including upgraded cropduster aircraft and 24 UH-1 helicopters to spearhead the next phase of the drug war.
Some experts compare the situation in Colombia to Vietnam in the 1960s when the United States became progressively bogged down in a faraway conflict as it shifted from covert involvement to frontline operations.
""To insert the U.S. into this kind of complex conflict is like putting the U.S. into Vietnam. If the U.S. provides aid for the drug war then it is essentially for counterinsurgency purposes too,"" Florida-based analyst Eduardo Gamarra said.
U.S. officials refuse to say how many advisers and agents are now working in Colombia and are coy about revealing the exact nature of their involvement. But a Western diplomat said 44 U.S. military were stationed at one of three ground-based radar stations manned by U.S. personnel carrying out ""essentially frontline intelligence gathering and monitoring.""
It is also known that U.S. spy-in-the-sky satellites chart the spread of illicit coca leaf or opium poppy plantations and that shadowy U.S. reconnaissance planes buzz suspicious light aircraft in Colombian airspace. Just last month the first U.S. pilot died in action when his plane crashed during a crop eradication mission over guerrilla-infested jungles.
Bogota-based political analyst Juan Tokatlian believes the prospects of successful U.S. intervention in the drug war are bleak. ""The idea of Vietnam creates the idea of a single territory and a single combat. This is much more complex since the drug war is being waged throughout the region. It could be much more dramatic in its effects in the long term than Vietnam,"" he said.
",20
"BOGOTA, April 23 Reuter - Colombia will draw heavily on its coffee stockpiles to meet export commitments, given that the 1996/97 harvest seems set to come in lower than previous estimates of 10.4 million 60-kg bags, the country's coffee czar Jorge Cardenas said this week.
Many private exporters and independent analysts, however, believe that much of the powerful National Coffee Growers' Federation's stocks are old crop or even beans that have been damaged by the so-called ""broca"" or berry borer - thereby making much of it unfit for export.
Gloomy harvest predictions by federation head Cardenas coincided with a report in Colombia's leading political magazine Semana that said serious underlying structural problems were the prime cause behind falling production levels.
In an impromptu press conference after the weekly federation meeting Monday, Cardenas said the 1996/97 harvest would come in at little over 10 million 60-kg bags. He predicted coffee inventories would drop to 3.5 million bags from current levels of about five million bags by the end of September this year as Colombia sought to meet export schedules.
He declined to comment on independent sources' claims that much of the stocks were old.
Quoting a range of experts, Semana magazine said the gradual fall in coffee output was due to the progressive aging of coffee plantations or because growers were abandoning them altogether.
A separate report in the respected El Espectador daily newspaper cited National Statistics Department figures saying that the dismal 0.21 percent growth rate of the agricultural sector in 1996 was largely due to the poor performance of coffee, with an 18.5 percent drop in production.
Also at Monday's federation meeting, the organization's technical director Antonio Herron, warned that ""broca"" was continuing to spread and could affect all Colombia's 900,000 hectares of coffee by 1999. At present about 680,000 hectares are affected by broca, about 75 percent of the country's plantations.
Federation officials previously said growers were managing to keep broca in check thanks to a vigorous TV advertising campaign. Growers themselves complain that the fight against broca has pushed up production costs.
The federation estimates that about five percent of the 1996/97 coffee crop will be damaged by broca -- a little more than 500,000 60-kg sacks -- further forcing down the amount of excelso coffee available for export.
The prevailing gloom was partially lifted by predictions by U.S. brokerage Merrill Lynch that international coffee prices could stay high until September.
Cardenas predicted July-September coffee prices would rise to somewhere around current spot May levels because of continuing supply jitters in the international markets.
A second bright point came at the end of last week with the negotiated end to a five-day truck drivers' strike, which Cardenas said had done ""a lot of damage to coffee flows"" and delayed shipment of 200,000 70-kg bags.
((--Bogota newsroom, 571 610 7944))
",20
"Fierce fighting for control of this mountain community outside the capital shows that Colombia's military appears to be losing the battle against Latin America's oldest guerrilla army, according to political analysts.
As four-days of fighting, in which 16 soldiers died, came to an end, army commander Gen. Manuel Jose Bonett flew in by helicopter on Wednesday to tell townspeople that Revolutionary Armed Forces of Colombia (FARC) guerrillas had been driven out of the area and that the soldiers were the peasants' allies.
But given the military's record of human rights abuses and counterinsurgency tactics, few peasants believed his pledge that the army would not take reprisals against civilians. Most said that once the military pulled out, FARC would be back.
FARC was set up as a pro-Soviet guerrilla group in 1964. It seeks a Marxist revolution for greater social justice and land distribution and opposes what it sees as U.S. interference in Colombian affairs.
San Juanito, 6,000 feet (1,800 m) above sea-level, amid knife-edge precipes and cavernous gorges, 30 miles (50 km) east of Bogota, is a microcosm of the large areas Colombia that political analysts say are under the de facto political and economic control of the guerrillas.
""We're neither for nor against the guerrillas. But we have to learn to live with those around us,"" said San Juanito mayor Ramiro Jimenez, referring to a strong rebel presence around the town for the past four years.
""The army has complained of lack of support from the people but we're a long way from the provincial government and there's no permanent military post here. What are we supposed to do?"" he added.
Even as Bonett gave a speech in the town square, a guerrilla source pointed out some of the FARC rebels who had taken part in the recent fighting mingling among the crowd.
Since 1993, when the FARC set up its 53rd Front in the area, as many as 50 rebels at a time have held regular, public meetings with San Juanito's inhabitants -- the last was just four weeks ago.
""The rebels hold frequent meetings and say they do not want anything (from the townspeople) and pay for the food they need. But they have made it clear that they will not tolerate informants,"" said the guerrilla source.
Bonett believed as many as 400 FARC rebels are based in the area because of San Juanito's location along part of a ""strategic corridor"" linking the eastern plains to Bogota.
Hundreds of troops have transformed San Juanito into a garrison town since fighting broke out last Saturday. But many local shopkeepers view the soldiers with distrust. Some even refuse to serve them and there is a feeling that the newly arrived force is an army of occupation not liberation.
""Guerrillas used to pass by my house and ask for food and drink. It makes me frightened to think that the army could start to take reprisals against those of us who have fed the rebels,"" said Ligia Gutierrez, of the nearby community of El Tablon, scene of the heaviest fighting.
""If I go to my fields on foot the army accuses me of being a subversive. If I go on a mule then they accuse me of running errands for the guerrilla,"" said another peasant.
Another woman complained directly to Bonett that an army officer had ordered more than $2,000 merchandise, destined for her small shop, to be confiscated on the grounds it was supplies for the guerrilla.
One soldier, on guard duty near the town's small airstrip, summed up the problem for the army. ""We come here and don't know the lie of the land. The locals won't guide us along the paths used by the guerrillas for fear of being seen as collaborators. We might as well be blindfolded,"" he said.
",20
"Colombia's state employees launched a nationwide strike on Tuesday and immediately drew support from the country's leftist rebels, who vowed to back workers' demands for higher pay with armed force.
Union bosses said the indefinite work stoppage -- billed as the biggest in 20 years -- had won the ""total"" support of an estimated 800,000 public sector employees and severely disrupted the nation's airports, telecommunications, oil production, government administration and all but emergency health services.
Government officials and spokesmen for the state oil company Ecopetrol played down the economic impact of the strike but admitted concern over threatened rebel attacks coinciding with the labour action.
""The strike is total. Workers have observed the call en masse and some social sectors are also joining in,"" said Hernando Hernandez, head of the oil workers' union USO, known for its combative, fiercely nationalistic stance.
""So far everything is passing off in a peaceful fashion. There are no reports of violence,"" he added.
Though Hernandez said Ecopetrol had been severely affected by the strike, a senior company official told Reuters there was no effect whatsoever. Administrative employees were filling in for union workers, as part of a strike contingency plan, and production and pumping operations were proceeding normally, the official said.
State workers called the strike to press for a 21.5 percent wage hike. The government, which is struggling to slash its burgeoning fiscal deficit, vowed to hold workers' to a weighted 13.5 percent increase. The strike began at midnight Monday (0500 GMT on Tuesday) and is to last indefinitely.
A communique issued by National Liberation Army (ELN) rebels, just hours after the strike began, underscored what authorities had already described as the threat of imminent rebel attacks.
""We support our union comrades. But simply making demands (through a strike) is not sufficient,"" the communique said. ""These actions must go hand in hand with effective pressure tactics and expressions of violence and grassroots disobedience as the only method to resolve the real problems of the nation.""
It said its backing of the strike was a preamble to what it termed a ""national armed strike."" In the past, the ELN has used so-called ""armed strikes"" to shut down vast regions of the country, blockading major highways, setting fire to vehicles and threatening people who show up for work.
The ELN, founded by radical Roman Catholic priests in the mid-1960s, specialises in economic sabotage and attacks on multinational companies.
Even before the ELN communique was made public, tight security was clamped on the capital of Bogota, where a ban on alcohol was declared late on Monday by Mayor Antanas Mockus and a lack of public transportation prevented thousands of people from getting to work on Tuesday morning.
State-run schools and universities across the country were shut down by the government as a security measure.
Heavy detachments of riot police and army troops stood guard outside public offices in the downtown area, and police helicopters hovered over Plaza de Bolivar, the city's main square, where an estimated 20,000 strikers gathered to protest outside Congress on Tuesday afternoon.
Francisco Hernandez, a spokesman for Bogota's El Dorado international airport, said operations were ""more or less normal"" early on Tuesday. Some carriers, including Continental and American Airlines, suspended all operations in and out of Colombia since airport firemen had threatened to disrupt operations.
A spokesman for the National Exporters Association said vast shipments of cut flowers to the United States, in preparation for this week's St. Valentine's Day holiday, had not been affected because they were flown out of Colombia on domestic carriers.
",20
"Four days of savage combat around this mountain town some 30 miles (50 km) east of Bogota has exposed what military experts say is the fatal flaw in the Colombian army's new counterinsurgency strategy -- the belief that helicopters can win the war.
The battle raging against knife-edged precipices and deep gorges between leftist rebels and the army has shown the strategy for what it is, the experts said.
""There have been many examples where more material hasn't won the war. More helicopters are just not the solution. You simply can't fly a chopper into the combat zone and drop troops,"" a Western defence attache told Reuters.
The Colombian military is scheduled to take delivery of several U.S.-made Blackhawks and Russian-produced Mi-17 helicopters this year. But the defence attache said, ""I personally wouldn't touch the Russian helicopters. I don't know what the military is thinking of.""
Fighting began last Friday when two companies of heliborne troops were attacked as they put down near San Juanito searching for a rebel column in the area. So far, at least 19 soldiers are reported dead and dozens listed as wounded or missing. Details about rebel casualties have been sketchy.
Attempts to fly in reinforcements over the weekend were thwarted as Blackhawk helicopters came under repeated fire from Revolutionary Armed Forces of Colombia (FARC) guerrillas. At least three helicopters were knocked temporarily out of commission, giving rebels time to take up strategic positions.
Just three weeks ago, in the face of a wave of guerrilla attacks across the country, armed forces chief Gen. Harold Bedoya announced a counterinsurgency emergency plan in which a sophisticated helicopter fleet was to play a key role and allow for surgical strikes against the rebels.
But experts say the strikes are being made with little more than a dull knife if the fighting around San Juanito is any example. It is one of the longest battles in recent memory and one of the worst to have erupted so close to Bogota.
The last humiliating blow dealt by the FARC was when they overran a jungle base in southern Colombia on Aug. 30, killing 27 soldiers and taking at least 60 prisoner. That defeat led military experts to suggest the army had lost control of Colombia's long-running guerrilla war and was setting itself up for seemingly irrevocable defeat.
In the battle that began on Friday, Defence Minister Guillermo Alberto Gonzalez stressed that the army had stepped intentionally into the lion's den with its helicopters. ""This whole thing started as an army offensive. It wasn't an ambush, the army went in there,"" Gonzalez said.
According to reports so far, the army has definitely come come off as second best.
",20
"Former Colombian president Virgilio Barco Vargas died on Tuesday in a Bogota clinic after a yearlong battle with stomach cancer and Alzheimer's disease, hospital officials said. He was 75.
Barco, a shy public figure but a tough politician and a skilled administrator, emerged from relative political obscurity to lead Colombia from 1986 to 1990.
""I share the sense of loss that all Colombians are feeling. Barco was a man of few but firm convictions and very dedicated to certain principles,"" President Ernesto Samper said in a radio broadcast tribute to Barco.
""I think he really was an example for the new generation,"" Samper, a Liberal Party member like Barco, added.
Barco's body was due to lie in state at the national Congress building. The government of his home province of Norte de Santander declared three days of mourning.
Barco was born in 1921 in the northeast town of Cucuta, on the border with Venezuela. He graduated from the Massachusetts Institute of Technology with a degree in civil engineering and later a doctorate in economic science.
Married to an American, Barco had a perfect command of English and is popularly remembered as one of Bogota's best- ever mayors between 1966 and 1969 when he promoted a series of major public works and urban renovation programmes.
He also served as Minister of Public Works and Minister of Agriculture in the late 1950s and early 1960s.
He was, however, ill-at-ease with the press and seen as a poor orator. Shortly after his election as president the Colombian media described him as resembling a ""disheveled, absent-minded and stuttering professor.""
Barco swept to power in the elections of May 1986 with more than 58 percent of the votes, one of the largest margins in Colombian history. He was committed to fighting poverty and promoting indigenous and children's rights.
But his administration saw drug-related violence soar to bloody heights. In the build-up to the 1990 presidential elections three candidates were shot to death, including presidential front-runner Carlos Galan -- gunned down by a drug cartel assassin at a rally just outside Bogota.
The president responded by restoring the extradition of Colombians to the United States, which had effectively been suspended by Supreme Court rulings in 1986 and 1987.
His a frontal challenge to the drug traffickers led Pablo Escobar, head of the Medellin cartel, to dub him ""Mr. Shit,"" according to journalist Simon Strong's book Whitewash.
Barco partly succeeded in his efforts to defuse Colombia's long-running guerrilla war. He negotiated a peace treaty with the leftist M-19 guerrilla group and opened the way for former guerrillas to return to civilian life.
But a tentative peace accord with the country's largest guerrilla army, the Revolutionary Armed Forces of Colombia (FARC) was short-lived.
",20
"The army began stationing troops in strategic areas of Colombia as union leaders warned that the state workers' strike due to begin at midnight on Monday could unleash a nationwide civic protest.
The indefinite work stoppage by about 800,000 state employees looked set to be the largest protest since 1977. The government feared leftist guerrilla movements were planning a wave of attacks to coincide with the strike and said rebels could try to infilitrate demonstrations.
Education Minister Jaime Nino cancelled all classes in state-run schools and universities to ""prevent any risk"" to teachers and students as unions continued to make last-minute plans for the nationwide shutdown.
State workers called the strike to press for a 21.5 percent wage hike, compared to the government's weighted 13.5 percent wage offer. They were also protesting the whittling away of labour rights and plans for the privatisation of national and regional industries.
""It has been a long time since the unions have really fought against the government and it's difficult to say how long this strike will last. The workers and the government are very far apart on their demands,"" said Gustavo Triana, one of the heads of the main oil workers' union USO, known for its combative, fiercely nationalistic stance.
""I think what we're building up to is a nationwide civic protest, which will involve not only state workers but also the private sector and social groups,"" he added.
Government ministers and defence chiefs spent much of Monday morning huddled in an emergency security summit to discuss measures to combat street protests and the possible blockade of major highways.
After the morning summit, Defence Minister Guillermo Alberto Gonzalez told reporters: ""We will be stepping up airborne patrols over the major urban areas and along the nation's main highways. Urban intelligence gathering operations will be stepped up to detect terrorist acts.
""Orderly public demonstrations will be permitted but we will take firm measures to stop subversive elements taking part in the strike,"" he added.
The strike threatened to severely disrupt air traffic, oil production, at least by the state-run oil company Ecopetrol, and telecommunications, labour leaders said on Monday.
All members of the armed forces including police were ordered back to barracks on Sunday. Gonzalez said police and troops would be sent in to boost security at airports and to set up roadside checkpoints across the country, including at the main entry points to the capital.
A heavy military presence was also destined for the main oil production centre of Barrancabermeja -- the power centre of the USO, one of the most radical of Colombia's unions.
Political analysts said the public sector strike could spark a groundswell of social unrest from groups not directly involved in the action but ruled out any direct parallels with the political chaos in Ecuador, which began with a general strike and ended in the ouster of President Abdala Bucaram.
The opposition Conservative Party was backing the protest as was the Communist Party, which had strong ties to both the public and private sector labour movement.
The last major national strike in Colombia took place in September 1977. At least 20 workers died in a single day of protest in Bogota.
",20
"Hefty budget cuts are sounding the death knell for Colombia's efforts to reverse social inequalities and undermine guerrilla movements in the poorest areas of the country, politicians and analysts say.
President Ernesto Samper announced in January that he would slash 1.3 trillion pesos (about $1 billion) from the 1997 budget to rein in a yawning fiscal deficit. He pledged that social spending and public works would not be affected.
But Finance Minister Jose Antonio Ocampo said earlier this week that more than two-thirds of the spending cuts would hit precisely those sectors the president said would be spared.
A central plank of his 1994 election platform was the so- called ""social leap forward"" that aimed to end the chronic isolation of many rural communities, virtually cut off from the rest of the country by poor access and communications.
""This is a significant step backwards for the social leap. The social programme has been failing for some time, and these cuts leave it virtually dead,"" said ruling Liberal Party Sen. Luis Guillermo Giraldo.
He accused Samper of taking the easy route by cutting funds for health, education, hygiene, drinking water and rural programmes instead of pruning government bureaucracy that soaks up three quarters of the cash destined for social spending.
Political analyst Eduardo Pisarro doubted that the reduction in social spending would spark protests among Colombia's poor, who stand to be most affected by the cuts.
But he said it would do little to loosen the grip of Marxist revolutionaries, already estimated by some analysts and defence officials to have de facto political and economic control over 40 percent of Colombia.
""Colombia has traditionally had a weak welfare state and so the impact (of these cuts) will be much less immediate. But one can forsee that the guerrilla and other groups will maintain their capacity to recruit followers in pockets of poverty,"" said Pisarro.
Armando Montenegro, head of the influential National Association of Financial Institutions (ANIF), welcomed the cuts and believed they would stem the fiscal deficit that ran at 4 percent of gross domestic product last year.
He argued that the social impact would be minimal, saying: ""Social investment is so inefficient and there's so much waste that in any event the money would not have reached the poor people.""
Montenegro hoped the budget reduction would open the way for wider private sector participation in infrastructure projects, such as road building. But he thought few private firms would be interested in building roads to remote areas needed by peasant farmers to take their produce to market.
Agriculture and defence are the other areas that will bear the brunt of the cutbacks, although the revised budget for military spending of about $350 billion pesos will be more than doubled thanks to a cash injection from the mandatory sale of so-called ""war bonds"" to rich Colombians.
Individuals or businesses with a net worth of more than $85,000 are required to spend 0.5 percent of their funds above $85,000 to purchase five-year bonds, which the government is using to finance the military.
",20
"Colombia's Senate approved on Thursday a controversial bill that would partially lift the country's six-year-old ban on the extradition of drug traffickers and other criminals.
A plenary session voted 53-14 in favour of the bill, which still faces more congressional hurdles and if successful would only become a statute toward the end of the year.
""I'm very satisfied because we had a big vote in favour of the motion,"" Justice Minister Almabeatriz Rengifo said after the session. ""This will be the last step to removing a constitutional ban (on extradition) which is what we have been fighting to do.""
Critics, however, say the original government-sponsored bill has been so watered down that it is virtually useless and is unlikely to impress U.S. anti-drug officials who have been pushing the Colombian government to push through an unconditional extradition law.
The bill must still be submitted to two more debates in the Lower House of Congress before June 20 and four more after mid-July.
If it survives intact it would forbid extradition if alleged criminals surrender to the Colombian authorities or if they face tougher penalties abroad than they would under the notoriously lenient Colombian justice system.
There are clear signs the proposal faces a rough passage in the Lower House where a similar bill foundered late last year.
""We're not in favour of a totally free or licentious extradition law. Nobody believes in the Gringos indictments with their false witnesses and everything else,"" said Giovanni Lamboglia, Liberal Party member and chairman of the Chamber of Representatives. He said he would be pressing for the bill to be watered down even further.
Foreign Minister Maria Emma Mejia, a respected member of President Ernesto Samper's cabinet remained optimistic and said the government would likely press to toughen the proposal after July 20 and even consider whether it could be applied retroactively.
The vote came on the day Virgilio Barco, former president who led his country through one of the most violent periods of drug-related violence in the nation's troubled history, was buried in Bogota. The 75-year-old statesman died on Tuesday after a year-long battle with stomach cancer.
As president between 1986 and 1990, Barco is the only Colombian leader to have ordered the extradition of one of the country's top drug lords to the United States.
He bundled Carlos Lehder, one of the masterminds of the infamous Medellin drug mob, off to a U.S. court in 1987 where a judge sentenced him to life without parole plus 135 years.
The move was one of the catalysts that led Pablo Escobar, the late Medellin cartel kingpin, to unleash a savage war against the state and forced a constitutional ban on extradition in 1991.
",20
"The looming national strike, due to start in Colombia at midnight on Monday, may unleash political and social unrest, political analysts believe, but few predict it will shake the ruling order.
Government ministers have been at pains to reject any parallels with the reigning chaos in Ecuador which began with a general strike and ended in the ouster of President Abdala Bucaram.
Union leaders said on Monday that the indefinite stoppage by an estimated 800,000 state workers, pressing for higher wages and end to a repressive labour code, could develop into a civic protest.
But political commentators insist there is little threat to President Ernesto Samper, who has already battled through the thick of a political crisis fuelled by allegations that he funded his 1994 election campaign with drug money. They say Samper has retained much higher levels of support among the ruling classes and ordinary voters than Bucaram was able to do.
In an editorial Sunday, the respected political magazine Semana wrote: ""Samper earned the condemnation of the political classes because of what happened in his campaign. But he has observed the needs of the country's other main power-brokers -- the economic elite, Congress, the Liberal Party, the military. His economic measures have never been as drastic nor as impopular as those of Bucaram.""
In the latest opinion polls Samper's popularity rating among voters hovers around 40 percent. He did, however, make many enemies among the working classes, whom he tries to court with his populist discourse, when he decreed below-inflation hikes in public sector pay and in the minimum private sector wage at the start of this year.
The tough line on pay prompted both country's main unions to pull out of a wage-price control agreement known as the social pact.
The state workers are now pushing for a 21.5 percent pay increase and an end to the government's planned programme of national and regional privatisations -- a cornerstone of Samper's economic policy.
""This strike began for labour and wage reasons but it is beginning to take on a social aspect,"" said Eberto Lopez, head of the 8,300-strong Telecom workers' union.
""Depending on the extent to which other sectors of labour and society become involved this strike could take on a different character,"" he added.
Last week, Samper charged that the strike was being used to promote covert political aims and not straightforward wage demands. The opposition Conservative Party and the Communist Party have said they will back the strike.
The security forces, meanwhile, have warned that leftist guerrillas are looking to launch a wave of attacks across the country under cover of the protest.
Labour leader Wilson Borja, head of the main public sector union FENALTRASE, tried to calm rising passions on Monday, insisting the strike was being driven solely by labour demands and that the state workers were not looking to topple Samper.
Interior Minister Horacio Serpa, Samper's right-hand man, played down comparisons with Colombia's southern neighbour.
""This strike bears no relation to the actions of 20 years ago that left such a bad taste in Colombia's mouth. Nor is there any comparison with the situation that is occurring in other latitudes,"" he told reporters.
The last major labour protest took place in September 1977, with the mass backing of private and public sector unions and social groups. At least 20 demonstrators were killed in a single day of running street battles in Bogota.
",20
"Convicts leading a riot, in which at least five guards died, demanded on Friday to be flown out of a jail in northern Colombia by helicopter to an undisclosed location, the regional human rights ombudsman said.
The inmates, some convicted leftist guerrillas and others former police officers, requested 10 parachutes, while one man, a jailed leader of the now defunct M-19 rebel group, demanded political exile in Cuba, ombudsman Carmen Quintero said.
About 550 prisoners seized control of the jail compound in Valledupar, in Cesar province, after taking weapons from prison guards on Thursday evening.
A National Prison Institute (INPEC) spokeswoman said the prisoners had taken 16 hostages, including the jail's deputy director and a 14-year-old girl.
""The prisoners are demanding vehicles to leave the jail and two helicopters with 10 parachutes. They have not said where they want to fly to but said they would take the hostages with them as a guarantee,"" Quintero told reporters outside the jail.
Provincial governor Mauricio Pimiento, part of the delegation trying to mediate the crisis, said he would not discuss the inmates' demands until they had freed their hostages and allowed all the dead and injured to be removed from the compound.
""A prisoner has reported that five guards are dead...,"" a spokeswoman for the prison said.
The inmates allowed an ambulance into the prison for some of the five inmates and jail guards injured in the initial shootout.
Police and soldiers surrounded the prison and fired bullets and tear gas over the walls but were ordered not to enter for fear of inflaming the situation, the spokeswoman said.
""We are holding our fire and have merely formed three security cordons around the jail,"" a police spokesman later told Reuters by phone from Valledupar.
Col. Rafael Pardo, head of national prisons, said there was no independent confirmation of the number of dead and injured because inmates had barred the security forces from entering the jail.
In addition to the small group of prisoners looking to break out of the jail, other inmates are demanding an end to prison overcrowding and improved living conditions.
The Valledupar prison is designed to house 200 convicts but more than 550 are imprisoned there. Earlier this week, Justice Minister Carlos Medellin admitted chronic overcrowding had turned Colombia's jails into a ""seedbed for corruption and violence.""
Across Colombia, 40,000 inmates are housed in facilities designed for 30,000 prisoners.
If news of the deaths was confirmed, it would be the worst in a string of prison disturbances this year. Last week, more than 2,000 inmates, led by leftist guerrillas, rioted and started fires in Bogota's La Modelo jail in protest at prison overcrowding.
Another convict died in the top-security wing of Bogota's La Picota jail when a bomb he was making in his cell exploded. Prisoners have rioted in at least three provincial jails so far this year.
",20
"President Ernesto Samper, moving to reverse Colombia's status as an international drug pariah, urged Congress on Tuesday to quickly approve tougher anti-narcotics laws.
Samper submitted legislation in mid-July to stiffen sentences for drug trafficking and to permit the confiscation of drug barons' property, but the measures are still tied up in Congress.
""I ask Congress to give urgent consideration to this (anti-drug) proposal,"" Samper said in a letter to lawmakers.
He said the judicial reforms ""reflect the government's unequivocal commitment to end drug trafficking and organised crime"" and would ""bring national laws into line with international parameters on drug trafficking and money laundering as laid down by the United Nations.""
By speeding up the measures, government officials say Samper has his eye on restoring Washington's faith in Colombia's anti-narcotics efforts.
Washington decertified Colombia as a partner in the global struggle against drugs in March, branding it a virtual outcast state. The government hopes to regain U.S. certification in March 1997, a government source said.
Political analysts have noted that no country decertified by Washington has ever had the measure lifted, however, and Samper's alleged ties to drug lords weigh strongly against any move by the Clinton administration to let Colombia off the hook.
Fabio Ochoa, the youngest of a drug trafficking family linked to the once-powerful Medellin cartel, was released from prison on Monday after less than six years behind bars.
U.S. drug experts have criticised the light sentences imposed on Colombian drug barons and say they continue to run their illicit activities from jail.
Samper initially said the tougher sentencing could mean convicted drug traffickers spending up to 60 years in prison. But in the bill presented to Congress, the maximum sentence envisaged adds up to little more than one-third of that term.
Despite Samper's push to regain U.S. certification, he has not yet submitted any bill that would reestablish extradition for drug traffickers. An extradition treaty with the United States was suspended with a constitutional reform in 1991, introduced against the background of a campaign of terror waged by major drug barons in the late 1980s and early 1990s.
",20
"Colombian union leaders representing 800,000 state workers launched a nationwide strike on Tuesday but its impact on vital economic sectors was not immediately clear apart from disruption in public transport.
Labor leaders said the strike of 800,000 public sector workers, which could be the biggest in Colombia since September 1977, would disrupt air traffic, oil production, telecommunications and all non-emergency health services.  
But early morning reports on national radio said, that apart from dire shortages of public transportation, everything appeared to be running at or close to normal.
Apart from the pre-dawn torching of a bus outside the central city of Ibague there were no immediate reports of violence or serious acts of vandalism by ""the dark forces of chaos"" that President Ernesto Samper warned of in a national television and radio address on Monday night.  
Ismael Enrique Arenas, a senior official with the state oil company Ecopetrol, said there was no immediate effect on exploration or production activity since administrative employeees were filling in for union workers joining in the work stoppage.
Private oil companies working under association contracts with Ecopetrol were also unaffected, he told Reuters.
Francisco Hernandez, a spokesman for Bogota's El Dorado international airport, said operations were ""more or less normal"" early Tuesday. ""I only hope we'll be able to say the same by this evening,""  he told Caracol news radio.  
Some carriers, including Continental Airlines Inc and AMR Corp's American Airlines, suspended all operations in and out of Colombia as a security precaution since firemen had threatened to disrupt operations at the airport. But Hernandez said most airlines were operating normally.
State workers called the strike, which began at midnight local time/0500 GMT Tuesday and is to last indefinitely, to press for a 21.5 percent wage hike.
The government, which is struggling to slash its burgeoning fiscal deficit, has vowed to hold workers' to a weighted 13.5 percent increase.  
Bogota police chief General Teodoro Campo stressed ""absolute normalcy"" in the capital in an interview with national radio.
But the city's streets, which were free of traffic, looked more like they do on a quiet Sunday afternoon than they do on a normal traffic-choked weekday. Buses were especially scarce.
Police helicopters clattered over the north end of Bogota, apparently on the lookout for urban rebel commandos, and a column of four light tanks and two armoured personnel carriers was spotted by a Reuter television cameraman heading for the southern gateway to the capital.  
Army officer Lieutenant Pedro Jimenez, in charge of the column, said he was under strict orders to prevent any strike-related violence.
""The aim of this operation is to prevent the outbreak of violence. We will ensure that this strike proceeds in a climate of complete calm,"" he said.
""All commanders have been given orders to make sure that there are no attempts to commit terrorist acts by subversive groups,"" said armed forces chief Gen. Harold Bedoya.  
Heavy detachments of riot police and army troops stood guard outside public offices in the city center -- where workers were to stage protest marches late Tuesday -- and police manned checkpoints along key roads in the capital.
All state-run universities and schools were closed and long lines of people could be seen stranded at bus stops in working- class districts on the south end of the capital.
""There's very little transportation this morning,"" said a woman waiting for a bus in the suburb of Soacha to take her to a cleaning job in the north end of the city.
""I've been waiting here for 1-1/2 hours and I'm afraid i'll lose my job over this. The bosses just don't understand,"" she said.
Elizabeth Fuentes, a union leader manning a picket line outside a Bogota adminsitrative building, said the strike would last indefinitely -- until the government bowed to demands for the 21.5 percent wage hike and cancelled plans for the privatization of national and regional industries.
""This strike is a protest against Samper's economic policy,"" she told Reuters. ""Those policies are anti-popular, they're policies against workers and against the Colombian people.""
",20
"Throngs of people flocked on Wednesday to a trade fare unveiling the latest personal security gadgets in a country where kidnapping and drug gangs are rampant.
The entry fee for the two-day Expo Seguridad fair was $285. But there was no shortage of takers in Colombia, which has the highest kidnap rate in the world, three guerrilla forces specialising in extortion and attacks on multinationals and drug gangs armed to the teeth.
Industrialists, government officials, defence experts and the worried wealthy were among those who descended on a downtown Bogota convention centre for the thrill of meeting shadowy people like an ex-spy from Israel offering the Sting-2, a $7 million dollar, remote-controlled plane able to start a one-man war or just monitor traffic.
Many hi-tech security gadgets like the Sting-2 are so secret that they are only be sold to hand-picked clients.
William Silva, a saleman with A1A Security, a Colombian firm headquartered in Miami, was offering a $600 wristwatch that is really a camera, or a video camera so small that it can be concealed in the end of a neck tie.
""My speciality is espionage and counter-espionage. I have given advice and provided equipment for the Colombian army and the security services,"" Silva said. ""I look on myself as a Colombian James Bond or a character from Mission Impossible.""
Another popular service for those with a bunker mentality is armour-plating. The price tag for fitting a Range Rover with sophisticated alloys, tough enough to resist a bazooka, missile or bomb attack, was around $150,000.
""Colombia is certainly the market leader in Latin America and probably in the world for sales of armour-plated vehicles. There's such a huge problem of terrorism against the government and of kidnap by the guerrilla,"" Silva said.
For those more interested in surrounding themselves with a human shield rather than a ring of steel, Luis Enrique La Rotta, director of Sicurex, boasted he can provide bodyguards trained in methods learned from the Chinese, Incas and Aztecs.
""Becoming a bodyguard is like entering a religion. Once you're in you must keep practicing the faith,"" he said. ""We don't want Rambos, our escorts are intelligent, intuitive and astute. They smell danger but don't look for a fight. They only use guns as a last resort.""
The Israeli connection at the fair is strong. One company is offering two-week training sessions in the Middle East. Another specialist Benny Manel, a former adviser to the Israeli government, gives a conference on industrial espionage and sabotage.
",20
"A nationwide public workers' strike entered its second day in Colombia Wednesday, but it was soccer that brought the nation to a standstill.
Thousands of workers deserted picket lines to watch television coverage of a World Cup eliminator clash between Colombia and arch-rivals Argentina in the Caribbean port city of Barranquilla.
""There were meetings and pickets this morning but most people went home because the strike has more or less come to a halt because of the soccer,"" said Wilson Borja, leader of the public sector FENALTRASE union.
In a country full of soccer fanatics, a match featuring Colombia's undefeated World Cup contenders would understandably get a bigger draw than picket lines. But even the private sector ground to a halt as employees crowded around TV sets to watch the nail-biting match.
But some say the government has purposely used soccer in the past to deflect attention away from perceived or actual political crises.
""It goes back to the Roman times when emperors offered bread and circus to the people. The problem in Colombia is that there is circus but no bread for the masses,"" said Enrique Parejo, a former justice minister.
Few are better placed than Parejo to comment on the link between politics and sport.
He was justice minister, in November 1985, when leftist rebels of the now-defunct M-19 movement stormed the Palace of Justice in downtown Bogota, taking more than 300 hostages and prompting a violent counter-attack by the army.
At the height of the battle the government encouraged radio and TV stations to halt live broadcasts from the scene and transmit a series of soccer matches instead.
""I didn't take part in the decision but I think undoubtedly it was aimed at diverting attention from what was going on,"" Parejo said.
Likewise, on the first day of the nationwide strike by an estimated 800,000 state workers Tuesday -- which government officials predicted could spark widespread violence -- a state-run TV channel re-broadcast Colombia's 1993 5-0 soccer victory over Argentina in Buenos Aires.
""I think they did it deliberately to try and neutralise the strike and get people off the streets,"" Parejo said.
Underscoring the fanaticism surrounding soccer in Colombia, 120 people were murdered across the country in celebrations that followed that thrashing of Argentina four years ago.
",20
"A German spoke on Wednesday of his kidnap ordeal in the jungles of Colombia and said he and his three companions, two of whom were killed, considered an escape on the day before the army stormed the guerrilla camp where they were held.
Mardean Muzinic, a construction worker from Munich, and Manfred Kehrer, of Linz, Austria, were freed on Tuesday, a month after being seized by a 20-strong group of Revolutionary Armed Forces of Colombia (FARC) rebels as they crossed into the country on foot from Panama via the remote Darien Gap.
But Kehrer's brother Johann and friend Alexander Scheurer, also from Munich, were killed -- by guerrillas according to the military -- moments after army special forces attacked the insurgents' hilltop base in northwest Choco province.
""We talked about the choice of escape Monday but there were two different opinions,"" Muzinic told Reuters in a phone interview from a military base in Carepa, in Choco.
""I was for taking the risk because I thought only half of the guerrillas knew how to fight,"" he added. Like his companions, Muzinic received weapons training during military service at home and said he was convinced he would have been able to handle a rebel rifle.
At least half the revolutionaries were less than 15 years old and had little idea of what they were doing, Muzinic said. But the four friends had been split into two groups after the 10th day of their ordeal -- making it almost impossible to time a joint escape attempt. They were only briefly reunited Monday to celebrate Manfred Kehrer's birthday.
The guerrillas told them they were demanding a $15 million ransom. But German embassy officials and Austrian ambassador Franz Irbinger said they had no idea the men had been snatched until after they were released and had received no demands.
""I was sure the kidnap would last for months or years because we didn't have any money to pay for a ransom ... We were never sure they (the rebels) were telling us the truth. We know they told us a lot of bullshit,"" Muzinic said.
The four backpackers, all between 25 and 30, finally opted to wait, fearing they could perish in the jungle if they made a dash for freedom through rebel-infested territory. ""The area around was full of guerrillas. The problem was where to run and which direction to take,"" Muzinic said.
The four were abducted on Feb. 7 at the entrance to the Los Katios nature reserve, just a short distance from Colombia's border with Panama.
Muzinic said they were forced to march about seven miles (10 km) a day along muddy jungle tracks on basic rations of rice and meat. At night a rebel leader known as ""Saul"" would read tracts of Marxist-Leninist literature to his comrades.
""It was not like a real kidnap. At times it was more like a guided tour. Some of the rebels were just playing with their weapons like in a cowboy movie. It was ridiculous,"" Muzinic said.
But that sense of make-believe turned to tragic reality shortly after midday on Tuesday. Muzinic and Manfred Kehrer had gone under guard to bathe in a river near the rebel camp. The next thing they knew, the bullets started to fly and their captors fled. Minutes later a small group of army troops appeared further down the river.
The firefight continued on the other side of the hill, however. In the hail of gunfire, Kehrer's brother and Scheurer died and four FARC fighters were also killed.
Regional army chief Gen. Ivan Ramirez blamed the deaths of the two tourists on the FARC. Muzinic said he had not seen or spoken with the pair since the previous day but added: ""When the army came down from the hill they said the others had been shot by the rebels. I believe Saul gave the orders. He was a real fanatic ... a hardliner.""
",20
"Gloria Cuartas is still haunted by the image of two gunmen who beheaded a child as she watched from the gates of a school in this troubled northwestern town.
The men tossed the severed head toward her as she shepherded young pupils back into the classroom seconds before a rival gang arrived and a shootout erupted. That experience is at the heart of why Cuartas, the mayor of Apartado, is raising a rare voice for peace amid the drums of war that thunder across the killing fields of Uraba -- one of the most violent regions of Colombia.
Since she took office in January 1995 Cuartas has battled to build an oasis of neutrality to shelter the civilian population from the crossfire of a savage war between leftist guerrillas, right-wing paramilitaries and the army.
""I was visiting a school last August when two men grabbed a child behind the school. They punched him in the stomach and then cut his head off and threw it toward me,"" Cuartas told Reuters. ""There was a shootout and I took refuge with the children in the classroom and then in a nearby house.""
She believes the attack was an attempt by paramilitaries to frighten her into quitting her post. But like most crimes in the area, the child's killers were never brought to justice.
CONSENSUS CANDIDATE
The gutsy, pint-sized mayor was elected as the consensus candidate of political forces ranging from the traditional Liberal and Conservative Parties to the left-wing Patriotic Union, seen as the political wing of the Revolutionary Armed Forces of Colombia (FARC), the country's largest guerrilla army.
She realised that in the short term it was impossible to take the guns out of local politics in this strategically located region where left and right have killed with impunity for more than a decade. But she has made repeated calls for townspeople to declare ""active neutrality"" and not take sides in the sectarian violence.
""You can't issue a decree about that because there's pain, suffering, refugees, resentment and people buried in shallow graves. But I do know the people of Apartado are tired of suffering,"" Cuartas said.
Apartado, with a population of 80,000, is the regional centre of this banana-growing region, which spreads across the provinces of Antioquia, Choco and Cordoba.
There were three massacres in and around the town last year, contributing to a death toll of more than 350 -- more than four times the national per capita average. Peasants are gunned down on a daily basis as they walk along dirt tracks that wind through lush banana plantations. And last month 11 civilians were killed and 60 others injured when FARC rebels detonated a massive car bomb in the town centre.
LIBERATION THEOLOGY A HELP
Cuartas, 36, a trained social worker, grew up near Medellin, Colombia's third largest city, and was educated by Carmelite nuns. ""I always read a lot about liberation theology -- that has been my guide. I was educated not just to talk of Jesus and justice but to construct it,"" Cuartas explained.
Her work has received wide international recognition and last year she won the United Nations UNESCO Mayors for Peace award. But with less than a year before her mandate ends many at home are sceptical of her project for peace.
""Gloria Cuartas' neutrality is in question. She's more a friend of the guerrillas than of the other political actors,"" said Hernan Correa, one of the leaders of the banana workers' union Sintrainagro.
Townspeople frequently complain about a lack of progress on public works projects and most adopt their own strategy of ""seeing but not looking and hearing but not listening"" to stay on the sidelines of the dirty war raging around them.
Other critics believe Cuartas has gone too far for a supposedly neutral mayor in voicing claims of a secret pact between the army, the banana companies and right-wing death squads. The fact that those views feature on an Internet page (http://www.igc.apc.org/csn/gloria.html/) set up by the Colombia Support Network rights group based in Apartado's sister town of Madison, Wisconsin, has further raised hackles in the military.
""She uses the image of violence to sell her political ideas ... and gives a distorted view of what's going on and gets a page on the Internet. What does she want? She will be a tireless champion of the violations against the Patriotic Union,"" said Col. Mario Correa.
But Cuartas, who shuns police protection and private bodyguards, continues to speak out regardless of the clamour of verbal attacks and a daily diet of death threats.
""I ask you who is killing the people. It's not peasant against peasant, are you blind? The whole world must speak out about this -- there's no room for another single body in this cemetery,"" she said.
",20
"British television and national newspaper group United News & Media Plc said on Friday its profit had risen 12 percent in an ""excellent"" first year following a merger which effectively doubled its size.
A media heavyweight was created last year when United News, publisher of national newspapers The Express and Daily Star, joined forces with commercial television and financial services group MAI in a three billion pound ($4.8 billion) deal.
The enlarged company said 1996 profit before tax and exceptional items rose 12 percent to 290.2 million pounds. Earnings per share increased 15 percent to 40 pence.
""I think we have delivered at the top end of expectations against the agenda we set ourselves at the time of the merger,"" chief executive Clive Hollick told Reuters.
The profit figure was just ahead of most analysts' forecasts. United shares gained 9-1/2 pence to 750 by 1130 GMT, bucking the trend in a generally lower market.
""The review of the businesses following the merger has been completed, with adjustments to the portfolio in some areas and changed operating strategies in others,"" said Hollick, who moved across from MAI.
United said savings as a result of the merger and subsequent restructuring were expected to reach 43 million pounds a year by 1998. It took an exceptional charge of 56 million pounds last year, mainly stemming from the merger.
The company has been active on the disposals and acquisitions front, spending more than 750 million pounds last year as it bought exhibitions group Blenheim and a 29.9 percent stake in regional television broadcaster HTV.
It recouped around 300 million by selling a finance company, a legal publisher and local newspaper interests.
United, which operates commercial television (ITV) franchises in southern and eastern England, said operating profit from its broadcasting and entertainment division rose by 36 percent to almost 60 million pounds.
Profit from the business services unit increased by 38 percent to 100.5 million but the contribution from financial services fell slightly to 51.1 million.
Earnings from consumer publishing dropped 7.5 percent to 81 million after a 31 million pound increase in paper costs.
Hollick said restructuring of the national newspapers should bring annual savings of 15 million pounds, some of which would be ploughed back into the titles.
The mid-market Daily and Sunday Express titles have been relaunched as a combined seven-day operation in a bid to end a long-term sales decline.
United said trading in early 1997 was ""well in line with expectations"". It is paying a final dividend of 15.5 pence per share, bringing the total for the year to 23.5 pence, an increase of two percent. ($1=.6228 Pound)
",21
"Shares in British publisher Dorling Kindersley Holdings Plc lost almost 20 percent of their value on Tuesday after the company warned that profits would fall short of last year's level.
Traders wiped over 40 million pounds ($64 million) off Dorling's value as the company warned tough conditions in the U.S. retail book market, currency movements and increased investment in its direct selling business would hit profits.
It restated its profits for the year to end-June 1996 to 12.9 million pounds ($20.5 million) from 17.4 million pounds to reflect a change in the way it accounts for multimedia development costs.
Managing director Rod Hare said profits would fall ""somewhat short"" of 12.9 million pounds but would not specify how much.
The warning, the second in little more than three months, sent Dorling shares spiralling 60p lower to 261p by 1025 GMT.
The value of the company has halved to around 180 million pounds since the company warned of the likely impact of sterling strength in early December.
Dorling reported a nine percent rise in pre-tax profit to 6.8 million pounds in the six months to December 31. Interim dividend was left unchanged at 1.5 pence per share.
""The primary factor for the downgrade in the profit forecast is...the U.S. book market has not performed as expected,"" managing director Hare told Reuters.
Hare said that Dorling had suffered from a change in policy at leading U.S. book retail chains Borders and Barnes & Noble, which had cleared out their stock and cut new orders after their store expansion programmes slowed.
Hare said that Dorling believed that a more normal re-order pattern would be restored later this year for back order books, However, he expects the U.S. chains to continue to order less initial stock of new titles.
Dorling earns more than 40 percent of revenue in dollars and Hare said that the strength of the pound would result in ""well over a million pounds of lost profit"" this year. ($1=.6281 Pound)
",21
"The plight of English soccer team Millwall provides a cautionary tale for investors planning to buy into the growing number of clubs joining the stock market, share analysts said on Wednesday.
Millwall's financial crisis was likely to make potential investors more careful about which stocks they pick in what is a much-hyped and increasingly crowded sector, analysts said.
Millwall Holdings Plc, owners of the London second division club, have called in administrators to run the company while it seeks to put together a financial rescue package.
Shares in Millwall remain suspended on the London Stock Exchange. They were worth just 4p each before their suspension on Tuesday, having slipped away from a price of 20p when they were issued seven years ago.
""This is a warning shot across the bows. Just because it is a soccer stock does not mean that it will outperform the market,"" said Vinay Bedi of stockbrokers Wise Speke.
Shares in premier league clubs Manchester United, Tottenham Hotspur and Caspian, owners of Leeds United, have almost trebled over the past year.
Revenue from a television deal with satellite broadcaster BSkyB and the anticipated riches from the introduction of pay-per-view in the coming years have driven growth.
An increasing number of clubs have come to the market to raise new funds and widen ownership.
Premier league glamour club Newcastle United were the latest to join the trend, announcing last week that they aimed to raise up to 50 million pounds ($83 million) through flotation.
But smaller clubs such as West Bromwich Albion have recently joined the junior AIM (Alternative Investment Market) market and their first division rivals Birmingham City and Charlton Athletic are also planning to float.
Analysts point out that there is clearly a greater risk in investing in clubs outside the premier league.
""It is not uncommon for clubs to run into financial problems but Millwall are the first time it has happened to a quoted company,"" said Nick Batram, of brokers Greig, Middleton.
""Fans will buy stocks in their favourite clubs because they want to become more involved. But institutional investors must look beyond the name and at the commercial strategy,"" he said.
""Millwall show that you can't run a lower division club on a premier division cost base,"" he said, noting that Millwall's wage bill of four million pounds last year was as high as that of premier league Southampton.
Millwall made a pre-tax loss of 2.9 million pounds in the year to end-May 1996 as the club tumbled to relegation after a disastrous run of form in the second half of the season.
The success of the premier league over the last five years has widened the gulf between the 20-club elite and the 72 members of the three lower divisions.
A study of the 1994/95 season by accountants Deloitte & Touche showed that the premier league generated almost 70 percent of soccer's total income of 468 million.
But Batram said that lower division clubs, which have their own separate BSkyB deal, could still prove good bets.
""You can be a profitable and successful club in the lower divisions if you have the right cost base,"" he said.
""The key is for clubs to build their business slowly. But it's hard to do that as all fans want their team to be in the premier league."" ($1=.6021 Pound)
",21
"Britons resigned to spending Easter at home in front of the television will at least have extra entertainment this year with the new Channel 5 station which goes on air on Sunday night.
The station is the first commercial terrestrial channel to launch in Britain since Channel 4 (C4) in 1982. But C4 has a remit to cater for minority tastes while Channel 5 will go head to head against the powerful ITV commercial network of regional broadcasters.
""Channel 5's audience will grow as ITV's declines,"" Dawn Airey, Channel 5 Director of Programmes, said last month. She promised ""intelligent, stylish and popular"" shows from a channel hoping to attract advertisers seeking to target young consumers.
Channel 5 is aiming to fill in the areas its terrestrial signal cannot reach by securing carriage agreements with BSkyB, and the cable companies.
Satellite and cable subscription channels have multiplied in Britain in recent years but only around 25 percent of households take them, limiting their appeal to advertisers.
Britons are television addicts, spending an average of almost four hours in front of the set every day. But will they find anything they want to watch on the new channel?
Operating on a limited budget, the station has set itself apparently modest initial viewing targets.
Its chief executive David Elstein, who was hired from pay television giant BSkyB, has said he believes the channel can win a five percent audience share by the end of the year. ITV, by contrast, has a share of around 35 percent.
However, Channel 5's core programme budget is only 110 million pounds ($175 million), against 600 million for ITV.
The licence-funded BBC, which supplies the other two ""free to air"" UK channels, spent a total of 1.1 billion pounds on its television operations in 1995/96.
Channel 5, owned by British media groups Pearson Plc, United News & Media, European broadcaster CLT-Ufa and U.S. investment firm Warburg Pincus, has already had its share of problems before going on air.
Its major headache was the need to retune millions of video recorders in homes up and down the nation to avoid interference from its signal. That exercise has cost an estimated 150 million pounds, three times the original forecasts.
Channel 5 delayed its start date from January after the allocation of an extra broadcast frequency increased the workload on its army of retuners.
Little more than 60 percent of Britons are likely to be able to receive the service when it goes on air on Sunday. But this figure should increase to around 85 percent of the population by the end of the year as the extra frequency comes into use.
However, as many as two million of the 18 million homes reached could require a new or upgraded television aerial in order to get a decent picture.
Channel 5 plans a daily soap at 6.30 p.m. and its main evening news will be at 8 p.m., to avoid competing with the bulletins on BBC 1 and ITV.
That early news bulletin clears the decks for a daily feature film in the 9 p.m. slot. Extra money has been added to the core programming budget to secure movie deals and films lined up include Speed, Mrs Doubtfire and Independence Day.
The channel has also secured the rights to the Poland-England World Cup soccer match on May 31.
The consensus in the industry is that Channel 5 is likely to establish itself once the teething troubles are overcome. Its prospects are enhanced by the fact that it is getting into the market before multi-channel digital TV becomes a reality.
""It has got a whole set of problems such as retuning and coverage and it is entering what is now a much more competitive market,"" said Kip Meek, of media and telecommunications industry advisers Spectrum Strategy Consultants.
""But it is a new terrestrial channel and as such it should be able to make money.""
",21
"Shares in British media group EMAP Plc tumbled about three percent on Monday after the company said it was losing managing director David Arculus to television and newspaper firm United News & Media .
Arculus, 50, who joined EMAP in 1972, will move to United News on April 7 as chief operating officer. His responsibilites there will range from consumer publishing through television to trade magazines and exhibitions.
""David Arculus has demonstrated a sure touch as a builder of media businesses. His experience and proven record make him a valuable addition to the team,"" United chief executive Clive Hollick said.
United said the move completed the management team it has built since its three billion pound ($4.9 billion) merger with television and financial services group MAI last year.
United shares rose 17p to 704.5p after the announcement while EMAP fell 25p to 787.5p.
EMAP has been one of Britain's fastest growing businesses in recent years, selling out of its original regional newspaper base, and expanding its British local radio operations and its consumer magazine interests at home and in France.
But it was hit last year by a row over corporate governance which resulted in the ousting of two non-executive directors.
Chairman Sir John Hoskyns at that time played down talk of a boardroom rift between Arculus and chief executive Robin Miller over who would succeed him.
Share analysts said the departure of Arculus was worrying, coming so soon after last year's upheaval.
""The fact that Arculus is leaving is slightly disturbing,"" said Nick Ward of Credit Lyonnais Laing, noting however that it was impossible for a company to predict staff changes.
""But the place will not fall apart without him,"" Ward added, saying that EMAP was known for its strong divisional management.
Analysts also pointed out that the fall in EMAP shares came after a strong run which has seen them rise from 730p in December when the non-executive directors were removed.
EMAP's Miller said the company's board had not yet decided on who will succeed chairman Hoskyns when he retires next year.
Miller, who joined EMAP in 1965 as a reporter on Motor Cycle News, said there had been differences with Arculus but the partnership had worked well overall.
Arculus, EMAP managing director since 1990, said he was delighted to be joining United, a company whose businesses include British commercial television stations, two national newspapers and a trade exhibitions arm.
""I got offered a job about three times the size of the one I was doing at EMAP,"" Arculus told Reuters. His 1995 pay package was worth some 250,000 pounds but he would not be drawn on how much he would earn at United. ($1=.6142 Pound)
",21
"Granada Group Plc expressed optimism on Thursday about prospects for the sale of more than 20 British motorway service areas as it continues to dispose of assets acquired in its takeover of Forte.
Competition authorities have ordered British media and leisure group Granada to sell its 21 Welcome Break motorway sites by April because of monopoly concerns.
Granada acquired the business when it won control of hotel and catering empire Forte a year ago after a long and bitter takeover struggle.
""What we had was effectively about 18 players there who came in and showed interest and we've basically taken that down now to six/seven interested parties,"" Granada chief executive Charles Allen said in an interview when asked about the Welcome Break sale.
He said both trade buyers and financial players were among those in the running in a deal which share analysts believe could raise as much as 370 million pounds ($600 million).
Granada is in the process of selling off 17 luxury ""Exclusive"" hotels it acquired from Forte. Buyers have already been found for properties in London, Paris and Barbados.
The hotel sale could raise more than 800 million pounds but Allen made it clear that Granada could yet decide to keep hold of London's Grosvenor House, the largest and most valuable of the assets on the market.
Allen said Granada would only sell if it got ""the right price"" for the swish hotel. It is believed to be seeking a figure in excess of 300 million pounds for that one building.
He said that there was scope to double annual profits at the Grosvenor House to around 40 million pounds.
Granada also acquired the Meridien international hotel chain as part of the Forte deal. Allen said that Granada planned over the next few years to turn the operation into a pure management contract business.
The chain comprises more than 70 hotels, of which around 25 are owned and 50 are run on management contracts.
Allen said the eventual sale of the Meridien ""bricks and mortar"" was likely to be worth about 500 million pounds. ($1=.6172 Pound)
",21
"The UK government on Monday threatened to scupper a bid by London Clubs International for rival casino group Capital Corp when they passed it to competition authorities.
Consumer Affairs Minister John Taylor said the 190 million pound ($310 million) hostile bid raised competition concerns in relation to the London casinos market. He referred it to the Monopolies and Mergers Commission (MMC).
London Clubs, which operates seven casinos in the British capital, said it was disappointed by the decision.
""We believe that the arguments which we submitted to the Office of Fair Trading (OFT) provided sound evidence that there were no adverse competition issues,"" said London Clubs chief executive Alan Goodenough.
The MMC has until July 7 to decide on the issue. The referral means the bid automatically lapses.
London Clubs said its board would meet to consider future action. It could come up with a fresh bid if the MMC clears the proposed acquisition of Capital, which operates Crockfords and the Colony Club for high rollers in the swish Mayfair area of London.
A merged company would have controlled almost two-thirds of London's 1.7 billion pound casino market.
Shares in Capital Corp fell 15.5p to 184.5p after the bid was scrapped. They had stood at 171p on February 14, the day before the bid was tabled. London Clubs came off 6.5p to 402p, having risen from 385p during the bid process.
London Clubs had been offering 47 of its shares for every 100 in Capital Corp in its all-paper offer. Share analysts had forecast a sweetened offer from London Clubs.
Capital Corp chief executive Alan Hearn welcomed the MMC referral, repeating that the bid was too low.
""The referral enables us to focus on developing further the group's valuable business, without the distraction and expense of a hostile bid,"" he said. ""I welcome the opportunity to demonstrate to shareholders the significant value we can create as an independent company.""
Hotel and gaming company Ladbroke Group Plc, which has four London casinos, had been mentioned as a possible rival bidder for Capital Corp. There had also been speculation that leading British leisure company Rank Group Plc, which has 31 casinos, could enter the fray.
British casinos are increasingly attractive investments as the government relaxes rules on membership and drinking hours. There are also proposals to allow new clubs to open at some 20 sites.($ = 0.611 British Pounds)
",21
"British pay television operator BSkyB said on Wednesday that it believed its planned 200-channel digital satellite service would prove a hit with viewers.
BSkyB, the dominant force in British pay TV, confirmed that it would proceed later this year with the launch of digital satellite into this country.
It said that the plan was not affected by its new digital terrestrial television (DTT) alliance with leading commercial broadcasters Carlton Communications and Granada Group .
The three have teamed up to form British Digital Broadcasting and apply for licences to run DTT networks when the 30-channel service comes on air in Britain in mid-1998.
""BSkyB is positioning itself to become a key player in digital,"" chief executive Sam Chisholm told a news conference.
""Digital satellite is going to be the primary driver (of the new technology) as it offers such a wide range of services,"" Chisholm added.
BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, earlier said pre-tax profit rose 26 percent to 133.7 million pounds ($214.4 million) in the six months to end-December, up from 106.3 million a year ago.
It reported record subscriber growth of 434,000 in the last three months of last year and now has over six million customers in Britain and Ireland.
BSkyB shares continued their surge of recent days as markets welcomed the digital developments. BSkyB closed 29.5p higher at 622.5p, its best level for over three months.
BSkyB said it expected shortly to confirm an order for up to one million digital satellite decoders from four manufacturers as it gears up for an autumn launch.
It plans to work with partners to offer interactive services such as home shopping and home banking as part of the digital satellite package.
Chisholm said a new company would be formed to subsidise the digital satellite decoder so that it could retail for around 200 pounds. A decoder is needed to view any digital service.
He did not name the members of the company, but BSkyB is reported to have had talks with British Telecommunications, Japanese electronics company Matsushita and bankers HSBC.
BSkyB remained optimistic about the prospects for digital television in Germany, playing down the initial slow take-up recorded by Kirch Gruppe's DF1.
""If you can get it right, it's a hell of an opportunity,"" said Chisholm, noting that there are some 37 million German-speaking households in Europe.
BSkyB agreed last year to take a stake of up to 49 percent in DF1 but is yet to invest any money in the venture.
DF1 was launched last July but recent reports suggest it has only attracted 20,000 subscribers. Chisholm said that DF1's slow take-up was partly the result of market confusion.
DF1 has been locked in a war with Premiere, another German pay-TV venture. Kirch owns 25 percent of Premiere but has fallen out with partners Bertelsmann and Canal Plus, who hold the remaining 75 percent.
Bertelsmann and Canal Plus want to develop Premiere into Germany's main digital television outlet but Kirch is backing its own DF1 for that role. ($1=.6237 Pound)
",21
"Pearson Plc's new chief executive Marjorie Scardino promised on Monday to improve the financial performance of the media and leisure group but said she would bring ""evolution not revolution"".
Pearson posted 1996 operating profit of 181.3 million pounds ($289 million) after a 100 million pound charge for improper accounting at its Penguin USA trade book publishing unit.
Leaving aside exceptional items, profit before tax rose seven percent to 251.8 million pounds. The total dividend was increased to 18 pence per share from 16.5p.
Scardino, a Texan who in January became the first woman to head a leading British company, noted that she had only been in the job 49 days and that she was in no position to unveil a ""new Pearson"" to assembled journalists. ""Decisions will be made speedily not hastily, it will be evolution not revolution around here,"" she said.
""Whatever else we do, we are going to work hard on improving the financial performance of the business,"" she said.
Scardino said Pearson, owner of the Financial Times newspaper, television production houses and Penguin books, had stellar assets but not all of them had performed well.
She said that underlying revenue growth of no better than six percent per annum over the past five years was ""clearly not very exciting"". Performance targets are to be better defined and incentive schemes for employees geared towards these.
She said ""there had not been enough joy and not enough sweat"" in the past among employees about the company's results.
Pearson shares fell 14p to 760p in a generally lower market. Share analysts said the Pearson presentation had been rather light on specific details.
They believe that Pearson will hold on to its television and Tussauds leisure interests despite speculation it would sell them. However, it may dispose of its holdings in the Lazard investment banking houses in London, New York and Paris.
Pearson also announced that it would invest up to 100 million pounds over the next five years in extending the Financial Times newspaper and brand internationally.
New print sites are to be established in Italy and Singapore but the main thrust of the expansion will focus on the United States. Financial Times editor Richard Lambert will be moving to New York for a year to oversee the editorial development.
Finance Director John Makinson said that he did not expect Pearson to increase the 100 million pound provision to cover the problems at Penguin USA, which date back to 1991.
The problem comes from unauthorised discounts given to customers in return for early payments and have been blamed on ""one rogue employee"".
""We are comfortable with that provision,"" Makinson told Reuters in a telephone interview. ""The 100 million pounds is to cover all known and foreseen eventualities,"" he added. ($1=.6281 Pound)
",21
"Investors in Britain's growing band of listed soccer clubs have recently experienced that sinking feeling all too familiar to long-suffering fans.
Shares prices have fallen faster than a relegation-bound team as the euphoria surrounding potential earnings from sources like pay-per-view television gives way to more sober analysis.
The sector has lost around 30 percent in the last six weeks or so, smaller clubs such as premier league strugglers Southampton and first division Sheffield United among the biggest losers.
However, even English champions Manchester United have seen their share price fall from a January high of 737p to its current level of 630p, this despite continuing success on the pitch at home and in Europe.
Share analysts who follow the financial fortunes of the clubs point out that these falls must be seen in the context of spectacular rises of 200 percent and more since early 1996.
Their view is that investors are backing a winner if they stick with the big clubs but that people should think twice before putting money into clubs outside of soccer's elite.
""We believe a derating of the smaller clubs is inevitable and could be marked. These are the footballing bubbles that will fade and die,"" UBS analysts Guy Feld and Julian Easthope wrote in a recent report on what they call ""UK Football Plc"".
""In England, Premier League status will be essential, and the cost of being outside it will increase, because of the increasing concentration of TV revenues at the top end of the game,"" they added.
Pay-per-view television is seen as a major benefit to only the creme de la creme of the British and European game.
UBS selected a top 10 UK soccer franchises, featuring listed clubs Manchester United, Leeds United, Glasgow Celtic and Tottenham Hotspur.
Two more of their tips, English premier league clubs Newcastle United and Aston Villa, will join the market shortly.
Analysts expect heavy interest in both those clubs, given their strong fan base and established position among the most successful teams in the country.
Analyst Nick Batram of Greig Middleton agrees that share prices of some of the smaller clubs could fall further.
But he believes that clubs can make money outside the premier league, providing they do not overstretch themselves.
""They have to look at being profitable in the lower divisions rather than gambling on getting in the Premier League,"" he said.
""Millwall is unfortunately a good example of what happens when you speculate on promotion,"" he said.
Second division Millwall were forced to call in the administrator in January after running up debts of 10 million pounds ($16 million).
The south London club had signed players on lucrative contracts in a bid to join the 20-club premier league elite but ran into financial problems when the club went down rather than up at the end of last season.
",21
"British Sky Broadcasting appeared in pole position on Thursday as participants lined up for the race into the multi-channel digital television future.
A report in the Financial Times said that BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, had decided to press ahead with plans to launch a 200-channel digital satellite service into Britain in late 1997.
BSkyB is poised to order a million digital decoders from manufacturers at a cost of 250 million pounds ($405 million), the report added. BSkyB did not comment on the report.
BSkyB shares had added 0.5p to 580.5p by midsession on Thursday. Share analysts said the report was confirmation of what they had been expecting the satellite broadcaster to do.
The digital television age is about to dawn in Britain. Digital transmission will offer viewers a much greater range of channels, clearer pictures and the possibility of accessing interactive services such as home shopping.
Digital satellite services have been launched in the United States and a number of European countries. However, Britain is pioneering digital terrestrial television (DTT) -- broadcast from land-based transmitters to regular rooftop aerials.
The Independent Television Commission (ITC) will announce on Friday which companies have applied to run the DTT transmission networks or ""multiplexes"". DTT, offering some 36 channels, is scheduled to begin in mid-1998.
Each multiplex can carry around six channels and there are four multiplexes available. A further two multiplexes are already earmarked for use by the existing terrestrial broadcasters.
Carlton Communications Plc, Britain's largest terrestrial broadcaster, has said that it supports DTT and is expected to be among the applicants.
It may join forces with newspaper company Mirror Group for its application and would probably use the extra capacity to boost its pay television operations.
Competition could come from France's Canal Plus, Britain's United News & Media and International CableTel Inc of the U.S.
Share analysts are intrigued to find out whether BSkyB will apply to run a DTT multiplex.
""They may see it as another market, reaching those people who don't want as many as 200 channels and also don't want a dish on the side of their house,"" said one.
Many in the media industry fear that DTT will not be able to compete effectively against BSkyB's 200 satellite channels, especially as BSkyB will be first into the digital market.
They are likely to cry foul if BSkyB tries to move in on the DTT world, claiming it would mean the company having a foot in two rival camps.
Viewers will need a digital decoder or ""black box"" to view digital services, whether they are delivered by satellite or terrestrial means.
BSkyB is believed to be in talks with a number of potential partners in an attempt to do a deal to subsidise the boxes and put them on the market for around 200 pounds, about half of the full retail cost.
",21
"Newcastle United FC, one of England's top soccer teams, will make its stock market debut in April in a flotation valuing the club at almost 200 million pounds ($325 million), broker NatWest Markets said on Friday.
NatWest said the offer price will be in the range of 120 to 135 pence per Ordinary share, valuing premier league Newcastle United at between 172 and 193 million pounds.
The offer is expected to raise 47.4 million pounds net and trading will begin on April 2. Ten percent of the shares are to be made available to the public rather than institutions.
Newcastle is the latest in a growing number of British soccer clubs to join the stock market. The value of listed clubs has soared over the past year as investors seek to cash in on the game's current boom.
A lucrative contract with pay television giant British Sky Broadcasting Plc has helped to transform the game, enabling clubs to recruit top foreign stars and to upgrade once crumbling stadiums.
English champions Manchester United have provided the model on and off the pitch, building a business valued at over 400 million pounds in the six years since flotation.
""The directors believe that Newcastle United has reached a stage in its development where it will benefit from the opportunities that derive from being a listed company,"" said Sir Terence Harrison, who has been appointed non-executive chairman.
Sir Terence is chairman of building company Alfred McAlpine Plc.
Newcastle, which has invested 50 million pounds since 1992 in recruiting players like England captain Alan Shearer, Frenchman David Ginola and Colombian Faustino Asprilla, said around 21 million pounds would be used to repay borrowings.
A further 12 million pounds will be used to pay for future instalments of transfer fees for current players and up to 10 million pounds to fund proposed training and youth team development facilities.
Newcastle had an operating loss of almost 24 million pounds in the year to July 1996 after transfer fee and associated costs of 29.8 million pounds. But it posted an operating profit of 7.6 million pounds in the first half of this year.
Cameron Hall, the family holding of millionaire Newcastle backer Sir John Hall, will retain a 57 percent stake in the club after flotation.
Sir John is to remain as chairman of Newcastle United FC -- the soccer club rather than the overall business -- and has said he will focus his energies on developing a centre of excellence for young players.
Newcastle have gained a reputation in recent years for playing exciting soccer but have yet to be rewarded with major trophies. They last won the English league title 70 years ago. ($1=.6140 Pound)
",21
"Shares in Pearson Plc gained on Wednesday as new chief executive Marjorie Scardino officially took the reins at the diversified British media and leisure company.
Scardino, who becomes the first woman to head one of Britain's leading companies, has already said that Pearson's profit performance has been inadequate and disposals are expected as she aims for greater focus on core businesses.
Pearson shares added 8.5 pence to 738.5 pence, reflecting hopes that she will shake up what critics regard as a slumbering giant.
Scardino, a 49-year-old Texan, had been chief executive of The Economist Group, a magazine company half owned by Pearson. A Pearson spokeswoman said Scardino spent her first day ""meeting the troops"" at the company's central London headquarters.
She has already met her fellow executives and share analysts are hoping for some swift action to focus a company which is accused by critics of underexploiting a stellar group of assets.
Its businesses range from the Financial Times newspaper to Penguin books and a television production arm which makes low-budget programmes such as Australian soap ""Neighbours"".
Analysts identify Pearson's investment banking interests, its theme park businesses and loss-making U.S. software publishing company Mindscape as the obvious candidates for sale.
Pearson's Tussauds Group unit includes London's landmark Madame Tussaud's waxwork exhibition and theme parks such as Alton Towers in England and Spain's Port Aventura.
It also has a 50 percent stake in London investment bank Lazard Brothers and smaller holdings in Lazard Freres in Paris and New York.
Pearson effectively has a new management team following changes to the board last year.
The process will be complete when Dennis Stevenson replaces Michael Blakenham as chairman in May. Stevenson is currently deputy chairman.
",21
"Channel 5, Britain's new commercial television station, said on Monday it was delighted with its launch after initial figures showed that five of its first night shows attracted a million viewers or more.
An estimated 2.3 million Britons tuned in when the station was launched on Sunday by chart-topping band The Spice Girls.
""We are delighted by the figures given that the weather was so good and some people are still tuning in their sets to pick us up,"" said Channel 5 spokeswoman Sally Osman.
Initial figures from the BARB monitoring service give Channel 5 a 5.8 percent share of viewing in the 6 p.m. to 10.30 p.m. slot.
The channel, the first commercial terrestrial station to launch in Britain since 1982, has a limited budget and has set itself a target for an audience share of five percent by the end of the year. It has styled itself ""modern and mainstream"" and is focusing particularly on the under-35s.
ITV, the dominant commercial television network, hit back by pointing out that its long-running Coronation Street soap had 11.6 million viewers for its Sunday evening episode. It said it had retained its traditional dominance of the ratings.
Channel 5 has transmission problems to overcome and is so far available in only six out of 10 British households.
It hopes to boost coverage to around 85 percent of the UK by the end of the year after an extra broadcast frequency comes on stream. It aims to fill in the gaps through carriage agreements with cable and satellite companies.
It was given a guarded welcome by the British press. ""Although the station's news output should be distinctive the mix of soaps, imports, comedy and films is close to what is already on offer elsewhere,"" the Times wrote in an editorial.
But the newspaper said that the channel's low budget need not result in low quality.
""There are obvious opportunities for savings in modern programme making. If that space is creatively exploited by Channel 5 then it should be able to secure for itself a deserved place on the nation's screens,"" it added.
Channel 5 is owned by British media companies Pearson and United News & Media, plus European broadcast group CLT-Ufa and U.S. investment firm Warburg Pincus.
It is the third commercial terrestrial channel after the ITV network and Channel 4. The two BBC channels are funded by an annual licence fee levy. The newcomer also faces competition from some 40 or so cable and satellite channels, to which around 25 percent of British households subscribe.
Channel 4 has a remit to cater for minority tastes so Channel 5 will compete directly with ITV for the mainstream terrestrial audience.
ITV has an average audience share of around 35 percent and its annual programming budget of 800 million pounds ($1.3 billion) far outweighs the 110 million pounds which Channel 5 plans to spend.
($1= .6124 Pound)
",21
"Channel 5, the British terrestrial television channel gearing up for launch next month, is confident of winning a five percent share of UK viewing by the end of the year, chief executive David Elstein said on Tuesday.
""We're confident we can deliver five percent of total viewing by Christmas this year,"" Elstein said as Channel 5 presented its programming schedule.
The exisiting ITV commercial network has an audience share of over 35 percent. However, its annual programme budget of 600 million pounds is much bigger than the 110 million core figure earmarked by Channel 5.
""Channel 5's audience will grow as ITV's declines,"" said Dawn Airey, Director of Programmes. She promised ""intelligent, stylish and popular"" shows from a channel that is hoping to be a hit with the young consumers sought after by advertisers.
Channel 5 is  owned by a consortium of British firms Pearson and United News & Media plus Luxembourg broadcast group CLT and US investment firm Warburg Pincus.
It will go on air on Easter Sunday, March 30, having delayed its launch by three months in order to give it more time to complete the task of retuning the nation's video recorders.
It has employed an army of retuners to visit millions of homes across Britain to prevent its signal from interfering with video playback.
Elstein said that Channel 5 should be available to around 40 million people -- just over 65 percent of the population -- at launch in March.
But he said this should grow to 45-46 million, or around 85 percent of Britons, by the end of the year as an extra broadcasting frequency comes into operation.
However, he conceded that as many as two million of the 18 million households covered may need to buy new aerials or aerial extensions to pick up the signal clearly.
Major areas of Britain will not see the new commercial channel, the first to be launched in this country since 1982. The Scottish city of Glasgow and parts of Wales and the south-west will miss out but Channel 5 hopes to fill in some of the gaps by securing carriage on cable and satellite systems.
Channel 5 plans what it calls a ""stripped and stranded"" schedule. Behind the jargon lies an attempt to make it easier for viewers to know what is on at a particular time.
A ""stripped"" show runs on consecutive days, at the same time each day while a ""stranded"" show rotates with other similar shows in the same slot each day.
Channel 5 will show a daily soap at 1830, its main evening news will be at 2000 and it will have a film at 2100 every evening. Films lined up include Speed, Independence day and Mrs Doubtfire.
-- London Newsroom +44 171 542 8793
",21
"Leisure group Rank Group Plc said on Thursday it planned to create 3,000 full-time jobs in Britain this year as it completes a radical restructuring.
Rank, which operates the Hard Rock Cafes around the world, said the outlook for its businesses was promising after a year in which an exceptional charge of 232 million pounds ($375 million) badly hit profit.
Profit before tax in 1996 fell to 65 million pounds from 515 million the year before. However, the 1995 figure was boosted by a 236 million pound exceptional gain.
Rank raised its net dividend by eight percent to 17 pence per share and said operating profit before exceptional items was 13 percent higher at 290 million pounds.
In early trading on Thursday, Rank shares, which have underperformed the market by some 20 percent over the past year, added 12p to 427p.
Chief executive Andrew Teare, who took the job last April, said that Rank was well placed after a financial restructuring and a decision to focus on four divisions -- Hard Rock, Holidays, Leisure and Film and Entertainment Services.
""These changes, together with the benefits of our investment programme and the generally favourable economic climate, provide a promising outlook for Rank,"" Teare said.
He said that Rank planned to sell its film distribution unit, which has a catalogue of classic British films dating back to the 1950s as well as some more modern American movies.
The unit also has a British distribution operation, run as a joint venture with Castle Rock-Turner of the United States, and an international sales arm.
Newspapers have speculated that the sale might raise up to 150 million pounds but Teare indicated he thought some of the figures in the press were on the high side.
Rank said it would be creating the 3,000 jobs by opening new bingo clubs, pubs, night clubs, holiday centres, cinemas and a leisure centre at sites around Britain.
Operating profit at three of Rank's four core divisions showed double-figure growth. The exception was holidays, where profit fell one percent as margins came under pressure at the Resorts USA campground and timeshare business in the United States.
The exceptional charges related mainly to a 148 million pound property value writedown, plus a loss on disposals and charge for restructuring.
Comparisons with last year were further complicated by a change in the way Rank accounts for its remaining 20 percent interest in Rank Xerox, its office equipment joint venture with America's Xerox Corp.
Rank repeated that it planned to sell the stake when a suitable opportunity arises.
($1=.6184 Pound)
",21
"Pearson Plc's new chief executive Marjorie Scardino, the first woman to head a major British company, vowed on Monday to improve the financial performance of the media and leisure group.
Pearson announced a 1996 operating profit of 281 million pounds ($451 million), a rise of eight percent, before taking a 100 million pound charge for improper accounting at its Penguin USA trade book publishing subsidiary.
Finance Director John Makinson said that he did not expect Pearson to have to increase the provision to cover the problems at Penguin USA, which date back to 1991.
""We are comfortable with that provision,"" Makinson told Reuters in a telephone interview. ""The 100 million pounds is to cover all known and foreseen eventualities,"" he added.
Makinson dismissed a report in the Sunday Times newspaper that the charge could double as a result of legal action by book retailers in the United States.
Pearson increased its full year dividend to 18p from 16.5p. The company's shares slipped 9p to 765p in early trading although the figures were broadly in line with market forecasts.
A great deal of market attention focused on the plans of Texan Scardino, who took the reins at Pearson in January.
She acknowledged that the company's profit performance must improve but gave few clues as to which parts of the business could be sacrificied in her drive for focus.
Among Pearson's assets are the Financial Times newspaper, a number of television production companies and a leisure arm which includes London's Madame Tussaud's waxworks museum.
""The major immediate changes under new management at Pearson will be the ones of style and focus on performance. As time goes on, we may change the business we're in too, as we work toward being first in a few important markets,"" Scardino said.
""But we won't be selling things just to be tidy. We'll be selling things where the move will make the company more valuable for our shareholders -- of today and tomorrow.""
The leisure operations and a 50 percent stake in London merchant bank Lazard Brothers have been seen as possible candidates for disposal.
Scardino said greater emphasis would be based on performance measures for the operating companies. She also said that running the company as an integrated media group would create considerable scope to increase revenues and reduce costs.
Pearson also announced that it would invest up to 100 million pounds over the next five years in extending the Financial Times newspaper and brand internationally.
New print sites are to be established in Italy and Singapore but the main thrust of the expansion will focus on the United States. Financial Times editor Richard Lambert will be moving to New York for a year to oversee the editorial development.
Pearson added that the group had made a satisfactory start to the current year with operating profits in line with expectations. ($1=.6228 Pound)
",21
"The battle for UK digital terrestrial television (DTT) licences is a David and Goliath contest pitting three of the country's biggest broadcasting groups against a little known cable company.
DTN, owned by Nasdaq-listed International CableTel, finds itself up against the might of pay television giant British Sky Broadcasting and ITV companies Carlton Communications Plc and Granada Group Plc.
But International CableTel chief executive Barclay Knapp has not yet raised the white flag as Britain's Independent Television Commission (ITC) considers the two bids.
""We are presenting ourselves as the ones that win on the merits,"" Knapp said in an interview on Wednesday.
""We are going to create an environment for new British programming to proliferate and to very aggressively exploit the interactive services component,"" he added.
Knapp believes that the successful launch of DTT is the best way to challenge BSkyB's dominance of UK pay television.
He also maintains that major programme makers and suppliers should not be left to run broadcast networks.
DTT signals are broadcast from land-based transmitters to ordinary aerials but viewers need a set-top box or decoder to view what is broadcast.
Digital compression improves sound and picture quality and means that more than 30 channels can be picked up. The technology permits a link to interactive services.
DTN and the rival British Digital Broadcasting consortium are each bidding for the same three blocks of frequencies, capable of carrying some 18 channels.
The ITC decision on the award of the licences is expected around May and DTT would begin in the spring or summer of 1998.
BSkyB plans separately to launch digital satellite services with up to 200 channels into the UK late this year and DTN questions its commitment to making the terrestrial version work.
International CableTel, the company behind DTN, has almost all its operations in the UK, where it is the third largest cable operator and also owns the NTL transmission network.
It believes its skills in programme packaging and marketing make it the ideal candidate to run DTT frequencies. Knapp points to International Cabletel's success in securing take up of around 40 percent in some of its cable franchise areas.
""Sports and movies are good for the first 20 percent in take-up but the two remaining factors are the breadth of choice and pricing,"" he said.
International CableTel breaks its programme packages down into tiers such as news or natural history to bring on board those not tempted by soccer or Hollywood blockbusters.
He believes that customers could be offered a limited package of say five extra DTT channels for around six pounds per month to get them to sample the multi-channel future.
""People don't want to dive right in, they just want to get their feet wet,"" he said.
",21
"British television and newspaper group United News & Media posted a profit rise of more than 20 percent on Thursday and said it had made significant progress since a merger earlier this year effectively doubled its size.
Pre-tax profit before exceptional items from the group totalled 151.9 million pounds ($236.2 million) in the six months to June 30, against last year's restated figure of 125 million.
Market reaction to the figures was broadly favourable, United shares closing 5p higher at 710.5p.
The figures were the first since a merger between United News & Media and television and financial services group MAI. The merger, completed in April, created a company with a market capitalisation of more than three billion pounds.
The group owns British national newspapers The Daily and Sunday Express and Daily Star and operates commercial television (ITV) franchises in southern and eastern England.
Share analysts said that extensive restructuring meant that most of the merger benefits would not feed through until next year and some complained that the results were unnecessarily hard to decipher.
""There are huge exceptional items and I think the progress will come next year but the jury is still out,"" said one, reflecting a general sentiment. ""They're spending a 100 million pounds to reshape the business and it will be a long payback.""
Chief executive Lord Hollick said that a review of the group's businesses would be completed by the end of the year.
""This year's accounts will tell the full story,"" he said.
Reviewing the merger, chairman Lord Stevens said in a statement: ""One-off costs will be significant and to date amount to 56.4 million pounds"".
United will take an 82 million pound profit on the sale of specialist legal publisher Tolley in its full year figures. It is also seeking buyers for some 50 local newspapers in southern England and Wales, a sale that could raise 50 million pounds.
On the debit side, it will take a charge in the second half of 32 million pounds for the reorganisation of Express newspapers. It also faces costs of up to 30 million pounds from its share in Britain's new Channel 5 television station.
The merger spawned an unlikely management team of Stevens and Hollick, dubbed ""The Odd Couple"" by the British press.
Hollick, formerly MAI's managing director, is a staunch supporter of the opposition Labour Party, while Stevens' Express newspapers reflect his backing for the ruling Conservatives.
United last week announced a plan to put the Daily and Sunday Express titles under a seven-day editorial team in an attempt to halt a long-term decline.
Hollick said the newspapers had been ""starved of investment"" and vowed to plough 10 million pounds back into Express annually in each of the next three years. ($1=.6430 Pound)
",21
"Anglo-Dutch publishing group Reed Elsevier Plc said on Wednesday that currency factors were likely to depress this year's earnings after the company recorded an 11 percent profit rise in 1996.
Reed Elsevier co-chairman Nigel Stapleton told Reuters the strength of sterling would, if maintained, ""drag down"" headline earnings by five percent this year. Earnings figures for the combined businesses of Reed Elsevier are expressed in sterling.
Pre-tax profits in 1996 rose to 805 million pounds ($1.3 billion) from 723 million on turnover from continuing operations up to 3.38 billion pounds from 3.21 billion. Share analysts had forecast profits of between 808 and 821 million pounds.
Analysts said that the strong pound was likely to restrict earnings growth to single figures this year and they mentioned a likely profit figure of around 870 million pounds.
Reed International Plc, the British arm of the business, proposed a two-for-one share split to take effect in May.
London-listed Reed shares were down 18-1/2 pence to 1,155p at 1520 GMT, while Elsevier NV shares in Amsterdam dipped 1.10 guilders to 31.40.
Analysts said the company's performance had fallen slightly short of expectations and that Reed shares had risen more than 10 percent over the last two months on bid speculation.
For shareholders in Reed the full-year dividend was raised by 11 percent to 27.2 pence per share. Elsevier shareholders will receive 0.76 guilders per share, a 29 percent increase.
The company noted that currency conversions meant that Elsevier results and dividends were helped in guilder terms.
""It's good news for Elsevier and bad for Reed,"" said co-chairman Stapleton. ""(But) the two share prices are linked so much that Elsevier should pull Reed up with it in some respects.""
Stapleton said the 1996 figures reflected a ""solid performance"" right across the group. They followed a four percent earnings dilution resulting from the company's 1995 consumer business divestment programme.
Reed Elsevier sold consumer businesses, such as local newspapers, in order to focus on the provision of information in fields like science, business and the legal profession.
Stapleton said a ""big deal"" such as Reed's $1.5 billion purchase of U.S. on-line information supplier LEXIS-NEXIS in 1994 would be ""nice but not necessary"".
His co-chairman Herman Bruggink told analysts in Amsterdam that Lexis-Nexis was stepping up its efforts to expand outside its U.S. base and targeting Europe in particular.
Reed International said its proposed share split would be put to the vote at its annual general meeting in April, to take effect the following month.
It gave no reason for the split, but companies often opt to split their stock in the belief that the process makes their shares more liquid or tradeable. ($ = 0.629 British Pounds)
",21
"Shares in British commercial television (ITV) broadcaster Yorkshire-Tyne Tees slid on Tuesday despite an 80 percent rise in interim profit.
Pre-tax profit for the six months to June 30 rose to 13.3 million pounds ($20.76 million) from 7.4 million pounds in the same period a year ago. Interim dividend was increased to 6.8 pence from 3.7 pence.
The company said that the improvement had come despite a ""very disappointing"" advertising sales performance.
The northern English company, based in the city of Leeds, said that a smaller than expected increase in total ITV advertising revenues had been compounded by a slight decline in its share of that income.
The sales shortfall was, however, more than compensated by higher programme sales and the effects of cost controls.
Yorkshire shares had fallen 30p to 1210 by 1440 GMT. Bid speculation has helped them to power ahead in recent months from a 1996 low of 679p.
The decline was hastened after Yorkshire chairman and chief executive Ward Thomas said that he hoped British media and leisure company Granada would hold off from mounting an expected takeover bid.
Share analysts said that Yorkshire's comments on advertising and Granada had pushed the price lower in what was already a weak London market.
Granada, which already operates two ITV licences, has built a 24 percent stake in Yorkshire. It had been expected to follow through with a takeover bid following a relaxation in media ownership laws.
But Granada, which earlier this year acquired Britain's leading Forte hotel chain for 3.9 billion pounds, has recently given the impression of going cool on the bid.
Duncan Lewis, head of Granada's Media Division, was last month reported as saying Granada may look at other ITV targets.
Thomas dismissed the reported comments as a ""fairly puerile attempt to get the (Yorkshire) share price down"".
But he said any delay in a Granada bid would give Yorkshire time to rebuild its share of ITV advertising revenue and to make progress in its campaign for a reduction in its licence payments. These totalled 33 million pounds in the first half.
He suggested that full value for Yorkshire shares in any bid could be as high as 18 pounds. ($1=.6406 Pound)
",21
"British pay television giant BSkyB Plc, a key part of Rupert Murdoch's News Corp international media empire, on Thursday staked its claim to a lead role in the development of digital television in the UK.
""Our clear and unambiguous aim is to be in the vanguard of the digital era,"" BSkyB deputy managing director David Chance told a Financial Times conference on New Media and Broadcasting.
BSkyB, the leading force in British pay television with some 5.5 million subscribers, plans to launch 200-channel digital satellite services into the UK later this year.
BSkyB, one of the corporate success stories of the 1990s in Britain, is 40 percent owned by Murdoch's News Corp.
Murdoch this week threw down the gauntlet to U.S. cable companies when News Corp sealed an alliance with EchoStar Communications Corp to offer satellite services to compete with the cable providers.
The venture, expected to operate under the American Sky Broadcasting (ASkyB) name, will offer as many as 500 channels of digital TV, Internet services and local broadcast TV signals to markets across the United States.
News Corp also has important satellite television operations in Asia, such as Star TV and JSkyB, a joint venture in Japan which is expected to begin full service next year.
Back in Britain, BSkyB is also seeking to expand into digital terrestrial television (DTT).
It has joined forces with UK commercial television giants Carlton Communications Plc and Granada Group Plc to apply for licences to run DTT services.
Their British Digital Broadcasting consortium faces competition from DTN, owned by Nasdaq-listed cable company International CableTel, for three key DTT licences.
Britain's Independent Television Commission (ITC) is expected to announce a decision on the licences around May.
DTT, broadcast from land-based transmitters to standard television aerials, is expected to begin in mid-1998 and offer a total of around 30 channels.
Chance said that he hoped that neither UK nor European regulators would oppose British Digital Broadcasting if it were awarded the DTT licences.
""Eight years ago we led Europe in multi-channel TV,"" Chance said. ""We are probably the last in Europe to launch a digital platform...It isn't the time for a handbrake to be applied.""
""We are behind and we need to get on with it.""
Digital television offers extra channels, improved sound and picture quality and the potential to access interactive services such as home shopping and home banking.
A digital set-top box or decoder is required to view digital channels and a rooftop dish is required to pick up the satellite version. Cable companies are also planning a move to digital.
Digital take-up has been slow in a number of countries, notably in Germany, Europe's largest television market.
Chance said that for digital to succeed it must offer attractive programming at affordable prices and be simple for viewers to understand and use. ($1=.6146 Pound)
",21
"The $10.5 billion bid by Hilton Hotels Corp (HHC) for U.S. rival ITT Corp reduces the likelihood of an HHC takeover of British partner Ladbroke Group Plc, share analysts said on Tuesday.
""The Ladbroke share price is off as people had been expecting HHC to take more than a five percent stake in Ladbroke and maybe eventually bid for the company,"" said one analyst.
""It looks as if they now have other fish to fry,"" he added.
Ladbroke shares were 1.5p lower at 227p in heavy trading at 1220 GMT on Tuesday, having earlier dipped below 223p.
HHC, America's largest hotel and gaming company, announced in the U.S. on Monday that it was bidding for ITT, owner of the Sheraton hotel chain and Caesars World Casinos.
A Ladbroke spokesman said on Tuesday that the move should have no immediate effect on a worldwide alliance it signed with HHC earlier this month.
The deal reunited the Hilton hotel brand worldwide for the first time since 1964. HHC owns the rights to the name in the U.S. while hotel and betting group Ladbroke held them in the rest of the world.
The two companies can take a share of up to 20 percent in each other under the deal and HHC has said it intends to take a five percent stake in Ladbroke ""in due course"".
Leisure industry analyst Fraser Ramzan of Lehman Brothers said that a HHC/ITT merger would prove a mixed blessing for investors in Ladbroke.
""A bid from HHC could seem less likely,"" he said, noting that bid speculation had been supporting Ladbroke's share price.
""On the positive side, if HHC succeed then there is a much larger park of hotel properties which could be brought under one reservation system,"" he said. ITT's operations include 415 hotels and 130,000 rooms worldwide.
Greg Feehely of Dresdner Kleinwort Benson said that he expected HHC to take a five percent stake in Ladbroke after the British company released its results in March.
He said that it may now take longer for HHC to raise its stake in Ladbroke to 20 percent. However, he said that Ladbroke shares should remain around current levels.
""We are not going to see the stock coming off much. It is still solidly underpinned and there may be potential for Ladbroke to invest in ITT's non-U.S. assets,"" he said.
Feehely said that a merger between HHC/ITT and Ladbroke remained a medium-term possibility.
""At the turn of the decade all this might just be one company,"" he said.
",21
"International music and film group PolyGram on Wednesday reported an almost 18 percent fall in earnings after taking dramatic action to respond to a slowdown in record sales.
PolyGram's 1996 net income after tax and extraordinary items dropped to 608 million guilders ($327.4 million) from 741 million guilders in 1995. The company held its dividend at 0.95 guilders per share. The results topped market forecasts and PolyGram shares surged 4.80 guilders to 88.10 on the Amsterdam stock exchange on Wednesday morning.
PolyGram took a post-tax charge of 114 million guilders as it reorganised its music operations, cutting some 400 jobs.
That move came as the music industry stalled after a decade of rapid growth. Global music sales had risen to $40 billion dollars in 1995 from $14 billion in 1986 but the rate of growth slowed to an estimated three percent last year.
""This will be a challenging year for PolyGram's music division, particularly in the U.S. where market instability is likely to persist for the next six to 12 months,"" PolyGram president and CEO Alain Levy said.
""Nevertheless, we remain optimistic that our continued success in breaking new talent and the measures we have taken to adapt to changing markets around the world will create the right conditions for long-term growth,"" he added.
Levy told Reuters that PolyGram, which boasts artists such as U2, Van Morrison, Elton John and The Cranberries, should see some swift benefits from its restructuring.
He said there should be some positive effects this year but added: ""That is not essential. What is essential is to be adapted (to market conditions)"".
PolyGram is restructuring the operations of its Motown unit, moving the label's headquarters from Los Angeles to New York as it seeks to recreate its heyday of the 1960s and early 1970s.
It is also reorganising its European music distribution and marketing operations and restructuring its classical music division.
PolyGram's music division increased its sales by five percent to 7.95 billion guilders but operating profit dipped slightly to 1.11 billion guilders as margins were squeezed.
PolyGram's infant film division moved into profit in the second half of last year thanks to the success of films such as Sleepers, Mr Holland's Opus and Dead Man Walking. The division has secured 14 Oscar nominations this year.
Levy said that the film business had done ""extremely well"" in its four years of operation but was now entering a crucial phase as it moved into bigger budget movies.
PolyGram is listed in Amsterdam and New York, with many of its senior executives based in London. Dutch giant Philips Electronics NV owns a 75 percent stake in the firm. ($1=1.857 Guilder)
",21
"Shares in British mobile telephone operator Orange Plc, languishing below their flotation price, rose on Monday after the company said it had more than doubled its total subscriber base to over 785,000 customers during 1996.
Orange, priced at 205p when floated 10 months ago, added 4p to 192p after the company said it had added 125,000 customers in the last three months of 1996, its best ever quarter.
The positive trend in the British cellular market was confirmed by subscriber figures issued later on Monday by One 2 One, a joint venture between Cable & Wireless Plc and a unit of US West Media Group.
One 2 One, the smallest UK operator, said the Christmas 1996 period was its best-ever quarter, gaining 85,000 customers to take its total to 545,000 -- an eight percent market share.
""The final quarter has generally been quite good for mobile phone companies and the trend is positive after four disappointing quarters,"" said analyst James Ross of broker ABN AMRO Hoare Govett.
Vodafone Group, the market leader in Britain, last week reported a 20 percent annual increase in subscriber numbers to some 2.8 million at end-December.
Cellnet, 60-percent owned by British Telecommunications, ended last year with 2.68 million UK customers, up from 2.3 million at the end of 1995.
Analysts said that Orange shares had good upside potential after a rollercoaster ride in their short time on the market. They rose to 260p shortly after a heavily-oversubscribed flotation only to dip below 160p after the initial glow faded for a company not expected to make a profit until 1998.
James Dodd of Kleinwort Benson said he regarded a level of 240p as fair value for shares in Orange, in which Hong-Kong based Hutchison Whampoa Ltd and British Aerospace remain the leading stakeholders.
Dodd noted that BT's plans to raise the price of calls to Orange and One 2 One handsets would be beneficial. The new rates, to take effect next month, could boost revenues by 10 percent per subscriber.
Orange said it now had an 11.5 percent share of the total UK market, against seven percent at the end of 1995. It said its ""churn"" or disconnection rate of 18.6 percent in 1996 was around a third below the industry average.
""We stay right on our plan for growth of subscribers, market share, usage, network coverage and churn,"" said managing director Hans Snook.
""We look forward in 1997 to continuing to move ahead and to extending our international service through new roaming agreements and the introduction of dual band handsets.""
The new handsets, to be launched in the first half of 1997, should extend potential coverage to most European countries.
",21
"Newcastle United said on Thursday that it would seek to raise up to 50 million pounds ($84 million) when it joins the growing band of British soccer clubs on the stock market.
But the plan for a flotation this spring does not mean that new team manager Kenny Dalglish, who was appointed to succeed Kevin Keegan on Tuesday, is about to embark on a spending spree.
""We believe we have arguably one of the best playing squads in Europe and we are not entering a phase of substantial incremental investment,"" joint chief executive Mark Corbidge told Reuters.
The announcement follows a dramatic few days for the northeast English club which hired former Liverpool and Blackburn boss Dalglish after Keegan's resignation last week.
Keegan had spent around 60 million pounds in recent seasons as he turned Newcastle into a potent footballing force but he failed to win any major honours.
Potential investors will be reassured that Sir John Hall, whose millions have helped to bring stars such as England's Alan Shearer, Frenchman David Ginola and Colombian Faustino Asprilla to Newcastle, is to remain as chairman of the club.
But NatWest Markets, which is organising the flotation, said a new non-executive chairman would be named for the holding company.
Property magnate Hall, whose Cameron Hall investment company owns a controlling stake in the club, plans to devote his time to developing a centre of excellence for young players.
The club plans to raise 40-50 million pounds through the issue of new shares and analysts expect the value of the club as a whole to total some 160 million pounds when it joins the stock exchange. Trading in the shares is likely to begin by April.
That would make it the second biggest British listed club, behind English champions Manchester United, valued at in excess of 400 million pounds.
The trend for soccer club flotations appears to be spreading across Europe, with reports in Italy on Thursday that European champions Juventus, controlled by Fiat's Agnelli family, would soon seek a market listing. However, the club owners later denied the report.
Paul Deakin, a director of corporate finance at NatWest Markets, said that the Hall family would remain major stakeholders after the flotation.
Asked about the use of the flotation proceeds, Deakin said that some would be used to pay off debts but that cash would be left over to fund the club's future development.
""The money has not been earmarked for one cause, there is a lot of flexibility,"" he said, adding that the club planned to invest in its commercial activity and the centre of excellence.
Deakin dismissed suggestions that Newcastle might have to issue more shares to pay for a planned move to a new stadium, which is likely to cost 65 million pounds.
Newcastle revealed that its interests in local rugby union, ice hockey and basketball teams had been sold last July to a company controlled by some of its directors.
It said they were sold because they were at an early stage in their commercial development and would require substantial further investment before producing a significant return.
Newcastle United reported a group operating profit from continuing operations of 5.9 million pounds for the year to end-July 1996 on 29 million pounds of turnover. However, that profit excluded the huge cost of transfer fees.
At least 10 percent of new shares will be available to Newcastle's fans, for a minimum investment of 500 pounds.
The club is still in contention for the premier league title plus the F.A. and UEFA Cups this season. Newcastle have not won the championship for 70 years but Dalglish is a winner, having led Liverpool and Blackburn to the title.
",21
"EMI, one of the world's top five music companies, said on Tuesday it expected strong sales in the current quarter to propel it to modest profit growth this year.
EMI, which has atists ranging from Sixties idols The Beatles to newcomers The Spice Girls, reported profit before tax and exceptional items fell about six percent to 293.3 million pounds ($480 million) in the nine months to December 31.
The fall would have been under one percent at constant exchange rates but the strength of sterling wiped 16 million pounds off operating profit in the period.
Finance Director Simon Duffy said that EMI still expected to meet share analysts' forecasts for full year pre-tax profit of 380-400 million pounds, excluding exceptional gains. He was confident of achieving that target despite an anticipated 25 million pound hit caused by currency factors.
EMI had 1996 pre-tax profit of 367 million pounds.
",21
"Anglo-Dutch publishing group Reed Elsevier Plc reported an 11 percent rise in 1996 profit on Wednesday but warned that currencies could depress this year's earnings.
Reed Elsevier co-chairman Nigel Stapleton told Reuters the strength of sterling would, if maintained, ""drag down"" headline earnings by five percent this year. Earnings figures for the combined businesses of Reed Elsevier are expressed in sterling.
Pre-tax profits rose to 805 million pounds from 723 million on turnover from continuing operations up to 3.38 billion pounds from 3.21 billion.
Analysts had forecast profits of between 808 and 821 million pounds.
Reed International Plc , the British arm of the business, proposed a two-for-one share split to take effect in May.
London-listed Reed shares were down 23.5 pence to 1,150.5p at 1145 GMT, while Elsevier NV shares in Amsterdam dipped 1.70 guilders to 30.80.
Analysts said the company's performance had fallen slightly short of expectations and that Reed shares had risen more than 10 percent over the last two months on bid speculation.
For shareholders in Reed the full-year dividend was raised by 11 percent to 27.2 pence per share. Elsevier shareholders will receive 0.76 guilders per share, a 29 percent increase.
The company noted that currency conversions meant that Elsevier results and dividends were helped in guilder terms.
""It's good news for Elsevier and bad for Reed,"" said co-chairman Stapleton.
""(But) the two share prices are linked so much that Elsevier should pull Reed up with it in some respects,"" he added.
Stapleton said the 1996 figures reflected a ""solid performance"" right across the group. They followed a four percent earnings dilution resulting from the company's 1995 consumer business divestment programme.
Reed Elsevier sold consumer businesses, such as local newspapers, in order to focus on the provision of information in fields like science, business and the legal profession.
Reed Elsevier said it remained committed to an active acquisitions policy.
The company spent over 300 million pounds on some 20 transactions in 1996.
Stapleton said a ""big deal"" such as Reed's $1.5 billion purchase of U.S. on-line information supplier LEXIS-NEXIS in 1994 would be ""nice but not necessary"".
Reed said its proposed share split would be put to the vote at its annual general meeting in April, to take effect the following month.
It gave no reason for the split, but companies often opt to split their stock in the belief that the process makes their shares more liquid or tradeable.
",21
"British television and newspaper group United News & Media reported a profit rise of more than 20 percent on Thursday and said it had made significant progress since a merger earlier this year effectively doubled its size.
Pre-tax profit before exceptional items from the group totalled 151.9 million pounds ($236 million) in the six months to June 30, against last year's restated figure of 125 million.
""This has been a period of significant progress. We achieved an increase in profits of over 20 percent, and the strategy outlined at the time of the merger is being implemented effectively,"" said chairman Lord Stevens.
""There will be further initiatives in the second half to improve our operating performance and to strengthen and develop our products and franchises,"" he added.
The merger between United News & Media and television and financial services group MAI, completed in April, created a major media company with a market capitalisation of over three billion pounds.
The enlarged group owns British national newspapers The Daily and Sunday Express and Daily Star and operates commercial television (ITV) franchises in southern and eastern England.
The merger spawned a management team of Lord Stevens and MAI's Lord Hollick, a duo dubbed ""The Odd Couple"" by the British press.
Hollick, now United News chief executive, is a staunch supporter of the opposition Labour party while Stevens' Express newspapers reflect his backing for the ruling Conservatives.
Hollick told Reuters on Thursday that United News aimed to complete a review of its portfolio of businesses by the end of the year. ""We have set a fairly fast pace,"" Hollick said of the first few months of life with United.
Hollick noted that the performance was ""at the top end of expectations"" but market reaction to the figures was cautious.
United shares added 9.5p to 715p in early business but gradually retreated to stand only 1p firmer at 706.5p.
The large number of exceptional items stemming from the company's reorganisation prompted the caution. Turnover was moderate as many traders sat things out while their media analysts discussed the figures with the company.
Reviewing the merger, chairman Lord Stevens said: ""One-off costs will be significant and to date amount to 56.4 million pounds"".
United will include an 82 million pound profit on the sale of specialist legal publisher Tolley in its full year figures. It will also take a charge in the second half of 32 million pounds stemming from the reorganisation of Express newspapers.
The Daily and Sunday Express titles are to be produced by a single editorial team, the first genuine experiment with a seven-day-a-week operation in the British national press.
Hollick said that the newspapers will be given time to close the circulation gap on mid-market rival The Daily Mail. The once-mighty Express sells some 1.2 million copies while The Mail has circulation of above two million all through the week. ($=0.6430 Pound)
",21
"British national newspaper publisher Mirror Group Plc defied a steep rise in newsprint costs to post a small profit increase on Wednesday.
Pre-tax profit before exceptional items in the first six months of the year rose by 2.9 percent to 39 million pounds ($60.6 million). This came despite an increase of 18 million pounds in the cost of newsprint -- the material on which newspapers are printed.
""Mirror Group has outperformed other newspaper companies in absorbing a 35 percent increase in newsprint costs, maintaining high levels of marketing investment in the brands and still producing an increase in profits,"" chief executive David Montgomery said.
""The quality of these results confirms Mirror Group as an efficiently run media business now capable of further expansion by deploying its core skills,"" he added.
Exceptional credits of 12.9 million pounds were realised, principally from the settlement of property related issues.
Interim dividend was increased to 1.35p from 1.2p.
Market reaction was positive, Mirror shares adding 5.5p to 207p by 1210 GMT after earlier hitting 210p.
Mirror Group's flagship title is the tabloid Daily Mirror, Britain's second-top selling newspaper. It also has a major stake in The Independent broadsheet and has recently branched out into cable television.
Finance Director John Allwood said that cover price rises had helped to boost circulation revenue by 11 million pounds while advertising revenue was up by around five million.
The group forecast that the price per tonne of newsprint should decline to 475 pounds in the second half of the year from 520 pounds in the first six months.
It said its annual newsprint bill could climb as high as 131 million pounds in 1996, an increase of 20 million pounds, and noted that the pricing trend remained uncertain. The Mirror's Television arm had losses of 4.2 million pounds, stemming from start-up costs at its Live TV local cable service.
Live TV's offbeat style, including programmes such as topless darts, has earned it hefty criticism but the company said it was an under-valued asset.
It said that a recent independent assessment had valued the company at up to 90 million pounds and added there were no plans to dispose of it.
Live TV is connected to 1.45 million households -- 94 percent of all UK cable homes. It has special local affiliates in central London and Birmingham with plans to add the cities of Liverpool and Edinburgh by the end of the year. ($1=.6430 Pound)
",21
"British media and leisure company Granada Group Plc said on Friday it planned to close around 100 of its 560 high street rental and retail stores.
""Today we told staff that we are reviewing the position of stores with a view to closing about 100 of the least profitable and least successful,"" a company spokeswoman said.
Granada employs some 1,500 full-time staff and 430 part-timers in its stores across Britain. It would not be drawn on how many would lose their jobs.
""At this stage locations have not been identified,"" the spokeswoman added. The closures are scheduled to begin in May after a three-month consultation period with workers.
The announcement came on the day that Granada announced it had joined forces with fellow British television groups BSkyB and Carlton to bid for digital terrestrial television licences.
Granada has expanded into one of Britain's leading companies in recent years. Last January it acquired the Forte catering and hotel empire in a 3.9 billion pounds ($6.25 billion) takeover.
However, the importance of its rental division has been diminishing in comparison with the rest of the group.
The shops sell household electrical goods and also support the company's television and video rental operations.
Granada has been reducing the number of its stores in recent years to end high street duplication. Growing numbers of customers have been switching to a direct rental operation where they do all their business by telephone.
Granada said in its 1996 annual report that rationalisation of its shop network was ""nearing completion"" after recent cuts.
The company is expected to move to bigger stores in some towns and is likely to keep around 450 shops. It believes that the stores will eventually focus purely on retail activity.
",21
"Shares in United News & Media Plc climbed to record highs on Friday after the British television and newspaper group reported a 12 percent profit rise in the first year since a merger effectively doubled its size.
A media heavyweight was created last year when United News, publisher of national newspapers The Express and Daily Star, joined forces with commercial television and financial services group MAI in a three billion pound ($4.8 billion) deal.
The enlarged company said 1996 profit before tax and exceptional items rose 12 percent to 290.2 million pounds. Earnings per share increased 15 percent to 40 pence.
""I think we have delivered at the top end of expectations against the agenda we set ourselves at the time of the merger,"" chief executive Clive Hollick told Reuters.
Share analysts also gave Hollick and his team their seal of approval. United shares added 25.5p to 766p by 1600 GMT after earlier hitting a post-merger high of 769p.
Several analysts increased their forecasts for 1997 profits, which are seen in a range between 310 and 335 million pounds.
""The review of the businesses following the merger has been completed, with adjustments to the portfolio in some areas and changed operating strategies in others,"" said Hollick, who moved across from MAI.
United said savings as a result of the merger and subsequent restructuring were expected to reach 43 million pounds a year by 1998. It took an exceptional charge of 56 million pounds last year, mainly stemming from the merger.
The company has been active on the disposals and acquisitions front, spending more than 750 million pounds last year as it bought exhibitions group Blenheim and a 29.9 percent stake in regional television broadcaster HTV .
It recouped around 300 million by selling a finance company, a legal publisher and local newspaper interests.
United, which operates commercial television (ITV) franchises in southern and eastern England, said operating profit from its broadcasting and entertainment division rose by 36 percent to almost 60 million pounds.
Profit from the business services unit increased by 38 percent to 100.5 million but the contribution from financial services fell slightly to 51.1 million.
Earnings from consumer publishing dropped 7.5 percent to 81 million after a 31 million pound increase in paper costs.
Hollick said restructuring of the national newspapers should bring annual savings of 15 million pounds, some of which would be ploughed back into the titles.
The mid-market Daily and Sunday Express titles have been relaunched as a combined seven-day operation in a bid to end a long-term sales decline.
United said trading in early 1997 was ""well in line with expectations"". It is paying a final dividend of 15.5 pence per share, bringing the total for the year to 23.5 pence, an increase of two percent. ($1=.6228 Pound)
",21
"Britain's Ladbroke Group Plc and Hilton Hotels Corp (HHC) of the U.S on Monday agreed to reunite the Hilton brand worldwide in a deal which they said could be worth tens of millions of dollars annually.
The worldwide alliance signed on Monday covers 400 hotels in 49 countries and unifies the world-renowned brand for the first time since 1964.
HHC president Stephen Bollenbach said the two companies had explored every possible avenue in their talks but had concluded that a worldwide alliance provided the benefits they were seeking without the complications of a merger.
Ladbroke chief executive Peter George said the agreement should be worth ""tens of millions of dollars per annum"" to the two companies.
""Our people can really get on with the business of reuniting the two parts of Hilton,"" he told a news conference, describing Hilton as one of the world's great brand names.
HHC owns the Hilton name in the U.S. while Ladbroke holds the rights everywhere else through its Hilton International (HIC) subsidiary.
The Hilton hotel chain was founded in 1919 when Conrad Hilton opened his first hotel in the Texan town of Cisco. In 1946 Hilton became the first hotel company to list on the New York Stock Exchange.
HIC was spun off in 1964 and acquired three years later by Trans World Airlines. It was eventually bought by Ladbroke some 10 years ago.
The companies said that the deal covering sales and marketing, loyalty programmes and reservations would drive revenues and dispel the confusion that has surrounded the two groups in recent years.
As expected, the agreements provide for taking cross shareholdings of up to 20 percent. HHC said it intended to acquire a five percent stake in Ladbroke in due course.
George said that Ladbroke had no current plans to take a stake in HHC but would invest in HHC gaming projects.
He said that HHC could build its Ladbroke stake either through buying shares on the market or taking up new equity, or a combination of the two methods.
The two companies announced an outline agreement to unify the Hilton brand last August and share analysts said the announcement on Monday contained few surprises.
Ladbroke shares ended 1p lower at 232.5p but have appreciated some 10 percent since that August announcement.
Analyst Greg Feehely of Kleinwort Benson Securities said the deal could add 15 million pounds ($25 million) to Ladbroke's operating profit next year.
($1=.5974 Pound)
",21
"Michael Grade, who shocked the British media world this week when he announced he was quitting Channel 4 television, said on Wednesday he was to head First Leisure Plc.
Grade is to become executive chairman of the company by July 31. Current chief executive John Conlan plans to leave the business by the end of the year.
Founded in 1982 by Grade's uncle, Lord Delfont, First Leisure operates a range of leisure business from bowling alleys and bars to the Blackpool Tower tourist site.
""I think I have a feel for what entertains the British public,"" said Grade when asked about his new role at a company where he is already non-executive chairman.
Grade, 53, announced on Monday that he was quitting as chief executive of the Channel 4 commercial televison network after almost a decade in the job.
Grade, who comes from a leading British showbusiness family, won plaudits at Channel 4 for building the station's audience share to more than 10 percent while maintaining its reputation for distinctive programming.
""The fear I had was that I would get stale,"" said Grade, commenting on his decision to leave the world of television.
Grade said he wanted to ""quit while he was ahead"" at Channel 4, having apparently seen off attempts to privatise the station and won the battle to end a system of payments to the ITV commercial television companies.
His move is certain to ensure a higher profile for First Leisure, a company with a market capitalisation of only around 600 million pounds.
The company had pre-tax profit of 43.7 million pounds ($71 million) in the year to end-October on turnover of 183 million.
First Leisure shares added 18.5p to 359.5p on Wednesday as the market welcomed news of Grade's appointment.
But Grade said ""continuity not change"" would be his motto.
""Anyone who is expecting radical change will be disappointed,"" he said. ""We have a major development programme ongoing. That is where the growth of the company is coming from. That is the strategy.""
First Leisure is spending 55 million pounds this year alone on new bars, nightclubs and fitness centres, part of an investment programme worth a total of 100 million pounds.
Channel Four has helped to produce hit British movies such as Four Weddings And A Funeral and Trainspotting in recent years and there had been speculation that Grade might seek to take First Leisure into the movie business.
However, Grade denied press speculation that the company planned to bid for Britain's Rank Film Distributors.
Grade, who was on an annual salary of around 450,000 pounds at Channel Four, would not be drawn on how much he would earn at First Leisure.
Conlan, who denied he had been forced out of the company, was paid some 400,000 pounds in 1995. ($1=.6175 Pound)
",21
"John Major's Conservatives can no longer rely on the loyal support of much of Britain's press to help deliver the votes needed to secure a fifth successive election victory, editors and political analysts say.
""It's the Sun wot won it,"" Rupert Murdoch's top-selling tabloid trumpeted after Major's ruling party defied the opinion polls and secured a slim 21-seat majority in 1992.
Traditionally pro-Conservative newspapers, some 70 percent of Britain's press, threw their full weight behind Major five years ago, rubbishing opposition leader Neil Kinnock at every turn and warning voters not to trust Labour's promises.
""If Kinnock wins today will the last person to leave Britain please turn out the lights,"" was the Sun's election day message, illustrated with a front-page picture of the Labour leader's head framed in a lightbulb.
But media watchers believe that Major is unlikely to enjoy such unequivocal support against Labour's Tony Blair in an election which the prime minister announced on Monday would be held on May 1. Labour has a big lead in opinion polls.
""It won't be possible for the Sun to be as enthusiastic about Major and negative about Blair as they were about Major and Kinnock last time around,"" said Ian Hargreaves, former editor of the Independent newspaper.
""They have poured so much crap on Major's head that it wouldn't be possible to back him enthusiastically and retain credibility with their readers,"" added Hargreaves, who now edits the left-leaning New Statesman magazine.
Kinnock was portrayed as volatile and untrustworthy by much of the press in the last campaign. Blair is a media-savvy moderate who has taken his party to the centre ground since becoming leader in July 1994 and is a harder target to attack.
Major's battle to keep his party together over future relations with the European Union has reduced his standing among the pro-Conservative newspapers, many of which demandi a stronger anti-European line.
""It would be inconceivable and a mistake for the Sun not to deliver its vote but it might not be done with the rasping clarity we have come to know and love,"" Hargreaves added.
""I would expect the Sun to be pro-Tory but I think the tone may be that of a 'plague on both your houses'. I think that might be something you see in quite a bit of the press.""
POLITICAL BIAS
British newspapers wear their political sympathies on their sleeves, not only writing trenchant editorials but also slanting their news coverage in a way that amazes many foreign readers.
The support is important as newspaper circulation remains high in Britain. The combined circulation of the national dailies has been in gradual decline but still tops 14 million each day.
Among the mass-market tabloids, the Daily Mirror and its Scottish sister the Daily Record were alone in backing Labour in 1992. The Daily Mail and the Daily Express both stuck to their customary pro-Conservative line, as of course did the Sun.
Among the broadsheet ""quality"" press, Murdoch's Times and Canadian Conrad Black's Daily Telegraph both backed the government while the Guardian supported Labour and the Independent lived up to its name by remaining broadly neutral.
Most surprising of all was an election day editorial in favour of Labour from the Financial Times, the daily staple of business people.
Blair understands the power of the press and provoked controversy in 1995 when he accepted an invitation to address a conference organised by Murdoch's News Corp in Australia, the media magnate's homeland.
The Labour leader has dined with several newspaper proprietors and editors who have reacted with warm words to Blair. But Blair's press secretary Alastair Campbell still believes he is ""dealing with a press that basically wants to do us in if it can"".
MURDOCH'S INFLUENCE
Murdoch's influence over the British press is hard to overstate, his News International arm controlling around 35 percent of the market through its ownership of the Sun, the Times and Sunday titles News of the World and Sunday Times.
""Labour are haunted by the Sun 'light-bulb' front page and are determined to avoid a repetition of that,"" said Andrew Jaspan, former editor of Britain's Observer newspaper, commenting on Blair's efforts to build bridges with Murdoch.
There has been speculation that some of the News International stable may come out and back Blair.
Campbell says the Sun and the Daily Mail, often called the voice of Middle England, are the most important papers for his party but he is cautious about the chances of their endorsement. ""I don't think even the most zealous right-wingers in those papers want to get back to where they were with Neil Kinnock,"" he said.
""Having said that, I've always said that if we could actually win the endorsement of a paper whose endorsement we didn't have at the last election, that would be a huge bonus."" The mid-market Express, known as a ""Conservative party cheer leader"", is one possibility. United News & Media, the paper's parent company, is now controlled by Labour supporting peer Lord Hollick, nicknamed ""The Red Baron"".
ABILITY OF MEDIA TO SWING VOTES IN DOUBT
Despite the anecdotal evidence and the Sun's claims, there is some doubt about the extent to which newspapers are able to affect voting patterns although opinion polls show readers of the Telegraph, Times and Sun are increasingly turning to Labour.
""It does look as if the tabloids are able to swing people and the Sun seems better at doing this than the Mirror,"" said Bill Miller, politics professor at Glasgow University.
""Mirror readers are more likely to be politically committed whereas the majority of Sun readers are not political animals and more open to influence,"" he said.
But Miller, who has studied the effects of newspapers on voting, said the importance of the press can be overstated.
He notes that the Sun, for example, sells only four million copies in a nation of 35 million voters.
""There is a net influence -- perhaps a swing of one percent which last time would have made the difference between Major's majority and a hung parliament.""
But he said that this was not enough to affect the 15 to 20 percentage point lead which Labour holds in most opinion polls.
""If you want to annoy an incoming government you must expect to bear the consequences. It may be that the classic Tory tabloids realise this is not the election for them,"" he said.
",21
"PolyGram, one of the big five powers in the world music industry, on Wednesday reported lower 1996 earnings but said it believed sales growth in the sector was set to recover strongly after stalling last year.
""We do not believe the music business to be a mature industry,"" PolyGram president and chief executive officer Alain Levy told a news conference, adding that he believed sales could grow at an annual rate of more than five percent.
Levy said the $40 billion global music market had reached a plateau in 1996, when it grew by only three percent after several years of double-figure increases.
But he said that he felt the problem was a shortage of good record releases rather than the end of a business cycle. ""I think the issue is an issue of creativity. The music makes the market,"" he said.
PolyGram has a strong-looking release schedule for 1997, with albums planned by U2, Elton John and Van Morrison.
PolyGram, Bertelsmann, Sony Music, EMI and Warner dominate the global music business, accounting for more than two-thirds of sales.
Levy was speaking after PolyGram announced an almost 18 percent decline in earnings following a restructuring carried out in response to the slowdown in music sales.
The music and film company's 1996 net income after tax and extraordinary items fell to 608 million guilders ($327 million) from 741 million in 1995. It took a post-tax charge of 114 million guilders as it reorganised its music operations.
Its dividend was held at 0.95 guilders per share.
Levy said PolyGram expected to resume earnings growth in 1997 but would not specify by how much.
The results topped market forecasts and PolyGram shares surged 6.50 guilders to 89.80 on the Amsterdam bourse.
As part of the restructuring, the company said it was cutting around 550 jobs, an increase on the forecast of 400 job losses made when the move was announced last October.
Chief financial officer Jan Cook said the restructuring would pay off in two or three years, the staff cuts trimming the annual wage bill by some 50 million guilders.
PolyGram is revamping its Motown unit, moving the famous soul music label's headquarters from Los Angeles to New York as it seeks to recreate its heyday of the 1960s and early 1970s.
It is reorganising its European music distribution and marketing and restructuring its classical music division.
PolyGram music increased sales by five percent to 7.95 billion guilders but operating profit fell three percent to 1.11 billion.
The PolyGram Filmed Entertainment (PFE) unit, set up  five years ago, crept into a two million guilder operating profit in the second half of last year. Full-year operating losses fell to 35 million guilders from 68 million in 1995.
But Levy said the unit would not make a profit in 1997 because of the costs of setting up a distribution operation in the United States and a move to bigger budget films.
PFE has won 14 Oscar nominations this year for films such as Fargo, The Portrait of a Lady, Sleepers and Trainspotting.
PolyGram is listed in Amsterdam and New York, with many of its senior executives based in London. Dutch electronics giant Philips Electronics NV owns a 75 percent stake in it. ($1=1.857 Guilder)
",21
"British leisure group Rank Group Plc said on Thursday that it planned to open a further 36 Hard Rock cafes internationally over the next three years.
The expansion programme for the themed diners will be launched in July and cafes will open at the rate of one a month until the year 2000, the company said.
Rank, which last year reunited the Hard Rock brand worldwide, said the outlook for its businesses was promising after a year in which an exceptional charge of 232 million pounds ($375 million) badly hit profits.
Profit before tax in 1996 fell to 65 million pounds from 515 million the year before. However, the 1995 figure was boosted by a 236 million pound exceptional gain.
Rank raised its net dividend by eight percent to 17 pence per share and said operating profit before exceptional items was 13 percent higher at 290 million pounds.
The company, which is in the process of a radical restructuring, said that it expected to create 3,000 jobs in Britain this year as it opened new pubs, cinemas, holiday and leisure centres and bingo clubs.
The news was welcomed by British National Heritage Secretary Virginia Bottomley, who saw it as a further boost to the nation's thriving tourist industry.
""This is excellent news for Britain and underlines the tourism industry's role as one of our major job creators and wealth generators,"" she said.
Rank shares, which have underperformed the market by 20 percent over the past year, added 19.5p to 434.5p.
Share analysts said that the price had been bolstered by Rank's plans to ask its shareholders for permission to buy back up to 10 percent of the company's stock.
Chief executive Andrew Teare said that Rank was well set after a decision to focus on four divisions -- Hard Rock, Holidays, Leisure and Film and Entertainment Services.
""These changes, together with the benefits of our investment programme and the generally favourable economic climate, provide a promising outlook for Rank,"" Teare said.
Rank last year won outright control of the Hard Rock brand worldwide when it bought the cafes and brand rights owned by Peter Morton, one of the joint founders of the chain in 1971. Ownership of the brand had previously been split.
There are plans this year to launch a television series based on the brand and a new Hard Rock Records label has also been announced.
Teare said Rank planned to sell its film distribution unit, which has a catalogue of classic British films dating back to the 1950s as well as some more modern American movies.
Newspapers have speculated that the sale might raise up to 150 million pounds but Teare indicated he thought some of the figures in the press were on the high side.
The exceptional charges related mainly to a 148 million pound property value writedown, plus a loss on disposals and charge for restructuring.
Comparisons with last year were further complicated by a change in the way Rank accounts for its remaining 20 percent interest in Rank Xerox, its office equipment joint venture with America's Xerox Corp.
Rank repeated that it planned to sell the stake when a suitable opportunity arises. However, Teare told analysts that he had not yet discussed the sale with Xerox. ($1=.6184 Pound)
",21
"British Sky Broadcasting Plc emphasised its commitment to digital television on Thursday and warned that the UK was falling behind its European neighbours in the move into the new era.
""Our clear and unambiguous aim is to be in the vanguard of the digital era,"" BSkyB deputy managing director David Chance told a Financial Times conference on New Media and Broadcasting.
BSkyB, the leading force in British pay television with some 5.5 million subscribers, plans to launch 200-channel digital satellite services into the UK later this year.
It has also joined forces with UK commercial television giants Carlton Communications Plc and Granada Group Plc to apply for licences to operate digitial terrestrial television (DTT) services.
Their British Digital Broadcasting consortium faces competition from DTN, owned by Nasdaq-listed cable company International CableTel, for three key DTT licences.
Britain's Independent Television Commission (ITC) is expected to announce a decision on the licences around May.
DTT, broadcast from land-based transmitters to standard television aerials, is scheduled to begin in mid-1998 and offer a total of around 30 channels.
Chance said that he hoped that neither UK nor European regulators would oppose British Digital Broadcasting if it were awarded the DTT licences.
""Eight years ago we led Europe in multi-channel TV,"" Chance said. ""We are probably the last in Europe to launch a digital platform...It isn't the time for a handbrake to be applied.""
""We are behind and we need to get on with it.""
Digital television offers extra channels, improved sound and picture quality and the potential to access interactive services
",21
"Shares in British media group EMAP Plc tumbled about three percent on Monday after the company said it was losing managing director David Arculus to television and newspaper firm United News & Media.
Arculus, 50, who joined EMAP in 1972, will move to United News on April 7 as chief operating officer. His responsibilites there will range from consumer publishing through television to trade magazines and exhibitions.
""David Arculus has demonstrated a sure touch as a builder of media businesses. His experience and proven record make him a valuable addition to the team,"" United chief executive Clive Hollick said.
United said the move completed the management team it has built since its three billion pound ($4.9 billion) merger with television and financial services group MAI last year.
United shares rose 17p to 704.5p after the announcement while EMAP fell 25p to 787.5p.
EMAP has been one of Britain's fastest growing businesses in recent years, selling out of its original regional newspaper base, and expanding its British local radio operations and its consumer magazine interests at home and in France.
But it was hit last year by a row over corporate governance which resulted in the ousting of two non-executive directors.
Chairman Sir John Hoskyns at that time played down talk of a boardroom rift between Arculus and chief executive Robin Miller over who would succeed him.
Share analysts said the departure of Arculus was worrying, coming so soon after last year's upheaval.
""The fact that Arculus is leaving is slightly disturbing,"" said Nick Ward of Credit Lyonnais Laing, noting however that it was impossible for a company to predict staff changes.
""But the place will not fall apart without him,"" Ward added, saying that EMAP was known for its strong divisional management.
Analysts also pointed out that the fall in EMAP shares came after a strong run which has seen them rise from 730p in December when the non-executive directors were removed.
EMAP's Miller said the company's board had not yet decided on who will succeed chairman Hoskyns when he retires next year.
Miller, who joined EMAP in 1965 as a reporter on Motor Cycle News, said there had been difficulties with Arculus but the partnership had worked well overall.
Arculus, EMAP managing director since 1990, said he was delighted to be joining United, a company whose businesses include British commercial television stations, two national newspapers and a trade exhibitions arm.
""I got offered a job about three times the size of the one I was doing at EMAP,"" Arculus told Reuters. His 1995 pay package was worth some 250,000 pounds but he would not be drawn on how much he would earn at United. ($1=.6142 Pound)
",21
"Leading British television companies BSkyB, Carlton Communications and Granada Group teamed up on Friday to apply to run digital terrestrial TV (DTT) services in Britain.
The formation of their British Digital Broadcasting venture, appeared to transform the prospects for DTT, previously dismissed as a ""lame duck"" technology.
British Digital Broadcasting has put in an application to run three DTT licences, offering 15 channels, including subscription channels from the BBC.
It faces competition from U.S. owned cable company International CableTel Inc, which has also put in an application for three of the four available networks.
The company is Britain's third largest cable operator and owns NTL, one of two major British transmission companies.
The BSkyB/Carlton/Granada/BBC venture plans three premium subscription channels showing top films and sporting action. Another 12 channels will be offered as part of a basic subscription package.
Shares in the three companies surged on Friday as markets welcomed the news. BSkyB added 21.5p to 602p, Carlton gained 21p to 540.5p and Granada added 12.5p to 890p.
DTT will broadcast from land-based transmitters to ordinary rooftop aerials. However, viewers will need a set-top decoder costing at least 200 pounds ($324) to receive the service.
There will be six digital networks or ""multiplexes"", each capable of broadcasting at least five channels. The first two have been earmarked for the existing, free, terrestrial broadcasters, the BBC and the ITV commercial network.
The other four will be awarded by the Independent Television Commission (ITC) watchdog body. The service is expected to be on the air by mid-1998.
Digital television offers more channels, clearer pictures and the possibility of accessing interactive services such as home shopping and home banking.
But DTT, with only 30 channels, had been seen as the poor relation to BSkyB's planned satellite version which will offer 200 channels.
BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, is expected to press on with its digital satellite launch in Britain later this year. DTT is seen as a complementary service.
""By plugging in one simple set top box, viewers will be able to see all the existing terrestrial channels, new free channels, the latest movies and the best sport,"" said Carlton chairman Michael Green.
Green will chair British Digital Broadcasting, and Carlton, Granada and BSkyB will each own one third of the company which unites Britain's leading commercial ITV companies with satellite pay operator BSkyB.
If successful in winning the three licences, the shareholders have agreed to meet between them a peak funding requirement of up to 300 million pounds. The company is expected to be profitable within five years.
($1=.6172 Pound)
",21
"Britain's Yorkshire-Tyne Tees Television Holdings Plc, a likely bid target for rival broadcasters, said on Tuesday it believed any offer would have to be at a hefty premium to its current share price.
YTT chairman and chief executive Ward Thomas told a news conference that he believed a bid from northern neighbour Granada Group Plc was ""extremely likely"".
Granada has built up a stake of 27 percent in YTT, the ITV commercial television broadcaster to northern cities such as Leeds and Newcastle, and has long been expected to mount a bid.
That speculation has pushed YTT shares up by some 80 percent over the past 14 months to their current level of around 12.50 pounds ($20.07), giving the company a value of around 800 million pounds, including warrants.
But Thomas suggested any realistic bid would have to be pitched at around 17 pounds per share.
""I say 17 pounds to Gerry (Granada chairman Gerry Robinson),"" Thomas told Reuters in a telephone interview.
""It's a conversational gambit,"" he added.
United News & Media Plc, which already operates ITV franchises for southern and eastern England, is another potential predator, with a stake of some 14 percent in YTT.
Thomas was speaking after YTT announced a 40 percent rise in 1996 pre-tax profit to 30.2 million pounds. It paid a total dividend for the year of 18 pence per share, against 14 in 1995.
YTT shares were down 7-1/2 pence at 12.40 pounds at 1430 GMT.
Thomas said that YTT's profitability could be greatly enhanced if it succeeded in its campaign to have its annual licence fee reduced from an annual 66 million pounds and improved its share of ITV advertising income.
YTT is urging a return to a special duty on advertising, which was originally introduced in 1961 but later scrapped.
Thomas argued that the duty should be applied to all broadcasters including pay television operator BSkyB and the Channel Four commercial station, both currently outside the licence fee system.
Thomas called YTT's 1996 share of ITV advertising revenue disappointing after it fell to 10.3 percent of ITV income.
It is in talks with Laser, its advertising sales agency, to market the whole of northern England as a single region. The fact that Laser is owned by Granada, the ITV broadcaster in north-west England, could facilitate this move. ($1=.6228 Pound)
",21
"Newcastle United season ticket holders were rewarded for their loyalty on Monday when the English premier league club said only those regular fans would be able to buy shares in a flotation.
Initial interest in the listing appeared to confound the sceptics who suggested that the London stock market's enthusiasm for soccer stocks was waning.
The prices of listed clubs have fallen heavily in recent weeks. First division Charlton Athletic is trading at a heavy discount to its offer price after joining the junior Alternative Investment Market on Friday.
Share analysts said that Newcastle's status as one of the elite of English soccer and a squad boasting talent such as England captain Alan Shearer was bound to tempt investors.
Each Newcastle season ticket holder who has applied for stock will be allocated 370 shares, an investment of 500 pounds ($805), when the club joins the stock market next week.
Newcastle made 15 percent of the placing available to individuals, the remainder going to large institutions. The level of demand meant that ordinary members of the public who are not season ticket holders missed out completely.
The offer price has been set at 135p, capitalising Newcastle at 193 million pounds and making it the third largest English soccer stock after Manchester United and Chelsea.
Former European champions Aston Villa, one place below Newcastle at fifth in the premier league, moved a step closer to the market on Monday when shareholders approved flotation plans.
The Birmingham-based club is aiming to raise 15-20 million pounds in a flotation valuing at in excess of 120 million. The flotation is expected before the soccer season ends in May.
Leicester City, a newly promoted premier league team who have reached this year's League Cup final, are also reported to be considering a flotation.
Soccer club owners have recently cashed in on the game's popularity by joining the stock market. The move allows clubs to raise finance to fund stadium redevelopment and enables directors to spread ownership more widely and see a return on their own investment. ($1=.6215 Pound)
",21
"PolyGram, one of the big five powers in the world music industry, on Wednesday reported lower 1996 earnings but said it believed sales growth in the sector was set to recover strongly after stalling last year.
""We do not believe the music business to be a mature industry,"" PolyGram president and chief executive officer Alain Levy told a news conference, adding that he believed sales could grow at an annual rate of more than five percent.
Levy said the $40 billion global music market had reached a plateau in 1996, when it grew by only three percent after several years of double-figure increases.
But he said that he felt the problem was a shortage of good record releases rather than the end of a business cycle.
""I think the issue is an issue of creativity. The music makes the market,"" he said.
PolyGram has a strong-looking release schedule for 1997, with albums planned by U2, Elton John and Van Morrison.
PolyGram, Bertelsmann, Sony Music, EMI and Warner dominate the global music business, accounting for more than two-thirds of sales.
Levy was speaking after PolyGram announced an almost 18 percent decline in earnings following a restructuring carried out in response to the slowdown in music sales.
The music and film company's 1996 net income after tax and extraordinary items fell to 608 million guilders ($327 million) from 741 million in 1995. It took a post-tax charge of 114 million guilders as it reorganised its music operations.
Its dividend was held at 0.95 guilders per share.
Levy said PolyGram expected to resume earnings growth in 1997 but would not specify by how much.
The results topped market forecasts and PolyGram shares surged 6.50 guilders to 89.80 on the Amsterdam bourse.
As part of the restructuring, the company said it was cutting around 550 jobs, an increase on the forecast of 400 job losses made when the move was announced last October.
Chief financial officer Jan Cook said the restructuring would pay off in two or three years, the staff cuts trimming the annual wage bill by some 50 million guilders.
PolyGram is revamping its Motown unit, moving the famous soul music label's headquarters from Los Angeles to New York as it seeks to recreate its heyday of the 1960s and early 1970s.
It is reorganising its European music distribution and marketing and restructuring its classical music division.
PolyGram music increased sales by five percent to 7.95 billion guilders but operating profit fell three percent to 1.11 billion as margins came under pressure in a hard retail climate.
The PolyGram Filmed Entertainment (PFE) unit, set up just five years ago, crept into a two million guilder operating profit in the second half of last year. Full-year operating losses fell to 35 million guilders from 68 million in 1995.
But Levy said the unit would not make a profit in 1997 because of the costs of setting up a distribution operation in the United States and a move to bigger budget films.
PFE has won 14 Oscar nominations this year for films such as Fargo, The Portrait of a Lady, Sleepers and Trainspotting.
PolyGram is listed in Amsterdam and New York, with many of its senior executives based in London. Dutch electronics giant Philips Electronics NV owns a 75 percent stake in the firm. ($1=1.857 Guilder)
",21
"Pearson Plc chief executive Marjorie Scardino began to reshape the British media and leisure company on Friday as she sold its 10 percent stake in Hong Kong broadcaster TVB for 111.1 million pounds ($180.1 million).
The stake in TVB, Hong Kong's leading television broadcaster, has been bought by Shaw Brothers (Hong Kong) Ltd and associates.
The disposal is the first major strategic move by Texan Scardino since she took over at Pearson last month.
""Our commitment to the growth of our businesses in Asia/Pacific is as strong as ever, but we have decided that this investment is no longer effective in developing either our television business or our other interests in the region,"" Scardino said.
Pearson acquired the stake in TVB two years ago for 106.2 million pounds and has received dividends of 3.5 million pounds on it.
Share analysts were pleased that Scardino had made an early move in her attempts to improve the focus of the business and said that Pearson had done well to recover its investment.
""It's obviously a blow to Greg Dyke,"" said one, referring to the head of Pearson's television arm, adding that Scardino appeared to have reversed part of his strategy.
There has been speculation that Dyke, a well-known figure in the British media world, may shortly part company with Pearson.
Dyke said that the investment had given Pearson great insight into the television business in Asia.
""However since we made the minority investment Pearson Television's strategy has evolved to concentrate on programme making and larger broadcast roles,"" he added.
Pearson shares stood unchanged at 764.5p after the announcement.
Debt rating agency Moody's said on Friday it was downgrading Pearson. Moody's said that this reflected its view that Pearson's debt protection measurements -- weakened by recent acquisitions -- would not recover to previous levels near term.
Scardino, the first woman to head a leading British company, has promised to improve Pearson's profit performance.
The company has a clutch of big-name assets such as the Financial Times newspaper and Penguin Books but has failed to secure an adequate return on these.
Analysts say that the company lacks focus and have predicted that Pearson may sell its Tussauds leisure unit and its stake in merchant bank Lazards.
The Scardino era got off to a bad start when the company announced last week that improper accounting at Penguin USA would force it to make a charge of up to 100 million pounds against 1996 profits.
Pearson said the problems dated back five years but had come to light only very recently. ($1=.6168 Pound)
",21
"Anglo-Dutch publishing group Reed Elsevier Plc  reported an 11 percent rise in 1996 profit on Wednesday but warned that currencies could depress this year's earnings.
Reed Elsevier co-chairman Nigel Stapleton told Reuters the strength of sterling would, if maintained, ""drag down"" headline earnings by five percent this year. Earnings figures for the combined businesses of Reed Elsevier are expressed in sterling.
Pre-tax profits rose to 805 million pounds ($1.3 billion) from 723 million on turnover from continuing operations up to 3.38 billion pounds from 3.21 billion. Analysts had forecast profits of between 808 and 821 million pounds.
Reed International Plc, the British arm of the business, proposed a two-for-one share split to take effect in May.
London-listed Reed shares were down 23.5 pence to 1,150.5p at 1145 GMT, while Elsevier NV shares in Amsterdam dipped 1.70 guilders to 30.80.
Analysts said the company's performance had fallen slightly short of expectations and that Reed shares had risen more than 10 percent over the last two months on bid speculation.
For shareholders in Reed the full-year dividend was raised by 11 percent to 27.2 pence per share. Elsevier shareholders will receive 0.76 guilders per share, a 29 percent increase.
The company noted that currency conversions meant that Elsevier results and dividends were helped in guilder terms.
""It's good news for Elsevier and bad for Reed,"" said co-chairman Stapleton. ""(But) the two share prices are linked so much that Elsevier should pull Reed up with it in some respects.""
Stapleton said the 1996 figures reflected a ""solid performance"" right across the group. They followed a four percent earnings dilution resulting from the company's 1995 consumer business divestment programme.
Reed Elsevier sold consumer businesses, such as local newspapers, in order to focus on the provision of information in fields like science, business and the legal profession.
Reed Elsevier said it remained committed to an active acquisitions policy. He noted the company had spent over 300 million pounds on some 20 transactions in 1996.
Stapleton said a ""big deal"" such as Reed's $1.5 billion purchase of U.S. on-line information supplier LEXIS-NEXIS in 1994 would be ""nice but not necessary"".
Reed said its proposed share split would be put to the vote at its annual general meeting in April, to take effect the following month.
It gave no reason for the split, but companies often opt to split their stock in the belief that the process makes their shares more liquid or tradeable. ($ = 0.629 British Pounds)
",21
"Shares in Pearson Plc gained on Wednesday as new chief executive Marjorie Scardino officially took the reins at the diversified British media and leisure company.
Scardino, who becomes the first woman to head one of Britain's leading companies, has already said that Pearson's profit performance has been inadequate and disposals are expected as she aims for greater focus on core businesses.
Pearson shares added 8.5p to 738.5p on Wednesday, reflecting hopes that she will shake up what critics regard as a slumbering giant.
Scardino, a 49-year-old Texan, had been chief executive of The Economist Group, a magazine company half owned by Pearson. A Pearson spokeswoman said Scardino spent her first day ""meeting the troops"" at the company's central London headquarters.
She has already met her fellow executives and share analysts are hoping for some swift action to focus a company which is accused by critics of underexploiting a stellar group of assets.
Its businesses range from the Financial Times newspaper to Penguin books and a television production arm which makes low-budget programmes such as Australian soap ""Neighbours"".
Analysts identify Pearson's investment banking interests, its theme park businesses and loss-making U.S. software publishing company Mindscape as the obvious candidates for sale.
Pearson's Tussauds Group unit includes London's landmark Madame Tussaud's waxwork exhibition and theme parks such as Alton Towers in England and Spain's Port Aventura.
Pearson also has a 50 percent stake in London investment bank Lazard Brothers and smaller holdings in Lazard Freres in Paris and New York.
Analyst Jason Crisp of SocGen said he thought that Scardino would make quite rapid decisions on which businesses to keep and which to sell. But he added that any disposals would necessarily take time to complete.
Crisp said that SocGen remained positive about Pearson.
""It's not a storming buy but with a good team in place, I think the share price will tend to improve,"" he said.
Pearson effectively has a new management team following changes to the board last year.
The process will be complete when Dennis Stevenson replaces Michael Blakenham as chairman in May. Stevenson is currently deputy chairman.
Analyst Colin Tennant of UBS shared the view that investment banking, theme parks and Mindscape could be jettisoned.
But he said that the new management might find it difficult to drive the share price forward while selling off businesses.
""They have stressed they want focus but the problem is there is the possibility of earnings dilution on disposals,"" he said.
Tennant added that he thought Pearson shares ""pretty fully-valued"" at current levels.
",21
"Britain's Express Newspapers, seeking to halt a long-term sales decline, announced plans on Tuesday to shed around 85 jobs as it puts its Daily and Sunday Express national titles under a single editorial team.
Express Newspapers, part of the recently enlarged United News & Media empire, said it would invest around 10 million pounds ($15.6 million) in an effort to improve the quality of the two ailing newspapers.
The planned job cuts will cost in the region of six million pounds in redundancy charges, an Express spokesman said.
The Daily Express has average sales of around 1.2 million copies, a far cry from its heyday in the 1960s when it had circulation of over four million and could boast with some justification of being ""The Voice of Britain"".
The Daily Mail, its rival in the mid-market area, sells more than two million copies daily.
Express Newspapers plans to offer colour supplements on Saturdays and Sundays plus a seven-day-a-week pull-out sports section. The number of pages in the titles will be increased and more of them will be in colour.
Richard Addis, editor of The Daily Express, will take charge of the papers seven days a week. Sunday Express editor Sue Douglas, appointed only nine months ago, has resigned.
The establishment of a single editorial team is intended to make the changes easier to implement and to maximise cross readership of the two newspapers. The Sunday title also sells just over 1.2 million copies.
The reorganisation confirms that United News & Media plans to hang on to the titles and seek to turn them around.
There had been speculation that the company might seek to divest its national titles following its merger earlier this year with MAI Plc, the television and financial services group.
United News also owns the down-market Daily Star. The Star is unaffected by the changes.
""This significant new investment will improve the quality and coverage of the Express titles seven days a week and bring major benefits to our readers,"" said United News chief executive Clive Hollick, who joined the company from MAI.
""Bold marketing initiatives will be launched to support our new products. This step confirms United's determination to revitalise and strenghten its national newspapers,"" he added.
United News shares closed 18p lower on Tuesday in a London market depressed by U.S. interest rate fears and the hostilities in Iraq. ($1=.6406 Pound)
",21
"British newspaper publisher Mirror Group Plc said on Thursday its 1996 profit rose six percent to a record level and that it was ploughing savings from lower newsprint costs back into its titles.
""We are trying to enhance our papers rather than cutting the cover price,"" chief executive David Montgomery said in a telephone interview.
""All the main newspaper groups are heavily subsidising cover prices in one way or another at the moment...We do not think this is the way to build a business,"" he added.
A newspaper price war has been fought in Britain since 1993, Rupert Murdoch's News International newspapers leading the way with price cuts and special promotions.
Montgomery said that the price of newsprint -- the material on which newspapers are printed -- had fallen some 20 percent from 1996 highs. The Mirror's newsprint bill last year came to more than 130 million pounds ($210 million).
The group's flagship Mirror newspaper is Britain's second-top selling tabloid, behind News International's Sun.
Mirror's 1996 pre-tax profit rose 6.6 percent to 82.2 million pounds, before exceptional items. Total dividend was increased by 12.5 percent to 4.5p per share.
Mirror Group shares came off 5.5p to 211p by 1115 GMT in a generally lower London market.
""The group is in a good financial position to make prudent investments for the future and to continue its strategy of creating a more broadly based media group,"" the company said.
Mirror Group has interests in cable television and a stake of around 20 percent in Scottish Television Plc, the commercial terrestrial (ITV) broadcaster to central Scotland.
Losses from the developing Live TV cable channel fell from 10 million to around eight million pounds in 1996.
Mirror Group has a 46 percent stake in Newspaper Publishing, the company which produces the Independent and Independent on Sunday broadsheets and Montogomery said there were no plans to dispose of this.
The two newspapers reported circulation rises in February, the first signs that they may be pulling out of a sales slump.
Newspaper Publishing operating losses were 43 percent lower last year and Montgomery said that cost savings from combined operations meant the impact was ""negligible"" to Mirror Group.
The group said it had an exceptional gain of 19.4 million pounds in 1996, generated by the resolution of a number of property-related issues and the sale of STV's stake in fellow regional broadcaster HTV.
An exceptional tax credit of 9.1 million pounds was included in the 1996 accounts after a settlement was reached with the Inland Revenue on corporation tax payable for 1991-1994. Profit after tax increased to 83.1 million pounds, from 82.4 million pounds in 1995. ($1=.6228 Pound)
",21
"Shares in Newcastle United Plc scored a premium to their flotation price on Wednesday when the Premier League soccer club became the latest team to join the London Stock Exchange.
Newcastle, floated at 135p, had added 6p to 141p by 1145GMT in heavy trading.
The club, based in northeast England and home to stars such as England captain Alan Shearer, Frenchman David Ginola and Colombian Faustino Asprilla, has a market capitalisation of just over 200 million pounds ($330 million).
Soccer club stocks rocketed in value last year but there has been a sharp correction in recent weeks, with the lesser lights of the Premier League and First Division clubs hit hardest.
Euphoria over potential income from pay-per-view television has evaporated, and the increasing supply of soccer club stocks has allowed investors to pick and choose more carefully.
However, clubs are still queueing up to join the market. Bolton Wanderers, poised for promotion to the Premier League, will be floated later this month following a 22 million pound agreed takeover by a company called Mosaic Investments.
Mosaic, which manufactures bar and catering products, is to rename the enlarged group Burnden Leisure Plc and plans to develop it into a sports and leisure business. The name is taken from Bolton's Burnden Park stadium.
Share analysts had expected the Newcastle flotation to prove popular as it gives investors access to one of the glamour clubs of the English game.
Only season ticket holders and club employees were allocated shares after the 15 percent retail tranche in the offer was heavily oversubscribed. The remainder was taken up by institutional investors.
Share analysts believe that Newcastle is well placed to benefit from soccer's financial growth. But they note that it still has work to do before it can claim to be on a par with the elite trio of Manchester United, Liverpool and Arsenal. Of those three, only United are listed on the main market.
""Newcastle have great ingredients with strong local support, a developing brand and a reputation for the kind of exciting soccer which attracts television audiences,"" said analyst Nick Batram of Greig, Middleton.
""The next stage is to turn that into profits and for a lot of people the jury is still out -- they want to see the company deliver.""
Newcastle have spent 50 million pounds on players over the past five years, bankrolled by millionaire property developer Sir John Hall. Hall remains chairman of the football club but has not joined the board of the parent company where his son Douglas holds a controlling stake.
The investment has transformed the club from an ailing first division team into a Premier League force, although a major trophy has so far proved elusive.
Those transfer costs mean Newcastle has reported an operating loss in each of the past five years, although it was profitable in the six months to January of this year.
Bolton, in north-west England, were one of the 12 founders of the English Football League over a century ago.
They have languished in the lower divisions of English soccer for much of the past 20 years but believe that promotion to the Premier League and a move to a new 25,000-capacity stadium give them a sound basis for the future.
($ = 0.606 British Pounds)
",21
"British national newspaper publisher Mirror Group Plc posted a small profit increase on Wednesday in the face of a large jump in newsprint costs.
Pre-tax profit before exceptional items in the first six months of the year rose by 2.9 percent to 39.0 million pounds ($60.59 million).
Interim dividend was increased to 1.35p from 1.2p.
Initial market reaction was positive, Mirror shares adding seven to 208.5p by 0845 GMT.
""Mirror Group has outperformed other newspaper companies in absorbing a 35 percent increase in newsprint costs, maintaining high levels of marketing investment in the brands and still producing an increase in profits,"" chief executive David Montgomery said in a statement.
""The quality of these results confirms Mirror Group as an efficiently run media business now capable of further expansion by deploying its core skills,"" Montgomery added.
Mirror Group's flagship title is the tabloid Daily Mirror, Britain's second-top selling newspaper. It also has a major stake in The Independent broadsheet and has recently branched out into cable television.
The costs of newsprint -- the material on which newspapers are printed -- rose by 18 million pounds year-on-year but Mirror said it had largely managed to off-set this through higher advertising and circulation revenues.
Finance Director John Allwood said that cover price rises had helped to boost circulation revenue by 11 million pounds while advertising revenue was up by around five million.
With newsprint price now levelling off, Allwood said that the company would now seek to win new readers with special supplements to its core titles.
The Mirror's Television arm had losses of 4.2 million pounds, stemming from start-up costs at its Live TV local cable service.
Live TV's offbeat style, including programmes such as topless darts, has earned it hefty criticism but Allwood said this was undeserved.
""It is now receivable in 1.45 million homes and I think people should stop knocking us and give us a bit more credit,"" he said, adding 60-70 main brand companies advertised on Live.
The channel is currently available in central London and Birmingham but launches are planned in the cities of Liverpool and Edinburgh by the end of the year.
($1=.6436 Pound)
",21
"The stock of Apple Computer Inc. rose in heavy trading Thursday on a report that the chairman of software company Oracle Corp. said once again he was interested in buying the troubled computer maker.
Larry Ellison, Oracle chairman, told the San Jose Mercury News Wednesday that he was forming an investor group to raise $1 billion to buy a majority stake in Apple.
Ellison, a flamboyant software billionaire, has said since April 1995 that he would like to buy Apple with his own money, partly to prevent Microsoft Corp. from dominating the computer industry.
Based on its stock price, Apple is worth $2.17 billion. Ellison's stake in Oracle is worth about $6 billion.
Apple rose $2.25 to $19, while Oracle fell $1.125 to $39.375 on Nasdaq, where both stocks were among the most active issues in late trading.
Ellison told the newspaper he was publicly reasserting his interest in buying Apple partly to gauge investor support in the next few days. Based on the reaction, he will decide soon whether to make a bid.
Previously, he has said he approached unidentified big investors about a joint bid. He also has mulled the idea with his friend Steve Jobs, the Apple co-founder who was kicked out of the company in 1985 and returned in December as a part-time advisor to Apple Chairman Gilbert Amelio.
Ellison could not be reached for comment. Katie Cotton, Apple spokeswoman, said the Cupertino, Calif.-based company had no comments about Ellison.
Wall Street analysts said they doubted Ellison actually would attempt to buy Apple because he has not taken any concrete steps in the two years that he has expressed an interest.
""The deal doesn't make sense for (any outside investor) to take him up on it,"" said David Wu, analyst at investment bank ABN Ambro Chicago Corp.
Still, Ellison's comments should not be dismissed, some analysts said.
""It would be a mistake to analyse this as a pure business issue, as there is substantial ego involved,"" said Paul Saffo, a tracker of Apple and Ellison and a research fellow at Institute for the Future, a Silicon Valley think tank.
Ellison, the third-richest software tycoon behind Microsoft co-founders Bill Gates and Paul Allen, is intent on slowing Microsoft's dominance of the software industry, he has said in recent interviews. Apple, with its huge following of Macintosh fans, could be a key weapon.
Saffo also said Jobs, since returning to Apple late last year, has been very influential in trimming the company, and could be ""sprucing up"" Apple for an acquisition.
Jobs recently became a member of the Apple board following Apple's $400 million acquisition of his Next Software Inc.
Apple has suffered declining market share for its famous brand of easy-to-use computers and endured several rounds of restructuring in recent years. The stock has languished in the mid-teens since early January and is at a 10-year low.
In mid-March, the company said it planned to discontinue several product lines and lay off 4,000 employees, or one-third of its staff, in its latest bid to slash costs and turn the company around.
",25
"Apple Computer Chairman Gilbert Amelio told the annual shareholders' meeting Wednesday that he was suspending Apple's executive cash bonus plan until the struggling computer maker returned to profitability.
""Let me assure you that my highest priority is to get this company in the black as early as possible,"" Amelio told Apple shareholders.
Amelio said that when he took the helm of Apple Computer Inc. one year ago, it faced five crises, which he has sought to address.
""We were broke,"" he said, adding that financial liquidity was so tight the company barely had enough reserves to manage its daily business.
Amelio's comments came a day after the company announced another restructuring and less than a month after Apple stunned Wall Street with a $120 million loss in the first quarter of fiscal 1997.
Amelio did not provide specifics about the restructuring or how many jobs might be cut as Apple seeks to cut costs.
But he said the company planned to suspend the executive bonus plan until Apple returned to profitability. Recently, Apple officials said they expect to begin making profits again by the end of the 1997 fiscal year in September.
The decision to suspend the cash payouts came after Apple revealed some executives received substantial bonuses last year when Apple reported an unexpected fourth-quarter profit.
The payout was the result of a change in the compensation plan which allowed the executives to receive bonuses based on the company's fourth-quarter rather than full-year results.
For the fourth quarter, which ended in September, Apple reported a profit of $25 million, surprising Wall Street, which had been expecting the company to report a modest loss.
Much of that profit, however, came from a one-time gain Apple recognised for an inventory adjustment. Without that, Apple would have reported a modest loss or broken even, one analyst estimated.
Based on that one profitable quarter, Apple's senior executives received ""175 percent of their special bonus target,"" according to Apple's proxy statement. Amelio, who had a separate compensation agreement with the company, received a $648,000 bonus on top of his $990,000 base salary. Apple did not disclose the bonuses of the other executives.
Apple officials said the special bonus plan was meant to encourage executives to meet their turnaround goals.
""It was basically to motivate them to achieve profitability,"" Apple spokeswoman Nancy Paxton said on Tuesday. She said the executives had expected financial performance to improve after the fourth quarter.
Apple stock fell 12.5 cents to $15.25 on Nasdaq.
",25
"The number of personal computers shipped worldwide rose by 15.4 percent in the first quarter, led by strong sales at Compaq Computer Corp. and International Business Machines Corp., market researcher Dataquest said Sunday.
The first quarter traditionally has been a slow time for PC makers. So a robust 15 percent growth means the industry is well on track to grow by 19 percent for 1997, as previously forecast, said Bill Schaub, director of computer research at Dataquest.
""Everybody had a really good quarter,"" Schaub said.
In the first three months of the year, the industry shipped 18.7 million machines, compared with 16.3 million in the same period a year ago.
Compaq, the world's biggest PC maker, widened its market-share lead in the quarter by shipping 1.87 million units, 18 percent better than the 1.59 million units last year. Compaq had 10 percent of the world's PC market.
Dell Computer Corp., the world's fourth-biggest PC maker, had the biggest shipment increase. The company's shipments rose 62 percent to 945,000 units in the first quarter, compared with the 584,000 units in the same quarter a year ago.
IBM, in the No. 2 spot, had a solid quarter, shipping 1.6 million units, 37 percent more than last year's 1.17 million units.
Packard Bell NEC Inc., the third-biggest PC maker, had a flat quarter, shipping 1.11 million PCs. Packard Bell is a closely held company.
Apple Computer Inc. was notable for not ranking in the top five spots this quarter. The company traditionally has been a fixture on Dataquest's top-five lists.
Still struggling to return to profits, Apple shipped only 602,000 units in the first quarter -- well below Toshiba Corp., the No. 5 vendor, which shipped 879,000 PCs.
Schaub said he was particularly impressed by Dell, which sells its PCs only through mail-order.
""Dell is really leveraging their direct approach,"" Schaub said. ""Because they can move their inventory really fast, they have a 15 percent cost advantage over Compaq and IBM.""
Dell's approach has been so successful, in fact, that Compaq wants to copy it. In recent weeks Wall Street analysts have speculated that Compaq will try to expand its direct-sales business by buying another company.
Compaq may be eyeing Gateway 2000 Inc. or Micron Electronics Inc., analysts have said in recent days.
Following is a chart of top-five vendors in the first quarter:
 Company	     1997	     1996	   Market share
 Compaq	  1.870 million   1.589 million   10.0 percent
 IBM	     1.600 million   1.166 million    8.5
 Packard Bell  1.108 million   1.070 million    5.9
 Dell		945,000	   584,000	  5.0
 Toshiba	   879,000	   560,000	  4.7
 Others	 12.338 million  11.281 million   65.8
    Total     18.740 million  16.250 million
",25
"Apple Computer Inc. reported a $708 million second-quarter loss Wednesday, reflecting a charge for the layoff of a third of its employees and weaker sales of its personal computers,
Apple said, however, that strong sales of new, speedy PCs and laptops and lower expenses would help the company meet its goal of reporting a profit by its fiscal fourth quarter, ending in September.
The Cupertino, Calif.-based computer company's net loss, equivalent to $5.64 a share, for the fiscal quarter ended March 28 compared with a net loss of $740 million, or $5.99 a share, in the year-ago quarter.
Apple's loss from operations of $186 million, or $1.48 a share, was worse than the consensus industry analyst forecast of $1.22 a share, according to First Call, which tracks analyst forecasts.
The $708 million net loss included a $155 million charge to cover the cost of layoffs and a $375 million charge for the acquisition of software developer Next Software Inc.
Apple said, however, that it expects to see higher revenue and a reduced operating loss in the third quarter as its restructuring programme takes hold. In March, the company said it would lay off 4,100 employees and reorganize operations to cut costs.
""Don't open champagne bottles yet, but the process seems to be working,"" said Lou Mazzucchelli, analyst at investment bank Gerard Klauer Mattison in New York.
During the quarter, Apple introduced a jazzy laptop and a speedy desktop machine for small businesses, schools and homes. Sales of the new machines have been strong, the company said.
""We feel the worst is behind us and our strategy is on track,"" Apple Chairman Gilbert Amelio said in a telephone conference call with analysts. He said sales will probably increase in the third quarter over the second and that the company probably will meet its goal of being profitable again by the fourth quarter.
Still, even with better financial health, Apple faces serious problems, analysts said.
The number of Apple computers shipped worldwide in the second quarter plunged 33 percent to 602,000 units, compared with 892,000 units in the same quarter a year ago. The drop was bigger than most analysts expected.
Sales in Japan and Europe also were weak, Apple executives said in the conference call.
""I want to see a couple of positive quarters before I say they're beginning to turn the corner,"" said Michael Kwatinetz, analyst at the DMG Technology Group investment bank in New York.
To keep costs in line with declining sales, Apple in the past year has laid off more than 5,000 employees. The company also has seen its entire management suite change in 15 months.
The uncertainty about the company's future still is keeping customers away from the Mac aisle at stores, analysts said.
Dataquest, which tracks PC sales worldwide, says Apple's share of the worldwide market fell to 5.2 percent last year from 7.9 percent. The slide left Apple's market share at the lowest point in three years.
",25
"When Gilbert Amelio took the top job at Apple Computer Inc. last year, many analysts predicted he would follow the same game plan he used to turn around National Semiconductor Corp.
Known as an expert cost-cutter, Amelio was expected to bring order to Apple's chaotic structure and stop the bleeding.
Things, however, have not gone according to plan.
After reporting a surprising $25 million profit in the fourth quarter, Apple reported a stunning loss of $120 million in the first quarter of fiscal 1997. The company expects the losses to continue until at least June.
Now, as Amelio prepares to meet with shareholders Wednesday, the company is planning another round of layoffs aimed at bringing its costs under control. Some analysts now wonder if Amelio can pull off his plans at all.
""It's not happening,"" said Michael Murphy, editor of the California Technology Stock Letter in Half Moon Bay, Calif. Based on the simple measure of Apple's stock price, trading near its all-time low, Amelio has not done a good job at all, Murphy said.
Under Amelio's original plan, he hoped to stanch Apple's losses in 1996, unveil new products in 1997 and show increasing revenues in 1998.
Analysts said Amelio did not quite accomplish the first goal and may not accomplish the other goals on time.
The trouble is, customers are hard-pressed to find a reason to buy a Macintosh instead of a personal computer based on Microsoft Corp.'s Windows software.
According to market researcher Dataquest, Apple's worldwide market share slipped to 5.2 percent in 1996 from 7.9 percent in 1995.
Returning Apple to profits is not a matter of reducing expenses and cutting jobs anymore, analysts said. Apple has to make a new revolutionary computer to leapfrog rivals in technology, ease of use and power to win back customers.
With Apple still about a year away from introducing a new generation of computers to polish its technology image, experts say the prospects of a quick turnaround are fading.
""A lot of people want instant gratification,"" said Lou Mazzucchelli, analyst at brokers Gerard Klauer Mattison & Co. in New York. ""In this case, you're not going to get it. This is a tough problem.""
To improve the fundamental software technology of the Macintosh, Amelio approved the $400 million purchase of Next Software Inc.
But some analysts doubt whether the bet will pay off.
""It's hard for me to say it was a good decision since we won't see a product until the end of this year, early next year,"" said John Coyle, investment officer at S&P Equity Group in New York.
Some Apple watchers also questioned the generous compensation doled out to Apple's management at a time when the company is contemplating massive layoffs to cut expenses by 20 percent by the end of the year.
For 1996, Apple had a compensation plan that would give senior executives bonuses based on Apple's financial performance for the first and second half of the year.
In the first half, Apple reported a cumulative loss of $809 million. In the fiscal third quarter ended June 28, 1996, Apple had a loss of $32 million. In July, Apple's compensation committee replaced the original bonus plan with a special plan that made the bonuses of Apple's senior management based solely on whether Apple reported a profit in the fiscal fourth quarter.
For the fourth quarter, which ended Sept. 30, Apple reported a profit of $25 million, surprising Wall Street, which had been expecting Apple to report a modest loss.
Much of that profit, however, came from a one-time gain Apple recognised for an inventory adjustment. Without that gain, Apple would have reported a modest loss or would have simply broken even, one analyst estimated.
Based on that one profitable quarter, Apple's senior executive received ""175 percent of their special bonus target,"" according to Apple's proxy statement. Amelio, who had a separate compensation agreement with the company, received a $648,000 bonus on top of his $990,000 base salary. Apple did not disclose the bonuses of the other executives.
In the following quarter, which ended Dec. 31, Apple went back into the red, leading some experts to question whether the fourth-quarter profit was a one-time event aimed at hitting the bonus target.
""Apple should win the Nobel Prize for executive compensation plans,"" said Graef Crystal, editor of the Crystal report and an executive compensation expert in San Diego. ""Apple is one of the worst abusers of executive compensation.""
Apple officials said the special bonus plan was meant to encourage executives to meet their turnaround goals.
""It was basically to motivate them to achieve profitability,"" said Apple spokeswoman Nancy Paxton. She said the executives had expected financial performance to improve following the fourth quarter.
",25
"Apple Computer Inc. said Tuesday it plans to release an operating system that will work on personal computers based on chips from Intel Corp. as well as on Apple computers.
At its annual developer conference, the company also said it will release programming tools in the next few months that will allow companies to write software for Apple computers once and automatically convert their products to run on PCs based on Intel chips and Microsoft Corp.'s Windows software.
The radical strategy is part of Apple's plan to keep software companies from abandoning Apple products, Apple Chairman Gilbert Amelio told a crowd of 1,900 programmers here.
""For those of you who seek substantial business on both the Mac and Windows platforms, this new development environment holds tremendous promise,"" Amelio said. ""You can (write your applications once) and with a simple recompilation release them for both platforms.""
Until now, Apple has released operating system software that runs only on Apple-designed hardware.
Amelio said Apple's next-generation operating system, code-named Rhapsody, will run on Apple-designed computers, and on PCs based on Intel chips.
""It's a really good idea if they can deliver,"" said Richard Zwetchkenbaum, analyst at market researcher International Data Corp. By entering the PC market, Apple will have a great opportunity to show the world that its technology is special, Zwetchkenbaum said.
For the past two years, Apple has been scrambling to come up with improvements to the Macintosh that would set it apart from PCs. Until 1995, Apple had relied on its computers' famed ease-of-use as a selling point, but Microsoft's release of Windows 95 took away much of the impact of Apple's pitch.
Last year, Apple gave up on a mired effort to revamp the Macintosh Operating System, the fundamental program that gives the Mac its look. In December, the company bought Next Software Inc. to get its software overhaul going again, and to use Next software as the foundation of a next-generation operating system.
The move concerned lots of programmers, though, because of fears that the new operating system would not run the products they designed for the older Mac operating system. Programmers also were not thrilled to develop products for yet another operating system.
Apple plans to spend the rest of this week convincing programmers that it is a worthwhile investment to write software for Rhapsody from now on.
Programs written specifically for Rhapsody can easily be converted to run on old Macs, as well as a new class of Apple machines using the Rhapsody operating system, and PCs running the Windows operating system, Amelio promised.
Until now, Mac programmers who wanted to write a version of their product for Intel machines had to make huge changes to their programs.
The first versions of Rhapsody will be delivered later this year, Amelio said.
Still, Apple faces a big challenge moving Mac developers to Rhapsody, Zwetchenbaum said. Switching to a new operating system involves learning lots of technical details.
Apple's stock closed unchanged at $17.56 on Nasdaq.
",25
"Apple Computer Inc., undertaking a second restructuring in a year, could announce on Friday bigger-than expected job cuts and forecast a big loss for the second quarter, analysts said.
The Cupertino, Calif., personal computer maker also is expected to specify which product lines it plans to drop as it concentrates on businesses that are still relatively healthy.  
Since Apple announced in January that it expects to report quarterly losses until at least September 1997, trade magazines and newspaper reports have speculated that the company would have to fire between 2,000 and 5,000 of its 13,000 employees to adjust its costs to declining revenues.
""I would not be surprised if the layoffs were deeper than the original estimates,"" said James Poyner, an analyst at investment bank Oppenheimer & Co in New York.
Apple executives have said they expect revenue for this fiscal year ending September to decline about 20 percent to about $8 billion.  
The company has said it would have to cut at least $400 million in costs this year to break even.
Apple may have to cut costs even deeper because Macintosh sales are declining faster than expected, analysts said.  In the March quarter, worldwide shipments of Macintosh computers will fall to about 804,000 units compared with 884,000 units in the March quarter of 1996, said Matt Sargent, analyst at market research firm Computer Intelligence InfoCorp.
Apple also will tell investors which product lines it will cut.  
Analysts have speculated that Newton handheld computers could be discontinued or sold to another computer company.
Last week, Chairman Gilbert Amelio told employees in an internal letter that the company would specify the cuts this Friday.
""I would like to hear clear bullet points on what they are going to do and what they are not going to do,"" said Stephen Dube, analyst at Wasserstein Perella Securities in New York. ""Every time Amelio has spoken he has sent confusing messages.""
Dube said he expects Apple also to forecast on Friday the size of its loss from operations for the quarter ending March.
Wall Street expects Apple, based in Cupertino, Calif., to post a loss from operations of $0.79 a share, according to a recent survey by First Call.
",25
"Apple Computer Inc. Tuesday said it plans to release an operating system that will work on personal computers based on chips from Intel Corp. as well as on Apple computers.
At its annual developer conference, the company also said it will release programming tools in the next few months that will allow companies to write software for Apple computers once and automatically convert their products to run on PCs based on Intel chips and Microsoft Corp. Windows software.
The radical strategy is part of Apple's plan to keep software companies from abandoning Apple products, Apple Chairman Gilbert Amelio told a crowd of 1,900 programmers here.
""For those of you who seek substantial business on both the Mac and Windows platforms, this new development environment holds tremendous promise,"" Amelio said. ""You can (write your applications once) and with a simple recompilation release them for both platforms.""
Until now, Apple has released operating system software that only runs on Apple-designed hardware.
Amelio said Apple's next-generation operating system, code-named Rhapsody, will not only run on Apple-designed computers, but also on PCs based on Intel chips and using Microsoft Windows software.
For the past two years, Apple has been scrambling to come up with improvements to the Macintosh that would set it apart from PCs. Until 1995, Apple had relied on its computers' famed ease-of-use as a selling point, but Microsoft's release of Windows 95 took away much of the impact of Apple's pitch.
Last year, Apple gave up on a mired effort to revamp the Macintosh Operating System, the fundamental programme that gives the Mac its look. In December, the company bought Next Software Inc. to get its software overhaul going again, and to use its software as the foundation of a next-generation operating system.
The move concerned lots of programmers, though, because of fears that the new operating system would not run the products they designed for the older Mac operating system. Programmers also were not thrilled to develop products for yet another operating system.
Apple plans to spend the rest of this week convincing programmers that it is a worthwhile investment to write software for Rhapsody.
Programmes written for Rhapsody will be able to run on old Macs, a new class of Apple machines using the Rhapsody operating system, and PCs running the Windows operating system, Amelio promised.
Investors, however, evidently decided to wait a while before rendering judgment, and Apple's stock ended unchanged at $17.5625 on Nasdaq.
",25
"Apple Computer Inc. said Friday it will cut 4,100 jobs, or nearly a third of its work force, and discontinue its consumer computer line in a bid to slash costs and return to profits.
The restructuring, the second in a year, will cost Apple a total of $250 million in charges to earnings for the next three quarters, the company said.
Meanwhile, Apple expects revenue for its fiscal second quarter, ending March, to plunge 22 percent to about $1.6 billion because of weak Macintosh sales.
Apple said it plans to drop its Macintosh Performa PCs, the models geared toward home users, to concentrate on its more profitable Power Macintosh line.
""It's very painful to have to lay off people who have worked so hard during the past year in trying to bring Apple back to health,"" Chairman Gilbert Amelio said. But Apple needs to cut $500 million in annual costs just to break even this year, he said.
Apple was bold to cut so many jobs and to discontinue one of its key brands, analysts said. But the company still does not have a clear plan to get sales going again.
""The company is on the aggressive side on reducing costs,"" said Walter Winnitzki, an analyst at PaineWebber Inc. in New York. ""But the issue for me is, can Apple reignite its sales momentum?""
Hampering Apple's efforts to reignite sales, the company also said it will not ship a long-awaited revamped operating system  -- the software that controls the basic functions of its PCs -- until at least June 1998, about six months later than the company had previously said.
Investors and Apple customers have been counting on the new operating system, code-named ""Rhapsody,"" to give Apple's computers a clear technological lead over PCs using technology from Intel Corp. and Microsoft Corp.
The uncertainty surrounding the Cupertino, Calif.-based computer maker will keep customers away from the Mac isle at computer stores, analysts said.
The job cuts include 2,700 full-time employees and 1,400 contract workers. Apple plans to give employees 60-day notices later this month. Before the layoffs, Apple employed about 13,400 including contract workers.
In the fiscal second quarter ending March 31, Apple will take a $155 million charge against earnings to cover the cost of the layoffs. The company also plans to take another $322.5 million charge for the December acquisition of Next Software Inc.
Fred Anderson, Apple's finance chief, declined to say what the company's total loss in the second quarter will be, but analysts said their preliminary estimates are close to $1 billion.
With the cost cuts, Apple could return to profit by the fiscal fourth quarter ending September, Anderson said.
Apple, which invented the first user-friendly computer, has suffered in recent years from missed opportunities, management turmoil and failed products.
Amelio, who took over in early 1996, has been refocusing Apple's effort on its healthiest businesses. As part of the restructuring, Apple will drop development of software based on the so-called OpenDoc technology and computer servers based on International Business Machines Corp.'s AIX standard. Apple also will stop development of its video-conferencing products.
The company will keep its Newton handheld computer for now, Apple said. The Newton was expected to be discontinued or sold to another company as part of Friday's restructuring.
Amelio has been under increasing pressure from shareholders and loyal customers to come up with new products to get sales going again.
On Friday, he dismissed calls for him to step down.
""Why would I step aside when we are at the cusp of turning this around?"" he told reporters.
",25
"Versant Object Technology Corp, a database software company, expects to do more business with MCI Communications Corp despite a stalled project last summer, Versant's chief executive said.
""We anticipate ongoing business from MCI,"" said David Banks, CEO of Versant, based in Menlo Park, Calif. ""They are still a customer of ours. They are using our licenses in existing projects and there are new projects on the horizon.""  
A lot is riding on Versant's relationship with MCI. Ever since the long-distance phone company put a major project to revamp its billing system on hold, Versant's stock has been in a funk.
Versant was supplying MCI with some of the fundamental software for the project. So when MCI last summer halted work to re-evaluate the project, code-named Horizon, investors assumed the worse about Versant and guessed the software company was the cause of the snafu, analysts said.  
Versant's stock plummeted from a high of 28-3/8 in late November to as low as 8 three weeks ago. On Tuesday, Versant was unchanged at 14-3/4.
In 1996, Versant's sales of software to MCI totaled about $4.8 million, or about 26 percent of the $18.4 million reported for the year.
""There have been rumors going around Wall Street implying that the relationship between MCI and Versant went sour,"" said James Mendelson, an analyst at brokerage SoundView Financial. ""I don't believe Versant was at fault.""  
Banks said he could not discuss the technical details of Horizon, or why it was halted, because of a confidentiality contract with MCI. An MCI spokesman said the company simply decided to change the goals of the project, and would not comment about Versant's performance.
But analysts said MCI's actions speak louder than words. Even though MCI never finished Horizon, MCI paid Versant all the money the software company was due.
In June, MCI placed a $3.9 million order for Versant software to revamp its billing system. In September, MCI told Versant that it was re-evaluating the project. So Versant decided not to recognize revenue from the project in the third quarter. In the fourth quarter, MCI renegotiated terms of the contract with Versant and paid the software company $4.4 million.
""MCI met all their financial obligations,"" Banks said. MCI also is still using Versant software, but Banks declined to say how much more revenue his company would receive from MCI.
Mendelson said he expects Versant's revenue to nearly double in 1997 to $30 million as the company finds new customers outside of the telecommunications industry.
",25
"Apple Computer Inc. Thursday launched the second wave of a massive advertising campaign started earlier this year to raise the profile of its computers and rebuild its tarnished image.
In 16 U.S. daily newspapers, Apple's eight page inserts, headlined ""Only Apple,"" touted the benefits of its new products, including a speedy Power Macintosh for home and small-business use, and a Mac that can run programmes written for Microsoft Corp.'s Windows, the dominant operating system software for personal computers.
The advertising campaign is part of Apple Chairman Gilbert Amelio's promise to shareholders in January to put the troubled company's marketing department ""back on the attack.""
Apple, which virtually created the personal computer 20 years ago with an easy-to-use machine, has been struggling amid fierce competition from cheaper PCs based on technology from Microsoft and semiconductor giant Intel Corp.
In recent months, Apple's products have been overshadowed by dismal financial results, management turmoil and takeover speculation.
Just last week, Saudi billionaire Prince al-Waleed bin Talal disclosed he had purchased more than 5 percent of Apple, fuelling speculation he might team up with Oracle Corp. Chief Executive Larry Ellison to acquire the company.
Industry analysts said the advertisements were an effort by the Cupertino, Calif.-based computer maker to draw attention away from its dismal financial performance and back to its new products.
""A week from now they're going to release what can be considered really bad news,"" said Tim Bajarin, president of market research firm Creative Strategies Research International. ""This is a preemptive move to get people off the bad news and onto the good news, which is some really exciting new products.""
Next week, Apple is expected to report a loss of more than $500 million for the second quarter of fiscal 1997, bringing its total red ink over the last six quarters to more than $1.5 billion.
In addition to a couple of one-time items -- a charge for laying off 4,100 workers and another charge for acquiring Next Software Inc., Apple's second quarter is also expected to feature a hefty operating loss, reflecting slower than expected sales of its flagship Macintosh line.
Experts say Apple's new line of computers should help slow down its eroding market share but it remains to be seen if Apple can regain its former glory.
""The new products are the best they've had in a long, long time, and will help them stay afloat,"" said Scott Miller, computer industry analyst at market researcher Dataquest. ""The advertising for the products is icing on the cake.""
Apple declined to comment on how much the campaign costs, but it is certainly more than the $1.6 million Apple spent in 1984 to tout the Macintosh in a brash TV spot aired during the Super Bowl. The 60-second spot, featuring an athlete hurling a hammer at a huge video screen helped establish Apple as an innovative company out to change the world.
Since 1993, Apple's share of the worldwide computer market has been cut almost in half, tumbling to 5.2 percent in 1996 from 9.4 percent in 1993.
Apple customers and shareholders had criticised Amelio for not having done enough to tout the Macintosh's ease-of-use and technical superiority over Windows-based personal computers.
Apple started the current campaign in February, with two-page advertisments in newspapers such as the Wall Street Journal and the New York Times. The previous advertisements and the ones unveiled Thursday focus on the Mac's technical superiority.
Apple plans to run more ads in coming days. The company also is planning more multi-page spreads in coming months as new products come out.
",25
"Apple Computer Inc. Chairman Gilbert Amelio said Wednesday he was suspending the merit bonuses of executives, including himself, until the struggling computer maker reported consistent profits.
Facing a crowd of grumbling shareholders at Apple's annual shareholder meeting, Amelio said he was as disappointed as the shareholders about Apple's $120 million loss in the latest quarter, declining revenue and a stock price near an all-time low.
""Let me assure you that my highest priority is to get this company in the black as early as possible,"" Amelio told shareholders near the company's headquarters in Cupertino, Calif.
The freeze is on the portion of the bonus that top executives would receive for meeting performance goals. Amelio said the freeze would be in effect until the board rescinded it.
The suspension came a day after the company announced its second restructuring in two years. It also came a month after Apple, the fourth-biggest personal company, reported the stunning $120 million loss.
To get the company back to profits, Apple plans to cut costs by $400 million by the end of its fiscal year in September. Amelio said cost reductions would involve job cuts and possible sale or discontinuation of product lines.
""It's time for Apple to face the fact that we cannot do everything,"" Amelio said. ""We can't be in every market. We can't support every technology.""
Amelio would not specify the number of jobs Apple was considering cutting nor whether the company would discontinue the Newton handheld computer, as has been reported.
Industry analysts have said they expect Apple to cut between 2,000 and 3,000 jobs from its work force of 13,000.
Amelio said when he took the helm of Apple one year ago, ""we were broke."" He added that financial liquidity was so tight the company barely had enough reserves to manage its daily business.
""The company was simply doing too much, moving in too many directions, and not enough of it was profitable,"" Amelio said. ""I sometimes think that, when it comes  to cool new projects, Apple's eyes were bigger than its stomach.""
Businesses were so fragmented, he said, the company was using no fewer than seven different financial systems and its forecasting system was ""completely inadequate"".
Amelio outlined actions he has taken to address these crises, including the company's decision in December to acquire Next Software Inc. for $400 million to help Apple develop a new stable, high-operating operating system.
The decision to suspend the executive bonus programme comes after the company revealed some executives received substantial bonuses last year when Apple reported an unexpected fourth-quarter profit.
Apple's compensation board approved a special bonus plan in July 1996 based on whether the company would report a profit in the fiscal fourth quarter, ended September 1996.
For the fourth quarter, Apple reported net income of $25 million. Much of that net income, however, came from a one-time gain Apple recognised for an inventory adjustment. Without that gain, Apple would have reported a modest loss or would have simply broken even, one Wall Street analyst estimated.
Based on that one profitable quarter, Apple's senior executives received ""175 percent of their special bonus target,"" according to Apple's proxy statement. Apple did not disclose the target levels nor the amount of the bonuses.
Amelio, who had a seperate compensation agreement with the company, received a $648,000 bonus on top of his $990,000 salary. Apple officials said the bonus plan was meant to encourage executives to meet their turnaround goals.
Apple stock dipped 12.5 cents to $15.25 on Nasdaq.
",25
"Apple Computer Inc will announce as early as Monday a new round of massive job cuts and a plan to reduce the company's operations to three groups, a person close to the company said on Sunday.
The second restructuring in the 12 months since new Chief Executive Gilbert Amelio took control of the struggling company may include job cuts of up to a quarter of Apple's 13,000 workforce, the Los Angeles Times reported on Saturday.
The restructuring also may include moves to focus Apple's half-a-dozen business units even more on selling computers to the publishing industry and schools, the segments where Apple still holds a market-share lead over competitors, the person close to Apple said.
The fourth-biggest U.S. maker of personal computers has been taking a closer look at unprofitable product lines, such as the Newton handheld computer, with an eye toward discontinuing them.
The latest restructuring would come less than a month after Apple, based in Cupertino, Calif., reported an unexpected fiscal first-quarter loss of $120 million. The loss was a setback to Amelio's three-year plan to staunch Apple's losses by 1996, introduce new products by 1997 and to get the company growing again by 1998.
To meet its goal, Apple has to cut another $400 million in costs this year to break even, Apple executives have said. Last year, Apple laid off 1,500 employees. But as customers avoid buying computers from the troubled company, revenue has declined faster than Apple executives expected.
According to a report released last week by market researcher Dataquest, Apple's U.S. shipments dropped 30 pecent in 1996 while the rest of the industry grew 17.8 percent.
Apple now expects revenue for the current fiscal year, which will end September, to decline by about 20 percent to $8 billion.
Apple is still working on the details of the restructuring plan, Apple sources said. An announcement on Monday would come two days before Apple's annual shareholder meeting at its headquarters.
",25
"Informix Corp. , facing plunging sales of its database software products, plans to raise cash and is considering refinancing its leases to keep its operations going at current levels, the company said in filings with federal regulators.
(Clarifies that company has yet to decide whether to refinance its leases).
The struggling database software company plans to raise capital to offset upcoming losses from operations, and to shore up its shrinking cash supply, according to a filing with the Securities and Exchange Commission.
Informix also is considering arranging for the refinancing of leases on parcels of land in Santa Clara, Calif., where it intended to build new corporate headquarters.
""While the company believes it will acquire the necessary financing, there can be no assurance that such financing will be available,"" Informix said in the filing. ""The company's failure to raise working capital would have adverse effect on its business, results of operations and financial condition.""
Informix, based in Menlo Park, Calif., is the second-largest publisher of database software, the computer programmes that let companies store huge libraries of vital information on computer networks.
Earlier this year, the company made a huge bet on a jazzy new database product, dubbed Universal Server, aimed at customers in just-emerging multimedia markets.
The bet, Informix executives have said, turned out to be misplaced. By focusing its marketing on the new product, Informix neglected its older, better-selling products.
It reported a first-quarter loss of $140.1 million, or 93 cents, on revenue of $133.7 million. Sales declined 34 percent in the first quarter.
The huge loss slashed Informix's cash supply in half to $120.6 million from $261 million, the company said. Part of the decline also was due to a $61.5 million cash deposit with Banque Nationale de Paris, which provided the financing for the Santa Clara land.
Informix also needs the money to carry on its plan to build 14 Information Superstores, a chain of showrooms where the company plans to demostrate the capabilities of its programmes to potential customers.
Informix's financial trouble also has raised speculation that the company is a candidate for an acquisition by a larger software vendor, possibly Computer Associates International Inc. or Netscape Communications Corp., analysts said.
Based on the speculation, Informix shares jumped $2.19, or 24 percent, to $11.375 on trading of 17.6 million shares on Nasdaq, where it was the most active issue.
An Informix spokesman declined to comment about the takeover speculation.
",25
"Intel Corp. will release its speedy new Pentium II microprocessor this week, but a glitch in the computer chip that turned up Monday could mar the launch.
The world's biggest chip maker plans to roll out the new microprocessor -- the heart of the personal computer -- Wednesday, and about a dozen personal computer makers will announce they plan to use it, said Richard Dracott, Intel marketing manager.
Intel officials said they were looking into reports the chips may contain a so-called floating point glitch that could cause computational errors. A similar problem bedeviled the original Pentium chip in 1994.
A spokesman for the Santa Clara, Calif.-based chip supplier said the problem appears to crop up when a computer performs an obscure calculation. The company said engineers were running tests on the chips to determine the extent of the problem but at this time Intel has no plans to recall them.
The problem appeared to affect only the Pentium II and Intel's top-of-the-line Pentium Pro chips. It was not immediately clear how many chips may be affected by the problem.
News of the problem, which was posted on a Web site called ""Intel Secrets"" (http://www.x86.org) and reported by CMP Media's EE Times Online (http://techweb.cmp.com/eet/823), cropped up just as Intel was preparing to launch the Pentium II on Wednesday.
Analysts said it was not clear if the flaw is as as serious as one which cost the semiconductor giant $475 million in 1994.
""It does not strike me right now as as big a problem as a couple years ago,"" Dataquest analyst Nathan Brookwood said, adding the problem would crop up in poorly written computer programs that store decimal numbers in a certain way.
The Pentium II is based on the Pentium Pro, but includes software and circuitry -- dubbed MMX technology -- that makes it more adept at handling graphics. In most cases, it works 30 percent to 40 percent faster than today's mainstream Intel products, analysts said.
Most of the new Pentium II machines will be desktop PCs aimed at engineers and professionals who use a lot of computing horsepower for graphics, analysts said.
Although the Pentium II is a souped-up version of the Pentium Pro, it is the biggest product introduction for Intel in years, said Mark Kirstein, research director at semiconductor market researcher In-Stat in Scottsdale, Ariz.
""The Pentium Pro was really a niche product"" for high-end desktops and servers, the computers that control networks, Kirstein said. ""The Pentium II is aimed at the mainstream.""
A streamlined design and cheaper production will make it easier for Intel to churn out the new chip, Kirstein said.
Within a year, most new PCs -- even the ones geared for home use -- will be based on the Pentium II, analysts said.
Intel also is trying to pitch the chip to new kinds of customers. The company has told video game makers, for example, that the chip can handle the intense graphics requirements of coin-operated arcade games.
""We will be delivering significant performance improvement over the fastest Pentium Pro,"" Dracott said.
Intel said part of the performance improvement comes from a new so-called cartridge design. The Pentium II will be sold to PC manufacturers in a plastic housing that includes specialized memory chips. Because the microprocessor and memory chips are packed closely together on a seperate circuit board, they can pump data to the rest of the PC much faster, Intel said.
There is one more benefit: It frustrates Intel rivals Advanced Micro Devices Inc. and Cyrix Corp., which for the first time are a credible threat to Intel.
AMD and Cyrix make chips that work like the Pentium and sell them to PC makers for much less. But their chips are designed to fit into the old slots for microprocessors.
AMD spent the past two years working on the K6 chip, which works as fast as the Pentium Pro and is 25 percent cheaper, but does not fit into the new cartridge slot.
Since most of the PC makers are expected to use Intel's cartridge design, AMD now has to spend time and money to make the K6 compatible.
Intel stock rose $4.875 to $162.50 Monday while Cyrix rose $1 to $22.50, both on Nasdaq. Advanced Micro Devices rose 50 cents to $44.50 in consolidated trading on the New York Stock Exchange.
",25
"Apple Computer Inc. Tuesday said it plans to release an operating system that looks like the Macintosh and runs Mac software, but will run on personal computers based on chips from Intel Corp.
At its annual developer conference, the company also said it will release programming tools in the next few months that allow companies to write software for the Macintosh once, and automatically convert their products to run on PCs based on Intel chips and Microsoft Corp. Windows software.
The radical strategy is part of Apple's plan to keep software companies from abandoning making Macintosh products, Apple Chairman Gilbert Amelio told a crowd of 1,900 programmers in San Jose, Calif.
""For those of you who seek substantial business on both the Mac and Windows platforms, this new development environment holds tremendous promise,"" Amelio said. ""You can (write your applications once) and with a simple recompilation release them for both platforms.""
Until now, the Macintosh operating system -- the programme that controls the basic functions of Apple computers -- has run only on machines designed by Apple.
Amelio said Apple's next-generation operating system, code-named Rhapsody, will not only run on Apple-designed computers, but on PCs based on Intel chips and using Microsoft software.
For the past two years, Apple has been scrambling to come up with improvements to the Macintosh that would set it apart from the PCs. Until 1995, Apple had relied on its computers' famed ease-of-use as a selling point, but Microsoft's release of Windows 95 took away much of the impact of Apple's pitch.
Last year, Apple gave up a mired effort to revamp the Mac OS, the fundamental programme that gives the Mac its look. In December, the company bought Next Software Inc. to get its software overhaul going again, and to use its software as the foundation of a next-generation operating system.
The move concerned lots of programmers, though, because of fears that the new operating system, Rhapsody, would not run the products they designed for the older Mac operating system. Programmers also were not thrilled to have to develop products for yet another operating system.
Apple plans to spend the rest of this week convincing programmers that it is a worthwhile investment to write software for Rhapsody. Apple's stock edged down 19 cents to $17.375 on Nasdaq in late trading.
",25
"3Com Corp. stock lost more than a quarter of its value Monday after the computer networking equipment maker said its fiscal third-quarter earnings will be less than Wall Street had expected.
3Com, the nation's second largest networking vendor, also had to respond to rising competition from PC component powerhouse Intel Corp. by sharply cutting prices of its so-called ethernet network products, from which it derives 43 percent of its revenue.
The move fuelled even more concern among investors about 3Com's earnings outlook in coming quarters.
Stock in 3Com, based in Santa Clara, Calif., fell $13.50 to $37.25 in Nasdaq trading of more than 36 million shares, making the stock the most active in U.S. markets.
""This goes beyond just the third quarter for 3Com,"" said Martin Pyykkonen, an analyst at brokerage Furman Selz.
3Com said for the quarter ending Feb. 28 it will report earnings per share in a range from the mid-40s to low 50 cents a share. Wall Street expected 3Com to earn 60 cents per share, according to a recent survey by First Call, which tracks analyst estimates. A year earlier, 3Com earned 42 cents a share, or $74.6 million.
3Com said third-quarter revenues will reach $770 million to $810 million, missing analyst forecasts by at least $20 million.
3Com makes electronic devices that shuffle information between PCs operating in a network. The company gets about 43 percent of its revenue from ethernet adapter cards: graham cracker-sized devices that plug into PCs to link them with networks.
Last week, Intel, the world's biggest maker of PC components, cut prices of its line of fast ethernet cards sharply. The reduction forced 3Com to announce its own sharp price cuts Monday, fuelling concern about the company's revenue in coming quarters.
""Intel rocked 3Com off its solid foundation,"" said Carl Howe, senior analyst at market researcher Forrester Research Inc. ""They hit 3Com's cash cow.""
In the next few years, Intel potentially could incorporate networking functions into its computer chips, eliminating the need for seperate networking products, analysts said. Meanwhile, Intel will use its huge manufacturing facilities and its cost benefit to undercut 3Com in ethernet prices, analysts said.
Pyykkonen said Intel could elbow aside networking suppliers, just as it knocked down suppliers of sound and video components by making multimedia functions a built-in feature of its microprocessors.
""There's no reason why networking can't go the way of PCs,"" Pyykkonen said.
3Com's shortfall projection prompted several Wall Street analysts to slash their ratings on 3Com stock to hold or neutral.
""The tone of 3Com's business remains weak,"" said William Rabin, analyst at J.P. Morgan Securities Inc., who cut 3Com to ""market performer"" from ""buy.""
3Com's earnings forecast also raised concerns about the entire networking industry, whose revenue has been growing about 35 percent annually. 3Com's woes are a sign that industry growth is finally slowing.
""Everyone is not only more on edge about 3Com's numbers but also whether they need to change the revenue picture in the longer term.""
Stock in another major network equipment company, Cisco Systems Inc. also fell, dropping $5.125 to $58 on Nasdaq. Ascend Communications Inc., another closely watched networking stock, fell $4.625 to $62.625, also on Nasdaq. Bay Networks Inc. fell 87.5 cents to $18.625, and Cabletron Systems Inc. fell $1.875 to $29, both on the New York Stock Exchange.
Intel also dropped, losing $4.75 to $151.625 on Nasdaq.
",25
"The lean times for the video game software industry appear to be over.
Three of the largest game developers on Thursday reported results for the crucial December quarter that were better than Wall Street expected.
Electronic Arts Inc., Activision Inc. and Spectrum Holobyte Inc. said strong sales of games for personal computers and next-generation video game consoles, such as the Sony PlayStation, contributed to the strong results.
For the past year, the video game software industry had been in a funk while consumers waited for the release of advanced game machines from Sony Corp., Sega Enterprises and Nintendo Corp. The industry also lacked blockbusters to draw customers to the video game isle at stores.
The release of the PlayStation last year and the Nintendo 64 this year has revitalised the industry, analysts said.
""People are underestimating how truly red hot sales of the video game systems are,"" said David Farina, an analyst at brokerage William Blair & Co. in Chicago. ""If history is any guide, we're in for a strong two-year cycle for my investors, cross my finger.""
After the market closed, Electronic Arts, the biggest U.S. game publisher, said net income for its fiscal third quarter, ended Dec. 31, rose 25 percent to $36.7 million, or 66 cents a share, from $29.3 million, or 54 cents, in the same quarter a year ago.
Electronic Arts' revenue in the quarter jumped 13 percent to $271.1 million from $240.1 million on strong sales of games for the PlayStation and PCs, the company said.
Activision, another big game vendor, said net income in its Christmas quarter more than doubled to $4.12 million, or 28 cents, from $1.95 million, or 13 cents, a year ago.
Spectrum Holobyte, based in Alameda, Calif., said net income in the December quarter was $5.7 million, or 20 cents a share, more than double the 9 cents Wall Street expected. In the same quarter last year, Spectrum Holobyte had a loss of $9.95 million, or 41 cents a share.
The strong earnings likely will continue into the March quarter, analysts said, as consumers buy a new generation of PCs based on Intel Corp.'s MMX technology, which soups up the graphics capabilities of the machines.
",25
"Advanced Micro Devices Inc., in a bid to take on computer chip giant Intel Corp.,  on Wednesday began shipping its K6 microprocessor.
AMD, based in Sunnyvale, Calif., said its K6 microprocessor works faster than Intel's top-of-the-line Pentium Pro chip, is 25 percent cheaper than comparable Intel offerings and is easier to design a PC around.
For the first time in its corporate history, AMD is a strong alternative for the latest technology to Intel, the world's biggest semiconductor company, said Jerry Sanders, AMD's chairman.
""It's the good guys vs. the bad guys,"" Sanders said in a presentation to investors and reporters. ""It's the Return of the Jedi. We're the Jedi.""
AMD makes microprocessors, the chips that handle the main calculations of a personal computer.
Until now, AMD's chips have been about three years behind in technology from what Intel has offered. The K6, using technology gained from the 1995 acquisition of chip designer Nexgen Inc., crunches numbers just as fast or slightly faster than Intel's Pentium, analysts said.
With the K6, AMD hopes to land several big computer companies as customers.
""There is a growing perception that the Intel monoply is getting broken up,"" said Krishna Shankar, semiconductor analyst at Donaldson, Lufkin & Jenrette. ""If I were a PC maker I would want two healthy competitors.""
No PC manufacturer, however, has yet committed to using the K6 in its machines. At the AMD presentation, Sanders did not name any K6 customers, as some analysts had expected.
Sanders said PC makers will begin to announce K6-based machines in the next 60 days.
""The single most important task for us right now is to convince the biggest PC players in the top tiers,"" he said.
AMD's stock fell 12.5 cents to $39.50 and was the most active on the New York Stock Exchange. Intel fell $2.31 to $137 on Nasdaq.
Even though AMD did not name any customers, most analysts expect the company to ship at least 2 million K6 chips by the end of the year.
Based largely on the demand for the K6, the worldwide market for non-Intel microprocessors will triple in 1997 to $2.4 billion from $722 million in 1996, market researcher Dataquest said.
",25
"Oracle Corp. Chairman Larry Ellison late Thursday confirmed he has formed an independent investor group to gauge interest in taking over troubled Apple Computer Inc.
The move, which is not the first time Ellison has raised the possibility of personally leading a bid for Apple, comes as the computer maker is struggling to recapture a profitable role in the intensely competitive PC industry.
The stock of Apple Computer Inc. rose in heavy trading Thursday, closing up $1.875 at $18.625 in Nasdaq trading after a newspaper reported that Ellison had renewed his interest in leading a takeover of Apple.
Ellison issued a statement late Thursday saying he and ""an undisclosed investor group"" had set up an e-mail address at savapple(at)us.oracle.com to test investor support for an acquisition of Apple.
""Presuming the successful acquisition of Apple by the Ellison investor group, what do you believe should be its single top priority?,"" was among the questions Ellison asked.
Ellison, a flamboyant software billionaire, has said for two years he would like to buy Apple with his own money, partly to prevent Microsoft Corp. from dominating the computer industry.
He restated his interest in acquiring control of the Cupertino, Calif., computer maker in an interview with the San Jose Mercury News, saying he would seek to raise $1 billion to buy a majority stake in Apple.
Although Ellison said any bid would be independent of Oracle, the database company's stock fell $1.125 to $39.375. Apple and Oracle were among the market's most active issues.
Based on its stock price, Apple is worth $2.17 billion. Ellison's stake in Oracle is worth about $6 billion.
Ellison said that based on the reaction from Apple investors, he will decide soon whether to make a bid in the next few days.
Previously, he has said he approached unidentified big investors about a joint bid. He also has mulled the idea with his friend Steve Jobs, the Apple co-founder who was kicked out of the company in 1985 and returned in December as a part-time adviser to Apple Chairman Gilbert Amelio.
Ellison could not be reached in person for comment. Katie Cotton, Apple spokeswoman, said the company had no comments about Ellison or his prospective bid.
Wall Street analysts said they doubted Ellison actually would attempt to buy Apple because he has not taken any concrete steps in the two years that he has expressed an interest.
""The deal doesn't make sense for (any outside investor) to take him up on it,"" said David Wu, analyst at investment bank ABN Ambro Chicago Corp.
Still, Ellison's comments should not be dismissed, some analysts said.
""It would be a mistake to analyze this as a pure business issue, as there is substantial ego involved,"" said Paul Saffo, a tracker of Apple and Ellison and a research fellow at Institute for the Future, a Silicon Valley think tank.
Ellison, the third-richest software tycoon behind Microsoft co-founders Bill Gates and Paul Allen, is intent on slowing Microsoft's dominance of the software industry, he has said in recent interviews. Apple, with its huge following of Macintosh fans, could be a key weapon.
Saffo also said Jobs, since returning to Apple late last year after it acquired his Next Software Inc., has been very influential in trimming the company, and could be ""sprucing up"" Apple for an acquisition.
Apple has suffered declining market share for its famous brand of easy-to-use computers and endured several rounds of restructuring in recent years. The stock has languished in the mid-teens since early January and is at a 10-year low.
",25
"Vantive Corp. said over the weekend that Federal Express Corp. will use its help-desk software for a key customer service project -- a potentially huge source of revenue for Vantive.
Federal Express, the Memphis-based package delivery company, will initially use Vantive's software to set up a computer system that lets technicians keep track of internal Fedex troubleshooting projects, the companies said.
Federal Express then will use Vantive's products to set up a help desk that will let the customer service department troubleshoot Fedex terminals in customers' mail rooms.
Depending on how well Vantive's products perform in the first two projects, Fedex potentially could deploy Vantive's software to 60,000 of its employees within three years, said Jim Colson, Fedex's vice president of technology services.
Terms of the transaction were not disclosed. But since Vantive gets a fee of up to several thousand dollars for every workstation, the agreement with Federal Express could be a huge source of revenue in coming years, analysts said.
""It will be a significant deal for Vantive, definitely,"" said Ed Bierdeman, analyst at Dakin Securities in San Francisco.
Bierdeman said he estimates Vantive will get about $4 to $5 million in revenue in 1997 from Federal Express.
Vantive, based in Santa Clara, Calif., writes computer programmes that help companies improve their customer service departments. Its Vantive Support product, for example, lets technicians log and track customer calls.
Depending on each project, Vantive gets about $30,000 for the central piece of its software and up to $2,500 for every user.
The deal with Fedex also gives Vantive an image boost. Late last year, America Online Inc., one of Vantive's high-profile customers, decided to base a revamped customer-service system on software from Scopus Technology Inc., a Vantive rival.
Although Vantive did not feel any financial damage from America Online's switch, the move raised concerns among investors about Vantive's technology.
With the Fedex deal, Vantive polishes its image, analysts said. Wall Street watches which products and technologies Fedex uses because Fedex has a track record of picking out hot products first. The company, for example, was one of the first to recognise the World Wide Web as a way to reach its customers.
",25
"Intel Corp. on Wednesday will unveil its Pentium II microprocessor, a speedy computer chip that will help the world's biggest chip maker break into new markets and stave off rivals.
The new chip is based on the Intel's top-of-the-line Pentium Pro, but includes software and circuitry -- dubbed MMX technology -- that makes it more adept at handling graphics. In most cases, it works 30 percent to 40 percent faster than today's mainstream Intel products, analysts said.
About a dozen personal computer makers will announce Wednesday they plan to use the chip in high-end machines, said Richard Dracott, Intel marketing manager.
Most of the new Pentium II machines will be desktop PCs aimed at engineers and professionals who use a lot of computing horsepower for graphics, analysts said.
Although the Pentium II is a souped-up version of the Pentium Pro, it is the biggest product introduction for Intel in years, said Mark Kirstein, research director at semiconductor market researcher In-Stat in Scottsdale, Ariz.
""The Pentium Pro was really a niche product"" for high-end desktops and servers, the computers that control networks, Kirstein said. ""The Pentium II is aimed at the mainstream.""
A streamlined design and cheaper production will make it easier for Intel to churn out the new chip, Kirstein said.
Within a year, most new PCs -- even the ones geared for home use -- will be based on the Pentium II, analysts said.
Intel, based in Santa Clara, Calif., also is trying to pitch the chip to new kinds of customers. The company has told video game makers, for example, that the chip can handle the intense graphics requirements of coin-operated arcade games.
""We will be delivering significant performance improvement over the fastest Pentium Pro,"" Dracott said.
Intel said part of the performance improvement comes from a new so-called cartridge design. The Pentium II will be sold to PC manufacturers in a plastic housing that includes specialised memory chips. Because the microprocessor and memory chips are packed closely together on a seperate circuit board, they can pump data to the rest of the PC much faster, Intel said.
There is one more benefit: It frustrates Intel rivals Advanced Micro Devices Inc. and Cyrix Corp., which for the first time are a credible threat to Intel.
AMD and Cyrix make chips that work like the Pentium and sell them to PC makers for much less. But their chips are designed to fit into the old slots for microprocessors.
AMD spent the past two years working on the K6 chip, which works as fast as the Pentium Pro and is 25 percent cheaper, but does not fit into the new cartridge slot.
Since most of the PC makers are expected to use Intel's cartridge design, AMD now has to spend time and money to make the K6 compatible.
",25
"Sequent Computer Systems Inc expects its revenue to increase at least 30 percent in 1997 on strong sales of its new NUMA-Q computer, the company's chief executive said on Wednesday.
""Our investors ought to be able to expect at least a 30-percent growth,"" said Casey Powell, Sequent chairman and chief executive.  
Sequent specializes in making computers that pack dozens of inexpensive Intel Corp Pentium microprocessors - the same kind of chips found in personal computers -- into one box. By harnessing the power of a team of Pentiums, a Sequent machine has about the same horsepower as an International Business Machine Corp mainframe computer, the favored data-processing workhorse at big companies.
Using clever software tricks and faster microprocessors, Sequent's new NUMA-Q line packs even more power in one box at a fraction of the cost of operating a mainframe, Powell said.  
""If what Sequent is saying is true, they are going to sell an awful lot of these systems,"" said Scott Butler, an analyst at Jensen Securities, a Portland, Ore., brokerage.
There is already plenty of attention from customers. Companies such as Boeing Co, Unocal Corp, Ford Motor Co and the National Association of Securities Dealers have bought the machines, Powell said.
A quarter of Sequent's fourth-quarter revenue of $183.2 million came from NUMA-Q sales, according to company. By the end of the year, almost all of Sequent's revenue will come from NUMA-Q sales, Powell said.  
In 1996, Sequent had net income of $7.77 million, or $0.23 a share, on revenue of $595.4 million.
Powell, the 52-year-old co-founder of the company, said he believes the new machines can help Sequent meet the rising demand for alternatives to the mainframe.
""There's an $178-billion base of installed mainframes out there,"" he said. ""About 12 percent of that market says, 'We are actively looking to get off the mainframe.'""
Even a sliver of the business from the mainframe defectors ""is a damn nice piece of business for me,"" Powell said.  
To pursue new business, Sequent increased its sales staff by 50 percent last year -- part of the reason why 1996 net income plunged 78 percent from 1995.
But Sequent is not the only vendor chasing the business. Last week, Sun Microsystems Inc, the $7-billion vendor of high-performance computers, unveiled Starfire, a machine that also uses dozens of microprocessors to rival a mainframe.
Some analysts even said there is no big rush to dump mainframes.  
""This is a brand-new technology,"" said Jerry Sheridan, an analyst at market researcher Dataquest. To long-time customers of mainframes, ""this is going to be a hard sell in the near term.""
Still, at least some investors are confident Sequent can lure customers. Sequent's stock has almost doubled in the past 12 months to about 18 on expectations of strong NUMA-Q sales.
With much of the cost of NUMA-Q's development and the investment in an expanded sales force out of the way, net income will ""absolutely"" increase in 1997, Powell said.  
Butler, who rates Sequent's stock as ""outperform,"" said prospects are good that the shares will keep rising in coming months.
",25
"Apple Computer Inc. will lay off more employees this year as part of its plan to return to profitabilty by 1998, an Apple spokesman said Friday.
The fourth-biggest U.S. maker of personal computers also is taking a closer look at unprofitable product lines with an eye at discontinuing them, said David Harrah, Apple's corporate spokesman.
As first reported in USA Today, the upcoming round of job cuts is part of Apple's plan to slash up to 20 percent of its costs to compensate for falling revenue. The company, based in Cupertino, Calif., has not yet determined how many it will fire, Harrah said.
Apple dismissed about 1,300 people last year as part of a broad corporate restructuring programme.
Earlier this month the company said it would launch another restructuring programme aimed at cutting another $400 million in costs. At the time Apple executives said additional layoffs were possible but they provided few details.
On Friday, Harrah confirmed layoffs will be part of the plan.
""There will be layoffs as part of a larger restructuring,"" Harrah said. ""We are taking a look at the entire business"" including the possibility of discontinuing lines such as the handheld Newton computer and the Pippin home entertainment console.
Abandoning Newton and Pippin would mark a return to Apple's core business of focusing on traditional PC products rather than other forms of technology. It would also signal a departure from the vision of former Apple Chief Executive John Sculley who pushed for the Newton before he was fired in 1993.
The move comes weeks after Apple reported a fiscal first quarter loss of $120 million on a sharp decline in sales. The struggling computer maker recently warned it does not expect to return to profitability until September, six months later than originally scheduled.
Apple's troubles are a setback to Chairman Gilbert Amelio's plan to stanch Apple's losses by 1997. Under his plan, Apple aims to reduce its costs so it can break even at $8 billion in annual sales.
Apple executives have blamed weaker-than-expected sales of the company's consumer-oriented personal computers for the decline in revenues.
To bolster sales, Apple on Friday said it cut price cuts on many of its product lines by as much as 27 percent. The company slashed prices of its consumer-oriented Performa machines, its high-end Power Macintoshes and its business-oriented Workgroup Servers.
For example, the price of the Power Macintosh 9500/200, a machine popular with graphic artists, was slashed to about $3,200 from $4,200.
",25
"Sony Corp. on Monday cut the U.S. price of its PlayStation video game machine by 25 percent to $149, a move that is expected to boost the entire video game industry.
Sony also cut the price of all of its new software titles for the PlayStation to $49, making games for the machine cheaper than many of its rivals' offerings.
The price cuts make the PlayStation $50 cheaper than the Nintendo 64, Nintendo Co. Ltd.'s rival video game machine. Sony's move could force Nintendo to cut its prices, which would accelerate hardware and accelerate software purchases, analysts said.
""Hardware price cuts are good news for everybody,"" said Mike Wallace, analyst at UBS Securities in New York. ""The most important thing to the industry is a bigger installed base"" of video game machines.
Sony's price cut could be the start of a boom for the video game industry, similar to the one in the late 1980s.
For the past three years, game companies have had lukewarm sales because of high prices for the new generation of video game machines, based on so-called 32-bit or 64-bit technologies. While the next-generation offerings from Sony, Nintendo and Sega Enterprises have much better graphics and sound than their predecessors, they have been too expensive for most households, analysts said.
With the price cut, the number of PlayStation units in use in the United States could almost double to 6 million by Christmas, from about 3.4 million right now, Wallace said.
Sony officials said even with the price cuts they make money on each PlayStation. They also said they do not expect their software price cuts to hurt outside software publishers, since Sony's software prices are slightly higher than the rest of the industry's.
Software executives applauded Sony's move.
""This is obviously great for the software publishers,"" said Bobby Kotick, chairman of video game software company Activision Inc.. Kotick said with hardware prices getting closer to $100, he expects 18 million to 20 million machines to be sold by year-end.
Nintendo officials said they are analysing Sony's move. Nintendo is sold out of the Nintendo 64 machine and has a month's backlog of orders at $199 apiece, so it does not have a reason to cut its prices for now, said George Harrison, Nintendo vice president of marketing in Redmond, Wash.
Sega officials could not immediately be reached for comment.
",25
"Computer network equipment maker 3Com Corp. Thursday reported a 17 percent rise in third-quarter profits, an unusually small rate for the company.
3Com executives told investors, however, they expect business to pick up again in the fourth quarter and said that, contrary to fears among Wall Street investors, the industry does not face an extracted slowdown.
""We do not expect that the demand weakness we saw in December will recur,"" said Eric Benhamou, 3Com chief executive. ""The fundamentals of the industry remain very strong and the potential remains for the industry to sustain growth rates in the 30 to 50-percent range in the coming years.""
3Com, the second-biggest maker of networking equipment after Cisco Systems Inc., said net income rose to $87.6 million, or 47 cents a share, from $74.6 million, or 42 cents, in the same quarter a year ago.
The company announced last month it was acquiring consumer computer modem giant U.S. Robotics Corp. in a stock deal valued at $7.3 billion.
Wall Street, after having been warned a month ago by executives that the company faced a difficult quarter, expected 3Com to earn 46 cents a share, according to a recent survey by First Call.
Revenue for the quarter ended Feb. 28 rose 30 percent to $786.8 million from $606 million a year ago.
3Com makes electronic devices that send information through computer networks. In December, the company had unusually weak sales because of falling product prices and aggressive moves by competitors Cisco and Intel Corp.
The warning set off a month-long slide of networking stocks and spurred concerns that the industry segment had seen its best days. Since the warning, 3Com's shares have lost more than half their value in seven weeks.
3Com shares on Thursday closed up $1.44 at $33.63.
""It looks like the worst is behind them, although it could take at least a quarter or two for them to get things back in line,"" said Noel Lindsey, analyst at investment bank Deutsche Morgan Grenfell Inc. in San Francisco.
Benhamou's positive remarks also likely will boost 3Com's stock Friday, Lindsey said.
About 45 percent of 3Com's revenue comes from the sale of networking adapter cards, the graham-wafer-sized devices that plug into PCs to connect them to networks. 3Com said adapter card revenue rose 39 percent in the third quarter to $346.3 million.
3Com also sells switches and hubs, the devices that shuffle information through networks. Sales of these system products rose 24 percent to $432.6 million.
Benhamou said the company is bringing expenses in line with revenue. He also said strong sales throughout Asia is offsetting weakness in Japan. Similarly, strong British sales are mitigating weak sales in Germany, he said.
""During the quarter, we saw strong demand for our high-end"" network equipment, 3Com Chairman Eric Benhamou said in a statement, ""and the number of multimillion-dollar orders we received from large accounts has never been greater.""
""At the same time, our industry is in the midst of many important transitions,"" Benhamou added, citing the adoption of higher-speed technologies, new methods for directing network traffic and pricing and distribution increasingly based on volume sales.
He said that as a result of these changes, 3Com's results in the latest quarter reflected increased price competition and a pause in industry demand as corporate networking customers and network service providers assess how to maximize their investments in computer networks.
But he added the changes were ""positive for 3Com and the industry in the long run.""
The acquisition of U.S. Robotics, the leading worldwide maker of modems for the consumer market, will create a company with annual revenues topping $5 billion.
Under terms of the agreement, each share of Skokie, Ill.-based U.S. Robotics will be exchanged for 1.75 shares of 3Com stock.
",25
"Intel Corp. said Friday its Pentium Pro and new Pentium II chips have a flaw that can cause computers to sometimes make mistakes but said the problems could be fixed easily with rewritten software.
The company will not need to recall the chips, Intel officials said. The flaw was officially dubbed the ""Flag Erratum"" by Intel, the world's biggest chip maker.
""Basically, an erratum is a design defect that may cause the product to deviate from published specifications,"" Intel spokesman Tom Waldrop said. ""All microprocessors have flaws in them.""
Intel, based in Santa Clara, Calif., has been investigating the flaw since it was uncovered by an independent analyst last week.
The discovery caused concern among investors and customers because it came just four days before Intel launched the Pentium II, its biggest new product in years.
Some investors feared the flaw could force Intel to replace tens of thousands of chips, as it did in 1994 due to a defect in the original Pentium chip.
International Business Machines Corp. said the flaw should not have any major impact on its PC customers.
""We currently have no information to believe that this reported anomaly will have a major impact on our customers,"" said a spokesman for the IBM PC Co.
""We are continuing to ship product,"" a spokesman for Houston-based Compaq Computer Corp. said. ""Every processor has some kind of errata. This is obviously one that Intel is working on. It's not a show stopper.""
The Flag Erratum occurs when some programs try to convert so-called floating point numbers, or decimal numbers, into integers. In some cases, the chip makes rounding errors, and it does not raise a warning flag that it made the error.
Waldrop said Intel would not judge how serious the flaw was, leaving that to computer makers and software developers. But Intel will help developers rewrite programs to compensate for the error when it does come up.
The Pentium Pro, a chip Intel began selling in November 1995, also has the defect.
At first glance, the flaw does not appear to be too serious because it had gone undetected in the Pentium Pro for 18 months, said Rick Doherty, a director at Envisioneering Group Inc., a market researcher company.
""We've got a year-and-half of work on this puppy and no one has reported a single problem with their applications yet,"" Doherty said.
""But it's not over yet,"" he said. ""This means that an IBM and a Microsoft will have to go through their software packages to see if things are affected by it.""
Waldrop said Intel will fix the defect in the new chips it makes. Investors apparently were not concerned about the flaw, as Intel rose 75 cents to $159.50 on Nasdaq.
",25
"Apple Computer Inc. Friday said it plans to cut 4,100 jobs in a restructuring aimed at returning the company to profitability.
The troubled computer maker said the restructuring, its second major overhaul in the last 12 months, will result in a $155 million charge in its second quarter ending in March.
The reserve would be in addition to a planned $325 million charge the current quarter for the previously announced purchase of Next Software Inc.
The cuts -- including 2,700 full-time employees and 1,400 contract workers -- were slightly less than what some analysts had expected. Apple said it planned to begin notifying employees about the layoffs later this month.
Apple, once the darling of the computer industry, has suffered in recent years from missed opportunities, management turmoil and failed strategies that resulted in the firings of former Chief Executives John Sculley in 1993 and Michael Spindler in 1996.
Apple Chairman Gilbert Amelio, who took over about a year ago, said the latest restructuring was aimed at boosting Apple's core business.
""The top priorities guiding our reorganization are the rapid delivery of distinctive products for our loyal business, education, and home customers, and the development of a robust next-generation operating system to carry them into the future,"" Amelio said in a statement.
""We can best achieve these goals by streamlining our organization, simplifying our product lines to deliver fewer but much stronger models, and stopping investments in activities that are not central to these core businesses,"" he said.
Over the last five quarters, Apple has posted more than $900 million in losses, reflecting slower sales of its flagship line of Macintosh personal computers and restructuring expenses.
In a statement issued after the market closed, Apple said it will phase out its slow-selling Performa Macintosh home computers this spring in favor of Power Mac models.
Disappointing Christmas sales of the Performa line led to a stunning $120 million loss in the first quarter of fiscal 1997 and a steep decline in Apple's market share.
According to research firm Dataquest, Apple's share of the worldwide PC market tumbled to 5.2 percent last year from 7.9 percent in 1995.
As part of the restructuring, Apple said it was exploring options for its Netwon hand-held personal assistant and will no longer produce Apple-branded Pippin devices, which enable television sets to access the Internet.
While Apple will continue to enhance its Mac Operating System, the company said some parts of the system -- such as the Open Doc component software technology, Cyberdog, Open Transport, Game Sprockets, and Mac OS Development Tools -- will receive less money for upgrades.
Apple will also halt funding for the Video Conferencing Solution and AIX Server Software.
The moves are aimed at cutting Apple's expenses by at least $400 million a year so the company can be profitable with revenues of around $8 billion.
Apple said it was revising the delivery schedule for future Mac Operating System releases but still plans to deliver its latest version, code-named Rhapsody, in 1998.
",25
"Informix Corp. shares plunged to a three-year low Tuesday after the database software company said it expected to report a ""substantial"" first-quarter loss on far weaker-than-expected sales.
Informix said it expected to report revenue of $130 million to $145 million, about 30 percent less than the $204 million reported in the same quarter a year ago and far less than Wall Street expected.
Shares of Informix, based in Menlo Park, Calif., fell $5.125 to $10 in mid-afternoon trading of 22 million shares, making the stock the second-most active on the Nasdaq. Earlier, the shares traded as low as $8.75.
The company blamed weak sales on an ""over-emphasis"" of marketing on a new, jazzy version of its flagship database software product, at the expense of neglecting its proven line of existing products.
""We were literally enamoured with our technology lead and we took our eyes off the core business,"" said Phil White, Informix chief executive, in a conference call with investors.
Informix writes computer programmes, called databases, that let big companies store and retrieve huge amounts of vital information, such as customer names and inventory lists.
In December, Informix introduced Universal Server, a database that can not only store text and numbers like a traditional database, but also video, sound, photographs, maps and other non-traditional types of data.
Informix executives last year bet that there would be huge demand for a database that could store media, as companies rushed to set up elaborate sites on the World Wide Web. They also expected existing customers to upgrade quickly to the new database.
Things will take much longer than Informix planned, analysts said.
""Universal Server is cool technology, but people don't go out to buy technology,"" said David Rothschild, managing director of brokerage Piper Jaffrey in Minneapolis. They buy proven products to help them manage vital records, he said.
""It's a classic product transition,"" said Charles Phillips, software analyst at investment bank Morgan Stanley & Co. in New York. ""They're trying to sell a new product before it's ready to be sold and they're not concentrating on the old product.""
Also, Informix seems to be losing ground to Oracle Corp., the biggest vendor of database software.
Oracle, too, is pitching a new generation of database software. Some customers may be waiting to check out Oracle's updated database product -- dubbed Oracle8 and scheduled to be released in June -- before buying from Informix, analysts said.
",25
"Apple Computer Inc. said Tuesday it will consolidate its independent marketing and development units into fewer groups to cut costs and to concentrate on selling computers in key markets.
Apple also said Steve Wozniak, the electronics whiz who invented the company's first computer 20 years ago, will rejoin with Steven Jobs, the other Apple co-founder, as a part-time advisor to Chairman Gilbert Amelio.
Apple, based in Cupertino, Calif., said it is still examining all aspects of its business and will determine by the end of the month how many jobs it will cut. The company also is considering dropping some product lines -- possibly including the Newton handheld computer, analysts have said -- to reduce its expenses by 20 percent by the end of the year.
""Simplicity is what makes this reorganization appropriate for Apple"" compared with other reorganizations in the past, said Guerrino De Luca, the new head of Apple's global marketing efforts.
Analysts had expected Apple to give specific details on Tuesday about job cuts and the financial impact of the move. They will have to wait until the end of the month, Apple executives said, while they analyse the company's situation.
Since Amelio took helm of the company last year, the company has focused on stanching quarterly losses, reducing inventories and increasing cash reserves, said George Scalise, head of Apple's operations.
""This organisation builds on that,"" Scalise said. ""It now allows us to focus on markets, to be focused on the hardware and software and to take advantage of the strengths we've built over the past six to eight months.""
With the most recent restructuring, the second in a year, Apple for the first time consolidates all its marketing functions under one manager, De Luca. The company also set up a worldwide sales and support organisation to be led by Marco Landi, currently Apple's chief operating officer.
Wozniak, who co-founded the company with Steve Jobs at the home of Jobs' parents, also will return to the company to advise Amelio on a part-time basis. Jobs rejoined Apple two months ago when Apple bought his software company, Next Software Inc., for $400 million in a move to revamp the Macintosh computer.
Analysts have said Amelio has done a decent job of shaping up the company's balance sheet, but have questioned his strategy of attracting new customers by basing the company's next generation of computers on Next's technology.
""Next is 1989 technology,"" said Michael Murphy, editor of the California Technology Stock Letter. Apple will have a hard time convincing outside software companies to develop programmes for the new machines, when they come out late this year, Murphy said.
One of the biggest blows to Apple's strategy came Tuesday when Bill Gates, chairman of Microsoft Corp., said he was ""confused"" about Apple's software strategy.
""I am very interested in continuing to work with Apple as we have done through history,"" Gates said on Tuesday at a new product launch in Germany. ""But I am confused by the Apple operating system strategy ... and have decided not to worry about the future.""
Microsoft's support for any new Apple product is crucial because corporate customers increasingly are deploying Microsoft's word processors and spreadsheets as their standard.
",25
"Technology stocks jumped Wednesday amid investor optimism that major computer, software and chip companies will report solid earnings.
Technology stocks also responded to a slew of optimistic investment recommendations from analysts, who have said in recent days that the shares are undervalued.
""A number of people, including yours truly, believe it's time to start nibbling again on the stocks that form the technology infrastructure,"" said Bruce Lupatkin, director of research at investment bank Hambrecht & Quist Group Inc. in San Francisco.
The month-long sharp decline of stocks like Cisco Systems Inc., Netscape Communications Corp. and Oracle Corp. represents a buying opportunity, Lupatkin said.
Cisco, the world's biggest network equipment maker, jumped $4.50 to $52.375 on Nasdaq trading of 18 million shares, making the issue the most active in U.S. markets.
Intel Corp., the world's biggest computer chipmaker, rose $7.375 to $140.625. Microsoft Corp., the biggest PC software company, gained $3.94 to $94.25. And Oracle, the No. 1 database software company, rose $1.50 to $40.50.
Analysts have said in recent weeks that technology sales seem to be slowing because of the strengthening dollar, weak sales in Europe and Japan and slow consumer sales. Stocks like Intel, Cisco and 3Com Corp. slumped on those expectations.
But some stocks slumped too far.
On Tuesday, John Skeen and Thomas Thornhill, the influential directors of research at Montgomery Securities Inc., said they believe the recent lows in stocks like Cisco, Oracle and Intel are ""buying opportunities.""
Based on Cisco's low share price and earnings prospect, the stock's rating was raised on Wednesday to a ""buy"" at Josephthal Lyon & Ross in New York.
""We think the stock is extremely undervalued at these levels,"" said Larry Rice, Josephthal's director of research.
Other stocks that gained Wednesday include 3Com, up $2.125 to $35.50; Dell Computer Corp., up $3.94 to $71.44; and Micron Technology Inc. up $2.125 to $40.875.
Some analysts said, however, the one-day rally might not last.
""It's going to be volatile for a while, I think,"" said John Rohal, managing director at Robertson, Stephens & Co. in San Francisco. Investors likely will wait until the second half of the year to gauge earnings performances before committing to technology stocks again, he said.
",25
"Sony Corp. on Monday cut the U.S. price of its PlayStation video game machine by 25 percent to $149, a move that is expected to boost the entire video game industry.
Sony also cut the price of all of its new software titles for the PlayStation to $49, making games for the machine cheaper than many of its rivals' offerings.
The price cuts make the PlayStation $50 cheaper than the Nintendo 64, Nintendo Co. Ltd.'s rival video game machine. Sony's move could force Nintendo to cut its prices, which would accelerate hardware and accelerate software purchases, analysts said.
""Hardware price cuts are good news for everybody,"" said Mike Wallace, analyst at UBS Securities in New York. ""The most important thing to the industry is a bigger installed base"" of video game machines.
Sony's price cut could be the start of a boom for the video game industry, similar to the one in the late 1980s.
For the past three years, game companies have had lukewarm sales because of high prices for the new generation of video game machines, based on so-called 32-bit or 64-bit technologies. While the next-generation offerings from Sony, Nintendo and Sega Enterprises have much better graphics and sound than their predecessors, they have been too expensive for most households, analysts said.
With the price cut, the number of PlayStation units in use in the United States could almost double to 6 million by Christmas, from about 3.4 million right now, Wallace said.
Sony officials said even with the price cuts they make money on each PlayStation. They also said they do not expect their software price cuts to hurt outside software publishers, since Sony's software prices are slightly higher than the rest of the industry's.
Software executives applauded Sony's move.
""This is obviously great for the software publishers,"" said Bobby Kotick, chairman of video game software company Activision Inc.. Kotick said with hardware prices getting closer to $100, he expects 18 million to 20 million machines to be sold by year-end.
Nintendo officials said they are analyzing Sony's move. Nintendo is sold out of the Nintendo 64 machine and has a month's backlog of orders at $199 apiece, so it does not have a reason to cut its prices for now, said George Harrison, Nintendo vice president of marketing in Redmond, Wash.
Sega officials could not immediately be reached for comment.
",25
"Citrix Systems Inc. stock surged 69 percent Monday after Microsoft Corp. agreed to license its software technology and include it in upcoming versions of Microsoft Windows NT.
As part of the agreement, Citrix, based in Fort Lauderdale, Fla., will get an initial $75 million fee from Microsoft and as much as $100 million in royalties tied to sales of Microsoft products using Citrix technology, the companies said.
Citrix shares jumped $13.375 to $32.625 on trading of 12.9 million shares on Nasdaq, where it was the most active stock.
Citrix writes software that lets an old PC or an outdated terminal -- a type of computer that gets its computing horsepower from a corporate network -- run programmes written for Microsoft's Windows.
Monday's agreement erased much of the concern in recent months about Citrix. In February, Citrix's stock plunged after Microsoft told Citrix executives that if the companies could not agree to develop the technology together, Microsoft would go it alone.
Microsoft agreed to add Citrix's so-called multi-user technology to Windows NT, which would let several terminal users share one server for running common business software, such as data-entry and word processing.
The agreement makes it easier for Citrix to sell additional products to Windows NT customers, analysts said.
""Basically, Citrix now has Windows NT pre-enabled for their products,"" said John Powers, analyst at Robertson Stephens & Co. in San Francisco. ""For Citrix, it's good that Microsoft has multi-user capabilites. It's even better that it's from Citrix.""
The agreement also is a shift in strategy for Microsoft. In recent months, Microsoft, after initially ridiculing the idea, has taken the idea of stripped-down network computers seriously. Big corporate customers have been clamouring for cheaper and easier-to-use machines that do not require the latest in software and hardware gadgets.
Microsoft also said Monday it agreed to license technology from France's Prologue Software SA, another company that writes terminal software.
Microsoft, based in Redmond, Wash., owns a 6 percent stake in Citrix. Microsoft's treasurer, Greg Maffei, also sits on Citrix's board.
Some analysts, however, were cautious about Citrix's outlook in coming years. As Microsoft adds more multi-user functions to Windows NT, customers might not need separate Citrix products.
""That's what I have warned our investors about,"" said Dawn Simon, analyst at investment bank Furman Selz in New York. ""It's a truce between the companies, but the burden will be on Citrix to innovate.""
Under the agreement, Citrix will get up to $100 million in royalties from Microsoft. Mark Templeton, Citrix vice president of worldwide marketing, said it is not clear whether Citrix will get a new royalty contract once Citrix gets all of the original $100 million.
",25
"Worldwide shipments of personal computers climbed 18 percent to 70.9 million units in 1996, with Compaq Computer Corp., International Business Machines Corp. and Dell Computer Corp. showing the biggest gains, market research firm Dataquest said Sunday.
Struggling Apple Computer Corp. suffered the biggest worldwide decline in shipments and saw its market share decline further, Dataquest said in its year-end report.
While the PC industry had robust growth, the increase in unit shipments was less than that in 1995 because of declining growth in the consumer market, the research firm said.
""While some vendors suffered from slowing PC home sales, others excelled,"" said Scott Miller, senior PC analyst at Dataquest, based in San Jose, Calif.
Led by strong sales to corporate customers, Compaq, IBM and Dell showed the biggest increases in shipments.
Meanwhile, the companies that specialize in selling PCs to home users, such as NEC Corp.'s Packard Bell NEC Inc. and Apple Computer Corp., suffered amid a lack of exciting new products to draw customers to PC stores, Dataquest said.
Compaq retained its position as the No. 1 PC vendor in the world for three years in a row, with 7.1 million units shipped in 1996, an increase of 19 percent from 1995.
The Houston-based company widened its market share to 10.1 percent from 10 percent, Dataquest said.
IBM had a strong year as its worldwide PC shipments jumped 28 percent to 6.1 million. Big Blue also increased its market share to 8.6 percent in 1996 from 7.9 percent the previous year.
Hewlett-Packard Co. showed the largest growth among the top five vendors worldwide as unit shipment surged 52 percent to 2.9 million, Dataquest said.
In the United States, Dell showed the biggest shipment increase with a 71 percent gain to 1.8 million, Dataquest said.
Worldwide, Apple had the biggest decline in shipments as consumers avoided buying the beleaguered company's Performa line of Macintosh computers. Worldwide shipments plunged 22 percent to 3.7 million, according to Dataquest. Apple's market share in 1996 declined to 5.2 percent from 1995's 7.9 percent.
Packard Bell NEC, which specializes in selling multimedia PCs to home users, saw its shipments fall 5 percent to 4.3 million units.
""Our ongoing consumer research in the U.S. shows increased interest in PC ownership,"" Dataquest analyst Miller said. Whether that means consumer sales will rise again this year is unclear, he said, but ""the fundamentals are in place for a strong home market in 1997.""
",25
"Informix Corp, still investing money and resources in a new generation of database software products, aims to increase its revenue by 30 percent in 1997, Informix's chief executive said.
Thirty percent growth may fall short of what some investors would like to see, but Informix's top priority right now is beefing up marketing, not sales, said Phil White, CEO of the No. 2 database software company.  
""Wall Street thinks I'm investing too heavily because they don't see enough revenue growth,"" White said in a recent interview. ""But I'm going to have to invest for the future of the business, and I think what I'm doing is absolutely the best thing to do.""
Informix, based in Menlo Park, Calif., writes computer programs that help companies store and retrieve huge amounts of vital corporate information, such as customer names and inventory lists. Its flagship database product is the data storehouse of companies such as MCI Communications Corp and investment bank CS First Boston.  
In December, Informix introduced Universal Server, a database that is not only adept at storing text and numbers, the traditional format of corporate information. But it also can handle new types of data such as photographs, maps, sound and video -- the media that make the World Wide Web compelling and easy to use.
White said he thought increasing demand for programs that store and retrieve sound and video, propelled by the growth of business on the Web, would drive sales of his Universal Server.  
White said Informix would spend heavily this year on marketing its Universal Server in an effort to build on its lead over Oracle. There is a price, however. Informix's profit and revenue will not rise as fast as it has in recent years, White said.
""I've got the best technology, but I can't lay back and hope Oracle fails or Microsoft fails,"" he said.
The prospect of slower profit growth has weighed down Informix's stock. In the past 12 months, the shares have lost more than half their value from a high of about 36. The stock was down 1/2 at 15-1/4 late Wednesday afternoon.  
""The growth rate has been disappointing,"" said Jim Pickrel, software analyst at investment bank Hambrecht & Quist Group Inc in San Francisco. ""The earnings outlook for this year is fairly moderate.""
In 1996, net income, including $5.91 million in acquisition expenses, was little changed at $97.8 million, or $0.63 a share, compared with $97.6 million, or $0.65, the previous year. The per-share figure fell as the company's shares outstanding rose 3 percent.  
Revenue in 1996 rose 32 percent to $939.3 million from $714.2 million. By comparison, revenue jumped 50 percent in 1995 from 1994.
Pickrel estimates per-share earnings in 1997 will rise to $0.86.
While Universal Server's technology is impressive, sales will not likely take off until near year-end, Pickrel said.
""It will be a little tough for Informix to make headway against Oracle,"" he said.
",25
"Informix Corp. ,facing plunging sales of its database software products, needs to raise cash and to refinance its leases to keep its operations going, the company said in filings with federal regulators.
The struggling database software company plans to raise capital to offset upcoming losses from operations, and to shore up its shrinking cash supply, according to a filing with the Securities and Exchange Commission.
Informix also is considering arranging for the refinancing of leases on parcels of land in Santa Clara, Calif., where it intended to build new corporate headquarters.
""While the company believes it will acquire the necessary financing, there can be no assurance that such financing will be available,"" Informix said in the filing. ""The company's failure to raise working capital would have adverse effect on its business, results of operations and financial condition.""
Informix, based in Menlo Park, Calif., is the second-largest publisher of database software, the computer programmes that let companies store huge libraries of vital information on computer networks.
Earlier this year, the company made a huge bet on a jazzy new database product, dubbed Universal Server, aimed at customers in the just-emerging multimedia business.
The bet, Informix executives have said, turned out to be misplaced. By focusing its marketing on the new product, Informix neglected its older, better-selling products.
It reported a first-quarter loss of $140.1 million, or 93 cents, on revenue of $133.7 million. Sales declined 34 percent in the first quarter.
The huge loss slashed Informix's cash supply in half to $120.6 million from $261 million, the company said. Part of the decline also was due to a $61.5 million cash deposit with Banque Nationale de Paris, which provided the financing for the Santa Clara land.
Informix's financial trouble also has raised speculation that the company is a candidate for an acquisition by a larger software vendor, possibly Computer Associates International Inc. or Netscape Communications Corp., analysts said.
In late afternoon, Informix shares were up $2.19 at $11.50 on trading of 17 million shares on Nasdaq, where it was the most active issue.
An Informix spokesman declined to comment about the takeover speculation.
",25
"AirTouch Communications Inc. agreed on Friday to buy U S West Media Group's cellular phone operations for about $4.5 billion in stock and debt, replacing a complex 1994 agreement between the companies.
If the transaction goes through, AirTouch would become the second-largest cellular service provider in the United States -- behind AT&T Corp. -- with 5.3 million customers in 20 states from the West Coast to the Mississippi River.
The companies warned, however, that they would call off the acquisition if Congress passes legislation that closes a popular corporate tax loophole.
Under the agreement, AirTouch, based in San Francisco, would pay about $2.2 billion in stock and assume $2.2 billion of U S West's debt.
AirTouch would acquire New Vector, U S West's domestic cellular operation, and U S West's interest in PrimeCo Personal Communications, an advanced wireless joint venture among three Baby Bell regional phone companies.
""It's a good move to put the companies together,"" said Charles DiSanza, telecommunications analyst at investment bank Gerard Klauer Mattison in New York.
""They've been operating together for a while and already the economies of scale have helped the U S West operations get substantially more profitable.""
AirTouch shares rose $1 to $24.50 in midafternoon trading on the New York Stock Exchange. U S West, based in Englewood, Colo., rose 50 cents to $17.75
Analysts said AirTouch would be paying a relatively cheap price for a healthy enterprise.
""The markets U S West has -- Seattle, Denver, Salt Lake City -- are some of the fastest growing cellular markets in the country,"" said Mark Lowenstein, analyst at Yankee Group, a market research firm in Boston.
The U S West acquisition also would give AirTouch a strong regional ""footprint"" against AT&T's cellular business, Lowenstein said.
AirTouch and U S West agreed to merge their cellular operations back in 1994 in a complex, three-step transaction. But that deal never won much favor from investors because the final value was to be determined by an outside appraisal of U S West's operations.
Friday's transaction ""eliminates much of the uncertainty investors had about the previous agreement,"" said Kevin Roe, analyst at investment bank ABN AMRO Chicago Corp. ""This one clearly spells out the terms and the timeline.""
The companies could scrap the acquisition, however, if Congress passes legislation introduced Thursday. The bill seeks to bar so-called Morris Trust transactions, which let companies sell chunks of their operations without paying taxes.
If the bill passes and regulators apply it to U S West, the companies could consider going back to their original agreement, the companies said.
Customers of U S West Media Group's cellular service will not notice any service changes, the companies said. Most of U S West's domestic cellular employees also will become AirTouch employees. UMG.N  T.N
",25
"Apple Computer Inc. said Tuesday it will consolidate its independent marketing and development units into fewer groups to cut costs and to concentrate on selling computers in key markets.
Apple also said Steve Wozniak, the electronics whiz who invented the company's first computer 20 years ago, will rejoin with Steven Jobs, the other Apple co-founder, as a part-time advisor to Chairman Gilbert Amelio.
Apple, based in Cupertino, Calif., said it is still examining all aspects of its business and will determine by the end of the month how many jobs it will cut. The company also is considering dropping some product lines -- possibly including the Newton handheld computer, analysts have said -- to reduce its expenses by 20 percent by the end of the year.
""Simplicity is what makes this reorganization appropriate for Apple"" compared with other reorganizations in the past, said Guerrino De Luca, the new head of Apple's global marketing efforts.
Analysts had expected Apple to give specific details on Tuesday about job cuts and the financial impact of the move. They will have to wait until the end of the month, Apple executives said, while they analyze the company's situation.
Since Amelio took helm of the company last year, the company has focused on stanching quarterly losses, reducing inventories and increasing cash reserves, said George Scalise, head of Apple's operations.
""This organization builds on that,"" Scalise said. ""It now allows us to focus on markets, to be focused on the hardware and software and to take advantage of the strengths we've built over the past six to eight months.""
With the most recent restructuring, the second in a year, Apple for the first time consolidates all its marketing functions under one manager, De Luca. The company also set up a worldwide sales and support organization to be led by Marco Landi, currently Apple's chief operating officer.
Wozniak, who co-founded the company with Steve Jobs at the home of Jobs' parents, also will return to the company to advise Amelio on a part-time basis. Jobs rejoined Apple two months ago when Apple bought his software company, Next Software Inc., for $400 million in a move to revamp the Macintosh computer.
Analysts have said Amelio has done a decent job of shaping up the company's balance sheet, but have questioned his strategy of attracting new customers by basing the company's next generation of computers on Next's technology.
""Next is 1989 technology,"" said Michael Murphy, editor of the California Technology Stock Letter. Apple will have a hard time convincing outside software companies to develop programs for the new machines, when they come out late this year, Murphy said.
One of the biggest blows to Apple's strategy came Tuesday when Bill Gates, chairman of Microsoft Corp., said he was ""confused"" about Apple's software strategy.
""I am very interested in continuing to work with Apple as we have done through history,"" Gates said on Tuesday at a new product launch in Germany. ""But I am confused by the Apple operating system strategy ... and have decided not to worry about the future.""
Microsoft's support for any new Apple product is crucial because corporate customers increasingly are deploying Microsoft's word processors and spreadsheets as their standard.
",25
"Advanced Micro Devices Inc. reported an unexpected first-quarter profit Monday, reflecting surprisingly strong computer chip sales.
The Sunnyvale, Calif.-based company earned $12.95 million or 9 cents a share for the quarter ended March 30, compared with a profit of $25.3 million, or 18 cents, in the same quarter a year ago.
Wall Street analysts had expected AMD, a maker of specialized memory chips and microprocessors, to report a loss of 3 cents a share, according to First Call, which tracks earnings estimates.
AMD said first-quarter revenue rose 1.4 percent to $552 million from $544.2 million a year ago. Revenue for the most recent quarter was about $10 million higher than Wall Street expected.
""The important message of the first quarter is that the company is profitable and that they are starting an incredible product cycle,"" said analyst Mark Edelstone, at brokerage Prudential Securities Inc.
The results were announced after the market closed Monday. AMD shares had risen $1.875 to $41.25 on the New York Stock Exchange. The shares rose an additional $1.75 to $43 in after-hours trading.
AMD Chairman Jerry Sanders said all of the company's businesses improved over the fourth quarter, when AMD posted a loss of $21.2 million, or 15 cents a share.
""Recovering strength in all sectors of our business produced the sales growth necessary for AMD to return to modest profitability even before volume shipments of AMD-K6 MMX processors,"" Sanders said, referring to AMD's newest chip.
""Revenue growth was led by flash memories, Microsoft Windows compatible microprocessors, and programmable logic devices from our Vantis division.""
Last week, AMD introduced the K6 chip, a microprocessor for standard personal computers that can handle basic calculations slightly faster than Intel's top-of-the-line Pentium Pro chip.
Based on expected demand for an alternative to Intel's pricey offerings and improving operations, AMD stock has doubled since the beginning of the year.
Sanders said the company shipped only 10,000 K6 chips during the quarter. He said, however, that AMD plans to increase production substantially in the new few months.
""We are ramping production in order to ship hundreds of thousands of AMD-K6 MMX processors during the current quarter, and millions of units in the second half of 1997,"" Sanders said in a statement.
In order to boost acceptance for its new chip, AMD is embarking on an aggressive marketing campaign, starting with TV commercials this week on the popular NBC sitcom ""Seinfeld"".
Intel, the world's biggest maker of computer chips, has spent millions in the past three years on the ""Intel Inside"" campaign, even though Intel's chips are the brains of about 90 percent of the world's PCs.
Before the K6, AMD's microprocessors had been at least three years behind Intel in computing horsepower. It did not have to counter Intel's marketing juggernaut because its customers mainly were second-tier PC makers that bought its chips for low-priced machines.
Two years ago, the company gambled its financial future to make sure that the K6 was just as fast, or faster, than comparable Intel chips.
The gamble paid off, at least technically. The K6 beats the Pentium Pro in most everyday applications, according to trade magazines. Not only that, AMD plans to sell it for at least 25 percent less than the Pentium.
Armed with the K6, AMD now plans to chase Intel's best customers -- makers of high-end professional and consumer PCs.
",25
"Sybase Inc., trying to boost sales growth, will revamp its flagship database software product and most of its other programmes this year, Chief Executive Officer Mitchell Kertzman said Wednesday.
The lineup will include an improved version of SQL Server System 11, the company's chief database software product, by the second or third quarter and a host of development tools to let customers more easily store and retrieve information in corporate databases, Kertzman said.
In the past two years, Sybase has been struggling because of increasing competition form its traditional rivals Oracle Corp. and Informix Corp., as well as a new competitor, Microsoft Corp.
Kertzman during the past year has trimmed Sybase's product lines and cut hundreds of jobs to focus the company on its core database business.
""Our customers wanted a symphony and we were giving them a lot of jam sessions"" with unrelated software product lines, Kertzman said at an investment conference.
To counter rivals and grow the company's core business, Sybase, based in Emeryville, Calif., plans to release a test version soon of an improved System 11, code-named 11G, Kertzman said.
The programme, likely to be released in the second or third quarter, will have better performance in so-called parallel systems -- a feature to take on Informix, which replaced Sybase as the No. 2 database vendor in 1996.
Sybase also will release this year a product code-named ""Jaguar,"" a so-called transaction server that helps customers more easily retrieve data from databases, Kertzman said.
Sybase stock rose 62.5 cents to $16.625 on Nasdaq.
The technology investment conference was hosted by Robertson Stephens & Co.
",25
"Apple Computer Inc., undertaking a second restructuring in a year, is expected to announce Friday thousands of job cuts and a huge loss for the second quarter, analysts said.
The Cupertino, Calif., personal computer maker also will specify which product lines it plans to drop as it concentrates on businesses that are still relatively healthy.
Since Apple announced in January that it expects to report quarterly losses until at least September 1997, trade magazines and newspaper reports have speculated the company would have to fire between 2,000 to 5,000 of its 13,000 employees to adjust its costs to declining revenues.
""I would not be surprised if the layoffs were deeper than the original estimates,"" said James Poyner, an analyst at investment bank Oppenheimer & Co. in New York.
Apple executives have said they expect revenue for this fiscal year ending September to decline about 20 percent to about $8 billion. The company would have to cut at least $400 million in costs this year to break even.
Apple may have to cut costs even deeper because Macintosh sales are declining faster than expected, analysts said. In the March quarter, worldwide shipments of Macintosh computers will fall to about 804,000 units, compared with 884,000 units in the March quarter of 1996, said Matt Sargent, analyst at market research firm Computer Intelligence InfoCorp.
Apple also will tell investors which product lines it will cut. Analysts have speculated the Newton handheld computer could be discontinued or sold to another computer company.
Last week, company Chairman Gilbert Amelio told employees in an internal letter the company would specify the cuts this Friday.
""I would like to hear clear bullet points on what they are going to do and what they are not going to do,"" said Stephen Dube, an analyst at Wasserstein Perella Securities in New York. ""Every time Amelio has spoken, he has sent confusing messages.""
Dube said he expects Apple on Friday will forecast the size of its losses from operations for the quarter ending in March.
Separately, Apple will announce in the next few weeks that it is changing its licensing agreements with makers of computers that use its Macintosh operating system.
Companies such as Umax Technologies Inc. and Power Computing Corp. have thrived in recent months since they introduced personal computers that use Macintosh-based software. Their success has come partly at the cost of Apple, because the clone makers sell machines that cost less than comparable offerings from Apple.
Analysts said they expect Apple to raise the royalty fee it charges the clone makers. An Apple spokeswoman said the company is reviewing its royalty agreements but would not say whether it will raise them.
The success of the clone makers has had one silver lining for Apple: it has raised the Macintosh operating system's share of the market.
In the December quarter, Apple's share of the U.S. PC market fell to 5.4 percent, according to market researcher Dataquest Inc. Counting sales of Mac clones, the Macintosh has 7.2 percent of the market.
By raising its licensing fees, Apple would hamper the growth of the clone makers and discourage software companies from developing products for the Macintosh, said Matt Sargent, an analyst at market researcher Computer Intelligence InfoCorp in San Diego.
",25
"Apple Computer Inc. reported a $708 million second-quarter loss Wednesday, reflecting a charge for the layoff of a third of its employees and weaker sales of its personal computers,
Apple said, however, that strong sales of new, speedy PCs and laptops and lower expenses would help the company meet its goal of reporting a profit by its fiscal fourth quarter, ending in September.
The Cupertino, Calif.-based computer company's net loss, equivalent to $5.64 a share, for the fiscal quarter ended March 28 compared with a net loss of $740 million, or $5.99 a share, in the year-ago quarter.
Apple's loss from operations of $186 million, or $1.48 a share, was worse than the consensus industry analyst forecast of $1.22 a share, according to First Call, which tracks analyst forecasts.
The $708 million net loss included a $155 million charge to cover the cost of layoffs and a $375 million charge for the acquisition of software developer Next Software Inc.
Apple said, however, that it expects to see higher revenue and a reduced operating loss in the third quarter as its restructuring program takes hold. In March, the company said it would lay off 4,100 employees and reorganize operations to cut costs.
""Don't open champagne bottles yet, but the process seems to be working,"" said Lou Mazzucchelli, analyst at investment bank Gerard Klauer Mattison in New York.
During the quarter, Apple introduced a jazzy laptop and a speedy desktop machine for small businesses, schools and homes. Sales of the new machines have been strong, the company said.
""We feel the worst is behind us and our strategy is on track,"" Apple Chairman Gilbert Amelio said in a telephone conference call with analysts. He said sales will probably increase in the third quarter over the second and that the company probably will meet its goal of being profitable again by the fourth quarter.
Still, even with better financial health, Apple faces serious problems, analysts said.
The number of Apple computers shipped worldwide in the second quarter plunged 33 percent to 602,000 units, compared with 892,000 units in the same quarter a year ago. The drop was bigger than most analysts expected.
Sales in Japan and Europe also were weak, Apple executives said in the conference call.
""I want to see a couple of positive quarters before I say they're beginning to turn the corner,"" said Michael Kwatinetz, analyst at the DMG Technology Group investment bank in New York.
To keep costs in line with declining sales, Apple in the past year has laid off more than 5,000 employees. The company also has seen its entire management suite change in 15 months.
The uncertainty about the company's future still is keeping customers away from the Mac aisle at stores, analysts said.
Dataquest, which tracks PC sales worldwide, says Apple's share of the worldwide market fell to 5.2 percent last year from 7.9 percent. The slide left Apple's market share at the lowest point in three years.
",25
"Apple Computer Inc. stock rose Thursday on renewed speculation that the troubled computer maker was trying to sell itself to a bigger company.
The stock of the Cupertino, Calif., company gained 87.5 cents to $18.875 on trading of 4.9 million shares, making it one of the most active issues on the Nasdaq. Earlier, the stock traded as high as $19.125.
On Wednesday, Saudi billionaire Prince al-Waleed bin Talal revealed he bought a 5 percent stake in Apple for $115 million because he expects the company to turn itself around.
Last week, software billionaire Larry Ellison, chairman of Oracle Corp., said he intended to form an investor group to try to buy a majority stake in Apple, take control of the company and revamp it with a new management team.
The New York Times, citing unnamed Apple sources, also reported Thursday that Apple was actively seeking to sell itself and has approached high-performance computer maker Sun Microsystems Inc. again. Sun tried to buy Apple in late 1995, but negotiations fell apart over price.
An Apple spokeswomen declined to comment about the speculation. Sun Chief Executive Scott McNealy also declined to comment about the rumours, ""no matter how accurate or silly they may be.""
Mulling takeover bids is nothing new at Apple. In addition to Sun, Apple negotiated with International Business Machines Corp. about a merger two years ago. IBM also demurred over price.
Former high-level Apple executives who keep close contact with the company said Thursday they have not heard of any recent moves by Apple to approach suitors.
One former executive said, however, that increasing pressure from investors -- who hold stock near a 10-year low -- may make Chairman Gilbert Amelio more receptive to any takeover proposal that might come along.
Trouble is, none might come along, analysts said.
""It's always possible, but we're not putting a lot of weight into it,"" said Peter Andrews, analyst at brokerage AG Edwards & Sons Inc. in St. Louis.
Even though Apple still has a huge following of Macintosh users, the company will not be able to stop its sales from falling for at least another year, making it an unattractive buyout, analysts said.
In the past five quarters, Apple has reported financial losses of close to $1 billion and has had two rounds of job cuts totalling 5,400. Despite the massive expense reductions, the company does not expect to report a profit until the September quarter.
Company executives have told investors they expect revenue for the year to fall about 20 percent to $8 billion.
The most likely suitor for now is Ellison, the flamboyant head of Oracle who has publicly criticised Amelio for failing to turn the company around.
Ellison set up a World Wide Web site last week to solicit e-mail from investors to gauge support (http://www.us.oracle.com/corporate/press/html/apple.html). Depending on the response, he would launch a bid.
A spokesman for Ellison said it was too early for him to comment on the results. Ellison could not be reached immediately for comment.
Some investors said they were not impressed by Ellison's offer.
Richard Ash, a private investor who owns 3,000 Apple shares, said he would not sell his stock to Ellison because he was not offering a premium over the current stock price.
",25
"3Com Corp. stock lost more than a quarter of its value Monday after the computer networking equipment maker said its fiscal third-quarter earnings will be less than Wall Street had expected.
3Com, the nation's second largest networking vendor, also had to respond to rising competition from PC component powerhouse Intel Corp. by sharply cutting prices of its so-called ethernet network products, from which it derives 43 percent of its revenue.
The move fuelled even more concern among investors about 3Com's earnings outlook in coming quarters, and some analysts said they expect a further drop in technology stocks.
Stock in 3Com, based in Santa Clara, Calif., fell $13.50 to $37.25 in Nasdaq trading of more than 36 million shares, making the stock the most active in U.S. markets.
""This goes beyond just the third quarter for 3Com,"" said Martin Pyykkonen, an analyst at brokerage Furman Selz.
""I think it's going to spread from here,"" said David Takata, an analyst with Gruntal & Co. ""The networking sector has been the leader in technology for three years.""
3Com said for the quarter ending Feb. 28 it will report earnings per share in a range from the mid-40s to low 50 cents a share. Wall Street expected 3Com to earn 60 cents per share, according to a recent survey by First Call, which tracks analyst estimates. A year earlier, 3Com earned 42 cents a share, or $74.6 million.
3Com said third-quarter revenues will reach $770 million to $810 million, missing analyst forecasts by at least $20 million.
3Com makes electronic devices that shuffle information between PCs operating in a network. The company gets about 43 percent of its revenue from ethernet adapter cards: graham cracker-sized devices that plug into PCs to link them with networks.
Last week, Intel, the world's biggest maker of PC components, cut prices of its line of fast ethernet cards sharply. The reduction forced 3Com to announce its own sharp price cuts Monday, fuelling concern about the company's revenue in coming quarters.
""Intel rocked 3Com off its solid foundation,"" said Carl Howe, senior analyst at market researcher Forrester Research Inc. ""They hit 3Com's cash cow.""
In the next few years, Intel potentially could incorporate networking functions into its computer chips, eliminating the need for seperate networking products, analysts said. Meanwhile, Intel will use its huge manufacturing facilities and its cost benefit to undercut 3Com in ethernet prices, analysts said.
Pyykkonen said Intel could elbow aside networking suppliers, just as it knocked down suppliers of sound and video components by making multimedia functions a built-in feature of its microprocessors.
""There's no reason why networking can't go the way of PCs,"" Pyykkonen said.
3Com's shortfall projection prompted several Wall Street analysts to slash their ratings on 3Com stock to hold or neutral.
""The tone of 3Com's business remains weak,"" said William Rabin, analyst at J.P. Morgan Securities Inc., who cut 3Com to ""market performer"" from ""buy.""
3Com's earnings forecast also raised concerns about the entire networking industry, whose revenue has been growing about 35 percent annually. 3Com's woes are a sign that industry growth is finally slowing.
""Everyone is not only more on edge about 3Com's numbers but also whether they need to change the revenue picture in the longer term.""
The drop in 3Com prompted declines in stocks in other network stocks, as well as makers of personal computers, computer chips and software.
Another major network equipment company, Cisco Systems Inc. saw its stock drop $5.125 to $58 on Nasdaq. Ascend Communications Inc., another closely watched networking stock, fell $4.625 to $62.625, also on Nasdaq. Bay Networks Inc. fell 87.5 cents to $18.625, and Cabletron Systems Inc. fell $1.875 to $29, both on the New York Stock Exchange.
Intel also dropped, losing $4.75 to $151.625 on Nasdaq.
",25
"Apple Computer Inc. said Tuesday it plans to release an operating system that will work on personal computers based on chips from Intel Corp. as well as on Apple computers.
At its annual developer conference, the company also said it will release programming tools in the next few months that will allow companies to write software for Apple computers once and automatically convert their products to run on PCs based on Intel chips and Microsoft Corp.'s Windows software.
The radical strategy is part of Apple's plan to keep software companies from abandoning Apple products, Apple Chairman Gilbert Amelio told a crowd of 1,900 programmers here.
""For those of you who seek substantial business on both the Mac and Windows platforms, this new development environment holds tremendous promise,"" Amelio said. ""You can (write your applications once) and with a simple recompilation release them for both platforms.""
Until now, Apple has released operating system software that runs only on Apple-designed hardware.
Amelio said Apple's next-generation operating system, code-named Rhapsody, will run on Apple-designed computers, and on PCs based on Intel chips.
""It's a really good idea if they can deliver,"" said Richard Zwetchkenbaum, analyst at market researcher International Data Corp. By entering the PC market, Apple will have a great opportunity to show the world that its technology is special, Zwetchkenbaum said.
For the past two years, Apple has been scrambling to come up with improvements to the Macintosh that would set it apart from PCs. Until 1995, Apple had relied on its computers' famed ease-of-use as a selling point, but Microsoft's release of Windows 95 took away much of the impact of Apple's pitch.
Last year, Apple gave up on a mired effort to revamp the Macintosh Operating System, the fundamental programme that gives the Mac its look. In December, the company bought Next Software Inc. to get its software overhaul going again, and to use Next software as the foundation of a next-generation operating system.
The move concerned lots of programmers, though, because of fears that the new operating system would not run the products they designed for the older Mac operating system. Programmers also were not thrilled to develop products for yet another operating system.
Apple plans to spend the rest of this week convincing programmers that it is a worthwhile investment to write software for Rhapsody from now on.
Programmes written specifically for Rhapsody can easily be converted to run on old Macs, as well as a new class of Apple machines using the Rhapsody operating system, and PCs running the Windows operating system, Amelio promised.
Until now, Mac programmers who wanted to write a version of their product for Intel machines had to make huge changes to their programmes.
The first versions of Rhapsody will be delivered later this year, Amelio said.
Still, Apple faces a big challenge moving Mac developers to Rhapsody, Zwetchenbaum said. Switching to a new operating system involves learning lots of technical details.
Apple's stock closed unchanged at $17.56 on Nasdaq.
",25
"Lam Research Corp., expanding its expertise in semiconductor manufacturing equipment, said Monday it agreed to buy OnTrak Systems Inc. for $225 million in stock.
The acquisition would help Lam enter one of the fastest-growing parts of the semiconductor equipment industry, analysts said.
As part of the agreement, Lam also will get a new chief executive: James Bagley, the current chief executive of OnTrak and an industry veteran who could help Lam manage its growth better, analysts said.
Seperately, Lam said it expected to report a loss of $1.40 a share in the fiscal third quarter because of slower-than-expected sales and write-offs of obsolete parts for older products. Wall Street expected Lam to report a profit of 7 cents for the quarter ending March 31.
In last year's fiscal third quarter, Lam reported a profit of $38.6 million, or $1.37 a share.
Lam Research, a manufacturer of machines used in computer chip factories, will trade 0.83 of its shares for each of OnTrak's shares and options outstanding. Based on Lam's Monday closing stock price of $31.50, Lam would pay about $26.15 for each OnTrak share. OnTrak shares closed at $28.
""The main reason for the acquisition is to fill out our product line,"" said Roger Emerick, Lam's current chief executive, who will give up that role but retain his position as chairman.
OnTrak's chemical mechanical planarization machines -- devices used to polish semiconductor wafers during the chip manufacturing process -- would help Lam enter an industry segment that is growing 31 percent a year, Emerick said.
More important to Lam is getting Bagley, the executive who helped Applied Materials Inc., the biggest semiconductor manufacturing equipment company, grow from $70 million to $4 billion, said Dan Hutcheson, president of market researcher VLSI Research Inc.
""Lam's weakness has been operations. Operations is Bagley's strength,"" Hutcheson said.
Lam could use Bagley's help. At the same time Lam announced the acquisition, it told investors that it will report an unexpected loss for the quarter ending in March.
Most of the loss will come from write-offs of obsolete inventory. Part of it will come from slower-than-expected sales as some customers put off major purchases until the fourth quarter, the company said.
",25
"Intel Corp. said Monday its first-quarter net income more than doubled, but its better-than-expected performance was overshadowed by a warning that it expected little revenue growth in the second quarter.
Intel, the world's biggest chipmaker, also said the number of chips it shipped in the first quarter was flat compared with the fourth quarter. That suggested its new line of Pentium microprocessors with souped-up multimedia capabilities is not helping to boost personal computer sales, analysts said.
""It was a solid quarter, showing Intel's dominance,"" said Peter Andrew, analyst at investment bank AG Edwards in St. Louis. ""But the flat revenue projection could upset some people.""
Intel, based in Santa Clara, Calif., said net income rose to $1.98 billion, or $2.20 a share, from $849 million, or $1.02 a share, in the same quarter a year ago.
Wall Street expected Intel, based in Santa Clara, Calif., to earn $2.07 a share, according to a recent First Call analyst survey.
First-quarter revenue rose 39 percent to $6.45 billion from $4.64 billion in the same quarter a year ago.
Intel, however, said it expects revenue in the second quarter -- when PC sales tradionally pick up from the after-Christmas lull -- to be flat or only slightly higher compared with the first quarter.
Intel is a bellwether for the entire computer industry. Flat sales could mean PC sales have ""plateaued"" for now, said Drew Peck, analyst at Cowen & Co. in Boston.
On top of the flat revenue, Intel plans to boost marketing expenses by 7 percent to 9 percent in the second quarter.
""When you factor in these guidelines, you would have to expect earnings to be down"" in the second quarter compared with the first, Peck said.
Intel released its earnings after the market closed. Its shares had closed up $3.25 at $133.75. The stock initially rose in after-hours trading but then fell as low as $129.25 due to concerns over the revenue forecast.
Intel executives told analysts in a conference call that it had strong demand for its new high-end chips, the Pentium Pro and Pentium with MMX media enhancement technology.
The company also said it expects strong demand for its Pentium II microprocessor. Scheduled to be launched in May, Pentium II crunches numbers much faster than its predecessors.
Intel said its revenue in the first quarter rose in all geographic regions except the Americas. Asia-Pacific revenue, which accounts for about 20 percent of Intel's total, almost doubled.
At the end of the month, the company also will cut some of its chip prices -- some analysts have estimated by as much as 20 percent.
Intel cuts its chip prices regularly about once a quarter. While the cuts are expected to drive PC prices down and increase demand, some investors have seen it as a defensive move against rivals Advanced Micro Devices Inc. and Cyrix Corp.
Two weeks ago, Advanced Micro revealed the K6 microprocessor, a chip that works faster than high-end Pentium chips but costs 25 percent less.
Cyrix, another competitor, has been selling a high-powered Pentium knock-off since the beginning of the year that sells for much less than comparable offerings from Intel.
Even with the conservative revenue forecast and the first real threat of competition in years, Intel is one of the strongest stocks, analysts said.
International markets are booming, which could offset slowing PC sales growth in the U.S., said Martin Pyykkonen, analyst at investment bank Furman Selz in New York.
And business software based on Microsoft Corp.'s Windows NT is driving demand for Intel's speedy chips, he said.
",25
"Apple Computer Inc., beleaguered by rivals offering cheap and easy-to-use personal computers, will unveil an aggressive advertising campaign attacking the PCs' shortcomings.
Distracted by massive financial losses and two restructurings in one year, Apple has been on a year-long hiatus from ads that poke fun at the intricacies of rivals' computers.
""Our advertising is fluff, soft and not very visible,"" Apple Chairman Gilbert Amelio told investors Wednesday at the company's annual shareholder meeting. ""We lost our edge in advertising. And that's unacceptable. I told our advertising people that their job is to get the edge back.""
So Amelio charged his advertising people -- the BBDO Worldwide unit of New York-based Omnicon Group Inc. -- to come up with a series that touts the Macintosh's famed ease-of-use and multimedia capabilities.
""Warning. Don't try any of these things on a Windows PC,"" is the headline of one ad to appear soon in newspapers highlighting the Mac's sound and video features.
The ad may placate Macintosh fans and Apple investors, who have been lamenting the company's marketing silence.
Millions of computer users swear the Macintosh is still easier to use than PCs running software based on Windows 95. But their word-of-mouth has been drowned out by the combined marketing juggernaut of computer powerhouses Microsoft Corp. and Intel Corp.
At Wednesday's shareholder meeting, the most vocal criticism against Amelio came not from angry investors holding stock trading near an all-time low, but from Mac fans who want more advertising to spread the Macintosh name.
Apple has not done nearly enough to bolster its image during its restructuring in the past year, said John Lister, principal of brand identity consulting firm Lister Butler Inc. in New York.
""The perception of an organisation is almost as important as the product,"" Lister said. ""The perception about Apple is that they have lost energy and are slipping behind, whereas Microsoft and the rest of the industry is gaining energy.""
Lister said although employees of his firm mostly use Macintoshs, none of them could recall recent advertisements.
For the past year, Apple has had far bigger problems to contend with than advertising. The company reported losses totalling more than $800 million in 1996, and saw 1,300 of its employees leave through lay offs or resignations.
The perception that Apple may not survive kept customers away from the Mac aisle at computer stores this Christmas, as well. Apple reported a stunning $120 million loss for the quarter ended in December as sales plunged 32 percent to $2.13 billion.
Amelio said part of his latest restructuring plan is for his marketing department to ""go on the attack.""
""We've been frustrated with the direction we've gotten from Apple's marketing"" while the company went through its turmoil, said David Lubars, chief executive of BBDO West and the chief creative officer behind Apple's ads. ""We're now ready to put the edge back in.""
Apple will return to its in-your-face style of advertising where it pokes fun at all the intricacies of operating a Microsoft-based PC, Lubars said.
He said Amelio recognised that the blame for weak advertising fell on Apple's own marketing organisation, now BBDO. The agency gets an estimated $100 million from Apple each year. The account, Lubars said, was not in jeapordy.
""Actions speak louder than words, we're still here,"" he said.
",25
"Rational Software Corp., expanding its expertise in offering software programming products, said Monday it agreed to buy rival Pure Atria Corp. in a stock deal initially valued at about $839 million.
Both companies' stocks plunged, however, after Pure Atria said its first-quarter earnings would be far less than Wall Street expected because of the difficulty the company has had managing its own recent acquisitions. Rational could have the same difficulties, analysts said.
""We're looking at a lot of questions about why the hell Rational would do this when they appeared to be winning the war with Pure Atria anyway,"" said Kris Tuttle, analyst at Soundview Financial Group.
Rational Software's stock fell $9.75, or 42 percent, to close at $13.625, while Pure Atria's stock fell $7.75, or 44 percent, to $10 on the Nasdaq. Both were among the most active on Nasdaq and both were the biggest percentage losers in U.S. trading.
Under terms of the acquisition, Rational would pay 0.9 of its shares for each of Pure Atria's 39.92 million shares outstanding. Based on Rational's Friday closing stock price of $23.375, the transaction would be worth $839 million. Monday's stock slide slashed the deal's value by 42 percent to about $489 million.
Both companies write development tools, a type of software that helps programmers write other software.
Rational, based in Santa Clara, Calif., specialises in methodology tools, which help programmers design the skeleton of complex software projects. Pure Atria specialises in development and testing tools, which let programmers write and test chunks of software code.
The acquisition would give Rational all the components a big developer would need to write commercial-quality software, said Stan Dolberg, director of software strategies of market researcher Forrester Research Inc.
But Rational is placing its bets on rigid, industrial-strength development tools at an awkward time. Rational and other development tool vendors face a fundamental threat from Java, a programming language that is all the rage among Internet and computer networking software developers, who do not need such rigid tools.
""My suspicion is that there are a lot of developers waiting to see what happens with Java,"" said Catlin Wolfard, analyst at brokerage Arcadia Investment Corp. in Portland, Ore. ""Every stock chart in the development market is down, down, down this year"" because of lower earnings prospects as big development tool purchases are put off.
Rational also is buying a company that has had a hard time managing its own acquisitions, analysts said. Pure Atria's trouble could now be Rational's, Andrew Roskill, analyst at Smith Barney, told the brokerage's clients Monday.
Pure Atria, based in Sunnyvale, Calif., was formed last August when Atria Software Inc. bought Pure Software Inc. The companies still are struggling to meld their operations.
Partly because of the difficult merger, Pure Atria said it expected first-quarter earnings to be between 2 cents to 4 cents a share, compared with 9 cents in the same quarter a year ago. Wall Street expected earnings of 12 cents, according to First Call, which tracks such estimates.
Rational executives said they viewed this as the right time to buy Pure Atria. The acquisition will accelerate Rational's expansion into the testing market, said Jerry Rudisin, Rational's vice president of corporate marketing.
",25
"Rational Software Corp., expanding its expertise in offering software programming products, said Monday it agreed to buy rival Pure Atria Corp. in a stock deal initially valued at about $839 million.
But both companies' stocks plunged after Pure Atria said its first-quarter earnings would be far less than Wall Street expected because of the difficulty the company has had managing its own recent acquisitions. Rational could have the same difficulties, analysts said.
""We're looking at a lot of questions about why the hell Rational would do this when they appeared to be winning the war with Pure Atria anyway,"" said Kris Tuttle, analyst at Soundview Financial Group.
Rational Software's stock fell $10.125, or 43 percent, to $13.25, while Pure Atria's stock fell $7.375, or 42 percent, to $10.375 on the Nasdaq, where both were among the biggest percentage losers and the most actively traded stocks on the exchange.
Under terms of the acquisition, Rational would pay 0.9 of its shares for each of Pure Atria's 39.92 million shares outstanding. Based on Rational's Friday closing stock price of $23.375, the transaction would be worth $839 million. Monday's stock slide slashed the deal's value by 43 percent.
Both companies write development tools, a type of software that helps programmers write other software.
Santa Clara, Calif.-based Rational specialises in methodology tools, which help programmers design the skeleton of complex software projects. Pure Atria specialises in development and testing tools, which let programmers write and test chunks of software code.
The acquisition would give Rational all the components a big developer would need to write commercial-quality software, said Stan Dolberg, director of software strategies of market researcher Forrester Research Inc.
But Rational is placing its bets on rigid, industrial-strength development tools at an awkward time. Rational and other development tool vendors face a fundamental threat from Java, a programming language that is all the rage among Internet and computer networking software developers, who do not need such rigid tools.
""My suspicion is that there are a lot of developers waiting to see what happens with Java,"" said Catlin Wolfard, analyst at brokerage Aracdia Investment Corp. in Portland, Ore. ""Every stock chart in the development market is down, down, down this year"" because of lower earnings prospects as big development tool purchases are put off.
Rational also is buying a company that has had a hard time managing its own acquisitions, analysts said. Pure Atria's trouble could now be Rational's, Andrew Roskill, analyst at Smith Barney, told the brokerage's clients Monday.
Pure Atria, based in Sunnyvale, Calif., was formed last August when Atria Software Inc. bought Pure Software Inc. The companies still are struggling to meld their operations.
Partly because of the difficult merger, Pure Atria said it expected first-quarter earnings to be between 2 cents to 4 cents a share, compared with 9 cents in the same quarter a year ago. Wall Street expected earnings of 12 cents, according to First Call, which tracks such estimates.
Rational executives said they viewed this as the right time to buy Pure Atria. The acquisition will accelerate Rational's expansion into the testing market, said Jerry Rudisin, Rational's vice president of corporate marketing.
",25
"The International Air Transport Association (IATA) said on Tuesday it supports plans for a single air traffic control centre to cover all airports in the fast growing Pearl River delta region in southern China.
IATA director general Pierre Jeanniot told the Hong Kong International Aerospace Forum that all three existing air traffic service providers in Hong Kong, China and Macau had indicated acceptance of the concept after a recent meeting in Guangzhou.
Jeanniot told Reuters after his speech that all airlines would benefit from a unified air traffic control through lower costs, faster transit times for overflights and reduced pilot workload.
However he could give no timescale for when the concept might be introduced, where an overall centre would be based or how much it would cost.
""Three air traffic control centres can be very inefficient and potentially dangerous. It is at a busy cross roads and it is important that local capacity is coordinated. There is agreement now that it would be better if control was integrated. The concept has been agreed in principle that it needs to be done. Discussions are ongoing,"" Jeanniot said.
Air traffic is continuously increasing in the Pearl River delta region with large airports at Guangzhou and Shenzhen and new airports at Zhuhai and in the nearby Portuguese enclave of Macau.
Also within a few minutes flying time is one of the world's busiest airports in Hong Kong at Kai Tak, which will be replaced in 1998 by Chek Lap Kok airport offering even more capacity, industry sources said
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017 .
",15
"The possibility that landing fees at Hong Kong's new Chek Lap Kok (CLK) airport could be the highest in the world are a matter of concern for the International Air Transport Association (IATA), its director general Pierre Jeanniot said on Tuesday.
He told Reuters that he hoped the increases in fees over those at the existing Kai Tak airport would be reasonable and would ""consider the economic impact on both airlines and Hong Kong"".
Jeanniot was speaking following a speech to the Hong Kong International Aerospace Forum which included key representatives from the territory's Airport Authority.
Last week, Hong Kong IATA representative Gilbert Chow said new research showed that fees at CLK, which is due to open in April 1998, could be up to four times higher than at Kai Tak.
If confirmed this would bring landing fees to around US$12,000 for a Boeing 747, industry sources said.
The research was based on revenue forecasts and the expected numbers of flights in and out of CLK, extracted from the business plan suuplied to IATA by the Airport Authority, Chow added.
The Authority has repeatedly said charges for landing and aircraft parking will not be announced until next year after full consultations with the airlines.
""They may be higher than existing charges but it is premature to speculate on their level. The Authority is committed to completing and operating a cost-effective airport according to prudent commercial principles,"" an airport statement said.
Later on Tuesday, IATA's director of corporate communications, William Gaillard, who was accompanying Jeanniot, said Hong Kong could become the most expensive airport in the world and a quadrupling of fees was ""obviously crazy.""
""We appeal to the Authority to be reasonable when they come to setting the new fees. The damage that could be done is tremendous. We realise there may be an increase but it should be gradual and by a small amount,"" Gaillard told Reuters.
Hong Kong's Civil Aviation Department said current landing fees for a Boeing 747 are about US$3,000. IATA said the most expensive landing fee is currently US$9,000 at Japan's Kansai airport.
Hong Kong IATA representative Gilbert Chow, who is also station manager for Northwest Airlines, said he would like to be proved wrong by the authority.
A meeting due to be held this week with authority executives has been postponed. The next meeting is due to be held in February, Chow said.
""This is a major concern to us and we are making the appeal -- don't hit us from day one. The airline business is very competitive but on the other hand it brings a lot of economic benefit to the entire territory. If the increase is so dramatic, then airlines will not be able to cope and the increase wil have to be passed onto the consumer,"" Chow told Reuters.
Industry sources said the Airport Authority, under pressure to recoup massive construction costs, is also under increasing pressure from a growing lobby of airlines which see future profit margins under threat from higher fees.
There have already been previous warnings about fees doubling which have alarmed airline groups including the Orient Airlines Association.
One of the main users of the new airport, Cathay Pacific Airways Limited also recently voiced its alarm and warned that Hong Kong's economy risked being damaged if airport fees were set too high.
- Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Civil Aviation Department statistics show cargo handled in October totalled by region rose by 10.35 percent compared with the same month last year. Air cargo imports on both scheduled and non- scheduled flights reached 64,843.64 tonnes and 89,461.59 tonnes for exports.
Regional figures (rounded) in tonnes are shown in the table below, in alphabetical order.
			OCTOBER 1996 - ALL FLIGHTS
			   Unloaded    Loaded	 Pct change
							    from Oct 95
 Africa		     151.20	320.54     14.89
 Asia - others	  4,244.56    5,613.22     11.45
 Australasia	    3,537.29    3,418.21     -0.98
 Continental Europe  10,857.35   11,388.83	4.27
 Japan		    6,580.89   14,376.34     10.12
 Mainland China	 1,963.18    2,950.68     13.15
 Middle East	    1,055.31    2,008.03     31.18
 SE Asia		 14,867.27   13,238.23     18.79
 South America	     43.11	 91.15    -25.67
 Taiwan		  10,703.19   10,289.98     33.98
 UK			 3,905.32    4,621.35	4.63
 USA/Canada	     3,905.32    4,621.35     -2.66
 Total		   64,843.64   89,461.59     10.35
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific Airways Ltd has opened a new cargo office in Auckland, New Zealand, according to the airline's in-house newspaper.
It said Cathay's cargo operations in New Zealand are growing fast following expansion of services from two to five flights a week between Hong Kong and Auckland over the past two years.
Auckland's cargo sales supervisor, Louise McNeil is quoted as saying the increased capacity means Cathay can carry a wider range of goods as well as help develop the long-haul market beyond Hong Kong. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"A electronic document language translator is expected to be commercially available within 18 months which will offer ""tremendous"" benefits for the air cargo industry, an electronic commerce specialist has told Reuters.
The market development director for Hong Kong information processing firm CargoNet, Edi Leong, said the translator will mean a shopfloor worker in China will be able to read in Chinese a purchase order received from an American company in English and vice-versa.
""That will be a tremendous benefit to business and greatly speed things up because you automate the whole process and actually get down to the working level,"" Leong told Reuters in an interview.
""We are about 12-18 months away from it being commercially available. People all over the world have been working on a translator for a long time and some universities have developed a working model. There is an awful lot of work to be done but it's not too far off and the benefits will be out of this world when it comes,"" Leong added.
Industry observers say there are tremendous difficulties in developing a Chinese to English translator because of the number and complexity of the characters and not every English word has a Chinese equivalent but agree the potential benefits are huge.
Among CargoNet's shareholders is sea container specialists Hong Kong International Terminals (HIT) which is part of the Hutchison Group and Hong Kong Association of Freight Forwarding Agents (HAFFA). - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Members of the Orient Airlines Association (OAA) operate the greatest concentration of Boeing 747 cargo aircraft in the world, according to the latest edition of the magazine which covers the association's affairs, Orient Aviation.
In a fleet review of the 16 member airlines - Ansett Australia has just become the 17th - the magazine said the most common aircraft type was the 747. Of the 382 strong 747-fleet 42 are freighters which the magazine said was ""the greatest concentration of cargo aircraft in the world.""
In all, OAA airlines operate 1,156 aircraft, 69 per cent of which are wide-bodies. The fleet is expected to grow by about 32 per cent by 2001.
The magazine said the average age of OAA aircraft is 7.7 years. Taiwan's EVA Air has the youngest fleet with average aircraft age at 2.3 years. Malaysian Airline System Bhd fleet average is 3.9 years, South Korea's Asiana Airlines is 4.9 and Singapore Airlines is 5.2 years.
Member airlines of the OAA are Air New Zealand, Air Nuigini, All Nippon Airways, Asiana Airlines, Cathay Pacific Airways, China Airlines, EVA Air, Garuda Indonesia, Japan Airlines, Korean Air, Malaysian Airlines, Philippine Airlines, Qantas Airways, Royal Brunei Airlines, Singapore Airlines and Thai Airways International. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"The Hong Kong Association of Freight Forwarding Agents (HAFFA) is to raise some of its freight charges from January 1, HAFFA chairman Sam Chung has told Reuters.
But he said the majority of rates, including handling and documentation, terminal charges and attendance fees will not increase.
""HAFFA's goal is to keep freight costs down in order to maintain Hong Kong's position as Asia's leading air freight centre. We raised tariffs this year only on essential, mainly labour intensive items. Although Hong Kong's overall economic situation remains good, salaries and overheads have escalated substantially and the increases in selected rates are necessary in order to keep pace with this,"" Chung said.
HAFFA said there will be a 6.2 percent increase in air freight flat pack cartage charges to HK$1.40 per kg. Devanning charges will rise by 3.5 percent to 29.5 cents per kg. Container field station loading and unloading charges will rise by 6.7 percent to HK$160 per consignment.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong's air cargo industry has been continuing to enjoy its busiest peak period for many years with demand for space especially on Europe-bound flights showing no signs of easing, Reuters research shows.
While trans-Pacific demand has once again failed to be sustained after the traditional Thanksgiving peak, cargo bookings for Europe-bound flights are predicted by market analysts to be strong into January and, remarkably, even extending until Chinese New Year.
One leading airline cargo manager summed up what has been a year of extremely fluctuating fortunes for both airlines and their customers.
""The first six months of the year were the worst for 10 years but the last six months have been the best,"" he said.
Hong Kong's dominant airline, Cathay Pacific, set a new cargo revenue record during the week November 17-23 for which a 19.4 percent increase over the same week last year was recorded, its in-house newspaper reported. It said that exceptional performances were achieved in in Hong Kong, the U.S., Canada, London and Frankfurt.
James Barrington, Cathay's general manager cargo was in a bullish mood.
""It has been a great three or four weeks for us. Europe seems to be going longer and stronger than previously predicted, which is good news for us and hopefully for everyone else. Forwarders are telling us that for the first couple of weeks in January, which is traditionally a bad time for us, things are looking quite strong and so the indications are good,"" Barrington said.
He also hinted that rates, which are already firm, could rise.
""Although nothing is decided yet, in a booming environment it's not impossible that we may see some more rate increases."" he said.
After a frantic few weeks, trans-Pacific rates are now reported to have dipped back below HK$20 per kg for a 100kg shipment as demand for space eases.
""It has been the busiest peak period in the last five years,"" said David Sung, Hong Kong sales manager for one of the biggest trans-Pacific cargo carriers from Hong Kong, Polar Air Cargo.
Like some other trans-Pacific operators, Polar is also cutting capacity as demand has been dropping by eight to 10 percent every week since the end of November, Sung said.
The U.S.-based carrier, which took delivery of its latest Boeing 747-200 freighter in Hong Kong within the past month, said its five flights per week schedule to the U.S. east coast will be reduced to one or two between from December 16 until the new year.
""The rush is over. Things are much calmer now on the trans-Pacific after a lot of panic to get goods to the Christmas shops on time,"" said one experienced Hong Kong airfreight forwarder. Unlike recently, when U.S.-bound cargo was taking a few days to clear, trans-Pacific cargo is now being sent on time, he added.
But demand for air cargo products in Europe continues apace and the industry is reporting exceptionally good business and backlogs to clear.
Rates to Europe are reported to be holding at around HK$23 to HK$24 per kg for 100 kg, which has pleased airlines ever anxious about disappointing yield levels and which have now managed to restore rates at least to last year's levels.
Air France Cargo also said the outlook for January is unusually healthy as demand refuses to show signs of flagging.
""The situation is very good and I do not understand why. Usually the market goes down in mid-November and is very weak by the start of December,"" said the carrier's regional manager cargo Phillipe Bour.
""But we still have a backlog to clear so the market is still there and very strong. And the forecast is very good. It's a nice situation to be in,"" he added.
Air France Cargo offers three weekly HK-Paris freighter flights a week in addition to daily Boeing 747 Combi services.
Bour said he was pleased to see cargo rates were now for the first time at the same level in 1996 as they were they were in 1995.
The chairman of the 260-member Hongkong Association of Freight Forwarding Agents (HAFFA), Sam Chung, also said he could not understand the reason for the current high demand to Europe, which he predicted would extend into January and onto Chinese New Year in early February.
""Traffic to the U.S. is slowing down, which is to be expected because in the past few years it has never been able to cnntinue after the Thanksgiving holiday. But the peak is very strong for Europe and the UK where backlogs exist,"" he said.
Lufthansa Cargo, which operates a joint freighter service from Hong Kong to Germany with Cathay, said that while an extra Boeing 747 flight introduced had helped with capacity, but demand remained high.
""The market is very strong -- stronger than the last two years,"" said Lufthansa Cargo's managing director for China, Hong Kong and Taiwan, Christian Sedelmaier.
""Chinese exports are strong I think because there seems to be quota problems and they want to get goods shipped as quickly as possible,"" he noted.
""Another factor is that department stores in Germany, which reduced initial orders, had to use air freight when they re-ordered to get to the shops in time for Christmas. Flights to Europe are full and we have some backlog. Demand is very high and I think the peak will last for another two weeks,"" Sedelmaier said.
A spokesman for Cargolux, which operates twice-weekly freighters from Hong Kong to Luxembourg via Bangkok and Abu Dhabi, said demand for space is critical with business this year better than last.
One factor driving up demand for space has been the sudden cancellation of some flights, he said.
British Airways said it has been able to offer more cargo capacity because of the newly inaugurated, shorter air route to Europe over China which allows less fuel and more cargo to be carried.
""Europe is still very, very strong. The last quarter has been extremely strong for BA out of Hong Kong and we are very pleased. We were well above our forecast for November and December is looking very good as well. We see things carrying on all the way up to the Christmas season and after that we'll wait and see how January turns out to be,"" said BA's Pacific regional cargo manager Chris Humphrey.
Hongkong Air Cargo Terminals Limited (HACTL), which handles all air cargo to and from territory, reported setting a new handling record of 5,700 tonnes in one day at the end of October.
HACTL managing director Anthony Charter also told Reuters that initial figures showed there had been a 16 percent increase in year-on-year growth with total throughput during November of 150,000 tonnes. Export growth for November's was 18 percent and imports increased by 12.8 percent, he said.
But traffic is not booming on all routes. The key intra-Asian route from Hong Kong to Japan is reported to have slowed dramatically after years of robust growth, with Japanese airlines badly hit.
""Unlike previous years, there has been zero growth (for us) in the cargo market between Hong Kong and Japan this year. It is not so busy,"" said Michael Wu, assistant manager cargo sales and reservations in Hong Kong for Japanese carriers All Nippon Airways and all-cargo sister airline Nippon Cargo Airlines (NCA).
He blamed the relative weakness of the Japanese yen and that of the country's economy. He also said some Japanese companies have shifted their production from China to other Asian countries, thereby reducing the demand for ex-Hong Kong airfreight.
NCA operates four weekly Boeing 747-200 freighter flights from Hong Kong to Japan -- two to Tokyo Narita and two to Osaka.
NCA has also operated 10 extra charter flights over recent months.
Wu said 70-80 percent of the NCA air cargo carried is in transit for trans-Pacific destinations with the remainder bound for the Japanese domestic market.
For ANA's daily passenger flights to Tokyo and Osaka, Wu said the situation is reversed, with 70-80 percent of bellyhold cargo destined for the Japanese market.
His rates to Japan were stable at between HK$14-15 per kg, which had been unchanged since October, he said.
He added that he hoped there might be a rush just before Christmas and before the traditional New Year holiday in Japan.
Fuel surcharges continue to cause controversy in the territory about whether or not they are legal.
Some airlines, such as Lufthansa Cargo and Air France Cargo, insist the 80 Hong Kong cents a kilo surcharge is legal and have refused to withdraw it.
But other airlines heeded a warning letter from Hong Kong's Civil Aviation Department after protests from the Hong Kong Shippers' Council, which said any surcharge should be outlawed.
The French government is reported to have intervened on behalf of Air France Cargo to obtain a clear ruling from the Hong Kong government.
Amid all the confusion, many airlines said they have raised their market rates instead.
-Air Cargo Newsroom Tel +44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Air Cargo Terminals Limited (HACTL) said it set four new handling records during the territory's pre-Christmas peak season in December.
HACTL managing director Anthony Charter told Reuters that imports were especially strong when new daily, weekly and monthly records were set.
A new daily import handling record of 2,661 tonnes was set on December 26, according to HACTL's performance records.
""The daily tonnage record (for the after Christmas) is most unusual. Imports into China have been very strong, noticeably machinery,"" Charter said.
A new weekly import record of 15,720 tonnes was also recorded between December 16 and 22.
December as a whole was also a record month for imports with 67,572 tonnes landing at Kai Tak airport.
December 15 also saw a new daily record being set for both imports and exports combined of 5,788 tonnes, HACTL figures show.
Charter said HACTL's long range forecast is for 8 per cent growth this year and he personally thinks it may reach 10 per cent.
""We have all been surprised by the trends of the last three or four months and there is not much to indicate a slowdown for the next six months,"" Charter added.
HACTL, which has a monopoly on all air cargo handling at Kai Tak airport, is jointly owned by Swire Aviation Ltd, Jardine Matheson, Wharf (Holdings) Ltd, Hutchison Whampoa Ltd, China National Aviation Corp and Cathay Pacific Airways Ltd. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"KLM Cargo intends to increase air cargo rates in northern Asia by between five and 10 per cent in the first quarter of the new year, KLM Royal Dutch Airlines NV regional director sales, Tom Presnail told Reuters.
""Exactly by how much has not been decided yet but it is definitely our objective to raise our income if at all possible sometime during the first quarter. A decision will be made by the end of January and rates raised sometime after that,"" he said in an interview from his Tokyo office.
""My personal preference would be for a blanket rise (on all routes) but it might vary in some markets,"" he added.
Presnail said he is responsible for KLM Cargo flights to the Japanese capital and Osaka as well as Hong Kong, Taipei, Seoul and Beijing.
The KLM executive said the main reason for a planned rate rise in his area continues to be ""dramatic"" increases in fuel costs coupled with continuing general cost increases while yields continue to give cause for concern.
""Yields have come back fairly strongly in the last quarter but they are still, if anything, where they were a year and a half ago. Fuel is one thing but other costs have escalated too and there is definitely the need for more upward movement in prices,"" he added.
Presnail added that current demand for cargo space aboard KLM's Asian freighters is strong.
""Most of Asia has been enjoying a very good, strong peak season with a lot of depth which is hanging on, hopefully into the new year too. It is refreshing. All indications are that it is the best peak season for a number of years,"" Presnail added.
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Exports of 22,835 tonnes to North America enabled it to keep its place at the top of the regional list of air cargo tonnage handled at Hong Kong, Civil Aviation Department statistics here show.
Total cargo handled in November rose by 15.19 per cent compared with the same month last year. Air cargo imports on both scheduled and non-scheduled flights reached 66,257.73 tonnes and 90,473.44 tonnes for exports.
Regional figures (rounded) in tonnes are shown in the table below, in alphabetical order.
		  OCTOBER 1996 - ALL FLIGHTS
			    Unloaded    Loaded	Pct change
							    from Nov 95
 Africa			158.86	354.19    28.24
 Asia - others	   4,297.56    5,143.29    13.68
 Australasia	     3,744.77    3,297.38    -1.61
 Continental Europe   10,883.78   11,210.77     4.41
 Japan		     6,975.49   13,306.77    11.42
 Mainland China	  2,122,49    3,286.41    11.77
 Middle East	     1,026,78    1,895.87    17.79
 SE Asia		  14,967.99   13,937.47    19.26
 South America		43.35	 82.49   -29.86
 Taiwan		   10,591.85   10,035.60    33.55
 UK			  4,060.89    5,058.33     2.38
 USA/Canada		7,383.23   22,834.83    22.21
 Total		    66,257.73   90,473.44   15.19
-Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax:5017
",15
"Hong Kong Air Cargo Terminals Ltd (HACTL) is busy handling one of its most difficult and dangerous cargoes - live snakes, HACTL's general operations manager, Tony Morris said.
As Hong Kong temperatures dip, up to five tons of mainly cobras and pit vipers are daily arriving by air to become snake soup, snake stew and snake wine. Rows of wire baskets outside restaurants are full of snakes awaiting their fate.
The Chinese swear by the medicinal qualities of snake gall bladder cut out of a live snake and swigged down with a glass of brandy to ward off winter flu as well as other snake delicacies, Morris told Reuters in an interview.
But the snakes pose a particular handling problem for the Hong Kong authorities as they are sometimes used to smuggle drugs, Morris explained. A popular method of smuggling heroin is to drug the snake with smoke, make a small cut in its skin and sew the heroin inside.
All snake imports from breeding farms in Thailand and mainland China are scrutinised by hand in two specially equipped inspection rooms at HACTL. The brown hessian sacks packed in wooden crates with breathing holes are dumped into a big wire basket from which each snake is pulled to be carefully examined for hidden contraband.
""It wouldn't be everyone's favourite occupation but the customs officers treat it as an everyday job and actually seem to enjoy it,"" Morris said. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"TNT Express Worldwide is to double the number of staff it employs in China and open five new branches within the next year, general manager for Hong Kong Bryan Chan told Reuters.
The express freight firm said it has also applied for full landing rights at Shanghai and Xiamen to extend its dedicated Asian Air Express freighter service. TNT uses two British Aerospace 146 and a Boeing 727 freighter in an overnight delivery service between Manila, Hong Kong, Singapore, Jakarta, Taipei and Seoul. Industry observers point out that it took TNT five years to gain rights for the six existing destinations, so permission for the Chinese destinations is expected to be a slow process.
""We realise it may take time but Shanghai is a very good point to connect to the Philippines and gives us more options to eventually allow us to close the loop in our Asian network,"" Chan said in an interview.
He said a main task for Eric Wong, newly appointed general sales manager for Hong Kong, will be to promote expansion of the air network.
TNT currently has nine China branches in Beijing, Shanghai, Tianjin, Dalian, Shenzhen, Qingdao, Nnnjing, Hangzhou, Guangzhou in a joint venture with the state monopoly Sinotrans Group. TNT plans to open new offices in Xiamen, Shenyang, Xian, Wuhan and Ningbo employing 300 more staff some of whom are due to arrive in Hong Kong this month to begin training, Chan said. TNT currently employs 273 staff in Hong and 300 employees in its China branches, he added.
TNT will also be focusing its expansion programme on southern China and the Pearl river delta.
""There is a big need for logistics and value added services in southern China including warehousing, documentation and pick and pack. With the increase in volume we need more staff and more infrastructure. We will try to offer the same 'one stop shop' service as we offer in Hong Kong,"" he added.
TNT said it expects its profits in Hong Kong to increase by 43 per cent this year after a 30 per cent increase in revenue along with a 20 per cent increase in China revenue. - Air Cargo Newsroom Tel+44 171 542 5017 Fax+44 171 542 5017
",15
"Hong Kong Air Cargo Terminals Limited (HACTL) said it has set a new handling record of 5,700 tonnes in one day.
HACTL managing director Anthony Charter also told Reuters that initial figures showed there had been a total throughput of 150,000 tonnes during November, representing a 16 percent increase in year-on-year growth.
November's export growth was 18 percent and imports increased 12.8 percent, he added.
But growth for the year is expected to be no more than five to six percent, Charter said.
""The new daily record at the end of October of 5,700 tonnes is very pleasing and signifies a pick up in the market during October and November. It has been a very strong peak season this year,"" Charter said in an interview.
HACTL, which has a monopoly on all air cargo handling at Kai Tak airport, is jointly owned by Swire Aviation Ltd, Jardine Matheson, Wharf (Holdings) Ltd, Hutchison Whampoa Ltd, China National Aviation Corp and Cathay Pacific Airways Ltd.
-Air Cargo Newsroom Tel +44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong's Airport Authority, which is being pressured by the world's airlines not to impose much higher fees at the territory's new airport, said it will reveal the estimated level of charges early in the new year.
An Authority spokesman told Reuters that it was ""premature to speculate"" what the level of charges at Chek Lap Kok would be.
""The Authority is still looking at its future charges in consultation with the airlines and the government. The estimated level of charges will be available early in the new year and will then go before the Civil Aviation Department and the Executive Council for approval,"" the spokesman said. He said he could not give an exact date when the charges would be published.
On Monday the International Air Transport Association (IATA) said it was dismayed by rumours of drastically increases up to four times the current charges at Kai Tak airport.
An IATA official estimated last month that this would mean a Boeing 747 would have to pay US$12,000 every time it landed at Chep Lap Kok. This compares to the existing most expensive landing fee of US$9,000 at Osaka's Kansai airport.
IATA also said revenues raised from the proposed redevelopment of Kai Tak should be used to offset the cost of using Chek Lap Kok. Hong Kong's new US$10 billion airport and associated infrastructure projects is due to open in April 1998.
A spokeswoman for Hong Kong's Civil Aviation Department said it was too soon to comment on future landing fees.
Regarding using money raised from the redevelopment of Kai Tak to offset charges at the new airport, she said a decision on the old airport's future use would not be made until after the Chinese handover next summer.
Air Cargo Newsroom Tel +44-171-542-7706 Fax+44-171-542-5017
",15
"Air Canada is interested in opening up new Asian destinations including Tokyo and Singapore, said the airline's president and chief executive officer Lamar Durrett.
In a speech to the Canadian Chamber of Commerce in Hong Kong, reputed by members to be the largest outside Canada, Durrett said the airline is looking forward to future competition with Asian carriers hopefully with the help of open skies agreements.
He said the airline was positioning itself to become a long-term participant with a major expansion of services to customers across the Asia-Pacific region.
""The steadily increasing trade and travel links between Asia, Europe and North America are creating more opportunities for more carriers to offer passenger and cargo services. The Hong Kong-Canada market is a perfect example,"" Durrett said, pointing out that there had been a 41 percent increase in trans-Pacific capacity with the introduction of the airline's winter schedule.
Speaking to reporters after his speech, Durrett said he would like to expand services into Japan -- Air Canada currently flies to Osaka in partnership with ANA -- and also to fly to Tokyo and other Asian destinations.
""I don't expect we will open up a new Asia city in 1997, although we never say never, but we are interested in Singapore, Indonesia and have a big interest in China. We think the Asian market will continue to grow at 8-9 per cent annually so it is a high growth market. Clearly you look to the future and the future is going to be Asian,"" he said.
Air Canada said it also pressing the Canadian government to allow daily services between Hong Kong and Vancouver and Toronto instead of being restricted to the current four times weekly service.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Major airlines including Lufthansa Cargo and Air France Cargo have raised their ex-Hong Kong air cargo market rates to European destinations by HK$1 per kilo, industry sources told Reuters.
The rate rise from January 1 is in addition to the controversial 80 HK cents a kilo fuel surcharge which some airlines imposed before Christmas, to cover big increases in aviation fuel costs.
The surcharge issue led to a protest by the Hong Kong Shippers' Council, which also represents the territory's air freight forwarders. The council lobbied the Hong Kong government's Civil Aviation Department to declare the surcharge illegal and, after warning letters were issued, some airlines quickly agreed to withdraw the fuel surcharge but raise market rates instead.
These airlines have increased ex-Hong Kong rates by HK$1.80 per kilo and include Alitalia, Emirates, Cargolux, Virgin Atlantic Martinair, Swissair and Air Hong Kong
Lufthansa Cargo, which had refused to withdraw its surcharge, raised its rate by HK$1 from January 1 and is also maintaining a separate 80 cents surcharge imposed before Christmas, according to an airline source. ....""We have informed the agents that we will increase our rates by one dollar and the 80 cents fuel fee or surcharge will be maintained but no longer shown on the airway bill which we think should solve the problem,"" the source said.
One of the leading advocates of a surcharge, Air France Cargo, raised its market rate by HK$1 from January 1 and is continuing with its 80 HK cents fuel surcharge, the airline's Hong Kong regional manager Philippe Bour told Reuters.
""The bottom line is the same with a HK$1.80 rise but we respect our commitment and have to be fair to our customers. As soon as the fuel price drops then we will cancel the fuel surcharge,"" Bour said.
Hong Kong's home carrier, Cathay Pacific Airways Limited which did not impose any fuel surcharge, raised its rate by HK$1.50 from January 1, the airline's general manager cargo, James Barrington said.
One airline cargo manager, who asked not to be named, said the fuel surcharge issue was a ""very touchy subject"" but it was not worth provoking more confrontation with the Hong Kong government.
Sam Chung, chairman of the Hong Kong Association of Freight Forwarding Agents, which represents more than 260 of the territory's agents, said all major airlines had raised rates apparently in anticipation of heavy demand before Chinese new year early next month.
""The fuel surcharge which we thought was illegal has gone and the airlines have raised their rates instead which we can't argue about.""
British Airways, a major cargo carrier to Europe with twice daily passenger flights and dedicated freighter flights, said it would ""wait and see"" before deciding on any rate rise.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"EVA Air is planning to start a new freighter service from Taipei to Brussels later this year, airline spokesman K. W. Nieh has told Reuters.
At the same time, the Taiwanese carrier is also planning to replace its McDonnell Douglas MD-11 freighter service from Taipei to Amsterdam via Dubai with an MD-11 Combi aircraft, Nieh said in an interview.
""We propose the new MD-11 freighter service to Brussels starting in May or June using the aircraft that is being replaced by the Combi aircraft on the Amsterdam service,"" Nieh said.
In a further expansion of its cargo business, EVA will also take delivery of two more McDonnell Douglas MD-11 freighters by the end of this year, along with the first of two new Boeing 747-400 passenger aircraft, bringing EVA's all MD-11 freighter fleet to five. EVA's current fleet of 28 aircraft is due to rise to 34 by next year with the two MD-11 freighters and two 747-400 purchases along with two McDonnell Douglas MD-90 shorthaul passenger twinjets, Nieh added.
He said the new freighters will be used to expand cargo revenue which is already expected to be more than 35 per cent of the airline's total revenue when last year's financial figures are published in March.
EVA has not yet chosen which routes the two new freighters will operate on but Chicago is a possibility to supplement existing freighter services to New York and Seattle. EVA also operates Combi flights into Los Angeles and San Francisco, Nieh added.
""We hope we can use our new freighters to the United States but it depends on traffic rights and government negotiations regarding America's open skies policy. We hope an agreement can be reached later this year, once that happens we could apply for Chicago,"" Nieh said.
EVA has no plans to start a dedicated freighter service from the Taiwanese capital to Hong Kong which is now served by 16 passenger flights a week partly using Combi aircraft, the spokesman added. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Air Cargo Terminals Ltd (HACTL) is considering marketing its knowhow to developing airports around the world, managing director Anthony Charter told Reuters.
During a visit to Hong Kong's new airport at Chek Lap Kok(CLK) Charter said HACTL may diversify by marketing its expertise built up over the past 20 years.
It may also start to license its sophisticated air cargo handling software, he added.
Industry sources said HACTL is acknowledged to be one of the world leaders in operating air cargo handling facilities and that Kai Tak, already the second largest for international airfreight, is also one of the most efficient.
HACTL may also be interested in becoming a joint venture partner, Charter added.
""Now we are in the execution phase of the new cargo terminal (at CLK) we are beginning slowly to have planning resources with experience available. When we have the time, I think we may start considering marketing services to other airports. Bangkok is obviously one where it would be interesting to be involved,"" Charter said.
The marketing venture -- possibly a separate unit within HACTL to work on individual projects -- could become a highly profitable offshoot, he added.
""I think we have perhaps been too reticent about marketing our product and we will certainly be looking into it and exploring the idea,"" Charter said.
Up to now, HACTL planners have been establishing and fine tuning its existing twin terminals at Kai Tak airport. The planning team has also been busy designing HACTLs HK$7.8 billion state of the art SuperTerminal 1 at CLK.
This has a a design capacity of 2.6 million tonnes a year of air cargo and the company says it will be the largest and most advanced facility of its kind in the world when it comes into service in 1998. --Air Cargo Newsroom Tel + 44-171-542-7706 Fax +44-171-542-5017
",15
"The cause of a fire on a Malaysian Airline System Bhd Airbus A330-300 aircraft while parked at Singapore's Changi airport three weeks ago is still under investigation, a MAS spokeswoman told Reuters.
The fire started in the early hours of January 4 when the aircraft was undergoing a routine overnight check, industry sources said.
Following the fire, on January 8 Airbus Industrie said it instructed all airlines operating both the A330 and A340 jets to de-activate one of the aircraft's electrically driven hydraulic pump systems implicated in two other similar fires.
An Airbus spokesman in Hong Kong emphasised that the pump system is only used as a back-up to operate the aircraft's cargo doors and is not active in-flight.
A total of 140 aircraft -- A330s and A340s -- operated by 25 airlines are involved.
Aviation industry sources said the hydraulic pump system was first suspected when an Air France A340 was destroyed by fire, followed by another fire aboard an Air Mauritius A340 while undergoing maintenance.
The MAS spokeswoman said the airline is still assessing the extent of the damage and could give no estimate of how much it will cost to repair or how long the aircraft will be out of action.
There is no serious effect on schedules, she added. MAS operate 11 A330 aircraft on its regional network.
She addded that MAS was awaiting an accident report from Singapore's civil aviation deparment before commenting further. --Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax:5017
",15
"Cathay Pacific Airways Limited said it welcomed the go- ahead for a second runway at Manchester airport.
""Although Cathay is not looking to increase frequency into Manchester in the near future, a second runway will give us the chance to optimise arrival and departure timings in the medium term,"" a Cathay spokeswoman told Reuters.
Cathay currently has daily flights to the north west of England airport via Amsterdam, Frankfurt or Paris. - Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax+5017
",15
"Cargo airlines may fly elsewhere if the cost of using Hong Kong's new airport is dramatically increased, the Orient Airlines Association (OAA) director-general Richard Stirland said.
Stirland, speaking from Manila, told Reuters he is alarmed at reports that charges may double when Hong Kong's new airport at Chek Lap Kok replaces Kai Tak in 1998.
The OAA  represents 16 of the major carriers in Asia including Singapore Airlines Ltd, Japan Airlines Co Ltd, Thai Airways International Ltd and Cathay Pacific Airways Ltd,
Stirland said some airlines - especially cargo carriers - may bypass Hong Kong for cheaper alternatives nearby such as Macau, Guangzhou and Shenzhen.
""You may get a situation as in Europe where freighter operators don't need to go to Heathrow or Paris-Charles de Gaulle and use smaller, cheaper alternatives instead,"" he added.
It currently costs around US$24,000 for a two hour stop in Hong Kong compared to $23,000 at Singapore's Changi, he said.
The new Hong Kong Airport Authority has said charges will ""inevitably rise"" but added that reports that they will double are ""pure speculation.""
A spokeswoman said it will not be until early next year how that a decision will be taken on how much it will cost after the airlines have been consulted.
The charges will then have to be approved by Hong Kong's Director of Civil Aviation.
A spokesman for one of the major users of the new airport, Hong Kong's de facto flag carrier Cathay Pacific said it is concerned at price rises which would have to be passed on to airline passengers and cargo customers.
""There is a big concern about fees rising which would damage all airlines and Hong Kong as a regional hub. Ultimately we could not absorb that sort of increase which would be passed onto our customers,"" Kwan Chuk-fai said.
""We will be seeking a meeting with the authority but so far no date has been fixed,"" he added. --Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"A report into the emergency evacuation of a Cathay Pacific Airways 0293.HK Boeing 777 on June 23 which injured several passengers has recommended design examinations of the cargo hold smoke detection system and emergency slides, a Cathay press release said.
It said results of an investigation by Cathay and the territory's Civil Aviation Department into the evacuation of the Cathay 777-200 lists five main conclusions and three recommendations.
The newly-introduced twin jet had just landed at Hong Kong's Kai Tak airport after a flight from Bangkok when there was a smoke warning in the forward hold which contained wet cargo and high humidity levels.
The captain ordered the evacuation of all 306 passengers and 15 crew. Several people were injured when they hit the ground. The alarm turned out to be false, the report said.
The report recommends Boeing examine the design of the cargo smoke detection system. It also calls on the U.S. manufacturer to investigate the effectiveness of the escape slide deceleration features.
A third recommendation suggests the Civil Aviation Department and the airport fire services make it easier for airline crew members to identify the leader of the rescue mission and his command vehicle.
In a statement, Cathay Pacific managing director Rod Eddington said the commander's decision to evacuate was correct.
""There was no suggestion by the investigation that either the cockpit crew or the cabin crew acted in anything other than a highly professional manner,"" Eddington said.
Cathay said that to prevent further false alarms it will shortly begin modifying the 777's smoke detection system to prevent condensation building up on the sensing surface.
Until modifications are complete by the end of the year, Cathay will ban wet cargoes, the statement added.
Cathay said the experience gained when 777 slides were used for the first time under true emergency conditions might be used by Boeing to refine future designs.
""There is no suggestion the slides are unsafe. They functioned as designed and the aircraft was empty in less than two minutes. However, the report does recommend examining ways to improve the deceleration of people as they come down the slides in wet conditions and we are discussing this with Boeing and the Civil Aviation Department,"" Eddington added.
Cathay currently has a fleet of four 777-200 aircraft with a firm order for seven 777-300s and 10 options.
The report in no way undermined Cathay's confidence Cathay in the aircraft, Eddington stated.
""Apart from this one incident, it has had an outstanding entry into service, with the best serviceability of any aircraft we have ever operated and we are delighted with its performance,"" he said.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Civil Aviation Department statistics show total air cargo handled in October by country rose 10.35 percent compared with the same month last year. Air cargo imports on both scheduled and non- scheduled flights reached 64,843.64 and 89,461.59 tonnes for exports.
The top 15 countries figures (rounded) are shown in tonnes in the table below in alphabetical order.
		     OCTOBER 1996 ALL CARGO
			Unloaded     Loaded	Pct change
							 from Oct 95
 AUSTRALIA	  3,178.64     2,941.36    -4.08
 CANADA	     1,851.36     1,951.16    13.94
 CHINA MAINLAND   1,963.18     2,950.68    13.15
 FRANCE	     2,214.39     2,167.83     6.74
 GERMANY	    4,114.32     4,865.89     3.94
 JAPAN		6,580.89    14,376.34    10.12
 SOUTH KOREA	3,250.40     4,441.79     7.08
 MALAYSIA	   1,909.95     1,803.46     5.55
 NETHERLANDS	1,890,62     2,028.71    66.43
 PHILIPPINES	2,611.37     2,516.16    64.02
 SINGAPORE	  3,893.81     4,258.78     5.98
 TAIWAN	    10,703.19    10,289.98    33.98
 THAILAND	   4,567.28     3,132.42    10.66
 UK		   3,905.32     4,621.35     4.63
 USA		  5,088.38    19,254.36    -4.64
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"A campaign is being launched to recruit Hong Kong workers to help complete the territory's new airport at Chek Lap Kok (CLK), a government statement said.
The recruitment campaign from December 16 to December 31 is being organised by the Hong Kong government, the Airport Authority and the Mass Transit Railway Corporation. A special telephone hot line is also being set up, the statement added.
The new airport, offshore of Lantau island is due to open in April 1998.
There have been several warnings recently that a skills shortage, especially of mechanical and electrical engineers, is threatening to delay completion of key projects.
But plans to import more workers from outside Hong Kong has been met by opposition from some trade unions in the territory who said local workers should be given first choice.
The government statement said the purpose of the campaign is to enable contractors to make an extensive trawl for suitable workers for job vacancies which have to be filled within three months to meet tight schedules.
If local workers can't be found, applications for imported labour will be hurried through, the statement said.
""On the basis of the results of this recruitment campaign, the government will give expeditious approval for imported workers to fill any particular shortfall of labour established through the two-week recruitment excercise during this campaign,"" the statement said.
The Airport Authority welcomed the government initiative.
""Given their pressing needs, it is essential that contractors have adequate numbers of workers with the right skills and experience to meet the tight programme to which we are all now working,"" Douglas Oakervee, the authority's project director said in a statement.
""While it is right to continue to give priority to suitable local labour, where available, it is also vital to the airport project that overseas labour can be imported quickly wherever needed,"" he added. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific Airways has raised air cargo rates from Hong Kong to compensate for higher fuel costs, cargo marketing and sales manager Ray Jewell told Reuters.
He declined to say by how much rates have been increased but said they have been introduced on a route by route basis ""wherever possible"" and not system-wide.
""There's been a huge cost associated with the increase in fuel and we have already had to make adjustments in our rates to compensate,"" Jewell said.
Other major airlines told Reuters they are raising their ex-Hong Kong cargo rates in response to higher fuel costs after an attempt to impose an 80 Hong Kong cents a kilo fuel surcharge was turned down by the territory's Civil Aviation Department.
The 80 HK cents surcharge is the equivalent to the 10 U.S cents/kg fuel surcharge being levies by many airlines around the world. Cathay is currently applying this surcharge or the local currency equivalent to flights from Europe.
Cathay Cargo also reported very good peak season business both in and out of Hong Kong on long-haul routes which shows no sign of any slackening off.
""Flights are full now and it is a very good peak season,"" Jewell said.
Earlier Cathay had said it would soon apply to the CAD for a three percent increase in passenger fares because of higher fuel costs. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Air Cargo Terminals Limited (HACTL) said its new SuperTerminal 1 will be only 50 percent operational when Hong Kong's new Chek Lap Kok(CLK) airport is due to open in April 1998.
HACTL managing director Anthony Charter told reporters during a construction site visit to the facility -- now about 25 percent complete -- that meeting the Airport Authority's opening deadline date was causing major concerns.
The new cargo terminal is due to cost HK$7.8 billion and is planned to be the world's biggest air cargo facility.
""It's a tall order when you see the size of the building. We will have something ready in April 1998, although we are not contractually due to open until August. The builders are working under severe pressure and we are doing our best but whether we will be able to cope in April, I cannot say,"" Charter said.
""If the airport opens in April we will have 50 percent of capacity available but 75 percent from June 30,"" Charter said.
SuperTerminal 1 is expected to be able to handle 1.2 million tonnes a year from June 1998 which is less than the 1.5 million tonnes Kai Tak handles now and does not take into account growth rates. A second, smaller cargo terminal is also being built.
Industry sources said it is vital that the cargo complex, one of the most technologically advanced of its kind, works perfectly on opening to prevent a logistical nightmare and an enormous traffic jam at the HK$49.8 billion new airport.
It is currently planned to close Kai Tak and open the new airport the following morning but Charter said he would like to see a ""soft"" opening to ensure a smooth start.
That could mean some cargo aircraft using the new airport during the night to test the highly automated cargo handling systems.
He also raised the possibility of Kai Tak remaining open while CLK gradually built up. A 24 hour embargo on cargo being delivered to the new facility might also have to be imposed, he added.
There had also been a two month delay to an already very tight schedule because of problems with concrete form work by the main contractor, Charter said.
An industry source told Reuters that the infamous baggage handling delays suffered by Denver's new airport showed how vital it was that everything work before opening.
He said it was rare for a new airport to open on time and increasing financial and political pressure was being put on contractors to ensure the opening deadline for CLK was met.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific Airways Limited is the first airline to test fly a new 'sharks skin' aircraft coating which could reduce fuel costs and revolutionise air travel, a Cathay spokeswoman told Reuters.
One of Cathay's four Airbus A340-300 aircraft has been partly covered by transparent, plastic adhesive foils containing fine ridges or riblets which resemble the texture of sharks' skin.
The spokeswoman said scientists discovered that sharks swim faster because their skin is covered in fine ridges running lengthwise along their bodies which reduces drag.
She said Airbus Industrie hope the streamlining principle can be transferred to aircraft, reducing the amount of fuel burned by up to one percent.
Over an aircraft's lifetime, the fuel bill saving could be huge at a time when rising fuel prices are a highly topical subject.
Airbus said it has already been conducting trials for several years with the U.S. manufacturer 3M but Cathay is the first scheduled airline to apply the latest technology, higher durability film.
Cathay passengers flying on long haul routes to Rome, Zurich, Toronto and Melbourne will not notice unless they look very closely at the fuselage and the differing destinations will offer a testing environment for the coating, the spokeswoman added.
""It is a very interesting development for Cathay to be involved in and anything that helps to cut the cost of fuel will be extremely welcome to us and the whole industry,"" the spokeswoman said.
She said the experiment is expected to last between one and five years with Airbus and 3M engineers visiting the aircraft for regular checks. Cathay's Flight Planning and Performance Department engineers will also be monitoring its performance, she said.
""We will have been an industry leader if this is a success,"" she added.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Some airlines and freight forwarders say they anticipate a traditional mini-boom in the lead-up to the Chinese New Year holiday starting on February 6, and despite space being available, rates are firmer than might be expected, a Reuters survey shows.
But industry sources also generally expect trans-Pacific rates to stay flat for the next couple of months.
Following what was reported to be one of the busiest pre-Christmas peak periods seen in Hong Kong for many years, the start of 1997 has seen the trans-Pacific air cargo market slump back into familiar January doldrums.
But both airlines and freight forwarders say they are pleased to report that last year's ""disastrous"" January, which many said was the worst they had ever experienced, has not been repeated.
Industry spokesmen said many factories in China which airfreight their finished goods out of Hong Kong are awaiting a new round of export licences. As soon as they are granted in the next few days, both airlines and freight forwarders expect a rush from manufacturers anxious to complete shipments before factory production comes to a virtual standtill for the two week long holiday or more.
More than one freight forwarder complained that, despite the seasonal drop in demand, cargo rates have not dropped as much as had been expected.
One well known freight forwarder in the territory said airlines are unusually keen to do deals on rates which indicated they have space to fill. He was happy doing business for a 35 tonne shipment to Los Angeles earlier this week which cost around HK$15 per kilo.
""Airlines which never normally do deals are very keen this month which indicates there is spare capacity around,"" he said.
""The market is reasonably busy and there is quite a bit of freight around,"" he added.
Yoichi Tanaka managing director of freight forwarding firm Kintetsu World Express (HK) Ltd said despite a softening of demand, ex-HK rates to Japan were being deliberately held firm by airlines ""who think they can still make money from the current market.""
""The market has seen its normal slow down both to Japan and trans-Pac compared with the peak season. Overall, for both air freight exports and imports, the market is better than last January,"" said Tanaka who is ""optimistically"" forecasting four to five cent growth over the next six months.
Yang Seung Joo, general manager for Korean Airlines Cargo in Hong Kong, was one airline executive who said that he was keen to maintain rate levels.
""We are trying to keep our prices as high as they were at the end of the year (during peak season). This year we will keep prices for all destinations a little bit higher than last year to protect our interests,"" he said.
KAL has three freighters a week - two Boeing 747s and one Airbus A300 - from Hong Kong to Seoul plus a joint venture flight with Cathay Pacific Airways Ltd.
Yang said demand was slack but business this year is better than last January which was the ""worst"" he had ever known. He ""cautiously"" expects this year to be better than last.
Strike action in South Korea had not caused any disruption to KAL's cargo flights, Yang said.
Another key player on Japanese and trans-Pacific routes, Cathay Pacific said the market had ""softened"" but was still ""healthy"". Compared with Cathay's cargo services to Europe, the west-bound market was not as strong, Cathay Cargo's marketing and sales manager Ray Jewell said.
""We are pretty optimistic about trans-Pacific which finished the year very strongly and the fact that the market has now weakened is nothing unusual. What is unusual is the European market staying so bouyant. Overall we are looking pretty good for the start of the year,"" he said
Cathay said there will undoubtedly be a pre-Chinese New Year boom in business but any indication of how strong the market really is will not really be known until after the holiday
David Sung, Hong Kong sales manager for Polar Air Cargo, which operates only trans-Pacific services from Hong Kong to Chicago, Colombus and New York, said the market had followed its traditional pattern and slumped after early January. Flights have been cancelled because of lack of demand.
But he said he was hopeful of a ""mini-peak season"" in the coming fortnight as factories in China rush to dispatch orders.
""The market is slowly picking up after being dead slow right after western new year. Chinese New Year is coming soon this year in early February and we expect a rush next week when we will operate a full schedule of five flights a week and are ready to put on additional flights if needed because we have aircraft available,"" Sung said.
He did not anticipate a rise in trans-Pacific rates in the lead-up to Chinese New Year.
A spokesman for All Nippon Airlines Co Ltd and its subsidiary Nippon Cargo Airlines (NCA) was also anticipating a rush before Chinese New Year as mainly garment manufacturers in China are awarded export licences.
""I think the market will pick up next week as manufacturers hurry to get their orders out. Last January was terrible but this year it is better and we expect a rush,"" the spokesman said.
He also said the outlook on both trans-Pacific routes and those to Japan during spring was reasonably optimistic.
But Northwest Cargo, which said it is the largest US trans-Pacific carrier, was not anticipating any major rise in demand leading up to Chinese new year.
After the pre-Christmas dash to meet year-end quotas the market has died down but, thankfully, not as much as last year. Northwest also cancelled flights in early January due to lack of demand.
""After the peak, rates have dropped but not substantially. I would say they are normal for this time of year. Concerning volumes, it's a case of so far so good,"" the Northwest spokesman said.
He also said there is currently a trade imbalance with exports far exceeding imports and demand for traffic to the U.S. East coast markedly higher than to the West coast.
Thomas Miu, general manager of the air freight division of Jardine Freight Services, was also pessimistic about a pre-holiday 'mini-boom'.
""I doubt very much whether we will see a little bit of a rush before Chinese New Year which is just two weeks away. I don't see any sign yet. I'm hoping we will have a boom before Easter,"" Mui said.
A leading freight forwarder who uses a variety of airlines said space on flights from Hong Kong to New York was ""wide open"" with rates generally around HK$20.50. For destinations to the US west coast, average shipment prices were reported to be around $19.50.
Rates to Japan on so-called first-class carriers such as Cathay Pacific and Japan Airlines Co Ltd are reported to be around $14 with around a $2 reduction at $12 for 'second tier' carriers such as United Airlines with no restriction problems on space.
Another trans-Pacific airline operating from Hong Kong, U.S.-based Evergreen International Airlines Inc, is operating a full schedule of four trans-Pacific freighter flights a week until Chinese New Year when, like many other carriers, all flights will be stopped as demand evaporates.
""The market is picking up after being a little bit slow which it usually is while people renew their export licences,"" reported Kersti Krepp. Trans-pacific rates remain firm, she added.
Japan Airlines is not yet ""in full swing"" after the early January lull but is another optimistic airline expecting another busy period before Chinese new year. JAL offers four freighters per week to Tokyo's Narita airport in addition to at least five daily passenger flights to Narita and Osaka offering around 15 tonnes belly capacity each with trans-pacific connections.
""Rates to Japan are holding steady, very stable. Trans-pacfic rates are negotiatable with different deals being done. Exports from Hong Kong are also exceeding imports,"" a JAL spokesman told Reuters.
The importance of the Japanese and trans-Pacific markets to Hong Kong's economy can be seen from the latest cargo statistics for November from the territory's Civil Aviation Department.
They show more than 21,000 tonnes of air freight exports to the U.S. while imports amount only to less than 5,500 tonnes. New York's JFK airport accounts for 4,400 tonnes of exports, Los Angeles 3,225, Columbus Ohio 3.071, Chicago 1,800 tonnes and San Francisco 985 tonnes.
For Japan, the statistics show Tokyo's Narita airport is the second most popular export destination from Hong Kong after Taipei. 9,016 tonnes was airlifted to Tokyo compared with 9,441 tonnes to Taipei during November. But only 4,502 tonnes of cargo was airlifted from Tokyo to Hong Kong. Air Cargo Newsroom Tel+44-171-542-7706 Fax +44-171-542-5017
",15
"HONG KONG, Dec 10 (Reuter) Polar Air Cargo is cutting the number of freighters it operates from Hong Kong to the U.S. until the end of the month as the trans-Pacific market is now winding down after a busy peak season, the all cargo airline's Hong Kong sales manager, David Sung.
From Monday December 16, Polar will only operate one or two Boeing 747 freighters to the U.S. east coast, instead of its usual five flights per week.
Sung told Reuters in an interview ex-Hong Kong trans Pacific rates are also reducing at the rate of five U.S. cents per week until the end of the month as demand for cargo space falls because most goods have already reached the U.S. Christmas market.
""For every week after the end of November we see an 8-10 percent drop in demand as the market steps down from the peak period. We will be adjusting our schedule from next week and reducing the number of flights from five to one or two until the end of the month. Recently all our flights have been full - the best peak period for the past five years in Hong Kong - but now demand is dropping off,"" he said. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"The regional manager for Air France Cargo, Philippe Bour said he will meet Hong Kong government officials on Monday to explain why some leading airlines are refusing to withdraw a fuel surcharge on ex-HK air cargo.
The imposition by airlines of an 80 Hong Kong cents a kilo fuel surcharge has caused controversy in the territory. Following complaints from the Hong Kong Shippers' Council, which also represents freight forwarders, the Civil Aviation Department (CAD) wrote warning letters asking airlines to withdraw the surcharge. Some did but Bour said Air France, Lufthansa Cargo, Swissair, Air Hong Kong and Thai Airways International have refused.
He told Reuters, "" we are fighting with the CAD because they are saying it is totally illegal, but we don't have the same point of view. I am saying it is not a rate increase but a fuel surcharge, which is something totally different. I understand perfectly well that we are not allowed to increase the official rate without referring to the CAD, but when are talking about market rate plus a fuel surcharge we are still far below the official rate. We can play around with the market rates and the fuel surcharge will remain,"" Bour explained.
The average rate from Hong Kong to Europe is between HK$23-24 per kilo with a fuel surcharge of 80 HK cents or 10 US cents which restores the rate to last year's level, Bour said. He said the fuel surcharge is not a blanket application, express cargo and cargo with airway bills containing the published rate is exempt.
Bour said the argument had been referred to the French civil aviation department, which has been in touch with the Hong Kong government.
""Hopefully the meeting on Monday will clarify things and will be a fruitful one,"" Bour added. - Tel+44 171 542 7706 Fax+544 171 542 5017
",15
"Air Canada said it is making a profit on its Hong Kong-Vancouver route which celebrates its first year of operations this month.
Speaking to reporters after a speech to the Canadian Chamber of Commerce in Hong Kong, the airline's president and chief executive officer, Lamar Durrett, said the airline carried 34,000 passengers, had an average load factor of 65 percent with projected passenger revenue until year end of Canadian $192 million during the first year.
On cargo, Durrett said 4.7 million kilos were carried with cargo revenue at just under C$12 million. 47 percent of ex Hong Kong cargo was destined for Canada, 53 percent went to U.S. via Toronto, he added.
""The Hong Kong route is running at a profit,"" Durrett said.
Air Canada started the Hong Kong -Vancouver route on December 20 last year using Boeing 747 Combi aircraft and now flies four times a week, officials said.
Dave Tangry, general manager cargo sales for Asia Pacific said summer weather conditions during July and August, including headwinds and hot temperatures, had sometimes severely restricted the Combi's normal 40 tonnes cargo payload to as little as three tonnes cargo payload.
Earlier, Air Canada's president said he expects Hong Kong's role as a funnel for half of China's exports and as a regional business and export centre to grow and that cargo is a key component in the airline's Asia Pacific strategy.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"British Airways World Cargo plans to increase its wet lease freighter service between Hong Kong and London to a daily frequency when the territory's new airport opens next year, the airline's area manager for Greater China, Chris Chan, has told Reuters.
BA is also planning to step up its three times a week freighter link from Hong Kong to London Gatwick to four times weekly later this year, Chan said in an interview.
It now operates Boeing 747-200 freighters wet leased from Atlas Air in addition to sizeable belly capacity aboard 14 Boeing 747-400 passenger flights a week to Heathrow.
Wet leasing involves the supply of an aircraft with crew, fuel, supplies and supporting services.
The proposed daily freighter service from Hong Kong could be switched to Heathrow where BA is building a new dedicated terminal provided suitable slots become available, Chan added.
""We are hoping to start the fourth weekly frequency late this summer and a daily service from next year as we continue to expand. Three years ago we started with zero now we have three freighters a week with the prospect of more to come,"" Chan said.
BA said it currently enjoys a 12 percent market share of shipments from Hong Kong to Europe and 45 per cent to the UK and Ireland.
--Reuters Air Cargo Newsroom Tel+44 171 542 7016 Fax 5017
",15
"Lufthansa Cargo said there is good demand for air freight services between Germany and China because mainland companies are rushing to beat a year end deadline for import tax changes, the airline's managing director for China, Hong Kong and Taiwan, Christian Sedelmaier has told Reuters.
In an interview, he said many joint venture companies are rushing to import machinery because it is tax exempt until the end of December. Leading German companies such as Volkswagen and Siemens are importing large amounts of industrial machinery into China via Lufthansa Cargo, Sedelmaier said.
""Because of the change, there is a rush for additional transportation requirements on our flights to China. Capacity until the end of the year is insufficient to meet demand. Companies have now missed the deadline to send machinery by sea so we are benefitting by that and also trying to arrange charter flights if possible,"" Sedelmaier said.
He also said demand for air freight in general in China will continue to grow with the 'just in time' concept becoming increasingly widespread in China.
Lufthansa Cargo said it currently offers one dedicated freighter service a week between Frankfurt, Beijing and Shanghai. It also offers additional cargo capacity on daily Lufthansa passenger flights and on five flights per week in a cooperation agreement with Air China. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific Airways Limited said its Boeing 747-400 freighters will become the world's first cargo aircraft to utilise Future Air Navigation System (FANS) routes expected to be pioneered by the Hong Kong airline later this year.
""We are leaders in this field and we have the first FANS equipped cargo aircraft. They are ready and waiting for the go ahead on any routes that are available,"" Cathay's international operations manager, Paul Horsting told journalists.
The revolutionary air traffic control system allows aircraft to use Global Positioning System (GPS)satellite navigation instead of radar ground stations for more direct routings and more efficient use of airspace. Airlines expect major benefits such as shorter flight times, reduced fuel costs and greater payloads.
Explaining how Cathay is exploiting the FANS technology potential, he said 18 of the carrier's 21 Boeing 747-400s, including two freighters, have been fitted with Communications Navigation/Air Traffic Management (CNS/ATM) equipment.
Cathay's entire 747-400 fleet is expected to be fully fitted by March and investigations are underway to fit the airline's Airbus A340-300 long range aircraft too. All 747-400 cockpit crew have already undergone training, he said.
Cathay has been one of the ""gang of four"" airlines - along with United Airlines, Air New Zealand and Qantas - which has pioneered the development of FANS technology and been conducting trials in the North Pacific.
Hong Kong's Civil Aviation Department has given engineering approval to the new system and operational approval is ""imminent,"" Cathay said. The Hong Kong government has also invested in FANS ground equipment which allows air traffic control messages to relayed to pilots via datalink instead of by voice.
Los Angeles to Hong Kong is expected to be the first FANS approved route later this year with others to European destinations expected around the same time or early next year.
Horsting said it was difficult to detail how much Cathay has invested in the new technology either in total or cost per aircraft.
""The saving is not just on navigation and more direct routes for aircraft. Passengers also get much better benefits by being able to use satellite phones and faxes. There is a saving otherwise we would not be doing it but it is very hard to quantify,"" Horsting said. - Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax 5017
",15
"Several European airlines have removed a fuel cargo surcharge but plan to replace it with an increase in their published rates, industry sources told Reuters.
The removal has been made by nearly all the airlines who originally imposed it and comes after a warning from the Hong Kong government that surcharges cannot be imposed nor rates lifted without government approval.
To add to what observers say is a confusing situation, one of the territory's biggest carriers - Lufthansa Cargo - said it is not withdrawing the surcharge. The airline's general manager in Hong Kong, Frank Berweger, said he does not think a surcharge is illegal.
""We still believe that it is legal. We are showing on the airway bill that there is an extra charge which will be dropped when the price of fuel comes down again. We are still in discussion with the CAD about what happens next,"" Berweger said.
The 80 Hong Kong cents a kilo surcharge was informally agreed by some carriers earlier this month to compensate for jet fuel prices which they said had leapt by around 50 per cent between July and October.
The Hong Kong Shippers' Council, an umbrella organisation representing trade bodies, freight forwarders and business leaders, protested to the Government that any surcharge is illegal unless it is first approved by the Civil Aviation Department.
A department spokeswoman said they had investigated the issue and sent a warning letter to airlines reminding them that permission to impose a surcharge must be obtained first.
Alitalia, KLM, Martinair and Cargolux said they quickly heeded the warning.
""We have withdrawn the surcharge after the warning. Instead we are putting up our rate to compensate for the much higher cost of fuel,"" said a spokesman for Alitalia cargo in Hong Kong. No details of such an increase have yet been published.
A spokesman for Dutch cargo airline Martinair said it would abide by the proper procedure and also withdraw the surcharge. But he said rates may be increased to compensate.
A Cargolux spokesman said the situation was confusing but it had agreed to also withdraw the surcharge.
Hong Kong Shippers' Council Executive Director Clement Yeung said he was pleased the surcharge had been mainly withdrawn but the situation is ""certainly confusing.""
""Some airlines are sticking to their guns but we believe that they should go by the book. Imposing surcharges sets a precedent which we do not want to see. If airlines now want to raise their published rates instead then we cannot complain about that,"" Yeung said.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"A Hong Kong government aircraft is to be the first to land at the territory's new Chek Lap Kok airport next month, a Civil Aviation Department spokesman told Reuters.
A Beechcraft Super King 200, belonging to the Government Flying Service, and normally used for search and rescue missions, is due to make the maiden landing on February 20, the spokesman said.
Initial reports said two American pilots flying a U.S. government Federal Aviation Administration (FAA) jet used to test the new airport's navigation instruments would be the first to land on the newly completed 3,800 metre long and sixty metres wide southern runway.
But for ""ceremonial"" reasons the spokesman said the honour will be given to Hong Kong government pilots watched by invited guests and the media.
""The first landing will be an important milestone in the airport's history,"" the spokesman said.
After the first flight, the specialised FAA aircraft is expected to start a test and calibration programme of the new airport's Instrument Landing System and navigation aids to prepare for the airport's opening in April next year, the spokesman added. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax +44-171-542-5017
",15
"Singapore Airlines Ltd (SIA) has taken delivery of a new Boeing 747-400 freighter, an airline spokesman has told Reuters.
The new arrival brings SIA's cargo fleet to five 747-400 and one 747-200 freighter which is expected to be replaced by a sixth 747-400 in March next year, the spokesman added.
SIA's latest 747 freighter flew into Singapore's Changi airport on November 27 and is due to make its first revenue earning flight to San Francisco and Los Angeles at a date yet to be announced.
It will then be used on all SIA's cargo routes worldwide, the spokesman added. --Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Growth of 33.55 percent in near level two-way trade enabled Taiwan to become the second most important country in tonnage terms for air cargo traffic handled by Hong Kong airport, Civil Aviation Department statistics issued here show.
Dominated by high exports from Hong Kong, the U.S. kept its place at the top of list but the surge in Taiwan's trade, edged Japan to third place compared with the same month last year.
Total cargo handled in November rose by 15.19 per cent compared with the same month last year. Air cargo imports on both scheduled and non-scheduled flights reached 66,257.73 tonnes with exports totalling 90,473.44 tonnes.
The top 15 countries figures (rounded) in tonnes in alphabetical order are:
			 NOVEMBER 1996 ALL CARGO
			 Unloaded    Loaded	 Pct change
							  from Nov 95
 AUSTRALIA	   3,330.30     2,866.51     -2.75
 CANADA		1,917.65     1,804.84     16.23
 CHINA MAINLAND    2,122.49     3,286.41     11.77
 FRANCE		2,310.18     2,285.52     14.94
 GERMANY	     4,036.83     4,814.84	8.07
 JAPAN		 6,975.49    13,306.77     11.42
 SOUTH KOREA	 3,370.43     4,008.83     10.93
 MALAYSIA	    2,127.11     1,975.74     12.02
 NETHERLANDS	 1,725.78     1,717.63     32.38
 PHILIPPINES	 2,266.74     2,657.19     66.40
 SINGAPORE	   4,186.57     4,509.78	2.23
 TAIWAN	     10,591.85    10,035.60     33.55
 THAILAND	    4,442.54     3,166.42     14.02
 UK		    4,060.89     5,058.33	2.38
 USA		   5,474.80    21,133.53     23.24
 WORLD TOTAL	66,257.73    90,473.44     15.91
-Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax:5017
",15
"British Airways World Cargo raised ex-Hong Kong market rates by HK$1.50 per kilo from January one to compensate for higher fuel prices, BA's area manager for Greater China, Chris Chan said.
BA was the only airline not to get involved in the controversy over a fuel surcharge late last year, he added. Then when freight forwarders' complained over fuel surcharges, most carriers operating European services raised ex-Hong Kong market rates on January 1 by HK$1 a kilo instead.
However, when asked in the second week of January if BA would also be raising rates in line with its competitors, a senior BA official in Hong Kong had said the airline would ""wait and see.""
Chan said BA's HK$1.50 market rate rise was imposed on January 1 and followed a 50 HK cents rise on November 1 because of rising fuel prices.
Customer resistance to any price rise was ""inevitable"" but customers were realising how hard fuel prices have hit airlines, he noted.
Chan said despite the increase, current demand was strong with BA's three times a week wet lease freighter service to London Gatwick operating at full capacity. -- Reuters Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Air Foyle is due to fly flight simulators into China next month as part of its targetted future business growth, sales director with special responsibilities for Asia and China, George Short told Reuters.
The specialist outsize cargo carrier said one of its Antonov AN-124 freighters has been contracted to transport two flight simulators and associated equipment from Tulsa, Oklahoma to a new training centre being built by the aviation training company FlightSafety International at Kunming in Yunnan Province. Air Foyle is the worldwide general sales agent for Russia's Antonov Design Bureau. The Antonov 124 aircraft can carry loads of more than 140 tons, Short said.
""We are due to fly the first Antonov flight into Kunming around December 18 with a 737 and 757/767 simulator. We are also due to do another flight for Volkswagen's new car plant being built under licence near Shanghai. There are so many projects going on within China and the Antonov is the ideal vehicle for moving a lot of the heavy industrial machinery that is needed in the development which is going in the nether regions of China which don't have sophisticated ground handling facilities,"" Short said in an interview from his airline's headquarters at Luton in England.
Demand from China has been increasing dramatically, the airline said. Recent flights have moved satellites, locomotives, power generation equipment, car assembly line equipment and Pitts Special aerobatic aircraft for China's first airshow earlier this month at Zhuhai.
One Antonov flight to Urumqi in western China flew heavy power generation equipment from Italy in 36 hours. If the equipment had arrived by sea, it would have taken 22 days to travel overland from the Chinese coast, Short said.
The executive said he was in Hong Kong last week to develop further business contacts in Asia and especially within China.
""I try to go to China about every three months. We are working within the different regions in China to work with suitable marketing partners. It's an interesting market because 70 percent of cargoes are oversize or heavyweight cargoes. We are not a threat to conventional airlines but the shipping lines.""
""Dealing with Chinese officials now is so much easier. Instead of just saying 'No' like they used to, their attitude is now to say 'how can we do this', "" Short said. He also praised British Embassy commercial staff for making it easier to do business in China. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific and the Hong Kong government's Civil Aviation Department (CAD) are at odds on the reason for delays at Hong Kong's Kai Tak's airport.
Cathay time performance manager Peter Li blames  delays on Cathay's increasingly congested home airport and ""air traffic control"" - a charge rejected by Hong Kong's Civil Aviation Department (CAD) which told Reuters congestion and not air traffic control was the true cause.
Cathay which is one of the main users of Kai Tak defines a delay as more than 15 minutes after scheduled arrival or departure. Departure delays rose in 1996 rose to 61 percent of flights from Hong Kong compared to 48 percent in 1995 with arrivals similarly affected, Li said in the airlines in-house newspaper.
Cathay does not publish more details on the extent or number of delays.
Other airlines which also fly into Hong Kong are also frustrated by Kai Tak's constraints which cannot be overcome until its new airport at Chek Lap Kok is due to open in 15 months time, industry sources said.
""In addition to these factors we have to fight against constraints such as slot availability, tight crew scheduling, high fleet utilisation, new products, new routes and new engines on new fleet,"" Li said.
He said action has been taken at both managerial and operational level to meet the on time performance target including reviewing routes to support re-design of better schedules.
CAD said delays are bound to occur when demand exceeds capacity and when aircraft are bunched together. It added the reason for the apparent increase in delays suggested by Cathay's statistics can be explained by the way delays are defined by the airlines. Because Kai Tak has limited apron space, aircraft occasionally have to be held in their parking bays which counts as a delay unlike at other busy airports, the CAD said.
The CAD has been actively reviewing ways of enhancing capacity to handle ever increasing demand, the CAD statement added. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong's air cargo workers are to pioneer a ""unique"" computerised rota system later this year, Hong Kong Air Cargo Terminals Limited (HACTL) deputy managing director Yueng Kwok Keung said.
The new system should enable HACTL to further improve its air cargo handling efficiency, Yueng told Reuters in an interview.
""It's a pretty unique system which we're helping to develop and is likely to be delivered to us in the middle of this year. We're expected to be the first to use it,"" Yueng said.
When introduced, HACTL's 2,000 employees will be able to have a big say on which shifts they work, who they work alongside and which days off they can have.
Rostering is a particularly difficult problem in the air cargo industry which, despite high automation, relies on intensive labour where workloads change from day to day, he added.
""The new system is democratic where every worker is given a set number of points so he can bid to have a certain day off for his wife's birthday or if he wants to work nights or whatever. It can also help with team formation,"" Yueng explained.
The rostering system is the result of a joint venture between business and academia. Funded by the Hong Kong government, research has been carried out at Hong Kong's Chinese University for the past year with HACTL computer experts closely involved, he added.
Yueng said he thinks the new system can be adapted in other industries with complicated work patterns. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Air Canada's president and chief executive officer, Lamar Durrett, has expressed his frustration at being repeatedly denied permission by the Canadian government to begin daily flights from Vancouver and Toronto to Hong Kong.
Air Canada said it finally began its Hong Kong to Vancouver link last December but was currently limited to four flights per week. It also wanted to compete with Cathay Pacific Airways Limite from Canada's biggest hub in Toronto.
Cathay currently dominates the Hong Kong-Canada non-stop route with 21 flights per week to Vancouver, Toronto and on to New York. National rival Canadian Airlines International has nine non-stop flights a week to its Vancouver hub from Hong Kong.
Speaking to reporters after a speech to the Canadian Chamber of Commerce in Hong Kong, Durrett said the Canadian government had repeatedly refused to reconsider the bilateral agreement and allow daily services to Hong Kong from both Vancouver and Toronto by Air Canada.
He agreed the airline was hamstrung and making no headway in breaking the impasse despite a continuing lobbying campaign.
""I can assure you the minister of transport, the cabinet and the prime minister are aware of Air Canada's desires and ambitions,"" Durrett said.
When asked when a breakthrough might be expected, Durrett said: ""We will continue our lobbying effort but it is very difficult to say. The only indication we have had from Ottawa is that we would probably get the increase when the new airport opens (at Chek Lap Kok due in April 1998),"" he added.
Air Canada currently uses Boeing 747 Combi aircraft on the Hong Kong route but Durrett ruled out increasing passenger capacity by using a Boeing 747-400, saying a daily service was the solution.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"HONG KONG, Dec 2 -(Reuter) Eighty percent of space at Hong Kong's new Airport Freight Forwarding Centre (AFFC) has now been leased, its managing director Paul Tsim told Reuters in an interview.
The 1.29 million square foot centre at Chek Lap Kok is expected to be fully booked by the end of the year, he added. Because of extra demand created by the recent go ahead for a second runway, Tsim said he thinks the AFFC will soon be expanded beyond its initial design.
""It all depends on market forces and demand over the next few months but I think the chances of the centre being expanded are very strong. The new runway will mean more capacity for air cargo and for consolidation and de-consolidation facilities. We will make a decision to expand at the appropriate time,"" he added.
""We are still marketing phase one but I think demand is showing that fears about 1997 may not be too much of an issue for freight forwarders,"" he added.
However the Hong Kong Air Freight Forwarders Association (HAFFA) has told Reuters many smaller firms have already ruled out a move to the AFFC because of the high costs involved and will be investing in new, off-airport sites instead.
Well-known firms which have already signed letters of intent for space at the AFFC include DHL Worldwide, Emery, K-line, Kintetsu, Baltrans Ltd, Burlington Air Express Limited, Tsim said.
Structural work is now underway, he added.
One of AFFC's biggest tenants is expected to be MSAS Cargo International Far East Limited. In an interview, the company's general manager for Hong Kong, Peter Tang, said the group was making a major investment of more than HK$10 million and doubling its current office and warehousing capacity. MSAS has contracted to take more than 44,000 square metres of space in the AFFC, he added.
The AFFC is expected to become the world's biggest freight forwarding centre when it opens along with Hong Kong's new airport due in April 1998.
AFFC is a consortium led by Sun Hung Kai Properties Ltd. Industry sources say AFFC has the largest land bank in Hong Kong and has a HK$1.9 billion agreement with the Airport Authority for a 20 year sub-lease to build and operate the centre.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Martinair has begun its ""historic"" freighter service between Guangzhou and Amsterdam, the Dutch airline's Far East general manager, Walter Tseng said.
Tseng told Reuters in an interview, that he expects the new service will be slowly built up after initial flights on December 20 and 29.
""The first two flights were a combination of local cargo supported by cargo from Hong Kong and topped up in Bangkok so it was shared by three hubs which we are using to slowly build up the Guangzhou service.""
""You have to remember Guangzhou is nothing compared to Hong Kong which is the traditional entry point. Because we have such strong competition from Hong Kong it takes a little time to convince shippers. In China the main problem is the red tape and documentation but they picking it up very fast,"" Tseng added.
The Dutch cargo carrier became the first European airline to be allowed to fly scheduled services into the southern Chinese city after twice being postponed in October and November because of ""licensing and equipment"" delays.
After a New Year holiday suspension, Martinair said it will begin a regular scheduled service proper on January 23 and every Friday after that. Also as a result of lengthy Government negotiations, Guangzhou based China Southern Airlines won permission to begin its first European service to Amsterdam.
Martinair, which earlier described the new Boeing 747-200 link via Bangkok and Abu Dhabi as a ""historic"" new link said it aims to capture a profitable portion of the air cargo market to Europe from the booming Pearl River delta region of southern China. Up to now most European bound air cargo from southern China is trucked over the border and flown from Hong Kong. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Hong Kong Air Cargo Terminals Limited (HACTL) is developing a new computerised memory system to ensure pallets fit into aircraft first time and avoid potentially costly delays, the company's deputy managing director Yueng Kwok Keung told Reuters in an interview.
HACTL hopes the new system, provisionally called a Pallet Contour Identification System, will save time, money and arguments with truck drivers insisting their cargo is packed properly.
Each arriving cargo will have to pass through a gantry fitted with precise measurement sensors which send high speed signals of a three dimensional picture to a computer. A memory bank contains a complete catalogue of all possible container contours and exact dimensions of each individual aircraft which use HACTL.
If the shape fits, the computer identifies the container as ""good to go"" and allows it to continue its journey. If the shape does not conform, the computer rejects it, long before handlers struggle to try to squeeze it into an aircraft, Yueng said.
""It's a very simple idea which can speed up the truck dock procedures and increase the reliability of container reception. It ensures there are no delays and every aircraft takes off with its intended load,"" Yueng said.
HACTL intends to test the prototype during the second quarter of this year at Kai Tak, continuously refine the design and implement the final design at the company's SuperTerminal One complex now under construction at Hong Kong's new airport.
Yeung, who is credited by observers as playing a leading role in developing HACTL's renowned computerised handling technology, said the new development could eventually be marketed to other air cargo operators around the world.
The cost of developing the new system has not been disclosed.
--Air Cargo Newsroom Tel+44-171-542-7706 Fax+44-171-542-5017
",15
"Illegal mobile phone use across the Chinese border is continuing to interrupt air traffic control communications with airline pilots flying in and out of Hong Kong but cross-border action to try and solve the problem appears to be working, industry sources told Reuters.
The Hong Kong Aircrew Officers' Association said Radio Frequency Interference (RFI) is a persistent problem with pilots complaining of a loud buzzing in their ears which forces them to quickly change to another frequency to maintain contact with air traffic control.
Hong Kong's Kai Tak is already regarded as one of the world's most difficult airports to land at, and the sources say RFI is an unwelcome addition to a pilot's workload. RFI is widely blamed on mobile phones and pagers being used on illegal frequencies in neighbouring Guangdong province.
One Hong Kong-based Boeing 747 freighter pilot, who did not want to be identified, said the problem caused safety concerns.
""It happened to me the other day just after take-off. But the interference is not consistent and they seem to have a problem in tracking it down. It means we sometimes get incomplete radio messages which causes a headache when you least need it. It takes time to change to the back-up frequency and at peak times the airwaves are very crowded. I know of quite a few captains who have filed an occurrence report because of the safety issue involved,"" he said.
The aircrew officers' association general secretary, John Findlay, agreed RFI was a concern but said remedial action appeared to be working.
""It has been a problem but pilots I've been speaking to say the situation has very much improved recently,"" he said.
In a statement, the Hong Kong government's Civil Aviation Department said RFI had been under ""urgent investigation"" by the territory's Office of Telecommunications Authority (OFTA) which had been liaising with the relevant authorities in China.
""It is understood that a team has been established in China to tackle the RFI issue. It appears recently that the extent of RFI has been reduced and the situation is being closely monitored. With assistance from the Chinese authorities, it is anticipated that the RFI problem could eventually be eliminated,"" the statement said.
The department also said it had deployed spare back-up frequencies as interim replacements when RFI occurred and until the effect on air traffic operations was overcome.
OFTA said in a statement it expected its counterpart in China, the Guangdong Radio Management Committee Office, to take urgent action to remove the interference, and that some channels had already been cleared.
--Air Cargo Newsroom  Tel+44-171-542-7706 Fax+44-171-542-5017
",15
"The decision by Cathay Pacific Airways Ltd to buy three more Airbus Industrie A340 long range aircraft will increase the airline's air cargo opportunities, according to a senior Cathay cargo executive.
Ray Jewell, cargo marketing and sales manager for Cathay Pacific Cargo, told Reuters in an interview that the new aircraft will be able to fly between 15 and 17 tonnes of belly space cargo plus passengers in normal weather conditions from Hong Kong to Toronto.
Other possible destinations for the new aircraft from Hong Kong to Europe are still being studied, he added. The A340's ability to fly ultra-long distances will mean some existing routes become non stop destinations, Jewell said.
""These new aircraft will certainly help us on the air cargo side of things, there is no question about that. We are very pleased with our existing A340s which are very cargo friendly and fuel-efficient along with our Boeing 777s,"" Jewell said.
Cathay currently have four A340-200 and three A340-300 in its fleet.
The new Airbus A340-300 models are due to be delivered in the second and third quarters of 1998 to coincide with the opening of Hong Kong's new airport at Chek Lap Kok and increased flight schedules.
""Chek Lap Kok will definitely open things up for us and for other airlines which at the moment are restricted for slots at Kai Tak. The new airport is a major factor in planning and strategy. The increased cargo opportunities go hand in hand,"" Jewell added.
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Northwest Airlines Cargo freighters have been averaging 96.7 percent utilisation on ex-Hong Kong flights during a ""difficult but interesting"" past 12 months, the airline's cargo sales and marketing manager in Hong Kong, Alexander Wong said.
He told Reuters in an interview that 38,000 tonnes of cargo had been moved to and from Hong Kong on Northwest's trans-Pacific routes which had seen unusual highs and lows over the past year.
Wong said Northwest had experienced in February and March the slowest months and in October and November the busiest months for several years.
""We are now looking at more or less the same volume as last year. 1996 was not as healthy as 1994 and 1995. The first three months of the year were unexpectedly slow for us and we lost US$6 million and eight million pounds of freight. The business just was not there, regardless of the price we were charging. We have always been trying to catch up since then,"" Wong said.
""Yield has picked up a little bit over the past two months but is still way below the 1995 level, I would say 8-10 per cent below,"" Wong added.
Northwest said it is the largest U.S. trans-Pacific carrier offering daily passenger flights and six freighters a week from Hong Kong to the U.S. via Tokyo Narita.
Air Cargo Newsroom Tel+44-171-542-7706 Fax +44-171-542-5017
",15
"The United States on Friday said it would grant 10-year multiple-entry visas to holders of Hong Kong passports issued after China takes back the territory, clearing a major worry here about travel rights.
U.S. Consul-General Richard Boucher said holders of future Hong Kong passports would get the same visa treatment now enjoyed by holders of Hong Kong British travel documents.
""We intend to issue maximum validity visas for the United States for people with the new Hong Kong Special Administrative Region (SAR) passport,"" Boucher told reporters.
The decision was a milestone in international recognition of the future SAR passport and removed a question mark hanging over Hong Kong as China prepares to resume sovereignty at midnight on June 30, ending 156 years of British colonial rule.
From July 1, the territory of 6.4 million people will become a Special Administrative Region of China, and winning easy travel access to major destinations is viewed as a barometer of confidence in the territory's future prospects.
Easy travel rights are also seen as key to maintaining Hong Kong's position as an international business and tourism centre.
So far, nine countries -- Britain, Singapore, Canada, the Philippines, Western Samoa, Trinidad and Tobago, Namibia, Benin, and San Marino -- have gone further to grant full visa-free entry for SAR passports, but other nations have hesitated.
Japan, for example, has said it will treat SAR passports more favourably than Chinese passports, but it has not yet revealed details.
Boucher said the same visa application procedures and conditions for approval as now would apply after the handover for Hong Kong people wishing to visit the United States.
""The same application procedures, the same forms, the same facilities will apply...the requirements are exactly the same. The decisions on yes or no are exactly the same,"" he said.
Hong Kong Director of Immigration Regina Ip welcomed Washington's decision and saw it as a confidence booster.
""Absolutely, this will be a very useful confidence booster. So far, nine countries will give visa-free treatment to Hong Kong SAR passports...a few more are considering and we will probably have a lot more before July 1,"" she said.
In return, U.S. citizens would be accorded the same visa-free entry privilege which they now enjoy, she said.
""Current arrangements are that they may do so without a visa for visits up to one month. The Hong Kong government has no plans to change the current practice,"" Ip said.
While the status of Hong Kong people travelling to the United States after July 1 has become clearer, questions still hang over locals with U.S. passports but who want to hold on to their Hong Kong permanent residency.
China, which does not recognise dual nationality, has said ethnic Chinese Hong Kong residents will be regarded as Chinese nationals with no right to foreign consular protection unless they declare their foreign citizenship.
Boucher indicated that Hong Kong residents with U.S. passports should make use of them when crossing borders to make clear their citizenship.
""An American citizen is an American citizen and we will endeavour to assist (them) whenever they need assistance.
""By taking advantage of their passports, it's easier for both sides to understand who is regarded an American and how we can protect them,"" Boucher said.
Separately, U.S. Ambassader to Beijing James Sasser told a business lunch in Hong Kong that Washington would keep a keen eye on the territory after the handover.
""Americans have invested $15 billion here. To sustain this U.S. presence requires a society governed by the rule of law and protection of basic freedom,"" he said.
",45
"Hong Kong's property sector on Thursday assailed the government over new measures to try to curb sky-high housing prices.
Property developers and analysts said the measures announced on Wednesday were not only inappropriate in a free-wheeling society but also may not work.
""It is an unwarranted intervention in normal commercial decision-making process,"" the Real Estate Developers' Association of Hong Kong said in a statement.
""It attacks the very foundation of Hong Kong's free market economy principle.""
The government's regulations require developers to put unfinished flats on to the market earlier than before.
Private flats must now be put up for sale 15 months before they are ready instead of 12 months previously.
For government-subsidised flats, the period has been extended to 24 months from between 12 and 18 months at present.
In addition, developers will have to put flats on to the market within six months of the government granting approval for them to sell, and to release no less than 20 percent of every batch of housing units that is built.
The moves quickly drew fire.
Some analysts said the government was tackling only the symptoms of the problem and not tackling its roots.
""You can go on for eternity producing short-term remedies. All they are doing is dealing with the symptoms at the moment, and not dealing with the actual cause (that) can only be eradicated by planning,"" said Paul Dwyer, head of Vigers Corporate Valuation Consultancy.
Another analyst with an Asian firm said the measures could backfire.
""This mere pushing forward of units in an environment where supply is already very tight...if anything, will provide room for more speculation as more units are in the market now,"" he said.
""Prices could rise faster as demand is very strong, so the government is actually shooting itself in the foot,"" he said.
While the government's pledge to release some 587 hectares (1,450 acres) of land for residential use earned some bouquets, the property community urged it to do more.
""We've got industrial land but nobody wants to build on industrial space in Hong Kong,"" said Dwyer.
""It's a matter of rezoning this land, putting money in to create the infrastructure and enhancing the environmental atmosphere, then you'll be able to use this land for residential purposes.""
A major property developer, who declined to be identified, criticised as unfair the requirement to push on to the market at least 20 percent of unfinished flats in every batch of units.
""It's like a regulation requiring a restaurant to cook 20 percent of its eggs, 20 percent of its lamb, regardless of whether they have customers outside,"" he told Reuters.
Hong Kong's seemingly endless property boom, which has not been threatened by the British territory's imminent handover to Chinese rule, was highlighted this week when developer Sino Land Co Ltd paid a record HK$11.82 billion (US$1.53 billion) for a residential site on Hong Kong island.
--Hong Kong newsroom (852) 28436441
",45
"A stunning dazzle of laser beams and dozens of powerful search lights dancing to music will illuminate Hong Kong's famous harbourfront skyline on the night of July 1, when the territory is once more a part of China.
It will be a night at the harbour Hong Kong will never forget, organisers said, and the hour-long extravaganza, which includes a parade of giant lanterns, will end in final big bang with the largest ever display of fireworks.
Neon lights, which have come to typify Hong Kong's skyline by night, will be shut off just before the show and turned on during a ""dramatic moment"" in the laser beam display, they said. Dubbed the ""Hong Kong 97 Spectacular"", organisers said they just want the territory of 6.4 million, which Britain will hand back to China at midnight on June 30, to have fun.
""After the politics is over, it's time for everyone to have fun,"" said Adam Bezark, show director and writer, who started planning the show last November.
Organised by the privately funded Better Hong Kong Foundation, the HK$100 million (US$13 million) extravaganza is sponsored by corporate giants in the territory.
""It's a gift from Hong Kong to Hong Kong,"" Bezark said.
In just 10 days Hong Kong, a British-ruled colony for over 150 years, will return to the Chinese fold.
Over 4,000 VIPs including heads of state are due to descend on Hong Kong and, in a land famed for its punctiliousness, last-minute preparations for the historic changeover are proceeding at clockwork efficiency.
Fairy lights now adorn bridges and buildings fronting the harbour. At the Hong Kong Exhibition and Convention Centre, where the midnight handover ceremony will be held, workers are putting the finishing touches to a new wing built for the event.
The entire territory has undergone a drastic transformation in the run-up to the handover. Miniature flags of China and the future Hong Kong, depicting the tropical hybrid bauhinia flower, are strung up in residential estates.
On a more serious note, police carried out their first extensive search for suspicious objects around areas of the handover ceremony venue on Friday and would keep up vigilance until all the main festivities are over around July 2.
""Around 2,000 police officers will guard the cordoned-off areas, especially during the peak dates between June 28 and July 2"", a police spokeswoman told Reuters.
The event has prompted a proliferation of 1997 souvenirs and China entrepreneurs, too, are cashing in on the fever.
Wine maker Dynasty has just shipped in hundreds of crates of a new edition, which it boasts is ""The Official 1997 Wine"" and retails now at HK$119 (US$15.4).
""By Special Appointment of the Association for Celebration of Reunification of Hong Kong with China"", its label says.
",45
"Britain and China signalled on Monday that they are set to discuss Beijing's late request to deploy more troops in Hong Kong before the territory reverts to Chinese rule at midnight this June 30.
Top British and Chinese officials on the Joint Liaison Group (JLG), a body handling details of Hong Kong's transfer, also said they were confident the matter would soon be resolved.
Beijing's request to have more of its People's Liberation Army (PLA) troops positioned in Hong Kong before the handover emerged last week and was quickly surrounded in controversy.
British officials were adamant there was no question of London agreeing to China's request as the British garrison alone remains responsible till the handover, barely two weeks away.
But on Monday, a top British representative on the JLG said both sides would soon discuss the issue.
""The subject has been on our agenda to discuss and we're continuing to discuss it,"" Hugh Davies told reporters.
Zhao Jihua, Davies' Chinese counterpart on the JLG, told reporters that Beijing thought it was necessary to have more troops deployed in Hong Kong before the handover.
""There is a practical need. It is a matter that needs to be resolved and we hope to solve it,"" Zhao said.
China has said it needs a few hours before the midnight handover ceremony to deploy its main force.
Beijing has already sent an advance party of 200 soldiers to prepare garrison, supply and communication facilities. Britain insisted they be unarmed and wear uniforms only in barracks.
Many Hong Kong people are jittery about the arrival of the PLA as they remember the comunist army's bloody crackdown on pro-democracy protesters in Beijing's Tiananmen Square in 1989.
But both Zhao and Davies gave no sign whether Britain would concede to China's latest request.
""We've made our position clear already,"" Davies said, but he added: ""I think the arrival of the PLA will take place as around July 1. We're not going to discuss what we're going to be talking about privately on the subject.""
Beijing's request to send more troops and London's clear refusal last week threatened to deepen a rift over Hong Kong's sovereignty changeover.
London, together with Washington, angered Beijing last week by saying they will boycott the swearing-in of a China-backed legislature during the midnight handover party to replace Hong Kong's current democratically-elected chamber.
Beijing has vowed to disband the existing chamber, removing at a stroke democratic reforms introduced unilaterally by Britain inthe twilight years of its rule in Hong Kong.
",45
"Hong Kong's democracy movement leader Martin Lee made a triumphant return to the territory on Monday after upstaging future leader Tung Chee-hwa by winning support from Washington for political freedoms.
The head of the Hong Kong Democratic Party became a media star in the United States where he clinched a White House meeting with President Bill Clinton, who promised U.S. support after the British colony reverts to Chinese rule on July 1.
Jubilant and relaxed after a hectic month-long, 12-city tour to the United States, Canada and Switzerland, Lee said he was convinced Hong Kong had friends throughout the world who were anxious to preserve its freedoms after China takes over.
Lee said governments in the West had a moral responsibility to see that China abides by its treaty pledge of allowing Hong Kong's freewheeling lifestyle to endure for another 50 years.
Hong Kong, a British colony for more than 150 years, reverts to Chinese rule at midnight June 30 under a 1984 treaty.
The Sino-British Joint Declaration on Hong Kong's handover promises the territory quasi autonomy in all areas except defence and foreign affairs.
But many in the bustling territory of 6.4 million fear a loss of fundamental freedoms after the handover, now just 71 days away.
The territory is plagued by a host of handover woes ranging from China's plan to replace the elected legislature with one carefully crafted by Beijing, to curbs on protests and a ban on foreign funding for political groups.
Lee, whose return coincided with the arrival of an advance party of China's army to prepare for the coming of the rest of the garrison on July 1, told Hong Kong people to take heart.
""We're not fighting alone for human rights and democracy in Hong Kong. We have many friends in Australia, New Zealand, Canada, the United States and Europe,"" he said.
""People are very concerned about Hong Kong and preservation of its freedoms as guaranteed by the Joint Declaration.
""We reminded the U.S. government and all other governments that supported the Joint Declaration...they owe Hong Kong at least a moral responsibility to make sure the rule of law, civil liberties are preserved after the sovereignty changeover.""
Last week at the White House, Lee won an assurance that Hong Kong was important to the United States and a warning from Clinton to China to abide by its Joint Declaration commitments.
Lee's return, after scoring his political victory in Washington, provided a counterpoint to the falling popularity of future leader Tung, who will govern Hong Kong from July 1.
Sharply criticised for his plans to ban foreign funding of political groups and curb protests, Tung found himself the subject of a scandal after he admitted having donated 50,000 sterling (US$81,500) to Britain's Conservative Party in 1992.
Lee vowed he and his party members would not give up their fight to preserve Hong Kong's freedoms, but he admitted he was deeply worried that Tung would press ahead with his plans.
""If Mr Tung stops us, and (the plans) become law, we will have to decide what to do,"" he said.
Lee's party raised HK$2.5 million (US$323,000) from Chinese communities during its month-long tour. (US$1 = HK$7.73)
",45
"Hong Kong's future leader Tung Chee-hwa faces mounting woes as the territory's handover to China nears, with a political funding scandal brewing and a democratic critic scoring a success at the White House.
Tung, who will lead Hong Kong when the British territory reverts to China at midnight June 30, caused shockwaves on Friday when he said he had made a 50,000 sterling (US$81,500) donation to Britain's Conservative Party in 1992.
The disclosure, made just days after he launched plans to ban foreign funding to local political groups and curb demonstrations after the handover, had critics accusing him of hypocrisy and double standards.
Tung, who has suffered declines in recent popularity polls, was further embarrassed last week when his political opponent and leader of Hong Kong's democracy movement, Martin Lee, met U.S. President Bill Clinton at the White House.
From the meeting on Friday, Lee won an assurance that Hong Kong was important to the United States and a warning from Clinton to China to abide by Sino-British treaties under which Hong Kong is promised a high level of self rule for 50 years.
""A winner in Washington,"" hailed the headline of an editorial in the English-language Sunday Morning Post.
Tung, who cancelled a pre-handover visit to the United States midweek, saying he was too busy, has come across the poorer, the newspaper said.
""The spectacular success of the Martin Lee visit sits in stark contrast to what has become the non-visit of Tung Chee-hwa,"" the editorial said.
The territory of 6.4 million is faced with a barrage of issues that include proposals to curb political freedoms and questions on who is entitled to residency rights.
Tung's plans to curb demonstrations and ban foreign funding were expected after China's parliament resolved in February that laws protecting civil liberties and rights should be changed.
Tung has argued that foreign funding must be banned because he did not want foreigners meddling in domestic politics.
Referring to Tung's donation in 1992, Nihal Jayawickrama, a law professor of the University of Hong Kong, said, ""Obviously at that time, he didn't think there was anything objectionable in making contributions to party funds whether to influence elections results, or whatever in another country.""
Jayawickrama said the restrictions Tung has proposed are really China-inspired proposals.
""It seems to me that China is expressing a desire to see that any independent political group would be subject to very strict scrutiny,"" he told Reuters.
British Governor Chris Patten also noted China's role in the proposals, saying on local radio Beijing simply did not trust Hong Kong to run itself sensibly and responsibly.
""The decision seems to be based on their wish to have a tighter control over life here. They don't -- they should but they don't -- yet trust Hong Kong.""
",45
"Crucial talks between Hong Kong and Taiwan on how to continue direct shipping links after the British-ruled territory reverts to China foundered on Friday when the two sides hit an impasse over which flags to fly.
The one-day talks, aimed at resolving sensitive details of shipping protocol, hit a major snag when the two sides failed to agree on which flags ships should fly when plying routes between Hong Kong and Taiwan, the Taiwanese representative said.
""The obstacle is the flag. This is a contentious issue,"" deputy secretary-general Chang Liang-jen of the semi-official Straits Exchange Foundation said at a news conference.
""It's a very complicated matter and a difficult one to settle just in one meeting,"" Chang said at the end of the talks.
Ships registered in Hong Kong and Taiwan currently follow the international practice of flying each other's flag when entering the other's territorial waters.
But this practice must be abandoned after Britain hands back Hong Kong to China on July 1, as the territory's post-handover constitution has a clause saying it must observe the ""one-China"" principle.
Communist-ruled China has viewed Taiwan as a rebel province since the Nationalist government fled to the island after losing a Chinese civil war in 1949. Beijing fiercely opposes any symbol or gesture of Taiwan independence.
As a result, Hong Kong ships will not be allowed to fly the Taiwan flag.
Taipei wants Taiwan and Hong Kong ships to lower all flags and identify themselves by telex before entering each other's waters, but Hong Kong is against the idea.
""Every ship in the world has to fly a flag according to international maritime laws. Only a pirate's ship is without a flag,"" said George Chao, head of the Hong Kong Shipowners' Association.
Chao, who held a separate news conference after Chang left, admitted he was constrained by guidelines given by China.
""Beijing has given me the 'one-China' principle within which to operate,"" he said, adding that although the meeting had not nailed down an agreement, it had ruled out some options.
""Both sides have agreed the Chinese flag and the Taiwanese flag will not be flown,"" he said.
But he refused to say whether Hong Kong's future flag, depicting the tropical bauhinia flower, or Taiwan's unofficial plum blossom flag used in international sport gatherings and other events were options under consideration.
""Until we agree, I will not disclose our plan,"" he said.
China, which has kept conspicuously silent on the issue, is keenly interested and monitoring it closely.
A China-backed Hong Kong newspaper said on Friday that the continuation of shipping links between Hong Kong and Taiwan after July 1 must abide by the ""one-China"" principle.
""Carrying the Taiwan national flag is in conflict with the one-China policy,"" Wen Wei Pao said.
But the newspaper offered a solution.
""The problem was solved for air traffic when China Airlines replaced the Taiwan flag on its logo with the plum blossom. It should not be too hard for sea traffic to do something similar,"" it said.
Chao said he was confident a decision would be reached before July 1. The two sides will hold their second meeting in Taipei, probably in two weeks' time, he added.
",45
"Hong Kong activists on Tuesday denounced Japanese nationalists who staged a landing on Japanese administered islands that are also claimed by China and Taiwan.
More than a dozen activists staged a noisy protest outside Japan's consulate in Hong Kong's stockbroker district to condemn the landing on the islands as a revival of Japanese militarism.
They also demanded that Tokyo apologise for its war crimes in World War Two, when Japan occupied large parts of China as well as Hong Kong.
The latest flare-up over the disputed isles, called the Senkakus in Japan and Diaoyus in China, was triggered by a Japanese nationalist legislator.
Shingo Nishimura, a member of Japan's main opposition New Frontier Party, together with Okinawa politician Hitoshi Nakama and two other people held a brief ceremony on one of the islands on Tuesday.
Cheung Man-kwong, a member of the Action Committee for Protection of the Diaoyu Islands in Hong Kong, said he was incensed by the landing and threatened to take further action.
""Of course we are very angry. Very clearly, they are trying to invade the Diaoyus which belong to China,"" Cheung said.
""I will discuss with my group and we will take some action,"" Cheung, an elected pro-democracy legislator, told Reuters.
Albert Ho, chairman of the Action Committee, described the landing attempt as an act of aggression and provocation against China. He said it made the group more determined to carry out plans to sail to the isles from Taiwan on May 18.
Hong Kong activists said last week they would launch the landing attempt with Taiwanese activists, but the Japanese Foreign Ministry said on Tuesday the government would repel any future attempts to land on the islands.
The decades-old dispute exploded into fiery anti-Japanese protests in Hong Kong, Taiwan and Chinese communities elsewhere last year after ultra-rightists in Japan built a makeshift lighthouse on one of the islands in July.
Tuesday's incident threatens to rekindle the Diaoyu protest movement, less than two months before the British colony of Hong Kong is returned to China, at midnight on June 30.
Last September tens of thousands of people turned out to mourn a Hong Kong activist who drowned after jumping into stormy waters near the islands to press China's claim.
",45
"Hong Kong's future leader Tung Chee-hwa assured the Democratic Party on Tuesday that it will not be cast out into the cold when China resumes control over the territory at midnight June 30.
But Tung rejected the Democrats' request to leave Hong Kong's election system alone, party chairman Martin Lee said.
Speaking to reporters after a one-hour meeting with Tung, Lee said his party wanted spokesmen on various issues to have ""direct contact"" with the future government.
""Mr Tung is supportive of the idea and we are very happy,"" he said.
The Democrats accuse Tung of seeking to alter Hong Kong's first-past-the-post voting methods specifically to dilute their presence in Hong Kong's legislature.
Tung and his advisers are considering replacing the British-style system with a form of proportional representation or multi-seat single vote system and have sought the views of the public.
""This seems to be a case of starting with the desired result,"" Lee said.
""Reducing the number of democrats and working backwards to an electoral system which will produce this result.""
Hong Kong has been a British colony for more than 150 years. A China-selected lawmaking chamber is poised to replace the current elected body which Beijing will disband at the handover.
The Democratic Party, the largest party with 19 seats in the current legislature, boycotted the incoming provisional chamber, and its members will be cast into the political wilderness for about a year.
They plan to contest the first post-handover elections scheduled in mid-1998 under new electoral laws to be passed by the interim-appointed chamber.
Tung denies scrapping the first-past-the-post system is designed to dilute the influence of the democrats.
Lee said Tung had rejected the Democratic Party's proposal for a taskforce to amend Hong Kong's future constitition, the China-promulgated Basic Law, to speed the path to full democracy in Hong Kong.
""We raised with Mr Tung the setting up of a taskforce to review the Basic Law provisions on democracy. We told Mr Tung that the pace for democratisation as contained in the Basic Law is much, much too slow,"" Lee said.
""Even by the year 2003, still half of the legislature will not be democratically elected by the people of Hong Kong.
""But Mr Tung gave us a flat no... We are extremely unhappy about that,"" Lee said.
The Basic Law provides for creeping democratisation leading to a fully elected legislature after 10 years.
At present, only 20 of the 60 seats are directly elected. Ten are returned by an electoral college made up of local civic authority chiefs and the rest are allocated to business and professional bodies in what are known as ""functional constituencies"".
",45
"Hong Kong's future leader Tung Chee-hwa on Wednesday launched plans to turn back the clock and curb demonstrations and foreign funding for political parties after the territory is handed back to China this year.
The planned changes, though controversial, were expected after China's parliament, or National People's Congress, resolved in late February that a string of existing Hong Kong laws protecting civil liberties and rights should be changed.
China's decision, based on the argument that existing laws breach Hong Kong's post-handover constitution, takes effect on July 1, when the British colony of 156 years reverts to China.
It will also remove at a stroke democratic freedoms introduced during the office of British Governor Chris Patten, whom China considers an arch-foe.
Top civil servant Michael Suen, who has been seconded to Tung's office to help craft the post-handover government, said the changes, outlined in a consultation paper released to the media, were needed because of China's decision.
The NPC took the action because China views the political liberalisation of Hong Kong in the twilight years of British rule as a breach of its handover agreements with Britain.
""The reason for this whole exercise is because of the legal vacuum caused by the NPC...so we are inviting public comments on the proposals,"" Suen, secretary for policy coordination, told a news conference.
Under the plans, societies and political parties would have to be registered and might be refused registration if they are known to have ties to or receive donations from foreign political organisations or individuals.
People wishing to hold demonstrations would have to get permission from police seven days in advance.
Demonstrations should only be staged after the police issue a notice of ""no objection"". Under the current system, the police need only be notified beforehand.
Suen said the proposals complied with Hong Kong's Basic Law, the post-handover constitution, and were above world standards.
""In working out the proposals, we adhere to the principle that they must be in full compliance with the Basic Law and consistent with the provisions of the International Covenant on Civil and Political Rights,"" Suen said.
Echoing the well-worn words of his boss, Tung Chee-hwa, Suen also said the changes were necessary to strike a balance between civil liberties and social order.
""We must strike a balance between civil liberties and social stability, personal rights and social obligations, individual interests and the common good,"" Suen said.
""Within the generality of this commitment, we seek to establish broad consensus among the people of Hong Kong as to where the balance should lie.""
The public was invited to give comments on the plans in a pulse-taking exercise over the next three weeks, Suen said.
Legislation drafted on the basis of the proposals will be enacted by a controversial China-anointed provisional legislature which replaces the elected Legislative Council on July 1.
The departing colonial power Britain, some of its allies and Hong Kong democracy groups have attacked all the moves as a reversal of democratic freedoms in this territory of 6.4 million people.
Under the Sino-British agreements on the handover, Hong Kong has been guaranteed a high degree of autonomy for 50 years.
",45
"China-controlled China Everbright Holdings Co Ltd emerged from out of the blue on Friday as the new China link for HongKong Telecommunications Ltd, analysts said.
Months of suspense were ended earlier when Hong Kong-based conglomerate CITIC Pacific Ltd said it would sell its 7.74 percent stake in Hongkong Telecom to China Everbright, a holding company controlled by China's State Council.
""It's not surprising that they will want a minority stake in a large strategic asset like Hongkong Telecom,"" said Andrew Fernow, director of research at Vickers Ballas.
But analysts were at a loss to say what China Everbright could bring to Hongkong Telecom.
""The biggest question is what edge could China Everbright possibly offer to Hongkong Telecom?"" a China analyst at a European firm said. ""It's like a snake swallowing an elephant.""
China Everbright Holdings has three listed subsidiaries in Hong Kong -- China Everbright International Ltd, China Everbright Technology Ltd and China Everbright-IHD Pacific Ltd.
It is one of 16 equal shareholders in China United Telecommunications Corp (China Unicom), China's second largest telecommunications provider after the powerful Ministry of Post and Telecommunications (MPT).
Unicom, set up in July 1994 at a total cost of 1.28 billion yuan (or 80 million yuan from each of its 16 partners), provides basic and long-distance telecommunications services, as well as mobile and paging facilities in China.
In recent weeks, both Unicom and MPT have been widely tipped as possible China partners of Hongkong Telecom, which as a foreign company is prevented from direct participating in China's telecom market.
But Unicom is known to be troubled by a host of problems, ranging from a lack of cash to its well-known friction with MPT. ""Unicom has no money to buy into Hongkong Telecom now,"" an analyst with another European firm said. ""As China Everbright is one of the shareholders in Unicom, it could be buying it first, and Unicom could come into the picture later.""
But while China Everbright had little in terms of assets to bring, it did have the connections in China, one analyst noted.
Zhu Xiaohua, known to be a close associate of China's economic tsar Zhu Rongji, is the chairman of China Everbright.
He had been deputy governor of the People's Bank of China and the deputy director of the economics department at the Hong Kong branch of Xinhua news agency prior to joining the China Everbright group in July 1996.
In China, however, there was at least one party keenly watching the developments that snowballed in Hong Kong.
A Unicom source said the company was watching developments but refused to disclose further details.
""Ask Everbright, or CITIC,"" the Unicom source said.
-- Hong Kong newsroom (852) 2843 6441
",45
"Hong Kong's colonial government cautioned Beijing on Monday not to cause constitutional problems by enacting laws for the territory before Britain hands it back to China at midnight on June 30.
Security Secretary Peter Lai said Beijing might spark a flurry of lawsuits that would work against its declared aim of a smooth transition for Hong Kong.
Lai's warning came after Hong Kong's future lawmakers from a China-appointed provisional legislature said they would develop laws for the territory before July 1, which marks the end of more than 150 years of British colonial rule.
Residency rights, or the so-called ""right of abode"", in Hong Kong after the handover are among the issues China wants the body to decide before the handover, but the Hong Kong government is opposed, Lai said.
""We clearly cannot accept this because there can only be one legislature for Hong Kong before July 1, and that is the legally constituted Legislative Council of Hong Kong which exists today,"" Lai told reporters.
But the Hong Kong government warning appeared unlikely to worry China. Lu Ping, Beijing's top official on Hong Kong matters, said the right of abode issue was an internal affair because it concerned China's nationality laws.
""The provisional legislature does not need the approval of the British government,"" Lu told reporters.
The 60-member provisional legislature that Beijing intends to install in place of the elected council faces fierce opposition from the pro-democracy camp. Democrats have vowed to sue the body if it tries to make laws before July 1.
While Britain and China have agreed on major provisions on the right of abode, they are deadlocked on actual legislation.
""Immigration/nationality matters are a notoriously litigious area...if decisions have to be taken on the basis of legislation processed by the provisional legislature before July 1, they would attract a huge amount of litigation which could paralyse the immigration system in Hong Kong after June 30,"" Lai said.
""That would be highly unconducive to a smooth transition.""
The issue on right of abode in Hong Kong after July 1 is close to the hearts of 750,000 Hong Kong people who have obtained foreign citizenship in recent years but who also value their permanent residency rights in Hong Kong.
Uncertainty has prompted a scramble for air tickets among migrants anxious to land in Hong Kong before midnight June 30.
Emigrants can establish permanent right of abode in Hong Kong if they return within 18 months of the handover, the Hong Kong and Macau Affairs Office in Beijing said.
Hong Kong Chinese will retain Hong Kong permanent residency status unless they stay away for more than 36 months before resettling in the territory, a spokesman for the office said.
Rita Fan, president of the interim legislature, vowed to press on and make the draft right of abode bill into law.
",45
"An advisor to Governor Chris Patten's inner cabinet said on Monday that property in Hong Kong has become like gold that is not merely worn but kept and accumulated -- giving rise to abnormal demand.
Chen Kwan-yiu, a member on the executive council, also hinted that a quick fix to the British colony's property woes was unlikely.
""The current supply of flats is actually adequate for demand, but property has become like gold in the 60s, when it was not only used but was kept as an investment,"" Chen said.
""So it has led to an abnormal demand,"" Chen told reporters. The economist said the solution to the problem was to provide more land for residential use.
Hong Kong's property sector has been in the news in recent months with the government and private property developers coming under intense public fire for soaring housing prices.
Many young working adults in Hong Kong continue to live with their parents due to notoriously high rents, and the option of owning a home is increasingly seen beyond the reach of many of the territory's 6.4 million population.
""If ever we see a revolution in Hong Kong, it'll be over housing. Young people don't have a hope in hell to own their own homes anymore,"" retiree Alex Lo, 55, told Reuters.
""It's now the giant property developers who control Hong Kong,"" said Lo, who lives in a tiny government flat in Tai Po with his wife and three children in their twenties.
Hong Kong has much on its mind as the handover to Chinese rule at midnight on June 30 nears, and in the last few weeks has had to cope with extra stress caused by the housing woes.
On March 12, a box thought to contain a bomb planted outside the legislative council building in the territory's Central district froze traffic for several hours.
The box turned out to be empty, but its message was no less troubling. Writing on the box complained that the government and the territory's future leader, Tung Chee-hwa, did not care about soaring property prices.
And on Thursday, a fist-fight broke out at a flat sale. One property agent was knocked out and two guards were arrested.
The government last week acted to curb speculation by requiring developers to put more unfinished flats on the market The move was followed by a 25 basis point rise in the prime lending rate to 8.75 percent, which bankers said could marginally affect the property market.
But they seemed to have little effect.
Ever-strong demand led developer Cheung Kong (Holdings) Ltd to release more units on Sunday in the sale of part of its Kingswood Villas development in the New Territories.
A total of 600 units, priced mostly at HK$4,793 (US$620) per square foot, was sold in addition to the 264 flats originally put up for sale.
(US$1 = HK$7.73)
",45
"One of the most enduring bastions of the British empire in the Far East will fade into memory on Friday when Britain closes its last Hong Kong naval base, HMS Tamar.
The closure of the naval base, on Stonecutters Island, comes ahead of the July 1 handover, when Britain returns Hong Kong, its colony of more than 150 years, to China.
From July 1, the island will house the Chinese garrison.
In a precursor to Friday's event, the Royal Navy on Thursday launched a new book marking its history in the colonial outpost of Hong Kong since 1840.
Major-General Bryan Dutton, commander of the British Forces in Hong Kong, told Reuters the closure of Tamar would be a sad ending to a long historical era.
""Well, I'm very sad to see HMS Tamar close but it's a fact of life, it's going to be a fact of history,"" said Dutton.
""We are proud of the part the navy and the forces at large have played in Hong Kong over the last 157 years,"" he said.
""The important thing is that we do it well, we do it with some style. We will go out with our heads held high,"" he said.
HMS Tamar is home to three patrol craft - HMS Plover, Peacock and Starling - the last remaining ships of the Hong Kong Squadron as the garrison winds down ahead of the handover.
Accompanied by music from the Band of the Royal Marines, over 200 marines from the Royal Navy will parade in front of the quarter deck as the White Ensign is lowered for the last time.
As the British army prepares to leave, Sino-British representatives handling details of Hong Kong's handover are finalising details of an advance party of Chinese troops to be stationed in the territory before the handover.
Dutton said an agreement on the advance party was near.
""I'm hopeful there will be a sensible outcome in the near future, I think they're probably getting near an agreement.""
It will not only be the British who will be affected by the closure of the Tamar base.
Lo Ying, 74, who has worked with the Royal Navy in Hong Kong as a cleaner for more than 50 years, will also be retiring.
""We will be retiring, the gweilos are going back,"" she said. ""Gweilo"" is a Chinese nickname for foreigners, translated as ""foreign devils"".
",45
"In a move certain to anger Beijing, publisher Penguin group and Chinese activists on Friday launched a compilation of letters and essays written in prison by prominent Chinese dissident Wei Jingsheng.
China's Foreign Ministry has already denounced publication of the book ""The Courage To Stand Alone"", which contains excerpts of hundreds of letters Wei wrote to his siblings, prison authorities and top members of China's Communist Party.
The eloquent and fearless letters were written during his 14-year (1979 to 1993) imprisonment, most of the time while in solitary confinement in a tiny cell.
Wei, 47, is China's best known dissident and regarded as the father of China's democracy movement.
He was jailed in 1979 for counter-revolutionary incitement after advocating democratic change when he referred to democracy as China's much needed ""fifth modernisation"".
Wei managed to obtain his letters, many of which were never mailed but kept in his prison dossier, just before he was released from jail in September 1993.
After six months of freedom, Wei was detained again in 1994 and later sentenced to a further 14 years for treason.
At a news conference on Friday, Chinese pro-democracy activists called for the immediate release of Wei, who has been denied medical attention for his deteriorating health.
""I am asking all of you, the people of Hong Kong and all freedom loving people of the world, to join me in demanding Wei Jingsheng's immediate and unconditional release,"" said Xiao Qiang, executive director of lobby group Human Rights in China.
""Democracy and human rights are not luxuries for Chinese people, they are necessities,"" Xiao said.
Wei, now in a jail in Hebei province, has arthritis, high blood pressure and stomach problems, and his spirit is now flagging, according to members of his family who are allowed to visit him once a month, said Robin Munro of Human Rights Watch/Asia.
""From accounts of his family, he has become very despondent. We have to be worried about his survival this time,"" said Munro.
Also present at the news conference was dissident Liu Qing, and close friend of Wei, who was jailed for 10 years for publishing the transcript of Wei's 1979 trial.
Liu told reporters he was worried about the future of political and human rights in Hong Kong after midnight June 30, when the territory of 6.4 million people reverts to Chinese rule after 156 years as a British colony.
Under Sino-British treaties on Hong Kong's handover, the territory is promised a high degree of self rule under a ""one country, two systems"" formula that was espoused by the late Deng.
""For the long term, I cannot believe in China's dictatorship. In the last few decades, this government has never kept to its words. It has always gone back on its words, its policy on Tibet and many other policies,"" Liu said.
""I cannot say that Hong Kong will be an exception to this record,"" said Liu, the chairman of Human Rights in China.
",45
"Its wheels whirring non-stop, Hong Kong is moving into top gear to prepare for one of the high points in its history -- its return to Chinese rule at midnight on June 30 after a century and a half as a British colony.
In a land where people are often too busy rushing about their own business and civil servants too occupied to pay heed to the walk-in visitor, the historic changeover is giving the city a sparkling facelift.
Roads and tiny lanes leading to the Hong Kong Convention and Exhibition Centre, where the midnight handover ceremony will take place, have been cleared of street-sleepers. In theiur place are pretty potted plants and ornamental iron fences.
Elaborate ""1997 handover"" lighting displays depicting dragons, dolphins and orchids illuminate glassy tower blocks.
In just 12 days, Britain will hand Hong Kong back to China.
As the big night nears, over 4,000 VIPs including heads of state, ministers and officials from all over the world will descend upon the territory to witness the historic flag change.
Thanks to almost 8,000 foreign reporters, specially flown in for the occasion, the event will be beamed to every television set and chronicled in every newspaper on the planet.
Tiny, famously industrious, Hong Kong is leaving nothing to chance.
Hotels have given intensive training to bellboys and chambermaids so they can field, as well as any schoolmaster, tough questions from puzzled VIPs or hustling reporters on Hong Kong history, geography, nightlife and typhoon threats.
At front-line government offices, civil servants seconded to the huge celebration machinery beam from ear to ear as they try to cater to the whims of visiting and local newsmen.
""I'm really impressed,"" a local reporter said as she walked into a press liaison office to get her identification dog tag.
On hand were a dozen staff and she was on his way in under 10 minutes with a stylish sling-bag full of giveaways -- courtesy of blue-chip sponsors only too happy to play a part.
At Hong Kong's top-notch hotels, employees have been given security clearance by police and their best suites, reserved for the VIPs, will be swept clean with bomb detectors.
Anyone up to mischief or with no business at the hotel stands little chance of getting his toe over the lintel, said a public relations manager at the five-star hotel JW Marriot.
""The Hong Kong police is very much involved. From the 28th, guests coming in and out must go through metal detectors, just like in airports,"" manager Peachie Dieken said.
JW Marriot will be playing host to 11 heads of state, and some rooms have even been reserved for police officers during the handover, in case they are needed for any emergency.
",45
"On a stage full of Hong Kong popstars, a middle-aged woman, cracking jokes, stole the show on Tuesday as Hong Kong's future first lady and a song-writer.
This was a kind of solo debut for Betty Tung who has written the lyrics of a song the world will hear when Hong Kong rejoins China on July 1.
Till now she has been overshadowed by her husband, prospective leader Tung Chee-hwa, an ex-shipping tycoon still wary of the public spotlight.
Accompanied by photographers' popping flashlights and questioning journalists, she walked into a studio and beamed widely, taking it all in her stride.
Tung Chee-hwa and Betty will be Hong Kong's leading couple from midnight June 30 when Britain hands the territory to China and governor Chris Patten and his wife Lavender sail away.
Elegantly dressed in a blue navy suit with a scarf, Betty took to the stage with half a dozen popular music stars to announce a musical gala on July 1, first day of Chinese rule.
Featuring in the ""Hong Kong Medley"" during the gala show is a song, ""The Homecoming"", in which Betty stars as lyricist.
""I don't know who you've come to see, but I've come to see my idols,"" Betty told reporters as she posed next to heartthrobs of the local popular music scene -- Jacky Cheung, Andy Lau, Aaron Kwok, George Lam and Sally Yeh -- who will all belt out the medley on July 1.
Little known in the past to the Hong Kong public, Tung and his wife were thrown into media glare when he was selected in December to become the territory's first post-handover leader.
But Betty seems to have taken on her demanding public role with consummate ease, perhaps even more so than her husband.
""Do I not look good to you?"" she shot out to one reporter when asked how well she and her husband were taking to their new public roles, before promptly taking the next question.
Announcers at the packed news conference said Betty provided inspiration for the ""The Homecoming"" and wrote the lyrics.
But the first lady-to-be sought to play down the accolade.
""I do not know musical notes, I just felt the song was so good to my ear and I was very much encouraged to do a bit of thinking,"" she told reporters.
""But I really didn't contribute very much to the song, I really must pass the microphone to my colleagues who did most of the work,"" she said.
Her husband, meanwhile, will be surprised.
""Mr Tung doesn't know I'm here. I think I've told him that there is a song. His staff has heard it.""
""But he's so very busy with the handover, I hope he will be very pleasantly surprised,"" Betty said.
",45
"For many in China, a fabled El Dorado lies at the southern tip of their vast country -- Hong Kong, rich and elusive.
The dream is likely to stay that way after the British-ruled territory reverts to Chinese rule on June 30.
Yang He, a Hong Kong resident for the past 40 years, has waited more than 11 years for his son to get a permit to come from China to join him, his wife and two daughters.
""We applied in 1986 for my son to come to Hong Kong. He has been cared for by his grandparents since he was a baby.
""We had to leave him when he was only 25 days old because he had no permit,"" Yang, 56, told Reuters in a recent interview.
""Most nights I cannot sleep for just thinking of him.""
Yang is not alone in his suffering.
Hong Kong authorities say there are 34,000 children in China waiting to join either one or both parents in Hong Kong, but Chinese authorities say the figure could be higher than 100,000.
CHINESE HEAR OF CITY STREETS PAVED WITH GOLD
In China, rock stars sing patriotic songs welcoming the return of Hong Kong, and television stations beam into Chinese homes documentaries describing the wealthy metropolis, giving an impression of streets lined with opportunities -- and gold.
But most of China's 1.2 billion people will probably never set foot on Hong Kong soil.
Although the British will leave and the Chinese red flag will flutter over the territory, Hong Kong will be separately run under a ""one country, two systems"" formula espoused by China's late paramount leader Deng Xiaoping.
To stop a flood of mainlanders into the tiny but crowded territory of 6.4 million people, border security is tight -- on both sides of the line.
Hong Kong operates a quota system permitting 150 mainlanders to migrate to Hong Kong each day, 66 of them children.
But it can take years to obtain the precious ""one-way permit"" -- and many resort to backdoor methods in dispair.
QUOTAS OPEN TO CORRUPTION
China-born Yang said he has totally lost faith in China's bureaucracy and communist system, which he said was so riddled with corruption that only the rich can buy their way out.
""In 1995, when I asked again about the status of my son's application, they (government officials) asked for money. They said they wanted at least HK$130,000 (US$16,800),"" Yang said.
""They told me it wasn't them who would take all the money, they have to ask favours from other people, buy cigarettes, drinks, fruit, and there wasn't such a thing as digging from their own pockets to pay my son's passage to Hong Kong.""
Yang paid HK$40,000 (US$5,175) and a few gold rings when he applied in 1985 to get his wife and eldest daughter to join him.
They arrived in 1986. But there was no permit for his baby.
""If you have money, you can come, proudly by train, if not, you can't come. If you haven't enough, you come illegally, dangerously by speedboat in the night,"" he said.
""You don't know the Chinese system, it is so corrupt, it would be best if after the handover, the Hong Kong government takes over the responsibility of approving the applications,"" said So Ying, a mother who has waited five years for her son and daughter to join her and her husband in Hong Kong.
Some get so frustrated by the wait that they have taken the matter into their own hands, paying between HK$2,000 to HK$4,000 to smugglers -- or ""snakeheads"" as they are known locally -- to spirit their spouses and children into Hong Kong.
Between January and April 1997, 1,449 young illegal migrants surrendered to authorities against 540 for the whole of 1996.
In the first four months of 1997, 7,406 illegal migrants, including adults, were arrested around border areas, against 23,180 for the whole of 1996.
HONG KONG AUTHORITIES GET TOUGH
In an unusual show of force, Hong Kong immigration officials last month seized eight-year-old Chung Yeuk-lam and her mother from their flat and sent them back to China.
The girl had been carried illegally into Hong Kong by her mother when she was just three months old.
Colonial Governor Chris Patten said it was important not to make exceptions in order to quash rumours spread by snakeheads that there will be an amnesty for illegals after the handover, which the Hong Kong government has repeatedly denied.
Hong Kong and Chinese authorities have joined forces to block the tide of mainland Chinese illegal immigrants.
The South China Morning Post has said one way to help solve the problem would be to quash the El Dorado myth in China.
""The simplest way to shrink their numbers would be if China dispelled the idea that Hong Kong's streets are paved with gold,"" the newspaper said.
",45
"Hong Kong's future lawmakers drew howls of protest from the pro-democracy camp on Saturday after they supported Beijing-backed plans to dilute civil liberties in the territory when it returns to China at midnight on June 30.
The democratic camp also accused the future lawmakers of the provisional legislature of selling out the people of Hong Kong by merely doing Beijing's bidding.
""This group, anyway, was not popularly elected, what Beijing wants, it will pass. This is a foregone conclusion,"" said Tsang Kin-shing, a legislator of Hong Kong's current elected chamber and a member of the popular Democratic Party.
""They are just doing it for their own advantage, I don't have any hope in them. They are just selling out on Hong Kong people,"" he told Reuters by telephone.
The outcry follows a meeting of the provisional legislature across the border in China's Shenzhen city earlier on Saturday, where members gave their backing to plans by Hong Kong's future leader, Tung Chee-hwa, to place curbs on freedoms from July 1.
The plans include requiring police permits for political protests and a ban on foreign funding of political groups. They have sparked protests from Hong Kong's lawyers and human rights activists, as well as from Britain and the United States.
But the curbs, Tung argues, are necessary to preserve social order in Hong Kong, which will return to China on July 1 when more than 150 years of British colonial rule comes to an end.
Tung's plans were widely expected after Beijing resolved in February to repeal or amend existing Hong Kong laws protecting freedoms and political rights.
The 60-member interim chamber, which was selected in December under rules crafted by China, agreed with the broad principles of the planned curbs, which have yet to be drafted.
""Hong Kong's situation is sensitive, as at any time, but now especially Hong Kong people must be on the alert for the possibility of the region being infiltrated by hostile elements,"" said provisional legislator Elsie Tu.
""It is our responsibility to maintain public order and prevent interference by outside political parties.""
Some, however, said the curbs must be reasonable and not restrict freedoms as Hong Kong people were usually law-abiding while others urged clearer definitions of some concepts in the proposed curbs to allay fears in Hong Kong.
Tung has cited concepts such as ""national security"" as a basis for the planned curbs, but critics have criticised the idea as both alarmist and groundless.
The planned curbs are widely expected to go through legislative procedures before the handover and be confirmed and made into Hong Kong laws on July 1 by the interim chamber.
The China-backed provisional legislature has held its meetings in China rather than Hong Kong to protect itself from legal challenges by members of the elected chamber.
China, angered by democratic reforms introduced by the last British governor, Chris Patten, has said it will disband the elected legislature and install the provisional body as Hong Kong's official lawmaking assembly after July 1.
The future chamber also prepared to make its first law for Hong Kong on Saturday. A bill, covering public holidays for 1997 and 1998, passed through all three readings and will be confirmed as law on July 1, the local cable TV station reported.
Andrew Cheng, a current legislator and Democratic Party member denounced the passage of the bill.
""The provisional legislature is an unconstitutional structure and they don't have any legal foundation to pass laws for Hong Kong,"" Cheng said on Radio Television Hong Kong.
",45
"Hong Kong property prices have tumbled 10 percent from recent peaks and are poised to fall further as speculators turn nervous following recent steps by the government to cool the market, analysts said on Wednesday.
Transactions have also dipped and some buyers have reneged on contracts, preferring to forego deposits rather than face further possible price falls, real estate brokers said.
""Sentiment on the property market has turned bearish,"" said Raymond Ngai, property analyst with UBS Securities.
""There will be a consolidation and property prices will fall by up to 20 percent by the end of this quarter,"" he said.
Property brokers said prices have already fallen five to 10 percent from recent peaks.
The bearish sentiment comes after the government, under intense pressure to cool sharply rising prices, in late March took steps to speed the flow of new flats into the market.
Flats can now be presold 15 months before completion, up from 12 months, and developers must offer them no more than six months after receiving government approval for presales in batches no smaller than 20 percent of the total available.
Compounded by a 25 basis point rise in prime lending rates to 8.75 percent, the bubble enveloping Hong Kong's property market has sprung a leak, analysts said.
Prices have dipped by at least five percent in the last week compared to better weeks seen in late 1996 and early 1997, while the number of transactions in popular private estates in Hong Kong have dipped five percent, real estate brokers said.
In some flashy locations like the Midlevels on Hong Kong island, some buyers or speculators have even reneged on deals, preferring to forego their deposits as they feared taking up mortgages in the face of falling prices, brokers said.
""Some people have reneged on deals, as many as two out of 10 units, especially in the pricier districts,"" said one property consultant who declined to be named.
""It's now a buyer's market, buyers call the shots,"" said May Toh, a broker with Glory Property Company.
Secretary for Housing Dominic Wong said confirmers, traders buy a property and then resell it before assignment procedures are completed whose activities give a broad indication of speculation, were cutting prices to move their holdings.
Some analysts described the thaw in prices as healthy because the sharp ascent in the last year was unsustainable.
The government curbs and the interest rate hike were merely catalysts for a correction that was long overdue, they said.
""Over the last six months, property prices have gone up very sharply, by 30 percent, so it is a healthy development now, with the market consolidating,"" Ngai said.
""The curbs, interest rate increase were just catalysts for the downturn in sentiment, the main reason is because prices went up too fast,"" Ngai said.
Tycoon Lee Shau-kee, chairman of Henderson Land Development Co Ltd, told Reuters on Wednesday residential property prices should stabilise after falling five to 10 percent.
""Property prices in the secondary market have fallen five to 10 percent in April from (levels) in early March and turnover has been reduced significantly,"" Lee said. ""The prices should stabilise after the recent adjustment.""
Housing in Hong Kong is notoriously expensive and many of its 6.4 million population fear being unable to buy homes.
Irked by sharply rising prices since mid 1996, anonymous residents have planted a fake bomb and threatened to poison top government officials who they accuse of ignoring the problem.
-- HONG KONG NEWSROOM (852) 2843-6441
",45
"Future Hong Kong lawmakers on Saturday agreed on a formula to pass laws for the territory in face of mounting anger over Beijing's plans to roll back civil liberties after taking back sovereignty from Britain.
The provisional legislature met in the Chinese city of Shenzhen, just across the border from Hong Kong, to decide the format which will enable it to pass bills, including those to dilute existing Hong Kong laws protecting civil rights.
The China-crafted interim chamber, which Beijing intends to put in place of the present elected legislature at the handover, agreed all three required readings of proposed bills could take place before July 1.
The bills would then be confirmed and made into laws on July 1, the local cable television station reported. Hong Kong, a British colony for more than 150 years, reverts to China at midnight on June 30.
The move followed a heated debate this week after the territory's future leader, Tung Chee-hwa, launched plans to curb protests and foreign funding of Hong Kong political groups after the handover.
""Some members feel that since we have been empowered to scrutinise and to pass laws before July 1, then that power should be used before July 1,"" provisional legislator Selina Chow said.
""(It will) enable some absolutely essential legislation to enjoy the certainty of having been passed before July 1 so as to avoid a legal vacuum.""
Pro-democracy activists have threatened to sue the 60-strong provisional chamber if it passes any laws, holds meetings or opens offices on Hong Kong soil before July 1.
Hong Kong democrats regard the interim legislature as a breach of the territory's post-handover constitution. Earlier, they launched a protest banner attached to dozens of colourful helium-filled balloons.
""Against the provisional legislature passing laws before July 1,"" the banner read. The protesters cheered as it floated towards China.
Tung's proposals on civil liberties were widely expected after Beijing resolved in February to repeal or amend existing Hong Kong laws protecting freedoms and political rights. But the plan has sparked a fiery debate locally and drawn criticism from the United States.
Hong Kong people will need police permission to demonstrate after July 1, a far cry from the current practice of merely notifying police beforehand.
With the lawmaking formula in place, the provisional chamber is now in a position to enact Tung's plans into law. Hong Kong's 6.4 million people have been given three weeks to comment on the proposals.
The rights issue looked sure to remain in the international spotlight after U.S. officials said Secretary of State Madeleine Albright would hold talks on Monday with the leader of Hong Kong's democracy movement Martin Lee, now on a lobbying and fund-raising mission in the United States.
But there is little to suggest that China will yield to pressure over its plans.
Chinese Foreign Minister Qian Qichen on Friday praised the provisional legislature and its work, a local newspaper said.
In a Beijing meeting with Rita Fan, president of the provisional chamber, Qian was quoted by Fan as saying he was very satisfied with the interim chamber and would give his full support.
",45
"China and Britain agreed on Wednesday to release large tracts of land in Hong Kong for development, but the accord failed to impress experts who said more must be done to address the territory's housing woes.
Housing experts and analysts criticised the amount targeted for residential use as too small and unlikely to reassure many of Hong Kong's 6.4 million population that they will be able to afford to buy homes.
Under terms of the agreement, a total 98.76 hectares (244 acres) of land will be disposed of between now and June 30, and only 12.27 hectares (29.7 acres) will be for residential use.
The rest will be for commercial, industrial and other uses, with 70.19 hectares (173.4 acres) alone for a container terminal.
""I don't think it's anything major and I don't think it's significant unless they say they are releasing substantially more land, say over the next five years,"" Stephen Kidd, research manager with Vigers Hong Kong Ltd, said.
""The land for residential use does not seem to be a whole lot,"" Francis Lui, director of Centre for Economic Development at the Hong Kong University of Science and Technology, said.
""I'm surprised they are only allocating such a small amount for residential use, it's a small slice of a big pie,"" Lui said.
The agreement, under a long-term land disposal programme in Hong Kong, was signed by both Britain and China. Development of the land to be released will straddle the territory's return to Chinese rule at midnight this June 30.
From July 1, Hong Kong will be known as a Special Administrative Region (SAR) under China.
Wednesday's accord comes amid public anger over spiralling property prices, which has prompted residents to plant fake bombs and send death threats to officials, accusing them of doing nothing to solve the problem.
For many in rich Hong Kong, owning a flat has become merely a dream and adults well into their thirties, or even older, still live under the same roof as their parents.
Growing anger prompted the government last month to take steps to force private developers to release flats more quickly into the market to crack down on speculation.
The move produced a knee-jerk effect. Within weeks, brokers reported falls of up to five percent in transactions and prices.
But analysts said Wednesday's accord, part of a long-term programme, was unlikely to yield the same impact, as the market would have already discounted it.
""This is not new,"" said an analyst with an U.S. investment house, who declined to be named.
Lui said what was more important was to make public a comprehensive long-term plan committed to releasing more land for residential use.
""This is just a short-term provision, the most important thing is how much land will be supplied in the long term.
""People would rather look at land supply for the next 10 years, it's important to have a long-term commitment.""
Proceeds from the land disposal will go into the Land Fund, which will be handed over to the future Hong Kong SAR government. The fund now stands at around HK$140 billion (US$18 billion).
",45
"A four-year saga over Hong Kong's Container Terminal Number Nine (CT9) project was finally resolved on Thursday with a berth swapping plan and removal a key consortium, government officials said at a news conference.
Under the terms of the deal, which received Beijing's blessing on Thursday, British-controlled Jardine Matheson Holdings Ltd no longer leads the consortium, which has been renamed Asia Container Terminals Ltd (ACT).
ACT, formerly the Tsingyi Consortium, would swap the two berths in CT9 originally awarded for two existing berths in the existing Container Terminal Eight (CT8) currently operated by Modern Terminals Ltd (MTL), a unit of Wharf (Holdings) Ltd
The Sea-Land Group would take over from Jardine as leader of the consortium, said an ACT spokesman also present at the news conference.
MTL would build three of the four berths at CT9, while Hong Kong International Terminals Ltd (HIT), a a unit of Hutchison Whampoa Ltd, would build one berth.
Both HIT and MTL would also have one smaller feeder berth each at CT9, officials said.
The contract to develop CT9, which will have an annual capacity of 2.2 million 20-foot equivalent units (TEU) upon completion, was awarded by the Hong Kong government in 1992 to the consortium by private treaty grant.
Tsingyi was originally allocated two berths. Existing container terminal operators, HIT and MTL, were awarded development rights to one berth each.
Beijing, citing the lack of an open tender, had refused to approve the project as required because it straddles Hong Kong's 1997 handover to China.
Beijing had accused the Hong Kong government of rewarding Jardine, a pillar of the British establishment since the colony was founded, for supporting Governor Chris Patten's electoral reforms, themselves the object of bitter Chinese opposition.
Government officials and the terminal operators declined to comment on the political aspects of the case.
""This is purely a commercial decision, it is not political ...no one can force any agreement upon the commercial partners,"" said Stephen Ip, the Hong Kong government's Secretary for Economic Services.
ACT representatives said the consortium had not discussed the changes with China.
""We had no discussion with the PRC (People's Republic of China) and we've had no political pressure from the PRC,"" ACT spokesman Ed Aldridge said.
ACT is 29.5 percent owned by Sea-Land. Jardine group companies, Jardine Pacific and the Hongkong Land Holdings Ltd jointly hold 28.5 percent.
Sun Hung Kai Properties Ltd holds 28.5 percent and New World Infrastructure Ltd 13.5 percent.
Officials declined to disclose cost estimates for the project, adding that all other details had yet to be worked out. -- HONG KONG NEWSROOM (852) 28436441
",45
"Chinese banking giant the Bank of China Group in Hong Kong and Macau (BOC) will not seek special treatment in Hong Kong after the territory reverts to Chinese rule on July 1, a senior official said on Friday.
""We seek no privileges after 1997...it is not our intention to replace any bank in the territory,"" said Clarina Man, a deputy general manager in the bank's public relations division.
""We will just compete on a level-playing field, on an equal footing and after July 1, business in Hong Kong will be the same as before,"" she told Reuters in an interview.
Hong Kong, a British colony for more than 150 years, reverts to China at midnight on June 30.
In the 1984 Sino-British treaty governing the handover, China pledged Hong Kong a considerable degree of self-rule and complete fiscal independence under a ""one country, two systems"" formula espoused by China's late paramount leader Deng Xiaoping.
But many Hong Kong people are concerned about the possible emergence of cronyism and meddling by Chinese officials and companies in Hong Kong affairs and that Beijing, however well-meaning, might be unable to control that.
Man said BOC was acutely aware of such concerns and was particularly sensitive that it must vigilantly observe the ""one country, two systems"" formula, and be seen doing so.
""We are very sensitive and mindful of the 'one China, two systems' formula...foreign and local banks will be treated equally (after the handover),"" she said.
BOC, which groups 13 sister banks, boasts of a quarter of the total banking deposits in Hong Kong and a fifth of total Hong Kong dollar loans in the territory.
In the fiscal year ended December 31, 1996, the bank reported a year-on-year 20.5 percent rise in global pre-tax profit, and a net profit of 11.6 billion yuan (US$1.4 billion).
Worldwide, the bank has assets of around HK$2,450 billion (US$316.9 billion), half of which are held overseas.
BOC started operations in Hong Kong in 1917 and experienced tremendous growth from the late 1970s when China opened its doors and moved towards a market-oriented economy, Man said.
From 1978 to 1996, BOC saw its total deposits jump 4,470 percent and total loans 7,240 percent, well ahead of the average rise of 3,420 percent and 4,090 percent enjoyed by other banks.
Hong Kong's second largest banking group, BOC helped steady the territory's markets through extension of a credit line during the global stock market crash in 1987 and lent a strong hand during the Mexican financial crisis in 1995.
Man, who is also a BOC economist, said she thought a run on the Hong Kong dollar was most unlikely around the time of the handover. Even in the event of a crisis, Hong Kong had more than enough reserves to pull through.
She was, however, guarded when asked if BOC would lend Hong Kong a hand, as it has many times before.
""Basically, we're a commercial company, it's not our responsibility to stabilise the financial markets.""
""We just do it from our point of view that we are a major commercial bank in Hong Kong. And that to stabilise Hong Kong's financial market is also in our interest,"" she said. ""We're all in the same boat. If it rolls over, we fall in too.""
In Hong Kong, BOC plans to expand electronic banking facilities to give more value to its retail banking business, and expand its merchant banking capabilities, Man said.
""This year, 38 mainland companies have been approved for listing overseas, they are waiting to be arranged,"" Man said, adding that BOC was keen to offer services to these companies. (US$1 = 8.3 yuan = HK$7.73)
-- Hong Kong newsroom, (852) 2843-6441
",45
"Hong Kong's government and business community on Tuesday welcomed U.S. President Bill Clinton's decision to renew China's trade privileges and said they hoped the U.S. Congress would not strike down the move.
The extension of China's Most Favoured Nation (MFN) trading status was particularly important to Hong Kong, now preparing for its return to Chinese rule on July 1, they said.
""The chamber is very happy,"" Erica Ng, assistant manager of international affairs at the Hong Kong General Chamber of Commerce said. ""Every year, we carry out lobbying activities to persuade the U.S. government to renew China's MFN.""
""We welcome the decision. However we would say at this stage it is still to receive the endorsement by Congress. There is a long way to go,"" Christopher Hammerbeck, executive director of the British Chamber of Commerce in Hong Kong, told Reuters.
The Hong Kong government also welcomed Clinton's move and said it would continue to lobby and remind the U.S. congress of the importance of China's trade privileges to Hong Kong.
""We are grateful to know that the President has taken Hong Kong's interests into account"", Secretary for Trade and Industry Denise Yue said in a statement.
""We will continue with our lobbying efforts and keep Congress informed of Hong Kong's position, so as to enable Congress to take our interests into account when it deliberates on the matter,"" Yue said.
Clinton on Monday announced his decision to renew China's MFN status for another year, but the move is expected to face fierce opposition from Congress.
Social conservatives, organised labour and other opponents are preparing for a fight, pointing to China's policies on human and religious rights, trade and other issues.
Many in Congress were wary of China's plans to curb some freedoms in Hong Kong after the handover, Frank Martin, president of the American Chamber of Commerce (AmCham) in Hong Kong, told government radio.
Martin was in Washington last week as part of an AmCham delegation lobbying for a renewal of China's MFN status.
""Others mentioned the allegations of China's involvement in election campaign fundraising (in the United States). The trade deficit is a perennial problem -- it is neither economically nor politically sustainable,"" he said.
Hong Kong's business community said U.S. Congress members should bear in mind the importance of China's trade status to Hong Kong.
""Hong Kong could lose very much in re-export trade,"" Ng said. ""We hope that Congress can understand that it is a critical year for Hong Kong because of the handover.
The chambers of commerce say Hong Kong could lose up to US$30 billion annually in trade and related industry revenues. Gross domestic product growth could be cut by about three percentage points and some 86,000 jobs in Hong Kong could be lost if China loses its trading privileges.
""We recognise fully not only the vital importance of China but the collateral impact it has on the prosperity of Hong Kong,"" Hammerbeck of the British business chamber said.
""The membership of this chamber employs not only 300,000 Hong Kong people but we also employ large numbers of Chinese citizens in China.""
-- Hong Kong newsroom (852) 2843 6441
",45
"Hong Kong yachtsmen bent with the wind on Thursday, voting overwhelmingly to adopt a Chinese name, two weeks before the territory's return to Chinese rule on July 1.
While keeping the name ""Royal Hong Kong Yacht Club"" in English, members of the elite colonial sporting club voted in a show of hands to adopt a Chinese name, which when translated would simply mean ""Hong Kong Yacht Club"".
At an extraordinary general meeting called to decide on the Chinese name, club commodore David Kong admitted to more than 200 members that the Chinese name was a compromise.
The club, which to this day has fewer ethnic Chinese members than Westerners, was deeply divided last year when its mostly British members fought hard to keep the ""Royal"" tag on the English name.
Chinese members lobbied hard but failed twice to remove the ""Royal"" tag, a symbol of British colonialism that they felt would be inappropriate after Hong Kong reverts to China.
""The proposal we have in front of us is a compromise. We are being courteous and considerate to the incoming government and courteous and considerate to our members,"" Kong told members.
Still, about seven members at the meeting voted nay.
""What is this? One club, two names?"" one member joked aloud, drawing uproarious laughter and applause from the rest.
Hong Kong, a British colony for 156 years, will revert to China from July 1 under a ""one country, two systems"" formula, espoused by China's late paramount leader Deng Xiaoping.
""I don't see why we should be inconsistent. If we are ""Royal"" in English, we should be ""huang jia"" in Chinese,"" a Caucasian member said at the meeting. ""Huang jia"" is ""Royal"" in Mandarin, China's official language.
Choi Chung-yung, a member since 1984, said it was important not to have ""huang jia"" in the Chinese name.
""If we are known as ""Royal"" after the handover, we may be disadvantaged if ever we need help from Chinese authorities because we will be seen as British,"" Choi said.
""Anyway, since the day I joined, I've never seen the ""Royal"" as meaningful or prestigious, unlike the British,"" he said.
Long before July 1, other elite clubs in Hong Kong have dropped their ""Royal"" tags and are now known simply as the Hong Kong Jockey Club and the Hong Kong Golf Club.
The queen's portrait has also been knocked off stamps and coins in favour of the territory's harbour skyline.
",45
"The New York Mercantile Exchange (NYMEX) signed an agreement on Thursday to hook up the Hong Kong Futures Exchange (HKFE) to its NYMEX ACCESS trading system, a move that may challenge Singapore's trading headstart.
Officials from both exchanges said Hong Kong's cash trading base and trading expertise could not compare with Singapore's, especially in the energy field, but rising oil and metals use in Asia, particularly China, would see a growing demand for risk management and hedging opportunities.
""I see great potential in China, refineries in South Korea and the rest of Asia, potential that provides the key to this (linkage),"" NYMEX president Patrick Thompson said at a news conference after the agreement was signed in Hong Kong.
The link with Hong Kong, expected to go into operation around the end of March 1997, would allow HKFE members to trade existing NYMEX futures and options contracts on the ACCESS system during local Hong Kong trading hours under a mutual-offset system.
The agreement with the HKFE seemed to throw into doubt NYMEX's intention expressed in 1994 to cooperate with the Singapore International Monetary Exchange (SIMEX), where two energy contracts already trade, albeit sluggishly.
While officials of the exchanges denied that rivalry with Singapore had catapulted Hong Kong into Thursday's deal, Thompson suggested the linkup with Hong Kong -- and with Sydney in 1995 -- would render a linkup with SIMEX more unlikely.
""Talks are progressing very, very slowly and Singapore is certainly not as much of a priority with us now as previously,"" Thompson said, adding the deal with the HKFE would introduce constraints that would affect any future deal with SIMEX.
SIMEX would also be cut out of any new futures and options contracts that NYMEX was working to introduce in Asia with the help of a newly formed Oil Advisory Committee.
The committee, made up of 30 members from Asia's oil community, would work out new contracts tailored to physical products traded in the region in terms of pricing and quality.
The first meeting, held last week in Singapore, brought together representatives from state oil companies, major oil players, Wall Street traders and top brokers, all of whom were eager to see the introduction of new oil futures contracts.
""We were gratified by the interest shown...and the unanimous crying need for new products,"" Thompson said, adding new contracts would be launched not with SIMEX but with the HKSE.
New crude and gas oil (diesel) futures contracts received overwhelming votes from the committee, but more meetings would be held to determine the type and specifications of the new product as well as its pricing formula, Thompson said.
NYMEX, the world's largest physical commodity exchange, offers contracts on the benchmark West Texas Intermediate crude, heating oil, natural gas and unleaded gasoline on its energy complex and gold, silver and copper on the metals complex.
NYMEX, together with its COMEX division, trades a daily volume of 310,000 contracts each day during day trading hours.
Its overnight ACCESS system rakes in around 5,000 contracts each night, and the volume has risen between 25 to 30 percent each year since it was launched in 1993.
Hong Kong would be the fifth location where ACCESS trades can be executed, after New York, Sydney, Chicago and London.
NYMEX officials will visit Hong Kong in coming months to train exchange members in energy and metals futures trading, said Ivers Riley, chief of the HKFE.
-- Hong Kong newsroom +852 2843 6441
",45
"Hong Kong's business community extended a cautious welcome on Tuesday to U.S. President Bill Clinton's decision to renew China's trade privileges and said they hoped the U.S. Congress would not strike down the move.
The extension of China's Most Favoured Nation (MFN) trading status was particularly important to Hong Kong, now preparing for its return to Chinese rule on July 1, they said.
""The chamber is very happy,"" Erica Ng, assistant manager of international affairs at the Hong Kong General Chamber of Commerce, told Reuters. ""Every year, we carry out lobbying activities to persuade the U.S. government to renew China's MFN.""
""We welcome the decision. However we would say at this stage it is still to receive the endorsement by Congress. There is a long way to go,"" Christopher Hammerbeck, executive director of the British Chamber of Commerce in Hong Kong, told Reuters.
Clinton on Monday announced his decision to renew China's MFN status for another year, but the move is expected to face fierce opposition from Congress.
Social conservatives, organised labour and other opponents are preparing for a fight, pointing to China's policies on human and religious rights, trade and other issues.
Many in Congress were wary of China's plans to curb some freedoms in Hong Kong after the handover, Frank Martin, president of the American Chamber of Commerce (AmCham) in Hong Kong, told government radio.
""Many members of Congress indicated concern on the perceived rollback of civil liberties in Hong Kong,"" he said.
Martin was in Washington last week as part of an AmCham delegation lobbying for a renewal of China's MFN status.
""Others mentioned the allegations of China's involvement in election campaign fundraising (in the United States). The trade deficit is a perennial problem -- it is neither economically nor politically sustainable,"" he said.
Hong Kong's business community said U.S. Congress members should bear in mind the importance of China's trade status to Hong Kong.
""Hong Kong could lose very much in re-export trade,"" Ng said. ""We hope that Congress can understand that it is a critical year for Hong Kong because of the handover.
""If it is not renewed, it will affect Hong Kong economically and greatly affect confidence in the territory,"" she said.
The chambers of commerce say Hong Kong could lose up to US$30 billion annually in trade and related industry revenues. Gross domestic product growth could be cut by about three percentage points and some 86,000 jobs in Hong Kong could be lost if China loses its trading privileges.
""We recognise fully not only the vital importance of China but the collateral impact it has on the prosperity of Hong Kong,"" Hammerbeck of the British business chamber said.
""The membership of this chamber employs not only 300,000 Hong Kong people but we also employ large numbers of Chinese citizens in China.""
-- Hong Kong newsroom (852) 2843 6441
",45
"Chinese political dissidents living in exile in Hong Kong are making a final dash for Western sanctuary as the clock ticks closer to the British colony's July 1 handover to communist-ruled China.
Fearful over China's future political clout in Hong Kong, scores have fled the territory and a dozen or so other dissidents are pleading with the government to help them out, pro-democracy activists said on Wednesday.
""There are very few now in Hong Kong, just over 10 people,"" said legislator Lau Chin-shek, spokesman for a pro-democracy group, the Hong Kong Alliance in Support of Patriotic Democratic Movements in China.
""It's depends on whether they think it will be problematic if they remain in Hong Kong. From what the (Chinese) Communist Party has done in the past, it's worrying to these people.""
The Alliance, which China has branded as subversive, has helped scores of Chinese dissidents in exile in Hong Kong find sanctuary in third countries before the British-run territory reverts to China just 27 days from now.
""Many left this year. Nineteen left last week,"" Lau said.
Many fled to Hong Kong in the aftermath of the bloody military crackdown on student activists in Beijing's Tiananmen Square in June 1989. But Lau said he was confident those remaining would be able to leave before July 1.
""We are very confident those eligible for political refugee status will be able to leave. Even the Hong Kong government wants them to leave...it is helping them,"" Lau said.
Anxieties over the future of Chinese dissidents in Hong Kong mounted as the territory's activists prepared to mourn hundreds, possibly thousands, of victims in China's anti-democracy crackdown, eight years ago to the day.
Up to 40,000 people were expected to attend a candlelit vigil in Hong Kong where organisers will demand a reversal of China's ""counter-revolutionary"" label on the crushed 1989 movement and the release of political prisoners in the country.
One mainlander, Zhang Taisong, had threatened to set himself on fire at the rally to force the Hong Kong government to quicken the exit of remaining dissidents, the Chinese-language newspaper Apple Daily said on Wednesday.
Worries were aggravated this week after Hong Kong's future leader Tung Chee-hwa said Chinese dissidents who entered the territory illegally cannot stay after the handover.
Tung, who was selected in December to become Hong Kong's first leader under Beijing's auspices, said only those who entered legally and with unlimited stay could continue to live in the territory.
Democratic Party legislator Cheung Man-kwong, also a member of the Alliance, warned that the dissidents could be in danger if they were forced to return to China after the handover.
""If they are forced to leave Hong Kong, it's very dangerous because they are political dissidents. If they go back to China, China will put them in jail,"" Cheung said.
Prominent Chinese dissident Chai Ling, a leader of the Tiananmen pro-democracy movement, voiced concern over the future of post-handover freedoms when she visited Hong Kong last month.
Chai, now studying at Harvard University in the United States, also urged Hong Kong people to defend their freedoms. Visits like hers might become a thing of the past after July 1.
Tung has announced plans to trim back civil liberties, ban overseas funding for political groups and require police permits for activists to stage protests.
",45
"In another sign of Britain's slow retreat from Hong Kong before its handover to China, the British army on Friday packed up its radio station -- literally into a shipping container.
Britain departs its colony of more than 150 years at midnight on June 30 and the British Forces Broadcasting Service (BFBS) plans to keep broadcasting until the very last moment, but not from its old studio in military headquarters.
In an informal ceremony to the tones of a lone bagpiper, Commodore Peter Melson, chief of staff of the British forces in the territory, declared the new BFBS station open in a standard 20-foot container.
The air-conditioned container sits alongside an office block at the Prince of Wales Barracks on Hong Kong's harbour front and comes replete with disc-jockey, studio equipment and soundproof styrofoam walls.
""It works!"" Melson declared to reporters as he stepped out of the container -- commissioned for use in Saudi Arabia during the 1991 Gulf War -- after a token inspection.
A staff of 15 who used to occupy two proper studios at the barracks will keep the station going until the handover although ""the shack"", as it is called by its users, itself will be loaded on the supply and troop ship Sir Percivale on June 29.
The extension to the Hong Kong Convention Centre, where the grand handover ceremony will be held, can be seen from container's sole window.
""I'm sure there'll be something in the last hours. It's not something we'll let go easily, not after so long,"" Melson said.
BFBS, with a network of other stations, has operated since 1971 in Hong Kong, where it hit a peak staff strength of 45 in 1990. It broadcasts non-stop news and programmes from Britain.
The British army has been packing up since last year, leaving only a skeletal force just before the handover.
Melson said BFBS has been more than a mere radio station to the garrison in the territory.
""It's meant an awful lot over the years, having our own radio station in Hong Kong. It's something we've been able to relate to, to talk to, have requests from loved ones at home.
",45
"History will be made on Monday when an advance party of the Chinese army takes up position in Hong Kong against the backdrop of a raging quarrel on aspects of the territory's return to China.
The 40-strong advance party will arrive in the British colony on Queen Elizabeth's birthday to ready the garrison for the People's Liberation Army (PLA) troops which will march in on July 1, when Britain bows out after over 150 years of rule.
Led by Major-General Zhou Borong, the recce party will drive into Hong Kong in eight PLA staff cars and trucks from China's Shenzhen city in full uniform -- but unarmed.
The arrival of the advance guard is set against a backdrop of fears in this bustling territory of 6.4 million which reverts to Chinese rule at midnight on June 30.
On Sunday, more than 1,000 Hong Kong people took to the streets to protest against curbs on civil liberties which future leader Tung Chee-hwa vowed in early April to enforce from July.
Tung, who was carefully selected under China's auspices in December, plans to curb protests and ban foreign funding for local political groups which he argues are necessary for social order and to prevent foreigners meddling in domestic politics.
His move, though expected after China's parliament in February resolved to drop or amend existing laws protecting civil liberties and rights, has provoked a storm of local protests and criticism from the United States.
Under joint Sino-British treaties on Hong Kong's handover, the territory is promised autonomy for the next 50 years, except in areas of foreign affairs and defence.
British Governor Chris Patten, who will be replaced by Tung from July 1, declared over local radio on Sunday Beijing simply did not trust Hong Kong to run itself sensibly and responsibly.
""The decision seems to be based on their wish to have a tighter control over life here. They don't -- they should, but they don't -- yet trust Hong Kong,"" Patten said.
While Tung has invited public comments on the planned curbs until the end of April, many are sceptical.
Demonstrators at Sunday's march slammed the consultation as fake. ""No to fake consultation"", their brightly-coloured placards screamed, while activists pleaded with the media to broadcast to the world what they said was Hong Kong's plight.
Amid controversy over planned law changes which has damaged Tung's popularity ratings, he was also caught last week in the middle of a brewing political funding scandal.
The shipping tycoon caused shock waves on Friday when he said he had made a 50,000 sterling ($81,500) donation to Britain's Conservative Party before the April 1992 general elections.
The disclosure, made just days after he said he would curb foreign funding, had critics accusing him of hypocrisy and double standards.
Tung was further embarrassed the very same day when his political opponent and leader of Hong Kong's democracy movement, Martin Lee, met U.S. President Bill Clinton at the White House.
From the meeting on Friday, Lee won an assurance that Hong Kong was important to the United States and a warning from Clinton to China to abide by Sino-British treaties under which Hong Kong is promised a high level of self rule for 50 years.
""A winner in Washington,"" the headline of an editorial in Sunday Morning Post said in tribute to Lee.
Tung, who cancelled a pre-handover visit to the United States in midweek, saying he was too busy, has come across the poorer, the newspaper said.
""The spectacular success of the Martin Lee visit sits in stark contrast to what has become the non-visit of Tung Chee-hwa,"" the editorial said.
",45
"Britain and China on Tuesday agreed to let Chinese troops into Hong Kong ahead of its return to China, but the accord was marred by a looming quarrel over residency rights after the handover.
Hong Kong, a British colony of more than 150 years, will become a Special Administrative Region under China on July 1.
The fight over residency rights, or ""right of abode"", is of concern to 750,000 Hong Kong people who have obtained foreign citizenship and now are unsure if they also will have the right to live permanently in Hong Kong after the handover.
Last week, future leader Tung Chee-hwa proposed measures to curb protests in the territory and bar political parties from receiving overseas donations after July 1.
With 77 days to go before China regains soverignty over Hong Kong, fewer people in the territory of 6.4 million say they are finding reasons to celebrate.
In a telephone poll for the daily South China Morning Post, 57 percent of 586 people surveyed last week said they would be happy on June 30, a drop of nine percentage points compared with a similar survey in February.
Those who said they were saddened by the sovereignty change rose to 17 percent from 11 percent. The English-language daily said it was the first decline in good feelings about the handover since August last year.
On Monday, Beijing announced rules on who would qualify for the ""right of abode"" in Hong Kong after July 1.
Britain quickly accused China of going it alone on an issue that should have been settled in diplomatic talks.
Beijing further angered Britain by saying it would send the residency bill to the provisional legislature it has appointed to replace the elected Legislative Council on July 1, and not to the current lawmaking body.
""It's our domestic affair. We don't need the British to tell us who is a Chinese national,"" reports from Beijing quoted China's top Hong Kong policy official Lu Ping as saying.
Firmly contradicting Britain, Lu said the issue had never been on the agenda of Sino-British diplomatic negotiations on the details of the sovereignty transfer.
More trouble appears to lay ahead over the issue.
Government-funded Radio Television Hong Kong reported on Tuesday that the British-led Hong Kong government will not extend any help to China, potentially jamming further talks.
""The government said it won't cooperate with China in drafting of right of abode legislation if it is put to the provisional legislature before the handover,"" it reported.
But on Tuesday, the Hong Kong government suddenly announced a breakthrough accord over the stationing of an advance party of 40 Chinese soldiers in the territory ahead of the handover, ending months of deadlock over the unit's size and role.
""They (PLA soldiers) will not be armed and will not enjoy any special legal status or...privileges and immunities,"" a government spokesman said.
Hugh Davies, a chief British representative in a joint Sino-British group handling Hong Kong's handover, said more Chinese troops would move in over the next few months.
""We haven't got a timetable, we are still talking to the Chinese side about future numbers, but clearly within the next two and a half months, that's not a great deal of time, we would expect some more to arrive shortly before the arrival of the main body of the People's Liberation Army,"" he told reporters.
The PLA advance guard will prepare the facilities for the PLA garrison due to take over defence duties from the British army's ""Black Watch"" regiment on July 1. The PLA garrison might eventually be up to 10,000-strong, military sources say.
",45
"Hong Kong's future leader Tung Chee-hwa will unveil on Thursday revised plans to curb civil liberties and rights in the territory after it reverts to China at midnight on June 30, a spokesman from Tung's office said on Wednesday.
The original proposals, announced in early April, restrict demonstrations and ban overseas funding of political parties. They have been revised after Tung launched a three-week consultation exercise seeking views from the public.
""The proposals have been revised after the consultation, considering what people said,"" the spokesman told Reuters.
""We will have a compendium of the thousands of submissions...what sort of responses there were,"" he said.
The revised plans will be announced on Thursday by Michael Suen, a top civil servant recently seconded to Tung's office, and are expected to be made into post-handover Hong Kong laws by the China-backed provisional legislature.
The interim chamber, under China's plans, will itself replace Hong Kong's current elected legislature on July 1.
Tung's plans had long been expected after China's parliament, the National People's Congress, endorsed in February a proposal to change or drop some laws protecting civil rights in Hong Kong.
Tung, the territory's chief executive-designate, argues the intended changes are mere technicalities, needed to strike a balance between freedoms and social order.
But they have drawn a groundswell of opposition from Hong Kong's pro-democracy camp as well as strong criticism from Britain, the United States and human rights groups.
Tung's revised plans were preceded on Wednesday by a fierce debate in Hong Kong's legislative council, with prominent lawmakers condemning the controversial plans.
Independent legislator Christine Loh said Tung had given no basis for his intended changes to current laws that have worked well for Hong Kong.
""The proposals are an invitation to political self-censorship and predictably have a serious, heinous effect on participation in public affairs and an assault on the international character and public spirit of Hong Kong civil society,"" she said.
But a motion, put forward by Democratic Party legislator Cheung Man-kwong, expressing deep regret over the proposals, was rejected by a vote of 27 against 23.
Legislator Ngai Shiu-kit and a member of the pro-business Labour Party argued the proposed changes were necessary.
""Some people have behaved themselves in such a manner in public that have given rise to some alarm,"" he said, referring to a protest last year when a group of Hong Kong activists stormed into the Japanese consulate in a row over disputed islands in the East China Sea, which are claimed by China, Japan and Taiwan.
""If a society is manipulated by such people, then Hong Kong will be embarking on a very dangerous path and that would not be in the overall interest of the community,"" he said.
",45
"Hong Kong and Taiwan shipping representatives sat down on Friday to discuss how to continue direct shipping links after British-ruled Hong Kong reverts to Chinese rule in two months' time.
George Chao, head of the Hong Kong Shipowners' Association, said sensitive details of protocol needed to be resolved before direct shipping links could continue when Hong Kong returns to China on July 1.
Top of the agenda was the issue of which flag ships should fly, he told Taiwan delegates at the start of the meeting.
""After July 1 this year, shipping between Taiwan and Hong Kong faces some questions, for example on flags,"" Chao said.
""These need to be adjusted so that normal shipping links between both places can continue.""
Ships registered in Hong Kong and Taiwan currently follow the international practice of flying each other's flag when entering the other's territorial waters.
But this practice will be abandoned from the sovereignty handover on July 1 because Hong Kong's future constitution has a clause that it must observe the ""one-China"" principle.
Communist-ruled China has viewed Taiwan as a rebel province since the Nationalist government fled to the island after losing the Chinese civil war on the mainland in 1949.
Beijing fiercely opposes any symbol or gesture of Taiwan independence.
Chang Liang-jen, deputy secretary-general of the semi-official Straits Exchange Foundation, said he preferred to keep the status quo in shipping links with Hong Kong and would like to make as few changes as possible.
Taipei has proposed that both Taiwan and Hong Kong ships lower all flags and identify themselves through telex communications before entering each other's waters.
Chao held out hope of an amicable solution.
""Both sides are optimistic and hope we can solve the matter in just one round,"" he said.
China, which has kept conspicuously silent on the issue, is keenly interested and monitoring it closely.
A China-backed Hong Kong newspaper said on Friday that the continuation of shipping links between Hong Kong and Taiwan after July 1 must abide by the ""one-China"" principle.
""Carrying the Taiwan national flag is in conflict with the one-China policy,"" the daily Wen Wei Pao warned.
The newspaper, however, offered a solution.
""The problem was solved for air traffic when China Airlines replaced the Taiwan flag on its logo with the plum blossom. It should not be too hard for sea traffic to do similarly,"" it said.
A Taiwan ship sailed to China last month under an agreement with Beijing for limited direct trips via an ""offshore transshipment centre"". No cargoes are allowed directly to pass from one country to the other.
China has guaranteed Hong Kong a wide degree of autonomy for 50 years after the handover.
",45
"As speculation mounted in Hong Kong about a possible link between Hong Kong Telecommunications Ltd and a Chinese partner, the Hong Kong utility chose to keep mum on Thursday about its future shareholding structure.
""Today is not the time, the place to say specifically what will be done,"" deputy chairman Richard Brown told a news conference. ""There are rumours covered in the press and we don't comment on them"".
In the run-up to July 1, when the British colony of Hong Kong will revert to Chinese rule, markets have been awash with rumours of state Chinese enterprises preparing to buy their way into the Hong Kong telecommunications giant.
Hongkong Telecom is 58.5 percent-owned by Cable & Wireless Plc but analysts said both companies may see the wisdom in taking on a mainland partner because of the handover.
However top officials at the Hongkong Telecom news conference, where the company reported a 12.5 percent rise in net profit for the year to March 31 to HK$11.18 ($1.44) billion, declined to answer reporters' questions on the issue.
China's Ministry of Post and Telecommunications (MPT) and China United Telecommunications Corp (China Unicom) have been consistently pinpointed by the local press as likely partners.
A China Unicom official told reporters on Wednesday the company was interested in buying a stake in Hongkong Telecom.
China Unicom is a joint venture of 16 major Chinese organisations, led by the ministries of power, railways and electronics industry.
Brown told reporters there were scores of companies which were interested in partnering Hongkong Telecom, but the company would only reveal details when something was firm.
A seasoned China observer said it was a foregone conclusion that Hongkong Telecom, like all other crucial infrastructure giants in the territory, will see an injection of Chinese interest, whichever state enterprise that came from.
""It's a positive and logical step. It opens scope for more cooperation with the mainland. Big state enterprises will want some kind of say in Hong Kong, after all these years,"" the observer said.
Powerful Chinese enterprises like CITIC Pacific have claimed large chunks of the territory's air carrier Cathay Pacific Ltd and utility China Light and Power, while China National Aviation Corp bought nearly 36 percent of Hong Kong Dragon Airlines Ltd last year.
An analyst with a foreign research firm, who declined to be named, said some investors viewed positively talk of a Unicom stake in Hong Kong Telecom. But he noted that Unicom had problems of its own.
""It is struggling with MPT and has so far nothing much apart from a mobile business in China,"" he said.
""Unicom has a host of shareholders from many different ministries and this could be a negative thing because all of them have different, conflicting views.""
Shares in Hong Kong Telecom rose to their highest level in almost a year on Thursday, gaining HK$0.80 to close at HK$15.00.
--HONG KONG NEWSROOM (852) 28436441 ($ = 7.745 Hong Kong Dollars)
",45
"Hong Kong's colonial government cautioned Beijing on Monday not to cause constitutional problems by enacting laws for the territory before Britain hands it back to China at midnight on June 30.
Security Secretary Peter Lai said Beijing might spark a flurry of lawsuits that would work against its declared aim of a smooth transition for the territory.
Lai's warning came after Hong Kong's future lawmakers in a China-appointed provisional legislature said they would develop laws for the territory before July 1, when more than 150 years of British colonial rule officially will end.
Residency rights, or so-called ""right of abode"", in Hong Kong after the handover are among the issues that China wants the body to decide before the handover, but the Hong Kong government is opposed, Lai said.
""We clearly cannot accept this because there can only be one legislature for Hong Kong before July 1, and that is the legally constituted Legislative Council of Hong Kong which exists today,"" Lai told reporters.
The 60-member provisional legislature that Beijing intends to put in place of the elected legislature faces fierce opposition from the vocal pro-democracy camp.
Democrats have vowed to sue the body if it tries to make laws before July 1.
While Britain and China have agreed on major provisions on right of abode, they are deadlocked on actual legislation. Any attempt by the interim legislature to enact it into law before the handover would spell trouble, Lai said.
""Immigration/nationality matters are a notoriously litigious area...if decisions have to be taken on the basis of legislation processed by the provisional legislature before July 1, they would attract a huge amount of litigation which could paralyse the immigration system in Hong Kong after June 30,"" he said.
""That would be highly unconducive to a smooth transition.""
Hugh Davies, Britain's envoy to joint Sino-British talks on the handover, blamed Beijing for failing to reach agreements.
""We have been unable to do so (reach agreements)...because (China) is insisting this is a matter in legislative terms for the provisional legislature, which is a most undesirable outcome.""
The issue on right of abode in Hong Kong after July 1 is very close to the hearts of 750,000 Hong Kong people who have obtained foreign citizenship in recent years but who also value their permanent residency rights in Hong Kong.
Uncertainty has prompted a scramble for air tickets among migrants anxious to land in Hong Kong before midnight June 30.
Emigrants can establish permanent right of abode in Hong Kong if they return within 18 months of the handover, the Hong Kong and Macau Affairs Office in Beijing said.
Hong Kong Chinese will retain Hong Kong permanent residency status unless they stay away for more than 36 months before resettling in the territory, a spokesman for the office said.
The Hong Kong government warning appeared unlikely to stop China's plan. Rita Fan, president of the interim legislature, vowed to press on and make the draft right of abode bill into law the moment it is submitted to the provisional legislature.
""The council would commence to scrutinise the bill and ensure the procedure of three readings of the bill be completed before June 30...the legislation would then be confirmed on July 1,"" Fan said in a statement.
",45
"China's late paramount leader Deng Xiaoping did not live to see Hong Kong's return to Beijing rule, but his eldest son Deng Pufang said on Wednesday he was thinking about seeing the July 1 handover.
Deng, 53, said his father, who engineered Hong Kong's return to China under a ""one country two systems"" policy, would have deeply regretted not having lived to see the change of flag.
The late Deng would also have liked to ""take a walk on Hong Kong soil"", his son told reporters during a visit to Hong Kong to promote a medical action plan in China.
""I haven't decided whether or not to come"" Deng said.
He said he did not think his family members had yet asked Beijing for permission to see the handover.
Deng was in Hong Kong for the launch of a plan to prevent and treat blindness and other eye diseases in the country.
His father died on February 19, aged 92, after almost two decades in power in which he opened China to the world and moved it down the path of reform and the free market.
Deng Pufang, a paraplegic, was hurt in a fall from a window when his father was being persecuted during the 1966-1976 radical leftist Cultural Revolution.
He was candid as he fielded personal questions from reporters, and emotional as he spoke of his father's death.
""He lived to 1997, but he died before the handover. This, I believe is his deep regret. It is a great pity,"" he said.
He also said his mother and siblings were very moved by the outpouring of grief in Hong Kong when his father died.
""On behalf of my whole family I want to express our gratitude to Hong Kong people for the condolences they gave when my father passed away. We are thankful for the warmth and the highest regards given to my father.""
In Hong Kong, the senior Deng is best remembered for his firmness in ending what Chinese people view as a century and a half of ""national shame"" under British colonial rule and engineering its return to China.
Britain wrenched Hong Kong from China as war spoils in the 19th century Opium Wars and has ruled it for 156 years.
Britain formally agreed to return Hong Kong to China in the Joint Declaration of 1984, under which Hong Kong was guaranteed a high degree of self-rule for 50 years after the handover.
Deng Pufang said his father was confident while he was alive that Hong Kong would continue to prosper after the handover.
""He was very confident that no matter what happened, China will manage Hong Kong well and that Hong Kong people will rule Hong Kong very effectively,"" he said.
",45
"A second wave of Chinese soldiers arrived in Hong Kong on Monday to prepare garrison facilities before Beijing takes back the territory from Britain on July 1.
Sixty-six uniformed but unarmed soldiers of the People's Liberation Army (PLA) drove into Hong Kong in a fleet of 14 staff vehicles from the Chinese border city of Shenzhen.
Monday's group was the second PLA contingent in as many months to arrive in the territory under arrangements worked out by the Sino-British Joint Liaison Group overseeing details of Hong Kong's sovereignty change.
Forty soldiers entered on April 21 to prepare logistics and facilities before the eventual arrival on July 1 of the rest of the Chinese troops to be stationed in the territory.
Major-General Liu Zhenwu, commander of the future garrison in Hong Kong, officiated a solemn send-off ceremony on the Chinese side of the border, according to the official Chinese Xinhua news agency.
Liu urged the advance party ""to carry on the fine traditions of the PLA, and to perform the sacred duties entrusted to them by the country and people"".
A handful of British soldiers and Chinese officers from the first advance group greeted the latest contingent on the Hong Kong side in a brief and low-key ceremony.
Sporting dark blue berets and crisply-starched uniforms, the 66 PLA troops crossed over at 1.00 p.m. (0500 GMT) in a convoy comprising a large air-conditioned bus, green army trucks, jeeps and black Audi cars.
Hong Kong, a British colony for more than 150 years, reverts to China on July 1 and the British garrison is already packing up ahead of its departure at midnight June 30.
From July 1, the bustling capitalist city of 6.4 million will be guarded by the PLA.
After the brief greetings, the British soldiers then climbed aboard the Chinese vehicles to help give directions to the Sek Kong military camp in the New Territories.
Besides Sek Kong, the latest group will be stationed in the Prince of Wales Barracks, Stonecutters Island and Gun Club Hill Barracks, a Hong Kong government spokesman said.
A third and final advance guard of 90 soliders is scheduled to arrive on May 30, bringing the total preparatory force of Chinese troops in Hong Kong to 196 before the handover.
Many Hong Kong people are concerned about the presence of PLA troops in the territory because of the bloody military crackdown on activists in Beijing's Tiananmen Square in 1989.
China plans to station some 10,000 troops in the territory after the handover, about the same number as the British garrison at its peak.
But the Chinese officers have been careful to make sure that the troops who have already arrived are keeping a low profile.
",45
"Sing Tao Holdings Ltd, facing a probe by graft-busters at its Hongkong Standard Newspapers Ltd unit, could see a drop in advertising revenues at its English-language papers, media analysts said on Thursday.
""Advertising will be affected, of course. People look at the circulation when they decide to place ads,"" said Ben Kwong, research director at Dharmala Securities.
Hongkong Standard Newspapers, a wholly-owned subsidiary of Sing Tao, publishes the English-language Hongkong Standard and Sunday Standard newspapers.
""Advertisers will probably withhold or be hesitant until they have clarification from the company as to what exactly their circulation was,"" another analyst said.
Hong Kong's graft watchdog, the Independent Commission Against Corruption (ICAC), said it raided the Hongkong Standard offices on Wednesday as part of an investigation into fraudulent inflation of circulation figures.
The ICAC also arrested four current employees and two former staff members.
The ICAC said its investigations had ""revealed a scheme which involved the deliberate excess printing of over 10,000 extra copies of the newspapers each day which were purportedly sold to a bogus bulk distributor"".
The surplus was actually sold as waste paper, it said in a statement on Wednesday.
""ICAC inquiries also indicated that more recently the deliberately printed surplus and systematic disposal has ranged from 14,000 up to 23,000 copies per day,"" it said.
A Sing Tao official told Reuters the company would not make any comment while the investigations were continuing.
Trading in Sing Tao shares resumed on Thursday after a one-day suspension. The shares closed HK$0.075 lower at HK$2.90.
Analysts said that while Sing Tao shares would come under some pressure due to the probe at its Hongkong Standard Newspapers unit, the publishing group was not expected to suffer deep cuts to its bottom line as the English-language papers had not brought in much profit in past years.
On Thursday, Sing Tao published an announcement reprinting the ICAC statement and gave results for the group.
""The results of Hongkong Standard for the year ended 31 March, 1996, showed an operating loss in excess of the operating loss of approximately HK$11.7 million (US$1.51 million) incurred by the group in newspaper publishing in that year,"" the announcement said.
It gave no breakdown of the losses.
""The impact on Sing Tao shares won't be great. Investors anyway don't weight newspaper stocks highly because of their difficult market conditions and keen competition,"" said Kwong.
Some analysts said Hong Kong's other English-language daily, the South China Morning Post -- published by South China Morning Post (Holdings) Ltd -- would emerge the clear winner.
""If anybody had wanted to save a little bit before by going on a cheaper advertising rate in the Standard, they will now say 'Why take the risk?'"" one analyst said.
The ICAC probe is not the first time the Sing Tao group has made news in Hong Kong.
In May, rumours swept the stock market that chairman Sally Aw was in talks to sell all or part of her 68 percent holding in the group to a Malaysian party. Aw denied the rumours.
The group shut its Chinese-language Sing Tao Evening Post newspaper in December, citing sluggish circulation and advertising revenue.
(US$1 = HK$7.74)
-- Hong Kong newsroom (852) 2843 6441. http://www.hk97.com
",45
"Hong Kong's luxury property market, which has taken a beating since March, looks set to consolidate before making a recovery in the third quarter of 1997, property experts and developers said on Tuesday.
""Over the next two to three months, the market will consolidate barring no further political and economic factors, and we're unlikely to see another dramatic drop,"" said Peter Lee, chairman for Asia with Jones Lang Wootton (JLW).
""There may be a little softness in the next two months, but once that is through, we may see a recovery at the end of the third quarter,"" said Charles Wheatman, Pacific director at JLW.
Prices of all types of flats have tumbled by around 10 percent since March, when the government bowed to public anger and took steps to curb sky-high prices.
Flats can now be pre-sold 15 months before completion, up from 12 months, and developers must offer them in batches of no less than 20 percent of the total number available.
At around the same time, banks put up prime lending rates by 25 basis points to 8.75 percent, further ripping the bubble enveloping the property market.
Within days, property brokers complained of transactions thinning out, buyers reneging on deals and prices falling as the market turned sharply in favour of buyers.
The effect was keenly felt in the luxury flat market, where speculation had been especially rife and dominated by ""confirmers"", or traders who buy a property and then resell it before assignment procedures are completed.
Prices of flats in flashy and expensive districts have fallen by at least 10 percent as confirmers now need to cut prices to move their holdings, experts said.
""Sellers have to bring prices down by at least 10 percent to get the deal done,"" Lee said.
But the market will head towards better times once these speculators are flushed out, Lee said.
""Confirmers who need to get rid of what's in hand need to complete their transactions within the next six weeks and two months. After that, prices will consolidate,"" he told Reuters.
But Sun Hung Kai Properties Ltd, which is selling only two flats in its luxury 42-unit development on Repulse Bay Road in a coming tender, does not think the units will be affected by the recent price downturn.
""This is an exclusive project, it will not be affected. We're confident we can get a reasonably good price,"" said Victor Lui, property investment manager at Sun Hung Kai.
Lui said it was the original plan of the company to keep the majority of units at the development for lease, and he would not disclose whether any more will be sold at a later date.
The 2,021-square-foot units are out for tender at a base price of HK$18,800 per square foot. The tender closes on May 13.
-- Hong Kong newsroom (852) 2843 6441
",45
"Future Hong Kong lawmakers, poised for a bitter legal clash with the pro-democracy camp, passed a string of laws on Saturday to come into effect after the territory reverts to China on July 1.
Meeting just across the border in China's Shenzhen city, the 60-member provisional legislature was presented with a series of bills by officials of the future administration led by Hong Kong's chief executive-designate Tung Chee-hwa.
The most crucial was a bill to govern residency rights in Hong Kong after Britain hands its colony of over 150 years back to China at midnight on June 30.
The bill, which passed through two readings on Saturday, is expected to pass a third before June 30 and be ""rectified"", or officially made into law on July 1.
The meeting came as Hong Kong's Democratic Party warned it will slap a lawsuit within the next few days on the China-backed provisional chamber, which Beijing has vowed to put in place of the current elected legislative council on July 1.
The party, which has 19 seats in the current chamber, claims the provisional legislature is unconstitutional and that it is illegal for two legislatures to operate at the same time.
Hong Kong's Supreme Court facilitated the imminent legal battle when it allowed the Democrats on Thursday to use government funds to fight laws passed by the shadow chamber.
But the looming legal clash threatens to involve more than just Hong Kong's incoming and outgoing lawmaking chambers.
A Beijing mouthpiece accused the British-led administration in Hong Kong of supporting the democrats -- against China.
""The British have once again threatened the smooth transition of sovereignty by allowing legal aid to challenge the laws passed by the provisional legislature,"" the Beijing-funded Wen Wei Po said in an editorial on Saturday.
Members of the provisional legislature who, like future leader Tung, were carefully selected into office under Beijing's auspices in December, scoffed at the looming lawsuit and claimed the future lawmaking chamber had strong legal basis.
""I'm only sad that Hong Kong must spend so much money over something when the outcome, everyone knows, is a foregone conclusion,"" said provisional legislator Tam Yiu-chung.
But there was an upbeat note as Hong Kong moves ever closer to the Chinese fold.
A survey conducted by Hong Kong's Home Affairs Branch found 78 percent of Hong Kong people were satisfied with the current situation in the territory, up from 76 percent in a March poll. The survey, done in mid-May, polled a total of 1,503 people.
But confidence levels dipped slightly. Some 72 percent said they expected Hong Kong to remain prosperous and stable, down from 73 percent in March. Twenty percent expected the situation to improve in the next 12 months, down from 24 percent in March.
On the economic front, China made further inroads into Hong Kong's strategic infrastructure industry with the purchase of a stake in Hong Kong Telecommunications Ltd.
In an announcement late on Friday, Cable & Wireless Plc, parent of HongKong Telecoms, said it sold a 5.5 percent stake to state-owned China Telecom for US$1.185 billion.
",45
"Internationally-known Hong Kong democracy campaigner Martin Lee, long branded a ""subversive"" by Beijing, plans to stay here and fight on for civil liberties under China's rule.
He has no foreign passport in his back pocket. Lee, leader of Hong Kong's democracy movement, says he has no intention of taking flight before or after midnight June 30 when Britain hands the territory back to China.
Lee's bookish, soft-spoken demeanour belies his skill as a political maestro winning audiences in the West in a long, dogged fight for freedoms in Hong Kong.
The 58-year-old leader of Hong Kong's largest political group, the Democratic Party, became China's marked man the day he stood up before formidable Communist Party elders, including the late paramount leader Deng Xiaoping.
In the Great Hall of the People in Beijing he gave them a polite but stern lecture.
""What do you mean by people who love China or love Hong Kong? Do you mean people who would say things the leaders of China would like to hear?"" the bespectacled Lee grilled them.
""Or do you mean these are people who genuinely love Hong Kong and would say honest things about Hong Kong--although maybe critical of the Chinese government?"" he asked.
Lee's lecture harked back to a day in 1987, when he questioned Deng who earlier promised a time of great prosperity for everyone who ""loves China and loves Hong Kong"" after the British colony of 156 years is handed back to Beijing.
His powerful and elderly audience appeared shocked by his forthright tone but they will get their own back very soon.
At midnight June 30, Lee loses his seat in Hong Kong's elected legislative council, which will be disbanded to make way for a provisional legislature, which China supports.
But the criminal lawyer with a successful practice does not intend to call his political career quits, let alone flee.
""This is my home and I don't intend to leave at all,"" Lee said in a recent interview. ""If you really want to achieve democracy then you must stay to fight for it, once you leave there is very little you can do.""
Son of a Nationalist (Kuomintang) general and the sixth of seven children, Lee was born in Hong Kong in 1938. He graduated from the University of Hong Kong and took his first job at a secondary school teaching English history and Bible studies.
The devout Catholic later left for London to read law before returning in 1966 to start his own practice.
His entry into politics came in 1985 when he was elected to the legislative council to represent the legal profession.
""My little worm of conscience made me ask what I had done for the community, having taken so much out of it,"" he once said.
A firm believer in humanitarian values, Lee has not looked back since. Loudly critical of both Britain and China, Lee has travelled the world to lobby for international pressure to keep China in check and highlight problems of Hong Kong's handover.
""Listen to Hong Kong people. There is no doubt that the people of Hong Kong want democracy, human rights and the rule of law,"" he wrote in a recent article in a British newspaper.
""Don't sacrifice Hong Kong for trade with China. Don't bow to economic blackmail or to the entirely predictable insistence of Beijing's leaders that Hong Kong is China's internal affair,"" Lee said, targeting British leaders.
His most prominent success came in April when he won an audience at the White House and a pledge from President Bill Clinton that Hong Kong's freedoms will be looked after.
Lee has been constantly attacked by pro-China politicians and even Hong Kong's future leader Tung Chee-hwa has accused him of ""badmouthing"" the territory abroad.
But Lee refuses to give up and he vows to fight elections, scheduled in mid-1998.
""We'll continue to work for Hong Kong people and we'll continue with our fight for democracy, freedoms and the rule of law and human rights...""We'll continue to be the voice of Hong Kong,"" he said.
",45
"Investors swept up in the current wave of ""red chip"" fever for China-related stocks are at risk of losses because of the poor health of many mainland state-owned companies, a senior economist warned on Friday.
Demand for the Hong Kong-listed companies with mainland ties has accompanied record highs in the Hang Seng index, in a burst of optimism about Hong Kong's handover to China in three weeks.
But Kenneth Courtis, strategist and chief economist at Deutsche Bank Group Asia Pacific, warned that the speculative gains could be short-lived in light of serious problems with mainland Chinese companies.
A growing number of Chinese and China-backed companies have listed in Hong Kong, and the lure of China's huge domestic market and economic potential have proved difficult for foreign investors to resist.
In Hong Kong, punters -- from serious investors to the unsophisticated -- have formed long queues to get their hands on subscription forms to buy new shares, sometimes paying for them, in the hope of making fortunes.
""People who are rushing into the streets to try to pay their $100 to get a subscription form may think they'll be able to sell that some time soon,"" said Courtis.
""Things like that usually end in tears and it won't be any different this time,"" he told the Foreign Correspondents Club.
But Courtis said caution would be a better bet as many mainland state-owned companies were losing money and Beijing itself was in a race against time to restructure them.
Chinese state-owned enterprises, which have lived under the shelter of communist rule, remain deeply inefficient and Beijing is encouraging many of them to merge into huge conglomerates in the hope that the stronger firms may help ailing ones.
""We are now in a situation when losses (made) by state companies are so big that they've come to destabilise the financial system,"" Courtis said.
He said that the problems of these companies are a factor in China's difficult campaign to join the World Trade Organisation (WTO), which promotes free trade and reliance on market forces.
""One of the reasons it is so difficult to negotiate WTO membership for China is that (most) state companies wouldn't survive under WTO rules.""
Courtis said he did not think China would enter the WTO for four to five years but was confident the United States will continue Most Favoured Nation (MFN) trade status for China for another year.
""It will go through this year. The President might have to use his veto to overscome the resistance...but the debate will be bitter,"" he told reporters after his speech to the club.
President Bill Clinton announced in May his decision to renew China's MFN status but many members of Congress have said they will vote against it, angered by China's policies on trade, human and religious rights.
",45
"Asia's ""party of the century"" arouses few cheers from a minority of active democrats in Hong Kong who fear Chinese rule will bring repression of liberties.
For these activists, campaigning at home and abroad for better guarantees from Beijing, there is little cause for celebration when the clock strikes midnight this June 30.
They plan protests as Britain hands Hong Kong back to China, which brands some supporters as ""subversive,"" and in the future to test the extent of cherished civil liberties.
Leaders of the movement have thrown down a gauntlet to Chinese authorities by vowing to force their way into parliament as the world watches Britain hand the territory back to China.
The pro-democracy campaigners remain sceptical about China's pledged self-rule for Hong Kong for 50 years under a ""one country, two systems"" formula espoused by the late paramount leader Deng Xiaoping.
Worries abound, they say, that the future administration under shipping tycoon Tung Chee-hwa, whom China supports, will curb rights and civil liberties in the territory of 6.4 million.
""When international attention dies down, who knows what will happen? What will happen when people become complacent?"" said Law Yuk-kai, director of Hong Kong Human Rights Monitor.
Controversially, when Hong Kong, a British colony of 156 years, reverts to China, an interim 60-member lawmaking chamber will replace the existing elected legislature, to the dismay of democrats and the West.
With this one step, Beijing will remove at a stroke democratic reforms introduced unilaterally by the British-led administration during its twilight years of rule in Hong Kong.
The interim chamber has also passed laws which from July 1 will ban foreign funding for political groups and require people to apply for police permits before they can stage protests.
Now, the police need only be informed ahead of protests.
Even more sinister, activists say, is Tung's introduction of a broad concept of ""national security"" which empowers the police to reject applications if they are thought to threaten Hong Kong's 'security' or China's territorial integrity.
""I expect the human rights situation to deteriorate, if Hong Kong people don't stand firm and there is no support from political leaders overseas,"" Law said in a recent interview.
""If such concepts like 'national security' are used for political convenience, it's an end to all freedoms. Anything that is thought to challenge the future administration can be struck down by this concept,"" he said.
Chinese officials have also warned against any advocacy of independence for Taiwan or Tibet, and self-censorship has wormed its way into the local press, which until recently was among the world's freest and most vibrant.
""Journalists have told us they are worried and are under great pressure and are practising self-censorship,"" Law said.
Chinese political dissidents in exile have warned of tough days ahead and said they could not conceive of China keeping to its pledge of a high degree of self rule for Hong Kong.
""In the long term, I cannot believe China's dictatorship. In the last few decades, this government has never kept to its words. It has always gone back on its promises, its policies on Tibet, many other policies,"" said Liu Qing, who was jailed for 10 years before leaving for the United States in 1992.
Another warned of possible abuses. ""'National seurity' worries me, there is a real danger. It has already been used against Chinese people as a tool to suppress political dissent. It can be similarly abused in Hong Kong,"" said Xiao Qiang, executive director of the New York-based Human Rights in China lobby group, in a recent interview.
But some inveterate pro-democracy activists are here to stay, despite the odds. Emboldened by the international glare enveloping Hong Kong, hopefully for years to come, they are banking on hopes that Beijing would not dare go too far.
""This is my home and I don't intend to leave at all,"" said Martin Lee, leader of the Democratic Party, Hong Kong's largest party.
""I don't think they are going to do anything nasty to my family. I don't believe they will dare do such things--what will people say if anything happens?"" said the accomplished lawyer, who has no foreign passport or residency rights overseas.
But the fear runs deeper for some. Law, married to a fellow activist, has no children--by choice. ""My wife and I, we can choose the way we want to live, but our children can't,"" Law, an activist for over 10 years, said.
Taxi-driver Shing Wai-pong, a seasoned protestor, has packed off his Malaysian-Chinese wife and daughter to Malaysia. ""I am prepared for the worst. I am not afraid of death or jail. My wife and child left Hong Kong so now I have nothing to worry about,"" he said recently.
",45
"Democracy leader Martin Lee returned on Monday from a foreign tour highlighted by talks with U.S. President Bill Clinton and convinced Hong Kong has friends anxious to preserve its freedoms after China takes over.
The head of the Hong Kong Democratic Party met Clinton at the White House and won a promise of U.S. support after the British colony is handed back to China on July 1.
Analysts contrasted Lee's tour of the United States, Canada and Switzerland with the recent falling popularity poll ratings suffered by the territory's future leader, Tung Chee-hwa, who last week called off his own U.S. tour amid a wave of criticism of proposed plans to curb civil liberties after the handover.
Tung, who will govern from July 1, was criticised by the United States, Britain and Hong Kong's pro-democracy camp for plans to ban foreign funding and curb protests.
He caused another stir when he admitted donating 50,000 sterling (US$81,500) to Britain's Conservative Party in 1992.
""Lee has made quite a victory. Quite apart from what he achieved from his tour, he subjected himself to scrutiny by groups of people,"" said law professor and political analyst Nihal Jayawickrama of the University of Hong Kong.
""While that was happening, we had Mr Tung saying he was disappointed with Lee and the exposure for his own activities which has affected his credibility quite considerably.""
Jubilant after his hectic month-long 12-city lobbying tour, Lee said he was convinced Hong Kong had friends worldwide who wanted to preserve its freedoms after China takes over.
Lee said governments in the West had a moral responsibility to see that China abides by its treaty pledge of allowing Hong Kong's freewheeling lifestyle to endure for another 50 years.
""We're not fighting alone for human rights and democracy in Hong Kong. We have many friends in Australia, New Zealand, Canada, the United States and Europe,"" he said.
Hong Kong, a British colony for more than 150 years, reverts to Chinese rule at midnight on June 30 under a 1984 treaty.
Many in the bustling territory of 6.4 million fear a loss of fundamental freedoms after the handover, now just 71 days away.
Apart from the latest threat of curbs on freedom, China plans to replace Hong Kong's elected legislature with one carefully crafted by Beijing.
""We reminded the U.S. government and all other governments that supported the Joint Declaration they owe Hong Kong a moral responsibility to make sure the rule of law, civil liberties are preserved after the sovereignty changeover,"" Lee said.
Lee, whose return coincided with the arrival of a small advance party of Chinese soldiers to prepare for the rest of the garrison on July 1, said he did not think it was necessary to have Chinese troops in Hong Kong.
""The stationing of troops in Shenzhen would have been sufficient to protect Hong Kong if necessary,"" he said.
""The British garrison was stationed here for an obvious reason, that is in case there was an invasion from a certain direction. But when Hong Kong is part of China there is no question of Hong Kong facing such a threat,"" he said.
Lee said he was deeply worried about the impact of Tung's planned curbs on protests and the ban on overseas fund-raising.
""If Mr Tung stops us, and it becomes law, we will have to decide what to do,"" he said. His party raised HK$2.5 million (US$323,000) from Chinese communities in its month-long tour.
(US$1 = HK$7.73)
",45
"Hong Kong's future leader Tung Chee-hwa assured Philippine Foreign Secretary Domingo Siazon on Friday that Filipino workers working in the territory will be allowed to stay after it reverts to Chinese rule on July 1.
Siazon, who arrived in the territory late on Thursday, said he also officially told Tung of Manila's decision in late March to waive visa requirements for Hong Kong holders of post-handover passports when they visit the Philippines.
Hong Kong, a British colony of more than 150 years, will become a Special Administrative Region (SAR) under Chinese rule at the stroke of midnight on June 30.
Nearly 140,000 Philippine workers, mainly working as maids, live in the vibrant territory.
But with Hong Kong becoming part of China, many Filipinos fear they will be expelled and replaced through an influx of domestic servants from mainland China.
Siazon said such worries were unwarranted.
""Mr Tung said he does not see any change to the status of the Filipinos working here,"" he said in an interview.
""They are contributing to the Hong Kong economy and in the future, this will not change,"" he said.
An estimated seven million Filipinos working in more than 137 countries remit about US$7 billion each year back to their relatively poor country.
Siazon, who spoke with Tung for half an hour, also met Governor Chris Patten and Financial Secretary Donald Tsang in separate meetings.
He said his country's granting of visa-free entry to Hong Kong passport holders was a pledge of Manila's support for the territory during its sovereignty change.
""We have decided to recognise the Hong Kong SAR passport and have (them) visa-free because we have full confidence in the future of Hong Kong and the smooth transition of Hong Kong from British to Chinese rule,"" he said.
""I told Mr Tung the Philippines is deeply committed to supporting Hong Kong's role in the future because Hong Kong is a big trading and investment partner,"" he said.
Each year, some 350,000 Filipinos visit Hong Kong while 290,000 Hong Kong people visit the Philippines and both governments were keen to continue the close friendship, he said.
Siazon said he had invited Tung to visit Manila.
""But right now he's extremely busy, so it will probably be after the transition,"" he said.
",45
"Philippine Foreign Secretary Domingo Siazon will press Hong Kong leaders over the fate of Filipino workers who fear China might kick them out after it takes over the territory in July, diplomats said on Thursday.
Siazon, who was to arrive in Hong Kong late on Thursday, will meet governor Chris Patten and future Hong Kong chief Tung Chee-hwa plus members of the 140,000 strong Filipino community, the largest expatriate group in the territory.
Siazon, who will stay until Saturday, is expected to officially announce Manila's March 26 decision to waive visas for holder's of Hong Kong's post-colonial passport, an official at the Philippine consulate said.
Hong Kong, a British colony for more than 150 years, will become a Special Administrative Region (SAR) of China on July 1.
Most of the Philippine workers living in the territory are maids, whose presence helps fuel Hong Kong's vibrant economy by freeing up local mothers to work.
But with Hong Kong becoming part of China from July 1, many Filipinos fear they will replaced by an influx of domestic servants from mainland China.
""Mr Siazon might seek assurances from the government and especially from Tung that the Filipinas in Hong Kong will be allowed to continue to live and work in the territory after 1997 under the same conditions,"" said a source at Manila's consulate.
""He may also seek clarification on whether mainland helpers will be allowed to work in Hong Kong,"" the source said.
Cynthia Tellez, director of the Mission for Filipino Migrant Workers in Hong Kong, a key support group, said her community hoped Siazon could get clear assurances from the future Hong Kong government they can continue to work and live in Hong Kong.
""The last statement from China was that as long as we remain helpful to Hong Kong, the status quo will remain. But it's quite vague and nothing is written about it,"" she said.
""They feel concerned whether their positions would be taken by mainland women,"" she said, voicing fears that Hong Kong employers and future authorities, might prefer to allow more mainland Chinese women to work as maids.
Tellez also stressed that the Philippine government needed to address the wider concern of Filipinos working overseas.
""What is there when we go back home, will I have something to look forward to?"" she said.
The Hong Kong Filipino community are part of a diaspora of four million Filipinos, according to official data, working abroad to support families in their relatively poor country.
Tellez said the number of Filipinos working overseas was probably as high as seven million, when taking into account illegal workers.
Spread over 137 countries the world over, the guest workers remit US$7 billion each year back to the Philippines.
",45
"Hong Kong's future government on Thursday made some minor changes to planned civil rights curbs in the territory after it reverts to China on July 1, but stuck to its guns on the need to roll back British reforms.
Michael Suen, an aide to leader-in-waiting Tung Chee-hwa, unveiled a diluted version of curbs on protests and a modified ban on foreign funding of local political groups.
Suen told a news conference the key concept of ""national security"", which forms the basis for many of the curbs, would not be fixed formally until a meeting of the China-backed interim legislature on Saturday.
However, he said: ""National Security will be defined as the safeguarding of territorial integrity and the independence of the People's Republic of China.""
The inclusion of the ""national security"" concept in Hong Kong's post-handover laws is widely expected to outlaw any protests advocating independence for Taiwan or Tibet, both of which China regards as rightfully its territory.
Suen said changes were made to the curbs after digesting views canvassed during a three-week public consultation exercise that was marked by strong opposition from the pro-democracy camp to any rollback of political freedoms and rights.
""We have listened carefully to public opinions on the consultation document and have taken positive steps to address the concerns expressed,"" Suen, a top civil servant who was recently seconded to Tung's office, told reporters.
Local political parties would now be barred only from taking donations from foreign political groups, he said.
Under Tung's original plan announced in early April, the ban extended to all foreign organisations and individuals.
Although donations from foreign political organisations would be banned, Suen said, contributions from mainland China were acceptable.
""Some people will like to include organisations in China, but the Chief Executive (Tung) has repeatedly stressed that Hong Kong will be part of China from July 1,"" he said.
""If we were to include China as a foreign country, it would be farfetched,"" he said. Accepting donations from political groups in Taiwan, however, would be illegal.
Curbs on protest marches have been slightly relaxed. The original plan required notification to the police not less than seven days before a protest, with discretion for the police to accept late notification up to two days beforehand.
""But having considered all views expressed on this subject, the Executive Council of the (future) government has decided to cancel this particular suggestion...the proposed minimum notice of 48 hours will be removed,"" Suen said.
Tung's planned curbs were originally proposed after China's parliament endorsed in February a proposal to change or drop reforms of civil liberties ennacted by the outgoing British colonial administration.
Tung has argued the changes are mere technicalities, needed to strike a balance between freedoms and social order and to guard against interference by foreign forces in local politics.
Hong Kong's popular Democratic Party attacked Tung for paying mere lip service to the consultation exercise.
""They (Tung's administration) have not given way at all. Larger principles have not changed,"" said party vice-chairman and elected legislator Yeung Sum.
""What we can see is his loyalty to what China wants,"" said Albert Ho, a legislator and party member.
The provisional legislature, which meets across the Hong Kong border in Shenzhen on Saturday, will replace the territory's elected legislature on July 1.
",45
"Future legislators on Saturday defied an imminent legal challenge and passed a string of laws for Hong Kong which will come into effect after the territory reverts to Chinese rule at midnight on June 30.
The 60-member provisional legislature met in Shenzhen, just across the border in China, where it was presented with a series of bills by officials of the future administration led by Hong Kong's chief executive-designate Tung Chee-hwa.
A crucial bill governing residency rights in Hong Kong after Britain hands it back to China on July 1 passed through two readings, Hong Kong's Wharf Cable TV station reported.
Three bills governing the membership of municipal bodies after the handover passed through all three readings, it said.
Under rules laid down earlier by the future chamber, proposed bills must go through three readings before July 1.
They will then be ratified as post-handover Hong Kong laws on July 1.
The provisional legislature was formed under Beijing's auspices in December and is poised to replace the current elected chamber, which China will disband, on July 1.
Its meeting in Shenzhen, however, follows a warning by the Democratic Party that it would file a lawsuit against the shadow chamber within the next few days claiming it was illegal to have two legislatures operating at the same time.
The imminent lawsuit has been facilitated by an earlier ruling by Hong Kong's Supreme Court allowing the Democrats to use government funds to fight laws passed by the shadow chamber.
But in Shenzhen, members of the provisional legislature scoffed at the imminent legal battle and claimed the future lawmaking chamber had strong legal basis.
""I'm only sad that Hong Kong must spend so much money over something when the outcome, everyone knows, is a foregone conclusion,"" said provisional legislator Tam Yiu-chung.
The president of the shadow body, Rita Fan, also waved it off.
""It (the threatened lawsuit) won't affect the work of the provisional legislature...It doesn't bother me at all. I'm confident we will prevail in the end,"" Fan told reporters.
The provisional chamber holds meetings, however, in Shenzhen, instead of Hong Kong, to fend off potential legal attacks.
The bill on residency rights, which was unveiled by future leader Tung on Friday, will tighten rules on immigrants getting permanent residency after July 1, local television stations reported.
It proposes that illegal immigrants, after residing in the territory for seven years, need permission from the immigration chief to receive permanent right of abode.
Under the current system, they are automatically granted permanent residency after seven years.
Critics on Saturday lambasted the bill as a way of keeping out Chinese dissidents, but a senior Tung aide dismissed the charge.
""Everyone, if they enter Hong Kong illegally, cannot get permanent residency in Hong Kong. This does not mean we are targeting any group of people,"" Elsie Leung, the future Justice Secretary told reporters.
Provisional legislator Henry Tang agreed.
""We will be part of China, in the event that there is any advocacy of splitting with the motherland, or other such activities, we must have laws (against them),"" Tang said.
",45
"Hong Kong's future leader Tung Chee-hwa, who plans to ban foreign donations to political groups, was strongly criticised on Saturday after he acknowledged having donated money to Britain's Conservative Party.
Critics labelled Tung a hypocrite and accused him of double standards, saying his credibility as Hong Kong's leader after China takes it back from Britain on July 1 was now at stake.
Tung's office confirmed a front-page report in the English-language South China Morning Post that he had donated 50,000 sterling (US$81,500) to the Conservative Party before Britain's April 1992 general election.
The disclosure comes at a sensitive time, just days after Tung launched plans to ban foreign donations to political parties in Hong Kong after the handover on the grounds that he did not want foreigners meddling in local politics.
""As a person, I have in the past made modest donations to the Conservative Party,"" Tung said. ""This is a fact well-known to everybody and, as a result, I am particularly sensitive that this should not happen in Hong Kong.""
A Tung aide told the newspaper that billionaire Tung had made the donation in a personal capacity when he was chairman of shipping group Orient Overseas (International) Ltd.
He resigned from that position last October to run for leader after Governor Chris Patten leaves the British colony.
Tung was appointed by Patten as a member of the executive council, or inner cabinet, in October 1992, the same year he donated the sum to the Conservatives.
Tung's critics on Saturday took aim at him.
""It's really too much for him to do it and then say others cannot do it. It's a question of hypocrisy and double standards and sort of saying 'don't do as I do, do as I say,'"" legislator and pro-democracy activist Emily Lau told Reuters.
Tung could see his credibility suffer, said law professor Nihal Jayawickrama at the University of Hong Kong.
""It must affect his credibility if you take up high ground and then you're shown up as having done previously what you are now preaching against,"" he told Reuters.
""If he had such strong views about foreigners getting involved in election campaigns and party funds then why did he do that, did it create so much damage to the British system?""
""And if it didn't create damage to the British system, why does he think it'll create damage to the Hong Kong system?""
The news coincided with a diplomatic coup scored by Martin Lee, leader of the popular Democratic Party, who met United States President Bill Clinton at the White House in Washington on Friday.
Tung, who previously enjoyed a high popularity rating, has seen his ratings fall in recent weeks, particularly after he launched plans to curb public demonstrations as well as the ban on foreign funding, which he argued were for ""national security.""
If his plans go ahead, police permission will be needed to hold protests, while police need only be notified now.
Meanwhile, an unarmed advance party of 40 soldiers from China's People's Liberation Army (PLA) will arrive on Monday to prepare in advance the logistics for the Chinese garrison that will replace British troops on July 1.
Many of Hong Kong's 6.4 million people fear the PLA, recalling the bloody 1989 military crackdown on student activists in Tiananmen Square in Beijing.
",45
"Canada's French-speaking political leaders voiced anger on Friday about a new pre-election ad that suggested Quebec-born politicians did not have what it takes to keep Quebec from leaving Canada.
""The suggestion that where you are born should determine whether or not you should be prime minister of the country is to say the least offensive,"" a sombre Jean Charest, leader of the Conservative Party, told reporters in Ottawa.
The ad, promoting the right-wing Reform Party, shows three French-speaking Canadian party leaders -- including Canadian Prime Minister and Liberal leader Jean Chretien -- along with Quebec Premier and leading separatist Lucien Bouchard.
As the ad calls for ""a voice for all Canadians, not just Quebec politicians,"" the images of the four Quebeckers are circled in red and then each face is crossed out.
Canada has had Quebec prime ministers for 19 of the last 20 years -- Quebec has a crucial one-quarter of the population -- and Chretien led Canada in an October 1995 referendum that Quebec sovereigntists lost by only one point.
Three of the five political leaders contesting the June 2 election are from Quebec: Charest, Chretien and the leader of the separatist Bloc Quebecois, Gilles Duceppe.
Aside from Reform's Preston Manning, from the West, the New Democratic Party's Alexa McDonough is the only non-Quebecker to lead a major political party in this campaign.
""Mr. Manning is setting a very bad example,"" the normally upbeat Charest said, looking troubled. ""He's sending a message here that one part of the country doesn't count.""
Chretien declared in Niagara Falls: ""I want to tell Mr. Manning that people don't like his divisiveness.""
Manning, who advocates decentralization to please both Quebec and other provinces, contends the traditional parties have failed to devise a method to keep Canada together.
""The separatists do damage by what they do. The old-line federalists do damage by what they do not do, the plan that they do not have, the alternative model they do not have, the strategies they do not have for the next referendum.
""We're saying each is equally dangerous in its own way to the unity of the country.""
But Manning -- running second in the polls outside Quebec -- has no voter base in Quebec and a poll released on Friday showed the Liberals, the Conservatives and the Bloc Quebecois neck-and-neck in the vote-rich French-speaking province.
It was not clear how his strategy would play across the country, but as often before in this 36-day campaign, he managed to get other politicians talking about his issues.
""It can divide the country. What he is doing I think is an act of desperation,"" said one Liberal voter, retired engineer Bal Sandhu of from the western city of Edmonton, Alberta.
But many voters are sick of the Quebec issue coming up again and again and think Quebec manages to get a disproportionate share of Ottawa's attention.
""They get more opportunities than the rest of the country, because the government is bending over backwards to try and keep them in the confederation,"" a disenchanted Edmonton technologist, John Mushka, said in a phone interview.
Charest has been rising steadily in popularity since televised leadership debates last week which put national unity at the center of the election campaign.
He is on an intense two-day tour of Quebec to build momentum, with a keen eye on forming the official opposition. The Bloc Quebecois fills that role, giving Canada an official opposition whose goal is to break up the country.
The Reform Party, with its strong support in Western Canada, also has hopes of forming the official opposition.
The stakes are high for Charest, who is personally popular but whose party suffers from a turbulent past. The Tories fell to only two seats in the 1993 election after controlling the government for eight years. And former Conservative Prime Minister Brian Mulroney is reviled across Canada.
",12
"Canada's election campaign shifted into high gear on Tuesday as party leaders prepared for the French-language debate after a relentless attack on Liberal Prime Minister Jean Chretien in Monday's English debate.
The troubling issue of Quebec independence will be in the forefront of Tuesday night's French debate among the leaders of the five major parties, ahead of the June 2 election.
""When it gets into (national) unity, there's an emotional attachment there that has to be responded to,"" Reform Party leader Preston Manning said on Tuesday. ""I believe it is emerging as one of the defining issues.""
Manning scored points in the English debate when he attacked Chretien for bringing Canada to the brink of separation.
Quebeckers narrowly voted to keep their French-speaking province in Canada in Quebec's 1995 sovereignty referendum, by 50.6 percent to 49.4 percent, despite assurances by Chretien that a solid vote against separation was virtually assured.
""You almost blew it, sir,"" Manning told Chretien. ""You do not deserve a second chance.""
But Manning faces a challenge as he tries to get his national unity message across in the French debate. Since he speaks only English, his participation will be limited to addresses at the beginning and the end of the debate.
The pressure is also on Gilles Duceppe, leader of the separatist Bloc Quebecois, who must shine during the French debate after a low-key performance in the English debate.
The Bloc became Canada's main opposition party in the last election in 1993, despite its aim to partition the country.
But the Bloc's grip on Quebec is threatened by early campaign gaffes and a new controversy over whether Quebec's separatist government would have unilaterally declared independence if it had won the 1995 referendum.
Duceppe, Chretien and Conservative leader Jean Charest -- all Quebeckers -- were expected to dominate the French debate. Alexa McDonough, leader of the left-wing New Democratic Party will also participate.
Charest stirred the English studio audience to applause on Monday when he proclaimed: ""I intend to make this country work, because if there's one commitment I made to my children, it's that I'm going to pass on to them the country I received from my parents.""
He said on Tuesday that he expected to be the main target during the French debate.
""Tonight I think you'll see them very aggressive with regards to my own participation,"" he told a morning news conference.
The Liberals have a huge lead in opinion polls, with the backing of between 42 and 47 percent of decided voters.
",12
"Canada's French-language televised debate for the June 2 federal election was cut short suddenly on Tuesday when the moderator collapsed, leaving the five political party leaders stunned.
Moderator Claire Lamarche, a well-known television personality in French-speaking Quebec, fell out of her chair moaning about the heat in the room, just as the five political party leaders were about to attack the defining election issue of national unity -- Quebec independence.
""We decided together that the debate should not continue under the circumstances,"" Arnold Amber, one of organizers of the debate, said in a hastily arranged news conference. ""All the parties are in agreement with this.""
The party leaders left without speaking to the media.
Canadians had been expecting a lively debate on how to handle the troubling issue of Quebec. But the moderator's collapse made the abbreviated exchange anti-climactic, said political scientist Ken McRoberts at York University in Toronto.
""There might have been some dramatic moments in the exchange over the response to a (pro-sovereignty vote),"" McRoberts said in a phone interview from Toronto. ""So (separatist Bloc Quebecois leader Gilles) Duceppe must be quite frustrated.""
Duceppe, a francophone, was sidelined in the English debate on Monday night but observers expected him to use the French-language debate to rally the separatist forces and gather support for his waning campaign.
The debate was about two hours into its scheduled 2-1/2 hours when the moderator collapsed, just as Prime Minister Jean Chretien was asked if he would recognize a vote in favor of Quebec sovereignty if it were by a slim margin.
In 1995, people in French-speaking Quebec voted 50.6 percent against Quebec separation, while 49.4 percent voted in favor of separation, prompting federalist forces to claim victory.
But instead of exploring how the next government would handle an expected referendum on sovereignty next year, the debate focused on Canada's high unemployment rate, robbing Duceppe of the chance to stir up much nationalist spirit.
",12
"Trade ministers from 18 Asia- Pacific countries were urged to support renewed talks for free and open trade in financial services, official documents showed on Friday.
In the documents, senior officials requested that ministers at the Asia-Pacific Economic Cooperation forum in Montreal ""note the successful re-launch of the financial services negotiations.""  
The officials said that ""while recognizing that flexibility may be needed with regard to transition periods for some participants, (we) urge all APEC participants in these negotiations to strive toward achieveing a permanent, most favored nation-based agreement by December 1997.""
Trade ministers from Canada, the United States, the European Union and Japan announced in Toronto last week that they would push negotiations in financial services to the top of the agenda for world trade liberalization talks.
Talks broke down last year after the United States pulled out because of its disappointment in the offers from other countries.
At the Toronto meeting last week, the so-called Quad leaders urged Asia and Latin America to improve their offers to the World Trade Organization. APEC's support this week will likely be seen as a big boost for the talks.
APEC leaders were also urged to consider expanding an agreement liberalizing trade in information technologies forged last December.
APEC members should ""consider the planned review of the Information Technologies Agreement with a view to the possibility of broadening participation in the agreement to all APEC members,"" the document said.
The United States and the European Union have said they hoped China, in particular, would join the agreement as a major step toward China's bid to join the World Trade Organization.
In the document, senior officials also asked the trade ministers to complete the implementation of the recent agreement to open telecommunications markets by January 1, 1998.
APEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
",12
"Bre-X Minerals Ltd., Canada's hottest junior mining company, has officially started its hunt for a partner to develop its spectacular Indonesian gold discovery.
The Calgary-based company said on Thursday it has hired international investment bank J.P. Morgan and Co. as its financial adviser and Republic National Bank of New York as its corporate adviser.
""This is the first step in finding a joint venture partner,"" a company spokesman said in an interview. ""We've hired J.P. Morgan and the Republic National Bank to evaluate our options.""
Bre-X said it wants to find a big, experienced mining concern to buy 25 percent of the Busang gold property and help Bre-X to develop and market the deposit.
""Every major mining company in the world, quite literally, has expressed interest in working with us on Busang,"" said the spokesman.
""So pick the biggest mining companies in the world. If you want names, RTZ, Barrick, Placer Dome, all the way to some of the South African companies to Australian companies, you name it,"" he added.
The company said it hopes to have a deal sewn up by the end of the year and start production in late 1998 or 1999.
The global gold mining community has been holding its breath for months, waiting for Bre-X to open up bidding for its prized Busang deposit.
The choice of J.P. Morgan as an adviser ""reflects that this is going to be a large international process,"" Gordon Capital analyst Barry Allan said in an interview. ""Everyone is interested. The question is who can afford it.""
Buying a chunk of Bre-X will not be cheap. With the company's stock hovering around C$25 ($18.25), it has a market capitalisation of about C$5.9 billion ($4.3 billion) fully diluted.
Bre-X shares, which soared from from a penny stock to more than C$160 ($116) before a 10-for-one stock split last spring, is expected to climb higher, pushing up the price tag for a 25 percent stake in the deposit.
The decision on a financial adviser is only the first of a slew of announcements expected from Bre-X this month that could drive the stock.
An Indonesian government contract is expected within weeks, which will outline environmental, social, tax and financial obligations for Bre-X and its Indonesian partner.
While details of the draft contract of work are already public, some observers fear the government may try to grab a bigger share of the profits as they see the deposit blossom.
New drilling results are also expected to hit the market within a couple of weeks, Bre-X said.
Both the contract of work and the drilling results will likely send the stock higher, analysts said.
For now, drilling at the Busang deposit has outlined 46.92 million ounces of gold. The next set of drill results should bump up the deposit to more than 50 million, analysts say.
""I've made the joke that everybody who goes to the property tends to see God,"" Gordon Capital analyst Allan said just days after returning from an analysts' trip to the site. ""And I guess I did. There's every probability it will be one of the largest in the world.""
The mine should be low cost, especially in the first years, said Allan, with operating costs around US$150 an ounce.
He has set a target of $35 for the stock, in the middle of the C$30 to C$40 range set by most analysts after the most recent tour and a previous tour in July.
""I continue to be really impressed by the deposit,"" said analyst Chris Bradbrook at Loewen Ondaatje McCutcheon, who has visited the site twice.  ""It keeps getting bigger and bigger. The upside is substantial.""
Bradbrook has a C$30 target for the stock for now, since investors want to see who the company's partner will be and how the partner will develop the property before they bid up the stock. ""That is the biggest potential driver.""
But Allan said Bre-X's options in developing the site include going it alone.
""They don't want to sell too low and give up some of the upside potential,"" he said. ""I'm sure they'll look at those offers and if they don't find any that are reasonable, I suspect they will go on their own.""
The economics of the project are robust enough for Bre-X to finance the mine itself, he added.
Bre-X said it would consider that option too.
",12
"Canadian mining companies are keeping a wary eye on the strengthening Canadian dollar, which threatens to bruise their earnings and cash flow.
""As the Canadian dollar strengthens, it hurts us,"" said Vic Wells, spokesman for Anvil Range Mining Corp., which cited the stronger currency as a factor that forced the company to suspend zinc and lead mining at its Faro property in Canada's Yukon last December.
Analysts are forecasting a surge in the Canadian currency in 1997, with some predicting the unit to rise to 80 U.S. cents from its current 74 U.S. cent range.
""It'll take the cream off, that's for sure,"" said George Miller, president of the Mining Association of Canada.
Canada is the world's largest producer of potash, uranium and zinc, the world's second-biggest producer of nickel after Russia and an important source of copper.
Companies that produce metal mainly in Canada are especially hit by the currency strengthening against the U.S. dollar because producers must pay their operating costs in Canadian dollars. But most companies' revenues come in U.S. dollars, the currency in which most metals trade.
""Currency gets full-time attention here,"" said Alan Thomas, chief financial officer of Noranda Inc..
A change of one U.S. cent in the Canadian dollar translates into C$20 million ($14.8 million) on Noranda's bottom line, Thomas said. The currency rose about three-quarters of a U.S. cent in 1996, costing Noranda about C$15 million ($11.1 million), he said.
""So for '96, there's not a big change. But if the dollar continues to go up, it will have a bigger effect,"" he said.
""All our costs are in Canadian dollars -- the salaries we pay, the supplies we buy, the rent we pay. All our products are priced in U.S. dollars and they're priced the same regardless of the exchange rate,"" Thomas said.
Companies such as Alcan Aluminium Ltd., with most production outside Canada, are not as exposed to harm from a stronger currency since they pay most of their operating costs in U.S. dollars, analysts said.
But for companies such as Inco Ltd. and Falconbridge Ltd., which produce most of their nickel in Canada, a stronger dollar will take its toll.
Falconbridge figures a one-cent change in the Canadian dollar would knock C$7 million ($5.2 million) off its bottom line, even with the company's substantial currency hedging programme.
While Falconbridge operations in the Dominican Republic and Norway would not be affected by a stronger Canadian currency, about two-thirds of the company's operating costs originate in Canada, said Chief Financial Officer Lars-Eric Johansson.
Inco estimated that every one-cent change in the Canadian dollar amounted to a $9 million pre-tax hit despite currency hedging. But the company earned $179 million in 1996 on revenues of $3.1 billion, so small movements in the Canadian dollar do not have a huge effect, said Inco Chief Financial Officer Tony Munday.
""It's not going to kill us,"" he said.
Still, some mining analysts said the effects of a stronger Canadian dollar must be understood in context.
""With a rising dollar, it usually means metal prices are going up as well,"" said base metal analyst David Davidson with CIBC Wood Gundy in Toronto.
",12
"The United States wants Asia-Pacific countries to expand free trade in information technology, telecommunications and financial services so that the region can influence the World Trade Organization agenda, U.S. Trade Representative Charlene Barshefsky said on Saturday.
""APEC has decided that it should play the catalytic role in sector opening,"" Barshefsky told reporters on the final day of a three-day meeting of trade ministers from the Asia-Pacific Economic Cooperation (APEC) forum.
""This is terribly significant,"" she said. ""APEC ought to be leading the way.""
Barshefsky said APEC will take the lead in expanding last year's agreement to liberalize information technologies markets and a recent deal to open up trade in telecommunications. If they succeed, APEC countries should give the impetus for a worldwide agreement to liberalize financial services markets.
""APEC countries will give a very strong push,"" she said.
If enough APEC members voluntarily agree to liberalize trade in these sectors, the organization can push the World Trade Organization to make the APEC deal binding on the larger trade body, Barshefsky said. Agreement is easier to reach within APEC than the WTO since the group is smaller and the agreements are not binding, she added.
But progress on financial services depends largely on Latin American and Asian countries significantly beefing up their offers, Barshefsky said.
""The United States will put forward an MFN (most favored nation)-consistent offer, but it will be conditional on achieving a critical mass in the Asian countries and Latin America,"" she said.
Among the 18 APEC members, some of them will have progressive offers in time for the WTO deadline of mid-July, Barshefsky said.
""There are others who have shown reluctance. The same with Latin America,"" she said.
""These offers are going to have to be good, or the United States will seek an MFN exemption,"" she challenged.
Such an exemption would likely stall progress on the talks. Last month, the United States said a financial services pact must include provisions that allow firms to operate in other countries in the form of their choice. It must also allow full majority ownership and assure existing rights of foreign financial service providers, the United States said.
The world's major trading powers have agreed to put forward requests on financial services commerce by mid-June and offers by July 14 in the hopes of finalizing a deal by the end of December.
Barshefsky said APEC, which concentrates on developing voluntary initiatives on free trade, should focus on forming sectoral free-trade pacts for areas that are important enough to force the rest of the world to join in.
She said she wants to have more than one sector to announce by the APEC summit in Vancouver in November.
Other APEC countries have suggested singling out trade in environmental services, medical products, oil seeds, wood, paper, chemicals and autos.
APEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
",12
"Canada's French-language televised debate for the June 2 federal election was cut short suddenly on Tuesday when the moderator collapsed, leaving the five political party leaders stunned.
Moderator Claire Lamarche, a television personality in French-speaking Quebec, fell out of her chair moaning about the heat in the room just as the five political party leaders were about to attack the key election issue of national unity.
""We decided together that the debate should not continue under the circumstances,"" Arnold Amber, one of organizers of the debate, said in a hastily arranged news conference. ""All the parties are in agreement with this.""
The party leaders left without speaking to the media.
Canadians had expected a lively debate on how to handle the troubling issue of Quebec independence. But the moderator's collapse made the abbreviated exchange anti-climactic, said political scientist Ken McRoberts at York University in Toronto.
""There might have been some dramatic moments in the exchange over the response to a (pro-sovereignty vote),"" McRoberts said in a phone interview from Toronto. ""So (separatist Bloc Quebecois leader Gilles) Duceppe must be quite frustrated.""
Duceppe, a francophone, was sidelined in the English debate on Monday night but observers expected him to use the French-language debate to rally the separatist forces and gather support for his waning campaign.
The debate was about two hours into its scheduled 2-1/2 hours when the moderator collapsed, just as Prime Minister Jean Chretien was asked if he would recognize a vote in favor of Quebec sovereignty if it were by a slim margin.
In 1995, people in French-speaking Quebec voted 50.6 percent against Quebec separation, while 49.4 percent voted in favor of separation, prompting federalist forces to claim victory.
But instead of exploring how the next government would handle an expected referendum on sovereignty next year, the debate focused on Canada's high unemployment rate, robbing Duceppe of the chance to stir up much nationalist spirit.
""You decreased the deficit on the backs of the poor,"" Duceppe accused the prime minister.
But Chretien, much feistier in the French debate than in Monday night's English debate, fended off his competitors time and again, speaking about his party's economic record.
Unemployment, especially among young Canadians ""is a very serious problem,"" Chretien said. ""However, first you have to have an economy which creates jobs, and this is the reason why we have to get rid of the deficit.""
Under Chretien's Liberals, the budget deficit has been cut back from about C$42 billion (US$30.3 billion) in 1993 to a projected 1996 defecit of C$16 billion (US$11.5 billion). But Canada's unemployment rate has hovered stubbornly between nine and 10 percent for much of Liberals' term.
Chretien, Duceppe and Progressive Conservative leader Jean Charest -- the three francophone leaders -- spent much of the evening trying to show their parties had Quebec's best interests at heart.
The two anglophone leaders -- Preston Manning, the leader of the right-wing Reform Party, and Alexa McDonough, who heads the left-leaning New Democratic Party -- were marginalized by their poor French.
Over the two days of debates, Charest appears to have fared better than the other leaders. ""My sense is that Charest shone, as he did (Monday) night,"" McRoberts said. ""He is very articulate and very well prepared.""
Charest's leadership has already translated into a surge in his popularity in Quebec. A recent poll indicated he was the most popular of federal party leaders in Quebec.
The Progressive Conservatives have a long way to go, however. They currently hold only two of 295 seats in the House of Commons after being decimated in the last federal election.
The Liberals have a huge lead in opinion polls, with the backing of between 42 and 47 percent of decided voters.
",12
"Fears of a U.S. interest rate hike battered Canadian financial markets this week, but Canada's top central banker gave no hint on Friday whether he might raise Canada's rates in reply to any Fed action.    ""There will always be aan
impact on Canada of an international change in interest rates,"" Bank of Canada Governor Gordon Thiessen told reporters after a speech to economists.
""But the difference I think now is that we have got more room to maneuver than we did before. But you should not interpret that as saying what we are going to do next week or not,"" he added.
The Canadian dollar and fixed income markets were rattled this week by investor concerns that the Federal Reserve would hike U.S. interest rates next Tuesday while the Bank of Canada is expected to hold rates steady.
Thiessen said nothing on Friday to ease market fears.
""He's saying inflation is under control and there is no reason for rates to rise,"" said Warren Jestin, chief economist for Bank of Nova Scotia.
However, economists predicted the central bank might eventually yield to pressure to tighten monetary conditions in Canada if the Canadian dollar continues to weaken.
The Bank of Canada dropped short-term interest rates 11 times last year compared with just one U.S. rate cut.
The lower rates and low inflation can be thanked for strengthening Canada's economy, Thiessen said on Friday, predicting strong growth for jobs and production in the year ahead.
""The Canadian economy should have room for strong above-potential rates of growth in output and employment in coming quarters without a resurgence in inflation,"" he said.
""The margin of unused capacity in our economy will shrink substantially over the next couple of years,"" he said.
Thiessen agreed with a Royal Bank forecast that 700,000 new jobs would be created over the next two years. And he predicted a return of consumer confidence and surging private sector growth.
Thiessen said he sees a strong Canadian dollar in the long term, citing a report on Friday of low Canadian inflation.
Canada's core consumer price index for February rose 1.5 percent on the year, according to Statistics Canada, which puts inflation well within the central bank's target inflation range of one to three percent.
",12
"Canada's stubborn youth unemployment problem is the Achilles heel for the ruling Liberals as they campaign for re-election on June 2.
As Prime Minister Jean Chretien travels the country to boast about his party's economic record, a 16.6 percent youth unemployment rate threatens to be a serious embarrassment for the Liberals. The unemployment rate for the general population is 9.3 percent.
""This is the Liberal betrayal of an entire generation, their hopes, their dreams, and yes, their birth right as Canadians,"" the leader of the leftist New Democratic Party, Alexa McDonough, said on Tuesday.
""Somewhere along the line the Liberals decided that Canada could afford to lose a generation after all,"" McDonough told CBC Newsworld in Newfoundland.
The number of Canadian young people with jobs has dropped steeply in recent years, Canada's federal statistics agency said in a recent study.
The employment rate for Canadians aged 15 to 24 in 1996 was 51.1 percent, a drop of more than 11 percentage points since 1989, Statistics Canada said.
The most recent statistics show the employment rate for youth was 50.5 percent in March. The difference between the 50.5 percent employment rate and the 16.6 unemployment rate is made up of young people in school or who have given up finding a job.
""The labor market has become a more precarious place for young people in the 1990s,"" StatsCan said in its spring 1997 youth unemployment report.
But none of the parties have a concrete plan to deal with youth unemployment, despite their rampant rhetoric, said Brad Lavigne, chairman of the 400,000-member Cahadian Federation of Students.
""There hasn't been an adequate level of discussion yet,"" he said in a phone interview in Ottawa. ""The (age group) is not seen as important. It's very easy to dismiss it.""
The Liberals have a youth employment strategy which provides summer jobs and access to job information. They also give reductions in unemployment insurance premiums to small businesses that create new jobs.
""That's a more effective way than simply cutting the premium across the board,"" said Industry Minister John Manley during a news conference in Ottawa on Tuesday.
The Conservatives, who hope to make a comeback in the election from their current two seats out of 295 in the House of Commons, say they have made youth employment a top priority.
Conservative Leader Jean Charest says his party wants to cut unemployment insurance contributions, establish common educational standards and testing to train young people for high-tech jobs and set up a C$50-million fund for common standards.
""The lack of federal leadership is causing our children to fall behind in the race for success in the new global economy,"" Charest said recently.
And the right-leaning Reform party, with strong roots in Western Canada, also wants to cut taxes as a way to create jobs for young people.
But none of the plans will make a dent in the unemployment problem, said the student federation's Lavigne.
He said the political parties and many Canadians have given up on the government's ability to do anything to create jobs.
((Reuters Ottawa Bureau 613 235-6745))
",12
"Although a Canadian federal election is not expected to be called until this weekend, the mudslinging has already begun.
Reform Party leader Preston Manning, defensive after charges of racism in his right-wing opposition party, sought to turn the tables on the rival Conservatives on Thursday.
The two parties face a battle for the right-wing vote. Reform won the third most seats in its inaugural national election campaign in 1993, while the Conservatives plummeted to two seats after nine years of rule.
But Reform has been haunted by accusations of racism through its 3-1/2 year term in Parliament.
Questioned by reporters on Thursday about Reform's record on tolerance, Manning accused the Conservatives of choosing a candidate based on race.
Manning produced a clipping from a Vancouver newspaper, which quoted a Conservative official as saying he deliberately sought election candidates who were not Sikh so the candidate could distinguish himself from the other parties' Sikh candidates.
""If we'd said that, we'd be crucified,"" Manning told the National Press Club in Ottawa. He urged the media to challenge the Tories on the comment, but denied he was mudslinging.
""I don't like any of that stuff,"" he said.
A Conservative spokesman brushed off Manning's remarks as ""electioneering.""
The ruling Liberals are widely expected to call an election this weekend for June 2. While recent polls predicted the Liberals would retain power, pre-election campaigning has taken on a bitter flavor, with name-calling and accusations of racism and sexism becoming more frequent.
Liberal Defence Minister Doug Young was criticised recently for sexist remarks. On Tuesday, Reform member of parliament Ian McClelland called Liberal Deputy Prime Minister Sheila Copps a ""bitch"" in the House of Commons and was forced to withdraw his remark.
Also this week, British Columbia Reform official George Rigaux resigned after saying that Sikh leaders were corrupting nominations in his riding. Conservative leader Jean Charest said on Wednesday that voters should be alarmed about charges of racism and sexism surrounding the Reform party.
The Conservative and Reform parties are trying to carve out distinct images as they compete for the conservative vote. In trying to portray itself as a grassroots party, Reform has had to fend off a reputation for extremism.
Last May, Reform members of parliament opposed a Liberal bill to expand rights for homosexuals. One Reform member of parliament said that if he owned a business he would move black or gay employees ""to the back of the shop"" or even fire them if their presence annoyed bigoted customers.
His comments were backed by another Reform member of parliament. Both were disciplined by the Reform caucus.
During the 1993 campaign, Reform had to dump a candidate after he acknowledged making anti-immigrant remarks.
",12
"Nickel prices have been in the doldrums in the third quarter, disappointing Canada's big nickel producers who had forecast an increase in prices and a boost to profits.
Canada's two nickel giants, Inco Ltd and Falconbridge Ltd, are also experiencing copper woes.
The unexpectedly low metal prices ""will likely take a bite out of our third-quarter earnings compared to previous earnings,"" Falconbridge chief financial officer Lars-Eric Johansson said in an interview.
Copper prices collapsed after Sumitomo Corp said its chief trader helped run up US$1.8 billion in losses through unauthorized trading over a decade. Only recently has copper showed signs of life.
For nickel, Johansson blamed the sluggish prices on faltering European and southeast Asian economies.
""In the very short term, the fundamentals are obviously not there,"" he said. ""The overall global economy is not doing as well as we had hoped for.""
But he added: ""We expect the demand for nickel to pick up, maybe not this quarter but during the fourth quarter or to be more conservative, early next year.""
Inco was also optimistic, with Inco executive vice president of marketing Peter Salathiel saying: ""The potential for a nickel spike still exists. The time frame has been shifted from say the first half of '96 to the fourth quarter of '96 or the first quarter of '97.""
Salathiel blamed a glut in stainless steel this year for nickel's poor performance. Stainless steel consumes about two-thirds of the world's nickel output.
Nickel demand and supply are currently on a par, Salathiel said.
He said that with nickel demand expected to remain steady for the next few months, nickel prices should rebound once stainless steel production picks up and the European and Asian economies strengthen.
But Richardson Greenshields analyst Ray Goldie said the nickel price should have picked up by now. He has seen growing demand along with a steady supply, laying the groundwork for a rise in prices.
""The fundamentals have worked beautifully,"" he said.
""Despite gloomy talk about the stainless steel industry, which is the major consuming industry, the most recent figures show nickel consumption is growing. Supply can't keep up and inventories are declining.""
So why did nickel fail to spike?
""The fact that nothing has gone wrong may be one reason,"" said Goldie.
He said that nickel companies produced at capacity with no strikes or disruptions and that it might take such a disruption to knock the nickel price out of joint.
The floundering nickel market could spell trouble for stocks that trade on nickel prices, he added.
The stock market has built in an expectation of a moderate price increase, said Goldie and ""if the price of nickel were to go sideways for the next six months, that would be a disappointment and the shares would go down,"" he said.
""But I don't believe there's an expectation we'll see sustained prices over US$4."" Nickel was trading today at US$3.46 a pound.
Bank of Nova Scotia economist Patricia Mohr predicted nickel prices of at least US$4 a pound by early 1997.
She expected stainless steel stocks to be depleted in the fourth quarter, leading to increased demand for nickel in the first quarter of next year.
""There isn't very much new mine supply coming on in the near future,"" said Mohr. ""So you do have the potential for prices to certainly move higher.""
Analysts expect third-quarter earnings for Inco to fall to US$0.29 a share from year earlier US$0.33, with Falconbridge earnings declining to C$0.18 a share from C$0.47 in last year's third quarter, according to estimates compiled by I/B/E/S.
-- Reuters Toronto Bureau 416-941-8104
",12
"Officials from the world's biggest trading partners agreed Friday to push a deal on opening up financial services markets to the top of the agenda in talks to liberalise global trade.
The leaders also emphasised the importance of bringing China and Russia into the World Trade Organisation as quickly as possible ""on commercially viable terms.""
The financial services talks are ""the most urgent, major priority in terms of negotiations for the world trade community,"" Leon Brittan, European Union Trade Commissioner, told a news conference after two days of talks between the so-called Quad partners -- Canada, Japan, the United States and the European Union.
""I believe that the Quad meeting has given a shot in the arm"" to negotiations on financial services, Brittan said.
The Quad members agreed to put forward requests by mid-June and offers no later than July 14 to work towards a financial services deal. They hope to wrap up negotiations in December.
""That should be an example to the rest of the world and a platform on which to build,"" Brittan said.
But he and the other leaders pointed out the need for countries in Asia and Latin America to put together improved offers to the World Trade Organisation. Last year the United States pulled out of talks on financial services because of its disappointment in the offers from other countries.
U.S. Treasury Secretary Robert Rubin, in a letter last week to a number of his counterparts, said a successful financial services pact must include provisions that allow firms to operate in other countries in the form of their choice.
It must also allow full majority ownership and assure existing rights of foreign financial services providers, he said.
The four trading chiefs also called for bringing China and Russia into the World Trade Organisation quickly.
The Quad members said they were united in their belief that China, in particular, should be brought into the global trading forum as long as Beijing committed itself to the global trading system and open market access.
""We are not going to push on the accelerator for political reasons, and we are not going to put on the brakes for political reasons,"" Brittan said.
Officials said the Quad members would like new members, especially China, to sign on to a recent pact to eliminate tariffs on various information technologies by 2000.
The forum provided an opportunity for the four countries to discuss bilateral trade issues with each other.
The European Union expressed concern about the implementation of a 1992 agreement with the United States limiting subsidies to aircraft industries.
""We do not accept that proposition at all, at the same time the United States has some concerns about European practices,"" U.S. Trade Representative Charlene Barshefsky told reporters after a morning meeting with Brittan.
Barshefsky said U.S. and EU officials would continue discussions on the issue in June, but that the United States would not agree to any emergency consultations.
Barshefsky also had a strong word with Canadian Trade Minister Art Eggleton over Canada's new copyright law which taxes blank cassettes and distributes the royalties to performers. U.S. performers, however, will not receive any money since the United States has not signed an international copyright agreement.
""We think there is a national treatment problem here,"" Barshefsky said, referring to one country's preferential treatment for its citizens. She said the United States would consider taking trade action against Canada over the law.
But Eggleton said Canada was well within its rights and obligations with the copyright law.
",12
"Although a Canadian federal election is not expected to be called until this weekend, the mudslinging has already begun.
Reform Party leader Preston Manning, defensive after charges of racism in his right-wing opposition party, sought to turn the tables on the rival Conservatives on Thursday.
The two parties face a battle for the right-wing vote. Reform won the third most seats in its inaugural national election campaign in 1993, while the Conservatives plummeted to two seats after nine years of rule.
But Reform has been haunted by accusations of racism through its 3-1/2 year term in Parliament.
Questioned by reporters on Thursday about Reform's record on tolerance, Manning accused the Conservatives of choosing a candidate based on race.
Manning produced a clipping from a Vancouver newspaper, which quoted a Conservative official as saying he deliberately sought election candidates who were not Sikh so the candidate could distinguish himself from the other parties' Sikh candidates.
""If we'd said that, we'd be crucified,"" Manning told the National Press Club in Ottawa. He urged the media to challenge the Tories on the comment, but denied he was mudslinging.
""I don't like any of that stuff,"" he said.
A Conservative spokesman brushed off Manning's remarks as ""electioneering.""
The ruling Liberals are widely expected to call an election this weekend for June 2. While recent polls predicted the Liberals would retain power, pre-election campaigning has taken on a bitter flavor, with name-calling and accusations of racism and sexism becoming more frequent.
Liberal Defense Minister Doug Young was criticized recently for sexist remarks. On Tuesday, Reform member of parliament Ian McClelland called Liberal Deputy Prime Minister Sheila Copps a ""bitch"" in the House of Commons and was forced to withdraw his remark.
Also this week, British Columbia Reform official George Rigaux resigned after saying that Sikh leaders were corrupting nominations in his riding. Conservative leader Jean Charest said on Wednesday that voters should be alarmed about charges of racism and sexism surrounding the Reform party.
The Conservative and Reform parties are trying to carve out distinct images as they compete for the conservative vote. In trying to portray itself as a grassroots party, Reform has had to fend off a reputation for extremism.
Last May, Reform members of parliament opposed a Liberal bill to expand rights for homosexuals. One Reform member of parliament said that if he owned a business he would move black or gay employees ""to the back of the shop"" or even fire them if their presence annoyed bigoted customers.
His comments were backed by another Reform member of parliament. Both were disciplined by the Reform caucus.
During the 1993 campaign, Reform had to dump a candidate after he acknowledged making anti-immigrant remarks.
",12
"The glory of controlling Busang, one of the world's richest gold deposits, has thrown together an unlikely duo.
In one corner is Peter Munk, the suave but aggressive founder of heavyweight Barrick Gold Corp., backed by buckets of money, power, connections and experience.
In the other is David Walsh, the maverick chief of Bre-X Minerals Ltd., the young Canadian exploration firm that discovered Busang in the jungles of East Kalimantan on the Indonesian island of Borneo.
The Indonesian government has told Barrick and Bre-X to form a joint venture to manage the fabulous gold find. But the government edict would force an unnatural David-and-Goliath alliance on two companies led by two very different men.
To observers, Munk, 69, is the epitome of class. He makes sure everything is top-notch and pays top dollar. Barrick's imposing office towers over downtown Toronto, impressing visitors with its grandiosity.
Those who know him best say Munk plays to win. In sports, he sticks to skiing and tennis, believing that focusing on just two activities will help him excel.
With Barrick, North America's biggest gold company and Munk's baby, he sticks doggedly to gold, refusing to diversify into other metals or minerals.
""He's like a tiger,"" his long-time friend Bob Smith, the recently retired president of Barrick, told Reuters. ""If he grabs hold of something, he won't let go. He has a tremendous ability to focus, whether it's recreation or business.""
In the 1950s, Munk, originally from Hungary, started up Clairtone Sound Corp., a stereo company that dazzled Canada until it flopped in 1971.
""Everything I've done afterward has been child's play compared with Clairtone,"" he told author Peter Newman. ""What I learned was never to give away your destiny.""
In 1983, Munk started Barrick, producing 3,000 ounces a year, and built it into the world's third largest gold company with estimated production of 3.2 million ounces for 1996.
Bre-X's Walsh has gone from rags to riches in less than four years. He started as a Montreal stockbroker, was transferred to Calgary, Alberta in the 1980s and then broke out on his own. He concentrated on oil and gas exploration and then switched to mining. But by 1993, his exploration efforts had dried up.
""We had these claims which were worthless, and no money,"" Walsh, 51, told Reuters in a recent interview.
Almost broke, he scraped together C$10,000 ($7,400) to start exploring in Indonesia, pursuading friends to invest C$200,000 ($148,000) for a stake in the area now known as the central Busang.
Walsh hit the jackpot with Busang, which has at least 57 million ounces of gold, currently worth $20 billion.
""It just kept growing,"" Walsh said. ""By July and August (1995) it really appeared it would be a monster discovery.""
He ran Bre-X from the basement of his Calgary home until last year. Bre-X's rocketing stock has made him a multi-millionaire and he now lives in the Bahamas with his wife Jeannette.
But he has one regret. ""We should have been more visible in Indonesia,"" he said. ""I think where we lacked was in making more relationships than we had in Indonesia.""
Bre-X has an alliance with Sigit Harjojudan, the son of Indonesian President Suharto, but observers said Sigit's influence was eclipsed by that of his sister Siti Hardiyanti, with whom Barrick forged an early alliance.
Munk has attracted to his advisory board former U.S. President George Bush, former Canadian Prime Minister Brian Mulroney and former Bundesbank President Karl Otto Poehl.
He has ties with politicians in many countries and analysts said those gave him the upper hand with Busang.
Munk and Walsh have tried to tango before. In 1994, they reached an agreement on developing Busang. But last-minute changes from Barrick prompted Bre-X to back out of the deal.
With Barrick's rival Placer Dome Inc. trying to woo the Indonesian government into allowing it to bid on Bre-X, Walsh has made it clear he would rather do business with Placer than with Barrick.
",12
"Canada hopes Asia-Pacific trade ministers in Montreal for trade talks will forge a consensus to target environmental products and services as an area for trade liberalisation.
""Environmental goods and services and technologies is one (sector) that I particularly favour,"" Canadian Trade Minister Art Eggleton said Thursday, the first day of a three-day meeting of the Asia-Pacific Economic Cooperation (APEC) forum.
Analysts said Eggleton is under pressure to make sure the APEC trade ministers have something concrete to show at the end of their meeting, held to set the agenda for an APEC summit in Vancouver, British Columbia, in November.
Environmental technologies is an area where Canada should find it easy to gather support, said senior Canadian trade officials.
""It tends to get a rather positive echo around the circuit,"" said one official who asked not to be identified.
Last year, the 18 APEC members kick-started a worldwide agreement on liberalising the information technology market, Eggleton said, and he hopes APEC can play a similar role this year in at least one sector.
""There's a lot of pressure (to announce concrete progress),"" Karen Minden, director of the APEC Studies Foundation for Canada, said in a telephone interview. ""People in the organisation have said if APEC doesn't catch the leaders' attention, then it won't get anywhere.""
Canada is this year's chair for APEC, and wants to show the world in November that the huge forum, which includes some of the world's richest countries as well as many developing countries, can be productive.
Previous summits have been long on trade liberalisation rhetoric but slow to promote free trade measures, critics charge.
""This will be the meeting that gets things started,"" Eggleton told reporters. ""I expect what we're going to announce is that we're moving forward and developing an agenda for the November meeting that will help ensure we'll come out of this Canada Year for APEC with some very solid accomplishments.""
He said he also hopes the trade ministers will discuss implementing country-specific trade liberalisation action plans put together by each of the 18 members last year.
""If we come out of this meeting having named one or two sectors, then we will have done well,"" a senior trade official said.
While U.S. officials said earlier this week they hoped to use the APEC meeting to test the waters for tariff cuts on wood and paper products, Canadian officials were not optimistic progress would be made in that sector.
""There are some sensitivities here,"" said the official. He said Canada would love to eliminate all tariffs in wood and paper trade, but APEC was divided on the issue.
Officials said they also hoped to make progress on streamlining customs regulations, which often cost small and medium-sized businesses crucial time and money in international trade.
""For these people, (customs red tape is) not merely an inconvenience like it is for big business,"" an official said. ""It's a block.""
As the APEC trade ministers prepared for their first dinner together Thursday, Canadian labour leaders called on them to focus on human rights in Indonesia.
The labour leaders said they opposed the imprisonment of Muchtar Pakpahan, an Indonesian trade union leader and dissident. The Canadians cited a letter from U.S. President Clinton conveying his disapproval of Pakpahan's jailing, and they urged Canadian officials to follow suit.
Eggleton said he would discuss human rights with Indonesia if the two countries could arrange a bilateral meeting.
APEC aims to achieve free and open trade and investment in the region among developed countries by 2010 and among all member countries by 2020.
APEC's members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
",12
"Canada is raising the amount of investment required of prospective immigrants seeking to settle in the country, Immigration Minister Lucienne Robillard said on Friday.
Under a program designed to attract investment, one way foreigners seeking to live in Canada may be granted an immigrant visa is by pledging to invest in the economy.
But Robillard told a news conference the required amount would be raised to avoid abuse and to ensure adequate economic impact.
""While we won't be changing the basic selection criteria for investor entry to Canada, we will be changing the amounts needed to invest, the ways in which that capital can be used and the way in which the program is administered,"" she said.
""It's the most practical way to ensure growth and employment at the local level.""
She denied that passage into Canada was for sale. ""Our citizenship is not for sale in this country,"" she said. ""The amount of money invested is not the only criteria here.""
Investors account for about three percent of total immigration to Canada each year. Currently they must invest $250,000 Canadian ($180,000) to gain entry.
That is being raised to C$450,000 ($325,000) for the richest, most popular destinations -- Quebec, Ontario, Alberta and British Columbia. For the rest of Canada the rate will rise to C$350,000 ($250,000).
At least 60 percent of the capital must be invested in small and medium-sized businesses. The provinces will be able to direct the remaining 40 percent to their chosen priorities.
The immigrant investor program was introduced in 1986 to attract experienced business people and their money to Canada. The program has attracted C$3.75 billion ($2.74 billion) since its inception and created more than 33,000 jobs, Robillard said.
",12
"Zaire's civil war should be resolved in Africa, without the intervention of the West, the Canadian government said on Wednesday.
""We're asking for all parties to sit down and discuss and peacefully negotiate a resolution to this,"" Christine Stewart, Canada's secretary of state for Latin America and Africa, told the House of Commons. ""We believe that the Africans themselves must come to a peaceful resolution to this problem.""
Canada's stand contrasted with that of the United States, which signalled on Wednesday that Zaire's President Mobutu Sese Seko should step down.
Rebel forces now control almost half the territory in Zaire, the largest country in central Africa. Although he is under siege and suffering from prostate cancer, Mobuto is clinging to power and has declared a state of emergency in the capital Kinshasa and the rest of the country.
""The government of Canada is not asking the president to leave the country at this time,"" Stewart said. ""Canada believes that Africans have to resolve their problems. Obviously Western-imposed solutions in this area of the world have not succeeded in the past.""
She encouraged the countries around Zaire to help it resolve its problems.
Earlier on Wednesday, Washington effectively ended a decades-old alliance with Mobutu. White House spokesman Mike McCurry said a negotiated soloution to Zaire's civil war must include agreements on interim transitional government arrangements leading ultimately to elections.
""That clearly reflects our view that Mobutuism is about to become a creature of history, because the support for President Mobutu is not sufficient to lead Zaire into the next chaprter of its history,"" McCurry told reporters.
Late last year, Canadian soldiers led a multinational force into eastern Zaire to aid Rwandan refugees fleeing after a revolt by Zairean rebels.
The Canadian-led force was able to do little more than coordinate data from aerial searches for refugees and prepare plans for aid airdrops.
",12
"Canada's political leaders, campaigning for re-election on June 2, are accusing one another of being too American in their approach to Canada's cherished but malnourished health care system.
Canada's universal medicare plan has suffered injury after injury in recent years as governments at the federal and provincial levels have taken a hatchet to health care spending in an effort to rein in galloping deficits.
While all Canada's main political parties are pledging to reinvest in health if successful on June 2, the sensitive issue has become a political game of numbers and name calling.
The ruling Liberals as well as the Conservative and Reform parties want to cut health care and are ""pushing Canada ever closer to an American-style two-tiered system,"" Alexa McDonough, leader of the left-leaning New Democrats, charged.
""Look past the rhetoric and look at the numbers,"" she said, adding that only her party would sustain federal support for medicare.
Government-funded universal health care is a sacred cow in Canada and a key way for Canadians to distinguish themselves from their powerful American neighbours. Polls show that preservation of health care is a major election concern.
But even as U.S. politicians have weighed adopting elements of Canadian health care in the past few years, Canada has moved further away from its traditional universal approach, adopting elements of the U.S. setup, the New Democrats say.
The Liberals have cut health and education spending to C$12.5 billion ($9.1 billion), down about C$6 billion ($4.4 billion) from 1993, when they first took office under Prime Minister Jean Chretien.
Critics say the cuts have shortened hospital stays, led to hospital closures and forced many Canadians to pay for their own home care -- shifting the system toward a U.S.-style one in which only the poor and the elderly receive care paid for by the government.
But the Liberals claim to have defended the principles of universal medicare by preventing doctors and hospitals from charging extra for their services and prohibiting private health care clinics.
""All Canadians should have equal access to high-quality care,"" Anne McLellan, a Liberal candidate and Cabinet minister, said on Tuesday at a news conference. ""We will never accept one system for the very wealthy and another for the rest of us.""
The day after Chretien called the June election, his government announced it would reverse C$4.8 billion ($3.5 billion) in planned cuts in transfers to the provinces for health and social spending over the next five years.
",12
"A large discrepancy between two recent statistical reports on job creation in Canada has raised questions about the depth of Canada's unemployment problem.
The so-called payroll report, which measures the number of employees on business payrolls in Canada, showed the creation of 301,000 jobs in the fourth quarter of 1996.
But the much-watched labor force survey showed a more depressing picture. The monthly labor force survey is a broader measure of labor markets and includes self-employed and agricultural workers, who are not on business payrolls, as well as the unemployment rate.
For the fourth quarter of 1996, the labor force survey showed the creation of about 86,000 jobs -- less than a third of the new jobs in the payroll survey.
While Statistics Canada officials played down the discrepancy, the numbers raised eyebrows in Ottawa, where job creation promises to be a major issue in a federal election campaign expected this spring.
The governing Liberals are ready to campaign on their economic record, but are vulnerable to criticism on jobs since the unemployment rate has remained stubbornly high, hovering just below 10 percent.
But the two reports are apples and oranges, said Mike Sheridan, director-general of labor and household surveys at Statistics Canada.
""There's a big difference there, but why don't you look at it year over year?"" he said in a phone interview. ""The problem here is, on the short term, these two surveys don't measure the same thing.""
For all of 1996, the labor force survey showed an increase of 186,000 jobs or 1.4 percent, while the payroll numbers showed an increase of 195,000 or 1.8 percent.
""Not a big difference,"" Sheridan said. ""Over short-term periods, they rarely move in sync. But over longer-term periods, they move in sync.""
The labor force survey had a 20-year history, while the payroll survey was fairly new and still undergoing changes, he said.
""The payroll numbers are being improved. They're playing almost a catch-up to the labor force,"" he said.
Economists said they tended to place more weight on the labor force survey than the payroll numbers, because the labor force survey gave a bigger, more up-to-date portrait of the job market.
The labor force survey for March is to be released on Friday. Economists predicted the creation of 35,000 jobs, compared to a loss of 18,000 for February. They predicted a dip in the unemployment rate to 9.6 percent from the 9.7 percent at which it had been stuck in the past three months.
Positive signals in the data are widely expected to encourage the Liberals to call a spring election, rather than waiting until autumn.
((Heather Scoffield, Reuters Ottawa Bureau 613 235-6745))
",12
"With the ruling Liberals far ahead in the polls, the biggest question in the campaign for Canada's June 2 federal election is not who will win but which opposition party will place second.
""It's an election that's quite unlike what you see in other Western countries because there really is no realistic option (aside from the Liberals),"" Reg Whitaker, a political scientist at York University in Toronto, said recently.
""The opposition parties are fighting for small markets. It's wide open for the Liberals.""
Despite opposition criticism of the Liberals' record on national unity, unemployment and taxes, polls show the Liberal party with a consistently strong lead.
The official opposition since the last election in 1993 has been the Bloc Quebecois, whose sole aim is promoting Quebec independence, not forming a federal government. ""They want to put themselves out of business,"" Whitaker said. ""So right off you have a bizarre situation.""
Prime Minister Jean Chretien called the June 2 election on Sunday. In the last election in 1993, the Liberals won 177 out of 295 seats, the Bloc Quebecois 54 seats, the Reform Party 52, the New Democrats nine and the Conservatives two. One independent was elected.
Unless one of two right-wing parties -- the Conservatives and Reform -- can consolidate nationwide support, analysts said, the Bloc was poised to be the official opposition again, keeping the Quebec sovereignty issue on the front burner.
Reform, with strong roots in western Canada but feeble support elsewhere, has painted itself as the only party that can hold the Liberals accountable. But it stops short of seeking the role of government for now.
""Our ultimate objective is to get a Reform government,"" party leader Preston Manning said recently. But when asked about his immediate goal, he said he wanted to win enough seats to form the official opposition.
""They're mainly concerned about holding on to what they've got,"" Whitaker said. Reform had 50 seats when the House of Commons was dissolved on Sunday.
The Conservatives, led by Quebecker Jean Charest, stubbornly maintain they can form the next government, but the right-leaning party has a long way to go. In 1993 the party, one of the oldest in Canada and the ruling party from 1984 to 1993, lost all but two of its seats in the House of Commons.
""They have some severe limitations,"" Whitaker said. ""You see the Conservative Party and the Reform Party fighting over the same right-wing margins.""
Reform and the Conservatives are both campaigning on smaller government and tax cuts as ways to fix Canada's persistent unemployment problem. The Conservatives, however, stand to gain in Quebec, while Reform has no base in the French-speaking province.
A poll in Quebec released on Monday showed support for the Liberals at 37 percent, the Bloc at 35 percent and the Conservatives at 25 percent.
Alone on Canada's left wing is the New Democratic Party, which makes no claims to forming a government.
""Federally, we've never made a government, but we've always been there to make a difference,"" NDP leader Alexa McDonough said as she launched her campaign last weekend.
But the Liberals have co-opted the NDP too, appealing to moderate left-wing Canadians with talk of preserving health care, social programmes and the national pension system, and promoting Liberal legislation on gun control.
",12
"Canadian Trade Minister Art Eggleton faces pressure at a meeting of Asia-Pacific officials that starts on Thursday to ensure concrete steps are taken to achieve free and open trade, analysts said.
Trade ministers from the 18 member Asia-Pacific Economic Cooperation forum are meeting through Saturday here to set the agenda for an APEC summit in Vancouver in November.
""There's a lot of pressure,"" said Karen Minden, director of the APEC Studies Foundation for Canada. ""People in the organisation have said if APEC doesn't catch the leaders' attention, then it won't get anywhere.""
Canada wants to show the world in November that the huge forum, which includes some of the world's richest countries and many developing countries, can be productive. Previous summits have been long on talk of reform but slow to promote free trade measures, critics say.
Canada, which as APEC chair this year will play a big role in directing the summit agenda, has a reputation for focusing on administration and structure rather than on trade reform.
But Eggleton probably will pick up on sectors discussed last week in Toronto at a conference of trade ministers from the United States, Japan, the European Union and Canada.
The so-called Quad countries agreed to make liberalisation of financial services a priority, with Canada optimistic about progress on trade in environmental products.
But APEC members should expect resistance from lesser developed Asian countries on financial services, said a Canadian trade specialist who asked not to be identified.
At the top of everyone's minds will likely be China's bid to join the World Trade Organisation, the trade expert said.
""The biggest issue will be in my view the WTO accession of China,"" the expert said in a phone interview.
At last week's Quad meeting, trade ministers said they wanted to bring China and Russia into the WTO quickly but wanted to assure Beijing was committed to the global trading system and open access to markets.
The APEC meeting will also provide an opportunity to test the waters for a new round of tariff cuts on wood, paper and other products, U.S. officials said.
APEC aims to achieve free and open trade and investment in the region between developed countries by 2010 and between all member countries by 2020.
APEC members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
",12
"The story of Bre-X Minerals Ltd. ( ) and its fabulous Indonesian gold discovery deep in the jungles of Borneo has all the elements of a thriller: suspense, international intrigue, politics, legal wrangling and lots of money.
The end of the story is nowhere in sight.
Until this week, Toronto-based Barrick Gold Corp. appeared to have a deal with Bre-X sewn up. But Placer Dome Inc. in Vancouver raised the stakes and added another twist to the plot on Tuesday by announcing that it had made an offer for Bre-X that was now under consideration by the Indonesian government.
On Wednesday, another Vancouver mining concern, Teck Corp., said it hoped to make its own bid for Bre-X and its rich Busang deposit.
""Busang assures any company a leading position, with its low costs and large size,"" said gold analyst John Ing of brokerage Maison Placements in Toronto.
The Busang deposit in Kalimantan on the island of Borneo contains at least 57 million ounces of gold, worth $21 billion at today's prices. Many analysts believe the deposit could contain more than 100 million ounces of high-grade, low-cost gold.
Until this week, it seemed Barrick was the only company with a realistic chance of grabbing a share of the project.
In November, the Indonesian government told Bre-X, which discovered the Busang gold find, to form a joint venture with Barrick and present their deal to the government for approval.
A proposal was assembled last month and awaits the government's blessing.
But the Indonesian government's edict spooked the international mining community and angered many Bre-X shareholders who felt their company had been forced to negotiate with a gun to its head. Some Bre-X shareholders hired high-profile lawyers to ensure their interests were protected in any eventual deal.
Meanwhile, the Barrick-Bre-X arrangement spawned rampant rumors in the mining and investment communities, prompting observers to ask why Busang deposit was not auctioned to the highest bidder, how Barrick acquired such a privileged position and who was calling the shots in hammering out a final deal.
Barrick maintains it was chosen for its experience operating large gold mines, its environmental record and its strong financial position.
Others cite Barrick's alliance with the influential daughter of Indonesia's President Suharto, and Barrick's high-powered advisory board, which includes former Canadian Prime Minister Brian Mulroney and former U.S. President George Bush.
Although Barrick contends it is still the only company in the running for Bre-X, shareholders have pushed up Bre-X's stock on the belief that Placer Dome may have a chance, analysts said.
""If it were a horse race, you'd have to look at Placer,"" said analyst Ing.
Bre-X shares rose C$1.10 to C$24.45 on Wednesday on the Toronto Stock Exchange after jumping C$1.90 to C$23.35 on Tuesday.
Analysts said Indonesian officials were probably concerned about tarnishing their reputation in the international investment community and were seeking a way to allow other companies to bid on Busang without losing face.
The fact that Placer Dome boldly declared its intentions in a news release, adding that it had discussed the matter with high-ranking Indonesian officials, could be a sign that the bidding process had already opened, said gold analyst Chad Williams at Research Capital in Montreal.
""We may be in the midst of a bidding process as we speak, a bidding process by Indonesian standards,"" Williams said. ""I think the Indonesians appreciate how important it is to attract foreign investment, so they're treading very carefully.""
For Bre-X, it is not simply a matter of waiting for word from the Indonesian government and doing what it is told.
One of Bre-X's Indonesian partners, Jusuf Merukh, this week filed a C$2 billion ($1.5 billion) lawsuit against Bre-X, its executives and others involved in Busang. The suit claims up to 40 percent of the Busang deposit. Merukh already controls an undisputed 10 percent of the smallest part of Busang.
""We're serious about this claim,"" Merukh's lawyer Aleck Trawick told Reuters by telephone from Calgary on Wednesday. He said Bre-X had 15 days to file a defense.
Bre-X described the law suit as ""frivolous"" and said it planned a vigorous defense.
Meanwhile, Bre-X is still waiting for its contract of work permits from the Indonesian government, which it needs to continue work on Busang.
Most observers agree on one thing: Indonesian  President Suharto and his close officials and advisers hold the key to any conclusion of the Bre-X saga.
""I think Placer and Barrick are waiting for some sort of signal,"" said Ing. ""I think it's a waiting game.""
While Placer Dome Chief Executive John Willson estimated this week that the saga would take three to six months to play out, some analysts believe the outcome will be clear long before that.
""I think things will develop very quickly from here on in,"" said analyst Williams.
",12
"Inmet Mining Corp chief executive Bill James has one focus for the company he has led for the past six months: Antamina.
The huge copper and zinc discovery in Peru holds a resource of at least 400 million tonnes of ore, but the deposit requires at least US$1.5 billion to develop. Inmet shares the deposit 50-50 with Rio Algom Ltd.
""We're going to focus on Antamina and hopefully that will turn out to be a very profitable mine,"" James said on Friday in an interview.
""Our trick is going to be to finance it. We have very limited cash flow right now,"" he said. ""It'll be a difficult situation. But we're going to do it.""
How?
""Well, at some stage we'll probably do some underwritings and we'll sell off some assets. With the combination of that, we think we can handle our share,"" James said, springing out of his chair and pacing the room.
""We're going to do it,"" he bellowed, shaking his clenched fists above his head. ""We are definitely going to do it.""
But James is not starting from a position of strength. The copper, zinc and gold company posted a 1996 loss of C$364 million -- one million dollars for every day of the year, as James puts it.
""Nobody would call that too healthy.""
James, 68, who is still officially chief executive at Denison Mines Ltd, was brought to Inmet last September to turn around the company. Denison would likely name a successor next week, said James, a former chief executive of Falconbridge Ltd.
Since James took the Inmet helm, the company has written down C$355 million in assets, including its solution mining at Copper Range in Michigan and its Bougrine zinc and lead mine in Tunisia.
It also wrote off a big chunk of its investment in the Izok Lake copper and zinc prospect in Canada's Northwest Territories and its investment at the Cayeli copper and zinc project in Turkey.
The company also faces low grades and rising costs at its young Troilus gold mine in northern Quebec.
A recent study on the Petaquilla copper-gold exploration property in Panama showed the project would probably not be economic under current conditions. Inmet has 48 percent of the project, with Teck Corp holding 26 percent and the rest held by Adrian Resources Ltd.
James would not say which assets were for sale. But he said he was sure the company could get at least book value or C$17 million for its stake in Petaquilla, ""a little bit"" for Bougrine and at least C$25 million for Izok Lake.
""We're not in any rush to sell these things off and we don't want anyone going around these properties kicking tires,"" he warned.
The company has C$185 million in the bank and would not need to fund Antamina for two or three more years, he said.
Inmet shares were up 0.05 to 8.85 in Toronto, down from a 52-week high of 11.13.
((Reuters Toronto Bureau 416 941-8100))
",12
"The man who watched Indonesia's Busang, the largest gold discovery of the century, slip from his grasp is gracious in defeat.
Peter Munk, chairman and chief executive of Canada's Barrick Gold Corp. said on Tuesday he still has faith in Indonesia and its mining law, despite losing the battle for the Busang gold deposit to Freeport-McMoRan Copper and Gold Inc. last week.
""It's in good hands now and I wish them all the good luck,"" Munk, 69, told Reuters in a telephone interview from Switzerland.
Munk and a team of executives and high-profile advisers -- including former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney -- spent months wooing the Indonesian government in an effort to win control of Busang.
In a race that included most of the world's biggest mining concerns, Barrick, the world's second largest gold company, initially dominated the negotiations for control of Busang, which was discovered and 90 percent-owned by Calgary, Alberta-based prospector Bre-X Minerals Ltd..
Busang contains at least 71 million ounces of gold, valued at about $25 billion, but Bre-X and others believe the size of the deposit may be much larger.
Late last year the Indonesian government told Bre-X to form a joint venture with Barrick and set a deadline for Feb. 17.
But Munk's glittering inside track to success ended abruptly when the government of President Suharto last month brought in Muhammad ""Bob"" Hasan, an Indonesian timber tycoon with extensive business interests, many friends in the mining community and close ties with Suharto.
""Control was not in my hands. It was really not any more in the government's hands,"" Munk said. ""It was transferred to Mr. Hasan's hands. He was appointed to make the final say and make the final decision.
""I did not know of Mr. Hasan's existence until the middle of January when I was informed by the government. He was not involved.""
Shunning Barrick, Hasan brokered a deal that gave Freeport 15 percent of Busang and the right to mine the deposit. The arrangement left Bre-X with 45 percent and handed the rest to the Indonesian government and to two Indonesian companies controlled by Hasan.
Bre-X received no compensation in the deal.
Despite being thwarted in the end game, Munk said he harbored no resentment. ""So is life,"" he said philosophically.
""It's given me a great amount of encouragement. Busang is not the largest gold find in Indonesia,"" he predicted. ""I think there will be many more gold finds and we intend to find many of them.""
The Bre-X case was an exception, Munk said, adding that he still had faith that Indonesian mining laws would serve him well in the future.
""Bre-X was a very unfortunate example and I think it is in no way an indication of the stability of the mining industry and the interests of the international mining community in Indonesia,"" he said. ""We intend to pursue our program in Indonesia with a great amount of vigor.""
But Barrick's plans do not include any fresh attempt to bid for Busang, despite the riches contained in the deposit.
Munk said he was ""absolutely not interested"" in a project that Barrick could not control.
""We've (grown) without Busang and we will continue to do it without Busang,"" he said. ""But we will not sacrifice the fundamental principles on which we built our company. That ends and begins with controlling our own mine.""
",12
"TVX Gold Inc is taking steps to join the ranks of major mining companies, bringing aboard three senior executives who pledge to turn the company into a million-ounce-a-year gold producer.
""We're here to help TVX grow,"" said Cliff Davis, the new senior vice-president of North American operations, among three officers who joined TVX in the past month.
""We understand the need for organization. We understand realistic plans. I think that's something we can help TVX with,"" Davis told Reuters in an interview.  
Davis's next plan is to speed production at the New Britannia mine in Manitoba and develop more reserves at Casa Berardi in Quebec.
Joining Davis at TVX are David Murray, the recently appointed president and chief operating officer, and Ken Sangster as senior vice-president of European operations.
The three have worked together before. They did stints at mining giant RTZ-CRA Corp Plc and have years of experience with huge projects.  
""For us it was a perfect fit,"" said TVX spokesman Ed Baer. ""One of the things that was a common concern to the market was our lack of management.""
Toronto-based TVX split off from Inco Ltd in 1993 and has concentrated on expanding its assets.
With its interests now growing in Canada, Greece, Brazil, Ecuador, Chile, the Czech Republic and Russia, the company is ready to switch its focus to production, he said.
TVX has promised its shareholders it will be producing 1.1 million ounces of gold a year by the year 2000 from 423,000 ounces in 1995.  
To help keep its promise, the company has placed its bets on the Kassandra Mines in Greece. ""If everything works for us, the story really lies in Greece,"" said Baer.
The property so far is expected to produce 300,000 ounces of gold a year at a cash cost of US$150 an ounce. TVX was still drilling and would not have a clear idea until next spring what the deposit offered, said Baer.
Uncertainty over Kassandra has unsettled TVX stock. Its shares peaked at 14.85 in Toronto during a road show and high gold bullion prices last winter. But the stock has since slid.  
With its stock now trading around 10 on the Toronto Stock Exchange and around 7.50 on the New York Stock Exchange, TVX has been rumored as a takeover target for some major gold producers.
But as a growing company, TVX is always looking for joint ventures and is on the prowl for small mining companies with proven reserves, Baer said.
Davis's first move at TVX was to shut the company's gold mine in Montana earlier this month.
The Mineral Hill mine drained money from the company for years. TVX hoped to revive it with additional ore found at nearby Crevice Mountain, but ore grades at Mineral Hill grew worse and the company could not keep its mill supplied.
Although the company continues to explore at Crevice, Davis did not hold out much hope for a resurrection of mining on the property.
""If it's what it appears to be, we won't reopen,"" he said.
",12
"Canada's Barrick Gold Corp on Monday dropped out of the race to control the vast Busang gold find in Indonesia, losing a long battle for the right to mine the deposit to U.S.-based Freeport-McMoran Copper and Gold Inc.
But analysts warned that the struggle to control Busang, possibly the world's biggest gold deposit, may not have ended. Placer Dome Inc, another big Canadian mining concern, said it has not given up hope of grabbing a piece of Busang.
""This thing is far from over,"" said Fred Ketchen, vice-president of Toronto brokerage ScotiaMcLeod.
Calgary's Bre-X Minerals Ltd, which discovered the 71-million-ounce Busang gold find, announced on Monday it had reached a deal with Freeport, shortly before an Indonesian government deadline was due to expire.
Under the deal, Freeport will own 15 percent of Busang find, Bre-X will keep 45 percent and Indonesian interests will take 40 percent.
The deal convinced Barrick, which has spent months negotiating for control of Busang, to give up its quest.
""We put forward our proposal last week and said to Bre-X that if you can find a better deal, we wish you success,"" said spokesman Vince Borg. ""For us to go beyond the proposal would not be in the best interest of our shareholders.""
He declined to elaborate on Barrick's final offer, citing a confidentiality agreement.
Many details needed to evaluate the Freeport deal remained a mystery on Monday, causing confusion in the stock market.
Bre-X said Freeport, based in Louisiana, will provide US$400 million or 25 percent of the capital costs of the Busang project. Freeport will borrow US$1.2 billion to fund the rest of the costs. But neither Bre-X nor Freeport would say how much would be paid to Bre-X.
""We're not making a comment until the (Indonesian) government announcement tomorrow,"" said a Freeport spokeswoman in New Orleans.
Since Bre-X did not mention any compensation from Indonesian interests or Freeport, observers have to assume there will be none, analysts said. Most analysts put a C$25 to C$30 target on Bre-X shares. The shares opened at C$25 on the Toronto Stock Exchange on Monday and sank quickly to C$23.50 by midafternoon.
""This has been very expensive for Bre-X. But Freeport has a pretty good deal here,"" said Rick Cohen, gold analyst at Goepel Shields in Vancouver.
The government of Indonesian President Suharto is expected to respond on Tuesday to the proposed deal. Freeport and Bre-X need government approval before going ahead.
""It's a tremendous loss for Barrick,"" said Cohen.
Barrick, the world's second biggest gold producer, had manouevred aggressively to grab control of Busang, spending months negotiating with Bre-X and Indonesian officials.
It formed an alliance with Suharto's eldest daughter Siti Hardiyanti Rukmana and used its powerful advisory board -- which includes former U.S. president George Bush and former Canadian prime minister Brian Mulroney -- to cultivate ties with other influential Indonesians.
Meanwhile, Placer Dome's chief executive officer, John Willson, said his company would re-evaluate its US$5 billion offer to merge with Bre-X, but would still be willing to use its financial resources and expertise to help develop Busang.
""Given the size, complexity and importance of Busang to Indonesia, we remain prepared to contribute our financial resources and unique mine development capabilities to this very attractive project,"" Willson said. ""Naturally, we are disappointed by the news that we were not selected as the developer and operator.""
If the Indonesian government grants Bre-X and Freeport the right to develop Busang, Bre-X could quickly become a takeover target for a large company that would not mind allowing Freeport operate the mine, analysts said.
But Barrick is unlikely to jump back into the race, said gold analyst Chad Williams with Research Capital in Montreal.
""I think Barrick would be apprehensive of buying out Bre-X because Bre-X is not the operator. It would be more amenable to Placer Dome.""
",12
"Canadian mining companies are keeping a wary eye on the strengthening Canadian dollar, which threatens to bruise their earnings and cash flow.
""As the Canadian dollar strengthens, it hurts us,"" said Vic Wells, spokesman for Anvil Range Mining Corp., which cited the stronger Canadian dollar as a factor that forced the company to suspend zinc and lead mining at its Faro property in Canada's Yukon last December.
Analysts are forecasting a surge in the Canadian currency in 1997, with some predicting the unit to rise up to 80 U.S. cents from its current 74 U.S. cent range.
""It'll take the cream off, that's for sure,"" said George Miller, president of the Mining Association of Canada.
Canada is the world's largest producer of potash, uranium and zinc, the world's second biggest producer of nickel after Russia and an important source of copper.
Companies that produce metal mainly in Canada are especially hit by a currency strengthening against the U.S. dollar because producers must pay their operating costs in Canadian dollars. But most companies' revenues come in U.S. dollars, the currency in which most metals trade.
""Currency gets full-time attention here,"" said Alan Thomas, chief financial officer of Noranda Inc..
A change of one U.S. cent in the Canadian dollar translates into C$20 million ($14.8 million) on Noranda's bottom line, Thomas said. The currency rose about three quarters of a U.S. cent in 1996, costing Noranda about C$15 million ($11.1 million), he said.
""So for '96, there's not a big change. But if the dollar continues to go up, it will have a bigger effect,"" he said.
""All our costs are in Canadian dollars -- the salaries we pay, the supplies we buy, the rent we pay. All our products are priced in U.S. dollars and they're priced the same regardless of the exchange rate,"" Thomas said
Companies such as Alcan Aluminium Ltd., with most production outside Canada, are not as exposed to harm from a stronger currency since they pay most of their operating costs in U.S. dollars, analysts said.
But for companies such as Inco Ltd. and Falconbridge Ltd. that produce most of their nickel in Canada, a stronger dollar will take its toll.
Falconbridge figures a one-cent change in the Canadian dollar would knock C$7 million ($5.2 million) off its bottom line, even with the company's substantial currency hedging program.
While Falconbridge operations in the Dominican Republic and Norway would not be affected by a stronger Canadian currency, about two-thirds of the company's operating costs originate in Canada, said Chief Financial Officer Lars-Eric Johansson.
Inco estimated that every one-cent change in the Canadian dollar amounted to a $9 million (corrects from $13 million) pre-tax hit despite currency hedging. But the company earned $179 million in 1996 on revenues of $3.1 billion, so small movements in the Canadian dollar do not have a huge effect, said Inco Chief Financial Officer Tony Munday.
""It's not going to kill us,"" he said.
Still, some mining analysts said the effects of a stronger Canadian dollar needed to be understood in context.
""With a rising dollar, it usually means metal prices are going up as well,"" said base metal analyst David Davidson with CIBC Wood Gundy in Toronto.
",12
"The story of Bre-X Minerals Ltd. and its fabulous Indonesian gold discovery deep in the jungles of Borneo has all the elements of a thriller: suspense, international intrigue, politics, legal wrangling and lots of money.
The end of the story is nowhere in sight.
Until this week, Toronto-based Barrick Gold Corp. appeared to have a deal with Bre-X sewn up. But Placer Dome Inc. in Vancouver raised the stakes and added another twist to the plot on Tuesday by announcing that it had made an offer for Bre-X that was now under consideration by the Indonesian government.
On Wednesday, another Vancouver mining concern, Teck Corp., said it hoped to make its own bid for Bre-X and its rich Busang deposit.
""Busang assures any company a leading position, with its low costs and large size,"" said gold analyst John Ing of brokerage Maison Placements in Toronto.
The Busang deposit in Kalimantan on the island of Borneo contains at least 57 million ounces of gold, worth $21 billion at today's prices. Many analysts believe the deposit could contain more than 100 million ounces of high-grade, low-cost gold.
Until this week, it seemed Barrick was the only company with a realistic chance of grabbing a share of the project. In November, the Indonesian government told Bre-X, which discovered the Busang gold find, to form a joint venture with Barrick and present their deal to the government for approval.
A proposal was assembled last month and awaits the government's blessing.
But the Indonesian government's edict spooked the international mining community and angered many Bre-X shareholders who felt their company had been forced to negotiate with a gun to its head. Some Bre-X shareholders hired high-profile lawyers to ensure their interests were protected in any eventual deal.
Meanwhile, the Barrick-Bre-X arrangement spawned rampant rumors in the mining and investment communities, prompting observers to ask why Busang deposit was not auctioned to the highest bidder, how Barrick acquired such a privileged position and who was calling the shots in hammering out a final deal.
Barrick maintains it was chosen for its experience operating large gold mines, its environmental record and its strong financial position.
Others cite Barrick's alliance with the influential daughter of Indonesia's President Suharto, and Barrick's high-powered advisory board, which includes former Canadian Prime Minister Brian Mulroney and former U.S. President George Bush.
Although Barrick contends it is still the only company in the running for Bre-X, shareholders have pushed up Bre-X's stock on the belief that Placer Dome may have a chance, analysts said.
""If it were a horse race, you'd have to look at Placer,"" said analyst Ing.
Bre-X shares rose C$1.10 to C$24.45 on Wednesday on the Toronto Stock Exchange after jumping C$1.90 to C$23.35 on Tuesday.
Analysts said Indonesian officials were probably concerned about tarnishing their reputation in the international investment community and were seeking a way to allow other companies to bid on Busang without losing face.
The fact that Placer Dome boldly declared its intentions in a news release, adding that it had discussed the matter with high-ranking Indonesian officials, could be a sign that the bidding process had already opened, said gold analyst Chad Williams at Research Capital in Montreal.
""We may be in the midst of a bidding process as we speak, a bidding process by Indonesian standards,"" Williams said. ""I think the Indonesians appreciate how important it is to attract foreign investment, so they're treading very carefully.""
For Bre-X, it is not simply a matter of waiting for word from the Indonesian government and doing what it is told.
One of Bre-X's Indonesian partners, Jusuf Merukh, this week filed a C$2 billion ($1.5 billion) lawsuit against Bre-X, its executives and others involved in Busang. The suit claims up to 40 percent of the Busang deposit. Merukh already controls an undisputed 10 percent of the smallest part of Busang.
""We're serious about this claim,"" Merukh's lawyer Aleck Trawick told Reuters by telephone from Calgary on Wednesday. He said Bre-X had 15 days to file a defense.
Bre-X described the law suit as ""frivolous"" and said it planned a vigorous defense.
Meanwhile, Bre-X is still waiting for its contract of work permits from the Indonesian government, which it needs to continue work on Busang.
Most observers agree on one thing: Indonesian  President Suharto and his close officials and advisers hold the key to any conclusion of the Bre-X saga.
""I think Placer and Barrick are waiting for some sort of signal,"" said Ing. ""I think it's a waiting game.""
While Placer Dome Chief Executive John Willson estimated this week that the saga would take three to six months to play out, some analysts believe the outcome will be clear long before that.
""I think things will develop very quickly from here on in,"" said analyst Williams.
",12
"Statistics Canada has admitted to making a significant error in one of the ways it calculates the depth of Canada's persistent unemployment problem.
The monthly payroll report, which shows how many new jobs were registered on Canadian payrolls, was scheduled to be released on Thursday.
But Statistics Canada said on Wednesday it will delay the report until May 6 so that it can correct its methods and fix inflated figures from December and January.
""In the course of our review of the February numbers, we discovered an error,"" Peter Lys, director of Statistics Canada's labor division, said in a phone interview.
He would not say how inflated the job creation figures for December and January were.
""It is significant,"" he said. ""We are very sorry for what problems this has caused.""
The most recent payroll report showed businesses adding 9,000 new employees to their payrolls in January and 134,000 new employees in December.
The error was made as Statistics Canada was fine-tuning its methodology for the survey, but the agency made changes too suddenly, Lys explained.
""The new data service is a definite improvement of the survey, but you can't just introduce it in a month or it will distort the numbers,"" Lys said. ""It was an unfortunate human error.""
The payroll report sparked debate earlier this month when it became obvious there was a large discrepancy between the payroll numbers and the less optimistic job creation numbers reported in the much-watched labor force survey.
During the fourth quarter of 1996, the payroll survey showed the creation of 301,000 jobs. But the labor force survey, which is more encompassing, showed the creation of about 86,000 jobs -- less than a third of the new jobs in the payroll survey.
The discrepancy raised eyebrows in Ottawa, where job creation promises to be a major issue in a federal election campaign widely expected to be called within the week.
Canada's unemployment rate has remained stubbornly high, hovering just below 10 percent. The rate showed its first improvement in months, when it dropped to 9.3 percent in March from 9.7 percent in February.
The unemployment rate also comes from the labor force survey, but the integrity of that survey has not been questioned, economists said.
The most recent labor force survey said employment grew by 60,900 jobs to 13.80 million in March. The payroll survey has not yet been released for February or March.
((Reuters Ottawa Bureau 613 235-6745))
",12
"Bre-X Minerals Ltd's choice today of J.P. Morgan and Co as a financial adviser completes the first step in its search for a partner to help develop its huge Indonesia gold deposit.
Bre-X also said on Thursday that it hired Republic National Bank of New York as a corporate adviser.
The two advisers will work together to ensure Bre-X gets the best deal possible as it picks a suitable partner, Bre-X said in a statement.  
""It's setting the stage for the auction process, allowing them to be in a position to quickly and fairly assess any offers that may come in,"" Gordon Capital analyst Barry Allan said on Thursday.
Calgary-based Bre-X sits atop one of the world's biggest gold finds and has said it wants to sell 25 percent of the project to an experienced gold miner that can develop the site and market its product.
""We've been approached by basically every major gold company in the world,"" a Bre-X spokesman said in a recent interview.  
Bre-X also said today it hired Bryan Coates as vice-president and corporate controller. Coates most recently worked for Cambior Inc and brings 15 years of experience in international gold mining to Bre-X, the company said.
The gold mining community has been holding its breath for months, waiting for Bre-X to open up bidding for its prized Busang deposit.
The choice of J.P. Morgan ""reflects that this is going to be a large international process,"" analyst Allan said.  
The decision on a financial adviser is the first of a slew of announcements expected this month from Bre-X that could drive the stock.
A contract of work from the Indonesian government is expected in the coming weeks. The contract will outline environmental, social, tax and financial obligations for Bre-X and its Indonesian partner.
Although details of the draft contract of work are already public, some observers fear the government may try to grab a bigger share of the profits as it sees the deposit blossom.  
New drilling results are expected to hit the market within a couple of weeks, Bre-X said.
The contract of work and the drilling results will likely send the stock higher, analysts said.
So far, drilling at the Busang deposit has outlined 46.92 million ounces of gold. The next set of results should bump up the deposit to more than 50 million, analysts said.
""I've made the joke that everybody who goes to the property tends to see God,"" Gordon Capital analyst Allan said just days after returning from an analysts' trip to the site.  
""And I guess I did. There's every probability it will be one of the largest in the world.""
The mine should be low cost, especially in the first few years, said Allan, forecasting operation costs at about US$150 an ounce.
He has set a target of 35 for the stock, in the middle of the 30 to 40 range set by most analysts after the most recent tour and a previous tour in July.
""I continue to be really impressed by the deposit,"" said analyst Chris Bradbrook at Loewen Ondaatje McCutcheon, who has visited the site twice.  
""It keeps getting bigger and bigger. The upside is substantial.""
Bradbrook has a C$30 target for the stock for now, since investors want to see who the company's partner will be and how the partner will develop the property before they bid up the stock.
""That is the biggest potential driver.""
But Allan said Bre-X's options in developing the site included going it alone.
""They don't want to sell too low and give up some of the upside potential,"" he said. ""I'm sure they'll look at those offers and if they don't find any that are reasonable, I suspect they will go on their own.""
The economics of the project are robust enough for Bre-X to finance the mine itself, he said.
Bre-X was up 0.05 to 25.05 in morning trading on the Toronto Stock Exchange and rose 1/4 to 18-3/8 on Nasdaq.
-- Reuters Toronto Bureau 416 941-8100
",12
"Trade ministers from the Asia Pacific region agreed on Saturday to work toward free trade in financial services and expanding open markets for information technology.
The Asia Pacific Economic Co-operation forum wrapped up its three-day trade ministers' meeting in Montreal, agreeing to look for ways to expand last year's information technology deal to include more products and more countries.
In the information technology sector, ""there are a number of both non-tariff measures and tariff measures that we might take up and we're hopeful that we'll see significant progress later this year,"" deputy U.S. trade representative Jeff Lang told a news conference. But Lang would not supply details on the kind of progress he hoped to see.
The information technology agreement included 41 countries and 91 percent of world trade now, but Lang said four or five more countries were interested.
The ministers also announced they were committed to forging a final financial services deal by December.
""Clearly what I'm hearing from the 18 members of APEC is that they want it to work this time,"" Canadian Trade Minister Art Eggleton said after the final news conference. Eggleton chaired the three-day meeting since Canada will host the APEC summit scheduled for Vancouver in November.
Previous talks on an international agreement on financial services fell through last year after the United States pulled out because of its disappointment in offers from some other countries.
And U.S. Trade Representative Charlene Barshefsky warned on Saturday that some countries in Latin America and Asia need to be more generous with their offers.
""The United States will put forward an MFN (most favored nation) consistent offer, but it will be conditional on achieving a critical mass in the Asian countries and Latin America,"" she told reporters.
Among the 18 APEC members, some of them will have progressive offers in time for the WTO deadline of mid-July, Barshefsky said.
""There are others who have shown reluctance. The same with Latin America,"" she said. ""These offers are going to have to be good, or the United States will seek an MFN exemption.""
Such an exemption would likely stall progress on the talks.
Last month, the United States said a financial services pact must include provisions that allow firms to operate in other countries in the form of their choice. It must also allow full majority ownership and assure existing rights of foreign financial service providers, the United States said.
Chile's Trade Minister Jose Miguel Insulza said his country would do its best to make a good financial services offer.
""We are prepared to make our offer and try to improve it, if it's possible,"" Insulza told a news conference.
The world's major trading powers have agreed to put forward requests on financial services commerce by mid-June and offers by July 14 in the hopes of finalizing a deal by the end of December.
The United States and Canada emphasized the role APEC should take in isolating certain trade sectors, liberalizing them within APEC and then putting them on to the agenda at the World Trade Organization. APEC agreements are voluntary, while WTO deals are binding.
But the lesser developed countries that form a large part of APEC's membership appeared to place sectoral liberalization on a lower pedestal than the developed countries. Instead, they emphasized unilateral and voluntary plans to knock down trade barriers.
""I think we have to emphasize that the system talks about individual action plans as well as sectoral liberalization,"" said Cesar Bautista, the trade minister for the Phillipines.
Malaysia and Indonesia both stressed the need to help small and medium sized businesses develop trading strategies. They said they appreciated APEC's progress on cutting customs red tape and promoting international investment in infrastructure.
",12
"Countries belonging to the World Trade Organization should be flexible and understanding about China's bid to join the WTO, the organization's director-general said on Saturday.
""As we approach the final stage of the Chinese accession process, there is a need for flexibility on all sides and a determination to resolve the crucial outstanding issues in the negotiations,"" Renato Ruggiero told trade ministers from the Asia-Pacific Economic Cooperation (APEC) forum.
""The success of this negotiation is a shared responsibility, and it can be assured only if we keep up the momentum established earlier this year,"" Ruggiero said.
He said substantial progress is needed on rules issues and market access.
The APEC members said they wanted China and Russia to join the WTO quickly, as long as they join on commercially viable terms, officials said.
The world's major trading partners have suggested that China join last year's international agreement to open up trade in information technology before it acceeds to the 130-member World Trade Organization.
Ruggiero said that talks on financial services have become the WTO's top priority.
""A success in financial services is essential to help ensure each of you -- industrialized and developing countries alike -- the necessary infrastructure growth,"" Ruggiero told the Asia-Pacific trade ministers.
""My message is: do not see this negotiation in North/South terms,"" he continued. ""On the contrary, developing countries whatever their economic position, have an even stronger need than the industrial countries for competitive financial institutions.""
Ruggiero urged APEC to make sure a financial services deal is reached this year, to maintain momentum in international trade talks.
""Not to  do so should be as unthinkable as it would be short-sighted,"" Ruggiero said.
Last week, the United States, the European Union, Canada and Japan affirmed they would stick to the WTO schedule on financial services by putting forward their offers by mid-July.
On Saturday, the 18 APEC countries affirmed their support too, building strong momentum for a deal by the end of the year in the lucrative sector, officials said.
But U.S. Trade Representative Charlene Barshefsky warned Saturday that some countries in Latin America and Asia need to be more generous with their offers. The United States pulled out of previous attempts to broker free trade in financial services because of its disappointment in offers from other countries.
The meeting between the WTO leader and the APEC trade ministers confirmed APEC's role as a regional catalyst for action within the WTO, trade officials said.
But Hong Kong expressed its concern about the WTO's dumping code, while Korea and Japan said they were worried about an onslaught of agriculture products flooding their markets from lesser developed countries because of WTO regulations, officials said.
",12
"Canada supports the U.S. bid to speed up free trade talks among 34 countries in North and South America, a Canadian foreign affairs spokesman said on Friday.
""We're certainly pushing for an early start to negotiations as well,"" spokesman Charles Larabie said in a telephone interview.
Ministers from the 34 countries were meeting in the Brazilian city of Belo Horizonte this week to decide when to start formal negotiations for the Free Trade Area of the Americas. But the meeting faced a north-south divide on how to pace the talks.
Brazil and its supporters want to proceed cautiously, negotiating in stages with tariff cuts until last.
But the United States is pushing for more concrete decisions and a faster pace in talks, threatening on Friday to ""pack its bags"" if it did not get its way.
The group aims to achieve a free trade deal by 2005.
While Canada would like to see faster progress, ""I wouldn't say we're ready to pack up our bags,"" Larabie said.
Canada also has a backup plan if formal negotiations for the FTAA do not go as fast as hoped.
Canada would push to join the South American free trade bloc Mercosur, which precluded the United States, Larabie said.
Mercosur is a free trade pact involving Brazil, Argentina, Uruguay and Paraguay. Chile and Bolivia are associate members.
""For us there's a tremendous market there,"" said Larabie.
Canada sees two major impediments to formalising free trade talks to form the FTAA. First, President Bill Clinton does not have so-called fast-track authority to negotiate free trade deals. Second, Brazil and its supporters wanted to take their time negotiating the FTAA, said Larabie.
So while the United States struggled to push the FTAA agenda, Canada was busy preparing the groundwork for a Mercosur deal that would preclude the Americans and give Canadians ""a foot in the door"" with South America, Larabie said.
As for the United States, ""they can join the party later,"" he added.
""Cleary Brazil stands out as the major opportunity for us in Mercosur,"" he said.""Argentina is also attractive for us.""
Trade between Brazil and Canada was worth about C$2.5 billion ($1.79 billion) in 1996, almost double that of 1993.
A Canadian deal with Mercosur would not be the first time Canada moved ahead without the United States, as Clinton awaited fast-track authority.
Canada has negotiated a free trade deal with Chile rather than waiting for the United States to agree to let Chile enter the North American Free Trade Agreement.
",12
"Fears of a U.S. interest rate hike battered Canadian financial markets this week, but Canada's top central banker gave no hint on Friday whether he might raise Canada's rates in reply to any Fed action. ""There will always be an impact on Canada of an international change in interest rates,"" Bank of Canada Governor Gordon Thiessen told reporters after a speech to economists.
""But the difference I think now is that we have got more room to maneuver than we did before. But you should not interpret that as saying what we are going to do next week or not,"" he added.
The Canadian dollar and fixed income markets were rattled this week by investor concerns that the Federal Reserve would hike U.S. interest rates next Tuesday while the Bank of Canada is expected to hold rates steady.
Thiessen said nothing on Friday to ease market fears.
""He's saying inflation is under control and there is no reason for rates to rise,"" said Warren Jestin, chief economist for Bank of Nova Scotia.
However, economists predicted the central bank might eventually yield to pressure to tighten monetary conditions in Canada if the Canadian dollar continues to weaken.
The Bank of Canada dropped short-term interest rates 11 times last year compared with just one U.S. rate cut.
The lower rates and low inflation can be thanked for strengthening Canada's economy, Thiessen said on Friday, predicting strong growth for jobs and production in the year ahead.
""The Canadian economy should have room for strong above-potential rates of growth in output and employment in coming quarters without a resurgence in inflation,"" he said.
""The margin of unused capacity in our economy will shrink substantially over the next couple of years,"" he said.
Thiessen agreed with a Royal Bank forecast that 700,000 new jobs would be created over the next two years. And he predicted a return of consumer confidence and surging private sector growth.
Thiessen said he sees a strong Canadian dollar in the long term, citing a report on Friday of low Canadian inflation.
Canada's core consumer price index for February rose 1.5 percent on the year, according to Statistics Canada, which puts inflation well within the central bank's target inflation range of one to three percent.
",12
"Barrick Gold Corp said on Wednesday it was now the world's second largest gold producer, supplanting Gold Fields of South Africa Ltd.
Barrick's 1996 gold production was 3,148,801 ounces, surpassing Gold Fields' 3,125,631 ounces for fiscal 1996. Barrick expects 1997 production to top three million ounces again.
The Toronto-based company posted a 40 percent increase in its proven and probable reserves to 51 million ounces from 36.5 million ounces. Barrick also reported 25 million ounces of gold in the resource category -- gold not fully proven yet.
Barrick has made no secret of its ambition to become the world's largest gold company, surpassing Anglo American Corp of South Africa Ltd.
To clinch first place, Barrick is seeking control of the huge Busang deposit in Indonesia, said to be one of this century's most sensational gold discoveries.
Two new mines will also likely carry Barrick closer to its leadership goal. Drilling at Barrick's Pierina property in Peru expanded reserves there to 6.5 million ounces so far, Barrick said. The mine is expected to come into production in late 1999 at an annual rate of 500,000 ounces of gold.
Drilling at Barrick's Pascua mine in Chile bumped reserves to 10 million ounces so far, with 6.7 million ounces identified in the reserve category. The mine is scheduled to start production of 400,000 ounces a year by the year 2000.
Barrick has been negotiating with Calgary's Bre-X Minerals Ltd for months to control the Busang discovery, but Barrick's chances of success are up in the air.
""One of the messages they'll probably try to get across is that they are not desperate for it, they certainly don't need it, they have an awful lot already,"" said gold analyst Catherine Gignac with Deacon Capital in Toronto.
Barrick also said today that its fourth-quarter and full-year earnings fell, due mainly to higher operating and exploration costs. Fourth-quarter profit declined to US$56 million or US$0.15 a share from year earlier US$78 million or US$0.22 a share.
Full-year earnings declined to US$218 million or US$0.60 a share from US$292 million or US$0.82 a share in 1995.
Barrick was down 0.40 to 35.70 on the Toronto Stock Exchange in afternoon trading on Wednesday and by 3/8 to 26-1/2 in New York.
",12
"The European Union's trade commissioner chided Canada on Thursday for its lack of action against the U.S. Helms-Burton law, which penalizes foreign firms for doing business in Cuba.
""We put our head above the block and Canada has declined to do so,"" Leon Brittan told reporters as he headed into quadrilateral trade talks with his counterparts in Canada, Japan and the United States.
""I find it a little curious that we have gone ahead and challenged the Uhited States, taken a very high-profile action and got some progress from the United States as a result of that, very substantial progress,"" Brittan said. ""Canada has held back on (action through) NAFTA.""
The European Union had threatened to challenge the United States through the World Trade Organization over the Helms-Burton law.
In April, the European Commission said it struck a deal with Washington, under which the EU agreed to suspend its action in the WTO and the U.S. government would continue to suspend a key clause in the Helms-Burton law.
The two parties would continue to discuss the anti-Cuba law through the multilateral investment agreement under the Organization for Economic Co-operation and Development, rather than pursue the debate throught the WTO.
""There'd been a sort of informal understanding of the division of labor, that we would go ahead under the WTO and Canada would go ahead under NAFTA,"" Brittan said.
But Canada has hesitated to challenge the Helms-Burton legislation under the auspices of the North American Free Trade Agreeement.
""I've still got the NAFTA challenge in my back pocket,"" Canadian Trade Minister Art Eggleton told reporters. ""If things break down and don't proceed, then I can always use that.""
He said Canada wanted to participate fully in the negotiations under the OECD.
""As long as progress is being made, it serves no purpose to go ahead (with a NAFTA challenge) at this point in time,"" Eggleton said.
Eggleton also brushed off U.S. criticism of Canada's new copyright law, which imposes a C$0.50 tax on blank audio cassettes, with the revenue to be distributed to performers. But the royalties are not passed on to U.S. performers since the United States has not signed an international treaty on copyright.
Eggleton confirmed on Thursday that Canada was on a U.S. ""watch list"" for its copyright legislation, among other issues.
""They put out a watch list at the end of every April and we've been on it every time,"" he said. ""We've been having discussions about copyright. We think it fully meets our trade obligations.""
He also repeated that Canada would not concede to U.S. demands to cap Canadian grain exports to the United States.
((Reuters Toronto Bureau 416-941-8100))
",12
"Softwood lumber prices may stay at their current high levels or even start to climb once Canadian lumber companies are given a fresh quota to sell to the United States on April 1, some analysts say.
""My opinion is we'll be seeing higher prices,"" said Gilbert Garant, a commodity broker in Montreal for Whalen, Beliveau and Associates.
Softwood lumber was trading on Friday at about US$370 a thousand board feet (tbf), against about US$320 before the quota system began a year ago.
April 1 marks the start of the second year of the Canada-U.S. agreement to limit Canada's softwood lumber exports -- and brings with it new uncertainties.
The quota system limits fee-free exports from the four top exporting provinces to 14.7 billion board feet of lumber/year. Companies surpassing their quotas must pay a fee ranging from US$50 to US$100 per 1,000 board feet. Statistics from about mid-March showed the country as a whole had already exported about 98 percent of its quota, while many individual companies had surpassed their own quotas and were now paying penalties.
In the previous three quarters, the market has been jittery as firms that had already reached the ceiling on their quota withheld stock toward the end of the quarter, waiting until they received a replenished quota in the next quarter to avoid paying fees, Garant said in a phone interview.
But as the end of the fourth quarter approaches, ""I don't believe there's much being held back,"" said Garant.
Prices have fallen slightly in recent weeks as some lumber producers rushed to fill their quotas for the year, since they will lose unused allocated quota that they had not turned back to the government by the end of 1996, analysts said.
But demand would likely rise to fulfill spring building needs, and Canadian mills did not have a glut of softwood lumber to satisfy rising demand, Garant said.
Buyers ""probably think people have more on the ground than there really is,"" he said.
Inventories are low and demand is on the rise for now, agreed Patricia Mohr, vice-president of economics at Scotiabank in Toronto: ""I think actual demand will pick up.""
The first year of the quota system has caused much uncertainty and price volatility in the market, a situation which will likely continue into the second year of the five- year agreement, analysts said.
""Things have settled down to a large extent, but it's far from clear what the next year will bring,"" said trader Gerry Yane at Marleau Lemire Securities in Montreal. ""There's not enough clear information coming out of the government.""
The system has made statistics a hot commodity and pitted Eastern Canada against the West as politicians give quotas.
""It's been very difficult. This is a very large industry to put under quota,"" said Ronald MacDonald, parliamentary secretary to Canada's trade minister. ""I think the system has worked as well as we expected it to work.""
He said there were bound to be bumps in the flow of lumber over the border at the end of every quarter as the quota system entered its second year, but the bumps would not be as dramatic as in the first year of the system.
""It won't be quite as bad, but you will get some problems like this,"" he said by phone from Dartmouth, Nova Scotia.
He said there would be no major changes to the system in the coming year. He brushed off complaints from the West: ""The system is very fair to East and West.""
The quota agreement gives Canada a bonus fee-free quota if softwood lumber averages more than US$405 in a quarter. Since the bonus was triggered in every quarter in the past year, the government has some leeway to give more quota this coming year to mills that were unfairly treated last year, MacDonald said.
""There might be some reallocation done mostly in favor of the East,"" added Garant. ""At this point, most major mills out of the eastern provinces are paying a minimum of US$50 (fee per one thousand board feet), and many are paying the US$100."" (Corrects to U.S dollars from Canadian dollars).
Some eastern mills have been out of quota room for almost two months, while in the West, some mills have had extra quota to fill at the end of the quarter, he said.
The interim allocation for companies in the first quarter starting April would be 28.75 percent of their full-year quota from last year, a government official said. The full-year allocations would be decided in the middle of May, he said.
((Reuters Ottawa Bureau 613-235-6745))
",12
"As Canada's budget deficit shrinks, politicians campaigning ahead of June elections are debating whether to cut taxes or raise government spending.
While many Canadians say they are desperate for tax relief, others are begging politicians to shun tax cuts and spend the extra money on social services.
""They have to stop talking about cutting taxes,"" one Toronto social worker said as Reform party leader and tax cut advocate Preston Manning spoke nearby at the kickoff of his campaign for the June 2 election.
""People want to hear about jobs and job creation. If you have a job you worry about keeping it, you worry about losing it,"" she told the Canadian Press news agency. Canada's unemployment rate is a stubbornly high 9.3 percent.
The governing Liberals on Sunday called for the June vote, just 3-1/2 years into their five-year term.
The two right-wing parties, Reform and the Conservatives, are touting their plans to cut taxes.
Canada has the highest personal income taxes among the seven leading industrial nations and the fourth highest among the member nations of the Organisation of Economic Cooperation and Development, according to an OECD study.
""(Conservative leader) Jean Charest believes that high taxes kill jobs -- that the economy needs tax cuts now to create jobs,"" the Conservatives' campaign literature says.
Reform lashed out at Liberal tax increases, accusing the centrist party of pushing through 31 tax hikes while in office. Reform has promised to cut payroll taxes and contributions to unemployment insurance, as well as simplify the income tax system.
In 1996, the average Canadian family's tax bill was about 48 percent of its income, a study released on Tuesday showed.
But the left-leaning New Democratic Party (NDP) opposes tax cuts, saying right-wing platforms are irresponsible. The NDP actually wants to raise corporate and capital gains taxes.
The separatist Bloc Quebecois wants Ottawa to close tax loopholes for big business, while giving tax breaks to smaller firms to stimulate growth.
The Liberals are sandwiched between the right's call for tax cuts and the left's call for spending, and face different opinions in their own ranks on the issue.
They have taken a typical middle-of-the-road approach, advocating tax cuts once the deficit is licked and when health care and education are securely funded.
""The choice the other political parties are offering is to declare the job done before it truly is, to introduce a tax cut before the country can afford it,"" Finance Minister Paul Martin told a Montreal news conference on Tuesday.
""They would short-change our hopes for a stronger economy and for greater job creation.""
Martin said his party would lower taxes but only when the deficit was eliminated. Instead, his party announced on Monday they would not cut C$6 billion (US$4.3 billion) in health care funding, as had been planned.
Martin has predicted the deficit for the year ended March 31, 1997, would be less than C$16 billion ($11.4 billion), well below the original target of C$24.3 billion ($17.4 billion) for the year.
But the Conservatives argue that 87 percent of the deficit decline was due to higher taxes. They say real after-tax income has fallen from the early 1990s.
",12
"Canada's Barrick Gold Corp. appeared to regain the upper hand on Tuesday in the perplexing fight for control of the massive Busang gold find in Indonesia.
Barrick said on Tuesday that a letter from the Indonesian government supported a proposed joint venture between Barrick and Bre-X Minerals Ltd., the Calgary, Alberta-based company that discovered Busang.
But the letter made plain that the government's blessing was conditional on satisfying the demands of Bre-X's Indonesian partners -- PT Askatindo Karya Mineral and PT Amsya Lyna -- within a month, Barrick said.
""The main thing here is that the government has reaffirmed its support of Barrick's participation,"" Barrick spokesman Vince Borg told Reuters. ""This is a very significant step forward.""
The Indonesian government told Barrick and Bre-X last November to agree on a joint venture to develop Busang. The companies submitted a proposal to the government in December, asking for clarification on a few issues.
However, delays in completing the agreement prompted Vancouver-based Placer Dome Inc. to make a $5 billion counter-proposal for Bre-X last week. Under Placer's rival bid, 40 percent of Busang would go to Indonesian interests. The letter from the Indonesian government received this week by Barrick and Bre-X addressed only their joint venture proposal and mentioned nothing about the Placer Dome offer.
Barrick gave little weight to Placer Dome's rival proposal after receiving the letter. ""I don't see how the Placer proposal can at all affect the progress we'll be making in reaching a final agreement,"" Borg said.
Placer was undaunted. ""We don't see it like that,"" Placer spokesman Hugh Leggatt said in Vancouver. ""We have a creative and compelling proposal on the table and we expect it will succeed.""
Meanwhile, Barrick said the Indonesian government had offered to help Bre-X sort out its relationships with its Indonesian partners and analysts believe Askatindo is the key to forging a successful deal between Barrick and Bre-X.
Askatindo, which has a 10 percent stake in the richest parts of Busang, is controlled by the Syakareni family and Muhammad ""Bob"" Hasan, a close associate of Indonesian President Suharto. Hasan bought a 50 percent stake in Askatindo earlier this month.
""The Indonesian people are looking for a bigger participation,"" observed one Toronto-based gold mining analyst.
Others said Bre-X, Barrick and the Indonesian government were being pressured to work out a way to give Askatindo a larger share of Busang.
In its letter, the government stipulated that Barrick and its partners should get 67.5 percent of a new company that would develop Busang. Bre-X and its partners would keep 22.5 percent and the Indonesian government would get 10 percent.
It was unclear whether Askatindo's portion was included in Bre-X's 22.5 percent.
""That's what we have to work out with Bre-X and Askatindo,"" Borg said.
Bre-X officials did not return telephone calls asking for comment.
",12
"The 1998 target date to start open pit mining at the rich Voisey's Bay metals deposit will be a ""tight"" deadline to meet, the new president of Inco Ltd's Voisey's Bay Nickel Co says.
""We're still looking at that (time frame) very carefully,"" Stewart Gendron said in an interview. ""It's pretty tight.""
Inco's takeover of the deposit was delayed for three months this summer when the completion of its C$4.3 billion acquisition of Diamond Fields Resources was put on hold while Diamond Fields executives settled a lawsuit.  
Gendron, 53, has been president for three weeks. He left his position as vice-president of milling, smelting and refining at Inco's Copper Cliff complex near Sudbury, Ontario, when the Voisey's Bay takeover was completed in August.
He and his team are now caught up in environmental issues and negotiations with local aboriginals.
Without land claims agreements, the aboriginal groups have the power to delay or even prevent mining in the area, Inco said in its circular to shareholders last May.  
Gendron said the company planned to finish a feasibility study for the remote Labrador site in eastern Canada before the end of the year.
""Our primary focus right at the moment is environmental permitting,"" Gendron said.
His negotiators are mired in a tangle of overlapping provincial and federal regulations that they hope to simplify for their project.  
""My view is both the provincial (Newfoundland) government and the federal government are committed to making this happen,"" he said. ""We clearly want to have production as soon as possible. Their objective would be the same.""
But negotiations with two local aboriginal groups could be complicated, since there are four sets of negotiations.
The two groups, the Innu and the Inuit, are about to launch a lengthy round of negotiations with the federal and provincial governments over land claims.
Gendron said he expected an agreement by March.  
The aboriginal groups are also trying to forge settlements with Inco on employment, training and scholarships as well as the economic, social and environmental impact of mine development.
""One of the things that seems frightening to the aboriginal groups is their perception that this is really a gigantic project and that the time schedule is very tight,"" Gendron said.  
""But as a mine goes, while this is a good size mine, it remains simply just a mine and just a mill. The physical imprint on the land is much larger in people's perceptions than in reality.""
Although making a 1998 schedule for open pit production might be challenging, the company's plans for full production by the year 2000 were on track, Gendron said.
""We've talked full refinery operation by the year 2000 and we're still working toward that target.""  
The company intends to start construction on an underground mine, a mill, a refinery and a smelter at the same time. The project will cost about C$1.1 billion, Inco has estimated.
""By the year 2000, we expect to have all four parts in operation,"" Gendron said.
Inco intends to produce 270 million pounds of nickel annually, as well as 200 million pounds of copper and a significant amount of cobalt at the site. The company has forecast initial production of 23 million pounds of nickel and 15 million pounds of copper in 1998.
-- Reuters Toronto Bureau 416 941-8100
",12
"The 1998 target date to start mining at the Voisey's Bay metals deposit, one of the world's biggest nickel deposit, will be a ""tight"" deadline to meet, says the new president of Inco Ltd.'s Voisey's Bay Nickel Co.
""We're still looking at that (time frame) very carefully,"" Stewart Gendron said in an interview recently. ""It's pretty tight.""
Inco intends to produce 270 million pounds of nickel annually, as well as 200 million pounds of copper and a significant amount of cobalt at the site in Canada's remote northeastern region of Labrador.
The company has forecasted initial production of 23 million pounds of nickel and 15 million pounds of copper in 1998.
Inco's plans to take over the deposit were delayed for three months this summer after the completion of its C$4.3 billion ($3.1 billion) acquisition of Diamond Fields Resources was put on hold while Diamond Fields executives settled a lawsuit.
The acquisition of Voisey's Bay has cemented Inco's position as the western world's largest nickel producer.
Analysts estimate that it will give Inco control 38 percent of the world's nickel market.
Gendron, 53, has been president for three weeks. He left his position as vice-president of milling, smelting and refining at Inco's Copper Cliff complex near Sudbury, Ontario, when the Voisey's Bay takeover was completed in August.
He and his team are now involved in environmental issues and negotiations with local aboriginals.
Without land claims agreements, the aboriginal groups have the power to delay or even prevent mining in the area, Inco has told its shareholders.
Gendron said the company also planned to finish a feasibility study for the remote Labrador site in the province of Newfoundland before the end of the year.
""Our primary focus right at the moment is environmental permitting,"" Gendron said.
His negotiators are mired in a tangle of overlapping provincial and federal regulations that they hoped to simplify for their project.
""My view is both the provincial government and the federal government are committed to making this happen,"" he said. ""We clearly want to have production as soon as possible. Their objective would be the same.""
But negotiations with two local aboriginal groups could be complicated, since there are four sets of negotiations.
The two groups, the Innu and the Inuit, are set to launch a lengthy round of negotiations with the federal and provincial governments over land claims.
Gendron said he expected an agreement by March.
""One of the things that seems frightening to the aboriginal groups is their perception that this is really a gigantic project and that the time schedule is very tight,"" Gendron said.
""But as a mine goes, while this is a good size mine, it remains simply just a mine and just a mill. The physical imprint on the land is much larger in people's perceptions than in reality.""
Although making a 1998 schedule for open pit production may be challenging, the company's plans for full production by the year 2000 are on track, Gendron said.
""We've talked full refinery operation by the year 2000 and we're still working toward that target.""
The company intends to start construction on an underground mine, a mill, a refinery and a smelter at the same time. The project will cost about C$1.1 billion ($802 million), Inco has estimated.
""By the year 2000, we expect to have all four parts in operation,"" Gendron said.
",12
"Hundreds of mining prospectors, armed with axes and machetes, are racing through swamps and thick brush in remote Northern Ontario this week in one of the largest staking rushes in decades.
The Ontario government invited prospectors to explore a 617,500-hectare area in the Temagami region, making the land available for the first time in 23 years.
But there was a shortage of experienced prospectors in the area, so big companies trained local high school track teams to fill in.
""There's a lot of potential,"" provincial government geologist Elaine Basa said. ""It's an area that hasn't been open to new technology. It's like virgin territory and that's what's exciting to a lot of people.""
Up to 600 prospectors, many of them hired by international mining companies, have been clambering across the rugged Canadian Shield, hoping to find gold or base metals.
The parcel of land is not far from existing gold mines and old copper and base metal mines, Basa said.
""That's why it's such a big target,"" she said. ""A lot of people want a piece of the pie.""
The Ontario government closed off the area in 1973 after a local Indian band laid claim to the land. The claim was struck down in 1991 and the government eventually decided to open the area to logging and exploration again -- despite raucous protests from environmentalists.
Major international mining companies, small explorers and independent prospectors have flocked to the rocky Canadian Shield. Most spent the weekend camping in the bush, preparing for what many saw as the chance of a lifetime.
Prospectors must follow strict rules to stake their claims.
""You physically have to define the boundaries out in the field,"" said Roy Denomme, a government mining recorder.
The race started Tuesday morning, with prospectors sprinting through the thick bush to pound a huge stake in each corner of the property. Between each stake, they had to blaze a boundary by marking trees with their axes along the way.
Some prospectors spent the weekend hiding stakes in the thick forest near the claim corners, hoping to get an edge on their competitors, said Basa.
The first person to stake all four corners and file a claim wins the rights to the property. Prospectors have 31 days to file their claims.
Basa expects a lot of wheeling and dealing in the next few days as the powerful mining companies manoeuvre for the best properties.
Toronto-based Falconbridge Ltd. sent a team of prospectors to the area in helicopters.
""It's a real crap shoot,"" said Paul Severin, vice president of exploration for Falconbridge, whose huge copper-zinc Kidd Creek mine is in nearby Timmins, Ontario.
",12
"Canada's Barrick Gold Corp on Monday dropped out of the race to control the vast Busang gold find in Indonesia, losing a long battle for the right to mine the deposit to U.S.-based Freeport-McMoRan Copper and Gold Inc.
But analysts warned that the struggle to control Busang, possibly the world's biggest gold deposit, may not have ended. Placer Dome Inc, another big Canadian mining concern, said it has not given up hope of grabbing a piece of Busang.
""This thing is far from over,"" said Fred Ketchen, vice-president of Toronto brokerage ScotiaMcLeod.
Calgary's Bre-X Minerals Ltd, which discovered the 71-million-ounce Busang gold find, announced on Monday it had reached a deal with Freeport, shortly before an Indonesian government deadline was due to expire.
Under the deal, Freeport will own 15 percent of Busang find, Bre-X will keep 45 percent and Indonesian interests will take 40 percent.
The deal convinced Barrick, which has spent months negotiating for control of Busang, to give up its quest.
""We put forward our proposal last week and said to Bre-X that if you can find a better deal, we wish you success,"" spokesman Vince Borg said. ""For us to go beyond the proposal would not be in the best interest of our shareholders.""
He declined to elaborate on Barrick's final offer, citing a confidentiality agreement.
Many details needed to evaluate the Freeport deal remained a mystery on Monday, causing confusion in the stock market.
Bre-X said Freeport, based in Louisiana, will provide US$400 million or 25 percent of the capital costs of the Busang project. Freeport will borrow US$1.2 billion to fund the rest of the costs. But neither Bre-X nor Freeport would say how much would be paid to Bre-X.
""We're not making a comment until the (Indonesian) government announcement tomorrow,"" said a Freeport spokeswoman in New Orleans.
Since Bre-X did not mention any compensation from Indonesian interests or Freeport, observers have to assume there will be none, analysts said. Most analysts put a C$25 to C$30 target on Bre-X shares. The shares opened at C$25 on the Toronto Stock Exchange on Monday and sank quickly to C$23.50 by midafternoon.
""This has been very expensive for Bre-X. But Freeport has a pretty good deal here,"" said Rick Cohen, gold analyst at Goepel Shields in Vancouver.
The government of Indonesian President Suharto is expected to respond on Tuesday to the proposed deal. Freeport and Bre-X need government approval before going ahead.
""It's a tremendous loss for Barrick,"" said Cohen.
Barrick, the world's second biggest gold producer, had maneuvered aggressively to grab control of Busang, spending months negotiating with Bre-X and Indonesian officials.
It formed an alliance with Suharto's eldest daughter Siti Hardiyanti Rukmana and used its powerful advisory board -- which includes former U.S. president George Bush and former Canadian prime minister Brian Mulroney -- to cultivate ties with other influential Indonesians.
Meanwhile, Placer Dome Chief Executive Officer John Willson, said his company would re-evaluate its US$5 billion offer to merge with Bre-X, but would still be willing to use its financial resources and expertise to help develop Busang.
""Given the size, complexity and importance of Busang to Indonesia, we remain prepared to contribute our financial resources and unique mine development capabilities to this very attractive project,"" Willson said. ""Naturally, we are disappointed by the news that we were not selected as the developer and operator.""
If the Indonesian government grants Bre-X and Freeport the right to develop Busang, Bre-X could quickly become a takeover target for a large company that would not mind allowing Freeport operate the mine, analysts said.
But Barrick is unlikely to jump back into the race, said gold analyst Chad Williams with Research Capital in Montreal.
""I think Barrick would be apprehensive of buying out Bre-X because Bre-X is not the operator. It would be more amenable to Placer Dome.""
",12
"A surprisingly weak February jobs report for Canada on Friday is staining the Liberal government's economic record as Canadians gear up for a federal election this year.
Canada's unemployment rate in February was stuck at 9.7 percent for the third month in a row, the government agency, Statistics Canada said. The figure was sharply higher than the U.S. jobless rate of 5.3 percent reported on Friday.
Especially dismal was the loss of 18,700 Canadian jobs last month. Full-time employment dropped by 38,000 from January, while part-time employment grew by 19,300.
Women and young people bore the brunt of the job losses, with women losing 44,000 full-time jobs and youths aged 15 to 24 losing 22,000 jobs.
The jobless news came with a federal election on the horizon, perhaps as soon as June.
The government of Prime Minister Jean Chretien has a commanding lead in public opinion polls and has won international praise for slashing Canada's budget deficit.
But it faces growing criticism over unemployment, the one serious blot on the economic landscape.    ""Despite what the
polls suggest, they (the Liberals) may be in trouble,"" said economics professor Fred Lazar at York University in Toronto. ""There's an increasing resentment building in the electorate.""
""These figures are a damning indictment of a government with no clue, no plan and no idea how real jobs are created,"" said Monte Solberg, finance critic for the opposition Reform Party.
Some opposition politicians, labor groups and even left-leaning Liberals want the government to spend more on job creation. The right-wing Reform Party sees broad tax cuts as the best route to job creation.
The Liberals gamely defended their job creation record on Friday, with Finance Minister Paul Martin's parliamentary assistant Barry Campbell saying the Canadian government still expected 300,000 to 350,000 new jobs this year.
""All the other indicators are very positive,"" added Prime Minister Chretien's spokesman Peter Donolo. ""You can't deny the fact that there's been a net creation of 715,000 jobs since we took office (in late 1993), which is higher than Germany, France and Italy combined.""
Critics noted, however, that Canada's recent job creation has lagged far behind that of the United States, which has generated almost 600,000 new jobs so far this year.
",12
"Canada's Federal Court ruled on Monday that immigration officials should move to deport a Saudi dissident suspected of being involved in a bombing that killed 19 U.S. airmen in Saudi Arabia last June.
Federal Court Judge Donna McGillis decided that a government certificate declaring Hani Abdel-Rahim Hussein al-Sayegh a terrorist and a danger to Canada was ""reasonable"" -- despite Sayegh's refusal to testify in the case.
""The court has satisfied itself that he was involved in terrorist activities,"" said Gaetan Blais, a spokesman for the Canadian Security Intelligence Service.
As a result, Sayegh will almost certainly be deported, although Canada's immigration minister must still decide whether he will be sent to the United States or Saudi Arabia. Sayegh cannot appeal the decision.
The Canadian government has accused Sayegh of being a driver involved in the massive truck bomb in Saudi Arabia last June 25 that killed 19 U.S. airmen. The bombing, which also injured 400 people, was at the Khobar Towers, a complex housing U.S. military personnel outside Dhahran in the oil-rich eastern part of Saudi Arabia.
The government also believes Sayegh is involved in the Saudi branch of Hizbollah, a fundamentalist group based in Lebanon, court documents showed. Canada believes Hizbollah is using Canada as a safe haven.
The hearing on Monday was meant to give Sayegh a chance to defend himself against the government charges. But Sayegh surprised the court by turning down a chance to testify.
""His testimony in this matter was crucial,"" McGillis said as she handed down her ruling.
Sayegh's lawyer, Doug Baum, would not say why his client did not give his side of the story.
""It's a difficult question to answer,"" Baum told reporters outside the courthouse. ""It's a deeply personal decision.""
Baum denied that his client had been advised by the U.S. Federal Bureau of Investigation.
But he said Sayegh's silence was not an admission of guilt, since the hearing was an immigration case rather than a criminal case.
""There were no admissions or denials,"" Baum said. ""The issue today is not his chance to defend himself on the issue of guilt or innocence or punishment. The issue today was admissibility to Canada.""
He said his hands were tied in defending Sayegh since the court shared only the summary of the government's case with him.
""I think the evidence in the summary is not up to scratch,"" Baum said.
U.S. and Saudi officials have said they want to question Sayegh about his links to the bombing.
Sayegh, 28, was arrested in Ottawa on March 18 on the grounds that he posed a security threat to Canada. He arrived in the country applying for refugee status from Saudi Arabia because of what he said was poor treatment of Shi'ite Moslems by the Sunni Moslem government.
He has told reporters that he was in Syria at the time of the deadly bombing.
Canadian government documents said that of the known conspirators in the bombing, Jaafar Chueikhat was dead, supposedly after committing suicide in a Syrian prison, Ahmed Ibrahim Ahmad al-Mughassil had been identified as the mastermind and Sayegh conducted the surveillance and drove the car directing the truck that exploded, killing the U.S. airmen.
",12
"Nickel giant Inco Ltd., after besting suitors and facing down legal challenges, said said on Wednesday that it has finally closed its C$4.3 billion ($3.2 billion) takeover of Diamond Fields Resources Inc.
The closing gives Inco, already one of the world's biggest nickel miners, a leading role in the nickel market for years to come with the acquisition of the massive copper-cobalt-nickel deposit in remote Voisey's Bay, Labrador, in northeastern Canada.
Diamond Fields shareholders had the choice to take common shares in Inco, cash up to a maximum of C$350 million ($256 million), preferred shares in Inco or a new class of VBN shares to participate directly in the Voisey's Bay deposit.
Inco said Wednesday the full C$350 million was paid out. The company also distributed a total of 50.3 million common shares, 25.9 million Inco class VBN shares and 9.4 million preferred shares as part of the acquisition.
The deal ends a long takeover battle and legal saga. Inco's bid beat out rival Toronto-based Falconbridge Ltd. last spring.
But Inco refused to sign the dotted line when, days before the scheduled closing of the deal, a group of Texans launched a lawsuit against Diamond Fields executives and Inco.
The lawsuit was settled Aug. 5, clearing the way for the deal to go through.
For Inco, the deal was worth fighting for. The Voisey's Bay deposit is thought to be one of the largest metals discoveries in the world.
The site contains an estimated reserve of about 150 million metric tons of ore and will give Inco a solid chunk of the nickel market when production starts up in 1998 or 1999.
The low-cost, high-quality Voisey's Bay project is expected to produce one-third of all new nickel mine output in the next 10 years and force some high-cost nickel projects out of business, analysts have said.
Inco may still face some roadblocks before it gets to that stage, however.
The nickel giant must negotiate with local native groups and win environmental approvals before it can go ahead with production.
",12
"The fight for control of Indonesia's rich Busang gold deposit has turned into an intense public relations battle rather than a traditional bidding war.
Barrick Gold Corp.'s founder and Chairman Peter Munk took the offensive on Wednesday, trumpeting Barrick's history, financial structure and mining capabilities.
Rival Placer Dome Inc. President John Willson has also kept a high public profile, lobbying in Indonesia to pursuade the government to give his company a chance to bid on Busang.
While both companies have been wooing Indonesian reporters, explorer Bre-X Minerals Ltd., which discovered Busang, has hired public relations firm Hill and Knowlton to polish its image.
Calgary, Alberta-based Bre-X currently controls the deposit. The Indonesian government has told Bre-X to form a joint venture with Toronto-based Barrick to develop the 57 million ounce gold deposit. But Placer Dome has said it wants a chance to bid on the deposit too by forming a merger with Bre-X.
""I think that Barrick is the company that is going to be involved in Busang's development,"" Munk said in a Wednesday conference call with mining analysts that seemed instead to be addressed to the Indonesian government.
""Not because somebody writes a letter, not because somebody calls somebody, not because somebody's got a better partner or worse partner, but only because Barrick is the company that has the most outstanding credentials to do the right job for Indonesia,"" he said.
Barrick has been criticized for using its high-profile board of advisers, which includes former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, to write letters and make phone calls to powerful Indonesians in a bid to corner Busang. Barrick also has an alliance with the eldest daughter of Indonesian President Suharto.
But Munk downplayed his company's influential ties, citing instead his company's strong finances, mining history, focus on gold and its experienced staff.
""Ultimately the right people will get this job and I think Barrick will qualify,"" Munk said.
Placer Dome's Willson thinks otherwise.
""We've come to a point now where there's a reasonable chance there will be a standard Western-type of auction,"" Willson told Reuters in an interview in Vancouver this week.
""I think there's a 50-50 chance that's going to happen. When it comes to competitive bid, I think there will be two people essentially in that race -- ourselves and Barrick.
The Indonesian government has instructed Bre-X and Barrick to work out a deal with their Indonesian partners at Busang by Feb. 17.
",12
"Nickel prices have been in the doldrums in the third quarter, disappointing Canada's big nickel producers who had forecast an increase in prices and a boost to profits.
Canada's two nickel giants, Inco Ltd and Falconbridge Ltd, are also experiencing copper woes.
The unexpectedly low metal prices ""will likely take a bite out of our third-quarter earnings compared to previous earnings,"" Falconbridge chief financial officer Lars-Eric Johansson said in an interview.  
Copper prices collapsed after Sumitomo Corp said its chief trader helped run up US$1.8 billion in losses through unauthorized trading over a decade. Only recently has copper showed signs of life.
For nickel, Johansson blamed the sluggish prices on faltering European and southeast Asian economies.
""In the very short term, the fundamentals are obviously not there,"" he said. ""The overall global economy is not doing as well as we had hoped for.""  
But he added: ""We expect the demand for nickel to pick up, maybe not this quarter but during the fourth quarter or to be more conservative, early next year.""
Inco was also optimistic, with Inco executive vice president of marketing Peter Salathiel saying: ""The potential for a nickel spike still exists. The time frame has been shifted from say the first half of '96 to the fourth quarter of '96 or the first quarter of '97.""
Salathiel blamed a glut in stainless steel this year for nickel's poor performance. Stainless steel consumes about two-thirds of the world's nickel output.  
Nickel demand and supply are currently on a par, Salathiel said.
He said that with nickel demand expected to remain steady for the next few months, nickel prices should rebound once stainless steel production picks up and the European and Asian economies strengthen.
But Richardson Greenshields analyst Ray Goldie said the nickel price should have picked up by now. He has seen growing demand along with a steady supply, laying the groundwork for a rise in prices.  
""The fundamentals have worked beautifully,"" he said. ""Despite gloomy talk about the stainless steel industry, which is the major consuming industry, the most recent figures show nickel consumption is growing. Supply can't keep up and inventories are declining.""
So why did nickel fail to spike?
""The fact that nothing has gone wrong may be one reason,"" said Goldie.
He said that nickel companies produced at capacity with no strikes or disruptions and that it might take such a disruption to knock the nickel price out of joint.  
The floundering nickel market could spell trouble for stocks that trade on nickel prices, he added.
The stock market has built in an expectation of a moderate price increase, said Goldie and ""if the price of nickel were to go sideways for the next six months, that would be a disappointment and the shares would go down,"" he said.
""But I don't believe there's an expectation we'll see sustained prices over US$4."" Nickel was trading today at US$3.46 a pound.
Bank of Nova Scotia economist Patricia Mohr predicted nickel prices of at least US$4 a pound by early 1997.  
She expected stainless steel stocks to be depleted in the fourth quarter, leading to increased demand for nickel in the first quarter of next year.
""There isn't very much new mine supply coming on in the near future,"" said Mohr. ""So you do have the potential for prices to certainly move higher.""
Analysts expect third-quarter earnings for Inco to fall to US$0.29 a share from year earlier US$0.33, with Falconbridge earnings declining to C$0.18 a share from C$0.47 in last year's third quarter, according to estimates compiled by I/B/E/S.
-- Reuters Toronto Bureau 416-941-8104
",12
"Trade ministers from the Asia-Pacific region were urged on Friday to cut customs red tape and make it easier to finance Asia's huge infrastructure needs, officials at the APEC trade ministers' meeting said.
But an Australian proposal to develop a travelling ""smart card"" to let business officials from Asia-Pacific countries jump to the front of the line when clearing customs got short shrift from Canada, the conference's host.
""We are looking at a slightly different approach,"" a senior Canadian trade official said. ""Our approach is to try to work on a larger package.""
Australia's proposal dealt with business travelers but not their cargo, the official said. The Philippines, Hong Kong and South Korea back Australia's plan for now, he added.
The APEC travelling card was one of several recommendations put forward by international business representatives at the first full session of the Asia-Pacific Economic Cooperation forum for trade ministers.
""We are the reality test and ... we are very happy about the dialogue that we started today,"" said Victor Fung, co-chairman of the APEC business advisory council, an international group of trade-oriented business representatives that has considerable influence on the APEC agenda.
Officials said Canada also used the session to drum up support to make it easier to finance Asia's massive infrastructure requirements. The region will require about $1.5 trillion to build transportation and communication links over the next 10 years, officials said.
Canadian Trade Minister Art Eggleton urged his counterparts to make information about private sector investment more readily available and to develop a framework that dealt with foreign financing of infrastructure projects.
""It's a very preliminary interest right now, but (Eggleton) did flag the special interest Canada has,"" an official said.
Officials said they expected substantial progress on harmonising customs regulations at the three-day meeting in Montreal. Canadian officials said they hoped to be able to post harmonised customs forms on the Internet that would let international traders file electronically around the world.
""They really want to move toward a much firmer, clearer blueprint, which will explain to businesses what it is they have to do,"" an official said.
Canada, as host of the meeting and of the APEC summit scheduled for Vancouver in November, has focused mainly on helping small and medium-sized companies clear hurdles to expand international trade. Simpler customs procedures and travelling requirements would be a big boost for the smaller companies, officials said.
The business community, especially smaller firms, would benefit greatly from financial guidelines for infrastructure, said Fung of the business advisory council.
He said the council would recommend in Vancouver that APEC set up a network to tie together organisations dealing with small and medium-sized enterprises in each country.
The APEC ministers are scheduled to take up broader trade issues on Saturday, during a meeting with World Trade Organisation officials and WTO Chairman Renato Ruggiero.
In a conference document, senior officials requested that the ministers recognise the ""successful re-launch of the financial services negotiations and, while recognising that flexibility may be needed ... urge all APEC participants in these negotiations to strive toward achieving a permanent Most Favoured Nation-based agreement by December 1997.""
The document also urged ministers to consider the WTO's planned review of an agreement for open markets in information technology, and consider broadening participation in the agreement to all members.
APEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States. REUTER
",12
"Ivory Coast's second port of San Pedro is gearing up to play an increasingly important role in the key cocoa and coffee sector -- both as a shipper and as a processor of the beans.
Three large new warehouses are under construction and the first of two planned cocoa processing factories is nearing the tendering stage.
""A factory site has been chosen and construction is about to go out to tender,"" said a spokesman for Abidjan-based Ivorian exporter ERAF.
""When a bidder has been selected ground-levelling starts and work will be around the clock to open in March 1998,"" export manager Claude Caissagnon told Reuters.
ERAF has announced plans for a 25,000 tonnes a year bean processing plant in San Pedro with Paris-based partner, Orebi and Dutch firm Nederland.
Plans for a second factory by Ivorian group SOLEGI are less clear but San Pedro exporters told Reuters they expect it to go ahead.
Ivory Coast aims to process 50 percent of its annual cocoa crop by the year 2000 to boost export value.
Industry sources point to attractive tax incentives behind a spate of industrial development in and around San Pedro - including cocoa and coffee industries and timber sawmills.
Three private factories can already process up to 160,000 tonnes of cocoa beans a year but after a record 1995/96 harvest of 1.2 million tonnes exporters doubt the 50 percent target date will be met.
Caissagnon said ERAF's planned factory -- producing only cocoa butter and cake -- could expand capacity to 75,000 tonnes/year. Existing Ivorian factories also produce powder and cocoa mass by grinding beans.
San Pedro's importance has grown with rising southwestern cocoa output since 1990.
A loosening of commodity marketing by the state Caistab cocoa board has also meant buyers' transport costs are lower than to the main eastern, port of Abidjan.
Port arrivals of cocoa for the 1996/97 season are already close to end-April 1995/96 levels of around one million tonnes as young, hybrid plants in the area around San Pedro have swollen local output.
Ivory Coast wants to limit long-term annual production to around one million tonnes and has said it will destroy illegal farms in classified forests.
Three warehouses under construction are due to be ready by the 1997/98 season (Oct-Sept). Construction managers said the warehouses would be owned by Omais, a Lebanese coffee and cocoa buyer and exporters PACI and SHAC.
An accute shortage of warehouse space in 1995/96 meant trucks of cocoa were left stranded at port approach roads.
Ivorian forwarder SIVOM was also expanding warehouse space and extra space could result from laws limiting exports of tropical timber, he added.
National bean processing capacity is set to increase to 180,000 tonnes later this year with the addition of capacity to Abidjan-based UNICAO -- part-owned by U.S.-based Archer Daniel Midland (ADM).
Up to four other factory proposals, apart from ERAF's, could raise capacity to well over 400,000 tonnes over the next few years.
SACO, Ivory Coast's largest cocoa processor, owned by Europe's Callebaut Barry group, has two factories with a total capacity of around 90,000 tonnes. Its second plant at the northern entrance to San Pedro opened in the 1995/96 season.
""ERAF's site is on the opposite side of the road from SACO with access routes possible from Sassandra and Soubre directions,"" said Caissagnon.
",32
"Ivory Coast exported 16,307 tonnes of robusta coffee beans in March, against 13,527 in February and 20,903 in March 1996, official shipping data show.
Ivorian coffee marketing started later than usual in 1996/97 after low world prices in late 1996, tighter bank lending policies to exporters and quality problems that slowed grading, exporters said.
""This year is slower but there is still plenty of coffee about,"" said one industry buyer, noting that the season opened in mid-November rather than October.
The data showed 12,904 tonnes of March exports went from Abidjan, the main port, with 3,403 shipped from Ivory Coast's second port of San Pedro.
Cumulative exports in the first six months of the 1996/97 (Oct-Sept) season were 45,783 tonnes against 58,667 in the same period of 1995/96.
Coffee product exports, from Abidjan, included 694 tonnes of soluble coffee and six tonnes of roasted coffee.
Ivory Coast forecast a 1996/97 crop of 230,000 tonnes, against 180,000 tonnes recorded last year.
Port sources put arrivals by late March 1997 at over 175,000 tonnes but said Ivory Coast would at least meet its full year output forecast.
Some buyers are still sorting and grading at stores and say more coffee is still held in villages.
But they said the quality of coffee sacks had also been poor in some areas due a shortage of supply from exporters. Piles of loose coffee awaiting grading could be seen in upcountry buyers' stores last week.
-- Matthew Bunce, Abidjan Newsroom +225 21 90 90
",32
"Ivory Coast opened talks with donors on Monday on implementing reform of the cocoa and coffee sector to qualify for the final part of a loan for agricultural restructuring.
Donors said agreement on releasing the final $45 million of a $150 million loan may not be reached until 1998.
""We will mainly discuss cocoa and coffee but some questions will probably not be resolved until the end of the year,"" said a World Bank official attending the talks, which end on May 7.
Ivory Coast, the world's largest cocoa producer, has declined to release trading data to the World Bank on an export-contract auction set up last May with the help of donor funds. The Bank would like to know volumes, prices and dates of trades at the auctions but Agriculture Minister Lambert Kouassi Konan has said the figures were commercially confidential.
Industry sources have complained that the auction encourages price speculation and overbidding to win export contracts. They also complain that auction contract rules on shipment dates and bid confirmation are not enforced.
Some exporters have already complained of difficulties in obtaining contracts because larger companies can bid above world market rates because of better access to finance. That threatens the viability of smaller exporters and market competition.
Exporters and the World Bank failed to agree on three proposed changes to auction rules when European Union, IMF and French development agency officials last met for talks on the system in September 1996.
Exporters, the World Bank and European industry officials subsequently proposed changes in auction rules to ensure cocoa quality. The Ivory Coast has not responded directly to those proposals.
Industry delegates are due in Ivory Coast in mid-May for follow-up talks aimed at finding a solution to concerns about the auction and quality.
Coffee sector talks have recently focused on how to liberalise marketing while maintaining adequate quality checks.
A report laying out options for Ivory Coast by British Consultant Landell Mills was expected in January but lack of guidance from Ivory Coast on which options to develop had delayed completion, said one donor.
""They are now in the process of writing it,"" he added, without indicating a delivery date.
The structural reforms to be funded by the loan also include the rice, sugar and cotton sectors.
--Abidjan newsroom, + 225 21 90 90
",32
"Ivory Coast's power capacity is set to increase by one third but with domestic demand slim export customers will be needed, power engineering firms and distributors said on Wednesday.
""They have about 1,200 megawatts (MW) installed but there are no large industrial users,"" a West Africa-based manager for Swedish power group Asea Brown Boveri (ABB) told Reuters. ""One of the top 10 power consumers is a hotel.""
The head of Ivory Coast's privatised power firm Compagnie d'Electricite Ivoirienne (CIE) agreed, and expected exports.
""The (domestic) problem is not so much one of construction. The techniques of construction are not a problem. It's the capacity to absorb the investment, to repay. There must be a market,"" CIE president Marcel Zadi Kessy said earlier this year.
ABB and five other bidders submitted proposals in April to build a $300 million, 450 MW, gas-fired power plant near the capital Abidjan on build-own-transfer terms.
The plant, at Azito, would start operating within 12 months with an initial capacity of 300 MW, which could be upgraded.
The supplier will be chosen on the basis of competitive bids based on kilowatt/hour charge, with the winner is due to be declared in May.
Plant ownership would pass to Ivory Coast after 20 years.
""Industrial companies would give us some baseload and make us less reliant on (an economy largely dependent on) cocoa and coffee prices,"" said ABB sub-regional manager Koen Beckers in a recent interview.
Ivory Coast, the world's largest cocoa producer, is keen to diversify export earnings away from its rural economy.
Power companies see promising markets in mining and food processing sectors, although domestic consumption is also set to rise, with a plan to supply 7,000 more villages over the next few years.
In the 37 years since independence from France only about 1,000 villages have been connected.
""CIE (Compagnie d'Electricite Ivoirienne) has already invested quite a lot in improving grid quality,"" said Beckers.
A nickel mine producing 30,000 tonnes a year is planned to open around the year 2002 at Biankouma in western Ivory Coast, which could raise industrial energy consumption by a further 150 MW, he said.
About 24 companies, including many newcomers, are exploring mainly for gold in 55 permits, each of up to 1,000 square kilometres.
Ivory Coast aims to triple cocoa bean processing capacity from about 150,000 tonnes to allow domestic processing of 50 percent of its long-term average yearly cocoa crop.
Three factories are working and a further five are under discussion.
Power exports began with Ghana after Ivory Coast achieved energy self-sufficiency in 1995.
""Now they (Ivorians) are discussing interconnecting Mali,"" meaning Ivory Coast would be connected to five other countries, said Beckers.
Power deals now link Ivory Coast, Ghana, Togo, Benin and Burkina Faso.
Ivory Coast also exports natural gas after using 60 percent of offshore output to feed its own thermal power stations, recently converted from other fuels.
Ivorian mines and energy Minister Lamine Fadika in April urged Ghana to fuel a new 300 MW power station at Takoradi, due on line this year with new Ivorian offshore gas under development by Shell and UMIC, a unit of Houston-based United Meridian Corp.
Ivory Coast's six hydroelectric plants can produce 604 MW and the Vridi thermal plant near Abidjan can produce 300 MW-plus.
Another 210 MW came on stream in April from CIPREL plant, a joint-venture between French firms Bouygues and Electricite de France.
A planned Regional West African Energy Community would ""allow countries with excess... gas or electricity, to fulfill the needs of neighbouring countries,"" said Fadika at a March conference in Accra on ""Meeting Africa's Oil and Gas Needs"".
-- Abidjan newsroom, + 225 21 90 90
",32
"Ivory Coast is destroying some cocoa farms in its protected forests but the impact on 1996/97 (October-September) output will be minimal as officials await clear eviction plans, forestry officials and crop analysts say.
""Nothing has really been done,"" said one state forest agency (SODEFOR) manager.
""We are told to get them (farmers) out but we are waiting for practical policies on the way to go ahead,"" south coast area manager Tanoh Yao told Reuters during a recent tour of protected forests.
Ivory Coast said in March that 30 percent of protected forests were ""illegally occupied"" by up to 450,000 farmers and their relatives, growing up to 100,000 tonnes, roughly one-tenth of the 1996/97 cocoa crop.
World Bank officials put the figure at around 50,000 tonnes.
The March 7 decree said officials would ""systematically destroy all plantations in parks and reservations"" to stop clearance of classified forests and national parks. A ""decontamination"" period would allow individual cases to be considered and give farmers time to quit farms.
No timetable or details of implementation were given.
Crop analysts expect Ivorian forest protection plans to bite in 5-10 years as World Bank and international pressure grows, but they predict limited action over the next few years.
""(The evictions) could be bluff so we do not expect any short-term effect,"" said one, adding that ""illegal"" output was impossible to quantify. ""The (""illegal"") yield would change each year with tree age and as planters move around.""
Donors say protected forest cover has dropped to 3.6 million hectares from 13 million at the time of independence from France in 1960.
SODEFOR offices in forest areas have displayed copies of the decree near entrances next to local newspaper articles on evictions of farmers and destruction of cocoa trees.
Yao said some farms had been destroyed in increasingly productive forests bordering the large Tai National Park in south-west Ivory Coast near Liberia, but elsewhere the action had been limited.
""At Guiglo (western district) and around Tai, it has begun,"" said Yao. ""(SODEFOR) is also replanting along roadsides as a first step to cut down on access to deeper forest areas.""
Up-country buyers say a large SODEFOR base north of Ivory Coast's increasingly important cocoa export port at San Pedro has recently been expanded.
""People had one-hectare farms or so but then chopped more and more forest down. Now there are no more animals so we have to walk 20 km to hunt,"" said one village cooperative buyer for a main Ivorian exporter. ""The policy is a good idea.""
Exporters said one farmer had lodged a complaint with San Pedro's prefect in April after eviction from a nearby farm outside Meadji. Others in deep forest areas had also been hit.
Crop analysts say large swathes of protected forest have been cut down but farming techniques there were poor.
Tai forest officials say loosely-defined tenure laws could make the destruction of plantations and villages difficult.
""The farmers are in negotiations with SODEFOR. Some of them have been in the forest for 20 years so we don't know where they will be lodged,"" says Commandant Koffi N'Dri, head of the Tai forest protection unit PACPNT (Projet Autonome pour la Conservation du Parc National du Tai.
""Illegal production in Tai itself is very small but in the surrounding forests it is another matter,"" he added.
Tribal chiefs south of Tai said oil palm plantation owners had destroyed more forest than cocoa and coffee growers.
""In five or 10 years we will no longer have any forest in our region,"" one Tai forest chief told Reuters.
""There is some cocoa and coffee but it is closer to main roads,"" he said. ""(The state says it owns) the forest but we want to rent land so at least our children have a future.""
Palm oil firms had chopped down forest and recruited villagers to work plantations without any rent or tenure provisions.
Refugees from neighbouring Liberia's war had mainly planted food crops, rather than cocoa and coffee, chiefs and missionaries living in south-western forest areas told Reuters.
""Oil palm prices are better than for cocoa here,"" said one priest near the Liberian border.
",32
"War baby Yegue Badigue was born at one of Chad's darkest hours.
To make matters worse, a hereditary defect struck him blind when he was little more than a year old.
But the boy who entered the world as Libyan and Chadian forces fought over the sprawling desert nation's capital in 1980 had a hidden talent -- the gift of music.
""We started Yegue off on Do-Re-Mi and he just started improvising with melodies,"" his father Jean Badigue, a soldier and director of Chad's army band, told Reuters. ""Then we gave him a harmonica and soon realised he was no ordinary child.""
Today, Yegue's musical talent is helping build bridges within the former French colony's blind community -- which some say is the world's largest as a percentage of the population.
His teachers, who have brought together children from Chad's rival Moslem and Christian communities, offer his case as a symbol of hope -- in a country starting to enjoy relative stability after decades of civil war or conflict with Libya.
""He joined the first of our mixed-religion classes and learned the piano in five years flat,"" said Roman Catholic Archbishop Jean Williet, who took over N'Djamena's diocese in 1986 and has taken a special interest in his case.
MUSIC ""HOLDS US TOGETHER""
""We cannot see each other so music for us is as solid as sight for others. It holds us together,"" said Yegue, 16, who is dependent on others -- until he sits at his piano.
Williet runs three blind centres around the capital.
""We had to do something as no one had ever reached out to the blind community,"" he said, bouncing his battered Peugeot through dusty backstreets from school to school. ""Chad after all has the highest blind population per head in the world.""
World Health Organisation figures show that 135,000 of Chad's 6.5 million are blind -- a third of them aged under 20. Many live by begging.
Williet says many cases of blindness are preventable.
Children become blind because of untreated early diseases such as chickenpox, measles and dangerous concoctions prescribed to clear symptoms, he adds. Poor hygiene is a factor.
Others, like Yegue, simply go blind for hereditary reasons.
Williet started Yegue on the piano by guiding his hands over a piano keyboard to teach him elementary theory and practice by feel and sound.
""We had an old Russian grand in those days but later scraped together the money for an electric piano so we could take it about with us,"" Williet said.
PLAYS TO INTERNATIONAL AUDIENCES
Before long Yegue was lifting the roof of N'Djamena's vast Notre Dame cathedral with the strains of Bach, Mozart or the Little Prince of Africa -- a piece composed by Williet himself.
Yegue, little over five feet (1.5 metres) tall and as thin as a reed, now plays to international audiences at the capital's plushest hotels.
""He played to a 400-strong audience of Lion's Club charities at Christmas,"" said Williet. ""They were dumb-struck.""
Yegue is one of 55 students aged from six to 20 in Williet's schools. They follow a full curriculum ranging from maths, braille and French to carpentry and basket weaving.
The aim is to integrate them into normal schools or a craft-based career. Religious instruction is optional.
Yegue's father says his son will have to decide what he wants to do next.
Yegue himself already has plans. ""I hope to be a teacher or go to music school,"" he said, his eyes fixed blankly on a wall as he raced through Franz Kuhlan's Sonata Opus 55.
Other blind children are following his example.
A full band of Moslem and Christian drummers, guitarists, singers and actors perform regularly in N'Djamena.
""He is a real symbol for peace time and how the community can work together after 30 years of war,"" said Williet.
",32
"Ivorian port cocoa stocks stand at up to 175,000 tonnes as arrivals trickle in at about 1,000 tonnes a week, but April and brisk May exports will reduce levels, port sources said on Friday.
""The main season (Oct-April) is over so arrivals will be down until early May,"" said a source. ""Some exporters have stock at the margins of (export) quality limits so they will be waiting to mix it with fresh mid-crop (May-Sept).""
Sources put stocks at Abidjan at 100,000 tonnes with 75,000 at the second port of San Pedro.
Exporters' agents said some exporters were short of cocoa for immediate shipment, but others said this represented a temporary commercial squeeze rather than a broader supply problem.
""Smaller exporters may have bought contracts beyond their capacity, the Caisse may have issued too many contacts or maybe a few exporters are holding large stocks,"" said one shipping manager. ""I have people crying out for cocoa,"" he added.
Another agent said, ""We must wait and see if the Caisse renews export licences if contracts are broken.""
Latest bean sizes were around 90-105 beans per 100 grams, against an export standard of 105 with up to eight percent humidity, industry buyers said.
""Bean sizes are tailing off now but smaller ones are still up-country,"" said one.
Exporters are gearing up for mid-crop arrivals after returning from Easter holidays, but crop analysts have not completed up-country pod tallies to give an indication of volumes, they said.
Early estimates range from 100,000 tonnes to well over 160,000, down on 200,000 in the 1995/96 season, crop analysts said.
""If good rains now carry on and cherelles survive through April and May, I see no reason to be pessimistic,"" said one. ""Estimates will be out later in April but most pod counters will be up-country in mid-April.""
Some main crop could be held back to mix with mid-crop to reach an overall export standard.
Tree crop and declared mid-crop could vary widely, he said.
Warehouse stocks totalled up to 400,000 tonnes in early 1997 as exporters held back cocoa bought through auction for December contracts from the Caistab marketing body.
Auction prices were out of line with world rates before a rally ahead of March contracts, they said at the time.
-- Abidjan newsroom + 225 21 90 90
",32
"Heavy April rains in Ivorian cocoa areas have favoured mid-crop (May-Sept) pod growth and flowering for early 1997/98 main crop (Oct-April) harvests, weather and crop analyts said on Thursday.
""At the end of March we were at 109 percent of the 10-year average (Jan-Mar) in all but a few areas,"" said one crop analyst. ""I would say April has been about average but the last 10 days will give the overall picture.""
National weather centre forecasters said coastal and inland areas, particularly around Yamoussoukro and Gagnoa, had received well above average levels in the first 20 days of April. ""If rains are heavy for the last 10 days of April you can say the (long) rainy season has begun (usually lasting until August).""
Many crop analysts use private data from undisclosed areas but official weather data for the first 20 days of April showed rains at 10 weather stations averaged 78.85 mm. A total of 95 mm fell in the first 10 days of April and 693.5 in the second.
One crop analyst put overall 1997 rainfall at just below average. Another said rains had risen to 145 mm against his 10-year average figure of 134 mm for 12 stations. Rains in some areas had been between 35-145 percent above normal.
""March and April have been good and recent rains also seem quite heavy,"" said one. ""April could be close to its average.""
March rains averaged 111 mm, against crop analysts' long-term averages ranging from 80-90 mm. February rains of 10 mm (against a usual 50 mm average) had threatened mid crop potential until rain fell later, crop analysts said.
Young flowers for 1997/98 main crop harvests where more abundant than at the same time last year but accurate predictions of harvests would not be possible until June onwards, analysts said.
Crop analysts' estimates of the 1996/97 midcrop range between 150,000 tonnes and 200,000 tonnes but rains into May will partly determine harvests. Arrivals stood at 970-980,000 tonnes by mid April.
""Mid-crop assessments are particularly difficult. You need to visit four times as many sites for an accurate indication because of the smaller number of pods involved,"" one explained.
Mid-crop arrivals, with smaller bean sizes than last year's export grade harvests (up to 105 beans/100 grammes), are expected from early May -- against mid-April last year.
One set of official weather data show rainfall averages for the first three months of 1997 were 34.6, 11.3 and 100 mm respectively -- against 14.2, 50.2 and 64.9 in the record 1.2 million tonnes 1995/96 season.
The long-term averages for the same three months (1987-96) were 13.6, 37.4, 83.2. For April, the average was 130.4.
The latest April 1997 data, from Ivory Coast's national weather station, showed the following rainfall (mm) for the first 10 days of April in key growing areas plus the commercial capital Abidjan (previous 10 days bracketed):
Daloa 0.2 (105.8), Gagnoa 0 (142.8), San Pedro 0 (18.3), Tabou 0.4 (1.0) Man 5.4 (98.7), Dimbokro 18.3 (73.2), Yamoussoukro 22.1 (83.8), Abidjan 0 (128.8), Sassandra 0 (10.6), Adiake 33.7 (64.5), Korhogo 15.1 (14.2).
For the second 10 days of April, the rains were:
Daloa 49.3, Gagnoa 63.7, San Pedro 47.1, Tabou 57.0, Man 29.3, Dimbokro 22.2, Yamoussoukro 107.7, Abidjan 156.5, Sassandra 39.1, Adiake 69.9, Korogho 51.7.
-- Matthew Bunce, Abidjan Newsroom + 225 21 90 90
",32
"Rains spread inland from coastal Ivory Coast cocoa areas this week after February drought which has threatened to stress trees and reduce late mid-crop (April-Sept) potential, weather and crop analysts said.
Industry sources say the mid-crop is likely to determine whether the 1996/97 season harvest is in line with government projections of 950,000 tonnes or close to 1.1 million tonnes -- as some industry players predict.
""The trees are still holding up but heavier rains will be needed in early March to ensure mid-crop prospects,"" one said.
""There are plenty of flower pinheads (buds) on trees but rains are needed to prompt pollinating activity by insects.""
Flowers would give pods maturing in August and September.
Weather data show little rainfall up to February 20 but another crop analyst returning to Abidjan along the coast this week drove for four hours through heavy rain showers.
The first heavy rains for three weeks fell as a thunderstorm over Abidjan on Thursday, following the appearance of clouds over the past 10 days.
""Heavy showers have fallen in the past few days in coastal areas but northern Ivory Coast is still experiencing dry Harmattan weather conditions,"" said a national weather station spokesman.
Ivory Coast produced a record 1.2 million tonnes 1995/96 crop after a bumper 200,000 tonnes mid-crop.
Some industry forecasters raised 1996/97 crop forecasts after strong main crop arrivals. Mid-crop prospects are expected to be clearer by mid-March.
Upcountry buyers said rains had also fallen inland as far as Gagnoa. New grass could be seen growing through fire-cleared verges on remote roads suggesting rains in those areas.
Buyers north of Gagnoa said dry dusty condions had not yet cleared.
Crop analysts said a build-up of dust on leaves cutting photosynthesis would only be washed off if rain continued to fall.
""If early March rains are good, trees will react well. There is no sign they have suffered any more than normal,"" one said. ""It is the dry season after all,"" he added.
Official weather data for the second 10 days in February showed a total of 13.1 millimetres were recorded at 10 weather stations compared to 0.6 mm in the previous 10 days.
Rains were concentrated in coastal regions east of Abidjan with little falling in the commercial capital itself.
Data for the past week were not immediately available.
In the first and second 10 days of February in 1996 rainfall totalled 303 mm and 361 mm. Weather analysts said this year's totals were 21 percent of the long-term average after higher than normal January levels.
Rains have traditionally increased from little rainfall in January towards the main rainy season from April to June followed by a dry spell in July and August.
Deforestation has meant convection rainfall patterns are more uneven than in the past with more usually falling in areas with stands of trees left intact -- mostly western areas where new cocoa tree planting is concentrated.
Temperatures in cocoa growing countries usually range between a minimum of 18-21 Celsius and a maximum of 30-32C.
Temperatures in some Ivory Coast areas have touched 37C in February. Soil moisture levels had partly compensated for the heat after heavy December and light January showers, said crop analysts.
The data, from Ivory Coast's national weather station, showed the following rainfall for the second 10 days of February in key growing areas plus the commercial capital Abidjan:
Dalao 0 mm, Gagnoa 0 mm, San Pedro 0.1 mm, Tabou 0 mm and Man 0 mm, Dimbokro 0, Yamoussoukro 0 mm, Abidjan 2.7 mm, Sassandra 0 mm, Adiake 10.3 mm, Korhogo 0 mm.
-- Abidjan Newsroom + 225 21 90 90
",32
"African coffee ministers meet on Thursday to discuss cutting robusta exports following a January agreement among world producers, but some officials say disease and drought make cuts unnecessary in some countries.
African producers agreed after a January meeting of the Association of Coffee Producing Countries to cut robusta exports by a total of 850,000 60-kilo bags between January and June 1997 in an attempt to force up prices.
Individual country quotas were left to be decided later.
""We shall be looking into the export programme in light of the Rio (de Janeiro) agreement and our objective is to ensure a transparent and effective implementation,"" said a spokesman for the Inter-African Coffee Organisation (IACO).
""The ministers will take a decision on how to allocate the share which falls on Africa and how to deal with shortfalls,"" said IACO chief economist Donald Kaberuka. ""We will also discuss the issue of non-member countries.""
Eight countries will take part in the talks -- Uganda, Ivory Coast, Cameroon, Kenya, Zaire, Tanzania, Madagascar and Ethiopia.
Quotas for individual countries set at the meeting would not be made public.
""Some people have said we will not make any cuts but that is not true,"" said Kaberuka.
A Uganda Coffee Development Authority (UCDA) official said this week that drought and disease had cut into that country's exports, making quotas unnecessary.
Uganda is Africa's largest robusta producer.
It produced around 4,644,397 60-kilo bags in 1996 against 3,079,261 in 1995, according to IACO. Ivory Coast produced 2,526,198 and 2,493,754 over the same periods.
Analysts in Ivory Coast say bean quality problems could mean no more than 130,000-150,000 tonnes will be exported in 1996/97 (Oct-Sept) despite an official forecast of 230,000 tonnes.
Ivorian exports by the end of January totalled little more than 24,000 tonnes. The season opened on November 14.
The Coffee Board of Kenya, also citing drought and disease, has forecast a drop in production and earnings this year.
Zaire's production has been cut by the conflict there since late 1996.
",32
"Declared cocoa arrivals at Ivorian ports for Ivory Coast's 1996/97 (October-April) main crop totalled 970-980,000 tonnes by April 14, close to record levels seen in the 1995/96 season, exporters and crop analysts said.
The 1995/96 main crop (ending April 30) reached just over a million tonnes.
""Arrivals are now at a trickle compared to last year but it is still possible the total (main crop) will reach a million by the end of the month,"" said one crop analyst.
Exporters said cocoa was arriving at Ivory Coast's two ports -- Abidjan and San Pedro -- at a total of up to 5,000 tonnes a week, compared to 8,000 tonnes a week in 1995/96.
Little or no main crop cocoa remained on south-western plantations visited by Reuters. ""Cocoa is now for the mid-crop (usually smaller, poorer quality beans),"" said one coastal area buyer.
Ivory Coast has forecast 950,000 tonnes for the 1996/97 season but some private forecasters upgraded their full-year predictions from that level to around 1.1 million tonnes after large arrivals in early 1997.
Last year, Ivory Coast produced a full-year record of 1.2 million tonnes after a bumper 200,000 tonne mid-crop (May-September).
Sources said Ministry of Agriculture data showed cocoa arrivals to April 4 (from October 24) stood at 940,0000 tonnes -- about six percent down from 1,003,366 last year. Another 40,000 tonnes or so should be added to the 1996/97 figure as the season opened three weeks later than the usual October 1, they said.
Other arrivals data seen by Reuters gave similar figures.
""The latest figures I have from the Caistab (cocoa and coffee marketing board) show arrivals at about 975,000 by April 14 but that is after some downward adjustments for sub-grade (inferior beans),"" said one source.
Arrivals to the end of the main crop in 1994/95 were 815,000 tonnes, with weekly arrivals of under 4,000 tonnes.
Trade sources say exporters usually over-estimate arrivals early in the season to help secure bank finance, but square accounts later in the season by under-declaring.
Crop forecasters say declared arrivals in Ivory Coast can exceed tree crop harvests as quantities of cocoa are carried between seasons in the hope of price rises and to mix poor with good quality cocoa.
One cocoa buyer for Ivorian exporter Jean-Abile Gal (JAG) said the latest cocoa bean sizes averaged 98 beans per 100 grammes at San Pedro, and 105 at the main port, Abidjan -- against an export standard of up to 105 with less than eight percent humidity.
Exporters said average humidity levels at both ports were below eight percent.
Up-country buyers' stores in coastal and south-western areas were mostly empty, except for coffee, but larger warehouses at San Pedro, including JAG's, were still well stocked.
""There is nothing left. Some exporters are desperate to meet contracts and cannot get cocoa,"" said one buyer. ""Cocoa harvested now is really for the mid-crop (from May).""
Port forwarders' figures seen by Reuters showed 1996/97 cocoa volumes handled 12 percent down on 1995/96, but managers said warehouse stocks for end-April shipment would close the gap.
""It is very acceptable. We thought the gap could be twice that,"" said a manager for SAGA, San Pedro's largest forwarder. ""Last year, arrivals figures were a lot more available so it has been harder to track.""
Cocoa bean shipments rose from 39,637 tonnes in February to 51,981 in March and at least another 10,000 tonnes was due to leave next week.
""Some of what is left in stores will be for local processors (using around 135,000 tonnes of beans a year),"" said one crop analyst.
SACO, San Pedro's only factory, had large volumes of produce stored in sheds with bagged cocoa under external awnings. Cocoa product exports totalled around 4,000 tonnes for February and March.
Several new warehouses are planned to increase port cocoa storage capacity. New factories are also in the pipeline.
Exporters are now looking forward to pod counters' mid-crop predictions, expected this month, and further news on Ivory Coast's intention to destroy illegal cocoa plantations in classified forest areas.
The country's Minister for Commodities, Guy-Alain Gauze, said earlier on Friday in the Netherlands that the upcoming mid-crop would be somewhere near 100,000 tonnes.
",32
"Cocoa bean exports from Ivory Coast jumped to 171,104 tonnes in March, against 148,827 in February and 169,065 in March 1996, official shipping data show.
March exports and bean quality were similar to last year's levels even though the 1996/97 crop is expected by pod counters to fall short of last year's 1.2 million tonne record, exporters said.
""Last year there was a demand peak earlier in the year but this year demand came later,"" said one shipper. ""March (1997) has been one of the biggest shipment months ever so we are looking hard at the (export) figures.""
Abidjan handled 119,123 tonnes of March 1997 exports with a further 51,981 tonnes leaving via the second port of San Pedro.
Cumulative exports for the first six months of 1996/97 (Oct-Sept) totalled 767,337 tonnes, against 722,646 by the end of March in 1995/96.
""The average bean count so far has been 101 (beans per 100 grams) so quality has been very good,"" said the exporter, adding that bean sizes last week averaged 100/100 grams.
Ivory Coast's bean export standard is 105 beans per 100 grams with less than eight percent humidity.
Some upcountry buyers have pointed to slipping bean sizes ahead of the mid-crop (May-Sept).
The main destinations for March exports from Abidjan were broadly the same as last year. North-west European ports received 85,198 tonnes, with 60,812 for Amsterdam. U.S. east coast ports took 17,161, including 13,865 for New York.
Separate figures by destination for San Pedro were not immediately available.
Shipments from the two ports during the main January and March cocoa contract months totalled 166,268 tonnes and 171,104 tonnes, against 174,927 and 169,065 last year.
Some shipments loaded in late February 1997 had probably been recorded as March exports, said one shipper.
""The (export) figure is very high for one month but bulk shipments might have put the volume up,"" he added.
Ivory Coast produced a crop of 1.2 million tonnes in 1995/96 and private forecasts for 1996/97 range up to at least 1.15 million tonnes.
Port arrivals stood at around 982,000 tonnes by mid-April as the main crop (Oct-April) tailed off, compared with 1.03 million tonnes in 1995/96, industry sources said this week.
Analysts have made preliminary harvest estimates of up to 180,000 tonnes for the mid-crop (May-Sept), but steady rains needed into June will partly determine final volumes.
Ivory Coast has not revised its 1996/97 total crop forecast of 950,000 tonnes, but U.K.-based broker GNI cut on Wednesday set its full year 1996/97 Ivory Coast cocoa crop estimate at 1.15 million tonnes.
GNI sharply cut its estimate of this year's world cocoa supply deficit from 180,000 tonnes to 33,000.
-- Matthew Bunce, Abidjan Newsroom +225 21 90 90
",32
"Rains favouring Ivorian cocoa midcrop development ended abruptly in early February but strong 1996/97 midcrop (April-Sept) harvests are still expected, weather and crop analysts said on Monday.
""Even if dry weather continues into March the trees will probably not suffer any stress,"" said one crop expert. ""Soil water levels are sufficient so the only danger is dust covering the leaves,"" he added.
Weather data showed a total of 0.6 mm of rain fell at 10 weather stations monitored in the first ten days of February compared to 114.3 mm at the end of January and 103 mm for the same 10 day period in 1995/96.
A month with less than 10mm of rain is considered ""dry"".
Dry weather can harm cocoa trees and shrink harvest volumes.
Dust arriving with dry harmattan desert weather seen since late January could reduce photosynthesis and cause defoliation, the crop expert said.
""Winds have dried surface soil but, if the dust is washed off, the trees could hang on up to the first week of March without suffering,"" said the crop expert.
Temperatures in cocoa producing countries usually range between a minimum of 18-21 degrees centigrade and a maximum of 30-32 degrees.
Ivorian temperatures over the weekend reached 35-37 degrees in some central and northern areas as dry desert harmattan weather continued.
Recent rains have varied widely between regions. Over 200 percent of average rainfall was seen in some cocoa areas in January while others registered a deficit.
""Rains are 20 percent down but cocoa trees have not suffered,"" said a plantation farmer near Gagnoa.
Rains of 10 mm a week until April would be need for maximum midcrop harvests, he added.
A weather analyst expected rains to pick up in late February.
""If cloud base had been a little lower at the weekend the clouds would have resulted in rain,"" said one weather analyst. ""Forecasting at the moment is particularly difficult as weather patterns are changing,"" he added.
Above normal rainfall in Ivory Coast during December made cocoa bean drying difficult but helped midcrop flowering and pod development.
Rains in January fell mostly around Man, Yamoussoukro and Daloa. Little rain fell along the south coast.
Weather up to April for midcrop development will partly determine whether private crop estimates of up to 1.1 million tonnes of cocoa for 1996/97, or government forecasts of 950,000 tonnes, turn out to be right.
A unexpectedly large 1995/96 midrop of 200,000 tonnes took Ivory Coast's total crop to a record 1.2 million tonnes.
Data to February 10 suggest 820,000 tonnes have already reached Ivorian ports in 1996/97.
""There is a lot of cocoa still around and midcrop prospects are still looking good despite the dryness,"" said a pod counter returning from upcountry.
-- Abidjan newsroom + 21 90 90
",32
"Stowaway deaths in the holds of cargo ships leaving West Africa are prompting calls for concerted international action to combat the problem.
Dockers at one port in Britain found the bodies of seven young Africans amid the cargo in ships carrying variously cocoa, coconut and oilseeds.
Three Africans died in the hold of another cocoa ship in Ivory Coast's main port Abidjan in February after inhaling toxic pecticides, leading to rejection of the 10,000 tonne consignment by American buyers.
Veterans in the cocoa trade recall the curious case of an African head that turned up in a sack of cocoa from Nigeria.
""The West African problem is fairly intense at the moment,"" says Chris Horrocks, Secretary-General of the International Chamber of Shipping.
""Industry has to gear up Western governments to bring the matter up but as their interests are not directly at stake it is often a token gesture,"" he said by telephone from London.
British Prime Minister John Major agrees something needs to be done.
""We do need to examine both with the host countries and with the shipping lines better arrangements to ensure that they (stowaways) are not hidden away on their ships,"" he told parliament in response to a question.
GOVERNMENTS RELUCTANT TO ACT
But shipping officials say governments fail to act out of fear of facing the bills for handling stowaways, a cost normally borne by shipping lines and their insurers.
Horrocks said the U.N. International Maritime Organisation in London had set up a committee to consider recommendations for a convention on stowaways but a rapid conclusion was unlikely.
Many stowaways, fugitives from war or poverty, are looking for a better life in the West. Others simply want adventure.
""One boy was found at Marseille with his toothbrush and identity papers,"" said a shipping agent who investigates such cases. ""He asked us to send him back home so he didn't miss any more classes. He was a real Tom Sawyer type.""
Most stowaways carry no proof of identity or nationality, prolonging procedures for repatriation or granting of asylum.
Ivory Coast, a beacon of economic and political stability in West Africa, has become a magnet for stowaways from neighbouring states -- especially Nigeria, Ghana and war-ravaged Liberia.
Port police say about 200 cases were reported in Ivory Coast in 1996.
""Stowaways slip on board from the lagoons at night or climb over port walls,"" said an Ivorian Transport Ministry spokesman. ""How to stop them is purely a police matter.""
SOME DEATHS MAY NEVER GET REPORTED
Investigators say many cases probably go unreported. ""If bodies are found at sea they are reported at the destination port but some are probably thrown overboard,"" one said.
Shipping agents say port security is very low on the list of priorities in the African countries concerned. Posting extra port guards is costly and of little value when guards can be bribed to turn a blind eye.
""All African ports suffer from the same problem,"" said a ship surveyor who has worked in most of Africa's principal ports for over 25 years. ""We always have a number of cases in hand.""
""People talk about complicity of the crew but I find it hard to believe stowaways are paying for their passage. Most are completely destitute when they get on board.""
As immigration laws around the world are tightened, particularly in rich countries targeted by stowaways, captains find it more and more difficult to land illegal passengers.
They face the prospect of having to keep stowaways on board for years or heavy fines or jail for letting them ashore.
SOME STRIKE IT LUCKY, MANY DON'T
Some stowaways reach their promised land. Some manage to stay there. Many don't.
The unlucky ones drown, starve, suffocate.
Eleven Nigerians survived a three-day ordeal off South Africa's Dyer Island in January when they were cast adrift on an oil-drum raft in shark-infested waters.
Seven Ghanaians who stowed away on a cocoa ship heading for France were not so lucky. Their plight -- and the story of an eighth stowaway who survived -- became the subject of a joint British-American film released in Ghana and worldwide last October.
The case highlighted problems of international jurisdiction over murders at sea. Testimony of the survivor, Kingsley Ofusu, before a French court in 1996 led to murder convictions for the Ukrainian captain and crew of the MC Ruby.
Ghana launched a campaign to publicise the deaths and discourage other would-be stowaways.
It has also tightened security at the ports but the lure of the bright lights of Europe and the Americas remains a powerful incentive -- as the rising death toll illustrates.
",32
"Port arrivals of 1996/97 (Oct-Sept) Ivorian coffee totalled about 150,000 tonnes by March 16 compared to about 110,000 tonnes in 1995/96 despite doubts over quality, exporters said.
""It is a larger crop than last year,"" said one industry buyer. ""The figures tie in with forecasts of upwards of 230,000 tonnes but as with last year marketing has been left a little later because of a large cocoa crop.""
Ivory Coast produced around 180,000 tonnes of mainly robusta coffee in 1995/96 and has slated 230,000 tonnes for 1996/97.
A mild January-March flowering period in early 1996 and a peak in the strong-moderate-weak production cycle had helped boost the 1996/97 harvest, crop analysts said.
Exporters said 120,000 tonnes had been taken to Abidjan and 30,000 to Ivory Coast's second port, San Pedro, since the season opened in mid-November.
Port sources put coffee exports to mid-March at little over 40,000 tonnes as sorting and grading had slowed port throughput, leaving warehouse stocks of around 100,000 tonnes.
""Trade is still talking about 230,000 tonnes to 300,000 tonnes but even 230,000 tonnes is big for Ivory Coast,"" said one. ""Exports are still low so stocks have built up.""
Large volumes of cocoa had reduced available warehouse space from December until a wave of shipments against March contracts, exporters said in February.
Coffee marketing usually picks up from Janaury as cocoa arrivals fall.
One port source said quality problems meant that not more than 150,000 tonnes would be exported in 1996/97, but others disagreed.
""There is now a lot of buying of all grades but the coffee is taking a long time to prepare for export,"" he added.
Yields per hectare had risen this year -- with one plantation manager citing 600 kilos per hectare compared to 400 last year -- but grading was taking much longer.
Exporters who fund upcountry purchases to meet export contracts (Oct-Sept year) said careless harvesting and poor sorting continued to be a problem.
Markets were now being found for lower grades after a world price rally followed a slump in late 1996, exporters said.
""Everything will find a way out so nothing will be wasted. Some will be sent out to eastern Europe or other such markets,"" said one. ""There are possiblities for black beans (sub-grade) but you never know what arrangement people have been able to make.""
Crop analysts recently touring upcountry farms said village farmers' wives were still busy winnowing large volumes of coffee initially rejected by upcountry buyers.
Farm union officials said coffee had had been badly stored after rains hampered drying in December. Some cooperatives were still short of sacks for sending coffee to ports, one said.
-- Matthew Bunce, Abidjan Newsroom +225 21 90 90
",32
"Ivory Coast's mid-crop cocoa harvest is set to exceed 100,000 tonnes, and rains may boost production to 160,000 or more, crop analysts said on Friday.
""It is possible but not definite,"" said one analyst after touring plantations. ""There is maybe two-thirds of that (160,000 tonnes) on trees at the moment but (the total) depends on what happens in the next three weeks.""
Weather and other factors are highly variable at this time of year. National weather centre forecasters expect rains to strengthen in the next two to three weeks -- favouring pod development.
""There are less (pods) than last year but no worse than the average over the past four to five years,"" said the analyst.
Ivory Coast set a record 1.2 million tonne total crop in 1995/96 (Oct-Sept) after a bumper 200,000 tonne mid-crop from end-April.
Crop analysts disagreed over mid-crop data -- let alone five-year averages. Tonnages arriving at ports are often 30-60,000 tonnes down on harvests as farmers and buyers build stocks hoping for a price rise as new seasons open in October.
""People's statistics and carryover estimates differ, but mine show a tree crop of 175-180,000 over the past five years,"" said one analyst, adding that some private mid-crop forecasts were issued after taking off an estimated carryover figure.
Main crop arrivals by March 7 totalled at least 920,000 tonnes, closing in on last year's one million.
""If the rains come in the next couple of weeks pod setting, leaf flushing and canopy regeneration will be good for the end of the mid-crop and the early main crop (1997/98),"" said the analyst.
The rate of arrivals this week had slowed to a trickle with bean sizes slipping below export standard (105 per 100 grams, with eight percent or less humidity) in some areas.
""Main crop cocoa is fading out...There is still some at farmer level in some areas, mainly the southwest,"" said one exporter.
Volumes are expected to pick up, particularly in June and July, after a gradual rise in May.
""If the main crops are becoming larger there is no reason to suppose the mid-crop will remain static,"" said one analyst.
Fears that mid-crop cocoa would be ravaged by drought had partly eased. A drought in February was broken by light rains and thunder showers around the end of the month.
""I do not think the trees are in terrible condition and there are a reasonable number of pods on them,"" an analyst said.
Recent rains have been heavy in some areas, with trees reported falling around Soubre in the west.
Overall levels remain down compared with last year, but crop analysts said trees were bearing up well despite localised damage.
Plantations in eastern areas bordering Ghana had suffered most, with some destroyed by bush fires in February.
""That is not a great problem as most of the trees are old,"" said one analyst.
-- Abidjan newsroom + 225 21 90 90
",32
"Plans to build cocoa factories in Ivory Coast will take national processing capacity to 360,000 tonnes in 1997/98 (Oct-Sept), in line with a target of 500,000 tonnes by 2000, Ivory Coast's commodities minister said on Friday.
""If you take into account Cargill, Touton, Cemoi, STF-CI, Orebi and Shanghai we will reach 360,000 tonnes in 1997/98,"" commodities minister Guy-Alain Gauze told Reuters on Friday, referring to chocolate processors' plans to build factories.
Gauze was speaking after a meeting on Friday with the world chocolate trade body OICCC (Office International du Cacao, du Chocolat et de la Confiserie) on cocoa quality and supply.
Ivory Coast is the world's largest cocoa exporter and aims to process 50 percent of its annual crop buy the year 2000. It produced a record 1.2 million tonned in 1995/96 and is set to harvest over 1.1 million tonnes in 1996/97
""Callebaut-Barry will raise its capacity to 100,000 tonnes from 90,000 tonnes this year, so by the year 2000 we will reach 500,000,"" Gauze added.
Callebaut-Barry already owns two factories in Ivory Coast and accounts for over a half of Ivorian annual processing capacity, which is set to rise to at least 180,000 by 1998.
Cocoa accounts for 40 percent of Ivorian export earnings but the government aims to diversify the country's economy away from agriculture by encouraging commodities processing, mining and energy sectors.
The OICCC was in Ivory Coast for the first of what it plans to be regular talks with the government on cococa issues, including bean quality and security of supplies.
OICCC spokesman Tom Harison told reporters afterwards that he welcomed Ivorian plans to raise cocoa processing capacity to 500,000 tonnes, or 50 percent of annual harvests, by the year 2000 as healthy competition for European grinders.
Other delegates were more sceptical.
""The question is how much the Ivorian farmer will have to give up to pay for it,"" said one, referring to tax and subsidy sweeteners to investors for building new factories.
The OICCC sees world demand growing at three percent in 1997/98 and sees ""immense potential for extra (chocolate) demand in Eastern Europe and Asia.""
""We believe in this. We have put our money in (to factories),"" said Harrison, adding that Ivory Coast was well placed as a supplier to benefit from stabilising or declining cocoa production in other major producing countries, such as Brazil and Indonesia.
But he pointed to an ageing population in Europe, health concerns over chocolate and stricter advertising rules which he said threatened future demand in some regions.
""People are having fewer children, and children are big consumers,"" he added. ""We are spending a lot of money to protect ourselves.""
He said producer country concerns over use of up to five percent non-cocoa fat in chocolate in Europe was a minor issue next to public perception of chocolate as a ""product which makes you fat and makes your teeth fall out.""
Gauze has fought European plans to allow non-cocoa fat usage, putting resulting demand for beans at between 60,000 tonnes and 200,000 tonnes.
Ivory Coast fears a fall in cocoa usage would hit its bean and processed product exports -- a view not shared by some chocolate manufacturers in Europe and the United States.
""Future demand for chocolate is goind to come in a wider and wider range of products,"" he added, saying that the OICCC did not have a common position on use of non-cocoa fats.
Overall cocoa consumption was rising despite use of synthetic and vegetable substitutes for cocoa fats, he added.
--Abidjan newsroom,  +225 21 90 90
",32
"A Sino-French group has submitted a proposal to build a new cocoa processing factory in Ivory Coast to supply Chinese chocolate manufacturers, an Ivorian government spokesmen said on Thursday.
""It is a completely new plan which the government will study this week to clarify its position on financial support,"" said Philippe Mian, cabinet technical advisor to Prime Minister Daniel Kablan Duncan. ""The idea is still only a proposal.""
Managers from French cocoa firm Touton S.A. and Chinese chocolate factory owner Shanghai Collin met Duncan last week to discuss investing 12 billion CFA in the new factory, he said.
Details were still under wraps but a new company called Societe Ivoirienne de Cacao (SICAO) would be set up if given the green light and enough government support, Mian added.
Ivory Coast, the world's largest cocoa producer, wants to process 50 percent of its annual cocoa production locally by the year 2000 to add more value and remove from export sale lower grades of cocoa.
Ivory Coast's inward investment arm CEPICI (Centre de Promotion des Investissements en Cote d'Ivoire) said the sponsors of the project had proposed an initial investment of eight billion CFA, rising to 12 billion CFA over about two years.
""They are looking for a site around Vridi (Abidjan port),"" said CEPICI director Michel Koffivi. ""We cannot say what the processing capacity will be at this stage,"" he added.
Plant construction could begin as early as September.
Touton managing director Patrick De Boussac declined earlier this week to clarify factory plans after last week's visit to Ivory Coast by co-director Alexandre Turincev and Shanghai Collin's president Foo Sam.
""I have no comment,"" he said by telephone from Bordeaux.
Formal factory proposals have already been submitted by three other investors looking at processing in Ivory Coast.
An Ivorian-Chinese-French group under the name STF-CI had submitted proposal for a plant to process 15-25,000 tonnes of beans a year, Commodities Minister Guy-Alain Gauze told Reuters last month. That plant also aims to supply promising Chinese markets with semi-processed products.
Ivorian exporter SICC and U.S.-based commodities giant Cargill recently opened talks over a 50,000-tonne capacity factory but sources close to discussions said a final decision was unlikely within the next three months.
French Perpignan-based confectioner Cantalou, which makes CEMOI brands, has submitted proposals for a factory with a capacity of 60,000 tonnes of beans a year but would not give details until later this year, a Cantalou spokesman said.
Ivory Coast is urging processors to use lower grade mid-crop (April-Sept) cocoa beans after constant complaints from buyers that sub-grade beans were being mixed in with beans for export.
Gauze said in early March that Ivory Coast aimed to process 300,000 tonnes of its 1996/97 crop.
""Capacity is currently 200,000 tonnes but we are working on increasing this,"" he told Reuters at the sidelines of an International Cocoa Association in London.
Ivory Coast produced a record 1.2 million tonnes of cocoa in 1995/96 and originally predicted 950,000 tonnes for this year before Gauze said in March only 800,000 would be exported -- partly due to increased local processing.
Four factories with a (bean) capacity rising to 180,000 tonnes in late 1997 are already operating in Ivory Coast.
Industry sources say over 130,000 tonnes of beans could be processed this year if factories operated normally.
New processing capacity was unlikely to be on line in 1997, taking into account application processing time and a minimum of six months to build a basic factory, one said.
Private forecasters have put Ivory Coast's 1996/97 crop at up to 1.1 million tonnes.
($1=567 CFA francs) -- Abidjan newsroom + 225 21 90 90
",32
"Ivorian coffee exporters are busy grading a large crop and will pay little attention to next week's meeting of Association of Coffee Producing Countries, when world export plans will be reviewed, exporters said.
""Forget it. It means nothing,"" said one on Tuesday. ""The (current retention) quantity is not shocking and we do not expect anything new but it might hit sentiment.""
Green robusta coffee arrivals at Ivorian ports totalled around 250,000 tonnes by May 9 in the 1996/97 (Oct-Sept) season against just over 180,000 by the same time last year, they said.
African producers agreed in January to cut robusta exports (Jan-June) from 6.52 million (60-kg) bags to 5.67 million under an ACPC export plan but the amount to be retained by each country was unclear.
Ivory Coast agreed to subtract 15,000 tonnes from its share of a previously agreed African quota totalling 6.52 million bags (Jan-June). Its share of the existing quota was not published.
Ivorian coffee exports and local industry offtake since the start of the season were about 110,000-120,000 tonnes to date, leaving export warehouse stocks of just over that amount.
""Those stocks have nothing to do with the (ACPC) plan, said one. ""That (stock) takes into account Nestle (Ivory Coast's main roaster) buying 30,000 tonnes for this year,"" said one source. ""Jean-Abile Gal (a smaller roaster) has also bought 5,000 to 10,000 for blending with imported arabica.""
Ivorian exporters expect a steady flow of shipments up to the end of the season despite roller-coaster world prices which this week hit a year high of $1,835 tonne basis July.
Robusta prices have risen 51 percent since January after late 1996 lows which prompted African countries to press the ACPC for an export limit plan to propel flagging robusta prices closer to higher Arabicas, which have doubled since January. Analysts have said the rises were more due to production fundamentals and uncertainty stemming from Just-In-time inventory policies adopted by roasters, rather than export retention.
Ivorian coffee exporters say the (Jan-June) ACPC plan was irrelevant for Ivory Coast given that coffee grading capacity only allows about 20,000 tonnes to be processed a week. That meant stocks would have built up without the plan with little chance of exceeding quotas.
Stocks might be carried into 1997/98 depending on late-season world prices, they added. However, shipments could pick up in July. U.S. analysts cited a robusta coffee supply squeeze ahead of end-season shipments for a robusta price spike basis July.
""It depends on the exporters' books,"" said one forwarder.
If the price trend continued, warehouses would empty out despite rising exports from non-ACPC Asian producers, said another. ""Ivory Coast usually exports between 150,000 to 200,000 tonnes a year. If late-season prices are good all the coffee might leave,"" he said.
Arrivals totalled about 12,000 tonnes last week, said one exporter. Quantities remaining upcountry were not clear but villagers were still holding stocks back for better prices from buyers, he added.
""When prices are low up to 50,000 tonnes of coffee can be carried over between seasons. Not of all of this year's crop will necessarily be exported,"" he added.
Ivory Coast has produced a better-than-expected 1996/97 crop, seen reaching anything up to 300,000 tonnes by the season's end against 180,000 last year. It has forecast 230,000 tonnes for this year but arrivals totalled that amount by the end of April -- with five months of the season remaining.
--Abidjan newsroom + 225 21 90 90
",32
"Heavy late-March rains favoured Ivorian mid-crop cocoa harvest prospects as the month's rainfall total edged up to long-term average levels after a February drought, weather and crop analysts said on Monday.
""The rains have been very satisfactory lately,"" said a National Weather centre spokesman. ""We are back to around average levels and the rains are continuing into April.""
Official weather data for the third 10 days of March showed rains at 10 weather stations totalled 742 mm against 208 mm in the previous 10 days. An average of 111 mm fell in March.
Crop analysts said weather data weighted for plantation density and long term productivity suggested the March rains were in line with a 20-year average of around 105 mm.
Rains falling on average on five out of ten days were spread widely over Ivory Coast's cocoa belt but heaviest falls were in central areas around Daloa, Gagnoa, Yamoussoukro and Abidjan.
""Everything now depends on the (mid-crop) pod-count,"" said one drop analyst.
""We had good January rains, bad February rains and good March rains. I remain an optimist (for midcrop harvest volumes),"" he added.
Rains during the second ten days of March were heaviest in less productive eastern border areas.
Otherwise, south-western forest areas, densely planted with productive hybrid trees, have tended to receive the most.
Crop analysts said in early March that regular showers up to April would determine how close this year's mid-crop would be to the bumper 200,000 tonnes in the record 1.2 million tonnes 1995/96 (Oct-Sept) harvest season.
The 1996/97 mid-crop could exceed 150,000 tonnes if rains were sufficient, one said, adding that harvest predictions would be reviewed in April when pods on trees gave a better idea of yields.
The data, from Ivory Coast's national weather station, showed the following rainfall (mm) for the third 10 days of March in key growing areas plus the commercial capital Abidjan (previous 10 days in brackets):
Daloa 105.8 (2.7), Gagnoa 142.8 (20.2), San Pedro 18.3 (12.6), Tabou 1.0 (21) Man 98.7 (2.0), Dimbokro 73.2 (32.3), Yamoussoukro 83.8 (0), Abidjan 128.8 (8.9), Sassandra 10.6 (8.8), Adiake 64.5 (13.9), Korhogo 14.2 (0).
--Abidjan Newsroom + 225 21 90 90
",32
"Ivorian warehouses remain largely full of cocoa after slow shipments ahead of an expected March export peak, leaving some exporters short of coffee storage space, industry sources said on Wednesday.
""There is so little space we are having problems with coffee marketing operations,"" said one exporter. ""Some people have to wait 10 days for space,"" he added.
Large cocoa shipments have recently left Ivorian ports, freeing some warehouses space, but a strong February tail to the main cocoa crop (Oct-Sept) has meant rapid replacement of shipped stocks.
Latest arrivals data show 880,000 tonnes taken to Ivorian ports by February 23, leaving warehouse stocks of up 380,000 tonnes. Port sources put usually available cocoa warehouse space at 400,000 tonnes.
Port sources put February cocoa exports at up to 100,000 tonnes.
""(February Cocoa) exports by the weekend were around 80,000 tonnes but that will rise to about 100,000 tonnes by March,"" said a port source.
The same warehouses usually take in coffee as cocoa marketing eases off in late February. Cocoa arrivals figures have dipped as coffee arrivals gather pace but cocoa shipments have been slower than usual.
Coffee exports have been sluggish on lack of demand and low world prices, coupled with poor quality.
Arrivals had reached 30,000 tonnes by early February but exports were languishing at 12,000 tonnes, compared to around 24,000 tonnes by February 1995/96.
""Marketing picked up in February and people now have coffee to move out,"" said one exporter.
Poor coffee harvesting methods and little if any grading by farmers have meant poor quality, made worse by December rains moistening beans.
Extensive re-grading was required before export to meet a busy February contract month, exporters said, adding that this meant the coffee had to spend more time in storage.
An early harvest but a late start to marketing had partly led to quality problems. ""The (coffee) crop was harvested early so it has been sitting in stores in not very good conditions,"" said one industry source.
Some warehoused cocoa had suffered crush damage at the bottom of warehouse stacks but industry buyers say quality losses are minimal and undetectable after factory grinding.
A brief February dockers dispute at San Pedro, coupled with a build-up of unshipped semi-finished cocoa products, had also contributed to a lack of warehouse space at Ivory Coast's second port, San Pedro, exporters said.
Shipping activity recently ground to a halt at San Pedro but port sources say boats were loading this week.
-- Abidjan newsroom +225 21 90 90
",32
"The El Nino weather pattern developing in the Pacific could damage West African cocoa crops, but the extent of any losses is hard to predict because of local weather and crop patterns, industry analysts said on Thursday.
""Sometimes it has effects on yields and sometimes it doesn't,"" said one crop analyst, referring to seven other El Nino events since one of the most damaging in 1976.
On Tuesday the U.S. National Oceanic and Atmospheric Administration said weather in the Pacific had triggered an El Nino weather pattern that would probably affect world crops.
Cocoa futures for July contracts spiked at a new high of 1,085 stg a tonne in London trading on Thursday but long-term price effects would depend on traders' views on supply deficits into 1997/98 (Oct/Sept).
El Nino is the name given to a reversal of ocean water circulation in the southern Pacific. The phenomenon, which scientists say is becoming more common, is generally associated with droughts in parts of Africa, Australia, Indonesia and South America.
In more northerly countries, El Ninos can spell rain.
El Nino cut Nigerian 1976/77 cocoa production from a possible 220,000 tonnes to around 160,000 tonnes, with Ghana's crop cut to around 330,000 tonnes from 412,000, say analysts.
""El Nino can cause enormous havoc. Depending on when it hits it can affect one or two years' main crop,"" one analyst told Reuters in Abidjan.
Ivory Coast was largely unaffected in 1976/77 as widespread tree plantings offset El Nino damage, leaving a stable crop trend.
A second wave of prolonged El Nino damage arose between 1982 and 1984, when bush fires caused by abnormally dry weather swept through Ivorian plantations.
""In 1992/93 yields were good so prices were not seriously affected,"" said one analyst. Collapsing Eastern European consumption after the fall of the Berlin Wall coupled with plentiful world stocks had dampened supply fears, he added.
""Now there is a deficit forecast and consumption is again expanding in Asia,"" he said.
UK-based trader ED & F Man in its May report said, ""Unless the weather in West Africa improves, the cocoa market faces a substantial drawdown in stocks in 1997/98"".
Man forecasts a supply deficit of 125-150,000 tonnes by the end of the 1996/97 season and a 34 percent rise in world grindings to 2,795,000 tonnes.
Other analysts say it is too early to guess the effects of the El Nino.
""If the El Nino develops and hits in late 1997 there will be no effect on the cocoa. The main crop (Oct-April) will already be on the trees,"" one said. ""(It) would only affect next year's mid-crop (May-Sept).""
One crop analyst said scant rains in the 1993/94 crop year (Oct-Sept) resulted from El Nino weather but failed to damage crops because thick cloud cover over West Africa prevented a drop in soil moisture.
Heavy rains have fallen throughout Ivory Coast over the past three weeks.
""People have not got terribly excited about it in the past,"" he added, referring to the effects of the previous El Nino reported in 1994. ""Futures may now be rising as people take on insurance cover but that stock can easily be dumped back into the market later if necessary.""
-- Abidjan newsroom + 225 21 90 90
",32
"Zaire's embattled President Mobutu Sese Seko went into a mini-summit in Gabon with a handful of fellow French-speaking African presidents on Thursday to try to find a peaceful end to the war threatening his capital.
Witnesses said Mobutu, sporting his trademark leopard skin cap, embraced Gabonese president Omar Bongo, another veteran leader who came to power in 1967, two years after Mobutu.
The two walked up a red carpet into the presidential palace to meet the presidents of Chad, Congo, the Central African Republic and former Spanish colony Equatorial Guinea. Cameroon, chairing the Organisation of African Unity (OAU), was represented by the foreign minister.
One Zairean opposition newspaper, the Potentiel, dubbed the meeting Mobutu's ""Goodbye summit"".
But Zaire's government, in the person of Information Minister Kin-Kiey Mulumba, rejected suggestions that Mobutu's departure for Gabon was a veiled flight into exile and said the veteran leader would return to his capital after the meeting.
""There's no question of the president fleeing the country,"" he told Radio France International on Thursday.
He said the only thing that would prevent Mobutu from returning immediately would be another meeting. ""He is coming back after the summit, unless there is another meeting. There is no reason why the president should flee the country no reason.""
South Africa's President Nelson Mandela, who brought Mobutu and rebel leader Laurent Kabila together on board a South African ship in Congo's port of Pointe Noire on Sunday, said at the time he would organise a fresh meeting within 10 days.
Hundreds of civilians and fighters from both sides were reported dead after a battle for Kenge, a town 200 km (125 miles) east of Kinshasa. Church and humanitarian sources hoped to establish whether massacres had taken place.
Mobutu, 66 and struggling with cancer, has dominated Africa's third largest country for more than three decades.
He has seen his hold over three quarters of the mineral-rich nation broken by Kabila and his rebels, who took up arms in October demanding Zairean nationality for ethnic Tutsis.
A spokesman in the Gabonese president's office, Vincent Mavungu, said Thursday's mini-summit aimed to find a negotiated settlement after the weekend meeting between Mobutu and Kabila.
""It is therefore normal that consultations take place at all levels to try and find this solution, that is what explains the presence of a certain number of heads of state,"" he said.
One U.N. source said he doubted very much whether there would be another face-to-face meeting between Mobutu and Kabila. ""They (the Central African presidents) will try to get Mobutu to withdraw in a dignified way,"" the source added.
Gabon's Bongo indicated that Mobutu's poor health had prevented the veteran president from meeting other heads of state on Wednesday. ""You know his state of health,"" Bongo said.
The Mobutu-Kabila weekend talks ended inconclusively.
Residents of Kenge, in radio contact with Kinshasa, said the rebels were in control of the town on Wednesday after Mobutu's forces recaptured it briefly on Sunday night. They said at least 200 civilians, 106 government soldiers and 15 rebels were killed.
Kinshasa was reported calm on Thursday but residents of the city of five million people remain apprehensive -- a mood reflected in the capital's newspapers.
The independent Reference Plus quoted Mobutu's security adviser Honore Ngbanda as saying the city was a powderkeg and any fire lit there could be very difficult to put out.
",32
"African coffee producers will meet March 6-7 for talks on implementing a robusta export limit set in Brazil in January to boost world prices, the Interafrican Coffee Oraganisation (IACO) told Reuters on Monday.
""Ministers will discuss exports and the implementation of the decisions for the rest of the coffee year,"" said IACO Seceretary General Arega Worku.
The Association of Coffee Producing Countries (ACPC) held an emergency meeeting in Rio de Janeiro last month after African producers' calls for action to boost flagging late-1996 prices.
Members agreed to cut robusta exports by one million bags (60 kg) and arabica exports by 300,000 bags between January and June 1997.
The IACO Special Ministers Conference, to be held on March 6-7 in Ivory Coast's commercial capital, Abidjan, will include ministers from IACO's 25 member states under IACO Chairman and Ivorian Commodities Minister Guy-Alain Gauze, Worku said.
""The initiative of the Africans boosted coffee prices,"" said Worku. ""Now we think we should reinforce this performance and think of other measures for which we would like to have the recommendations of the member countries.""
IACO last met in Abidjan for its 36th General Assembly in November when it decided to consider ""prompt response"" measures depending on market price direction.
""We must now reinforce the current limitation programme coupled with a prompt response strategy,"" IACO Chief Economist Donald Kaberuka told Reuters on Monday.
Ivory Coast had originally pencilled in a late February date for the latest IACO talks.
World robusta prices soared after January's ACPC meeting.
""Market perceptions are as important as fundamentals and fund activities,"" Kaberuka said, referring to some market analysts' belief that ACPC cuts had not caused the rises.
Indonesia said after the ACPC talks it would cut its robusta exports by 150,000 bags, leaving Arican producers to decide on how to share the rest of the one million bag quota.
Ivory Coast, Africa's main robusta exporter, has forecast a 1996/97 (Oct-Sept) crop of 230,000 tonnes but has had qualtiy problems in some areas.
Industry sources told Reuters the Ivorian crop could exceed 250,000 tonnes. One quality inspector said he doubted more than 150,000 tonnes would be marketable.
Kaberuka said high robusta prices would mean a market would be found for even poorer grades.
""Low quality coffee can be sold. Especially at these prices ($1,600 a tonne on Monday basis March),"" he said.
Robusta makes up around 72 percent of Africa production.
Ivory Coast opened its 1996/97 coffee season in November with guide farmgate prices down 200 CFA to 500 CFA.
In late 1996 Ivory Coast said it would for the first time consider adjusting its guide farmgate coffee price in mid-season if necessary.
Industry sources close to the Caistab say such a move could be made around the time of the IACO talks planned for March.
""We will first have to see if coffee prices consolidate at their higher level,"" said a source.
Ivory Coast will soon receive a private consutlants' report on coffee sector liberalistion steps to meet donor loan terms.
-- Abidjan newroom + 225 21 90 90
",32
"Exports of Ivorian cocoa totalled 150,000 tonnes in January taking the 1996/97 season's cumulative total to 416,000 tonnes since October 1, port sources said on Tuesday.
""Warehouses are still full,"" said one port source.
Latest figures on arrivals of cocoa at ports were not immediately available but are widely expected to total 800,000 tonnes since October 1. The figures, for Abidjan and San Pedro ports, were expected to be clearer this week.
Total dedicated warehouse space is put by sources at close to 400,000 tonnes, meaning stocks of around the same amount.
Quality inspectors said bean humidity levels were around 7.5-8.0 percent with grain sizes of 95-100 beans per 100 grammes.
Export standards allow a maximum of eight percent humidity and 105 beans per 100 grammes.
Shipping line managers said break bulk (loose beans in holds) shipment of cocoa was proving more popular with clients than shipment in containers.
""There is a lot of demand for mega-bulk,"" said one shipping line manager, referring to the trade name for loose bulk, increasingly favoured by Amsterdam-based cocoa processors.
Higher-than-expected arrivals of cocoa, coupled with low overseas demand and world prices, and difficulty in obtaining export contracts led to the build-up of stocks in January.
Forwarders expect large shipments to leave against March delivery. Some exporters have held on to stock in the hope of rising prices. Prices last week hit 18-month lows.
Arrivals figures are expected this week to indicate whether volumes reaching ports will tail off ahead of the April-Sept mid-crop.
Exporters expect a total crop of around a million tonnes but private forecasters have said a good mid-crop could take total volumes closer to 1.1 million tonnes -- still short of last season's record 1.2 million tonnes.
A firmer idea of mid-crop prospects is expected later this month as flower survival rates and pod-setting patterns emerge.
Official port statistics for January will not be available until February. Official cumulative exports for the first three months of the 1996/97 (Oct-Sept) season were shown as only 309,762 tonnes compared with 270,257 tonnes in the same period of 1995/96.
-- Abidjan newsroom + 225 21 90 90
",32
"Rains continued across Ivory Coast's cocoa belt in late April, confirming the onset of wet season patterns and boosting mid-crop (May-Sept) and early 1996/97 main crop (Oct-April) prospects, weather and crop analysts said on Tuesday.
""A favourable weather pattern developed in April with strengthening rains in many areas,"" said one weather analyst, adding that a band of rain usually sitting 200 km south of the region's tropical weather front was now over cocoa areas.
""There have been some heavy rains but so far the flowers (for the 1997/98 maincrop) have held on,"" said one crop analyst.
Official rainfall data for the third 10 days of April totalled 789.2 mm against 693.5 mm in the previous 10 days and 95.2 mm for the first 10 days of the month.
Rains fell mainly in south coast areas between Abidjan and Tabou but steady rains also fell in other key growing areas around Gagnoa. Rains were lightest in northern areas.
One crop analyst put overall 1997 rainfall at just below average but said end-April rains were likely to have brought levels back to average.
Another said rains had risen to 145 mm against his 10-year average figure of 134 mm for 12 stations. Rains in some areas had been 35-145 percent above normal.
A dry period in February threatened to cut prospects for the mid-crop but subsequent rains allowed pod forecasters to upgrade forecasts for the period to a range of 160-180,000 tonnes -- compared to 200,000 tonnes last year.
Crop analysts now expect the total 1996/97 cocoa crop to be near last year's record of 1.2 million tonnes. Ivory Coast has not revised its original total crop forecast of 950,000 tonnes.
Latest figures for the 1996/97 main crop, which ended on April 30, have not been released but are expected by exporters and crop analysts to show port arrivals of just over one million tonnes.
This year's mid-crop depends partly on steady rains into June -- when forecasters also begin early assessments of cocoa trees for the 1997/98 main crop.
Latest data from Ivory Coast's national weather station showed the following rainfall (mm) for the first 10 days of April in key growing areas plus the commercial capital Abidjan (previous 10 days in brackets):
Daloa 21.8 (49.3), Gagnoa 62.7 (63.7), San Pedro 49.4 (47.1), Tabou 95.4 (57.0) Man 12.5 (29.3), Dimbokro 41.8 (22.2), Yamoussoukro 69.0 (107.7), Abidjan 221.2 (156.5), Sassandra 154.7 (39.1), Adiake 51.7 (69.9), Korhogo 9.0 (51.7).
-- Abidjan Newsroom + 225 21 90 90
",32
"Ivory Coast is planning to streamline management of mining policy to cut red tape and attract more investors to its expanding gold mining sector.
""There should be some big changes in about three weeks,"" a foreign advisor to the Ministry of Mines told Reuters. ""Existing rules will not change but management will be tightened to make things run smoothly.""
Ivory Coast, the world's largest cocoa producer, introduced a new mining code in 1996 to simplify rules for investors and broaden its agriculture-dependent economy.  
Ministry of Mines officials said around 24 companies holding a total of over 55 exploration permits were searching mainly for gold and nickel.
Firms rushing to West Africa since the Cold War ended have been attracted by Ivorian political and mining code reforms.
Three new permits were approved in March alone but prospectors, and two working gold mines, point to bureaucracy which they say still dogs operations. They want decision times cut and better coordination between mining and other ministries.  
""What the Minister of Finance and what the Minister of Mines says are two different things,"" Philippe Palanque, managing director of Ivory Coast's largest mine, SMI (Societe des Mines d'Ity), which is prospecting around its existing site.
""Administrative decisions are sometimes taken all the way up to the Prime Minister,"" said another exploration geologist.  
Ivory Coast's annual gold output of less than three tonnes a year is dwarfed by mining giant Ghana's annual output of 40 tonnes. Recent finds in Mali are set to at least double national production to over 10 tonnes, but underlying Birimian greenstone geology is similar throughout the sub-region.
""Ivory Cost had no mining experience like Ghana, so development has been slow while Mali and Burkina have raced ahead in the 1990's,"" Joe Hinzer, General Manager at Ivory Coast's other gold mine SOMIAF (Societe Miniere d'Afema) told Reuters.  
""Ivory Coast has good potential but discoveries like Ghana and Mali follow no rhyme or reason,"" said one geologist, adding that a find of one million ounces would be seen as good.
SMI opened in 1990 and was privatised last year. It predicts a gold production, by leaching ores with cyanide, of 1,523 kilos in 1996/97 after ouptut of 1,276 last year.
SOMIAF says its production is set to jump to 935 kilos against 565 last year and has started feasibility studies for expanding operations in the next three years.  
Newcomers are undeterrred by small gold ouptut, pointing to geological potential, infrastructure, and political stability.
""(The mining code) is not a star example but it works. There are some pretty good tax exemptions,"" says Peter Pelly, geologist for South Africa-based Gencor which, with other firms, has joined a gold rush to West Africa.
Exploration companies are given a customs duty waiver on imports but they say red tape delays securing the exemption.
State participation in projects has waned however, with mining develpment arm SODEMI a candidate for privatisation.  
""In the last year since the mining act a lot of companies have gone straight into ventures without Sodemi,"" says Gencor.
Mining firms arriving in Ivory Coast in the early 1990's are still tied into joint-ventures but benefit from 30 years of mapping and prospection by SODEMI.
""Sodemi is improving as it gains more experience but at one stage we almost pulled out as the goal posts kept changing,"" said one geologist, citing problems over board representation.  
Other mining and investment laws give the state a free ride of 10 percent of mining profits but allow firms to repatriate funds and dividends.
Taxes are now levied at three percent of turnover rather than profits, while tax breaks apply for mining investments of 500 million CFA or more.
Processing time for permits of up to 1000 square km, valid for three years but renewable twice for two years, was slashed from over a year to a few weeks.  
""The fiscal regime is also better but there needs to be more work on banking and accounts as well as uniform implementation of different mining code provisions,"" said one mine manager.
Ivorian officials say relaxation of unwritten gold sales rules are being considered. Gold from SMI is currently marketed at spot rates through West Africa's central bank, (BCEAO).
""We are paid the going gold rate but payments are often delayed,"" says Planque. ""We cannot raise loans against the gold or stabilise profits on the futures market,""  
SMI, which is planning to open a new gold mine as part of a French (BRGM) and Australian (Normandy Mining) group, La Source, also wants clearer rules on illegal mining at its proposed site.
""At the moment there are too many, over 5,000, artisanal miners from Liberia, Guinea and Mali,"" says Palanque.
-- Abidjan newsroom, = 225 21 90 90
",32
"Ivory Coast is set for a bumper 1996/97 (October-September) coffee crop because of favourable weather and better farm maintenance but buyers point to quality problems, industry and port sources said on Wednesday.
With five months of the 1996/97 season remaining, exporters and crop analysts expect a total crop of up to 300,000 tonnes, against 180,000 tonnes last year and Ivory Coast's official forecast of 230,000 tonnes.
Port arrivals by April 17 totalled 228,000 tonnes compared with 150,000 tonnes by the same time last year, suggesting a return to pre-1990s levels.
Exporters said markets would be found for the increased supply of poor grades. But one quality inspector said it was unlikely the full 1996/97 crop would be shipped because of wastage and rejection.
Precise warehouse stocks were not known but the latest export and arrivals figures suggested stocks of well over 150,000 tonnes, after allowing for offtake by local roasters.
""There's still more coffee upcountry but it is coming down slowly,"" one upcountry buyer told Reuters. ""Farmers are holding back because buyers have been offering such low prices.""
Coffee marketing started slowly after the season opened later than usual in mid-November. A fall in world prices in December, stricter bank lending policies for export financing, and poor quality slowed movement of the crop from farms to ports.
Ivory Coast set a farmgate price of 695 CFA ($1.20) a kg for 1995/96 but slashed the rate as world prices dropped in late 1996, leaving the Caistab state marketing board with a large paper loss after domestic price-stabilisation payments to exporters.
Quality problems this year have meant buyers offered farmers as little as 300 CFA per kg compared to the Caistab's guideline price of 500 CFA. But one industry buyer paid over 500 CFA for premium quality beans.
""Farmers harvested the coffee in October but no-one started buying until a couple of months ago,"" said one crop analyst. ""Coffee is usually harvested in January (after cocoa) so there was a long storage period and the beans turned black.""
The output rise was caused by mild weather in the January-March 1996 flowering period. That was boosted by a peak in the general three-year cycle which sees trees yielding a weak, then moderate and finally strong crop.
""Prices were better in 1995/96 so farmers took more care over pruning trees...and general maintenance,"" one analyst said. ""That is paying off this year as tree yields have gone up.""
The manager of one plantation said better maintenance meant some farms were yielding 600 kg a hectare, compared to 450 last year.
Arrivals are running far ahead of 1996/97 exports which reached a cumulative total of 45,783 tonnes by end-March, compared to 58,667 tonnes from a smaller crop by the same date in 1995/96.
Exporters have built up stores which need sorting and regrading.
""The season will be twice as long as usual,"" one buyer in the productive northwestern district around Man told Reuters in January -- when coffee marketing usually starts.
Rains in December hampered drying of beans. Farmers had also harvested a mixture of ripe and unripe cherries and had not separated them before sale, buyers said.
Upcountry stores visited by Reuters in mid-April had small stocks of coffee awaiting grading or regrading. Some coffee had been stored loose because of a shortage of jute bags supplied by exporters.
Ivory Coast aims to boost exports to the level of 300,000 tonnes per year seen before the early 1990s when a drop in world prices discouraged maintenance of trees by farmers.
Buyers and crop analysts said plans to rehabilitate plantations, funded by donors, had yet to have any noticeable effect.
""They may be talking about it, but no farmers I have met have received any payments,"" said one crop analyst.
",32
"Wilt disease killing Zaire's coffee trees surfaced three years ago, but a revolt in the east has hampered efforts to study and control it, a state coffee board official said.
Christian Feruzi, Commercial Director of the Zairean Coffee Office (OZACAF), told Reuters in an interview that production and export data since war started in October was limited and contradictory.  
No coffee from rebel-controlled eastern regions was included in export data, he said, adding that about 10,000 tonnes of coffee was exported from October to December 1996 from the west.
""IACO (Interafrican Coffee Organisation) and Zaire are carrying out a study to see how much of our production is recoverable but the war is handicapping efforts,"" Feruzi said in the interview at an African coffee meeting in Ivory Coast.  
Rebels under Laurent Kabila, who has vowed to topple Zaire's veteran president Mobutu Sese Seko, control much of the east and are poised to attack Kisangani, Zaire's third largest city.
Feruzi said coffee exports made up 15 percent of Zaire's export revenue before the war, after copper and diamonds.
""Where Kabila is in command we cannot get production estimations for the east. We are completely cut off from people on the ground,"" he added.  
Most arabica is grown around the eastern town of Goma and in remote eastern hills in North Kivu bordering Rwanda and Uganda. Lesser amounts are grown in South Kivu.
Robusta is grown throughout Zaire, except in mineral-rich Shaba region in the south.
Feruzi said wilt disease or Tracheomycosis surfaced up to three years ago but had already cut into production volumes.  
""Before the war the Office du Cafe took intiatives to stamp out the disease by uprooting trees, burning and replanting new stock,"" he said. ""The ICO (International Coffee Organisation) is studying a request we made for help with the programme and we are hoping for a reply soon.""
Feruzi said output was growing before the war.
Coffee production totalled about 100,000 tonnes in 1995/96 (Oct/Sept). ""Only 60,000 tonnes was exportable,"" he said.
""About 55 percent of our coffee came from eastern regions (now occupied by rebels) and 45 percent from Western areas (still in Zairean government hands),"" he added.  
Export data from January 1997 were not available. ""About 10,000 tonnes of western regional coffee was exported from October to December 1996, mainly from Boma and Matadi ports.""
Feruzi said exports were strongest from October to December with June to August exports higher than January to June.
OZACAF said in January rebels in the east were trying to legitimise export procedures, adding that a lack of security for buyers meant most coffee would probably be smuggled abroad.  
""Exports are escaping all official state agencies,"" Feruzi said, citing Uganda and other neighbours as likely exit points.
Uganda, Africa's largest coffee producer and another wilt sufferer, said smuggling did not show up in trade data.
""The quantities are negligeable,"" Uganda Coffee Development Authority Secretary-General William Naggaga told Reuters. ""Our figures do not show a lot of smuggling,"" he said in Abidjan.  
Uganda had no role in selling its coffee but did monitor quality at export warehouses, he said.
Zaire coffee usually goes to western ports by road or rail.
""We do not know how many trucks and trains have been trapped but supply routes have all been cut. Farmers are most likely not selling except in remote areas,"" said Feruzi.
Some of Zaire's estimated 30 state-approved exporters, some with operations in both eastern and western areas, had fled to western Zaire, said Feruzi. Numbers were not clear.  
Zaire last week agreed a new export limit for its les busy January to June period.
African producers met in Ivory Coast last week to share out a 850,000 bags export cut agreed at an Association of Coffee Producing Countries (ACPC) meeting in Brazil in January.
Zaire was allocated 7.86 percent (66,180 bags) of the cut.
""Zaire has agreed to limit coffee exports to 331,000 bags (20,000 tonnes) between January and June (1997),"" said Feruzi.
OZACAF comes under Zaire's umbrella coffee policy unit, the Commission Mercuriale de Prix de Cafe, which groups ministerial, customs, banking, quality and other functions.
((-- Abidjan newsroom + 225 21 90 90))
",32
"Ivorian coffee exports are set to rise in late February after world price increases but poor quality could mean only 150,000 tonnes of the 1996/97 season's crop is marketed, industry sources say.
""I really cannot see much more than 150,000 tonnes being exportable this year,"" one port quality analyst told Reuters.
Industry sources expect exports to take off before March.
""There are a good number of shipments for late February,"" a San Pedro-based exporter said. ""People are waking up because of the prices but exports now are still minimal.""
Existing contracts would sustain export volumes into March and April, he added. ""The rest (of 1996/97 exports) depends on which way the dollar moves,"" he said.
Ivory Coast opened its 1996/97 coffee season on November 14, delayed from around October 1, in an attempt to set guide farmgate prices closer to then plummeting world spot rates.
Upcountry buying and exports were minimal in late 1996 as bankers were reluctant to fund coffee buying and put up export guarantees as world prices and local bean quality crashed.
Upcountry buyers said farmers had taken little care over selecting beans during late 1996 harvesting. Subsequent rains and long storage had led to deterioration and slowed down sorting.
""For every 500 tonnes of grade two coffee exported you need to sift 1,000 tonnes,"" said one forwarder in Abidjan.
Arrivals by early February are estimated to be upwards of 30,000 tonnes with exports lagging at 12,000 tonnes.
Quality in 1996/97 has varied widely by region with northwestern coffee seen by buyers as best. Largely unusable black beans were proving a problem, they said.
""In some places we have seen 60 percent black beans,"" said one buyer. ""Black beans and debris are still slowing grading.""
An exporter said: ""Ivory Coast can only condition 20,000 tonnes of coffee each month so exports of that amount would be very good.""
In 1995/96, Ivorian coffee exports totalled 22,461 tonnes by the end of February with only 2,332 tonnes exported in February itself.
Exports then picked up to around 15,000 tonnes in March and 21,000 tonnes in April. Arrivals data were less clear.
Ivory Coast exported 150,000 tonnes of its total 180,000 tonnes 1995/96 crop and has forecast a total crop of 230,000 tonnes for this year. Some upcountry buyers expect 250,000 tonnes or more.
Ivorian coffee marketing usually does not get underway until peak cocoa arrivals tail off after January as stored cocoa deteriorates faster than coffee.
One coffee plantation manager in central Ivory Coast said later season arrivals could be lower than expected if dry conditions were not broken by rain.
""There is a risk of damage to coffee trees but cocoa is holding on well. We need a couple of rains,"" he added.
A light Harmattan wind followed by hot weather settled over Ivory Coast in late January. Rains since have been scant.
""Rains for January are 20 percent down on normal,"" the plantation managter said by telephone on Friday. ""We make a little clearing around the trunk (of the tree) to allow watering while the threat of dessication persists,"" he added.
Weeds had been allowed to grow up around young bushes to protect them from direct sun, he said.
A report for Ivory Coast on sector liberalisation and quality by a private British consultant was ready at the end of January but late fee payment meant it had not been delivered.
""Last year exporters took anything so farmers have got out of the habit of maintaining trees,"" said one Gagnoa-based buyer.
-- Abidjan newsroom + 225 21 90 90
",32
"A week of prolonged and heavy rains in Ivory Coast's cocoa belt has boosted prospects for a large mid-crop (May-Sept), but more rain is needed, up-country buyers and crop analysts said on Thursday.
""We have had heavy rains of five or six hours a day for the past week so that is very good,"" said a leading agent working in central areas around Gagnoa and Daloa.
Crop analysts said rains favoured late mid-crop pod setting and overall bean sizes after drought from mid-January to late February threatened harvest volumes.
""It is an excellent development as March has been a bit dry, but now we would normally expect these rains to steadily increase to a June peak,"" said one analyst.
Analysts are waiting until April to put a figure on the mid-crop. Early estimates put the current tree crop at more than 100,000 tonnes, with over 150,000 possible if rains remain favourable.
Ivory Coast set a record 1.2 million tonnes cocoa crop in 1995/96 after an unexpected 200,000 tonne mid-crop.
Main crop (Oct-April) harvests totalled 920,000-960,000 tonnes in early March but private forecasters' early assessments predict a total crop of up to 1.1 million tonnes.
""From what I have seen the trees appear to be in good condition, although I have not visited all areas,"" said the crop analyst. ""The effects of these rains will not be seen until some time in April,"" he added.
Latest national weather data for the second 10 days of March were not immediately available.
Heavy rains have fallen in the commercial capital, Abidjan, over the past week and buyers in other areas have reported regular rainfall.
""Bush tracks are getting bad, but there will be very little cocoa to go out and collect until May,"" said one industry source.
A crop analyst said widespread rains had also fallen on cocoa areas in neighbouring Ghana.
-- Matthew Bunce, Abidjan newsroom + 225 21 90 90
",32
"Ivory Coast plans to discuss further reform of its cocoa industry in May, officials said on Monday.
This follows a review by a committee of industry, donor and Ivorian delegates on February 5-7 which identified quality and marketing problems.
""The Prime Minister attaches great importance to the deliberations of this committee and its conclusions,"" Commodities Minister Guy-Alain Gauze said afterwards, adding that the state Caistab marketing body would retain a role in future.
""The state must retain a quality control role,"" he added, saying no solutions to concerns had been agreed but that proposals would be discussed in May. ""The product must be stamped with an Ivory Coast quality label.""
Findings of the consultative committee -- set up in October and chaired by Prime Minister Daniel Kablan Duncan's technical adviser Philippe Mian -- would be considered at cabinet level before May.
A government statement released after the private talks gave no details of discussions but said prices, quality, the auctions, cocoa conditioning and fixed contracts had been on the agenda.
World Bank officials, seen before the talks as opposing changes to the rules governing Ivorian cocoa auctions, said they would reconsider ideas put forward by exporters.
""There will be another ASAC (World Bank Agricultural Sector Adjustment loan) meeting in April,"" World Bank spokesman Jean-Claude Balcet said on Friday.
Cocoa and coffee sector liberalisation linked to an earlier $150 million ASAC loan led to the introduction of an export auction system that the industry believes encourages overbidding for contracts.
Donors want a sharp reduction in the role played by the Caistab, which until 1994 monopolised internal and external marketing and whose functions now include setting guide farm gate prices.
""The Caistab still has substance,"" Gauze said. ""There has been a dispersal of its activities and we are now attempting to re-centre them.'
He added, ""It is the government which forms policy and the Caistab which effects a marketing plan.""
Exporters want the Caistab to act as a trade service, providing quality assurance, trade information and statistics.
Government ministers recently said that Caistab statistics were not reliable.
Ivory Coast only carries out port cocoa quality checks, but proposals for detailed checks from farm to port are expected to be put forward in May.
""Quality is the name of the game,"" Netherlands Cocoa Association managing director Loouis Bensdorp said on Friday.
Amsterdam expects to receive 350,000 tonnes of cocoa in bulk rather that in bagged form next year in response to the requirements of large processors. One shipping line manager told Reuters up to 50 percent of Ivorian cocoa could soon be shipped in bulk.
But this would mean quality and origin would be harder to monitor.
Liberalisation of cocoa and coffee markets in Cameroon and Nigeria led to the emergence of a large numbers of inexperienced operators and a loss of quality premiums.
-- Abidjan + 225 21 90 90
",32
"Heavy wet season rains in April favouring Ivorian cocoa midcrop growth (May-Sept) dropped off in early May but harvests are expected to match forecasts of over 150,000 tonnes, weather and crop analysts said on Thursday.
""Nothing much has really changed,"" said one crop analyst returning from upcountry and referring to favourable pod growth and flowering seen in early April. ""The development seems to be coming along quite nicely.""
Official weather data for the first 10 days of May totalled 292.6 mm against 789.2 mm in the previous 10 days.
Wet season rains, which arrived in April, are expected to peak in June before small dry season conditions in July and August.
Steady June rains would favour pod growth and bean sizes and help propel harvest volumes toward preliminary crop analyst mid-crop forecasts of between 150,000-200,000 tonnes.
""I would have hoped for a bit more soil moisture,"" said one crop analyst. Another said levels were around average for the time of year.
Early May rains were concentrated north of main cocoa growing areas, with a total of 338 mm falling around Odienne, Bouake and Bondoukrou, and are not included in the above data.
Ivory Coast produced a bumper 200,000 tonnes mid-crop in its record 1.2 million tonnes harvest year (Oct-Sept). This year's main crop (Oct-April) was close to one million tonnes when the season closed at the end of last month.
The latest data, from Ivory Coast's national weather station, showed the following rainfall (mm) for the first 10 days of May in key growing areas plus the commercial capital Abidjan (previous 10 days bracketed):
Daloa 44.4 (21.8), Gagnoa 12.0 (62.7), San Pedro 1.3 (49.4), Tabou 60.5 (95.4) Man 33.3 (12.5), Dimbokro 39.7 (41.8), Yamoussoukro 34.6 (69.0), Abidjan 35.1 (221.2), Sassandra 0 (154.7), Adiake 27.1 (51.7), Korhogo 4.6 (9.0).
-- Abidjan newsroom + 225 21 90 90
",32
"Chad faces cereal shortages in 1997 but appeals for aid from one of the world's poorest nations have met sceptical responses from some foreign donors alleging mismanagement of available stocks.
Chad asked donors to replenish 50,000 tonnes of emergency cereal stocks in a New Year appeal by recently elected President Idriss Deby.
In the 1996 campaign year, leading to the country's first multiparty legislative elections in almost 30 years in January, Chad also acknowledged a shoot-to-kill policy against some criminals.
Human rights groups told Reuters petty grain pilferers had been summarily executed for stealing derisory amounts from public markets.
GOVERNMENT MAKING SHORTAGE WORSE
Donors accuse officials in the arid landlocked state of making food shortages more acute.
The half-desert country usually keeps 25,000 tonnes as an emergency buffer stock with another 25,000 tonnes for immediate emergency use.
""The problem is that stocks have been emptied for political reasons. There has been a problem with donors about that,"" said Joseph Alain Charriere, the U.N. World Food Programme's representative in Chad.
""That does not mean there will not be extreme hardship this year. It is very bad but not catastrophic."" he told Reuters.
The government says storehouses are precariously empty but the government's opponents point to vote-buying.
""There are ways of making people's lives more comfortable around election time,"" said one opposition party leader and former National Assembly leader Jean Alingue. ""Don't forget that 80 percent of Chadians live in the country and are mostly poor.""
CHAD SAYS SHORTAGE CRITICIAL
Chadian officials say urgent action is required as women struggle to set aside private stocks at village level to tide over their families through Chad's regular droughts.
The Director of Food Security, Ali Adoum Djourou, told Reuters recently that shortages could last until October. He cited a Rural Development Ministry report for December putting Chad's 1996/97 cereal deficit at just under 200,000 tonnes.
The United States aid agency USAID closed its Chad bureau last year as part of wider cuts while European stock donations have recently dwindled out of a preference for boosting grass-root production instead, say U.N. officials.
Donors agree severe drought has hit the Sahel region but they dispute food reserves are needed, pointing to a European early warning study putting Sahel area shortages at 17,000 tonnes instead of the government's forecast of 50,000 tonnes.
While donors recognise the deteriorating food situation is serious they also point to non-cereal food alternatives left out of food need calculations.
""All the elements that can lead to famine are nevertheless there,"" said Charriere. ""Output is down, cereal prices are rising, and transportation is difficult. People will be forced to sell whatever they have -- goats and camels -- just to survive.""
PRICES ALREADY SURGING
Prices were already spinning out of control, even though some of that was caused by speculation.
""Normally we would expect millet prices of 7,000-8,000 CFA (francs) per 100 kilos. Now we are seeing 12,000 CFA and we expect the price to rise to 15,000 or 17,000 CFA in 1997,"" said Charriere.
Chad, one the world's poorest nations, puts its annual cereal consumption at over one million tonnes with output seen at 840,000 tonnes in 1996/97, against 900,000 last year and a record 1.12 million tonnes in 1994/95.
The population stands at 6.9 million from 6.4 million in 1995 and 6.2 million in 1993.
FAO says production of one staple cereal, berbere, used in calculations could prove to be higher that the 90,000 tonnes anticipated.
""About 13 percent of the 200,000 deficit is really urgent,"" Chad director Pierre Gence told Reuters. ""That would mean 25,000 tonnes.""
Donors say poor roads, armed banditry, and farmers switching to more lucrative cotton crops in the unaffected south have made prospects worse.
Chad stepped up border patrols against rebel groups and smugglers around Lake Chad but donors say it is easier for some farmers to sell produce abroad when roads are closed by rains.
($1=568 CFA francs)
",32
"Ivory Coast plans to flush illegal cocoa and coffee planters out of protected forests but crop production is likely to fall by less than five percent of annual output, say donors and crop analysts.
The government forecast 1996/97 (Oct-Sept) cocoa production of 950,000 tonnes but some private analysts expect closer to 1.1 million tonnes by the time the season ends in September.
Ivory Coast's government said on Friday that 72,000 peasant farmers and their familes were illegally occupying protected forest.
""This explains the gap between our production forecasts and the eventual outcome,"" Commodities Minister Guy-Alain Gauze said on the sidelines of an International Cocoa Organization meeting in London this week. ""It is a big problem,"" he added.
Ivory Coast produced an unexpected record of 1.2 million tonnes of cocoa in 1995/96 (Oct-Sept) and 180,000 tonnes of coffee.
A cabinet statement on measures to protect forests in line with donor loan terms said 72,000 farmers, and a total of 450,000 people, had settled in classified forest.
It gave no timetable for destroying illegal plantations, relocating farmers and reforesting lands.
Donors say protected forest cover has been slashed from 13 million hectares before independance from France in 1960.
""By 1998, only 3.6 million hectares survived,"" World Bank analyst Leandre G'Beli told Reuters on Wednesday.
Peasants slash and burn to clear protected forest, undeterred by the presence of armed guards. Forested areas generally receive better rainfall than deforested areas, which are exposed to drying winds harmful to trees.
""Cocoa production continues its increasing trend, contrary to what many feared,"" said one donor official who would not be named. ""Remaining forests are being put into production.""
Illegal production was concentrated in 21 of Ivory Coast's 60 or more protected forest areas, he added.
One crop researcher regularly making deep forays into forests to assess cocoa crop prospects recently took a helicopter trip over Tai, the largest national forest.
""The forest is now a doughnut,"" he said. ""There is a massive hole in the middle.""
Refugees from Liberia's eight year civil war have been blamed for raising output in Tai where it borders on Liberia but critics say Ivory Coast's traditionally rural population is mainly responsible for swelling crop volumes.
Gauze put illegal output at about 100,000 tonnes but donors say the figure is smaller, due to low labour and land productivity and poorly defined land tenure laws discouraging careful farm management.
""It is less than five percent (of annual production),"" World Bank analyst Leandre Gbeli told Reuters, adding: ""A lot of other forest has been chopped down but that is not protected. The two should not be confused.""
A spokesman for Ivory Coast's state forestry corporation SODEFOR said government eviction plans were not yet clear.
Donors, including the World Bank, have made forest conservation a condition for loans.
""(Cocoa) continues to provide the best remuneration for farmers,"" said one donor official. ""We will believe (the plan) when we see results on the ground... Announcements are not necessarily put into effect.""
Ivory Coast launched a donor-sponsored National Environmental Action Plan in late 1996 which included Forest Sector Projects up to 2010 aimed at working closely with villagers to protect forests. The government is also looking at a new forestry tax regime to augment funds for World Bank-sponsored re-forestation. --Abidjan newsroom +225 21 90 90
",32
"Industry and crop analysts are sticking to forecasts of a total Ivorian 1996/97 (Oct-Sept) cocoa crop of well over one million tonnes though the government appears to say it will be less than that figure.
""We raised our forecast to 1.07 million tonnes in January from one million tonnes but really there could be 1.1 million tonnes,"" said one major buyer of Ivorian cocoa.
Ivorian Agriculture Minister Lambert Kouassi Konan restated on Wednesday in Paris that Ivory Coast's total 1996/97 crop would be less than one million tonnes -- in line with an earlier Ivorian Caistab marketing board estimate of 950,000 tonnes.
It was not immediately clear whether Kouassi was referring to total arrivals of cocoa at ports, or beans considered to be of sufficient quality for export.
""That would certainly not be the total arrivals figure but it could be the export figure,"" said one port source.
""Arrivals (of cocoa declared at ports) are already close to 900,000 tonnes (since October 1) so we are really looking at a crop of not much less than last year,"" said another source.
Sources close to the agriculture ministry said arrivals figures to February 21 (since October 24) stood at around 850,000 tonnes.
Quality inspectors have pointed to generally good bean quality depite humidity problems.
The 1996/97 cocoa season opened on October 24, about three weeks later than usual. Exporters have said 30,000-50,000 tonnes should be added to arrivals figures to give a cumulative arrival figure since October 1.
Crop analysts expect Ivory Coast's main crop (Oct-Sept) alone to match to the Caistab's 950,000 tonnes full-year forecast, but they said predictions of a promising mid-crop (April-Sept) were still premature.
Ivory Coast is estimated to have produced a record 1.2 million tonnes in 1995/96 after a larger than expected 200,000 tonnes mid-crop.
Prospects for this year's mid-crop depend partly on rains over the next few weeks.
Industry sources do not expect rejection of cocoa at port to reduce total exports significantly.
Industry sources said undisclosed amounts of sub-standard cocoa had been declared at ports but rejected as Fair Average Quality (FAQ) -- or unexportable sub-grade.
That would be either mixed in with better quality cocoa and exported, or bought by local factories.
Rejection of cocoa could cut into total crop figures but industry sources say little is likely to go to waste.
""Most is presented again for export. Little goes to waste so it will be sold somehow,"" said one exporter, referring to humidity problems in early 1997.
One set of figures circulating put arrivals to February 21 at 936,000 tonnes, with close to 150,000 tonnes initially classified as sub-grade, industry sources said.
Ivory Coast has said in the past it would process its lower quality mid-crop cocoa locally to remove lower grades from world markets and add more value to exports.
""Local factories will probably use about 160,000 tonnes this year so a certain proportion will be set aside for that,"" one source said.
Factory capacity currently stands at around 180,000 tonnes although plans for more factories are reaching final stages.
Foreign buyers recently voiced concern that poorer grades were being mixed in with export quality cocoa rather than being absorbed by local factories.
""The normal crop potential for Ivory Coast is around 1.17 million tonnes,"" said one port source. ""Take off 160,000 tonnes and you are not far off the one million figure,"" he added.
""The question is how much will be held back for next year to speculate on prices. That depends on how much money traders have to hand,"" he said.
-- Abidjan newsroom +225 21 90 90
",32
"Rains in Ivory Coast's southern cocoa belt picked up in late February and an overall deficit stretching into March has not stressed trees too much, weather and crop analysts said on Tuesday.
""Rains have continued along the south coast and in forest areas, and soon we expect them to start moving further to the north,"" said a national weather centre spokesman on Tuesday, adding that there was no reason for trees to be over-stressed.
Crop analysts said trees were beginning to show some reaction to prolonged dry weather but no signs of damage.
""People are forgetting that we had over 200 percent of normal rains in December and January,"" said one. ""We will be in trouble if there are no rains in March but all the signs indicate that will just not be the case.""
Ivorian commodities minister Guy-Alain Gauze said on Monday the 1996/97 crop would be less than one million tonnes, despite private estimates of up to 1.1 million.
""The weather has been very dry, despite reports that it has been raining recently...We do not call this rain,"" he said.
Little or no rain fell in most areas during the first 20 days of February leading to concern that possible damage to trees would reduce mid-crop (April-Sept) potential and reduce bean sizes in developing pods.
But official data for the last eight days of the month show average rainfall at 10 weather stations of 12.24 mm, against 1.31 mm in the previous 10 days and 15.5mm for the last eight days of February last year.
Ivory Coast produced a record 1.2 million tonnes 1995/96 crop after a bumper 200,000 tonnes mid-crop.
Some industry forecasters raised 1996/97 crop estimates after strong main crop arrivals. Mid-crop prospects are expected to be clearer by mid-March as pod counters complete tallies.
Late mid-crop volumes depend partly on rains up to April.
""Normally we get a bit more rain in early March but they are a bit late,"" said the weather centre spokesman. ""If dry weather continues until the end of the month trees might be over-stressed but some stress is normal for this time of year.""
A crop analyst said, ""There is some yellowing of leaves which we usually see in January, but I am not worried.""
Others returning from growing areas said drizzle had fallen in southern regions with isolated thunderstorms.
""There was not much rain but we are still optimistic that levels will increase soon,"" one said. ""My figures show average rainfall of 20 mm for February against (an average) 54 mm.""
Late 1996 rains and a mild January harmattan wind meant the effects of drought in February had not been as harsh as might otherwise have been the case, said crop analaysts.
On some eastern cocoa and coffee plantations, fires that had been started to clear undergrowth had got out of control.
""There has been some damage to badly maintained plantations but on farms we usually visit the fire swept through undergrowth in a flash and did not affect trees,"" said one crop analyst.
""Overall, there doesn't appear to have been much serious damage at all,"" he said. ""It sounds worse than it is, although some coffee farms were burnt to the ground.""
Data from the 10 national weather stations showed the following total rainfall for the last eight days of February in key growing areas plus the commercial capital Abidjan (previous 10 days in brackets)-
Dalao 2.7 mm (0), Gagnoa 20.2 mm (0), San Pedro 12.6 mm (0.1), Tabou 21 mm (0.1) and Man 2.0 mm (0), Dimbokro 32.3 (0), Yamoussoukro 0 mm (0), Abidjan 8.9 mm (2.7), Sassandra 8.8 mm (0), Adiake 13.9 mm (10.3), Korhogo 0 mm (0).
Rains fell in Abidjan on Monday and Tuesday as skies remained overcast.
-- Matthew Bunce, Abidjan Newsroom +225 21 90 90
",32
"A world chocolate industry group meeting Ivorian officals to discuss cocoa quality and supply will meet donors in Washington on Monday to discuss effects of market reforms on bean quality, a spokesman said Friday.
""We know that where there has been liberalisation in the past there has been a drop in quality,"" said a spokesman for the world industry forum OICCC (Office International du Cacao, du Chocolat et de la Confiserie).
OICCC officials would meet World Bank officials in Washington on Monday, he said.
""You must protect quality and you must protect the forward market,"" OICCC spokesman Tom Harrison told Ivorian Commodities Minister Guy-Alain Gauze at a meeting with journalists after separate talks with donors and ministers on Friday.
The talks on Friday between OICCC representatives, Ivorian agriculture and commodities ministers and industry delegates, were held against a background of stricter food legislation worldwide and rising demand for quality chocolate in some countries.
World supply has also fallen or stabilised in other producer countries, including Brazil, Malaysia and Indonesia, leaving chocolate manufacturers more dependent on Ivorian production.
""Legislators and consumers are putting pressure on us,"" said one delegate. ""There are a lot of factories going up in Eastern Europe and Asia and we cannot afford hiccoughs.""
Ivory Coast has closed upcountry cocoa checking stations and liberalised cocoa marketing since 1995 under the terms of a $150 million World Bank farm sector loan.
Industry buyers say cocoa bean quality has dropped as a result. Donors reject the idea and say only a complete liberalisation of marketing prices will provide farmers with enough incentive to improve husbandry.
Ivory Coast also put in place a cocoa export contract auction system but there have been concerns that rules encourage exporters to overbid to win contracts, creating a parallel price above terminal market levels.
""We have particular problems in blending good cocoa with poor cocoa... particularly since the Caisse (state marketing board) stopped upcountry quality checks,"" said Harrison.
Exporters say poor and good quality beans are often mixed together to meet Ivory Coast's export grade standard of 105 beans per 100 grammes with under 10 percent humidity.
Harrison also called for Ivory Coast to produce more of the high-quality beans that could be used to give chocolate its cocoa flavour.
""We do use some Ivorian beans in our flavour element (for chocolate) but we have to be highly selective,"" he said. ""To make high quality chocolate we need beans with no off-odours,"" said Harrison.
""Only one country produces the beans which give us the flavour element in our chocolate and that is Ghana,"" he added.
The size of Ghana's crop is between a third and a quarter of Ivory Coast's annual crop, which in 1996/97 (Oct-Sept) hit a record 1.2 million tonnes.
It has kept upcountry checks in place and this week said it would not go ahead with donor-sponsored liberalisation of internal marketing.
Ghanaian cocoa usually attracts a $30 dollars a tonne premium over other origins, including Ivory Coast.
Ivory Coast and the World Bank held discussions in May on further cocoa sector liberalisation but disagreed on policies to increase competitiveness while maintaining quality.
-- Abidjan newsroom + 225 21 90 90
",32
"New crop cocoa arrivals at Ivory Coast's San Pedro port are expected to rise slowly to a peak in November and December then tail off rapidly at the beginning of next year, buyers and exporters say.
""November and December will be the strongest months,"" said the manager of a large cooperative store in San Pedro.
Pods on south coast farms seen by Reuters were concentrated in mid to large ranges, suggesting a November/December harvesting peak. Smaller pods due to mature around January were fewer.
Some farms had insect damage and there was limited black pod, but farms were in generally good condition.
""There might be a small boom at the beginning of October as people have been stocking,"" exporter agent Kone Lassana said, adding that arrivals would probably dip again before the peak.
Some stored mid-crop might be mixed in with early 1996/97 (Oct-Sept) cocoa but the bulk of it would be marketed before the end of this season, exporters said.
""They (farmers and merchants) will not risk moisture damage by holding stocks for another two weeks,"" one said. Most buyers said they expected no internal price rise for the new season so there was little incentive to stockpile.
San Pedro exporters said they had stopped buying during the August holiday but several had restarted in the past week.
They expected to take delivery of most mid-crop stock from buyers before the start of the main crop in October.
Mid-crop bean size was much better than at the same time last year, with counts averaging around 105 beans per 100 grammes. Main crop bean counts are usually in the range of 85-90 and the official maximum for exportable beans is 105.
""We are not stocking. Bean sizes are good,"" private buyer Amer Bilal said at his store in Sassandra. Late mid-crop would be sold to a processing plant in San Pedro, he added.
One buyer in San Pedro said he had beans with a six percent mould content that he would mix in gradually with the better-quality main crop.
He said heavy rainfall in July had made drying difficult. August had also been a bit wetter than usual but conditions were now more favourable, with showers and bright spells.
One San Pedro exporter said he was still receiving some damp cocoa but it was not a major problem. Most buyers were drying cocoa outside their stores before sending it to the exporters.
Feeder roads in the main southwestern growing zone were in reasonable shape despite the July deluge and some in the Maedji area had been recently graded, making cocoa collection easier.
Crop forecasters expect the 1996/97 main crop to be around 850,000 to 900,000 tonnes against one million tonnes this season. The total 1995/96 harvest is seen at a record 1.2 million tonnes.
""The main crop might be down 15-20 percent and will be earlier here than in the south,"" said the manager of Soubre branch of one large exporting firm. Other local trade sources expected a smaller total crop next season.
""In June the crop was not looking good, but now it is OK. I foresee not more than 950,000 to 980,000 tonnes in total. One million (tonnes) is too much, it might approach that but not pass it,"" he said.
",32
"Land mines may delay Angola's attempts to rebuild its coffee industry for decades but output could rise tenfold in the short term with better access to areas once cut off by war, according to a government official.
""The last government figure for production before the war the was 40,000 tonnes,"" Secretary of State for Coffee Gilberto Lutucuta told Reuters. ""Over the next four to five years the objective is to produce 50-60,000 tonnes.""
Exports through official channels in 1995/96 (Oct-Sept) totalled 5,000-6,000 tonnes, he said in an interview, adding: ""In 1996/97, we hope to double our production.""
Angola's government signed a 1994 peace deal with UNITA rebel opponents controlling the main coffee-rich northern areas, paving the way towards unified government.
In the early 1970's, Angola was the world's main supplier of robusta coffee and Africa's second largest coffee producer overall -- yielding 230,000 tonnes in 1973.
Around 33 exporters were approved at the time.
Lutucuta suggested that Angola may not returned to those sort of production levels, advancing 100,000 tonnes as a notional target. ""For the time being, we're being modest.""
Portuguese interests dominated the sector until Angola sank into civil war following independence in 1975
Most of 1995/96 exports came from southern farms but 70 percent of potential coffee production lay in the north in UNITA areas largely closed to access, Lutucuta added.
""What is certain is that access roads are mined,"" he said. ""Plantation roads themselves are not, except for a few where UNITA had camped and placed them for security.""
Military mine clearance units set up in 1995 are working in each province under local government control.
""It is a long, drawn out process which could take decades,"" said Lutucuta, adding that delays since 1995 to setting up a government of national unity had slowed progress.
""We hope that a single government will be formed by the end of March,"" said Lutucuta, who was in Ivory Coast last week for an African producers' export quota fixing meeting.
""About 10 exporters are now licensed but not all of them are active,"" he added.
Angola sets minimum coffee prices to be paid to farmers taking into account world rates. The latest price, 115,000 new kwanzas per kilo was left unchanged from the 1995/96 season.
The government in 1995 estimated the cost of rehabilitating 60,000 hectares of family farms and 30,000 hectares of plantation coffee trees at $20 million.
Most of Angola's 10 or so remaining plantations of around 5,000 hectares each were in southern government-held areas.
""Some of the roads have been closed for 30 years so we would be working on areas long abandonned,"" said Lutucuta.
The money would also cover transport, access route repairs, water pumping and other hardware needs, he added.
""Given the political situation we have still not obtained that money but that would be enough to rehabilitate the coffee,"" said Lutucuta, adding that foreign investors remained wary.
An application to the International Coffee Organisation for funding is still under review.
Lutucuta said production could be increased to 28,000 tonnes a year from the same land now yielding 5,000 tonnes by using intensive farming techniques, including use of pesticideds and fertilisers with hybrid stock.
""Most farmers cannot afford to do that so most regeneration will use naturally occurring robusta,"" he said.
""For the moment we are not too ambitious as many coffee areas are still not under government control,"" he added, noting that markets for natural coffee were promising.
He said total production could top 100,000 tonnes from over 200,000 hectares, but yields would have to rise from 250 kg per hectare on artisanal farms.
Angola was exempted from an Interafrican Coffee Organisation (IACO) plan to share out a January to June robusta coffee export cut of 850,000 bags.
IACO agreed to the cut at an Association of Coffee Producing Countries (ACPC) meeting in Brazil in January to bolster world coffee prices.
Oil and mining provides Angola's main export revenues.
($1=120,000 new Kwanza)
-- Abidjan newroom + 225 21 90 90
",32
"Ivory Coast has opened a new Mining Commission (COMINE) to streamline permit approval for its booming exploration sector and cut red tape for investors, a government statement said on Wednesday.
""COMINE will allow consideration of mining applications with speed and transparency and will guarantee coherence of points of view from different ministries,"" said the statement issued by the Ivory Coast's ministry of Mines and Energy.
Mining permit approval times would be limited to 45 days from receipt of applications while equipment import requests would be handled within 15 days, it added.
Ivory Coast set a new mining code in 1995 which came into effect last year but exploration firms have said red tape continues to dog operations.
Mines and Energy Minister Lamine Fadika told Reuters last week COMINE would begin work on Monday and handle permit approval, environmental studies and import tax matters.
COMINE brings together over 17 government ministries, departments and other related groups involved in decisions. In the past policy was handled by the Direction des Mines, with decisions passed up for ministerial approval.
In future, permit applications will be received by the government's inward investment agency, CEPICI and handed to COMINE for co-ordination of decisions, said a mining ministry official.
Policy management would be streamlined without changes to existing mining code rules, said mining officials.
Ivory Coast, along with other West African countries, has liberalised economic policy and attracted a lot of mining interest since the early 1990s.
Gold production stands at less than three tonnes a year from two gold mines but a third mine is due to open later this year.
Fadika said 55 permits had been issued to up to 25 companies over the past two years. Most prospectors were looking for gold -- but nickel, manganese and bauxite deposits were also promising, he said.
""We have already adopted a plan for a (nickel) factory to be in production by 2002,"" he added in an interview.
Canada-based Falconbridge, is carrying out feasibility studies for mining 250 million tonnes of ore with a nickel content of about two percent, he added.
Proven bauxite deposits could also be mined.
""We are in discussion with several groups but we still have not chosen a consortium leader,"" said Fadika, putting reserves at one billion tonnes.
Talks were also being held with South Africa-based Purity Metals on mining an estimated 2.7 million tonnes of ore with around 44-47 percent manganese content, he added.
Diamond mining is also being given more attention by South African groups and studies are planned on potential coastal rutile sand deposits, a Direction des Mines research manager said.
--Abidjan newsroom, + 225 21 90 90
",32
"French chocolate group CEMOI is building a new cocoa processing factory in Ivory Coast which will open in October 1997, the company's managing director said on Wednesday.
""The factory can process 60,000 tonnes of beans a year,"" Managing Director Patrique Poivrier told Reuters by telephone from CEMOI's headquarters at Perpignan, in the south of France. He put the cost of the project at 160 million French francs.
Ivory Coast aims to process 50 percent of its annual crop locally by the year 2000 to add export value and remove lower quality late season (May-Sept), or mid-crop, beans from international markets.
CEMOI's factory would open at its full capacity but could be upgraded to 120,000 tonnes after two years, producing cocoa liquor and cocoa cake and butter, Poivrier said. Work began at the construction site in northern Abidjan (Yopougon) on Friday, he added.
CEMOI, one of Europe's largest chocolate confectioners, uses 40,000 tonnes of raw cocoa beans a year and would sell products from the extra 20,000 tonnes capacity mainly to Europe and perhaps China.
""We are also looking at markets in China,"" he said.
Poivrier said the factory had been planned to secure a regular supply of good quality cocoa and by-pass Ivorian commodity exporters.
Ivory Coast already has three cocoa processing factories with capacity for processing up to 160,000 tonnes of beans a year.
Europe's Callebaut Barry group owns two factories. Ivorian exporter SIFCA owns a third, with some share participation from U.S.-based Arthur Daniels Midland. It plans to expand capacity by 21,000 tonnes by 1998.
Several other factory projects are nearing final planning stages.
U.S.-based Cargill will soon reach a decision on whether to go ahead with plans to build a 60,000 tonnes-capacity factory in partnership with Ivorian exporter SICC.
""There should be a decision in June,"" said a source close to the negotiations.
-- Abidjan newsroom, + 225 21 90 90
",32
"Gold output from Ivory Coast's second mine, SOMIAF, is set to double over the next two years and could rise further as sulphide deposit studies are completed, an operations manager said on Thursday.
""We just started on a (350,000 tonne) new gold oxide lens which will take over a year to mine,"" operations manager Joe Hinzer told Reuters. ""We have a second lens close to it which we plan to blend in which could take one and half years.""
SOMIAF (Societe des Mines d'Afema) announced two new oxide deposits totalling 510,000 tonnes with a gold content of up to 4.5 grammes/tonne in early April after commissioning a doubling of factory capacity last month.
Gold production is set to rise to 935 kilos in 1996/97 (Oct-Sept) from 600 kilos in 1995/96 -- with calendar year yields of 950 kilos (1997) and 622 (1996), Hinzer said.
Output could reach 1,000-1,300 kilos in 1997/98 and continue rising if new sulphide deposits under study for at least two more years proved to be exploitable, he said.
SOMIAF, is 68 percent-ownded by Canada's Eden Roc, with another 32 percent held by Ivory Coast. It owns one permit (120 sq km) and manages two nearby exploration sites (1,380 sq km) for a joint venture between state mining group Sodemi and Eden Roc.
Oxide deposits were being reassessed after recent management changes Hinzer said in an interview this week, putting total recoverable oxide gold at 500,000 ounces.
""We are counting the marbles now but about 30 percent of that is proven, probable or possible"" he said.
Average ore grade from the latest oxide deposit to be worked would mean an average 1997 gold grade of 5 g/t at leach pads against 1.9 g/t last year, said Hinzer.
SOMIAF, which employs 350 permanent and 150 temporary staff invested $10-12 million to get operations underway in 1992.
Eden Roc's new president Mario Caron will officially take control of SOMIAF during a visit pencilled in for May, said Hinzer.
Studies of gold suphide deposits are already advanced.
A $10 million pre-feasibility sulphide study could be completed in two to three years but the cost of a new plant to handle sulphide ore, on top of recent oxide capacity expansion, could reach $35-40 million, said Hinzer.
""There are no hard numbers but we hope to identify 3-3.5 million ounces of gold. When we have the figures we can move on to feasibility and factory plans,"" he added.
""We have drilled over 1,000 holes, or 82,000 metres,"" he added. ""Before feasibility studies we would need to put in another 40,000 metres of tests.""
Promising areas lay along a broken 12 km strike within SOMIAF's exisitng permits, which in Ivory Coast are issued for three years and are renewable twice for two years.
Oxide mining is open cast but sulphide deposits could mean ramp mining or other deeper deposit recovery techniques.
Ivory Coast's largest mine, Societe des Mines d'Ity (SMI), is also planning to dig deeper for growth, SMI president Yves Palanque told Reuters.
""We will reach the water table in two years and will need to buy new equipment to deal with wet mining,"" said Palanque.
Sub-contractors mine the site but in two years SMI will take direct control over operations.
Production is running at 1.5 tonnes of pure gold per annum with 7.5 tonnes produced since 1991 and reserves put at 27 tonnes. Exploration to raise gold output is focused on a nearby 900 square km block.
Ivory Coast is keen to develop mining to broaden its agriculture-based economy and opened a Mines Commission this week to cut red tape for investors and prospectors.
Around 55 exploration permits have been issued to a total of up to 25 firms, many of which have arrived since the introduction of a new mining code in 1995.
-- Abidjan newsroom, + 225 21 90 90
",32
"Central African leaders on Thursday welcomed a decision by President Mobutu Sese Seko not to seek reelection, saying it opened a way for a peaceful end to Zaire's civil war and gave its transitional parliament a key role.
Mobutu and the presidents of Gabon, Chad, Congo, Central African Republic and Equatorial Guinea urged the parliament to fill the vacant post of speaker -- Mobutu's constitutional successor in the event of death or incapacity.
""The heads of state of Central Africa took note of the important statement made by President Mobutu Sese Seko, according to which, because of his health problems, he will not stand for reelection,"" a statement issued after a summit in Gabon's capital Libreville said.
This provided ""new prospects for a negotiated political, settlement of the conflict"", it added.
""The heads of state invite Zaire's political forces under the direction of the High Council of the Republic - Transitional Parliament to proceed with the election of its president to allow normal functioning of institutions and favour an orderly and democratic transition,"" the statement said.
Mobutu, who has prostate cancer, met with his fellow leaders during a morning session. The other leaders met without him during much of the afternoon.
Mobutu aides say he will return to Kinshasa by Friday.
Mobutu, 66, has dominated Africa's third largest country for more than three decades. Laurent Kabila and his rebels, who took up arms in October demanding Zairean nationality for ethnic Tutsis, now control three quarters of the mineral-rich nation.
Kabila has said he will drive Mobutu from Kinshasa if he does not hand power to him before rebel fighters arrive.
Residents say they are around 200 km (125 miles) from the city. A spokesman for South Africa's Nelson Mandela, who brought Mobutu and Kabila together on a South African ship on Sunday, said the rebels appeared to have halted their advance in line with a pledge from Kabila.
In Tanzania, South Africa's Deputy President Thabo Mbeki said a second meeting between Mobutu and Kabila was set for next Wednesday, adding that the place was uncertain because of Mobutu's health.
In Paris, U.S. special envoy Bill Richardson said a fresh summit was crucial to ensure a peaceful transfer of power.
""I think the probability is high for a second meeting and I'm also encouraged that this second meeting will produce a result that does not involve a violent end, and that includes also an inclusive transitional government,"" he said.
One Zairean opposition newspaper, the Potentiel, dubbed the meeting Mobutu's ""Goodbye summit"" but Zaire's information minister, Kin-Kiey Mulumba, rejected suggestions that his departure for Gabon was a veiled flight into exile.
He said the only thing that would prevent Mobutu from returning immediately would be more talks. ""He is coming back after the summit, unless there is another meeting. There is no reason why the president should flee the country, no reason.""
Mandela promised after Sunday's inconclusive meeting in Congo's port of Pointe Noire that he would bring Kabila and Mobutu back together within 10 days.
Mandela's spokesman Parks Mankahlana said South Africa expected the two men's aides would first thrash out a formula ""which we hope will define very clearly the roles of both in the transition process"".
",32
"The 1996/97 cocoa harvest in central Ivory Coast could be earlier than in the main southwest growing area and more prolonged if good rains continue for the next few months, buyers in the central region said.
""October and November will be the strongest,"" said Daloa-based private buyer Antoine El-Hayek.
""A total of 950,000 tonnes would be surprising...the harvest now depends on good rain before January,"" he told Reuters, adding, ""Mould is a danger. With this humidity and no sun, drying has been hard.""
Other buyers expected main crop quality to be better in 1996/97 than this year because farmers could spend more time treating the smaller harvest.
Forecasters predict a 1996/97 main crop of 850,000 to 900,000 tonnes against one million in 1995/96.
Pod sizes on farms seen by Reuters between Daloa and the central town of Gagnoa suggested a relatively early start to the season and a bigger harvest in early 1997 than further south.
But there was little flowering, indicating weaker March harvests.
Good quantities of early main-crop cocoa were seen drying on the roadsides between Daloa and Gagnoa.
Buyers said they were not stocking 1995/96 mid-crop cocoa and they had seen little being stored by farmers.
""There is a little in the bush, but not much, and that is (being held by) those who are not in a hurry for cash,"" private buyer Makkram Haddad said.
Farmers are often squeezed for cash at this time of the year because of the cost of sending children back to school in October.
The manager of a cooperative store in Gagnoa said he aimed to attract more cocoa by paying farmers a 30 CFA a kg bonus at the end of the season. This would come out of the transport commission element in the marketing price structure set by the government at the start of each season.
A large competing buyer had recently set up in Gagnoa, he added.
He expected 1996/97 cocoa purchases in the Gagnoa area to be on a par with 1995/96, despite lower tree yields.
Marketing in the area had been disrupted by civil disturbances in the run-up to last October's presidential election, he said.
Pesticide use on farms remained minimal, according to the cooperative's figures on sales of Endosulfan and Diazinon-based products, which were used to fight capsid attacks.
The store manager said many farmers found the cost of a full spraying programme prohibitive. Annual treatment of a typical three hectare farm would cost around 55,000 CFA.
",32
"Port arrivals of 1996/97 Ivorian cocoa totalled around 1.02-03 million tonnes by May 12, down from 1.11 million by that date in the record 1995/96 year, port sources said on Tuesday.
Weekly arrivals at Abidjan and Ivory Coast's second port, San Pedro, dropped sharply to 5,000 tonnes in the week to May 12 from about 50,000 during the final week of the main crop (Oct-April), raising concern that the size of the May-September mid-crop would be disappointing.
""The mid-crop has been weak so far but we are still optimistic,"" said one Abidjan-based crop analyst. ""Some people thought it was going to be a bit late but we are optimistic as July and August will be the most important time (for arrivals).""
Ivory Coast's main crop totalled around 1.04 million tonnes by its April 27 close, against about 1.06 million tonnes in 1995/96 when a larger than expected mid-crop of just under 200,000 tonnes took that year's total to a record of around 1.2 million tonnes.
Early forecasts of Ivory Coast's 1996/97 crop proved to be cautious as arrivals by the end of the main crop had exceeded Ivory Coast's official full-year (Oct-Sept) forecast of up to 950,000 tonnes.
The 1996/97 crop is not expected by local crop analysts to set a new record but it will not be far behind if early private mid-crop forecasts of 150-180,000 tonnes prove to be correct.
""We are still fairly optimistic. Our figure is at the higher end of that range but we may cut by just a little,"" said the crop analyst.
Other crop analysts said recent talk of a mid-crop as small as 80,000 tones had been based on weak May and early June arrivals and signs of poor bean quality and sizes.
""What was around was small but I think it (bean quality) has improved,"" said one analyst. ""It should now be possible to get beans of 105 to 110 (beans per 100 grams).""
Ivory Coast's export grade standard of 105 beans per 100 grams sometimes eludes exporters during the mid-crop, when bean sizes usually decline along with harvest volumes. Exporters last year were surprised by high bean quality well into the mid-crop period.
Export quality inspectors have reported bean sizes in a 105-110 range with little evidence of humidity problems.
Torrential rains since mid-May have not raised bean humidity levels above the eight percent permitted for export grades. Farmers had problems drying main crop beans during heavy December rains, leading to some quality problems at port.
Crop analysts also report favourable signs for next year's 1997/98 main cocoa crop, but add that no reliable indication for the first half of that year would appear on trees until late July.
""We are only looking at the very beginning and it looks fairly good,"" said one. ""Nothing untoward has happened and rumours of a disastrous crop are probably wishful thinking. No one is yet in a position to know.""
-- Abidjan newsroom + 225 21 90 90
",32
"A potential new source of revenue -- oil -- offers hope of a fresh start for Chad's fragile economy as it rebuilds after three decades of war.
""Soon work will begin,"" Foreign Minister Saleh Kebzabo told Reuters recently. ""Chad should get some royalties so we can free the country through development.""
Chad has known coups, civil war or conflict with its northern neighbour Libya for much of its life from independence in 1960. Sporadic cross-border rebel raids remain a problem.
But after July's presidential election won by former warlord Idriss Deby, who seized power in a 1990 French-backed coup, there are signs of durable peace and opportunities for growth.
Deby's Patriotic Salvation Movement is strongly placed to win a comfortable majority in the new national assembly which will convene on March 31 after runoffs on February 23.
""Some public spirit is needed and southerners must have a feeling of sharing wealth,"" said one French diplomat. ""Deby has kept a peace for nearly six years and he now also has a political mandate.""
Oil offers the main hope for the 21st Century, with local units of Exxon (Esso Exploration and Production Chad Inc.), Shell (Societe Shell Tchadienne de Recherches et d'Exploitation) and ELF (Elf Hydrocarbures Tchad), prospecting in the south and west.
Little has leaked out about terms and royalties.
Chad's projected revenue from its first oilfield at Doba, which has reserves estimated by Exxon at 900 million barrels, are also unclear. Production is planned to run for 15 to 20 years from 2001. Backers of the project plan to build a 650-mile (1,060 km) pipeline to tanker terminals in Cameroon.
FEAR OF CORRUPTION FROM OIL WEALTH
The discovery of oil has raised fears of mismanagement or corruption. ""I am frightened about the oil. The experience of most African countries is that it is mismanaged,"" Kebzabo said.
But donors say oil should give Chad, which has only 300 km (190 miles) of paved roads, a chance to develop infrastructure, public services and particularly education.
Chadians and businesses can also expect a brighter future and cheaper overheads from a combined fuel and power plant project to be fed by oil or gas from the Sedigi field in the west.
A 12 MW heavy fuel power plant with possible gas feed is expected on line by 2000 in association with a mini-refinery.
""We hope to cut electricity costs to French levels from among the world's highest,"" said the refinery project finance director Souradj Koulamallah.
Donors have been backing economic and political reforms and business and development projects to boost Chad's main export earners -- cotton, livestock and gum arabic.
World Bank loans include $430 million for structural adjustment, among other things, to improve public finances and improve the environment for private business.
France has chipped in with a 60 million French franc ($11 million) grant and will offer a further 45 million French francs if Chad sticks to International Monetary Fund proposed reforms.
World Bank figures give gross domestic product per capita in 1995 of $170. On the negative side, external debt rose to $817 million in 1996 from $803 million in 1995 and 1996 GDP growth was projected at 0.5 percent, down from 4.5 percent in 1995.
The population of 6.5 million grows by 2.5 percent a year.
DROUGHT LEADS TO FOOD SHORTAGE
Inflation fell from 40.4 percent in 1994 to 10 percent in 1996 but Chad's World Food Programme bureau points to food shortages after drought cut cereal output by eight percent.
High overheads and devaluation of France's CFA franc in 1994 squeezed small businesses. France's Caisse Francaise de Developpement (CFD) development agency has frozen lending to many small and medium-sized firms.
But the outlook seems rosier for Chad's main export, cotton.
State monopoly COTONTCHAD expects a record 205,000-tonne crop and higher world price rises in 1997. Low prices and little or no textile manufacturing to add value have kept income down.
Livestock prices are rising despite drought and Chad, its neighbours and donors are studying ambitious irrigation projects.
The United Nations and France are backing projects to develop gum arabic -- a natural stabiliser used widely in the food and drinks industries but until recently eclipsed by synthetic substitutes. Both predict renewed demand and higher prices.
Chad's 80 percent rural community is plagued by drought, with cereal food shortages forecast for 1997.
Poor roads are seen as partly at the root of food shortages in some regions. Crops can be cut off in storage by rain for up to four months a year when some tracks are ordered closed.
($1 = 5.5 French francs, 540 CFA francs)
",32
"Ivory Coast has received three formal proposals for building new cocoa processing factories but no approvals have yet been notified, Ivorian Commodities Minister Guy Alain-Gauze said on Friday.
""There are projects involving Canatalou, STF-CI and Cargill,"" Gauze told Reuters after three days of cocoa sector reform talks with International Cocoa Organisation, donor and Ivorian officials. ""All have submitted formal proposals to the government which are being considered,"" he added.
Ivory Coast aims to process annually 50 percent of its cocoa production it wants stabilised at 900,000 tonnes a year.
In 1995/96 (Oct-Sept) an unexpectedly large 200,000 tonne mid-crop (April-Sept) took output to a 1.2 million tonne record.
Total 1996/97 season output is expected to be over a million tonnes and higher, depending on the shape of the mid-crop.
Rumours of factory plans surfaced in late 1996 with many firms said to be interested without deals signed.
French Perpignan-based confectioner Cantalou, which makes CEMOI brands, has submitted proposals for building a 60,000 tonnes of beans a year capcity plant.
An Ivorian firm, STF-CI, and a French partner are discussing building a 15,000 tonnes to 25,000 tonnes capacity plant for exporting cocoa butter and liquor exports to a Chinese chocolate factory under construction.
U.S-based commodities giant Cargill, in discussions with Ivorian cocoa exporter SICC for construction of a third plant, has also submitted plans to Ivory Coast's government.
Its capacity would be over 50,000 tonnes a year according to industry sources.
SICC told Reuters its first processing project was likely to take shape in early 1997. The firm handles a total of 200,000 tonnes of cocoa in 1996/97 for clients including Cargill's Netherlands processing subsidiary Gherkens.
""We cannot think of handling that much without going into processing. We want to start in 1997 and are now at the decision stages with our partners,"" Deputy-Director Guillaume Adome told Reuters in an interview.
One European processor industry in Abidjan for cocoa talks said he was surprised that a 25,000 tonne plant would be used for cocoa butter as well as powder production.
""It seems a bit on the small side for that,"" he said.
Other industry delgates to the cocoa talks said it would be difficult to built plants by the end of 1997 but not impossible.
Philippe Mian, technical advisor to Prime Minister Daniel Kablan Duncan, yesterday told Reuters all three plans were firm but that other factory plan proposals also existed.
""Procurement stages are advanced so it would be possible,"" he said, referring to the end of 1997 date.
Mian presided over of three days of Consultative Committee cocoa reform talks which ended in Abidjan on Friday during which cocoa processing and cocoa quality were discussed.
Gauze told Reuters Ivory Coast would be on target to meet its home processing goal if the plans went ahead.
Ivory Coast currently has three processing factories with capacity for 180,000 tonnes. One is expected to increase capacity by 21,500 tonnes by 1998 taking Ivorian total capacity to 201,500 tonnes.
If all three plant proposals are given government approval capacity would rise top a maximum of around 336,500 tonnes.
Some industry observers have said Ivory Coast's processing target is unattainable.
Local procesing of beans is part of an overall policy to add value to exports while taking low quality mid-crop (April-Sept) beans off the international market.
""Most output would have no effect on this year as it usually takes up to a year to build a normal plant,"" said one local processing official.
-- Abidjan newroom + 225 21 90 90
",32
"Port arrivals of 1996/97 (Oct-Sept) Ivorian coffee totalled about 175,000 tonnes by March 24 compared to about 160,000 tonnes in 1995/96 but more remains upcountry, exporters said.
""My figures show 175,000 tonnes by March 24 (since mid-November),"" said one port source. ""Arrivals dropped off over the past week but there is still plenty upcountry. We have had perhaps three-quarters of the crop.""
Another exporter put arrivals at closer to 200,000 tonnes by April although the rate of deliveries had slowed.
Exporters and crop analysts expect the 1996/97 crop to at least equal Ivory Coast's official forecast of 230,000 tonnes, against 180,000 tonnes produced in 1995/96 when coffee arrivals tailed off sharply in late March.
Port sources said exports by April reached 50,000 tonnes, similar to the same period in the 1995/96 year in which 150,000 tonnes were exported.
Buying had been dominated by coffee exporters JAG, SIFCA and SHAC with local processor Nestle expected by industry to roast 30,000 tonnes at its Abidjan processing unit.
""There's a lot of coffee coming in but as exports are still slow stocks are building,"" said one forwarder.
Coffee marketing and exports got off to a later start this year after the season was opened about six weeks late. Banks refused to finance early buying operations because of low world prices before a rally in early 1997.
Coffee quality has since been dogged by black beans resulting from farmers harvesting unripe green cherries in a rush to sell.
Farmers and unions said derisory farmgate prices were being paid by buyers, in some areas 300 CFA per kilo below the official 495 CFA guideline miniumum price.
""Price adjustments mean two tonnes are cut out for every 30 tonnes delivered,"" said one SYNAGCI farm union leader. ""Fifty percent of the crop was sold by farmers for between 200 and 250 CFA a kilo,"" he added.
""Most have been paid between 300 to 450 CFA,"" said an industry buyer.
One port quality inspector said no more than 150,000 tonnes of coffee might be exported in 1996/97 but exporters dismissed the prediction.
Prices paid for coffee on Ivory Coast's export contract allocation auction system were largely in line with European market rates, they said, and problems of overbidding for cocoa contracts had not been repeated in the coffee sector, exporters said.
Export markets were being found although Ivory Coast has said it would no longer market black beans, industry sources said.
The Caistab marketing board recently condidered issuing a second marketing price structure to cover large volumes of low grade 1996/97 beans but had shelved the idea.
""What I hear from people in the Caistab is nothing will be done (on prices) for now but maybe they will have to consider it,"" said one large buyer. ""The market is very changeable. One day you can sell anything, the next it is all sitting in the warehouse.""
Ivory Coast agreed in February to limit January to June exports by around 15,000 tonnes after an Association of Coffee Producing Countries meeting in December aimed at pushing up world prices.
""It would all be shipped in June anyway, if anything is done at all,"" said one exporter. ""People can just go and buy from Vietnam and others not in the (ACPC) agreement.""
-- Matthew Bunce, Abidjan newsroom, + 225 21 90 90
",32
"Ivory Coast's cocoa mid-crop (May-Sept) could match harvest forecasts of over 150,000 tonnes but bean sizes are seen down from the record 1995/96 season (Oct-Sept), crop analysts and exporters said on Thursday.
""The development seems to be coming along quite nicely,"" said one. ""It is still early but I see no reason to suspect the mid-crop will be poor.""
Good peak wet season rains in June would decide the final mid-crop tally but this year's bean sizes are not expected to match the mainly exportable grades (105 beans per 100 grammes) seen in the record 1.2 million tonnes (total crop) 1995/96 year.
""Last year's mid-crop (200,000 tonnes) was exceptional. I think the sizes will return to more normal levels,"" said another crop analyst, pointing to a range of 110-120 range with lowest grades possibly touching 150.
Ivory Coast's main crop reached around one million tonnes by the season's closing date of April 27. Crop analysts expect the mid-crop to be down on 1995/96 with some early forecasts in a 160-180,000 tonnes range.
Crop analysts said said plantation soil moiture levels had dropped in some areas after heavy wet season rains in April eased off in the first ten days of May.
""There was less moisture than I thought there would be, but it is not a problem,"" said one.
Bean sizes would swell if June rains were sufficient.
""I do not have a pessimistic view of mid-crop,"" said the analyst. ""As far as I am concerned soil humidity is average but our teams have not yet completed their tour.""
Crop analysts returning from upcountry farm inspections reported little harvesting and drying of cocoa. They did not expect mid-crop arrivals at port to strenghten until June -- after a lull in activity between the main and mid-crops.
""What is there will sit around for mixing in with better beans and larger quantities. It is just not worth the farmers selling yet,"" said one.
Exporters say late main crop and a trickle of mid-crop beans arriving at ports are in a 105-110 range.
""Last year, even the tail of the mid-crop met export standards,"" said one. Special contracts for grades outside the official export standard would still be exported.
""Discounts will be applied, as for poor coffee beans, but it will all be exported,"" he added.
Ivory Coast aims to process 50 percent of its annual cocoa crop by the year 2,000, partly to remove poorer grades from export markets, but also to push up world prices while adding export value.
Local processors, with three factories, have a total bean processing capacity of around 160,000 tonnes.
That figure could rise to at least 209,000 tonnes in 1996/97 as local factories build extensions and possible oil-palm factory capacity for cocoa bean processing comes on line.
Other factories already under construction or in final planning stages could take Ivorian bean processing capacity to over 350,000 tonnes by 1998/99 (Corrects from 1997/98) -- without taking into account a raft of plans in early discussion stages.
-- Abidjan newsroom, + 225 21 90 90
",32
"Privacy advocates warned Wednesday that the Clinton administration's latest proposal to modify controversial computer encryption export restrictions would trample on citizens' rights in cyberspace.
Encryption products scramble information and render it unreadable without a password or software ""key.""
Under a Clinton executive order that took effect Jan. 1, U.S. companies can export stronger encryption than previously allowed, but only if they promise to incorporate within two years features allowing the government to decode any message.
The strongest encryption, an increasingly important component of online commerce and global communications, cannot be exported unless it already includes a feature known as ""key recovery"" that allows the government to crack the code by gaining access to the software keys.
The administration's latest proposal, being circulated in the form of draft legislation, is designed to encourage companies to produce software with key recovery features.
The proposal also establishes the legal foundation for a key recovery system, criminalizing the improper disclosure of keys, for example.
Although domestic use of strong encryption is not restricted and the Clinton proposal affirms that policy, privacy advocates contended the government's ""encouragement"" would quickly devolve into a de facto requirement.
""The proposed bill would destroy any prospect of privacy and security on the Internet by opening a huge window of vulnerability to the private communications of Internet users,"" said Jerry Berman, executive director of the Centre for Democracy and Technology, a non-profit public interest group.
Under the proposal, the government would have ""carte blanche"" access to coded messages, Berman added.
Commerce Undersecretary William Reinsch, in testimony last week, said the proposal would not compel participation. ""The administration has stated on numerous occassions that we do not support mandatory key escrow and key recovery, "" he said.
Opposition to the Clinton approach continued to simmer elsewhere as well this week.
In Congress, where several bills have been introduced to gut the export restrictions, Republicans on the House Commerce Committee pressed administration officials for a defence of the current policy.
Committee Chairman Tom Bliley of Virginia and Representative Rick White of Washington sent letters asking for more information to the Commerce Department, FBI and National Security Agency, among others.
White already has endorsed one of the bills to relax the restrictions. ""It's time to take a close look at the export restrictions that are in place,"" White said. The Internet should not be ""stifled by federal regulations and ill-conceived public policies.""
In the private sector, people in the software industry said they expected a high-profile application to export encryption from Sybase Inc. would be rejected soon. Some companies, including International Business Machines Corp., have received permission to export encryption under the current policy.
Commerce Department officials declined to comment on pending applications.
The export rules require that key recovery products allow government access to stored data, like a document saved on a computer hard drive, as well as live communications, like a telephone conversation or electronic mail message.
Encryption customers only want to buy products with key recovery for stored data, U.S. companies have argued. Allowing key recovery of live communications is a more complicated and expensive proposition, they said.
Sybase sells software that allows a computer user on a network to access a database of information located on another computer on the network. The company applied for permission earlier this month to export a product that allows for access to keys used to encrypt the stored information in a database.
But to enhance security, the Sybase programme also encrypts the communications over the network between the computer user and the database. The product does not provide access to the keys used to encrypt those communications, according to Tom Parenty, director of data and communication security at the Emeryville, Calif.-based company.
""We're doing nothing for communications because there is absolutely no customer demand or need for any kind of key recovery for communications,"" Parenty said. ""What we are proposing is something that we can sell.""
",0
"The number of consumers and businesses filing for U.S. bankruptcy protection continued a dramatic rise, hitting a record 335,073 in the first quarter of 1997, the American Bankruptcy Institute said Tuesday.
The first quarter total, the fifth straight quarterly record, was up 26 percent from 266,149 in the first quarter of last year, the non-partisan research group noted.
Consumers filed more than 321,000 of the first quarter petitions, about 96 percent of the total and a rise of 27 percent from a year earlier.
""The continued record pace of bankruptcies tracks the sustained growth in consumer spending and debt,"" said the group's executive director, Samuel Gerdano said.
After consumer filings surpassed the 1 million mark for the first time last year, the first quarter's pace ""suggests that 1997 will surpass the 1996 record,"" he said.
The quarter's bankruptcy surge has already hit some consumer lenders.  Credit card giant Advanta Corp. shocked Wall Street when it reported a loss of 43 cents a share for the first quarter.
""Credit card debt is playing a big role in bankruptcy trends,"" said George Salem, banking industry analyst at Gerard Klauer Mattison & Co. in New York. And bankruptcies, in turn, have been depressing credit card company profits, Salem said.
""It's like continuing to be punched and it's going to be a while before it stops,"" Salem said.  Card issuers are cutting back on lending and tightening underwriting standards, but the current problems result from loans made more than a year ago, he said.
Looking at the 12 months ended March 31, 1997, Hawaii had the largest increase in bankruptcies, with a 61 percent jump. The northern section of West Virginia followed closely behind with a 60 percent rise.
About 70 percent of consumers filed for a Chapter 7 bankruptcy, where unsecured debt is wiped out and the debtor is allowed to keep some property.
Some card companies maintain that more consumers should be forced to file for Chapter 13 reorganizations, where debts are not wiped out but must be repaid over several years.
Visa USA said this week that its analysis of bankruptcy petitions showed that mounting credit card debt was not responsible for the rise in bankruptcies.
""This analysis refutes the notion that bank credit cards are largely responsible for the increase,"" Visa USA Senior Vice President Kenneth Crone said.
Crone said the analysis showed people with an ability to repay some of their debts were filing for Chapter 7 bankruptcy. ""People who can repay a portion of their debts should be required to do so,"" he said. ""Until this changes, lenders and consumers will continue to foot the bill.""
But consumer groups disputed the Visa findings and said excessive credit card debt was directly implicated.
""They are not making the correct comparisons,"" said Stephen Brobeck, executive director of the Consumer Federation of America. ""The only two figures that really matter are the average income and average credit card debt of bankrupt people.""
Among people who file for Chapter 7, the average income was about $20,000 and the average credit card debt was about $17,000, Brobeck said.
",0
"A top federal regulator Thursday urged banks to be more careful in issuing credit cards as an industry group reported that late payments by consumers jumped to a record level at the end of last year.
The latest sign that consumers are overburdened with credit card debt came in survey by the American Bankers Association.
The group said that in the fourth quarter of 1996 late payments jumped to 3.72 percent of credit card accounts, the highest rate since it began tracking delinquencies in 1980 and up from 3.34 percent a year earlier.
The survey, in conjunction with earlier reports that personal bankruptices are at record levels and bank losses from credit card loans are growing, has bank regulators on edge.
Comptroller of the Currency Eugene Ludwig, whose office oversees almost 3,000 nationally chartered banks, said the problems, while still under control, raise concerns about the safety and soundess of banks.
""We are continuing to see signs of slippage in some areas that you and we must address now,"" he told a New York State Bankers Association meeting in Washington on Thursday.
""It is worrisome to consider that there was a 44 percent growth in credit card losses and a 50 percent increase in credit card delinquencies during the past year,"" Ludwig said.
Ludwig also noted that bank chargeoffs on credit cards ""increased significantly"" in January to 6.5 percent of the $220 billion of loans outstanding from 4.7 percent a year earlier.
""These statistics are particularly troubling given the current health of the economy,"" he said.
As a result, the Comptroller's office issued an advisory to banks on credit underwriting standards and portfolio credit risk management, Ludwig said.
""The role of the regulator is to take action before potential problems become real problems,"" Ludwig said. ""Our goal is to remind national banks how changes in underwriting standards affect overall portfolio credit risk and to highlight the key component of an effective portfolio credit risk management process.""
Tighter loan standards should prevent the problem from getting out of hand, but losses may grow further before the new standards have an impact, Ludwig said.
""Current losses likely represent weaker credits making their way through the pipeline,"" he said. ""We can expect some continued losses, but hopefully we'll begin to see positive effects of those cautious underwriting decisions.""
Bankers had expected that tighter credit standards put into place in recent years would already have started reducing losses.
""We are disappointed that the numbers didn't improve,"" American Bankers Association chief economist James Chessen said. ""We had hoped that banks' tightening of credit standards over the last several years would have reversed the trend of delinquencies by now.""
In the fourth quarter of 1996, 37 percent of banks reported tightening standards, a drop from 49 percent in both the second and third quarters of 1996, the association said.
Delinquency rates also ticked up on home equity loans, the group reported. The delinquency rate was 1.42 percent in the fourth quarter of 1996, compared with 1.29 percent in the previous quarter and 1.41 percent in the same period the previous year.
On auto loans, the delinquency rate was 2.03 percent in the fourth quarter of 1996, compared with 1.95 percent the previous quarter and 1.87 percent a year earlier.
Delinquent payments are defined as 30 days or more overdue.
",0
"Federal Reserve Chairman Alan Greenspan urged lawmakers on Thursday to put off consideration of controversial proposals that would allow banks to merge with commercial companies, such as carmakers.
Instead, he said Congress should press ahead with more modest financial reforms that would knock down the 60-year-old legal barriers that prevent banks from affiliating with insurance companies and securities firms.
""Congress should widen the permissible range of affiliations for banking organizations in order to expand the choices for consumers and increase the efficiency of financial markets,"" Greenspan told the House Banking Committee.
Technology and free-market competition are blurring the boundries between financial and non-financial companies, but Congress can afford to wait, Greenspan said.
""Any wider authorization of banking and commerce should be postponed while we focus on financial modernization,"" he said. ""Were we to move forward, it is truly irreversible.""
Greenspan's position reflected an evolution of the Fed's view since February when he last testified on reforming the 1933 Glass-Steagall Act. At that time, Greenspan urged caution, but backed a transitional approach allowing limited mixing.
Since then, numerous lawmakers, small bankers and a host of interest groups, including consumer and labor organizations, have voiced opposition to allowing such combinations.
They complained that allowing a company like Microsoft Corp. or General Motors Corp. to own a major bank would diminish competition and could bias lending decisions.
Banking Committee chairman Jim Leach, an ardent opponent of mixing banking and commerce, said there was no public support for allowing commercial companies to own banks.
""I think that's going too far,"" the Iowa Republican said.
Rep. Marge Roukema, who has introduced a bill that would allow banking and commerce combinations, said she was disappointed by Greenspan's testimony.
Because savings and loans institutions are allowed to combine with commercial firms under current law, not including banking and commerce in new legislation leaves ""an enormous loophole,"" said Roukema, Republican of New Jersey.
Analysts said Roukema's observation was critical to understanding why Congress has been unable to modernize bank law, despite repeated efforts over the past decade.
""It's already out there,"" said Karen Shaw Petrou, president of bank consulting firm ISD/Shaw Inc., referring to the savings and loan authority. ""That's always been the stumbling block and if you take it away, people will get mad and Congress doesn't deal with that very well.""
On Wednesday, Treasury Secretary Robert Rubin outlined the Clinton administration's bank plan, but sidestepped the controversial banking and commerce question. Instead, he offered Congress two alternatives -- one that would allow such combinations and another that would not.
",0
"Federal bank regulators have begun prodding U.S. financial institutions to prepare for possible computer problems in the year 2000.
Many computers and software programs record only the last two digits of a year and could mistakenly treat the year 2000 as the year 1900. For banks, confused computers could erroneously trigger a wave of bounced checks, missed loan payments and miscalculated interest rates.
In letters to Senate Banking Committee Chairman Alfonse D'Amato, regulators said they were aware of the dangers.  
The various agencies, including the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency, said they had formed an interagency working group to address the issue, often referred to as the ""Millennium Bug.""
""The costs of making systems year 2000 compliant will be substantial and may affect some banks' earnings,"" Comptroller Eugene Ludwig, whose office oversees almost 3,000 national banks, wrote in a letter dated March 21. ""Most experts believe that even the most prepared organizations will encounter some problems.""  
""The year 2000 rollover could pose substantial risks to the financial services industry,"" Nicholas Retsinas, director of the Office of Thrift Supervision, warned.
Analysts have said corporations and governments might have to spend $300 to $600 billion worldwide to correct the problem by rewriting software and reprogramming hardware.
Even if banks correct all of their own computers, they could be brought down by computer errors from their major customers or third-party vendors, the regulators added.  
Bank examiners will question banks about year 2000 preparations this year, hopefully alerting them in time for solutions to be implemented and tested well before the end of 1999.
Some programs may fail much sooner as they try to process current transactions such as mortgage loans that extend beyond the year 2000.
""This is not a project that can be delayed or the deadline extended,"" Federal Deposit Insurance Corp Director Nicholas Ketcha wrote in a recent memo to the agency's regional directors. ""Because of the nature of some date related calculations, many software programs currently running which are not year 2000 compliant may fail at some point prior to December 31, 1999.""
The letters were in response to a query on the topic issued by Senator D'Amato earlier this month. The Banking Committee is reviewing the responses and had no immediate comment, a spokesman said.
((--202-898-8312))
",0
"The chairman of an influential National Research Council report on computer encoding technology said Thursday the report's year-old findings are still valid.
Kenneth Dam, a law professor at the University of Chicago, told Reuters that an approach favored by the Clinton administration to allow government access to coded information is still not ready for widespread use despite advances in computer encryption.  
Encryption, increasingly important for online commerce and global communications on the Internet, scrambles information and renders it unreadable without a password or software ""key.""
The Clinton administration bars the export of strong encryption unless the products incorporate a feature known as key recovery which allows the government to decode messages by gaining access to the software keys.
Such access is needed to catch criminals or terrorists who might be using encrypted communications, the administration argues.  
But poorly designed key recovery systems might create new vulnerabilities by letting hackers get access to the keys as well, critics contend.
Echoing the findings of last May's NRC report, Dam said key recovery is not sufficiently reliable yet.
""It may be that one would have more confidence today than we did a year ago and still more next year,"" Dam told Reuters after speaking to a conference here sponsored by the Brookings and Cato Institutes. ""It's not yet quite ready.""  
""The idea, which I stand by, is that one shouldn't require the implementation of key escrow even as part of some general infrastructure project until we're absolutely certain that we have not created a monster problem for ourselves,"" he said.
The report also recommended that strict export controls on encryption, opposed by U.S. software makers, be progressively relaxed.
Under a Clinton plan that took effect at the beginning of the year, companies may now export strong encryption products but only if they include key recovery. Companies promising to include key recovery within two years may export medium strength encryption.
That continues to draw the ire of software makers and privacy advocates opposed to government snooping.
Properly balancing the conflicting interests in the encryption debate is a difficult task, Dam conceded.
""Law enforcement and national security concerns do conflict with individual privacy and the legitimate needs of business and with the international future of our software industry,"" he said in a speech to the conference.
((--202-898-8312))
",0
"Treasury Secretary Robert Rubin, outlining a plan to overhaul Depression-era laws governing the U.S. financial sector, said Wednesday the Clinton administration favoured allowing banks to enter the securities and insurance fields.
""The old lines that separated insurance, securities and banking industries have increasingly blurred as new financial services and products have appeared,"" Rubin said in a speech here.
The highly anticipated administration proposal, originally expected in March, takes its place with several bills already introduced in Congress. ""We look forward to working with Congress on this important initiative,"" Rubin said.
Increased competition in financial services should benefit consumers, generating savings of up to $15 billion a year, Rubin said.
The new proposal did not take a firm position on the controversial question of allowing banks to combine with non-financial, commercial firms.
""Because of the nature of the issues and the complete lack of consensus, we think the issue needs to be further debated by Congress before settling on a final approach,"" Rubin said.
Some lawmakers, along with smaller banks and consumer groups, adamantly oppose allowing banks to combine with commercial firms. But insurance companies and securities firms say they are already intertwined with non-financial interests and could not compete with banks if such combinations were not permitted.
Rubin outlined two possible approaches. Under one approach, some mixing would be permitted but limited and with the 1,000 largest non-financial firms excluded.
Under a second approach, no mixing would be allowed with banks but, as currently permitted, thrifts would be allowed to combine with  commercial firms.
If banks are allowed to mix with commercial firms, the reforms could take effect two years after enactment, Rubin said. If mixing is not allowed, the reforms could take effect in nine months.
The Federal Reserve should continue to oversee bank holding companies, while specific activities would be overseen by specific regulators such as the Securities and Exchange Commission and state insurance regulators.
Banks would be allowed to underwrite municipal revenue bonds. An exemption for banks in the federal mutual fund law, the Investment Company Act, would be narrowed.
",0
"The number of banks charging non-customers for using their automated teller machines doubled over the past six months, a consumer watchdog group said Tuesday.
About 45 percent of ATMs added the controversial surcharge, on top of the fee most consumers already pay their own banks for using another bank's machine, up from 23 percent in October, according to a survey by U.S. Public Interest Research Group.
The non-profit consumer advocacy group also found that the average fee had risen 20 percent to $1.15 from 96 cents.
""Banks aren't earning money the old-fashioned way. Instead, they're gouging consumers,"" Edmund Mierzwinski, program director for the group, told a press conference.
Two states, Connecticut and Iowa, have banned the practice of charging non-customers and 12 other states, along with the federal government, are considering similar legislation.
Mierzwinski endorsed those efforts and said consumers should avoid using machines that impose a surcharge.
The rise in fees followed a decision one year ago by the two largest ATM networks, Visa's Plus and Mastercard's Cirrus, to lift a prohibition on surcharges.
Banks defended the practice and said the additional fees helped pay for ATMs in new locations.
""The marketplace should decide the prices for ATMs, not the government,"" the American Bankers Association said in a statement. ""Price controls will only inhibit innovation and put a halt to future ATM growth.""
Banks added almost 17,000 new ATMs last year, a 13 percent increase, according to a survey by the publication Bank Network News. With surcharges now permitted, ""ATM growth is accelerating,"" editor Don Davis said. ""It's a better business to be in, so more people are getting in.""
Big banks were more likely than smaller ones to impose a surcharge, according to the survey. Among the 300 largest banks, 53 percent of ATMs had a fee while only 40 percent of smaller bank ATMs and 6 percent of credit union ATMs charged a fee.
That could raise antitrust law implications if large banks banded together to impose fees and drive smaller competitors out of business, Mierzwinski charged. ""Not only are big banks using their monopoly muscle to punish consumers with higer fees, but their strategy is to use the surcharge to hurt small banks and credit unions as well,"" he said.
Customers of small banks, which have fewer of their own ATMs, would likely have to pay a surcharge more often.
Banks say free-market competition is functioning properly. ""Competitions is already keeping ATM pricing in check,"" the ABA said.
The consumer group said it surveyed 860 ATMs chosen at random in 27 states and the District of Columbia. The highest rates of surcharging were in the South, with 93 percent of Texas ATMs imposing a surcharge, 95 percent in Georgia, and 88 percent in Viginia and North Carolina, the group said.
((--202-898-8312))
",0
"As a new class of financial derivative based on credit risk continues to grow in popularity, U.S. banking regulators are still pondering how to best assess the sometimes complex instruments.
Most derivatives, financial instruments whose value is based on or ""derived from"" the value of something else, are linked to interest rates or currencies. Credit derivatives are based on the value of loans, bonds or other lending vehicles.  
""I think, inevitably, the regulators, the lawyers and the accountants tend to be reacting to market developments and, to an extent, trying to keep up,"" William Kroener, general counsel of the Federal Deposit Insurance Corp, said Friday at a symposium sponsored by the agency.
Last August, bank regulators issued preliminary guidance to bank examiners concerning credit derivatives. The guidance emphasized that banks should have policies in place describing how they intend to manage the risks incurred from credit derivatives.  
Regulators also asked banks to clearly list credit derivative activity in their call reports instead of lumping the deals into bigger derivative categories such as interest rate swaps.
But regulators are likely to revise the guidance and are still considering perhaps the most critical issue, the amount of capital a bank must set aside against its credit derivative portfolio.
""The real issue is whether a credit derivative is different than other loans,"" FDIC chairman Ricki Helfer said at the symposium.  
""Our challenge is to identify the risks embedded in credit derivatives and establish appropriate standards for those risks -- including appropriate capital requirements under the Basle risk-based capital accord,"" Helfer said.
Like other derivatives, credit products can be used to limit or reduce risks taken by banks, regulators said.
""They have great potential to enhance the management of credit risk,"" Christine Cumming, senior vice president in the bank supervison group of the Federal Reserve Bank of New York, said at the symposium. ""And the better you can manage credit risk the better you can manage all of a bank's risks.""  
So far, regulators see credit derivatives as analagous to letters of credit, Cumming said. When a bank issues a letter of credit, it promises to make good on a loan or bond if the original borrower defaults.
""The capital issue of course is the most important in the sense that it has a dollars and cents implication for banking institutions involved in this market,"" Cumming said.
Market innovations could make easier the task of tracking credit risk and assessing capital standards, industry participants said.  
J.P. Morgan & Co unveiled a product on Thursday called ""Creditmetrics,"" which is designed to help banks and others better measure and manage credit risk both on derivatives and on ordinary bonds and loans.
""It is only if we can promote better understanding of credit risks in a portfolio framework that we will be able to generate greater transparency of credit risk, and ultimately, greater liquidity in the credit markets,"" Blythe Masters, head of global credit derivatives at the bank, said.
CreditMetrics is also meant to ""kick-start or set forward the dialogue we have with bank regulators,"" Masters said. ""One of the perhaps most obvious applications of the CreditMetrics framework is a move towards a more risk-driven allocation of economic and potentially regulatory capital for credit risky instruments, including potentially credit derivatives.""
((--202-898-8312))
",0
"U.S. lawmakers redrafting a legislative proposal to modernize U.S. banking laws will rely heavily on the Clinton administration's reform plan, congressional staffers said on Wednesday.
But whatever provisions end up in the new draft, expected to be finished by Friday, the real battle will be fought when the House Banking Committee begins its formal consideration, or mark up, of the proposal currently scheduled for next week.  
""The goal here is to get in the (bill) those areas where there is general agreement,"" committee spokesman David Runkel said.
""The intent is to use as much of the Treasury (Department's) language as appropriate,"" Runkel said. The most controversial questions will be resolved as lawmakers offer varied amendments during the mark up, he added.
Treasury Secretary Robert Rubin unveiled the administration's plan to overhaul antiquated U.S. banking laws in a speech on May 21.  
In testimony on Tuesday, Rubin urged Congress to scrap the 1933 Glass-Steagall Act and free banks to enter other financial sectors like insurance and securities underwriting.
At least four major areas of disagreement remain that will be the focus of the scheduled June 11 mark up, staffers said. Some lawmakers want the mark up delayed at least a week, however, so the session could be delayed.
First, wide differences of opinion exist among legislators about whether financial firms should be allowed to engage in nonfinancial, commercial activities. The administration ducked the difficult question, offering two alternatives instead.  
Three earlier bills also each took a different approach and numerous alternatives have been floated in recent weeks. ""You'll see it all at the mark up,"" one staffer predicted.
Also, the insurance industry is up in arms about provisions in the administration plan that may broaden a 1996 Supreme Court decision limiting state regulation of bank insurance sales. The bill would allow federal bank regulators to overrule state insurance authorities in some instances.
""This could have the effect of threatening the safety and soundness of the nation's insurance system,"" said David Pratt, senior vice president of the American Insurance Association.  
A third controversey sprouted from one of the administration's two ""alternatives"" on banking and commerce.
The plan said Congress could allow limited mixing or keep the current prohibition while also maintaining the present exception allowing commercial companies to own thrifts.
Under the second option, thrifts and banks would continue to operate under different federal charters. That outraged the banking industry, which thought it made a deal last year guaranteeing the charters would be merged.  
""A very critical piece if the puzzle will be that any financial reform measure specifically deals with the thrift charter issue,"" said Beth Climo, group director of financial industry affairs at the American Bankers Association.
""That is the fundamental thing that needs to be addressed,"" Climo said.
Another area of disagreement surrounds proposals to allow creation of so-called wholesale financial institutions, or ""woofies."" These bank-like entities could only take deposits over $100,000 and would not receive deposit insurance.
Some opponents of mixing banking and commerce fear that wholesale banks represent a significant loophole, since a commercial company could set up a ""woofie.""
Banking Committee chairman Jim Leach said earlier this week that he hoped to have the committee approve a bill and send it to the House floor by July 4.
But even if a majority of the banking panel can reach a consensus, the bill will be sequentially referred to the House Commerce Committee. That committee could then hold its own mark up or even stall the legislation.
((--Washington Newsroom 202-898-8312))
",0
"Congress revives the debate over encryption export policy this week but much has changed since last year's tussles.
Once the domain of spies and generals, encryption has become a critical component of electronic commerce and global communications on the Internet.
This year, the Clinton administration has a new policy in place allowing freer export of encryption products, programs that scramble information and render it unreadable without a password or software ""key.""
The new Clinton policy, enacted through executive order in November and in effect since January 1, allows export of stronger encryption than previously allowed. But it requires companies to incorporate features within two years allowing the government to crack the codes by getting access to the software keys.
The government says it needs the ability to crack strong encryption to catch criminals and terrorists.
While a few companies, most notably International Business Machines, have obtained export licenses under the new policy, most high-tech companies remain frustrated.  
They want to be able to export very strong encryption without including the government access features.
Privacy advocates also oppose the current Clinton policy, which they say puts too much power in the hands of government.
Since the government does not require guaranteed access to the keys to one's home, it should not be given such access to the keys to one's data, they argue. ""My lock, my key,"" is the slogan on their buttons this week.
In congress, the passage of time has crystallized the issue for many members and both sides in the debate have found new allies. Last year, most lawmakers seemed either in favor of relaxed export restrictions or undecided.
The full Senate Commerce Committee will hear testimony Wednesday on two bills introduced in the Senate to remove almost all export restrictions, and Thursday, the House Judiciary subcommittee on Courts and Intellectual Property will debate a similiar bill under consideration there.
While the list of supporters of the bills has grown, some outspoken opponents have surfaced for the first time.
Sen Bob Kerrey made a statement on the Senate floor March 3 opposing the Senate bills.  
""The administration's policy not only can work, it is working,"" the Nebraska Democrat said. ""Congress should let the administration's negotiations and policies on encryption go forward, to succeed or fail on their own merits.""
At confirmation hearings for Anthony Lake to head the Central Intelligence Agency last week, senators also raised the encryption issue and appeared to side with the administration, including Kerrey, Sen John Kyl, Republican of Arizona, and Sen John Kerry, Democrat of Massachusetts.
Lake Monday dropped out of the running for CIA chief.
Kyl plans to make a policy statement on the issue shortly, a staffer said, possibly as soon as Wednesday at a hearing on Internet crime in the Judiciary subcommittee Kyl chairs.
Sen Max Baucus was also said to be leaning towards the administration but a spokeswomen denied the Montana Democrat was inclined toward either side. Baucus is seeking a consensus approach and ""has taken no position on any of the proposed bills,"" spokeswoman Naomi Seligman said.
Sen Kerry's office did not return calls for comment.  
At the House encryption hearing, Under Secretary of Commerce William Reinsch, deputy director of the National Security Agency William Crowell and a member of the Department of Justice criminal division, will defend the Clinton policy.
The Senate will also hear from FBI director Louis Freeh and special encryption envoy David Aaron.
Industry representatives at the hearings will include officials from Netscape Communications Corp, one of the most vocal administration critics, and Microsoft Corp.
Privacy advocates will testify in the House, including Jerry Berman, executive director of the Center for Democracy and Technology, and Marc Rotenberg, director of the Electronic Privacy Information Center.
((--202-898-8312))
",0
"Two members of Congress criticised the Federal Reserve Thursday for what they called its ""woefully inadequate"" record of hiring and promoting women and minorities.
Representative Henry Gonzalez and Representative Jesse Jackson Jr., in a letter to Fed chairman Alan Greenspan, said several discrimination lawsuits against the bank ""show a clear need for reform.""
The letter paired persistent Fed critic Gonzalez, a Democrat from Texas serving his 19th term in Congress, with second-term Illinois Democrat Jackson, son of the well-known civil rights leader.
A Fed spokesman declined comment.
One of the lawsuits, filed against the central bank in January by four black secretaries, may be expanded as 15 other current and former employees have asked to join the litigation, the two Democratic lawmakers said.
""As one of the nation's primary banking regulators, the Federal Reserve should serve as a model for the banking system it regulates,"" the two wrote to Greenspan.
""Despite being at the forefront in carrying out the nation's laws, we are concerned that the Federal Reserve's record of diversity in hiring and promotion is woefully inadequate.""
The four black secretaries filed suit Jan. 21 in the U.S. District Court for the District of Columbia on behalf of themselves and ""all others similarly situated.""
A black Fed researcher won a similiar suit against the bank in 1994, the Congressmen noted.
Gonzalez and Jackson asked Greenspan to assess the validity of the complaints and report if any action has been taken to address the alleged problems.
They did commend the central bank for increasing the number of women and minorities among the most highly paid Fed employees over the past three years.
In 1993, only one woman and one non-white were among the 35 top paid staff earning more than $125,000. Now, with 72 people making that much, 11 are women and five are minorities.
The hiring of additional women ""is an important step in ending what appeared to be gender bias in the selection of top staff, but it is still below comparable government standards which are also too low,"" Gonzalez and Jackson said. Minority representation ""remains poor.""
",0
"A bill to dramatically relax U.S. export controls on computer encoding technology will be considered by a House Judiciary subcommittee on Wednesday, congressional staff members said Monday.
Heading for a vote, the bill garnered an endorsement from a politically diverse coalition of Internet privacy advocates.
In a related development Netscape Communications Corp. said the Commerce Department gave the Internet software company permission to export some products containing stronger encoding, or encryption, features.
Current U.S. laws strictly limit export of products with encryption, software that scrambles information and renders it unreadable unless one has a password or software ""key.""
Netscape, which had been allowed to export encryption software with keys 40 bits long, said it will now be able to sell abroad products with 56-bit keys. The longer the key, the harder it is to crack an encoded message, and the 56-bit key makes it 65,000 times tougher to decode.
The Security and Freedom through Encryption Act, sponsored by Virginia Republican Representative Robert Goodlatte, would allow U.S. companies to export strong encryption programmes if such products were being offered by foreign competitors.
The Clinton administration opposes the legislation, which it argues would allow international criminals and terrorists to get easy access to encryption that could thwart law enforcement agencies' efforts.
Under the adminstration's current policy, strong encryption can be exported only if it allows the government to crack the codes by recovering the software keys.
Netscape has promised to abide by that policy, said its chief scientist, Taher Elgamal. Within two years, its products will allow the government to decode encrypted data by gaining access to the keys.
If the bill is approved by the Courts and Intellectual Property subcommittee, the full Judiciary Committee will consider it, said David Lehman, legislative counsel for Goodlatte.
The legislation will sail through the subcommittee and be voted on by the full committee in a few weeks, according to Shabbir Safdar, executive director of the Voters Telecommunications Watch, one of the groups endorsing the measure Monday.
""It looks very promising with 78 co-sponsors,"" Safdar said. ""This is the best hope in the House for real encryption reform this decade.""
Others who endorsed the bill included the Centre for Democracy and Technology, the Electronic Frontier Foundation and Americans for Tax Reform.
A similiar bill is pending in the Senate, where the Commerce Committee is expected to vote on its version in the next few weeks.
Not all civil libertarians favour the legislation as currently drafted. Another group, led by the American Civil Liberties Union, wrote Goodlatte this week asking him to delete a provision of the bill that would create new criminal penalties for using computer encryption ""in the furtherance of the commission of a criminal offence.""
The group generally backed Goodlatte's efforts but said in its letter the new criminal penalties ""could have a series of unintended consequences that would easily undermine the other desirable features of the bill.""
From the Internet community, signers included the Internet Society and two private companies, Cybercash Inc. and Digex Inc.
Instead of criminalizing use of encryption, the group said prosecutors should rely on existing federal and state laws prohibiting obstruction of justice and concealment of evidence.
",0
"Scientists working on the next generation of the Internet are finding their first challenge is to convince a sceptical U.S. Congress to fund the project.
Rather than stumbling over new hardware or software, the next generation network has quickly run into several road blocks on Capitol Hill.
On Tuesday, scientists involved with the project, including President Bill Clinton's top science adviser John Gibbons, will try to soothe concerns at a Senate hearing.
Some lawmakers are worried that the project lacks focus and is not sufficiently different from a related university project known as Internet2.
The next generation Internet project, announced with great fanfare by Clinton during last year's presidential campaign, aims to send data at 1,000 times the speed of today's net. Higher speed and improved reliability could spur a host of new uses for the network, some with sound and video.
Clinton pledged the government would spend $100 million annually for five years to build the super high-speed network and promote its use.
The money was to come from reallocating existing research funds, but that plan is already in trouble. In April, the House of Representatives passed a budget for the National Science Foundation that specifically barred any spending on the next generation Internet.
The bill is awaiting action by the Senate and could be modified before going to the president's desk.
In May, 28 senators sent a letter to science adviser Gibbons complaining about the composition of the next generation Internet's advisory board. The senators, from both political parties but all from rural states, noted that the board's 20 members came from only eight states.
""Instead of a potentially major positive development, therefore, 'Next Generation Internet' and Internet2 becomes a significant source of concern for us,"" the senators wrote in the letter obtained by Reuters.
National Science Foundation officials are confident that the programme will go forward. ""Next Generation Internet is a presidential initiative that will have a lot of congressional involvement,"" NSF spokeswoman Elizabeth Gaston said.
Congressional staffers said for the time being they remained confused about the administration's priorities. ""Everyone I speak with tells me different things about what these programmes are supposed to do, and which agencies get which portions of the budget,"" one staffer said.
To some degree, the confusion reflects the changing fortunes of the Internet. While the original Internet, including connections to universities, was largely funded by government, this time around higher education and industry are more likely to foot some of the bill.
More than 100 schools have pledged to spend $50 million a year on Internet2, mainly for higher speed connections and switches. The schools are also seeking corporate sponsorship.
Less government involvement for building the plumbing frees up more resources for cutting-edge research, according to George Strawn, director of the NSF's division of networking and communications research.
""The first time around, the NSF sort of had to take the lead to diffuse it to all of higher education because there wasn't an industry yet,"" Strawn said. ""Now that there is, as soon as it becomes cost effective we've got peddlers out there who will find higher education a receptive customer.""
The original Internet began as a Defence Department project called ARPAnet to link far-flung computer centres. Funded mostly by the government until the mid-1980s, the net is now run almost entirely by private companies including MCI Communications Corp, Sprint Corp and BBN Corp.
Representatives from those companies gathered with other stars of the Internet community in Virginia two weeks ago for a ""next generation"" planning meeting. Some will return to Washington next week to explain the project to Congress.
",0
"The largest online services providers reacted cautiously to a plan announced Tuesday that would vastly expand the number of possible address names on the Internet.
Internet Society, which helps develop standards on the global computer network, said it had approved a plan to add seven new top-level domains, the last three letters at the end of every electronic mail or Web site address.
While some major Internet companies endorsed the plan, online service providers gave it a cool reception.  
""We are still studying the proposal,"" said William Burrington, director of law and public policy at America Online Inc. While praising the plan's concept, Burrington said he thought ""it still needs some more work.""
America Online, the largest online service in the world with more than eight million members, hopes to craft a better plan ""that is more saleable,"" he added.
The largest pure Internet service provider, AT&T Corp's Worldnet service, was equally unenthusiastic. ""We are still looking at these domain names,"" spokesman Mike Miller said.  
""We are studying them, trying to better understand what it means for our business,"" Miller added.
Under the plan, new domain names such as ""firm,"" ""arts,"" and ""web"" will be added to the existing top-level domains such as ""com,"" ""net"" and ""org"" starting in the third quarter of 1997, the society said.
But online service providers will seek to delay implementation of the plan, officials said. ""It's not ready for prime time,"" one official said. ""We have been approached by other providers, and we're going to try and come up with something.""
The plan establishes an arbitration and mediation procedure for resolving disputes over names, such as when a trademarked name is used in an Internet address.
Several net organizations, along with computer-maker Digital Equipment Corp, telecommunications company MCI Communications Corp and UUNET Technologies Inc., a unit of WorldCom Inc, immediately endorsed the plan, first unveiled in February.
Any delay would likely please Herndon, Va.-based Network Solutions Inc. The company is the sole registration agent for the most popular current domains, including ""com"" and ""net.""  
Under the plan, the domain names registered by Network Solution will be registered jointly by all registration agents once the company's contract with the National Science Foundation expires.
Network Solutions, which has spoent millions of dollars on its set-up, pledged that would never happen. ""We have no intent of opening up our registry to others upon expiration,"" spokesman Christoper Clough said.
The Internet Society plan is also opposed by a group that has tried to create on its own informal system of new top-level domains. Less than one percent of the computers that route traffic on the Internet recognize names registered with the informal group, which recently began calling itself the Enhanced Domain Name Service.
Karl Denninger, the group's founder and president of a small Internet provider in Illinois called MCSNet, pledged to boycott any companies that go along with the Internet Society's plan.
""I'm not going to pay anybody who doesn't pay attention to my interests,"" Denninger said. ""You can vote with your wallet.""
((--202-898-8312))
",0
"Sun Microsystem Inc's decision to use powerful computer encoding software made in Russia put added pressure on the Clinton administration on Monday to relax strict U.S. export controls on similiar products made by American companies.
Encryption products, which scramble information and render it unreadable without a password or software ""key,"" have become a critical component of global communications and online commerce over the Internet.  
But encryption's power to prevent hackers from snooping on telephone calls and credit card numbers sent over the Internet can also be employed by drug cartels or terrorists to thwart law enforcement survellience.
Clinton administration officials oppose allowing exports of powerful U.S. encryption programs unless the software is designed to allow the government to crack the codes by gaining access to the software keys.
Federal Bureau of Investigation Director Louis Freeh and others have said repeatedly that the encryption ""genie"" is not yet ""out of the bottle.""  
""It's an arguably legal way around what is clearly a ludicrous export control policy of the administration that is creating jobs in Russia,"" Rep. Bob Goodlatte said in a telephone interview.
Goodlatte, Republican of Virginia, introduced one of several measures being considered by Congress to relax the export controls. The bill was passed by the House Judiciary Committee last week and is awaiting action by the International Relations Committee.
If U.S. export restrictions stay in place, industry officials warned, other companies will go the same route.
""A lot of U.S. companies have been contemplating this,"" said Jon Englund, vice president at the Information Technology Association of America. ""Sun's move is the first example of a trend that will continue. We'll see more and more of that.""
Administration officials had no comment on the Sun announcement.
((202-898-8312))
",0
"The Clinton administration gave a solid boost this week to congressional efforts to overhaul antiquated U.S. banking laws but substantial hurdles remain, participants in the debate said.
On Wednesday, Treasury Secretary Robert Rubin outlined the administration's plan to eliminate the 1933 Glass-Steagall legal barriers separating banks from securities firms and insurance companies.
The administration plan was due to Congress by March 31 and the nearly two-month delay had some lobbyists fearing that the administration would avoid the tangled regulatory controversies and not submit anything.
Congress has sought to reform banking laws for more than a decade, but one interest group or another has always managed to block passage of legislation. In prior years, banks sought reform, while other financial firms opposed change.
Recently, courts and regulators have granted banks new authority, however. That brought insurance companies and securities firms to the table to seek a level playing field.
""There is renewed hope that the 105th Congress will tackle this difficult issue,"" said David Farmer, lobbyist for the Alliance of American Insurers, after Rubin's speech.
The action now shifts to the Banking committees in the House of Representatives and the Senate, where detailed reform measures will be drafted. Rubin will provide more details of the Clinton plan in testimony before Congress on June 3.
House Banking Committee Chairman James Leach said this week that drafting will begin immediately after that testimony and that he wants committee action completed by mid-June.
It is at the drafting stage where some past efforts to reform banking laws have foundered as competing interests fought over the details.
The new administration proposal ducked one of the most contentious issues -- whether banks should be allowed to combine with non-financial, commercial firms.
Instead of taking sides, Rubin offered two alternatives. Under one plan, banks would be allowed a limited amount of commercial activity, but the largest 1,000 commercial companies could not own or be owned by banks.
Under a second alternative, the current prohibition would be continued, but the current exception allowing savings and loans to be owned by commercial companies would also be maintained.
Several months ago, administration officials were discussing proposals to allow nearly unlimited mixing of banking and commerce. The apparent retreat left advocates of greater mixing fuming.
""Their recommendation is tantamount to surrender on the issue,"" Minnesota Democrat Rep. Bruce Vento said.
Vento and New Jersey Republican Rep. Marge Roukema introduced a bill in January that would allow banks to have a ""basket"" of commercial activity accounting for up to 25 percent of an institution's total business.
Another blow to Vento and Roukema's efforts came Thursday when Federal Reserve Chairman Alan Greenspan testified before the House Banking Committee.
Greenspan said Congress should eliminate Glass-Steagall now, but put off the banking and commerce issue for future review. ""Any wider authorization of banking and commerce should be postponed while we focus on financial modernization,"" he said.
Now the banking and commerce issue threatens to derail their backing, said bank consultant Karen Shaw Petrou, president of ISD/Shaw Inc.
""The administration's plan is a decent baby-step,"" Petrou said. ""But unsurprisingly, it's not the lightning bolt that transforms the debate.""
Securities firms and insurance companies are involved in commercial activity, but want to get into banking if banks are allowed into their fields.
""If you don't allow banking and commerce, then you create obstacles for non-banks,"" Petrou said. ""But somebody's twist or turn to solve that then creates another problem for someone else.""
Even a small percentage limit on commercial activity would accommodate the largest non-bank financial companies, according to research from the Federal Deposit Insurance Corp. released on Thursday.
Among the seven securities firms in the Fortune 1000, plus Goldman Sachs & Co., none earned much more than 5 percent of their revenue from commercial activity in 1996, the FDIC estimated.
Only one of the five largest life and health insurers and one of the five largest property and casualty firms exceeded the 5 percent level, the FDIC said.
Four of the 10 largest diversified financial firms would exceed the 5 percent level, however. American Express derived 9 to 14 percent of its revenue from commercial activities, for example, and Marsh & McLennan Cos Inc. had 28 percent of revenues from commerce.
",0
"The merger of Bankers Trust New York Corp. and Alex. Brown Inc. sends a clear signal to Congress that the nation's banking laws enacted amid the Depression have fallen hopelessly behind market trends.
""It's another example of the kind of progress that is being made in the market,"" said Karen Shaw Petrou, president of the consulting firm ISD/Shaw. ""The industry is modernising even if Congress is lagging on modernisation legislation.""
Legislators have argued for more than a decade about repealing the Glass-Steagall Act of 1933 -- enacted in the wake of the stock market crash of 1929 -- which prohibits banks from offering other financial services like securities or insurance.
The debate is still raging in Congress, but this time around the market may exert more influence. In the last year, federal courts and bank regulators have substantially diminished Glass-Steagall's reach.
""This is the most profound example that Glass Steagall is no longer on life-support systems; it's dead,"" said Larry LaRocco, a bank industry lobbyist and former congressman. ""Now we need to move on and deal with the other issues.""
One of the biggest controversies to be addressed is whether banks should be allowed to combine with non-financial commercial firms, said LaRocco, who is managing director at the American Bankers Association's Securities Association.
Bankers Trust said Sunday it would acquire Baltimore-based Alex. Brown in a stock deal valued at $1.7 billion.
In acquiring Alex. Brown, Bankers Trust was taking advantage of a move by the Federal Reserve last December to more than double the amount of revenue a bank securities subsidiary could earn without running afoul of Glass-Steagall's Section 20.
Bankers Trust Chief Executive Officer Frank Newman told reporters Monday that after the acquisition securities activity would constitute about 20 percent of revenues on a pro forma, or estimated, basis. That would have exceeded the previous cap of 10 percent but is permissable under the revised 25 percent cap.
Section 20 says a nonbank subsidiary of a bank holding company may not be ""principally engaged"" in non-permitted securities activity. Since 1987, the Fed has interpreted that to allow bank subsidiaries to do a limited amount of dealing and underwriting in a wide range of securities, including corporate stocks and bonds.
The law already permitted banks to deal in certain kinds of securities such as Treasury bonds and general obligation municipal bonds.
Initially, the Fed ruled that a subsidiary that derived less than 5 percent of its revenue from securities was permissible. In 1989, the cap was raised to 10 percent and in December the cap was raised to 25 percent effective March 6.
Fed officials declined to comment on the merger.
The merger also benefited from Fed actions to eliminate previously required barriers, known as firewalls, separating a bank from its securities subsidiary.
""While the deal wouldn't have been do-able at all without the revenue limit change, from a profitability standpoint the changes in the firewalls that have been made and have been announced are quite important as well,"" consultant Petrou said.
Removing the firewalls allowed banks to cut costs by eliminating duplication between the two activities while allowing additional benefits from the combination.
The relaxation of firewalls has drawn some criticism from Congress, where Sen. Lauch Faircloth, chairman of the Senate Banking Committee's Financial Institutions subcommittee, held a hearing questioning the move.
But the North Carolina Republican now seems satisfied with most of what the Fed has done or proposed. ""We're going to entrust to the Fed that they'll continue to do the prudent thing,"" Faircloth's legislative director James Hyland said.
Faircloth's remaining concerns centre on two of the 28 firewall reforms proposed by the Fed in January, allowing a bank to buy investments underwritten by its securities firm for its own trust accounts and lending money to an investor to purchase underwritten securities, Hyland said.
",0
"Senate Banking Committee Chairman Alfonse D'Amato on Wednesday introduced legislation to prohibit banks from charging additional fees to non-customers who use their automated teller machines.
About 54 percent of all automated teller machines now impose a surcharge on non-customers, according to a survey by the General Accounting Office released by D'Amato at a congressional hearing.
""ATM's were supposed to reduce costs, and the savings could be passed on to consumers,"" the New York Republican said. ""Now, banks are suddenly claiming that ATM's are no longer cost-effective.""
""They have decided to soak consumers with multiple fees every time they need to take money out of their accounts,"" D'Amato said.
Consumer groups urged lawmakers to enact the ban. Surcharges pose a serious competitive threat to smaller banks, which have fewer automated teller machines, according to Edmund Mierzwinski, programme director at the non-profit U.S. Public Interest Research Group.
""If enough small bank customers switch accounts to big banks to avoid surcharges, then the big banks, facing less competition, will raise the fees they charge their own customers even more,"" Mierzwinski said.
After the hearing, banks denied the fees amount to double-dipping and argued consumers benefit from the proliferation of ATMs made possible by surcharge revenues.
""The marketplace is at work,"" said Ed Yingling, executive director of the American Bankers Association. ""Consumers, not the government, should decide if they are willing to pay for the convenience of using ATMs at thousands of new locations.""
If surcharges are banned, many newly installed machines would be shuttered, Yingling said.
Until last year, the two largest ATM network operators, Mastercard International's Cirrus and Visa USA's Plus, generally prohibited banks from levying surcharges on non-customers. Banks received a portion of the fee on such transactions charged by the customer's own bank.
Last April, Cirrus and Plus began allowing ATM surcharges, and the fees have rapidly proliferated. Fifteen states, including Texas, had previously allowed surcharges. More recently, Connecticut and Iowa have passed legislation banning surcharges.
The GAO found that about one-third of banks impose surcharges, covering 54 percent of all teller machines in the country. From the end of 1995 to February 1997, the number of ATMs rose 34 percent, while the number imposing a surcharge rose 320 percent, the GAO said.
The average surcharge was $1.14 in 1997, up from 99 cents in 1995.
Not all the senators at Wednesday's hearing favoured legislation banning surcharges. Sen. Lauch Faircloth, Republican of North Carolina, said he preferred allowing the market to set ATM fees.
""The ATM surcharge is a convenience fee,"" Faircloth said. ""That convenience comes at a price.""
",0
"The Clinton administration has crafted a plan to reform what many call outdated U.S. banking laws and will begin making its positions known over the next few weeks, industry officials said Monday.
The administration will formally unveil its plan when Treasury Secretary Robert Rubin testifies at a House Banking Committee hearing June 3, but details of the plan are expected to emerge as early as this week, the officials said.
Under Secretary John Hawke, a leading architect of the administration plan, is slated to speak here on Wednesday. In his speech, Hawke may indicate the administration's stand on mixing banking and commerce, lobbyists said.
""Mr. Hawke certainly won't do anything to upstage Rubin,"" one lobbyist in contact with the administration noted. ""But we will hear generally where they are on some of these topics.""
While most in Congress and the finance industry agree that the Depression-era barriers separating banking from securities and insurance should be torn down, there is little consensus about going farther and allowing banks to combine with securities and other firms.
The administration's position has evolved over the past several months. A task force on financial reform headed by Hawke initially recommended eliminating all barriers.
But the specter of Citicorp or Chase Manhattan merging with General Motors Corp. or Microsoft Corp. drew strong protests from House Banking Committee Chairman Jim Leach of Iowa, as well as prominent labour and consumer groups.
And during the spring, several Democratic senators, led by Paul Sarbanes of Maryland, wrote to Rubin to register their opposition to mixing banking and commerce.
Bowing somewhat to the criticism, the administration is now said to favour allowing limited combinations. Financial firms would be limited to a ""basket"" of non-financial activity, expressed as a percentage of total revenue or capital, some lobbyists said.
But the basket could be further limited by prohibiting combinations of the largest financial and non-financial firms. For example, one approach would be to bar the 1,000 biggest commercial firms from owning or being owned by banks.
Another difficult issue concerns regulating disparate financial businesses within a diversified firm.
Almost everyone favours ""functional regulation,"" meaning that each activity of a firm would be regulated by the appropriate regulator. The Securities and Exchange Commission would regulate securities activities while state insurance regulators would oversee insurance sales, for example.
But debate continues about the level of federal intrusion in insurance regulation as well as the need for a top-level regulator to oversee entire firms.
While some favour setting the Federal Reserve at the top of the heap, the administration is expected to back a committee approach. The committee would be composed of representatives of the various functional regulators.
",0
"U.S. Commerce Department is forming a committee to advise the department on its controversial computer encryption export policy, Commerce officials said on Friday.
The committee, which will be called the President's Export Council Subcommittee on Encryption, will be composed of about 25 members, drawn from state and local law enforcement agencies and the private sector, according to Sue Eckert, Assistant Secretary of Commerce for Export Administration.  
But the committee is not intended as a forum to debate the merits of the current export policy, Eckert told Reuters.
""This is not a debating forum towards policy in general,"" Eckert said in a telephone interview. ""It is the advisory group to provide input to implementation of our policy.""
Current law restricts the export of encryption technology, computer programs that scramble information and render it unreadable without a password or software ""key.""  
But many software companies, including Microsoft Corp and Netscape Communications Corp, oppose the export rules, which they say hamper sales abroad. And civil libertarians contend the export rules permit excessive governmental intrusions even within the United States.
Under the current policy, in effect since the beginning of 1997, the Clinton administration permits companies to export powerful encryption programs but only if the products allow the government to crack the codes by gaining access to the software keys.  
Companies can export medium-strength encryption if they promise to incorporate so-called key recovery features within two years.
The committee is ""to advise on the range of issues of implementation of key recovery...not just the technical issues, but also law enforcement and access,"" Eckert said.
The administration was criticized by privacy advocates last month for drafting legislation that might allow easy government access to software keys without a court order.  
While emphasizing that the committee was intended for law enforcement and corporate officials, Eckert said no groups would be excluded.
""We haven't excluded anybody,"" she said. ""That's why we published a notice in the Federal Register and advised everyone and anyone who's interested to submit their comments and suggestions.""  
The members of the committee will be selected by the Secretary of Commerce ""to assure a balanced representation among the exporting community and those government agencies with a mandate to implement policy regarding encryption,"" the notice indicated.
Eckert declined to predict when the committee would be appointed, but added ""hopefully within a period of a couple of months it will be up and established.""  
The administration will not wait for the committee to rejigger its export policy on several fronts, Eckert said. A modest revision of current export rules will be issued ""in a relatively short period,"" Eckert said, and a legislative proposal ""in the next several weeks.""
The advisory committee would have input on future revisions, Eckert said.
Opponents of the current policy said on Friday they continued to favor a legislative solution. Several bills are pending in Congress that would dramatically relax the export limits.
""This subcommittee is not a bad thing, but it does not change the nature of the debate,"" Business Software Alliance spokeswoman Kim Willard said. ""We still favor legislation.""
((202-898-8312))
",0
"Legislation to dramatically relax U.S. export restrictions on computer encoding technology moved ahead on Wednesday as the House Judiciary Committee approved the measure.
The bill, known as the Security and Freedom through Encryption Act, now goes to the House International Relations Committee where opponents plan to make their stand.
Encryption, computer programmes that scramble information and render it unreadable without a password or software ""key,"" has become an essential component of global communications and electronic commerce over the Internet.
The Clinton administration has opposed the bill and similiar measures in the Senate, arguing that allowing strong encryption out of the country will put it in the hands of international criminals and terrorists.
Representative Bob Goodlatte, the bill's author, said he had spoken to administration officials on Tuesday and hoped a compromise could be reached.
""We're very, very close in many areas,"" the Virginia Republican told reporters after the committee vote. ""The export control issue is probably the area that we're still the furthest apart on.""
Goodlatte's bill would also write into law the current policy of allowing unrestricted domestic use of encryption.
The bill would criminalize the use of encryption to conceal information related to the commission of a felony. That provision came on an amendment from Massachusetts Democrat Representative William Delahunt which replaced a broader criminalization provision included in the original bill.
The committee also approved an amendment requiring law enforcement officials to compile statistics for Congress on the use of encryption by criminals.
Software industry officials and privacy advocates, who have strongly opposed the export limits, urged lawmakers to continue moving the legislation forward.
The International Relations Committee ""will have a go at it but it's great to have some momentum,"" Netscape Communications Corp. public policy counsel Peter Harter said after the vote. ""We've come a long way in a very short period of time. This legislation is moving at Internet time.""
Jonah Seiger, communications director at the Centre for Democracy and Technology, said the vote was a ""historic moment.""
""The Judiciary Committee agreed that the administration has the wrong policy sending a very clear signal that we need to change direction,"" Seiger said.
Before the vote, committee Chairman Henry Hyde of Illinois prohibited amendments to the bill on the controversial export section. Hyde said the export section fell under the jurisdiction of the International Relations Committee.
",0
"The U.S. government is scrambling to update thousands of computer systems and software programmes that might otherwise see January 1, 2000 as ""00"" and think they are operating in 1900.
""We are confident that all of the major systems will be fixed,"" said Sally Katzen, who is coordinating much of the repair effort from her post as administrator of the Office of Information and Regulatory Affairs in the Office of Management and Budget.
""That is what we are setting out to do and that is what we will do,"" she pledged in an interview.
Legislators in Congress have also taken an interest in the subject and prodded agencies into action. Most are well aware of the problem, congressional staff say, although a few slackers including the air traffic control system are raising concerns.
""Congress is sounding the alarm and will keep sounding it until this problem is solved,"" Representative Steve Horn told Reuters.
Horn, chairman of the Government Reform Committee's Management, Information and Technology sub-committee, has taken testimony from a variety of government and private-sector experts on the year 2000 problem.
""I have learned that the real challenge it poses is to management,"" Horn said. ""Software experts are capable of fixing the problem but can management understand what is at stake, make it a priority, organise a plan and allocate resources so the technical experts can do their job?""
GOVERNMENT AGENCIES READY TO ADJUST FOR MILLENNIUM
The sub-committee surveyed government agencies about year 2000 awareness last year and responses to an updated survey have just come in. The latest survey found that all agencies are aware of the problem and most are ready to put in place the needed fixes, a congressional staffer said.
Some of the agencies that people are most concerned about, the Defence Department and the Social Security Administration, appear to be in good shape and have extensive plans to fix the problem well before December 31, 1999.
At the Defence Department, ""we are treating it much as we would a computer virus,"" Assistant Secretary of Defence Emmett Paige told Horn's sub-committee.
Although weapons systems are not set to launch automatically by computers, problems could crop up when the weapons interact with command and control systems that are operated by computers, congressional staffers explained.
During the Gulf War, a command and control system that was scheduled to run for 12 hours began shutting down weapon systems it was in contact with after running a few hours past its deadline.
""That would obviously be a disaster, but they're working on it,"" said one staffer.
Social security is also a primary focus of concern, but for more political reasons. Millions of voters depend on their social security cheques for meeting basic living expenses. If the cheques were delayed or cancelled, Congress would probably be inundated with thousands of complaints.
""They started the earliest but they have a lot to do and still aren't finished,"" a staffer said. ""My sense is that they will be fine.""
CONCERN OVER AVIATION
One agency of concern, according to congressional staffers, is the Federal Aviation Administration, which operates the country's air traffic control system and inspects commercial airplanes.
""The Department of Transportation is very worrisome,"" one staffer said. ""The FAA is still in the assessment phase. That's the one that's a real concern.""
The agency cannot give an estimate of how many lines of code it has that must be changed, or how much that might cost, until it completes an assessment expected by the end of May, according to Mary Powers-King, who heads the FAA's information technology effort.
""It's somewhat painful because no new funding has been appropriated and we're having to reprogramme to absorb the activity,"" Powers-King said. ""That is a big part of the reason why we started late. We've got that figured out now and we've got to just bite the bullet.""
Overall, recent estimates indicate the federal government will need to spend $2.4 to $2.5 billion to identify and correct year 2000 computer problems, Katzen said. The estimate has risen slightly from about $2.3 billion a few months ago.
""I wouldn't be surprised to see them come another ($100 to $300 million) as we continue through the process of assessment,"" Katzen said. ""But I think that we've got it in just about the right ballpark.""
In a February 7, 1997 report to Congress, the budget office projected that the military needed the largest portion of the money for updates. The Air Force would require $371 million, the Army $218 million, the Navy $90 million and other defence-related areas $291 million.
Other big spenders in the report were the Treasury Department, needing $319 million, and the Veterans Administration, needing $144 million.
",0
"Legislation to dramatically relax U.S. export restrictions on computer encoding technology moved ahead on Wednesday as the House Judiciary Committee approved the measure.
The bill, known as the Security and Freedom through Encryption Act, now goes to the House International Relations Committee where opponents hope to make their stand.
Encryption, computer programs that scramble information and render it unreadable without a password or software ""key,"" has become an essential component of global communications and electronic commerce over the Internet.  
The Clinton administration has opposed the bill and a similiar measure in the Senate, arguing that allowing strong encryption out of the country will put it in the hands of international criminals and terrorists.
Rep Bob Goodlatte, the bill's author, said he had spoken to administration officials on Tuesday and hoped a compromise could be reached.
""We're very, very close in many areas,"" the Virginia Republican told reporters after the committee vote. ""The export control issue is probably the area that we're still the furthest apart on.""  
Goodlatte's bill would also write into law the current policy of allowing unrestricted domestic use of encryption.
But the bill would criminalize the use of encryption to conceal information related to the commission of a felony.
That provision came on an amendment from Massachusetts Democrat Rep. William Delahunt which replaced a broader criminalization provision included in the original bill.
The committee also approved an amendment requiring law enforcement officials to compile statistics for Congress on the use of encryption by criminals.  
Software industry officials and privacy advocates, who have strongly opposed the export limits, urged lawmakers to continue moving the legislation forward.
The International Relations Committee ""will have a go at it but it's great to have some momentum,"" Netscape Communications Corp's public policy counsel Peter Harter told Reuters after the vote. ""We've come a long way in a very short period of time. This legislation is moving at Internet time.""
Jonah Seiger, communications director at the Center for Democracy and Technology, said the vote was a ""historic moment.""
""The Judiciary Committee agreed that the administration has the wrong policy sending a very clear signal that we need to change direction,"" Seiger said.
Before the vote, committee chairman Henry Hyde of Illinois prohibited amendments to the bill on the controversial export section. Hyde said the export section fell under the jurisdiction of the International Relations Committee.
",0
"Former Federal Reserve chairman Paul Volcker on Wednesday tangled with lawmakers who opposed his view that banks should not be allowed to combine with commercial companies.
But neither side broke much new ground in the debate, one of the hottest controversies remaining as Congress tries to overhaul ageing U.S. financial laws.
Volcker may have set the tone when he began his remarks to the House Banking Committee by observing that he delivered almost the identical testimony at a similiar hearing in 1991.
""I could read that statement word-for-word and it would be totally relevant"" on most issues being discussed, he said.
Volcker, a long-time opponent of mixing commerce and banking, pointed to recent experiences in Japan and Germany.
""I do not think that today many observers look to Germany or Japan for a model of an effective, innovative banking system,"" he said, ""Quite the contrary.""
That suited committee chairman Jim Leach, Republican of Iowa, also a longtime opponent of mixing banking and commerce. Rep. Doug Bereuter, Republican of Nebraska, announced at the hearing he would oppose such combinations.  
But advocates of legislation allowing some mixing questioned Volcker's evidence and conclusions.
Rep. Richard Baker, who has introduced a bill to allow unlimited mixing, said banks had been permitted to combine with commercial firms for most of U.S. history.
""This reflects that there is no principle or meaningful distinction between commerce and finance,"" the Louisiana Republican said.
Baker noted that Bankers Trust New York Corp, where Volcker sits on the board of directors, reported a profit of $62 million last year on an equity investment in an airline, asking: ""Isn't that an investment in a commercial enterprise?""
""Banks are able to hold some equity investment in the course of underwriting and in the course of merchant banking, and Bankers Trust has done so at times,"" Volcker responded. ""Had they extended beyond that, they would have one director who would protest.""
Banks cannot hold a controlling stake in a commercial firm, Volcker added.
When Baker suggested that lawmakers would put similar limits on commercial holdings at consolidated financial firms, referred to as a basket approach, Volcker disagreed.  
One bill under consideration would allow financial firms to conduct 25 percent of their business in non-financial endeavors, although legislators have also discussed basing the basket limit on total capital as opposed to business activity.
The ban on control ""is not a basket at all, it is a non- controlling interest and if it reached the point where it affected the fortunes of the bank, I'd worry about,"" Volcker said.
Later, Rep. Tom Campbell, Republican of California, said he was leaning towards allowing combinations of banks and commercial firms.
Representatives of the securities and insurance industries testified after Volcker and most favored allowing banking and commerce to mix.
""Such combinations are today part of the normal course of business for Merrill Lynch as well as other companies in our industry here in the U.S. and around the world,"" John Heinmann, the firm's chairman of global financial institutions, said.
((Washington newsroom 202-898-8312))
",0
"Senator Bob Kerrey is preparing legislation in an attempt to break the deadlock over computer encryption export policy, people familiar with the Senator's plans said.
Until now, the debate has pitted the Clinton administration, which favors strict export controls, against U.S. software companies and civil libertarians, who want to relax the export limits.
Encryption programs scramble information and render it unreadable without a password or software ""key.""
",0
"There may be many more places to hang your hat in cyberspace soon, thanks to a plan adopted by the Internet Society and a host of other groups, the society announced Tuesday.
But while some major Internet companies immediately endorsed the plan, online services providers gave it a cool reception.
The Internet Society, which helps develop and coordinate Internet standards, said the plan would provide seven new top-level domains, the last three letters at the end of every electronic mail or Web site address.
New domain names such as ""firm,"" ""arts,"" and ""web"" will be added to existing top-level domains such as ""com,"" ""net,"" and ""org"" starting in the third quarter of 1997, the society said.
Computer maker Digital Equipment Corp., telecommunications company MCI Communications Corp. and UUNET Technologies Inc., a unit of Worldcom Inc., endorsed the plan, first unveiled in February, the society said.
But America Online Inc., the largest online service in the world with more than 8 million members, said some details still needed to be worked out.
""We are still studying the proposal,"" said William Burrington, director of law and public policy at America Online. While praising the plan's concept, Burrington said he thought ""it still needs some more work."" The company hopes to craft a better plan ""that is more saleable,"" he added.
The largest ""pure Internet"" service provider, AT&T Corp.'s Worldnet service, was equally unenthusiastic. ""We are still looking at these domain names,"" spokesman Mike Miller said. ""We are studying them.""
The plan also has been endorsed by the Internet Assigned Numbers Authority, the central coordinator of Internet addresses and other standards operating under a charter from the society and the Federal Network Council.
The plan also establishes an arbitration and mediation procedure for resolving disputes over names, such as when a trademarked name is used in an Internet address.
Last year, for example, toymaker Hasbro Inc. won a lawsuit to regain control of the address ""candyland.com,"" which was being used for an adult Web site with nude photographs. But more complex disputes arise when both parties may have a legitimate claim to an address name.
""Responsible self-governance is the key factor in assuring that the Internet will reach its fullest potential,"" Internet Society President Donald Heath said.
Although other groups have tried to establish alternate domain names, they have not succeeded in persuading the vast majority of Internet service providers to add their new names to the computers that route information across the network.
The Internet Society plan better meets the needs of major providers, supporters said.
""The Internet is growing up rapidly and it is vital that the processes, procedures and policies that define its adminstration be sound, stable and sustainable in an international setting,"" MCI Senior Vice President Vincent Cerf said.
MCI is a top operator of the Internet's backbone network.
Currently, one company, Network Solutions Inc., registers addresses under most existing top-level domains under a contract with the National Science Foundation. Under the plan, up to 28 new registration agents will be chosen in a process overseen by the Big Six accounting firm Arthur Andersen.
But Network Solutions Senior Vice President Don Telage said having so many registrars would create chaos on the Net.
""This plan risks the stability of the Internet,"" he said.
The current system functions ""pretty well"" without international arbitration procedures, Telage said, noting his company has registered 1.2 million addresses and been sued only 26 times.
Herndon, Va.-based Network Solutions will come out with its own plan soon for reforming the domain name registration system, Telage added.
",0
"The Federal Reserve may not be taking adequate precautions to ensure that its technological systems and those of the banks it regulates will function properly in the year 2000, Senate Banking Committee chairman Alfonse D'Amato warned Monday.
After querying U.S. bank regulators on the year 2000 computer issue in February, New York Republican D'Amato said he was troubled by the answers he received from the Fed and the National Credit Union Administration (NCUA).
Problems are expected to crop up in computers and software that only record the last two digits of the year. Such a programme might treat the year 2000 as the year 1900, leading to serious miscalculations or even a system crash.
D'Amato also queried in February the Office of the Comptroller, which oversees national banks, and the Federal Deposit Insurance Corp. Both entities told D'Amato they had detailed plans to cope with the so-called millennium bug.
But D'Amato singled out responses of the Fed and the NCUA as raising concerns over whether they are ""devoting enough attention and resources to solving the year 2000 crisis,"" D'Amato's office said in a release. D'Amato sent both agencies letters Monday asking for additional information.
""Congress expects detailed plans and concrete actions to prevent possible future catastrophes which could endanger the financial well-being of hundreds of millions of Americans,"" D'Amato said. ""We can't wait around, timing is critical.""
Estimates for fixing year 2000 problems in government and the private sector worldwide have ranged as high as $300 billion to $600 billion. Chase Manhattan Bank recently said in a routine filing it planned to spend $250 million on the problem over the next three years.
""We have no comment,"" Fed spokesman Joe Coyne said Monday. ""We will, of course, answer the letter.""
D'Amato said the Fed and the NCUA appeared to lack an aggressive plan of action for coping with the problem, failed to give an assessment about the scope of the problem in institutions they oversee, and did not explain how they would assist regulated institutions that might have a problem.
The Fed, which operates the nation's payment system moving $1 trillion a day among financial institutions, also failed to describe any steps it had taken to ensure that its own systems would be ready for the year 2000, D'Amato said.
",0
"Treasury Secretary Robert Rubin goes to Capitol Hill on Tuesday to further explain the Clinton administration's bank reform plan, but lawmakers are likely to focus foremost on what the plan left out.
The Clinton proposal, along with several pending bills, would scrap the 1933 Glass-Steagall Act's separation of banking from other financial services.
On the contentious issue of going further and allowing banks to combine with commercial firms, however, the administration ducked.  
Instead, the Clinton plan unveiled by Rubin on May 21, offered two alternatives and left the hard choice to Congress.
""We think the issue needs to be further debated by Congress,"" the secretary said as he announced the plan.
Congress has debated overhauling antiquated U.S. banking laws for more than a decade without success and some analysts suggest the banking and commerce issue will sidetrack this year's attempts.
At Tuesday's House Banking Committee hearing, opponents of mixing banking and commerce led by committee chairman and Iowa Republican Jim Leach will try to steer Rubin to examine the risks of unlimited mergers.
Proponents, including subcommittee chairpersons Marge Roukema and Richard Baker, Republicans from New Jersey and Louisiana respectively, will take the opposite tack.
Under one of the two alternative outlined by Rubin last month, limited mixing would be permitted but excluding the 1,000 or so largest nonfinancial firms, measured by asset size.  
Bank holding companies could derive ""some significant percentage"" of their gross revenues from commercial activity under the approach, referred to as a basket limitation.
Under the second alternative, the current prohibition on mixing would be maintained but the current exception allowing commercial firms to own savings and loan institutions would also be maintained.
The administration chose to walk a fine line on the issue after Democratic legislators and traditionally Democratic labor and consumer groups came out against combining banking and commerce.
On Monday, other opponents including small bankers and agriculture groups issued a statement against even limited mixing of banking and commerce.
""Say NO to those who would undermine the world's strongest and most dynamic economic and financial system,"" the groups said. The 31 signers of the statement ranged from the National Bankers Association to the National Bakers Association.
Some lawmakers also plan to raise concerns at the hearing that portions of the Clinton plan contain loopholes that would render any limitations on banking and commerce irrelevent, staffers said.  
Any firm could own a thrift and establish a so-called wholesale financial institution. Wholesale banks could only accepts deposits over $100,000, would not be covered by deposit insurance, but would have access to the Federal Reserve's electronic payment system.
""The way the wholesale institution is structured would allow enormous activity,"" one staffer said. ""It's a big loophole.""
The notion of allowing savings and loans to continue operating under different rules than banks is also likely to draw some criticism.
Under legislation passed by Congress last year to recapitalize the savings industry's deposit insurance fund, the Clinton administration was directed to report on how the legal charters of the two industries could be merged.
((--202-898-8312))
",0
"The heads of 10 leading U.S. high-technology companies descended on Washington Wednesday to lobby for stronger laws protecting their products from piracy.
Executives including Microsoft Corp Chairman Bill Gates and Intel Corp Chairman Andrew Grove met with senators in the morning, reporters in the afternoon, and Vice President Al Gore and Commerce Secretary William Daley later in the day. They came armed with fresh research indicating that the software industry has been a key factor boosting economic growth.  
""The PC software industry is a very fast growing, very innovative business,"" Gates told reporters. ""Government statisics don't accurately capture all the things going on.""
According to research done for the Business Software Alliance, the industry totaled $102.8 billion in 1996, directly employing 619,000 people and paying wages of $36.4 billion. Another 1.4 million American workers owed their jobs indirectly to the industry.
The industry has grown at a rate of 12.5 percent annually since 19890, more than twice as fast as the U.S. economy, the study concluded.
To spur further gains, the software executives urged political leaders to strengthen international laws protecting intellectual property,
Piracy cost the industry $11.2 billion in 1996, the report noted. Although a considerable proportion of the piracy occurred in China, the software executives said they favored extending most favored nation status to China.
Government could also promote software sales by relaxing strict export limits on computer encoding technology, the executives said.
Encryption software, which scrambles information and renders it unreadable without a password or software ""key,"" was the realm of spies and generals. But the technology has become an increasingly critical security component of electronic commerce and global communications networks.
While U.S. companies cannot export powerful encryption products, foreign companies are cleaning up, the executives warned. Last month, for example, Sun Microsystems said it would market an encryption program made in Russia with some of its products to evade the export limits.
""The cat's already out of the bag,"" Novell Inc Chief Executive Eric Schmidt said. U.S. law should be modified to allow export of any encryption product already available abroad, he said.
Intel's Grove said fast moving technology companies sometimes get frustrated working with more sedate pace of government. ""We have been asked to exercise patience,"" Grove said. ""Patience is not one of our virtues.""
((--202-898-8312))
",0
"The rapidly evolving market for stored-value cards could be hurt by premature government regulation, one of the top U.S. bank regulators said in a report issued Wednesday.
An array of companies, including banks, credit card networks and others, are trying to popularize stored value or ""smart"" cards that carry electronic currency. But the cards have yet to catch on with consumers.
Federal Reserve Board, which regulates banks and runs the payment system used to tranfer hundreds of billions of dollars a day among financial institutions, evaluated possible regulation of smart cards under the Electronic Fund Transfer Act.
""Early regulation of electronic stored-value products could cause higher regulatory costs than later regulation,"" the Fed said in its report. Regulations could be costly for smart card providers and might arbitrarily favor one type of product over another, the Fed said.
""Given the limited experience with stored value products to date, it is difficult to assess the extent to which the benefits to consumers from any particular Regulation E provision would outweigh the corresponding costs of compliance,"" the report noted.
Regulation E sets out the Fed's rules for electronic funds transfers, including protecting consumers against fraudulent or mistaken transfers.
Sen Bob Bennett, chairman of the Senate banking Committee's subcommittee on financial services and technology who criticized an initial Fed plan to regulate smart cards, welcomed the report.
""For the first time, the Federal Reserve has carefully considered the cost of action as well as the potential cost of inaction with regard to the implementation of new regulations on the fledgling stored-value card industry,"" the Utah Republican said.
Last April, the Fed had proposed applying some parts of the funds transfer act to smart cards. But Bennett and others in Congress opposed that move and passed legislation requiring a report before any action was taken.
Early regulation could have some benefits, however, the Fed said. Government rules have ""the potential to speed up development by promoting standardization and by removing uncertainty.""
In any event, the market will probably grow slowly, the Fed predicted. ""Widespread public acceptance of stored-value products, if it occurs at all, will likely develop slowly over many years,"" the report said. ""Their introduction seems unlikely to change the fundamental nature of our current payment system in the near future.""
David Jung, senior analyst at the market research firm Killen & Associates, agreed. ""We expect solid growth of about 25 percent a year but we don't see any break-out yet,"" Jung said.
Volume of smart card transaction is expected to grow from under one billion transactions this year to about 10 billion worldwide in 2001, Jung said.
Fairly soon, smart cards could be used to pay for everything from parking meters to magazines published on the Internet, Jung said.
((202-898-8312))
",0
"Federal Reserve Chairman Alan Greenspan urged lawmakers on Thursday to put off consideration of controversial proposals that would allow banks to merge with commercial companies, such as carmakers.
Instead, he said Congress should press ahead with more modest financial reforms that would knock down the 60-year-old legal barriers that prevent banks from affiliating with insurance companies and securities firms.
""Congress should widen the permissible range of affiliations for banking organisations in order to expand the choices for consumers and increase the efficiency of financial markets,"" Greenspan told the House Banking Committee.
On Wednesday, Treasury Secretary Robert Rubin outlined the Clinton administration's plan to allow banks to get into the securities and insurance businesses.
But Rubin sidestepped the controversial question of whether banks should be allowed to merge with commercial companies, instead offering Congress two proposals -- one that would allow such combinations, and another that would not.
Greenspan acknowledged that the barriers separating banks and commercial companies will eventually crumble with the continued advance of technology.
But he urged caution in knocking them down now, in part because of uncertainties over how that would affect the U.S. financial system.
""Any wider authorisation of banking and commerce should be postponed while we focus on financial modernisation,"" Greenspan said.
The administration plan would allow banks, securities firms and insurance companies to compete directly under a uniform set of regulations. That increased competition should benefit consumers, generating savings of up to $15 billion a year, according to Rubin.
The highly anticipated administration proposal, originally expected in March, took its place with several bills already introduced in Congress to overhaul the Glass Steagall Act of 1933. ""We look forward to working with Congress on this important initiative,"" Rubin said.
Congress and the banking industry have been working to reform the law for more than a decade without success. But this year, previous opponents of reform have come to the table as regulators and courts have chipped away at the law and granted banks some new powers.
",0
"A bill to protect homeowners from paying unneccessary mortgage insurance was passed overwhelmingly by the House of Representative Wednesday.
By a vote of 421 to seven, the House adopted the Homeowners Insurance Protection Act that would cancel mortgage insurance once the homeowner has built up sufficient equity.
""The truth is that a vast number of people are paying for insurance they no longer need,"" Representative Henry Gonzalez said during the debate on the bill. The Texas Democrat urged the Senate to quickly pass the measure.
Consumer advocates say these policies cost homeowners millions of dollars a year.
""I think it would be hard for the Senate to resist moving forward,"" Michelle Meier, counsel for government affairs at Consumers Union, said. The House vote ""brings us really close to getting a final measure.""
But the mortgage insurance industry warned that the automatic cancellation proposal would raise the cost for loans with low downpayments.
""Unfortunately, the bill has serious flaws that would impose unnecessary government mandates and controls on the industry,"" said Suzanne Hutchinson of the Mortgage Insurance Companies of America.
Currently, mortgage lenders require a borrower to obtain and pay for such insurance when the borrower is making a relatively small down payment, such as 5 percent of the purchase price of a home.
Borrowers putting down 20 percent or more of the purchase price generally are not required to obtain insurance, which can cost $300 to $900 a year.
The bill would automatically cancel a mortgage insurance policy if the homeowner was current on mortgage payments and had built up 25 percent equity of the original house value.
The bill would not not apply to existing mortgages. The new rules would cover only mortgages and refinancings closed a year after enactment.
",0
"Legislators continued to debate on Wednesday one of the most difficult issues related to U.S. financial sector reform, but little common ground emerged.
While most in Congress and industry now agree the Depression-era laws separating banking from other financial businesses should be eliminated, there is little consensus about going farther and allowing banks to combine with ordinary commercial firms.  
House Banking Committee chairman Jim Leach, who has previously opposed mixing banking and commerce, reiterated his opposition at a hearing Wednesday.
""The more you keep financial services separate from commerce, the better,"" Leach said in testimony before the Banking Committee's Capital Markets Subcommittee.
The Iowa Republican has introduced a bill that would allow minimal combinations among banks and commercial firms. On the other side, Rep. Richard Baker, chairman of the subcommittee, has offered a bill that would impose virtually no limits on such combinations.  
A possible middle approach, contained in a bill introduced by Rep. Marge Roukema, Republican of New Jersey, and Rep Bruce Vento, Democrat of Minnesota, would allow financial companies to conduct up to 25 percent of their business in non-financial activities.
Baker, republican from Louisiana, continued to back his approach at the hearing.
""With limited regulatory oversight and greater vigor, financial institutions can pursue consumer demand and can broaden activities,"" he said. ""That should include commerce.""  
Leach did offer some new nuances to his previous statements on the issue. He provided the subcommittee with charts prepared by the Federal Reserve outlining the hypothetical mergers permitted under various approaches.
For example, a 25 percent limit on non-financial activity based on total asset size would allow a large bank like Chase Manhattan to acquire all but six of the largest companies in the entire country. If Chase merged with a large securities firm like Salomon Brothers, the Fed data indicated it could acquire even Exxon Corp, fourth largest company in the country based on market value.  
A 10 percent limit would leave 18 companies out of Chase's sights or eight from a merged Chase-Salomon.
Based on the Fed's findings, Leach suggested that, if Congress does include a percentage-based limitation, the limit should be a portion of total capital.
""If it seems that modest investment experimentation should be granted banks, a basket that relates to capital rather than business activity might, at least initially, be more prudential and less market distorting,"" he said.
Looking at book equity values as a measure of capital, the Fed found Chase would be barred from acquiring the 74 largest companies in the United States under a 25 percent cap. Under a 10 percent cap, 215 large companies would be off-limits. ((--202-898-8312))
",0
"There will be many more places to hang your hat in cyberspace soon, thanks to a plan adopted by the Internet Society and a host of other groups, the society announced Tuesday.
The group, which helps develop and coordinate Internet standards, said the plan would provide seven new top-level domains, the last three letters at the end of every electronic mail or Web site address.
Computer maker Digital Equipment Corp., telecommunications company MCI Communications Corp. and UUNET Technologies Inc., a unit of Worldcom Inc., endorsed the plan, first unveiled in February, the society said.
The plan also has been endorsed by the Internet Assigned Numbers Authority, the central coordinator of Internet addresses and other standards operating under a charter from the society and the Federal Network Council.
The International Telecommunications Union, World Intellectual Property Organization and International Trademark Association backed the plan as well, the society said.
Under the plan, new domain names such as ""firm,"" ""arts,"" and ""web"" will be added to the existing top-level domains such as ""com,"" ""net,"" and ""org"" starting in the third quarter of 1997, the society said.
The plan establishes an arbitration and mediation procedure for resolving disputes over names, such as when a trademarked name is used in an Internet address.
Last year, for example, toymaker Hasbro Inc. won a lawsuit to regain control of the address ""candyland.com,"" which was being used for an adult Web site with nude photographs. But more complex disputes arise when both parties may have a legitimate claim to an address name.
""Responsible self-governance is the key factor in assuring that the Internet will reach its fullest potential,"" Internet Society President Donald Heath said.
Although other groups have tried to establish alternate domain names, they have not succeeded in persuading the vast majority of Internet service providers to add their new names to the computers that route information across the network.
The Internet Society plan met the needs of major providers.
""The Internet is growing up rapidly and it is vital that the processes, procedures and policies that define its adminstration be sound, stable and sustainable in an international setting,"" MCI Senior Vice President Vincent Cerf said.
MCI is a top operator of the Internet's backbone network.
Currently, one company, Network Solutions Inc., registers addresses under most existing top-level domains under a contract with the National Science Foundation. Under the plan, up to 28 new registration agents will be chosen in a process overseen by the Big Six accounting firm Arthur Andersen.
But Network Solutions Senior Vice President Don Telage said having so many registrars would create chaos on the Net.
""This plan risks the stability of the Internet,"" he said.
The current system functions ""pretty well"" without international arbitration procedures, Telage said, noting his company has registered 1.2 million addresses and been sued only 26 times.
Herndon, Va.-based Network Solutions will come out with its own plan soon for reforming the domain name registration system, Telage added.
While Network Solutions charges $100 for a two-year registration, the new firms will be free to compete on price. All names will be maintained in a central, shared database.
Once Network Solution's contract with the National Science Foundation expires, the top-level domains it registers will be opened to all the other registry agents.
A broad range of Internet companies and organizations will gather in Geneva at the end of April to add their formal endorsements on a memorandum of understanding, Heath said.
",0
"Congress revives the debate over encryption export policy this week but much has changed since last year's tussles.
Once the domain of spies and generals, encryption has become a critical component of electronic commerce and global communications on the Internet.
This year, the Clinton administration has a new policy in place allowing freer export of encryption products, which are programmes that scramble information and render it unreadable without a password or software ""key.""
The new Clinton policy, enacted through executive order in November and in effect since January 1, allows export of stronger encryption than previously allowed. But it requires companies to incorporate features within two years allowing the government to crack the codes by getting access to the software keys.
The government says it needs the ability to crack strong encryption to catch criminals and terrorists.
While a few companies, most notably International Business Machines, have obtained export licenses under the new policy, most high-tech companies remain frustrated.
They want to be able to export very strong encryption without including the government access features.
Privacy advocates also oppose the current Clinton policy, which they say puts too much power in the hands of government.
Since the government does not require guaranteed access to the keys to one's home, it should not be given such access to the keys to one's data, they argue. ""My lock, my key,"" is the slogan on their buttons this week.
In congress, the passage of time has crystallised the issue for many members and both sides in the debate have found new allies. Last year, most lawmakers seemed either in favour of relaxed export restrictions or undecided.
The full Senate Commerce Committee will hear testimony Wednesday on two bills introduced in the Senate to remove almost all export restrictions, and Thursday, the House Judiciary subcommittee on Courts and Intellectual Property will debate a similiar bill under consideration there.
At the House encryption hearing, Under Secretary of Commerce William Reinsch, deputy director of the National Security Agency William Crowell and a member of the Department of Justice criminal division, will defend the Clinton policy.
The Senate will also hear from FBI director Louis Freeh and special encryption envoy David Aaron.
Industry representatives at the hearings will include officials from Netscape Communications Corp., one of the most vocal administration critics, and Microsoft Corp.
Privacy advocates will testify in the House, including Jerry Berman, executive director of the Centre for Democracy and Technology, and Marc Rotenberg, director of the Electronic Privacy Information Centre.
",0
"Legislation to dramatically relax U.S. export restrictions on computer encoding technology moved ahead on Wednesday as the House Judiciary Committee approved the measure.
The bill, known as the Security and Freedom through Encryption Act, now goes to the House International Relations Committee where opponents plan to make their stand.
Encryption, computer programmes that scramble information and render it unreadable without a password or software ""key,"" has become an essential component of global communications and electronic commerce over the Internet.
The Clinton administration has opposed the bill and similiar measures in the Senate, arguing that allowing strong encryption out of the country will put it in the hands of international criminals and terrorists.
Representative Bob Goodlatte, the bill's author, said he had spoken to administration officials on Tuesday and hoped a compromise could be reached.
""We're very, very close in many areas,"" the Virginia Republican told reporters after the committee vote. ""The export control issue is probably the area that we're still the furthest apart on.""
After the votes, administration officials emphasised the differences. Under Secretary of Commerce William Reinsch said the administration ""is disappointed that the committee acted precipitously. The bill contains serious deficiencies.""
Goodlatte's bill also would write into law the current policy of allowing unrestricted domestic use of encryption.
The bill would criminalize the use of encryption to conceal information related to the commission of a felony.
Software industry officials and privacy advocates, who have strongly opposed the export limits, urged lawmakers to continue moving the legislation forward.
The International Relations Committee ""will have a go at it but it's great to have some momentum,"" Netscape Communications Corp. public policy counsel Peter Harter told Reuters after the vote. ""We've come a long way in a very short period of time. This legislation is moving at Internet time.""
Jonah Seiger, communications director at the Centre for Democracy and Technology, said the vote was a ""historic moment.""
""The Judiciary Committee agreed that the administration has the wrong policy sending a very clear signal that we need to change direction,"" Seiger said.
Before the vote, committee chairman Henry Hyde of Illinois prohibited amendments to the bill on the controversial export section. Hyde said the export section fell under the jurisdiction of the International Relations Committee.
",0
"The U.S. Commerce Department showed an unexpected degree of flexibility in approving an application from Sybase Inc to export computer encoding products, company officials said on Wednesday.
About a dozen companies have already gotten permission this year to export products with encryption, data scrambling technology that renders information unreadable without a password or software ""key.""
But Sybase's products appeared to skirt strict U.S. export rules in effect since the beginning of the year.  
""I was sufficiently surprised when I got word over the phone that we had been approved that I wrote a letter spelling out what I saw as the differences of our approach versus (the regulations),"" said Tom Parenty, Sybase's director of data and communication security. Shortly thereafter, Parenty said, he received written confirmation.
To export powerful encryption under the current rules, a company must include features allowing the government to crack the codes by gaining access to the software keys. Companies may export medium-strength encryption by promising to include so-called key recovery features within two years.  
The rules indicate that a product must allow key recovery both for encrypted stored data, like a file on a hard drive, as well as for live communications that are encoded.
But Sybase's products, Internet transaction software and client-server database programs, will allow for key recovery within two years only of stored data. Encrypted communications between a customer and a web site using the Sybase transaction software, for example, would not allow for government decoding, Parenty said.
The key recovery feature was designed to meet the needs of customers, he said.  
""Many people want a key recovery mechanism for stored data,"" Parenty said. ""But there is no reason, once I have the answer to my query, to want the keys to decrypt those communications.""
Sybase still supports legislative proposals that Congress is considering that would eliminate most of the export restrictions, Parenty said.
The Clinton administration has opposed loosening the rules, but pressure for change continued to mount this week, as Sun Microsystems Inc announced it would get around the rules by marketing Russian-made encryption with its export products.
And on Wednesday, a group of cryptography experts released a study concluding that the large-scale infrastructure needed to support key recovery for law enforcement agencies could compromise the security of lawful encryption users.
((--202-898-8312))
",0
"Treasury Secretary Robert Rubin outlined on Wednesday the Clinton administration's plan to allow banks to get into the securities and insurance businesses, eliminating 60-year-old legal barriers enacted during the Great Depression.
""The old lines that separated insurance, securities and banking industries have increasingly blurred as new financial services and products have appeared,"" Rubin said.
The plan would allow banks, securities firms and insurance companies to compete directly under a uniform set of regulations. That increased competition should benefit consumers, generating savings of up to $15 billion a year, Rubin said in a speech at the Exchequer Club here.
The highly anticipated administration proposal, originally expected in March, takes its place with several bills already introduced in Congress. ""We look forward to working with Congress on this important initiative,"" Rubin said.
House Banking Committee Chairman Jim Leach welcomed the plan, but said some substantive issues were unresolved.
""While differences of judgment on several key legislative points remain, Secretary Rubin's statement today is very constructive to the process,"" the Iowa Republican said.
Industry participants said the administration plan would give the reform effort a needed boost.
The proposal ""should provide considerable momentum for long-needed reform,"" Bankers Trust New York Corp. Chairman Frank Newman said. Newman gave the effort some prior momentum last month, when his bank took advantage of recent regulatory changes and acquired the securities firm Alex. Brown Inc.
Consumer advocates, however, complained that the proposal did not contain adequate measures to protect bank customers buying insurance.
""We're very disappointed that there are no protections on insurance,"" Mary Griffin of Consumers Union said. Banks have a weak track record in that area, she added.
Credit insurance on mortgages, the second most popular insurance product sold by banks, ""is one of the biggest consumer rip-offs out there,"" she said.
The Rubin proposal did not take a firm position on the controversial question of allowing banks to combine with non-financial, commercial firms.
""Because of the nature of the issues and the complete lack of consensus, we think the issue needs to be further debated by Congress before settling on a final approach,"" Rubin said.
Some lawmakers, along with smaller banks and consumer groups, adamantly oppose allowing banks to combine with commercial firms. But insurance companies and securities firms say they are already intertwined with non-financial interests and could not compete with banks if such combinations were not permitted.
Rubin outlined two possible approaches. Under one approach, some mixing would be permitted but limited and with the 1,000 largest non-financial firms excluded.
Under a second approach, no mixing would be allowed with banks but, as currently permitted, thrifts would be allowed to combine with commercial firms.
",0
"On the Internet, where new products come and go in the blink of an eye, time is said to move at ""Internet speed.""
But in the rarefied air of Congress, where legislation often moves at a glacial pace, few would equate ""Washington time"" with the speed of cyberspace. That may be changing, however, as Congress struggles to come to grips with the Net as a phenomenon with great potential for reaching voters.
In the 1996 election, exit polls showed more than one-fourth of voters were ""wired"" and about 10 percent primarily used online sources of information in deciding how to vote. Responding to the surge in Net use by voters, congressional Internet use also has skyrocketed by some measures.
At the begining of 1994, just a handful of lawmakers had posted home pages on the World Wide Web. Two years later, 222 representatives and 85 senators had Web pages. The Congressional Internet Caucus has 91 members, up from 60 in the last Congress.
Despite the flurry of activity, Congress will never be on the cutting edge, according to some who work in the capital.
""I expect Congress will always be one or many steps behind,"" Chris Casey, who helped set up the first congressional Web page for Sen. Edward Kennedy, told a briefing about the Web for congressional staff sponsored by the Internet caucus last week.
A question about when Congress would be ""up to speed"" on the Net brought peals of laughter from the audience of staffers.
BEYOND WEB PAGES
Nonetheless, some legislators have gone beyond posting simple Web pages and have integrated the Net into the most basic operations of their congressional offices. Rep. Anna Eshoo, a California Democrat whose district encompasses Silicon Valley, created a special area on her Web site to give constituents individualized information (http://www-eshoo.house.gov). A constituent sends Eshoo a query and receives a personal answer posted on a private part of the site accessible only to that individual with a password.
Sen. Pat Leahy, Democrat of Vermont, participates in live online chat sessions with school children in his home state with transcripts on his Web site (http://www.senate.gov/leahy). Leahy's office also is planning to start a newsgroup, a type of group mailing list on the Net, devoted to Vermont issues.
Almost all legislators accept electronic mail but most respond on paper through the mail. Leahy's office is one of the few that answer e-mail with e-mail, staffer Paul Mann said. Although some feared this might overwhelm the office with too many messages, ""surprisingly it hasn't happened,"" Mann said.
For the co-chairman of the Internet Caucus, Rep. Rick White, the Internet is a key foundation of his media strategy.
""The first place we send any press release is to our Web page,"" White staffer Aaron Weissman told the Web information session. Even media staff for the Washington state Republican Party look to the Web site (http://www.house.gov/white) to find copies of a release to send to the media, Weissman added.
The Internet is also changing the way groups lobby Congress. The Citizen's Internet Empowerment Coalition set up a Web page to get Internet users to send e-mail to Congress on the issue of restricting obscenity on the Net (http://www.ciec.org).
But since legislators are most interested in hearing from voters in their own districts, the page looks up the e-mail address of an Internet user and guides users to send targeted messages. ""We have a responsibility as advocates to educate Internet users,"" said Jonah Seiger of the Center for Democracy and Technology, which helped set up the coalition's site.
Much more remains to be done to educate users and legislators. While the text of bills is available online, some advocates want Congress to make more information available.
""There are broad sections of the electorate that are entirely uninformed about what our Congress does,"" Gary Ruskin, director of the Congressional Accountability Project, said. ""So much of the problem is that it is very, very difficult to obtain in real time the core documents of our democracy.""
Ruskin urged that Congress post an assortment of documents on the Web, including voting records, disclosure forms, testimony from hearings and draft legislation.
",0
"Commuters stuck in traffic on the Leesburg Pike in Northern Virginia are just a few hundred yards away from an even bigger jam, one that stretches around the world.
This is a traffic jam of bits and bytes, digital data travelling through one of the main arteries of the global Internet.
With thousands of new users signing on every day, the Internet's data routes are brimming with traffic and some predict the imminent demise of the net due to overcrowding.
""Demand for the Internet is outstripping supply,"" said Mark Luker, programme director of the National Science Foundation's network infrastructure project.
But work is under way to provide more capacity through technical solutions and ways are being explored to ration the Internet by price, through fees based on the speed and quantity of data.
The facility in Northern Virginia is a computer interchange, called Mae East, where 46 major and minor Internet service providers come together to exchange data travelling across the Internet.
BUSIEST PUBLIC EXCHANGE POINT ON THE INTERNET, FIRM SAYS
MFS Communications Inc, which runs Mae East and its California counterpart Mae West, describes it as ""the busiest public exchange point on the Internet."" Peak loads run as high as 53 million bytes per second.
Until April 1995, the National Science Foundation (NSF) managed and financed the common highway underpinning most of the Internet, called a network backbone.
Before the network was phased out in favour of privately managed networks, traffic increased steadily from 1.3 trillion bytes a month in March 1991 to a high of 17.8 trillion bytes in late 1994, the equivalent of transfering the entire contents of the Library of Congress every four months.
The private system sends data across a host of different company networks and crowded interchange points. As the load continues to increase, MFS and the Internet providers can add more fibre optic lines and switching equipment, but that is expensive and still may fail to keep up with rising usage.
Some providers are setting up smaller, one-to-one interchanges to relieve the burden on Mae East. MCI Communications, which has seen a 5,000 percent increase in Internet traffic since the beginning of 1995, set up 22 circuits for one-to-one exchanges.
For now, the best solution is to keep adding hardware, said Luker. ""But in the long run, you can solve problems by adding knowledge to the system instead of brute force,"" he said.
The NSF recently announced 13 grants for the development of high speed networking technologies and software programmes.
IDEAS TO REDUCE CONGESTION
One project hopes to reduce congestion by developing a system, called caching, to hold copies of popular sites at duplicate locations around the world.
If an Internet user in Japan tries to download a web page in New York, the data must travel all the way around the world, even if another user in Japan has just downloaded the same page. With a cache, the second user could grab the page from a closer computer that the data had already gone through.
""A cache automatically duplicates the pages that are used most often,"" Luker explained. The NSF had sponsored a study at the National Laboratory for Advanced Networking Research of a cache that ""is showing great improvements in traffic.""
A procedure called multicasting could also reduce repetitive data transfers, said Robert Hagens, MCI's director of Internet engineering. Multicasting sends a stream of data such as sound or video across the net that can be accessed by many users.
""If you look at the radio stations beginning to appear on the Internet, they commonly require each listener to open a connection to the station so you've got a lot of duplication,"" Hagens said. ""With multicast, you put that data into a stream of packets that only get duplicated when they have to.""
New ways of charging for Internet usage may alter the traffic patterns, as well. At the moment, most users pay a flat rate for Internet service regardless of how much capacity they use. Sending e-mail is considerably less taxing than sending live videos, but users pay the same for both.
""The Internet is a mature technology but an immature economy,"" said Hal Varian, dean of the University of California's School of Information Management and Systems. The current pricing model does not provide incentives to Internet providers to offer high quality service, he said.
People who need high priority channels for sending live video might have to pay more, Varian said, but basic tasks like sending e-mail will remain essentially free.
Varian also predicted Internet service providers will begin paying each other based on the amount of traffic they exchange, much as phone carriers make settlement payments to foreign telecommunications companies for completing international calls.
Much of the slowdown experienced by individuals trying to surf the World Wide Web is caused by limits at each end of a connection rather than by delays moving across the network.
Web pages reside on computer servers that can be overwhelmed when too many requests arrive at the same time. And many individuals access the Internet through relatively slow modem links.
Such delays could be eased by a proposal from Sun Microsystems to create a new Internet standard for the way computers access each others' files.
Called Web Network File System, the protocol reduces the burden on the computer holding the web pages, speeding the transfer of files and allowing three times as many Internet surfers to gain access at one time, according to Sanjay Sinha, head of Sun's Solaris Server project.
""In real life, most web servers are heavily loaded,"" Sinha said. Sun's web file system ""doesn't require that load.""
User delays are real, but by some measures the Internet's performance has actually improved over the last few years.
Matrix Information and Directory Services of Austin, Texas, compiles a weather report which it publishes on the Internet.
The report, updated every four hours, shows how long it takes a small message to travel from Matrix's headquarters to 4,500 major computers around the world and back.
Traffic clogging the Internet slows the round trips. The reports show huge fluctuations in Internet traffic, with ""rush hour"" occuring weekdays as business users log on.
But the average delay declined by 30 percent between January 1994 and January 1996, according a report by Matrix.
",0
"The International Monetary Fund opened a site on the Internet Thursday providing information about the types of economic data available in 18 member countries.
""For a long time we have been trying to press countries to report to us on a more timely basis, more information, and based on good statistical systems,"" said Jack Boorman, director of the IMF's policy and review department.
The 1994-95 Mexican peso crisis highlighted the need for timely and accurate data about developing countries, Boorman told a news conference.
The site does not include the countries' actual data -- that may come later -- but it lists contacts for obtaining the information.
""Good statistical citizenship helps to inform markets,"" Boorman said. ""The whole purpose of this system is to help that process, to make sure that markets are getting better data in a timely way.""
The Internet address of the site is http://dsbb.imf.org. It lists information such as the frequency, schedule and types of economic and financial data released on a regular basis by the countries which have subscribed to the fund's ""Special Data Dissemination Standard.""
The countries on the site are Argentina, Canada, Denmark, Finland, Ireland, Italy, Malaysia, Mexico, the Netherlands, Norway, Peru, the Philippines, Singapore, Slovenia, Switzerland, Thailand, Britain and the United States.
By next week, information about another eight countries is expected to be added. Those countries are Croatia, France, Hungary, Japan, Poland, South Africa, Sweden and Turkey.
Another eight countries have subscribed to the data standard but are not ready to go online. Those are Austria, Australia, Belgium, Chile, Columbia, Iceland, Israel, and Lithuania.
The special standard is being phased in over two years. countries agreed to meet the standards by Dec. 31, 1998.
Discussions are continuing with other countries that have not yet agreed to subscribe, including Germany, said John McLenaghan, director of the IMF statistics department.
IMF officials said the site could eventually include direct links to countries' data or other kinds of information.
""We're starting something which, while it has a very specific content and frame at the present time, has potential for going in directions that none of us perhaps quite see at the present time,"" Boorman said.
",0
"The Clinton administration has crafted a plan to reform what many call outdated U.S. banking laws and will begin making its positions known over the next few weeks, industry officials said Monday.
The administration will formally unveil its plan when Treasury Secretary Robert Rubin testifies at a House Banking Committee hearing June 3, but details of the plan are expected to emerge as early as this week, the officials said.
Under Secretary John Hawke, a leading architect of the administration plan, is slated to speak here on Wednesday. In his speech, Hawke may indicate the administration's stand on mixing banking and commerce, lobbyists said.
""Mr. Hawke certainly won't do anything to upstage Rubin,"" one lobbyist in contact with the administration noted. ""But we will hear generally where they are on some of these topics.""
While most in Congress and the finance industry agree that the Depression-era barriers separating banking from securities and insurance should be torn down, there is little consensus about going farther and allowing banks to combine with securities and other firms.
The administration's position has evolved over the past several months. A task force on financial reform headed by Hawke initially recommended eliminating all barriers.
But the specter of Citicorp or Chase Manhattan merging with General Motors Corp. or Microsoft Corp. drew strong protests from House Banking Committee Chairman Jim Leach of Iowa, as well as prominent labor and consumer groups.
And during the spring, several Democratic senators, led by Paul Sarbanes of Maryland, wrote to Rubin to register their opposition to mixing banking and commerce.
Bowing somewhat to the criticism, the administration is now said to favor allowing limited combinations. Financial firms would be limited to a ""basket"" of non-financial activity, expressed as a percentage of total revenue or capital, some lobbyists said.
But the basket could be further limited by prohibiting combinations of the largest financial and non-financial firms. For example, one approach would be to bar the 1,000 biggest commercial firms from owning or being owned by banks.
Another difficult issue concerns regulating disparate financial businesses within a diversified firm.
Almost everyone favors ""functional regulation,"" meaning that each activity of a firm would be regulated by the appropriate regulator. The Securities and Exchange Commission would regulate securities activities while state insurance regulators would oversee insurance sales, for example.
But debate continues about the level of federal intrusion in insurance regulation as well as the need for a top-level regulator to oversee entire firms.
While some favor setting the Federal Reserve at the top of the heap, the administration is expected to back a committee approach. The committee would be composed of representatives of the various functional regulators.
",0
"There will be many more places to hang your hat in cyberspace soon, thanks to a plan adopted by the Internet Society and a host of other groups, the society announced Tuesday.
The group, which helps develop and coordinate Internet standards, said the plan would provide seven new top-level domains, the last three letters at the end of every electronic mail or Web site address.
Computer maker Digital Equipment Corp., telecommunications company MCI Communications Corp. and UUNET Technologies Inc., a unit of Worldcom Inc., endorsed the plan, first unveiled in February, the society said.
The plan also has been endorsed by the Internet Assigned Numbers Authority, the central coordinator of Internet addresses and other standards operating under a charter from the society and the Federal Network Council.
The International Telecommunications Union, World Intellectual Property Organisation and International Trademark Association backed the plan as well, the society said.
Under the plan, new domain names such as ""firm,"" ""arts,"" and ""web"" will be added to the existing top-level domains such as ""com,"" ""net,"" and ""org"" starting in the third quarter of 1997, the society said.
The plan establishes an arbitration and mediation procedure for resolving disputes over names, such as when a trademarked name is used in an Internet address.
Last year, for example, toymaker Hasbro Inc. won a lawsuit to regain control of the address ""candyland.com,"" which was being used for an adult Web site with nude photographs. But more complex disputes arise when both parties may have a legitimate claim to an address name.
""Responsible self-governance is the key factor in assuring that the Internet will reach its fullest potential,"" Internet Society President Donald Heath said.
Although other groups have tried to establish alternate domain names, they have not succeeded in persuading the vast majority of Internet service providers to add their new names to the computers that route information across the network.
The Internet Society plan met the needs of major providers.
""The Internet is growing up rapidly and it is vital that the processes, procedures and policies that define its adminstration be sound, stable and sustainable in an international setting,"" MCI Senior Vice President Vincent Cerf said.
MCI is a top operator of the Internet's backbone network.
Currently, one company, Network Solutions Inc., registers addresses under most existing top-level domains under a contract with the National Science Foundation. Under the plan, up to 28 new registration agents will be chosen in a process overseen by the Big Six accounting firm Arthur Andersen.
But Network Solutions Senior Vice President Don Telage said having so many registrars would create chaos on the Net.
""This plan risks the stability of the Internet,"" he said.
The current system functions ""pretty well"" without international arbitration procedures, Telage said, noting his company has registered 1.2 million addresses and been sued only 26 times.
Herndon, Va.-based Network Solutions will come out with its own plan soon for reforming the domain name registration system, Telage added.
While Network Solutions charges $100 for a two-year registration, the new firms will be free to compete on price. All names will be maintained in a central, shared database.
Once Network Solution's contract with the National Science Foundation expires, the top-level domains it registers will be opened to all the other registry agents.
A broad range of Internet companies and organisations will gather in Geneva at the end of April to add their formal endorsements on a memorandum of understanding, Heath said.
",0
"The number of banks charging non-customers for using their automated teller machines doubled over the past six months, a consumer watchdog group said Tuesday.
About 45 percent of ATMs added the controversial surcharge, on top of the fee most consumers already pay their own banks for using another bank's machine, up from 23 percent in October, according to a survey by U.S. Public Interest Research Group.
The non-profit consumer advocacy group also found that the average fee had risen 20 percent to $1.15 from 96 cents.
""Banks aren't earning money the old-fashioned way. Instead, they're gouging consumers,"" Edmund Mierzwinski, programme director for the group, told a press conference.
Two states, Connecticut and Iowa, have banned the practice of charging non-customers and 12 other states, along with the federal government, are considering similar legislation.
Mierzwinski endorsed those efforts and said consumers should avoid using machines that impose a surcharge.
The rise in fees followed a decision one year ago by the two largest ATM networks, Visa's Plus and Mastercard's Cirrus, to lift a prohibition on surcharges.
Banks defended the practice and said the additional fees helped pay for ATMs in new locations.
""The marketplace should decide the prices for ATMs, not the government,"" the American Bankers Association said in a statement. ""Price controls will only inhibit innovation and put a halt to future ATM growth.""
Banks added almost 17,000 new ATMs last year, a 13 percent increase, according to a survey by the publication Bank Network News. With surcharges now permitted, ""ATM growth is accelerating,"" editor Don Davis said. ""It's a better business to be in, so more people are getting in.""
Big banks were more likely than smaller ones to impose a surcharge, according to the survey. Among the 300 largest banks, 53 percent of ATMs had a fee while only 40 percent of smaller bank ATMs and 6 percent of credit union ATMs charged a fee.
That could raise antitrust law implications if large banks banded together to impose fees and drive smaller competitors out of business, Mierzwinski charged. ""Not only are big banks using their monopoly muscle to punish consumers with higer fees, but their strategy is to use the surcharge to hurt small banks and credit unions as well,"" he said.
Customers of small banks, which have fewer of their own ATMs, would likely have to pay a surcharge more often.
Banks say free-market competition is functioning properly. ""Competitions is already keeping ATM pricing in check,"" the ABA said.
The consumer group said it surveyed 860 ATMs chosen at random in 27 states and the District of Columbia. The highest rates of surcharging were in the South, with 93 percent of Texas ATMs imposing a surcharge, 95 percent in Georgia, and 88 percent in Viginia and North Carolina, the group said.
",0
"Treasury Secretary Robert Rubin, outlining a plan to overhaul Depression-era laws governing the U.S. financial sector, said Wednesday the Clinton administration favored allowing banks to enter the securities and insurance fields.
""The old lines that separated insurance, securities and banking industries have increasingly blurred as new financial services and products have appeared,"" Rubin said in a speech here.
The highly anticipated administration proposal, originally expected in March, takes its place with several bills already introduced in Congress. ""We look forward to working with Congress on this important initiative,"" Rubin said.
Increased competition in financial services should benefit consumers, generating savings of up to $15 billion a year, Rubin said.
The new proposal did not take a firm position on the controversial question of allowing banks to combine with non-financial, commercial firms.
""Because of the nature of the issues and the complete lack of consensus, we think the issue needs to be further debated by Congress before settling on a final approach,"" Rubin said.
Some lawmakers, along with smaller banks and consumer groups, adamantly oppose allowing banks to combine with commercial firms. But insurance companies and securities firms say they are already intertwined with non-financial interests and could not compete with banks if such combinations were not permitted.
Rubin outlined two possible approaches. Under one approach, some mixing would be permitted but limited and with the 1,000 largest non-financial firms excluded.
Under a second approach, no mixing would be allowed with banks but, as currently permitted, thrifts would be allowed to combine with  commercial firms.
If banks are allowed to mix with commercial firms, the reforms could take effect two years after enactment, Rubin said. If mixing is not allowed, the reforms could take effect in nine months.
The Federal Reserve should continue to oversee bank holding companies, while specific activities would be overseen by specific regulators such as the Securities and Exchange Commission and state insurance regulators.
Banks would be allowed to underwrite municipal revenue bonds. An exemption for banks in the federal mutual fund law, the Investment Company Act, would be narrowed.
",0
"The U.S. government is scrambling to update thousands of computer systems and software programmes that might otherwise see Jan. 1, 2000, as ""00"" and think they are operating in 1900.
""We are confident that all of the major systems will be fixed,"" said Sally Katzen, who is coordinating much of the repair effort from her post as administrator of the Office of Information and Regulatory Affairs in the Office of Management and Budget.
""That is what we are setting out to do and that is what we will do,"" she pledged in an interview.
Legislators in Congress have also taken an interest in the subject and prodded agencies into action. Most are well aware of the problem, congressional staff say, although a few slackers, including the air traffic control system, are raising concerns.
""Congress is sounding the alarm and will keep sounding it until this problem is solved,"" Representative Steve Horn said in an interview.
Horn, chairman of the Government Reform Committee's Management, Information and Technology subcommittee, has taken testimony from a variety of government and private-sector experts on the year 2000 problem.
""I have learned that the real challenge it poses is to management,"" Horn said. ""Software experts are capable of fixing the problem, but can management understand what is at stake, make it a priority, organise a plan and allocate resources so the technical experts can do their job?""
The subcommittee surveyed government agencies about year 2000 awareness last year and responses to an updated survey have just come in. The latest survey found that all agencies are aware of the problem and most are ready to put the needed fixes in place, a congressional staffer said.
Some of the agencies that people are most concerned about, the Defence Department and the Social Security Administration, appear to be in good shape and have extensive plans to fix the problem well before Dec. 31, 1999.
At the Defence Department, ""we are treating it much as we would a computer virus,"" Assistant Secretary of Defence Emmett Paige told Horn's subcommittee.
Although weapons systems are not set to launch automatically by computers, problems could crop up when the weapons interact with command and control systems that are operated by computers, congressional staffers explained.
During the Gulf War, a command and control system that was scheduled to run for 12 hours began shutting down weapon systems it was in contact with after running a few hours past its deadline.
""That would obviously be a disaster, but they're working on it,"" said one staff member.
Social Security is also a primary focus of concern, but for more political reasons. Millions of voters depend on their Social Security checks for meeting basic living expenses. If the checks were delayed or cancelled, Congress would probably be inundated with thousands of complaints.
""They started the earliest but they have a lot to do and still aren't finished,"" a staff member said. ""My sense is that they will be fine.""
One agency of concern, according to congressional staffers, is the Federal Aviation Administration, which operates the country's air traffic control system and inspects commercial airplanes.
""The Department of Transportation is very worrisome,"" one staffer said. ""The FAA is still in the assessment phase. That's the one that's a real concern.""
The agency cannot give an estimate of how many lines of code it has that must be changed or how much that might cost until it completes an assessment expected by the end of May, according to Mary Powers-King, who heads the FAA's information technology effort.
""It's somewhat painful because no new funding has been appropriated and we're having to reprogram to absorb the activity,"" Powers-King said. ""That is a big part of the reason why we started late. We've got that figured out now and we've got to just bite the bullet.""
Overall, recent estimates indicate the federal government will need to spend $2.4 to $2.5 billion to identify and correct year 2000 computer problems, Katzen said. The estimate has risen slightly from about $2.3 billion a few months ago.
""I wouldn't be surprised to see them come another ($100 to $300 million) as we continue through the process of assessment,"" Katzen said. ""But I think that we've got it in just about the right ballpark.""
In a Feb. 7, 1997, report to Congress, the budget office projected that the military needed the largest portion of the money for updates. The Air Force would require $371 million, the Army $218 million, the Navy $90 million and other defence-related areas $291 million.
Other big spenders in the report were the Treasury Department, needing $319 million, and the Veterans Administration, needing $144 million.
",0
"The merger of Bankers Trust New York Corp. and Alex. Brown Inc. sends a clear signal to Congress that the nation's banking laws enacted during the Depression have fallen hopelessly behind market trends.
""It's another example of the kind of progress that is being made in the market,"" said Karen Shaw Petrou, president of the consulting firm ISD/Shaw. ""The industry is modernizing even if Congress is lagging on modernization legislation.""
Legislators have argued for more than a decade about repealing the Glass-Steagall Act of 1933 -- enacted in the wake of the stock market crash of 1929 -- which prohibits banks from offering other financial services like securities or insurance.
The debate is still raging in Congress, but this time around the market may exert more influence. In the last year, federal courts and bank regulators have substantially diminished Glass-Steagall's reach.
""This is the most profound example that Glass-Steagall is no longer on life-support systems; it's dead,"" said Larry LaRocco, a bank industry lobbyist and former congressman. ""Now we need to move on and deal with the other issues.""
In Congress, lawmakers involved in drafting bank reform legislation said they had received the market's message.
""This proposed merger simply underscores the need for timely Congressional action,"" House Banking Committee chairman Jim Leach, R.-Iowa, said.
The ranking Democrat on the Banking Committee, Texas Rep. Henry Gonzalez, said the safety and soundness of the banking system could be jeopardized by ad hoc mergers.
""As it is today, it is only a matter of luck that restructuring deals like this will truly serve the best interests of the market and the people who depend on it,"" Gonzalez said. ""Congress can't afford to do nothing and hope that everything will be all right.""
One of the biggest controversies to be addressed is whether banks should be allowed to combine with non-financial commercial firms, said LaRocco, who is managing director at the American Bankers Association's Securities Association.
Bankers Trust said Sunday it would acquire Baltimore-based Alex. Brown in a stock deal valued at $1.7 billion.
In acquiring Alex. Brown, Bankers Trust was taking advantage of a move by the Federal Reserve last December to more than double the amount of revenue a bank securities subsidiary could earn without running afoul of Glass-Steagall Act.
Bankers Trust Chief Executive Officer Frank Newman told reporters Monday that after the acquisition securities activity would constitute about 20 percent of revenues on a pro forma, or estimated, basis. That would have exceeded the previous cap of 10 percent but is permissable under the revised 25 percent cap.
Fed officials declined to comment on the merger.
The merger also benefited from Fed actions to eliminate previously required barriers, known as firewalls, separating a bank from its securities subsidiary.
Removing the firewalls allowed banks to cut costs by eliminating duplication between the two activities while allowing additional benefits from the combination.
The relaxation of firewalls has drawn some criticism from Congress, where Sen. Lauch Faircloth, chairman of the Senate Banking Committee's Financial Institutions subcommittee, held a hearing questioning the move.
But the North Carolina Republican now seems satisfied with most of what the Fed has done or proposed. ""We're going to entrust to the Fed that they'll continue to do the prudent thing,"" Faircloth's legislative director James Hyland said.
Faircloth's remaining concerns center on two of the 28 firewall reforms proposed by the Fed in January, allowing a bank to buy investments underwritten by its securities firm for its own trust accounts and lending money to an investor to purchase underwritten securities, Hyland said.
",0
"U.S. Senators on Tuesday sharply criticized a new Securities and Exchange Commission rule forcing companies to disclose their use of derivatives.
Both the SEC and the Financial Accounting Standards Board have issued proposals to make companies disclose more about derivatives use following some high-profile losses on the complex instruments in 1994.  
Derivatives, financial instruments such as options and futures whose value is based on an underlying stock or commodity price, were involved in the bankruptcy of Orange County, Calif., and losses exceeding $100 million at Procter & Gamble Co.
The SEC adopted its rules last month, while the FASB is still working on its proposal.
On Capitol Hill on Tuesday, senators took aim at both approaches, charging that the added expenses and complications would discourage companies from properly using derivatives to reduce risk.  
""One of my chief concerns when I came to the Senate in 1993 was whether we had too many unnecessary rules and regulations,"" North Carolina Republican Sen. Lauch Faircloth said at a hearing of the Senate Banking Committee's securities subcommittee. ""I am concerned this may be the case with the SEC's new rule.""
""At this juncture, I don't agree with the direction we're heading in,"" Faircloth added.
FASB is a private organization that makes accounting standards, but the SEC must approve its rules to make them binding on public companies.  
Senators questioned whether the the recent rule proposals adequately addressed the 1994 problems. While the rules focus on derivatives, the 1994 situations were caused not by the instruments but by the people in charge of those investments, Sen. Christopher Dodd said.
""I think what most of us concluded was the problem there was not the instrument but the human element,"" the Connecticut Democrat said.
And neither rule would affect Orange County, a municipal government not bound by most FASB or SEC rules, the legislators observed.  
""Interestingly enough, the regulation, as almost always happens, doesn't even apply to Orange County -- it applies to corporate America,"" said Sen. Phil Gramm, who presided over the hearing.
Gramm opened the hearing expressing his doubts about the rules. After hearing from industry representatives and SEC commissioner Steven Wallman, the Texas Republican said he was still worried.
""I'm not converted,"" Gramm said. ""In fact, every concern I had at the beginning, I have even more now.""  
Gramm was a prominent opponent of the accounting board in an earlier dispute over proposed rules on executive stock options.
In an unprecedented vote, the Senate passed a non-binding resolution in 1994 urging FASB to abandon the plan that would have required companies to reduce earnings to account for the value of stock options granted to executives. A few months after the vote, the board quashed the proposal.
That was the only previous time he took on the FASB, Gramm said after Tuesday's hearing. ""I just never could figure out where they were coming from,"" he said.  
The Republican Congress has since passed a law allowing legislators to overturn agency rules directly, Gramm said. ""I think we have the power in Congress to override the regulation if we decided to,"" he said, but added ""I haven't made that decision.""
Commissioner Wallman defended the new rules and said the SEC had made several changes from an earlier proposal to address industry complaints.
He denied the rules would discourage companies from properly using derivatives to manage and reduce business risk.
""Quite the opposite, the better investors understand the potential impact of market-sensitive instruments on their investments, the more likely it is that management will be able to engage in appropriate risk management,"" Wallman said.
--Aaron Pressman ((202-898-8312))
",0
"A broad coalition of corporations went to Capitol Hill on Tuesday to lobby in favor of relaxed export restrictions on computer encoding technology.
On Thursday, the Senate Commerce Committee will mark-up the Promotion of Commerce Online in the Digital Era Act of 1996 known as Pro-CODE, a bill that would abolish most export restrictions.
Under a Cold War-era munitions statute, only weak encryption programs created in the United States can be sold abroad, although domestic use of encryption is not regulated.
Companies in the high-tech industry argued they are losing business to foreign competitors who are not bound by U.S. export restrictions. And multinational companies in other industries said the the restrictions hamper their ability to conduct business overseas.
""We are at a competitive disadvantage vis-a-vis our foreign competitors and that is an unacceptable situation,"" Gregory Garcia, director of international trade affairs for the American Electronics Association, said at a press briefing here.
The Pro-Code bill, sponsored by Republican Senator Conrad Burns of Montana, Democratic Senator Pat Leahy of Vermont and others, has bipartisan support in the Commerce Committee.
""We support the Burns bill because it does enable companies to utilize encryption technology securely which is vital if we're going to compete in a very tough global marketplace,"" Victor Parra, president of the Electronic Messaging Association, said.
The association represents companies that rely on electronic communications, including Exxon Corp, Citicorp and Boeing Co, Parra said.
Encryption programs use mathematical formulas to scramble information and render it unreadable without a password or software ""key.""
Earlier this week, Senator James Exon, the Nebraska Democrat, came out against the current bill in a letter to Commerce Committee chairman Sen Larry Pressler. Exon will likely offer amendments at the mark-up, an aide to the senator said.
The Clinton administration opposes the Pro-CODE bill, arguing that export of encryption technology would hamper law enforcement and intelligence gathering operatiobns.
The House Judiciary Committee will hold a hearing on a similiar measure on September 25.
--202-898-8312
",0
"Four publicly traded startup companies formed to help computer users surf the World Wide Web are now fighting it out in a battle that promises to circle the world at high speed.
Since the flurry of their initial public offerings this spring, all four -- Yahoo! Inc., Excite Inc., Infoseek and Lycos Inc. -- have been busy trying to establish a beachhead on the Internet.
At issue is a solid shot at establishing leading brands for years to come for serving as the gateway to help people weave their way through the Internet's extensive, but still unruly, World Wide Web.
The stakes are high for establishing navigation hubs which could be ""the ultimate power brokers"" at the center of major traffic flows on the Internet, said John McCarthy, director of research for interactive technology strategies at Forrester Research.
He also said the fledgling companies need to offer more than the initial scattershot Web search approach he said was akin to ""a drive-by shooting.""
""Users are getting more sophisticated and they need more than just pointers,"" he said.
McCarthy and others involved in the industry expect those who are successful in the next 12 to 18 months to attract even greater attention, and perhaps even acquisition offers, from the industry's largest players.
""Oracle, Microsoft and Netscape are not going to stand by and watch,"" McCarthy said.
All four of the newly public firms are developing and improving personal services by providing a sort of custom electronic front page on the Internet and most are looking overseas as well as to domestic deals to expand their reach.
For its part, Yahoo! -- started two years ago by two Stanford University graduate students -- has focused sharply on developing and extending its brand name, developing sites for three U.S. metropolitan areas and in Japan. Yahoo! also expects to launch country services for Britain, Germany and France in the next few weeks.
At an industry conference Monday, Yahoo Chief Executive Tim Koogle said the company was seeking to build on its lead in market share and advertising by spreading Yahoo's brand internationally and in a variety of services.
""You come to Yahoo! to find information and consume it,"" he said. ""The brand is important. Technology is important, too, but people don't want to have to care about that.""
While customers are most interested in ease of use, the companies have their eyes on the potentially billions of dollars in advertising that may find a home on the Internet.
Infoseek President Robin Johnson, whose company has developed speedy new Ultra search technology, said there was upwards pressure on advertising rates, currently at around $21 per thousand views.
Excite President George Bell, whose company launched a service this week using technology that updates a personalized service based on an individual's usage patterns, said ultra-customized services could one day produce highly-targeted ad rates of up to $200 per thousand views.
Koogle said a projected $2.5 billion in Web advertising by the year 2000 -- some 1 percent to 2 percent of estimated total advertising spending, was not unreasonable.
How much of that will flow to navigation companies and their ability to continue to attract the eyes of computer users still remains a critical question.
Koogle said a 20 percent to 30 percent share for the sector's ability to provide ""a share of eyeballs"" may be possible.
",41
"Intel Corp., the world's biggest maker of computer chips, said Tuesday its workers received about $820 million in cash bonuses, profit sharing and retirement pay for the company's record year in 1996.
""The average employee received a minimum of about 33 percent payout over their base salary for the year -- about four months of extra income,"" Intel Chief Operating Officer Craig Barrett told reporters in a conference call.
For an entry-level hourly worker earing $25,000 a year, the combined package of added compensation and benefits for last year amounts to roughly $8,000 extra, Intel said.
""We think it's also been a phenomenal benefit to our shareholders by motivating our employees to do the best possible job they can for our shareholders and our customers,"" said Barrett, who will become Intel's president this spring.
Intel said the $820 million in 1996 cash profit-sharing and retirement contributions exceeded the company's total 1981 revenues and was roughly equal to its 1991 net income.
Profits at the Santa Clara-based semiconductor company, which supplies the microprocessors used in four out of every five personal computers shipped, last year soared to $5.2 billion as revenues hit $20.8 billion.
Barrett said he did not begrudge employees any of the extra benefits from contributing to record results, and the company now plans to make all its employees eligible for stock options beginning with its next plan, which starts in April.
""This outstanding year would not have been possible without the remarkable efforts of Intel employees around the world,"" said Barrett, heir apparent to Intel CEO Andy Grove.
Intel ended 1996 with a workforce of around 48,500.
Separately, Intel Chief Financial Officer Andy Bryant told an investment conference in New York City that Intel remained on track in the first quarter to meet its financial targets, as personal computer unit sales continue to grow.
The stock of Intel closed up 12.5 cents at $151.75 on the Nasdaq market, where it was third most heavily-traded.
Barrett said the company last year paid out $214 million, or the equivalent of 26.9 days' salary for each Intel employee, under the Employee Cash Bonus Programme. All employees receive the cash profit-sharing in six-month instalments.
In 1996, the company also extended its Employee Bonus profitability-based programme to all employees. The plan, based on growth in Intel earnings and achievement of an employee's business group goals, paid out a total of $360 million.
A one-time bonus marking Intel's record-breaking year paid $1,000 to each U.S. employee and a locally adjusted figure to each non-U.S. employee, or a total of $45 million.
Intel said that for the ninth consecutive year it contributed the maximum allowed by law to its employee retirement programme, or 12.5 percent of employees' pay -- a figure which totalled about $200 million.
Intel has sought to build one of the corporate world's most innovative compensation and benefits packages as a way of attracting top employees and to reward them for contributing to the company's long-term growth and profitability.
Intel, whose shares have vaulted 180 percent in the past year despite moribund results at many rival semiconductor companies, said it was one of only a small number of companies to have instituted an across-the-board options plan.
Even the lowest-level hourly workers will receive options to buy a minimum of 50 shares in a five-year plan in which the employee gains one-fifth of the allotment each year.
Barrett said Intel also spends roughly 6 percent to 7 percent of its payroll, or around $150 million, on employee training each year to help employees advance in their careers.
Barrett said Intel's generous compensation plan and the hardships at other companies resulted in lower jobs turnover last year. He declined to specify the exact turnover rate, but said ""We're in the relatively low single-digit range.""
",41
"Netscape Communications Corp. on Wednesday raised the ante in the Internet software wars, announcing a price increase effective April 1 as it prepares to release new products this spring.
Netscape also introduced a five-level support program, beginning next month, which allows customers to pick the level of service they are willing to pay for.
The price of Communicator, the integrated communications package which includes Netscape's Navigator browser, will rise to $59 from $49, the Mountain View, Calif.-based company said. Its enterprise server software, used on the server computers that run networks, will cost $1,295, up from $995.
Under the new pricing, Netscape will charge an average 10 percent to 15 percent more for service, it said.
But, by delaying the price increases until April 1, Netscape has made a pre-release version of Communicator a more attractive buy and positioned itself for higher sales this quarter, executives said.
People who pay now for the software, which is available in a preview version, will be able to get the final version for free when it becomes available in the next quarter.
Michael Homer, Netscape's vice president of marketing, said the new prices still offer a better deal than rival products from Microsoft Corp. and the Lotus Development Corp. unit of International Business Machines Corp..
Lotus President Jeff Papows quickly challenged that and accused Netscape executives of ""childish behavior"" in making pricing comparisons that Papows said were misleading.
""There's very little difference in the price points, actually,"" Papows said after making a presentation to a Goldman Sachs conference at which Netscape's vice president of engineering, Eric Hahn, disclosed the price increases.
""Our servers are much cheaper to acquire,"" he said, noting that Lotus Domino server software is priced at $2,995 compared with Netscape's SuiteSpot 3.0, which allows customers to chose five of its nine server products for $3,995, or $4,995 after April 1.
A Microsoft executive also disputed Netscape's pricing claim.
""Our browser and our server are still free, so we've got to be less expensive,"" said Mike Nash, a marketing director in the company's personal and business systems group.
Microsoft's Internet Explorer browser is free for all platforms, and its Internet Information Service is included as a feature of the Windows NT Server operating systems for large networks.
The three companies are competing fiercely in the fast-growing market for electronic mail, scheduling and so-called workgroup software for intranets, the corporate networks that make use of cost-effective Internet technologies.
Netscape stock rose 87.5 cents to $35.625, and Microsoft climbed $1.375 to $99.875, both on the Nasdaq market. IBM rose 12.5 cents to $144.875 on the New York Stock Exchange.
Homer said a configuration for 1,000 users combining Communicator and Netscape's server software only costs $58 per user computer -- just $23 a user for those already using Navigator -- compared to $77 for Lotus.
But Papows contested this, saying the true list price figure would be around $58, or roughly the same.
""They are quoting irrelevent data, doing it deliberately, and posting it to their Web site,"" he said, adding he recently discussed his concerns with Homer and Netscape Chief Executive Officer James Barksdale.
The Lotus executive added, however, that he expects the market for all players to continue to expand briskly, with Lotus aiming to increase the number of electronic mail users of its software by up to 8.5 million this year to 18 million.
""We're doing enormously well. I suspect they're doing well, too. There's a big market,"" he said, adding Netscape ""ought to be well credited for invigorating the Internet market.""
Homer said Netscape's price advantage was even greater, according to recent studies by third parties, when the total cost of acquiring, installing and using its systems was taken into account, including training and other factors.
",41
"The legal barrage by Netscape Communications Corp. against arch-rival Microsoft Corp. may end up dampening investors' enthusiasm for both stocks, analysts said on Wednesday.
Gary Reback, Netscape's outside counsel at Wilson Sonsini Goodrich and Rosati, has urged the Department of Justice to take immediate action against Microsoft for alleged violations of its 1994 consent decree and antitrust laws.
Separately, Tim O'Reilly, head of Internet publisher O'Reilly & Associates, said he was recently approached by a Justice Department official asking about Microsoft's behaviour, perhaps indicating fresh interest in the matter.
Microsoft, which has weathered legal battles successfully in the past, has rebuffed the allegations, saying Netscape's claims are ""full of wild and unsubstantiated statements.""
The software giant went on the offensive Wednesday, accusing Netscape of failing to live up to its own promises that it would support open Internet standards.
""Netscape should take a good look at themselves in the mirror,"" said Brad Chase, vice president or marketing for Microsoft's Internet division, noting Netscape had blocked users of Microsoft's browser from parts of the Netscape site.
Nevertheless, analysts noted the market has a distaste for legal uncertainty, and investors were likely to start factoring in at least some degree of risk that the battle could escalate into a full-fledged government investigation or lawsuit.
""The legal risk is starting to get heightened on this,"" said Montgomery Securities analyst David Readerman, who covered Microsoft during Apple Computer Inc.'s failed five-year copyright lawsuit against the software giant.
Microsoft also was probed by the Federal Trade Commission and, subsequently, the Justice Department for five years until its July 1994 signing of a consent decree agreeing to alter the way it licenses operating system software.
That accord was viewed by some of its software rivals as having been lenient, and Netscape's lawyer asked the Justice Department in a letter released Tuesday to examine whether Microsoft was now using its control over computer operating systems improperly.
In both cases, analysts noted that the hint of further legal difficulties could dampen further advances in the companies' stocks as the market seeks to sort out the business impact, if any.
""We've been there with the Apple vs Microsoft and we've been there with the (Justice Department) and the experience is that these stocks tend to stall as the market tries to figure out what the risk is all about,"" said Readerman.
Microsoft stock closed up 12.5 cents at $123.50, while Netscape was unchanged at $37.25, both on Nasdaq.
Lawyers in Washington, D.C., said they doubt the Justice Department would find Microsoft had acted improperly, based on the charges leveled against the company by Netscape.
Mountain View, Calif.-based Netscape alleged through its letter to the DOJ that Microsoft had offered ""clandestine side payments"" and discounts on its operating system, and other inducements, to promote use of its own Internet browser.
The lawyers contacted by Reuters noted that while Microsoft dominates the PC operating system market with around a 90 percent share, Netscape has an estimated 80 percent share of the market for Internet browser software.
""In the browser category, Netscape is the elephant and Microsoft is the mouse,"" said Robert Skitol of Drinker Biddle & Reath. ""It's a bit of a stretch to call what Microsoft is described as doing a violation of the consent decree or a violation of antitrust laws.""
",41
"General Magic Inc. Monday demonstrated components of a new service that will let people use phones, pagers and the Internet itself to keep track of schedules, electronic mail, voice mail and telephone call processing.
The service, code-named Serengeti will allow mobile workers to check and respond to electronic mail and scheduling details from the road using voice commands.
The system may compete with voicemail providers like Octel Communications Inc. and Siemens' Rolm systems, as well as electronic mail readers which small startups are developing, but it appears to be the first which integrates all these components into one service.
For example, users can check their schedules by computer or cellular telephone, while also checking voice mail and electronic mail, and using everyday English to communicate with with the service.
The service will be accessible from most devices, including desktop PCs as well as via telephones and pagers.
General Magic Chairman Steve Markman said in an interview at the Upside/David Coursey Internet Showcase here that a pilot version of the service will enter testing in May and it could generate revenues later in 1997.
""Our focus is to make sure we've got the service right,"" said Markman, who unveiled the company's new business plan earlier this year and repeated that General Magic does not expect to make significant revenues from it until mid-1998.
Executives declined to discuss pricing or distribution of the product, but said it would be available to individual mobile workers. Kevin Surace, who headed the Serengeti project, said it would cost less than ""hundreds of dollars.""
General Magic also announced a joint technology accord with Starfish Software, Inc., which was founded in 1994 by technologists including former Borland Inc. head Philippe Kahn to develop products focused on the Internet, wireless communications and computer telephony.
Under the Starfish agreement, the two companies will work together to integrate Starfish's technology based on the Java programming language into General Magic's Serengeti service.
",41
"E*Trade Group Inc President and Chief Executive Christos Cotsakos said the company continues to increase its subscribers by eight to ten percent per month, with some days at higher rates.
We are growing between 8 and 10 percent a month, Cotsakos said in a presentation to investors at Robertson, Stephens & Co's Tech 97 Agenda investment conference.
E*Trade is fresh from its initial public offering in August 1996. The company's stock closed up 2-3/4 at a record closing high of 22-1/8, after reaching an all-time mark of 22-7/8 earlier in the day.
Investors and analysts said a deal with Microsoft Corp in which E*Trade's share trading service will be integrated into Microsoft's online investment service, investor.com, had helped boost the shares.
Like many of the companies presenting here, analysts see strong rationale for continued growth for specific companies like E*Trade as the Internet space expands and draws businesses onto the World Wide Web.
There's a lot of momentum behind them, Robertson Stephens & Co analyst Catherine Baker, who covers Internet service and commerce sectors along with information companies, said of E*Trade.
While the Palo Alto-based electronic brokerage company has been averaging 550 new accounts a day representing about $10 million in assets, Cotsakos said the company has had at least one day when it signed up 1,200 new customers with assets of $22 million.
Cotsakos noted that the company's percentage of total daily retail share trading volume had risen from 1/10 of 1 percent in 1995 to 0.7 percent of daily volume.
E*Trade processes some 7,000 daily transactions over the Internet, which represents approximately half its total volume, with telephone calls making up around a quarter of volume and the rest coming from direct dial modems and from gateways such as America Online.
E*Trade earlier announced it had struck a deal with Microsoft Corp in which customers of Microsoft's Microsoft network MSN and its Microsoft Money product will be able to access E*Trade for trading.
Cotsakos said E*TradeFs customer assets have risen from $800 million two years ago to $3 billion currently, a compound annual growth rate of 208 percent.
He also noted that investors that sign up with E*Trade trade on average around 25 times a year, o roughly six times more than usual investors using a discount broker.
Cotsakos said E*Trade will be adding further news services as well as upgrading its telephone services with voice recognition technology. The company also plans to expand to Japan, Taiwan, Hong Kong and Britain this year.
Cotsakos declined to discuss upcoming financial results. Baker said, however, that she estimates E*Trade's revenue could be $1 to $3 million ahead of projections in its current quarter, or 10-15 percent above expectations.
Baker's estimate for the current, second fiscal quarter had been for the company to report $0.07 a share profit on revenues of $27 million.
Baker said the upside surprise would track with currently strong market trading volumes, adding the company's growth would track well as long as the overall stock market continues to be strong, driving volumes up.
The analyst said the most important strategic move for E*Trade now would now be to add trading of mutual funds.
Nearly 400 companies are due to make presentations at the Robertson Stephens & Co. technology conference in presentations spread over five days this week. ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Sun Microsystems Inc. will Tuesday announce its entry into the supercomputing systems market long dominated by Cray Research, which was acquired by Silicon Graphics Inc. last year.
Sun executives said in interviews ahead of the Tuesday announcement that their new Sun Ultra HPC servers, or computers that manage the flow of data in a network, will offer better price performance than Silicon Graphic's Origin 2000 and International Business Machine Corp.'s RS6000 SP.
Industry analysts said the move could make Sun an aggressive new player in a market that has been changed over the last decade by new massively-parallel computers that use lots of small processors to work simultaneously on different parts of a problem in order to reach a solution more quickly.
""It's revolutionary for them,"" said Dataquest analyst Jerry Sheridan. ""It presents a competitive environment. SGI is a strong competitor in the technical arena.""
Executives at Sun, which bought part of Cray's computing business from Silicon Graphics as part of the Silicon Graphics-Cray deal, said Tuesday's announcement was the first of a series of developments aimed at boosting Sun's share in the high performance computing market from virtually nothing last year.
Sun noted International Data Corp. projects the market for the world's most powerful computers, used for everything from nuclear weapons and environmental modelling to aerospace and automotive design, will hit $5.6 billion by 2000.
""We're leveraging into the markets where we've been traditionally successful -- that is the markets of the technical, engineering and scientific user,"" said Jamie Enns, manager of product marketing at Sun Microsystems Computer Co.
Sun's ultimate objective is to have a stake similar to the estimated 30 percent to 50 percent of the market now held by Silicon Graphics, he said. ""This is a five year programme.""
Enns said the core product is based on the Enterprise Server 3000 to ES 6000 line of products Sun introduced in April 1996 and adds supercomputing features. Sun said the U.S. list price for the systems will range from $43,745 to more than $2.5 million.
",41
"Novell Inc. Tuesday named Eric Schmidt, a prime architect of Sun Microsystems Inc.'s Internet and Java language strategy, as its chairman and chief executive officer.
Schmidt, who will join Novell April 7, will be charged with re-energizing the network software company, which has been involved in a head-to-head battle with software giant Microsoft Corp..
Over the last 18 months, Novell has managed to dispose of software applications WordPerfect and Quattro Pro, which had been acquired by former Novell chief executive officer Ray Noorda in a failed effort take on industry leader Microsoft.
Analysts and industry executives, some of whom were startled by the move, said Schmidt had the energy and intellect to help hone the company's strategy and to draw talented but scarce developers to its ranks.
""A lot of guys want to ride at the front,"" one analyst said of Schmidt's move to the chief executive position.
Schmidt, who joined Sun in 1983 as a manager of software, said the opportunity to run Novell would fulfill ""a lifelong dream"" of heading up a company in the industry.
In recent months, Schmidt has emerged as a main spokesman for development of the Internet and of Sun's effort to promote the Java language, designed to enable software to run on virtually all computer systems.
These skills will be critical at Novell, analysts said, where former Hewlett-Packard Co. Chairman John Young has been serving as chairman since last August when former Novell CEO Robert Frankenberg stepped down, just as the company was gearing up a new Internet focus.
Young will move to the post of vice-chairman.
Chris Le Tocq, an industry analyst at Dataquest, said Schmidt ""will bring the vision"" Novell has been lacking.
Despite facing competitive pressure from Microsoft, Novell still has the No. 1 market share in network operating systems.
Joe Marengi, Novell's president and chief operating officer who was serving as acting CEO since Frankenberg's departure, said Novell currently claims 60 million users worldwide.
""I think it's a very defensible position and, in fact, one that we can grow very rapidly, in my personal view,"" Schmidt said of Novell's market position.
In addition to competing with Microsoft in advanced networking features, Schmidt said the company will work to make sure its software works well on both Microsoft's Windows NT and Unix networking environments.
Schmidt received a degree in electrical engineering from Princeton University and a doctorate in computer science from the University of California at Berkeley. He has worked at Xerox Corp.'s Palo Alto Research Center, at Bell Laboratories and Zilog Inc.
",41
"A senior Clinton administration adviser said Friday electronic commerce over the Internet could become the world's largest trade category within the next decade if it did not become over-regulated.
Ira Magaziner, senior advisor to President Clinton for policy development, said in a keynote speech to an Internet Tax Policy Conference here the Internet must remain a free market for electronic commerce to take off.
""If we get the right kind of environment in place, we can accelerate this growth so that in a five- to 10-year time frame, trade across the Internet will actually be more than any other category of trade,"" he said. ""If we do it wrong, we could spend 30 to 40 years trying to undo bad policy.""
The Clinton administration last month proposed a global electronic commerce framework and put forth a draft policy which proposes making cyberspace a duty-free zone, with no new taxes and minimal governmental regulation.
""One of the reasons we wanted to move quickly is we wanted to pre-empt what we saw as bad policy already being thought about,"" said Magaziner, who said he knows of a dozen countries contemplating slapping duties on the Internet.
Magaziner, who organized the task force on health care which failed in its bid to introduce sweeping health care reforms in Clinton's first presidenctial term, said the White House wanted to be ""completely open"" in its developing its initiative.
The draft document is posted on the Internet at the White House home page (http://whitehouse.gov). The administration is collecting responses and hopes to issue a final version of the policy paper in March, the Clinton adviser said.
Magaziner said intellectual property protection was a key issue, along with fair use, liability and privacy, and he said the government's policy towards encryption, which has been sharply criticized here in Silicon Valley, is still evolving.
""We want to preserve the Internet in its somewhat anarchic form...,"" he said of the White House position. ""The economic potential is tremendous, and what we in government must do is make sure we don't mess it up or interfere.""
",41
"Sun Microsystems Inc. said Monday it will move to build on the momentum behind its Java computer programming language despite overtures by Microsoft Corp. to co-opt Sun's initiative.
The president of Sun's JavaSoft unit, Alan Baratz, said the company will unveil several new initiatives at the second annual JavaOne software developers' conference in San Francisco later this week.
At the same time, some developers were buzzing with expectation that Microsoft on Wednesday may spell out its own plans for Java, including some which may not sit well with other Java licensees.
As the dominant supplier of operating systems for personal computers, Microsoft is among the more critical licensees of Java, which promises to operate across otherwise incompatible computing systems.
Microsoft Chief Executive Officer Bill Gates is due to address a software developers conference in one hall of San Francisco's Moscone Center the same day JavaSoft unveils its latest initiatives in another part of the same convention center.
Microsoft would not comment Monday on its plans, but the showdown follows a months-long tug of war between the Redmond, Wash.-based software giant and Sun's JavaSoft unit.
Earlier this year, Sun teamed up with International Business Machines Corp., Netscape Communications Corp. and Novell Inc. to launch a ""100 percent pure Java"" branding campaign aimed at ensuring Java retains its ability to work on multiple computer systems.
The initiative was designed to keep Microsoft -- or any other licensees -- from appropriating the technology, according to its proponents.
Microsoft, meanwhile, complained Sun had deliberately made a new Java version incompatible with recent releases of Microsoft's Windows.
Two weeks ago, JavaSoft applied to become a standards-setting body which could submit Java and its various upgrades to become standards under the auspices of the International Organization for Standardization.
At the time, a Microsoft executive complained Sun was not surrendering the Java branding and compliance process to the standards board, an action JavaSoft retorted would break with industry practice.
Michael Kwatinetz, the lead analyst in Deutsche Morgan Grenfell's high technology group, said Microsoft's objective is to stay at the forefront of the software development community by continuing to extend its tools into the hot Java arena.
In an interview ahead of JavaOne, which starts Wednesday after a Tuesday gathering of Java licensees, Baratz said Sun was introducing a combination of new products and specifications aimed at the server computers used by large organizations for handling computer networks.
He also said that, as a separate intitiative, Sun will announce sharply scaled-down varieties of Java -- PersonalJava and EmbeddedJava -- which will be able to work on a variety of small devices.
These would bring Java to personal digital assistants such as Apple Computers Inc.'s Newton, copiers and even smart cards, as well as televisions, pagers and cellular phones, changing the definition of what a computer is, according to Javasoft executives.
""The momentum behind Java continues to grow,"" said Baratz, adding the JavaOne show is sold out with more than 9,000 developers registered and an estimated 400,000 developers now seriously using Java worldwide.
",41
"Hewlett-Packard Co. jumped solidly into the Microsoft Windows NT camp on Wednesday, saying it would ""aggressively integrate"" the operating system into its computers and spend tens of millions of dollars on joint strategies.
HP Chairman and CEO Lewis Platt, appearing at a news conference with Microsoft Corp Chairman and CEO Bill Gates, said the companies would work together on a broad range of products and services aimed at reducing computing costs.  
At one time Hewlett-Packard dismissed Windows NT, designed for the servers that run computer networks. Platt said customer demand was behind the decision to embrace it.
""It's all built around input from our customers,"" he said in a news conference at HP's corporate headquarters in Palo Alto.
Support for Windows NT -- only one aspect of the collaboration announced by the companies -- corresponds to HP's plan to develop a new processor with Intel Corp capable of running both NT and Unix software.  
HP's warming to Microsoft could cause some discomfort to the company's partners, especially Netscape Communications Corp, Microsoft's Internet arch-rival. HP forged an alliance last May with Netscape to help companies build Internet-based internal networks on Unix and NT systems, analysts said.
""Our strategic direction is to provide choices and interoperability between choices,"" said one HP executive, called on by Platt and other HP executives to answer a question on whether HP will continue to support Novell Inc.'s directory services, as announced last week.  
HP executives have stressed that the company wants to stay clear of the battles raging between Microsoft and Silicon Valley companies such as Sun Microsystems Inc.
But David Tremblay, an analyst at Computer Intelligence/ Infocorp, said the next year may bring confusion for HP's customers if, for example, its neutrality prevents HP from making firm recommendations on software suppliers.
The deal also strikes a blow for HP rival Digital Equipment Corp, which has worked with Microsoft on Windows NT for five years. Digital's speedy Alpha chip is the only 64-bit microprocessor that currently runs NT.  
""The strength of HP is really quite impressive,"" Gates said in response to a question about how the deal may affect Microsoft's alliance with Digital. ""We've got a lot of breadth here.""
The demand for services and support for NT now exceeds what has been available on the market before the deal with HP, which has a wide array of reseller partners, Gates said.
""Digital's jumping up and down about NT, but they're not exactly blowing the doors off of it,"" one analyst said.  
The growth of Windows NT is building steam, according to Gates, who showed a slide in which sales of Windows NT Server licenses were approaching 250,000 in the fourth quarter of 1996, up from around 150,000 in the first quarter last year. ""HP is pragmatic, if nothing else,"" said Scott Miller, an analyst at Dataquest. But he cautioned that HP faced a challenge as it drew more technologgy from partners such as Intel and Microsoft, making it more difficult for the company to ""own the customer"" as closely as in the past.
((sam.perry@reuters.com, Palo Alto Bureau +415 846 5400))
",41
"Netcom On-Line Communications, Inc. on Monday unveiled a new multi-tier pricing policy, with price points ranging from $24.95 to thousands of dollars a month.
Netcom said it would ""grandfather"", or maintain current customers, at the present $19.95 flat rate, but will introduce a ""fair usage"" policy which will over time limit these users from hogging bandwidth at peak hours, for example.  
Netcom Chairman and CEO David Garrison told Reuters in an interview the company continues to grow very rapidly, and expects the pricing plan to boost revenues.
""Our company continues to grow very rapidly,"" he said ahead of the announcement. ""We think that (the new pricing plan) will result in increased revenues above where we would have gotten.""
""We were operating profit positive in the fourth quarter in the United States operations and we would expect to continue that way,"" he said.  
But he added that ""We don't expect to see the full impact of this until the third and fourth quarter of this year.""
The $24.95 a month Netcomplete Advantage service provides 28.8 kilobits per second access along with an extra mailbox, blocking software, financial and anti-virus software.
Netcomplete Advantage Pro adds premium support and access to online research libraries for $29.95 a month.
Both services have a $25 set-up fee.  
Among its business services, which Garrison said could range up to monthly fees in the thousands of dollars, are new Web hosting services priced at $125 a month with a one-time $150 set-up fee.
Garrison said the company was seeking to show ""leadership in a business that's sort of gone haywire.""
He said the pricing plan was developed after collating responses from more than 25,000 subscribers. ""It was important that somebody lead the industry away from this craziness,"" he added.
The largest U.S. consumer online service, America Online Inc, raised a rage of protest and lawsuits after it announced a $19.95 a month flat fee Internet access plan and couldn't keep up with demand for access.
Garrison said the company's research provided an answer of ""a resounding no"" to whether it could provide a ""successful business that is $19.95, has unlimited access, unlimited usage and quality service.""
Garrison said the Netcom plan is geared towards active Internet users who frequently combine the Internet usage with their business day and require access from work, home and on the road. ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Intuit Inc. said Monday it would swap its Intuit Services Corp. bill payment and bank services unit to CheckFree Corp. for $260 million worth of CheckFree stock.
Mountain View, Calif.-based Intuit, which pioneered personal and small business financial software, also launched a far-reaching initiative to accelerate adpotion of electronic financial data exchange and commmunications over the Internet.
Wall Street applauded Intuit's decision to trade its private network bank services business, which it acquired in 1994, for 12.6 million shares of CheckFree common stock. On the Nasdaq, Intuit rose $2.125 to $32.25 while Columbus, Ohio-based CheckFree gained $3.19 to $21.25.
Lehman Brothers analyst Michael Stanek said he believed Intuit had received ""an excellent price"" from CheckFree.
""By selling Intuit Services Corp., we believe that investors will breathe a sigh of relief as Intuit has decided to exit the transaction processing business and will begin to focus efforts on its front-end software products,"" he said.
Scott Cook, Intuit's co-founder and chairman, said in a statement that the original investment two years ago had enabled Intuit to provide a secure private network connection between customers and financial service providers.
But now, he said, rapid advances in the safety and reliability of the Internet have made it the central focus of Intuit's strategy.
""Our goal is to speed the adoption of electronic connections between individuals, small businesses and financial service providers,"" he said.
Intuit produces TurboTax, the best-selling tax preparation software; and QuickBooks, the most popular small business accounting software. Its Quicken program is the leading personal finance software.
Intuit, which has 12 million personal finance customers -- both individuals and small businesses -- said it would facilitate the growth of links across the Internet by coordinating an industry framework for electronic data exchange dubbed OpenExchange.
Intuit said it planned to put Internet connections into place for online investment next spring, with online banking and bill payment activities in the fall of next year.
CheckFree said its acquisition would expand its home banking and bill payment services to more than 180 financial institutions and more than 1 million customers.
CheckFree Chairman Pete Kight said he expected all major banking institutions to begin establishing electronic transaction capabilities within the next 12 months.
CheckFree said its open set-up enables financial institutions to offer home banking and payment using personal computers, touch-tone phones and the Internet.
The swap occurs as use of the Internet for online financial transactions, rather than private networks, shows signs of taking off after a period of modest penetration.
David Weisman, an analyst with Cambridge, Mass.-based consulting firm Forrester Research Inc., said the number of U.S. households doing online banking is expected to grow to 9.1 million by the year 2001 from 1.1 million today.
Intuit Service accounted for less than 3 percent of Intuit's revenues in fiscal 1996. Intuit said it was selling about 2 million CheckFree shares acquired in the transaction, which Kight said brings its holdings below 20 percent.
Separately, Intuit said its losses widened to $22 million, or 48 cents a share, in its fourth fiscal quarter ended July 31 from $1.4 million, or 3 cents a share, a year earlier. Revenues rose 26 percent to $91.1 million from $72.4 million.
The results include an $8 million acquisition charge, higher spending in customer service and technical support, and bill payment processing startup expenses at Intuit Services.
Cook said Intuit must invest in research and development and marketing to address the Internet, which is growing faster than first anticipated, and he expected lower revenue growth and a modest increase in operating margins in fiscal 1997.
""We will continue to run our business focusing on long-term results, not quarterly results,"" he said.
",41
"Novell Inc. Tuesday named Eric Schmidt, a prime architect of Sun Microsystems Inc.'s Internet and Java language strategy, as its chairman and chief executive officer.
Schmidt, who will join Novell April 7, will be charged with re-energising the network software company, which has been involved in a head-to-head battle with software giant Microsoft Corp..
Over the last 18 months, Novell has managed to dispose of software applications WordPerfect and Quattro Pro, which had been acquired by former Novell chief executive officer Ray Noorda in a failed effort take on industry leader Microsoft.
Analysts and industry executives, some of whom were startled by the move, said Schmidt had the energy and intellect to help hone the company's strategy and to draw talented but scarce developers to its ranks.
""A lot of guys want to ride at the front,"" one analyst said of Schmidt's move to the chief executive position.
Schmidt, who joined Sun in 1983 as a manager of software, said the opportunity to run Novell would fulfil ""a lifelong dream"" of heading up a company in the industry.
In recent months, Schmidt has emerged as a main spokesman for development of the Internet and of Sun's effort to promote the Java language, designed to enable software to run on virtually all computer systems.
These skills will be critical at Novell, analysts said, where former Hewlett-Packard Co. Chairman John Young has been serving as chairman since last August when former Novell CEO Robert Frankenberg stepped down, just as the company was gearing up a new Internet focus.
Young will move to the post of vice-chairman.
Chris Le Tocq, an industry analyst at Dataquest, said Schmidt ""will bring the vision"" Novell has been lacking.
Despite facing competitive pressure from Microsoft, Novell still has the No. 1 market share in network operating systems.
Joe Marengi, Novell's president and chief operating officer who was serving as acting CEO since Frankenberg's departure, said Novell currently claims 60 million users worldwide.
""I think it's a very defensible position and, in fact, one that we can grow very rapidly, in my personal view,"" Schmidt said of Novell's market position.
In addition to competing with Microsoft in advanced networking features, Schmidt said the company will work to make sure its software works well on both Microsoft's Windows NT and Unix networking environments.
Schmidt received a degree in electrical engineering from Princeton University and a doctorate in computer science from the University of California at Berkeley. He has worked at Xerox Corp.'s Palo Alto Research Centre, at Bell Laboratories and Zilog Inc.
",41
"Netscape Communications Corp.'s lead antitrust lawyer has written the Justice Department urging it to take immediate action against Microsoft Corp. for what he characterised as ""far-reaching, anti-competitive behaviour.""
The letter demanding ""immediate attention"" was dated Aug. 12 and made available to Reuters Tuesday. It represents a further escalation of a battle of words between the rival companies that began earlier this month as they prepared to issue new versions of Internet browser software.
Gary Reback, the outside attorney representing Netscape, also suggested in the letter to Deputy Assistant Attorney General Joel Klein that the issue be turned over to the Federal Trade Commission for further investigation.
The eight-page letter accused Microsoft of having made written offers to computer makers, Internet service providers, large corporations and others providing for ""either clandestine side payments, discounts on the Microsoft desktop operating system (Windows) or payments in the form of 'real estate' on the Windows 95 (opening) screen.""
Reback says these inducements were made on condition that the parties involved would ""make competitors' browsers far less accessible to users than Microsoft's own browser."" A browser enables computer users to access the Internet's World Wide Web.
The letter said Netscape had ""uncovered numerous additional steps that Microsoft has taken for the purpose of eliminating competition in the Internet software markets,"" including predatory pricing and bundling of products.
Microsoft spokeswoman Claire Lematta dismissed the letter, saying it ""appears to be full of wild and unsubstantiated statements.""
""It looks to us like a marketing document masquerading as a legal document,"" she said. ""Netscape must be feeling the competitive pressure.""
The legal clash comes at a critical point as both Netscape and the Redmond, Wash.-based software giant introduce new versions of their respective browsers, Netscape Navigator and Microsoft Internet Explorer.
Mountain View, Calif.-based Netscape, an early leader in browser technology, holds the lead in market share with an estimated 80 percent or more of the worldwide market.
But Microsoft, whose Windows systems are found in about 90 percent of personal computers, has moved quickly to gain an estimated 10 percent of the browser market and says more than 1 million people have downloaded its latest browser ,version.
That software, Internet Explorer 3.0, was formally introduced just a week ago. On Monday, Netscape launched the latest version of its browser, Navigator 3.0
Both companies have linked up with content providers to offer free trial subscriptions as a way of promoting their browsers. Analysts have said that Microsoft, which has thrown its marketing and financial clout into Internet products, has leveled the playing field with its latest software.
Microsoft and Netscape are also already well along the way to developing the next versions of their browsers.
Reback, a Silicon Valley lawyer known for spearheading past legal tussles with Microsoft, said the alleged practices went far beyond those which had been addressed in a consent decree reached by Microsoft and the Justice Department just two years ago.
""Microsoft's behaviour is, if anything, more anti-competitive and pernicious than the conduct addressed specifically in the decree,"" Reback wrote in the letter.
",41
"Netscape Communications Corp's first quarter results were better than Wall Street's most gloomy projections despite investor worries about sweeping product upgrades next month, analysts said.
Not only did the company manage revenues of $120.2 million in the quarter to March 31, essentially matching more upbeat estimates, but the Internet software pioneer topped analysts' $0.08 a share mean estimate by a penny.
Analysts said company executives appeared confident they will be able to introduce a broad upgrade of its new software within the current second quarter, allaying some concerns the date could slide.
Netscape CEO Jim Barksdale told analysts and media by teleconference that the company will hold its third developers' conference in San Jose on June 11-13 and analysts said it will likely ship final versions of its Communicator and SuiteSpot upgrades before then.
""Relative to what was being presumed for the quarter this should be a sigh of relief for a lot of folks out there,"" said Goldman Sachs analyst Michael Parekh. ""There was no bogeyman under the bed, as some folks had feared.""
The company told analysts and reporters after the earnings report that sales of its ""client"" browser products as a portion of total revenue declined to 38 percent from 51 percent in the final 1996 quarter.
Server software accounted for 37 percent of total revenue, up from 33 percent in the December quarter, while services soared to $25 percent of revenue from 16 percent.
Compared to a year ago, when analysts noted the company had essentially four products, Barksdale said a total of 15 products had been introduced, upgraded or entered beta testing since January 1.
""We continue to think the market opportunity is significant, and we feel terrific about our product line, particularly our new releases which are in final beta cycles today and which will be released commercially this quarter,"" Barksdale said.
Some analysts expressed surprise at the growth in services revenue, which included greater emphasis on content reachable from its Web site and a fresh focus on growing Netscape's service offerings on their own.
""In my mind it's absolutely a positive, given that they are competing with a software company that is also on its way to becoming a content company,"" said Parekh, referring to Microsoft Corp's media initiatives.
The company was also at the tail end of its Navigator cycle, ahead of the introduction of Communicator, with one analyst saying retail browser revenues fell to two percent from seven percent in the December quarter.
But Netscape retains its share of doubters.
Zona Research said in a report after the results that a dip in overall margins might be a one-time event, but it was nonetheless ""a warning that cannot be taken lightly.""
""Although we believe jackrabbit growth rates are not infinitely sustainable, there is an ominous statistic in today's announcement,"" it said of the margin levels.
On Tuesday, brokers Volpe Brown Whelan & Co. said that though Netscape might report ""a perfectly respectable"" first quarter result on Wednesday, it was entering a period of significantly greater stakes and higher risk.
Two analysts at the firm, Charles Finnie and David Locke, initiated coverage of Netscape with its lowest investment rate, an underperform, setting a 12-month price target of $21 based on comparable valuations.
Netscape faces more substantial risks in the next 18 months than earlier in its short history, the analysts said in a research report, in addition to having drawn ""the unwelcome, and undivided, attention of Microsoft."" ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Internet software company Netscape Communications Corp. Wednesday reported a 119 percent surge in first-quarter profits to $7.9 million, boosted by new business on its Web site and corporate sales growth.
Chief Executive Officer Jim Barksdale said in a statement the company's server -- or network host computer software -- business continued to grow, accounting for roughly 38 percent of the company's revenues for the quarter.
Mountain View, Calif.-based Netscape's earnings, equal to 9 cents a share, compared with $3.6 million, or 4 cents a share in the first quarter of 1996.
Revenues totalled $120.2 million, a 114 percent increase over the $56.1 million in revenues generated a year ago. Industry analysts on average had expected Netscape to post earnings of 8 cents a share.
Netscape reported growth in revenues from new businesses that will attract viewers to its Web site for informaiton as well as products, including a deal with Yahoo! Inc. to provide an Internet information navigation service.
That deal was among the factors that helped boost services to 25 percent of revenues from 16 percent in the fourth quarter of 1996.
Chief Financial Officer Peter Currie said services and the Web site were important financial contributors.
The earnings were released after the market close.
Netscape shares had traded at less than a third of their 52-week intraday peak of $75.25 during Wednesday's session, but rallied to close up $2.50 at $27.50 in Nasdaq trade.
The stock remained steady in after-hours trade, trading in a band of $27.375 to $27.625.
",41
"Hewlett-Packard Co., seeking to forge rapidly into the fast-growing area of electronic commerce, said Wednesday it agreed to acquire VeriFone Inc. in a stock swap worth $1.18 billion.
Hewlett-Packard said VeriFone, a leader in electronic payment hardware and software, will be operated as an independent unit of HP. Verifone stockholders will receive one HP share for each VeriFone share, the company said.
Forrester Research estimates the market for business to business electronic commerce will jump from $600 million last year to $66 billion in the year 2000, with consumer retail business rising to $7 billion from $530 million in 1996.
""When you talk about online commerce today, invariably you're talking about online payment. VeriFone is going to be the diamond in the crown in this area for some time to come,"" said Forrester Research analyst Karen Epper.
HP said the proposed acquisition would combine its strength as the second-largest U.S.-based computer equipment company with VeriFone's leadership in electronic commerce. VeriFone had net revenue of $472 million in its 1996 fiscal year.
The acquisition price of about $1.18 billion was based on HP's closing stock price of $50.50 a share Tuesday. HP's stock slipped by $1 to $49.50 in midday trading on the New York Stock Exchange, where it was one of the most heavily traded issues.
Verifone jumped $17.625, or 59 percent, to $47.75, also in heavy trading on the NYSE.
JP Morgan analyst Daniel Kunstler said the deal provides HP with some ""lynchpin technologies"" for electronic commerce, and although it will be slightly dilutive to HP's current fiscal year earnings, the impact should be less than one percent.
Redwood City, Calif.-based VeriFone, which was founded in 1981 and pioneered automated credit card transaction systems, has recently expanded to include conducting business over the Internet and using ""smart-card"" products for the home.
Smart cards have imbedded computer chips that can store so-called electronic cash and other information.
Just last week, Citicorp's Citibank said it will launch a pilot programme with VeriFone to test smart card use that will allow selected customers to download funds onto smart cards using its devices in their home or office.
VeriFone estimates that its systems handled more than $520 billion of the $800 billion in electronic transactions conducted in the United States last year.
The acquisition is a further step in HP's drive to develop products for what it calls the ""on-ramps"" and ""off-ramps"" of the information superhighway, a business that includes computer printers and scanners, where HP is a dominant player already.
HP said the two companies' technologies complement each other, with HP's focus on Internet security technologies and major corporate markets, including its broad distribution channels, melding with VeriFone's expertise in moving money.
""Central to HP's strategy to achieve this vision is the ability to move money securely from end to end over the Internet, an area VeriFone has pioneered through products and strategic relationships,"" HP Executive Vice President Rick Belluzzo said.
The companies' relationship includes providing products for the Visa/MasterCard Secure Electronic Transaction protocol, which is being rolled out this year, for secure credit-card payments over the Internet.
Analysts noted that other firms, many of them fledgeling startups like Cybercash, in which VeriFone holds a 10 percent stake, are also competing in what they expect will be an explosive market for electronic commerce systems and services.
",41
"Hewlett-Packard Co., seeking to forge rapidly into the fast-growing area of electronic commerce, said Wednesday it agreed to acquire VeriFone Inc. in a stock swap worth $1.18 billion.
Hewlett-Packard said VeriFone, a leader in electronic payment hardware and software, will be operated as an independent unit of HP. Verifone stockholders will receive one HP share for each VeriFone share, the company said.
Forrester Research estimates the market for business to business electronic commerce will jump from $600 million last year to $66 billion in the year 2000, with consumer retail business rising to $7 billion from $530 million in 1996.
""When you talk about online commerce today, invariably you're talking about online payment. VeriFone is going to be the diamond in the crown in this area for some time to come,"" said Forrester Research analyst Karen Epper.
HP said the proposed acquisition would combine its strength as the second-largest U.S.-based computer equipment company with VeriFone's leadership in electronic commerce. VeriFone had net revenue of $472 million in its 1996 fiscal year.
The acquisition price of about $1.18 billion was based on HP's closing stock price of $50.50 a share Tuesday. HP's stock slipped by $1 to $49.50 in midday trading on the New York Stock Exchange, where it was one of the most heavily traded issues.
Verifone jumped $17.625, or 59 percent, to $47.75, also in heavy trading on the NYSE.
JP Morgan analyst Daniel Kunstler said the deal provides HP with some ""lynchpin technologies"" for electronic commerce, and although it will be slightly dilutive to HP's current fiscal year earnings, the impact should be less than one percent.
Redwood City, Calif.-based VeriFone, which was founded in 1981 and pioneered automated credit card transaction systems, has recently expanded to include conducting business over the Internet and using ""smart-card"" products for the home.
Smart cards have imbedded computer chips that can store so-called electronic cash and other information.
Just last week, Citicorp's Citibank said it will launch a pilot program with VeriFone to test smart card use that will allow selected customers to download funds onto smart cards using its devices in their home or office.
VeriFone estimates that its systems handled more than $520 billion of the $800 billion in electronic transactions conducted in the United States last year.
The acquisition is a further step in HP's drive to develop products for what it calls the ""on-ramps"" and ""off-ramps"" of the information superhighway, a business that includes computer printers and scanners, where HP is a dominant player already.
HP said the two companies' technologies complement each other, with HP's focus on Internet security technologies and major corporate markets, including its broad distribution channels, melding with VeriFone's expertise in moving money.
""Central to HP's strategy to achieve this vision is the ability to move money securely from end to end over the Internet, an area VeriFone has pioneered through products and strategic relationships,"" HP Executive Vice President Rick Belluzzo said.
The companies' relationship includes providing products for the Visa/MasterCard Secure Electronic Transaction protocol, which is being rolled out this year, for secure credit-card payments over the Internet.
Analysts noted that other firms, many of them fledgeling startups like Cybercash, in which VeriFone holds a 10 percent stake, are also competing in what they expect will be an explosive market for electronic commerce systems and services.
",41
"Netscape Communications Corp will on Monday map out a vision on how companies will be able to use its products in the future to coordinate activities between themselves and customers, partners, suppliers and distributors.
While much of the hype surrounding the advent of the World Wide Web has been devoted to new media opportunities, the area with the biggest payback involves a vast network of secured interconnections between companies using Internet technology.  
Internet analysts and investors in the technologies now expect the market for this variety of electronic commerce to far outstrip even their most upbeat projections for expansion of merchandising and advertising over the Web.
And for software providers such as Internet pioneer Netscape, the market could be even larger than the $10 billion that independent research firms are projecting the Intranet software market may grow to be by the year 2000.  
Marc Andreessen, Netscape's co-founder and senior vice president of technology, has been talking since the middle of last year about the prospective new market for these so-called ""Extranets"" -- external networks of interlinked corporate Intranets.
""Extranets could actually be bigger than Intranets. We'll see,"" Andreessen told Reuters. ""The reason is because if there's 10,000 Intranets out there, then there's 10,000 squared possible connections between them, every one of which is going to involve software.""  
""Right now, if a company wants to build an Extranet between two Intranets, they have to do a lot of work at the network level,"" Andreessen said.
With Netscape's software, companies can provide partners with access to parts of their Intranet, making it easier to communicate on projects, he said.
Netscape, which supplies the world's most popular Internet browser, hopes to develop what it calls ""Crossware"" -- on-demand software applications that run across a multitude of networks and operating systems.  
Netscape said its own next-generation products -- a client's software for computer users dubbed Mercury and a suite of server products codenamed Apollo -- will be available in early 1998.
The announcement is part of a flurry of product introductions expected this week at the industry's Internet World trade show in Los Angeles, and weeks before the final release of Netscape's Communicator package of Internet software, incorporating browsing, electronic mail and group collaboration features.  
Netscape also hopes its Actra Business Systems joint venture with a division of General Electric Co, will help build products for business-to-business and business-to-consumer markets.
Actra is releasing products before mid-year which will enable electronic data interchange over the Internet, Andreessen said.
In a bid to seed this new market, Andreessen said Netscape plans as early as this summer to release a new development tool codenamed Palomar to help developers build crossware applications.
For Netscape, the potential Extranet market could be a huge boon. It also promises to be no cakewalk, with rivals Microsoft Corp and International Business Machines Corp's Lotus Development Corp reaching into their own deep pockets to compete aggressively in the field.
But Netscape hopes to continue to push its leadership role in Internet software and has lined up partnerships with more than 35 companies around a core set of standards for Extranets.
",41
"Apple Computer Inc. is seeking outside investment in its Newton computer unit and is looking for new homes for at least a dozen technology projects it recently decided to stop funding, the struggling computer maker's chief scientist said.
The unit responsible for the hand-held Newton computer was spared the axe in a restructuring last month despite speculation it would be closed.
Early versions of the highly touted Newton did not make the grade four years ago, but Apple Chief Scientist Larry Tesler said in an interview late Thursday that the unit's latest offerings have been getting rave reviews.
Demand for its new eMate, a version of the Newton in a stylish clamshell case with a keyboard for schoolchildren and costing around $800, is particularly strong, Tesler said.
A small group of Apple executives has been assigned to explore alternatives for increasing investment in the Newton business while Cupertino, Calif.-based Apple slashes spending elsewhere in a bid to return to profitability, he said.
Tesler declined to talk about individual companies which Apple may have approached and said he is not directly involved in the group's day-to-day efforts, but said the executives had entered the process with ""an open mind.""
The group was prepared to consider a broad set of options, he said, although he would not say specifically whether these could include a joint venture or some sort of manufacturing or distribution deal, for example.
""We are pleased by the reception for the eMate and looking at how we can increase our investment in it at the same time as we lower expenses of the company,"" he said.
Apple's lead scientist said talk of scaling back or exiting the Newton business, which made Apple a pioneer in the hand-held computer market despite its bumpy start, was off target at a time when ""it's just hitting its stride.""
In mid-March, Apple set out to cut spending by an average of 25 percent across the company while abandoning support for an array of technologies in its research labs.
Apple has said it would cut 4,100 jobs and take a $155 million restructuring charge in the second quarter ending March 31. Apple is due to report second-quarter results April 16.
Tesler said Apple was looking for ways to keep its discontinued work alive by licensing it, for example, to third parties ""so these technologies can come to market.""
""They're not ones that fit our business model, but they're ones that we think are good and ought to come to market,"" he said. ""We have one or two dozen technologies that Apple has decided to discontinue and (it is seeking to farm them out) rather than seeing them wither.""
Tesler declined to give details on what the technologies were, other than the outline given last month in the company's restructuring announcement. He said the method of seeking new sponsors to further develop and market the technologies would differ according to each.
Tesler was attending the Sixth International World Wide Web Conference in Santa Clara, Calif., where he made a presentation to a packed room on some of the newest technology for use in Apple systems.
",41
"Hewlett-Packard Co. said it plans to introduce a photographic system for personal computer users capable of snapping, scanning and printing photography-quality images.
The company's new PhotoSmart line, aimed at the consumer digital photography which some industry experts expect to heat up this year, will not come cheaply, however.
The company's photo printer, scanner and digital camera can be purchased independently but together cost about $1,400, while new ink cartridges will cost roughly $40 each.
And while any paper can be used in the printer, for best results HP recommends its own glossy and deluxe glossy photography paper, to be priced in the United States at up to $1.10 a page for the finest quality.
A spokesman for HP said the products are initially aimed at photography enthusiasts.
HP cited figures from the Photo Marketing Association which estimated that in 1995 some 710 million rolls of film were processed, or an estimated 2.5 billion pictures.
Although the quality of consumer market digital cameras themselves is still well below that of conventional photography, HP's scanning device enables PC users to scan, edit and print images made with conventional photography as well.
The HP PhotoSmart products work with Microsoft Corp.'s Windows 95 operating system and at least a 66- megahertz 486 processor, although Intel Corp.'s Pentium chips are recommended.
Both the printer and scanner, which will be available beginning in May, require a 2x-speed CD-ROM device, although a 4x-speed CD-ROM is recommended.
The printer, priced at about $500, requires at least 16 megabytes of random access memory (RAM) and 80 megabytes of hard disk storage, although double as much RAM and 120 megabytes of storage are recommended.
HP's PhotoSmart scanner, priced at $500 in the U.S. market, requires eight megabytes of RAM, a SCSI card and 25 megabytes of hard disk space, although 16 megabytes of RAM and 50 megabytes of hard disk space are recommended.
Photography professionals said the difference between the output of the new HP devices and conventional photo printing methods can be detected by experts, but that the two are very similar in quality.
HP's new inkjet printing system will enable people to print their pictures right away at home, although the results will not be instantaneous.
An eight-by-ten-inch picture takes an average five minutes to print and will take three to 20 minutes to dry, depending on the paper, print quality and humidity.
HP has been working with companies to expand PC photography standards. Last week, it unveiled a new standard to promote browsing, distributing and printing high-resolution images over the Internet.
",41
"Intel Corp. will extend its reach into the networking equipment market Monday by launching two aggressively priced products aimed at speeding the use of increasingly powerful computers.
Intel's Hillsboro, Ore.-based Internet and Communications Group (ICG) said it is introducing a networking hub to allow customers to move gradually from 10 megabits per second (Mbps) to 100 Mbps speeds.
The Intel Express 10/100 Stackable Hub will be priced at $99 a port in some configurations -- a price it said was very competitive with traditional 100 Mbps hubs at $150 to $175 a port and the slower 10 Mbps hubs at $70 a port.
It can be stacked up to eight units high, allowing for denser packing of networking equipment than rival's hubs.
Intel is also launching the industry's first single chip Fast Ethernet product -- dubbed the Intel 82558 -- to support networking at speeds of 10 or 100 Mbps.
""We want to make network connectivity a standard part of every PC shipped,"" said ICG vice president Mark Christensen, adding that the chip reduces the cost of building Fast Ethernet networking into PCs by about 50 percent.
The chip can be shipped directly on a personal computer's motherboard. Of the roughly 40 million new Ethernet-ready PCs shipped each year, less than 10 percent are done with motherboard implementations and Christensen said this could approach 30 to 40 percent of PCs.
The new chip will also improve manageability features, such as remote management of the PCs over a network to simplify maintenance and upgrades. Limited samples of the 82558 are now available for manufacturers, Intel said.
The move is Intel's second bold thrust this year in the fast-paced market dominated by Cisco Systems, 3Com Corp., and Bay Networks Inc..
In February Intel dropped its prices nearly 40 percent on Fast Ethernet network adapters - devices which can be installed in a computer to enable them to communicate in a network at higher speeds -- a strike most directly at 3Com.
""3Com responded very quickly,"" Dataquest analyst John Armstrong said of Intel's February price drop, ""When they modified their adapter pricing they really rocked 3Com.""
""I don't think this announcement is at the same level,"" in terms of its direct impact on the current players, Armstrong said of Monday's introductions.
Nevertheless, Armstrong said Intel's aggressive price points could be a significant factor in accomplishing Intel's objective of boosting use of the technology.
""The fact they have 10/100 isn't innovative - the price point is. It will reduce the indecision level,"" he added. ""Because Intel is coming up a bit later, they have to do things that make people stand up and notice.""
3Com is the leader in 100-megabit hubs, based on 1996 data, with its share on some products in the category up to the high 30 percent range. Bay Networks and Hewlett- Packard Co. are also strong in the market.
In the adapter market, analysts noted that 3Com has also provided advanced capabilities like the sort of network management features Intel is now making it possible to place directly on the PC motherboard.
""3Com is trying to outflank Cisco by coming at them from the desktop and in a way Intel is doing the same thing,"" Armstrong. 3Com has been facing greater pressure from both Intel and from Cisco, however.
Just last week, 3Com said in its quarterly report that it could see slower revenue increases than the rest of the networking industry because of falling prices and weaker overall demand for networking gear.
The stock of 3Com has fallen sharply from the low $70 range early this year to below $30 last week. It closed down $2.75 on Friday at $29.25 on the Nasdaq market.
""Intel is certainly a contender now,"" in networking, said Armstrong, noting that in the networking hub market, for example, they were not in the top 10 industry players in 1996 but they could burst up the charts this year.
""They have indicated they certainly are not stopping with these most recent product announcements,"" he said.
Intel said it was able to support the aggressive price levels due to its expertise in silicon design and fabrication and its volume manufacturing capabilities.
The company, the world's largest semiconductor maker, said its drive into networking, like many of its other recent industry initiatives, is aimed at selling more high powered personal computers that use its microprocessors.
",41
"Apple Computer Inc.'s chief scientist said the company is seeking to generate outside investment in its Newton computer group, especially for its hot eMate product.
Apple Chief Scientist Larry Tesler also told Reuters in an interview here late Thursday that Apple is looking to find new homes for at least a dozen technology projects it recently decided to stop funding.
The Newton unit was spared the ax in last month's restructuring, despite speculation it would be scrapped.
Indeed, although early versions of the highly-touted Newton fell short of the mark four years ago, Tesler said Apple is getting rave reviews for its latest offerings.
Demand for its eMate, a version of the Newton in a stylish clamshell case with a keyboard for schoolchildren and priced around $800, was particularly strong, he said.
A small group of Apple executives have been charged with exploring alternatives to increase investment in the Newton business while the company is slashing spending elsewhere in a bid to return to profits, he said.
Tesler declined to talk about individual companies which Apple may have approached, and said he is not directly involved in the group's day-to-day efforts, but that they had entered the process with ""an open mind.""
The group was prepared to consider a broad set of options, he said, although he would not say specifically whether these could include a joint venture or some sort of manufacturing or distribution deal, for example.
""We are pleased by the reception for the eMate and looking at how we can increase our investment in it at the same time as we lower expenses of the company,"" he said.
Apple's lead scientist said talk of scaling back or exiting the Newton business, which helped Apple pioneer the handheld computer market despite its bumpy start, was off target at a time when ""it's just hitting its stride.""
In mid-March, Apple set out to cut spending by an average of 25 percent across the company while abandoning support for an array of technologies in its research labs.
Apple has said it would cut a total of 4,100 jobs and take a $155 million restructuring charge in the second quarter to the end of March. Apple is due to report its second quarter results on April 16.
Tesler said Apple was looking for ways to keep its discontinued work alive by licensing it, for example, to third parties ""so these technologies can come to market.""
""They're not ones that fit our business model, but they're ones that we think are good and ought to come to market,"" he said. ""We have one or two dozen technologies that Apple has decided to discontinue and (it is seeking to farm them out) rather than seeing them wither.""
Tesler declined to give details on what these further technologies were, other than the outline given last month in the company's restructuring announcement, and he said the method of seeking new sponsors to further develop and market the technologies would differ according to each.
Tesler was attending the Sixth International World Wide Web Conference in Santa Clara, where he gave a presentation to a crowded audience on some of the hottest new Internet technology for use on Apple systems.
Speculation that Apple might part with its Newton division re-emerged on Thursday after USA Today reported Apple was in talks with Sun Microsystems Inc. over the possibility Sun might buy the Newton unit.
The newspaper reported Sun could be a tough bargainer and said no deal was imminent. Neither Tesler, Apple nor a spokesman for Sun Microsystems would comment on the report. Sun said it does not comment on speculation.
Sun Chairman and CEO Scott McNealy said last week he would not comment on acquisition rumors, including those about Apple. He said that in general Sun will remain ""opportunistic"" in evaluating any deals that come its way.
Earlier this year Advanced RISC Machines Ltd. (ARM), which makes the speedy processors used in the Newton eMate and Apple's recently launched MessagePad 2000, said ARM was working with Sun's Javasoft unit to make an operating system based on Java technology run on the ARM platform.
((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"The full-service Internet travel agency Premier Travel said it will launch a new site on the World Wide Web on Wednesday to make it easy to surf the Internet for airline tickets.
Ken Orton, president of Preview Travel, said in an interview the company has already sold more than $5 million worth of airline tickets and vacation packages through its services on American Online Inc since May this year.
""This is a utility built for consumers,"" Orton told Reuters, noting that the service aims to provide the travelling public with ""an unbiased look at what's available"".
""People are voting with their credit cards,"" he added. ""People who know they want to buy an airway ticket want to go the shortest distance (to obtain it).""
Up to now, Premier Travel has offered vacation packages and tickets through America Online, itself an investor in Premier with a stake of less than 20 percent of the travel agency, and on its Web site at  http://www.vacations.com.
The new service, at  http://www.reservations.com, enables customers to design their own travel plan, order tickets using their credit cards, and have them delivered within two days.
Orton noted this service largely revolved around specific details, such as fares and schedules, while its other holiday package-oriented businesses are geared to use multimedia capabilities to sell entire vacation deals.
The airline ticketing system will enable travellers to book tickets 24 hours a day, seven days a week, and enable them to store up to five different profiles with preferences, such as seating priorities, class of service and meal requests.
Individuals can keep separate profiles for business trips and for use with family members or when traveling alone.
Preview Travel said it has invested heavily in research and development to introduce the service both on the Web and on America Online, where it is available under the keyword ""reservations.""
Orton said that as of September 18, it will become America Online's primary airline ticketing service, displacing EasySaabre, the electronic ticketing service pioneered by AMR Corp's American Airlines.
Orton said the company's existing online travel service has been averaging $50,000 to $100,000 in tickets daily, with great peaks in usage during last month's fare wars.
""During the fare wars we did very large numbers,"" he said, noting the rush to buy tickets had aparently flooded airlines' own reservation agents with inquiries.
Although the company has online competition and is a long way from matching the size of sales by EasySaabre, which according to industry executives last year sold in excess of one million tickets worth an estimated $300 million, Orton said its technology has the capacity to exceed that amount.
""We could get bigger than EasySaabre using our present architecture,"" Orton said, adding the company is also engaged in a co-promotional deal with Netscape Communications Corp to appear on Netscape's ""destinations"" button.
The Netscape home page is the most heavily-trafficked site on the World Wide Web multimedia section of the Internet.
Preview Travel is a 12-year-old company which has specialised in travel-related television programming and which began offering services on the Internet in 1995.
Investors in  the privately-held company include America Online, Landmark Communications, US West Corp's US WEST Interactive Services group and the Menlo Park-based venture capital firm Kleiner Perkins Caufield & Byers.
",41
"Sun Microsystems Inc. and its partners will Wednesday launch initiatives aimed at making its Java computing platform more speedy on devices ranging from smart cards to supercomputers.
Just two years after the unveiling of Java, a language for programming computers which began as a tiny project within Sun that was nearly scuttled, it has created an awkward alliance between fierce rivals.
Wednesday's proceedings, to be witnessed by thousands of computer developers in San Francisco, will not be without controversy.
Down the hall from where Sun Chairman and CEO Scott McNeally and other Java luminaries will be giving keynote addresses, Microsoft Chairman and CEO Bill Gates is due to showcase Microsoft's own implementations of Java.
""Certainly the center of the nuclear attack is going to be right here at ground zero in San Francisco,"" Gartner Group analyst David Smith said of the duelling keynotes.  
The pre-conference hype in the industry over the JavaOne conference reached such grand proportions that San Francisco Mayor Willie Brown issued a proclamation designating this week as ""Java Week"" in the city.
Analysts see Java -- which promises to enable programmers to write one piece of software that can run across all computer systems -- as a technology that will eventually creep into pretty much every company's systems.
Sun hopes that by de-emphasizing individual platforms, especially Microsoft's Windows operating systems which are themselves nearly ubiquitous on business and home PCs, it can level the playing field and extend sales of systems like its Solaris Unix platform, analysts said.
International Business Machines Corp. and virtually every other major computer systems maker, including PC industry giants Microsoft and Intel Corp., have clambered aboard the Java bandwagon.
But Gates, who is not used to playing second fiddle, and other industry players over time are expected to vie with Sun for leadership of the growing number of developers entranced with Java, now estimated at 400,000.
",41
"Hewlett-Packard Co. Monday will raise the stakes in the fiercely-competitive and fast growing market for computer servers by launching new models that are more than double the speed of their predecessors.
The new HP 9000 line of servers, the machines at the heart of computer networks including the Internet, are based on H-P's latest PA-RISC 8000 microprocessor. The company claims that they easily outperform those of its rivals.
The widely-watch launch will put pressure on archrivals Sun Microsystems as well as competitors like International Business Machines Corp., Silicon Graphics Inc., and Digital Equipment Corp.
The introduction, which follows a sluggish transition to speedy PA-8000-based workstations in June, will give a boost to Hewlett-Packard at a time of ferocious growth in the market.
""It's growing in the 50-plus range a year,"" Carol Mills, worldwide general manager for HP's multibillion dollar Unix server business, said in an interview.
""The Internet is hot,"" she said, but added that new applications such as data warehousing -- enabling access to vast data storage facilities -- and using servers as an alternatives to mainframes are also key market opportunities.
Mills, who said the current shift to Internet-based technology presents ""not just a window of opportunity but the sliding glass door,"" estimates that the new markets alone will generate many billions of computer hardware revenue dollars.
HP's three new server lines complete its transition to 64-bit microprocessors for Unix machines, and the company is due to deliver a 64-bit HP-UX Unix operating system next year.
At the core of its new offering are four models its mid-range K-Class family, available immediately and ranging in starting price from $52,200 to $77,200.
H-P said the HP 9000 K-Class models -- described as the ""sweet spot"" in its lineup -- are designed for symmetric multiprocessing and can accomodate one to four PA-8000 chips.
The company said the highest performing K460 model had 85 percent better performance that Sun's Ultra Enterprise 3000, while outperforming Digital's 4100 5/400 by 65 percent and had twice the performance of IBM's RS/6000 J40.
H-P also said a new high-end HP 9000 server, the T-Class Model T600 with symetrical multiprocessing as a mainframe alternative for such tasks as on-line transaction processing, will be available in the second calendar quarter of 1997.
HP said it will also begin shipping two new models in its entry-level HP-9000 D-class in October. The D270, starting at $22,260 and the D370, priced at $25,250, are designed for worgroups and departments and for sale by resellers.
As a sign of the fierce pace of product advances in the market, analysts noted the new models more than double the performance of machines updated as recently as February 1996 for the K-Class and January of this yer for the C-Class.
Jean Bozman, an analyst at International Data Corp. said the updated HP 9000 models is ""a strong offering"" which would be a boost for existing customers and make it ""highly competitive"" with fast-charging Sun in the duel for number one.
IDC's 1995 statistics show Hewlett-Packard had the lead in worldwide revenues from small- and medium-size servers at $3.4 billion, with Sun selling more than $1.8 billion worth.
Across all Unix systems, according to IDC, H-P had server and workstation revenues totalling $6.1 billion, compared with $5.6 billion for Sun Microsystems, which due to lower system cost had the overall lead on a unit shipment basis.
The approaching H-P launch prompted a preemptive strike from officials at Sun Microsystems, which closed its fiscal year-ending June quarter with record-level backlogs due to soaring orders for the Ultra machines it introduced in April.
""This is just a chip upgrade for a system they've had a long time,"" Anil Gadre, vice president of corporate marketing at Sun Microsystems, said of H-P's launch, dismissing the high performance ratings of what he termed ""a late life kicker.""
""We could not be in a better position to compete with them and position ourselves to take share away from them,"" he said.
",41
"Undeterred by recent market worries over the networking sector, Cisco Systems Inc chief executive John Chambers said he continued to see the industry's overall business growing at a brisk clip in 1997.
""We see a very good market at 30 to 50 percent growth for the forseeable future,"" Chambers told Reuters in an interview after a conference call with analysts in which he repeated Cisco's goal of outperforming the market's growth.
Cisco's second quarter results narrowly beat Wall Street estimates, rebuffing market talk on Tuesday of a shortfall.
Cisco reported that net income rose nearly 62 percent to $339.5 million in its second quarter to January 25 compared with $209.7 million a year earlier. Net sales rose 73 percent to $1.59 billion from $918.5 million a year earlier.
Analysts said Cisco's pro forma net income of $351.9 million, or $0.51 a share, excluding an acquisition-related writeoff and a net gain from sale of an investment, topped First Call's mean analysts estimate of $0.50 a share and roughly equalled Wall Street's $0.51-$0.52 ""whisper number.""
Chambers said the firm expected to acquire another 10 to 12 companies in its current year. ""Almost every market segment has opportunity for internal products, joint development projects with our partners and acquisitions,"" he told Reuters.
Cisco shares, which had ended the Nasdaq market session down 1-1/8 at 67-1/8 before the results were released, slid as low as 64-1/4 in after-market trade. Some analysts attributed the decline to concerns the company's post-exceptional $0.49 a share earnings number had fallen short of expectations.
Analysts said Cisco executives in their conference call had addressed concerns over a possible slowing in the market, sparked by comments attributed to rival 3Com Corp.
Several analysts said they saw no sign that any December sluggishness observed by 3Com had a major impact on Cisco's business.
""I think it was another good solid quarter from Cisco. No hint of any problems,"" said Paul Saunders of Van Kasper & Co.
Chambers said a shortening of order lead times -- down to one to three weeks now from eight to 12 weeks previously -- meant quarterly shifts in results may be more pronounced. He repeated previous comments that ""sometime in the future, we'll see a quarter that is in single-digit growth.""
Analysts said sequential growth in revenues from one quarter to the next -- such as the second quarter's more than 10 percent rise from the first fiscal quarter -- would still provide sharp year-on-year increases.
A second quarter gross margin of 65.3 percent surprised some analysts who had been expecting price competition to cut into margins. But Chambers said: ""Our overall guidance is over time...margins will continue to go down.""
""There will be a few (quarters) up, but I think most of them will be down, hopefully just slightly.""
Smith Barney analyst Therese Murphy noted Cisco's third quarter tended to be weak, but saw no reason to be ""any more cautious than we normally would be in the April quarter.""
Chambers did not see any fundamental industry change, and continued to target growth above the industry rate while taking advantage of further consolidation, she said.
",41
"USWeb Corp Chairman and Chief Executive Joe Firmage on Monday said the fast-growing Internet services company had launched the second stage of its business plan, agreeing to acquire affiliates in six U.S. metropolitan areas.
Firmage, who started the Santa Clara-based company just 13 months ago, said the second phase of the plan called for the expansion of its corporate-owned operations. He said USWeb would also expand outside the United States, particularly in Southeast Asia and Japan, by the end of October.  
Next year, USWeb will concentrate on profitability, he said. ""In January 1998 the focus is on leveraging what we built,"" Firmage said in an interview in Palo Alto.
He said the company was seeking to achieve economies of scale in the market for services related to building Internet sites and intranets -- internal corporate computer networks that take advantage of inexpensive Internet technologies.
Firmage said USWeb in its first phase succeeded in building a string of franchises in 54 locations in 26 states, including recent affiliates in Austin, Texas., Seattle, Pittsburgh, and Irving and Laguna Hills, Calif.  
The chief executive said USWeb had also succeeded in building a strong name and thus a currency for expansion. A recent study rated USWeb third among information technology executives for brand awareness, behind AT&T Corp and MCI Communications Corp, he said.
Firmage said the company was close to arranging a second round of financing. Last year, USWeb raised $17 million from Softbank Corp of Japan and Crosspoint Ventures, which valued USWeb at $31 million, he said.  
Firmage declined to project the size of any new investment.
By next year, the company's expansion should help USWeb become ""broad and deep and profitable,"" he said, declining to elaborate on expected profit margins.
Firmage said more than 50 percent of USWeb's business was ""the $50,000 to $1 million range of companies setting up business-critical sites for department-sized operations.  
That work, and even much of the business of setting up enterprise-wide sites ranging in value from $500,000 to $3.0 million, is below the horizon of some of the bigger high-technology consulting firms, he added.
Firmage said Internet technologies accounted for an increasing share of the $20 billion information technology out-sourcing market.
The affiliates that USWeb is acquiring are in Washington, San Francisco, the New York City area, Orange County, Calif., Philadelphia, and Milwaukee.
Firmage declined to discuss when or whether the company may consider an initial public stock offering. But, he said, with the current moribund IPO market and declining share prices, ""the private market is the place to be right now.""
Meanwhile, acquisition offers the owners of its franchises a way of creating some liquidity in their holdings, he said.
""There's no question that this does open the possibility of liquidity,"" he said. ""We have a liquidity path.""
USWeb's operations now encompass some 400 to 500 people. The company will hold its semiannual affiliate meeting, known as Velocity, in San Francisco next week.
((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Sun Microsystems Inc. will announce Tuesday its entry into the supercomputing systems market long dominated by Cray Research, which was acquired by Silicon Graphics Inc last year.
Sun executives said in interviews ahead of the Tuesday announcement that their new Sun Ultra HPC servers will offer up to 45 percent better price performance than SGI's Origin 2000 and International Business Machine Corp.'s RS6000 SP.
Industry analysts said the move could vault Sun into an aggressive new player in a market which has been disrupted over the last decade by new massively-parallel computers.
""It's revolutionary for them,"" said Dataquest analyst Jerry Sheridan. ""It presents a competitive environment. SGI is a strong competitor in the technical arena.""
The move comes as Silicon Graphics is in the midst of a massive overhaul of its entire product line, a process which has dampened its earnings as it strives to execute a strategy of moving into the commercial market, where Sun is strong.
Executives at Sun, which bought part of Cray's computing business from SGI as part of the SGI-Cray deal, said Tuesday's announcement was the first of a series of developments aimed at boosting Sun's share in the high performance computing market from virtually nothing last year.
Sun noted International Data Corp. projects the market for the world's most powerful computers, used for everything from nuclear weapons and environmental modelling to aerospace and automotive design, will hit $5.6 billion by the millenium.
""We're leveraging into the markets where we've been traditionally successful -- that is the markets of the technical, engineering and scientific user,"" said Jamie Enns, manager of product marketing at Sun Microsystems Computer Co.
""I'm not even sure we're on the radar screen right now,"" Enns said in an interview. But he projected the company could grow to become ""a significant component"" such as 10-15 percent of the market in the next 12-18 months.
Sun's ultimate objective is to have a stake similar to the estimated 30-50 percent of the market now held by Silicon Graphics, he said. ""This is a five year program.""
""I've spoken with (Sun Microsystems CEO) Scott McNealy and Scott wants it all,"" added Sheridan. ""They have the capability and the product to play in the marketplace and of course the technology is just one small piece of the puzzle.""
To help lay the infrastructure for sales and support to the high calibre researchers who use supercomputers, Sun said it has established a High Performance Computing (HPC) consortium which will have a total of 15 members worldwide.
Founding members are Syracuse University, University of California at Berkeley, Massachusetts Institute of Technology, University of Tennessee, the University of Tokyo in Japan, the Germany's University of Cologne and CENAPAD-MGG/CO in Brazil.
Sun said its recent acquisitions of the former Cray Business Systems Division and the GlobalWorks division of Thinking Machines Corp. along with its own Sun Ultra HPC server line were important features of the new capabilities.
Enns said the core product is based on the Enerprise Server 3000 to ES 6000 line of products Sun introduced in April 1996 and adds supercomputing features using Symetric Multiprocessing (SMP) server architecture and Uniform Memory Access (UMA) design running parallel applications.
Sun said the U.S. list price for the systems will range from $43,745 to more than $2.5 million.
The 250 megahertz Sun Ultra HPC servers will be available immediately in six SMP configurations from the deskttop Sun Ultra HPC 2 to the supercomputer-class Sun Ultra HPC 10000 server. The machines scale from two to 64 processors and offer up to 64 gigabytes of memory and 20 terabytes of storage.
Sun said the top-end machine delivers more than 20 gigaflops of power -- a measure of supercomputing performance -- which it said was more than twice that of a fully-configured Digital Equipment Corp Alpha or a 32-processor Silicon Graphics Origin 2000.
(sam.perry@reuters.com, Palo Alto Bureau 415 846 5400)
",41
"Live Picture Inc., the California photography software company headed by former Apple Computer Inc. Chief Executive John Sculley, will on Monday launch its first photo imaging product for consumers.
The product, called LivePix, will be available in retail stores for under $100 and will enable home personal computer users to stretch or enhance pictures, stick on disguises or drag and drop them into other digital photos for printing.
The product is also available through the LivePix home page at http://www.livepix.com.
Sculley, who joined the Soquel, Calif.-based firm as president and chief executive in January, said in an interview that the technology for the first time enables individuals and families to use professional-quality digital picture editing techniques on their own home computers.
""We think that PC photography is really going to be one of the exciting emerging markets,"" said Sculley, whose company has minority equity investment from such industry heavyweights Eastman Kodak Co. and Broderbund Software.
The technology allows people to add special effects, such as changing colouring, skewing images or distoring them, and to compose graphics such as greeting cards and calendars which incorporate pictures and text.
LivePix, like the company's Live Picture product for professionals, uses FlashPix technology the company pioneered to allow speedy, high resolution photo viewing and printing.
Instead of moving the tiny pixels used to create computer monitor images about, a task Sculley describes as taking ""an excruciating long time to move on the screen"" FlashPix uses sophisticated mathematical algorithms to speed processing.
While Sculley noted that older technology could take a half an hour or more to move rotate and manipulate a photographic image, or requires movement of low grade images to improve speed, FlashPix moves pictures rapidly.
This is one feature which is expected to help speed adaptation in the market of digital editing technology.
Although digital cameras remain expensive -- at around $350 to $800 for entry-level models -- and image quality for these is still below that of film cameras, the industry expects consumers to take advantage of the increasing availability of services which will digitize film images.
Sculley said Live Picture has also been working with other industry leaders, such as Hewlett-Packard Co. which is a dominant force in computer printing technology, to develop and expand a market which is now in its embroyonic stages.
Sculley noted that three are more than 60 billion photographs taken every year, but only some 2 percent of those are ever duplicated or used again, providing a wide-open market for people to add new, digitally-enhanced flourishes.
""What we really want to do in the early stages is to establish the foundation,"" said Sculley, who predicted the market would really begin to heat up in the build up to Christmas 1997 a year from now. ""The technology is here now.""
Sculley compares the advance and the consumer market potential with that of electronic publishing in the 1980s, when several major software companies such as Aldus and Adobe, which have since merged, thrived by significantly lowering the cost and ease of professional graphics.
He also said the concentration of major high tech firms on the Internet will provide enormous new market potential.
This week, for example, Live Picture has scheduled a briefing in conjunction with Hewlett-Packard, Eastman Kodak, Microsoft Corp. and Netscape Communications Corp.to discuss further plans for using its technology to publish and distribute photographic images on the Internet.
Sculley said people will be able to include photographs in documents and send them in electronic mail.
""What makes this technology different from anything that's come before is it is totally open, it's available and has huge advantages in sending photos over the Internet,"" Sculley said.
Microsoft is expected to introduce a product in the same general area soon, also using FlashPix technology, according to industry executives, and Sculley said competition would only help define and expand the market at this stage.
""What we really want to do is see FlashPix become the standard and see it grow,"" said Sculley, adding that Live Picture wrote most of the original technology behind it.
Sculley, who left Apple in 1993 and served briefly as chief executive of Spectrum Information Technologies Inc. before a financial scandal surfaced at the small company, also has a New York-based venture capital business.
In January, Sculley announced he had joined privately-held Live Picture, and had bought a piece of the company. He has declined to detail his holding, although he said holdings by key executives of Live Picture exceed that of the corporate investors.
",41
"Making use of technologies originally developed for supercomputers, Sun Microsystems Inc. will this week unveil its first high-end computer servers that can compete with mainframe performance.
""It's not just a hot box,"" said Ed Zander, president of the Sun Microsystems Computer Co. ""We look at this as combining the best of the mainframe world and the traditional Unix-server world.""
The machines also are capable of more than four times the processing performance of an International Business Machines Corp.  mainframe, according to data supplied by Sun.
The new Ultra Enterprise 10000 servers, which were code named Starfire, will be formally unveiled on Wednesday morning at a San Francisco news briefing and analysts expect them to further boost Sun's already roaring sales growth.
The servers will be Sun's first machines priced in the $500,000 to $2 million range, offering stronger margin potential and extending the company's computer line to the heavy-duty machines used in corporate data centers.
The Mountain View, Calif. company last week reported its second fiscal quarter revenues jumped 19 percent to a record $2.08 billion, and net income soared 41 percent to $178.3 million, helped by sales of server products.
Goldman Sachs analyst Laura Conigliaro estimates that Sun's sales of servers -- machines which serve at the center of computer networks which are capable of intensive calculations -- grew in excess of 45 percent in the fourth quarter of last year.
Sun also boosted its market share leadership in the fiercely competitive but weakening Unix workstation market in 1996, winning a 41 percent stake of the $15 billion market, a position larger than its next three rivals combined, according to a preliminary International Data Corp. survey.
The base Starfire configuration -- with 16 processors and two gigabytes of memory -- will be priced starting at $873,890 and the machines will begin shipping in limited quantity this week, with volume shipments due around two months from now.
Analysts and industry consultants said the computers will for the first time enable Sun to compete at the top end of the market with machines capable of handling the largest mission- critical tasks like online transaction processing.
""I think this is going to open up some new market segments for them,"" said a consultant at N.H.-based Technology Business Research. ""Sun's sales force has been unusually successful in selling in competitive environments.""
Sun was able to take advantage of supercomputer-like performance features developed by Cray Business Systems. Rival Silicon Graphics Inc., which bought Cray Research last year, sold the former Cray division to Sun last May.
The Cray team had already developed a machine based on Sun's Sparc/Solaris system that can run 64 processors.
Sun is augmenting its new offering with powerful storage systems it says offers strong price-performance advantages.
Among the features which distinguish the new computer systems are the ability to provide 10 times the amount of bandwidth of other Unix systems and 50 percent more than top- of-the-line mainframe computer models.
The system can run at two to four times the power of an IBM mainframe as measured by million instructions per second, a standard measurement of computer speed, Sun said.
""This is deep into mainframe territory,"" said Andrew Allison, publisher of Inside the New Computer Industry.
Zander said Starfire may not be a straight-out replacement for mainframe computers, but that customers may chose to shift major Unix applications to the Starfire technology, which can also be partitioned in the same way mainframes can.
IDC analyst Jay Bretzmann projects the market for high-end Unix machines alone is around $2 billion now, and growing very rapidly in a total marketspace valued at around $50 billion.
Sun said the Ultra Enterprise 10000 has set a record in an industry performance benchmark test known as the Transaction Performance Council Benchmark D.
Analysts expect the machines to challenge rivals like Digital Equipment Corp., whose Alpha machines had topped the performance curves, and Hewlett-Packard Co., which was a pioneer in the high-end server market, and IBM.
A number of organizations are in line for orders for the machine, including insurance giant Aetna Inc., the German maratime traffic agency BSH, health information services provider HCIA and the Kelly Services staffing agency.
Rich Castor, technology officer at Aetna, said he chose the new Sun computers in competition with rival offerings because it brings mainframe-class capabilities to servers while using server-based applications packages.
""In this case, it allows us to marry mainframe class computing environments with some of the best of breed client- server applications programs,"" such as those of Oracle Corp. and Peoplesoft, he said. ""We're very impressed.""
(sam.perry@reuters.com)
",41
"Hewlett-Packard Co. Monday announced price cuts of up to 41 percent for its computer workstations in a bid to win back market share for its products.
Analysts said the move was aimed at reversing recent gains by rival Sun Microsystems Inc. in workstations, the powerful desktop computers used in technical and engineering work.
""This price cut is the opening salvo in determining how competitive they're going to be,"" said Joe Ferlazzo, analyst at Technology Business Research in Hampton, N.H.
The price cuts range from 27 percent to 41 percent. For example, the price for the higher-end HP Visualize Model C180 equipped with a 20-inch colour monitor was slashed by 32 percent, to $34,995 (corrects price from $43,995) from $51,500.
At the lower end, the price of the HP Visualize Model B132l was cut to $6,795 from $11,500, the company said.
The new pricing corresponds with Hewlett-Packard's plan to make its workstations more like personal computers by trimming expenses and passing on expected savings to customers.
The strategy is aimed at rivals such as Digital Equipment Corp., Silicon Graphics Inc. and especially Sun, widely regarded as the low-cost producer of workstations.
Sun Microsystems raised its market share to 41 percent in the workstation business in 1996, more than its three nearest competitors combined, as the overall workstation market shrank by 1 percent to $15 billion, according to data from International Data Corp, a market research firm.
Managers at Hewlett-Packard's workstation operations said the new pricing was aimed directly at its competition.
""It is a very significant change,"" said Andrew Allison, publisher of the newsletter Inside the New Computing Industry.
""HP has not heretofore been a price leader or expressed the intent to be a price-performance leader.""
But Hewlett-Packard's move was unlikely to go unnoticed by rivals in the fiercely competitive sector.
Executives at Sun Microsystems, which cut its prices last quarter, told analysts last week it was prepared to make further aggressive price cuts in the power workstation market it now dominates.
""Sun is the low-cost producer,"" said Allison. ""Sun is in the best position to deal with this issue and I would expect Sun to respond to HP's moves.""
",41
"While Internet stocks have taken center stage in the investment arena alongside such high-tech stalwarts as Intel Corp and Cisco Corp, many investors are wary about what 1997 will bring.
Tech sector stocks have sagged amid uncertainty over the 1997 market outlook.
With growth of the PC market expected to moderate further despite a strong business upgrade cycle, investment in technology stocks is shifting somewhat towards value investing from momentum players,  according to some investors and analysts at the annual Robertson Stephens & Co. technology conference here.
""People are still suffering from too much money  and too much volatility and they're not sure when it's all going to stop,"" said Keith Benjamin, a Robertson Stephens senior research analyst covering Internet media content and services companies.
Investors also said they are being more selective than a year ago, when Internet stocks were the rage and bankers joked that you could write ""Internet"" on a dollar bill and take it public for $10.
""Investors are looking for stable revenue streams here, annuity-type businesses,"" said one investor for a European fund.
Some investors also expressed frustration at the process of sifting through myriad business plans -- some 70 of the more than 350 companies presenting here this week were Internet related, many taking the center stage over more established firms.
""I don't think they have any idea what their business plan is,"" said another investor, shaking his head as he left the room after a presentation of one well-known Internet startup.
""There are very few opportunities and so much money out there looking for them,"" said Robert Herwick, head of Herwick Capital Management, noting the recent sell-off in networking stocks could also have repercussions for shares of hot chip-makers supplying the communications market.
Many of these fast-growing companies had held their value last year despite the slump in the rest of the semiconductor sales at the time amid a flood of new semiconductor capacity and Herwick says investors may even be experiencing a bottoming of high tech sentiment now.
Despite some bullish comments about spot prices of 16-megabit computer memory chips by companies like Micron Technologies Inc., which said this week spot prices for the chips have risen 50 percent in recent weeks, executives remain cautious.
Micron's chairman, Steven Appleton, warned that although markets exaggerate the up and down cycles of the semiconductor business, it is folly to ever believe these swings will disappear.
Likewise, Herwick said some semiconductor executives are worried about further capacity coming on-line despite the apparent efforts of Korean chipmakers to curb output, and this could impact pricing for the next-generation  64-bit memory chips in the second half.
Several of the Internet companies stressed, as they had in their initial share offering documents, that they have limited operating histories and are focused foremost on gaining market share and revenues.
""There's one thing on our minds, and that's revenue,"" said Bruce Wilson, executive vice president of CyberCash, Inc., at a presentation late Thursday.
Further consolidation is expected in the Internet space.
The on-line chat company iChat noted in its presentation here that 99 percent of all Internet traffic is already commanded by less then one percent of all sites, and others said this concentration is only expected to increase.
Forrester Research CEO George Colony said he expects many leaders in existing physical markets will successfully enter and dominate the on-line world as well, over time.
Referring to Amazon.com, the Seattle-based Internet bookseller which currently runs one of the hottest Internet merchant sites, Colony said established companies may yet come to dominate space.
""Do you think three to four years from now Amazon.com will be a major brand?"" he asked in a panel discussion this week. ""I call them Amazon.toast.""
In an apparently unrelated decision, Amazon.com, the company, canceled its presentation at the conference, Robertson Stephens announced. ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Hewlett-Packard Co. stock surged in heavy trading Wednesday, a day after the computer and printer maker reported surprisingly strong first-quarter profits that were its highest in eight years.
Morgan Stanley & Co., Donaldson, Lufkin & Jenrette and Goldman Sachs & Co. upgraded their ratings on the company's stock and raised earnings estimates amid renewed confidence in the company's growth and cost management prospects.
Hewlett-Packard rose $7.375, or nearly 13 percent, to close at $56.875 on the New York Stock Exchange, where it was the most active issue on volume of more than 9.1 million.
The stock traded as high as $57.50, just shy of its record high of $57.63 reached last spring.
Late Tuesday, Hewlett-Packard reported profits of $912 million, or 87 cents a share, on revenues of $10.3 billion in its first quarter ended Jan. 31. In the year-ago period, it earned $790 million, or 75 cents a share, on revenues of $9.3 billion.
Analysts had expected earnings per share to be unchanged.
""Nearly all of the positive earnings surprise was driven by improved gross margins,"" NatWest Securities said in a report, echoing comments by other analysts citing Hewlett-Packard's strong asset management controls during the quarter.
HeWlett-Packard said gross profit margins rose to 35 percent in its first quarter, up by more than 2 percentage points from 32.8 percent in the fourth quarter.
Hewlett-Packard Chief Financial Officer Bob Wayman said Hewlett-Packard pared inventories by 8 percent in its first quarter while revenues rose 11 percent to $10.3 billion, a sharp contrast to the prior year when inventories grow 54 percent, or twice as fast as its 27 percent revenue growth.
Analysts said they were cheered by the company's ability to trim its cost of sales across virtually all its businesses -- a process which company executives said would remain a key focus.
""That's why we and a number of other people consider them the best-managed company in the (computer industry) group,"" said John Jones, industry analyst at Salomon Brothers.
Jones said he had upgraded his earnings per share estimates by 6.6 percent to $3.25 from $3.05 for the fiscal year ending in September 1997, and by 4.3 percent to $3.65 from $3.50 for fiscal 1998 and reiterating the firm's ""buy"" rating on the stock.
""I think there's upside in their numbers, but at this point I'd like to see us get through the next quarter,"" Jones said. ""We've got one more tough comparison and then the numbers get a lot easier.""
Hewlett-Packard fell short of expectations in the final two quarters of fiscal 1996 after two blockbuster quarters, and management cautioned analysts again Tuesday that its second quarter will be measured against 33 percent revenue growth a year ago.
""The exceptional growth that they had last year is really having a negative impact on them,"" Jones said. ""Right now, people are basically comfortable with this being a 15 to 18 percent growth company.""
NatWest also raised its 1997 and 1998 earnings estimates and continued to recommend accumulating Hewlett-Packard stock, which it said was very attractive at current levels and could reach $66 within in 12 months.
Goldman Sachs, which had previously rated Hewlett-Packard's stock ""outperform,"" put it on the brokerage's recommended list and raised its 1997 earnings estimate to $3.25 from $3.00.
",41
"Microsoft Corp Chief Technology Officer Nathan Myhrvold said Tuesday that contributions to new products from its basic research arm prompted its decision to triple the size of the group.
""Research has made very material contributions, so much so that we have decided to triple it,"" Myhrvold said of the company's plans, announced previously, to triple the size of its research staff from 180 currently.
Myhrvold told Reuters in an interview that every major Microsoft product line now includes features that began in its five-year-old research labs, including the grammar checker and help system in its new Office 97 products.
Microsoft has budgeted a whopping $2 billion for its research and development spending in its current fiscal year to June 30, 1997, although by far the lion's share of that goes towards product development and marketing.
Microsoft Research receives between one and two percent of the overall budget, or between $20 million and $40 million now, and Myhrvold said the company wants to increase this by a factor of three to about five percent.
Myhrvold and Rick Rashid, vice president of Advanced Technology and Research at Microsoft, said Microsoft's commitment to basic research in proportion to its industry could soon surpass longer-standing laboratories, like Bell Labs, which is now part of Lucent Technologies.
A major benefit of the research laboratories is the amount of research the company can weave into its intellectual property portfolio.
One example of research under way at Microsoft is speech recognition and synthesis.
Gordon Bell, an eminent computer scientist who works in Microsoft's San Francisco-based research group, noted in a talk to the Association for Computing Machinery here the technology has taken decades to develop.
Myhrvold said effective speech applications are now still three to five years away, but added this can now be estimated based on evolutionary improvements on current research, rather than speculation over new breakthroughs.
The Microsoft technologist says he was concerned the overwhelming enthusiasm over the Internet could subside if expectations become too high, although he added most of the dramatic Internet innovations still lie in the future.
""There's going to be a wave that makes the current use of the World Wide Web pale in comparison,"" he added.
Myhrvold added that software companies will continue to innovate and drive sales of hardware by producing software needing more powerful PCs.
One day, the process of technical innovation will also create machines to rival human intelligence, he added.
""It's pretty likely that we'll invent computers that are as smart as we are,"" he said.
""When you tell people that a machine might be smarter than they are, they get tremendously insecure and threatened,"" he noted. ""But my car is faster than I am and I don't feel threatened or jealous of my car.""
	 ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Sun Microsystems Inc on Wednesday unveiled its first mainframe-class server, marking its entry into a $50 billion market for data-center computer hardware, storage, software and services.
Ed Zander, president of the company's Sun Microsystems Computer Co, said he expected the machines to sell for an average price of more than $1 million.  
Speaking to a a gathering of analysts, customers and reporters at San Francisco's Museum of Modern Art, Zander cautioned that the new Ultra Enterprise 10000 servers, which can compete with mainframe computers on many measurements of computing performance, would have a longer sales cycle than Sun's more traditional Unix product lines.
Still, he said Sun expected to sell more of its speedy Ultra Enterprise 5000 and 6000 midrange servers as a result of its new high-end machine, which is available immediately to launch customers. It will begin shipping in volume in March.  
""It really puts Sun into some new markets where they have not been able to play before,"" said C.B. Lee, senior analyst at Sutro & Co.
Lee said the new server would be most useful for running complex database applications and for extending new computing capabilities, rather than replacing older software and hardware that have come to be known as legacy systems.  
Montgomery Securities analyst Kurt King said by extending Sun's capabilities at the high end, the new machines may help overall investor sentiment by allaying somewhat the fears of competition at the lower end of Sun's product line from PCs based on Intel chips and Microsoft Windows.
""It expands Sun's business,"" he said, adding it would inevitably help boost margins and help move the mix toward servers and away from the Unix workstation market. Sun dominates that market but Intel and Windows NT are challenging its lead.
The base Starfire configuration -- 16 processors and two gigabytes of memory -- will be priced around $870,000.  
Sun officials declined to comment specifically on margin and revenue or earnings expectations, although John Shoemaker, who heads Sun's enterprise server and storage group, repeated that Sun aimed to become the leading midrange server supplier.
It is currently third behind International Business Machines Corp and Hewlett-Packard Co, analysts said. Shoemaker said Sun estimated its rate of growth to be two to three times that of its archrivals, however.
""We think we have a realistic objective in about three years to be number one,"" he said. ""We are significantly gaining share on our competitors.""  
Sun said its 10000 series, codenamed 'Starfire', offers up to four times the performance of IBM's CMOS (complementary metal oxide semiconductor) mainframe and HP T-series servers.
Zander said the company's sales force would market the machines aggressively. ""This is a hunk of Iron,"" he said after the machine was brought onto stage using a turntable. ""Bring back the old days -- gross margin, revenue,"" he said.
Because it runs Sun's Solaris version of Unix, the 10000 series also can run 12,000 Solaris-based applications.
Shares of Sun fell 68 cents to $32.75 in Nasdaq trade.  
Sun also announced storage products, including its RSM Array 2000, which supports up to 20 terabytes for the 10000. It will begin shipping in February for Solaris servers.
The RSM Array 2000 is priced at $0.49 per megabyte, sharply lower than the $1.75 per megabyte and $1.08 per megabyte it said new EMC machines cost.
Sun said it would offer Veritas Software Corp's Veritas File System disk and information management system with its storage products, and it demonstrated it on the RSM Array 2000. Mountain View-based Veritas jumped $6.75 to $51.
-- Sam.Perry@Reuters.com, Palo Alto Bureau +1 415 846 5400
",41
"Intel Corp. stock fell for the third straight day Friday on concerns that a series of upcoming price cuts could slow the company's momentum.
The stock tumbled $6.75 to $130.50, off a total of $16.125, or roughly 11 percent, since Tuesday.
The fall led the entire market lower, and analysts cited nervousness about Intel's first-quarter results, due after the market close on Monday. The earnings report will serve as a critical barometer of whether strong corporate earnings can keep underpinning stock values.
Industry analysts said Intel's quarterly price cuts on Pentium processors are expected to lead to slightly lower prices for personal computers. Some speculated that in expectation of rival chips, such as Advanced Micro Devices Inc.'s new K6, Intel will cut Pentium prices more than usual, from 25 percent to 30 percent.
""This continues to fuel normal PC demand,"" said Kimball Brown, an analyst with Dataquest Inc in San Jose, Calif. ""This is the normal stuff that keeps stimulating the market.""
According to First Call, which tracks Wall Street estimates, analysts expect Intel to report a first-quarter profit of $2.07 a share, up from $1.02 a year ago, when Intel posted net income of $894 million on revenues of $4.64 billion.
If Intel meets those expectations, it will be the second straight quarter in which the world's largest maker of computer chips has more than doubled its year-on-year profits.
An Intel spokesman said the company could not comment this close to its earnings report, but the company said in mid-March -- within two weeks of the close of the quarter -- that market fundamentals ""remain very strong.""
Intel executives told analysts in January they expect revenues to be around $6.4 billion, about even with what it reported in the fourth quarter. Gross margins -- the difference between revenue and the costs of goods -- are expected to be even with or below the fourth quarter's 63 percent.
Analysts said Intel's bellwether role -- it has recently made a habit of re-energizing flagging stock markets with particularly upbeat earnings reports -- is especially crucial given Wall Street's current moodiness.
Wall Street is particularly wary of the outlook for corporate earnings following the Federal Reserve's March 25 decision to raise interest rates and fresh speculation about chances of another rate increase based on Friday's report of underlying price pressures at the wholesale level in March.
""People are scared. Intel is one of the biggest holdings and they can still sell it at a profit,"" said David Wu, high-tech analyst at ABN AMRO Chicago Corp. ""They're scared because tech stocks are going down. If technology stocks can't do corporate earnings, you can forget about the rest.
Analysts said the much-heralded ""whisper"" number for Intel is for it to make $2.15 a share, and that even $2.20 a share could be possible given another blow-out quarter.
But, one analyst cautioned, ""anything less than $2.15 would not be good"" for the market.
Market researcher Dataquest said last week that Intel will continue to dominate the personal computer industry, where its processors currently account for 95 percent of the market, although clone-makers will start to make inroads this year.
Intel spokesman Howard High said Friday the company will continue with its routine quarterly pricing changes, but that he saw no unusual changes in the upcoming pricing pattern from that to which the PC industry has grown accustomed.
""We do our price declines in a pretty predictable, orderly fashion,"" he said.
Analysts expect Intel to cut some prices when it unveils its new high-end Pentium II chip next month, and High said Intel's practice is to ""move other products down a notch"" to make room for the new processors.
""The movement is always in a relatively consistent direction, which is down. The rate is dependent on market conditions ... They (the pricing reductions) seem to have been pretty constant over the years,"" he added.
In February, Intel's pricing changes for its Pentium and Pentium Pro family of microprocessors ranged from no change at all to roughly a 34 percent decline, he noted.
Intel's processors range in price from around $100 for the lower-end, older models to over $1,000 for the highest-end chips.
",41
"The great Internet gold rush may be over, some high-technology industry executives say, but they see a silver lining: continued growth for leading high-tech companies.
""The Internet gold rush is over. We've had this big phenomenon, but there's not a lot of gold there,"" Frank Gill, executive vice president and general manager of Intel Corp.'s Internet and Communications Group, said in an interview on the eve of Wednesday's Spring Internet World 97 conference.
Gill is one of five keynote speakers at the Los Angeles conclave, which is expected to produce a blizzard of new product announcements from Internet start-up companies, many of them based in California's Silicon Valley.
In additon to Intel's Gill, top executives from computer makers Apple Computer Co., International Business Machines Corp. and Digital Equipment Corp. are expected to speak at the conference.
The Internet start-up explosion reached its peak nearly a year ago, when some Internet companies changed the rules of raising money in stock markets, where three years of profitability were considered a prerequisite for going public.
Yahoo! Inc., for example, went public at a valuation that peaked in initial trading at over $1 billion on its first day of trading despite less than a year of full operating history and no assurance of profits in the foreseeable future.
Despite the brakes applied to the Internet public offering market last summer, venture capital investment continues at a strong pace and major corporations are now going onto the World Wide Web, which continues to grow at a rapid clip.
Start-ups with innovative products -- including technology that ""pushes"" news and software content to users instead of making them go out and get it and so-called intelligent agents that help sift through the huge mass of data on the Internet -- are expected to flock to the conference floor hoping to flaunt their wares.
""I don't think the number of start-ups will slow down (but) their dreams for (stock) valuations will be more realistic,"" said Gill, who is due to address the conference Thursday.
Now people are ""hunkering down"" to focus on providing value to consumers and value to business, Gill said, adding that Intel itself has invested in smaller companies with pioneering technology and sought to foster new technologies, such as modems that run on cable televison systems and making telephone calls over the Internet.
Gill sees JamTV, a new online music network developed with Digital Entertainment Networks, as an example of new Internet capabilities which also drive demand for higher-performance computers.
For Intel, he said, the Internet is a ""wonderful opportunity"" because it could drive demand for more PC sales.
The Internet World conference will be the next battleground in the war between Internet pioneer Netscape Communications Corp. and software giant Microsoft Corp. for leadership in the Internet software market.
It also will give Apple Computer Chief Executive Gil Amelio another chance Wednesday to spell out his struggling company's Internet strategy, which he has said is core to its turnaround efforts, just two days before he is due to announce further layoffs in a fresh restructuring.
Whatever the plight of individual companies, industry executives at a conference held near San Francisco Tuesday said they saw no slowdown in Internet demand.
""We've seen over 300 percent growth in our backbone in 1996,"" said Robert Hagens, director of MCI Communications Corp.'s Network MCI Service, referring to the company's core Internet service lines.
",41
"Intel Corp. stock fell for the third straight day Friday on concerns that a series of upcoming price cuts could slow the company's momentum.
The stock tumbled $6.75 to $130.50, off a total of $16.125, or roughly 11 percent, since Tuesday.
The fall led the entire market lower, and analysts cited nervousness about Intel's first-quarter results, due after the market close on Monday. The earnings report will serve as a critical barometer of whether strong corporate earnings can keep underpinning stock values.
Industry analysts said Intel's quarterly price cuts on Pentium processors are expected to lead to slightly lower prices for personal computers. Some speculated that in expectation of rival chips, such as Advanced Micro Devices Inc.'s new K6, Intel will cut Pentium prices more than usual, from 25 percent to 30 percent.
""This continues to fuel normal PC demand,"" said Kimball Brown, an analyst with Dataquest Inc in San Jose, Calif. ""This is the normal stuff that keeps stimulating the market.""
According to First Call, which tracks Wall Street estimates, analysts expect Intel to report a first-quarter profit of $2.07 a share, up from $1.02 a year ago, when Intel posted net income of $894 million on revenues of $4.64 billion.
If Intel meets those expectations, it will be the second straight quarter in which the world's largest maker of computer chips has more than doubled its year-on-year profits.
An Intel spokesman said the company could not comment this close to its earnings report, but the company said in mid-March -- within two weeks of the close of the quarter -- that market fundamentals ""remain very strong.""
Intel executives told analysts in January they expect revenues to be around $6.4 billion, about even with what it reported in the fourth quarter. Gross margins -- the difference between revenue and the costs of goods -- are expected to be even with or below the fourth quarter's 63 percent.
Analysts said Intel's bellwether role -- it has recently made a habit of re-energising flagging stock markets with particularly upbeat earnings reports -- is especially crucial given Wall Street's current moodiness.
Wall Street is particularly wary of the outlook for corporate earnings following the Federal Reserve's March 25 decision to raise interest rates and fresh speculation about chances of another rate increase based on Friday's report of underlying price pressures at the wholesale level in March.
""People are scared. Intel is one of the biggest holdings and they can still sell it at a profit,"" said David Wu, high-tech analyst at ABN AMRO Chicago Corp. ""They're scared because tech stocks are going down. If technology stocks can't do corporate earnings, you can forget about the rest.
Analysts said the much-heralded ""whisper"" number for Intel is for it to make $2.15 a share, and that even $2.20 a share could be possible given another blow-out quarter.
But, one analyst cautioned, ""anything less than $2.15 would not be good"" for the market.
Market researcher Dataquest said last week that Intel will continue to dominate the personal computer industry, where its processors currently account for 95 percent of the market, although clone-makers will start to make inroads this year.
Intel spokesman Howard High said Friday the company will continue with its routine quarterly pricing changes, but that he saw no unusual changes in the upcoming pricing pattern from that to which the PC industry has grown accustomed.
""We do our price declines in a pretty predictable, orderly fashion,"" he said.
Analysts expect Intel to cut some prices when it unveils its new high-end Pentium II chip next month, and High said Intel's practice is to ""move other products down a notch"" to make room for the new processors.
""The movement is always in a relatively consistent direction, which is down. The rate is dependent on market conditions ... They (the pricing reductions) seem to have been pretty constant over the years,"" he added.
In February, Intel's pricing changes for its Pentium and Pentium Pro family of microprocessors ranged from no change at all to roughly a 34 percent decline, he noted.
Intel's processors range in price from around $100 for the lower-end, older models to over $1,000 for the highest-end chips.
",41
"Sun Microsystems Inc. and its heavyweight partners Wednesday launched a series of initiatives aimed at making its Java software perform more speedily on devices ranging from ""smart cards"" to supercomputers.
The announcements by Sun and Java partners like computer power International Business Machines Corp., software giant Microsoft Corp. and Web browser leader Netscape Communications Corp. came at the second annual JavaOne software developers' conference in San Francisco.
Analysts see Java -- a computer language which promises to enable programmers to write one piece of software that can run on many different systems -- as a technology that will eventually creep into pretty much every company's computers.
Sun said it would introduce a stronger Java for Microsoft's dominant Windows operating system this summer and would further enhance Java's performance and security by the end of the year.
The company, which before Java was best known for its computer workstations, said it also had devised Java variants optimized for devices ranging from large data center computers to smaller, hand-held machines and even pagers and cellular phones.
On the hardware side, Sun announced licensing and partnership agreements with companies like Japan's Toshiba Corp. which will put semiconductors designed around Java in a variety of devices from cellular phones to television set-top boxes, navigational devices known as global positioning systems and the aircraft electronics known as avionics.
A previously announced version of Java software that will run on older personal computers using Microsoft DOS will be dubbed JavaPC and will be available this fall for less than $100 for machines using Intel 486 and Pentium microprocessors.
The company estimates JavaPC will offer new life to some 180 million such PCs.
Java, unveiled just two years ago, has produced an awkward alliance among fiercely competitive rivals. Wednesday's proceedings at San Francisco's Moscone Center, which was packed by thousands of software developers, were highlighted by the usual industry controversy.
Down the hall from where Sun Chief Executive Officer Scott McNeally and other major Java figures were giving keynote addresses, Microsoft Chief Executive Officer Bill Gates was due to show off his company's Java work later in the day.
""Certainly, the center of the nuclear attack is going to be right here at ground zero in San Francisco,"" Gartner Group analyst David Smith said of the dueling speeches.
Sun hopes that by de-emphasizing individual platforms, especially Microsoft's Windows, it can level the playing field and extend sales of computer systems like its Solaris, which runs on the Unix operating system.
Gates, who is not used to playing second fiddle, and other industry players over time are expected to vie with Sun for leadership of the growing number of developers entranced by Java, now estimated at 400,000.
",41
"Internet start-up companies continue to plunge into a fiercely competitive, still-embryonic market -- but major investors expect an equally fast shake-out in the next few months.
Internet security, Internet-based telephone service and Web publishing were among the vibrant but increasingly crowded sectors for new products and services from more than 60 companies demonstrating their wares at an industry conference in San Diego.
""There are a lot of things here that are products, not companies,"" said Thomas Winter, general partner at Onset Ventures in Austin, Texas, after viewing demonstrations at the three-day Upside/David Coursey Internet Showcase.
What separates the Internet market from previous start-up investment booms like personal computers and biotechnology, venture capitalists say, is the potential market opportunity is expected to be far broader.
John Doerr, the Kleiner Perkins Caufield & Byers venture capital guru often hailed as someone who starts whole industries rather than just companies, calculates the Internet venture market is taking off at three times the velocity of the PC industry 15 years ago.
Yet the speed also means sectors of the Internet industry have gone through consolidation phases far more rapidly than more mature industries.
Just a year ago, four Internet search and navigation companies were hitting the public market. But, shortly after that, merger activity began swiftly for other, non-public navigation services.
Some industry executives and venture investors are already seeing a similar phenomenon in other areas. With the cool state of the market for initial public offerings, many companies are expected to seek corporate investment or buyouts.
Many have shifted their business plans to the corporate market in an effort to win corporate information technology dollars. Partly, this is also due to a view that public Internet access will not speed up any time soon.
""There's no panacea in the bandwidth area,"" said Intel Corp. executive Victor Varney, using the industry term for the speed of an Internet connection. Varney noted that an independent survey projects that by the year 2000 fewer than 20 percent of individuals will have speedier connections than a common phone line.
One example of overcrowding in an Internet business sector is the category of ""push computing"" where more than two dozen companies are competing, including Net software heavyweights Microsoft Corp. and Netscape Communications Corp.
Many industry executives expect Microsoft and Netscape will turn push technology -- the automatic delivery of customized information over the Internet to computer users -- into a commodity market, leaving room for only a few providers.
Venture capitalists see this as an example of a broader shake-out in the Internet business.
""I think we're still deeply into the settling-out period,"" Onset Venture's Winter said.
""Is push going to be a business? It may turn out to be a technology like AI (artificial intelligence),"" rather than a full-blown business, he said.
The pace of the initial public offering (IPO) market for Internet start-ups was at its most frantic last spring when some companies gained $1 billion initial market valuations despite little promise of sustainable profits.
At the time, investment bankers joked you could write ""Internet"" on a dollar bill and they could take it public for $10, but no longer.
""Within six months 'Internet' is going to be a nasty word to use in an IPO. I predict no company going public will want to be an Internet company by then,"" said one industry executive.
Nevertheless, major companies like microprocessor maker Intel are seeking to drive adoption of Internet technologies forward and to encourage continued entrepreneurial investment, partly to ensure the continued growth of their own businesses.
""We don't think there has been enough thinking through of new content capabilities of the Internet,"" said Varney, who predicts one day there will be ""a much more aggressive integration of the Internet than we see today.""
",41
"Silicon Graphics Inc. said it will launch a new line of computer workstations Monday as the company moves to fend off the threat of increasingly high-powered personal computers.
The new line of Octane workstations fills out the broadest revamp ever of Silicon Graphics' product line. It includes a powerful new design aimed at bolstering its No. 3 position in the market for workstations running the Unix operating system.
The Mountain View, Calif.-based company discussed its new products in interviews ahead of Monday's formal release.
Silicon Graphics will also shave the prices of its Indigo2 Impact 10000 workstations by up to 22 percent as it aims to position the line between its entry-level O2 machines, introduced in October, and the new Octane models.
The powerful machines are typically used by engineers in intensive number-crunching tasks ranging from oil exploration and molecular modeling to flight simulation, computer-aided design and video and television.
The new Octanes share many of their components with the company's new supercomputing design unveiled in October and feature technology that greatly increases the speed with which data moves between its components.
""What SGI has done is eliminate most of the chokepoints, and you get the full effects of most of the microprocessor"" that is the heart of the computer, said David Weisberg, publisher of the newsletter Engineering Automation Report in Englewood, Colo.
Weisberg and industry analysts said such performance was important to Silicon Graphics' effort to fend off the threat to its traditional high-end graphics markets by increasingly powerful PCs built with Intel Corp. microprocessors running Microsoft Corp.'s Windows NT operating system. Shipments of the computers based on what analysts have dubbed the ""Wintel"" PC architecture surpassed traditional workstations for the first time in 1996, according to preliminary data from International Data Corp.
The market research firm said Wintel-based systems grew 38 percent worldwide to 831,000 units. With revenues rising 16 percent to $3.7 billion while sales of traditional Unix workstations declined, International Data said it expects Windows NT-based systems to continue gaining share in 1997.
Weisberg said he was concerned that Silicon Graphics, along with Sun Microsystems Inc., has chosen to shun Windows NT and adapt a Unix-only approach despite the fact many newer software developers favor Windows NT.
""Silicon Graphics is, in effect, eliminating some of the very good software vendors,"" he said. ""If they don't make some type of a move to support Windows NT by the end of the year, 1998 could be a very difficult year for Silicon Graphics.""
Drew Henry, product line manager of Silicon Graphics' power desktop line, said that with the design used in its O2, Indigo2 and Octane systems, Silicon Graphics can ""sell levels of performance that are well above levels of performance that you're going to get out of a Wintel system.""
About half of the new Octanes, which Silicon Graphics plans to start shipping by the beginning of March, are expected to be sold through third parties, he said.
International Data analyst Karen Seymour said the Octane's new design, or architecture, would give it ""headroom"" for future high-end performance and help it gain market share. But she said it was not likely to challenge the position of first-place Sun Microsystems and No. 2 Hewlett-Packard Co..
""I think the most critical aspect of this announcement is going to be SGI's ability to execute,"" she said.
Silicon Graphics last week said delays in stepping up production of new computer models hurt financial performance in its December quarter despite strong demand for new products which pushed its orders to record levels.
Pricing for the Octane systems starts at $24,995, the company said.
The new prices for Indigo2 machines, which take effect Feb. 1 and include up to a 33 percent reduction in memory and storage upgrade prices, reduce the price of its lower-end Indigo2 Solid Impact to $19,995 from $24.995.
",41
"NEC Corp's NEC Computer Systems unit will on Monday launch a set of personal computers aimed at what it sees as a huge North American market of businesses with fewer than half a dozen employees.
The computers, which will include the first customized for this market to include Intel Corp Pentium Pro processors and a special software bundle from Microsoft Corp, are aimed at the needs of small businesses.  
They include APC uninterruptible power supplies,  Iomega Corp Zip drives for storing onto 100 megabyte floppy disks, NEC Multispin 8X CD-ROM drives, telephone headsets with built-in microphones and stereo speakers.
The four ""Ready Office"" models range in price from $2,199 to $2,999 and include processors ranging from the 133- or 166- megahertz Pentium to Intel's 180-megahertz Pentium Pro.
The target market, which NEC calls the ""Tiny Office/Home Office"" (TOHO) segment, is a subset of the Small Office/Home Office market targeted by many computer makers and includes a vast array of professionals and service businesses.  
According to IDC/LINK data, NEC said, this group accounts for around 56 percent of the businesses with fewer than 100 employees in the United States, referred to in the computer industry as the SOHO, or Small Office/Home Office, market.
Furthermore, NEC said in a white paper, the group will purchase 2.23 million computer units in 1996, or some 40 percent of all units sold into the SOHO market.
Accountants, florists, doctors, graphic designers, real estate agents, writers, restaurants and travel agents are among the businesses NEC aims to address.  
NEC's research found these one to five person businesses generally lack the corporate infrastructure found in larger operations, so often one personal computer-level machine must carry the weight of all the organization's activities.
""TOHO business owners require computing solutions that will not only auotomate business processes, but assist them in managing the business as well,"" Timothy Chin, NEC Computer Systems senior product manager, wrote in a market report.  
""TOHO business owners need computing solutions that will help them to better wear each of their several hats, including those of president, chief financial officer, marketing professinal, MIS technician, business or legal advisory, even secretary,"" he said.
""In TOHO companies, the computer is the busineess -- without it core activities would come to a screeching halt.""  
Steffanee White, a product manager at NEC Computer Systems here, said in an interview that NEC had taken a ""bottom-up"" approach to designing its products for the TOHO market, stripping out unnecessary features like high-end audio and graphics or computer games and children's educational titles.
Through a partnership with Microsoft, NEC said it will be the first to include on its machine the combination of Windows 95 with a business software suite incorporating Word, Excel and Publisher 97 and special Excel and Word templates.  
The computers are also fitted with Peachtree First Accounting, Microsoft Schedule+, Money, Bookshelf and Automap Streets, in addition to voicemail, fax, e-mail and Novell Inc network certification, the company said.
For the reseller channel, the company will ship four roughly equivalent PowerMate Office models ranging in price from $2,100 to $3,200, with the high-end PowerMate Office Pro 2620 running the Windows NT Workstation 4.0 operating system.
NEC said the products will be available by mid-October.
System prices do not include monitors, it said.
",41
"In the next half century, computers will be ubiquitous in the home, waking us up to cheerful songbirds, making the morning coffee, filling the bathtub and driving us to work, according to leading computer scientists.
In fact, advances in computer imaging and communications known as ""telepresence"" may eliminate the need to drive anywhere to hold business meetings and conferences, several scientists told the Association for Computing Machinery's 50th anniversary exposition and convention here.
The theme of the three-day convention in the heart of Silicon Valley was to predict the progress of computing in the year 2047, 50 years from now.
""People will expect that when you wake up in the morning, you should be able to talk to your house,"" said Vinton Cerf, the scientist often described as the ""father of the Internet.""
Pervasive use of computer chips and smart electronic sensors will link everything from the refrigerator, which can be automatically locked to help a dieter's self discipline, to intelligent toilets, already available in Japan, that can analyse human waste to produce routine health reports, he said.
Three leading scientists - former Digital Equipment Corp. researcher Gordon Bell, Hewlett-Packard Co. research head Joel Birnbaum, and Microsoft Corp. Chief Technology Officer Nathan Myhrvold -- predicted computers will rival human intelligence in the next half-century.
A person could spend the first 40 years of life doing everything possible, then spend the rest of life reliving the sensations, Birnbaum speculated. Or one could chose to adapt the taste buds of a connoisseur.
Just days after reports emerged from Scotland of the successful cloning of a sheep, an eclectic group of some of the world's most advanced thinkers in science, technology and the arts said biology may also hold keys to the future of the most advanced computing devices.
For example, Birnbaum described how synthetic DNA strands could theoretically be used one day to create biological computing devices in which the DNA contained in one test-tube could compute one billion billion operations at once.
Birnbaum said it was difficult to know if this could be achieved in the next 50 years, but it was theoretically feasible. He said quantum computing, in which calculations are made using subatomic particles, and optical computing also were promising areas.
Myhrvold said software development also could move towards software that could re-generate itself for new purposes.
But the experts also warned that eminent technologists in the past have also made very mistaken assumptions.
Bell noted that International Business Machines Corp.'s Thomas Watson, Sr., had predicted when the first general purpose computers were being designed in the mid-1940s that the world would need no more than five computers in total.
Digital's founder, Ken Olsen, projected in 1977 there would never be a reason for using computers in the home.
Now roughly one-third of U.S. households have personal computers and computing devices are used in devices from dish washers to automobiles.
On the other hand, many people thought voice recognition would advance far more quickly than it has.
Massachusetts Institute of Technology professor Pattie Maes described how software agents can already be used at the MIT Media Lab to determine whether there's enough milk in the fridge or alert you if the value of your stock portfolio has plummeted.
Maes described software agents under development like Kasbah, which will be available from MIT soon and buys or sells items such as personal computers electronically.
""The first 50 years was largely about hardware. My guess is the next 50 years is going to be about software,"" said John Sainson, general manager of International Business Machines Corp.'s applications solutions unit.
((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Intel Corp. executives said late Tuesday the company has agreed to invest cash and technical know-how in a new company to deliver multimedia content by satellite to personal computers across Europe.
Intel said the investment, to be formally announced at the CeBIT technology trade fair in Hannover, Germany, on Wednesday, will be Intel's first investment in personal computer delivery services, although it has sought to foster other technologies that can help drive the use of personal computers worldwide.
Intel will hold a minority stake in the newly formed European Satellite Multimedia Services S.A. (ESM), said Leslie Vadasz, Intel senior vice president and director of corporate business development.
""Europe has a lot of satellite use, so it was an obvious place,"" to begin such a service, Vadasz told Reuters. ""There is a need to provide a new kind of service for PC users.""
Industry sources valued the Intel investment at $15 million, with Luxenbourg's Societe Europeenne des Satellite (SES) holding a majority stake in the new company, which will also be based in Luxenbourg.
Intel executives declined to comment on the cash value of the deal, but said the company would also be contributing technology to the endeavor, and hopes to bring in partners capable of supplying multimedia content to the venture.
""Part of our contribution will be technology. Part of it will be our relationship with many of our customers, content and media companies,"" Vadasz said in an interview.
Other investors are expected to be announced in the near future, he said. Negotiations with prospective investors aere under way, he said, but he declined to elaborate.
The new company will launch ASTRA-NET, a system for communications using SES's ASTRA satellite system already in place. The first business-to-business communications links will be operational in the second half of this year.
ESM is expected to eventually bring PC services to European homes much as increasingly popular satellite television services, like BSkyB, have done for TV.
Intel noted that more than 16 million personal computers bought in Europe last year, according to the research firm Dataquest, and 23 million European households have direct access to ASTRA satellite transmissions.
ASTRA-NET reception throughout Europe will require 50-60 centimeter satellite dish, less than two feet in diameter, connected to a PC equipped with a high-performance Intel Pentium microprocessor and a PC card which is compatible with Europe's Digital Video Broadcasting (DVB) transmissions.
Intel said business data can be sent to servers at speeds up to 38 megabits per second, well above the 56 kilobit speeds of leading-edge telephone modems or the 128 kilobits per second rates of Integrated Digital Services Network (ISDN).
Speeds of six megabits per second to the home will be possible, with technology likely to be available by the year 2000 which could enable two-way satellite traffic.
At first, traffic will be broadcast-only, however, with the capcity to send data and multimedia programming at speeds hundreds of times faster than over conventional phones.
""As satellite technology moves along, there's be more and more opportunity to do an on-demand type of service,"" such as higher-speed Internet browsing. ""Initially, this will be a push technology only.""
Vadasz said Intel's work on developing technology for cable modems and on Ethernet local area network (LAN) adapters can be brought to bear in the project. Intel also has been working on a wireless data standard dubbed Intercast.
Vadasz has argued that PC communications have lagged wellbehind other technologies, stating in a recent editorial letter to the San Jose Mercury News that such services could result in more than $10 billion in annual U.S. sales alone.
To foster such a market, he wrote, higher bandwidth connections with instant access, multimedia integration, security and affordable pricing were necessary features.
((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Hewlett-Packard Co., seeking to extend its position as a leader in electronic commerce, said Wednesday it agreed to acquire VeriFone Inc. in a stock swap worth $1.18 billion.
Hewlett-Packard said VeriFone, a leader in electronic payment hardware and software, will be operated as an independent unit of HP. Verifone stockholders will receive one HP share for each VeriFone share, the company said.
The acquisition is a big step in HP's drive to develop products for what it calls the ""on-ramps"" and ""off-ramps"" of the information superhighway, a business that includes computer printers and scanners, where Hewlett-Packard already has a dominant market share.
In an intervew last week the company's top Internet executive, Ira Goldstein, said Hewlett-Packard aimed to become the information appliance supplier to the fast-growing market for Internet technology.
The Internet portion of the electronic commerce market alone is expected to reach $95 billion in the United States by the year 2000, according to research by International Data Corp.
HP said the proposed acquisition would combine its strength as the second-largest U.S.-based computer equipment company with VeriFone's leadership in electronic commerce. VeriFone had net revenue of $472 million in its 1996 fiscal year.
The acquisition price of about $1.18 billion was based on HP's closing stock price of $50.50 a share Tuesday. As of Monday, VeriFone had 23.3 million shares of common stock outstanding, the companies said.
HP's stock slipped by $1 to $49.50 in midday trading on the New York Stock Exchange, where it was one of the most heavily traded issues.
Verifone jumped $17.625, or 59 percent, to $47.75 in very heavy trading on the NYSE, after initially being halted, as investors priced in the value of the stock swap.
Redwood City, Calif.-based VeriFone, which was founded in 1981 and pioneered automated credit card transaction systems, has recently expanded to include conducting business over the Internet and ""smart-card"" products for homes.
Smart cards have imbedded computer chips that can store so-called electronic cash and other information.
Just last week, Citicorp's Citibank launched a pilot programme with VeriFone to test smart card use that will allow selected customers to download funds onto smart cards using devices in the home or office.
VeriFone estimates that its systems handled more than $520 billion of the $800 billion in electronic transactions conducted in the United States last year.
HP said the two companies' technologies complement each other, with HP's focus on Internet security technologies and major corporate markets melding with VeriFone's expertise in moving money.
""Central to HP's strategy to achieve this vision is the ability to move money securely from end to end over the Internet, an area VeriFone has pioneered through products and strategic relationships,"" HP Executive Vice President Rick Belluzzo said.
The companies' relationship also includes providing products for the Visa/MasterCard Secure Electronic Transaction protoco, which is beginning to roll out this year, for secure credit-card payments over the Internet.
",41
"@Home Network CEO Tom Jermoluk said the $48 million raised by the high-speed Internet service group allows it to be selective in the timing of an eventual initial public offering (IPO).
""We're not out seeking other forms of capital,"" Jermoluk said after the company announced the private placement in preferred stock, accounting for about 4.5 percent of the company and valuing it at a whopping $1.07 billion, nearly 20 times its initial value in 1995.
""We are a company that has been designed from the beginning to be one that does eventually go to the public market,"" he added, declining to discuss any specific schedule for when it might go public.
""The nice thing about now having raised this cash is we're flexible,"" he told Reuters in an interview after the funding announcement. ""Whenever the market and the company conditions are right together, then we'll be able to go.""
Despite the hefty valuation for @Home - more than double the $425 million Microsoft Corp agreed to pay for fledgling startup WebTV in its mostly stock deal last week -- @Home is heavily dependent on its partners to build out their cable networks to accommodate @Home.
While WebTV has sought to gear its network to deliver Internet content at slow speeds over ordinary phone lines to a television set-top box of its design, @Home is aiming to provide speedy, high-bandwidth service from the start.
Technically, it can offer service at speeds more than 30 times faster than the currently-deployed dialup modems, but its seven cable operator partners will have to spend heavily upgrade their systems to accommodate @Home.
""Certainly hundreds of millions of dollars (are) required to upgrade all of their systems,"" he said.
For example, taking @Home partners' current rights to supply cable to some 45 million homes in North America, Jermoluk said $50 dollars a home would be a conservative investment requirement. This would be roughly $2.25 billion if every home were actually to be hooked up.
""That's a lot of dough over the next five or six years of doing upgrades,"" said Jermoluk, who estimated it would take that long ""to get a majority of those homes.""
@Home has already begun residential deployment in more than half a dozen citites, with each of its three primary investment partners.
@Home's partners are not required to roll out an Internet service, but if they do, they have agreed it will be the @Home service. As a hedge, @Home has started a trial of Asynchronous Digital Subscriber Line (ADSL) for use eventually by customers outside its partner's regions.
""In the areas where we don't have cable we ourselves will go in with an ADSL type of approach,"" he said, adding he will deploy ADSL selectively this year although he felt it is two years behind cable and modem prices are high.
@Home, which is available for $35-$40 a month in a handful of areas, is also leading an @Work business for telecommuters and other business users priced around $150 a month for a direct link to an office machine.
Jermoluk said the commercial business will potentially become half of its revenue.
""It's a very attractive market,"" he said.
@Home Network is also looking to expand outside North America, Jermoluk said.
""We've been in talks with a number of different countries,"" he added. ""I think the obvious targets are the big ones, like Japan, UK, Germany - the heavy population centers."" (sam.perry@reuters.com, Palo Alto Bureau 415 846 5400)
",41
"Separate divisions of Hewlett-Packard Co. will Monday unveil new products executives say will reduce the difficulties and costs of owning and operating computer networks.
The products, which HP representatives said are geared to ease computing systems management while also reducing costs, include manageability tools and new additions to the company's HP Vectra line of business computers.  
The Palo Alto-based company is also launching a second generation of its HP NetServer E series server devices for small and medium-size businesses which typically have little or no computer systems management staff.
Computer servers are the machines which tie together networks of computers and other devices, such as printers and centralized data storage.
In an additional announcement, HP's printer division said it is adding to its HP OfficeJet ""all-in-one"" line of machines which combine in one device tasks such as printing, scanning, copying and fax capabilities.  
HP said its HP Vectra personal computer models will now come loaded with TopTOOLS, a new management tool provided free which enables systems managers to handle configuration, security and a variety of other tasks from any location on a computer network.
TopTOOLS is part of a series of enhancements HP is preparing in an effort to reduce the cost of operating networked personal computers, which some research studies have estimated can cost up to $12,000 a year to run.
The tool has a broad range of features, including the ability to remotely configure and upgrade systems, handle security features and keep an inventory of their PCs.  
HP said it will also provide a sweeping upgrade of its HP Vectra personal computer lines, including models equipped with Intel Corp.'s Pentium processors with MMX technology, enhanced 10/100 Base-T LAN interface and 4.5 gigabyte Ultra SCSI hard disk drives.
Its new high performance XA Pentium Pro processor HP Vectra PC models, for example, will begin at an average selling price of $2,624 for 200 Megahertz models, for example, or $3,583 with the Ultra SCSI drive.  
New models of the HP Vectra VL line will include a 64- bit graphics engine and new S3 Trio64 V2 video controller for enhanced graphics. The line in various configurations will range in price from $1,235 to $1,871, HP said.
The HP Vectra VA PCs will incorporate manageability features and have average prices of at $1,827 to $2,221 and the HP Vectra VE personal computers are to be value priced with expected prices in the $1,050 to $1,200 range.
HP also said it will launching the second generation of its NetServer E Series, the E40 model, just six months after it introduced the line last September.  
HP faces stiff competition from Compaq Computer Corp. in the space, but still reckons the top market competition is use of a generic personal computer tilted on its side and configured as a server.
For this reason, HP is adding features to make the E 40 models, priced at $2,160 to $2,630 and available on April 1, extremely simple to use for a company which may have no internal systems management staff.  
Elaine Lennox, worldwide E-Series product manager at HP's Network Server Division, said the machines include a simple alerting mechanism for problems and contain a remote console for resellers to fix problems remotely.
""We only tell you when there's a problem,"" said Lennox, adding each unit will be shipped with Novell Inc.'s IntranetWare for Small Business pre-installed so it can be activated using a key code if a customer wishes to add the network operating system.  
HP's printer business said it is launching its OfficeJet 500 printer-fax-copier-scanner which can print black text at speeds up to four pages a minute and color documents at a rate of a page a minute.
The new machine, expected to be available in May, are targeted at the small office, home office market and are expected to cost around $500 in the U.S. market.
HP said it will continue to sell its OfficeJet 300 for a reduced price, about $400 in the United States.  
HP is also introducing a professional multifunction printer, the OfficeJet Pro 1150C color printer-copier- scanner for about $1,000.
The product can print black text at speeds up to eight pages a minute and mixed text and color documents at speeds up to four pages a minute, with copy speeds only slightly slower. It can scan color images in 10 seconds.
HP is also introducing a 14-inch liquid crystal display (LCD) flat-panel PC monitor, which is expected to ship in April at an average U.S. selling price of $2,419.
The sleek monitors are more energy efficient than cathode ray tube devices and are particularly useful in areas where workspace is limited, HP said. ((sam.perry@reuters.com, Palo Alto Bureau 415 846 5400))
",41
"Intel Corp., the world's biggest maker of computer chips, said Tuesday its workers received about $820 million in cash bonuses, profit sharing and retirement pay for the company's record year in 1996.
""The average employee received a minimum of about 33 percent payout over their base salary for the year -- about four months of extra income,"" Intel Chief Operating Officer Craig Barrett told reporters in a conference call.
For an entry-level hourly worker earing $25,000 a year, the combined package of added compensation and benefits for last year amounts to roughly $8,000 extra, Intel said.
""We think it's also been a phenomenal benefit to our shareholders by motivating our employees to do the best possible job they can for our shareholders and our customers,"" said Barrett, who will become Intel's president this spring.
Intel said the $820 million in 1996 cash profit-sharing and retirement contributions exceeded the company's total 1981 revenues and was roughly equal to its 1991 net income.
Profits at the Santa Clara-based semiconductor company, which supplies the microprocessors used in four out of every five personal computers shipped, last year soared to $5.2 billion as revenues hit $20.8 billion.
Barrett said he did not begrudge employees any of the extra benefits from contributing to record results, and the company now plans to make all its employees eligible for stock options beginning with its next plan, which starts in April.
""This outstanding year would not have been possible without the remarkable efforts of Intel employees around the world,"" said Barrett, heir apparent to Intel CEO Andy Grove.
Intel ended 1996 with a workforce of around 48,500.
Separately, Intel Chief Financial Officer Andy Bryant told an investment conference in New York City that Intel remained on track in the first quarter to meet its financial targets, as personal computer unit sales continue to grow.
The stock of Intel closed up 12.5 cents at $151.75 on the Nasdaq market, where it was third most heavily-traded.
Barrett said the company last year paid out $214 million, or the equivalent of 26.9 days' salary for each Intel employee, under the Employee Cash Bonus Program. All employees receive the cash profit-sharing in six-month installments.
In 1996, the company also extended its Employee Bonus profitability-based program to all employees. The plan, based on growth in Intel earnings and achievement of an employee's business group goals, paid out a total of $360 million.
A one-time bonus marking Intel's record-breaking year paid $1,000 to each U.S. employee and a locally adjusted figure to each non-U.S. employee, or a total of $45 million.
Intel said that for the ninth consecutive year it contributed the maximum allowed by law to its employee retirement program, or 12.5 percent of employees' pay -- a figure which totaled about $200 million.
Intel has sought to build one of the corporate world's most innovative compensation and benefits packages as a way of attracting top employees and to reward them for contributing to the company's long-term growth and profitability.
Intel, whose shares have vaulted 180 percent in the past year despite moribund results at many rival semiconductor companies, said it was one of only a small number of companies to have instituted an across-the-board options plan.
Even the lowest-level hourly workers will receive options to buy a minimum of 50 shares in a five-year plan in which the employee gains one-fifth of the allotment each year. Barrett said Intel also spends roughly 6 percent to 7 percent of its payroll, or around $150 million, on employee training each year to help employees advance in their careers.
Barrett said Intel's generous compensation plan and the hardships at other companies resulted in lower jobs turnover last year. He declined to specify the exact turnover rate, but said ""We're in the relatively low single-digit range.""
",41
"Amid pictures of unimaginable brutality -- of soldiers holding aloft severed heads, of young girls strapped to chairs while being raped -- lies the truth about Japanese war atrocities in China, says author Shi Young.
Shi, whose book ""The Rape of Nanking (Nanjing): An Undeniable History in Photographs"" documents one of the most controversial episodes of recent Chinese history, is collecting material for an exhibition to be held this year in the U.S. city of St. Louis.
The book and the exhibition, he said, set the record straight about the events of 1937 that came to be known as the Rape of Nanking, then the capital of China.
""Our aim was accuracy,"" Shi said in an interview while en route through Shanghai to Nanjing, as the city is now called, to interview survivors of the massacre on video and to collect artifacts from the Nanjing Museum.
Shi said the video-taped interviews and artifacts will be included with photographs from the book in an exhibition to be held later this year at the Holocaust Museum in St Louis. The date has not yet been set.
Among the people to be interviewed was Liu Xiuying, one of 10 survivors of the Nanjing massacre now demanding US$813,000 each from the Japanese government as compensation for their suffering at the hands of invading troops.
Now 79 years old, Liu appeared in a Tokyo court in February and told how, as a pregnant 19-year-old in 1937, she was attacked, raped and stabbed 37 times by Japanese soldiers who left her for dead. She lost her baby the following day.
Shi is also updating the book for a second edition, he said. The first print run of 7,500 copies published last year is close to sold out.
PICTURES OF HORROR WERE SOLDIERS' SOUVENIRS
Shi and fellow author James Yin spent two years collecting more than 400 photographs that depict the horror of the Japanese occupation of Nanjing, many taken by Japanese soldiers as souvenirs of their experiences.
The ""souvenir"" pictures were kept by two Chinese men who worked in a Nanjing photo processing laboratory where the soldiers took their film to be developed, Shi said.
""Japanese soldiers enjoyed what they did to Chinese people -- there are photos of them smiling,"" said Shi, a Beijing-born Chinese who has lived in the United States for 16 years.
""They used live people as bayonet practice targets,"" he says, pointing to a blurred and grainy picture in the book.
""These soldiers,"" he continues, holding up a picture of five Japanese soldiers squatting around the body of a man, ""dug out the heart of a Chinese to be an appetiser that goes with wine. They ate his heart and they took these pictures as souvenirs.""
The book's major achievement, Shi said, was arriving at the exact number of Chinese people slaughtered by Japanese troops in the two months after Nanjing fell, on December 13, 1937.
Using information from a wide range of sources, including diaries kept by Westerners living in Nanjing at the time and inscriptions on mass graves -- the authors conclude that 354,780 Chinese people died in the massacre that followed.
""This number does not include 'small' killings, where a family is killed here, a dozen or so people there,"" he said.
""And it doesn't include rape killings. The Japanese had a habit of killing women after they raped them, and those can't be counted because we don't know where they are buried.
""So (in the book) we're only talking about mass killings -- 300 or more in one go,"" he said.
JAPANESE WARTIME ATROCITIES A FESTERING ISSUE
The issue of Japan's wartime atrocities in China and elsewhere in Asia has festered since the end of World War Two.
Anti-Japanese feeling in China still runs deep, not only among people old enough to remember Japan's 1931-45 occupation, but among young people too.
A survey of 15,000 people, most of them under 40, carried out by the China Youth Daily last year found that more than 40 percent of young Chinese have a negative impression of Japan.
More than 80 percent of the people surveyed said the first thing they thought of when Japan was mentioned was the Nanjing massacre, recent press reports on the survey said.
More than 97 percent said they could not tolerate Japan's repeated attempts to whitewash its wartime atrocities, and 56.1 percent of those surveyed characterised Japanese people as ""cruel"", the survey found.
Beijing puts the number of Chinese killed and wounded during the Japanese occupation at 35 million.
Lack of accurate and objective information has given successive Japanese governments an excuse for denying responsiblity for atrocities such as those committed in Nanjing as well as the use of women as sex slaves, now euphemistically known as ""comfort women"", Shi said.
But the on-going clamour for apologies and compensation had ""accomplished very little so far"", he said.
It would be better to direct that energy towards educating people about the truth of the atrocities, he said.
",27
"China could be sitting on ample copper supplies to get it through the next few months, wiping out the need to buy on the world market whether current high prices fall or not, traders and analysts said on Thursday.
Copper stored in Shanghai warehouses could be around 100,000 tonnes if talk is to be believed, a Chinese trader with a Beijing-run firm in Singapore said.
Shanghai Metal Exchange (SME) warehouse figures released last week put copper stocks at 16,772 tonnes, which a SME copper futures trader told Reuters was about two months' supply.
Another Chinese trading source said he had confirmed with sources at the Chinese State Reserve Bureau that Shanghai warehouses held 80,000 tonnes of central reserve copper.
The market has been plagued in the past year by talk of 100,000 tonnes of copper being held in Shanghai. Officials have consistently denied any knowledge of such a stockpile.
That copper and another 200,000 tonnes were reported to have been channeled into China after last year's revelations by Japan's Sumitomo Corp of $2.6 billion in copper trading losses, which led to significant price falls.
Many market and industry sources said at the time that the copper, moved out of bonded warehouses and through customs in October and November 1996, was bought by Beijing's metals trading arm China National Non-ferrous Metals Import/Export Corp, possibly in conjunction with Sumitomo.
Neither corporation has made an official comment.
Analysts with private think tank Shanghai Colub Consultant Co have said China's carryover copper stocks from 1996 imports could be as high as 250,000 tonnes.
The official China Daily Business Weekly said last Sunday that China amassed a stockpile in 1996 of 170,000 tonnes of copper which would be used to fill the domestic supply/demand gap in 1997.
It put 1997 imports at more than 130,000 tonnes, for demand of 1.2 million tonnes and production of about 900,000 tonnes.
Imports in 1996 of raw and uncast copper were up 32.7 percent to 714,248 tonnes, according to official figures. Exports were 133,700 tonnes, leaving net imports at 580,600 tonnes, the figures show.
""I'm convinced they have enough (copper),"" a trader with a major European firm said.
""Everyone has been waiting since Chinese New Year for this huge Chinese buying spree... it is possible there are tens of thousands of tonnes of copper there,"" he said.
Whether or not the red metal is moving into tight supply in China -- as some traders looking at falling SME prices believe -- few traders polled by Reuters see Chinese buying at current prices.
London Metal Exchange (LME) copper prices dipped slightly in inter-office trading late on Wednesday after putting in a weak performance in ring activity. At 1900 GMT three month prices were indicated at $2,330/4 per tonne, down from a kerb close of $2,338.
London analysts said they saw copper testing the $2,313 support level in the near term.
""My (Chinese) customers are telling me they would rather close their factories than buy at these levels,"" said Vinod Kumar, general manager of Singapore trading house Donald Macarthy.
""They can't make any money if they buy above $2,200 (per tonne),"" Kumar said by telephone.
Other trading sources in the region and in China put prices favourable to Chinese importers at $2,000 to $2,300 per tonne.
-- Shanghai newsroom (86-21) 6279-8544
",27
"China is awash with steel and suppliers scrambling for a piece of one of the world's few active markets and keeping prices down while they go about it, traders and industry executives in Asia said on Tuesday.
""The competition is forcing prices down,"" a senior executive with a Western firm said.
Prices had fallen 10 percent and more over the past couple of months, an executive with a Japanese steelmaker said, with cold-rolled steel fetching between $400 and $430 a tonne and galvanized steel up to $100 less than that.
Steel industry figures said China was flooded with cheap steel, much of it from the former Soviet Union, and most gave a pessimistic outlook for the recovery of the Chinese market.
""I can't see the bottom yet,"" the Japanese executive said. ""People have been hoping for a recovery, but I think there is no hope for improvement within this year.""
Figures published in the official Chinese press in July showed imports of steel billet and rolled steel in the first five months of 1995 at 6.83 million tonnes, up 18.9 percent on the same 1995 period.
Exports of these products were down 31.8 percent, to 2.59 million tonnes, in the January-May period, press reports said.
A flood into Asia of European steel makers fleeing soft markets at home had increased the choice of quality products in China five-fold, the western source said.
Steel stockpiles that had been mounting since the phenomenal buying of 1993 -- when 33 million tonnes of steel entered the country -- were slowly being whittled away, traders said.
Total 1994 imports were 22 million tonnes. In 1995, they were 15 million.
Jason Zheng, senior China and regional steel analyst at Morgan Stanley in Hong Kong, said he estimated China's steel stockpile at 30 million tonnes.
The quality was unknown, but doubtful and should not dent China's need for high quality product, he said.
China would probably import between 12 and 15 million tonnes of steel in 1996, trade and industry sources said.
""What they need is a quality they can't get at home,"" the western executive said.
Imports from the Commonwealth of Independent States were falling, Zheng said, ""because it is low quality stuff and if you only have 12 to 15 million tonnes of imports, you must have a higher quality product coming in"".
However, the sources said China's steel market was weak and beset by a lack of cash for buyers -- and a rising incidence of contract washouts.
""Buyers are not willing to pay for their orders, not just because they don't have the cash, but because the price drops between order and delivery time and they are rejecting the cargoes or asking us to reduce the price,"" the Japanese executive said
A source with another Japanese steelmaker said major Japanese mills had cut prices by 10 to 15 percent to hold on to their Chinese customers.
""So the obvious trend is that demand is not growing as the Japanese mills had expected and as a result they have a lot of surplus to push onto the market,"" he said.
""The problem is that even though China's state-owned manufacturers are trying to produce more, they are having problems getting hard currency to buy the raw materials.""
",27
"The traffic did not come to a standstill and the portable phones did not stop trilling, but throughout China's biggest and richest city, pockets of people stood in quiet tribute to their late leader Deng Xiaoping.
The eulogy to Deng, who died last Wednesday aged 92, was broadcast live from Beijing's Great Hall of the People on a giant screen on the edge of Shanghai's People's Square.
Hundreds of people crammed onto traffic islands and grassy knolls nearby, straining through the glare of a hazy Shanghai morning for a clear view as President Jiang Zemin read a tribute to his predecessor.
Funereal music poured from the giant bank of speakers flanking the screen, flooding surrounding streets and the square opposite with a sombre wave of grief.
""Of course, Deng is responsible for building our country into what it is today,"" said Gu Qi, 65, who watched the screen from the vantage point of the rickety balcony of his tiny flat opposite.
Gu said he and his wife had lived in the apartment for more than 30 years, watching Shanghai's transformation into the mercantile centre of China's new, market-style economy.
""He was an old man, so he had to die sometime, didn't he,"" the recently retired Gu said of Deng, whose reform policies China from a Stalinist backwater into an economic powerhouse.
""We're thankful for the changes and the progress,"" he said. ""But life goes on, doesn't it?""
Behind him, on the big screen, President Jiang wiped tears from his eyes and intoned in a slow, measured voice: ""The people of China love Comrade Deng Xiaoping...we miss Comrade Deng Xiaoping.""
As three minutes of official mourning began at 10.00 a.m. (0200 GMT), during which sirens were to sound nationwide as a mark of respect for the man who led the country for 18 years, life in Shanghai proceeded much as usual.
In the People's Square area of Shanghai, there was no sign of sirens or horns being blown in tribute.
Only the incongruous sight of a lone crying man carrying a poster of the late leader and a bouquet of yellow chysanthemums drew a crowd on nearby Xizang Road.
He walked to his bicycle and prepared to ride away as police -- whose presence was thick and obvious for what one of them called ""a sensitive day"" -- ushered the crowd away.
Shanghai stock traders said trading on the city's exchange did not stop to mark the day. But they said volumes dropped dramatically during the hour of the funeral, with many traders and customers watching the live television broadcast.
Shanghai's grain and metals exchanges shortened Tuesday morning trading hours for the funeral.
Share indices on both the Shanghai and Shenzhen stock exchanges were up at midday, but volumes were down because of the funeral, brokers said.
Shanghai's newspapers gave wide coverage to the public display in Beijing on Monday of the patriarch's body, with photographs of Jiang consoling family members.
",27
"China's decision to resume corn exports could pressure the United States and other producers into discounting their grain to remain competitive on the world market, traders and grain industry sources said on Thursday.
""We will see a price war,"" a U.S. trader said. ""People are already discounting U.S. replacement by US$3-$4 a tonne.""
China, once one of the world's biggest corn exporters, banned overseas sales of the grain in December 1994 to help re-build dwindling central stocks.
Total sales of Chinese corn this month to Southeast Asia could hit 300,000 tonnes by the end of this week, traders said.
The market was unsure about how to read the sales. Some traders said they did not necessarily signal a full lifting of the export ban, while others said they could be the start of a flood of Chinese corn onto the world market.
Some traders said Chinese sales this year could hit one million tonnes.
Already in the past week, at least 76,000 tonnes have been confirmed sold to South Korea, for April/May arrival at between $139.50 and $143 a tonne, inclusive of cost and freight (C&F).
Emerging competition had pushed the Chinese price down to $129 a tonne C&F for May arrival by Thursday afternoon, as trader Toepfer secured two 52,500-tonne shipments in a Korean Feed Association tender. U.S. trader Cargill sold one cargo of 52,500 tonnes of corn in the same tender with a seller's option for Chinese corn at $140.10 for March 30 arrival.
Traders representing China's central food trading arm will travel to Manila on Thursday to hammer out the final details of a government-to-government deal to sell 145,000 tonnes of Chinese corn to the Philippines, said a trading source who expected the deal to be quickly finalised.
""They've already done 150,000 (tonnes) to South Korea and Malaysia, so there's 300,000 tonnes right there, and from there they could do a bit more,"" another trader said.
China's corn crop harvested in late 1996 has been estimated by Western and Japanese grain traders at 110-118 million tonnes.
A good proportion of the harvest went into central reserves because the government was offering farmers above the market price for the quota they must sell to the state, a trader said.
With farmers getting more than 1,000 yuan ($120) a tonne from the grain bureaux, ""they delivered to the government everything they could,"" he said.
""So now the silos are choc-a-bloc and the treasury is empty in terms of grain procurement,"" he said. ""Exports will be an attempt to re-balance the books and stem the negative market feelings.""
The current Chinese market price for corn is about 800 yuan a tonne, while corn is being offered for export at the northeastern port of Dalian for 1,040 yuan a tonne FOB (free on board).
Whether the government now gives the green light to exports depends on how comfortable the authorities are about the domestic supply/demand situation, traders said.
Around 1.5 million tonnes of corn is being moved from northern growing areas to the south, to relieve pressure on storage facilities, traders said.
And according to one well-connected trading source, 200,000 tonnes is being sold to a number of Central Asian countries that suffered poor 1996 corn crops. This could not be confirmed.
U.S. corn is arriving in Southeast Asia at $152-$153 a tonne, a Singapore source said. April arrival is priced around $141-$142 a tonne C&F.
Argentine corn, available from late April, is already being discounted, another source said.
""It's cheap for summer, $134-$135 C&F,"" he said, against $135-$136 two weeks ago. Sales have been reported in Thailand as low as $130 C&F.
The question for traders was, would the Chinese sellers push their prices down to that level, thereby forcing the U.S., which had considered the market its own, to discount further.
""They (U.S. exporters) will have to price themselves lower,"" another trader said. ""It is tight, but not so tight that they can't afford to maintain their export programme.""
Evidence of Chinese corn sales weighed on Chicago Board of Trade (CBOT) corn futures on Wednesday, with March closing down 1/2-cent at $2.70-1/2 per bushel.
China has the freight advantage in the region, especially with the growing number of ports able to take large Panamax-sized vessels (up to 65,000 dwt), another source said.
A Japanese trader said freight to Japan could tip the balance in favour of Chinese corn if the export programme did kick off.
""Japan could be interested in Chinese corn, it depends on price,"" the trader said by telephone from Beijing. ""Even if it is a little higher than CBOT, we can ship directly to Japanese local ports and save on the freight.""
",27
"Chinese zinc producers are expected to take advantage of high international prices to export, though  this may lead to a domestic supply squeeze and firmer prices at home, Far East metal traders said on Monday.
With London Metal Exchange (LME) zinc prices having risen by around $50 a tonne since the start of 1997 to the highest levels in nearly two years, Chinese producers are seen accelerating sales, they said.
Three month LME zinc was little changed at $1,137/39 a tonne in early trade in London on Monday, after a kerb close of $1,139 on Friday. The market was seen consolidating after a blistering rise that peaked last week at $1,157.
Already this year, Torch Metal in Hong Kong, which sells on behalf of Chinese producers, has exported 30,000 tonnes of Chinese zinc to end-users ""because the price is right,"" a company source said by telephone from the British colony.
None of this metal had gone to the LME warehouse in Singapore, he said, adding that Torch had a further 50,000 tonnes of zinc to sell in the course of 1997 and would not hesitate to take advantage of price rallies.
A Chinese trader in Beijing said one of the major smelters had sold between 20,000 to 30,000 tonnes of Chinese metal in late December at 9,800 yuan ($1,180) a tonne FOB (free on board) southern Chinese ports.
That metal was exported after the government wiped out the five percent zinc export tax on January 1, 1997, he said.
""That zinc was sold before the rally, but it was still quite expensive,"" he said.
A futures trader with a state Chinese firm in Singapore said Chinese producers who sold into the market before price rises could well deliver their metal to the LME to record a paper loss, but a healthy profit in the cash market.
""They (producers) would only look at the premium picture,"" he said. ""If physical sells at a nice premium, they could sell their LME position, and sell physical based on LME prices plus a nice premium,"" he said.
Sources in Asia said LME price levels over $1,150 a tonne would make Chinese exports worthwhile.
""If the price goes up further, the quantity of (Chinese) exports will move up,"" a source in China said.
That echoed the view of a number of traders in China, Hong Kong and Singapore polled by Reuters.
Some said it could lead to another round of boom-bust trading that saw domestic Chinese zinc prices rise to 10,700 yuan ($1,289) a tonne, ex-smelter, two years ago.
The Beijing trader said China had 250,000 to 300,000 tonnes of zinc metal available for export this year.
China exports around a quarter of its annual zinc output.
Official figures show 1996 exports of unwrought zinc and zinc alloys rose to 226,777 tonnes, over 1995's 191,526 tonnes. December 1996 exports alone were 29,519 tonnes.
""We always believe Chinese metal will pressure the market,"" another Chinese source said. ""Most people will see a good chance in the price rises.""
But he said that once Chinese zinc producers saw they could get attractive export prices for their product, they could desert their domestic customers.
""This will squeeze domestic supplies, then domestic prices will move up, then it makes more sense to keep the metal at home because the prices are better,"" he said. ""Here we go again.""
The Beijing trader said special high grade zinc accounted for around 30,000 tonnes of Chinese exports so far this year, with the same quantity of high grade metal.
Up to 70 percent of the exports had gone to end users, he and other sources said, much of it to Japan.
Under its General System of Preferences (GSP) programme, Japan exempts metal imports from developing countries submitted for customs clearance before the April 1 start of the fiscal year. ($1=8.3 yuan)
",27
"Chinese sugar processors have begun hoarding their white sugar in the hope that prices will improve after the two-week lunar new year holiday, traders and industry watchers said on Wednesday.
""Now the factories are reluctant to sell because they want the price to stabilise at a level where they can at least recover their costs,"" said a Chinese trader in Hong Kong, just returned from the southern sugar-producing region of Guangdong.
""The factories are holding on to their product, storing it in their warehouses, in the hope that the price will improve after the holiday,"" he said by telephone.
Wholesale prices for white sugar in China have not moved above 3,800 yuan ($458) a tonne for some weeks. The cane harvest continues and the factories are flush with processed sugar.
Breakeven point for the factories, which process cane into coarse granulated white sugar, is around 4,000 yuan a tonne.
Traders in China and Hong Kong polled by Reuters said no movement in prices could be expected just before the new year, when the entire country closes down.
""The Spring Festival is very long and holidays are anything from a week to a month in some places, so the market will not change,"" another Chinese trader said.
Guangdong and neighbouring Guangxi are China's principal sugar-producing provinces. Total sugar production for the current season is expected to be 6.6 million tonnes.
The cane harvest ends in late March and crushing will continue until around May, after which prices traditionally begin to strengthen.
China's annual sugar demand has been put at eight million tonnes.
One industry executive in Australia told Reuters that with the industry having told itself Chinese demand will hit 14 million tonnes a year by 2005, maybe it is time to look at why demand has remained constant for the past few years.
""The (Beijing) government is able to control the industry in terms of what comes in, what goes out and to a large extent to influence prices through official procurement channels,"" he said from Sydney.
""So maybe it is time to ask if it is also the case that the government controls demand,"" he said. ""China is not like India, where the government would fall if there is no sugar to put in the tea.""
Other trading sources have said that as sugar is not an integral part of the Chinese diet, it is a flexible commodity. People will buy it when it is available and won't miss it when it is not.
Factories were not immediately concerning themselves with government pronouncements that domestically produced sugar would be procured for central reserves in order to shore up prices, traders said.
Nor was there any concern about imports as nothing was expected to arrive in China before the middle of the year.
The central government said it would permit sugar imports of 690,000 tonnes, which would include tonnage imported under barter deals with Cuba.
But traders and producers around the region have said they expect China to import at least 1.5 million tonnes of sugar in 1997.
",27
"China is unlikely to take delivery of Thai sugar bought in the past month because import licences have not been issued to Chinese buyers and local prices are too low to make imports viable, traders said on Wednesday.
""People got excited, but China is not importing sugar,"" a trader with a big U.S. house in Hong Kong said.
Sugar cannot be imported to China without a licence.
""There are no import licences at all being issued, it is all in the hands of (Beijing's central food trading arm) Ceroils. Prices are still pretty low, so I don't see any movement on imports,"" the bank source said from Hong Kong.
Since February, China has reportedly bought four cargoes of Thai raw sugar for tolling, or processing and re-exporting, traders said.
But a trader with a European bank said the Chinese purchases had been overstated by two-thirds and in fact stood at 25,000 tonnes bought on licence.
The licence had been issued to the local government in China's Himalayan region of Tibet.
Other traders also had mentioned the Tibetan import licence for 25,000 tonnes of sugar, issued in order to allow the government of the impoverished region to sell the commodity on the local market and make some money. This could not be officially confirmed.
Thai raw sugar premiums have firmed recently on the news of China's purchases, and traders throughout the region were caught out, having predicted China would not import sugar until the second half of 1997 when traditional market shortages would begin to bite.
Far East traders had said they did not expect to see China buying sugar on the international market before then. Some sources questioned whether China would import at all this year.
Recent buying by central authorities from Guangxi, China's major production area, would have boosted central government reserves, probably to about 10 percent of annual consumption, or 700,000 tonnes, one trading source said.
This could be released onto the market if prices, currently around 3,900 yuan per tonne, go up to 4,500 yuan which is unlikely before August/September, he said.
Some industry sources were sounding smug on Wednesday, having done their sums and seen that even importing at good prices was not an economical option for Chinese buyers currently.
Imported sugar is subject to 12 percent import duty and 17 percent value-added tax, which would be added to the cost of the Thai raws of $250 a tonne, plus a $30 a tonne premium, the trading source said.
Processing would push cost per tonne to above 4,000 yuan in a climate where market prices are below that, the head of a joint venture processor in Gaungxi said.
""If they can import and toll and sell for 4,200 then they can buy back some sugar at the current levels and then they can still make a margin and a little profit,"" he said.
""But at the moment, the price is not high, so how can they make money?"" he said.
With the sugar cane crushing season in full swing, Chinese markets are flush with processed sugar and prices have been soft for some months.
Wholesale sugar prices in the southern growing regions have yet to reach break-even levels for the factories, the Guangxi joint venture manager said.
Ex-factory prices in Gaungxi were seen at 3,950-3,980 yuan ($476-469) per tonne. Break-even is above 4,000 yuan.
""There is an upward trend and hope is on the horizon,"" the manager said, adding he expected sugar prices to move to 4,000-4,100 yuan ($482-494) a tonne within the next 30 days.
Prices were likely to stabilise at that level before shortages kicked in around August and September, he said.
($1 = 8.3 yuan)
",27
"The manager of China's first joint venture producer of cobalt powder says the market is growing as fast as the economy and he is confident his product will wipe out local competition before the end of the century.
Since it went into production in May 1996, Shanghai Blue Lotus Metals Co Ltd has captured a hefty share of China's market for cobalt powder, Stephan Csoma, the company's general manager, said in a recent interview.
""We have the finest product on the market in China today,"" Csoma told Reuters. He refused to go into details about the financial strength or market share of the joint venture.
Blue Lotus is the first foray into China in a production capacity for Union Miniere SA, a Belgian metals refining and transforming giant and part of the General de Belgique group.
Its subsidiary company, Sogem, already has a significant presence in Asia as a trader of base and minor metals.
Csoma said Union Miniere had invested less than $10 million for a 75 percent stake in Blue Lotus with partner Shanghai Smelter Number Two, also known as the Jiuling Smelter.
Jiuling is one of two major smelters in Shanghai and comes under the auspices of the local branch of the national metals production giant China National Nonferrous Metals Corp (CNNC), he said.
Jiuling has been such a satisfactory partner that Union Miniere is also planning to produce zinc powder with it.
Cobalt is among the hardest metals in the world, and the powder is used in the manufacture of diamond tools that cut everything from concrete to marble and stone, and hard metals that are used to drill the earth for minerals and ore.
The powder is also used in making rechargable batteries for portable phones, computers and the like, Csoma said.
In China, with the world's fastest-growing economy, demand for diamond tools, the biggest market for Blue Lotus, was riding a construction boom, Csoma said.
Accurate figures on China's annual consumption of cobalt powder are difficult to obtain. Csoma said the market was between 400 and 600 tonnes a year.
""Our capacity is a bit above 100 tonnes today so when we get closer to 100 tonnes in terms of sales, we will increase our capacity to 200 tonnes,"" he said.
The eventual goal is capacity of 300 tonnes, Csoma said. Capacity equals the amount of cobalt metal used to make the powder, on a one-to-one conversion ratio, he said.
""I don't see any problem with moving 200 tonnes a year within two or three years; 300 tonnes will take a bit longer and will depend on our international customers moving into China and it will depend on how fast we can keep growing,"" he said.
""Last year was quite fast, we started from nothing and doubled our sales turnover every month until Chinese New Year (in February) when everything closes down,"" he said.
Blue Lotus manages to keep costs for its cobalt powder about the same as Chinese producers for the same grade, Csoma said.
""Today's market price is between 680 yuan and 720 yuan ($82-87) a kg,"" he said.
""It is higher than the international price because we have to pay import tax (six percent) and value-added tax (17 percent) on the metal,"" he said, adding that locally produced cobalt powder is still cheaper than the imported product.
While finding a good partner in China is half the battle won for many would-be China-investors, dealing with the competition is the hard part for Blue Lotus.
Csoma said Blue Lotus had more than 30 competitors in the local market, all with much lower overheads but all producing cobalt powder of lower quality.
""There is an overcapacity (in China)...and I believe we are going to close a lot of them down on quality, price, financial strength.""
-- Shanghai newsroom (86-21) 6279-8544
",27
"Indium, one of the few minor metals to survive the end of the Cold War with demand intact, is now in short supply as Chinese producers have either oversold or are hoarding stocks as prices soar, traders said on Friday.
Traders in China and Japan, the world's biggest consumer of indium, said Chinese producers seemed unwilling to sell at current prices, instead waiting for further rises.
Indium, a by-product of zinc, is used in the manufacture of semi-conductors and liquid crystal displays (LCD).
China is Asia's biggest producer, according to one trading source.
Japan uses about two-thirds of annual world supply, with 80 percent of that used to make LCDs, a Tokyo market source said.
Japanese consumption slumped 38 percent in 1996 to 43.5 tonnes, pressuring on prices, he said.
But with an improved economic outlook and a revival in the high-end electronics industry, indium demand is picking up and world supply is tightening.
Figures for China's annual output are not available. One trader said it is not a major world supplier of indium but in a tight market its output counted.
""Chinese producers have sold out, in effect they have oversold, so I don't think we will see anything available before late April/early May,"" a Chinese trader in Beijing said.
""Chinese producers are now looking for $290 a kg,"" on a free-on-board (FOB) basis, he said.
The price for 99.99 percent indium ingot was quoted in Rotterdam last week at $220/250 a kg.
Chinese indium is arriving in Japan at $280-300 a kg, inclusive of cost, insurance and freight (CIF), the Tokyo trader said.
Far East traders said they have been waiting for spot prices for indium to hit $300 a kg, as there was no perceptible pickup in Chinese production after the Lunar New Year holiday in February.
A European source in Hong Kong said he recently bought a few hundred kg of indium in the belief that prices are on their way back up to the levels of two years ago, close to $500 a kg.
""The market has seen those levels before and is not afraid of them,"" he said.
The Chinese trading source said that Chinese factories were now shipping against old contracts but were asking for a premium over the contracted price.
Other traders said long-term contracts were being delayed, with some reporting that Chinese suppliers were attempting to re-negotiate prices.
Some suppliers were also reneging, they said.
""We have had that experience,"" a source at a Western company said.
""So in this atmosphere people are very wary and we are still pushing for our own deliveries,"" he said.
Another Chinese trader said there were sources of indium in China and Hong Kong but these were unlikely to seep into the market until prices firmed more dramatically.
""When the price rose to $400-500 a kg in 1995, a lot of Chinese companies were thinking it would go as high as $700 and they bought a lot of material at $400,"" the source said.
""Some of them are still holding, waiting for the price to go up again so they can clear their books,"" he said.
""So there is material and we will see some come out but there won't be a flood because producers have oversold, they will want to clear their old contracts first.
""In the meantime, there are a lot of people knocking on our door looking for indium,"" he said.
",27
"China is unlikely to need to buy rice on the international market to make up for flood damage to domestic crops, Far East traders said on Tuesday.
No China inquiries for rice were reported by traders in China, Hong Kong, Singapore and Thailand.
""As far as large demand from the (central grain) reserve, COFCO (China National Cereals, Oils and Foodstuffs Import Export Corp) or the grain bureaux goes, I rule it out,"" said a Chinese trader in Shanghai.  
China's Futures Herald newspaper, quoting State Grain Reserve Administration statistics, said on Saturday that although flood damage had reduced the early rice harvest and was likely to slow planting of late rice, total output for 1996 was expected to be unaffected.
This is because China has increased the area under rice cultivation this year, the newspaper said, adding that the reduction in the early harvest should not have a significant effect on the total grain harvest due to higher production of other crops, it said.  
Rice imports could not go ahead without central government approval, and the process of issuing quotas and licences could take weeks or even months, trading sources said.
The International Federation of Red Cross and Red Crescent Societies said at the weekend that flooding in Hunan, one of China's major rice-growing provinces, had prevented farmers from planting rice for the autumn harvest and could force them to depend on food aid until next summer.  
""Many farmers lost the season's first crop of rice in the floods and were unable to plant for the second harvest, leaving them dependent on food aid until their next crop, in one year's time,"" said Thorir Gudmundsson.
""For the second crop, they need to plant in July, and it is now mid-August,"" he said.
The notion that China might need to import rice to meet demand provided some underlying support to rice futures prices on the Chicago Board of Trade (CBOT) on Monday.
The CBOT September price closed up 5-1/2 U.S. cents per cwt at $10.16.  
Chicago rice futures have been underpinned by a recent U.S. report that China bought 20,000 tonnes of Vietnamese white rice for prompt July shipments and that additional purchases were expected.
But very little movement in domestic Chinese rice prices has been seen over the past three months, traders said.
""To be convinced that China will buy some rice, I have to get confirmation from the market -- but so far the market has not done anything, prices are steady,"" one Asian trader said.  
Traders in China quoted domestic prices at 2,200-2,300 yuan ($265-$277) a tonne for low quality long grain rice; 2,600-2,700 yuan ($313-$325) for high quality long grain rice; up to 2,800 yuan ($337) for low quality short grain rice; and 3,000 yuan ($361) for high quality short grain rice.
More than 500 people were killed by the July floods in Hunan alone, with the national death toll from floods and typhoons surpassing 2,700, according to the government.
Applications for rice imports would have to traverse China's multi-layered bureaucracy, trading sources said, though the procedure could be speeded up in times of emergency.  
The State Planning Commission (SPC) would issue a national quota, which would then be allocated to provincial SPC offices, which would then distribute the quota to trading companies, trading sources said.
Rice, along with wheat, corn and soybeans, is considered a strategic grain and is thus tightly regulated.
Hunan grows more than 22 percent of China's total early rice crop. Losses to the rice crop in the central province have been estimated at 2.4 million tonnes, accounting for most of the 2.6 million tonnes of Hunan's total grain losses.  
About 90 percent of China's early rice crop of 50 million tonnes is grown in Hunan, Guangxi, Guangdong, Jiangxi and Zhejiang provinces. China has three rice crops a year.
A Chinese analyst predicted earlier this month that the flooding could cut early rice output by between 10 and 20 percent. This would reduce the total 1996 rice crop by up to four percent for a total output figure of about 180 million tonnes.
China's rice production in 1995 was 179 million tonnes according to figures from the China National Cereals, Oils and Foodstuffs Import and Export Corp.  
-- Hong Kong newsroom (852) 2843-6470
",27
"Chinese interest in soymeal imports has tapered in the wake of a rally that has pushed prices above US$320 a tonne C&F, traders said on Tuesday.
""There's no business above $300 (a tonne),"" a trader in Singapore said.
""Everyone is lurking at $300,"" said another trader in the region. ""If anyone is buying at $320, I want to find them.""  
Reports that China had bought Indian meal for September shipment at $323 a tonne, inclusive of cargo and freight, and further for November/December shipment at around $313 a tonne were greeted with ridicule throughout the region.
Trading sources said China was staying out of the market, and that Indian meal was currently overvalued by a good $20 a tonne.
Traders gave the market a couple of weeks before prices came back to more ""reasonable"" levels and the Chinese resume buying.  
""The rally in India has been happening for the past couple of weeks and the market has just jumped up. Prior to that India was undervalued,"" another trader said.
Chinese buying halted around two weeks ago, the traders said, and domestic prices had remained firm.
Meal prices at Chinese ports were around 3,000 yuan ($361) a tonne, the Singapore trader said.
Traders throughout the Far East have told Reuters they expect China to import between one million and 1.2 million tonnes of soymeal in 1996.  
One trader said last week that 600,000 tonnes of soymeal was expected to arrive in China by mid-September.
Chinese demand for animal feed -- a principal component of which is soymeal -- was down by five to seven percent in the southern regions, a veteran trader in Hong Kong said.
Another source, however, said this did not correlate with an apparent rise in Chinese meat production of 15 percent so far this year, or with the relative stability of domestic meal and corn prices.
""There is reasonable (feed) demand,"" he said.  
Meanwhile, the Chinese government has yet to issue vegetable oil import quotas and licences -- though traders reported that permission was granted for three trading firms to bring in a total of 100,000 tonnes of liquid oil in mid-August.
The veteran in Hong Kong said the wait for quotas was frustrating traders who knew China was still flush with vegetable oil -- some saying current stocks could last through to the end of 1996.  
""The trading companies are long on oil, the state, Cofco (China National Cereals, oils and Foodstuffs Import Export Corp), the crushers -- everyone is long on oil,"" another trader said.
""Domestic oil prices are being forced up, and they are trying to clear heavy stocks,"" the Hong Kong source said.
Soybean oil prices in northern China have been under some pressure recently -- movements reported by the National Grains and Oils Information Centre in Shanghai show a range since early August between 7,200 and 7,800 yuan per tonne.  
""We are hoping that in a couple of months we will see some action as the stocks clear,"" the Hong Kong source said.
Some traders were putting oil in bonded warehouses against the issue of the licences, which usually happens well before the end of August, he said.
Customs figures reported from Beijing on Tuesday show total soyoil imports from January to July 1996 were 919,140 tonnes, with 188,626 tonnes in July alone, and 72.2 percent of the total from Brazil.
($1 = 8.3)
-- Hong Kong newsroom (852) 2843-6470
",27
"The death of reform architect Deng Xiaoping is not likely to herald changes in China's influential role as a buyer and seller of grain on the world market, traders and industry sources said on Thursday.
""As long as the current policies keep inflation down and the farmers are making money and the city people are eating -- hey, nobody would change that policy,"" a Western agriculture trade official in Shanghai told Reuters.
Grain traders, industry executives and diplomats throughout the Asia-Pacific described China's current agriculture policies as a legacy of reforms introduced by Deng in 1979 and accelerated in the past five years.
""He was the man that got it going,"" said a grain trader in Singapore, referring to Deng's policy of freeing farmers from the yoke of collective farming and state-set prices.
""I think there will be a continuation of the policies put into place when he first started his reforms and that have been maintained and expanded on for the past four or five years,"" he said.
Deng died late on Wednesday from respiratory failure. He was 92.
One of China's major policy objectives has always been grain self-sufficiency.
But trade sources said that China's agricultural gurus have realised they need some supplementary imports to meet total national needs and were now defining self-sufficiency as producing 95 percent and importing five percent of annual needs.
Bumper harvests in recent years, and a ban on some exports, have allowed China to build up grain reserves and keep market prices stable.
A North American marketing source noted China's bumper 1996 grain crop of 480 million tonnes and along with other sources said China had the potential to further boost yields and efficiency.
""If you look at agricultural output over the past 15 years, there has been very impressive progress and while there is some doubt about the Chinese target of producing 500 million tonnes of grain a year by 2000, it is not impossible,"" he said.
Total grain imports in calendar 1996 were 12 million tonnes, down 42 percent on the 1995 figure, official figures show. Exports rose last year by 42.3 percent to 1.43 million tonnes.
Canada sold China more than four million tonnes of wheat, about 40 percent of its needs, in the August 1995-July 1996 crop year, the North American source said on condition of anonymity.
This year, he said, Canadian wheat sales were expected to remain at about that level.
China's 1996 wheat imports were 28.3 percent down on the year before, to 8.3 million tonnes, State Statistical Bureau figures show. The 1996 wheat crop was a record 109 million tonnes.
The North American source said China's grain imports were based more on a need for variety than for quantity.
""China will import high quality wheat so makers of high-end food products get the quality of flour they need,"" he said.
Australian grain industry sources voiced concern over China's use of import tarrifs and permits.
""There's good reason to be concerned about where China is heading (on import permits) in general,"" said a trader in Sydney. ""That was the case before Deng's death and remains after.""
A U.S. oilseeds marketing source in Shanghai said, however, Chinese authorities seemed to be aware that duties and costs associated with permits had an inflationary impact -- and keeping prices down is a major government objective.
""They are in a state of almost experimental flux all the time,"" he said. ""It's often a case of two steps forward, one step back -- and that means they are learning,"" he said.
",27
"China's corn exports have taken the world market by surprise and could double from current sales levels to more than two million tonnes for the year, Far East grain traders said on Tuesday.
""Just based on done business, it sounds like their programme is big,"" a Singapore-based trader said of China's corn exports.
A trader in Seoul said China's corn sales to South Korea alone since the start of 1997 were 690,500 tonnes and could hit 1.5 million tonnes for the year.
Other spot sales to Southeast Asia brought the total so far close to 1.5 million tonnes, the Singapore source said, including 600,000-700,000 tonnes of optional sales he said would probably be Chinese product.
Japan had yet to buy, traders said, having been badly scorched after China banned corn exports in December 1994 and reneged on some contracted sales.
Traders in the South Korean capital said on Tuesday a group of local feed milling companies called the Top Margin Committee bought a total of 126,500 tonnes of Chinese corn late on Monday.
Sale prices of $140.95 and $142.90 per tonne inclusive of cost and freight (c&f) indicated a free on board (FOB) price of $130-132 per tonne, with freight between northern China and South Korea about $10 a tonne.
This indicated a slight discount, of $2 to $3 a tonne, from the original Chinese asking price of $135 a tonne, a trader whose company represents Beijing's food trading arm COFCO, said.
A trader with a major South Korean feed mill company said one of its suppliers could come up with another 750,000 tonnes of Chinese corn.
That some of the South Korean purchases have been for August and September delivery indicated China was in the middle of a major corn export programme that could total two million or more tonnes for the year, traders throughout the region said.
Trade and industry sources have long said that corn stored in the northern port of Dalian, where it is priced and loaded for export, tops two million tonnes.
China's 1996 corn harvest was a record 118 million tonnes, official figures show.
In the same year, China imported 440,000 tonnes of corn, down 91.4 percent on 1995, while it exported 160,000 tonnes, up 40.9 percent.
While traders in the Far East said they were taken by surprise at the volumes of corn moving out of China, the impact on world corn prices was limited because some level of activity had been anticipated since last November.
Traders began 1997 with figures of 300,000 tonnes of total Chinese corn exports. As exports began to soar, traders and other experts started favouring levels closer to a million tonnes.
As one source said on Tuesday: ""We're revising our numbers every day. Last week we said a million. This week it's two.""
Corn futures on the Chicago Board of Trade (CBOT) closed 1-1/2 to six cents per bushel higher in Monday trade, with the March contract hitting a 5-1/2-month high, up six at $3.12.
An industry executive in Singapore said the Chinese sales had already been factored into the CBOT price, while prices in Tokyo and Chicago were driven by less fundamental and more speculative activity. -- Shanghai newsoom (86-21) 6279-8544
",27
"China's aluminium can makers are facing a tough year in 1997 as surging world metal prices force costs up while domestic Chinese demand has yet to catch up with capacity, industry experts said on Wednesday.
Profit margins for manufacturers in China of aluminium beverage cans have fallen over the past couple of years, Western and Chinese industry sources said.
Now that aluminium prices on the London Metal Exchange (LME) are at their highest point in more than a year, China's can makers are facing a further squeeze on profits, sources said.
""The wholesale price of an aluminium can is about one yuan (12 U.S. cents), which leaves around 0.1 yuan profit,"" an official with the China Packaging Technology Association, an industry body with interests in domestic can makers, said.
""Competition in the industry is so severe that any factory with capacity of 600,000 cans or less faces bankruptcy,"" the official said by telephone from Beijing.
He suggested the central government was considering lowering the import duty on aluminium, currently 15 percent, in order to help the industry.
This could not be immediately confirmed, though industry sources said they had been lobbying for the cuts.
One senior industry executive described current aluminium can prices as ""below sustainable levels"".
But with demand for canned beverages growing by anything up to 30 percent a year, the long-term outlook is the key, industry sources said.
""Prices are generally below what we would like to see -- it is a case of waiting for demand to catch up with capacity,"" said Terry Cartwright, managing director of Crown Can Hong Kong Ltd.
Crown Can has four plants in China and one in Hong Kong with total capacity of two billion cans a year, which will hit 2.5 billion in 1998 on current expansion, Cartwright said.
""In the long-term, China is an important market and strategically, can makers need to be in China,"" he said.
""But it is going to be tough in the short term, particularly as aluminium prices on the LME are so high,"" Cartwright said.
The rises on the LME have been fuelled by speculative fund buying, pushing prices up on Tuesday to $1,701 a tonne.
This was the highest price in 14 months, up $11 from Monday and some $150 above the levels prevailing at the start of 1997.
But it is a cost can makers in China cannot avoid, sources said, as local aluminium does not meet quality standards.
According to the China Packaging Technology Association, China's current installed can-making capacity is 10 billion cans a year. This figure is seen rising shortly to 13 billion cans a year, the spokesman said.
Demand in China is rising by about one billion cans a year, and in 1996 was five billion cans, the official said.
Current output consumes about 85,000 tonnes of refined aluminium a year, industry sources have said.
Capacity has soared in recent years because of tax rules that allowed manufacturers to import capital equipment duty free until late last year, and in some cases to the middle of 1997.
""It is true that people were perhaps pulling forward their expansion plans ahead of the imposition of duty, and that is what accounts for the increase in investment in the can making industry in China,"" another Western industry source said.
""But there has been tremendous investment in the soft drinks industry in China. It has gone up dramatically and that will certainly be matched by investment in the can-making industry in the long term,"" he said.
",27
"Chinese copper producers could soon start selling their red metal to take advantage of current high prices -- and before a long-awaited correction hits the international market, Chinese traders said on Friday.
London Metal Exchange (LME) copper, currently hovering close to its highest price in almost a year, is ready for a correction and Chinese producers want to get what they can before the price fall begins, a Shanghai copper trader said.
""Chinese producers have begun to sell domestically at these prices because they don't believe they will last,"" he said.
Prices on the Shanghai Metal Exchange (SME), which often move in tandem with the LME, rose on Friday morning, in what one trading source in the city said was a reflection of local fundamentals.
""Once the local selling becomes a factor here, the price in Shanghai will correct,"" he said.
Shanghai copper futures opened mostly up on Friday. The most active June 1996 contract opened at 23,650 yuan ($2,851) per tonne, up 300 yuan from Thursday's close. It moved around that level early in the session.
Traders on the SME said copper was likely to consolidate in a range of 23,000 to 24,000 yuan ($2,771-2,891) in the short term with buyers and sellers having mixed views over its direction.
LME copper see-sawed in trade on Thursday, breaching the $2,400 resistance level at the afternoon kerb. It closed at $2,403 per tonne, up $28 on the day, after fund buying at the midday dips spurred the price up.
Shanghai traders said they expected the funds to begin selling, bringing the correction with them in the process.
Traders and analysts here have said the LME copper price is not supported by fundamentals and that the market is waiting for Chinese buying to begin.
China's total copper production in 1996 was 909,700 tonnes, up 5.71 percent on 1995, according to State Statistical Bureau figures. Physical demand for copper in China for 1997 is expected to exceed supply by around 100,000 tonnes.
Chinese media reported in January that China's 1997 copper demand should rise five percent over last year to 1.05 million tonnes. Output is expected to be more than 900,000 tonnes.
Copper imports are expected to remain high, media reports have said. Imports of raw and uncast copper in 1996 were up 32.7 percent to 714,248 tonnes.
Western traders and those elsewhere in the region agreed China needed to buy copper, but those polled by Reuters were unanimous that China appeared to be holding off on its buying programme while prices remained high.
But Chinese buyers are not known for entering the market at the bottom of a correction, instead, they are likely to wait for prices to rise again before coming in, Shanghai traders said.
""I think $2,100 to $2,200 (per tonne on the LME) would be a good price because China will need to buy, they are short of copper every year,"" said an executive in Shanghai with a European metal producer.
She said the crackdown on scrap imports, part of China's campaign last year against the import of foreign garbage, would lead to a rise in Chinese need for cathode.
""Domestic prices are still moving up, I guess because stocks are getting low,"" she said. ""They will have to buy eventually.""
Figures released last Friday by the SME show exchange warehouse copper stocks at 23,407 tonnes.
But local traders have said this figure has barely changed in recent months and the big question is the tonnage off-warrant, that is, the amount of copper not registered on the exchange but still available to the market.
-- Shanghai newsroom (86-21) 6279-8544
",27
"The jump in London Metal Exchange (LME) zinc prices to a 4-1/2 year high, as yet, threatens no flood of Chinese metal onto the market, but producers are sitting on a windfall, traders said on Monday.
The main flow of Chinese zinc exports is currently headed for Japan attracted by its preferential duty free policy for metal imports from developing countries up until April 1, a trader with a European firm in Hong Kong said.
""Chinese zinc is very tight otherwise and you won't see any indications for a while,"" she said.  
LME three-month zinc touched a 4-1/2 year high of $1,266 a tonne on Friday, before a slight fall back to close at $1,254, up $12.
Far East metal traders and producer representatives in the region agreed the metal has yet to hit its peak, with some expecting a consolidation around $1,240 and others predicting a push towards $1,350 before a consolidation.
Official China customs figures show China's exports of unwrought zinc and zinc alloys in January, 1997 reached 30,914 tonnes, up 100.3 percent compared to the year-ago period.  
Exports were boosted by high LME prices and a reduction in a Chinese export tax on the metal from five percent in 1996 to nil this year, boosting the value of domestic zinc by $50 a tonne.
""This year should be an historic year for Chinese zinc metal exports -- if the price stays high,"" a Beijing dealer said.
He said he believed total Chinese zinc exports would hit 80,000 tonnes for January and February 1997, and possibly half a million tonnes for the whole year.
China exported a total of 226,777 tonnes of unwrought zinc and zinc alloys in 1996, up 18.4 percent on 1995, the customs figures show.  
But an executive with a Western producer that supplies to the region said he had so far seen no evidence of increased Chinese zinc sales to the Asian market.
""The supply and demand fundamentals on physical metal are improving as far as expectations of price hikes and continued support go,"" he said. This would see prices firm further.
""I am telling my customers that it is best for them to place their orders as soon as possible, as the trend is rising and we don't know where it will go,"" the representative for a major North American producer said.  
LME zinc could probably move up at least another $100 a tonne and this would see premiums start to soften as producers and sellers tried to compete, he said.
Traders pegged current CIF special high grade zinc premiums in Hong Kong at $130 a tonne over the LME cash price and high grade at $120 a tonne.
The Beijing trader said Chinese smetlers were selling at a $40 premium FOB Chinese ports. High grade was selling at a discount of $25 a tonne, he said.  
""I think LME zinc will be volatile,"" he said. ""Some people were saying last year they thought it would go to $1,400 but I wouldn't be so bullish.""
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				March 10		   March 3
 Copper, cathode	     75			   75
 Aluminium, 99.7 ingot    180			  180
 Lead, Chinese		 60			   60
 Zinc, SHG 99.995 ingots  100-130		     25
-- Shanghai newsroom (86-21) 6279-8544
",27
"Chinese end-users of copper are buying the metal in small lots but Chinese trading sources said on Tuesday that high world prices would prevent any significant Chinese buying in the short term.
A fall last Friday in copper stocks held in London Metal Exchange (LME) warehouses was not fully attributable to Chinese buying, traders in China and Hong Kong said.
LME copper stocks fell 9,675 tonnes, to 187,777 tonnes last Friday amid reports that most of that material was on its way to China.
""For the time being only one third of the stock moving out of LME warehouses will head to China, because they are taking out their own material,"" a Chinese trader with a provincial-government firm in Hong Kong said.
A trader in Beijing with a major European trading house said China was more likely to sell copper at current prices.
LME three months prices finished the kerb at $2,367 a tonne, down just $1 from Friday's kerb close. The cash/threes backwardation was at $55/60.
""If I bought at $2,310 and I sell at $2,370, I make $60 a tonne,"" the Beijing trader said.
""This does suggest some speculative Chinese action on the LME, but I don't see anything major, long or short, from China,"" he said.
Trading sources said copper prices on the Shanghai Metal Exchange (SME) did not indicate any real tightness in domestic Chinese supply.
Figures released by the exchange last Friday showed an increase in copper supplies held on warrant in SME warehouses of 664 tonnes to 13,522 tonnes, which traders here said is about two months' supply.
The exchange is also known to have off-warrant stocks, and China's central reserve has warehouses in the city holding undisclosed tonnages.
Another Chinese trading source in Hong Kong said he was seeing some interest from Chinese end-users who were ordering in small lots of 500 to 2,000 tonnes at a time.
""Some customers in Shanghai are placing small orders and they will take the cargo because they are end-users and they need it,"" he said.
Another source with a Chinese trading firm in Singapore said tight cash flow would also keep smelters off the market until government funds became available later in the first half of 1997.
Trading sources in London and Asia have predicted a further fall in stocks on Tuesday of 25,000 tonnes.
-- Shanghai newsroom (86-21) 6279-8544
",27
"China's decision to resume corn exports could pressure the United States and other producers into discounting their grain to remain competitive on the world market, traders and grain industry sources said on Thursday.
""We will see a price war,"" a U.S. trader said. ""People are already discounting U.S. replacement by US$3-$4 a tonne.""
China, once one of the world's biggest corn exporters, banned overseas sales of the grain in December 1994 to help re-build dwindling central stocks.  
Total sales of Chinese corn this month to Southeast Asia could hit 300,000 tonnes by the end of this week, traders said.
The market was unsure about how to read the sales. Some traders said they did not necessarily signal a full lifting of the export ban, while others said they could be the start of a flood of Chinese corn onto the world market.
Some traders said Chinese sales this year could hit one million tonnes.
Already in the past week, at least 76,000 tonnes have been confirmed sold to South Korea, for April/May arrival at between $139.50 and $143 a tonne, inclusive of cost and freight (C&F).  
""They've already done 150,000 (tonnes) to South Korea and Malaysia, so there's 300,000 tonnes right there, and from there they could do a bit more,"" another trader said.
China's corn crop harvested in late 1996 has been estimated by Western and Japanese grain traders at 110-118 million tonnes.
A good proportion of the harvest went into central reserves because the government was offering farmers above the market price for the quota they must sell to the state, a trader said.
With farmers getting more than 1,000 yuan ($120) a tonne from the grain bureaux, ""they delivered to the government everything they could,"" he said.  
Emerging competition had pushed the Chinese price down to $129 a tonne C&F for May arrival by Thursday afternoon, as trader Toepfer secured two 52,500-tonne shipments in a Korean Feed Association tender. U.S. trader Cargill sold one cargo of 52,500 tonnes of corn in the same tender with a seller's option for Chinese corn at $140.10 for March 30 arrival.
Traders representing China's central food trading arm will travel to Manila on Thursday to hammer out the final details of a government-to-government deal to sell 145,000 tonnes of Chinese corn to the Philippines, said a trading source who expected the deal to be quickly finalised.  
""So now the silos are choc-a-bloc and the treasury is empty in terms of grain procurement,"" he said. ""Exports will be an attempt to re-balance the books and stem the negative market feelings.""
The current Chinese market price for corn is about 800 yuan a tonne, while corn is being offered for export at the northeastern port of Dalian for 1,040 yuan a tonne FOB (free on board).
Whether the government now gives the green light to exports depends on how comfortable the authorities are about the domestic supply/demand situation, traders said.  
Around 1.5 million tonnes of corn is being moved from northern growing areas to the south, to relieve pressure on storage facilities, traders said.
And according to one well-connected trading source, 200,000 tonnes is being sold to a number of Central Asian countries that suffered poor 1996 corn crops. This could not be confirmed.
U.S. corn is arriving in Southeast Asia at $152-$153 a tonne, a Singapore source said. April arrival is priced around $141-$142 a tonne C&F.
Argentine corn, available from late April, is already being discounted, another source said.  
""It's cheap for summer, $134-$135 C&F,"" he said, against $135-$136 two weeks ago. Sales have been reported in Thailand as low as $130 C&F.
The question for traders was, would the Chinese sellers push their prices down to that level, thereby forcing the U.S., which had considered the market its own, to discount further.
""They (U.S. exporters) will have to price themselves lower,"" another trader said. ""It is tight, but not so tight that they can't afford to maintain their export programme.""  
Evidence of Chinese corn sales weighed on Chicago Board of Trade (CBOT) corn futures on Wednesday, with March closing down 1/2-cent at $2.70-1/2 per bushel.
China has the freight advantage in the region, especially with the growing number of ports able to take large Panamax-sized vessels (up to 65,000 dwt), another source said.
A Japanese trader said freight to Japan could tip the balance in favour of Chinese corn if the export programme did kick off.  
""Japan could be interested in Chinese corn, it depends on price,"" the trader said by telephone from Beijing. ""Even if it is a little higher than CBOT, we can ship directly to Japanese local ports and save on the freight.""
",27
"Far East metals traders were preoccupied with one question on Monday -- will China buy copper in the midst of the current rally, or are prices on the London Metal Exchange (LME) nearing precarious heights?
There was little doubt in the minds of most traders and industry sources polled by Reuters that copper prices would continue their heady rise.  
Copper on the LME finished Friday trading substantially higher, with technical buying and aggressive short covering taking the red metal to fresh 8-1/2 months highs despite an unexpected stocks increase of 1,875 tonnes.
It was $2,366 a tonne at the afternoon kerb close, off the day's $2,375 high but up $38 from Thursday's finish.
Prices on the Shanghai Metal Exchange (SME) have been mirroring the LME's rises since trading resumed last week after the long Lunar New Year holiday.  
Shanghai copper futures started higher on Monday, with the most active May 1997 contract opening at 23,500 yuan ($2,831) a tonne, rising 190 yuan from last week's close. It fell back a little to 23,460 yuan in early trading.
Trading sources in Hong Kong and Singapore said that as long as Shanghai rises along with the LME -- and as long as the LME continues to rise -- the Chinese should not be scared away from the market.
""We're starting to see the start of glimmers of interest from China to start re-importing metal they lent,"" a trader in Singapore said.  
""But it is difficult at these high prices to see a lot of Chinese buying, though the fact remains that if they need it, there seems to be so little on the ground in China that they will have to buy it,"" he said.
Shanghai Metal Exchange figures show copper stocks at 17,524 tonnes, a level described by one Western trader as ""nothing"".
The head of a big Hong Kong trading house said there had been some signs of Chinese buying in recent weeks.
""But it's just a few hundred tonnes here, a few hundred tonnes there,"" he said, adding he had seen no indication that China's central reserve authorities had been in the market.  
""They (Chinese end-users) do need to buy but they could be scared off by these price levels,"" he said.
""I think the LME will go higher -- I believe it will break $2,400 (a tonne) before we see a correction.""
Premiums on copper arrivals in Shanghai are now $120 a tonne over LME cash metals pushing the price close to $2,500 a tonne, an analyst here said.
Arbitrage opportunities were seen kept in check by high costs -- three percent import duty and 17 percent value-added tax (VAT).  
""You're looking at healthy arbitrage opportunities looming, as long as there are discounts on the VAT,"" another Western source said, adding that big traders were often able to get waivers on the VAT.
Beijing's States Statistical Bureau last week released figures showing China's January copper production level at 70,000 tonnes, up 2.2 percent on January 1996.
China's total copper production in 1996 was 909,700 tonnes, up 5.71 percent on 1995, the bureau said.
Physical demand for copper in China for 1997 is expected to exceed supply by around 100,000 tonnes.  
Chinese media reported last month that China's 1997 copper demand should rise five percent over last year to 1.05 million tonnes. Output is expected to be more than 900,000 tonnes.
Copper imports are expected to remain high, the newspaper said. Imports of raw and uncast copper in 1996 were up 32.7 percent in 1996 to 714,248 tonnes.
				  Feb 24		   Feb 17
COPPER (FOB Shanghai)     120			N/A
ALUMINIUM
(High-grade Western
	 C&F south China)   110		     110-120
(High grade Western
	 C&F Shanghai)	120			 N/A
	(CIS)		   80-90		   80-90
($1=8.3 yuan)
-- Shanghai newsroom (86-21) 6279-8544
",27
"Copper and zinc were the main focus of attention for Far East metal traders on Monday, though China's exit from the market to celebrate the arrival of the Year of the Ox left a gaping hole in trading activity.
China has closed down to celebrate the arrival of the new lunar year. Most Chinese markets will be closed until February 17, though trading activity should start to pick up mid-week.
A slight fundamental tightness in copper supply was seen throughout the region, a trader in Singapore told Reuters, adding that it was not being helped by high cash prices.
""Even in mainland China we understand people are having difficulty in obtaining metal,"" he said. ""Obviously the high cash price is somewhat of a deterrent but if they need physical metal they just have to buy it.""
Three months copper on the London Metal Exchange (LME) ended the Friday afternoon kerb at $2,239 a tonne, after profit-taking trimmed $18 off Thursday's closing price.
Physical demand for copper in China for 1997 is expected to exceed supply by around 100,000 tonnes.
Chinese media reported last month that China's 1997 copper demand should rise five percent over last year to 1.05 million tonnes. Output is expected to be more than 900,000 tonnes, after 1996's 909,700 tonnes, Market Daily said.
Copper imports were expected to remain high, the newspaper said. Imports of raw and uncast copper in 1996 were up 32.7 percent in 1996 to 714,248 tonnes.
The few trading sources available on Monday said end-users of the red metal in Asia were buying hand-to-mouth, but there was as yet no element of panic-buying.
""If you start to see some significant increase in demand, then I think that's where the market will have some interest via higher prices,"" one trader said.
Zinc enters the Year of the Ox as a bull for Asian traders, some of whom thought recent rallies that have seen LME prices touch two-year highs could be more in anticipation of upcoming tightness than a reflection of current fundamentals.
LME zinc hit a fresh two-year high of $1,196 a tonne in early Friday trading, ending the day $3 easier at $1,183 a tonne.
What one Asian trader described as ""the magical and psychological level"" of $1,200 a tonne is the metal's next test, followed by the January 1995 peak of $1,239.
Traders' optimism that current price levels would consolidate before true tightness hit the market in the second half of 1997 were being fuelled by this year's shortfall in global supply of up to 250,000 tonnes, they said.
Lack of Chinese activity in the zinc market during the holiday period was not seen by trading sources as impacting on price movements one way or the other.
But word that Chinese producers had already moved 20,000 tonnes of zinc to Singapore warehouses, and that another 30,000 to 40,000 tonnes was on the way, was indicative of their selling interest, traders said.
""I'm not sure that there is any interest in immediately selling it but they (Chinese producers) are moving it very close to a market where they can sell it, deliver it and get cash in two days,"" another Singapore source said.
Chinese metal producers often moved their product to Singapore, keeping it off-warrant so it does not show up in LME stock reports but where it can be used as collateral, he said.
If the market remained strong, Chinese zinc could stay put as producers waited for prices to rise even further, he said.
""If they hold off on the anticipation of higher prices, it is just a gamble, and how quickly they sell into a retracement is difficult to know -- but they certainly don't appear to be overly concerned at present,"" he said.
The latest Hong Kong/Shanghai indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				Feb 10		   Feb 3
 COPPER			  N/A			70
ALUMINIUM
	     (Western)	 N/A		    100
	     (CIS)	     N/A		     75
 LEAD							N/A
	(FOB Chinese ports)  N/A		     10
 ZINC (Chinese)		 70
(Chinese unregistered, FOB Shanghai)
				   N/A		    -25-30
     (Western)		 110-120		 N/A
     (Western alloys)	N/A		     N/A
($1=8.3 yuan)
",27
"China's role as an important world trading partner is a legacy of reformist leader Deng Xiaoping, but the hard task of fully opening the country's food markets remains, diplomats and analysts said on Monday.
As U.S. Secretary of State Madeleine Albright arrived in Beijing declaring it her mission to draw China into the international fold, the sources said that on agricultural trade, China still had a long row to hoe.
Restrictions on trade in grain and other agricultural products have often been seen by trading partners, especially Washington, as political barriers to a more open Chinese market.
Quarantine issues loom large in Sino-U.S. trade, with U.S. grain officials saying, for instance, that Chinese restrictions aimed at keeping out a fungus called TCK smut deny the United States of annual wheat sales worth up to $500 million.
A high-ranking U.S. diplomatic source in Beijing said talks on this and similar issues appeared to be making progress.
The hard part, he said, would be prying open the state-controlled grain trade.
""The hard work is going to be state trading monopolies,"" he said.
""Allowing access to the market, getting away from restrictive licensing and quotas, allowing others to participate in trade, allowing the Cargills and the Continentals to import and distribute on their own account -- all this remains to be done.""
The senior representative in Asia of a major U.S. grain trading house agreed, but said progress was a long way off.
""It is something we have been campaigning for for a long time...that China's import markets and domestic distribution of grains and grain-related products should be open to foreign participation,"" he told Reuters on condition of anonymity.
""I don't know that we have any great hope that there will be changes in the short term,"" he said.
He and other sources in Asia said Chinese authorities were beginning to face the fact that grain imports would always be necessary and that it would be acceptable if China could supply 85 to 90 percent of its own grain needs.
Total grain output in 1996 was a record 480 million tonnes, with a state-set target of 500 million tonnes by 2000. Total grain imports for 1996 were 12 million tonnes, down 42 percent on the previous year.
The diplomat said China's cotton industry has slowly been eased into the world at large as authorities realised it is cheaper to import than pay Chinese farmers prices that are higher than those on world markets.
""One of the arguments we keep making is that when you continue to force people to produce at high prices, it fuels inflation,"" the diplomat in Beijing said.
Deng Xiaoping's forward-looking reform policies recognised that ""no nation is an island"", another trading source said.
High tariffs as well as licencing and quota systems had been relaxed on intermediate commodities such as vegetable oil and high-value products such as apples from the U.S. state of Washington.
While movements on China's entry to the World Trade Organisation (WTO) did signal some hope that Beijing will open its markets, trading and diplomatic sources were not sure any changes would take place in the near term.
""It is our big hope that somehow WTO will provide the leverage for this to happen, but it is not the universal panacea,"" the trading house representative said.
""It is an evolutionary process, not a revolutionary one.""
",27
"The death of Deng Xiaoping is unlikely to shake the so-called Shanghai Gang of technocrats allied to President Jiang Zemin, analysts said on Friday.
They said the group could rely on Jiang's continued patronage, in part because of the talent of its members.
""Shanghai is a pretty important place, therefore you'd expect people who have made it up to a certain level there to move on up,"" said a Western diplomat.
Shanghai, China's biggest city and its economic heart, represents the success of Deng's forward-looking policy of integrating the country's economy with the rest of the world.
The city attracts a major share of China's foreign investment and many analysts see Shanghai moving to regain its 1930s mantle as Asia's most important financial and cultural centre.
Most high-profile of the Shanghai's stars are economic tsar, vice-premier Zhu Rongji and fellow vice-premier Wu Bangguo.
Political pundits in the city are looking for signs of who will be the next to join the club of former Shanghai officials to heed Jiang's call to join him in Beijing.
Officials say privately that both Shanghai Mayor Xu Kuangdi and local Communist Party chief Huang Ju are heading for senior posts in the capital later this year.
One official said he expected Huang to be given a role in the party discipline area while Xu would take a job dealing with the economy.
Current vice-mayor Chen Liangyu is seen as the most likely successor to the mayor, while analysts in Shanghai lean towards the view that Huang will be replaced by someone from outside Shanghai.
The central government wants to keep a steady rotation of officials from different regions to prevent the local administration becoming too independent, analysts said.
Past and recent movements of senior Communist Party officials from Shanghai to senior posts in the central government have long been viewed as attempts by President Jiang to tighten his grip on power.
But many of those in the loosely knit group are not Shanghai natives. Jiang, for instance, was not born in Shanghai, though he cut his political teeth here.
""The people he is going to feel most comfortable having around him are the people he worked with,"" said an analyst.
But their abilities in the task of running a modern government are probably even more valuable, the analysts said.
Shanghainese are perceived as competent administrators and canny business people.
""The Shanghainese do have a reputation for being very skillful at administration and business,"" said a Shanghai-based diplomat.
""And that's where China is right now -- they need competant people, people with management experience. And the management experience in Shanghai is one which is needed in the centre,"" he said.
The move late last year to Beijing of Shanghai's vice mayor in charge of the economy Hua Jianming fitted into this pattern, analysts said.
Hua was widely respected for his management and administrative skills, said an Asian diplomat, ""and he was brought into the centre to use those skills"".
""The Shanghainese clique are simply very expeditious at implementing other people's vision because, essentially, they are technocrats and that's what China needs,"" said a Western analyst.
",27
"China's sugar factories could ease their financial woes by taking advantage of Far East demand and exporting to Asian users but they are unlikely to be given the go-ahead soon, trade and industry sources said on Wednesday.
Chinese producers, most of which are burdened by low prices and high debts, could earn $15-20 a tonne exporting white sugar to the region, a trader with a Western bank in Hong Kong said.
Recent Indonesian purchases of Thai sugar had tightened regional supply, which could mean Asian buyers will have to look elsewhere for their sugar, he said.
""If you take the Thai white sugar out of the market, other importers will need to find a place for sugars, so you could find interest coming from Sri Lanka, Bangladesh, the Philippines,"" he said.
""And that's when China will come in as a replacement,"" he said.
But that wasn't likely to happen any time soon, an official of the China Sugar Association told Reuters.
""The international prices are not at a level we could be happy with,"" he said by telephone from Nanning, capital of Guangxi province where most of China's sugar is produced.  
Traders in Hong Kong said the current premium on white sugar over raw was $70 a tonne, but Far Eastern white sugar had a further $20 because of the cheaper regional freight rates.
The association source said the Chinese government had agreed to buy locally produced sugar for central reserves in the hope of shoring up prices still well below break-even point for the factories.
These guaranteed sales would help factories, most of which had to repay bank loans at the end of the season, he said.
Guangxi's sugar reserves currently held 700,000 to 800,000 tonnes, he said. The national figure was not available.
Central reserve sugar would not be released on to the market before ex-factory prices hit 4,400 to 4,500 yuan per tonne, another trader in Hong Kong said.
Wholesale prices had not moved above 3,800 yuan ($457) a tonne for two months, the sugar association source said, speaking anonymously. Breakeven point for factories was 4,000 yuan a tonne, he said.
Domestic demand has been flat for the past year or so, the official said, so it was difficult to predict when prices would start to firm and factories could see some profit.  
Traders said they hoped prices would firm once the harvest and crushing season finished in late March.
Sugar prices had been expected to firm in the lead-up to the Lunar New Year holiday, China's premier annual festival when confectionary demand traditionally soars.
This was not the case this year, said Asian traders just returned from their five-day break.
Slack demand for the festival compounded on-going flat consumption of soft drinks, sweets, ice-cream and other sweet luxuries that has kept China's annual sugar demand figure to around eight million tonnes in recent years, a trader with a Chinese firm in Hong Kong said.
He blamed China's sluggish economy. ""If people are watching their pennies, they are not going to want to spoil themselves.""
Chinese sugar demand should pick up as the summer approaches, he said, but it will be six to eight weeks before the factories see higher than break-even prices.
China's current sugar crop has been officially predicted at 6.6 million tonnes, a figure most traders polled by Reuters agreed on, though one put it closer to 6.3 million tonnes.
Imports, which central authorities have said will be 690,000 tonnes in 1997, are not expected to begin before mid-year.
-- Shanghai newsroom (86-21) 6279-7004
",27
"Old and young couples waltzed around the sunny marble plaza of Shanghai's People's Square on Thursday, many of them oblivious to the death of paramount leader Deng Xiaoping.
""I didn't know, but death befalls all men alike,"" a 70-year-old man said, quoting an ancient Chinese saying.
""The government has prepared for the transition for a long time,"" he added, before gliding off with his partner in time to music blaring from huge mushroom-shaped speakers.
People gather in the square every day to dance and exercise.
There was general apathy in Shanghai about the death of the man who led China for 18 years. The news that Deng died on Wednesday was first broadcast on Shanghai radio at 6 a.m. on Thursday (2200 GMT Wednesday) and on television an hour later.
""I heard the news when one of my neighbours stuck her head out of the window and shouted it to all and sundry,"" one young man said. ""That happens whenever there is big news -- I can't remember what the last big news was.""
Shanghai television stations broadcast programming beamed directly from Beijing's China Central Television, replaying over and over the news of Deng's death being read by black-suited announcers.
Shanghai radio stations broadcast dirges and historical accounts of Deng's contributions to China's political, social and economic development.
One station played speeches by the gravel-voiced Deng, whose pragmatic reforms transformed China from Stalinist state to economic powerhouse.
In Shanghai, China's biggest city and economic hub, many people were confident the government was well-prepared for a smooth transition of power.
""Chinese people are now more interested in evolution than revolution,"" a university graduate in his mid-twenties told Reuters. ""The government's priority is social stability.
""Deng was very conservative, even Stalinistic in his thinking, so now maybe we will see younger people, people with more understanding of the way the world works, coming to the fore,"" he added.
""But change won't come for some time. The leaders will want to consolidate their positions before they make any changes,"" he said.
For one 16-year-old the greatest sadness of Deng's passing was that the elderly leader would not witness the handover of the British colony of Hong Kong to the mainland in mid-year -- one of his goals -- or see the rapid development of Shanghai.
""Deng came to Shanghai in the early 90s and told us to make great progress from year to year,"" he said. ""Now he won't be able to see just how well we are doing.""
""We have confidence in our leaders that things will be okay and that they are well prepared for the transition,"" said a middle aged woman exercising in the warmth of a sunny Shanghai morning.
""The markets will drop. I guess that will bring some good opportunities to make money,"" a taxi driver said when asked what difference Deng's passing would make. ""But I don't buy shares so it makes no difference to me.""
Shanghai's B share index fell sharply at the opening on Thursday morning on the news of Deng's death, but was up by the midday close by 0.29 percent to 65.318 points on volume of 21.245 million shares worth $8.62 million.
Brokers said heavy bargain-hunting and institutional buying that came in after the low opening was behind the rises.
""Whatever changes there are immediately after Deng's death, they won't have a lasting effect,"" another driver told Reuters.
""Give it a couple of days and everything will be back to normal,"" he said.
",27
"Far East metals traders said on Monday they were bearish about China's short term role in the world copper market, but conflicting signals from Chinese traders and industry officials added to prevailing confusion.
Talk has been swirling through China's domestic markets since the middle of last week that copper traders on the Shanghai Metal Exchange (SME) had been told not to sell their red metal to prevent price falls.  
Trading sources in Shanghai told Reuters at the same time that an official directive along these lines had been issued after an industry seminar in Beijing.
Shanghai copper futures opened higher on Monday on the reports, with local dealers saying the seminar had also resulted in a request that traders suspend imports and hold their own positions to prop-up prices and help loss-making state mines.
The SME's most active June contract opened at 23,800 yuan ($2,867) a tonne, up 130 yuan, before advancing further to hit a peak of 24,320 yuan.  
An official of the China National Nonferrous Metals Import and Export Corp (CNIEC) said no directives had been issued after the seminar to suspend copper imports or to order traders not to sell their copper to hold-up prices.
But the official said the firm, which is responsible for China's copper trade, had last week recommended traders hold their positions to wait for further price rises. This week he said the firm was urging traders to sell because prices were seen as favourable.  
""China at the end of the day is a net importer (of copper) and if they are talking about stopping imports you've got to believe that there is enough available on the domestic market for the time being,"" a Singapore trader said.
""If they are halting imports, that can be nothing but bearish,"" he said. ""If they're not allowed to sell, that can be nothing but bearish.
""If this is indeed the case, the LME (London Metal Exchange) will come off, and you'll be sitting there with this huge arbitrage, which I cannot believe the Chinese traders will ignore,"" he said.  
Sources in Shanghai say warehouses in the city hold 80,000 tonnes of copper that would be available to the market.
""So there is no need to buy right now -- and if there is no buying (imports) then the Shanghai price will go up,"" said a local trader, adding he thought the SME price would hit 25,000 yuan per tonne in the short term.
Western traders said that if Chinese buying does not soon start in earnest -- as has been expected since Chinese New Year in February and more so as the peak summer consumption period looms -- then LME copper price would tumble.  
China's imports of raw and uncast copper in 1996 were up 32.7 percent to 714,248 tonnes, official figures show. Exports were 133,700 tonnes, leaving net imports at 580,600 tonnes.
China's copper mines are not believed to be losing money, as production costs in China are lower than in most places in the world, and current LME prices are almost twice Western production costs, trading sources said.
Another source said the emphasis of China's copper imports had shifted from refined copper to concentrate so smelters can produce their own end product for the domestic market.  
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				March 17		     March 10
Copper, grade A cathode   75			   75
Aluminium, 99.7 ingot    180			  180
Lead, Chinese		 70			   60
Zinc, 99.995 ingots	80-90			100
-- Shanghai newsroom (86-21) 6279-8544
",27
"China has missed a golden opportunity to export corn and earn millions of dollars, and now has up to a million tonnes of the grain rotting in silos in the country's north, Far East traders said on Tuesday.
""This year is going to be a major disaster,"" a Hong Kong trader said.
""All that corn sitting in Dalian is just rotting,"" he said, adding his estimate that 500,000 to one million tonnes of corn was stored in northern silos in anticipation of exports.  
Corn, grown predominantly in China's far northeastern provinces of Heilongjiang, Jilin and Liaoning, began moving to northern ports, particularly Dalian, around May, traders said.
""People had geared up for a huge export programme and I think the traditional northeast suppliers anticipated two million tonnes being permissioned for export,"" a trader in Singapore said.
Concern about national food security and the impact on domestic prices that exports would have in an atmosphere of acute inflationary paranoia had kept China out of the world corn market, trading sources said.  
Corn and rice exports were banned in December 1994 after stocks fell to frighteningly low levels in a country where the governing Communist Party bases much of its ruling mandate on availability and affordability of staple foods.
Imports soon began, totalling 5.18 million tonnes in 1995. Corn imports in the first five months of 1996 were 400,000 tonnes, customs figures show.
Expectations began building in April that China's central grain authorities would allow corn exports to take advantage of high world prices and also to ease a local surplus and push up softening domestic prices. Prices had dropped below $120 a tonne in some areas.
Word at the time from traders involved in negotiations with China's central grain reserve on what nature the exports should take -- barter or cash -- was that the corn would be sold mostly to Japan and South Korea at around $180 a tonne.
""There was a stage when they could have got $180, and from the inverse they could have picked up $20 a tonne selling FOB (free on board) and picking up from the U.S. six months later,"" the Singapore trader said. ""They missed a big opportunity.""  
The company was applying for the right to import and export corn ""in order to solve the problem of huge corn stockpiles,"" an official of the company said.
Official figures put 1995 corn production at 101 million tonnes. Output in 1996 has been projected by media to hit 112 million tonnes. Annual demand is 100-115 million tonnes.
Traders and grain industry sources have said China's total corn reserves are up to 30 million tonnes.  
A few hundred thousand tonnes of Chinese corn was sold to Japan, South Korea, Indonesia and Malaysia, or bartered for equipment supplied by Japanese food processing corporations as part of joint-venture deals, industry sources said.
China's government, however, remained adamant that the export ban had not been lifted.
Officials of the newly-established Jilin Grain Group, set up by the Jilin provincial government and opened for business on Monday, told Reuters the province had its biggest stockpile in history, some three million tonnes.  
Traders said that while owners of the corn stocked at northern ports such as Dalian, Yingkou and Qinghuangdao had lost money on transport, storage and deterioration, the grain was now slowly being absorbed back into the domestic market.
-- Hong Kong newsroom (852) 2843-6470
",27
"Copper prices on the London Metal Exchange (LME), which have reached a nine-month high, are not supported by fundamentals and cannot last, a private Chinese base metals consultancy said on Thursday.
""We believe that worldwide copper fundamentals do not support the copper price rises, that any rises in the copper price will be shortlived and that 1997 will see a bearish market for copper,"" the Shanghai Colub Consultant Co said in a report.
Analyst Rudolf Wolff, in an evening metal report, said that with little producer selling on Wednesday, it seemed any further buying could easily push the copper price towards its $2,400-$2,450 technical target.
LME copper reached a fresh nine-month high of $2,415 a tonne at 1900 GMT on Wednesday, after a kerb level of $2,392 a tonne, up $42 on the day.
But the report said although the charts remained bullish, the fundamentals were not.
Shanghai Colub Consultant Co's managing director Yen Zheng agreed, saying his company was more interested in market fundamentals than technical analysis.
In its internal report, a copy of which was provided to Reuters, Shanghai Colub says an increase in worldwide copper output in 1996 should continue into 1997, quickly turning the market from shortage to oversupply.
New technology was constantly lowering production costs, the report said, with the 1996 average worldwide production cost of 67.8 U.S. cents a lb likely to fall to 60.7 cents a lb in 1997.
If the copper price hit 110 cents a lb, profit margins would stretch to 81.2 percent and hedging opportunities would widen, the report said.
The level of LME copper stocks affected the price more than other stocks, such as those held by producers and end-users, the report said. It cited the effect that the ""irrationally"" low LME stock level of 90,000 tonnes at the end of 1996 had in pushing up prices.
Copper prices had a roller-coaster ride in 1996. They plummeted to a 2-1/2-year low of $1,745 a tonne in June, when Japan's Sumitomo Corp revealed massive trading losses, from a high for the year just a month earlier of $2,715 a tonne.
But tight global supply and low stocks saw LME copper prices claw their way back, to start 1997 at $2,167 a tonne.
With prices now around $2,400 a tonne, the Shanghai Colub report points to the current large stocks of copper held in LME warehouses and concludes that stocks will continue to rise, pushing values down.
""Recently, LME copper stocks have risen to around 222,000 tonnes, and while they will move around this level, the trend for stock increases will not change and will very quickly rise to 270,000 tonnes,"" the report said. ""This is one reason the LME copper price will fall.""
LME warehouses now hold 222,050 tonnes of copper, after a slight fall earlier this week of 2,450 tonnes.
China's influence on the world market was also significant because the country was a major copper user, the report said.
In 1996, China produced 910,000 tonnes of refined copper, importing 300,000 tonnes for total national demand of 940,000 tonnes, the Shanghai Colub report said.
China's carryover stocks from 1996 into 1997 were around 250,000 tonnes, it said, going some way to explain the difference between demand and domestic production and import figures.
A recent report in the official Market Daily newspaper said China's 1996 exports of uncast and raw copper were up 2.5 percent on 1995, to 133,708 tonnes.
The Shanghai Colub report said that while China's copper production in 1997 should be about the same as last year, demand would rise to 1.1 million tonnes, maintaining the balance between demand and available stocks.
-- Shanghai newsroom (86-21) 6279-8544
",27
"China's beer and beverage market has such enormous potential that aluminium can makers already have installed capacity in the country which is double their currents needs, an industry executive in Hong Kong said.
By the turn of the millenium, China's two-piece aluminium beverage can requirments could hit eight billion cans a year, Terry Cartwright, managing director of Crown Can Hong Kong Ltd, said in a recent interview.  
""If we look at the market in round numbers, the market is about five billion (aluminium cans a year),"" Cartwright said. Installed capacity in China and Hong Kong -- which feeds the mainland market -- is now about 10 billion cans a year, he said.
By 1997, Crown Can's four plants in China and one in Hong Kong will give the company one quarter of the world's fastest growing beverage can market, with a capacity of 2.5 billion cans a year, he said.
""We're very confident about the (Chinese) market, obviously there is huge potential there,"" Cartwright said.  
""The market is growing and is growing quite well, and certainly the demand will catch up with can supply.""
Average annual consumption in China had grown from 4.2 billion cans a year in 1995, to an expected five billion this year, he said.
""The increase in the beverage market has been 25 percent in the past year,"" Cartwright told Reuters.
""Whether that will continue is a very hard call. We are predicting a total market of about 8.5 billion (cans used annually) by 1999.""  
By then, he added, installed production capacity for the China market should have reached 15 billion cans a year.
Cartwright's forecast would imply a rise in Chinese refined aluminium demand for beverage can production to about 140,000 tonnes by 1999 compared with roughly 85,000 tonnes now.
Can capacity expansion will continue until the end of 1996, Cartwright said, as manufacturers race to import necessary capital equipment before taxes of up to 50 percent are imposed.
The Chinese government cancelled tax concessions on capital equipment imports on April 1 this year, he said. The grace period lasts until the end of the year.  
""Obviously all the major can manufacturers want to become established in the Chinese market because the potential is huge,"" he said.
""So can manufacturers that wanted to become established have also wanted to ensure they put capacity in prior to the end of the duty concession period.
""There has been a big expansion over the last couple of years and it will continue to grow because capacity that has been installed now will be commissioned this year or next year,"" he said.  
Consumption of canned beverages in China still impressively trails that of Western countries -- consumption in the United States, for example, is around 300 cans per capita a year compared to China's four per capita.
China's beer market, however, is expected to overtake that of the United States by 2000, Cartwright said, to become the world's biggest.
China's 1995 per capita beer consumption was 12 litres (21 pints), just one-eighth of the U.S. figure, the official Xinhua News Agency reported.  
Beer production figures for 1995 have variously been reported by official Chinese sources as 15.46 million and 21.4 million tonnes.
Xinhua has also said China's 1.2 billion people would be drinking 30 million tonnes of beer by 2000.
These sort of figures, no matter how flexible Chinese reporting might be, augur well for the can makers.
""At the moment, the beer market is dominated by returnable bottles, but cans are gaining market share quite significantly,"" Cartwright said.  
""So obviously as the market develops and cans become more predominant, then the potential for the market is huge.""
-- Hong Kong newsroom (852) 2843-6470
",27
"Tin production at one of China's biggest mines has been cut by summer flooding, but a lacklustre market means business has not been affected, an executive with Deng's Yunnan Tin Corp said on Monday.
Gejiu Tin Mine in southern Yunnan province was damaged by floods in June and July, deputy general manager Sheng Weichung told Reuters.
Deng's Yunnan Tin Corp is the Hong Kong representative and trading arm of Yunnan Tin Corp, China's biggest tin producer.  
In 1995, Sheng said, Yunnan Tin Corp produced 20,000 tonnes of tin. The Gejiu mine was the company's biggest, he said.
""But business has been slow in China because the world market is soft and because of domestic restructuring of the industry, changes in government policy and tight credit,"" Sheng said. ""So a cut in production at the Gejiu mine would not have any adverse affect on China's overall tin industry picture.""
It was unclear how extensive the damage to the mine was, he said, or by how much production had been cut.  
China expected to produce 45,000 tonnes of tin in 1996, an official of the China National Non-ferrous Metals Import and Export Corp said in July.
He forecast 1996 exports of 20,000 to 25,000 tonnes.
Total 1995 tin exports were 43,307 tonnes, down 2.4 percent on the year before, China's State Statistical Bureau reported.
Total Chinese tin production for the first half of 1996 was down 6.14 percent on the same 1995 period, to 25,944 tonnes, the figures show.  
Exports for the first half of 1996 of unwrought tin and tin alloys were 12,867 tonnes, down 27 percent on the first half of 1995, customs figures show.
Tin exports in June were 3,339 tonnes.
Despite its size and the high quality of its product, Yunnan Tin Corp was still a ""loss-making state enterprise"" and as such was facing tough times, Sheng said.
A labour force of 100,000 had been cut within the past two years to 40,000 with the introduction of a redundancy programme that offered lump sum payments, he said.  
Senior management had also been trying to raise capital abroad to help get expansion projects off the ground, he said.
Other metals markets in China continued slow, traders said.
A return to pre-summer volatility that saw London Metal Exchange (LME) copper prices fluctuate sharply throughout last week would keep China business slow, traders said.
Three month copper values on the LME traded between $1,905 and $1,970 a tonne in the July 30-August 29 period, giving traders some hope that calm had returned to the market after Sumitomo Corp revealed in June it had lost US$1.8 billion in a decade of unauthorised trading.  
But the calm was shortlived. On September 2, copper prices spiked to a 2-1/2 month high of $2,195, before slumping back on Friday to $1,915.
""I think the market will go down again,"" a trader in Singapore said.
A lack of buyers for Chinese aluminium products had led to domestic stockbuilding, trading sources said.
""They are in the market to export, but there is no real market for them...we are not touching it,"" another source said.
Singapore premiums for zinc were firm at around $65-70 over the LME cash price, traders said.  
Another source added the only zinc available for trading in Singapore was Chinese, ""and the Chinese are working on a fixed price basis"" of around $1,080 to $1,120 a tonne.
Three month LME zinc closed six dollars down on Friday at $1,034 a tonne.
Latest Hong Kong indications at a premium or discount in US$/tonne over LME cash prices on a CIF basis:
				    Sep 2	   Sep 2
    COPPER (ex-Singapore)    100	     N/A
	     (ex-Rotterdam)    N/A	     120
    ALUMINIUM  Western	 N/A		80
		   CIS	     N/A		70-75
    LEAD (Chinese brands)    N/A		70
	   (LME registered)  flat-50	   N/A
    ZINC			   65-70	    70
($1=8.3 yuan)
-- Hong Kong newsroom, (852) 2843-6470
",27
"China, currently importing about 100,000 tonnes of soybean oil a month, could step up imports as traders move away from palm oil and new licences to import soybean oil become available, Asian traders said on Wednesday.
While Chinese markets are seen flush with oil at the moment, traders said most of the available vegetable oil is palm, which is now selling at a hefty premium to soybean oil.
Palm oil is costing $596 a tonne FOB (free on board) at Malaysian ports, a Singapore trading source said. He said freight charges added a further $25 per tonne. This would put the c&f (cost and freight) price on arrival in China at $621 a tonne.
In comparison, South American soybean oil is arriving in China at about $560 a tonne c&f, he said, adding ""It's a big spread.""
""People are clamouring for (soybean oil) import licences now,"" another regional trader told Reuters.
China on Monday purchased a total of 35,000 tonnes of U.S. soybean oil for February shipment, U.S. exporters in Chicago said.  
One position for 25,000 tonnes was slated for shipment from the U.S. Gulf for around $512 per tonne FOB, the other 10,000 tonnes for shipment from Norfolk at $510 a tonne FOB.
U.S. exporters say China has been seen actively buying South American vegetable oil. They estimated purchases at around 50,000 to 60,000 tonnes of Brazilian and Argentinian product.
China's total 1996 soybean oil imports were 1.3 million tonnes, with imports in December alone at 91,000 tonnes.
January and February import figures are expected to show a dip because of Western and Chinese holidays, traders said, adding it would probably be made up in the second quarter of 1997.
Western and Chinese traders have said they do not understand how the government administers the import licencing system given that permits were issued for only 600,000 to 700,000 tonnes of the 1.3 million tonnes of soybean oil imported in 1996.
Soybean oil imported without a licence is subject to import duty of 120 percent, compared to licenced imports which are subject to a 13 percent import duty and 13 percent value-added tax (VAT) on top of that.  
Fears of an official crackdown on soybean oil arriving without permits arose last week on news that one 20,000-tonne cargo of U.S. oil had been held up at a Chinese port.
A trader involved in the sale told Reuters at the time the huge gap between China's domestic price and the international price could see Chinese importers placing orders without the necessary import licences.
South American and U.S. soybean oil, once refined, is costing around 6,600 yuan ($795) a tonne, compared to 7,200 to 7,300 yuan ($867-879) per tonne for the domestic product.
However, traders said soybean import licences are now being made available on a regular basis and the 20,000-tonne cargo had been discharged.
($1=8.3 yuan)
-- Shanghai newsroom (86-21) 6279-7004
",27
"China's national flag flapped at half mast along Shanghai's famous waterfront Bund on Friday as a mark of respect to late patriarch Deng Xiaoping and residents remembered a man who made their lives better and more certain.
Shanghai's press noted the stability of the local share markets in the wake of Deng's death late on Wednesday.
Both share market indices ended the day higher.
Life in China's largest city was largely normal on Friday but just as precaution, police increased their presence throughout Shanghai's sprawling suburbs.
The city's 14 million residents woke on Thursday to the news Deng had died on Wednesday night at the age of 92. For many residents, it has taken time for the significance of his passing to sink in. Most on Friday remembered him as a reformer and a strong leader.
Deng's sweeping market reforms have served the city well, returning it to its former glory as China's financial and industrial powerhouse and boosting the fortunes of its proud residents. His long rule has also brought a long period of stability to the port city.
And stability is the key for many people in Shanghai.
""Our country is peaceful and stable because of Deng Xiaoping,"" said Gao Jixing, 53, a driver for a Japanese bank, in an oblique reference to the turmoil of the 1966-76 Cultural Revolution.
""Now there are basically no problems and we have a lot of confidence that the policies he introduced, his efforts to reform China and open up to the outside world, will continue without change,"" Gao said.
For Li Qi, 33, from rural Shandong province, Deng Xiaoping ended China's tradition of struggle and left behind the foundation of a new political and social system.
""He did a lot of things Chinese leaders have never done, such as retiring early,"" Li said. ""He has set an example that other Chinese leaders can follow.""
Participants at the annual session of the Shanghai People's Congress, the local parliament, paid tribute to the man who had led the country for 18 years, the Business News said.
Deng was praised, too, for his decision to establish the Pudong New Area, a sprawling multi-billion-dollar investment zone across the Huangpu River from the Shanghai's waterfront Bund.
In the bright spring sunshine of Shanghai's famous riverside boulevard, overshadowed by the foreign-built trading houses from another era, Chinese from all walks of life expressed their sadness at the passing of a great statesman.
""Without Deng Xiaoping, our country would still be as poor and as chaotic as it was just 50 years ago,"" said a middle-aged man, with a tiny red-and-gold button of former leader Mao Zedong pinned to his lapel.
""Look at these buildings,"" he said, his sweeping hand taking in the scene behind him. ""Foreigners built them for us. If Deng Xiaoping had not let us build up our country, we'd be like Russia is now -- no law, no social stability and no effective government.""
Jiang Wei, 26, a dealer at the Shanghai Securities Exchange, said she was saddened by the news of Deng's death.
""But look at Shanghai's share markets, they are stable and Deng Xiaoping's death cannot change that,"" she said.
Deng's influence on the vast majority of China's 1.2 billion people -- its 800 million peasants -- had been immeasurable, according to a group of construction workers from Deng's native Sichuan Province.
They had left the land, they said, and like tens of millions of other Chinese peasants had headed for the big city in search of work and fortune.
""Deng's reform policies have really made life much better for the peasants,"" said 28-year-old Duan Weisheng.
""And things will get better, there is still progress to be made,"" he said.
",27
"As China winds down from a two-week Spring Festival holiday and warmer weather looms, Far East metals traders forecast on Monday that demand for Chinese base metals would begin to pick up.
Some traders said physical tightness of some materials, especially copper and aluminium, would push premiums higher.
A trader based in Hong Kong with a major Chinese metals producing firm said mainland customers who had bought three months ahead of the new year holiday were now clamouring for nearby delivery.
""I will have to contact the LME (London Metal Exchange) and arrange to borrow because they want their 300 tonnes before the end of this month,"" he said.
""We're expecting our customers to buy, though many are holding on for price falls,"" he said, adding that high LME prices should soon prompt a profit-taking related correction.
Tightness in the Chinese domestic market was immediately evident on the Shanghai Metal Exchange, which resumed trading on Monday after the Lunar New Year holidays.  
Shanghai copper futures were sharply higher with the most active May 1997 contract opening at 21,980 yuan ($2,648) per tonne, up 400 yuan. It rose further to its limit-up of 22,100 yuan per tonne early in the session.
A source in Shanghai with a Western trading firm said the local exchange's stocks stood close to 20,000 tonnes, though this could hardly be considered high.
Aluminium futures also opened up, with the May contract first traded at 15,900 yuan per tonne, up 20 yuan.
Dips in the LME price of aluminium have prompted Chinese orders over the past two weeks, an industry executive said.
""My belief is that despite the fact that the Chinese were on holiday, there have been some Chinese orders going into the LME already,"" the executive said on condition of anonymity.
A long-awaited correction in the aluminium price had brought Chinese buyers out of their holiday cocoon, he said, adding however that he had no details of Chinese orders.
Aluminium prices on the LME have whipsawed recently. They sagged on Friday under commission house sales and liquidation after the market failed to respond to a 9,975-tonne draw down on stocks. Final kerb trade was at $1,565, down $11 per tonne.  
China's peak aluminium usage period coincides with summer when demand for airconditioners and refrigerators soars.
China's imports of unwrought aluminium and aluminium materials in 1996 rose by three percent, to 634,418 tonnes, from 1995's 615,749 tonnes, according to official figures.
Exports of unwrought aluminium and aluminium materials fell 34.1 percent in 1996 to 169,170 tonnes, from 256,744 tonnes in 1995.
The latest Hong Kong/Shanghai indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				  Feb 17		   Feb 10
 COPPER			  N/A		     N/A
ALUMINIUM
(Western, FOB south China)
				   110-120		  N/A
	    (CIS)		 80- 90		  N/A
 LEAD							N/A
    (FOB Chinese ports)     N/A		     N/A
ZINC
(Chinese) 70
(Chinese unregistered, FOB Shanghai)
				    N/A		     N/A
    (Western)		   N/A		    110-120
     (Western alloys)	N/A		     N/A
($1=8.3 yuan)
-- Shanghai newsroom (86-21) 6279-7004
",27
"World zinc prices that have risen to levels not seen for more than four years are good for Chinese zinc producers who will gear up output to take advantage of the hikes, producing and trading sources said on Tuesday.
While many Chinese producers have sold out of their metal, output would be boosted from April, said a source at the Zhuzhou smelter, one of China's major producers in Hunan province.
Zhuzhou's exports for the first three months of 1997 would hit 20,000 tonnes, more than for the same period of 1996, he said, though he had no comparative figure.
As with most producers, Zhuzhou had been moving its metal to Japan to take advantage of Tokyo's general system of preferences (GSP) policy that exempts developing country imports from tariffs if they are submitted for customs clearance before the beginning of the fiscal year on April 1, the source said.
""This is on long-term contracts, and you can say we're pretty well sold out,"" the source said.
This knowledge has led some Western industry sources to question just how quickly the Chinese could take advantage of the current price rally.
Trading sources said significant tonnages of Chinese zinc had been delivered to warehouses in Singapore, where it is used as collateral for loans but also is available for sales on price rises.
Talk among traders has put the amount stored Singapore at up to 75,000 tonnes, but this could not be confirmed with Chinese or Western sources.
The worldwide Zinc supply is expected to become tight in the second half of 1997. One Western producer representative said his company was sold out for the second half and he saw world prices climbing another $100 a tonne before the end of the year.
""This situation really does seem good for China,"" the Zhuzhou source said.
Zinc prices on the London Metal Exchange (LME) ploughed through a 4-1/2-year high on Monday after a sizeable fall in stocks announced last Friday.
The market touched $1,304 a tonne before settling $6 a tonne up on the day at $1,296. The metal at 0200 GMT was being quoted just a shade under $1,300 at $1,294/99 a tonne.
Premiums have begun to soften on the back of the firming prices. One representative of a North American producer said Chinese traders were quoting premiums on a cost and freight (c&f) at $65 a tonne at Chinese ports.
A Chinese trader in Hong Kong, who sells registered and unregistered zinc on behalf of southern Chinese producers, said he was quoting premiums over the LME cash price basis Chinese ports at $70-80 a tonne. He said $60 would be the bottom level.
A Western trader in Singapore said Chinese smelters had sold forward, leaving domestic supply tight. Chinese trading sources agreed that metal in China is now in tight supply.
Firm domestic prices of around 10,500 yuan ($1,265) a tonne were indicative of the tightness, the Zhuzhou source said, ""but the domestic market just isn't that big"".
Some sources in China have said they think 1997 will be a historic year for Chinese zinc exports, with one local trader putting China's total for the year at half a million tonnes, with up to 80,000 tonnes done in January and February alone.
Official China customs figures show China's exports of unwrought zinc and zinc alloys in January 1997 reached 30,914 tonnes, up 100.3 percent compared to the year-ago period.
China exported 226,777 tonnes of unwrought zinc and zinc alloys in 1996, up 18.4 percent on 1995, the figures show.
-- Shanghai newsroom (86-21) 6279-8544
",27
"Sugar producers in China are worried that a flood of imports could swamp the domestic market and drive down prices already below break-even point, industry and trade sources said on Wednesday.
White sugar prices in China's southern production belt of Guangxi province are still below 4,000 yuan ($481) per tonne, in some places dipping to 3,700 yuan ($445), traders and industry sources in China and Hong Kong told Reuters.
Break-even point was above 4,000 yuan per tonne, and prices ideally should be up to 4,200 to 4,300 yuan per tonne for the factories to make any money, a senior industry executive said.
Official Chinese media reported last week that China planned to import 690,000 tonnes of sugar in 1997.
Of that amount, 350,000 tonnes would come from Cuba, where, according to German statistician F.O. Licht, the 1996/97 sugar crop should be close to the forecast of 4.5 million tonnes.
The remainder of China's 1997 imports would come from Thailand and Australia, traders said.
Official customs figures show total 1996 sugar imports were 1.25 million tonnes, 57.5 percent down on the previous year.
One Hong Kong-based sugar trader said China's 1997 sugar imports would probably be closer to 1.5 million tonnes.
""The country has 1.2 billion people, they can consume as much as you put in there,"" he said.
A Hong Kong-based executive responsible for several sugar facilities in southern China, however, said that unless the Chinese government controlled the way in which the imported sugar reached the market, prices could be expected to worsen.
""It is a question of when the imports come in and how they are released on to the market,"" he said on condition of anonymity.
""If it is tightly controlled and it trickles on to the market, it would be OK,"" he said.
He said the experience of 1995 would hopefully have shown authorities the effect on the domestic industry of sudden and large injections of sugar on to the market.
That year, sugar imports hit 2.95 million tonnes, 90.3 percent more than the year before. Much of the imports were illegal, prices plummeted and many factories are still trying to recover.
The sugar cane crop in southern China is now being harvested, and white sugar prices are expected to keep softening until the crop is all in, around late March/early April.
China's officially-stated 1996/97 sugar production target has varied over the past few months, in one case going over eight million tonnes. Traders in the region have tended to put more store in an earlier figure of 6.53 million tonnes.
China's annual demand is around eight million tonnes.
Once the harvest is through, market prices should begin to improve, giving factories a chance to drag themselves out of the red and repay loans taken out to pay farmers for their cane, an industry executive said.
Factories have complained that the price they must pay farmers for cane is too high given the low market price for the processed product.
This year's cane price has been set at 230 to 300 yuan ($27-36) per tonne, about the same as last season, though that was a 65 percent increase on the 1994 set price. Ten tonnes of cane produces one tonne of white sugar.
""All the factories are strapped for cash to pay farmers for the cane, and so are selling whatever they can get just to bring some money in,"" the executive said.
""While there is an overhang of volume there will be pressure on prices, and introducing another 700,000 tonnes will just add another element on top of that.""
Like the factory manager, he was cautiously optimistic that China's authorities had indeed learnt from 1995.
""Calculations we've done on the back of an envelope suggest that 600,000 to 700,000 tonnes will not result in oversupply,"" he said.
But he added that if imports did go as high as some traders predicted, ""things will be quite serious"".
",27
"While he ruled China, Deng Xiaoping politely declined the worshipful personality cult that grew up around his predecessor, Chairman Mao Zedong.
With his death last Wednesday, however, the floodgates were opened for what could be the start of the ""Deng market"" as books, posters and comics featuring the patriarch swept into stores ahead of his funeral on Tuesday.
In Shanghai, China's fast-beating mercantile heart, more than 80 branches of the state-run Xinhua bookstore had taken delivery of glossy Deng posters to meet anticipated demand, the Liberation Daily said.
Thousands of sets of the pictures, entitled ""The Architect of China's Opening, Reform and Modernisation -- Deng Xiaoping"", had been flown to Shanghai from publishing houses in various parts of China, it said.
Elsewhere, the People's Daily reported that ""people old and young, men and women, including officers and soldiers of the People's Liberation Army and young students"" had waited in line for hours in Beijing to buy Deng portraits.
The state's rush to push out Deng memorabilia follows long years during which China's 1.2 billion people rarely saw even a photo of their paramount leader.
After the excesses of Mao worship during the 1966-76 Cultural Revolution, Deng made a clear break in leadership style by insisting on a low public profile. On retiring from his last official post in 1991, he dropped almost completely from view.
There was a brief burst of Deng propaganda in 1992, when he successfully overruled communist hardliners and pushed his capitalist-style economic reforms to a new pitch. After that, however, Deng vanished again from the public eye.
His death at 92, however, freed Deng's heirs to make the most out of his political patronage and China's state stores and news media were ordered to begin cranking out memorials and mementoes as quickly as possible.
In one store in Shanghai, a city which has benefited greatly from Deng's reforms, biographies, collections of Deng's thoughts on socialism and economic development -- and handbooks explaining them -- were selling well.
""China has hope because of Deng Xiaoping,"" said one 73-year-old man poring over a selection of Deng's works at a bookshop on the city's premier shopping street, Nanjing Road.
He was buying a book for his grandson, he said, and had chosen ""Xiaoping Says -- What is Socialism"", which for 7.60 yuan ($0.91) uses simple cartoons to explain Deng's theories.
""He was the greatest leader China ever had,"" the man said.
""Look at what he did -- he brought the country out of chaos, he came up with the 'one country, two systems' theory for the return of Hong Kong, and he retired early. A truly great man.""
Britain returns Hong Kong to China at midnight on June 30.
",27
"Australia's Prime Minister arrives in China on Friday to redefine Canberra as a friend of Beijing, which less than a year ago accused Australia of being party to U.S. attempts to contain China, business sources said.
John Howard wants to let China know that the business of Australia is business, said Bruce Dover, general manager of PDN-Xinren Information Technology Co, a joint venture of media giant News Corp and Chinese Communist Party newspaper People's Daily providing online computer technology information.
""I think the Chinese have made it clear that if you want to do business, then business becomes the business of government and that should be the priority,"" Dover said.
Sino-Australian relations, warm throughout the 13-year reign of the Australian Labour Party, started to chill once Howard's Liberal Party took over from Labour in elections in March 1996.
The relationship began to sour soon after the elections with the cancellation of a financial support scheme for Australian business in developing countries followed in September by a visit to Australia by Tibet's spiritual leader, the Dalai Lama.
The nadir came in August 1996 when China accused Australia of moving too close to the United States, after U.S. Secretary of Defence William Perry described Japan and Australia as the northern and southern anchors of Washington's Asian security arrangements.
""From this we can see that the United States is really thinking about using these two 'anchors' as the claws of a crab,"" the official People's Daily said in an editorial.
Australia's trade commissioner in Shanghai, Richard Pillow, said he saw no impact from the political issues on Australia's booming trade with China -- Australian exports to China grew 24 percent in 1996 to A$3.896 billion ($3 billion).
""Howard's visit is a proactive move to strengthen bilateral ties,"" Pillow said, adding that Australian companies were on a long list of international firms wanting a slice of the Chinese pie.
Howard arrives in Shanghai, China's biggest city and its mercantile heart, on Friday evening with a business delegation that includes representatives of Australian banks, insurance firms and commodity trading bodies.
A number of deals expected to be announced during the trip, including the opening in Beijing of a branch of ANZ Bank, business sources said.
In the lead-up to his five-day China trip, Howard emphasised the importance of Canberra's relationship with Beijing and of Australia's place in Asia, and said the level of the business delegation with him reflected this.
""It is probably the most senior and most broadly based representative business group to accompany an Australian prime minister on an overseas trip,"" he said.
In 1996, Australia's imports from China were worth A$4.122 billion, up from A$3.861 billion the year before, Australian officials said.
($1=A$0.78)
",27
"A plan by U.S. car giant Ford Motor Co to increase its stake in a Chinese truck maker is a bet on the future of China's auto industry, as revitalising the Chinese partner could take years, analysts said on Wednesday.
Ford announced on Wednesday that it planned to increase its investment in Jiangling Motors Corp with the purchase of $54.5 million worth of shares.
""In the longer term it is a beneficial deal, because they (Jiangling) have been losing out in the competition for market share -- and if they don't do something they can't compete at all,"" said An Lu, vice president of China research at Salomon Brothers in Hong Kong.
Under the subscription agreement, Ford said it had agreed to increase its equity share in its Chinese partner to about 30 percent from the current 20 percent.
The agreement is subject to approval of Jiangling's shareholders, who will discuss it at a meeting scheduled for April 30, and China's regulatory authorities, Ford said.
Ford and Jiangling are developing a light commercial vehicle that will be launched as a nine- and a 12-seater bus, a Ford spokeswoman told Reuters. A van and a chassis cab, or pick-up truck, would follow, also produced at Jiangling's plant in Nanchang, eastern Jiangxi province, she said.
Jiangling's share of China's top-end light truck market had fallen in recent years to 15-18 percent from about 20 percent as that of its major competitor, Qingling Motors, had risen to about 21 percent, Salomon's Lu said.
He said Qingling's use of Japanese technology through its cooperative deal with Isuzu put it one car generation, or about 10 years, ahead of Jiangling.
Qingling vehicles also commanded a premium of about 10 percent because of their use of the Isuzu name and technology.
Qingling had sold about 35,000 vehicles in 1996, Lu said. Jiangling said in December it expected 1996 sales to reach 17,000 vehicles, compared to 20,500 in 1995.
An injection of Ford capital and technology for Jiangling would be a welcome step towards the future, said analyst John Lu at ING-Barings in Shanghai.
Continued economic growth would spur infrastructure development, he said, and growth of China's interior would spur demand for light trucks for passenger and goods transport.
An analyst with a western bank in Shenzhen, where Jiangling is listed, said the deal would help lower Jiangling's production costs, a substantial overhead in car manufacturing.
Some analyst sources said, however, it could be up to three years before Jiangling was able to effectively utilise the unfamiliar Ford capital and technology.
""I don't know how they will merge their two technologies,"" Salomon's Lu said. ""Or will they choose the new Ford technology and replace the old with the new -- which would mean they have much higher start-up costs.""
""Jiangling will still need at least a couple of years to get production up and running using new technology that is unfamiliar to them, and in redeveloping their market,"" Lu said.
The Shenzhen-based banker said the announcement of the deal should not have any effect on Jiangling's share price,
""There will be some dilution, but the effect would be countered by better company prospects,"" she said.
Trading in Jiangling shares was suspended on Wednesday morning on the announcement. After trading resumed, its B shares edged up slightly to HK$4.00 against HK$3.98 at Tuesday's close.
($1=HK$7.8)
-- Shanghai newsroom (86-21) 6279-8544
",27
"China's flagship futures bourse, the Shanghai Metal Exchange, has ambitions to become Asia's premier metals trading floor, but economic realities are holding it back, the exchange's president said on Friday.
Total turnover since the exchange opened in May 1992 has topped 180 billion yuan ($21 billion) and efforts at regulation have curbed speculation, Hu Yuezheng said in an interview.
The exchange's 120 members include China's biggest base metals producers. All of them, along with the central government, now use the exchange's prices to monitor the market, Hu told Reuters.
Measures introduced in 1994 and 1995 to reduce speculation on the exchange had cut turnover to 230 billion yuan last year, from 455.8 billion yuan in 1995, Hu said.
But the introduction of several major regulations would see 1997 turnover expand on the 1996 figure, he said, but refused to make any projections.
Although greater market regulation has boosted its credibility, the Shanghai Metal Exchange still remains a long way from a place on the world trading stage, Hu said.
International metals trade is conducted in U.S. dollars, but China's yuan is not fully convertible, he said. Foreign investors are also not allowed to trade on China's futures exchanges.
China has no securities law and the quality of Chinese product lagged far behind world standards, he added.
But Hu said: ""It is of course my hope"" that Shanghai will become the East Asian equivalent to the London Metal Exchange (LME). Sipping tea from a Chicago Mercantile Exchange mug, Hu listed the market's current regulations, including margin requirements, limit up and limit down, daily clearance, and strict payment and delivery rules.
Limit up and limit down rules, designed to minimise risk, covered three trading days, Hu said, after which traders suffering losses of more than six percent were required to enter their losses in the exchange computer so they could be offset against gains.
""On day one, the limit is three percent, on day two it is four percent and margin requirements are then increased from five (percent) to six percent,"" he said.
""If it is still limit up by day three, the limit increases to five percent and the margin requirement increases to eight percent,"" he said.
Speculators would then be required to offset their positions, he said. And if there were no speculators, then hedgers would be required to do so.
""Why did we do it like this? Because over the past few years we have had many speculators here trying to squeeze the market and in this way we have brought some stability to the market, and our members feel their interests are protected,"" Hu said.
Up to 20 percent of the exchange's total turnover was now generated by producer and consumer hedging, he said.
While prices on the exchange are often move in tandem with those on the LME, Hu said Shanghai price levels increasingly reflected local fundamentals.
""At the moment there is no real relationship between the two exchanges,"" he said. ""China's rapid economic development has seen copper demand grow and now the country must import 30 percent of its needs, now around 1.1 million tonnes a year.""
""This need is what influences international prices,"" he said.
""There will always be contradictions between activity and regulation, but we feel it is more important to have a regulated market,"" he said.
($1=8.3 yuan)
",27
"China has set realistic targets in its 1997 budget but analysts said on Sunday that debt-ridden state-owned enterprises and high unemployment remain thorns in the government's side.
A 1997 budget deficit target of 57 billion yuan ($6.87 billion), was, at less than one percent of gross domestic product (GDP), a ""very healthy level and good for a developing country,"" said Hoong Yik-Luen, head of China research at ING-Barings.
Finance Minister Liu Zhongli, in his budget report on Sunday, announced a 7.2 percent cut in the budget deficit from 61.442 billion yuan in 1996, which was itself 10.8 percent below target.
""Very few countries in the world today have a budget deficit around one percent of GDP,"" Hoong said.
""If you look at the United States, it is probably three to four percent, so they (China) are doing better in terms of budget deficit control than a lot of First World countries,"" he said.
The government's use of domestic bond issues was a clever and thoughtful way of soaking up China's surplus cash for domestic investment, he said.
China issued a total of 196.742 billion yuan in debt last year, 1.485 billion yuan above the targeted figure and an increase of 27 percent over 1995.
The 1997 target for domestic and overseas debt announced by Finance Minister Liu is 248.596 billion yuan ($29.95 billion), up 27.3 percent on the 1996 figure.
One analyst in Shanghai said government authorities ""are realising there is a lot of money domestically"" as bank deposits far outstripped bank loans.
By issuing domestic bonds -- though minute in value compared to developed countries that issue domestic and international debt -- the government was able to soak liquidity back into the system.
""If you look at the fact that all the bond issues were sold to domestic investors, then basically it is not an external debt problem,"" Hoong said.
""It is actually recycling domestic savings and moving the money from people's hands, preventing them from spending and thereby accelerating inflation, and bringing that money back to the government,"" he said. ""Then the government relies on domestic savings to invest domestically.""
Another analyst in Shanghai said one reason for the popularity of bonds was the lack of investment alternatives.
""One of the reasons that bank savings outstrip loans is because there is a lot of money in the system and people want to get some kind of return on it,"" she said.
""The other problem is that the lending rate is too low. The banks could be lending a lot more than they are and they could be doing it very productively if they were allowed to do their own lending,"" she said.
This was due in part to China's tight credit policy of the past few years, she said. While credit would probably be eased in 1997, bank deregulation was not on Beijing's agenda, she said.
Stability, however, was a top government priority, especially after the death last month of Deng Xiaoping, whose 18-year leadership steered China from Stalinist backwater to economic powerhouse, analysts said.
After three years of belt-tightening aimed at slowing growth that threatened to spin out of control, China should now be concentrating on such pillars as infrastructure development to create jobs and kick-start the sluggish economy, they said.
China's estimated 100,000 state firms reported their first ever combined net loss in the first quarter of last year, but a banking source said the economy's reliance on them has fallen from 100 percent before 1979 to around 40 percent now.
The need to retrench up to 150 million people had been factored into the government's long-term economic policies, he said, and for the sake of stability could not be done overnight.
""It has to be done slowly,"" another of the bank analysts said. ""And we would prefer it to be slow because if it is too hasty it could result in some very unproductive mergers.""
She and others put real national unemployment at close to 15 percent.
The 1997 target for urban unemployment unveiled in Sunday's budget was three percent. China's official urban unemployment rate was 2.9 percent at the end of the third quarter of 1996, with no figure available for all of 1996. Officials have said the figure could be around seven percent.
An inflation target of six percent for 1997 was realistic and achievable after 1996's 6.1 percent, Hoong of ING-Barings said.
""They have shown they feel comfortable with the inflation rate,"" he said. ""The question now is stability and stability will come if everyone has a job.""
",27
"Up to one million tonnes of soybean meal is clogging Chinese ports, filling warehouses and forcing domestic prices down, traders said on Wednesday.
""There is no demand,"" said one U.S. trader.
Of the million tonnes estimated to be sitting in Chinese ports, either on ships or in warehouses, 400,000 tonnes is in southern Guangdong, one source said.
""The market has dropped and the buyers are stuck with the meal,"" the source said.
Feed mills were buying on a hand-to-mouth basis, keeping minimum stocks and hoping to squeeze desperate importers on the price, said a trader in Shanghai.
""When they find all the port stocks are consumed, they will start increasing their buying -- but that won't be for a while and who knows when,"" he said.
Traders polled by Reuters varied in their view of just when the stocks would dwindle to a point that will inspire buying -- the optimists said late February, the pessimists plumbed for as late as July.
In the meantime, the domestic Chinese price of soybean meal has plunged around 10 percent in the past six weeks, traders said, from 2,900-2,950 yuan ($349-355) a tonne, to 2,650-2,750 yuan ($319-331) a tonne now.
Soybean meal prices on the Chicago Board of Trade (CBOT) ended mostly firm on Tuesday, closing $2.40 per tonne higher to 30 cents lower, with March up $1.40 to $238.10 per tonne.
Thai traders reported on Tuesday that Chinese buyers of Indian-origin soybean meal had defaulted on some cargoes because the market could not absorb the huge quantities on the way.
China's soybean meal arrivals in the last quarter of 1996 were between one and 1.2 million tonnes, traders said, with loading and shipping delays pushing back the landing time of large quantities from South America and the United States.
""Our vessels with an ETA (estimated time of arrival) around mid-December all arrived in January,"" said the Shanghai source.
Another said his company currently had vessels in four or five Chinese ports awaiting discharge and facing demurrage charges.
A trading source in Singapore said 250,000 tonnes of meal was due to arrive and/or discharge at Chinese ports this month.
On top of that, 400,000 to 500,000 tonnes of soybeans would be discharged in China before the Lunar New Year vacation begins on February 6, he said.
""It will be interesting to see how all this is absorbed by the market,"" another trading source said.
Overbuying in 1996 and delayed arrivals were compounded by a decision in December by Heilongjiang province to allow the sale of unprocessed soybeans to other parts of the country for the first time in more than three years.
Heilongjiang, in the far northeast, is China's biggest soybean producer, with 1996 output estimated at 4.135 million tonnes, down slightly from 1995.
While prices in the province had suffered from the moratorium, the decision to lift the non-value-added sales ban had had little impact on farmers' prices, the U.S. source said.
The Shanghai trader, however, said that fundamental demand in China for beans as food, rather than feed, kept prices steady.
""In Shanghai now, prices are 3,000 yuan (per tonne) for beans, and of that 2,600 goes back to Heilongjiang. That's not bad,"" he said.
",27
"Sky-high world copper prices do not seem to be supported by fundamentals and could soon be in for a liquidation-related correction, Chinese copper trading sources said on Monday.
""I don't really see any support for $2,400,"" a Chinese source on the Shanghai Metal Exchange (SME) said.
""If the price can go above $2,400 a tonne and stay up there for a decent period, that would indicate some support,"" he said. ""But I think the funds are under pressure to sell.""
London Metal Exchange (LME) copper came under heavy pressure from liquidation and end-week sales on Friday after surging to a nine-month high of $2,445 a tonne.
The market fell back to close Friday's kerb at $2,390, a $13 fall on Thursday's close.
Shanghai copper futures ended down across the board on Monday on heavy profit-taking, with the most active June 1997 contract ending at 23,370 yuan ($2,817), losing 50 yuan.
Traders said the correction came on the back of the LME's Friday falls.
The SME trading source said he would sell at 23,300 yuan per tonne. Monday's intra-day low was 23,200 yuan and he saw it going down further this week to 22,800.
LME copper appeared set to test the downside on Monday, with the first support level at $2,350, London analysts said.
This had the support of Chinese traders, one of whom said from the southern Zhuhai Special Economic Zone that LME copper prices should consolidate around $2,320-2,380.
He and others ruled out Chinese activity in the immediate term, saying prices were still too high to justify buying.
The official China Daily Business Weekly said on Sunday that China's demand for copper would reach 1.2 million tonnes in 1997.
China's total copper production in 1996 was 909,700 tonnes, up 5.71 percent on 1995, according to State Statistical Bureau figures.
Physical demand for copper in China for 1997 is expected to exceed supply by around 100,000 tonnes.
Copper imports are expected to remain high, media reports have said. Imports of raw and uncast copper in 1996 were up 32.7 percent in 1996 to 714,248 tonnes. -- Shanghai newsroom (86-21) 6279-8544
",27
"Far East metal traders said on Tuesday they were resigned to seeing China steer clear of major copper purchases before the end of April, when the country's high consumption season begins.
""Now is not the right time of year, I think more towards the later part of this month because that's when the season starts,"" said the head of a trading house in Hong Kong with smelting and refining interests in China.
Small parcel purchases of 500 to 2,000 tonnes at a time by end-users continued, he and other traders said, as they had run down inventory and had no choice but to pay current high prices.
The price of copper on the London Metal Exchange (LME) has been hovering around $2,300 a tonne for the past couple of months, as the market waits for China's annual buying programme to begin.
LME copper finished the afternoon kerb last Thursday, ahead of the Easter holiday, at $2,372 a tonne.
China's peak season coincides with the end of winter, as construction projects gear up.
""China is producing healthy amounts of cathode from its own sufficient supplies of concentrate,"" a trader in Beijing said. ""For a short period of time, domestic production should be able to support demand.""
Shanghai Metal Exchange figures show 14,828 tonnes of copper held on warrant in exchange warehouses, which local trading sources have said would be sufficient supply for two months.
Attention has focused on zinc, as Japan's window of tariff-free import opportunity from designated developing countries under its General System of Preferences (GSP) closed on March 31.
Brokerage house Brandeis said last week GSP imports of zinc were expected to reach 90,000-100,000 tonnes, compared to 84,000 tonnes last year. About 70,000 tonnes of that zinc would come from China, Brandeis said, up from 49,000 tonnes last year on expectations of higher world zinc prices spurring higher exports.
Zinc prices on the LME have hovered around 4-1/2-year highs of $1,300 a tonne for the past few weeks, with many trading sources in the region confident of seeing prices touch $1,400 in the foreseeable future.
Zinc closed on the LME on Thursday at $1,295 a tonne.
A trader in Beijing said he expected LME zinc to correct downwards in the short term before bouncing back above $1,300 a tonne.
""After that I think there will be a consolidation and we could see the price move above $1,400 even in the first half of the year,"" he said.
He and other sources in the region said China has begun to move substantial quantities of zinc to LME warehouses in Singapore, with estimates of 20,000-25,000 tonnes on the way.
China's major smelter, Huludao in the northeastern province of Liaoning, was producing 10,000 tonnes of special high grade zinc ingots a month despite annual capacity of 330,000 tonnes, a Chinese industry source said.
Technical problems were keeping production of high quality exportable ingots down, he said.
""The goal is to do as much special high grade as possible but there are problems with the wet electrolytic process that mean they cannot clean the liquid properly and the impurities are higher than they should be for special high grade,"" he said.
Sources at China's other major smelter, Zhuzhou in Hunan province, and at one of its trading representatives in Hong Kong have said it plans to gear up production to take advantage of the high world prices.
Chinese producers are also known to move zinc to Singapore to use as collateral for bank loans. In this case it does not necessarily appear on LME warrants, traders said.
",27
"Far East metals traders were preoccupied with one question on Monday -- will China buy copper in the midst of the current rally, or are prices on the London Metal Exchange (LME) nearing precarious heights?
There was little doubt in the minds of most traders and industry sources polled by Reuters that copper prices would continue their heady rise.
Copper on the LME finished Friday trading substantially higher, with technical buying and aggressive short covering taking the red metal to fresh 8-1/2 months highs despite an unexpected stocks increase of 1,875 tonnes.
It was $2,366 a tonne at the afternoon kerb close, off the day's $2,375 high but up $38 from Thursday's finish.
Prices on the Shanghai Metal Exchange (SME) have been mirroring the LME's rises since trading resumed last week after the long Lunar New Year holiday.
Shanghai copper futures started higher on Monday, with the most active May 1997 contract opening at 23,500 yuan ($2,831) a tonne, rising 190 yuan from last week's close. It fell back a little to 23,460 yuan in early trading.
Trading sources in Hong Kong and Singapore said that as long as Shanghai rises along with the LME -- and as long as the LME continues to rise -- the Chinese should not be scared away from the market.
""We're starting to see the start of glimmers of interest from China to start re-importing metal they lent,"" a trader in Singapore said.
""But it is difficult at these high prices to see a lot of Chinese buying, though the fact remains that if they need it, there seems to be so little on the ground in China that they will have to buy it,"" he said.
Shanghai Metal Exchange figures show copper stocks at 17,524 tonnes, a level described by one Western trader as ""nothing"".
The head of a big Hong Kong trading house said there had been some signs of Chinese buying in recent weeks.
""But it's just a few hundred tonnes here, a few hundred tonnes there,"" he said, adding he had seen no indication that China's central reserve authorities had been in the market.
""They (Chinese end-users) do need to buy but they could be scared off by these price levels,"" he said. ""I think the LME will go higher -- I believe it will break $2,400 (a tonne) before we see a correction.""
Premiums on copper arrivals in Shanghai are now $120 a tonne over LME cash metals pushing the price close to $2,500 a tonne, an analyst here said.
Arbitrage opportunities were seen kept in check by high costs -- three percent import duty and 17 percent value-added tax (VAT).
""You're looking at healthy arbitrage opportunities looming, as long as there are discounts on the VAT,"" another Western source said, adding that big traders were often able to get waivers on the VAT.
Beijing's States Statistical Bureau last week released figures showing China's January copper production level at 70,000 tonnes, up 2.2 percent on January 1996.
China's total copper production in 1996 was 909,700 tonnes, up 5.71 percent on 1995, the bureau said.
Physical demand for copper in China for 1997 is expected to exceed supply by around 100,000 tonnes.
Chinese media reported last month that China's 1997 copper demand should rise five percent over last year to 1.05 million tonnes. Output is expected to be more than 900,000 tonnes.
Copper imports are expected to remain high, the newspaper said. Imports of raw and uncast copper in 1996 were up 32.7 percent in 1996 to 714,248 tonnes.
",27
"Chinese soyoil buyers who have been selling cargoes back to the market are unlikely to unleash a flood of supplies originally destined for China, traders in the Far East said on Wednesday.
And soybeans and soybean meal have been flowing into the country, they added.
""It's logical,"" a Hong Kong trader said of the Chinese sell-backs. ""It's not easy to sell in China and they immediately make a profit of US$10 a tonne that they definitely would not get in China.""
U.S. exporters told Reuters in Chicago on Tuesday that China had resold between 25,000 and 50,000 tonnes of Argentine soyoil to two trading houses in recent days.
Uncertainty over Chinese government plans for issuing import quotas for soyoil could be behind the sell-backs, traders in the Far East said.
""I suspect they are scared the quotas won't be issued,"" a source in Singapore said, adding that market sentiment had swung violently from bullish to bearish in a matter of days.
""Buyers (in China) commit without downpayment, so you don't know what is going to happen about your money until the cargo arrives,"" another veteran China trader said.
Traders said little oil was actually on its way, and it was unlikely that washouts would become a feature of the market.
Soybeans and soybean meal were a different story, with trading sources reporting huge quantities of both commodities on the way to Chinese ports this month.
One trader in Singapore put the amount of soybean meal due to arrive in China this month at ""way, way above half a million tonnes... and closer to one million tonnes"".
The meal was coming from India, the U.S., Brazil and Argentina, he said without elaborating.
Another trading house source chipped in with 700,000 to 800,000 tonnes of soybean meal due to land in China this month.
He also said 430,000 tonnes of U.S. soybeans would be arriving at Chinese ports in January.
Domestic soybean meal prices had already begun to soften as the imports arrived, sources said.
One source quoted meal in the southern province of Guangdong, bordering Hong Kong, at 2,700 to 2,800 yuan (US$325-337) a tonne, down from closer to 3,000 yuan just weeks ago.
""With so much (meal) arriving and discharging, the price has already been impacted,"" the Hong Kong trader said.
""End-users are not very keen to talk about prices, they're going to buy on a hand-to-mouth basis because they're thinking if they buy now they have to pay cash and then pay storage.
""So he'll push the seller to the wire to get as good a price as possible,"" the trader said.
China's premier annual Spring Festival vacation, this year beginning on February 6, is traditionally preceded by a few weeks of extremely slow business and extremely tight cash.
Importers of soybeans were more than likely to have secured deposits from their buyers and ""should be fairly safe,"" a Chinese source said.
",27
"Chinese zinc producers are expected to take advantage of high international prices to export, though  this may lead to a domestic supply squeeze and firmer prices at home, Far East metal traders said on Monday.
With London Metal Exchange (LME) zinc prices having risen by around $50 a tonne since the start of 1997 to the highest levels in nearly two years, Chinese producers are seen accelerating sales, they said.  
Three month LME zinc was little changed at $1,137/39 a tonne in early trade in London on Monday, after a kerb close of $1,139 on Friday. The market was seen consolidating after a blistering rise that peaked last week at $1,157.
Already this year, Torch Metal in Hong Kong, which sells on behalf of Chinese producers, has exported 30,000 tonnes of Chinese zinc to end-users ""because the price is right,"" a company source said by telephone from the British colony.  
None of this metal had gone to the LME warehouse in Singapore, he said, adding that Torch had a further 50,000 tonnes of zinc to sell in the course of 1997 and would not hesitate to take advantage of price rallies.
A Chinese trader in Beijing said one of the major smelters had sold between 20,000 to 30,000 tonnes of Chinese metal in late December at 9,800 yuan ($1,180) a tonne FOB (free on board) southern Chinese ports.
That metal was exported after the government wiped out the five percent zinc export tax on January 1, 1997, he said.  
""That zinc was sold before the rally, but it was still quite expensive,"" he said.
A futures trader with a state Chinese firm in Singapore said Chinese producers who sold into the market before price rises could well deliver their metal to the LME to record a paper loss, but a healthy profit in the cash market.
""They (producers) would only look at the premium picture,"" he said. ""If physical sells at a nice premium, they could sell their LME position, and sell physical based on LME prices plus a nice premium,"" he said.  
Sources in Asia said LME price levels over $1,150 a tonne would make Chinese exports worthwhile.
""If the price goes up further, the quantity of (Chinese) exports will move up,"" a source in China said.
That echoed the view of a number of traders in China, Hong Kong and Singapore polled by Reuters.
Some said it could lead to another round of boom-bust trading that saw domestic Chinese zinc prices rise to 10,700 yuan ($1,289) a tonne, ex-smelter, two years ago.
The Beijing trader said China had 250,000 to 300,000 tonnes of zinc metal available for export this year.  
China exports around a quarter of its annual zinc output.
Official figures show 1996 exports of unwrought zinc and zinc alloys rose to 226,777 tonnes, over 1995's 191,526 tonnes. December 1996 exports alone were 29,519 tonnes.
""We always believe Chinese metal will pressure the market,"" another Chinese source said. ""Most people will see a good chance in the price rises.""
But he said that once Chinese zinc producers saw they could get attractive export prices for their product, they could desert their domestic customers.  
""This will squeeze domestic supplies, then domestic prices will move up, then it makes more sense to keep the metal at home because the prices are better,"" he said. ""Here we go again.""
The Beijing trader said special high grade zinc accounted for around 30,000 tonnes of Chinese exports so far this year, with the same quantity of high grade metal.
Up to 70 percent of the exports had gone to end users, he and other sources said, much of it to Japan.  
Under its General System of Preferences (GSP) programme, Japan exempts metal imports from developing countries submitted for customs clearance before the April 1 start of the fiscal year.
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				Jan 27		  Jan 20
COPPER			 70			70-100
ALUMINIUM (Western)     100-105		 100
	    (CIS)	    75			75
LEAD			  100		     120-130
ZINC (Chinese)	     50			N/A
     (Western alloys)   100-120		  N/A
($1=8.3 yuan)
",27
"Chinese interest in soymeal imports has tapered in the wake of a rally that has pushed prices above US$320 a tonne C&F, traders said on Tuesday.
""There's no business above $300 (a tonne),"" a trader in Singapore said.
""Everyone is lurking at $300,"" said another trader in the region. ""If anyone is buying at $320, I want to find them.""
Reports that China had bought Indian meal for September shipment at $323 a tonne, inclusive of cargo and freight, and further for November/December shipment at around $313 a tonne were greeted with ridicule throughout the region.
Trading sources said China was staying out of the market, and that Indian meal was currently overvalued by a good $20 a tonne.
Traders gave the market a couple of weeks before prices came back to more ""reasonable"" levels and the Chinese resume buying.
""The rally in India has been happening for the past couple of weeks and the market has just jumped up. Prior to that India was undervalued,"" another trader said.
Chinese buying halted around two weeks ago, the traders said, and domestic prices had remained firm.
Meal prices at Chinese ports were around 3,000 yuan ($361) a tonne, the Singapore trader said.
Traders throughout the Far East have told Reuters they expect China to import between one million and 1.2 million tonnes of soymeal in 1996.
One trader said last week that 600,000 tonnes of soymeal was expected to arrive in China by mid-September.
Chinese demand for animal feed -- a principal component of which is soymeal -- was down by five to seven percent in the southern regions, a veteran trader in Hong Kong said.
Another source, however, said this did not correlate with an apparent rise in Chinese meat production of 15 percent so far this year, or with the relative stability of domestic meal and corn prices.
""There is reasonable (feed) demand,"" he said.
Meanwhile, the Chinese government has yet to issue vegetable oil import quotas and licences -- though traders reported that permission was granted for three trading firms to bring in a total of 100,000 tonnes of liquid oil in mid-August.
The veteran in Hong Kong said the wait for quotas was frustrating traders who knew China was still flush with vegetable oil -- some saying current stocks could last through to the end of 1996.
""The trading companies are long on oil, the state, Cofco (China National Cereals, oils and Foodstuffs Import Export Corp), the crushers -- everyone is long on oil,"" another trader said.
""Domestic oil prices are being forced up, and they are trying to clear heavy stocks,"" the Hong Kong source said.
Soybean oil prices in northern China have been under some pressure recently -- movements reported by the National Grains and Oils Information Centre in Shanghai show a range since early August between 7,200 and 7,800 yuan per tonne.
""We are hoping that in a couple of months we will see some action as the stocks clear,"" the Hong Kong source said.
Some traders were putting oil in bonded warehouses against the issue of the licences, which usually happens well before the end of August, he said.
Customs figures reported from Beijing on Tuesday show total soyoil imports from January to July 1996 were 919,140 tonnes, with 188,626 tonnes in July alone, and 72.2 percent of the total from Brazil.
($1 = 8.3)
",27
"- The one million tonnes of corn rotting in storage in China's northern port of Dalian will lead to tightened local supplies and force prices up before new crop is available at year-end, traders said on Wednesday.
Up to 50 percent of the stored corn is unfit for milling, a trader in Hong Kong said.
""I'd buy Dalian futures. Prices have got to start going up,"" he said.  
""The price will keep going up until January (because) the new crop won't be available until then, after the farmers have dried it and then want their money for Chinese New Year. If the domestic price keeps going up, what's the point of exporting,"" he said.
Even if exports were an option for China's grain authorities, they no longer make economic sense, traders said.
""What's the point? The inverse has gone. You can't do any better than low $180s (US$ a tonne) into Southeast Asia now. It just doesn't work,"" a U.S. trader in Hong Kong said.  
He said free on board (FOB) values in Dalian were 1,400 yuan ($168) per tonne for good quality corn.
Another regional trader, whose company has joint-venture interests in China's corn belt, said southern feed millers were rejecting the Dalian corn on the basis of quality.
""There is a lot of low quality corn around. We are FOB suppliers so in an atmosphere in which the feed millers are looking for any excuse not to accept cargo, we are having to turn it back,"" he said.  
""In the U.S., they could blend low quality with high quality to get a medium quality product. In China they can't do that because everything is bagged by hand,"" he said.
""So they will just have to sell it at a heavy discount.""
The U.S. trader said China's recent demand for soymeal indicated a need for corn to mix with the protein product.
""Feed values are decent,"" he said. ""Some livestock producers are starting to gear up again and will need corn.""
The Dalian corn could be absorbed into the market over the coming three months, and the poorer quality corn could be used industrially, for instance to produce starch, he said.  
Exports were first mooted in early April, when market prices fell to less than 1,000 yuan ($120) a tonne in some areas of the northeast corn belt comprising Heilongjiang, Jilin and Liaoning.
A few hundred thousand tonnes of Chinese corn did sell to Japan, South Korea, Indonesia and Malaysia, or was bartered for equipment supplied by Japanese food processing corporations as part of joint-venture deals, industry sources said.
China's government, however, remained adamant that its ban on corn exports, imposed in late 1994 when central reserves ran low, had not been lifted.  
Trade and industry sources said they saw official fears of inflation as the reason large-scale exports were not sanctioned. Of the sales that did go ahead, South Korean buyers paid $216.70 a tonne cost and freight (C&F) when U.S. corn was arriving at Asian ports for more than $230 a tonne.
China could easily have sold up to two million tonnes at the time, making substantial hard currency profits and helping increase prices for impoverished farmers, traders said.  
Chinese corn output in 1996 has been projected by the official media to hit 112 million tonnes. Official figures put 1995 corn production at 101 million tonnes. Annual demand is 100-115 million tonnes.
China's corn reserves have been reported at 30 million tonnes. New crop will be harvested from late September to November, and should start arriving at market, in a dried state, a month or so after that.
-- Hong Kong newsroom (852) 2843-6470
",27
"Far East metals traders on Monday waited for London Metal Exchange (LME) reaction to reports that Australia's MIM will halve 1997 zinc supplies to Europe.
MIM Holdings Ltd said it was holding talks with customers worldwide on the impact of reduced zinc production this year.
Nick Stump, chief executive of MIM, declined to comment on a Reuters report quoting european smelter sources as saying that MIM would reduce zinc supplies to Europe by half this year.
""There is definitely a shift to Asia, although to what extent we will have to wait and see,"" Stump told Reuters in Sydney.
LME zinc prices were expected to rise -- one Chinese trader in Hong Kong predicted zinc would hit new highs on the news -- but little direct impact was seen on the Asian market.
LME zinc has traded at dizzy heights recently, hitting two-year highs last week of $1,174 a tonne.
Consistent falls in LME stocks indicated the physical market would confirm the strong futures trend. Last trade on Friday was $1,169, up $33 a tonne.
China exports around a quarter of its annual zinc output.
Official figures show 1996 exports of unwrought zinc and zinc alloys rose to 226,777 tonnes, over 1995's 191,526 tonnes. December 1996 exports alone were 29,519 tonnes.
Asian trading sources said that while the impact of the MIM news on Chinese prices would be limited, the continuing climb of world prices would encourage China's zinc producers to export.
""Chinese smelters are looking at the LME price and so domestic supply is quite high now,"" the Chinese trader, who represents Chinese producers in Hong Kong, said.
Domestic Chinese prices for LME-registered brands of Chinese zinc, like Torch, had hit 9,600 yuan ($1,156) per tonne, he said.
Long-term export contracts done by his company had been settled at $1,170 per tonne FOB (free on board) at major Chinese ports, he said.
Costly freight between China and Europe would keep most of the Chinese product in the region, Chinese and Western sources said.
Vinod Kumar, director of Donald McCarthy in Singapore, said Chinese shipments of zinc ingots to Singapore in the past month totalled around 20,000 tonnes.
""I hear there are another 30,000 to 40,000 tonnes on the way,"" he said.
He said China's total shipments of zinc in the past month to customers in the region, including South Korea, Taiwan and Japan, were 100,000 to 120,000 tonnes.
""This is a fairly heavy level of activity,"" he said, adding that most of the material in Singapore was being kept off-warrant and therefore would not show up in LME stock figures.
""We are not putting what we buy on warrant, but selling directly to customers,"" Kumar said.
Kumar predicted a rise in LME stocks on Tuesday of around 3,000 tonnes. LME zinc stocks on Friday stood at 482,925 tonnes.
A metals trader in Shanghai said unregistered Chinese zinc ingots were arriving at major Chinese ports at the LME spot price, less $25-30 a tonne on quality.
Her company was buying small lots -- up to 300 tonnes at a time -- to sell onto Japanese customers, she said.
""Demand is there as long as the quality is not too bad,"" she said.
Copper premiums were firming in some areas of the region, another trading source said. Premiums to South Korea had firmed in the past week to $80-90 a tonne, from $70 last week, on rumours of a major short position being held there.
Premiums on arrivals at major Japanese and Taiwanese ports were steady at around $70-75 a tonne, traders said.
The Chinese New Year holiday officially begins on Thursday, February 6, and lasts five days but has already seen business activity throughout the region slow to a standstill that is expected to last until mid-February.
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				   Feb 3		  Jan 27
     COPPER			 70			70
     ALUMINIUM (Western)     100		 100-105
		   (CIS)	    75			75
     LEAD			  N/A		     100
	    (FOB Chinese ports) 10		     N/A
     ZINC (Chinese)  N/A				  50
	    (Chinese unregistered, FOB Shanghai)
				 -25-30			N/A
	    (Western alloys)    N/A		 100-120
($1=8.3 yuan)
",27
"The sun is setting on China's soybean importing season, but Far East traders have set their sights on 1997 as high oil stocks run out and the domestic crop falls by up to a million tonnes, trade sources said on Thursday.
China's soybean imports so far in 1996 had reached 600,000 tonnes, a Hong Kong trader said.
Import expectations for the remainder of the year would bring the calendar year 1996 total to 800,000 tonnes, he said.  
Another trader in Hong Kong said his day had been brightened by the prospect of a Panamax deal at $320 a tonne FOB (free on board) for beans of U.S. and South American origin to the northern Chinese port of Tianjin.
Buyers were joint venture feed mills, he said. Domestic buyers were thin on the ground as the variety of taxes and charges made importing beans uneconomical.
Domestic soybean prices were holding steady around 3,000 yuan ($361) a tonne, traders said.  
The Dalian Commodities Exchange September contract was 3,730 yuan ($449), which traders said was far away from the market, suggesting heavy speculative interest on the exchange.
Traders throughout the region agreed current world prices were a good $10-$15 too high for Chinese buyers.
""There are a lot of Chinese inquiries -- at least 200,000 to 300,000 tonnes -- but most interest is at $315-$320,"" one Hong Kong source said. ""But the price in the market is $325-$330, so we're still $10 away.""  
""For beans, the price is too high and China cannot buy, but they don't need to be so aggressive as the new crop will go out (into the market) in late October/November.""
Expectations that China's soybean crop will be down two to three percent this year on 1995's 13 million tonnes buoyed the spirits of regional traders, one of whom put China's 1997 soybean imports at 1.5 million tonnes.
By early 1997, high oil stocks will have been depleted, and the domestic crushing industry will be in need of raw material.  
Chicago Board of Trade (CBOT) soybeans futures closed lower on Wednesday under the bearish influence of a report by the Iowa-based Farmers Commodities Corp (FCC) predicting an increased U.S. soybean crop this year.
FCC raised its output expectation to 2.276 billion bushels, or 61.942 million tonnes, from a previous 2.271 billion. The USDA estimates the crop at 2.3 billion bushels.
That news pushed prices down five cents to 15-1/4 cents per bushel lower, with September down 13-1/4 cents at $7.97-3/4.
""Sooner or later, if there is no major natural disaster, the CBOT will go down a lot,"" a trading source said.  
""China has banned oil imports this year and so the stock is decreasing,"" he said, echoing a long-held trade view that China's vegetable oil stocks will hold through to year-end.
""Next year they won't have this problem, and the crushers will have space to store their oil,"" he said.
China's soybean harvest last November was said by trade and industry sources to be down at least 20 percent on 1994's bumper 16.3 million tonnes.  
Traders have said Chinese farmers in the northeast have switched some acreage from beans to corn, but that falling acreage could be made up by increased yield as the weather has been favourable.
Traders said soybean import licences had yet to be issued by China's State Planning Commission. And while many said quotas were not needed to import beans this year, one did caution that ""it depends on who you talk to"".
His greatest fear, he said, was that his 50,000-tonne Panamax deal would turn up at a Chinese port, only to be turned away for lack of an import licence.  
-- Hong Kong newsroom (852) 2843-6470
",27
"British drug discovery group Scotia Holdings Plc said on Tuesday it remained confident about prospects for its drug pipeline despite recent setbacks.
In a telephone interview with Reuters, chief executive David Horrobin said the company believed troubled diabetic drug Tarabetic would win approval in Britain, despite a formal rejection by the UK's Medicines Control Agency.
""We are internally confident that we have the evidence to respond to the MCA's concerns,"" said Horrobin.  
He said he also believed the drug would not have to be marketed with a weakened labelling indication for its use, as some analysts have suggested. ""It will be some variation of nerve damage in diabetes,"" he said.
The MCA's rejection of Tarabetic sent shares in Scotia plunging earlier this month, amid fears that the group would be forced into a rights issue in unfavourable circumstances.
But Horrobin also told Reuters that Scotia would not resort to a rights issue before the end of 1997 or 1998 at the earliest, helping take some pressure off the shares, which rose 36 pence to 415 by midmorning, recovering from early losses.  
He said trials of Foscan, currently in Phase III trials in Europe for head and neck cancer, were going well, with 250 patients recruited compared with 115 a year ago.
""We are getting the same results as you would get with surgical excision of early stage cancer,"" he said.
Horrobin also said the company was excited about Amelorad, a drug for alleviating the effects of radiation therapy on the skin and red blood cells.
""The one-year data is considerably stronger than the six to 12 week data, and shows substantial reductions in skin damage"" in breast cancer, Horrobin said.
",19
"Shares in Anglo-Australian drugs and diagnostics group Cortecs International Plc could rise by more than 60 percent if news due shortly on one of its leading drugs is positive, analysts said on Tuesday.
Cortecs president Michael Flynn told Reuters he expected to announce the interim result of a key European Phase III trial on Macritonin, a new drug for treating the bone-wasting illness osteoporosis, at the end of next week or early the week after.
Flynn said that if the results ""are positive, as we expect, they will be used as the pivotal data for the first applications for registration in Europe.""
Cortecs has used its skills in developing oral versions of drugs to create a tablet form of calcitonin, which increases bone retention of calcium and slows the loss of bone mass.
Analysts believe oral calcitonin, to be taken once a day, will have strong advantages over the existing injected form of calcitonin and over a nasal spray version, Miacalcic, marketed by Switzerland's Novartis AG. The market for the existing drugs is around $800 million a year and is expected to grow strongly as population in the developed world ages.
""There is the potential for a lot of very positive news,"" Nomura analsyt Nick Woolf, who has issued a strong buy note on Cortecs, told Reuters.
Woolf said the shares could rise to 420 pence if the trial data was positive. ""The shares could almost double if news is good. It is very important for them.""
Shares in the company were up 19-1/2 pence at 256-1/2 in midday trading, but remain well below their March 21 high of 291 pence and their April 1996 peak of 450 pence.
""The stock has been moving down on no news other than people getting scared by what may come out,"" said Woolf.
But analysts said Cortecs had already established proof of principle for Macritonin, and has a number of international marketing partners lined up.
Yamaichi International analyst Erling Refsum also sees considerable upside to Cortecs' shares. He values the company's portfolio of drugs, which include oral insulin and chronic bronchitis products and an oral influenza vaccine, at around 1.5 billion stg compared with its current market capitalisation of just over 300 million stg.
Refsum said the calcitonin data, which will indicate the drug's ability to reduce bone destruction, should boost confidence in Cortecs, ""because people are not confident about the company at the moment.""
Refsum is particularly bullish about Macritonin, which he said could be ""a billion dollar product if they have got it right, and I suspect they have.""
Cortecs management believes osteoporosis products could become the largest class of drugs in the world, overtaking anti-ulcer treatments. Around 200 million mainly elderly people currently suffer from the condition in OECD countries, and the numbers at risk in the U.S. alone are expected to double over the next 25 years as the population ages.
Tom Geimer of Henry Cooke Lumsden added to the upbeat predictions on the share price. He said positive trial results on Macritonin would ""fundamentally support values near 300 pence"" but added that ""as the shares have traditionally been a trading stock, we expect them to break 400 pence on positive news.""
But Geimer added a note of caution on Cortecs, which has enjoyed a chequered career as far as investors are concerned, most notably an upset in 1991 involving trials of oral insulin in Korea.
""Cortecs is progressing nicely,"" Geimer said in a written commentary, but he added: ""We advise investors to remember that Cortecs, despite its recent progress in the lab and clinic, still needs to prove itself in the market.""
--London Newsroom +44 171 542 7717
",19
"Peptide Therapeutics Plc, a tiny Cambridge vaccine discovery company, moved firmly into the big time on Monday after signing up its second major strategic alliance in under three weeks.
Shares in Peptide rocketed on news that Anglo-American drugs giant SmithKline Beecham Plc is to pay six million pounds up front for access to novel vaccines which could protect against allergic reactions ranging from mild hay fever to fatal food allergies.
The stock rose 14 percent or 46 pence to 375 in late trading. Peptide, which only floated on the stock market in November 1995, has seen its shares rise 63 percent since the start of the year. Shares in technology group BTG Plc, which signed over patents for the vaccine to Peptide on Monday, rose 17 1/2 pence to 480.
SmithKline, the world's biggest supplier of vaccines, is taking a 2.8 percent stake in Peptide for 3.6 million pounds ($5.88 million) and providing cash and licence payments of 2.4 million pounds. Peptide said it could receive another 24 million pounds from SmithKline, excluding any royalties on eventual sales.
SmithKline's seal of approval for Peptide's science follows another high profile coup late last month, when Medeva PLC agreed to transfer its know-how in developing oral and nasal vaccines to the company. Peptide is now working on non-injectable vaccines to block a range of infections such as typhoid, flu and food poisoning by the e-coli bug.
Yamaichi International analyst Erling Refsum said Peptide had ""got some quite impressive partnerships. Medeva is not to be sniffed at and SmithKline is quite a big catch. It means they have validated what (Peptide) are doing.""
The allergy vaccine was also backed by the British government last September in the form of 450,000 pounds development grant.
Peptide said it had already proved succesful in small-scale trials against food allergies, which were often lethal, and Peptide believes it could work against allergic forms of asthma and eczema as well as adverse drug reactions.
Peptide licensing director Nick Higgins, a key mover behind the SmithKline deal, told Reuters that several major companies had expressed an interest in the allergy vacccine, but SmithKline offered a stable, long-term alliance.
Higgins said the first allergy product could be on sale around the turn of the century.
Despite the flurry of recent deals finance director John Brown said there was room for other tie-ups, notably involving technology to allow rapid identification of protease inhibitors, which block enzymes crucial to a virus's ability to reproduce.
Protease inhibitors have been used successfully against the HIV virus, but Brown said ""they clearly have many therapeutic possibilities,"" including tackling viral conditions like herpes.
A novel treatment for rheumatoid arthritis is also in early stages of development.
Yamaichi's Refsum said 400 pence ""looks like a fair price"" for Peptide shares, but he added that even this level ""may be undervaluing the rate of progress they are making.""
But another analyst said the share price ""may be overcooked.""
""This is a superb deal for them,"" he said, but added ""it is going to take a long time to turn the interesting science into late-stage projects."" ($1=.6120 Pound)
",19
"British drugs group Medeva Plc announced a strong rise in underlying profits on Wednesday and stressed its growing Americanisation with a decision to seek a listing on the New York Stock Exchange.
Pre-tax profits before exceptional items rose 31 percent to 103.5 million pounds ($167.4 million) in 1996, and shareholders were rewarded with a 20 percent rise in the dividend to 4.8 pence per share.
Medeva's shares, which have enjoyed a solid run this year, rose three pence to 283 pence in morning trading.
Headline profits were hit by an expected 65 million pound charge for last year's acquisition of the U.S. assets of defunct British group Fisons from Rhone Poulenc Rorer Inc.
Products from the business, based in Rochester, New York, helped to fuel a 30 percent rise in Medeva's sales last year to 332 million pounds.
However, analysts expressed some concern over slowing growth rates for Medeva's top-selling and most profitable drug Methylphenidate, which is used to control attention deficit disorder in children and young adults.
Sales rose 20 percent to 108 million pounds, but this was a marked slowdown from the previous year and Medeva warned that it faced increased competition in the tightly-controlled U.S. market.
The Rochester acquisition helped push the proportion of Medeva's operating profits contributed by U.S. operations to 86 percent last year from 79 percent, with sales increasing to 69 percent from 62 percent.
In a sign of its growing emphasis on the United States, Medeva announced that all its U.S. businesses would operate under the name Medeva Pharmaceuticals, and said it would switch its American Depositary Receipt (ADR) listing to the prestigious Wall Street New York Stock Exchange from the smaller American Stock Exchange.
Finance director Garry Watts told Reuters the decision reflected the strength of their American business and the fact that around 35 percent of Medeva shares were held in the United States.
""I think it is time that we were on the big board,"" he said.
Chief executive Bill Bogie said Medeva, which specialises in acquiring existing businesses and products, now had ""a fully integrated sales force"" in the United States.
He said the current force totalled 264 part- and full-time staff, but added that ""the structure is there to grow to a thousand if you want to.""
The impact of the restructured U.S. operation was already being felt by the Rochester products, Bogie said. Sales of the ten products totalled $77 million in the first six months of Medeva's ownership, compared to $100 million in the whole of 1995.
One of the strongest performers was appetite inhibitor Ionamin, used to treat obesity, although Medeva said sales slowed significantly at the end of 1996 following the launch of American Home Products Corp's rival Redux.
Nomura analyst Nick Woolf said the mood of an analysts' meeting with Medeva, which has fallen in and out of favour as investors struggled to understand its unique strategy, was ""really quite positive.""
""Especially with the Rochester products, where they have got some quite dynamic ideas in terms of sales and marketing, so that is quite exciting,"" Woolf said.
Outside the United States, Bogie said he was still interested in building up Medeva's position in Italy and Germany, but declined to say if he had acquisitions in mind. And he stressed Medeva's growing links with the biotech industry as a potent source of future products to sell via Medeva's expanding infrastructure. ($ = 0.618 British Pounds)
",19
"Fast-developing vaccine discovery group Peptide Therapeutics Plc said on Tuesday it planned to target North America in its quest for further alliances.
In a telephone interview with Reuters following the announcement of full-year results the group's new chief executive John Brown said ""what we want is big pharmaceutical companies andd the biggest concentration is in North Amercica.""
Peptide said on Tuesday that Alan Goodman would step down as chief executive to spearhead the group's assault on North America.  
Peptide already has major deals with SmithKline Beecham Plc and Medeva Plc under its belt. It agreed in January to develop vaccines using Medeva's expertise in creating non-injectable drugs and earlier this month licensed its portfolio of allergy vaccines to SmithKline Beecham.
Despite these high profile agreements, which have seen Peptide shares soar this year, Brown said there was still plenty in the cupboard to attract new partners. He said there was ""huge potential for our technology platforms,"" which include methods for discovering new vaccines and protease inhibitors, a class of drugs which help stop viruses from reproducing.  
Brown said the company would also be interested in finding partners to help develop early stage vaccines against Meningitis B and Respiratory Syncitial Virus (RSV), a breathing disorder which affects young children. Peptide is also looking at using peptides against rheumatoid arthritis and multiple sclerosis, and at using its vaccine technology for animal health.
Brown , said that Peptide, which floated on the stock market in November 1995, was now changing gear. ""We are entering the third phase of the company. Phase one was the venture capital, pre-flotation stage and in phase two we built up the company and established a solid base.""  
Peptide has built its Cambridge, England, headquarters up in the past 12 months to 77 staff from 28, and Brown said this could move to ""between 90 and 100 over the next year.""
Brown, who has relinquished the finance director's post to become chief executive, said the company was in a strong cash position, with 27.4 million stg of cash on its books.
""The burn rate may increase marginally this year to seven or eight million stg"" from 6.5 million in 1996, Brown added.
--London Newsroom +44 171 542 7717
",19
"Unilever Plc stirred up the world chemicals industry Tuesday with surprise news that it plans to sell most of its speciality chemicals businesses.
The announcement of the massive disposal programme, which analysts said could net up to five billion pounds ($8.17 billion) for the Anglo-Dutch group, sparked a rash of speculation about potential buyers.
The four businesses, National Starch & Chemical Co., Quest International, Unichema International and Crosfield, had total sales of around three billion pounds ($4.9 billion) last year and employ nearly 16,000 people in 35 countries.
Analysts said the move, which could free Unilever up for a major acquisition in its core food, detergents and personal product businesses, was well-timed.
The company is taking advantage of a shake-up in chemicals as Europe comes to grips with overcapacity and increasing competition from the United States and Asia by swapping assets and disposing of non-core operations.
Businesses like Unilever's are particularly attractive, offering higher margins and less volatile performance than industrial chemicals. With profit margins of more than 14 percent, Unilever's businesses ""are at the good end of the range,"" said Williams de Broe analyst Peter Cartwright.
""This is a highly saleable and attractive portfolio,"" Kleinwort Benson analyst Jeremy Chantry said. He added that the businesses were likely to be sold ""in big pieces.""
Another analyst, who asked not to be named, said U.S.-based National Starch, which makes industrial adhesives, resins and speciality starches, could fetch 1.3 to 1.5 times its annual sales.
The Quest fragrances and flavorings business and the Unichema natural oils businesses, both based in the Netherlands, might be worth 1.5 times their annual turnover.
With no obvious buyer for the whole package, speculation centred on possible interest for the different segments.
Williams de Broe's Cartwright said industrial adhesives and resins could both be a target for Britain's Imperial Chemical Industries Plc , which wants to buy lighter chemicals operations and move away from industrial products.
Analysts said ICI, which has little debt, could also be interested in the petroleum and plastics catalysts business of British-based Crosfield.
Another analyst said National Starch could interest other U.S. firms. ""A lot of the big processors in the States, like Cargill, make raw starch and haven't moved on into the value-added chain, which is what National Starch is in. Those big food processors may be interested in that,"" he added.
Switzerland's Roche Holding AG spent $1.1 billion last week buying flavors group Tastemaker. Another major player in the sector, International Flavors and Fragrances Inc. of the United States, said last year it was not interested in buying another flavors company, but it could be attracted by Quest's investment in biotechnology.
Unichema, whose products include lubricants and ingredients for polymers, soap and skincare products, might be of interest to one of the five or six major players in this segment. They include Witco Corp. of the United States and the German groups Henkel KGaA and Degussa AG.
",19
"Glaxo Wellcome Plc reported an 18 percent jump in 1996 pre-tax profit on Thursday but said it faced two lean years after its biggest-selling drug Zantac loses its U.S. patent in July.
Pre-tax profits at the world's number one prescription drugs company climbed to 2.964 billion pounds ($4.8 billion) from 2.505 billion, in the middle of analysts' expectations.
Sales rose nine percent to 8.341 billion pounds and shareholders were rewarded with a 13 percent rise in the dividend to 34.0 pence.
Despite a forecast of flat profits for 1997 and 1998 as a result of an anticipated plunge in sales of ulcer treatment Zantac, the group's shares ended the day 11-1/2 pence higher at 10.48 pounds, recovering from early falls.
Analysts said they were encouraged by the performance from the group's management, which is confident it can ride out the collapse of Zantac, the best-selling drug on which Glaxo built its international fortune.
Glaxo boldly predicted a return to double-digit sales growth in 1999, pinning its hopes on drugs for AIDs, asthma and migraine and promising 20 new product launches over the next four years.
SocGen's director of equity research, Paul Diggle, said Glaxo Wellcome had gone a long way to answering the question of whether it was ""a becalmed giant that through patent expiries is going to be hard-pressed to grow...or a serious growth player which faces a bit of a dip.""
BZW analyst Steve Plag added: ""We think that by the end of 1998 Glaxo Wellcome will be one of the strongest drug companies in the industry.""
Sales of Zantac slipped 14 percent last year as competition began to bite around the world but at 1.931 billion pounds they continued to make it the world's biggest-selling drug, a spot it has held since 1986.
The company said sales of Zantac in the U.S. market, which topped one billion pounds last year, could plunge by up to 80 percent in the first year of full competition.
""The tough period is mid-1997 to mid-1998, when Zantac will come under severe generic pressure in the U.S.,"" deputy chairman and chief executive Sir Richard Sykes told Reuters.
But he added: ""If you take Zantac out, we have a 6.4 billion sterling business growing at 14 percent. That underlying growth is a very clear indication of the strength of the group going forward.""
He said sales of Zantac fell by 324 million pounds last year, while a portfolio of newer products launched since 1990 saw sales rise by 650 million pounds to 2.0 billion pounds.
The group's top performers last year included its rejuvenated HIV and AIDs treatments, whose sales doubled to nearly 500 million pounds.
Retrovir and Epivir are cornerstones of new cocktails of drugs that have shown startling success in reducing virus levels, giving Glaxo a 57 percent share of the fast-expanding AIDs market.
Other big sellers included asthma drugs Serevent and Flixotide, which notched up combined sales of more than 500 million pounds, and migraine drug Imigran, which saw sales in the U.S. market alone leap by 69 percent last year.
Sales of the group's second-biggest product, herpes treatment Zovirax, which has already lost most of its key patents, were steady at 812 million pounds.
Despite persistent speculation that Glaxo Wellcome, formed after Glaxo's nine billion pound acquisition of Wellcome in 1995, would hit the acquisition trail again when debt levels allowed, Sykes said the pressure for mega-mergers had dissipated.
""The bigger companies get, the more difficult it is to buy them or merge, so the way forward will be much more looking at regional and local opportunities and building these as opportunities come along,"" he added. ($ = 0.620 British Pounds)
",19
"Britain's Courtaulds Textiles Plc on Tuesday reported a first-half loss after one-off charges and said that most of the 30 to 35 million pounds it plans to spend on restructuring will fall in the second half of 1996.
Courtaulds made a pre-tax loss after exceptional charges of 8.5 million pounds ($13.26 million) compared with profit of 6.4 million in the first half last year. Excluding exceptional charges, pre-tax profit fell to 600,000 pounds from 10.3 million.
In a telephone interview with Reuters, the group's new chief executive, Colin Dyer, said his aim is to move ahead quickly on reorganisation, which includes further disposals and creation of four product-led divisions, and get back to a ""clean set of results.""
The decline in profits was mainly in its fabrics division and resulted from weak demand in the U.S. and in continental European for lace, as well as reorganisation costs in Britain.
Dyer said the company is to shed jobs in Britain and western Europe and increase production in low wage economies, especially in Asia. ""The most important thing is that we are attacking our problems and putting them right quickly,"" Dyer said.
Reorganisation into four clear divisions will allow Courtaulds Textiles to focus on its strengths and relieve managers of the burden of ""firefighting,"" Dyer said.
Courtaulds has sold around half its hit list of a dozen problem businesses, with three disposals announced last week.
Dyer said in total the disposals will account for 160 million pounds of turnover, and those so far announced ""must be getting towrds half."" Talks on ""one or two"" remaining sales are ""quite advanced,"" he added.
Courtaulds took a 9.1 million stg restructuring charge in the six months to June, and expects to generate cost-savings of 10 to 13 million pounds a year by 1998. Dyer said benefits ""will be kicking in a bit this year, but significantly in 1998.""
He declined to give exact forecasts for 1996 as a whole, but added that analysts' profit forecasts ""are not far away on the full year."" Analysts are predicting full-year pre-tax profit of between 34.0 and 40.6 million stg before exceptional items.
He also would not be drawn on whether the company will be able to continue to maintain its dividend. ""We will take that half by half,"" he said. It held its interim dividend at 5.2p.
Dyer also signaled the group's intention of ""moving the cost base from Britain and western Europe to lower cost manufacturing"" and warned that opposition Labour Party plans to introduce a minimum wage in Britain would make matters worse.
""There will be job losses,"" Dyer said, but would not give further details. Courtaulds currently has operations in Britain, France, Germany and Spain, as well as Morocco and Turkey.
Dyer said the Far East offers clear advantages in terms of labour costs and access to raw materials. The group already operates in the Philippines and Thailand, where it makes stretch fabrics.
Turning to individual markets, Dyer said the U.S. is ""a mixed bag,"" with fabrics ""very strong"" but lace ""bumping along the bottom"". ""Britain is quite strong. All you read in the press about the feelgood factor is right,"" he said.
""The European scene is mixed. Germany and Italy are still poor but lace is showing signs of recovery in the second half,"" Dyer said, adding that ""France is the deadest"" market, with consumer spending flat. ($1=.6412 Pound)
",19
"Unilever Plc stirred up the entire chemicals sector on Tuesday with surprise news that it plans to sell most of its speciality chemicals businesses.
The announcement of the massive disposal programme, which analysts said could net up to five billion pounds ($8.17 billion) for the Anglo-Dutch group, sparked a rash of speculation about potential buyers.
The four businesses, National Starch & Chemical Co, Quest International, Unichema International and Crosfield, had total sales of around three billion pounds last year and employ nearly 16,000 people in 35 countries.
Analysts said the move, which could free Unilever up for a major acquisition in its core food, detergents and personal product businesses, was well timed.
The company is taking advantage of a shake-up in chemicals as Europe gets to grips with overcapacity and increasing competition from the United States and Asia by swapping assets and disposing of non-core operations.
Businesses like Unilever's are particularly attractive, offering higher margins and less volatile performance than industrial chemicals. With profit margins of more than 14 percent, Unilever's businesses ""are at the good end of the range,"" said Williams de Broe analyst Peter Cartwright.
Kleinwort Benson analyst Jeremy Chantry said: ""This is a highly saleable and attractive portfolio."" He added that the businesses were likely to be sold ""in big pieces"".
Another analyst, who asked not to be named, said U.S.-based National Starch, which makes industrial adhesives, resins and speciality starches, could fetch 1.3 to 1.5 times its annual sales. The Quest fragrances and flavourings business and the Unichema natural oils businesses, both based in the Netherlands, might be worth 1.5 times their annual turnover.
But Kleinwort's Chantry noted that ""these are high margin businesses and some could be going for two times sales"".
With no obvious buyer for the whole package, speculation centred on possible interest for the different segments.
Williams de Broe's Cartwright said industrial adhesives and resins could both be a target for Britain's Imperial Chemical Industries Plc, which wants to buy lighter chemicals operations and move away from industrial products.
Analysts said ICI, which has little debt, could also be interested in the petroleum and plastics catalysts business of British-based Crosfield.
Another analyst said National Starch could interest other U.S. firms. ""A lot of the big processors in the States, like Cargill, make raw starch and haven't moved on into the value-added chain, which is what National Starch is in. Those big food processors may be interested in that,"" he added.
Quest is also in a sector seeing major rationalisation. Switzerland's Roche Holding AG spent $1.1 billion last week buying flavours group Tastemaker, paying more than 3.4 times Tastemaker's annual sales.
Another major player in the sector, International Flavors and Fragrances Inc of the United States, said last year it was not interested in buying another flavours company, but it could be attracted by Quest's investment in biotechnology.
Unichema, whose products include lubricants and ingredients for polymers, soap and skincare products, might be of interest to one of the five or six major players in this segment. They include Witco Corp of the United States and the German groups Henkel KGaA  HNKG-p.F and Degussa AG. --London Newsroom +44 71 542 7717
($1=.6120 Pound)
",19
"British textiles group Coats Viyella Plc is ""well placed"" for a recovery in profitablity, its retiring chief executive Neville Bain said on Thursday.
Bain told Reuters in an interview following publication of results that showed a sharp fall in 1996 profits: ""We are poised for a period of growth from the base we have put in place."" He added, ""The company is well placed to move ahead in 1997 and future years, although the extent of that does depend on some factors outside our control,"" including exchange rates and economic trends.  
Bain said he felt now was the right time to stand down as chief executive after 6-1/2 years, and added that he hoped to take up other directorships and chairmanships.
""We agreed at the end of last year that this would be a good time to go,"" Bain said.
He said he would continue to be available to assist Coats Viyella. Bain said his successor, former McKechnie Plc chief executive Michael Ost, ""has a very good track record, and he did not expect him to change the group's strategy.  
""This year's results, in difficult circumstances, are exactly in line with expectations and the trading statement that we made at the end of last year,"" said Bain. ""Underlying profit is down by seven percent, which is a tad disappointing, but given the state of this industry that certainly would augur well in (comparison with) our peer group.""
Bain said cost savings from the group's reorganisation, which led to charges of 54.9 million stg against 1996 profits, were flowing through faster than expected. Savings in 1996 totalled 12 million pounds against a prediction of 10 million stg.  
Bain said he was ""confident"" that savings of at least 35 million stg would be achieved in 1998.
He highlighted the performance of the group's home furnishings division, where operating profits rose 42 percent to 12.5 mllion stg, and the continued strength of fashion retail, which he said had built profits to 13.1 million stg in 1996 from around 2.0 million over the past five years.
But he said the performance of clothing, where profits fell 12 percent to 19.1 million stg, ""was not satisfactory."" He said the division had been affected by disruption from restructuring, which involves relocation of a number of operations.  
Bain said he was confident management ""is doing the right things to secure greater profits into the future, but it is taking us a bit longer than anticipated."" He added that group was looking for a ""significant improvement"" on the division's profit margins of between three and four percent.
The core threads division, where operating profits fell 10.4 percent to 90.3 million stg, had enjoyed a stronger fourth quarter after a weak first half, Bain said.
-- London Newsroom +44 171 542 7717
",19
"Tiny Scottish research company Shield Diagnostics Plc said on Monday it had moved closer to marketing a potentially world-beating test for predicting heart attacks and coronary heart disease.
Shield said studies showed that patients with coronary heart disease had 30 percent higher levels of a key clotting agent, Activated Factor Twelve (AFT), in their blood than healthy people.
Dundee-based Shield has developed the only known test for AFT, the first element in a cascade of reactions in the blood which can eventually result in heart attacks and heart disease.
It believes this will prove a much more accurate indicator of both conditions than the 500 million pounds worth of cholesterol tests taken every year.
Shares in Shield closed 40 pence higher at 690 pence, to show a net gain of 393 percent since the start of the year.
However, they continued to trade below the all-time peak of 928 pence reached just before news of problems with a patient-monitoring trial in the United States unnerved some investors on March 14.
The company says problems with the U.S. trial, which has monitored incidence of heart atacks in 16,000 people for more than a decade, would not affect the timetable for launching a general screening test and a simple test kit for use in doctor's surgeries.
Shield said it planned to make the test itself and then license it out on a semi-exclusive basis to large diagnostic companies and to drug companies who would use it to promote their products.
Talks with diagnostics companies, believed to include Abbott Laboratories Inc, are already under way.
Shield declined to predict sales for the test but said it could save health services and insurers hundreds of millions of pounds a year through earlier detection and prevention.
Chief executive officer Gordon Hall said caring for patients with cardiac disase in the United States alone cost $151 billion a year, including $118 billion on hospital care.
""Any process than can reduce this figure must be highly attractive to healthcare providers ...if five percent of cases were detected earlier and prevented, then over $7.5 billion could be saved,"" Hall said.
For now Shield is more than content to have its eye not just on the 500 million pound annual cholesterol test market but on a further 380 million pounds spent on other tests related to cardiovascular disease.
Yamaichi International analyst Erling Refsum, a long-standing supporter of Shield, said he calculates that every one percent gain in Shield's share of the cholesterol testing market is worth 60 million pounds on its market capitalization. Even after its price surge this year, the group is worth around 130 million pounds.
However, Shield continued to try to dampen more feverish expectations about the test's prospects on Monday.
""All we can say is that if you have high AFT, you are a high risk (of a heart attack),"" said technical director Peter Foster. ""We can't say that if you have low AFT there is no risk -- there may be other reasons (for a heart attack).""
Shield's caution may also stem from press and market criticism in recent week of the way it has handled news about the product.
One industry specialist said many investors had not been getting a straight story on the AFT test, leading to the share's underperformance last year.
The company ran into trouble in January when it published a newsletter on AFT which was not initially sent to the stock exchange. The newsletter sparked a sharp rise in the group's share price.
",19
"Shares in one of Britain's best-performing biotechnology stocks plunged on Friday after it announced that some trials linked to its main product could have been mishandled.
Scottish-based Shield Diagnostics Group Plc said parts of a U.S. clinical trial which it hopes will help prove that it has a blockbuster heart attack predictor on its hands had been mishandled and could produce ""misleading conclusions.""
Shares in Shield dropped 140 pence to 665 pence on the news. The stock had hit an all time high of 928 pence just ahead of the announcement, a gain of more than 560 percent since the start of the year.
The company is developing a diagnostic test for a blood-clotting agent, known as Activated Factor Twelve (AFT), which it hopes will be a much more accurate predictor of the likelihood of coronary heart disease and heart attacks than cholesterol levels.
Some analysts believe that the test is a potential blockbuster, which could easily overtake the $500 million a year spent on cholesterol tests.
Shield has been waiting for publication of a number of long-running surveys which are tracking the incidence of heart attacks and trying to establish links with different factors in the blood, including AFT.
A doctor involved in one major trial, the U.S. ARIC study, which has taken regular blood samples from 16,000 people over more than ten years, wrote to Shield on Thursday to say mishandling and storage of early blood samples could distort analysis of the results.
In an interview with Reuters, Shield's technical director Peter Foster said the company still expected to have test kits on the market this year.
""We don't see it as a problem at all and we will continue with our timetable for the commercialisation of the test,"" Foster said.
He said data from a British study of 3,000 individuals by researchers based at St Bartholomew's hospital in London ""is there and getting stronger."" Initial results from the St Bartholomew study published on February 21 added to ""the body of consistent positive data from a number of clinical sites"" which back the link between AFT and heart disease, Shield said.
At least one analyst however criticised the company for allowing its share price to race ahead when ""they don't even know if the product correlates to a use that a regulatory authority would approve.""
Thomas Geimer, biotechnology analyst at Henry Cooke Lumsden, added that ""the product may be valid and be fine,"" but he said the problems with the U.S. trial showed the need for investors to be ""very selective in this market.""
",19
"Drug group Rhone-Poulenc Rorer Inc said on Wednesday it was still keen to forge a cancer drug partnership in the U.S. as part of its goal of becoming a major oncology player over the next five years.
Setting out the U.S.-based group's growth strategy, RPR President Tim Rothwell said the company ""aims to be in the top five, and ideally the top three"" in cancer sales.
RPR ranked 15th in oncology sales in 1995. Rothwell said the improvement would be driven by breast and lung cancer drug Taxotere, which he predicted would achieve peak sales of at least $500 million over the next five years.
Sales this year are forecast to double in 1997 from around $90 million last year. Brain cancer treatment Gliadel, which Rothwell said should be approved in the U.S. in 1998, will also fuel the improvement.
""We continue to be interested in a partnership or alliance in the U.S. Others have two or three cancer products in a market dominated by Bristol-Myers Squibb, so it would make sense to ally ourselves,"" he said.
Rothwell cited RPR's link with Novo Nordisk on hormone replacement therapy as a model for other therapeutic alliances.
He again brushed aside recent speculation that RPR, which is 68 percent-owned by France's Rhone-Poulenc SA, could be a suitor for Sanofi, saying that the French company would not help achieve his aim of building up RPR's strength in the U.S. and Japan.
""The U.S. is still the largest and most profitable market in the world,"" Rothwell said, noting that only 24 percent of RPR's sales are in the United States compared to more than 40 percent for many of its rivals.
He said he wanted to raise U.S. sales to around 35 percent of the group's total, adding: ""That will only come about through internal growth and perhaps from opportunistic product deals."" In Japan RPR's strategy would be to continue with alliances and to build on the ""eight or nine products in Phase II and Phase III trials"".
""If the right kind of acquisition came along we would consider it, but the very good Japanese companies are the ones that can't be bought,"" he added.
In addition to cancer, RPR's growth strategy will centre on enhancing its position in key therapeutic areas, including thrombosis, asthma/allergy and anti-infectives.
It will also seek to swap non-core products with other companies and build up its base of early-stage products through links with universities and biotech companies.
In thrombosis, where RPR is number three in the world, the company expects sales of its best-selling drug Lovenox to double by the end of the century to more than $800 million.
In asthma and allergy, where RPR's position was enhanced by the acquisition of Britain's Fisons  FISN.L, Rothwell said RPR was likely to remain in fourth place in five years' time, but predicted it would have overtaken Germany's Boehringer and would be challenging Sweden's Astra for third place.
Rothwell also hopes RPR will move up from 15th to be in the top five for anti-infective sales by the year 2005. He said new oral antibiotic Zagam and ""other compounds under consideration"" should boost its standing.
RPR is currently the 11th largest drug company in the world in terms of total sales. On Monday the company announced a 25 percent jump in 1996 net profits to $428.7 million.
",19
"The soaring value of British medical devices company Biocompatibles Plc may be rushing ahead of itself, analysts said on Tuesday.
Shares in the company, which is concentrating its skills in biomaterials on applications in contact lenses and heart surgery, have soared by up to 98 percent since the start of 1997 and by 265 percent in the past year, touching an all-time high of 14.35 stg on April 11.
Although the shares have slipped back from this peak, trading at 13.60 pounds midafternoon on Tuesday, they have still outperformed the FT-SE All Share index by 68 percent since the start of the year, according to Reuters 3000 data.
The surge in value has been built on hopes for Biocompatibles' specially-developed lubricious material, which produces very little reaction with human tissues.
The product has so far led to the creation of a new type of soft contact lens, Proclear, which is targeted at people who suffer from dry eyes, and a coating for stents, which are inserted to expand furred-up arteries in the heart. Proclear, which has already been launched in Britain, won approval from U.S. regulators last week.
Some analysts, notably Yamaichi International's Erling Refsum, believe there is a lot more to come in the share price, which Refsum said could hit the 20 stg mark by the end of the year.
Refsum said the company is expected to sign three major licensing deals for its contact lenses, stents and a paint additives operation, all of which will help to drive sentiment. He forecasts pre-tax profits for the previously loss-making group of 17.5 million stg in 1998 after a small profit this year.
Refsum said that despite a number of competitors, Biocompatibles' phosphocoline-based coatings appear to give its stents strong advantages over rivals, particularly in reducing the risk of thrombosis.
Other analysts are more cautious, however. Nick Woolf of Nomura, who believes the shares are ""probably looking quite expensive,"" said ""the real value is in their stents business, and they have got to demonstrate that their product will deliver a demonstrable benefit,"" said Woolf.
Henry Cooke Lumsden analyst Thomas Geimer, who also believes the shares are overvalued at present, said in a recent note that ""competitors are lurking round every corner.""
Although Geimer believes the company will be able to achieve close to 10 million stg of stent sales this year, at 1,500 stg each, he said maintaining prices in a competitive market will be hard.
Nomura's Woolf added ""it is not that we are negative"" on the stock. ""It is moving ahead too quickly.""
-- London Newsroom +44 171 542 7717
",19
"The fate of Britain's Clyde Petroleum Plc hung in the balance on Tuesday as shareholders mulled over an improved 120 pence per share offer from predator Gulf Canada Resources.
There was some disappointment that the Canadian group had failed to come up with a knock-out punch, and there were signs that key shareholders who will decide Clyde's fate might wait to see if a rival bidder emerges in the next two weeks.
With Clyde's share price resolutely stuck at the 120 pence offer level in Tuesday afternoon trading, analysts said it seemed to be pulled two ways - by the possibility of another bid emerging and the suspicion that one or two large shareholders might accept Gulf's offer.
Gulf Canada's final proposal, which valued the Scottish exploration and production company at 494.6 million pounds ($793 million), represented a 14 percent improvement on its original 105 pence offer made on December 18, and a 42 percent premium to Clyde's share price before the bid was announced.
But the price was below the 125 pence per share many analysts had been expecting, and some said it had robbed Gulf Canada of the chance of pulling off a clear victory.
Clyde immediately rejected the latest bid, saying it was ""worth a great deal more than this offer.""
""I think I would recommend holding (the stock) on the possibility of another bidder,"" one analyst said.
Gulf Canada's president and chief executive officer J.P. Bryan however dismissed the prospect of a rival offer, saying there had not been ""a sniff or a rumour"" of a second bid.
""I can't see that anyone could possibly find justification for making a higher bid unless it is based on synergy or insanity,"" said Bryan, maintaining Gulf's line that it was paying a very full price for the British company.
Hopes of a white knight centred on North America, where the habit of valuing oil exploration and output companies on the basis of their cash flow multiples makes Clyde look very attractive. The oil sector is also relatively cash rich after years of cost-cutting.
""The phone lines across the Atlantic will be buzzing,"" said an analyst at a leading UK bank.
But he added that the struggle ""is quite finely balanced now. There are a few shareholders who control a majority of the shares and of those one or two have been dithering about what sort of level they would find acceptable. This has certainly caught their attention.""
He said some shareholders would be worried that if Gulf Canada's offer failed then Clyde's share price would slide back to around 90 pence, which Gulf Canada said on Tuesday was its true value.
Analysts said Clyde would now be working to persuade shareholders that they they could gain a better long-run return on their investment by sticking with the current management, who are seen as having turned the company around in recent years.
Meanwhile Gulf Canada, which sees Clyde offering it a ""third leg"" in the North Sea to add to its strength in western Canada and Indonesia, will be hoping that a rival bidder does not focre it to dig even deeper into its pockets.
--London Newsroom +44 71 542 7717
",19
"British clothing group Courtaulds Textiles Plc signalled on Tuesday that it plans to shift much of its production to cheaper Asian markets as it battles to return to profitability.
The company, which is behind a host of famous brands including Gossard lingerie and Jockey underwear, refused to spell out details but said the shift will mean job losses in Britain and western Europe.
It is to spend up to 35 million pounds ($54 million) restructuring its business and create four product-led divisions.
Exceptional charges helped push Courtaulds Textiles to a pre-tax loss of 8.5 million pounds compared with a profit of 6.4 million in the first half last year. Excluding exceptional charges, pre-tax profit fell to 600,000 pounds from 10.3 million.
The depressed state of Britain's clothing industry is expected to be underlined on Wednesday when Courtaulds' rival Coats Viyella Plc, which unveiled a shock 50 million pound restructuring charge in March, reveals its interim results.
Shares in Courtaulds Textiles closed five pence higher at 310p, but analysts were adopting a wait-and-see approach.
One analyst who asked not to be named said ""...four or five years ago this was deemed the well-managed stock in the sector, the leading light."" He added that Courtaulds is taking action late ""...and they are paying the price for catching-up.""
The group's new chief executive, Colin Dyer, said his aim is to move ahead speedily on reorganisation, which includes further disposals, and get back to a ""clean set of results.""
""The most important thing is that we are attacking our problems and putting them right quickly,"" said Dyer, who was appointed in June with a brief to shake-up the group.
He signalled his intention of ""moving the cost base from Britain and western Europe to lower cost manufacturing,"" and warned that opposition Labour Party plans to introduce a minimum wage in Britain would make matters worse.
Dyer said the Far East offered clear advantages in terms of labour costs and access to raw materials. The group already operates in the Philippines and Thailand, where it makes stretch fabrics.
The decline in first-half profits was led by Courtaulds' fabrics division and resulted from weak demand in the U.S. and in continental European lace, as well as reorganisation costs.
Courtaulds has sold around half its hit list of a dozen problem businesses, with three disposals announced last week, and Dyer said talks on ""one or two"" of the remaining sales are ""quite advanced.""
Courtaulds took a 9.1 million pounds restructuring charge in the six months to June, and expects to generate cost-savings of 10 to 13 million pounds a year by 1998.
Dyer said benefits ""will be kicking in a bit this year, but significantly in 1998.""
He declined to give exact forecasts for 1996 as a whole, but added that analysts' profit forecasts ""are not far away on the full year."" Analysts are predicting full-year pre-tax profit of between 34.0 and 40.6 million pounds before exceptional items.
Most of the restucturing charge will hit second-half earnings. UBS analyst Chris Burbridge said the 30 to 35 million pound charge ""was substantially greater than I'd anticipated."" ($1=.6436 Pound)
",19
"Cambridge Antibody Technology Group Plc (CAT) said late on Wednesday that it expected to forge a major genetics alliance in the next 12 months.
In an interview with Reuters, chief executive officer David Chiswell said a link would bring together CAT's ability to use the body's own defenses against disease with the thousands of potential disease targets being unlocked by work to crack the genetic code.
""We will do at least one major new deal which will acquire targets...in the next 12 months,"" Chiswell said.
There has been speculation that CAT, which hopes to float on the stock exchange before the end of March, could forge a link with SmithKline Beecham Plc, which has established a strong position in breaking the genetic code, or genome, through a link with Human Genome Sciences.
But Chiswell declined to be drawn on the identity of any likely partner.
""It will be a genomics-element deal,"" he said. ""Whether it's with a genomics firm or whether its with a pharmaceutical company with access to genomics we are leaving in the air.""
CAT is pioneering work in human antibodies, which are produced by cells in the immune system to help combat invading substances like viruses and bacteria. Scientists believe antibodies could be used like missiles to target drugs exactly where they are needed in the body.
Other companies, like Britain's Celltech Group Plc, have concentrated on developing mice antibodies. Chiswell said CAT has effectively ""captured"" the hundreds of millions of variations in antibodies which the human body produces to protect itself.
CAT, which grew out of work conducted by the Medical Research Council, already licenses its technology to major companies including Genentech Inc, Eli Lilly & Co chemicals  and Pfizer Inc.
Chiswell said CAT's techniques allow companies to test for potential antibody targets in a matter of days rather than up to six months with other methods.
""You give them a huge benefit in trying to get a handle on the function of any particular gene sequence...(perhaps) a ten- or a hundred-fold improvement in productivity in that particular activity.""
But Chiswell has ambitious goals for CAT's own drug development programme, which is still in its infancy. CAT hopes to raise 30 to 35 million stg through its flotation, valuing it at 85 to 100 million stg. CAT plans to use the funds to develop over the next two years to the point where it can ""put three or four new clinical programmes in place every year from 2000.""
CAT is developing a human antibody drug with potential against rheumatoid arthritis with Germany's BASF AG, which is expected to start clinical trials in the next few months. A similar drug could be targeted against Crohn's disease, a poorly treated illness in the small intestine.
Both would compete directly with mouse antibody products being developed by Celltech and Centocor Inc of the United States, but Chiswell said CAT's product should prove to be more easily tolerated by the human body. Other programmes include drugs to improve the success of operations for detached retina and glaucoma, and Chiswell said CAT hoped to have antibody drugs for cancer and obesity in the clinic in 1998 or 1999.
--London Newsroom +44 171 542 7717
",19
"British Biotech Plc moved to reassure its shareholders on Thursday after the surprise resignation of finance director James Noble.
""It is a smoooth transition and we believe we have a broad and strong management team,"" chief executive Keith McCullagh said in a telephone interview with Reuters.
""We have had a number of talks with our major shareholders and they are very confident about what's happening, as are our two brokers,"" he added.  
News of Noble's resignation, as the company prepares to launch its first products, came as a complete surprise to analysts who watch the company closely.
However McCullagh said Noble ""has been considering his future for some time but his decision has only happened this week."" He denied suggestions of tension at the top of the company, saying ""it is an amicable departure.""
McCullagh praised Noble's contribution to developing the business, which has gone from being a small research operation to stand on the brink of entering the FT-SE 100, saying he had ""raised in excess of 300 million stg for the further development of the business and taken the major responsibility for developing relations with shareholders.""
Noble has not yet taken another post, but McCullagh said he was considering a number of opportunities.
Some analysts believe Noble, who is 37, may want to use his skills in the kind of start-up operation which British Biotech was a few years ago rather than in the large international business it will become if its major drugs, notably cancer treatment Marimastat, succeed.
""His interests and skills are in corporate finance and investor relations and the management of that phase of growth. That is what he likes to do,"" McCullagh said.
He added that Noble's replacement would be ""a more traditional finance director than we have had in the past.""
The company would be using headhunters to find someone with ""strong international operating experience for a major company which has a range of subsidiaries and which is building revenues and profits.""
The chief executive said the decision on Thursday to name chief accountant and company secretary Anthony Weir as finance director of the group's UK operating subsidiary, British Pharmaceuticals Ltd, was to ""emphasise that our financial management is continuing smoothly and soundly.""
He also took the opportunity to deny a suggestion in the Daily Mail newspaper that British Biotech, which raised 143 million stg in a rights issue last year, could return to the markets for further funding.
""We have just under 200 million stg in cash reserves and that is a considerable amount of money,"" said McCullagh, adding that it had sufficient funds to commercialise its lead products.
-- London Newsroom +44 171 542 7717
",19
"Drug discovery company Chiroscience Group Plc said on Monday that its research alliance with ophthalmic specialist Alcon Laboratories Inc would allow it to test its leading drug programmes in a new therapeutic area.
In a telephone interview with Reuters, chief executive John Padfield said the link with the Nestle SA unit would also give Chiroscience access to Alcon's skills in rapid screening of potential new drugs.
Earlier the company said Alcon would put Chiroscience's library of compounds through its own high-intensity biological test system, retaining rights to develop any ophthalmic and optic drugs that resulted. Alcon is one of the world's biggest eyecare companies, making contact lenses and solutions as well as prescription drugs.
""Ophthalmology is an area of growing importance,"" Padfield said, which was likely to benefit from ageing populations in the developed world and increasing expenditure in developing countries. He said it was also a ""niche area"" with very few competitors.
Padfield said the programme with Alcon would focus on Chiroscience's work in MMP inhibitors, PNP inhibitors and PDE IV inhibitors.
Chiroscience is working on drugs for arthritis and cancer using MMP inhibitors, but Padfield said these may also prove useful in areas like corneal ulceration and recovery from eye surgery because of the role they played in healing wounds.
Padfield told Reuters that the group's lower profile work on inhibiting another class of enzyme, PNPs, could also receive a boost, with potential in corneal transplantation. Padfield said initial results suggested that PNP inhibitors could be more effective in helping prevent rejection of transplants than the current lead drug, cyclosporine, marketed by Novartis AG as Sandimmum.
A third major part of Chiroscience's novel drug programme involving the PDE IV enzyme, which is implicated in major inflammatory diseases like asthma and arthritis, could also be extended to inflammatory diseases of the eye.
Padfield said the agreement did not extend to the genetic research being conducted by Darwin Molecular Corp, the Seattle-based biotech company which Chiroscience bought in November 1996. But he noted work done by Alcon and the University of Iowa on isolating a gene linked to glaucoma, and said the two companies will ""be able to talk about what we have in Seattle.""
Padfield said access to Alcon's rapid-screening skills for new drugs would ""offset some of the need to invest"" in new technology. Chiroscience will have rights to all non-ophthalmic discoveries made through the alliance.
Padfield declined to disclose financial details of the arrangement, but said ""most of the money"" would come from product royalties and milestone payments. ""There is a bit of cash up front,"" he added.
Shares in Chiroscience were up 7 pence at 371 in early afternoon trading.
--London Newsroom +44 171 542 7717
",19
"A rapid deterioration in Britain's science base is putting a question mark over future investment in the country's world-beating pharmaceutical industry, according to major companies.
Two of the biggest domestic players, Glaxo Wellcome Plc and SmithKline Beecham Plc, have issued veiled warnings that unless a rapid decline in the quality of graduate training and basic education is reversed they will be forced to site increasing amounts of research abroad.
""We may be looking at the demise of yet another historically successful industry,"" George Poste, SmithKline Beecham's chairman of research and development (R&D), told Reuters. ""I don't see how any society that does not keep up (scientifically) can become anything other than a second-tier nation. It is quite stunning and it is just not seen here.""
At the root of concerns is the drive over the past 10 years to inflate the number of 18-year-olds going through higher education, which the companies say is stretching resources and forcing standards down across the board.
Michael Elves, Glaxo Wellcome's director of scientific and educational affairs, said that although the company could cream off the brightest of Britain's graduates, they arrived with disappointing levels of numeracy, literacy and computer skills.
Even more alarming for the skill-intensive industry is the lack of basic laboratory experience due to clapped out, antiquated equipment and sheer pressure of numbers. SmithKline's Poste said the need for ""remedial training"" of up to two years was acting as a hidden tax on the industry, which could add to the pressure to site future investment in the United States or the increasingly competitive Asian economies.
FIRMS INVEST HEAVILY IN SCIENTIFIC RESEARCH
Both Glaxo Wellcome and SmithKline have invested huge sums in Britain. Glaxo spent more than 700 million pounds ($1.13 billion) on its research centre at Stevenage, north of London, while SmithKline has poured 256 million pounds into facilities to be opened in April at its Harlow site to the east of the capital.
Poste said the investment was ""an act of faith"" that was in danger of not being repeated. SmithKline Beecham has already shifted its microbiology operations to the United States because of a lack of relevant skills, and there are fears that other key areas could follow.
""For our survival it makes sense to put our resources in the place where we can find the best,"" added Glaxo's Elves. ""For a long time the UK science base was of high status and supplied what we needed, a pool of highly qualified world class scientists and technologists, but one has doubts now.""
A larger slice of Glaxo's academic collaboration budget already goes abroad, reaching 27 percent last year from five percent in 1988/89.
The industry, which invests more than two billion pounds a year on R&D, roughly equal to its trade surplus with the rest of the world, is sensitive to charges of special pleading.
PHARMACUETICALS - A 'SUNRISE' INDUSTRY IN BRITAIN
Peter Fellner, chief executive of the biotech company Celltech Group Plc, said: ""We don't have too many sunrise industries, and we should make a fuss of those we do have. Pharmaceuticals and biotech is one area where we have done extremely well compared with other European nations.""
Industry figures show that five of the current top twenty best-selling drugs internationally were discovered and developed in British laboratories, and Britain accounts for the lion's share of Europe's biotech industry.
While Britain's research eminence is under threat, the job of drug discovery is increasingly complex. Information technology, high-speed screening of chemical entities, robotics and the evaluation of genetic factors behind disease are revolutionising research. Zeneca Group Plc's director of research and development Peter Doyle said ""the qualities demanded of people in new drug discovery are very much greater than when I joined 30 years ago. We expect a formidable array of skills and the ability to take on a whole lot of new skills.""
POLITICIANS BLAMED FOR INDIFFERENCE
The big three companies all point the finger at indifference among politicians and a deterioration in higher education, which they say is suffering from a fall in funding per student and declining entrance standards as well as equipment shortages.
""University research conditions are appalling,"" said Glaxo Wellcome's Elves. ""The present system was designed for five to eight percent of the elite 18-year-olds and is now being forced to take 30 percent. It can't work.""
Poste, Elves and Doyle said funding needed to be more elitist, with costly equipment and laboratory training reserved for a core of excellence rather than being spread thinly. The companies hope for progress on the issue through the government-sponsored Dearing review of higher education, which is due to report later this year.
Glaxo Wellcome has proposed the creation of two-tier science degrees. Two-year bachelor degrees in scientific theory would be followed by specialised masters' courses providing practical training for smaller numbers.
Another issue the companies want addressed is the lack of courses for skilled technicians, which Zeneca's Doyle said had worsened with the conversion of the more vocational polytechnics to universities.
And they said action needed to be taken at schools. Science subjects have failed to keep up with a boom in numbers of students taking Advanced Levels, the passport to university entrance. Glaxo's Elves said the national curriculum ""is too restrictive and divorces everything from reality.""
""Success in science is not that different to success in sport,"" said SmithKline's Poste. ""It requires great discipline and there are premier leagues and other leagues. If Britain wants to play in the premier league...somebody has got to grasp the nettle."" ($1=.6173 Pound)
",19
"The world's biggest prescription drugs company, Glaxo Wellcome Plc, announced an 18 percent leap in pre-tax profits on Thursday, but said life would be tougher after its best-selling drug loses its U.S. patent in July.
Pre-tax profits climbed to 2.964 billion pounds ($4.8 billion) from 2.505 billion, bang in the middle of analysts' expectations. Sales rose 9 percent to 8.341 billion pounds, and shareholders were rewarded with a 13 percent rise in the dividend to 34.0 pence.
Shares in Glaxo Wellcome, which slipped back to a low of 981 pence at one stage, were down just 7 1/2 pence to 10.27 1/2 pounds as analysts responded positively to a meeting with the company. Traders said some profit-taking had been expected after the stock touched a record 10.63 on Wednesday.
Sales of  gastric ulcer treatment Zantac fell 14 percent last year, but at 1.931 billion (corrects from ""million"") pounds  it continued to be the world's biggest-selling drug, a spot it has held since 1986. Zantac has single-handedly transformed Glaxo, which merged with rival Wellcome in 1995, into a huge international player.
Sales of its second-biggest seller, herpes treatment Zovirax which has already lost most of its key patents, were steady at 812 million pounds.
Glaxo warned that the best it could hope for over the next two years would be to ""at least maintain"" its profits at the 1996 level.
""The tough period is mid-1997 to mid-1998 when Zantac will come under severe generic pressure in the U.S.,"" deputy chairman and chief executive Sir Richard Sykes said in a telephone interview with Reuters.
But he added: ""If you take Zantac out we have a 6.4 billion pound business growing at 14 percent. That underlying growth is a very clear indication of the strength of the group going forward.""
Sykes noted that sales of Zantac fell by 324 million pounds last year, while a portfolio of newer products launched since 1990 saw sales rise by 650 million pounds to 2.0 billion pounds.
""Our responsibility is to grow those new products to maintain these two (sales) lines in balance as much as possible. It is a balancing act,"" he said.
The best performers included Glaxo Wellcome's rejuvenated HIV and AIDS treatments. Retrovir and Epivir are at the cornerstone of new cocktails of drugs which have shown startling success in reducing the levels of the virus in the blood to virtually undetectable levels, giving Glaxo Wellcome the lion's share of a rapidly expanding market.
""Today we have 57 percent of the AIDS market and I don't see why we won't continue to be a very major player,"" Sykes said.
Other big sellers included asthma drugs Serevent and Flixotide and migraine drug Imigran, which saw sales in the U.S. alone leap by 69 percent last year.
Despite persistent speculation that Glaxo Wellcome will get onto the acquisition trail again as soon as its debt levels allow, Sykes told Reuters there had been a clear dissipation of the pressures for mega-mergers. He said Glaxo Wellcome's future expansion was likely to be ""incremental.""
""The pressures of the early 1990s have changed somewhat in the big markets. The bigger companies get, the more difficult it is to buy them or merge, so the way forward will be much more looking at regional and local opportunities and building these as opportunities come along,"" he said.
($ = 0.620 British Pounds)
",19
"British chemicals group Albright & Wilson Plc said on Thursday that it planned to focus its business increasingly on emerging markets, with particular emphasis on South America, China and India.
""These are very important for the growth of Albright & Wilson,"" chief executive Robin Paul told Reuters in an interview.
Paul, who steered the company back onto the stock market in 1995 after 17 years as part of Tenneco Inc, said expansion was likely to come through partnerships and the acquisition of majority stakes in partner companies where appropriate.
Last year Albright & Wilson took a majority stake in an Indian partner, and is now stepping up its activities in phosphates and surfactants there. The company, which announced a 13.6 percent rise in 1996 pre-tax profits, also said it had appointed Gabriel Kow as president of its Asia Pacific operations. Kow joins the group from Glaxo Wellcome Plc.
""We continue to believe China is a very important region for Albright & Wilson,"" said Paul, who said Kow had ""a very good understanding of China and its markets.""  
The company said 1996 produced ""a satisfactory result in an environment that has offered little assistance in the various markets in which the group operates."" Paul said rises in raw material prices, which added 40 million stg to costs in 1995, had stabilised, with just four million stg added to costs last year.
In the key phosphates business, which goes into products ranging from soft drinks to washing powders, sales rose eight percent to 361.1 million stg, including associate companies, but operating profits fell 7.5 percent to 47.0 million stg, with margins down to 13.0 percent from 15.2 percent.  
Albright & Wilson is the world's largest producer of wet phophoric acid. Paul said phosphates had been affected by ""a number of special factors"" in 1996, including higher Chinese phosphorus prices and costs and distortions linked to capacity increases and refurbishment of plants in England and Mexico.
""These factors are largely behind us,"" said Paul. ""Chinese phosphorous prices have started to come down compared to the middle of 1996."" Demand was strong: ""We are sold out in phosphates,"" he said.  
Paul said promised progress had been made in both the surfactants business, which supplies wetting and foaming agents for items like toiletries and detergents, and in specialty chemicals, whose products include flame retardants and chemicals for water treatment.
At surfactants operating profits leaped 76 percent to 14.1 million stg last year on sales of 309.0 million stg, with margins rising to 4.6 percent from 2.5 percent. Paul said the division was on target to achieve margins of between six and eight percent ""by the end of this year.""
At Specialties, where the group is targeting margins of 15 percent, operating profits rose 33 percent to 16.9 million stg on sales of 187.5 million, with margins improving to 9.0 percent from 6.6 percent.
Paul said the strength of sterling had little impact on 1996 results. In 1997 Paul noted that ""some people are talking about a 10 percent (impact) on profits if these rates continue for the whole year,"" but he added that this did not take into account the company's efforts to contain costs and a beneficial impact from lower raw material prices.
The chief executive said the group was slightly ahead on its goal of generating 20 percent of sales from new products by 1998, noting the successful launch of a biocidem Tolcide THPS, during 1996.
Paul, who retires from the board in July, said the company wanted to ""keep the option"" of buying back shares. However he added ""we believe we'll have other opportunites to use the strong balance sheet and cash flow rather than buying back shares, but we'll keep it under review.""
-- London Newsroom +44 171 542 7717
",19
"British Gas Plc, which unveiled an expected sharp deterioration in interim profits on Thursday, is in a ""realistic phase of negotiations"" with producers over crippling gas supply contracts, chairman Richard Giordano said.
In a telephone interview with Reuters, Giordano said so-called ""take or pay"" contracts, which oblige it to buy gas at prices well above market rates, were a major factor behind growing losses at its industrial and commercial division.
""The solution to the losses is for us to unhook from take of pay,"" Giordano said.  
British Gas said progress on the contracts, which force it to pay around 20 pence per therm for gas compared to market rates of 10 to 13 pence, ""is a gradual process.""
""We are in intense negotiations now. We have said we will not do this in public and so both sides are keeping quiet,"" Giordano said.
He added that losses at the industrial and commerical arm rose to 180 million stg from around 50 million a year before as greater competition and costs related to the planned demerger kicked in. First-half results would have been worse but for a 200 million pound benefit from severe winter weather, he said.  
But Giordano said there was no sign of commercial and industrial losses accelerating in the second quarter from the first and stood by his forecast for full-year losses of ""close to"" 400 million stg at the division.
He also held out some hope on the other main headcahes for British Gas, talks with regulator Ofgas on separate price reviews of its Transco and domestic energy businesses.
Giordano refused to be drawn on the crucial Transco review but made clear British Gas has not yet slammed the door on an agreement. ""There is nothing to say on this. We are still meeting with Ofgas,"" Giordano said.  
Ofgas wants Transco to cut charges to gas suppliers by 20 percent in 1997 and then 6.5 points below inflation for four years. British Gas, which has until October 7 to respond, has warned this could have serious consequences for dividends.
Giordano said the group will only be able give indications on dividend prospects when there is clarity on Transco.
But he was more upbeat about the domestic review, wehere Ofgas wants to fix price changes to five points below inflation. He said a resolution should be in place by ""the end of September or the middle of October,"" adding ""my guess is that we are closer to Ofgas and Ofgas is closer to us on that review.""  
Giordano told Reuters British Gas is preparing to beef up incentives to keep domestic customers loyal when the market opens fully to competition in 1998. It launched a credit card on Wednesday, which will allow users to save on gas bills.
He said other initiatives planned include offering illness or unemployment insurance to cover bills, and gas safety checks.
Giordano said a pilot scheme in south-west England has seen the company lose only around 15 percent of customers to rivals, and noted that British Gas has ""more freedom"" to act than in the commercial market, where market share has plummeted because ""our tariffs were locked up and our hands were tied.""  
Giordano said British Gas's progress towards a demerger into two separate companies, Transco International and British Gas Energy, ""are going ok. We are still on target for the Spring of next year.""
He said the formation of the two exective boards has removed ""the biggest hurdle.""
""I'd guess that before the end of the year we'll have a definite plan for the media and shareholders,"" he said, adding: ""Looking ahead if these managements do their job both (companies) should have a basis for prosperity.""
-- London Newsroom +44 171 542 7717
",19
"The world's biggest business services group Rentokil Initial Plc announced sharp rises in 1996 sales and profits on Wednesday, but there were concerns that it relied heavily on newly-acquired BET for progress.
Rentokil Initial, formed last year through Rentokil's acrimonious takeover of British rival BET, said pre-tax profit jumped 48 percent to 318 million pounds ($505.8 million) while sales were up 168 percent at 2.34 billion pounds. The dividend rose 20.5 percent to 5.06 pence per share.
The results were restrained by a stronger pound, which took just over three million pounds off profits, and by a 16.4 million pound integration charge for BET. The charge included almost 1.5 million pounds paid to former BET chief executive John Clark, although the final payment is subject to a legal dispute.
Although profits were in line with analysts' forecasts, shares in the enlarged group dropped 5.6 percent, or 25 1/2 pence, in midafternoon trading to 432 1/2 pence.
Traders said there was disappointment at the performance of the core Rentokil operations, which failed to live up to their 14-year track record of delivering annual 20 percent sales and profits growth. Excluding BET, sales were up 15 percent and profits rose nine percent to 233.4 million pounds.
One trader said ""they managed the 20 percent gain, although the contribution from BET is very substantial. People will be asking about their core businesses and wondering whether they would have made the grade without BET.""
Chief executive Sir Clive Thompson admitted that ""sales grew faster than profits for the first time"" at the core business and accepted that managers had taken their eye off the Rentokil ball while integrating BET's 53 operations.
He noted that managers at one of the weakest performing divisions, Rentokil's famous UK pest control operations, had not moved as swiftly as usual to control costs when orders turned down.
""I'd suspect that was because management were focusing on other parts of the business."".
The company said it expected another integration charge in 1997 of ""double digit millions, but not as high as 16 million pounds."" It also warned that if sterling remained at current levels it would wipe 5 percent of its full-year profits.
Thompson told Reuters Financial Television that he did not expect any large acquisitions for the next two years while BET was digested, although he added that there was scope for ""bolt-on"" acquisitions in the core international businesses of hygiene and cleaning, pest control, security and textiles.
Sales of peripheral BET businesses are likely to be modest, totalling between 50 and 100 million pounds over the next year.
Rentokil Initial, whose services also include specialist waste disposal for hospitals and providing tropical plants for offices, also announced a two-for-one share split to make its stock more manageable for investors. The split is expected to take effect on May 16.
--London Newsroom +44 171 542 7717
",19
"Shares in British drugs company Zeneca Group Plc had another busy day on Friday as the bid rumour mill again started churning, overshadowing a key patent victory in the United States.
Zeneca shares climbed 35 pence to 18.55 pounds ($30.06) in late afternoon trading after a U.S. Appeals Court threw out a patent challenge to one of its top-selling drugs, breast cancer treatment Nolvadex.
The ruling, which follows a U.S. district court decision in Zeneca's favour a year ago, means that Canadian generic drug maker Novopharm Ltd will not be able to market a generic version of Nolvadex before Zeneca's patent runs out in 2002.
But analysts said the ruling was widely expected and pointed the finger instead at the Swiss magazine Cash for driving up Zeneca's shares.
Cash said Swiss giant Roche Holdings AG was about to announce an agreed takeover of the British group.
Stephen Putnam, analyst at Kleinwort Benson, said: ""I think this rise has more to do with rumours about a Roche bid. I can't believe anybody thought there would be a different outcome (to the Novopharm appeal).""
In an unsourced article, Cash said Roche was planing to offer between 21 and 22 pounds per share for Zeneca, which it would then break up, selling off the agricultural chemical and specialty seeds divisions as well as Roche's own fragrances and aromas division.
Both companies, increasingly weary of the mounting bid speculation, again declined to comment. But London analysts laughed the suggestion out of court.
""Frankly, for 21 pounds they'd be lucky to get the agricultural chemicals division. I think the bidding would start at 30 pounds,"" said one analyst who asked not to be identified. ""Zeneca is not interested and doesn't need to embark on a merger,"" he added.
Zeneca's patent victory against Novopharm has, however, strengthened its main attraction for any possible bidder -- its strong product portfolio.
Nolvadex is the world's top-selling breast cancer treatment, with sales of 2.7 billion pounds since its launch. Last year Zeneca sold 332 million pounds worth of Nolvadex, making it one of its biggest money spinners.
Zeneca began legal action against Novopharm in January 1995 after the Canadian company tried to get U.S. regulatory approval for a generic version of Nolvadex, also known as Tamoxifen Citrate.
Two other patent challenges for Nolvadex in the U.S, against Mylan Pharmaceuticals Inc and Pharmachemie BV, are outstanding. A third, against Lemmon Co, was dropped after Lemmon withdrew its marketing application.
Kevin Scotcher, analyst at NatWest Markets, said Zeneca's patent position was now much more secure as a result of the Novopharm ruling. ""This case must strengthen their hand significantly in those other cases,"" he said.
Novopharm has been very active in legal challenges recently, last week successfully winning the right to market a generic version of one of the world's biggest-selling drugs, Glaxo Wellcome Plc's Zantac, from July.
",19
"British-based drugs group Medeva Plc said on Wednesday that the structure was now in place for further growth in the U.S. market, where the bulk of its sales and profits are made.
In a telephone interview with Reuters after publication of results for 1996, chief executive Bill Bogie said the U.S.-based Rochester business, bought last year from Rhone Poulenc Rorer Inc, was being turned into the group's ""flagship.""  
In a sign of its growing emphasis on the U.S. market, Medeva announced that all its U.S. operations would operate under the name Medeva Pharmaceuticals, and declared its intention of switching its American Depositary Receipt (ADR) listing to the New York Stock Exchange.
Bogie said the group now had ""a fully integrated sales force"" in the U.S. ""This is very important progress. Behind that you can get a national sales force, and you can add to that when you like."" He said added that the current sales force totalled 264 part- and full-time staff, but added that ""the structure is there to grow to a thousand if you want to.""  
After the acquistion of Rochester, which came with a portfolio of ten products, the proportion of operating profits contributed by U.S. operations rose to 86 percent last year from 79 percent, with sales increasing to 69 percent from 62 percent.
Bogie said he was ""very encouraged"" by the performance of the 10 Rochester products, with sales totalling $77 million in the six months of Medeva's ownership compared to $100 million in the whole of 1995. One of the strongest performers was appetite repressent Ionamin, used to treat obesity, although Medeva said sales slowed significantly at the end of 1996 following the launch of American Home Products Corp's rival Redux.  
Bogie said he expected to see ""significant and sustained growth"" from the Rochester products this year as the products emerged from relative neglect.
Finance director Garry Watts told Reuters that the decision to seek a New York Stock Exchange listing in the next two weeks reflected the strength of the U.S. business and the fact that around 35 percent of Medeva shares were held in the U.S.
""I think it is time that we were on the big board,"" he said.
Outside the U.S, Medeva is still interested in building up its position in Italy and Germany, although Bogie declined to comment on whether it had acquisitions in view.
The company said its French business had now achieved critical mass and become profitable following the addition of certain Rhone Poulenc assets there. The group has also enhanced its presence in Switzerland and Spain in the past 18 months.
Bogie said Medeva would also consider adding a sixth therapeutic category to the list of central nervous sytem, respiratory, vaccines, hospital products and gastroenterology.
""And we have opportunites in biotech where we are seen increasingly as a company that understands biotech,"" he said. Medeva has alliances with Chiroscience Group Plc, Peptide Therapeutics Plc and ML Laboratories Plc.
Bogie said Medeva continued to see behaviour-controlling drug Methylphenidate as a ""long-term opportunity"" despite the likelihood of increased competition this year from rival products.
The drug, given largely to children and young adults, continues to be the main profit engine for Medeva, andd saw sales rise 25 percent last year to 108 million stg.
--London Newsroom +44 171 542 7717
",19
"British speciality chemicals group Laporte Plc on Monday reported higher-than-expected annual profits, evidence that its recovery was firmly on track.
Laporte, whose value tumbled in November 1995 after a shock profits warning, said pretax profit before exceptional items rose 12 percent to 127.0 million pounds ($203 million) last year, beating analysts' forecasts of between 114.3 million and 124.0 million.
After exceptional charges, pre-tax profits were 78.7 million pounds, compared with 24.5 million in 1995.
Shareholders, who saw the dividend frozen at the half-year stage, received a five percent rise in the full-year payout to 24.25 pence.
The results provided an early boost to Laporte's shares, which were up 18 pence at 686-1/2 in mid-morning trade after touching a high of 696 pence.
Laporte, whose products supply a wide range of customers including the drugs, electronics and food industries, has undergone a major shake-up since chief executive Jim Leng took the helm in October 1995.
Leng, forced to issue a profit warning within weeks of taking charge, introduced sweeping management changes and launched a two-year restructuring programme which included selling around one fifth of Laporte's business.
In December, Laporte sold most of its European adhesives business, including Evode, to France's Elf Atochem for 110 million pounds, and Leng told Reuters that it had received ""some initial expressions of interest"" for its U.S. and Italian adhesives operations.
Laporte, which started 1996 with debts of 180 million pounds on its books, ended the year with net cash of 13 million pounds, putting it in a strong position to start buying businesses in more proftiable sectors like electronic chemicals and performance materials.
But Leng said it did not intend to rush into purchases, commenting: ""It is not burning a hole in our pocket. We have got a business which is growing and we will carefully and analytically decide what we are going to do.""
Leng said Laporte intended to take positions in international growth sectors which could not be entered easily by new competitors.
He added that Laporte was on target to achieve annual cost savings of 10 million pounds by the end of 1997 as a result of the shake-up of its operations in which 34 percent of its operating units were sold last year.
""It has been a good all-round performance.. every business division made positive cash flow contributions,"" Leng said.
Profit margins improved to 12.9 percent overall in 1996 from 11.8 percent in 1995.
""Our target is to get closer to 15 percent and we made some good progrss on that,"" Leng said, adding that he wanted to reach a position where ""no business has less than 10 percent with the group at an average of 15 percent.""
""We won't do that overnight and we won't get there this year,"" he added.
Leng expects raw material prices to be fairly stable this year but said sterling's strength ""will dilute our progress"".
""If fourth-quarter rates applied all year, it would affect profits and sales by 50 million and five million pounds, respectively,"" he said. ""It is a big challenge for UK Plc."" ($ = 0.625 British Pounds)
",19
"Textiles group Coats Viyella Plc, reporting lower first-half results, said on Wednesday it is confident it is on course for a bounce back to profit growth in 1997 as it puts a restructuring behind it.
The first 17.2 million pound chunk of reorganisation costs announced in March caused first-half pretax profit to tumble 34 percent to 47 million pounds ($73.09 million), with the remaining 38 million pounds of costs all to be charged against second-half earnings.
Chief executive Neville Bain told Reuters that ""charges will be taken this year so 1997 will be put on a clean basis going forward"" and predicted ""a good return to profit"" next year.
The announcement from Coats, whose products range from bath towels to precision engineering components, ended uncertainty about how the charges would fall.
An upbeat statement about prospects in key markets, in contrast with the gloomier tone of some competitors, helped to boost Coats' shares by 4-1/2 pence to 164 pence by late morning.
Bain said he is confident the group will achieve its cumulative annual cost saving targets of 10 million pounds in the second half of 1996, 25 million pounds in 1997 and 35 million in 1998.
But he said not all of this will reach the bottom line as the group spends money shifting an increasing amount of clothing production to lower-cost areas such as Morocco, eastern Europe and parts of Asia.
The reorganisation involves shedding 7,750 jobs, including nearly 3,000 in Britain.
Rival Courtaulds Textiles Plc announced on Tuesday that it is belatedly following Coats' lead in looking abroad to tackle continued margin pressures.
Coats' first-half operating profits on continuing operations slipped to 78.0 million pounds from 87.3 million, largely due to declines at its threads division, which produces thread for sewing and knitting and is the world's second-biggest zipper maker.
Bain said the decline was ""largely due to Brazil and Turkey in the first-half of 1995 having exceptional levels of profits. We said at the time that was unsustainable.""
Coats expects a ""worthwhile"" improvement in second-half results year-on-year before charges, with the key September to December period accounting for half its annual profits.
It said trading conditions ""appear to be showing some signs of improvement"", with a return of consumer confidence in Britain and normal weather patterns expected to help the second-half.
Bain said there was continued progress at its Jaeger and Viyella fashion retail chains, and the group's home furnishings business is struggling to keep up with demand caused by a ""substantial"" pick-up in the British housing market.
""The USA is picking up and we think it will good to us, especially in threads and engineering,"" Bain added, while demand in the rest of Europe is expected to remain mixed. ($1=.6430 Pound)
",19
"A buoyant SmithKline Beecham Plc played down talk of another mega-merger on Tuesday after posting a bumper set of profits for 1996 and unveiling a raft of new drug projects.
Pre-tax profits at the Anglo-U.S. group surged 14 percent to 1.545 billion pounds ($2.48 billion) last year, towards the lower end of analysts' forecasts, while sales climbed 13 percent to 7.93 billion pounds.
The company said it would have done even better but for the strong pound, which cut fourth-quarter pre-tax profits by 35 million pounds and the full-year figure by around 29 million.
Shareholders were rewarded with a 25 percent rise in the annual dividend to 17.85 pence, while shares climbed 14-1/2 pence to 896-1/2 pence in late afternoon trading.
Chief executive Jan Leschly said the results were a vindication of the company's strategy, including the move into gene-based drug discovery, high investment in research and development and the 1994 acquisition of Sterling Healthcare, which boosted sales of over-the-counter drugs.
""Our strategy is working,"" Leschly told reporters. In an echo of the independent line consistently taken by British rival Zeneca Group Plc, he added: ""We feel we have the size that is big enough to compete and at the same time keep double-digit sales growth.""
Underlining SmithKline Beecham's strength, he said five new drugs, all with potential to sell between 300 and 500 million pounds a year, had gone into late-stage clinical trials.
SmithKline Beecham is frequently touted as a potential merger candidate, not least because of the ambitions and track record of its management.
But Leschly, who presided over a spending spree by the group in 1994, ruled out any merger that did not boost the drug pipeline.
And he criticised the rationale behind last year's fusion of Swiss groups Ciba-Geigy AG and Sandoz AG as an example of scale without underlying growth. ""If Novartis is going to be successful, it has to be based on products in the pipeline. It doesn't help just to make it bigger,"" Leschly said.
SmithKline's own prescription drug sales rose 14 percent to 4.76 billion pounds, with growth once again fuelled by products launched within the last five years.
Antibiotic Augmentin and fast-growing anti-depressant Paxil/Seroxat were the biggest selling treatments, both helped by new formulations and indications.
Sales of Augmentin rose four percent to 868 million pounds, while those of Paxil, which competes with Eli Lilly & Co's blockbuster anti-depressant Prozac, rose 42 percent to 706 million pounds.
Finance director Hugh Collum told Reuters that Paxil, which is also prescribed for panic attacks, was likely to be the group's biggest seller by the end of the year, chasing Prozac's $2.3 billion annual sales hard.
At consumer healthcare, which sells a raft of products including Aquafresh toothpaste, health drink Horlicks and over-the-counter digestive drug Tagamet, sales jumped 17 percent. Anti-smoking patches and chewing gum Nicoderm and Nicorette were star performers, clocking up combined sales of 221 million pounds in their first year on sale.
Collum said diagnostics business Clinical Laboratories might now be back on track after running into trouble over changes in U.S. reimbursement rules. He added that a dispute with the U.S. government over alleged overcharging was likely to be resolved in the next couple of months. ($1=.6227 Pound)
",19
"KS Biomedix Holdings Plc said on Tuesday that it was nearing a major breakthrough in the formulation of sheep monoclonal antibodies.
In an interview with Reuters, managing director Kim Tan said the tiny biotech group was ""very close"" to being able to create sheep antibodies artificially, a key step in a process which KS Biomedix hopes will lead to ground-breaking drugs for cancer and viral infections.  
Tan said he hoped that the second key step, humanising the artifically-created antibody by attaching it to part of a human antibody gene, would be achieved this year.
Scientists across the drug industry believe that antibodies, which are proteins produced by the body to fight off disease, could be used like torpedoes to carry cancer-killing drugs direct to cancerous cells. They would bind themselves to affected cells but leave healthy tissue alone.
KS Biomedix is pioneering development of sheep antibodies in place of the mouse or rat antibodies which are the current mainstay of research.  
Malaysian-born Tan, who has done much of the work himself, says sheep antibodies are much better at binding to targeted cells than mouse antibodies and promise to pack far more punch.
""We are saying that we think the mouse antibody approach is correct, but because mouse antibodies don't bind as tightly we think sheep antibodies will be better,"" Tan said, adding ""perhaps 10,000 times better.""
The technology receved a boost last October when Swiss drugs giant Hoffman-La Roche asked KS Biomedix to develop a sheep-based antibody for an as yet undisclosed disease area.  
Tan said he believed other companies would follow when the superior characteristics of the sheep product were demonstrated.
""We are making biological missiles that can carry a variety of payloads,"" Tan said. ""It is like the Ariane rockets - we don't care whose satellite we deliver, we'll launch it and get it there.""
Tan said the technology could revolutionise treatment of cancer, especially in comparison with the ""machine-gun approach"" of chemotherapy. He said that with antibody technology a cancer treatment could be administered ""14 times in a week compared with once every two weeks for chemotherapy.""  
KS Biomedix, which was founded in 1991 and listed on the Alternative Investment Market in January 1996, is initially targetting colon, breast and small cell lung cancer in cooperation with a number of British hospital and university research teams.
But Tan said the basic technology, which would be licensed to other drug companies, ""is capable of hundreds of products,"" including combating viruses like hepatitis and HIV. Tan said KS Biomedix, which farms most of its research work out to academic researchers, was now looking for partners in this field.
Tan told Reuters that the company was unlikley to have to return to the market for further funding. He said he was confident that income from two drugs in Phase II trials, for rheumatoid arthritis and osteo arthritis, would help to fund the rest of the company's drug development programme.
-- London Newsroom +44 171 542 7717
",19
"BOC Group Plc launched on Thursday a breathable, liquefied version of air which could create temporary cold stores in minutes and provide super-cold conditions for testing aircraft engines.
BOC said the product, which is a mixture of liquid oxygen and liquid nitrogen, was the first gas of its kind that could be breathed safely and represented a major breakthrough.
Food retailers had already shown great interest in the gas, which would allow companies to turn anything from giant warehouses to small rooms into temporary chilled stores without using massive refrigeration equipment, it said.
""If you need a cold store for one day a week or two hours a day then there is some technology to do it,"" said BOC managing director of technology Deb Chatterji.
Possible uses for the gas, which was developed in Britain and the United States, were endless. ""The only limit on this is the limit of our imaginations,"" he said, adding that annual sales could eventually ""be north of 20 million pounds ($32.40 million) and south of 200 million pounds"".
BOC had originally wanted to find a way of enabling refrigerated lorries to keep their loads cool over ""multi-drop"" deliveries, which meant finding a gas that someone entering the back of the lorry could breathe.
People cannot breathe liquid nitrogen, the current mainstay of refrigeration.
A number of companies including Air Products and Chemicals Inc of the U.S. are believed to have studied the complex storage problems created by liquefied air, which has a temperature of minus 191 degrees centigrade.
However, BOC is the first to launch the gas commercially.
It has already been tested on poultry farms, where it dramatically cut death rates caused by high summer temperatures.
BOC said it could eventually be used to air condition spaces like rock concert venues and to create extreme-temperature test chambers for the aerospace and other high-tech industries.
Britain is being used as a commercial test-bed for the gas, and BOC said it would make a decision about expanding production and overseas marketing at the end of the year.
--London Newsroom +44 71 542 7717 ($1=.6172 Pound)
",19
"Specialty chemicals and minerals group English China Clays Plc (ECC) chief executive Dennis Rediker said on Monday the group had had ""a fairly horrible year"" in 1996, but was now placed to rebuild profitability.
In a telephone interview with Reuters, Rediker said ""we have got a good understanding of the fundamentals of the business and put a management team in place that can take us to the next level of performance.""  
Predicting a return to profitability in the first half of 1997 after posting a pre-tax loss of 42.9 million stg last year, Rediker also pledged to restore and improve on the group's historic margins in the core paper mineral and specialty chemicals operations.
He said management had ""positioned the company to be able to have normal growth prospects,"" adding that ""the proof will be in the pudding.""
ECC, which provides kaolin and carbonates to paper manufacturers, said it was affected by ""a background of severe volume decline in the paper market and the lowest point in the turnaround of the specialty chemicals business.""  
Rediker said that profit margins in the European minerals business ""held through 1996"" with a strong recovery in the second half bringing the overall profit margin to 12.4 percent from 14.3 percent a year before. Operating profit fell 20 percent to 50 million stg.
However, weak paper markets and increased investments saw operating margins at the Americas/Pacific business drop 49 percent to $30.8 million, with profit margins dropping to 6.5 percent from 12.4 percent.  
Although he declined to give margin targets for the businesses, Rediker noted that ""in the past we have had margins in the 12 to 18 percent range for Europe and nine to 13 percent for Americas/Pacific.""
ECC is having to adjust to a switch from using higher margin kaolin, its main product, to lower margin calcium carbonates in paper production. Rediker said demand for kaolin for paper is likely to grow at only ""one percent a year,"" although ""it should be cash generative.""
Rediker said other performance minerals for paints, ceramics and plastics had ""good growth prospects.""  
In specialty chemicals, whose customers also include the paper industry, operating profits fell 57 percent to $7.0 million, with profit margins declining to 2.5 percent from 6.0 percent.
Rediker said the business had been in decline ""from 1995 to the middle of 1996."" He added: ""we have replaced all the management in that business and it is on a good trajectory.""
Rediker said his aim was ""to achieve industry norms in 1998,"" targeting profit margins of between 10 and 15 percent, which would exceed the division's previous best-ever performance of eight to nine percent.  
There has been speculation that ECC would sell the non-paper activities of its specialty chemicals operation Calgon.
Rediker said new managers at Calgon ""were being effective at turning that around, and added that ""all options"" for its future were being looked at.
ECC said it was ""likely"" that 1996 marked the low point in its trading cycle. It said there had been some weakness in paper markets for minerals worldwide, but noted ""a significant recovery"" of mineral volumes to the north American paper industry.
A combined approach to selling minerals and chemicals to the paper industry was also helping to gain business, and the outlook for the performance minerals business was ""encouraging,"" ECC said.
--London Newsroom +44 171 542 7717
",19
"Britain's third-largest drugs company Zeneca Group Plc said on Tuesday that it broke a string of records in 1996, with sales topping five billion pounds ($8 billion) and profits surging above one billion pounds for the first time.
Pre-tax profits before exceptional charges rose 15 percent to 1.01 billion pounds, beating the most optimistic analysts' forecasts. After exceptional charges, pre-tax profit soared 58 percent to 975 million pounds.
Sales were up nine percent at 5.363 billion pounds, while the dividend was raised 13 percent to 35.0 pence per share.
Zeneca's booming share price broke briefly through the 19 pound barrier, touching a new record high of 19.38 pounds during the morning. However the stock, which has risen by around 40 percent in the past 12 months, was trading down 16-1/2 pence at 18.86 pounds later as analysts pondered their meeting with the group's management.
Chief executive David Barnes told Reuters the results showed the company was ""in touch with"" his ambitious target of doubling profits by the end of the century, but warned that spending on new products would restrain profits in the short term.
Last year Barnes set what he called ""an inspirational target"" of increasing earnings per share (eps) by an average of 15 percent between 1996 and 2000. Before exceptional items, eps rose 14 percent last year to a record 70.6 pence, and after exceptionals jumped by 90 percent to 67.8 pence.
The group's 13 percent rise in drug sales to 2.44 billion pounds dwarfed the six percent sales growth announced last week by its bigger rival Glaxo Wellcome Plc. Operating profits rose 10 percent.
Heart drug Zestril continued to be the group's best-selling product, with sales rising 10 percent despite increased competition. Sales of established prostate cancer treatment Zoladex jumped 31 percent, while newly-launched prostate treatment Casodex ""exceeded expectations"" with sales of 68 million pounds.
Sales at the agrochemical and seeds operations rose 10 percent to 1.68 billion pounds, while operating profits surged 56 percent to 224 million pounds thanks partly to sharply lower losses at seeds. Profits at the slimmed-down specialty chemicals arm also rose strongly, up 25 percent at 70 million pounds.
Barnes said Zeneca had a raft of new drugs and agrochemicals which ""should be significant products by the time we come to 2001,"" when Zestril loses its patent protection.
He said Zeneca had won its highest ever number of new drug approvals last year, and announced that a new migraine drug, Zomig, won its first approval wordlwide in Britain on Monday.
Barnes said other promising products included the novel mild asthma tablet Accolate, which Zeneca said had sales of eight million pounds in its first few weeks of launch, schizophrenia treatment Seroquel and the fungicide Amistar.
The company expects its capital spending to rise above the 400 million pound level this year as it gears up for new production, while research and development spending is seen rising around 10 percent after topping 600 million pounds in 1996.
""In 1996 we essentially, through increased capital expenditure and R&D, invested one billion pounds in the medium and long-term of the business, while making record profits of a billion pounds, generating cash and having an ungeared balance sheet,"" he told Reuters.
Barnes, whose contract as chief executive expires in 15 months time, would not rule out using the group's debt-free balance sheet to make a major acquisition.
""We are very alive to new product opportunities. We are alive to regional infill opportunities if they were to strengthen our business. If a good opportunity were to present itself by way of acquisition we would look at it, but here is no strategic imperative to do that. We have got strong organic growth,"" Barnes said. ($ = 0.623 British Pounds)
",19
"Britain's biggest chemical company ICI said on Thursday that profits collapsed last year, but it set its sights on a more profitable future with plans to float its troubled tioxide operations on the stock exchange.
Profits before tax and exceptional charges dropped 37 percent to 603 million pounds ($967 million) in 1996 from 951 million a year before, while the dividend payout climbed 6.7 percent to 32.0 pence. Both figures were towards the bottom end of market expectations.
The company blamed the drop on sharp cyclical price falls in the overcrowded chlorine, titanium dioxide (tioxide) and polyester markets, higher oil prices and a stronger pound.
Some of the downturn was offset by a bouyant performance in the fast-expanding paints business, where operating profits jumped 60 percent to 171 million stg, and a steady performance in materials, which makes acrylics and polyurethanes.
Shares in the group reacted erratically to the results, rising briefly to a peak of 780 pence before slipping back 10 pence to 754-1/2 in late-morning trade.
Traders said upbeat forecasts on prospects for chemical prices and news of the Tioxide float were overshadowed by continued worries over the strength of sterling and disappointment over the full-year figures.
The results reinforced the group's determination to reposition itself as a producer of ""light"" chemicals like acrylics, polyurethanes and paints and to move away from the less predictable industrial end of the market.
A reshuffle of the board's responsibilites on Thursday signalled the change, and finance director Alan Spall told Reuters ICI would be ""a very different company"" by the turn of the century.
Spall said ICI planned to float the Tioxide Group, which is the world's second biggest producer of tioxide, a whitening agent for for paints, plastics, inks and fibres, in the next 18 months. The company is consulting advisors about its value, but Spall said its net assets totalled around $700 million.
""We are determined to reduce the proportion of assets and income from the heavy industrial end,"" Spall told Reuters.
""You can expect us to use every tool around to shift the portfolio,"" he added, including flotations, asset swaps, sales and acquisitions.
He said the entire chemical industry was in talks on swapping key assets and pointed to Wednesday's $30 million acquisition of a Puerto Rico paint company and last year's purchase of Bunge Paints in South America as the kind of move that could be expected. ""There is a whole series of potential acquistions,"" said Spall.
ICI belieives that the downward spiral in key industrial chemical prices is now at an end. Spall predicted a ""sharp"" rise in tioxide prices this year, and said prices of olefins and chlorofins were now improving. ""1997 chemical production and demand looks better...the balance will tighten,"" he said. ($1=.6237 Pound)
",19
"Anglo-U.S. drugs group SmithKline Beecham Plc said on Tuesday that it expected anti-depressent Paxil/Seroxat to take over as its best-selling drug by the end of this year.
In a telephone interview with Reuters finance director Hugh Collum said it was probable that Paxil/Seroxat ""will be the biggest selling product by the end of this year.""Sales of the drug, which competes with Eli Lilly & Co's Prozac, jumped 42 percent last year to 706 million stg, gaining ground on SmithKline's current top seller, antibiotic Augmentin.  
""The added indication of panic disorder gives us added uniqueness"" in comparison with Prozac, said Collum. Although he declined to give sales targets for Paxil, he said ""we are very optimistic"" and noted that Prozac sales were in excess of $2 billion a year.
The finance director also highlighted the Havrix hepatitis A vaccine, Hycamtin for ovarian cancer and anti-emetic Kytril as potential strong growth products looking ahead, together with combination vaccines like Infanrix.  
SmithKline does not expect drugs to flow from its DNA research link with Human Genome Sciences (HGS) until after the turn of the century, Collum said. But he noted the licensing arrangements on DNA-based drugs already in place with major competitors including Merck & Co and Schering-Plough Corp and added ""we are very optimistic. Looking back I think it was a very good investment decision.""
Collum said he was ""really very pleased"" at the reduction in the group's stubbornly high debt levels, which came down to 1.64 billion stg at the end of 1996 from around 1.8 billion at the start of the year.  
However, he said that with capital expenditure expected to total around 550 million stg this year, debt levels would only ""come down a bit"" in 1997.
He said operating margins would continue to be affected by high research and development spending and marketing costs related to over-the-counter products.
Collum said he hoped the Clinical Laboratories operation, which has been hit by changes in U.S. reimbursement rules for diagnostic tests, was ""back on track.""
""We hope so. On the other hand there are still pressures on it. It is the third biggest in the U.S, we have a good geographical spread but it is still difficult,"" Collum said.
--London Newsroom +44 171 542 7717
",19
"Britain's chemical industry predicted another three years of sluggish investment on Wednesday despite relatively strong market conditions, adding to worries about the country's investment record.
The Chemical Industries Association (CIA) said spending on new plant and equipment was barely changed last year at 2.15 billion pounds ($3.5 billion), and after taking inflation into account it actually fell by 0.6 percent.
This put Britain well behind its international competitors. Spending by French chemical companies rose seven percent last year, with U.S. spending rising 11 percent and the Netherlands by 13 percent.
The CIA said the outlook for 1997 was little better, with spending seen rising only five percent.
The downbeat forecasts contrasted with positive predictions about economic growth and future production levels, with chemicals output expected to grow by three percent this year and exports by five percent.
Nikko Europe analyst Philip Morrish told Reuters that global overcapacity in the industry and weak European economies were major factors behind lacklustre investment.
""The industry may also be hedging its bets about whether we are getting close to the peak of the (demand) cycle globally, and I think more importantly we have seen the industry making much better use of its plant and equipment,"" he added.
But the Confederation of British Industry (CBI) said weak investment levels were reflected across the British economy.
Douglas Godden, head of the CBI's economic policy group, told the CIA's investment intentions conference that business investment had staged a relatively weak recovery compared both with in the early 1980s and with some other countries, notably Japan, the United States and the Netherlands.
""Manufacturing investment has lagged even further in the last year or so, with companies' own investment intentions not being fulfilled,"" Godden said.
CIA director-general Elliot Finer said investment by the chemicals industry had been weak for four years in a row, despite strengthening economic growth and an excellent business climate.
""We must look for other explanations of this subdued business climate,"" Finer told the conference. ""One factor is likely to be uncertainties about the UK's future membership of EMU.""
Finer called for a delay in starting European economic and monetary union (EMU) to allow time for genuine economic convergence. But he said Britain had to be involved from the beginning if it was not to lose out on both domestic and overseas investment.
His call, which is unlikely to be heeded by the Labour or Conservative parties currently vying for power in the May 1 election, was backed by Chris Andrews, who heads the British arm of French chemicals group Rhone Poulenc SA.
Andrews said a major part of his time was spent trying to win investment for Britain. ""I get the impression talking to many French colleagues that uncertainty about the UK position on EMU is worrying them, and can only act as some kind of discouragement to investment in the future,"" Andrews said.
($ = 0.615 British Pounds)
",19
"International chemicals group Courtaulds Plc said on Wednesday that its wonder-fibre Tencel, global coatings business and fast-growing plastic packaging operations would spearhead expansion in the coming years.
In his first major interview since taking the helm last July, chief executive Gordon Campbell laid out his plans for the group, including an increasing focus on fast-growing Asian markets and a determination to move on from its historic role as a major producer of viscose fibres.  
He also told Reuters that Courtaulds would play its part in the current global restructuring of the specialty chemicals business through asset swaps, joint ventures and possibly acquisitions.
He said Courtaulds was set on expanding Tencel, a highly flexible fibre derived from wood pulp, ""as fast and as profitably as we can"", with annual sales seen approaching $500 million by the turn of the century.  
But he added: ""We have to keep reminding people that we have growth prospects in areas other than Tencel, and that people don't think that Courtaulds is a combination of Tencel and viscose. It is Tencel, coatings and polymer products, all of which are capable of growing.""
Campbell's other goals include lifting the group's sales in Asia by 10 percent a year, raising sales at Coatings by five percent a year and doubling the proportion of sales derived from the packaging-oriented Polymer business to make it ""a significant third leg"" for Courtaulds.  
Campbell said growth in Asia would be led by the Coatings business, where Courtaulds had world-leading positions in marine and yacht paints, visible on the P&O luxury liner Oriana, and in aerospace sealants. It is also a major producer of powder coatings for consumer goods.
""Marine is always the bridgehead into developing markets, because it is such a well-known and internationally-recognised brand... then we backfill behind that with our other coatings products,"" he said.  
Campbell said the company had enjoyed annual sales growth in Asia of 15 to 20 percent over the past five years. ""The only reason I scaled it down to 10 percent (as a target) was because it is more difficult to grow at that rate from a bigger base,"" he added.
Polymers, whose products include toiletry and toothpaste packaging for giants like Unilever Plc and Colgate-Palmolive Co, accounted for less than 10 percent of Courtaulds' 2.30 billion stg sales in the year to March 1996, compared with nearly 50 percent for Coatings and 40 percent for fibres.  
""We ought to see it at least doubling over a period of time...Over five years might not be a bad period,"" said Campbell. He said growth would be largely organic, although Courtaulds would be interested in ""small, strategically useful acquisitions"" which expanded product range or geographic spread.
Campbell said the company was in negotiations with a number of countries in the Far East over the siting of a new production plant for Tencel, which will supplement factories in Alabama in the U.S, and Grimsby, England. He would not be drawn on the timing of an announcement.
""Various countries are attempting to attract us. We have three criteria: closeness to the market, country infrastructure ranging from political stability to whether the electricity supply is reliable...and financial incentives.""
He said the costs of investing in Tencel will spark ""a fairly sharp increase in gearing this year, but not to a level we feel concerned about"".
He added that ""the real measure"" is interest cover, which is currently around five times. ""We expect to be able to hold it at that,"" Campbell said.
--London Newsroom +44 171 542 7717
",19
"Britain's biggest textiles group Coats Viyella Plc announced a sharp fall in 1996 pre-tax profits on Thursday, reflecting continuing tough market conditions and the costs of an extensive reorganisation.
Pre-tax profits fell 42 percent to 94.4 million pounds ($150.8 million) last year, with a previously-announced 54.9 million pound reorganisation charge accounting for a large chunk of the decline.
But even excluding charges, profits slid eight percent as several key divisions, including the core thread operations, struggled to cope with poor demand and economic weakness in important markets including Europe, Brazil and Turkey.
Despite the drop in earnings Coats Viyella held its dividend payout per share steady at the 1995 level of 8.8 pence, even though this was well ahead of the group's earnings per share of just 6.7 pence.
Shares in Coats, whose products range from bedlinen to precision engineering components for mobile phones, rose 4 1/2 pence to 134 1/2 in late morning trading.
Over the past two years the stock has fallen 52 percent and underperformed the FTSE All Share index by 48 percent, according to Reuters 3000 data. The stock is currently 84 percent below its 1988 peak of 860 pence.
Neville Bain, who announced his intention to step down as chief executive of the group in May after nearly seven years, told Reuters the dividend payment was ""a sign of strong confidence for 1997"".
""The company is well placed to move ahead in 1997 and future years, although the extent of that does depend on some factors outside our control,"" including exchange rates and economic trends, said Bain.
Joining the growing chorus of complaints from British industry about the strong pound, Coats said the current level of sterling against the dollar could wipe between five and eight million pounds off pre-tax profits in 1997, while weak European currencies could hurt the competitiveness of British manufacturing.
A year ago the group announced a wide-ranging restructuring plan aimed at cutting costs and raising productivity, centred on the clothing, thread and home furnishings operations.
Bain said savings from the reorganisation were coming through faster than expected, with 12 million pounds notched up in 1996 and annual savings of at least 35 million anticipated by 1998.
The group's thread operations, which account for more than 40 percent of sales and over 50 percent of operating profit, reported a 10 percent slide in profits to 90.3 million pounds last year. Bain said the division, which supplies yarn and thread to the clothing, footwear and car industries, had seen a pick up in the last quarter.
Disruption from reorganising the clothing operation, which is a major supplier of Marks & Spencer Plc, helped profits to fall 12 percent to 19.1 million pounds. Profits also fell at precision engineering, where volatile consumer electronics and automobile markets undermined strong sales growth.
An upturn in Britain's housing market helped to boost the home furnishings division, where operating profits rose 42 percent to 12.5 million pounds. Fashion retail, which includes the Jaeger and Viyella brands, also saw a solid performance.
Bain is to be replaced at the top by former McKechnie Plc chief executive Michael Ost, who is 52. ""We agreed at the end of last year that this would be a good time to go,"" Bain said.
--London Newsroom +44 171 542 7717 ($ = 0.626 British Pounds)
",19
"International business services group Rentokil Initial Plc announced sharp rises in 1996 sales and profits on Wednesday, but there were concerns that the group relied heavily on newly-acquired BET for progress.
Rentokil Initial, formed last year through Rentokil's hostile takeover of rival BET, said pre-tax profit jumped 48 percent to 318 million pounds ($505.8 million) while sales were up 168 percent at 2.34 billion pounds.
The dividend rose 20.5 percent to 5.06 pence per share.
The results were at the bottom end of analysts' forecasts of between 317 and 335 million pounds, and shares in the company fell sharply in morning trading, trading down 5.7 percent or 26 1/2 pence to 431 1/2 pence.
Rentokil Initial, whose services include office cleaning, personnel, security, pest control and supplying plants, also announced a two-for-one share split.
It said the integration of BET, bought for 2.1 billion pounds, ""had proceeded rapidly and successfully in line with plans.""
However, excluding BET, sales were up 15 percent and profits rose nine percent to 233.4 million pounds, raising concerns that the company would not have lived up to its long-established reputation for delivering year-on-year earnings and sales growth of 20 percent without BET.
One trader said ""they managed the 20 percent gain, although the contribution from BET is very substantial. People will be asking about their core businesses and wondering whether they would have made the grade without BET.""
The company said the results had been affected by 16.4 million pounds of integration costs, focusing of management effort on BET's integration and adverse exchange rates.
Chief executive Sir Clive Thompson said he did not expect the company to make any more large acquisitions for the next two years while it integrated the 52 BET operations.
""I'd be very suprised to see us making major acquisitions for certainly under two years, and if we were to do so it would indicate that we had integrated the businesses extremely well,"" Thompson said.
However, Thompson said there were opportunities for ""bolt-on acquisitions"" in the core businesses of hygiene and cleaning, pest control and security ""and I hope we'd be making those sorts of acquisitions.""
Thompson said he expected to make a number of low-key disposals of BET operations over the next year.
""In the short term you'd expect to see a series, quite a number, of relatively small-sized disposals. In total terms over the next 12 months it might approach 50 to 100 million (pounds),"" he said.
($ = 0.628 British Pounds)
",19
"Britain's Courtaulds Plc has set its sights well beyond the troubled viscose business, putting its faith in its new wonder-fibre Tencel, industrial coatings and plastic packaging.
Chief executive Gordon Campbell told Reuters on Wednesday that viscose and acrylics would account for a dwindling portion of sales in coming years as its other businesses expanded.
Campbell was speaking in his first major interview since taking the helm at the international chemicals group last July.
Courtaulds, which was the first company to produce a manmade fibre commercially in 1905, has suffered from a slump in demand for viscose because of changing fashions and increased competition from Asian producers.
Worries about viscose have weighed on its share price, helping force it out of the FTSE 100 last December.
Courtaulds shares, which closed at 363 1/2 pence on Wednesday, have fallen 35 percent from their 12-month high of 490 pence touched in October last year, according to Reuters 3000 data.
Campbell said there were tentative signs of a recovery in viscose. ""But it is from such a lousy base, I'm not really celebrating,"" he said.
Last month the group closed 20 percent of its European viscose capacity, switching workers to a new plant for Tencel under construction at Grimsby in northern England.
Heavy investment in Tencel, a fibre derived from woodpulp which has attracted the attention of designers like Jean Paul Gaultier, Gianfranco Ferre and Christian Lacroix, is a cornerstone of Courtauld's growth strategy.
The company can sell every inch of the highly flexible fibre it can produce, and Campbell said sales should be close to $500 million a year by the end of the century.
But this would still be less than 10 percent of total sales. ""We have to keep reminding people that we have growth prospects in areas other than Tencel, and that people don't think that Courtaulds is a combination of Tencel and viscose,"" he said. ""It is Tencel, coatings and polymer products, all of which are capable of growing.""
Campbell's other goals include lifting sales in Asia by 10 percent a year, raising sales at Coatings by five percent a year and doubling the proportion of sales derived from the packaging-oriented Polymer business to make it ""a significant third leg"" for Courtaulds.
Campbell said growth in Asia would be led by Coatings, where Courtaulds had world-leading positions in marine and yacht paints, visible on the P&O luxury liner Oriana, and in aerospace sealants. It is also a major producer of powder coatings for consumer goods.
Despite a third of Courtauld's production capacity lying in continental Europe, Campbell backed a warning by Barclays Plc chief executive Martin Taylor about the dangers of Britain joining a single currency too soon.
""If you go in at the wrong rate then it could be a very serious long-term problem for Britain,"" Campbell said.
He said the argument over a single currency was a ""stalking horse for the real debate"" which was about political union.
",19
"British Gas Plc, which is battling to clear away regulatory and contractual headaches before splitting into two companies, unveiled an expected sharp deterioration in half-year profits on Thursday.
The energy giant revealed a first half dip in historic cost net profit to 565 million pounds ($878.7 million) from 635 million a year before. Pretax profit fell to 926 million from 1.003 billion, and the company turned in a net loss of 8.0 million in the second quarter.
Beleaguered shareholders were offered some comfort, however, with the interim payout kept unchanged at 6.40 pence, but the group refused to make any promises until rows with the industry regulator Ofgas over price controls are resolved.
Last winter's bleak weather provided some relief for the embattled company as it prepares to face the final phasing out of its monopoly in 1998.
Prolonged cold weather added 218 million pounds to operating profits, more than offsetting steep declines at its industrial and commerical arm where competition and controversial ""take or pay"" contracts with gas producers continue to bite.
The company is also locked in a battle with Ofgas over a tough review of the prices it can charge customers.
Chairman Richard Giordano said talks on take or pay gas contracts, which oblige British Gas to pay well above market rates for the gas it buys, are now in a ""realistic phase.""
In a telephone interview, Giordano said these were a major factor behind losses at its industrial and commercial division, which widened to 180 million pounds from 50 million in the first half of 1995.
""The solution to the losses is for us to unhook from take of pay,"" Giordano said, although talks with producers were a gradual process.
""We are in intense negotiations now. We have said we will not do this in public and so both sides are keeping quiet,"" Giordano said.
The chairman also held out some hope on negotiations with regulator Ofgas on separate price reviews of its Transco and domestic energy businesses.
Giordano refused to be drawn on the crucial Transco review, but made clear British Gas has not yet slammed the door on an agreement. ""There is nothing to say on this. We are still meeting with Ofgas,"" Giordano said.
Ofgas wants Transco to cut charges to gas suppliers by 20 percent in 1997 and then 6.5 points below inflation for four years. British Gas, which has until October 7 to respond, has warned that even these watered down proposals could have serious consequences for dividends.
Giordano was more upbeat about the domestic review, where Ofgas wants to fix price changes at five points below inflation. He said a resolution should be in place by ""the end of September or the middle of October,"" adding ""my guess is that we are closer to Ofgas and Ofgas is closer to us on that review.""
Giordano said British Gas was preparing to beef up incentives to keep domestic customers loyal when the market opens fully to competition in 1998.
It launched a credit card on Wednesday which will allow users to save on gas bills. Other initiatives planned include offering illness or unemployment insurance to cover bills, and gas safety checks.
Progress towards a demerger into two separate companies, Transco International and British Gas Energy, is still on target for next spring, with a definite plan expected by the end of 1996.
London Newsroom +44 171 542 7717 ($1=.6430 Pound)
",19
"Young drug discovery group Vanguard Medica Plc said on Thursday it could wait longer than expected before seeking a fresh cash injection.
Vanguard floated on the stock exchange in May, raising 46.4 million stg to fund its pipeline, which includes migraine and kidney failure drugs.
""We said we'd be expecting to seek more finance in 1998, but we took in more money than we'd expected and may have scope for going on longer,"" commercial director Nick Heightman said in a telephone interview following interim results.  
Vanguard said on Thursday that its pretax loss in the six months to June 30 widened to 3.7 million stg from 1.8 million a year earlier, largely due to the cost of moving migraine drug VML 251 and anti-inflammatory drug VML 295 through trials.
Heightman, who joined Vanguard from drug giant Glaxo Wellcome Plc, said the company had expected to announce results of large-scale intermediate, or Phase II, trials on the migraine drug by July 1997.
""I think we are going to be able to do that in the first quarter, so we are about a quarter ahead,"" he said.  
Analysts say the migraine drug, which is being developed in cooperation with SmithKline Beecham Plc accounts for around half of Vanguard's current stock market valuation.
Some studies have shown it may be more potent than the current market leader, Glaxo Wellcome's Imigran, although Heightman said direct comparisons cannot be made for another 18 months.
He said another Vanguard drug, VML 252, which promises to tackle bone damage suffered by patients with severe kidney problems, is now ""running neck and neck"" with the migraine treatment.  
Although VDL 252 is currently in Phase I trials, Heightman said it is likely to progress more quickly through trials than the migraine drug.
""Its effectiveness is particularly easy to measure. You can quickly tell if you are having an effect,"" he told Reuters. Heightman believes both drugs could be on the market in the year 2000 if trials continue to go well.
Despite the positive news from the company, Vanguard shares dropped 5 1/2 pence to 495 pence on Thursday.  
Greig Middleton analyst Julia Dickson expressed surprise at the fall, saying the market ""doesn't seem to understand the company.""
""We think it is very cheap and I am surprised it is off,"" Dickson said, adding that the company's statement was ""very positive"" and Vanguard's meeting with analysts on Thursday showed drugs are progressing even faster than the company has officialy acknowledged.
Lehman Brothers' analyst Ian Smith said the ""share price adequately reflects the value of the current portfolio, with some excellent opportunities,"" particualrly in migraine and kidney-related problems.
He said in the medium- to long-term, the value will depend on Vanguard's ability to attract further partnerships like that with SmithKline Beecham, a cornerstone of Vanguard's growth strategy.
-- London Newsroom +44 171 542 7717
",19
"The value of one of Britain's largest biotech companies plunged on Tuesday after regulators said they were unwilling to approve one of its lead drugs.
Shares in Scotia Holdings Plc dropped 23 percent, or 132 1/2 pence, to 437 1/2 pence after it said Britain's Medicine Controls Agency (MCA) was not yet willing to give marketing approval to Tarabetic, a drug aimed at relieving sensory impairment in diabetics.
More than 100 million pounds ($160.5 million) was wiped off the company's market capitalisation, valuing it at around 337 million pounds by the close of trading.
The MCA's Committee on the Safety of Medicines is believed to have questioned whether trials at 12 different centres showed Tarabetic, derived from Evening Primrose Oil, was sufficiently effective.
Although Scotia put a brave face on the announcement, saying that another MCA committee, the Medicines Commission, could still decide in its favour, the news added to market fears that the company would be forced into a rights issue in unfavourable circumstances.
Analysts said Scotia, which is developing a portfolio of novel drugs based on fatty acids and lasers, has around 18 months of cash left on its books.
The company's shares slipped sharply last month after Panmure Gordon analyst John Savin issued a sell note, warning that Scotia needed a major refinancing. He said then that ""the success of this will depend on the outcome of the regulatory review of Tarabetic.""
The diabetes product had been expected to gain marketing approval and go on sale in Britain in the second half of last year.
Panmure Gilbert analyst Robin Gilbert said he wasn't surprised by the rejection, adding that the drug had ""been at the approval stage for much too long.""
Gilbert said Scotia was ""by no means a one product company,"" but Tarabetic had been one of its highest profile products. ""Investors have been more hopeful about this one, and indeed the company has encouraged that,"" he said.
""Diabetes is an exceedingly difficult market, where many have failed,"" Gilbert added.
However, one of Scotia's strongest supporters, Yamaichi International analyst Erling Refsum, said concerns were overdone. Refsum said that even stripping out sales assumptions for Tarabetic, the company was ""at least"" 50 percent below his current market valuation of around 500 million pounds.
Refsum said an update by the company on March 25 on its laser technology treatment for cancer, known as Foscan, ""could completely restore all of the price drop we have seen.""
Refsum believes that Foscan, which is about to start clinical trials in the U.S. for treatment of head and neck cancer, ""could be worth the entire market capitalisation of the company as it stands.""
Nomura analyst Nick Woolf said the current slump represented a good buying opportunity.
""If ever there was a good time to buy biotech companies, it was when they had a setback,"" Woolf said.
Woolf still believes Tarabetic could win approval and achieve sales of up to 120 million pounds a year. He predicted sales of Foscan of up to 280 million pounds a year.
Investors in Scotia are used to a bumpy ride. Analysts said the group's previous star product, anti-cancer drug EF13, has proved disappointing in clinical trials, while its existing nutritional and drug products are in very competitive segments. ($ = 0.623 British Pounds)
",19
"Vaccine discovery group Peptide Therapeutics Plc said on Monday that there was still room for further product alliances, despite signing up two high profile deals in the space of three weeks.
In an interview after announcing an agreement with SmithKline Beecham Plc to develop allergy vaccines, Peptide finance director John Brown said ""the area that is finding interest is protease inhibitors.""
Peptide is developing technology to allow rapid identification of protease inhibitors, which block enzymes crucial to a virus's ability to reproduce.
Protease inhibitors have been used successfully against the HIV virus, but Brown said ""they clearly have many therapeutic possibilities,"" including tackling viral conditions like herpes.
The agreement with SmithKline to develop Peptide's allergy vaccines follows a tie-up in January with Medeva Plc, in which Medeva licensed its know-how in creating oral and nasal vaccinations to Peptide.
SmithKline is to pay 6 million stg to Peptide immediately, including 3.6 million stg for a 2.8 percent stake in the group. Peptide said it could eventually receive up to 30 million stg from the deal, excluding any royalties on product sales.
SmithKline will take over Peptide's lead project, a vaccine which could prevent a range of allergic reactions from mild hay fever to often fatal food allergies, and has the right to any follow-up drugs.
""This is a validation of the company and the technology,"" said Peptide's licensing director Nick Higgins, a key player in the deal. ""The term strategic alliance is rather over-used, but this really is a strategic alliance.""
Higgins said a several companies had expressed interest in the allergy vaccine, which won backing from the British government last September in the form of a 450,000 stg development grant.
""The negotiations with SmithKline Beecham went very smoothly and one of the big pluses...was that they were not interested in just a single product arrangement but in this whole area,"" said Higgins. ""For us that gives stability to the relationship. If you look at single product deals (with biotech companies) then if the product goes down the marriage breaks.""
Brown and Higggins declined to be drawn on the timetable for developing the vaccine, which they said was now in the hands of SmithKline Beecham. One set of Phase II trials has been completed, with another set still to run. However Higgins said ""I think you are looking at the end of the decade in terms of availability"" on the market.
SmithKline has also acquired a right to develop a vaccine specifically targeted at rye grass allergy. Brown said Peptide should start clinical trials on this ""shortly,"" after which SmithKline ""will have an option to proceed"" with further development.
--London Newsroom +44 171 542 7717
",19
"Promising trial results published on Wednesday on a new drug for treating Hepatitis B have raised hopes that Britain's Glaxo Wellcome Plc may have another big seller on its hands.
The pharmaceuticals giant, whose best-selling ulcer drug Zantac is expected to be eaten up by generic competition later this year, said advanced studies showed that Lamivudine may reduce and even reverse damage to the liver caused by the Hepatitis B virus.
Shares in Glaxo Wellcome, which licensed Lamivudine from Canada's BioChem Pharma Inc in 1990, climbed 23 1/2 pence to 11.13 pounds ($18.04) in early afternoon trading.
Lamivudine is also the base for Glaxo Wellcome's increasingly successful AIDS drug Epivir. But analysts said questions remained about how effective Lamivudine would be with Hepatitis B, with detailed results from several other studies not expected until the end of the year.
However, any advance would be a breakthrough against a virus which doctors say is 100 times more infectious than AIDS and kills two million people every year.
The World Health Organisation estimates that 350 million people carry the virus worldwide. Passed on in a variety of ways including unprotected sex, drug use, contact sports and from mother to baby, it can lead to severe liver scarring and is responsible for 80 percent of cases of liver cancer.
In a ground-breaking move Glaxo Wellcome plans to file its first regulatory approval for the drug in Asia later this year rather than in Europe or the United States, reflecting the prevalence of Hepatitis B in the region.
Glaxo Wellcome told the European Association for the Study of the Liver on Wednesday that phase III tests of Lamivudine on 358 people with chronic Hepatitis B in Taiwan, Singapore and Hong Kong were ""extremely encouraging"".
It said 67 percent of patients who took a 100 milligram Lamivudine tablet every day for a year saw the condition of their liver improve compared with 30 percent who took a placebo. The number of people whose liver deteriorated was greatly reduced.
It also found that 16 percent of people taking the drug managed to stop the Hepatitis B virus from replicating in the blood compared with four percent who took a placebo.
More than 95 percent of Hepatitis B cases are estimated to be in the developing world. Authorities in China said last year that 120 million Chinese were affected by the condition and about 40 percent of these were pregnant women. Glaxo Wellcome said it had already held talks with the Chinese government on making the drug available there.
A spokesman said Lamivudine would also fit in with the group's strategy of becoming more focused on different regions, partly in recognition of the huge growth potential for pharmaceuticals and health care in regions such as Asia and South America.
But analysts said Lamivudine's focus on poorer countries made the issue of pricing the drug difficult to predict. It also raised the question of creating different pricing policies for rich and poor countries, a controversial move which Glaxo Wellcome is known to want to explore.
One analyst said sales estimates ranged from a couple of hundred million pounds a year to a billion pounds, reflecting uncertainty about how the drug will be marketed.
""From a scientific point of view this is a very exciting prospect (but) in commercial terms there remain questions on its sales prospects,"" he said.
SocGen analyst Alyson Coates said she had cautiously estimated sales of 150 million pounds for the drug by the year 2000 and peak sales of 350 million pounds a year.
But she said questions remained about whether Lamivudine would be more effective when taken together with other drugs, just as Epivir works better in combination, and on how resistant the virus might be to the drug in some people.
Glaxo Wellcome is one of a number of companies working on products for Hepatitis B.
SmithKline Beecham Plc is developing a version of its herpes treatment Famvir, and Germany's Boehringer Mannheim GmbH, Vion Pharmaceuticals Inc and Gilead Sciences Inc of the United States and Britain's Medeva Plc also have products in clinical trials. ($ = 0.616 British Pounds)
",19
"The world's biggest prescription drugs company, Glaxo Wellcome Plc, announced an 18 percent leap in pre-tax profits on Thursday, but said life would be tougher after its best-selling drug loses its U.S. patent in July.
Pre-tax profits climbed to 2.964 billion pounds ($4.8 billion) from 2.505 billion, bang in the middle of analysts' expectations. Sales rose 9 percent to 8.341 billion pounds, and shareholders were rewarded with a 13 percent rise in the dividend to 34.0 pence.
Shares in Glaxo Wellcome, which slipped back to a low of 981 pence at one stage, were down just 7 1/2 pence to 10.27 1/2 pounds as analysts responded positively to a meeting with the company. Traders said some profit-taking had been expected after the stock touched a record 10.63 on Wednesday.
Sales of gastric ulcer treatment Zantac fell 14 percent last year, but at 1.931 billion pounds it continued to be the world's biggest-selling drug, a spot it has held since 1986. Zantac has single-handedly transformed Glaxo, which merged with rival Wellcome in 1995, into a huge international player.
Sales of its second-biggest seller, herpes treatment Zovirax which has already lost most of its key patents, were steady at 812 million pounds.
Glaxo warned that the best it could hope for over the next two years would be to ""at least maintain"" its profits at the 1996 level.
""The tough period is mid-1997 to mid-1998 when Zantac will come under severe generic pressure in the U.S.,"" deputy chairman and chief executive Sir Richard Sykes said in a telephone interview with Reuters.
But he added: ""If you take Zantac out we have a 6.4 billion pound business growing at 14 percent. That underlying growth is a very clear indication of the strength of the group going forward.""
Sykes noted that sales of Zantac fell by 324 million pounds last year, while a portfolio of newer products launched since 1990 saw sales rise by 650 million pounds to 2.0 billion pounds.
""Our responsibility is to grow those new products to maintain these two (sales) lines in balance as much as possible. It is a balancing act,"" he said.
The best performers included Glaxo Wellcome's rejuvenated HIV and AIDS treatments. Retrovir and Epivir are at the cornerstone of new cocktails of drugs which have shown startling success in reducing the levels of the virus in the blood to virtually undetectable levels, giving Glaxo Wellcome the lion's share of a rapidly expanding market.
""Today we have 57 percent of the AIDS market and I don't see why we won't continue to be a very major player,"" Sykes said.
Other big sellers included asthma drugs Serevent and Flixotide and migraine drug Imigran, which saw sales in the U.S. alone leap by 69 percent last year.
Despite persistent speculation that Glaxo Wellcome will get onto the acquisition trail again as soon as its debt levels allow, Sykes told Reuters there had been a clear dissipation of the pressures for mega-mergers. He said Glaxo Wellcome's future expansion was likely to be ""incremental.""
""The pressures of the early 1990s have changed somewhat in the big markets. The bigger companies get, the more difficult it is to buy them or merge, so the way forward will be much more looking at regional and local opportunities and building these as opportunities come along,"" he said.
($ = 0.620 British Pounds)
",19
"British engineering group Charter Plc made an agreed 378 million pound ($602.1 million) bid for the world's largest industrial ventilation and fan supplier Howden Group Plc on Friday, ending days of speculation.
Shares in Howden, which also supplied drilling and boring equipment for the Channel Tunnel, began to climb on Monday after news of a possible bid leaked into the press, forcing Charter to declare its hand privately to Howden's board.
Charter's offer values the Scottish company's shares at 128.5 pence each, which Charter said was 54 percent above Howden's closing price on March 14th, the last trading day before bid speculation seeped into the market, and 40 percent above Thursday's closing price of 91.5 pence.
Charter is paying 124.78 pounds in cash and offering three new Charter shares for every 115 Howden shares held. The company said it would issue around 7 1/2 million new shares as a result of the deal.
Charter chairman and chief executive Jeffrey Herbert, who has transformed the group from a mining-focused business to the world's leading welding company in the past three years, said Howden fitted his aim of having ""three strong manufacturing businesses that are market leaders and this will be the basis of Charter's future growth.""
The acquisition would lift Charter into a new league internationally, boosting its annual sales by nearly 60 percent to around 1.4 billion pounds. Shares in the company jumped eight percent, or 62 1/2 pence, to 847 1/2 as analysts welcomed the move, while Howden shares rose 35 pence to 128 pence.
Charter, which changed its name from Charter Consolidated in 1993, is now centred on the welding products operation Esab, which it bought in 1994 for 445 million pounds. Its second business is the Pandrol rail track equipment operation based in Britain and the U.S.
Herbert made clear that Howden's world-leading fan, pump and ventilation division, which makes fans up to 17 feet in diameter for industrial use including mines and tunnels, was Charter's prime target.
""The company has one gorgeous centre,"" said Herbert, ""which is the Air and Gas Handling business."" The division, which also makes cooling systems for aircraft and tanks, made operating profits of 26.6 million pounds in the year to April 1996 on sales of 328 million pounds, accounting for 72 percent of Howden's total operating profit and 69 percent of turnover.
Herbert said the other two divisions, which make drilling and boring equipment and packaging and handling equipment, would have to justify their value to shareholders and could be sold.
Charter believes Howden will enhance its earnings in the first full year of ownership. Herbert said his goal was to drive Howden's profit margins, which at 7.9 percent lag Charter's 10.5 percent, up to the level of its closest competitors, which are forty to fifty percent higher.
In its central ventilation operations, Howden's main global rivals are ABB Flakt of Sweden and Germany's Deutsche Babcock AG.
""Margins at Esab have improved two-and-a-half times since we acquired it,"" said Herbert. ""Charter today is about world market-leading businesses, quite simply because market leaders earn larger margins than market followers. Howden is an exception because as a world leader it earns smaller margins than its competitors."" ($ = 0.627 British Pounds)
",19
"The world's biggest prescription drugs company, Glaxo Wellcome Plc, announced an 18 percent leap in pre-tax profits Thursday but said life would be tougher after its best-selling drug loses its U.S. patent in July.
Pre-tax profits climbed to 2.964 billion pounds ($4.8 billion) from 2.505 billion ($4.04 billion), in the middle of analysts' expectations. Sales rose 9 percent to 8.341 billion pounds ($13.45 billion), and shareholders were rewarded with a 13 percent rise in the dividend to 34.0 pence.
Sales of Glaxo's gastric ulcer treatment Zantac fell 14 percent last year, but at 1.931 billion pounds ($3.1 billion) it continued to be the world's biggest-selling drug, a spot it has held since 1986. Zantac has single-handedly transformed Glaxo, which merged with rival Wellcome in 1995, into a huge international player.
Sales of its second-biggest seller, herpes treatment Zovirax, which has already lost most of its key patents, were steady at 812 million pounds ($1.3 billion).
Glaxo warned that the best it could hope for over the next two years would be to ""at least maintain"" its profits at the 1996 level.
""The tough period is mid-1997 to mid-1998 when Zantac will come under severe generic pressure in the U.S.,"" Deputy Chairman and Chief Executive Sir Richard Sykes said in a telephone interview.
But he added: ""If you take Zantac out we have a 6.4 billion pound ($10.3 billion) business growing at 14 percent. That underlying growth is a very clear indication of the strength of the group going forward.""
Sykes noted that sales of Zantac fell by 324 million pounds ($523 million) last year, while a portfolio of newer products launched since 1990 saw sales rise by 650 million pounds ($1.05 billion) to 2.0 billion pounds ($3.2 billion).
""Our responsibility is to grow those new products to maintain these two (sales) lines in balance as much as possible. It is a balancing act,"" he said.
The best performers included Glaxo Wellcome's rejuvenated HIV and AIDS treatments. Retrovir and Epivir are at the cornerstone of new cocktails of drugs that have shown startling success in reducing the levels of the virus in the blood to virtually undetectable levels, giving Glaxo Wellcome the lion's share of a rapidly expanding market.
""Today we have 57 percent of the AIDS market and I don't see why we won't continue to be a very major player,"" Sykes said.
Other big sellers included asthma drugs Serevent and Flixotide and migraine drug Imigran, whose U.S. sales leaped by 69 percent last year.
Despite persistent speculation that Glaxo Wellcome will get onto the acquisition trail again as soon as its debt levels allow, Sykes said there had been a clear dissipation of the pressures for mega-mergers. He said Glaxo Wellcome's future expansion was likely to be ""incremental.""
""The pressures of the early 1990s have changed somewhat in the big markets. The bigger companies get, the more difficult it is to buy them or merge, so the way forward will be much more looking at regional and local opportunities and building these as opportunities come along,"" he said.
",19
"Imperial Chemcial Industries Plc said on Thursday that it would ""look at every creative opportunity"" for reshaping its business, including flotations, asset swaps, sales and acquisitions.
In a telephone interview with Reuters following 1996 results and news of float plans for the Tioxide operations, group finance director Alan Spall said ""You can expect us to use every tool around to shift the portfolio.""
Spall told Reuters that ICI would be ""a very different company"" by the turn of the century.  
""We are determined to reduce the proportion of assets and income from the heavy industrial end,"" Spall said, while building up the group's strength in less cyclical areas like ""polyurethanes, acrylics, performance chemicals and paints"".
He said the ""whole of the industry"" is in talks on asset swaps and ""of course ICI is part of that"".
The finance director pointed to Wednesday's $30 million acquisition of a Puerto Rico paint company and last year's purchase of Bunge Paints in South America as the kind of move that could be expected. ""There is a whole series of potential acquistions,"" said Spall.  
The group's dermination to transform its operations was reinforced by the 1996 results, with sharp falls in price for industrial chemicals like tioxide, chlorine and polyester undermining progress at the lighter end, notably paints.
""Post demerger (the spin-off of Zeneca Group Plc in 1993) we have been growing our lighter end disproportionately and we have seen some cyclical price pressure on the industrial elements,"" he said.
But he added: ""What goes down also goes up, and what is important to look at is the underlying robustness of the porfolio improvement.""  
He predicted a ""sharp"" rise in Tioxide prices this year, and said that generally in industrial chemicals ""the fourth-quarter prices look like the bottom of what looks like a pause in the mid-1990s.""
Prices of both olefins and chlorofins were now improving and ""1997 chemical production and demand looks better...the balance will tighten.""
In Europe Spall said he detected two important trends, with ""volumes set to move upwards and destocking at an end in Germany.""  
Spall said that since demerger output per employee had been growing by eight percent per year, but he added ""we recognise we are not as good as the best in the industry"".
He said an efficiency drive to improve productivity and profit margins would be fully in place by the end of this year. The programme had added 165 million stg to pre-exepctional pre-tax profits of 603 million stg last year, the finance director added.
--London Newsroom +44 171 542 7717
",19
"Avalon Oil Plc said on Monday that it had decided to look to London for funding of its oil exploration joint venture with FAO Gazprom because British investors were ahead of the U.S. in investing in Russian projects.
""The London investment community is probably five years ahead of the U.S. investment community when it comes to Russia,"" Avalon Oil chairman John Wieczorek told Reuters in an interview.
""We couldn't see any Russian ventures which have been taken public in the States.""
Oklahoma-based Avalon said earlier on Monday that it intended to seek a listing on Britain's Alternative Investment Market (AIM) to raise funds for Stimul, a joint venture with a Gazprom subsidiary which will exploit oil reserves at Orenburg in southern Russia.
The U.S. company is believed to want to raise around 35 million pounds via a placing, which will finance its 49 percent stake in Stimul.
Avalon is following an increasingly well-worn path. Other companies such as Melrose, JKX Oil and Gas and Dana xxx have all become involved in projects to develop immense and largely untapped gas and oil reserves in the former Soviet Union, which some say could rival reserves in the Middle East.
Wieczorek said Gazprom, which accounts for nearly a quarter of the world's natural gas production, was keen to use Avalon's portfolio of new technology.
The two have been working together since 1993, and Stimul alrady produces 2,850 barrels of oil a day, which it hopes to booost to 18,500 barrels a day next year.
""Gazprom were attracted by access to western technology,""said Wieczorek. ""They have a tremendous history of gas production but not oil production.""
Avalon has already introduced different drawing fluids for the extraction of oil which do not damage the reservoirs, and is about to bring in its system of flow drilling, which limits damage during the drilling phase and allows production to start while drilling is going on. This will be the fist time the technique has been employed in Russia.
""You can produce more quickly and you are able to produce at a higher rate. It also reduces the cost of the well,"" said Wieczorek.
Without more sophisticated production methods the reserves at Orenburg, which Wieczorek said are similar in scale to the Nelson field in the North Sea, could not be exploited economicallly.
Under current plans Stimul will be able to exploit the site by drilling around 160 horizontal producing wells and 50 vertical wells over the next six years. The original Russian plans called for drilling more than 3000 wells.
Wieczorek said the Orenburg project would be ""a jumping-off point for other projects in Russia.""
He said the company had been looking at three other oil fields, one nearby and two in different regions of Russia. ""I feel very confident that we'll be able to add these to our future agenda,"" he said.
Wieczorek said Avalon was unlikely to have to seek further funding beyond the initial placing.
""I don't think we'll have to come back for more because this programme should be cashflow positive in 1999, so from that point of view it should be self-funding,"" he added.
",19
"Chrysler Corp. will report record earnings for 1996, based on record worldwide sales of 2.97 million vehicles, company chairman Robert Eaton said Tuesday.
""We're going to have a record year,"" Eaton said in an interview at Detroit's North American International Auto Show.
Chrysler's previous annual profit record came in 1994, when the company earned $3.713 billion. It earned $2.025 billion in 1995, when sales were held to 2.61 million units by the launch of its current line of minivans.
Eaton also said Chrysler in 1997 should be able to exceed its 1996 sales results because the company will be able to produce about 190,000 more trucks in 1997 than in 1996.
The increase will be come from added capacity for the new Dodge Durango sport utility vehicle in Newark, Del., as well as increased assembly line speeds for the Dodge Ram pickup truck in St. Louis, and increased production of Dodge Dakota pickup trucks in Warren, Mich.
Chrysler planned to unveil the Durango at the Detroit auto show later Tuesday.
Eaton said despite sluggish industrywide car sales and the increasing popularity and profitability of light trucks, the automaker has not cut back on investment in future car programmes.
He said, however, that Chrysler may shift its investment plans if trucks continued to gain market share.
""We're going to put the money where the market goes,"" he said, adding that new, more efficient truck engines should allow Chrysler to continue to increase truck capacity without violating federal fuel economy laws.
Eaton also said Chrysler has tentatively planned to add a third production shift to its Bramalea, Ontario, car assembly plant after it launches production of a new generation of LH family sedans later this year. The LH line includes the Dodge Intrepid, Chrysler Concorde and LHS and Eagle Vision, which also are expected to be introduced at the show.
Chrysler stock dropped 12.5 cents to $35.50 on the New York Stock Exchange in early afternoon trading.
",7
"Chrysler Corp., capping the strongest annual sales performance in its history, said Tuesday it earned $807 million during the fourth quarter of 1996, with special charges holding it back from its best full-year profit ever.
Detroit's No. 3 automaker reported full-year 1996 net income of $3.53 billion, or $4.77 per common share, compared with $2.025 billion, or $2.65 a share, for calendar-year 1995.
Last year's results fell short of Chrysler's 1994 record of $3.71 billion because of $347 million in special charges.
Chrysler said it finished 1996 with 2,450,826 U.S. retail vehicle sales, including fleet sales, which broke the 1988 calendar-year record of 2,208,057.
""One of the highlights of the year was the fact that according to independent data, Chrysler is the only auto manufacturer to beat industry average in both owner loyalty, or repurchase rate, and new customer conquest rate in 1996,"" Chrysler Chairman Robert J. Eaton said.
""That's the best way to grow the company and we did, increasing our combined U.S. and Canadian retail market share by 1.4 percentage points,"" he added.
The fourth quarter's results, equal to $1.12 a share, compared with profits of $1.04 billion, or $1.35 a share, in the 1995 quarter. Revenues climbed to $16.2 billion from $15.1 billion.
Chrysler's performance in the latest period included charges totalling $279 million related to the retirement of debt, the write-down of its investment in Pentastar Electronics, lump sum retiree pension costs and a voluntary early retirement programme.
On an operating basis, both the fourth quarter and full year were records for Chrysler.
Excluding the charges, Chrysler earned $1.09 billion in the quarter and $3.88 billion for the year, beating out its previous operating records of $1.04 billion in the fourth quarter of 1994 and $3.58 billion in the full 1994 year.
Chrysler attributed its strong performance to a 10.7 percent increase in worldwide factory vehicle sales, to 2,958,800 from 2,673,539 in 1995.
Based on strong sales of trucks, sport/utility vehicles and minivans, Chrysler's share of the U.S. and Canadian car and truck market climbed to 16.1 percent for the year from 14.7 percent in 1995.
Eaton said, however, that the company will not rest on its laurels.
""There is no end to the improvements we can achieve if we remain vigilant about controlling our costs and about continually improving our processes and our products,"" he said in a statement accompanying the results.
""That's the challenge we're all focused on and it's one I'm confident we'll meet.""
Chrysler said its employees will share the wealth, with about 79,000 U.S. hourly and salaried workers receiving an average profit-sharing payment of $7,900 in February.
That compares with $3,200 for the company's 1995 performance and $8,000 for the 1994 performance, which was received by about 75,200 employees.
Chrysler's stock rose 62.5 cents to $35.125 in very early trading on the New York Stock Exchange.
",7
"The scrutinized right engine of a Comair commuter aircraft was replaced on Jan. 4, five days before the plane plunged into a snowy Michigan field, killing 29 people, the airline said on Tuesday.
Meghan Glynn, a spokeswoman for Erlanger, Ky.-based Comair Holdings Inc, said the engine on the Embraer 120 Brasilia turboprop was replaced during routine maintenance operations. She said the company does not believe the engine change was a factor in the crash.
But the Pratt & Whitney PW118 engine has become a major focus of the federal crash probe, as cockpit controls indicated that pilots may have tried to shut down the engine and activate a fire extinguishing system.
A spokesman for the National Transportation Safety Board was not immediately available to comment on the significance of the engine replacement.
But NTSB investigators have said previously there was evidence that the right engine's propeller may have been over-speeding, or racing out of control, shortly before the crash. There was no evidence of an in-flight fire.
The 30-seat commuter plane nosedived to earth in a snowstorm on Jan. 9 in Raisinville Township, Mich., as it was making a 30-degree left-hand turn on its approach to Detroit Metropolitan Airport from Cincinnati. Comair flight 3272's 26 passengers and three crew members died instantly in the fiery impact.
According to flight data recorder information released late on Monday, trouble started 38 seconds before the crash, when the plane kept turning to the left, even though the autopilot tried to move it to the right.
The autopilot disengaged and a stall warning -- a mechanism that vibrates the plane's control stick when wings lose lift -- went off about 17 seconds before the crash.
Within the next five seconds, the plane's nose tipped from three degrees up to 50 degrees down, and the aircraft rolled violently. Cockpit voice recordings revealed that the crew was silent during the doomed plane's final oscillations.
Aviation experts said an over-speeding engine would pose serious control problems for such a turboprop aircraft, since one engine would be providing too much thrust, throwing the plane out of balance.
""If you had an engine over-speed situation, you'd go through an engine shutdown,"" said Richard Schaden, a pilot and air crash attorney based in Bloomfield Hills, Mich.
In addition, NTSB officials said another pilot in the vicinity reported icing conditions 20 minutes after the crash. Ice formation on wings or propellers can wreak havoc an aircraft's ability to maintain lift and control.
""It sounded like it hit them all at once,"" Beau Murphey, a former Comair pilot, told the Detroit News. ""If you're making a 30-degree left-hand turn and your right propeller over-speeds, man, you're in trouble.""
Schaden said he is representing families of three of the victims and eventually plans to file lawsuits on behalf of them. He said the suits may be filed in Broward County, Fla., because the U.S. headquarters of the plane's Brazilian-based maker, Embraer SA, is located in Fort Lauderdale.
Michigan ""is not a very good jurisdiction for victims these days,"" because of recent laws limiting non-economic damages to $500,000 in personal liability cases.
Meanwhile, recovery of wreckage at the crash site near Monroe, Mich., continued Tuesday, and more parts of the aircraft were moved to a building at the nearby county fairgrounds.
Monroe County Medical Examiner David Lieberman said all victim remains had been removed from the site and most had been identified. All died of massive injuries and had to be identified through fingerprints or dental records, he said.
",7
"Teasing the automotive world with a glimpse of possible product offerings for the turn of the century, Chrysler Corp on Sunday unveiled five concept cars that appear ready for production, including two new versions of its Jeep Wrangler sport/utility vehicle.
The vehicles, which also include a new Dodge roadster based on the Plymouth Prowler chassis, an affordable Neon-based small car with a roll-back top, and a 1940s-style ""dual-cowl"" convertible, are design studies for future vehicles that could be put into production within three years, said Thomas Gale, Chrysler's new product development chief.
""We've made no decision to take any of these to market,"" he said.
However Chrysler will be listening closely to consumer reaction to the vehicles on this year's auto show circuit. In the past, positive public reaction has prompted Chrysler to put several concept cars into volume production, including the Dodge Viper roadster, first shown in 1989. Chrylser's Plymouth Prowler retro-roadster, which goes on sale this year, also first began life as a concept car in 1993.
This year's crop of concept cars, unveiled at the start of Detroit's North American International Auto Show, include:
-- Jeep Wrangler Dakar, a four-door hard-top version of the Wrangler sport/utility vehicle. Decked out with a safari-style roof rack that holds a spare tire, a winch on the front end and spare fuel cans on the rear, the vehicle appears ready for an African wildlife filming expedition. Based on the existing Wrangler hardware, the vehicle also may be the easiest to produce.
""Personally, I think there's a huge opportunity with something like that car,"" Gale said.
--Jeep Icon, a design study for an all-new successor to the curent Wrangler. The Icon features a lighter, unitized body construction that would offer better fuel efficiency than the current model and an all new drive train, but it retains much of the Wrangler's classic styling cues.
-- Dodge Copperhead, a two-seat roadster reminiscient of classic sports cars of the late 1950s and early 1960s. The Copperhead uses the chassis from the Prowler and is designed to be a more affordable car that could compete with BMW's $30,000 Z3 roadster.
""Copperhead will fit comfortably into any sports car enthusiast's garage -- and budget,"" said Chrysler design chief John Herlitz
-- Plymouth Pronto, a plastic-bodied hatchback designed to be a roomy, affordable car with style. The vehicle, based on the Neon chassis, features a front end that evokes the retro look of the Prowler, a design theme that will make its way into more Plymouth products, Gale said. To cut costs Chrysler designed body panels with molded-in color and do not need to be painted.
-- Chrysler Phaeton, a high-style luxury convertible that recalls the automaker's grand touring cars of the 1940s and '50s. Taking cues from wood-hulled motor boats of the 1940s, the car has two cowls, with the back seat separated from the front. Powered by a V-12 engine and equipped with a retractible hard top, the Phaeton is the most ambitious the concept cars and is part of an effort to add cachet to the automaker's flagship Chrysler brand.
Gale said projects like the Phaeton allow designers to stretch their minds without risking much investment from shareholders.
""Other than the Phaeton, four out of the five look like they'll see production at some point,"" said Lehman Brothers auto analyst Joseph Phillippi, who attended the unveilings on Sunday.
He added that he believes Chrysler will remain ahead of its competition in product innovation, which allowed it to gain market share and achieve record sales of 2.45 million vehicles in 1996. ""The stuff that these guys do is innovative and really is exciting,"" Phillippi said.
The concept cars were the first of scores of production vehicles and design studies to be introduced by major automakers at the show over the next three days. Sport/utility vehicles, minivans and sports cars are expected to dominate the show.
",7
"Riding a crest of popular vehicles, Chrysler Corp. Tuesday reported better-than-expected fourth quarter earnings, but special charges held the automaker back from its best-ever full-year profit.
The U.S. No. 3 automaker earned $807 million, or $1.12 per share, during the fourth quarter after $279 million in charges. Excluding those charges, Chryler's operating earnings were a record $1.09 billion. In the year-ago quarter, Chrysler posted net income of $1.04 billion, or $1.33 a share.
Chrysler stock jumped $1.625 to $36.125 on the New York Stock Exchange in afternoon trading.
""Our 1996 results were outstanding in virtually every respect thanks to what is arguably the strongest product lineup in the industry and to the dedication of our people who have worked so hard to get us where we are today,"" Chrysler Chairman Robert Eaton said in a statement.
Chrysler reported full-year 1996 net income of $3.53 billion, or $4.74 per share.
The automaker's 1996 profit fell short of its 1994 record of $3.71 billion because of $347 million in special charges taken during 1996. On a pretax basis, Chrysler earned $6.09 billion for all of 1996, a new calendar-year record that topped 1995's $3.45 billion.
The company, which had its most recent brush with bankruptcy in 1991, rewarded its U.S. employees handsomely in 1996 with average profit-sharing checks of $7,900 -- more than double the $3,200 they received in 1995.
Based on pretax earnings, Chrysler said the profit sharing was below the $8,000 it paid out for 1994 because more employees will share in the profits. About 79,000 hourly and salaried workers in the United States will receive their payments in February. Two years ago, Chrysler issued profit sharing checks to 75,200 workers in the United States.
During the fourth quarter, Chrysler's profit was reduced by $279 million in charges that covered the early retirement of debt; higher United Auto Workers pension costs; a voluntary early retirement program; and the write-down of Pentastar Electronics, a subsidiary sold to a Huntsville, Ala., investor group for $17 million.
Excluding the charges, Chrysler earned $1.09 billion, or $1.51 a share, in the quarter and $3.88 billion, or $5.21, for the year, beating two-year-old records for operating results.
Wall Street cheered the results, which beat analysts' fourth-quarter consensus operating estimate of $1.43 a share.
John Casesa, an analyst at Schroder Wertheim, said the most impressive news was an increase in the quarter's gross profit margin to 22.3 percent from 20.8 percent -- thanks to high-profit vehicles such as the Ram pickup trucks and minivans.
""The highlight was the company's gross margin was very good, and that reflects a continued rich product mix,"" he said.
Eaton told reporters in a conference call that Chrysler's financial position was so strong it might not need to dip into its approximately $7 billion cash reserve to fund operations and stay profitable during the next industry downturn.
""That would allow us to use a significant portion of our cash reserves for growth opportunities that might just occur during such a downturn,"" Eaton said.
Casesa said it was the first time Eaton has made such a prediction. ""It would be the first time in decades any automaker would have been able to do that,"" Casesa said.
He added that growth opportunities could include purchasing vehicle assembly capacity cheaply from a competitor that needed to unload a costly plant during a recession.
Chrysler attributed its strong performance to a 10.7 percent increase in worldwide factory vehicle sales, to 2,958,800 from 2,673,539 in 1995.
Based on strong sales of trucks, sport utility vehicles and minivans, Chrysler's share of the U.S. and Canadian car and truck market climbed to 16.1 percent for the year from 14.7 percent in 1995.
Eaton said in a statement the company would not rest on its laurels.
""There is no end to the improvements we can achieve if we remain vigilant about controlling our costs and about continually improving our processes and our products,"" Eaton said. ""That's the challenge we're all focused on and its one I'm confident we'll meet.""
",7
"Chrysler Corp., formalising plans to keep President Robert Lutz on its payroll past the age of 65 and develop a new generation of managers, said its board of directors named Lutz vice chairman on Thursday.
The board gave Lutz's title of president to Chairman and Chief Executive Officer Robert Eaton, who will take on more day-to-day operating duties. The chief operating officer post that Lutz also held was left vacant.
Lutz, a former Marine fighter pilot who is credited with pumping new life into Chrysler's product development process and making it the most efficient in the industry, is expected to stay on for two more years, a company spokesman said.
Chrysler's board also on Thursday took steps to boost shareholder value by increasing its share buyback programme to $2 billion from $1 billion for 1997, and hiking the annual dividend to $1.60 a share from $1.40.
The new quarterly dividend of 40 cents a share is payable Jan. 15 to stockholders of record as of Dec. 15.
Chrysler said it has now raised its dividend seven times in the past three years and has increased the payout by 433 percent since September 1993. Thursday's actions come about 10 months after the company settled a bitter fight with Las Vegas billionaire Kirk Kerkorian.
Kerkorian and his Tracinda Corp., the automaker's largest single shareholder, had mounted a hostile takeover attempt of Chrysler last year, complaining the company was not doing enough to reward shareholders. A Tracinda representative could not be reached for comment Thursday.
In its personnel moves, Chrysler switched international and product development duties among two top executives considered to be in line to succeed Eaton some day, Thomas Gale and Francois Castaing.
Gale will trade his duties as head of international operations for Castaing's duties as head of engineering and product development.
Gale, who becomes executive vice president - product development, will retain his control over product design, while Castaing, who becomes executive vice president - international, will retain his control of powertrain operations.
Four other executive vice presidents did not receive job changes. But Chrysler spoksman Arthur Liebler said Gale and Castaing do not have an edge over them to be chosen as Chrysler's next chairman.
Lutz, who turns 65 in February, will report to Eaton and will focus primarily on the automaker's product development activities, and will serve as a ""coach, mentor and advisor,"" the company said in a statement.
""As vice chairman, Bob will focus his considerable talents on the product development process ... specifically on making sure we retain our product edge well into the 21st Century,"" Eaton said in a statement.
""He will continue as a member of the Office of the Chairman and as a director of the Company and will continue to be involved in all major decisions,"" Eaton said.
Industry analysts said the moves were aimed at allowing Chrysler to continue to take advantage of Lutz' skills while not eliminating any prospective future chairmen.
""They've really kept out of a sort of hysterical concern about where people fit in the organisation -- and that might not be too bad,"" said David Cole, director of the University of Michigan's Centre for the Study of Automotive Transporation.
Cole theorised Chrysler may never hand out the president title to a rising executive, thus allowing its executive vice presidents to concentrate on their current jobs.
""What they're really doing is managing the transition from the old Chrysler to the new one,"" he said.
",7
"In addition to the $9.5 billion in value that General Motors Corp. and its shareholders will see from selling Hughes Aircraft Co., GM said Friday it will gain about $100 million in annual savings from no longer having to write off Hughes' goodwill, or intangible assets.
Each quarter, GM writes off about $25 million worth of good will associated with its 1985 purchase of the Hughes defence assets, said GM spokesman Mark Tanner. He said the write-offs will end after the complicated sale to Raytheon Co. closes, an event expected by midyear.
""Project Triple Play,"" as the massive deal was known to GM executives, includes the spin-off and merger of the Hughes defence business with Raytheon, the shift of Hughes' Delco Electronics business into GM's automotive operations, and the infusion of capital into Hughes' remaining telecommunications and space satellite business.
Most of the $4.4 billion in cash that GM will receive in the deal will be injected into the telcommunications business, which will continue to use the Hughes Electronics Corp. name.
GM Chief Financial Officer J. Michael Losh said the biggest single use of that cash will be to complete Hughes Electronics' $3 billion acquisition of satellite services company PanAmSat Corp.
GM also will use the cash to fund the growth of its DirecTV satellite broadcasting business and its Hughes Network Systems business.
The automaker has no plans to spin off the telecommunications business, which is growing quickly.
""We think it's a very exciting business to be in,"" GM Vice Chairman Harry Pearce said Thursday. ""We think we're early in terms of the potential of the business.""
Losh said also said holders of GM's Class H common stock will receive additional shares in the post-merger Raytheon to compensate them for GM's plan to move Delco Electronics out of Hughes and into into its Delphi Automotive Systems subsidiary.
Currently, Class H shareholders have a 25 percent interest in Delco's earnings, while GM and its automotive shareholders control the rest.
But Losh said Class H shareholders will get more than 25 percent of the new Raytheon shares allocated to all GM stockholders. GM's automotive shareholders will get less than 75 percent.
Overall, GM stockholders will control 30 percent of Raytheon after the Hughes merger.
GM Class H stock, currently tied to Hughes' Delco, defence and telecommunications business, closed up 37.5 cents Friday at $63 on the New York Stock Exchange.
Raytheon closed up 25 cents at $48.75, while GM's automotive stock lost 50 cents to $60.125.
",7
"General Motors Corp.'s move to deflate Wall Street expectations about its fourth-quarter earnings will not likely be repeated by rivals Ford Motor Co. and Chrysler Corp. analysts said Thursday.
GM told analysts Wednesday that its fourth-quarter North American incentive and other marketing costs were higher than earlier estimates, causing analysts to slash their estimates by hundreds of millions of dollars.
The automaker also said its product mix in Europe will be weaker than expected, with the low-margin Corsa subcompact making up a bigger portion of sales, and new product launch costs remain high.
As a result, many analysts slashed their estimates by 45 cents to 50 cents a share, helping to drive down GM stock by $1.375 over the past two days, to close at $54.50 on the New York Stock Exchange on Thursday.
Burnham Securities analyst David Healy now estimates that GM will earn $435 million, or 52 cents a share, in the fourth quarter, excluding extraordinary items.
Among other items, GM plans to take a charge of $170 million, or 22 cents a share, to make lump-sum payments to United Auto Workers members as part of the company's new contract with the union.
GM also previously disclosed that strikes in the United States and Canada during the quarter reduced its fourth-quarter profit by about $700 million. In the fourth quarter of 1995, GM earned $1.87 billion, or $1.98 a share.
Analyst Michael Ward of brokerage PaineWebber Inc. said GM appears to be viewing the fourth quarter as a ""cleanup quarter"" and may accelerate some costs to help improve next year's results.
But analysts did not expect Ford and Chrysler to reveal similar surprises with marketing costs.
""Both Ford and Chrysler are more heavily weighted toward trucks,"" said brokerage A.G. Edwards & Sons analyst Michael Braig. ""I don't know that I have to get any more sceptical than I have already been with them.""
Ford could earn as much as $1.25 billion, or $1.03 a share, in the fourth quarter before extraordinary items, according to a consensus estimate by First Call Corp., which tracks analyst forecasts. That total excludes an expected charge of $400 million, or 34 cents a share, to cover costs of an early retirement programme for salaried workers.
In the fourth quarter of 1995, new product launch costs held Ford's profit to $660 million, or 48 cents a share.
Although Ford continues to struggle with problems in Europe and Brazil, it is reaping benefits in North America from its new F-150 pickup truck, the new Ford Expedition sport utility vehicle and continued strong sales of the Explorer sport utility.
Ford said Thursday it sold 2 million trucks in a single year for the first time ever, including 800,000 F-Series trucks.
Lehman Brothers brokerage analyst Joseph Phillippi said Ford may announce another onetime charge for restructuring its European operations in the fourth quarter. Ford officials have declined to discuss plans for specific cost-cutting actions in Europe, but expect such actions to pay off in 1997.
Chrysler, which is enjoying a record sales year, is expected to cruise to a fourth-quarter profit of more than $1 billion, or about $1.40 a share, according to First Call. Driving the Chrysler earnings are strong sales of minivans, pickup trucks, and sport utility vehicles.
Chrysler chief economist Van Bussmann said Thursday that the automaker's market share, now at about 16 percent vs. 12 percent five years ago, should grow further in 1997. The automaker is introducing a new generation of large sedans and a new Dodge Durango sport utility vehicle based on its new Dakota pickup truck.
",7
"The Canadian Auto Workers union's choice of Chrysler Corp as its strike target on Wednesday sets up a battle between General Motors Corp and Ford Motor Co to take the lead in bargaining with the larger United Auto Workers.
Currently, Ford appears to gaining an edge, analysts say.
Detroit's No. 2 automaker, viewed as least likely to be named the UAW's target a few weeks ago, has recenly made offers that show a willingness to work with the union on the thorny issue of outsourcing, analysts say.  
""Ford is working hard to give the UAW a framework agreement,"" said Sean McAlinden, a labor analyst with the University of Michigan's Office for the Study of Automotive Transportation.
Now that the Canadian union has chosen Chrysler, it appears highly unlikely that UAW President Stephen Yokich will choose Chrysler as the U.S. target. Traditionally, the two unions have chosen different targets and threaten each with a national strike to push negotiations along.
Pacts covering about 400,000 Big Three hourly workers in the United States and 53,000 in Canada expire on September 14.  
McAlinden said Ford has offered the UAW some opportunities to move some parts manufacturing now done by outside suppliers back into Ford plants. That's the opposite of the task that GM is trying accomplish -- shifting more of its parts work to outside suppliers to bring down its burdensome cost structure.
In addition, Ford earlier this year encouraged one of its suppliers, Johnson Controls Inc to allow some of its plants to be organized by the UAW -- a move that could help the union reverse declining membership rolls.  
If Ford is chosen to negotiate the pattern agreement for the Big Three automakers in the United States, it could craft an agreement that would help meet its own needs, but that would hold back GM's cost-cutting progress.
""Ford may try to throw them a chicken bone to choke on,"" McAlinden said.
Yokich last week opted to delay the union's choice of a target and analysts said he could let GM and Ford compete for a while longer to be named the target. In 1984, the union named the two automakers as ""dual targets"" and later negotiated the patern agreement with GM.  
""A dual target is certainly possible, but it's hard to focus on two places at once,"" said Harley Shaiken, a professor of labor relations at the University of California-Berkeley. ""The UAW may just let it roll a bit longer and select the best offer sometime later.""
Shaiken believes the Canadian Auto Workers' choice was probably dictated by the UAW's decision to eliminate Chrysler from consideration. CAW President Buzz Hargrove's decision to focus on Chrysler ""was a reluctant choice"" since he had spent much of the summer talking tough to GM.
Some UAW leaders at individual Chrysler plants said they supported Yokich's apparent decision to focus on Ford or GM.
""I have full confidence that the UAW leadership is making the right decision,"" said Gary Kimbel, vice president of UAW Local 140 at Chrysler's Warren, Mich., truck plant.
",7
"In addition to the $9.5 billion in value that General Motors Corp and its shareholders will gain from the sale of Hughes Aircraft Co, GM said Friday it will gain about $100 million in annual savings from no longer having to write off Hughes' goodwill.
Each quarter, GM writes off about $25 million worth of goodwill associated with its 1985 purchase of the Hughes defense assets, said GM spokesman Mark Tanner. He said the write-offs will end after the complicated sale to Raytheon Co closes, an event expected by mid-year.  
In an interview Friday, GM Chief Financial Officer J. Michael Losh also said GM's Class H shareholders will receive additional shares in the post-merger Raytheon to compensate them for GM's plan to move Delco Electronics out of Hughes and into into its Delphi Automotive Systems subsidiary.
The amount of Raytheon shares that will be distributed to holders of Class H shares versus the holders of GM $1-2/3 par-value, or autmotive, stock, will be determined when GM assigns a value to Delco, which makes automotive electronics.
""That's a valuation that's being done by the investment bankers right now,"" Losh said.  
Currently, Class H shareholders have a 25 percent interest in Delco's earnings, while GM and its automotive shareholders control the rest. But Losh said Class H shareholders will get more than 25 percent of the new Raytheon shares allocated to all GM stockholders. GM's automotive shareholders will get less than 75 percent.
Overall, GM stockholders will control 30 percent of Raytheon after the Hughes merger.
Delco will be valued based on its current performance as well as its future performance potential as a part of Delphi.  
For the first nine months of 1996, Delco's operating profit fell to $562 million from $655 million in the same period of 1995. Revenues for the 1996 period fell to $4.1 billion from $4.15 billion in 1995.
""If your're an H shareholder, in effect what you get is a new defense stock that's the equivalent of your 25 percent holdings in (Hughes) defense today, plus compensation for the 25 percent holding in Delco Electronics that's going back to GM and an exchange of today's H stock for a new H stock that's a telecommunications and space stock.""  
Kenneth Blaschke, an analyst with Dean Witter Reynolds Inc, said he did not expect the valuation of Delco to significantly alter the distribution ratio of new Raytheon shares beyond the 75 percent-25 percent mix.
GM Class H stock, currently tied to Hughes' Delco, defense and telecommunications business, closed up 25 cents Friday at $63 on the New York Stock Exchange.
Raytheon closed up 12 cents at $48.625, while GM's automotive stock lost 37.5 cents to $60.  
Losh said ""Project Triple Play,"" as the massive transaction was known to GM executives, will give Class H shareholders a stock that tracks a more focused, fast growing telecommunications company.
The three steps of the deal as they saw it included the the spinoff and merger of Hughes defense assets, pulling Delco back into GM's automotive operations and infusing capital into Hughes remaining telecommunications and space operations.
Most of the $4.4 billion in cash that GM will receive in the deal will be injected into the telcom business, which will continue to use the Hughes Electronics Corp name.  
The biggest single use of that cash will be to complete Hughes Electronics' $3 billion acquisition of satellite services company PanAmSat Corp.
GM also will use the cash to fund the growth of its DirecTV satellite broadcasting business and its Hughes Network Systems business. The automaker said it has no plans to spin off the telecommunications business, which is growing rapidly.
""We think it's a very exciting business to be in,"" GM Vice Chairman Harry Pearce said on Thursday. ""We think we're early in terms of the potential of the business.""
",7
"General Motors Corp is expected to seek bids for its Hughes Electronics Corp defense businesses in the first of a series of transactions aimed at divesting its remaining non-automotive assets, analysts said Thursday.
The possible sale of Hughes' defense operations for as much as $8 billion is the latest speculative scenario to emerge about GM's plans for Hughes Electronics.  
""I think the GM board and Hughes Electronics management are very interested in divesting the defense business, merging the Delco Electronics unit with the Delphi components business and spinning off the communications business into a separate company,"" CS First Boston defense analyst Peter Aseritis said.
""My sense is that they want to find a merger partner for the defense business first,"" he added.
Analysts said there are several candidates interested in Hughes' defense units, including McDonnell Douglas Corp, Raytheon Co and Northrop Grumman Corp.  
GM declined to comment Thursday on a possible sale of the defense business, first reported by the Wall Street Journal.
""I have to classify it all in the realm of speculation, for which we have no comment,"" said GM spokeswoman Toni Simmonetti in New York.
However, GM disclosed in recent U.S. Securities and Exchange Commission filings that Hughes was open to divestitures, saying the unit wanted to ""strengthen its leadership position through acquisitions, consolidations, realignments and divestitures,"" among other actions.  
""Clearly I would personally be surprised if there was an outright sale,"" said BT Securities analyst Wolfgang Demisch.
A sale of the defense business would clear the way for GM to fold its Delco Electronics unit, which makes vehicle audio systems and other automotive electronics components, back into its Delphi Automotive Systems auto parts unit.
That would leave Hughes' lucrative telecommunications and space segment, which has been soaring on the growth of its DirecTV satellite broadcasting service. Those operations may be spun off into a separate company, analysts said.  
Hughes' missile systems, radar, electronic warfare, thermal imaging, information systems and other businesses posted operating profit of $688 million on revenues of $5.95 billion in 1995. The businesses are regarded as attractive assets in a consolidating defense industry.
McDonnell Douglas, which many analysts believe is ready to make an acquisition, declined to confirm any specific bidding, but said it was interested in Hughes.
McDonnell President Harry Stonecipher ""has gone on record saying that he is interested in making an acquisition. He finds Hughes an interesting choice,"" a spokeswoman said.
",7
"Chrysler Corp., moving to shed its last defense subsidiary, said Monday it agreed to sell Pentastar Electronics Inc. to a management-led investment group for less than $50 million.
Pentastar Electronics, based in Huntsville, Ala., produces electronic test equipment for tanks and other military systems. A remnant of Chrysler's former position as the nation's major tank builder, Pentastar has about 350 employees and annual sales in the $50-million range.
Terms of the sale to PEI Acquisition Corp. were not announced, but the price is less than Pentastar's annual revenues, said Tom Noojin, Chairman of Huntsville-based Hickory Venture Capital Corp., the major financial partner in the deal.
Chrysler said it hoped to close the sale before the end of 1996, but noted that the certain conditions may push the closing into 1997. A company spokeswoman declined to say whether the automaker would book a gain on the deal.
The new company, which will operate as PEI Electronics Inc., also negotiated significant changes to the new United Auto Workers contract at the plant. Noojin said the deal preserved UAW wages and benefits for current workers, but allowed PEI to hire new workers at lower wages that are more typical of the defense industry.
The company also won permission to change work rules and job classifications inside the plant to improve efficiency. Existing PEI workers, however, will have opportunities to transfer back to Chrysler's Acustar Electronics unit in Huntsville, which makes automotive electronics.
""This could not have gone through without the cooperation of the United Auto Workers,"" Noojin said. ""As a stand-alone facility, the union would have made this company non-competitive.""
UAW officials could not be immediately reached for comment on the pact.
PEI expects to hire about 200 new workers over the next 12 months as it executes expansion plans that were curtailed over the past two years by Chrysler's efforts to sell the subsidiary, Noojin said. He added that Hickory, an affiliate of Memphis-based First Tennessee National Corp., will remain a passive investor.
Joseph Ritch, another local investor in the deal, said the company hoped to expand its business by developing commercial applications for its diagnostic test equipment, which plugs into tanks and other equipment to help technicians make repairs.
The transaction will complete Chrysler's plans to divest all of its aerospace and defense businesses.
The automaker in June sold Electrospace Systems Inc., a defense electronics unit, and Chrysler Technologies Airborne Systems Inc. to Raytheon Co.'s E-Systems Inc. unit for $475 million. Chrysler sold its tank business in 1981 to General Dynamics Corp.
Chrysler also has said it wants to divest other non-core businesses, such as its Dollar and Thrifty rental car chains, as part of its plans to focus on its core automotive business.
Separately, Chrysler said it had broken an eight-year-old record for U.S. calendar year sales with more than a month to go in the year. Chrysler said its 1996 sales through November 22 reached 2,214,289 cars and trucks, toppling the company's 1988 record of 2,208,057 vehicles.
Chrysler shares rose 37.5 cents Monday on the New York Stock Exchange to close at $34.875.
",7
"Chrysler Corp. Tuesday announced $380 million in new investments for South America, including assembly plants for pickup trucks and diesel engines in Brazil and the expansion of a Jeep plant now being built in Argentina.
Chrysler, which is cautiously trying to rebuild its international presence, said the projects in Brazil were worth about $315 million, and the expansion in Argentina was worth about $65 million.
Roughly one third of the total investment, or about $126.6 million, will come from Chrysler's suppliers, who will play a major role in the automaker's low-risk global growth strategy, Chrysler Chairman Robert Eaton said.
""We don't intend to make risky investments just to be a major player in emerging markets,"" added Thomas Gale, Chrysler's executive vice president of international operations. ""We're quite content to grow at a steady pace in regions where we see solid opportunities.""
Eaton said the investments will boost Chrysler's sales in the Mercosur free-trade zone, which groups Argentina, Brazil, Paraguay and Uruguay.
But the company's limited production capacity will allow it only to grab a small portion of the Mercosur market away from rivals General Motors Corp., Ford Motor Co. and Volkswagen AG, he said.
""We are targeting very specific market segments,"" he said. ""We don't have any interest or desire to offer a vehicle for every possible application.""
The new Brazilian plant, which will be Chrysler's third limited-production facility in South America, will assemble the automaker's all-new Dakota compact pickup truck for sale in Argentina, Brazil, Paraguay and Uruguay, the countries in the Mercosur free-trade zone.
In Argentina, Chrysler said it will add production of about 6,000 Jeep Cherokees a year at a plant now under construction in the Cordoba province. The plant is already scheduled to build about 14,000 Jeep Grand Cherokees per year starting next April, and Cherokee output will begin in 1998.
A site for the Brazilian plant will be selected by year-end and vehicles will roll off the assembly line starting in mid-1998, Chrysler said. Production, however, will be modest, with 12,000 trucks in the first year and an ultimate capacity of 40,000 units annually. Employment will start at 400 people.
The trucks at first will be largely assembled from ""complete knock-down"" kits shipped from the United States, but the automaker intends to meet the Mercosur trade bloc's 60 percent local content requirement after three years.
Chrysler has not decided whether to market the Dakota under the Dodge brand name or under one of its other brands. The automaker now uses the only Jeep and Chrysler brand names outside the United States, Canada and Mexico.
The $315 million Brazil investment also includes a new diesel engine plant to be built by Detroit Diesel Corp..
The $10 million facility will supply the company's Italian-designed VM Motori four-cylinder turbocharged diesel engines for use in the Brazilian Dakota as well as in Jeep models built in Argentina. Chrysler installs about 40,000 of the engines annually into minivans and Jeep Grand Cherokees sold in Europe.
Others suppliers supporting the Chrysler by opening plants in Latin America include Dana Corp., Johnson Controls Inc., Lear Corp., Lear Corp. United Technologies Corp. and PPG Industries Inc., Chrysler executives said.
Eaton said total annual vehicle sales in the four-country Mercosur region will increase from about 2 million units currently to about 2.5 million by the end of the decade.
""We think this is a major growth area,"" Eaton said. ""It's politically and economically a stable region, we think with particularly rising consumer buying power.""
Including a small plant in Venezuela that assembles Cherokees and Neon small cars from kits, the investments announced Tuesday bring to $735 million the total financial commitments Chrysler and its suppliers have made in South America, the company said.
Chrysler stock rose 25 cents to close at $28.875 Tuesday on the New York Stock Exchange.
",7
"General Motors Corp.'s board of directors Monday approved a $2.5 billion stock buyback programme and a 25 percent dividend hike, but the moves apparently were not enough to satisfy Wall Street's inflated expectations.
GM shares were off $1.875 at $60.625 in early afternoon trading on the New York Stock Exchange.
""Failure to generate a positive surprise is punished without mercy by the stock market,"" said Burnham Securities analyst David Healy, who noted that GM's moves were widely anticipated.
Some analysts had predicted GM would boost the payout by up to 50 percent and commit to buying back up to $5 billion worth of stock, which pushed GM shares up last week.
The auto giant said the stock repurchases would take place over the next 12 months and at current prices would reduce the number of its automotive shares by slightly more than 5 percent.
GM raised its quarterly dividend on the automotive shares to 50 cents a share from 40 cents previously. It was the third increase since May 1995, but left GM's payout well short of its peak of 75 cents a share in 1989 and 1990.
The automaker does not plan to release its year-end 1996 earnings results until Tuesday, but it said Monday that it ended 1996 with a whopping cash balance of $17 billion, up from $10.2 billion at the end of 1995.
Many analysts had estimated GM's cash pile at $15 billion.
Auto analyst Scott Merlis, president of Merlis Automotive International, said that showed GM had the resources to buy back shares for a long time to come.
""I would see this repurchase as the tip of the iceberg and the first of a sustainable repurchase programme that can boost earnings per share by 5 percent a year,"" Merlis said.
GM Chairman Jack Smith said in a statement that the automaker will consider additional stock buybacks in the future and added that GM's board was committed to enhancing shareholder value.
He also noted that GM's new dividend rate would be sustainable through the ups and downs of the business cycle.
""We intend to pursue the repurchase programme vigorously,"" Smith added. ""The decision to announce a $2.5 billion programme at this time is based on our belief that we can execute a programme of this size quickly and with confidence.""
GM last issued common stock in 1992, offering 50 million shares to raise about $2.1 billion to help carry the automaker through the worst financial crisis in its history. GM has bought back about $800 million in stock over the past two years, but has reissued shares to support employee benefit and executive compensation programmes.
GM's board also raised the dividend on its Class H shares, which are tied to the performance of its Hughes Electronics Corp. subsidiary, to 25 cents a share from 24 cents.
The new dividends on both the Class H and automotive stocks are payable March 10 to shareholders of record as of Feb. 6.
",7
"General Motors Corp. workers overwhelmingly ratified a new labour contract, the United Auto Workers union said Monday, capping a contentious bargaining season for the Big Three U.S. automakers.
The UAW said 85 percent of the hourly and skilled workers who voted approved the three-year pact, marking the largest approval margin in 20 years.
The pact marks the end of the union's national bargaining for more than 386,000 hourly workers at GM, Ford Motor Co. and Chrysler Corp.. While the Ford and Chrysler talks hit minor snags, negotiations at GM ignited a national strike by the Canadian Auto Workers in October and local UAW strikes at two plants that stretched into November.
GM said last week the walkouts will reduce its fourth quarter profits by some $700 million, and other costs associated with the UAW pact will cost another $170 million.
GM's UAW contract follows the pattern set by Ford and Chrysler on most issues, including a guarantee that GM will maintain employment at 95 percent of its current UAW hourly work force of 215,000 people.
All three pacts offer workers about $13,900 over the life of the agreement, including $2,000 lump-sum payments in the first year and 3 percent base wage increases in the second and third years.
But the GM pact also includes some tougher restrictions aimed at preventing the shifting of parts work to outside suppliers.
In return, the world's largest automaker gained the ability to drop below the 95 percent level when it makes productivity improvements -- a big factor given the many new car and truck models GM will introduce in the next few years.
GM also gained flexibility to transfer workers more freely between plants and retained its ability to sell some unprofitable factories. The company will proceed with plans to sell a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., GM spokesman Charles Licari said.
""We have the ability to execute our business plan,"" Licari said. ""We have the ability to reduce employment through productivity gains and attrition.""
He declined to say how many jobs GM hopes to eliminate over the life of the agreement. Analysts estimate that if GM is allowed to shrink by its normal retirement rate of about 5 percent a year, it could cut 30,000 jobs.
""We believe that it is a fair and equitable agreement that provides additional job security as well as economic and benefit enhancements for our employees while giving GM the flexibility that it needs to be more competitive in the future,"" Licari said.
The 85 percent approval margin for the GM contract was higher than any ratification vote since 1976, when 86.9 percent of GM's production workers and 69 percent of a smaller group of skilled workers approved the pact.
Lehman Brothers analyst Joseph Phillippi said the 1996 contract should allow GM to become much more competitive than it could under the previous agreement.
""I think GM won this time around, as opposed to 1993. The key here is they have gained the ability to ride the attrition curve,"" he said.
But GM still faces a major hurdle in negotiating plant-level labour agreements at the vast majority of its 123 UAW locals. UAW officials have said GM could face more local strikes, and such agreements could make it more difficult to reduce employment at each individual plant.
Ford and Chrysler achieved labour peace in their agreements, but they also are likely to have some flexibility to exit certain unprofitable businesses, Phillippi said.
",7
"Using cost cuts to offset flat same-store sales, discount retail giant Kmart Corp. Wednesday reported a $9 million third-quarter profit, compared with a year-ago loss of $69 million.
The results, equal to 2 cents a share, slightly exceeded Wall Street analysts' consensus expectation that the Troy, Mich.-based retailer would break even during the August-October period.
Nevertheless, Kmart stock closed down 62.5 cents at $10.50 on the New York Stock Exchange after Chairman Floyd Hall dismissed rumors that Kmart was the target of a possible takeover by leveraged buyout specialists Kohlberg Kravis Roberts & Co.
The rumors drove Kmart's stock up $1.625 on Tuesday.
Speaking to reporters at the opening of Kmart's second Manhattan store, Hall said he has not heard from KKR.
""As far as we know, they are all rumors,"" he said.
In a statement accompanying the third-quarter results, Hall said Kmart is ""beginning to see meaningful progress toward a recovery.""
""Our biggest challenge of the year lies just ahead in the fourth quarter, and we remain cautiously optimistic about our near-term outlook,"" he added.
But sales growth has been a tough challenge since Hall was hired to rebuild Kmart in June 1995.
Kmart's total revenues for the quarter fell 1.6 percent from last year to $7.85 billion. Company-wide same-store sales rose 0.1 percent from a year ago and same-store sales for U.S. Kmart stores increased 0.8 percent.
Hall said revenues did not meet the company's growth expectations for the period, but savings from store closings, contracting out of certain functions and other costs cuts have resulted in a $370 million reduction in Kmart's year-to-date selling, general and administrative expenses.
But Kmart's gross margin rate for the third quarter increased to 22.6 percent of sales from 21.2 percent last year, reflecting fewer markdowns to clear aged inventory and a lower level of overall promotional activity, Kmart said.
Analysts said the slow sales growth suggests that Kmart is still losing market share to archrivals Wal-Mart Stores Inc. and Target, a unit of Dayton Hudson Corp. But they were pleased with Kmart's 8 percent reduction in selling, general and administrative expenses for the period.
""If you compare it with last year, the company is making considerable progress. The part of the equation that remains is to get the sales up,"" said Brown Brothers Harriman analyst Joseph Ronning.
Kmart executives told analysts in a conference call that they expect better sales results in the near future from their apparel offerings -- particularly children's clothing -- and the ""pantry concept"" stores, which offer several aisles of attractively priced consumable items such as soft drinks and snacks just inside the front entrance.
Kmart now has about 180 pantry concept stores in the United States and will change 450 stores to the new format annually for the next couple of years.
Hall also told reporters that Kmart is aiming for a 3.5 percent to 5 percent increase in same-store sales for the all-important holiday selling period. Kmart could achieve a 6-7 percent increase, Hall said. But he cautioned that he didn't want to sacrifice profit margins to achieve that figure.
Still, he said analysts' estimates that Kmart will earn a profit of $165.5 million for the fourth quarter ending in January 1997 were ""reasonable.""
Kmart, the second largest retailer in the United States, operates 2,143 Kmart and 168 Builders Square retail outlets, and operates 129 stores internationally.
",7
"For the second time in a row, the United Auto Workers union has chosen Ford Motor Co. to lead the union's labor contract negotiations with the Big Three U.S. automakers, officials said late on Tuesday.
UAW vice president Ernest Lofton said union leaders notified Ford executives of the decision Tuesday, but added that the union was not viewing the company as a traditional ""strike target"" in the talks.
""They are the lead company in regards to resolving our 1996 negotiations,"" Lofton said Tuesday night in a brief interview on WDIV-TV.
The selection will allow the No. 2 U.S. automaker to negotiate an agreement that will serve as a pattern for rivals General Motors Corp and Chrysler Corp to follow.
Contracts covering nearly 400,000 U.S. hourly workers at all three companies expire September 14. Despite the conciliatory talk, Ford as the target company faces the threat of a national strike if it fails to reach an agreement before the expiration.
Ford spokesman Jon Harmon would only read the following statement Tuesday: ""We're hard at work negotiating with the UAW at the subcommittee level as well as at the main table, and we are encouraged by the tone of the negotiations,"" he said.
""Our team is working under the assumption that we will be closely involved in whatever transpires over the next two weeks. And that's been our preference all along.""
The decision marks the second time in a row that the union has chosen Ford to lead its Big Three U.S. negotiations. Ford, which employs about 104,000 UAW members,  negotiated the current pact in 1993 and is widely viewed to have the best union relations among the three automakers.
The UAW's top priorities in the 1996 negotiations are improved job security for its workers and restrictions on the automakers' ability to shift work to lower-cost outside suppliers. Analysts say Ford has shown willingness to cooperate with the union on both fronts.
General Motors has been shrinking its workforce in an effort to become cost-competitive, presenting negotiators with more difficult problems to overcome. The UAW typically has first gone to the company where it believes it could reach the most favorable contract with the least amount of difficulty.
Chrysler, which UAW officials say was less willing to meet their demands, has instead been chosen as the Canadian Auto Workers union's negotiating target. The CAW's Big Three labor contract, covering about 53,000 workers, has been extended until September 17.
",7
"United Auto Workers leaders said Monday they will likely choose a strike target in the next few days among the Big Three automakers, giving the union less than two weeks to craft a pattern-setting labour agreement.
Speaking to reporters at Detroit's annual Labour Day parade, UAW Vice President Ernest Lofton said the UAW is currently focusing on General Motors Corp. and Ford Motor Co. for its later-than-normal choice.
Chrysler Corp. will not likely be the lead company because it has been chosen as the Canadian Auto Workers' strike target, he said.
Labour contracts covering about 400,000 UAW and 53,000 CAW hourly workers at Detroit's Big Three automakers expire Sept. 14. The Canadian union has extended its deadline until Sept. 17.
""I imagine we've got to do it this week,"" Lofton said of the U.S. target selection. Some UAW officials said an announcement could come as early as Tuesday.
Historically, the UAW's target choice has come before Labour Day. The union normally focuses negotiations on a single company and the resulting agreement serves as a pattern for the other two to follow. The target company is threatened with a national strike, but none has occurred since 1976.
UAW President Stephen Yokich this year delayed the choice of a target to allow one of the companies to show itself more willing to meet union demands on job security and outsourcing issues.
Yokich, who ultimately will decide the target, said little at the Labour Day Parade, where more than 100,000 unionized workers marched through downtown Detroit.
""I'm not here to talk about negotiations. I'm here to talk about Labour Day,"" he told reporters.
Lofton, who heads the union's negotiations with Ford, said he believes Ford has a very good chance of being chosen because of its willingness to cooperate with the union on job security. He also sees little chance of a strike at the No. 2 carmaker.
""When we need to get a principle established, we've gone to Ford,"" Lofton said.
Ford has shown some willingness to encourage its suppliers to allow the UAW to organise some of their plants, including Johnson Controls Inc. UAW officials also have said Ford has offered the union some opportunities to shift work back into Ford plants from outside suppliers and is interested in a contract longer than the normal three-year period.
Lofton said it matters little that Ford negotiated the pattern agreement for the current contract in 1993.
""We never have taken turns,"" he said. ""We go where we think we can get the best contract with the least amount of difficulties.""
UAW Vice President Richard Shoemaker, who heads negotiations with GM, said talks with the world's largest automaker have not progressed much since Aug. 22, when the union announced that it would delay its target choice.
""There hasn't been a lot of difference in the status"" at General Motors, Shoemaker said.
In an unusual twist to the UAW-dominated parade, a group of 18 Japanese trade unionists marched to show support for U.S. rubber workers in a dispute with Bridgestone-Firestone Inc., a unit of Japan's Bridgestone Corp.
The tire company hired more than 2,000 replacement workers during an 11-month strike that ended in May 1995 and has failed to call back several hundred former strikers.
""We're very upset about the way they've been treated,"" said Yoshiaki Jingu, a member of Japan's National Railway Workers Union. He added that the delegation also was ""hoping to strengthen the labour movement back home"" by coming to Detroit.
Also marching in the parade was AFL-CIO President John Sweeney, who was arrested Friday during a peaceful protest against the lack of negotiations in the nearly 14-month-old strike against the The Detroit News and Free Press.
""I'm always happy to go to jail on behalf of striking workers. We're fighting against some of the greediest employers,"" said Sweeney, who received a $50 ticket for disorderly conduct when he blocked the entrance to the News building.
Striking newspaper workers led the parade for the second consecutive year.
Sweeney said he was pleased with the support shown by union members for the Clinton-Gore presidential ticket, but said that labour needs to rebuild its grass-roots orgaization to regain its political clout.
""We have to move from a Washington-based organisation to a strong, active movement in every congressional district,"" he said.
",7
"Kellogg Co., in a move to broaden its breakfast food business and help offset sluggish cereal sales, said Monday it will acquire the Lender's Bagels business from Kraft Foods Inc. for $455 million.
Lender's, based in White Plains, N.Y., is the nation's largest maker of fresh and frozen bagels sold in grocery stores, with annual sales of about $275 million. Kraft is owned by Philip Morris Cos. Inc., the New York-based food and tobacco giant.
""Lender's Bagels is a perfect fit for Kellogg Company's fast-growing convenience foods business,"" Kellogg Chairman Arnold Langbo said.
""With our heritage based in nutrition and our technical competence in grain-based food products, adding the nation's number one brand in bagels ... offers substantial new opportunities to grow our business,"" he said in a statement.
Analysts said the deal would extend Kellogg's reach into America's breakfast pantry by moving it into the fast-growing bagel business, with sales estimated at about $2.8 billion a year.
In addition to being the world's largest maker of ready-to-eat breakfast cereal, Kellogg also makes Pop-Tarts toaster pastries, Eggo frozen waffles and Nutri-Grain breakfast bars.
""It's a good fit in that it is a breakfast business,"" said Salomon Brothers analyst Nomi Ghez. ""It recognises that the cereal market has matured, and other areas are eating into it. They have to move into those other areas.""
The deal, expected to close by year-end, includes Lender's plants in New Haven, Conn.; Mattoon, Ill., and Buffalo, N.Y., Kellogg said.
But the acquisition is not big enough to halt the erosion in Kellogg's mainstay cereal business, analysts said. Price cuts of about 19 percent this year have failed to boost demand, and Kellogg's cereal sales fell as much as 15 percent in the third quarter due to stiff competition, they said.
Standard & Poor's Corp. Monday cut its ratings outlook for $1.3 billion in Kellogg corporate debt to negative from stable because it believes the company will have difficulty in recapturing lost sales and improving profits.
Kellogg's earlier this month warned that its first quarter 1997 profits will likely fall below the year-earlier results.
Kellogg stock fell 12.5 cents to $68.125 on the New York Stock Exchange.
At a price of more than 1.5 times Lender's sales, the acquisition will depress Kellogg's earnings slightly in 1997, Ghez estimated. It should boost profits in 1998, she said.
Joseph Stewart, Kellogg's senior vice president of corporate affairs, said the company sees long-term growth prospects for Lender's Bagels, which has 45 percent of the nation's prepackaged bagel market.
""This is a long-term positive proposition to build shareholder value,"" Stewart said.
Kraft, based in Northfield, Ill., is the nation's largest packaged food company with revenues of $16 billion.
Kellogg, based in Battle Creek, Mich., has annual sales of about $7 billion.
",7
"Ford Motor Co., moving to stem losses in Europe, said Sunday it will restructure but not close its giant Halewood car plant in England, with some job losses expected.
Susanne Wegerhoff, a Ford spokeswoman in Brentwood, England, said the automaker will announce operating changes for the plant after a meeting scheduled for Thursday with major unions. She denied a British newspaper report that Ford was threatening to close the facility.
""Halewood is going to have a future. What we are going to talk about is a plan to secure a realistic future for Halewood,"" Wegerhoff said in a telephone interview.
She declined to discuss specifics before the meeting with the Transport and General Workers union and other unions, adding that ""it is people's careers we're talking about.""
London's Observer newspaper reported on Saturday that Ford wanted to cut 500 jobs at Halewood and install new, more efficient work practices. The newspaper said Ford would threaten to close the plant or build its next-generation Escort elsewhere if unions fail to agree to the concessions.
The plant, which employs 6,500 workers, produces Ford's European-designed Escort sub-compact cars. Similar in size to the U.S.-built Escort, the cars are Ford's main mid-range models in Europe, competing with Volkswagen AG's Golf and General Motors Corp.'s Opel Astra.
The moves to restructure the Halewood plant come as Ford is struggling in Europe. In the third quarter of 1996, the latest figures available, Ford's losses in Europe climbed to $472 million from $320 million in the year-earlier period.
Ford Chairman Alex Trotman declined to comment last week on fourth quarter and full-year 1996 European results, but said he expected a profit in Europe for the current year.
Industry analysts consider the Halewood plant in northwestern England the least efficient of Ford's three Escort plants in Europe, including its sister facility at Dagenham in London, which also builds smaller Fiesta models, and the Saarlouis, Germany, plant.
""We have an issue of overcapacity, particularly in that segment of medium-sized cars,"" Wegerhoff said.
In a meeting Friday with Wall Street analysts, Ford executives said they planned to take actions to reduce excess capacity but did not offer specifics, Burnham Securities analyst David Healy said.
At the North American International Auto Show in Detroit last week, Ford Automotive Operations President Jacques Nasser said Ford wanted to avoid outright plant closures.
""We prefer to use the facilities and the resources we've got,"" Nasser said in an interview.
Ford's previous two European Escort models have been a disappointment for the automaker in the heart of the European car market. The next generation Escort, expected to debut in 1999, will be the first car engineered under Ford's new global product development structure, dubbed ""Ford 2000.""
",7
"Chrysler Corp. said on Monday it has developed a new way to extract hydrogen from gasoline that could shave 10 years off the introduction of super-efficient electric cars powered by ""fuel cells.""
Chrysler said the system it developed would use normal gasoline to obtain hydrogen and power a future car with a 50 percent increase in fuel efficiency over current cars.
Cars using the system would be vastly more expensive than cars with internal combustion engines. But Chrysler officials said the system could be commercially viable by 2010 to 2015.  
If the system ever makes it out of the laboratory, drivers of gasoline fuel cell cars would simply refuel at a normal gasoline station, although the car would have a smaller tank than those used today. Chrysler hopes to have a working test vehicle within three years.
""We believe hydrogen needs to be processed from gasoline on-board vehicles because hydrogen isn't a practical fuel choice today,"" Francois Castaing, Chrysler's vice president of vehicle engineering, said at the North American International Auto Show here  
""Simply put, there's not any filling stations supplying it to a mass market,"" Castaing said.
Further development of the elaborate system -- called an on-board ""refinery"" by Chrysler advanced technologies specialist Christopher Borroni-Bird -- faces significant hurdles. Packed with precious metal catalysts to remove harmful sulfur and carbon monoxide emissions, it would currently cost 10 times more than a conventional internal combustion engine, or about $30,000.  
Long used in spacecraft applications, fuel cells generate electricity through the chemical reaction between hydrogen and oxygen, triggered by a platinum catalyst.
Detroit automotive engineers have studied them as a potential power source, but have scratched their heads at the problems associated with producing, distributing and storing highly volatile hydrogen fuel. The on-board ""refinery"" would solve that problem by extracting hydrogen from gasoline.  
""In time, we think development of this processor will help open the door to the use of fuel cells as the primary power source in a series hybrid vehicle that meets consumer demands for range and performance,"" Castaing said.
The first wave of modern electric vehicles from Detroit and Japan are now being introduced. They rely on batteries to provide electrical energy, but their range is severely limited.  
General Motors Corp became the industry's first automaker to introduce a new-generation vehicle, the $35,000 two-seat EV1, which can only drive 60 to 70 miles between charges.
Automakers also are tinkering with hybrid electric vehicles, which use a small internal combustion engine to drive a generator that supplies electricity to drive the wheels. The cars also use an interim storage device, such as a battery or flywheel.
Automotive engineers say the major problem with such hybrids is their high cost -- they essentially use two separate powertrains, instead of just one in conventional internal combustion cars.
",7
"General Motors Corp. was expected to seek bids for its Hughes Electronics Corp. defence businesses in the first of several transactions aimed at shedding GM's remaining non-automotive assets, analysts said Thursday.
The possible sale of Hughes' defence operations for as much as $8 billion was the latest of several scenarios that have emerged in recent months regarding GM's plans for Hughes, which it bought in 1985 for about $5 billion.
""I think the GM board and Hughes Electronics management are very interested in divesting the defence business, merging the Delco Electronics unit with the Delphi components business, and spinning off the communications business into a separate company,"" said CS First Boston defence analyst Peter Aseritis.
""My sense is that they want to find a merger partner for the defence business first,"" he added.
Analysts said several candidates could be interested in Hughes' defence units, including McDonnell Douglas Corp., Raytheon Co. and Northrop Grumman Corp.
GM declined to comment on the idea of splitting off the defence business, first reported by the Wall Street Journal.
""I have to classify it all in the realm of speculation, for which we have no comment,"" said GM spokeswoman Toni Simmonetti in New York.
However, GM disclosed in recent Securities and Exchange Commission filings that Hughes wants to ""strengthen its leadership position through acquisitions, consolidations, realignments and divestitures,"" among other actions.
Hughes' missile systems, radar, electronic warfare, thermal imaging, information systems and other defence units, which earned operating profits of $688 million on revenues of $5.95 billion in 1995, are regarded as attractive plums in a consolidating defence industry.
McDonnell Douglas, which many analysts said was ready for an acquisition, declined to confirm any specific bidding activity, but said it was interested in Hughes. McDonnell President Harry Stonecipher ""has gone on record saying that he is interested in making an acquisition. He finds Hughes an interesting choice,"" a McDonnell spokeswoman said.
But analysts cautioned that any transaction involving Hughes would be complicated, because of tax considerations for GM and its Class H shareholders.
Under a complex ownership structure, shareholders of GM Class H stock are entitled to dividends based on Hughes' earnings while GM owns the subsidiary's assets. Thus an outrightright sale would create a major tax liability for GM.
For that reason, analysts said GM was more likely to pursue a non-cash transaction, such as a stock swap or other type of deal that could take some time to structure.
""Clearly I would personally be surprised if there was an outright sale,"" said BT Securities analyst Wolfgang Demisch.
A sale of the defence business would clear the way for GM to fold its Delco Electronics unit, which makes audio systems and other components, back into its Delphi Automotive Systems auto parts unit.
That would leave Hughes' lucrative telecommunications and space segment, which has been soaring on the growth of its DirecTV satellite broadcasting service. Those operations may be spun off into a separate company, analysts said.
",7
"Buoyed by strong sales of light trucks, Chrysler Corp. Tuesday reported better-than-expected fourth quarter earnings, but special charges held the automaker back from its best-ever full-year profit.
Detroit's No. 3 automaker posted net income of $807 million, or $1.12 per share, during the fourth quarter after $279 million in charges. Excluding those charges, Chrysler's operating earnings were a record $1.09 billion, or $1.51 a share. In the fourth quarter of 1995, Chrysler posted profits of $1.04 billion, or $1.33 a share.
Chrysler's full-year 1996 net income came to $3.53 billion, or $4.74 per share, including $347 million in special charges. The total fell short of the company's 1994 all-time record of $3.71 billion.
On a pretax basis, Chrysler earned $6.09 billion for all of 1996, a full-year record that topped 1995's $3.45 billion.
Chrysler, which was fighting for its life five years ago, rewarded its 79,000 U.S. employees handsomely for the 1996 results, saying they will receive average profit-sharing checks of $7,900 in February -- more than double the $3,200 they received last year.
Comerica Bank economist David Littman estimated that the payments to Chrysler's 45,000 workers in Michigan could boost the state's economy by as much as $356 million.
Wall Street also cheered the results. Chrysler's stock rose $1.50 a share to close at $36 on the New York Stock Exchange.
Analysts said shares of General Motors Corp. and Ford Motor Co., which report results next week, rose in sympathy. GM shares closed up $1.25 at $62, while Ford shares closed up 50 cents at $33.625.
Driving the gains for 1996 was a 10.7 percent increase in worldwide factory vehicle sales, to 2.96 million from 2.67 million in 1995. Strong sales of trucks, sport utility vehicles and minivans, pushed Chrysler's 1996 share of the U.S. and Canadian car and truck market to 16.1 percent from 14.7 percent in 1995.
""There is no end to the improvements we can achieve if we remain vigilant about controlling our costs and about continually improving our processes and our products,"" Chrysler Chairman Robert Eaton said in a statement. ""That's the challenge we're all focused on and its one I'm confident we'll meet.""
During the fourth quarter, Chrysler's profit was reduced by $279 million in charges that covered the early retirement of debt; higher United Auto Workers pension costs; a voluntary early retirement program; and the write-down of Chrysler's investment in Pentastar Electronics, a defence subsidiary sold to a Huntsville, Ala., investor group for $17 million.
Excluding the charges, Chrysler earned $1.09 billion for the fourth quarter and $3.88 billion for the year, beating two-year-old records for operating results.
John Casesa, an analyst at Schroder Wertheim, said a strong mix of high-profit vehicles, such as minivans and Dodge Ram pickup trucks, led to an increase of in the company's profit margin to 22.3 percent from 20.8 percent.
Chrysler's fourth quarter profit per vehicle -- viewed as the envy of the industry -- rose $60 from a year earlier to $1,331, but fell short of the company's record level of $1,350 in the fourth quarter of 1994.
""It was a good quarter, but I don't think it was a great quarter,"" said PaineWebber analyst Michael Ward. ""They are not at their peak operating margin.""
Ward and other analysts said the margin pressure was due to an increase in U.S. incentives per vehicle to $660 from $495 in 1995 and $410 in 1994. Increased spending on new products and overseas expansion, as well as higher labour and pension costs, also helped to eat into margins.
Still, Chrysler is ""hitting on all cylinders, and they're sold out,"" noted Dean Witter Reynolds Inc.analyst Ron Glantz.
Eaton told reporters in a conference call that Chrysler's financial position was so strong it might not need to dip into its approximately $7 billion cash reserve to fund operations and stay profitable during the next industry downturn.
""That would allow us to use a significant portion of our cash reserves for growth opportunities that might just occur during such a downturn,"" Eaton said.
",7
"Automakers, eager to fill Americans' insatiable appetite for sport/utility vehicles, plan to introduce a variety of new models at next week's North American International Auto show here.
The annual festival in Detroit features new heights in size, style, luxury and refinement for the once-crude go-anywhere haulers.
Analysts are watching most closely the public reaction to Ford Motor Co.'s new luxury behemoth, the Lincoln Navigator, and Chrysler Corp.'s smaller Dodge Durango, which borrows its meaty front-end styling from the Dodge Dakota pickup truck.
But they also have their eyes on Subaru's new Forester, a car-based hybrid sport/utility vehicle that is among the first of a coming new breed of vehicles with truck-like bodies atop passenger car underpinnings.
The industry's continued fixation on sport/utility vehicles is understandable. U.S. compact sport/utility sales were the second-fastest growing segment in the industry in 1996, increasing 17.9 percent through November to 1,575,627 units and making up 11.3 percent of the market.
The only segment to grow faster was full-size sport/utility vehicles, up 51.5 percent to 379,260 vehicles through November.
""They're technically trucks, but a whole lot of people driving them don't know they're trucks,"" said James Holden, Chrysler's executive vice president of sales and marketing. ""The minivans and Jeeps are in suburban garages all over the place, so the definition of trucks is sort of blurring.""
In 1996, trucks, including sport/utility vehicles and minivans made up 66 percent of Chrysler's total vehicle sales.
The introduction of the Durango -- slightly larger than Ford's Explorer -- is expected to push that percentage even higher, and Holden said new sport/utility vehicles will push up other automakers' truck mix as well.
Ford is trying to push the luxury limits of the segment with the Navigator, a vehicle based on the F-150 pickup truck swathed in soft leather and likely to be priced in the same mid-$40,000 range as the Range Rover and Lexus LX450 vehicle.
Ford also is testing the consumer waters with two other concept sport/utilities, including an all-wheel drive version of its Taurus station wagon and a design study for a future Explorer model featuring more aggressive styling.
Mercedes-Benz also aims to whet the appetites of luxury sport/utility buyers by showing off the chassis for its Alabama-built M-Class sport/utility, which enters production next year. It is not showing off the vehicle's body, which is expected to be toned down from a concept vehicle shown at last year's show.
Mercedes also will spotlight a segment that has received little attention in recent years -- the luxury coupe -- by introducing its new CLK coupe to the world. The car borrows its elliptical headlamp styling from the larger E-Class sedan.
General Motors Corp., which dominated last year's show with the introduction of four new mid-size sedans, is expected to limit its splash to sports car buffs with the introduction of its first all-new Corvette in 14 years.
The fifth-generation plastic-bodied 'Vette is expected to offer more power and performance, but also more comfort and interior room for drivers and luggage.
More practical cars also are scheduled for introduction, including Ford's new Escort coupe, and Chrysler's next-generation LH family sedans -- the Dodge Intrepid, Chrysler Concorde, LHS and Eagle Vision.
Toyota Motor Corp will unveil its first serious assault on the U.S. minivan market, an all-new U.S.-built minivan based on the Camry family sedan. The Toyota Sienna is scheduled for introduction later this year.
""This is the first real Japanese foray into a North American stronghold,"" said Michael Robinet, an auto analyst with CSM Forecasting in Farmington Hills, Mich. ""Toyota has gone squarely after Chrysler's NS minivans.""
The Detroit auto show is open to the public Jan. 11 through Jan. 20.
",7
"Pulling back from the battered car rental business, Ford Motor Co. said Tuesday it agreed to sell its interests in Budget Rent a Car Corp. to a Florida firm in a deal valued at about $350 million.
Team Rental Group Inc., the Daytona Beach-based buyer, already owns and operates 13 Budget franchises with 155 locations. It also leases commuter vans in 22 states and sells used vehicles.
""In light of investor interest in the entire rental car industry, we concluded that it is now in the best interests of Budget and Ford if Team Rental, Budget's largest franchisee, were to acquire Budget. It's a good fit,"" Ford Vice Chairman Ed Hagenlocker said in a statement.
Although the sale of Ford's preferred stock in Budget is not expected to close until March, the automaker said it will book an unspecified gain on the deal in its fourth quarter 1996 earnings.
The gain will partially reverse a $437 million after-tax write-off Ford took on its investment and on loans to Budget in the second quarter.
The deal also will add cash to Ford's coffers, bringing it closer to a future stock repurchase program.
Ford spokesman Christian Vinyard said top Ford executives told analysts Friday that the company will consider such repurchases after it cuts automotive costs by $1 billion and boosts cash reserves above their current level of $7 billion.
""We said it's on the menu, but way down the line,"" Vinyard said of a stock buyback program. ""Don't be looking for it in the March or April timeframe.""
Tuesday's deal marked a major shift by Ford to reduce its rental car holdings and reverses a plan announced by the automaker last year to acquire full ownership of Budget.
Ford also has said it may sell a partial stake in its Hertz Corp. subsidiary, among other strategic options it examining.
Archrival General Motors Corp.  has already divested its holdings in National Car Rental System Inc. and Avis Inc., while Chrysler Corp.'s Dollar and Thrifty units remain on the sale block.
Analysts said a new breed of bottom line-oriented investors was now taking a dominant role in car rental industry.
""That industry has gotten a little fat,"" said George Magliano, an automotive consultant with WEFA Group in New York. ""They sit with a lot of cars that go unrented. And when that happens, the bottom line is destroyed,"" said George
Lisle, Ill.-based Budget, together with its independent licensees, ranks as the world's fourth-largest rental car business, Ford said.
Ford does not own Budget outright, but controls it through a stock purchase option.
""We have the right to direct the sale of the common shares and that's what we have done,"" Vinyard said.
A Team Rental spokesman said the company will pay $275 million in cash and issue non-voting preferred securities convertible into 4.5 million shares of Team common stock with a minimum value at closing of $75 million.
The board of Team Rental already has approved the deal, spokesman Steve Polito said.
Ford said it would continue to be a major supplier of cars and trucks to Budget's fleet. The transaction also includes a new vehicle supply arrangement between Ford and Budget.
Automakers began acquiring rental car companies in the mid-1980s with the idea that they could absorb unsold auto inventory into their fleets and keep Detroit's factories running.
That strategy worked for a few years, but then backfired when sales of barely used rental vehicles began eating into new car sales.
The Budget deal is the second major car rental sale in just over a week. On Jan. 6, investor H. Wayne Huizenga's Republic Industries Inc. bought National from a private investor group for $600 million. Republic bought Alamo Rent-A-Car Inc. late last year.
Ford's stock closed up 50 cents at $33.75 on the New York Stock Exchange.
",7
"Comerica Inc. said Wednesday it will cut 1,890 jobs, or about 16 percent of its work force, as part of an effort to slash costs and boost revenues by $110 million annually by the first half of 1998.
The Detroit-based banking company said the restructuring actions caused it to incur a $90 million pretax charge against its fourth-quarter earnings, which fell to $60.8 million, or 52 cents a share, from $106.5 million, or 92 cents a share, in the year-ago period.
Comerica, with $34 billion in assets at the end of 1996, said the actual number of employees to be laid off may be less than 1,890 because of attrition, a hiring freeze and reinvestment actions.
The company has about 12,000 employees in Michigan, Texas, California and Florida. The cuts will fall in all four states and will take place between now and mid-1998, Comerica said.
""Regrettably, as we streamline processes and eliminate redundancies, a number of employees throughout the corporation will be displaced,"" Comerica Chairman Eugene Miller said in a statement. ""To assist these employees, we have put in place an enhanced severance plan with out placement services to help their transition.""
Comerica also said it planned to close about a dozen branch offices.
Comerica, Michigan's largest independent bank holding company, has been the subject of merger speculation in the past year. However, it has steadfastly maintained it is not interested in being acquired by an out-of-state bank and has instead embarked on a long effort to streamline its operations.
Comerica said the third phase of its restructuring effort includes other initiatives to reduce costs and enhance revenues. They include:
-- Eliminating one-third of paper forms and replacing them with electronic forms.
-- Simplifying the referral and delivery of investment services.
-- Giving branch employees more authority and reducing their clerical duties so they can serve customers better.
-- Reducing the documentation required to open a new account.
-- Streamlining the credit approval process.
-- Streamlining financial and operations reporting.
For the full year, Comerica earned $417.2 million, or $3.55 a share, up from $413.4 million, or $3.54 a share, in 1995.
",7
"Chrysler Corp Chairman and Chief Executive Officer Robert Eaton said Tuesday that the automaker will report record earnings for the full 1996 year, based on record worldwide sales of 2.97 million vehicles.
""We're going to have a record year,"" Eaton told Reuters in an interview at Detroit's North American International Auto Show.  
Chrysler's previous annual profit record came in 1994, when the company earned $3.713 billion. It earned $2.025 billion in 1995, when sales were held to 2.61 million units by the launch of its current line of minivans.
Eaton also said Chrysler in 1997 should be able to exceed its 1996 sales results because the company will be able to produce about 190,000 more trucks in 1997 than it built in 1996.  
The increase will be made up of added capacity for the new Dodge Durango sport/utility vehicle in Newark, Del., as well as increased line speeds for the Dodge Ram pickup truck in St. Louis, and increased production of Dodge Dakota pickup trucks in Warren, Mich.
Chrysler plans to unveil the Durango at the Detroit auto show later Tuesday.  
In other capacity moves, Eaton also said Chrysler has tentatively planned to add a third production shift to its Bramalea, Ontario, car assembly plant after it launches production of a new generation of LH family sedans later this year.
The LH line includes the Dodge Intrepid, Chrysler Concorde and LHS and Eagle Vision, which also are expected to be introduced at the show.
Eaton said despite sluggish industry car sales the increasing popularity and profitability of light truck models, the automaker has not cut back on investment in future car programs.  
However, he said Chrysler may shift its investment plans if trucks continue to gain market share. ""We're going to put the money where the market goes,"" he said, adding that new, more efficient truck engines should allow Chrysler to continue to increase truck capacity without violating federal fuel economy laws.  
Eaton said he is pleased with the financial stability that Chrysler has acheived in recent years, but it still needs to continue to prove itself to Wall Street to earn a higher stock price and raise its price-to-earnings ratio above the current level of 7.3 percent. Chrysler shares were trading down 1/4 at 35-3/8.
He reiterated that Chrysler can earn still earn a profit even if U.S. automotive industry sales fall by 20 percent.
",7
"General Motors Corp. said on Thursday it expected an $870 million reduction in its fourth quarter earnings due to recent strikes in the United States and Canada and costs associated with its new United Auto Workers contract
In its quarterly 10-Q report, filed with the Securities and Exchange Commission in Washington, D.C., the auto giant also said its Delco Electronics unit faced a substantial decline in future profit margins from price cuts and the loss of GM-related business.
GM said the costs associated with the U.S. and Canadian strikes came to $700 million, or 91 cents a share. The Canadian Auto Workers was on strike for three weeks in October over contract negotiations with the automaker, causing factory shutdowns in the United States.
GM was still reeling from the Canadian walkout when UAW members staged local strikes at a metal stamping plant in Indianapolis and a truck plant in Janesville, Wis., which forced GM to idle more workers.
Production was cut back at 17 North American assembly plants and numerous parts facilities. GM said earlier this week the strikes cost it at least 151,000 vehicles in the walkouts, cutting its planned fourth quarter production to 1.169 million cars and trucks
GM said lump-sum payments to U.S. workers under its new UAW contract will force it to book a charge of $170 million, or 22 cents a share, against fourth quarter earnings.
Under the pact, GM will pay each of its 215,000 UAW workers a $2,000 bonus in the first year of the contract, followed by three percent increases in base wages during the second and third years of the pact.
GM also for the first time disclosed that it will gain several benefits from the pact, including greater worker mobility and certain exclusions from its promise to guarantee employment at 95 percent of current levels over the next three years.
""Greater worker mobility will make it easier for General Motors to relocate UAW members and thus will decrease the number of employees that GM must pay income security protection,"" the company said in the filing.
Under its past three contracts, GM has agreed to continue to pay workers who are idled. The automaker spent $1.21 billion on such payments in the 1993-96 contract, and pledged to make $4.33 billion available for future payments, if needed, under the new contract.
The 95-percent job guarantee is not expected to restrict GM's ability to reduce employment due to productivity gains or volume reductions. GM also said it preserves the company's ability to sell certain unprofitable parts plants.
GM also said its Delco Electronics unit, which makes audio systems and a host of other electronics components for GM cars and trucks, will see its profit margins drop to the low diouble digit range from 15.9 percent in.
GM said as its automotive operations move to cut costs, they will seek price cuts and will likely buy more electronic components from other suppliers. Delco, a part of GM's Hughes Electronics Corp. subsidiary, now supplies about $900 in components for every GM vehicle, a figure that is expected to drop.
Earlier Thursday, Hughes announced a management shakeup for Kokomo, Ind.-based Delco, naming Michael Burns as general manager, replacing the retiring Gary Dickinson. Burns was previously in charge of GM's Delphi Thermal Systems unit which makes vehicle radiators and climate control systems.
",7
"Trampling a half-century of tradition, United Auto Workers President Stephen Yokich is reinventing the way the union negotiates its biggest and richest contract.
At every turn in the triennial ritual of labor negotiations with Detroit's Big Three automakers, Yokich has surprised industry observers with new, ground-breaking twists, such as dispensing with the traditional concept of a ""strike target.""
On Tuesday, he quietly anointed Ford Motor Co. to lead the negotiations for a new contract covering over 385,000 workers. At the same time, the UAW will continue talks with General Motors Corp. and Chrysler Corp. -- leaving the door slightly open for them to come up with a last minute offer and putting subtle pressure on Ford.
""Yokich is an unusually confident and bold leader,"" said Harley Shaiken, a professor of labor relations at the University of California-Berkeley. ""He knows where he wants to go, and if a precedent is preventing from getting there, he throws it out.""
The 61-year-old Yokich, who became the UAW's eighth president last year, has even downplayed the importance of enforcing a strict pattern agreement at all three automakers -- something held sacred by the UAW for decades.
Every three years since roughly the end of World War II, the UAW has selected a strike target to hammer out a pattern agreement for all three companies, with the threat of a national strike if talks run past contract's expiration.
In many cases, the contracts were negotiated partly through the media, with both sides publicly castigating each other.
""I remember back in the early to mid-80s, it was an 'I'll take whatever I can get' attitude on both sides,"" said PaineWebber analyst Michael Ward.
But Yokich prefers to duck the media limelight and has gone out of his way to show that he doesn't want a strike, even to the point of saying that he has banishing the word ""strike target"" from his vocabulary.
""Our members didn't elect us to go out on strike, they elected us to bring them an agreement,"" Yokich said last month.
Yokich, who worked as a tool and die maker before entering union politics, has a close relationship with Peter Pestillo, Ford executive vice president of corporate relations, which analysts believe will help smooth the way for a quick settlement.
Indeed, UAW officials in recent days say that with less than two weeks to go before the contract expires Sept. 14, bargainers at all three companies are closer to agreements than at the same point in any prior negotiation year.
There may be other breakthroughs -- the UAW and Ford have discussed the possibility of a longer contract of up to five or six years, and Ford has shown some willingness to encourage suppliers to allow the UAW to organize their plants.
Labor analysts said they expect him to come up with an agreement that provides some improved job security for UAW members, but will not hamstring the automakers' competitiveness.
""Yokich is a fairly sensible negotiator,"" Ward said. ""He has a big-picture view of the industry.""
He also has a big-picture view of labor, causing him to embark last year on what may one day be viewed as his greatest accomplishment, the proposed merger of the UAW, the United Steel Workers and the International Association of Machinists and Aerospace workers into a giant metal trades union with over 2 million members.
Retired UAW leaders applaud Yokich's new direction and do not view him as tearing down their legacy.
""He's breaking out of the mold and trying something different,"" Doug Fraser, who was the UAW president in the late 1970s and early 1980s. ""In my view it can only be positive.""
",7
"General Motors Corp. said Friday it will consolidate all of its commercial truck production in Flint, Mich., but will discontinue some engineering work there and in Lansing, Mich.
The moves ensure a solid future for the automaker's truck plant in Flint, which will expand its work force by up to 3,000 jobs by the year 2001, according to United Auto Workers officials. It now employs about 2,000 workers.
But the gain for Flint, a beleagured GM factory town hit hard by job losses in recent years, will be a blow to Detroit's inner city. GM said it will close a 78-year-old truck and bus chassis plant in Detroit that employs 494 people and move the production to Flint in the year 2000.
About 90 engineers at the six-story plant will be transferred immediately to GM facilities in Pontiac, Mich.
GM also will shift production of medium-duty commercial trucks from Janesville, Wis., to Flint, in 2001. The Janesville truck line employs about 1,000 people, but GM officials say many of those workers should be absorbed by Janesville's full-size sport utility vehicle assembly line.
GM said the Janesville plant will build the next-generation Chevrolet Tahoe and Suburban and GMC Yukon vehicles, but it did not disclose any plans to expand Janesville's capacity to build the trucks.
GM will begin building the popular sport utility vehicles at a second plant, in Arlington, Texas, later this year.
The auto giant said it will invest about $500 million in the Flint truck plant to prepare it for the medium-duty truck production and to expand its capacity to build the next generation of GM's full-size C/K pickup trucks.
The plant currently builds larger commercial versions of C/K pickups, but before Friday's announcement, GM had not assigned it a future product, leaving its fate clouded.
The investments will pay for two new body shops, a second paint shop and additional chassis, trim and general assembly lines at the facility. Expanded production at the plant will increase GM's truck production capacity by about 5 percent, allowing it to grab a bigger share of the expanding truck market.
However, long before Flint sees new jobs at the truck plant, it will have to give up the jobs of about 950 engine and transmission engineers, which GM will transfer to other facilities in Warren and Milford, Mich., in 1998.
GM also is discontinuing other powertrain engineering work in Lansing that employs about 600 people. That work also will be transferred to Warren and Milford.
Another 550 engineers have already been transferred to those locations from elsewhere in the Detroit area, bringing the total affected by the powertrain moves to 2,100.
The consolidation moves are aimed at reducing GM's production and operating costs, but GM officials did not specify the expected savings.
""The optimization of our facilities will allow us to reduce our structural costs, make better use of our resources and improve our productivity,"" said Ned McClurg, general manager of the GM Powertrain Group.
Few of the production workers displaced by the moves will be left without a paycheck. Under GM's UAW contract, it must continue to pay workers who are idled by such actions.
A day after it announced the long-awaited, $9.5 billion sale of its Hughes Aircraft defense operations to Raytheon Co., GM's stock had slipped 25 cents to $60.125 in late trading on the New York Stock Exchange.
",7
"Dow Corning Corp. said Monday it would set aside up to $2 billion to pay silicone breast implant claims under a $3 billion bankruptcy reorganization plan but that it also was seeking a trial on whether the implants cause diseases.
Dow Corning said the plan, filed Monday with the U.S. Bankruptcy Court in Bay City, Mich., would provide up to an additional $1 billion to pay commercial creditors.
The Midland, Mich.-based company, a joint venture between Dow Chemical Co. and Corning Inc., filed for Chapter 11 bankruptcy protection in May 1995 because of lawsuits by thousands of women who alleged that their implants have caused a variety of medical problems, including lupus and other autoimmune disorders.
Dow Corning introduced silicone gel breast implants in 1964 and was the largest maker of the products until the Food and Drug Administration imposed a moratorium in 1992.
Under the reorganization plan, Dow Corning said it would set up a $600 million fund for out-of-court settlements. Another $1.4 billion would become available for implant claims if it was proven in a trial that implants caused disease.
Dow Corning said it wanted a jury to hear testimony from a court-appointed, independent panel of doctors on the issue and to decide whether the company should compensate claimants.
The company has long held that numerous scientific studies have failed to show a link between the implants and disease.
""We believe the value of breast implant claims should be based on the best and most compelling scientific evidence available,"" Dow Corning Chairman Richard Hazleton said in a statement. He added that the plan ""provides a fair process to resolve the central legal controversy of whether breast implants cause disease.""
Plaintiffs said the $600 million settlement fund was not enough to address the needs of some 300,000 women who have received Dow Corning implants.
""It is not adequate to address the number of tort claims and the kinds of tort claims they face,"" said Elizabeth Cabraser, a San Francisco attorney representing women with breast implants. ""This is not a plan that is ready to go out of the box or should be approved.""
Cabraser said a committee of plantiffs attorneys would submit an alternative proposal to the bankruptcy court in the coming weeks.
Sybil Niden Goldrich, a former breast cancer sufferer and plaintiff who had her implants removed in 1984, said the out-of-court settlements would likely only give women about $2,000 each -- an amount she said would not cover the cost of removal.
""You can't sell these things for 30 years and just give women $2,000 and tell them to go away,"" she said.
If Dow Chemical ends up spending the full $2 billion on implant claims, it would be roughly the same amount as the company agreed to pay in a global settlement plan that collapsed in 1995.
In November 1995, five other manufacturers, including Bristol-Myers Squibb Co., Baxter International Inc. and Minnesota Mining & Manufacturing Co. agreed to a new open-ended settlement offer that would pay women up to $250,000 each.
Hazleton said the plan would ensure the viability of Dow Corning while providing women with flexible options to resolve their claims and preserving their right to a jury trial.
The plan offered five settlement choices available over several years to process and resolve the claims:
-- Women who can prove a physical injury arising from a Dow Corning implant could obtain an expedited cash payment.
-- Those who want to have their implants removed could obtain a certificate for an ""explant"" procedure.
-- Women with claims that meet an established range of criteria could obtain a cash payment, but the precise definition of the criteria and the payment schedule would depend on the outcome of the causation trial.
-- Women could also choose an individual evaluation of their claim, which would require a higher level of proof, including a possible independent medical examination.
-- Women could also agree on non-binding mediation as an alternative to proceeding with the expense and uncertainty of a jury trial, it said.
Dow Chemical's stock closed up 25 cents at $84 and Corning rose 62.5 cents to $41.125 Monday on the New York Stock Exchange.
Separately, specialty materials maker Rogers Corp. said it has received approvals to buy Dow Corning's Bisco Products silicone foam business for $12 million. Rogers and Dow Corning have agreed to continue to work together to develop silicone foam resins over a seven-year period.
",7
"General Motors Corp.'s move to deflate Wall Street expectations about its fourth-quarter earnings will not likely be repeated by rivals Ford Motor Co. and Chrysler Corp., analysts said Thursday.
GM told analysts Wednesday that its fourth-quarter North American incentive and other marketing costs were higher than earlier estimates, causing analysts to slash their estimates by hundreds of millions of dollars.
The automaker also said its product mix in Europe will be weaker than expected, with the low-margin Corsa subcompact making up a bigger portion of sales, and new product launch costs remain high.
As a result, many analysts slashed their estimates by 45 cents to 50 cents a share, helping to drive down GM stock by $1.375 over the past two days, to close at $54.50 on the New York Stock Exchange on Thursday.
Burnham Securities analyst David Healy now estimates that GM will earn $435 million, or 52 cents a share, in the fourth quarter, excluding extraordinary items.
Among other items, GM plans to take a charge of $170 million, or 22 cents a share, to make lump-sum payments to United Auto Workers members as part of the company's new contract with the union.
GM also previously disclosed that strikes in the United States and Canada during the quarter reduced its fourth-quarter profit by about $700 million. In the fourth quarter of 1995, GM earned $1.87 billion, or $1.98 a share.
Analyst Michael Ward of brokerage PaineWebber Inc. said GM appears to be viewing the fourth quarter as a ""cleanup quarter"" and may accelerate some costs to help improve next year's results.
But analysts did not expect Ford and Chrysler to reveal similar surprises with marketing costs.
""Both Ford and Chrysler are more heavily weighted toward trucks,"" said brokerage A.G. Edwards & Sons analyst Michael Braig. ""I don't know that I have to get any more skeptical than I have already been with them.""
Ford could earn as much as $1.25 billion, or $1.03 a share, in the fourth quarter before extraordinary items, according to a consensus estimate by First Call Corp., which tracks analyst forecasts. That total excludes an expected charge of $400 million, or 34 cents a share, to cover costs of an early retirement program for salaried workers.
In the fourth quarter of 1995, new product launch costs held Ford's profit to $660 million, or 48 cents a share.
Although Ford continues to struggle with problems in Europe and Brazil, it is reaping benefits in North America from its new F-150 pickup truck, the new Ford Expedition sport utility vehicle and continued strong sales of the Explorer sport utility.
Ford said Thursday it sold 2 million trucks in a single year for the first time ever, including 800,000 F-Series trucks.
Lehman Brothers brokerage analyst Joseph Phillippi said Ford may announce another onetime charge for restructuring its European operations in the fourth quarter. Ford officials have declined to discuss plans for specific cost-cutting actions in Europe, but expect such actions to pay off in 1997.
Chrysler, which is enjoying a record sales year, is expected to cruise to a fourth-quarter profit of more than $1 billion, or about $1.40 a share, according to First Call. Driving the Chrysler earnings are strong sales of minivans, pickup trucks, and sport utility vehicles.
Chrysler chief economist Van Bussmann said Thursday that the automaker's market share, now at about 16 percent vs. 12 percent five years ago, should grow further in 1997. The automaker is introducing a new generation of large sedans and a new Dodge Durango sport utility vehicle based on its new Dakota pickup truck.
",7
"General Motors Corp.'s 50.8 percent drop in fourth quarter earnings from continuing operations earnings was a disappointment long anticipated by Wall Street, but the automaker's strong cash generation has hopes raised for a strong performance in 1997.
Despite the earnings drop, GM's cash and marketable securities topped the $17 billion mark at year-end, up $2.5 billion from September 30, 1996 and up $6.8 billion from a year earlier.  
Although $1 billion of GM's fourth quarter cash increase came from a tax refund, analysts said the $1.5 billion increase in cash from strike-marred operations was impressive.
""It's a good news bad news quarter,"" said Burnham Securities analyst David Healy. ""It suggests that if 1997 is normal and largely free of strikes, it ought to be another good year for cash generation.""
GM's fourth quarter North American production volume, mauled by strikes and new model launches, fell 11.4 percent, resulting in a $124 million North American loss, compared to a year earlier profit of $603 million.  
But analysts expect GM to bounce back in 1997 with new models and robust production. And as the new product benefits that management has been promising for several years materialize, GM's 1997 profits and cash flow should swell.
J.P. Morgan analyst David Bradley estimated that GM in 1997 could wind up with $28 billion in cash at the end of 1997, including about $4.5 billion from the sale of Hughes Aircraft Co to Raytheon Corp.
That's about $15 billion above GM's cash reserve target of $13 billion, and he added that GM could make up to $12 billion of that available for stock repurchases.  
""This company could have enough cash to buy back a quarter of its shares,"" Bradley said.
GM on Monday committed to repurchasing $2.5 billion worth of stock in the next 12 months, but GM Chief Financial Officer J. Michael Losh said the automaker wants to complete that quickly and ""revisit"" the stock buyback issue.
Nonetheless, GM shares fell 1-1/8 to 60-3/4, reflecting profit taking on the stock's climb from the last month, earnings that were roughly in line with expectations  and continued market disappointment that GM did not announce a bigger stock buyback program.  
""I think the disappointment of yesterday was not counterbalanced by positive surprises today,"" said Prudential Securities analyst Philip Fricke.
GM reported that its fourth quarter net income from continuing operations, which included a host of extraordinary items, came to $786 million, or $0.92 a share, down from $1.6 billion, or $1.95 a share, a year earlier.
The results also included weaker profits in Europe, which is plagued with a slumping market. Earnings from International Operations, long GM's standout performer, will likely be flat or declining next year, putting more pressure on GM's North American operations.
Fricke said 1997 is a ""show and tell"" year for that must reveal steady improvements in the automaker's vehicle profit margins.
""What will be the telling factor is whether the improvement in operating income goes way beyond what can be explained by higher production volumes,"" he said.
To accomplish that, GM's new cars and trucks must be a hit with consumers and help reverse the automaker's long-term slide in U.S. market share. GM ended 1996 with about 31 percent of the U.S. market, down from 32.4 percent in 1995.
""GM has to make believers out of people as far as market share goes,"" added Healy. ""If they don't gain market share this year, I don't know if they ever will.""
",7
"Chrysler Corp Vice Chairman Robert Lutz, who recently throttled back on his corporate responsibilities, said Tuesday he still sees himself as an integral part of Chrysler's product creation activities.
""I don't see that anything changed,"" Lutz told Reuters in an interview at Detroit's North American International Auto Show. As of January 1, Lutz gave up his president and chief operating officer titles to become vice chairman in anticipation of his 65th birthday in February.  
Although Lutz is largely credited with turning around Chrysler's product development operations by instituting a system of super-efficient ""platform teams"" to bring each new vehicle to market, he said he rarely gives orders to subordinates.
He said he will continue to act as a coach and mentor for the engineers and product executives responsible for new products.
Lutz said he and Chrysler Chairman Robert Eaton ""are really more cheerleaders and coaches rather than the captain of the team that's out on the field actually playing.  
Eaton took over Lutz's chief operating officer duties and now has several executive vice presidents reporting directly to him.
Lutz said the new structure will give Eaton a chance to work more closely with the executive vice presidents, which will ease the transition to the next generation of leadership. He declined to comment on which executive vice presidents -- who include product development chief Thomas Gale, international chief Francois Castaing and sales and marketing chief James Holden -- have the best shot at succeeding the 57-year-old Eaton as the company's next chief executive.  
Lutz said he will probably stay at Chrysler for at most two ""I have to use to use this transitional period to ease myself out gradually, because the harsh reality is that I cannot stay around until I'm 70,"" he said. ""I would be seriously worried about a company that had its product fortunes guided by a 70-year-old guy. That usually results in cars directed at 70-year-olds.""
Lutz said he will probably become less involved in Chrysler's manufacturing operations, but will probably spend more time visiting Chrysler's international operations, an area in which he has more expertise.
",7
"Using cost cuts to offset flat same-store sales, discount retail giant Kmart Corp. Wednesday reported a $9 million third-quarter profit, compared with a year-ago loss of $69 million.
The results, equal to 2 cents a share, slightly exceeded Wall Street analysts' consensus expectation that the Troy, Mich.-based retailer would break even during the August-October period.
Nevertheless, Kmart stock closed down 62.5 cents at $10.50 on the New York Stock Exchange after Chairman Floyd Hall dismissed rumours that Kmart was the target of a possible takeover by leveraged buyout specialists Kohlberg Kravis Roberts & Co.
The rumours drove Kmart's stock up $1.625 on Tuesday.
Speaking to reporters at the opening of Kmart's second Manhattan store, Hall said he has not heard from KKR.
""As far as we know, they are all rumours,"" he said.
In a statement accompanying the third-quarter results, Hall said Kmart is ""beginning to see meaningful progress toward a recovery.""
""Our biggest challenge of the year lies just ahead in the fourth quarter, and we remain cautiously optimistic about our near-term outlook,"" he added.
But sales growth has been a tough challenge since Hall was hired to rebuild Kmart in June 1995.
Kmart's total revenues for the quarter fell 1.6 percent from last year to $7.85 billion. Company-wide same-store sales rose 0.1 percent from a year ago and same-store sales for U.S. Kmart stores increased 0.8 percent.
Hall said revenues did not meet the company's growth expectations for the period, but savings from store closings, contracting out of certain functions and other costs cuts have resulted in a $370 million reduction in Kmart's year-to-date selling, general and administrative expenses.
But Kmart's gross margin rate for the third quarter increased to 22.6 percent of sales from 21.2 percent last year, reflecting fewer markdowns to clear aged inventory and a lower level of overall promotional activity, Kmart said.
Analysts said the slow sales growth suggests that Kmart is still losing market share to archrivals Wal-Mart Stores Inc. and Target, a unit of Dayton Hudson Corp. But they were pleased with Kmart's 8 percent reduction in selling, general and administrative expenses for the period.
""If you compare it with last year, the company is making considerable progress. The part of the equation that remains is to get the sales up,"" said Brown Brothers Harriman analyst Joseph Ronning.
Kmart executives told analysts in a conference call that they expect better sales results in the near future from their apparel offerings -- particularly children's clothing -- and the ""pantry concept"" stores, which offer several aisles of attractively priced consumable items such as soft drinks and snacks just inside the front entrance.
Kmart now has about 180 pantry concept stores in the United States and will change 450 stores to the new format annually for the next couple of years.
Hall also told reporters that Kmart is aiming for a 3.5 percent to 5 percent increase in same-store sales for the all-important holiday selling period. Kmart could achieve a 6-7 percent increase, Hall said. But he cautioned that he didn't want to sacrifice profit margins to achieve that figure.
Still, he said analysts' estimates that Kmart will earn a profit of $165.5 million for the fourth quarter ending in January 1997 were ""reasonable.""
Kmart, the second largest retailer in the United States, operates 2,143 Kmart and 168 Builders Square retail outlets, and operates 129 stores internationally.
",7
"General Motors Corp., stung by years of steady losses in its U.S. market share -- including another 1.3 percentage points in 1996 -- Wednesday vowed to aggressively reverse the trend in 1997.
""In 1997, we plan on aggressively increasing our U.S. share,"" Chairman Jack Smith told reporters at the North American International Auto Show here.
GM remains the world's largest automaker, but it has sunk far since its glory days in the 1960s when it commanded half of the U.S. market. As recently as the mid-1980s it held as much as 45 percent of the U.S. passenger car market.
In 1996, GM's U.S. light vehicle sales fell 2.7 percent to 4.74 million units, causing its market share to drop to 31.3 percent from 32.6 percent in 1995 and 33.1 percent in 1994.
Smith said the company's U.S. market share was hurt in 1996 by costly labor strikes in March and October, as well as by factory down-time to retool for new models.
The strikes by the United Auto Workers and Canadian Auto Workers cost GM an estimated $1.2 billion to $1.3 billion in profits in 1996 as the company lost production of about 300,000 vehicles, said GM North American Operations President G. Richard Wagoner.
Wagoner added, however, that the strikes were ""worth it"" because they resulted in productivity-related gains for the automaker.
Smith added that there could be other work stoppages, as GM still needed to reach local labor agreements at many of its assembly and parts plants.
Assuming GM's labor relations are peaceful, the company expects to utilize more than 90 percent of its North American factory capacity in 1997, which will significantly help the company's profitability.
GM's factory utilization in 1996 fell below the 85 percent it had in 1995, but was still well above the dark days of 1991-92, when it sank to 60-65 percent and led to massive losses.
Wagoner said GM was getting back on track toward reaching its goal of a 5 percent return on sales in North America but would not reach that level until the end of the decade.
Smith said GM was in a ""strong position"" to regain market share this year with 15 new models being introduced during the 1997 model year. GM will not sacrifice profitability to gain market share, but will stay competitive with other automakers in offering incentives, he said.
""What we're looking for is for our products to sell themselves,"" Smith said. ""If we're in a market where somebody else has heavy incentives, we're going to be competitive. We're going to be a player.""
GM, however, sees greater opportunities for growth in its international operations, where sales in 1997 are expected to expand to $38 billion from $35 billion in 1996.
Worldwide, Smith said GM holds about 17 percent of the global car and truck market and is aiming to raise that share by expanding into growing areas of the world, including Asia, Latin America and Eastern Europe.
GM will expand its investments in overseas operations faster than in the United States, but it does not plan to cut back on North American product investment.
Smith also announced that the automaker was developing new technologies that could help improve the fuel efficiency of its cars by 50 percent. Those include:
-- A new direct-injection diesel engine that is now being introduced in overseas markets. The four-cylinder diesel could raise fuel economy in GM's minivans to 38 miles per gallon from about 20 miles per gallon for current V-6 gasoline engines.
-- An electric-powered transmission flywheel that gives a boost to a conventional drivetrain and increases fuel economy. It also acts as a starter and alternator for the vehicle.
-- Lightweight aluminum body structures that save weight.
-- Hybrid electric vehicle technology that combine internal combustion engines and electric motors to gain dramatic range and efficiency improvements over both electric and conventional cars.
",7
"Mary Graessle had wanted a house of her own, so three months ago she took a deep breath and bought a mobile home in Chateau Properties Inc.'s Lake in the Hills community here.
Today, her double-wide, vinyl-sided dwelling, built in a Redman Industries Inc. factory, is at the centre of some of the biggest merger activity ever to hit the manufactured housing industry.
Two competing mobile home community operators -- Sun Communties Inc. and Chicago investor Sam Zell's Manufactured Home Communities Inc., are bidding for Chateau, while Champion Enterprises Inc. recently agreed to acquire Redman in a $315 million stock swap.
The deals are expected to make Auburn Hills-based Champion the nation's largest home manufacturer and whoever buys Chateau will become the largest real estate investment trust in the industry. Some analysts expect Chateau, based in Clinton Township, Mich., to respond to the offers in the next few weeks.
Graessle's purchase decision was based on pure economics. The recently divorced, 48-year-old bookkeeper for a medical equipment firm simply found that she could get more house for her money in a manufactured home. She paid under $60,000 for a three-bedroom, 1,680 square-foot house, versus more than $100,000 for a similarly sized site-built home.
""I had a hard time with it at first. I did not want to move into a trailer park,"" she said. ""But I felt better once I saw this place. It's not junked-up.""
Lake in the Hills, a well-maintained community near Chrysler Corp.'s gleaming new headquarters in one of metro Detroit's hottest real estate markets, is one of a growing number of communities that are helping to revamp the image of mobile homes.
The dwellings that occupy them are no longer the tin boxes they were in the 1960s. They offer cathedral ceilings, drywall interiors, exterior dormers and other features that make them look more like conventional site-built homes.
""This is no longer the trailer of 30 years ago of 'I Love Lucy' fame,"" noted Champion Chief Executive Walter Young.
For the first six months of 1996, manufactured homes made up about 24 percent of U.S. housing starts and 32 percent of all sales of new homes.
Industry executives believe they can account for 30 percent of new housing starts in the next several years, although growth in home shipments has slowed to 9.5 percent this year from 20 percent two years ago.
Walter Wells, chief executive officer of Middlebury, Ind.-based Schult Homes Corp., said he believes the recent merger activity is the result of the industry's profit potential and shows it is losing its trailer-park stigma.
""Fundamentally, the industry continues to gain share of single-family housing starts,"" Wells said. ""It's doing that because the product offered to consumers these days matches what a house should be -- it looks like a house, it has all the amenities of a site-built house and it offers a better value per square foot.""
According to the Manufactured Housing Institute, the average price per square foot for a multi-section mobile home was $26.79, versus $56.28 for a site-built home, excluding land costs. The average multi-section home sold for $45,900, compared with $119,025 for a site-built home, excluding land costs.
The industry's growth also is a boon to suppliers. Grand Rapids, Mich.-based Universal Forest Products Inc., which makes 60 percent of the roof trusses used in manufactured homes, last month reported a 55 percent gain in second-quarter earnings to $8.2 million.
The industry's growth in urban areas, however, could be limited by difficulties in obtaining and development approvals for new manufactured home communities. Conventional homeowners still worry that nearby manufactured homes will drag down their property values.
""Zoning remains difficult to achieve,"" said Jeffrey Jorissen, chief financial officer for Farmington Hills, Mich.-based Sun Communities. ""It's the not-in-my backyard syndrome.""
But that has also created an opportunity for mobile home community operators because the limited supply of parks maintains strong demand for prime suburban home sites.
That allows firms like Sun and Chateau to increase land rents annually for homeowners like Graessle. She pays about $370 a month for her large lot, which offers backyard views of a pond and a stand of trees.
A prime location also means that her home is more likely to appreciate in value. Although such dwellings have steel frames that allow them to be transported, few are ever moved because of the prohibitive cost -- $4,000 to $10,000.
Graessle, herself a sceptic at first, said her total costs, between $700 and $800 a month for mortgage and land rent, are tough to beat.
""For what you pay for an apartment, you're getting three times the size and you own it,"" she said.
",7
"U.S. sales of General Motors Corp. cars and trucks in November dropped nearly 12 percent from a year ago because of strikes in the United States and Canada and major model changeovers, the automaker said Tuesday.
The world's largest automaker said its total U.S. vehicle sales for the month fell to 336,815 from 382,372 a year earlier.
GM car sales plunged 22.5 percent to 179,150, while total truck sales, despite strike-related production losses, rose 4.2 percent to 157,665.
GM said walkouts by the United Auto Workers and Canadian Auto Workers unions in October and early November reduced the availability of its full size pickup trucks and sport utility vehicles, as well as its high-volume Chevrolet Lumina, Monte Carlo, Cavalier and Cadillac DeVille car lines.
In addition, sales of several key high-volume models that GM is replacing were down significantly from year ago levels due to model changeovers.
""We expect GM's car maket share to struggle along for about six months,"" said Lincoln Merrihew, auto analyst with DRI/McGraw-Hill in Cambridge, Mass. ""They're running out of old product.""
Production of the Chevrolet Corsica and Beretta compact cars was recently ended, and sales were down 89 percent to 1,494 units. GM dealers have not yet begun selling the cars' replacement, the Chevrolet Malibu.
Chevrolet, GM's largest division, had November sales of 169,110, a drop of more than 13 percent from 194,973.
Car sales for other GM divisions fell in November, with Pontiac off 7.4 percent, Oldsmobile off 27.6 percent, Buick off 14.5 percent, Cadillac off 11.1 percent and Saturn off 18.3 percent.
The automaker also blamed the drop partly on the fact that it has been less aggressive than Chrysler Corp. and Ford Motor Co. with incentives on 1997 models.
Merrihew said about 15 percent of all 1997 model cars and trucks currently offered rebates of $1,000 or more.
For the first 11 months of 1996, GM dealers have sold 4,447,147 total vehicles, down 1.7 percent from the same period of 1995.
GM's numbers, which came one day after Chrysler reported a 1 percent increase in November sales, confirmed analyst projections that November will be a weak month for Detroit's Big Three automakers.
That was not the case with three Japanese automakers, Toyota Motor Corp., Honda Motor Co. Ltd. and Mitsubishi Motors Corp..
Spurred by strong sales of its new Camry sedan, Toyota reported total November sales of 99,241, a 19.6 percent increase.
""Consumer confidence and spending have proven surprisingly resilient in the fourth quarter, driving industry sales far beyond expectations,"" Yale Gieszl, executive vice president of Toyota Motor Sales USA Inc., said in a statement.
Toyota said it sold 31,644 Camrys last month, a 31 percent increase and its best-ever November performance. Total sport utility sales were 16,268, more than double a year ago.
Toyota said its new 4Runner had sales of 9,040, a record for November and an increase of 35.3 percent. The RAV4 mini sport utility continued to exceed sales expectations and had November sales of 5,321.
Honda sales rose nearly 16 percent to 70,534, riding the strength of the company's Accord, which had a 41 percent jump in sales to 32,719.
While total car sales for Honda rose 16.8 percent to 68,136, Honda light truck sales fell 6 percent to 2,398.
Mitsubishi sales for the month rose 13.6 percent to 14,225 units, with a 51.4 percent increase in domestic car sales offsetting declines in import car and truck sales.
Nissan Motor Co. Ltd. said its U.S. November sales fell 2.5 percent to 51,325 cars, due to a 12.4 percent drop in domestic car sales.
Ford is expected to report its sales results on Wednesday.
",7
"Marking another step in the consolidation of the automotive interior parts industry, Canada's Magna International Inc. said Thursday it will acquire seat maker Douglas & Lomason Co. for about $135 million in cash.
Under the deal, Magna made a $31-a-share tender offer for all of Douglas & Lomason's 4.45 million common shares outstanding, which include some managment stock options to be bought at lower option prices.
Douglas & Lomason shares rose 37.5 cents to $26.125 on Nasdaq prior to the merger announcement.
The acquisition will beef-up Markham, Ontario-based Magna's North American car and truck seating business, allowing it to better compete with Johnson Controls Inc. and Lear Corp..
Family-controlled Douglas & Lomason, which had 1995 revenues of $561 million, was finding it more difficult to compete for new seating contracts from automakers, said James Hoey, chief financial officer.
""Unfortunately, in the auto industry these days, a $500 million company is not a big company any more,"" Hoey said. ""This merger makes us much more competitive.""
Douglas & Lomason's profits have been hurt in the past year by model changeovers that had limited production at some key customers, but were recovering, analysts said.
The company earned $11.2 million on sales of $299 million in the first six months of 1996, up from year-earlier earnings of $4.7 million on sales of $285.7 million.
Some analysts said the deal was encouraged by Ford Motor Co. because it wanted Magna to become a stronger competitor to Lear and Johnson Controls, its principal seat suppliers.
Douglas & Lomason currently supplies seats for the Ford Contour and Mystique cars and other models, while Magna's only major seat contract is for Chrysler Corp.'s minivans.
A Ford spokesman said the automaker did not take an active role in encouraging the merger, but he added that Ford was pleased with the deal.
Ford plans to cut its roster of 2,300 tier-one suppliers -- those it deals with directly -- in half over the next five years.
""The deal really levels the seating field somewhat,"" said John Casesa of Schroder Wertheim & Co. ""It should give Magna the critical mass to be a bigger player in that market.""
Magna's traditional strength has been instrument panels, door panels and other interior components.
Magna, Johnson Controls and Lear have been working to build up their capabilties to supply complete interiors to automakers, including seats, instrument panels, door panels and carpeting.
Johnson Controls Inc. last month agreed to acquire Holland, Mich.-base Prince Automotive for $1.35 billion in cash to build up its non-seating capabilities.
Lear also has made several acquisitions in the past year to add to its capabilities.
",7
"Automakers ended a strong 1996 with a whimper Friday, as General Motors Corp. said December U.S. car and truck sales fell nearly 14 percent and Chrysler Corp. managed a 1.1 percent sales gain for the month.
Chrysler's full-year sales of 2.45 million vehicles, however, broke the company's 1988 record, and the industry stayed on track to report full-year sales of 15.1 million cars and light trucks, matching the 1994 total that was also its best year since 1988. Automakers sold about 14.8 million cars and light trucks in the United States in 1995.
""It was a pretty good year as a whole, but it's closing on a soft note,"" Burnham Securities analyst David Healy said.
December sales from the 14 automakers who reported Friday ran 8.6 percent below the year-ago results, but full-year sales were up 1.8 percent. Analysts predicted that the seasonally adjusted annual sales rate for the month would be about 14.5 million to 14.8 million units, compared with a strong December 1995 rate of 15.9 million units.
Several Japanese automakers also reported December sales declines on Friday. Ford Motor Co. and Honda Motor Co. Ltd. are set to release year-end sales results on Monday.
GM's car sales fell 12.5 percent in December and normally stronger sales of GM trucks also fell a sharp 15.6 percent.
The December declines brought the auto giant's full-year 1996 vehicle sales to 4,793,169 cars and trucks, a 2.7 percent decline from the 4,895,368 units sold in 1995.
GM's sales for the year were marred by strikes that disrupted production in March, late October and early November, but analysts said car model changeovers and stiff competition in trucks also took a toll.
""I think we're past the point where you can use the strikes as an excuse,"" Healy said. ""I think Ford and Chrysler are beginning to hurt GM in the truck area, where its products aren't fresh any more.""
Still, GM said truck sales for the full year exceeded 2 million units for the first time, rising 2.8 percent over 1995.
GM marketing chief Ronald Zarrella predicted gains in both cars and trucks in 1997, fueled by new sedans, minivans and increased sport/utility vehicle producion.
""The positive reception our new-for-'97 models are receiveing from both our dealers and customers is a certain sign that the coming year will be a good one for General Motors and its dealers,"" Zarrella said in a statement.
GM's market share has hovered near 30 percent in recent months, continuing a steady decline over the past decade.
By contrast, Chrysler estimates that its market share increased by nearly 2 percentage points to nearly 16 percent.
Bolstered by strong sales of minivans, pickup trucks and sport/utility vehicles, Chrysler said its 1996 sales totaled 2,450,826 vehicles, up 13 percent from 1995's 2,164,343. It broke the previous annual record of 2,208,057 units, set in 1988.
Chrysler said December sales of North American-built vehicles rose 5.4 percent but light truck sales dipped 0.2 percent in the month. For the full year, Chrysler's domestic car sales rose 6.6 percent to 827,941 units while light truck sales rose 16.7 percent 1,618,193.
Chrysler's executive vice president of sales, James Holden, said Chrysler may have difficulty surpassing 1996 results this year in some months due to model changeovers. He said the industry will still need incentives to maintain its sales pace.
""I don't see a way to wean ourselves completely from rebates and incentives, but I expect to hold them to similar levels to what we've had, which have been relatively modest.""
Chrysler stock rose 50 cents to $34.625 while GM fell 62.5 cents to close at $57.875, both on the New York Stock Exchange.
Among Japanese automakers, Toyota Motor Corp. said December sales fell 17.4 percent while full-year sales rose 6.4 percent to 1.16 million units.
Nissan Motor Corp.'s December sales dipped 0.2 percent and full-year sales fell 3.4 percent to 749,763 units.
Mazda Motor Corp.'s December total was off 17.2 percent while annual sales fell 16.6 percent to 238,285 units.
Germany's Volkswagen AG posted its best U.S. sales year since 1990, with sales up 17.3 percent to 135,907 cars and trucks. December sales jumped 23.5 percent.
",7
"Chrysler Corp. will report record earnings for 1996, based on record worldwide sales of 2.97 million vehicles, company chairman Robert Eaton said Tuesday.
""We're going to have a record year,"" Eaton said in an interview at Detroit's North American International Auto Show.
Chrysler's previous annual profit record came in 1994, when the company earned $3.713 billion. It earned $2.025 billion in 1995, when sales were held to 2.61 million units by the launch of its current line of minivans.
Eaton also said Chrysler in 1997 should be able to exceed its 1996 sales results because the company will be able to produce about 190,000 more trucks in 1997 than in 1996.
The increase will be come from added capacity for the new Dodge Durango sport utility vehicle in Newark, Del., as well as increased assembly line speeds for the Dodge Ram pickup truck in St. Louis, and increased production of Dodge Dakota pickup trucks in Warren, Mich.
Chrysler planned to unveil the Durango at the Detroit auto show later Tuesday.
Eaton said despite sluggish industrywide car sales and the increasing popularity and profitability of light trucks, the automaker has not cut back on investment in future car programmes.
He said, however, that Chrysler may shift its investment plans if trucks continued to gain market share.
""We're going to put the money where the market goes,"" he said, adding that new, more efficient truck engines should allow Chrysler to continue to increase truck capacity without violating federal fuel economy laws.
Eaton reiterated that Chrysler can earn still earn a profit even if U.S. automotive industry sales fall by 20 percent.
Separately, Chrysler Vice Chairman Robert Lutz, who recently cut back on his corporate responsibilities, said he he still saw himself as an integral part of Chrysler's product creation activities.
""I don't see that anything changed,"" Lutz said. As of Jan. 1, Lutz gave up his president and chief operating officer titles to become vice chairman in anticipation of his 65th birthday in February.
Lutz is largely credited with turning around Chrysler's product development operations by instituting a system of super-efficient ""platform teams"" to bring each new vehicle to market. He said he will continue to act as a coach and mentor to engineers working on Chrysler's car and truck programmes.
Lutz said he will probably stay at Chrysler for a maximum of two more years.
""I have to use this transitional period to ease myself out gradually, because the harsh reality is that I cannot stay around until I'm 70,"" he said. ""I would be seriously worried about a company that had its product fortunes guided by a 70-year-old guy. That usually results in cars directed at 70-year-olds.""
Chrysler stock was unchanged at $35.625 on the New York Stock Exchange.
",7
"The man accused of a shooting rampage at a Ford Motor Co. plant that left one person dead and three others injured was apparently despondent over a rejection of a marriage proposal by a woman who worked at the factory, authorities said Friday.
Gerald Atkins, 29, a former U.S. Army paratrooper, planned an elaborate escape from the car assembly plant in Wixom, Mich., leaving a backpack in nearby woods that contained fresh clothing, water and military food rations.
Atkins was arraigned on more than two dozen criminal charges Friday, including first-degree murder, 11 counts of assault with intent to commit murder, numerous felony firearms charges, and auto theft, for a stolen truck he used to drive to the suburban Detroit factory.
""This was something that was planned out, that was deliberate, and according to what we find now, that he was planning to make his escape,"" Oakland County Prosecutor Richard Thompson told a news conference.
Atkins, an employee at a Walled Lake, Mich., glass factory, had apparently tried to enter the plant previously in the past week to talk to a female employee Thompson identified as ""Debbie.""
Thompson said Atkins was turned away from the factory last Saturday when he apparently tried to propose to the woman. Investigators found a diamond engagement ring in a trash can at Atkins' Wixom apartment.
Ford spokesman Bill Carroll also said Atkins was turned away again Thursday. He came back about an hour later dressed in green camouflage with a military-style assault rifle and shot out the exterior windows of the plant's security office.
Broken glass from the volley injured a man working on computer equipment in the office.
The man killed in the rampage, manufacturing planning manager Darrell Izzard, came outside to investigate, but was shot twice in the leg. Police said he tried to escape into the factory, but Atkins followed him and shot him three more times, in the hip, chest and elbow.
Atkins sprayed gunfire at police in several areas of the plant and wounded two sheriff's deputies outside of the facility when he tried to escape, according to the charges. He held police at bay for more than four hours by barricading himself in a network of drainage tunnels on the plant property.
In 52nd District Court in Novi, Mich., Atkins was ordered held without bond. If convicted on the murder charge, he faces mandatory life in prison.
",7
"General Motors Corp. stock rose Friday on widening optimism that the auto giant's board of directors on Monday will reward shareholders with a dividend increase and stock buyback programme of up to $5 billion, analysts said.
GM shares were up $1.125 to $63 in composite trading after hitting a 52-week high of $63.75 on the New York Stock Exchange in early afternoon trading.
Analysts said GM, flying high a week after it announced the sale of its Hughes Aircraft defence operations to Raytheon Corp. in a deal worth $9.5 billion, was working to catch up with rivals Chrysler Corp. and Ford Motor Co. in returning cash to shareholders.
""I think GM is looking at this rightly. It's time to pay the shareholders for their patience,"" said CS First Boston analyst Nicholas Colas. ""They want to hand some cash back to shareholders who have been long waiting on the suffering side.""
GM spokeswoman Toni Simonetti said GM was scheduled to consider its dividend at the board meeting, but would not comment on a possible increase or stock buyback programme.
The automaker could have afforded such a move last fall, but analysts said it did not want a big payoff to shareholders throwing a wrench into tense contract negotiations with the United Auto Workers union.
Analysts estimated that the board, which holds its regularly scheduled board meeting for February on Monday, will increase the quarterly dividend by 10 cents to 20 cents a share and announce $2 billion to $3 billion in stock repurchases this year. GM now pays a quarterly dividend of 40 cents a share.
Colas said his estimate that GM will buyback $3 billion worth of stock this year was based on expectations that GM ended 1996 with $15 billion in cash, $3 billion above its target of $12 billion.
He noted that Chrysler, less than a third of GM's size, plans to repurchase $2 billion worth of shares in 1997. Chrysler's buyback programme has put a floor under the automaker's stock, allowing it to outperform its rivals.
Smith Barney analyst David Garrity said the board could authorise as much as $5 billion in repurchases over a longer period of time.
GM's dividend hike will be aimed at improving the automakers dividend yield to competitive levels, analysts said. It now is at 2.59 percent, compared with 4.56 percent for Ford and 4.57 percent for Chrysler.
A regular share repurchase programme also would lend stability to GM's share price and help it sustain its recent gains, analysts say.
In the past month alone, GM shares have risen about 15 percent, from about $55 a share, largely on anticipation of the Hughes deal, news that it settled its industrial espionage dispute with Volkswagen AG and expectations of strong cash flow.
""They've packed an awful lot of good news into a short period of time,"" Bear Stearns & Co. analyst Nicholas Lobaccaro said. ""They've accomplished the goal of getting the stock price up, and now the challenge is to sustain it. That can only get done through consistent earnings for several quarters.""
The euphoria over the Hughes deal has overshadowed GM's fourth quarter earnings, which are expected to show the ravages of lower production due to strikes and model launches.
GM has said U.S. and Canadian strikes in October and November reduced its fourth quarter results by $700 million. The automaker also is taking a $170 million charge for lump-sum payments associated with its new United Auto Workers contract.
According to consensus Wall Street estimates, GM on Tuesday is expected to post fourth quarter earnings of about $385 million, or 51 cents a share, which excludes the $170 million charge.
In the fourth quarter of 1995, GM earned a record $1.9 billion, or $1.98 a share, a figure helped by about $577 million worth of tax benefits.
",7
"Chrysler Corp., forced to scrape together all of its resources to survive just five years ago, broke ground Tuesday on a $10 million red granite monument to its up-and-down past.
The automaker is building a 35,000-square-foot historical museum on the grounds of its corporate headquarters and technical center here to house vintage vehicles, company archives and a theater.
The project will be the first full-fledged company-owned museum among Detroit's Big Three automakers. German automakers Mercedes-Benz AG and Bayerische Motoren Werke AG have museums in their respective home cities of Stuttgart and Munich that have become major tourist attractions.
Eaton said the Chrysler Historical Museum also will eventually open to the public, but added that it also is intended to instill pride in the company's employees.
The project is another sign of Chrysler's confidence in its future and of the dramatic shift in the automaker's fortunes since its brushes with financial ruin in 1980 and again in 1991.
The automaker nearly sold its collection of vintage vehicles -- including the very first 1924 Chrysler Six touring car -- in the late 1970s to raise cash.
""Five years ago, we wouldn't have been talking about being able to afford this,"" Eaton said.
But he insisted that the museum was not corporate largesse brought on by Chrysler's financial success this year and does not expect any backlash from shareholders.
""I don't think there would ever be anybody who would ask that question when you consider the amount we've invested in in new products and in the shareholders, etcetera.""
Prodded by Chrysler's largest shareholder, Las Vegas billionaire Kirk Kerkorian, Eaton pledged to buy back $3 billion in stock over the last two years and will repurchase another $1 billion worth in 1997.
It is unclear how the museum will treat Lee Iacocca, the legendary former Chrysler chairman who joined Kerkorian's failed takeover bid for the automaker last year.
Asked if Iacocca's role in Chrysler's history will be featured in the museum, Eaton said, ""He's part of the history, so there's a likelihood he will.""
Eaton also said Chrysler wants to purchase a few key vehicles for the collection. He's in the market for a 1955 Chrysler 300 equipped with a ""hemi"" V-8 engine.
",7
"Kellogg Co., in a move to broaden its breakfast food business and help offset sluggish cereal sales, said Monday it will acquire the Lender's Bagels business from Kraft Foods Inc. for $455 million.
Lender's, based in White Plains, N.Y., is the nation's largest maker of fresh and frozen bagels sold in grocery stores, with annual sales of about $275 million. Kraft is owned by Philip Morris Cos. Inc., the New York-based food and tobacco giant.
""Lender's Bagels is a perfect fit for Kellogg Company's fast-growing convenience foods business,"" Kellogg Chairman Arnold Langbo said.
""With our heritage based in nutrition and our technical competence in grain-based food products, adding the nation's number one brand in bagels ... offers substantial new opportunities to grow our business,"" he said in a statement.
Analysts said the deal would extend Kellogg's reach into America's breakfast pantry by moving it into the fast-growing bagel business, with sales estimated at about $2.8 billion a year.
In addition to being the world's largest maker of ready-to-eat breakfast cereal, Kellogg also makes Pop-Tarts toaster pastries, Eggo frozen waffles and Nutri-Grain breakfast bars.
""It's a good fit in that it is a breakfast business,"" said Goldman Sachs (corrects from Salomon Brothers) analyst Nomi Ghez. 
""It recognizes that the cereal market has matured, and other areas are eating into it. They have to move into those other areas.""
The deal, expected to close by year-end, includes Lender's plants in New Haven, Conn.; Mattoon, Ill., and Buffalo, N.Y., Kellogg said.
But the acquisition is not big enough to halt the erosion in Kellogg's mainstay cereal business, analysts said. Price cuts of about 19 percent this year have failed to boost demand, and Kellogg's cereal sales fell as much as 15 percent in the third quarter due to stiff competition, they said.
Standard & Poor's Corp. Monday cut its ratings outlook for $1.3 billion in Kellogg corporate debt to negative from stable because it believes the company will have difficulty in recapturing lost sales and improving profits.
Kellogg's earlier this month warned that its first quarter 1997 profits will likely fall below the year-earlier results.
Kellogg stock fell 12.5 cents to $68.125 on the New York Stock Exchange.
At a price of more than 1.5 times Lender's sales, the acquisition will depress Kellogg's earnings slightly in 1997, Ghez estimated. It should boost profits in 1998, she said.
Joseph Stewart, Kellogg's senior vice president of corporate affairs, said the company sees long-term growth prospects for Lender's Bagels, which has 45 percent of the nation's prepackaged bagel market.
""This is a long-term positive proposition to build shareholder value,"" Stewart said.
Kraft, based in Northfield, Ill., is the nation's largest packaged food company with revenues of $16 billion.
Kellogg, based in Battle Creek, Mich., has annual sales of about $7 billion.
",7
"Continuing the shake-up of its huge marketing organisation, General Motors Corp. Wednesday said it will replace the heads of its Buick and Cadillac divisions, which have been hurt by slow sales in recent years.
The departures of veteran Cadillac General Manager John Grettenberger and long-time Buick General Manager Ed Mertz on Feb. 1 will bring to four the number of GM division chiefs to leave the automaker in the past year.
Oldsmobile General Manager John Rock announced in October that he will retire at year-end, amid reports of clashes with GM Executive Vice President of Marketing Ronald Zarrella.
James Perkins retired as Chevrolet general manager earlier this year, turning the reins of GM's largest division to John Middlebrook, previously in charge of Pontiac, which was merged with the GMC Truck division.
GM has been in the process of reducing the power and independence of its divisions -- which once operated as separate automakers and competed for new products -- to bring its vast array of brands into sharper focus.
Over the next several years, GM will move its division staffs from their traditional home cities throughout Michigan to the automaker's new corporate headquarters at Detroit's riverfront Renaissance Centre.
Mertz, 59, Buick's general manager since 1986, will be succeeded by 59-year-old Robert Coletta, a 41-year Buick veteran who was previously the division's general sales and service manager.
Grettenberger, 59, Cadillac general manager since 1984, will be succeeded by John F. Smith, 45, who was previously president of GM's Allison transmission division.
Smith is no relation to GM Chairman John F. Smith Jr., but worked under him at the automaker's European operations and on its corporate finance staff. The new Cadillac general manager was a vice president of planning for GM-Europe, regarded as the automaker's most efficient operation, from 1989 to 1994.
Smith and Colletta will report to Zarrella, the executive guiding the marketing overhaul at the world's largest automaker.
Since joining GM in December 1994, Zarrella has hired more than 34 new brand managers, some of them from non-automotive consumer product industries, and put them in charge of developing stronger brand character for GM's cars and trucks.
On Tuesday, Zarrella said GM was preparing to build its Cadillac brand into a world-class luxury car nameplate that sells cars worldwide and can compete with Mercedes and Lexus.
In recent years, Cadillac has suffered from its reputation as a builder of massive, traditional American luxury cars with soft rides and plush upholstery.
Cadillac's annual sales peaked in 1978 at 350,813 cars, but have declined steadily as consumers have turned to Japanese and European luxury brands and sport/utility vehicles. For the first 11 months of 1996, Cadillac sales fell 5.8 percent from a year earlier to 153,393 units.
But Cadillac recently introduced a new entry-level luxury car, the German-built Catera, in an effort to draw younger buyers. It is also developing a new generation Seville that will be sold in world markets.
""The 1998 Seville is sized right for international markets. It will have right-hand-drive,"" Zarrella said.
Also on Tuesday, Buick unveiled its next-generation Regal sedan, which will go into production next year with other important GM mid-sized sedans. GM is trying to position Buick to capture more conservative buyers who have traditionally gravitated to Oldsmobile as Oldsmobile tries to compete with import near-luxury brands.
Buick, which also gets a replacement for its Century sedan this year, has also seen its sales decline steadily from their 1984 peak of 941,611 cars. This year through November, Buick sales are down 9.8 percent to 399,627 cars.
Mertz is retiring after a 40-year career with GM and Grettenberger has spent 34 years with the company.
",7
"Ford Motor Co., following several competitors in offering ""certified"" used cars, said Monday its Ford and Lincoln brands are starting used vehicle warranty programmes that eventually will be available nationwide.
Under the programmes, Ford and Lincoln-Mercury dealers will put cars and trucks through special inspection and reconditioning processes and offer factory-backed warranties and three-day, money-back guarantees.
""This is not just an individual, dealer programme,"" said Ford division spokesman Dan Bedore. ""It's backed by the Ford Motor Company.""
The Ford Division programme will be launched in the spring following a regional rollout in the southeastern United States in mid-November, while the Lincoln programme will be introduced in major markets Dec. 9.
A third programme covering Ford's Mercury brand cars and trucks will begin next summer, a Ford spokesman said.
The programmes are among several now offered by major automakers, including General Motors Corp. and Toyota Motor Corp., in an effort to keep their dealers competitive in the growing market for used cars and trucks.
Ample supplies of used vehicles that have come off of two-year leases have given rise to several new used-car ""superstore"" chains, such as Circuit City Stores Inc.'s successful CarMax unit, and a new chain called AutoNation USA, started by Blockbuster Entertainment founder H. Wayne Huizenga.
Ford estimated the annual pre-owned car and truck market at 43 million units and $370 billion in revenues. Automakers are expected to sell about 15.5 million new cars and trucks in the United States this year.
To qualify for the Ford Quality Certified programme, Ford brand cars and trucks must be under four years old and have been driven less than 50,000 miles. Those vehicles must pass a 100-point inspection, and following reconditioning, will receive a one-year, 12,000-mile warranty, 24-hour assistance and a three-day, 300-mile money-back guarantee.
To qualify for the Lincoln Assured prgram, Lincoln luxury cars must be one-owner 1994 models or later with less than 36,000 miles and have suffered no major damage.
They will undergo a 150-point inspection and will be backed by a two-year, 24,000-mile bumper-to-bumper warranty, Lincoln-Mercury said, adding that brake pads will be replaced on all Lincoln cars with more than 25,000 miles.
",7
"Ford Motor Co. said Wednesday its U.S. light vehicle sales fell 2.2 percent in November as a steep drop in car sales offset gains in trucks, capping off a disappointing month for the industry.
Earlier this week General Motors Corp. reported a 12 percent drop in November sales, while Chrylser Corp. reported a 1.4 percent increase.
Ford said it sold 290,774 cars and light trucks, compared with 297,362 a year earlier.
Domestic car sales fell 11.3 percent to 52,101 units, while light truck sales rose 5.7 percent to 175,606. Ford's import car sales fell 48.2 percent to 1,597.
""The retail market's shift from cars to light trucks not only has continued, but is gaining momentum as the year progresses,"" said Robert Rewey, Ford group vice president of sales and marketing.
Ford's combined Explorer, Mountaineer and Expedition sport utility vehicle sales rose 38 percent to 55,343 units. Rewey added that Ford planned to ease shortages of its four-wheel-drive vehicles by adding new component capacity in the first quarter of 1997.
But November sales of every Ford car line, except the Taurus mid-size sedan, declined from the year-ago period.
Taurus sales rose 9 percent to 31,017, enough to preserve the car's lead over the Honda Accord in the perennial duel for the best-selling car in the United States. So far this year, Americans have purchased or leased 363,077 Tauruses vs. 353,328 Accords and 335,906 Toyota Camrys.
Ford's sales brought total industry U.S. car and light truck sales for November to 1,125,582 vehicles, down 1.6 percent from the 1,144,448 units sold a year earlier.
The seasonally adjusted annual sales rate for the month was 14.9 million units, compared with 14.8 million units a year earlier, and 14.9 million units for the month of October. The rate is calculated with seasonal factors supplied by the Commerce Department.
General Motors on Tuesday reported a 12 percent drop in November sales, fueled by strikes and model changeovers, while Chrylser reported a 1.4 percent increase in sales.
Toyota Motor Corp. and Honda Motor Co. Ltd. were the industry standouts, with sales gains of 19.6 percent and 15.5 percent, respectively.
Analysts said the lackluster November results for Detroit's Big Three automakers did not signal the start of a downturn in the U.S. vehicle market.
""I think one of the problems in November was that you had Thanksgiving late in the month, with only two selling days after it, compared to six last year,"" said Smith Barney auto analyst David Healy in New York.
""December seems to have gotten off to a good start, so I think we'er going to have a good close to the year,"" he said.
For the first 11 months of 1996, automakers sold 14,010,647 light vehicles, up 2.4 percent on a daily selling rate basis from the 13,590,795 sold a year earlier. Analysts predicted that the year-end total will be about 15.1 million to 15.2 million vehicles.
Automakers sold 486,407 North American-built cars in the United States in November, down 9.7 percent from a year ago. Domestic truck sales totaled 494,166 during November, up 5.6 percent from a year earlier.
",7
"Chrysler Corp. said Monday it has developed a new way to extract hydrogen from gasoline that could shave 10 years off the introduction of super-efficient electric cars powered by ""fuel cells.""
Long used in spacecraft applications, fuel cells generate electricity through the chemical reaction between hydrogen and oxygen, triggered by a platinum catalyst.
Detroit automotive engineers have studied them as a potential power source, but have scratched their heads at the problems associated with producing, distributing and storing highly volatile hydrogen fuel.
At the North American International Auto Show here, Chrysler said Monday it has developed a fuel cell system that can extract hydrogen from normal gasoline and power a future car with a 50 percent increase in fuel efficiency over current cars using conventional internal combustion engines.
""We believe hydrogen needs to be processed from gasoline on-board vehicles because hydrogen isn't a practical fuel choice today,"" said Francois Castaing, Chrysler's vice president of vehicle engineering. ""Simply put, there's not any filling stations supplying it to a mass market.""
If the system ever makes it out of the laboratory, drivers of gasoline fuel cell cars would simply refuel at a normal gasoline station, although the car would have a smaller tank than those used today.
But the elaborate system -- called an on-board ""refinery"" by Chrysler advanced technologies specialist Christopher Borroni-Bird -- faces significant hurdles. Packed with precious metal catalysts to remove harmful sulphur and carbon monoxide emissions, it would cost 10 times more than a conventional internal combustion engine, or about $30,000.
Chrysler hopes to have a working test vehicle within three years, and estimates that if the rest of the auto industry adopts the same approach to fuel cells, they could become commercially viable power sources by 2010 to 2015.
""In time, we think development of this processor will help open the door to the use of fuel cells as the primary power source in a series hybrid vehicle that meets consumer demands for range and performance.""
The first wave of modern electric vehicles from Detroit and Japan are now being introduced. They rely on batteries to provide electrical energy, but their range is severely limited.
General Motors Corp. became the industry's first automaker to introduce a new-generation vehicle, the $35,000 two-seat EV1, which can only drive 60 to 70 miles between charges.
Automakers also are tinkering with hybrid electric vehicles, which use a small internal combustion engine to drive a generator that supplies electricity to drive the wheels. The cars also use an interim storage device, such as a battery or flywheel.
Automotive engineers say the major problem with such hybrids is their high cost -- they essentially use two separate powertrains, instead of just one in conventional internal combustion cars.
",7
"Chrysler Corp.'s redesigned 1997 Jeep Cherokee sport utility vehicle will carry a base price $555 to $1,344 higher than the 1996 model, the automaker said Wednesday.
Chrysler, implementing the first major update of the Cherokee since it was introduced by American Motors Corp. in the fall of 1983, said the base SE, two-door, two-wheel-drive 1997 model will start at $15,825, an increase of $555 from the 1996 model.
The four-door, four-wheel-drive Cherokee Sport model -- the most popular version of the vehicle -- will sell for $20,985, an increase of $815 from the 1996 model. The most expensive Cherokee, the four-door, four-wheel-drive Country model, will start at $23,945, an increase of $1,344 over the 1996 model.
The Sport and Country models offer a standard six-cylinder engine, while the SE model offers a standard four-cylinder engine. All of the prices include a $525 destination charge.
For 1997, the vehicle gets a new instrument panel with dual air bags, updated sheet metal and a redesigned grille.
But the Cherokee retains much the same squared-off look it had when it became the industry's first compact, four-door sport utility vehicle as a 1984 model.
Chrysler said it has the capacity to build about 150,000 Cherokees annually at its Toledo, Ohio, assembly plant. Through the first 10 months of 1996, Jeep dealers sold 131,995 Cherokees, which represents a 44 percent increase over the 91,246 they sold in the same period of 1995.
The automaker also said it kept the price of its 1997 Dodge Viper GTS coupe unchanged at $66,700, but two features that were standard the 1996 model -- metallic blue paint with white racing stripes and polished aluminum wheels -- are now options with a combined cost of $1,500. The 1997 Viper GTS coupe comes with standard monochromatic red paint.
Separately, Chrysler increased cash incentives on two 1996-model versions of its full-size vans, effective immediately through April 7, 1997.
Chrysler said the cash rebate on the 1996 Dodge Ram Wagon was increased to $1,500 from $1,200, while the rebate on the 1996 Dodge Ram Van Conversion was raised to $2,000 from $1,600.
",7
"State-owned Gaz de France plans to spend billions of francs upgrading its infrastructure to meet demand growing at an estimated three percent a year.
Chairman Pierre Gadonneix said on Wednesday he was against European rules aimed at liberalising the gas industry because that would focus minds on the short term whereas long term commitments were needed.
""It's extremely difficult to make people understand that while we have for a few more years an abundance of gas, we need long term deals to ensure our medium term needs,"" Gadonneix told reporters at a visit to the ""Artere du Midi"" gas pipeline under construction.
He said European liberalisation could not do for gas what it had done for electricity, noting there were big differences between the two energy sectors.
While all European countries produce electricity, only Britain and the Netherlands export gas in the European Union and the other member states are almost completely dependent on imports from Norway, Russia and north Africa.
""I am not against a spot market,"" Gadonneix said, ""As long as it does not hurt the long term (20-25 years) commitments.""
It takes many years to build a gas infrastructure and in France's case it is far from completed. Gaz de France will have spent 4.5 billion francs on transport and distribution in 1996 and will spend five billion in 1997 with a 10 percent growth rate for many more years to come.
To amortise these investments takes many years. On top of that there is the question of the national security of assuring supply, now arranged by so-called ""take or pay"" contracts.
""The producer takes a risk on the price, we take a risk on the volume,"" Gadonneix said.
He is not in favour of allowing big clients to order natural gas directly from the producer, but he does support the existing European gas transit system. ""The Europe of gas distribution has been working for 30 years, long before people wanted to invent rules for it,"" he said.
Gas firms have agreed deals for the transit of gas, based on a ""normal"" reward for the investment on one side while on the other the advantages of scale are being passed on to the user.
France, due to its geographic position, transits gas from Norway to Spain -- some two billion cubic metres this year, rising to 2.6 billion in 1997.
Gadonneix does not believe that Gaz de France should remain for ever in the hands of the state.
""It does not make a difference. For me there are well-run companies and badly-run companies. We have to serve our clients, take account of our staff and our shareholder whether it is the state or the private sector,"" he said.
The ""Artere du Midi"" pipeline, a one billion franc investment for Gaz de France, links Marseille to Toulouse for the transport of gas from Algeria to the southwest of France. The link will also help to transport gas to Spain.
Gadonneix said that in France gas has a 13 percent share in the market for energy products, against fuel and electricity, while the average for Europe is 20 percent.
""Almost every day of the year we connect a new village,"" he said. This, with the new cogeneration of electricity from gas as well as oil or coal, means that demand will grow by three percent per year, or one billion cubic metres.
For this, the company has two other infrastructure projects, one to land gas from Norway and another for Dutch gas.
Gadonneix is also enthusiastic about new uses of gas and the company will in 1997 start an experiment with an undisclosed town for buses and municipality vehicles to run on natural gas to help cut pollution.
",29
"French chemical group Rhone-Poulenc SA and Merck & Co Inc of the U.S. announced on Thursday they were merging their animal health activities to create the world leader in the sector.
The new 50/50 joint venture company Merial, with estimated 1996 sales of $1.750 billion, will be the market leader in biology products, veterinary drugs and poultry drugs, they said.
In the animal health sector Merial will overtake Pfizer-Smithkline Beecham, Bayer and Novartis -- the recent merger between Ciba-Geigy AG and Sandoz AG of Switzerland.
Igor Landau, managing director of Rhone-Poulenc, told a news conference the merger would cut costs and have an effect on jobs, although it was too early to give details.
""It will not be in France that the impact will be most pronounced,"" he said, adding that the merger would have a positive effect on Rhone's results.
Merck will make an unspecified payment to Rhone for the 50/50 parity.
""Taking everything into account, the valuation of our business was higher than that of Merck,"" Landou said, because Rhone's growth potential was higher.
The joint-venture will merge the animal health activities of Rhone Merieux and Merck AgVet. It will be headed in the first few years by Merck's John Preston, while Rhone's Louis Champel will become chief executive of Merial and will succeed Preston.
Landau said discussions had lasted several months and a letter of intent had been signed on Thursday morning. J.P. Morgan and Bear Sterns were advisor banks.
Merck was the number two in animal health in 1995 but has been overtaken in 1996 by Novartis. Its leading product, Ivermectine, loses some of its patent protection next year but has still some eight years of sales ahead of it. 1996 sales for this product alone have been some $750 million.
Rhone Merieux's main product is the recently launched Frontline, which has had sales this year of $85 million and expects them to doublein 1997.
Merial will benefit from the launch of a number of new Merck products in the coming years while a new jointly-developed product will be ready in three years.
""The real creation of added value is in innovation,"" Landau said, stressing the possible synergies of the joint research and development.
Shares in Rhone-Poulenc were up 0.48 percent at 166.80 francs on the Paris stock exchange at 1200 GMT.
Landau said that Merial would not be listed seperately. He said that Rhone's animal health activities had a profitabilty of 13.5 percent in operating income as a percentage of sales and of some 18 percent in operating income as a percentage of working capital. Merck's profitability is ""largely higher"" than that.
The Merial merger is the latest of a series of big corporate moves in animal health.
In 1994, American Cyanamid was bought by American Home Products Corp (AHP). In 1995 by Pfizer bought the animal health business of Smithkline Beecham Plc and Rhone Merieux acquired the veterinary business of Sanofi, part of Elf Aquitaine.
1996 saw the creation of Novartis and Belgium's Solvay sold its animal health business to AHP.
Landau said that Mallinckrodt, number nine in world animal health, was for sale but Rhone was not interested.
Asked to comment on rumours of a merger between Rhone's Rhone-Poulenc Rorer and Sanofi, following a Thursday statement by Elf that a merger was desirable for Sanofi, Landau said Rhone was not interested in a pharmaceutical alliance.
",29
"French food group Saint Louis on Tuesday tightened its grip on the Spanish sugar sector by acquiring a 15 percent stake in Spain's biggest sugar company and second-largest food group Ebro Agricolas.
Analysts welcomed the move and Saint Louis shares rose two percent to 1,355 francs in an otherwise flat stock market.
""I think they want to have a controlling stake in Spanish sugar-making but I do not believe that the political powers there will allow them to do so quickly. They have to go slow,"" said a Paris-based food sector analyst.
The company's Generale Sucriere unit bought the 15 percent stake from Banco Santander. Spanish newspapers said the deal was for 17.14 billion pesetas ($129.4 million).
A Saint Louis spokesman declined to comment on the price but said Ebro had a market value of 110 billion pesetas, annual sales of 154 billion pesetas and a market share of 54 percent.
Saint Louis already has a stake of about 21 percent in Sociedad General de Azucarera de Espana (Azucarera), Spain's second-largest sugar group.
The two Spanish groups said in December they were working on a merger which would create the European Union's fifth-largest sugar group. Ebro bought a 21.8 percent stake in Azucarera from bank Banco Central Hispano (BCH) in November.
Saint Louis chairman Daniel Melin has said he wants to have a stake of 20 to 25 percent in the merged group, which would produce 80 percent of Spain's European Union sugar quota.
""We would now have a 17 percent stake in a merged group which is in line with our policy. We do not want to rise above 25 percent because we would have to make a bid for the rest. We want to be a shareholder, not an operator,"" Saint Louis spokesman Olivier Labesse said.
Spain's Ministry of Agriculture has in the past blocked attempts by the French group to increase its stake in Azucarera as part of a general policy of stopping foreign companies taking control of the Spanish sugar market.
""I believe Saint Louis will try to get a majority and restructure the new company where there is a lot of scope for cost savings. The Spanish ministry may be against it and they can huff and puff but I do not really see how they can block it,"" a London-based analyst said.
""There will be a lot of political opposition to a majority stake,"" said Dominique Bastien of brokerage Pinatton Wargny.
BCH has sold another 24 percent in Ebro to a savings bank, Caja de Salamanca. The Kuwait Investment Office (KIO) is Ebro's largest shareholder with a 35 percent stake, while state-owned food group Mercase is expected to increase its 4.7 percent holding by buying BCH's remaining 4.1 percent stake.
Dresdner Kleinwort Benson financial analyst Charles Manso welcomed the Ebro deal and said he was reviewing his Saint Louis recommendation and might raise it from ""hold"".
""This is the second bit of good news in two days. We have to factor that in. I think today's deal is slightly earnings enhancing,"" Manso said.
On Monday, Saint Louis said it was closing its sugar plant at Bresles in France as part of a rationalisation of its production structure.
""The new management has been in place for 18 months now and they are doing the right things,"" Manso said.
In November, it sold its Royal Champignon mushroom unit to Champi-Jandou and it has made provisions for restructuring at its 40 percent-owned paper unit Arjo Wiggins Appleton.
Melin, a former head of construction group Spie Batignolles, was named chairman and chief executive at Saint Louis in May 1995 after Bernard Dumon died in a plane crash in January.
The group is controlled by Bank Worms et Cie, which has a 27.8 percent stake and Italy's IFIL SpA, an Agnelli family finance company, with a 25.9 percent stake.
""I like what they are doing with sugar and with paper, but I do not see what they are going to do to create their so-called third pole,"" said a Paris analyst.
Saint Louis is the fourth-largest sugar group in Europe behind Germany's Suedzucker, Britain's Tate and Lyle Plc and France's Eridania Beghin-Say.
($1=132.5 Peseta)
",29
"French state agencies met on Friday to rubber stamp an 11 billion franc ($2.09 billion) capital injection of state aid in electronics group Thomson SA, as the government reviewed options for reviving its sale.
Thomson labour unions, with the support of many other labour groups, were planning a big demonstration in Paris later to demand the total cancellation of the group's privatisation after its controversial sale was suspended earlier this week.
Finance Minister Jean Arthuis, under political pressure to come up quickly with ways to restore France's reputation on international markets, was working on how to relaunch the sale process.
He must also find ways to mollify South Korea, which was outraged by the decision to suspend the privatisation because the independent Privatisation Commission did not agree with the terms of the planned sale of Thomson's consumer electronics subsidiary Thomson Multimedia to Daewoo Electronics.
Inside Thomson's Paris headquarters state shareholders were holding an extraordinary meeting to vote on the capital increase that is needed to bolster the company's balance sheet ahead of a sale.
Representatives of France Telecom and the CDR state holding company, which owns former Credit Lyonnais assets, met to agree the aid package, which has also to win approval from the European Commission in Brussels.
A spokesman for Dutch-based Philips Electronics denied a rumour the company had lodged an official complaint.
One issue that Arthuis has to settle is whether to restart the sale from the beginning and invite new tenders, or to limit negotiations to the two finalists in the orginal process -- the winner Lagardere Groupe and Alcatel Alsthom.
He must also decide whether to abandon France's preference for the defence and electronics group to be sold as a whole rather than in parts. Arthuis has said he his willing to consider a split before a sale.
The influential Les Echos financial newspaper said on Friday that if the government insisted on a package sale, Alcatel Alsthom stood the best chances of winning. Alcatel chairman Serge Tchuruk recently suggested the state should sell Thomson SA as a whole, but in tranches.
If the government accepted a split, Lagardere Groupe could still obtain control of 58-percent defence unit Thomson-CSF, Les Echos said.
Whatever the solution, Arthuis faces a series of problems.
South Korea's Deputy Prime Minister Han Seung-son told French ambassador Dominique Perreau in Seoul on Friday that the Thomson decision had ""caused worries to many people"" in South Korea.
French companies have recently won huge orders from Korea, including a TGV high-speed train deal, and are vying for a multi-billion combat aircraft order.
Another problem is the risk of a spillover into other privatisations. International investors are expressing their dislike of the French decision and trades unions see the climbdown at Thomson as a sign they can win elsewhere.
The Communist-led CGT union said on Friday the government should also suspend the planned sale of France Telecom. Billed as France's biggest stock market flotation, it is set for next spring. ($1=5.270 French Franc)
",29
"Shareholders of electronics group Thomson SA rubber-stamped an 11 billion franc ($2.12 billion) state capital injection of Friday as the government  reviewed how to relaunch the privatisation process.
""I believe we need a few days to think things over. We've been accused of amateurism and blundering, we're not going to rush into any statements now,"" a government official told Reuters.
Industry Minister Franck Borotra received a delegation of Thomson worker representatives who wanted the government to drop the privatisation plans entirely, after the state on Wednesday announced it was suspending the sale.
State-owned Thomson SA comprises 58 percent of defence electronics group Thomson-CSF and all of televison and video recorder maker Thomson Multimedia (TMM).
Some 200 Thomson workers marched through the streets of Paris, welcoming a group of 15 employees that had walked for a week from the Thomson Multmedia plant in Angers in west France.
""Franck Borotra has expressed the government's intention to pursue the (Thomson) privatisation according to terms which will be detailed in the coming days,"" the industry ministry said.
""He has taken note of comments that TMM should be fully valued and reconfirmed the recapitalisation of this company.""
The government on Wednesday suspended the sale, for a symbolic franc, of Thomson SA to Lagardere Groupe because the independent Privatisation Commission could not agree with the terms of Lagardere's planned sale of Thomson Multimedia to Daewoo Electronics of South Korea.
The French Foreign Ministry on Friday, asked by an irritated South Korea to explain itself, issued a statement aimed at easing the strain on its ties with an important trade partner.
The ministry said France and South Korea enjoyed relations of ""respect, partnership and confidence"".
Inside Thomson's Paris headquarters, state shareholders voted to back a capital increase needed to bolster the company's balance sheet ahead of an eventual sale.
The shareholders are a handful of representatives for the state, telecom operator France Telecom and a pool of banks represented by the state-owned Caisse des Depots et de Consignations (CDC).
Thomson said afterwards that the state would pay the bill, but the aid still needs EU approval.
At the end of 1995, Thomson SA had debts of 25.3 billion francs of which 13.8 billion were at TMM and 2.3 billion at Thomson-CSF.
Finance Minister Jean Arthuis said on Thursday he was not ruling out any options, including whether Thomson-CSF and TMM should be sold seperately rather than in one go.
In February, President Jacques Chirac made the privatisation conditional on the group remaining intact.
The Les Echos business newspaper said that if the government insisted on a package sale, Alcatel stood the best chances of winning.
Alcatel Alsthom chairman Serge Tchuruk, whose rival offer had been sidelined by the government in October, recently suggested the state should sell Thomson SA intact but in stages.
If the government accepted a split, Lagardere could still obtain control of Thomson-CSF and finalise the planned merger with its Matra Defence unit, Les Echos said. ($1=5.186 French Franc)
",29
"Philippe Jaffre, chairman of French oil group Elf Aquitaine, is entering the last lap of an ambitious restructuring drive to cut the formerly state-owned conglomerate back to its core oil and chemicals activities.
After a three-year programme to sell assets from a treasury trove lovingly amassed by state-appointed predecessors such as Loik Le Floch Prigent -- now in jail pending trial on fraud charges -- Jaffre this week said he was ready to give up control of the health and beauty products unit Sanofi.
Sanofi, in which Elf holds 53 percent, has a promising product pipeline but needs money to get them to market quickly.
Its chief executive Jean-Francois Dehecq also has ambitions to play a part in the global pharmaceutical industry's restructuring and needs more financial support.
At a board meeting on Wednesday at Elf's imposing glass office tower in Paris's La Defense business district, Jaffre told Dehecq Elf would not commit money to a Sanofi expansion but freed the unit to engage in talks toward an alliance.
""Jaffre wanted to send a signal to other pharmaceutical companies that Sanofi is in play,"" a company source said.
Jaffre had previously said Elf would not invest a lot of money in Sanofi because it was trying to reduce its own debt and improve its profitability.
Elf is among the weakest performers in the oil industry. In 1995, its return on equity was 6.5 percent, compared with 12.1 percent at Shell/Royal Dutch and 16.7 percent at Exxon, according to data on Reuters Securities 3000.
Elf said on Thursday its consolidated income for 1996 was up 40 percent at 7.3 billion francs ($1.4 billion) and the board said it was pleased with the recovery stemming from stringent controls.
In June 1994, when Sanofi wanted to buy the Sterling Winthrop business from Eastman Kodak, Jaffre agreed with the $1.68 billion acquisition on condition that Sanofi sold assets for the same amount. Dehecq was forced to part with Sanofi's bio-activities and some lacklustre perfume brands.
Jaffre was appointed chairman and chief executive of Elf in 1993 when it was still under state control and he oversaw the privatisation of the group in 1994. The sale of a 64 percent stake in Elf for 385 francs per share generated 14.9 billion francs, representing the biggest privatisation to date.
But Elf reported its first ever loss that year, of 5.4 billion francs, after Jaffre took an 8.7 billion charge to clean up the balance sheet and write off overvalued oil reserves and the Texas Gulf phosphate business.
He said he aimed to sell 15 billion francs of industrial assets and six billion of financial assets to cut the debt which stood at 46 percent of equity. Most of this programme has been carried out, company sources said.
Jaffre cut investment in the ambitious Leuna refinery project in former East Germany, sold stakes in Entreprise Oil in Britain and Petrofina in Belgium and most recently a stake in Compagnie de Suez.
Elf returned to profit in 1995, reporting income of 5.04 billion francs, and Jaffre stated his goal to place the company in the Top 10 oil firms worldwide in all its activities by 2005.
While it ranks eighth overall, its chemicals are in 13th place, pharmaceuticals in 20th, and the refining and marketing activities are also lagging.
Chemical unit Elf Atochem rode an industry upswing to boost 1995 operating income to 5.0 billion francs from 1.8 billion.
The core refining and marketing business remains weak. In November 1996, Elf merged its British refining and retail operations with Chevron Corp unit Gulf Oil and Murco Petroleum of Murco Oil Corp. ($1=5.260 French Franc)
",29
"The French government called off the controversial sale of electronics group Thomson SA Wednesday in a major policy reversal after weeks of staunchly defending its controversial choice of a buyer.
It was the second privatisation to be halted in less than a month after the government decided to suspend the sale of a state-owned bank.
It comes at a time when Prime Minister Alain Juppe, at a record low in opinion polls, is anxious to avoid another labour revolt following last month's truckers strike.
The Finance Ministry said in a statement the suspension of the proposed Thomson sell-off to Lagardere Groupe was due to objections to the planned sale of the company's consumer electronics unit to South Korea's Daewoo Electronics.
Lagardere said in a statement it was still interested in taking over Thomson, which it said was of strategic importance.
The office of Prime Minister Alain Juppe said renewed talks about the sale could start soon.
""The government will launch consultations as rapidly as possible allowing the privatisation to take place on a basis that will be defined very quickly,"" Juppe was quoted as saying.
""The aim of privatising Thomson addresses the necessity for France to have an electronics and defence industry of global standing,"" he said.
Industry Minister Franck Borotra said in a statement the privatisation of Thomson remained essential.
The government said in October it had selected Lagardere Groupe because it was best for French defence interests and would sell the heavily indebted company for a symbolic one franc after a 10.8 billion franc ($2 billion) state capital injection.
Lagardere planned to merge Thomson's 58 percent owned defence electronics unit Thomson-CSF with its own Matra Defence Espace.
The Finance Ministry's surprise suspension announcement came on the day the European Commission had been expected to give the green light to the deal.
The ministry said the Privatisation Commission ""declared itself incapable of giving a favourable opinion to the Lagardere Groupe offer, because of the terms of Daewoo Electronics' purchase of Thomson Multimedia.""
",29
"French oil group Elf Aquitaine on Monday signed a landmark oil exploration deal with Azerbaijan, the former Soviet republic which France has described as the next oil Eldorado.
The contract is the latest in a string of Western oil deals in the Caspian Sea region, whose waters contain some of the most sought-after oil reserves in the world despite ethnic conflicts and a web of disputes over pipeline rights.
Following months of negotiations, Elf said in a statement it had signed a production sharing contract for the offshore Lenkoran-Talysh Deniz permit with Azeri national oil firm Socar.
Symbolising the Baku government's drive to attract Western capital and technology, the contract was signed in the presence of Azeri President Haydar Aliyev, who is on a three-day state visit to France, and French President Jacques Chirac.
Elf will take an initial 65 percent stake as operator in the field, while Socar will have 25 percent. Elf's smaller French oil rival Total SA has 10 percent and there are negotiations for other companies to join the consortium.
""The signature of the Lenkoran-Talysh Deniz contract is a major step for the group in its establishment in Azerbaijan,"" Elf chairman and chief executive officer Philippe Jaffre said.
A spokesman for Elf declined to detail the estimated reserves or the investment needed. He would not comment on reports that Mobil Corp and Germany's Deminex could join the consortium.
Azeri news reports have said the oil exploration deal is worth around $2 billion, although Western oil industry sources cautioned the exact value of the deal was still hard to assess.
The 30-year Lenkoran-Talysh Deniz project allows Elf to seek and produce oil in an area of 420 square kilometres (162.2 sq miles) in waters up to 100 metres (328 ft) deep, located south of Baku in the Caspian Sea .
Russia's Interfax news agency said the contract could tap into oil reserves of 80 to 100 million tonnes.
In June 1996, Elf also signed a production sharing contract for a 10 percent interest in a consortium led by British Petroleum Plc on the Shah Deniz permit in the Caspian Sea.
French Foreign Minister Herve De Charette said when he visited the area in October that he had obtained ""very precise"" pledges about the role Elf could play on the Azeri oil fields, which have attracted more than $12 billion of Western investment since Baku won independence from Moscow in 1991.
De Charette called Azerbaijan a new oil Eldorado.
But Azerbaijan, which played a dominant role in early oil exploration in the nineteenth century, must deal with a morass of ethnic conflicts and disputes among its neighbours over pipeline routes before it can deliver its latest oil finds to the West.
Azerbaijan's largest oil project, a trio of giant Caspian oil fields operated by a consortium led by BP and Norway's Den Norske Stats Oljeselskap A/S (Statoil), plans to use two pipeline routes for its own output, starting this year.
One will send production through strife-torn Chechnya to the Russian Black Sea, the other passing close to Georgia's breakaway region of Abkhazia to the Mediterranean Sea via Turkey.
Elf has not said which route any oil to be discovered in the Lenkoran-Talysh Deniz fields might take.
In a reminder of Azerbaijan's own regional conflict with Armenia over the enclave of Nagorno-Karabakh, Aliyev arrived in France on Mnday pledging not to back down on sovereignty.
""Everybody has to know that we will never tolerate that this territory remains occupied,"" Aliyev told the French newspaper Le Figaro in an interview.
Azerbaijan has said it is willing to grant autonomy to the enclave populated mainly by Armenians, but will not give in to Armenia's demands that it also hands over independence.
About 10,000 people were killed in fighting in the region from 1988 until a shaky ceasefire was called in 1994.
Aliyev said he would encourage France, which has strong links with Armenia, to use its influence in finding a solution.
",29
"French conglomerate Generale des Eaux looked set to extend its power in the media industry after revealing on Monday it was in talks with Havas, primarily about pay-television company Canal Plus .
""Havas and Compagnie Generale des Eaux confirm discussions are now in progress concerning their respective interests in audiovisual activities, primarily Canal Plus,"" said a joint statement from Generale des Eaux and Havas.
The announcement, which was rushed out before the stock exchange opened, followed press reports that the companies were preparing a deal which would make Generale des Eaux the key shareholder in Havas. That, in turn, would make the Havas media group the biggest shareholder in Canal Plus.
The companies added in a joint statement that they would not comment further pending board meetings scheduled for February 6.
The prospect of a major transformation of the French media landscape gained weight when a corporate source confirmed that Alcatel Alsthom was in talks about a possible sale of part of its 21.2 percent stake in Havas to Generale des Eaux.
Generale des Eaux, already a powerful force in the water and telecommmunications industry, owns almost 20 percent of Canal Plus. The satellite broadcaster is itself merging with fellow-pay-TV group Nethold to create Europe's largest subscription television company.
According to French newspapers, Generale des Eaux would transfer its Canal Plus stake into Havas, almost doubling Havas's current 21.6 percent stake in the broadcaster. Havas would then increase its own capital to allow Generale des Eaux a bigger stake.
Other major shareholders in Canal Plus are the bank Societe Generale , with 4.5 percent, and the state-owned bank Caisse des Depots et Consignations with 6.9 percent.
Generale des Eaux would also become indirectly the biggest shareholder in the merged Canal Plus company. Havas would establish its direct dominance within Canal Plus, well ahead of Nethold's owners, Richemont and MIH, which have 15 and 4.9 percent repectively.
Alcatel has owned 21.2 percent of Havas since selling its media business to Havas in 1995 in return for shares in Havas, which it was obliged to hold on to for at least two years.
The initial market reaction was broadly positive. Havas shares soared and those of Generale jumped too. ""It's a good deal for all parties involved,"" one share dealer said.
Alcatel stands to make a capital gain on the sale, as well as receiving cash, because the Havas share price has increased a lot over the past year, in line with a French stock market which is at record highs.
Alcatel needs money to finance its planned acquisition, if the state permits it, of the government's 58 percent stake in defence electronics group Thomson-CSF .
The government is due to announce its Thomson-CSF sale plans shortly, after scrapping its original privatisation plan in December.
Newspapers have for months speculated about the Havas share structure, although Generale des Eaux has in the past denied plans to raise its stake.
On the share market, Havas shares opened up eight percent but then gave in some of the gains to trade 5.3 percent up at 427 francs.
Generale des Eaux was 0.7 percent up at 713, but Canal Plus was 0.93 percent lower at 1,171 and Alcatel slipped 0.55 percent to 545 francs.
",29
"France Telecom said on Monday it had taken full control of Keystone Communications, a major U.S. television uplink company, to strengthen its position in the North American television market.
Michel Combes, director general of France Telecom's audiovisual transmisson activities, said the acquisition for less than $100 million gave the company a prestigious client list of the U.S. majors as well as an enhanced position in Asia.
""The acquisition boosts our position on the North American market where our main rival is VIVX Global Access,"" Combes said by telephone from Cannes where he is attending the MIDEM audiovisual market fair.
France Telecom, through its Telediffusion De France (TDF) unit, is already leader in the European market with a 20 percent stake, ahead of British Telecommunications Plc and has an estimated 15 percent in the world market. Keystone has a 20 percent share of the North American market.
The market for audiovisual transmission -- the service of carrying television pictures from an event or studio to the broadcasting centre -- is estimated at eight billion francs ($1.5 billion) and seen growing by eight percent per year.
The market of broadcasting pictures to the homes, both direct to home as well as to cable company receivers, is also seen at some eight billion francs.
Total sales of the unit are two billion francs.
This market stands to grow rapidly with the take-off of digital satellite television companies.
France Telecom is partner and service provider to the Television Par Satellite (TPS) digital satellite television venture with TF1, France Television, Lyonnaise des Eaux and Luxembourg's Compagnie Luxembourgeoise de Television (CLT).
Combes said that while the world market was seen growing by eight percent, this growth was less pronounced in Europe while Asia would increase at a quicker pace.
TDF has a pact with Japan's KDD as well as NHK and is service provider to Hong Kong's television company.
He said France Telecom wanted ""to have a foothold in Asia"" which he called an ""interesting market with good growth potential"" but he declined to comment on whether to company would make an acquisition soon in the area.
""It is increasingly important that you can provide services for your television clients from whatever place in the world, be it for news or sport,"" Combes said.
France Telecom already had a 40 percent stake in Keystone and bought the remainder from Simmons Group. Together with its Maxat British unit, the three companies are now offering international services under the name ""Global Skylink"".
France Telecom, official operator for the 1998 World Soccer Championships, also has a 20 percent stake in TBA in Argentina.
-- Paris newsroom +33 1 4221 5452 ($ = 5.481 French Francs)
",29
"The French government on Wednesday called off a controversial sale of the state electronics group Thomson SA to Lagardere Groupe but President Jacques Chirac vowed to bring the sell-off to fruition.
The government, which had doggedly defended its choice amid a storm of employee protest and political opposition, made the U-turn after the independent Privatisation Commission challenged the terms of a South Korean firm's involvement in the sale.
""The French defence electronics industry can lay claim to being world class,"" Chirac's spokeswoman Catherine Colonna said. ""The privatisation of Thomson is key to creating the necessary 'poles of excellence' needed to achieve this ambition.""
""The government will carry (the sale) out in accordance with the terms set on February 22,"" she said, referring to Chirac's televised speech on restructuring the army and defence industry.
Finance Minister Jean Arthuis told reporters the process would be delayed by several weeks, but other politicians said it could stall things for months.
""Unfortunately, the decision to suspend the privatisation process to which the government has had to resort will delay this process by serveral months, possibly even a year,"" said, Francois-Michel Gonnot, a parliamentary committee chairman and member of the ruling coalition.
Lagardere planned to merge Thomson's 58-percent owned defence electronics unit Thomson-CSF with its Matra Defense Espace unit and sell television set and video recorder maker Thomson Multimedia to Korea's Daewoo Electronics.
The Privatisation Commission, France's highest authority on the sale of state assets, said in a confidential report obtained by Reuters that the Daewoo deal did not fully reflect the value of Thomson's technology in digital decoders and flat screens.
The decision to suspend the sale of loss-making Thomson SA was the second embarassing U-turn on a privatisation in two weeks after a decision to suspend the sale of state-owned bank CIC following staff protests and political opposition.
Several thousand workers of Thomson Multimedia marched in Paris and other cities on November 20 to protest against a sale to a booming Asian competitor, fearing for their jobs and working conditions.
The government said in mid-October it had picked Lagardere over rival bidder Alcatel Alsthom because it was best for French defence interests and that it would sell the heavily indebted company for a symbolic one franc after a 10.8 billion franc ($2 billion) state capital injection.
Lagardere shares closed 6.4 percent down at 146.00 francs in Paris after having been suspended in the morning, because investors believed the Thomson deal was good for the company.
Alcatel Alsthom dropped three percent to 460.70 francs because it is now back in the race.
Opposition parties said on Wednesday that they hoped the delay would lead to the total scrapping of the sale plan.
""Today is a first success...but we should not stop there,"" Socialist Party spokesman Francois Hollande said.
""We are now calling for the privatisation to be abandoned totally,"" he said. Communist Party members said they now wanted a national debate on the future of Thomson.
The ruling RPR party said in a statement Hollande was behaving like a ""shipwrecked man who blames his rescuers for his problems in getting afloat.""
",29
"Franco-Italian semiconductor group SGS-Thomson Microelectronics NV on Wednesday reported a 19 percent rise in 1996 earnings to $625.5 million, but warned about the first quarter of 1997 after a weak end to last year.
A 15.5 percent fall in fourth quarter earnings to $142 million contrasted with a near-doubling of Intel Corp's profit in the same period. The U.S. company's report on January 14 had boosted SGS-Thomson shares on bullish expectations.
SGS-Thomson shares plunged more than five percent to 403 francs at midday following the results and a company statement saying the recovery of the world semiconductor market may be postponed by one or two quarters, with a real upturn not starting until 1998.
President and chief executive Pasquale Pistorio said he was pleased with the 1996 performance. He was cautious about the first quarter of 1997, although he said the company would still outperform the industry average.
""With lead times shrinking throughout the industry, we are entering the first quarter of 1997 with less order visibility than we have historically enjoyed,"" he said.
""From what we know today, we expect 1997 first quarter revenues to be close to third quarter 1996 levels. We also anticipate that overall pricing pressures will continue, and therefore, in spite of productivity improvements, gross margins could be slightly below fourth quarter 1996 levels.""
In the third quarter, net revenues were $988.4 million.
""While first quarter conditions continue to be uncertain, we believe that subsequent quarters of 1997 will show progressive improvement compared to the 1997 first quarter as the company continues to emphasise differentiated products and high growth applications,"" Pistorio added.
""Recent contracts with key customers and new design wins in such high growth areas as hard disk drives, set-top boxes and digital cellular phones give us confidence that SGS-Thomson will continue to outperform the industry average in 1997.""
Company chief economist Jean-Phillipe Dauvin said the world semiconductor market had fallen by eight percent in 1996 which made it the third worst year on record for the industry.
The fall was to a large extent due to price pressures, with prices of Dynamic Random Access Memory (DRAM) chips plunging by 80 to 90 percent, causing losses at many chipmakers.
SGS-Thomson does not make DRAMs, however, but dedicated chips which shielded it somewhat from the price erosion. Its market rose by five percent.
Dauvin said that market research bureaux WSTS, Dataquest and VLSI Research were predicting a 1997 market increase ranging from respectively 7.4 percent to 14.9 percent.
""They are now seeing recovery before the (start of the) second half of 1997. I think they are probably optimistic. If overcapacity persists, the recovery could be postponed by one to two quarters,"" Dauvin said.
""In 1997 there will probably be a slight recovery but we will not see a big upturn until 1998. It is possible that we have to postpone the start of the recovery from June-July to the second half of 1997,"" he added.
In 1996, according to Dataquest estimates, SGS-Thomson moved to the ninth place in the world ranking from 14 in 1995, being the sole chip maker with Intel to show significant sales growth.
Dauvin said he maintained his forecast that the chip market would be worth $300 billion in 2000, rising from $133 billion in 1996.
SGS-Thomson, whose shares are listed in Paris and New York, is 70 percent-owned by two consortia, one French and one Italian, reflecting its 1987 formation in a merger of France's Thomson Semiconducteurs and Italy's SGS Microelettronica.
Its main shareholders are France Telecom SA, Thomson-CSF, CEA Industrie, Comitato SIR, IRI and Finmeccanica.
Pistorio denied a rumour the company might be interested in buying Cyrix of the U.S.
",29
"Shareholders of electronics group Thomson SA rubber-stamped an 11 billion franc ($2.12 billion) state capital injection of Friday as the government reviewed how to relaunch the privatisation process.
""I believe we need a few days to think things over. We've been accused of amateurism and blundering, we're not going to rush into any statements now,"" a government official told Reuters.
Industry Minister Franck Borotra received a delegation of Thomson worker representatives who wanted the government to drop the privatisation plans entirely, after the state on Wednesday announced it was suspending the sale.
State-owned Thomson SA comprises 58 percent of defence electronics group Thomson-CSF and all of televison and video recorder maker Thomson Multimedia (TMM).
Some 200 Thomson workers marched through the streets of Paris, welcoming a group of 15 employees that had walked for a week from the Thomson Multmedia plant in Angers in west France.
""Franck Borotra has expressed the government's intention to pursue the (Thomson) privatisation according to terms which will be detailed in the coming days,"" the industry ministry said.
""He has taken note of comments that TMM should be fully valued and reconfirmed the recapitalisation of this company.""
The government on Wednesday suspended the sale, for a symbolic franc, of Thomson SA to Lagardere Groupe because the independent Privatisation Commission could not agree with the terms of Lagardere's planned sale of Thomson Multimedia to Daewoo Electronics of South Korea.
The French Foreign Ministry on Friday, asked by an irritated South Korea to explain itself, issued a statement aimed at easing the strain on its ties with an important trade partner.
The ministry said France and South Korea enjoyed relations of ""respect, partnership and confidence"".
Inside Thomson's Paris headquarters, state shareholders voted to back a capital increase needed to bolster the company's balance sheet ahead of an eventual sale.
The shareholders are a handful of representatives for the state, telecom operator France Telecom and a pool of banks represented by the state-owned Caisse des Depots et de Consignations (CDC).
Thomson said afterwards that the state would pay the bill, but the aid still needs EU approval.
At the end of 1995, Thomson SA had debts of 25.3 billion francs of which 13.8 billion were at TMM and 2.3 billion at Thomson-CSF.
Finance Minister Jean Arthuis said on Thursday he was not ruling out any options, including whether Thomson-CSF and TMM should be sold seperately rather than in one go.
In February, President Jacques Chirac made the privatisation conditional on the group remaining intact.
The Les Echos business newspaper said that if the government insisted on a package sale, Alcatel stood the best chances of winning.
Alcatel Alsthom chairman Serge Tchuruk, whose rival offer had been sidelined by the government in October, recently suggested the state should sell Thomson SA intact but in stages.
If the government accepted a split, Lagardere could still obtain control of Thomson-CSF and finalise the planned merger with its Matra Defence unit, Les Echos said. ($1=5.186 French Franc)
",29
"The French government said on Tuesday it planned to sell the loss-making SFP film studios, maker of much of the country's cinema and television film heritage, to Generale des Eaux and Havas.
The sale, which still needs approval from the independent Privatisation Commission, will be preceded by a state capital injection of up to 1.2 billion francs ($229 million).
The Societe Francaise de Production et de Creation Audiovisuelle (SFP) will get 350 million francs of this amount before the end of 1996.
In a joint statement, the Culture Ministry and the Ministry of Economy and Finance said Culture Minister Philippe Douste-Blazy had met European Commissioner Karel van Miert in Brussels on Monday to discuss the planned capital injection.
""He (Van Miert) accepted the principle of a very quick opening of the examination procedure which would allow the European Commission to approve, in principle before the spring, the state's financial effort in the privatisation framework.""
It said that the cash injection was needed because of the financial and economic situation of the SFP and would allow the future shareholders to run the normal operating risks and contribute 40 percent to the costs of a job reduction plan.
There had been four offers for SFP on the table. One was by Global Studios run by French businessman Walter Butler, another by Little Big One (LBO) run by Swiss investor Frabrice Giger and a third by former SFP director Jean Cressant.
The fourth was made by Havas' Images Television International and Generale des Eaux's Generale des Images.
All the bids were demanding a state capital injection in exchange for maintaining jobs.
The Havas/Generale des Eaux plan contained 480 job cuts out of the 1,010 SFP staff. LBO promised to keep as many as 700 jobs while Walter Butler would have kept 580.
Generale des Eaux, which also owns the Babelsberg studios in Germany, had previously backed the Butler bid.
The European Commission had previously objected to the 1.1 billion franc in aid given to SFP between 1993 and 1996.
The SFP studios were created on the grounds of the Buttes Chaumont villa of French film pioneer Leon Gaumont in north Paris and its later facilities in Boulogne-Billancourt and modern site at Bry-sur-Marne are the backdrop of many French films and television series.
The group ran into difficulties adjusting to competition by smaller independent production companies and by changed buying behaviour by the French television companies following the arrival of competitors TF1, owned by Bouygues, M6 and Canal Plus.
Last year SFP signed a deal to sell its Buttes Chaumont studios to Bouygues and demolished the buildings to make place for an office and housing complex. But a change in the political scene in Paris held up the procedure for the building licence.
Banks Paribas and Credit National had granted SFP a 250 million franc loan with as collateral the future receipts of the sale. These banks wanted SFP to pay the final 200 million of the loan back before the end of the year.
Where the studios once stood, there is now a large hole in the ground.
($1=5.245 French Franc)
",29
"French energy group Total SA on Wednesday reported a 50 percent increase in its 1996 net income to 5.6 billion francs ($1 billion), boosted by higher oil prices, a firmer dollar, improved refining margins and productivity gains.
The profit figure, which was in line with financial analysts' expectations, would have shown a 150 percent increase if 1995 special charges of 1.5 billion francs were taken into account.
Operating income rose by 37 percent to 10.2 billion francs on 30 percent higher sales of 176 billion francs.
Total chairman Thierry Desmarest said the profit improvement compared with rises of some 25 percent at U.S. oil majors.
Larger French group Elf in December said its 1996 net income would be between 7.3 and 7.5 billion francs compared with 5.3 billion in 1995, or some 40 percent higher.
Total shares rose on the figures, adding 0.76 percent to 477.70 francs at 1203 GMT while the blue-chip index was down 0.65 percent.
""A more favourable operating environment in 1996 than 1995 accounts for more than half of (the) 3.3 billion franc increase in operating income,"" Total said, adding external factors such as these had a positive impact of two billion francs.
The U.S. dollar rose to an average rate of 4.99 francs in 1995 to 5.12 francs in 1996, Brent oil rose to 20.7 per barrel from $17.04 per barrel while the refining margins improved to $13.6 per ton from $11.4 per ton.
Productivity gains contributed 500 million francs to the improvement and higher volumes 1.1 billion. An increase in operating expenses trimmed the total gain by 300 million.
Desmarest said he expected the oil price to slip in 1997, due to the return of Iraq to the market and higher production by non OPEC members, but he expected it not to fall as far as the 1994/1995 low of $16.40 a barrel.
""I do not think that we will continue to see the favourable prices from the start of the year,"" Desmarest said. ""But it is very unlikely that it will return to a level of $16.40 per barrel.""
Total expects a further increase in profits but Desmarest declined to be drawn into precise forecasts.
""Continuing production growth and ongoing productivity gains projected over the next few years should allow the company to improve profitability relative to the 1996 level of return on equity."" Total said.
Desmarest told the news conference that he aimed to get a four billion franc increase in the years up to 1999. ""For the next three years, and with unchanged circumstances, we aim to improve the operating results by four billion francs,"" he said.
Total aims to boost its investments in 1997 to 18 billion francs, from 16 billion in 1995, with the lion's share going to upstream activities -- exploration and production.
Desmarest said that by the year 2000, he expected about half of the company's operating income to come from exploration and production, while both the downstream and chemicals activities would have a slice of 20 to 25 percent.
Total aims to have reserves to allow it to tap into more than one million barrels of oil equivalent per day in the year 2000 and planned further growth after that.
In downstream, refining and marketing, Total is still faced with a weak European market.
Desmarest said the company was ready to participate in a restructuring of the refining industry but he did not plan to shut Total's refineries. Instead he was willing to offer access to the refineries to other operators in exchange for closures.
($1=5.577 French Franc)
",29
"French energy group Total SA on Wednesday reported a 50 percent rise in its 1996 net income to 5.6 billion francs ($1 billion), boosted by higher oil prices, a firmer dollar, improved refining margins and productivity gains.
The profit figure, which was in line with financial analysts' expectations, would have shown a 150 percent increase if 1995 special charges of 1.5 billion francs were taken into account.
Operating income rose by 37 percent to 10.2 billion francs on 30 percent higher sales of 176 billion francs.
Total chairman Thierry Desmarest said the profit improvement compared with rises of some 25 percent at U.S. oil majors.
Larger French group Elf in December said its 1996 net income would be between 7.3 and 7.5 billion francs compared with 5.3 billion in 1995, or some 40 percent higher.
Total shares initially rose on the figures but closed down 0.55 percent at 471.50 francs while the CAC-40 blue chip index was down 0.71 percent.
""The market had anticipated the increase in results. The figures were in line with expectations,"" an analyst said.
Total said that external factors had contributed two billion francs to the rise in operating income.
""A more favourable operating environment in 1996 than 1995 accounts for more than half of (the) 3.3 billion franc increase in operating income,"" Total said.
The U.S. dollar rose to an average rate of 4.99 francs in 1995 to 5.12 francs in 1996, Brent oil rose to 20.7 per barrel from $17.04 per barrel while the refining margins improved to $13.6 per tonne from $11.4 per tonne.
Productivity gains contributed 500 million francs to the improvement and higher volumes 1.1 billion. An increase in operating expenses trimmed the total gain by 300 million.
Desmarest said he expected the oil price to slip in 1997, due to the return of Iraq to the market and higher production by non OPEC members, but he expected it not to fall as far as the 1994/1995 low of $16.40 a barrel.
""I do not think that we will continue to see the favourable prices from the start of the year,"" Desmarest said. ""But it is very unlikely that it will return to a level of $16.40 per barrel.""
Total expects a further increase in profits but Desmarest declined to be drawn into precise forecasts.
""Continuing production growth and ongoing productivity gains projected over the next few years should allow the company to improve profitability relative to the 1996 level of return on equity."" Total said.
Desmarest told the news conference that he aimed to get a four billion franc increase in the years up to 1999. ""For the next three years, and with unchanged circumstances, we aim to improve the operating results by four billion francs,"" he said.
Total aims to boost its investments in 1997 to 18 billion francs, from 16 billion in 1995, with the lion's share going to upstream activities -- exploration and production.
Desmarest said that by the year 2000, he expected about half of the company's operating income to come from exploration and production, while both the downstream and chemicals activities would have a slice of 20 to 25 percent.
Total aims to have reserves to allow it to tap into more than one million barrels of oil equivalent per day in the year 2000 and planned further growth after that.
In downstream, refining and marketing, Total is still faced with a weak European market.
Desmarest said the company was ready to participate in a restructuring of the refining industry but he did not plan to shut Total's refineries. Instead he was willing to offer access to the refineries to other operators in exchange for closures.
($1=5.577 French Franc)
",29
"The French telecommunications market, which opens to full competition in 1998, seems be hotting up despite denials that Nippon Telecom and Telegraph Co (NTT) will enter the fray, analysts said on Thursday.
Whether the NTT story was correct or not, 1997 would be full of alliances and deals, they said. ""If you want to be in France after liberalisation, you have to make your move now,"" a Paris-based analyst said.
The Financial Times newspaper reported that NTT was planning to spend $500 million to take a 10 percent stake in Cegetel alongside British Telecom Plc.
But a spokesman for Cegetel, the company aiming to rival France Telecom as a national operator in 1998, said no changes were planned in its shareholding capital.
""The capital make-up of Cegetel will be the one we announced in September with British Telecom, Mannesmann and SBC Communications Inc,"" said a spokesman of the joint venture controlled by Generale des Eaux.
BT will have around 25 percent, SBC 15 percent and Mannesmann 10 percent.
In Tokyo, NTT said it was not considering investing in the French telecoms market. ""We're not in a situation to positively consider any such action. Everything is up in the air,"" a spokesman told Reuters.
Cegetel had previously said there might be marginal changes in the shareholdings. But in Paris the spokesman said: ""They are about to be fixed and it's roughly like we have announced them.""
From January 1, 1998, when the European telecommunications market is liberalised, France Telecom will lose the last vestiges of its monopoly.
It will still be majority state-owned, after a partial flotation this year, and will be responsible for the so-called ""public service"" of telecommunications, but other companies will be able to apply for operating licences.
An independent regulator, l'Autorite de Regulation des Telecommunications (ART), will oversee the market.
Cegetel is so far the only big grouping to have announced its intention to set up against France Telecom as a national operator. The company already runs France's second biggest mobile telecommunications network, SFR.
Bouygues Telecom has teamed up with VEBA of Germany and STET of Italy for telecoms ventures but it has not yet detailed how far its ambitions stretch beyond mobile telecommunications and business services.
Waiting in the wings are Unisource and AT & T.
Unisource, a joint venture of Dutch PTT, Telia of Sweden, Swiss Telecom PTT and Spain's Telefonica, was previously a Generale des Eaux partner but they broke up after the Cegetel deal with BT.
U.S. giant AT & T, which has not hidden its ambition to be a big player in all the main European telecommunications markets, is concluding the Uniworld alliance with Unisource.
On Thursday AT & T and Unisource teamed up with Mannesmann for the German telecommunications market.
France Telecom itself is allied to Deutsche Telekom and Sprint Corp of the United States.
Smaller rivals, operating on target markets in France, are MFS Communications and Colt Telecom Plc of Britain as well as a telecoms subsidiary of Eurotunnel SA/Plc.
MFS's new owner WorldCom Inc has recently stated its intention to obtain a licence as national operator.
-- Paris newsroom +33 1 4221 5452
",29
"Nobody expected Serge Tchuruk, chairman of electronics and telecommunications group Alcatel Alsthom, to sit and wait while the state made up its mind what to do with defence group Thomson-CSF.
But his audacious move to try and line-up state-owned aerospace group Aerospatiale and Rafale fighter plane builder Dassault came as a surprise to many.
Alcatel on Monday confirmed newspaper reports it was talking to the two plane makers about a Thomson offer.
The link, if successful, would group most of France's defence electronics industry players in one camp, with Lagardere Groupe's Matra Defense Espace in the other.
Other players, Sagem and Cie des Signaux, could join either camp at a later stage.
For Tchuruk's gamble to win, however, the government has to decide to sell its 58 percent stake in Thomson-CSF in a private placement, and not through a market float.
Alcatel Alsthom has defence businesses with some 10 billion francs in sales which would be transferred to Thomson-CSF, already a global player in defence electronics.
Aerospatiale and Dassault, themselves in advanced merger talks, would transfer their missiles and electronics business to Thomson-CSF in exchange for a stake in the group under the Alcatel scheme being discussed, industry sources said.
It would turn the remaining Aerospatiale-Dassault group into a pure aerospace ""platform"" company, with ties to one of the world's third biggest defence electronics groups.
The enlarged Thomson-CSF would have annual sales of 60 billion francs, against some 35 billion francs currently.
The government, as biggest shareholder in the future Aerospatiale-Dassault, has to allow this company to participate in a bid for another company majority-owned by the state.
The merger of Aerospatiale with Dassault is expected to be concluded before the spring, after which the new group will be privatised itself.
While the government has not publicly expressed its opinion on whether it would allow Aerospatiale to join a Thomson-CSF bid, it has had ample chances to express any opposition.
In December, when the first news reports appeared about a possible Aerospatiale/Dassault interest in Thomson-CSF, the Defence and Finance Ministries said such reports were ""without foundation"" and ""premature"".
Industry sources said that Tchuruk had informed all ministers involved about the possible link with the plane builders and they added that the fact Alcatel confirmed its discussions with the plane makers on Monday was a sign that Tchuruk had not been told to drop his plans.
Tchuruk, a 59-year old Marseille-born weapons engineer, had already impressed the independent Privatisation Commission with the industrial logic behind his group's Thomson-CSF bid.
But the government had in October selected Lagardere as preferred bidder because the Matra merger was the best solution for French defence interests.
Meanwhile, Alcatel has confirmed its return to profits in 1996 after heavy losses due to one-off charges in 1995.
It has sold its interests in mobile telecoms operator SFR and it is in talks to reduce its stake in Havas.
Whether that will help convince the government to change its mind remains the question.
On the Paris Bourse, Alcatel shares closed 1.09 percent lower -- after big gains late last week -- at 542 francs, while Lagardere fell 1.59 percent to 154.70 with traders citing concern it may not win Thomson.
",29
"French oil group Elf Aquitaine on Monday signed a landmark oil exploration deal with Azerbaijan, the former Soviet republic which France has described as the next oil Eldorado.
The contract is the latest in a string of Western oil deals in the Caspian Sea region, whose waters contain some of the most sought-after oil reserves in the world despite ethnic conflicts and disputes over pipeline rights.
Following months of negotiations, Elf signed a production sharing contract for the offshore Lenkoran-Talysh Deniz permit with Azeri national oil firm Socar
Symbolising the Baku government's drive to attract Western capital and technology, the contract was signed in the presence of Azeri President Haydar Aliyev, who is on a three-day state visit to France, and French President Jacques Chirac.
Aliyev said the pact was worth $1.5 billion and said that it raised total planned investments in Azeri petroleum since a first international contract was signed in 1994 to $15 billion. He added the field should produce 350 million barrels of oil.
""There can be no doubt that Azerbaijan is an open country ready to cooperate with the world,"" he said in a speech to the French Institute of International Affairs (IFRI).
Elf, which gave no details of price or production, will take an initial 65 percent stake as operator in the field, while Socar will have 25 percent. Elf's smaller French oil rival Total SA has 10 percent and there are talks for other firms to join.
""The signature of the Lenkoran-Talysh Deniz contract is a major step for the group in its establishment in Azerbaijan,"" Elf chairman and chief executive officer Philippe Jaffre said.
The 30-year Lenkoran-Talysh Deniz project allows Elf to seek and produce oil in an area of 420 square kilometres (162.2 sq miles) in waters up to 100 metres (328 ft) deep, located south of Baku in the Caspian Sea.
In June 1996, Elf also signed a production sharing contract for a 10 percent interest in a consortium led by British Petroleum Plc on the Shah Deniz permit in the Caspian Sea.
French Foreign Minister Herve De Charette said when he visited the area in October that he had obtained ""very precise"" pledges about the role Elf could play on the Azeri oil fields.
De Charette called Azerbaijan, which won independence from Moscow in 1991, a new oil Eldorado.
But Azerbaijan, which played a dominant role in early oil exploration in the nineteenth century, must deal with a morass of ethnic conflicts and disputes among its neighbours over pipeline routes before it can deliver its latest oil finds to the West.
Azerbaijan's largest oil project, a trio of giant Caspian oil fields operated by a consortium led by BP and Norway's Den Norske Stats Oljeselskap A/S (Statoil), plans to use two pipeline routes for its own output, starting this year.
One will send production through strife-torn Chechnya to the Russian Black Sea, the other passing close to Georgia's breakaway region of Abkhazia to the Mediterranean via Turkey.
Aliyev gave strong backing for the new pipelines. ""Oil production from this region is going to keep on rising. These oil pipelines must be built. They are necessary,"" he told IFRI.
Elf has not said which route any oil to be discovered in the Lenkoran-Talysh Deniz fields might take.
",29
"Within a few years, some two million severely handicapped people in Europe could communicate with each other over the global Internet using a special eye-movement control to run a personal computer.
A small French team of researchers on Thursday showed the latest prototype of an Apple Macintosh computer that reacts to the subtle movements of the eye.
This system, which follows a clinical test with 30 people in France to evaluate a word processor commanded by eye movement, opens the world of multimedia to the handicapped and will allow them to entertain themselves with electronic books, compact discs or computer games.
""Severely handicapped people are mainly young people in the 15 to 31 years category who have had a road accident. They have not always been handicapped, they still have all their intellectual facilities and they have a very long life expectancy,"" said Bernard de Groc of social researchers Delta 7.
Doctor Philippe Thoumie, who coordinated clinical tests in three hospitals in France this year, said that of the 30 people that had tried to use it, 22 had managed to do so with success.
""The main advantage of this system is that it is not a heavy system that makes a patient feel bad. They do not want to be robocops with special helmets on or with wires all over them,"" he told a news conference.
The idea of letting the handicapped, especially those that have lost control of their upper body functions and sometimes even their speech faculty, communicate through the use of a computer is not new.
There are systems that let a person ""push"" buttons on a screen by means of a mounted headset with a laserbeam.
Other systems let the alphabet pass by on a screen and the patient can indicate the right letter. Yet another system puts sensors on the patient's face. There are also mouse-based systems for people who have still some control over their hands.
""The difficult thing was to be able to track eye-movements with a fixed camera in a head which is not being kept still,"" said Jacques Charnier, a researcher of the INSERM institute in Lille who has been working on the system since 1990.
The Deltavision system they developed allows the handicapped to use ordinary computers and standard software applications.
For that they have to sit in front of a computer screen above which there is a small box. This box contains a small camera in the middle of a field of characters and symbols.
The camera tracks the eye when the handicapped person looks at a character to write a sentence in a word processor programme, or to give commands to execute other programmes.
Charnier said the system could be coupled to infrared sensors that can change the volume of a music system or the temperature in a room. It can be used to play compact discs, make recordings of telephone conversations, browse through an encylopaedia on CD-Rom or surf the Internet.
Delta 7 will test four of the upgraded prototypes in 1997, at a cost of some 150,000 French francs ($28,460) each, and hopes to be able to start commercialising the system in 1998.
Financed by mutual insurance fund Mutuelles de Mans and a French medical charity, Delta 7's Groc is not dreaming of the commercial value of the machine but of new applications.
""What we want to do next is to make a system than can be used by people who have to stay in bed,"" he said. ($1=5.270 French Franc)
",29
"The French government on Wednesday halted the sale of electronics group Thomson SA to Lagardere Groupe but said it still wanted to privatise the group to build a large French defence company.
French defence firms including Thomson's 58-percent owned Thomson-CSF, Matra, combat plane maker Dassault Aviation, tank builder GIAT, and aerospace group Aerospatiale face shrinking defence budgets and a restructuring of the industry in Europe.
President Jacques Chirac when he announced in February that he wanted Aerospatiale to merge with Dassault Aviation -- maker of the Mirage and Rafale planes -- and the privatisation of Thomson made it clear he wanted strong French groups to play a powerful role in Europe, rather than see smaller French companies swallowed up by large European rivals.
Most of Germany's defence activities are in the hands of Daimler-Benz AG while Britain has two big defence champions in British Aerospace Plc and General Electric Co Plc.
Thomson-CSF is a big player in its defence electronics niches but is small compared with the British and German groups.
The government on October 16 decided it preferred the offer of Lagardere for the Thomson group over one from Alcatel Alsthom because of defence issues.
Lagardere wanted to merge Thomson-CSF with its Matra Defence Espace unit, making a large group with international ties.
Alcatel wanted to merge Thomson-CSF with its much smaller defence electronics activities and then planned to hoist Thomson-CSF to the number two spot in the world defence industry, overtaking GM Hughes Electronics Corp but staying behind Lockeed Martin, through an alliance with another big group -- either GEC or Daimler-Benz or both.
But the government was not taken with Alcatel's effort to create a conglomerate active in many kinds of electronics, from televisions in Thomson Multimedia to telecommunications and Thomson-CSF's defence activities, but preferred the pure defence play of Lagardere.
Industry sources said the government feared that French interests would not be able to retain control in a large alliance under the Alcatel banner.
There was even a newspaper report, never confirmed, that President Jacques Chirac's decision to go with Jean-Luc Lagardere was influenced by a report that General Electric Co Plc honorary chairman Lord Weinstock and executive chairman George Simpson had discussed how they could take the upper hand in such an alliance.
Although Chirac brought French forces back into the North Atlantic Treaty Organisation (NATO), he is very keen on safeguarding France's own defence capabilities, as shown by his decision to finalise a series of nuclear tests.
An independent self-sufficent defence force needs to have unhindered access to arms supplies.
At first, industry observers believed Alcatel was only interested in the multimedia business and financial analysts were slightly surprised when Alcatel chairman Serge Tchuruk unveiled big defence plans.
Lagardere has never hidden his intention to keep only Thomson-CSF and went to great lengths to make its South Korean partner Daewoo Electronics acceptable to the French government.
The government did come around to accept Daewoo but on Monday France's highest authority on the sale of state assets -- the independent seven-member Privatisation Commission -- told the government that it could not approve certain elements of the planned sale, for one franc, of Thomson Multimedia to Daewoo.
",29
"French State-owned aerospace group Aerospatiale said on Saturday it could make a bid for defence electronics group Thomson-CSF with Dassault Aviation if it obtained government permission.
The Le Monde newspaper said Alcatel Alsthom could also join the project to form a big French defence group in response to last week's merger announcement of Boeing Co and McDonnell Douglas Corp.
Aerospatiale spokesman Patrice Kreis told Reuters on Saturday that Aerospatiale and fighter plane maker Dassault, in merger talks themselves, were not at the moment actively preparing an offer to acquire Thomson-CSF.
""At the moment, and I say that after having talked to the boss -- chairman Yves Michot -- a few minutes ago, at the moment we are not working on an offer."" But he confirmed that the chairmen had expressed an interest in acquiring Thomson-CSF.
Kreis said the companies had to await the terms of the new procedure for the sale of Thomson-CSF, expected in January, and for the green light from the state as shareholder.
""We will see in January whether we will work on one or not. If we are authorised to do so, we will, but only after we now the terms of the (sale) procedure,"" he said.
A Ministry of Defence official told Reuters: ""It is certain that Yves Michot and (Dassault Aviation chairman) Serge Dassault are working on an offer.""
""If Aerospatiale and Dassault wanted to make an offer for Thomson-CSF, the government ... would allow them to,"" Le Monde quoted a Ministry of Defence source as saying.
At Alcatel Alsthom there was no immediate comment.
In February President Jacques Chirac launched the sale of Thomson SA and urged the merger between Aerospatiale and Dassault as a first step in an industry shake-up.
Thomson SA has a 58 percent stake in Thomson-CSF, the remainder being listed on the Paris Bourse. It also has 100 percent of consumer electronics group Thomson Multimedia (TMM).
In October, the government said it preferred a bid by Lagardere Groupe over one by Alcatel Alsthom.
Lagardere would buy Thomson SA for one franc after a 14 billion franc capital increase and would sell TMM to Daewoo Electronics of South Korea. Lagardere planned a a bid on the other 42 percent of Thomson-CSF and would merge the company with its Matra Defense Espace unit.
The independent Privatisation Commission objected to the TMM sale and the government suspended the procedure early December.
The government has since decided to sell Thomson-CSF seperately in early in 1997 and wait with the TMM until 1998.
On Friday, the government said it would announce the terms of the Thomson-CSF sale in early January. One of the issues it has to resolve is whether to decide on a public float or a new tender for an industry sale.
Thomson chairman Marcel Roulet is campaigning for a float.
The Aerospatiale spokesman said on Saturday that a link with Lagardere was not logical but one with Alcatel was. ""It is true that Aerospatiale and Dassault are competitors of Matra, but we are complementary to Alcatel and Thomson-CSF.""
Aerospatiale is the French partner in the Airbus Industrie consortium with British Aerospace Plc, Germany's Daimler Aerospace and Spain's CASA.
""When the Boeing-McDonnell merger was announced people said that it was a threat to Airbus and that it had to speed up its integration. But that is not true, the merger is mainly a Pentagon project,"" an industry source said.
""Boeing-McDonnell also have Rockwell -- the American Thomson-CSF -- (and) their merger is mainly a defence industry challenge,"" the source added.
",29
"Britain's software and technology consultancy group Logica Plc on Thursday said it had bought Axime Ingenierie SA for 161 million francs and said it saw no need to make a pause in its expansion programme.
""Of course we will need some time to digest this acquisition but I see no need why we should stop our expansion. We have the resources and we want to develop further in continental Europe,"" Logica board member Duncan Craig told Reuters, saying Germany, Italy and Scandinavia were among the countries that interested the group.
Axime Ingenierie, with 1,000 staff and 360 million francs in sales, was a loss-making and non-core part of Axime SA which is in the process of merging with Sligos.
""We see good synergies between the two companies. We are active in the same fields and Axime Ingenierie is bringing in a solid client list,"" Craig said.
""It's is our biggest acquisition for ten years,"" he added.
The French unit will be named Logica SA and its chief executive Christian Chevallier keeps his post.
""The team remains in place, the clients will have the same contacts they had before,"" he added.
Craig declined to comment what the French acquisition would do to the earnings per share development.
The company said in a statement that it expected a small positive effect on earnings for the current financial year ending June 30. Last year, Logica had a pre-tax profit of 24.7 million sterling on sales of 284.8 million sterling and with 4,800 staff.
Its main rival in France is Cap Gemini while in Britain it is facing Arthur Andersen Consulting and EDS.
""We compete on specialist fields, in area's where we can bring our project management expertise and win business,"" Craig said.
Among Logica's specialisations are the financial sector, telecommunications and the energy/utility sector.
""With the ongoing deregulation of telecommunications and the utilities sector in continental Europe we believe that these areas will be key growth sectors,"" Craig said.
Logica is also acquiring Axime Ingenierie's Belgium and Luxembourg operations and will merge these with Logica Belgium.
""That's a nice fit. We had mainly international clients and a predominant English/Flemish organisation. Axime has domestic Belgian clients in the French language areas,"" Craig said.
-- Paris newsroom +33 1 4221 5452
",29
"French conglomerate Generale des Eaux looks set to extend its power in the media after revealing on Monday it was in talks with Havas primarily about pay-television firm Canal Plus.
""Havas and Compagnie Generale des Eaux confirm discussions are now in progress concerning their respective interests in audiovisual activities, primarily Canal Plus,"" said a joint statement from Generale des Eaux and Havas.
The announcement, rushed out before the stock exchange opened, followed press reports that the companies were preparing a deal which would make Generale des Eaux the key shareholder in Havas. That, in turn, would make the Havas media group the biggest shareholder in Canal Plus.
The companies added that they would not comment further pending board meetings scheduled for February 6.
The prospect of a major transformation of the French media landscape gained weight when a corporate source confirmed that Alcatel Alsthom was in talks about a possible sale of part of its 21.2 percent stake in Havas to Generale des Eaux.
Generale des Eaux, already a powerful force in the water and telecommmunications industry, owns almost 20 percent of Canal Plus. The satellite broadcaster is itself merging with fellow-pay-TV group Nethold to create Europe's largest subscription television company.
""The big winner is (Generale des Eaux chairman) Jean-marie Messier who will find himself at the top of a pyramid in the French audiovisual sector,"" said an analyst at Paribas.
According to French newspapers, Generale des Eaux would transfer its Canal Plus stake to Havas, almost doubling Havas's current 21.6 percent stake in the broadcaster. Havas would then increase its own capital to allow Generale des Eaux a bigger stake.
Other major shareholders in Canal Plus are the bank Societe Generale with 4.5 percent, and the state-owned bank Caisse des Depots et Consignations with 6.9 percent.
Generale des Eaux would also become indirectly the biggest shareholder in the merged Canal Plus company. Havas would establish its direct dominance within Canal Plus, well ahead of Nethold's owners, Richemont and MIH, which have 15 and 4.9 percent repectively.
Alcatel has owned 21.2 percent of Havas since selling its media business to Havas in 1995 in return for shares in Havas, which it was obliged to hold on to for at least two years.
The initial market reaction was broadly positive. Havas shares soared and those of Generale jumped too. ""It's a good deal for all parties involved,"" one share dealer said.
Alcatel stands to make a capital gain on the sale, as well as receiving cash, because the Havas share price has risen strongly over the past year in line with a French stock market which is at record highs.
Alcatel needs money to finance its planned acquisition, if the state permits it, of the government's 58 percent stake in defence electronics group Thomson-CSF.
The government is due to announce its Thomson-CSF sale plans shortly, after scrapping its original privatisation plan in December.
Newspapers have for months speculated about the Havas share structure, although Generale des Eaux has in the past denied plans to raise its stake.
On the share market, Havas shares opened eight percent higher but then gave up some of the gains to close 4.56 percent up at 424 francs.
Generale des Eaux was 1.55 percent up at 719, but Canal Plus was 0.42 percent lower at 1,177 and Alcatel slipped 1.09 percent to 542 francs.
-- Paris Newsroom +331 4221 5454
",29
"France's new telecommunications supervisor, ART, said on Thursday that it had ordered France Telecom to review a proposal for prices it will charge future competitors for using parts of its infrastructure.
""We have had a meeting with all the operators yesterday. We are waiting for a new proposal by France Telecom,"" ART president Jean-Michel Hubert told the body's first news conference.
The list of so-called interconnection charges will be key to both the economic viability of future entrants into the French market and to the value of France Telecom, slated for partial privatisation this spring in the biggest French market float.
Prospective rivals to France Telecom must apply for licences in the first three months of this year to be ready for competition in the telecommunications market in 1998.
""We have been asked to submit a new proposal before the end of January,"" a France Telecom spokesman said.
Hubert said he hoped ART (Autorite de Regulation des Telecommunications) would issue its opinion on a general draft decree on interconnection at the start of February.
Telecommunications Minister Francois Fillon aims to publish the final decree before the end of that month.
On the actual price list, Hubert said he hoped the five-member ART could take a decision ""as soon as possible"" and added it should be before the partial sale of France Telecom.
He declined to be specific about what kind of changes ART wanted from France Telecom. Other operators are demanding drastic price cuts from its original proposal.
Hubert noted that there was ""only a small window"" between a price structure at which competition was impossible and another at which competition would be ""ridiculous"".
ART would take account of international comparisons, Hubert said, because he believed there would be a move to harmonise these costs internationally. But he added that such a comparison should not be the norm for a decision.
ART started its legal life on January 6, taking over the regulatory and licensing powers which the Ministry of Telecommunications previously held.
ART is independent and will also act as an arbitrator in case of disputes between operators. Its five members -- appointed by the presidents of the republic, senate and parliament -- cannot be sacked nor can they seek a new term.
Hubert said that a difference with Britain's OFTEL regulator was that ART would take collective decisions while at OFTEL the director-general had decision-making powers.
Asked whether ART would make life as difficult for France Telecom as OFTEL had made for British Telecom Plc, Hubert said he expected ""hard and difficult talks with all operators"".
",29
"Franco-Italian semiconductor group SGS-Thomson Microelectronics NV on Wednesday reported a 19 percent rise in 1996 earnings to $625.5 million but warned about the first quarter of 1997 after a weak end to last year.
The profit warning and lower fourth quarter results took the market by surprise and the share closed nearly 12 percent lower at 379.40 francs in Paris in a turnover of 542 million francs ($98 million).
The French blue-chip index closed 1.35 percent higher.
""There is an awful lot of profit-taking. Now that it is falling 12 percent people are seeing a disaster, but it has been rising a lot in January,"" said a dealer.
SGS-Thomson has been steadily climbing from 154.50 francs in July to 433 francs on January 20, with the rise accelerated earlier this month when Intel Corp reported a big rise in quartely profits.
At SGS-Thomson, the fourth quarter earnings were down by 15.5 percent to $142 million.
President and chief executive Pasquale Pistorio said he was pleased with the 1996 performance. He was cautious about the first quarter of 1997 although he said the company would still outperform the industry average.
""With lead times shrinking throughout the industry, we are entering the first quarter of 1997 with less order visibility than we have historically enjoyed,"" he said.
""From what we know today, we expect 1997 first quarter revenues to be close to third quarter 1996 levels. We also anticipate that overall pricing pressures will continue, and therefore, in spite of productivity improvements, gross margins could be slightly below fourth quarter 1996 levels.""
In the third quarter, net revenues were $988.4 million.
""While first quarter conditions continue to be uncertain, we believe that subsequent quarters of 1997 will show progressive improvement compared to the 1997 first quarter as the company continues to emphasise differentiated products and high growth applications,"" Pistorio added.
""Recent contracts with key customers and new design wins in such high growth areas as hard disk drives, set-top boxes and digital cellular phones give us confidence that SGS-Thomson will continue to outperform the industry average in 1997.""
Company chief economist Jean-Phillipe Dauvin said the world semiconductor market had fallen by eight percent in 1996 which made it the third worst year on record for the industry.
The fall was to a large extent due to price pressures, with prices of Dynamic Random Access Memory (DRAM) chips plunging by 80 to 90 percent, causing losses at many chipmakers.
SGS-Thomson does not make DRAMs, however, but dedicated chips which shielded it somewhat from the price erosion. Its market rose by five percent.
Dauvin said that market research bureaux WSTS, Dataquest and VLSI Research were predicting a 1997 market increase ranging from respectively 7.4 percent to 14.9 percent.
""In 1997 there will probably be a slight recovery but we will not see a big upturn until 1998. It is possible that we have to postpone the start of the recovery from June-July to the second half of 1997,"" Dauvin added.
In 1996, according to Dataquest estimates, SGS-Thomson moved to the ninth place in the world ranking from 14 in 1995, being the sole chip maker with Intel to show significant sales growth.
Dauvin said he maintained his forecast that the chip market would be worth $300 billion in 2000, against $133 billion now. ($1=5.547 French Franc)
",29
"French state-owned electronics group Thomson SA said on Tuesday that it had no comment on a report in the Le Monde newspaper that its management preferred a market float for Thomson-CSF over a private placement.
The French government plans to privatise Thomson SA through the early sale of the latter's 58-percent stake in profitable defence electronics group Thomson-CSF and a later sale of Thomson SA's wholly-owned but loss-making Thomson Multimedia (TMM).
The government earlier this month suspended the planned sale of Thomson SA to Lagardere Groupe after the independent Privatisation Commission objected to the terms of the planned resale of TMM to Daewoo Electronics.
Le Monde said that during the December 16 supervisory board meeting of Thomson SA and Thomson-CSF, the management let it be known that it prefered a market sale over a private placement.
""Although the management representatives have not openly said that they prefer a market sale, they have said that such a float would allow a quicker sale and also added that it was necessary to go quickly,"" an unnamed supervisory board member was quoted as saying in Le Monde.
""We have no comment. What is being said during a board meeting is part of the private life of the company,"" a Thomson spokesman told Reuters.
""(Chairman) Marcel Roulet's official position is that it is up to the seller, the Finance Ministry, to decide how to go about the sale,"" he added.
The Lettre d'Expansion, a confidential newsletter, said on Monday that Roulet had sent a four-page letter to the government and the chairman of the Conseil d'Etat, the constitutional council, to argue for a market sale, an Offre Publique de Vente (OPV) in French.
The Thomson-CSF sale is scheduled to take place in early 1997 while the Thomson Multimedia sale could take until 1998.
Originally, the French state wanted to sell Thomson SA as a block and after an initial round of offers only two companies remained as likely buyer, Lagardere and Alcatel Alsthom.
In October, the government said it prefered the Lagardere offer because of its plans to merger its Matra Defense Espace arm with Thomson-CSF to create a French defence giant.
Industry sources said that a market float of Thomson-CSF, already a world player in defence electronics and radars, would allow the company's management to negotiate on its own terms any alliances in a French or European defence restructuring.
If it were sold in a private placement, either to Lagardere, Alcatel or any other suitors, the new owner would decide policy.
Meanwhile the La Tribune newspaper said that European Union Commissioner Karel van Miert might start a probe into the price at which France plans to buy-back shares in state-controlled Credit Lyonnais from Thomson SA/Thomson-CSF.
Thomson-CSF shares were down 0.29 percent at 169.70 francs at midday in a lower Paris Bourse.
Investors expect any buyer of the state's 58-percent in Thomson-CSF to make a buy-out offer for minorities. In the case of a market sale, however, there will be no such bid.
",29
"The French government is moving edgily towards a key decision for the future of Europe's defence industry -- whether to privatise defence electronics group Thomson-CSF through a public sale or private placement.
The stakes are huge, as the choice of the method of sale will to a large extent determine the final outcome of a far-reaching restructuring in the French defence industry and has major implications for the entire sector in Europe.
Like a master chess player, the state must look several moves ahead, decide what sort of defence industry it wants to see in a few years' time, and ensure the decision will be seen as fair to all involved.
Government sources said on Friday that the decision, originally expected at the end of January, would probably slip into early February because the government was studying in great detail all the elements of the politically-sensitive dossier that involves Europe's biggest defence electronics company.
""The decision will be taken shortly, but not today. We are still studying all possibilities,"" said an official source.
""The decision will have to be taken by the cabinet. At the moment there is no proposal to send to the ministers. I could not tell you when exactly that will happen,"" he added.
Prime Minister Alain Juppe is anxious to avoid another embarassment like the one he suffered on December 4 when the government had to suspend an earlier privatisation plan under which Thomson-CSF would have gone to conglomerate French Lagardere Groupe.
That deal involved the privatisation of the Thomson group, which included both a 68 percent stake in Thomson-CSF and 100 percent of consumer electronics group Thomson Multimedia (TMM).
The state was forced to call off the plan because the independent privatisation commission balked at the terms of a sale of TMM to South Korea's Daewoo Electronics.
The cancellation outraged the Korean, who called the decision racist and prompted an angry call for explanation from President Kim Young-sam.
Since then the French government has decided to separate the sales of TMM and Thomson-CSF.
The ultimate aim of the government is to have a strong defence industry able to supply its armed forces with state-of-the art weaponry and play a leading role in Europe and on the world scene.
A year ago, President Jacques Chirac announced a wide-ranging restructuring of the French defence industry around a merged group of Aerospatialeand Dassault Aviation for aerospace, and Thomson-CSF for electronics.
With a public sale through a market float, Thomson-CSF management will have its hands free to pursue its own negotiations about future alliances while interested partners can acquire stakes on the market.
But this may mean that a foreign cash-rich group from elsewhere in Europe or from the U.S. or Asia could buy itself into the talks.
With a private placement there are two main options.
One is by choosing candidates for a sale using a ""cahier de charges"" -- a sort of bidding book comprising price, intended strategy and commitments on jobs and investments.
This would leave the government with the biggest influence on the outcome, but also with the biggest responsibilty.
Another procedure, rare in France, would be to auction the state's 68-percent stake in Thomson-CSF among qualified bidders, putting the emphasis on price and ensuring the greatest possible revenues for the state at a time France is trying to reduce its public deficits ahead of monetary union.
",29
"Microsoft Chairman Bill Gates said on Wednesday that French President Jacques Chirac was reluctant to allow private companies to use highly encrypted code for messages and transactions on the Internet.
""We had one problem with the U.S. government, now we have a second one with France,"" Gates told a news conference after meeting Chirac for more than an hour at the Elysee Palace.
""We should be able in France to use strong encryption,"" he added. Encryption makes messages and transactions safe on the Internet but also makes them harder to track by authorities.
Gates, who was in France as part of a European tour, also discussed education with Chirac and stressed the importance of computer literacy for future competitiveness.
""It's not the gap in Internet use (between the United States and Europe) of today that counts. It's the gap in 10 years' time that will be important,"" he said.
His private foundation will support European school computer projects with the first French projects expected in 1997.
Gates, perhap the richest man in the world, said he wanted to spend most of his wealth on such projects and charity. ""Ninety-five percent of my wealth will be returned to society, not to my heirs,"" he said.
In a keynote speech to the Comdex/IT forum computer show, Gates said an important feature for future Microsoft products would be simplicity to make computers easier to use.
He said that although in the past personal computer prices had remained stable while the machines' power and features increased dramatically, he now expected prices to come down.
Microsoft unveiled its Office 97 software package, integrating Internet and Intranet capabilities with its familiar productivity tools, at the show.
Jean-Philippe Courtois of Microsoft France said France ranked ninth in both the number of Internet users and web sites.
He said he expected three million personal computers to be sold in France in 1997 -- 700,000 of them to households.
Gates said only a small part of the installed computer base was linked up to the net and strong growth was to be expected. He also foresaw a mix between personal computers and television.
On that theme, Jacques Segela, vice president of Havas Advertising, said ads would become more personal and interactive than the broadly targetted and often blunt messages broadcast on television.
""In three years' time, people will invest more in ads on the net than on television,"" he said.
Roel Pieper, chief executive of Tandem Computers Inc., said an expected shift to Internet transactions from online transactions (like cash machines) would need secure, scalable clusters of computers and high-capacity telecommunications networks -- land lines as well as mobiles and pagers.
He said telecoms operators would be able to tap a new market in selling information about the use of their network, something which is already happening in the United States but breaches privacy laws in some European countries.
Herbert Budd, general manager Business Intelligence Solutions at IBM, told Reuters that many companies do not use the full potential of their data.
IBM and other companies are proposing to build data warehouses. IBM is also developing SurfAid, due out in the United States in the first half of 1997, to facilitate searches of text and data on the Internet.
Budd said such business solutions would represent a market of $30 billion in 2000, compared with between $6 and $8 billion currently.
",29
"French food group Saint Louis on Tuesday tightened its grip on the Spanish sugar sector by acquiring a 15 percent stake in Spain's biggest sugar company and second-largest food group Ebro Agricolas.
Analysts welcomed the move and Saint Louis shares closed 3.17 percent higher at 1,369 francs ($255.3) on the Paris Bourse while the CAC-40 blue chip index ended 1.73 percent higher.
""I think they want to have a controlling stake in Spanish sugar-making but I do not believe that the political powers there will allow them to do so quickly. They have to go slow,"" said a Paris-based food sector analyst.
The company's Generale Sucriere unit bought the 15 percent stake from Banco Santander. Spanish newspapers said the deal was for 17.14 billion pesetas ($129.4 million).
A Saint Louis spokesman declined to comment on the price but said Ebro had a market value of 110 billion pesetas, annual sales of 154 billion pesetas and a market share of 54 percent.
Saint Louis already has a stake of about 21 percent in Sociedad General de Azucarera de Espana (Azucarera), Spain's second-largest sugar group.
The two Spanish groups said in December they were working on a merger which would create the European Union's fifth largest sugar group. Ebro bought a 21.8 percent stake in Azucarera from bank Banco Central Hispano (BCH) in November.
Saint Louis chairman Daniel Melin has said he wants to have a stake of 20 to 25 percent in the merged group, which would produce 80 percent of Spain's European Union sugar quota.
""We would now have a 17 percent stake in a merged group which is in line with our policy. We do not want to rise above 25 percent because we would have to make a bid for the rest. We want to be a shareholder, not an operator,"" Saint Louis spokesman Olivier Labesse said.
Spain's Ministry of Agriculture has in the past blocked attempts by the French group to increase its stake in Azucarera as part of a general policy of stopping foreign companies taking control of the Spanish sugar market.
""I believe Saint Louis will try to get a majority and restructure the new company where there is a lot of scope for cost savings. The Spanish ministry may be against it and they can huff and puff but I do not really see how they can block it,"" a London-based analyst said.
""There will be a lot of political opposition to a majority stake,"" said Dominique Bastien of brokerage Pinatton Wargny.
BCH has sold another 24 percent in Ebro to a savings bank, Caja de Salamanca. The Kuwait Investment Office (KIO) is Ebro's largest shareholder with a 35 percent stake, while state-owned food group Mercase is expected to increase its 4.7 percent holding by buying BCH's remaining 4.1 percent stake.
Dresdner Kleinwort Benson financial analyst Charles Manso welcomed the Ebro deal and said he was reviewing his Saint Louis recommendation and might raise it from ""hold"".
""This is the second bit of good news in two days. We have to factor that in. I think today's deal is slightly earnings enhancing,"" Manso said.
On Monday, Saint Louis said it was closing its sugar plant at Bresles in France as part of a rationalisation of its production structure.
""The new management has been in place for 18 months now and they are doing the right things,"" Manso said.
Saint Louis is the fourth largest sugar group in Europe behind Germany's Suedzucker, Britain's Tate and Lyle Plc and France's Eridania Beghin-Say.
The group is controlled by Bank Worms et Cie, which has a 27.8 percent stake and Italy's IFIL SpA, an Agnelli family finance company, with a 25.9 percent stake. ($1=132.5 Peseta) ($1=5.363 French Franc)
",29
"The French government on Wednesday called off the controversial sale of electronics group Thomson SA in a major policy U-turn after weeks of staunchly defending its choice of buyer.
It was the second privatisation to be halted in less than a month, after a decision to suspend the sale of state-owned bank CIC.
It comes at a time when Prime Minister Alain Juppe, at a record low in opinion polls, is anxious to avoid another labour revolt following last month's truckers stoppage.
The Finance Ministry said in a statement the suspension of the proposed Thomson sell-off to Lagardere Groupe was due to objections to the planned sale of the company's consumer electronics unit to South Korea's Daewoo Electronics.
Several thousand workers of Thomson Multimedia marched in Paris and other cities on November 20 to protest against a sale to a booming Asian competitor, fearing for their jobs and working conditions.
Staff were also enraged by Juppe telling parliament in October their hi-tech company was worthless. The prime minister said the company was ""worth not even a franc, it is worth 14 billion francs of debt.""
Socialist opposition leaders attacked the government for opting to sell Thomson to Lagardere and not to rival bidder Alcatel Alsthom without awaiting the binding opinion of the independent Privatisation Commission.
It was that body which told the government on Monday it could not agree with the sale of Thomson Multimedia to Daewoo.
The Finance Ministry said it still believed the sale of Thomson was vital because of President Jacques Chirac's wish to create a world-class electronics group, maintain employment and keep key technologies.
The government said in October it had picked Lagardere because it was best for French defence interests and would sell the heavily indebted company for a symbolic one franc (19 cents) after a 10.8 billion franc state capital injection.
Lagardere planned to merge Thomson's 58-percent owned defence electronics unit Thomson-CSF with its own Matra Defense Espace.
The Finance Ministry's surprise announcment came on the day the European Commission had been expected to give the green light to the deal.
The ministry said the Privatisation Commission ""declared itself incapable of giving a favourable opinion to the Lagardere Groupe offer, because of the terms of Daewoo Electronics' purchase of Thomson Multimedia.""
""Consequently, the government has decided to suspend the privatisation process under way,"" it said.
It added the companies could continue their discussions with the Privatisation Commission and the state would pursue talks with the European Commission about conditions for a capital increase, on which Brussels had expressed reservations.
Shares in Lagardere and Thomson-CSF were suspended, while those of Alcatel fell three percent with investors expecting the group to make a new bid that could create uncertainties about the financing and its own profit recovery.
Lagardere said in a statement it was still interested in taking over Thomson, which it called of strategic importance. A spokesman for Alcatel Alsthom said only the company ""took note"" of the decision.
""The chances (for Alcatel) have got to be increased by this, if they can come up with a different offer,"" said a Paris share broker, adding the decision was a blow to the government's standing. ""It doesn't look good for the French government.""
Alcatel chairman Serge Tchuruk recently said he was ready to make a new offer for Thomson, breaking weeks of silence after French newspapers suggested Chirac might have been influenced by a disputed report of British plans to take over the company.
Britain's GEC has said it is willing to talk about a cooperation deal with whoever wins Thomson. ($1=5.298 French Franc)
",29
"The French government is moving edgily towards a key decision for the future of Europe's defence industry -- whether to privatise defence electronics group Thomson-CSF through a public sale or private placement.
The stakes are huge, as the choice of the method of sale will to a large extent determine the final outcome of a far-reaching restructuring in the French defence industry and has major implications for the entire sector in Europe.
Like a master chess player, the state must look several moves ahead, decide what sort of defence industry it wants to see in a few years' time, and ensure the decision will be seen as fair to all involved.
Government sources said on Friday that the decision, originally expected at the end of January, would probably slip into early February because the government was studying in great detail all the elements of the politically-sensitive dossier that involves Europe's biggest defence electronics company.
""The decision will be taken shortly, but not today. We are still studying all possibilities,"" said an official source.
""The decision will have to be taken by the cabinet. At the moment there is no proposal to send to the ministers. I could not tell you when exactly that will happen,"" he added.
Prime Minister Alain Juppe is anxious to avoid another embarassment like the one he suffered on December 4 when the government had to suspend an earlier privatisation plan under which Thomson-CSF would have gone to conglomerate Lagardere Groupe.
That deal involved the privatisation of the Thomson group, which included both a 68 percent stake in Thomson-CSF and 100 percent of consumer electronics group Thomson Multimedia (TMM).
The state was forced to call off the plan because the independent privatisation commission balked at the terms of a sale of TMM to South Korea's Daewoo Electronics.
The cancellation outraged the Korean, who called the decision racist and prompted an angry call for explanation from President Kim Young-sam.
Since then the French government has decided to separate the sales of TMM and Thomson-CSF.
The ultimate aim of the government is to have a strong defence industry able to supply its armed forces with state-of-the art weaponry and play a leading role in Europe and on the world scene.
A year ago, President Jacques Chirac announced a wide-ranging restructuring of the French defence industry around a merged group of Aerospatiale and Dassault Aviation for aerospace, and Thomson-CSF for electronics.
In France alone, any such restructuring would affect the business of Lagardere, owner of Matra Espace Defense with British Aerospace Plc as a partner, Alcatel Alsthom and its ally GEC Plc, and smaller groups such as Sagem and Compagnie des Signaux.
With a public sale through a market float, Thomson-CSF management will have its hands free to pursue its own negotiations about future alliances while interested partners can acquire stakes on the market.
But this may mean that a foreign cash-rich group from elsewhere in Europe or from the U.S. or Asia could buy itself into the talks.
With a private placement there are two main options.
One is by choosing candidates for a sale using a ""cahier de charges"" -- a sort of bidding book comprising price, intended strategy and commitments on jobs and investments.
This would leave the government with the biggest influence on the outcome, but also with the biggest responsibilty.
Another procedure, rare in France, would be to auction the state's 68-percent stake in Thomson-CSF among qualified bidders, putting the emphasis on price and ensuring the greatest possible revenues for the state at a time France is trying to reduce its public deficits ahead of monetary union.
",29
"French Caisse Nationale de Credit Agricole said on Saturday it would take full control of merchant bank Banque Indosuez from financial holding company Compagnie de Suez on December 23.
The two companies said in a joint statement that the total price would be 11.9 billion francs.
Credit Agricole bought a 51 percent stake in the merchant bank in July for 6.3 billion francs and will on Monday pay the outstanding 5.6 billion francs.
Compagnie de Suez said its 1996 annual result, expected to be published on April 2, would show a 300 million franc capital gain on the transaction.
Under the original sale terms, Credit Agricole would have bought an additional 29 percent in July 1997 and the remaining 20 percent on January 1, 2000.
""It has been a joint decision to speed up the transaction,"" Compagnie de Suez spokeswoman Michele Meyzie told Reuters.
""Credit Agricole has engaged a restructuring of its activities and this is easier to pursue when it has full control of Indosuez. At the same time, for us it is welcome to have the capital gain and the 5.6 billion francs in cash,"" she added.
The companies said than an audit ended at June 30 this year showed that the value of Indosuez was 11.790 billion francs to which was added some interest.
In May, when the orginal deal between the two companies was announced, the vale of the bank was put at 11.85 billion francs.
Credit Agricole is setting up an international investment bank under the Banque Indosuez name -- combining French brokers Cheuvreux de Virieu, Dynabourse and Hayaux de Tilly.
In asset management, there is the combination of Indosuez and Segespar which have a combined 650 billion francs under management.
On Friday, Dutch savings bank SNS said it was buying Banque Indosuez Nederland NV.
Gerard Mestrallet, the former head of Societe Generale de Belgique who was appointed chairman of parent Suez in July 1995 after a messy board room battle, is restructuring the holding company which suffers from heavy property losses.
In June, Mestrallet said he expected a return to profit in 1996 after a pre-tax loss of 3.9 billion francs in 1995.
Credit Agricole has a five percent stake in Suez.
",29
"French oil groups Total SA and Elf Aquitaine said on Monday that they had signed contracts with Iraq to buy crude oil under a United Nations oil-for-food deal with Baghdad.
Total said it had signed a contract to take 30,000 barrels of oil per day (bpd), conditional on United Nations approval.
""We reached an agreement with the Iraqis at the end of last week to take 30,000 barrels per day. We now await approval of the United Nations,"" a spokesman for Total said.
At Elf Aquitaine a spokesman said the company had signed a three-month deal but declined to say how much oil it would take.
""I do not know whether we have permission from the UN overseers. We signed on Friday and have submitted it for approval,"" an Elf spokesman said.
Under the U.N. programme, Iraq may sell $2 billion of crude oil to finance purchases of food and medicine to ease the plight of Iraqi civilians bearing the consequences of international economic sanctions.
The plan was agreed in principle in May after months of negotiations but the U.N. delayed signing the deal after an Iraqi assault on Kurdish rebels until early this month.
Under the plan, oil companies will reimburse Iraq for the oil through payments into an Iraqi account in New York to finance purchases of food and medicine.
The strain on daily life is fuelling opposition to President Saddam Hussein. Two opposition groups in exile have claimed responsibility for an attack last week on Hussein's son Uday.
Mitsubishi Corp of Japan was the first company on Monday to say it had signed a deal. It signed an accord on Friday to take 40,000 bpd.
The United Nations has so far approved five contracts. U.S. firms Coastal Corp and Bay Oil on Sunday began lifting crude oil from the southern export outlet of Mina al-Bakr.
Other companies granted U.N. approval include Turkish state oil company TUPRAS and Italy's Oil Energy.
TUPRAS was the first to get U.N. permission. Much of the oil will be exported through a pipeline to Ceyhan in Turkey which opened last week.
On Monday the first tanker with Iraqi oil left Ceyhan while tow tankers are loading at Mina al-Bakr.
The French oil companies resumed contacts with Iraq shortly after the Gulf war and Elf is in talks to extract oil from the Majnoon field in southern Iraq -- with an estimated capacity of 300,000 bpd -- while Total wants to develop the giant Nahr Umar field which could have a capacity of 500,000 bpd.
Elf and Total have been in talks with Iraq since 1992 and always worked within the framework of the 1990 United Nations sanctions imposed after the invasion of Kuwait.
French firms are also lining up deals to sell wheat to Bagdad for the first time in six years.
Traders will have to submit their offers on Tuesday for an auction to sell 100,000 tonnes in French wheat to Iraq for delivery in January and February.
Iraq also tendered for between four and six cargoes of lower quality white sugar for delivery between mid-February and early March, sugar traders said.
",29
"A French parliamentary commission said on Wednesday that it approved a planned merger between Anglo-French industrial power group GEC Alsthom and state-controlled nuclear engineering group Framatome.
But it attached a number of conditions to its approval that go beyond the terms set by Industry Minister Franck Borotra.
The Socialist members of the commission, however, said they opposed the privatisation of Framatome and they feared four to five thousand of the company's 19,000 jobs could be lost.
GEC Alsthom is a joint venture between France's Alcatel Alsthom and Britain's General Electric Co Plc.
The French government in August gave the go-ahead for a merger study between GEC Alsthom and Framatome, the world's biggest maker of nuclear power stations.
Framatome competes against Swiss-Swedish ABB, Germany's Siemens, Mitsubishi of Japan, and U.S. firms General Electric and Westinghouse.
Alcatel has a 44 percent stake in Framatome, with the rest in the hands of French state groups CEA, EDF and CDR.
The commission said in a statement that after six weeks of study and talks, it had concluded that a merger had undeniable advantages and even found that it would be ""suicidal"" for Framatome to try and survive the next 10 to 15 years on its own because few nuclear stations are expected to be ordered.
The commission put down nine conditions to the merger.
It said the group had to be French, which means that Framatome has to absorb GEC Alsthom, which is a joint-venture under Dutch law, and not the reverse.
It also wants French shareholders to have control for as long the group is unlisted and a blocking minority when it is listed.
It said the nuclear activities of Framatome had to be put in a special subsidiary of the new group and public authorities should have a right of veto on strategic decisions.
It said the cash reserves of this unit should be at least equal to a provision for nuclear risks, or the cost of decommissioning plants, estimated at 6.5 billion francs ($1.24 billion).
The commission said cooperation with Siemens on the development of a new European nuclear reactor should continue and the parliamentarians suggested a share swap between the nuclear subsidiary and Siemens's KWU unit.
The commission also called for a new cooperation deal between Framatome, CEA and electricity utility EDF as well as for an extension to 2011 of an agreement between Framatome and nuclear material group Cogema on fuel rods.
Finally, the commission said parliament should have control over the nuclear activities.
It said all nine conditions were ""non-negotiable"".
Borotra's conditions include French identity, the Siemens link, a French majority stake and provisions for nuclear risks.
GEC has let it be known that it wants a stake equal to that of Alcatel in the new group and that it does not want to end up a minority shareholder.
Framatome had net attributable profit of 663 million francs in 1995 on sales of 17.9 billion.
GEC Alsthom had operating income of 2.6 billion francs in 1995 on sales of 29.3 billion francs.
($1=5.224 French Franc)
",29
"The French government on Wednesday called off the controversial sale of electronics group Thomson SA in a major policy U-turn after weeks of staunchly defending its choice of buyer.
It was the second privatisation to be halted in less than a month after a decision to suspend the sale of state-owned bank CIC.
It comes at a time when Prime Minister Alain Juppe, at a record low in opinion polls, is anxious to avoid another labour revolt following last month's truckers stoppage.
The Finance Ministry said in a statement the suspension of the proposed Thomson sell-off to Lagardere Groupe was due to objections to the planned sale of the company's consumer electronics unit to South Korea's Daewoo Electronics.
But the office of Prime Minister Alain Juppe said renewed talks about the sale could start soon.
""The government will launch consultations as rapidly as possible allowing the privatisation to take place on a basis that will be defined very quickly,"" Juppe was quoted as saying.
""The aim of privatising Thomson addresses the necessity for France to have an electronics and defence industry of global standing,"" he said.
Industry Minister Franck Borotra said in a statement the privatisation of Thomson remained essential
""The goal of privatisation of Thomson, and in particular TMM (Thomson Multimedia), remains essential for the future of the company,"" Borotra said.
""TMM needs to cuts its debt, enter new markets and improve its competitiveness in order to better exploit its technological and human resources,"" he added.
Several thousand workers of Thomson Multimedia marched in Paris and other cities on November 20 to protest against a sale to a booming Asian competitor, fearing for their jobs and working conditions.
Staff were also enraged by Juppe telling parliament in October their hi-tech company was worthless. The prime minister said the company was ""worth not even a franc, it is worth 14 billion francs of debt.""
The government said in October it had picked Lagardere because it was best for French defence interests and would sell the heavily indebted company for a symbolic one franc after a 10.8 billion franc ($2 billion) state capital injection.
Lagardere planned to merge Thomson's 58-percent owned defence electronics unit Thomson-CSF with its own Matra Defense Espace.
The Finance Ministry's surprise suspension announcement came on the day the European Commission had been expected to give the green light to the deal.
The ministry said the Privatisation Commission ""declared itself incapable of giving a favourable opinion to the Lagardere Groupe offer, because of the terms of Daewoo Electronics' purchase of Thomson Multimedia.""
It added the companies could continue their discussions with the Privatisation Commission and the state would pursue talks with the European Commission about conditions for a capital increase, on which Brussels had expressed reservations.
Shares in Lagardere and Thomson-CSF were suspended, while those of Alcatel fell three percent with investors expecting the group to make a new bid that could create uncertainties about the financing and its own profit recovery.
Lagardere said in a statement it was still interested in taking over Thomson, which it said was of strategic importance. A spokesman for Alcatel Alsthom said only that the company ""took note"" of the decision.
""The chances (for Alcatel) have got to be increased by this, if they can come up with a different offer,"" said a Paris share broker, adding the decision was a blow to the government's standing. ""It doesn't look good for the French government.""
Alcatel chairman Serge Tchuruk recently said he was ready to make a new offer for Thomson, breaking weeks of silence after French newspapers suggested Chirac might have been influenced by a disputed report of British plans to take over the company.
Britain's GEC has said it is willing to talk about a cooperation deal with whoever wins Thomson.
($1=5.271 French Franc)
",29
"Merck & Co. Inc. and French chemical group Rhone-Poulenc SA Thursday announced the merger of their animal health businesses to create a new company that will be the world leader in the sector.
Merial Animal Health, their 50/50 joint venture with estimated 1996 sales of $1.750 billion, will be the market leader in biology products, veterinary drugs and poultry drugs, they said.
Merial will overtake Pfizer-Smithkline Beecham, Bayer and Novartis -- the recent merger between Ciba-Geigy AG and Sandoz AG of Switzerland.
Igor Landau, managing director of Rhone-Poulenc, told a news conference in Paris that the merger would cut costs and have an effect on jobs, although it was too early to give details.
""It will not be in France that the impact will be most pronounced,"" he said, adding that the merger would have a positive effect on Rhone's results.
Merck will make an unspecified payment to Rhone for the 50/50 parity.
""Taking everything into account, the valuation of our business was higher than that of Merck,"" Landou said.
The joint-venture will merge the animal health activities of Rhone Merieux and Merck AgVet. It will be headed in the first few years by Merck's John Preston, while Rhone's Louis Champel will become chief executive of Merial and will succeed Preston.
Merck was No. 2 in animal health in 1995 but has been overtaken in 1996 by Novartis. Its leading product, Ivermectine, loses some of its patent protection next year but still has about eight years of sales ahead of it. Sales for this product alone in 1996 have been $750 million.
Rhone Merieux's main product is the recently launched Frontline, which has had sales this year of $85 million and are expected to double in 1997.
Merial will benefit from the launch of a number of new Merck products in the coming years while a new jointly developed product will be ready in three years.
""The real creation of added value is in innovation,"" Landau said, stressing the possible synergies of the joint research and development.
The Merial venture is the latest of a series of big corporate moves in animal health.
In 1994, American Cyanamid was bought by American Home Products Corp. In 1995 Pfizer bought the animal health business of Smithkline Beecham Plc and Rhone Merieux acquired the veterinary business of Sanofi, part of Elf Aquitaine.
In 1996 Belgium's Solvay sold its animal health business to AHP.
Landau said that Mallinckrodt, No. 9 in world animal health, was for sale but that Rhone was not interested.
Asked to comment on rumours of a merger between Rhone's Rhone-Poulenc Rorerand Sanofi, following a statement Thursday by Elf that a merger was desirable for Sanofi, Landau said Rhone was not interested in a pharmaceutical alliance.
",29
"France Telecom has been ordered by France's new telecommunications supervisor to review a proposal for a list of prices it will charge its future competitors for the use of parts of its infrastructure.
""We have had a meeting will all the operators yesterday. We are waiting for a new proposal by France Telecom,"" Jean-Michel Hubert, president of the new ART regulator, said during the body's first news conference on Thursday.
The catalogue of so-called interconnection charges is going to be a key element both for the economic viability of future entrants into the French market as well as for the value of France Telecom, slated for partial privatisation this spring in the biggest French market float ever.
Hubert said that he hoped to be able to render opinion of the Autorite de Regulation des Telecommunications (ART) on the draft decree on interconnection at the start of February.
Telecommunications Minister Francois Fillon aims to publish the final decree before the end of that month.
As far as the actual price list is concerned he hoped the five-strong body could take a decision ""as soon as possible"" and added it should be before the partial sale of France Telecom.
He declined to be specific about what kind of changes ART was asking from France Telecom -- the other operators are demanding drastic price cuts from an original proposal -- only saying that he wanted to be ""equitable"".
Hubert noted that there was ""only a small window"" between a price structure at which competition was impossible and another at which competition would be ""ridiculous"".
He added that while ART would take account of international comparisons, because he believed there would be a move to harmonise these costs internationally, he said such a comparison should not be the norm for a decision.
ART started its legal life on January 6, taking over the regulatory and licencing authorities that were previously the prerogative of the Ministry of Telecommunications.
ART is indepedent and will also have to act as an arbitrator in case of disputes between various operators.
Its five members -- appointed by the presidents of the republic, senate and parliament -- cannot be sacked nor can they seek a new term. Apart from Hubert, the members are Dominique Roux, Yvon Le Bars, Roger Chinaud and Bernard Zuber.
Hubert said that a difference with Britain's OFTEL was that ART will take decisions as a college while at OFTEL the director-general has the decision-making power.
Asked whether ART would make life as difficult for France Telecom as OFTEL has made that of British Telecom Plc, Hubert said only that he expected ""hard and difficult talks with all operators.""
Hubert said he wanted to promote growth of the market, which would boost economic growth and jobs. He said he had the interests of the consumer in mind and noted the existence of ART alone as an unbiased regulator was an incentive to competition.
But he made it clear that ART would also come to the aid of France Telecom, or other French operators, as far as international matters were concerned. ART still needs to appoint a director of international affairs but Hubert said the matter was very important and had to be based on reciprocity -- if French operators find obstacles abroad, ART could be engaged in the negotiations.
Hubert is travelling to London on Monday to meet OFTEL's Don Cruickshank and other international counterparts. He said much of the international negotiations would need to be done on a European level while the EU member states would want to harmonise their regulation in a single telecoms market.
Hubert said that ART was following closely discussions between France Telecom, Generale des Eaux unit SFR and Bougues Telecom about the cost of interconnecting mobile telecommunications but said ART had not been asked to arbitrate in the matter.
""I hope the operators come to an agreement,"" he said.
",29
"Alcatel Alsthom said on Monday it was in talks with Aerospatiale and Dassault about a joint offer for the government's 58-percent stake in defence electronics group Thomson-CSF.
Prime Minister Alain Juppe said a decision about the procedure for the privatisation of Thomson-CSF would be made before the end of February.
""There are discussions with the companies mentioned in the press,"" an Alcatel spokesman said when asked to react to newspaper reports about a joint bid.
Industry sources said that Alcatel chairman Serge Tchuruk had kept the government informed about his plans to form an alliance with Aerospatiale and Dassault in order to win the Thomson-CSF stake.
Alcatel in October lost out to Lagardere Groupe in bidding for state-controlled Thomson SA, which has the stake in Thomson-CSF as well as 100 percent of consumer electronics group Thomson Multimedia (TMM).
But the government had to suspend the sale on December 4 after the independent Privatisation Commission balked against the terms of the sale by Lagardere of TMM to Daewoo Electronics of South Korea.
A decision about the procedure for the relaunch of the sale, either by a private placement or a public sale, was expected at the end of January. Juppe said it would now be in February.
""I think that in the days to come, between now and the end of February, we will be in a position to announce very clearly the procedure, which I want to be as clear and as transparent as possible,"" he said in an interview on French radio.
""All candidacies will obviously be examined in the context of the procedures we decide on,"" he said.
At Dassault and Aerospatiale there was no comment.
The two companies are currently in talks about a merger of the aeroplane activities.
President Jacques Chirac said a year ago that he wanted to restructure the French defence industry around a merger of Aerospatiale/Dassault and Thomson-CSF.
A joint bid by the aerospace group and Alcatel would speed up this restructuring. But the situation could be difficult because Aerospatiale is state-owned and the state will be the main shareholder of the merged group with Dassault.
""It is complicated but not impossible,"" an industry source said.
According to French newspapers, Aerospatiale would transfer its missiles and satellites business to Thomson-CSF and Dassault its electronics activties, now in Dassault Electronique.
Alcatel would merge its own defence activities into Thomson-CSF and become the main shareholder of the enlarged group which would be Europe's biggest and the world's third biggest such group after Lockheed Martin  LK.N and Boeing-McDonnel Douglas.
At Lagardere Groupe there was no immediate comment.
Lagardere shares fell 1.40 percent to 155 francs on the news of the stengthened Alcatel bid.
Aerospatiale has a minority stake in Thomson-CSF's Sextant Avionique and is a rival to Lagardere's Matra in missiles.
",29
"French Industry Minister Franck Borotra said on Wednesday that state consumer electronics group Thomson Multimedia (TMM) would get a capital injection in the next few weeks.
He declined to comment on the size of the injection or whether it was in line with a prior plan for an 11 billion franc ($2 billion) payment into TMM's parent Thomson SA. Some 10 billion of that would have gone to TMM as part of a plan to privatise the company.
Borotra said he also expected a decision on the sale terms of the state's 58-percent stake in defence electronics company Thomson-CSF to be taken before the end of January.
Thomson-CSF is the Thomson group's other subsidiary and will be sold first under a new plan to sell the branches separately.
""It is necessary to recapitalise Thomson Multimedia in the next few weeks,"" Borotra told reporters at his traditional New Year's reception for the news media.
The European Commission is conducting a formal probe into the planned state aid to TMM.
In early December, the French government suspended an earlier privatisation plan for Thomson under which missiles to books conglomerate Lagardere Groupe would have bought the firm after a recapitalisation for one symbolic franc.
Lagardere would have merged Thomson-CSF with its Matra Defence Espace unit and sold TMM to Daewoo Electronics of South Korea.
Daewoo, which was angered by the government's decision not to go through with the sale, is probably still keen on TMM, Borotra said.
French presidential envoy Jean-Claude Paye, former head of the Organisation for Economic Cooperation and Development, is currently in Seoul on a mission to repair the diplomatic damage. He said on Wednesday he had urged Daewoo to bid again.
""Since Daewoo has already made a near-successful bid once, we are sure that it would be looked upon with sympathy, but of course without preference, because the process must be transparent and without prejudice,"" he said.
Alcatel Alsthom is also interested in Thomson-CSF and Compagnie des Signaux has said it wants to associate itself with the new owner of Thomson-CSF, which it expects will be Lagardere.
""We have to find a solution as soon as possible. The government will announce a decision before the end of the month,"" Borotra said.
""Separating the sales of Thomson-CSF and Thomson Multimedia was a good thing. Thomson-CSF has to become the heart and the engine of the restructuring of the defence electronics and professional electronics sector,"" he added.
He did not state his preference, or whether he thought Daewoo's chances were good. An independent Privatisation Commission objected to the sale of TMM to Daewoo on the grounds that there were insufficient job guarantees and because the one-franc price did not fully reflect the value of TMM's expertise in flat-screen technology and digital decoders.
He indicated he would look with favour on a solution in which TMM had a few partners, with an Asian company among them.
""With the help of partners it will master its production processes and penetrate markets where it is not at present, in particular the Asian markets,"" Borotra said.
He held up the example of the privatisation of computer group Compagnie des Machines Bull, which returned to the private sector in December after a two-stage privatisation to three main shareholders, France Telecom, Motorola of the United States and NEC of Japan.
""These privatisations (of Thomson-CSF and TMM) have to become successes, just as the privatisation of Bull was a success,"" Borotra said.
",29
"French books-to-missiles conglomerate Lagardere Groupe said on Tuesday it does not expect to make a profit on its ambitious multimedia activities until 1998, despite leading market positions in the U.S. and France.
Arnaud Lagardere, the son of founder Jean-Luc Lagardere and the New York-based head of the multimedia (Grolier) activities, told a news conference that while the results were improving, there would still be a loss for 1996 and 1997.
""We will hit the break-even point during 1997 and 1998 will be the first full year that we will be above break-even,"" Lagardere said. ""In 1996 our contribution to the group will be slightly negative but it will be an improvement over the previous year,"" he added.
Grolier, the number two interactive encyclopaedia publisher in the U.S. behind Microsoft and owner of Hachette and Filipacchi and titels such as Elle, is the largest content contributor to America Online in the U.S.
It has annual sales of some 2.5 billion french francs ($448 million).
Lagardere is also the owner of the Club Internet access provider which is number three in France behind CompuServe and AOL and has big ambitions for the Intranet market of closed web services for companies.
""1997 will be the year of the Intranet in Europe,"" Lagardere said, pointing out that while Europe was lagging behind the U.S. with only 22 percent of companies having such a service, the majority of companies was planning to start such a service.
That is where the hardware people of Lagardere come in.
Noel Forgeard, chairman of the Matra Defence Espace unit which is vying for state-owned Thomson-CSF, said the company would try to find investors and industrial partners for a multimedia satellite project targeted for 2005.
Lagardere is already partner in the Orion satellite project and its MCNSAT service can provide high-capacity internet and multimedia transport for companies.
The company is currently working on two projects, called ""TurboPC"" and ""West"", which would turn digital television sets into stand-alone internet computers.
The TurboPC project envisages that computers can receive information from a satellite through a small dish -- like the ones to be used for digital satellite television.
In the first instance, the so-called return line remains ""terrestial"" via a telephone line.
With ""West"", a series of at least three satellites would allow computers to use the satellite for the return as well.
Forgeard declined to speculate on the investments needed, saying these K-band satellites were not comparable to mobile telecommunication satellite projects such as IRIDIUM which plans to launch 66 low-orbit satellites and has raised $2.65 billion.
Forgeard said Lagardere would need to find investors and telecommunications operators to participate in the project.
""It is far too premature to speculate about the investments needed,"" he said.
Arnaud Lagardere added that while the project was ambitious the company would not engage in investments or take on risks that would ""put the group into danger"".
($1=5.577 French Franc)
",29
"AOL France hopes to reach the level of 100,000 subscribers in 1997 from some 30,000 now at the end of its first calendar year since launch in April, managing director Bertrand le Ficher said in an interview.
""We passed the 30,000 mark this weekend and there is a big acceleration in recent months which I expect to continue in 1997. I think 100,000 should be possible,"" he said.
He said that while the French market had developed slower than expected, with a low penetration of personal computers, the AOL subscriber numbers were ahead of planning.
The company, a joint-venture between America Online Inc and Bertelsmann of Germany, is sticking to its plan of breaking-even within three years after launch.
Le Ficher said that during 1997, AOL would add a number of services, such as train reservations, currently available on France's online Minitel database. He said he expected to have an agreement soon with French banks for financial services such as the consultation of accounts and making money transfers.
Electronic commerce, however, was unlikely to really hit France in 1997 because there are as yet insufficient numbers of subscribers.
Le Ficher said that at 130,000 subscribers it would become economically viable. Pending that level, AOL France will present a number of French companies, such as the wine and fashion industries, on electronic shopping malls for the Canadian and Japanese versions of the world's biggest service provider.
Advertising was also not really taking off. He said that he saw mainly a future in sponsored events -- like AOL's Tour de France coverage which was sponsored by insurer GAN -- than in simple spots.
Le Ficher said that he did not fear the arrival of more Internet access providers, who offer a pure access to the worldwide web of computer connections.
""We're addressing the general public, we have a subscription at 49 francs with three hours free use. We are not addressing those people that spend 20 hours on the net,"" he said.
Havas and Lagardere's Grolier are extending their internet services as is France Telecom's Wanadoo and Infonie.
CompuServe, which opened its services in France in 1993, is currently market leader. Le Ficher said he had not yet noted an impact of the relaunched MSM by Microsoft.
Further market entrants are expected in 1997.
Le Ficher said that AOL offered ""easily, packaged, aided and thematic"" access to the web and many people needed some support while surfing the net. He said that in France, 40 percent of the time AOL users were connected they were surfing the Internet.
""That means they are also doing other things,"" he said noting that discussion groups were ""massively"" used.
He said AOL was having preliminary talks with broadcasters who are starting digital satellite television services.
In France, Canal Plus has already launched its Canalsatellite service while the TPS venture and AB Sat will start soon.
TPS groups private broadcasters TF1, M6 and Luxembourg's CLT as well as state-owned France Television and France Telecom and cable operator Lyonnaise des Eaux .
""We are starting discussions with the digital television groups. For the moment, television is static, there is no interactivity. But there is a certain need there and we are starting talks about how to combine that,"" he said.
Le Ficher said that with digital television, which will lead to a multitude of new channels, the programmes will become more specialised which will increase the need for interactivity.
""The day that we can link televisions to the internet, that will be a winning combination, with higher (modem) speeds etcetera. But for the moment the market is with personal computers and telephone lines,"" he said.
-- Paris newsroom +33 1 4221 5452
",29
"Alcatel Alsthom said on Monday it was in talks with Aerospatiale and Dassault about a joint offer for the government's 58-percent stake in defence electronics group Thomson-CSF .
Prime Minister Alain Juppe said a decision about the procedure for the privatisation of Thomson-CSF would be made before the end of February.
""There are discussions with the companies mentioned in the press,"" an Alcatel spokesman said when asked to react to newspaper reports about a joint bid.
Industry sources said that Alcatel chairman Serge Tchuruk had kept the government informed about his plans to form an alliance with Aerospatiale and Dassault in order to win the Thomson-CSF stake.
An industry analyst, who prefered not to be named, said the new plan improved the credibility of Alcatel's offer.
Alcatel in October lost out to the Lagardere Groupe in bidding for state-controlled Thomson SA, which has a stake in Thomson-CSF as well as 100 percent of consumer electronics group Thomson Multimedia (TMM).
But the government had to suspend the sale on December 4 after the independent Privatisation Commission rejected terms for the sale by Lagardere of TMM to Daewoo Electronics of South Korea.
A decision about the procedure for the relaunch of the sale, either by a private placement or a public sale, was originally expected at the end of January.
""I think that in the days to come, between now and the end of February, we will be in a position to announce very clearly the procedure, which I want to be as clear and as transparent as possible,"" Juppe said in an interview on French radio.
""All candidacies will obviously be examined in the context of the procedures we decide on,"" he said.
Dassault and Aerospatiale, which are currently in talks about a merger of their aircraft activities, had no comment.
President Jacques Chirac said a year ago that he wanted to restructure the French defence industry around a merger of Aerospatiale/Dassault and Thomson-CSF.
A joint bid by the aerospace group and Alcatel would speed up this restructuring. But the situation could be difficult because Aerospatiale is state-owned and the state would be the main shareholder of the merged group with Dassault.
""It is complicated but not impossible,"" an industry source said.
According to French newspapers, Aerospatiale would transfer its missiles and satellites business to Thomson-CSF and Dassault its electronics activties, now part of Dassault Electronique.
Alcatel would merge its own defence activities into Thomson-CSF. It would become the main shareholder of the enlarged group which would be Europe's biggest defence company and the world's third biggest after Lockheed Martin and Boeing-McDonnell Douglas Corp.
At Lagardere Groupe there was no immediate comment.
Lagardere shares closed 1.59 percent lower at 154.70 francs on the news of the strengthened Alcatel bid. Alcatel, which rose strongly last week, closed 1.09 percent lower at 542 francs.
",29
"French state agencies met on Friday to rubber stamp an 11 billion franc ($2.09 billion) capital injection of state aid in electronics group Thomson SA, as the government reviewed options for reviving its sale.
Thomson labour unions, with the support of many other labour groups, were planning a big demonstration in Paris later to demand the total cancellation of the group's privatisation after its controversial sale was suspended earlier this week.
Finance Minister Jean Arthuis, under political pressure to come up quickly with ways to restore France's reputation on international markets, was working on how to relaunch the sale process.
He must also find ways to mollify South Korea, which was outraged by the decision to suspend the privatisation because the independent Privatisation Commission did not agree with the terms of the planned sale of Thomson's consumer electronics subsidiary Thomson Multimedia to Daewoo Electronics.
Inside Thomson's Paris headquarters state shareholders were holding an extraordinary meeting to vote on the capital increase that is needed to bolster the company's balance sheet ahead of a sale.
Representatives of France Telecom and the CDR state holding company, which owns former Credit Lyonnais assets, met to agree the aid package, which has also to win approval from the European Commission in Brussels.
A spokesman for Dutch-based  Philips Electronics denied a rumour the company had lodged an official complaint.
One issue that Arthuis has to settle is whether to restart the sale from the beginning and invite new tenders, or to limit negotiations to the two finalists in the orginal process -- the winner Lagardere Groupe and Alcatel Alsthom.
He must also decide whether to abandon France's preference for the defence and electronics group to be sold as a whole rather than in parts. Arthuis has said he his willing to consider a split before a sale.
The influential Les Echos financial newspaper said on Friday that if the government insisted on a package sale, Alcatel Alsthom stood the best chances of winning. Alcatel chairman Serge Tchuruk recently suggested the state should sell Thomson SA as a whole, but in tranches.
If the government accepted a split, Lagardere Groupe could still obtain control of 58-percent defence unit Thomson-CSF, Les Echos said.
Whatever the solution, Arthuis faces a series of problems.
South Korea's Deputy Prime Minister Han Seung-son told French ambassador Dominique Perreau in Seoul on Friday that the Thomson decision had ""caused worries to many people"" in South Korea.
French companies have recently won huge orders from Korea, including a TGV high-speed train deal, and are vying for a multi-billion combat aircraft order.
Another problem is the risk of a spillover into other privatisations. International investors are expressing their dislike of the French decision and trades unions see the climbdown at Thomson as a sign they can win elsewhere.
The Communist-led CGT union said on Friday the government should also suspend the planned sale of France Telecom. Billed as  France's biggest stock market flotation, it is set for next spring. ($1=5.270 French Franc)
",29
"France's Rhone-Poulenc SA said on Thursday its 1996 net income grew 28.4 percent to 2.74 billion francs ($494.9 million), but called this an insufficient level.
Chairman Jean-Rene Fourtou denied market rumours the company was on the look-out for acquisitions, sought a merger or planned to split its chemicals and pharmaceuticals activities.
He told a news conference the group would focus on internal growth and he maintained his target of an increase in 1997 earnings per share of 20 percent, before exceptionals, from 8.44 francs in 1996.
Fourtou said the group would in 1997 exceed its planned two-year asset sale programme of 10 billion francs, which stood at 6.8 billion at the end of 1996, and would slash debt to below 50 percent of equity, from 61 in 1996 and 72 in 1995.
Sales were three percent higher at 85.82 billion francs and operating income rose 38.5 percent to 6.892 billion. The gross dividend was increased by 16.7 percent to 5.25 francs per share.
The profit figure was in line with analysts' expectations and Rhone-Poulenc shares closed 0.39 percent lower at 179.80 francs while the CAC-40 blue-chip index was up 1.54 percent.
""This is an encouraging figure, but it remains insufficient for a company of our size,"" Fourtou said about the profit.
He said there were three negative elements in the group's results -- the recall of albumin products at Centeon, a worldwide crisis in polyester which reduced operating income by 700 million francs, and a very low price of titanium oxide which had a 500 million franc negative impact.
Centeon is a 50-50 joint venture between Germany's Hoechst AG and Rhone's 68 percent-owned pharmaceuticals unit Rhone-Poulenc Rorer.
Finance director Jean-Pierre Tirouflet said that while the negative effects would persist in the first quarter and perhaps first half of 1997, he saw an improvement in operating results of these activities.
Fourtou said that while improving profitablilty and cutting debt was his main priority, he dismissed rumours of a merger, split-up or capital increase.
""I can confirm we do not plan a major acquisition in 1997. We have never had so many opportunities for internal growth,"" he said. ""I can also confirm that we have no plans for a capital increase, as is being rumored, nor do we envisage a de-merger.""
He said later that his company was not interested in buying Elf Aquitaine's health and beauty unit Sanofi nor in linking up with this company.
""Firstly, as far as I understand, Sanofi is not for sale. But Elf has said it is willing to go below 50 percent,"" he said. ""I want to make clear that we are not interested in an acquisition of Sanofi nor in a link-up with this company.""
Fourtou added that while Rhone wanted better access to the Japanese and other Far Eastern markets, the company had dropped its previous goal of finding a Japanese takeover candidate and was now focusing on joint ventures.
($1=5.536 French Franc)
",29
"French conglomerate Generale des Eaux looked set to extend its power in the media industry after revealing on Monday it was in talks with Havas, primarily about pay-television company Canal Plus.
""Havas and Compagnie Generale des Eaux confirm discussions are now in progress concerning their respective interests in audiovisual activities, primarily Canal Plus,"" said a joint statement from Generale des Eaux and Havas.
The announcement, which was rushed out before the stock exchange opened, followed press reports that the companies were preparing a deal which would make Generale des Eaux the key shareholder in Havas. That, in turn, would make the Havas media group the biggest shareholder in Canal Plus.
The companies added in a joint statement that they would not comment further pending board meetings scheduled for February 6.
The prospect of a major transformation of the French media landscape gained weight when a corporate source confirmed that Alcatel Alsthom was in talks about a possible sale of part of its 21.2 percent stake in Havas to Generale des Eaux.
Generale des Eaux, already a powerful force in the water and telecommmunications industry, owns almost 20 percent of Canal Plus. The satellite broadcaster is itself merging with fellow-pay-TV group Nethold to create Europe's largest subscription television company.
According to French newspapers, Generale des Eaux would transfer its Canal Plus stake into Havas, almost doubling Havas's current 21.6 percent stake in the broadcaster. Havas would then increase its own capital to allow Generale des Eaux a bigger stake.
Other major shareholders in Canal Plus are the bank Societe Generale, with 4.5 percent, and the state-owned bank Caisse des Depots et Consignations with 6.9 percent.
Generale des Eaux would also become indirectly the biggest shareholder in the merged Canal Plus company. Havas would establish its direct dominance within Canal Plus, well ahead of Nethold's owners, Richemont and MIH, which have 15 and 4.9 percent repectively.
Alcatel has owned 21.2 percent of Havas since selling its media business to Havas in 1995 in return for shares in Havas, which it was obliged to hold on to for at least two years.
The initial market reaction was broadly positive. Havas shares soared and those of Generale jumped too. ""It's a good deal for all parties involved,"" one share dealer said.
Alcatel stands to make a capital gain on the sale, as well as receiving cash, because the Havas share price has increased a lot over the past year, in line with a French stock market which is at record highs.
Alcatel needs money to finance its planned acquisition, if the state permits it, of the government's 58 percent stake in defence electronics group Thomson-CSF.
The government is due to announce its Thomson-CSF sale plans shortly, after scrapping its original privatisation plan in December.
Newspapers have for months speculated about the Havas share structure, although Generale des Eaux has in the past denied plans to raise its stake.
On the share market, Havas shares opened up eight percent but then gave in some of the gains to trade 5.3 percent up at 427 francs.
Generale des Eaux was 0.7 percent up at 713, but Canal Plus was 0.93 percent lower at 1,171 and Alcatel slipped 0.55 percent to 545 francs.
",29
"The French government Wednesday called off its controversial sale of state electronics group Thomson SA to Lagardere Groupe but President Jacques Chirac vowed to complete the privatisation.
The government, which had doggedly defended its choice amid a storm of employee protest and political opposition, suddenly reversed itself after the independent Privatisation Commission challenged the terms of a South Korean firm's involvement in the sale.
""The French defence electronics industry can lay claim to being world class,"" Chirac's spokeswoman, Catherine Colonna, said. ""The privatisation of Thomson is key to creating the necessary 'poles of excellence' needed to achieve this ambition.
""The government will carry out (the sale) in accordance with the terms set on Feb. 22,"" she said, referring to Chirac's televised speech on restructuring the army and defence industry.
Finance Minister Jean Arthuis told reporters the process would be delayed by several weeks, but other politicians said it could be stalled for months.
""Unfortunately, the decision to suspend the privatisation process to which the government has had to resort will delay this process by serveral months, possibly even a year,"" said, Francois-Michel Gonnot, a parliamentary committee chairman and member of the ruling coalition.
Lagardere planned to merge Thomson's 58 percent owned defence electronics unit Thomson-CSF with its Matra Defence Espace unit and sell Thomson Multimedia, which makes televisions and video recorders, to Daewoo Electronics Co. of South Korea.
The Privatisation Commission, France's highest authority on the sale of state assets, said in a confidential report obtained by Reuters that the Daewoo deal did not fully reflect the value of Thomson's technology in digital decoders and flat screens.
The decision to suspend the sale of money-losing Thomson SA was the government's second embarassing reversal on a privatisation in two weeks. It earlier decided to suspend the sale of state-owned bank CIC following staff protests and political opposition.
Several thousand workers of Thomson Multimedia marched in Paris and other cities Nov. 20 to protest their company's sale to a booming Asian competitor, fearing for their jobs and working conditions.
The government said in mid-October it had picked Lagardere over rival bidder Alcatel Alsthom because it was best for French defence interests and that it would sell the heavily indebted company for a symbolic one franc (19 cents) after a 10.8 billion franc ($2 billion) state capital injection.
Opposition parties said Wednesday that they hoped the delay would lead to the total scrapping of the sale plan.
""Today is a first success ... but we should not stop there,"" Socialist Party spokesman Francois Hollande said.
""We are now calling for the privatisation to be abandoned totally,"" he said. Communist Party members said they now wanted a national debate on the future of Thomson.
",29
"France's Rhone-Poulenc SA said on Thursday its 1996 net income increased by 28.4 percent to 2.74 billion francs ($494.9 million), but called this an insufficient level.
Chairman Jean-Rene Fourtou denied market rumours the company was on the look-out for acquisitions, sought a merger or planned to split its chemicals and pharmaceuticals activities.
He told a news conference the group would focus on internal growth and he maintained his target of an increase in 1997 earnings per share of 20 percent, before exceptionals, from 8.44 francs in 1996.
Fourtou said the group would in 1997 exceed its planned two-year asset sale programme of 10 billion francs, which stood at 6.8 billion at the end of 1996, and would slash debt to below 50 percent of equity, from 61 in 1996 and 72 in 1995.
Sales were three percent higher at 85.818 billion francs and the operating income rose by 38.5 percent to 6.892 billion.
The gross dividend was increased by 16.7 percent to 5.25 francs per share.
The profit figure was in line with analysts' expectations and the share traded 0.11 percent higher at 180.70 francs at 1116 GMT when the CAC-40 was trading 1.28 percent up.
""This is an encouraging figure, but it remains insufficient for a company of our size,"" Fourtou said about the profit.
He said there were three negative elements in the group's results -- the recall of albumin products at Centeon, a worldwide crisis in polyester, which reduced operating income by 700 million francs, and a very low price of titanium oxide which had a 500 million franc negative impact.
Centeon is a 50-50 joint venture between Germany's Hoechst and Rhone's 68 percent-owned pharmaceuticals unit Rhone-Poulenc Rorer.
Finance director Jean-Pierre Tirouflet said that while the negative effects would persist in the first quarter and perhaps first half of 1997, he saw an improvement in operating results of these activities.
Fourtou said that while improving profitablilty and cutting debt was his main priority, he dismissed market rumours of a merger, split-up or capital increase.
""I can confirm that we do not plan a major acquisition in 1997. We have never had so many opportunities for internal growth,"" he told a news conference.
""I can also confirm that we have no plans for a capital increase, as is being rumored, nor do we envisage a de-merger.""
He said later that his company was not interested in buying Elf Aquitaine's health and beauty unit Sanofi nor in linking up with this company.
""Firstly, as far as I understand, Sanofi is not for sale. But Elf has said it is willing to go below 50 percent,"" he said.
""I want to make clear that we are not interested in an acquisition of Sanofi nor in a link-up with this company,"" he said.
Fourtou added that while Rhone wanted a better access to the Japanese and other Far Eastern markets, the company had dropped its previous goal of finding a Japanese takeover candidate and was now focusing on joint ventures.
($1=5.536 French Franc)
",29
"Franco-Italian semiconductor group SGS-Thomson Microelectronics NV said on Wednesday 1996 earnings rose 19 percent to $625.5 million, but issued a warning on the first quarter of 1997 after a weak end to last year.
A 15.5 percent fourth quarter drop to $142 million contrasted with a near-doubling of Intel Corp's profit in the same period. The U.S. company's report on January 14 had boosted SGS-Thomson shares on bullish expectations.
SGS-Thomson's president and chief executive Pasquale Pistorio said he was pleased with the 1996 performance. But he was cautious about the first quarter of 1997, although he said the company would still outperform the industry average.
""With lead times shrinking throughout the industry, we are entering the first quarter of 1997 with less order visibility than we have historically enjoyed,"" he said in a statement.
""From what we know today, we expect 1997 first quarter revenues to be close to third quarter 1996 levels. We also anticipate that overall pricing pressures will continue, and therefore, in spite of productivity improvements, gross margins could be slightly below fourth quarter 1996 levels,"" he added.
In the third quarter of 1996, net revenues were $988.4 million.
""While first quarter conditions continue to be uncertain, we believe that subsequent quarters of 1997 will show progressive improvement compared to the 1997 first quarter as the company continues to emphasise differentiated products and high growth applications,"" Pistorio added.
""Recent contracts with key customers and new design wins in such high growth areas as hard disk drives, set-top boxes and digital cellular phones give us confidence that SGS-Thomson will continue to outperform the industry average in 1997,"" he said.
SGS-Thomson, whose shares are listed in Paris and New York, is 70 percent-owned by two consortia, one French and one Italian, reflecting its formation in a merger of a French and Italian microchip company.
Pistorio said the 1996 results were achieved in difficult market conditions.
Prices of Dynamic Random Access Memory (DRAM) have plunged and caused losses at many chipmakers. SGS-Thomson, however, does not make DRAMs but dedicated chips which shielded it somewhat from price erosion.
""Our concentration on differentiated products provided consistency to our financial results throughout a period that was characterised by industry-wide volatility,"" Pistorio said.
Full year revenues rose to $4.12 billion from $3.55 billion. Capital expenditure rose to $1.12 billion from $1.0 billion and research and development spending was up by 21 percent to $532.30 million, or 12.9 percent of sales.
The Le Monde newspaper recently said that French Industry Minister Franck Borotra wanted to reduce the French stake in the company, which is held by France Telecom, CEA-Industrie and Thomson-CSF.
The Industry Ministry has no official comment.
",29
"France Telecom on Thursday announced it was cutting its call tariffs to boost telephone use ahead of its flotation in 1997 and full liberalisation of the market in 1998.
""Now that we are a few months away from our flotation, I would like to unveil our plans,"" chairman Michel Bon told a news conference, reiterating that the first sale of shares in the state operator could be from the second half of April.
He said the exact timing of the sale and details of the capital to be sold depended on market conditions and Finance Minister Jean Arthuis' decisions.
""What is clear is that the government will not sell more than 49.9 percent,"" Bon said. The government has said it will sell about 20 percent in the spring. ""We want to make our market introduction as much a popular success as the Deutsche Telekom sale,"" he said.
From March 4, France Telecom will slash a number of call rates and in October and in 1998 there will be further cuts. The monthly standing charges, however, will increase.
Bon said the reductions were aimed at boosting telecommunications use. ""If the traffic rises by six percent in 1997 the cuts will be good for France Telecom's business model,"" he said, declining to be more specific ahead of the flotation prospectus.
He added that he aimed to increase foreign sales, such as the company's mobile telecommunications subsidiary in Belgium started this year, by 50 percent.
""Our aim is to grow the market. If we grow the market everybody will benefit, we and our competitors,"" he said.
Bon said that recent price cuts had already boosted telephone use and he added that the Itineris mobile telecommunications unit would have 1.3 million subscribers at the end of 1996, against 700,000 in 1995.
Bon said France Telecom's 1996 accounts would not be comparable to previous accounts because they would use U.S. standards. But this would not diminish the value of the company.
France Telecom said it would cut national call rates by 17.5 percent on March 4 and a further 21 percent in October 1997.
This will bring standard call rates to 1.20 francs (22 cents) per minute by end-1997 from 2.30 francs in 1994.
International rates will be slashed by 20 percent in March, putting all European countries at less than 2.50 francs per minute and North America at less than three francs.
France Telecom said it would raise its monthly standing charge by 15.20 francs to 68 francs, but added this was still one of the lowest rates in Europe.
",29
"A spectre of central planning seems to have settled over Hong Kong just as its future sovereign, China, tries to loosen the last chains of Stalinist economic doctrine.
Economic intervention heads the agenda of a number of hand-picked advisers to future Hong Kong leader Tung Chee-hwa, many of them urging action to keep Hong Kong competitive in a region full of booming Asian ""tiger"" states.
Proposals so far include a government-funded science park, tax breaks to lure multinationals, a venture capital fund for high-tech businesses and most recently, a cross-border zone with an industrial park on the Hong Kong side and would-be immigrants on the Chinese side.
It all suggests a major policy shift on July 1, when Hong Kong reverts to Chinese control -- and a marked departure from the sort of free-wheeling past that saw Hong Kong dubbed ""the world's freest economy"" by the U.S.-backed Heritage Foundation.
The idea of state funding for business is anathema to Hong Kong, where a strict separation between government and business has long been considered essential to economic success.
""Hong Kong is like a Rolls Royce. All you need to do if you're in charge is slip into the drivers's seat, switch on the ignition, and away you go. I don't quite see the point of lifting the bonnet to tinker with the engine,"" said departing colonial governor Chris Patten.
Financial Secretary Donald Tsang, the man who balances the territory's books, recently gave a speech pledging government help for the economy -- but only after the private sector had taken the lead.
A SIGN OF THE TIMES ... AND NEW FACES
This is a hot topic in Hong Kong as it speeds towards unification with China on July 1. It is also one of the most important signs that faces are changing along with the times.
Over the past 15 years Hong Kong's economic success was virtually guaranteed by its location next to southern China's economic boom, the biggest on record.
But wage rates in southern China are no longer cheap. Vietnam and central Chinese provinces closer to Shanghai now offer lower pay than Guangdong, and even tougher competitors lurk on the horizon in India and elsewhere.
Hong Kong already suffers from stratospheric wage rates and property prices. And with most large Asian centres scrambling for service income higher up the economic food-chain, Hong Kong faces stiff competition from rival ""baby dragons"" such as Singapore.
Unnerved by an almost complete dependence upon services, Singapore recently altered its foreign exchange policy to support a lagging industrial base and declining exports.
Over the past 15 years, Hong Kong has experienced a similar decline in its own export base. Services now account for a rising 85 percent of gross domestic product while domestic exports continue to decline.
They are being replaced by soaring re-exports, goods shipped through Hong Kong for processing -- most of them to China -- in a trend that reflects the relocation of virtually Hong Kong's entire manufacturing base into southern China.
It all begs the question of just how vulnerable Hong Kong wants to become to the fundamental economics of regions outside its immediate influence.
Economists say diversification is a good idea to minimise risk associated with such a high dependence upon services, and opportunities could become more available after July 1.
Hong Kong entrepreneurs could soon gain easier access to Chinese land and labour that will enable the development of a high-tech sector, said economist Kevin Chan at Salomon Brothers.
""After July 1 we may be able to draw directly on resources from the mainland that would enable us to develop a high-tech manufacturing sector,"" he said. ""We will have a better foundation on which to do this.""
SHAPING HONG KONG IN THEIR OWN IMAGE
Many of the well-educated, well-heeled businessmen who hold Tung's confidence believe that intervention is essential to secure Hong Kong's long-term future.
With HK$330 billion (US$42.3 billion) in fiscal reserves, they have the means as well as the determination to effect great change. And if there is any opposition to the new proposals, it is unlikely to win a sympathetic hearing.
Most of these privileged tycoons and technocrats espouse elitist, almost anti-democratic views, having been raised in the autocratic, do-or-die tradition of Asian family business.
""There has been too much pandering to public opinion by the legislature,"" Leung Chun-ying, the property surveyor asked to map out a long-term housing strategy for the territory, told the Far Eastern Economic Review recently.
Two sources have been most outspoken about the new mood of intervention that marks the men closest to Tung.
Henry Tang, head of the Federation of Hong Kong Industries and a member of Tung's inner cabinet, is reported to have been asked to map out an industrial policy for Hong Kong.
James Tien, a pro-intervention businessman, is a high-profile member of the Provisional Legislature, the interim body that will replace the existing legislature on July 1.
",42
"A Royal Navy warship, bristling with weaponry, took up position on the Hong Kong waterfront on Monday to serve as a floating nerve centre for Britain's end-of-empire retreat in just 29 days time.
Dodging flimsy sampans and commuter ferries chugging about the famously crowded harbour, the multi-role frigate HMS Chatham berthed beneath glassy skyscrapers alongside the Prince of Wales barracks in the heart of the metropolis.
There it will tick away the hours, assuming the role of command centre for the British military withdrawal, until China takes back Hong Kong at the stroke of midnight on June 30.
After the historic handover, the Chatham will escort the departing Royal Yacht Britannia, with Prince Charles and colonial governor Chris Patten on board, out of Hong Kong.
Braving one of the hottest and steamiest days so far this summer, Captain Christopher Clayton said he and his crew looked forward to performing an historic task with pride.
""There is no sense of withdrawal,"" Clayton said.
""This is very much one professional armed forces handing over the protection and sovereignty of Hong Kong to another, the People's Liberation Army. So I look on it as a classic military evolution and one which we hope to do with some style, orderly and professionally.""
The arrival of the type 22 frigate coincided with a 21-gun salute by the navy's HMS Plover patrol ship on the anniversary of Queen Elizabeth's coronation, which the Chatham honoured by ""dressing overall"" in a busy selection of flags and signals.
With just 29 days to go, the frigate's arrival was the latest piece in the jigsaw puzzle of preparations for Britain's withdrawal from the pearl of its colonial possessions.
The drawdown of the garrison, a highly visible expression of the end of British sovereignty, has already cut its strength to little more than 1,000 from 10,000 in the early 1990s.
And while the British are leaving, the Chinese are arriving.
The latest contingent of 90 PLA troops drove across the border on Friday, boosting an advance guard already in place to 206 unarmed soldiers, here to get garrison facilities ready.
Offering them friendship, Clayton said the Chatham hoped to host PLA officers on board his ship.
The frigate, designed to assume flagship duties, bristles with advanced weaponry including Harpoon anti-surface missiles and Sea Wolf missiles. She also carries Sea King helicopters.
The Chatham is in the Asia-Pacific region as part of a larger 1997 task force deployment, codenamed Ocean Wave, involving a dozen vessels including the aircraft carrier HMS Illustrious and two nuclear submarines.
""This is not a regrettable occasion,"" said Robert Curry, a signal communications officer.
""It's an end of an era, certainly, but I don't think there should be any regret or shame at all.""
The Chatham's nimble sailors in crisp, white suits shinnied up and down the ship's narrow galleys and stairwells, outlining all its guns in loving detail to bedraggled, thirsty visitors stumbling over unexpected nuts and bolts.
""As you can see, we are not a cruise ship. We are definitely a warship,"" said principal warfare officer Phil Haslam.
",42
"U.S. interest rates have been the focus for most investors in Asia lately, but one key development that has escaped much notice is the increasing divergence of the region's markets, Guinness Flight Asia Ltd said.
""Investors are becoming much more discerning, and market performance across the region is now highly divergent,"" Guinness Flight said in its second quarter Asian outlook.
""Rather than simply investing in Asia, funds are flowing to those markets where the investment story is strong and avoiding those where it is weak,"" the fund manager said in the recently released report.
This placed a greater onus on fund managers to get their asset allocations correct.
It was too easy for investors get caught up in the hype about the ""Asian growth miracle"", but rosy expectations for earnings growth have traditionally been linked to high headline rates for gross domestic product growth and less to what companies have been achieving, it said.
""High levels of bank lending growth and overheating property markets can also produce flattering results in the short term, but the longer-term sustainability of such earnings growth is more questionable.""
But long-term growth was available, it said. Asia is a highly dynamic region, but some growing pains are inevitable, reflected in the cyclical slowdown in a number of key export industries or structural problems in Thailand and South Korea.
""Nevertheless, companies that are well-managed and well-positioned have an excellent environment in which to prosper,"" Guinness Flight said.
To gain access to that growth, investors need to have a clear idea of which markets are the strongest. Stock picking has become increasingly important, it said.
By focusing on companies that constitute the bulk of index capitalisation, investors may miss many of the best opportunities. This partly reflects the undeveloped nature of these markets where blue chips account for the lion's share of turnover, commission and research, the report said.
Concentrating on small and medium-capitalisation stocks is time-consuming and difficult because the information sources are fewer, but Guinness Flight argued it was essential.
""Management quality is the key criterion,"" it said. ""This is very much 'growth investing' as good sustainable earnings growth and strong cashflow are indispensible if a company is to be successful and provide a good return to shareholders. Asia is a growth story and this is where it is happening.""
Guinness Flight called China a key prospect. Although tiny as an equity market, China has profound influence and a slow easing of monetary policy there boded well for the earnings outlook of Chinese companies over the next few years.
Guinness Flight is holding an overweight position in Hong Kong and raising Singapore to overweight in expectation of an electronics recovery. It is moving to underweight in Malaysia following greater economic uncertainty there.
Indonesia remains overweight on strong economicdomestic liquidity. The Philippines has been cut to underweight on a deteriorating current account, while South Korea continues to fail to address structural problems.
Thailand has shown no real signs of recovery, although indications are that the market may have reached its bottom, the report said.
The following is Guinness Flight's second quarter percentage weightings against the Morgan Stanley Capital Index Asia ex-Japan. (Figures in brackets show Guinness Flight's weighting versus Morgan Stanley's weighting):
Overweight: Hong Kong (34 vs 26.5), China (1 vs 0.5), Indonesia (7 vs 6.5), all unchanged. Singapore, increased (14 vs 12.5). Neutral: India, increased (7.0 vs 7.0), Philippines, reduced (4 vs 4), South Korea, (5 vs 5), Thailand, (5 vs 5) both unchanged. Underweight: Malaysia, reduced (16 vs 20), Taiwan, increased (7 vs 11.5).
",42
"Institutional investors applauded China's attempts to cool down stock market speculation last week but warned that Hong Kong's volatile reaction was unlikely to end any time soon.
""Undoubtedly, the very considerable volatility requires someone to be very brave indeed to participate, and it will continue to remain that way for quite some time to come,"" said Stewart Aldcroft, director of sales and marketing for Templeton Franklin Investment Services (Asia) Ltd.
Hong Kong's Hang Seng index of blue chip stocks closed Friday's see-saw session up 188.21 points or 1.35 percent at 14,112.55 following a total drop of 907 points in five consecutive trading sessions ending on Thursday.
The index swung wildly on a variety of factors, including China's move to curb speculation, jitters about the property market and a downgrade by Merrill Lynch.
As usual of late, the real action was in red chips, that unruly bunch of China-related stocks that have taken investors on a roller-coaster ride since February.
The sector, made up of companies with financial backing from China, responded very badly to news that Beijing intended to clamp down on the stocks, many of which listed in Hong Kong with promises of future asset injections of uncertain value.
Now trading in excess of 30 times 1997 earnings, the red chips have outperformed the rest of the Hong Kong market by a wide margin. But last week they shed about one-third of the gains they have made since January, according to one estimate.
""The extent to which there has been speculation about which red chip is going to get the next asset insertion and how valuable it will be has clearly got out of hand,"" Aldcroft said.
Templeton and other international institutions with established valuation criteria have avoided the sector while retail and smaller brokerages leapt on board, speculating about the value of promised assets and connections.
How do you establish a multiple for influence? one asked.
Although the larger institutions appear to have steered clear on these sorts of concerns, plenty of smaller funds have invested, according to funds authority Micropal.
China fund performance figures to June 6 show GT up by 56.6 percent, Barclays up 51 percent, ImPac up 47 percent, Nomura and Guinness Flight up 45 percent, Invesco up 38 percent, HSBC up 35 percent and Jardine Fleming up 34 percent.
""You couldn't get that type of performance if you hadn't been invested in red chips,"" Aldcroft said.
But both Jardine Fleming and HSBC said they limited their exposure to the biggest and most credible red chips.
""Among them there are good quality companies with solid earnings growth,"" said Jardine Fleming investment director Patrick Wong, who put JF's red chip weighting at 15 percent.
Prudential Asia's senior portfolio manager, David Descalzi, said he had avoided the sector completely -- a difficult position to take when profits were there to be had.
""No fund manager likes to be left behind,"" he said. ""But there has to be a recognition that this is speculative and there will be a correction, which is what has happened.""
But Prudential is buying into market weakness, and Descalzi said if the red chips run again, they will be harder to ignore.
""Hong Kong is still one of the only viable stories out here, with the possible exception of Korea, and we want to take advantage of that,"" he said.
",42
"China's resounding declaration of support for the Hong Kong dollar makes a successful assault on the currency even more unlikely, foreign exchange experts said on Wednesday.
""The only way you're going to get a remote chance of a successful speculative attack is if there is such a crisis of confidence it begins to affect retail bank deposits. Otherwise, I just don't see it,"" said Jim Rohwer, Asian emerging markets strategist for C.S. First Boston in Hong Kong.
Chen Yuan, deputy governor of the People's Bank of China, China's central bank, reiterated at a Bank of England seminar in London on Tuesday that Beijing stands ready to defend the Hong Kong dollar from attack if need be.
""We are prepared to offer liquidity support to the (Hong Kong Monetary Authority) for the purpose of stabilising the exchange rate of the Hong Kong dollar,"" Chen said. ""We also stand ready to use our foreign reserves to support the Hong Kong dollar, if necessary.""
The Hong Kong dollar peg was set in 1983 at HK$7.80 to the US dollar when jitters connected to the 1997 handover sent it into a tailspin. The peg still remains Hong Kong's first line of defence against economic instability associated with the handover at midnight on June 30 next year.
The peg has an impressive track record. It withstood the fallout from the Tiananmen massacre in June 1989, when the Hong Kong stock market plunged, and also the global stock market crash of 1987.
""Nineteen ninety-seven is just a date on the calendar at this point,"" said one currency trader. ""There is no uncertainty. You're either here or you're not here. It won't be Independence Day. There are no aliens.""
An opportunistic attack upon the currency in January 1995 was quickly warded off by Hong Kong's de facto central bank, the Hong Kong Monetary Authority, which immediately raised interest rates to punishing levels.
Experts said a speculative assault upon the currency would almost certainly be doomed given Hong Kong's foreign exchange reserves of around US$60 billion.
As well as access to China's reserves of $90 billion, Hong Kong has repurchase agreements with several Asian nations that hoard U.S. dollars, partly to protect relatively fragile and export-dependent economies.
Such a deep war chest is a formidable deterrent to all but the richest and most determined of speculators.
""The only thing that can break the peg at this point is political instability that causes capital outflows,"" another trader said.
But the extent of the political unrest would have to be extraordinary, given the Hong Kong dollar's immunity to the political instability in Beijing in June 1989.
""It would have to be a real debacle. You have to imagine something much, much worse than Tiananmen,"" said Bill Overholt, director of research at Bankers Trust in Hong Kong.
Hong Kong does not have sufficient reserves to defend a sustained run on the territory's banking deposits, but there are few signs so far that retail investors are concerned.
Rohwer said that confidence appears to be improving with the Hong Kong dollar moving at the stronger end of its trading band. Also, the proportion of banking deposits held in foreign currency is falling, reaching 45 percent at the end of the April this year compared to 54 percent in 1991.
",42
"Taiwan has stepped forward in the delicate run-up to Hong Kong's reversion to China and rejected once more the ""one country, two systems"" policy guiding the territory's July 1 handover to mainland rule.
In a souvenir edition of the Far Eastern Economic Review, Taiwan President Lee Teng-hui wished Hong Kong well after its return to China but repeated his island's determination never to unify with China under the same terms.
""We hope that Hong Kong will not only preserve its present system of freedom, democracy and openness, but enjoy further development after 1997,"" Lee said in a paid advertisement.
""However, the (Taiwan) government cannot accept the 'one China, two systems' formula imposed on Hong Kong by Peking (Beijing), because the state of division across the Taiwan Strait differs categorically from Hong Kong's situation.""
The statement, a striking reminder of the China-Taiwan issue at a sensitive moment, followed Taiwan's confirmation of annual wargames on June 23-24 in the Taiwan Strait, the scene last year of a tense stand-off between the ""two Chinas"".
Communist Beijing has considered Taiwan a renegade province since the Chinese civil war ended in 1949 and the defeated Nationalists (Kuomintang) set up a rival government there.
China staged eight months of war games near Taiwan in the run-up to the island's March 1996 presidential election, which Beijing suspected was a bid to pursue full independence.
China fully intends to reclaim Taiwan, by force if necessary, and designed the ""one country, two systems"" policy with Taiwan -- not just Hong Kong -- in mind.
But Taiwan, which calls itself the Republic of China, has ruled out unification until China's Communist Party gives up its political monopoly and introduces pluralism.
Most political analysts said the ostensibly routine nature of Taiwan's summer military exercises was belied by their timing. Taiwan rejects any link between the wargames and Hong Kong's handover, but few Hong Kong commentators are convinced.
""The timing of the wargames is certainly related to the Taipei government's position on the Hong Kong issue and I think wargames have these political connotations,"" said Joseph Cheng, professor of political science at City University in Hong Kong.
Michael DeGolyer, professor of political science at Baptist University in Hong Kong, said that the purpose of the exercises was to send a message.
""You have to ask yourself just how subtle is shooting off a bunch of rockets, but it does get across the clear statement that the ""one country, two systems"" formula by which Hong Kong is being returned to China does not apply to them,"" he said.
Yet most analysts do not expect any major disruption, citing Taiwan's commitment to a smooth Hong Kong transition and the international community's awareness of issues in the strait.
""Will all this have a significant impact on the handover? No,"" said Richard Margolis, political analyst at broker Merrill Lynch in Hong Kong.
""The scene is set for the handover. It will be full of symbolism but when the first of July rolls around the overall expectation is that it will be business as usual.""
DeGolyer said that now was the wrong time for China to force the Taiwan issue. Although Taiwan originally topped China's reunification agenda, Britain's insistence on settling the Hong Kong issue has guaranteed that the next couple of years will be spent ensuring the territory is functioning well, he said.
""If there's any time at which we could consider the Taiwan issue to be the least likely to blow up in our face, this is probably it,"" DeGolyer said.
But he warned that Chinese President Jiang Zemin had explicitly pledged to resolve the Taiwan issue in his lifetime, just as former paramount leader Deng Xiaoping stated his intention to settle Hong Kong during his tenure.
",42
"China no longer expects to join the World Trade Organisation this year but sees better relations with Britain under the new Labour government, a delegation of Hong Kong business leaders said on Wednesday.
""China's membership in the WTO is unlikely to be settled this year,"" General Chamber of Commerce chairman James Tien told reporters after returning from meetings in Beijing with Chinese Premier Li Peng and the top Chinese official responsible for Hong Kong affairs, Lu Ping.
A number of outstanding issues with the United States remain. These concern the opening of the Chinese market, particularly in the area of services, and would probably delay China's WTO membership, Peng told the delegation.
But relations with Britain were poised to improve following the May 1 election of Prime Minister Tony Blair's Labour government, ending 18 years of Conservative rule.
""(Li said) he looked forward to a better relationship with the Labour government in the UK and that would help Hong Kong's transition after July 1,"" Tien said.
Former Conservative prime minister Margaret Thatcher was responsible for the 1984 Sino-British treaties governing the return of Hong Kong to Chinese rule at midnight on June 30, ending 156 years of British colonial rule.
Tien also revealed that China did not support attempts to tighten visa requirements for foreigners or restrict their right to work in the territory -- a proposal made in a private member's bill tabled by Hong Kong unionist legislator Chan Yuen-han.
""The Chinese government was not supportive of that position,"" Tien said.
The issue was raised in a discussion about Hong Kong's continued competitiveness, said chamber member Eden Woon. Attempts would be made to remove uncompetitive tax treatment for foreign firms investing in China through Hong Kong, he added.
Foreign companies now investing in China through Hong Kong must pay tax in both locations, reducing Hong Kong's competitiveness as a gateway to the Chinese market, Tien said.
A number of states, including Singapore, have worked out tax and investment treaties with China, providing a greater incentive for foreign companies to avoid Hong Kong, Tien said.
Because Hong Kong will be a Special Administrative Region of China, a separate treaty is not appropriate, but steps would be taken over the next few months to remove this potential hurdle, Tien said.
",42
"Financial market pundits in Hong Kong are closely watching the territory's top civil servants for any sign of discontent in the government as the British colony speeds towards its merger with China on July 1.
Credited with integrity and common sense, the continued tenure of the top echelon of Hong Kong's civil service is often cited as the key to a successful transition 41 days away. (Corrects from ""less than 40 days away"")
Speculation is intense in Hong Kong financial and political circles that friction has emerged between top officials such as Chief Secretary Anson Chan and Financial Secretary Donald Tsang, and future leader Tung Chee-hwa over policy.
""At the end of the day what we are most concerned about is whether the current status of the current coterie is maintained and that there will not be some substantial policy mistake,"" said a senior broker, who declined to be named.
""The likelihood of that would be increased if, for example, Donald Tsang was not in office.""
Other financial market experts agreed, but warned against focusing on any one individual.
""I wouldn't have any disagreement with those views, but I'm wondering to what extent any one person (is irreplaceable),"" said Eric Nickerson, currency analyst at Bank of America.
""I would think that they'd try to move away from that, and that would be a positive if that could be achieved.""
Recent comments by Chan calling for a credible legislature as soon as possible after the handover rekindled speculation about her future as second-in-command to Tung, who was chosen by a China-controlled committee to govern after Britain departs.
""We have an obligation to the community to ensure that they are represented by a credible and authoritative legislature in which they, and the international community have confidence,"" Chan told a business conference in Manila on Monday.
""Otherwise, the credibility and authority of the future administration itself will be weakened.""
Chan did not specifically mention the China-appointed provisional legislature, which will replace the current council on July 1. But pro-China politician Lau Siu-Kai told a newspaper Chan's remarks implied she did not feel the provisional body was a credible and authoritative legislature.
This might undermine her future working relationship with the interim body, Lau told the South China Morning Post.
Donald Tsang has also been the subject of speculation following his opposition to changes to civil liberties laws.
""Tsang and Chan are the only senior members of the inner circle who have spoken out against the current measures and at the end of the day, that's what matters,"" the broker said.
""We need people who are prepared to maintain the status quo in terms of Hong Kong's foreign exchange policy and the general course of monetary policy.""
Both China and Hong Kong have stressed repeatedly their commitment to the ""one country, two systems"" policy guiding Hong Kong back to the motherland, but political scientists said some friction was inevitable.
""These senior civil servants will say that we have been doing very well, there is no need to make changes while the other side says that these are colonial things and if changes need to be made we have no hesitation,"" said Joseph Cheng, professor of political science at City University of Hong Kong.
Both sides will have to be flexible and adjust, he said, and warned that an early resignation would send a bad signal.
""It's not so much the individual. It's that people will ask why a top civil servant wants to leave. What is wrong? And this will affect confidence in Hong Kong,"" he said.
",42
"While the issue of Hong Kong's civil liberties after its return to China has grabbed the international spotlight, the territory's people remain concerned about a more insidious threat -- corruption.
Future leader Tung Chee-hwa's efforts to cool local and international fears about plans to curb civil rights have eclipsed an issue that has persistently taken top spot in local surveys as the biggest concern tied to Hong Kong's return to China on July 1, analysts said.
""This is the thing people are most concerned about,"" said Michael DeGolyer, a political scientist at the Baptist University of Hong Kong.
""We asked people which post-1997 aspects worried them most in July 1996, December 1996 and February 1997. It (corruption) was number one out of a total of seven various aspects...three times in a row. It's been number one there for over a year.""
Political analysts said the implications of a rise in corruption associated with Hong Kong's handover to Chinese rule were enormous.
Fears abound that the Chinese style of doing business, called ""guanxi"" or being connected to the right people, will erode the rule of law, which is considered essential to confidence in Hong Kong and its longer-term competitiveness.
""The prosperity of Hong Kong is very much based on upholding the rule of law, its respect for due process. These are very important factors for Hong Kong to function as an international and regional financial centre,"" said Professor Joseph Cheng of the City University of Hong Kong.
Political analysts said that while there was clear evidence of growing Chinese influence in Hong Kong's business, people were less concerned about ""guanxi"" seeping across the border than they were about individual Hong Kong businessmen exploiting the new style of doing business to their advantage.
""The business community sees the establishment of relationships in China as very important business assets, and we all know corruption facilitates the establishment of such relationship networks,"" Cheng said.
""Businessmen usually say they support fair competition while they make relationship contacts. So we could see this spread of relationship networks and the willingness to use bribery to seal business deals.""
DeGolyer said it was essential that Tung started to promote Hong Kong's continued integrity aggressively, with a strong focus on the Independent Commission Against Corruption (ICAC).
The anti-graft agency has been widely acknowledged as crucial to Hong Kong's reputation as a respectable place to do business.
""He should be incessantly beating the drum about the ICAC,"" DeGolyer said. ""He should be hammering away about its independence, its being above board, that he will support it.""
The powerful ICAC was set up in 1974 when corruption was endemic in Hong Kong.
Cheng added that corruption, while not an immediate risk, could be devastating over the longer term.
""The whole process is a very gradual one. Corruption spreads gradually, and you don't just say 'There's corruption and I withdraw my investment.' It takes time,"" he said.
",42
"Cathay Pacific Airways Ltd said on Monday it expects most of its grounded Airbus Industrie A330-300 aircraft to be back up and running within three weeks.
The British Civil Aviation Authority (CAA), meanwhile, urged PT Garuda Indonesia to ground its A330-300 fleet, the Civil Aviation Department (DCA) of Hong Kong said.
Cathay's fleet of 11 Airbuses was grounded on Saturday, the day after a Rolls-Royce Trent 700 engine failed on a Hong Kong Dragon Airlines (Dragonair) flight and forced the plane to make an emergency landing on one engine in the Philippines.
It was the fifth time since November that a Cathay Pacific or Dragonair A330-300 had made a single-engine landing. Rolls-Royce said on Friday that gearbox bearings were to blame for the problems with the Trent 700s, which were introduced in March 1995.
Dragonair, owned 25.5 percent by Cathay, has also suspended operations of its fleet of four A330-300 aircraft.
Roland Fairfield, engineering director for Cathay Pacific, told reporters that Rolls-Royce had proposed a modification to the Trent 700 engine gearbox, which the companies hoped to start incorporating into the Airbus fleet within one week.
""We expect the aircraft to commence re-entering service on a progressive basis in approximately one week's time,"" he said.
""The rate at which the remainder of the fleet enters service is going to be very much a function of how fast manufacturers can supply modification kits and we can get them embodied into the gearboxes, but I would expect at this stage that from the commencement of re-entry of the aircraft into service, the entire fleet will be back flying within two weeks of that date.""
Hong Kong's DCA said in a statement that the British CAA call for Garuda to ground its A330-300 fleet had prompted the DCA to tell Garuda that its services to Hong Kong ""should only be operated by aircraft other than"" Trent-powered A330s.
But Garuda said earlier it would only ground the airplane if there were an order from the aircraft maker or from the engine maker.
Stressing their primary commitment to safety, Cathay and Dragonair declined to give any indication of costs of the suspension, or its impact on 1997 profits.
""Clearly at the appropriate time in the appropriate way we will be discussing these issues,"" said Tony Tyler, director of corporate development.
""It is too early to make such comments we are all aware there are regulations covering what we can and cannot say ...stock market regulations ... and at this stage we are not in a position to comment on that particular feature of this issue.""
But analysts expected some erosion of 1997 profits, which some had forecast at HK$4 billion before the suspension. One analyst said the impact would depend largely on how long the fleet remained dormant.
Another analyst, Mark Simpson at Schroder Securities, said he was reducing his earnings forecasts for Cathay, but added that Rolls-Royce would almost certainly help defray Cathay's costs and reduce the bottom line impact.
Cathay declined to reveal whether any compensation agreement with Rolls-Royce was under discussion.
""We're not in the habit of disclosing the financial arrangements that go on with our suppliers,"" Tyler said.
",42
"Whatever the worries about Hong Kong's return to China this year, business isn't one of them. At least, that's the official line.
""With 100 days to go, it's no big deal from the point of view of business. It's a fait accompli,"" said Stewart Aldcroft, director at Templeton.
But scratch the surface of Hong Kong's international business community, and niggling doubts emerge.
""Our half (of one country, two systems) is that Hong Kong will retain its present way of life. And I think that remains to be seen,"" Brigadier Christopher Hammerbeck, executive director at the British Chamber of Commerce, said, rather stiffly.
March 23 will marks the 100-day countdown to the handover to China at midnight on June 30, a date dismissed by most corporate types in party-mad Hong Kong as another opportunity to dress up and play hard.
That's because the actual business of the handover was taken care of years ago.
Ever since Deng Xiaoping flung open China's doors to foreign investment in the late 1970s, Hong Kong has been forging ties with the mainland, actively investing from Guangzhou to Shanghai and building bridges to Beijing with joint ventures, franchises and huge infrastructure projects.
China has reciprocated by listing state enterprises on Hong Kong's stock exchange, investing heavily in the territory's hot property market and establishing a firm Hong Kong foothold for the People's Liberation Army, parts of which have been reinvented as vibrant business machines.
MAINLAND INTERESTS
""There are many, many companies registered in Hong Kong that are primarily owned and backed by mainland interests,"" said Tai Ming Cheung, analyst at Kim Eng Securities.
Then there are the red chips, companies listed and based in Hong Kong but operating in China, whose 15-year success story bodes so well that their sizzling shares have helped fuel a stunning 22-percent rise in Hong Kong stocks over the past year.
The bellwether property market has risen more than 40 percent in the same period, turning many Hong Kong residents into instant millionaires.
At the same time, the economy is steaming along with growth rates of five percent or more. And while inflation shows signs of re-emerging, it is not yet cause for serious concern.
Relief from pent-up inflationary pressure was only one of the many benefits bestowed upon Hong Kong by an open China, whose land and resources provided welcome expansionary room for the territory's frenzied but constrained economy 15 years ago.
Economists said the economic integration between Hong Kong and Southern China is now virtually complete, with labour mobility the only remaining division in a vast, sprawling metropolis stretching from Hong Kong to Shenzhen and beyond.
""Harsh economics have driven it, the realities of the cheapness of labour north of the border,"" said Hammerbeck.
THE POLITICS, HOWEVER, ARE DELICATE
Experts warned that while borders are clear, the line between economics and politics is finely-drawn and easily overstepped.
""People are already politically pessimistic. They are already politically sensitive. It is the economic performance that holds them together,"" said Michael DeGolyer, political analyst at the University of Hong Kong.
While Hong Kong's booming stock and property markets indicate high confidence about the territory's commercial fate under China, big business is quietly but keenly alert to any challenge to the features that made Hong Kong one of the great business wonders of the world.
Rule of law, free markets, free flow of information, tight fiscal control and strong education are an oft-repeated mantra by a business community determined to protect what it views as the essential ingredients in Hong Kong's magic formula.
The ""one country, two systems"" policy devised by Deng to guide Hong Kong's return to the Motherland guarantees the territory's autonomy, but it has yet to be implemented or tested. Its success is crucial.
""Because we haven't yet reached the post-handover period, we have not yet seen the extent to which (future chief executive) Tung Chee-hwa and thus, also, the future Hong Kong government can exert their independence,"" said Templeton's Aldcroft.
TUNG ON A TIGHTROPE
Tung's task to uphold a capitalist system inherently at odds with China's communist regime is a balancing act few envy, even though most big business in Hong Kong has banked heavily on his ability to pull it off.
Tung's decision to leave the the territory's team of civil servants virtually intact was greeted warmly, but China's plan to repeal some civil liberties laws was viewed with caution.
""If we get rid of these laws so promptly, what other laws are going to be got rid of because they're inconvenient? That does not give confidence. But at the same time, we must not make too many assumptions,"" Aldcroft said.
While the handover's success is considered more assured in Hong Kong than overseas, the Hong Kong stock market is over-bought.
Recent consolidation has removed some of the froth, but enough funds are sufficiently overweight to cause disruption should anything ""go wrong,"" said David Semple, regional strategist at Peregrine Asset Management in Hong Kong.
""There is very negative sentiment from the United States,"" he said. ""And if it does go wrong, there will be a very large element of 'I told you so'.""
",42
"Hong Kong conglomerate Hutchison Whampoa Ltd reported healthy 1996 earnings in line with expectations on Wednesday, but analysts warned the outlook remains mixed despite upbeat comments from tycoon Li Ka-shing.
""Basically it was in line with what the market was forecasting, propped up by the HK$4.1 billion exceptional from the Orange flotation earlier in the year,"" said ING Barings analyst Nam Park.
""But the outlook is pretty mixed,"" he said. ""I think I'll be revising my numbers downwards.""
Hutchison is 48.9 percent owned by Cheung Kong (Holdings) Ltd and has interests in property, energy, telecommunications, container terminal operations and retailing.
Despite weakness in most of its major divisions last year, Hutchison maintained earnings momentum by spinning off British mobile phone operator Orange Plc in April 1996.
The exceptional gain -- described by one analyst as recurrent income because Hutchison maintained its dividend payout ratio -- helped to boost 1996 net profit to HK$12.02 billion (US$1.55 billion) compared to HK$9.57 billion in 1995.
Although the company failed to give a detailed financial breakdown, analysts said the numbers suggested the company's telecoms and property divisions performed poorly last year while parts of the container business did reasonably well.
The outlook is slightly better in 1997 thanks to Orange, which has been performing better than expected, and the spin-off of a Hongkong Electric Holdings Ltd holding into subsidiary, Cheung Kong Infrastructure Holdings Ltd.
""It's a pretty mixed outlook,"" said Park. ""But I think the real swing factor could be the telecoms side.""
Hutchison chairman Li Ka-shing said the company's cellular telephone subscriber base is now about 340,000 and costs would plunge with the changeover from analogue to digital systems.
""With its solid base of recurrent quality income, strong cash flow and financial position, the Group is well positioned to move forward to the next century with confidence,"" Li said.
But analysts said Hutchison faces an increasingly competitive telecoms market in Hong Kong, and 49-percent-held Orange remains a loss-making business despite early strength.
Analysts said the property division would continue to suffer from a lack of property developments, despite Li's comments that investment income offset any decline in property development income and rental income would remain strong this year.
""It'll be 1998/99 before it's back to property being a source of significant growth,"" said John Hetherington, analyst at Asia Equity.
The container terminals division, however, seems set to improve. Analysts said Li suggested that Hongkong International Terminals Ltd (HIT) enjoyed double digit growth.
""Given that other operators saw a three percent drop (in container traffic) HIT was obviously the other beneficiary,"" said Raymond Chong at Yaimichi Securities.
The medium-term outlook is much more positive, thanks to Hutchison's exposure to Chinese exports.
""Medium term I'm very bullish. I'm bullish on China trade flows and Hutch is all up and down the coast of China,"" said Hetherington.
He is forecasting 1997 earnings of HK$3.60 per share, an estimate another analyst described as ""very aggressive"".
Earnings per share in 1996 were HK$3.32.
(US$1 = HK$7.74)
",42
"Hong Kong's hefty cash reserves offer a comfortable cushion for children born in 1997, the year the British colony returns to Chinese sovereignty.
According to Wednesday's 1997/98 budget figures, thrifty Hong Kong will confront its future as part of China with HK$330 billion (US$42 billion) in total fiscal reserves.
That works out to more than US$6,500 for each man, woman and child in the territory.
By comparison, gross national debt in the United States of US$5.5 trillion translates into a debt of US$20,500 for every child born there this year.
But Financial Secretary Donald Tsang resisted the temptation to hand down a give-away budget.
Instead of widely-anticipated tax cuts, Tsang's budget speech for 1997/98 (April-March) stressed the need for continuity in 1997, and Hong Kong's ability to work with China to strike a balance.
""Fortunately, our healthy public finances and robust economic prospects have made the task of finding the right balance somewhat easier,"" Tsang said.
But critics were not satisfied by the government's failure to spend more on the needy, particularly the elderly, while reporting a budget surplus of HK$15.1 billion this year rising to HK$31.7 billion in 1997/98.
""I think the size of the surplus is utterly obscene and I'm very, very mad just on that,"" said Emily Lau, an independent Democrat and outspoken critic of the government's social policy.
""We are probably the richest place on earth and to think we have several hundred thousand poeple living from hand to mouth.
""I've got nothing against the tax reduction on wine, that's fine. But I think we should also do something for the elderly.""
Tsang cut duties on wine to 60 percent from 90 percent.
Experts warned that the gap between rich and poor in Hong Kong is bound to widen as impoverished Chinese immigrants flock to Hong Kong seeking streets paved with gold.
In 1995, Hong Kong increased the quota for mainland immigrants to 150 a day from 105, mainly for family reunions.
""Twenty years ago, Hong Kong could absorb impoverished migrants from the mainland in large numbers because it had an immense need for cheap labour,"" said David Dodwell, a director at Jardine Fleming Holdings.
""Today, that is no longer the case. Now our capacity to absorb those in the economy today is much less than it used to be. We don't have the unskilled jobs,"" he said.
Hong Kong's rapid transformation from international manufacturing and industrial hub into a services economy geared to China's economic expansion has caused the relocation of virtually its entire manufacturing base into southern China.
Tsang's highly conservative budget indicated growing awareness of the potential ramifications of mainland immigration, with a 150-percent boost to spending on benefits for newly-arrived mainland children.
""As for the children, we help them fit into our schools with special support services and remedial English programmes,"" he said. ""In 1997/98 we will spend a total of around HK$168 million on these children -- an increase of over 150 percent in real terms of 1996/97.""
($ = 7.74 HK dollars)
",42
"British soldiers fought their way through jungle, attacked an enemy camp and took prisoners in Hong Kong on Tuesday, but it was only a mock battle and the last such exercise by the army after 156 years of colonial rule.
With only 70 days left before Britain hands Hong Kong back to China, the Black Watch regiment headed to the hills of the New Territories to play jungle war games and ignore, for a few hours, the fast-approaching end of British rule.
Shots ripped through the air and red flares spewed smoke as sweat-drenched soldiers laden with gear waded across rivers, charged up and down hills and crawled through lush and heavy undergrowth in a practice assault on an enemy camp.
The Black Watch -- dubbed the ""Highland Furies"" by the French after the Battle of Fontenoy in 1745 -- are nearly half-way through an historic tour of duty in Hong Kong.
On June 30, the pipes and drums of the regiment will sound the end of British colonial rule.
But on Tuesday, sweat and slog rather than ceremony was the order of the day.
The camp and two prisoners-of-war were successfully taken, marking the end to the British army's permanent access to a valued training ground for jungle warfare skills.
""I'll miss it. We'll miss it, because you don't get training like this on a regular basis on a tour,"" said Corporal John Lyon, 28. ""This area you can train throughout the whole time you're here.""
Lieutenant-Colonel Alasdair Loudon, commanding officer of the Black Watch in Hong Kong, said the New Territories have become something of a secret weapon.
Few would guess that less than one-hour's drive from the concrete jungle of Hong Kong Island lie stretches of hot, humid and heavily overgrown countryside which represents a challenge for British troops.
""For us, it's harsh terrain. We're not used to the heat, we're not used to the hills and when you get away from tracks the undergrowth is very difficult. So it's demanding,"" he said.
The Black Watch also had a busy day on Monday -- they were escorting an advance party of China's People's Liberation Army (PLA) soldiers as they drove from the border to the Prince of Wales barracks in the territory's Central business district.
The 40-strong PLA party are to lay the ground for up to 10,000 Chinese troops likely to be stationed in Hong Kong after the handover.
Loudon said his regiment's main task as June 30 approaches is to ensure the handover goes smoothly.
""Our most important task is to get out on June 30 and have a fine parade so that the handover of British sovereignty has gone in a smooth and dignified way,"" he told reporters.
At least 100 of the Black Watch soldiers will be involved in the ceremonies with another 100 providing logistical support. The regiment flies back to Inverness in northern Scotland after the ceremonies.
""To a man, they will have had a very interesting time here. They will have done some good training, they've done a good job,"" Loudon said.
""And I'm sure when they get back to Inverness, where it's warm only two days a year, they're going to miss Hong Kong very much,"" he said.
",42
"Temperatures are rising as Hong Kong prepares for its midsummer transition to Chinese rule, and nowhere is it hotter than at the territory's newspapers.
Those on the front lines of freedom of speech -- one of the hottest issues of the transition -- are fighting back against accusations of pro-China bias and self-censorship, charges that are difficult to prove and even more difficult to dispute.
Chief among the accused is the South China Morning Post, Hong Kong's leading English-language daily.
Ever since 1995, when it canned the popular cartoon ""The World of Lily Wong"", which had taken regular swipes at China, the English-language Post has been snubbed and dubbed the ""Pro China Morning Post"" by its foes.
More recently, it came under attack for hiring a founding editor of China's state-owned China Daily as a consultant.
Much of the concern was rooted in the location of the consultant's office close to editor Jonathan Fenby, who firmly denies being under Beijing's thumb.
""I am the editor,"" Fenby told Reuters. ""He will not be involved in editorial decisions.""
SPOTLIGHT TURNS TO CANTONESE DAILY
Similar charges have been made against Ming Pao, one of Hong Kong's best-selling Chinese-language newspapers.
A recent front-page story in the Asian Wall Street Journal outlined a shift in editorial focus at the independent daily.
Ming Pao's reputation for diligent reporting of Chinese politics and dissident activity had faded, the Journal said.
For example, when Tung Chee-hwa was picked in December to lead Hong Kong after it returns to Chinese control on July 1 after 156 years as a British colony, one Ming Pao headline read, ""Tung impresses one most by his character"".
But concrete examples of bias are hard to come by -- and that's not surprising, according to journalism professor Tim Hamlett at Hong Kong Baptist University.
""People don't march down the corridors and say, 'Our focus is changing',"" he said. ""People just pick up what's wanted from hundreds of tiny details. Is your story the front-page lead, the inside-page lead or is it buried at the back?""
Perhaps more telling, one in five journalists admitted hesitating to criticize China, according to a survey conducted by Chinese University of Hong Kong in early May.
More than half said they thought most working journalists in Hong Kong were hesitant to criticize their future sovereign, while one-third felt that most journalists also tempered their criticism of large corporations in Hong Kong.
The findings supported a 1995 survey by the Hong Kong Journalists' Association, in which 90 percent said self-censorship was occurring in Hong Kong.
In the HKJA survey, 80 percent expected things would change after the handover while the more recent Chinese University survey revealed a ""wait and see"" attitude among most Hong Kong journalists, with more than half worried that press freedom would change past the handover.
""Although Hong Kong journalists highly support the values of press freedom, they seem to develop considerable uncertainty about Hong Kong's future,"" the survey's authors wrote.
UNCERTAINTY, CAUTION ORDER OF THE DAY
Senior Chinese leaders have warned the Hong Kong press against advocating independence for the territory or for Taiwan and there are ample precedents for journalists who may wonder what will happen to them if they ignore these warnings.
In 1994, China sentenced Ming Pao journalist Xi Yang to 12 years in prison for espionage for using central bank information on interest rates and gold sales -- the sort of scoop that would have won Xi professional kudos in the West.
Xi was released earlier this year as a goodwill gesture -- but at about the same time, Chinese authorities arrested an SBC Warburg analyst and questioned her for a month after she, too, obtained and used central bank information.
Then there is Jimmy Lai, the controversial entrepreneur who in a 1994 column called Chinese Premier Li Peng ""a turtle's egg"", a terrible insult in Chinese.
Lai's Giordano clothing shop in China was forced to close shortly after his column ran. Lai has since sold his Giordano stake, but the company still has difficulty on the mainland.
More recently, Lai has found it hard finding an underwriter for one of his companies, Next Media Group, which he wants to list on the Hong Kong stock exchange.
Freedom of speech is considered crucial to the continued commercial success of Hong Kong, whose large and developed financial markets require free flowing, high-quality information to function efficiently.
But democracy is a relatively new concept in Hong Kong.
Fenby argued that, rather than a shift in favour of China, the South China Morning Post has shed its former identity as a colonial mouthpiece and become an independent daily reflecting Hong Kong's new realities.
Fenby even said colonial officials had made a forceful request to remove a story that embarrassed Patten from the front page -- a charge government spokesman Kerry McGlynn denied.
""I'm not shocked by that...(but) Tung's office hasn't called. Neither has Xinhua,"" Fenby said. ""(Freedom of the press) is what we do here, and that is what we are going to continue doing through July 1.""
",42
"Hong Kong witnessed another vote in favour of the status quo on Wednesday when future leader Tung Chee-hwa appointed Financial Secretary Donald Tsang to manage the US$19 billion Land Fund after July 1.
The move was interpreted as a vote of support for the outspoken Tsang, whose continued influence as one of Hong Kong's most senior civil servants has long been viewed as an indication of top tier stability as the handover to China approaches.
""That is interesting. That would indicate Donald Tsang is not being marginalised as some people were speculating,"" said Bob Broadfoot of the Political and Economic Risk Consultancy.
Broadfoot was referring to Tung's decision to appoint Tsang chairman of a Land Fund Committee to be established when Hong Kong becomes a Special Administrative Region of China on July 1.
The Land Fund's management threatened to turn into something of a political football when Tsang's post-handover status was debated earlier this year.
A bitter opponent of Tung's proposals to alter Hong Kong's Bill of Rights, Tsang's continued tenure as Financial Secretary after Hong Kong reverts to Chinese control in 48 days was considered less than certain.
Tsang was eventually confirmed, but in February, Tung said he was considering changes in the reporting structure at the territory's de facto central bank, the Hong Kong Monetary Authority (HKMA).
Instead of reporting to Tsang, Tung suggested that HKMA chief Joseph Yam might report directly to the chief executive, effectively sidelining Tsang.
But no changes have been announced. And Tsang's appointment as controller of the Land Fund was interpreted as a sign that changes were unlikely.
""That puts him back in the reporting arrangement between Tung and Yam, doesn't it?"" said Broadfoot.
Tung said on Wednesday that the HKMA will manage the fund under Tsang's direction.
The Land Fund was established in 1984 to assuage Chinese concern about Britain's intentions. The fund, made up of proceeds from government property sales, now exceeds HK$150 billion -- equivalent to Hong Kong's fiscal reserves.
Half of land sales proceeds were remitted directly to the colonial government. The other half was held in escrow in the Land Fund to revert to the post-colonial government.
The fund has become so large that its inclusion into the existing reserves, or Exchange Fund, threaten to boost the Hong Kong dollar and put pressure on the Hong Kong-U.S. dollar peg.
Any change to Hong Kong's independent monetary system could undermine corporate confidence in the territory after the transition, experts said.
The status of the territory's top three civil servants is being watched closely in Hong Kong.
Tsang, Chief Secretary Anson Chan and the future secretary for justice are automatic members of Tung's inner cabinet, or Executive Council.
-- Hong Kong Newsroom (852) 2843-6352
",42
"The arrival in Hong Kong next week of a contingent of China's People's Liberation Army (PLA) carries a symbolism far outweighing the numbers involved -- 40 unarmed soldiers.
After long and painful negotiations, Britain and China announced on Tuesday that in less than a week the PLA personnel would arrive in the territory as an advance guard prior to Britain's formal handover of the territory to China.
The sovereignty switch is not until the stroke of midnight on June 30, but the PLA personnel, who will not wear uniforms outside their barracks and will have no security role, will be an emphatic mark of Hong Kong's transition.
""This is the real thing. And the PLA, of course, has a central role in China and that also gives it significance,"" Michael DeGolyer political analyst at Hong Kong's Baptist University, told Reuters.
The diplomatic status of most other Chinese representative offices in Hong Kong, such as Xinhua News Agency and the Hong Kong and Macau Affairs Office, had on occasion been uncertain, he said.
But there is no confusion about the status of the PLA. It is China's designated protector of both party and state.
""It will be interesting to see who they talk to,"" DeGolyer said. ""It would be appropriate to pay a courtesy call on the chief executive, Tung Chee-hwa.
""And it would be symbolically significant for the chief executive to meet with them simply because they are the first establishment of an official representation of sovereignty in the territory,"" he added.
Tung was appointed by China in December to become the first post-colonial leader, succeeding colonial Governor Chris Patten.
Details of the PLA deal were welcomed by some of those who had been previously alarmed by reports that a heavily armed advance guard might march into the territory before July 1.
Memories of the 1989 Beijing massacre, in which PLA soldiers crushed pro-democracy protests with heavy loss of life, remain vivid in Hong Kong.
""The PLA issue has been highly sensitive. At least they managed to persuade them not to come in heavily armed before July,"" said independent Democrat Emily Lau.
But senior government sources warned against reading any new mood of Sino-British reconciliation into the announcement.
""Politically, it's a minor sign they can agree on things but it really doesn't change things. I don't see any major turning point in this in terms of relationship,"" said PLA expert and political analyst Tai Ming Cheung.
In fact, there are increasing signs of strain in the Sino-British relationship.
On Monday, Beijing unilaterally announced who would qualify for permanent residency in Hong Kong after July 1.
The move prompted a rebuke from Britain for announcing a go-it-alone decision on an issue that it said should have been settled diplomatically.
Sources close to Patten said China cared less about the right of abode than it did about forcing the recognition of a Beijing-backed Provisional Legislature.
China insists that the provisional chamber will pass the residency law rather than the territory's existing elected Legislative Council, due for extinction on July 1.
Signs of a Sino-British standoff are evident everywhere as the colony's endgame unfolds and Britain, perceived by most Hong Kong people as increasingly irrelevant, packs its bags and prepares to leave town.
The only mainland China representation on Tuesday at a Foreign Correspondents Club reception for diplomats was a low-ranking Chinese official.
Xinhua director Zhou Nan, his senior deputies and China's chief handover negotiator Zhao Jihua, all stayed away.
",42
"U.S. House Speaker Newt Gingrich said on Thursday he expected to discuss with China allegations of illegal funding to the Democratic Party by Beijing during his visit, even though he considered it a domestic issue.
""Obviously I think this will come up in Beijing...(but) this is not a Chinese problem,"" Gingrich, on a 10-day Asian tour, told the American Chamber of Commerce before leaving for Beijing on Thursday evening.
The Washington Post has reported that the Federal Bureau of Investigation warned six members of the U.S. Congress last year they had been targeted by China to receive illegal campaign funds from foreign corporations.
U.S. Vice President Al Gore said he talked about the issue on Tuesday in Beijing with Chinese Premier Li Peng, who has denied the reports. Gore said that the probe into the allegations should not disrupt China-U.S. ties, but proof of payments would make it a serious matter.
Gingrich, who was in Hong Kong on a two-day visit and was due to arrive in Beijing hours after Gore leaves, said the campaign financing scandal should be treated as a domestic issue, albeit a serious one.
""This is an American problem,"" Gingrich said. ""It is an American law violated by Americans engaging in acts which are illegal in our system, and we have an obligation to police our system.""
He said the United States would defend its political system from foreign interference, and called upon Asian nations for cooperation on investigations.
""My only point in Beijing and in Taiwan would be, if we need information about specific people and specific companies, we hope you will give us the information,"" he said.
The China allegations followed other reports of irregular fund-raising by the Democratic Party involving Asian nations and American-Asians based in the United States.
Gingrich said the media's portrayal of the fund-raising affair as a complicated international issue was incorrect.
""It's not complicated at all,"" he said. ""About a year and a half ago, a group of people sat down and decided they couldn't win the election if they didn't raise every penny they could from every source they could, and if they actually obeyed the law, it'd be too complicated.""
U.S. President Bill Clinton this month blamed much of the controversy on a political system that was ""out of whack"".
",42
"With the memory of Thailand's banking sector implosion still fresh, alarm bells are starting to sound about banks' property exposure in Hong Kong.
Massive capital inflows into the territory, most driven by optimism about Hong Kong's reversion to China at midnight on June 30, have fuelled an explosion in bank loans for property.
The enthusiasm evokes memories of the building boom that helped push Thailand to the brink of economic collapse earlier this year, with banks weighted under by bad loans.
Widely viewed as Hong Kong's most accurate confidence indicator, soaring property prices are considered by many people to be yet another sign that all is well with the territory's handover to China just around the corner.
But others are urging officials to check out the foundations on which the boom is built.
""There appears to be an assumption among Hong Kong bankers -- not to mention their clients -- that they can print as much money as needed to keep property and other asset prices in orbit indefinitely,"" said Hugh Peyman in a recent report by Dresdner Kleinwort Benson (DKB).
David Lui, director at Schroder Securities, took up the same issue at a public forum on Tuesday.
""If property prices continue to rise, that will affect the soundness (of the financial sector),"" Lui said.
The Hong Kong Monetary Authority (HKMA), the territory's de facto central bank, warned late last month that additional restraints in mortgage lending might be required, taking some of the steam out of Hong Kong's hyperactive stock market.
Profit-taking hit property counters on Wednesday despite the Hang Seng Index's overall recovery from early lows. The blue-chip index was up 105 points, or 0.73 percent, at 14,545 at midday, while the property sub-index was down 0.48 percent.
DKB dismissed the HKMA's warning as ""tepid"".
""The horse may already have bolted,"" Peyman said. ""The pressure on the HKMA not to (do) anything to stop the current asset price orgy is clear enough, particularly with the handover only a month away.""
Outstanding property lending has risen 26 percent in one year. Property and construction now account for 47 percent of all Hong Kong lending, Peyman said.
""These massive increases in property lending have taken place against a backdrop of the lowest new supply of residential flats in 23 years,"" he said.
Mortgage loans now account for 22 percent of all loans, and loans to developers have hit HK$363 billion (US$46.5 billion) -- up 18 percent over six months and 30 percent over one year.
Hong Kong's fixed exchange rate and open capital account leave the HKMA very little room to manoeuvre to calm the frenzy, except to resort to aggressive hands-on lending restrictions.
Local banks are already restricted to a 40 percent property exposure, but the HKMA has no control over foreign banks who usually enter late in a boom and give the biggest boost to lending as they grab for market share at any cost.
DKB said the figures are worrying enough to suggest tougher HKMA action to dampen down credit expansion before the September International Monetary Fund/World Bank meeting in Hong Kong.
But other analysts adopted a more sanguine view.
The start-up of a new mortgage corporation later this year will eat up some of the banks loans as property debts are securitised, said Clive McDonnell, economist at SocGen Crosby.
More important than lending restrictions are plans already announced by the new Hong Kong government to increase supply.
""There has been a level of excess liquidity and that's been feeding through into property prices,"" McDonnell said. ""However, long-term trends will affect the short term. People will not pile into property if trend supply increases.""
Financial Secretary Donald Tsang has already pledged to release 51 hectares of land for development over the next five years, which translates into about 30,500 units each year.
-- Hong Kong newsroom (852) 2834 6441.  http://www,hk97.com
",42
"A widespread shake-up is hitting the highly competitive funds management industry, stripping a number of Hong Kong's key players of their jobs.
""The whole industry is in turmoil at the moment,"" said Christopher Day, formerly of Thornton Management (Asia) Ltd.
Day left Thornton in the wake of its amalgamation last November into the other fund units of Dresdner Bank, including RCM Capital and Kleinwort Benson Investment.
He is one of at least four senior dismissals during the past few weeks, according to industry sources. All were the result of consolidation in the industry with finance houses scrambling for position in the exploding mass market for retail mutual and pension funds.
""A number of companies want to become the Proctor & Gamble of fund management,"" Day said. ""Virtually every European bank thinks it'll play in this market.""
Big financial companies are merging, seeking distribution networks powerful enough to gain dominance in this sector. The best example was Morgan Stanley Group Inc's US$10.7 billion merger with Dean Witter, Discover & Co last February, he said.
""Dean Witter is a distributor, although it may not be called that,"" Day said. ""Branding and distribution are the key. Marks & Spencer sells mutual funds, so does Virgin ""
Banks are keenly interested in funds management because they want to shift income away from loans to investment management income, which they perceive as higher quality, said another senior industry figure who was about to leave his company.
""And there's growing income from fund management where on the loan side you increase profits by driving volume,"" he said.
But he warned that banking and funds management do not necessarily blend well due to a difference in cultures.
""A loan-driven bank in Europe just does not have the entrepreneurial flair to drive fund management volumes, and in banks, nobody has any skill to manage these egotists,"" he said.
This sort of culture clash could jeopardise compliance, he warned. Fund managers, often seen as unmanageable by the more conservative banks, end up being left alone while compliance officers -- usually lawyers -- have a poor understanding of the fund industry.
Some fund managers also said they were becoming uncomfortable in the new supermarket-style fund houses, and this was one factor that accounted for a mushrooming of niche operations.
Fund managers were under pressure to design mass market products and have assumed more of a marketing role to adapt to an increasing focus on the consumer.
""Small boutiques are rising up full of people (fed) up with the large houses,"" said the second fund manager
The boutiques seem to function well. Joseph Paul, customer service manager at Rothschild Asset Management Asia Pacific, said his group has little interest in the high-turnover, mass market best exemplified by Jardine Fleming Unit Trusts in Hong Kong. But Rothschild proved that even niche players are not immune to fall-out from this industry shake-up.
In late 1995, Rothschild lost its entire funds management team to National Westminster Bank, which merged one of its units with Wheelock and Co Ltd
The merger folded last November, with NatWest buying out Wheelock's stake, partly because NatWest had sealed a deal with huge British pension giant Gartmore Plc
-- Hong Kong Newsroom (2843 6470)
",42
"Hong Kong's business and political leaders are gearing up to face a tough new world when the handover party is over.
Surrounded by rival Asian tiger economies, the territory can no longer rely on its historic role as the outside world's gateway to China to maintain its position as the world's seventh biggest trading economy.
""Our economic challenge is to improve Hong Kong's competitiveness in the new world order,"" future chief executive Tung Chee-hwa said in an interview with the South China Morning Post.
A quick glance at rivals Singapore, Shanghai, Kuala Lumpur and Tokyo has convinced Hong Kong's new leaders that drastic action is necessary.
Tung said Hong Kong had to become ""more compassionate and caring"" and tackle problems in education, housing and care of the elderly.
""Only if we succeed in meeting these challenges can we sustain our economic vitality and thereby continue to create wealth and improve the quality of life of all the people of Hong Kong,"" he declared.
""LIVELIHOOD"" ISSUES AT THE FOREFRONT
Tung's blend of economic and social policy into ""livelihood"" issues masks controversy over the prospect of government intervention in an economy dubbed the world's freest.
With a cash pile of HK$330 billion (US$42 billion) in reserves, Tung and his advisers have plenty of ammunition to fire at improvement targets.
Easy access to the cheap labour regions of southern China allowed Hong Kong's manufacturing base to explode and multiply when China opened its doors to foreign investment in the late 1970s and early 1980s.
Once a manufacturing base dependent on exports of labour-intensive, low-value goods, Hong Kong has been transformed into a service centre geared to China's emergence.
Manufacturing's contribution to Hong Kong's gross domestic product has plunged to single digits from more than 50 percent in the 1970s. Meanwhile, services have soared to 85 percent of GDP and are rising.
The speed of this process has amazed economists around the world -- and has created a new set of challenges for Hong Kong.
WAGES, PROPERTY CRUSH
The most obvious is a shortage of skilled workers.
""We need people, not machinery,"" George Leung, economic adviser at Hongkong and Shanghai Bank, said. ""This is the most serious issue in Hong Kong.""
Wage rates are rising, putting pressure on inflation rates even while unemployment rises -- a new phenomenon.
Demand is switching from high-labour, low-skilled jobs to white-collar occupations such as accountants, lawyers, managers and investment bankers.
The education system is ill-suited. Business leaders have called for government action to address a shortage of schools and properly qualified teachers.
""It's not a question of dumping money at the problem,"" Leung said. ""We need to come up with a helpful programme to train people and raise their quality. Otherwise, we will have no resources to expand our economy.""
With China's economy expected to double within the decade, Leung believes Hong Kong could face critical labour shortages in the next 10 years unless it acts aggressively now.
Rivals Singapore, Kuala Lumpur, Jakarta and Tokyo are waiting to pounce on failure.
Tung has appointed one adviser to draw up a detailed education policy and asked another for guidance on how to tackle Hong Kong's critical property shortage.
Both wages and property make a major contribution to high costs, Hong Kong's major handicap in the competitiveness stakes. Rents and wages are higher than virtually anywhere else in Asia.
",42
"An unskilled labour force is Hong Kong's biggest stumbling block to a successful future under China, Hongkong and Shanghai Bank economic adviser George Leung said on Friday.
""We need people, not machinery,"" Leung told Reuters, referring to Hong Kong's transformation into a service economy from the low-skilled manufacturing days of the past.
""This is the most serious issue in Hong Kong,"" Leung said.
""And it's not a case of dumping money at the problem. We need to come up with a helpful programme to train people and raise their quality. Otherwise, we will have no resources to expand our economy.""
An exploding service sector scrambling to meet the demands of the awakening Chinese economic giant has created a huge demand for properly qualified people in Hong Kong.
Investment bankers snowed under by listing applications from Chinese companies constantly complain they cannot find qualified workers, allowing barely-skilled expatriates to walk into highly-paid jobs far beyond their grasp back home.
The demand for all types of service professionals, such as lawyers, accountants, doctors, traders, analysts and others, has skyrocketed, putting upward pressure on overall wage rates and fuelling inflation.
The shortage can only get worse. China's economy is expected to double in size over the next decade, and Hong Kong's school system is unequipped to meet the new demand.
A shortage of school space is forcing Hong Kong's future workforce to attend school in shifts, and studies show Hong Kong students score lower in mathematics and science tests than rivals elsewhere in Asia.
This problem threatens to turn into a crisis within the decade, Leung warned. Under current circumstances, Hong Kong will be unable to find sufficient expatriates to meet its needs, possibly allowing centres such as Singapore, Kuala Lumpur and Tokyo to step in to meet demand.
Standards of English, the language of international commerce, are already considered to be lower in Hong Kong than in Singapore.
They will worsen further following the reversion of sovereignty to China on July 1, with an increasing emphasis on Mandarin as the common language of China rather than English, a legacy of a period considered shameful to China.
""We have got to place more emphasis on this otherwise we will be at a disadvantage,"" Leung said.
Anybody who doubted the importance of English to Hong Kong needed only turn to Tokyo, said Leung, where a lack of language ability had caused Japan to lag Hong Kong and Singapore as an Asia-Pacific financial centre, despite Japan's bigger markets.
Hong Kong's future leader Tung Chee-hwa has appointed a special task force to review the education system, which Leung said was a good idea.
""At least they know it is one of the most important factors affecting Hong Kong,"" Leung said.
But he is waiting to see what recommendations surface, calling for practical steps to massively upgrade the labour force's skill sets to match Hong Kong's new economic identity.
-- Hong Kong Newsroom (852) 2843 6470
",42
"After July 1, Hong Kong's role as facilitator of China-Taiwan trade will continue and probably expand, but the territory's reversion to mainland rule is bound to heighten sensitivities between the ""two Chinas"", experts say.
""I don't think after the first of July we will see a negative effect on triangular trade (between Hong Kong, Taiwan and China) but some of the issues, their handling will become much more sensitive,"" said George Leung, economic adviser at Hongkong Shanghai Banking Corp.
Direct trade and investment between two of Asia's largest and most vibrant economies have been banned for 48 years, creating a lucrative opportunity for Hong Kong to act as the gateway for indirect Taiwan-China trade and investment.
The ban on direct business, transport and communication links dates from 1949, when China's Communists won the civil war on the mainland and the defeated Nationalists fled to Taiwan, but the rivals' interest in indirect economic ties has overcome the political tensions -- to Hong Kong's benefit.
Hong Kong's return to Chinese sovereignty, set for midnight on June 30, at first seemed to threaten a delicate but workable arrangement. But experts say the ""one country, two systems"" policy guiding Hong Kong's transition -- and intended by China as the model for Taiwan reunification -- has allowed the continuation of an important triangular trade relationship.
Under this policy, Hong Kong will remain a separate customs territory, reflecting Beijing's promise of a high degree of autonomy as enshrined in Hong Kong's new mini-constitution, the Basic Law.
China and Taiwan also recently sealed a pact that lessens any diplomatic nervousness about Taiwanese and Chinese vessels moving through each other's waters.
After the handover, Taiwanese vessels will remove all flags in Hong Kong waters while Hong Kong ships visiting Taiwan will fly only the flag of the new Special Administrative Region.
""I don't see any particular problem, both the Chinese and Taiwanese governments recognise the economic benefit they both derive from trade linkage,"" Leung said.
""And the past offers lots of examples that no matter how strained the relationship seemed to be, it had very little impact on economic ties...They argue on the political issues but never on economics.""
Experts said the greatest harbinger of change for Greater China trade is not Hong Kong's handover but last January's agreement on direct shipping links between China and Taiwan.
Less than one year after the March 1996 Taiwan Straits missile crisis -- an incident that damaged trade throughout the region and pressured economic growth in Hong Kong -- shipping executives agreed to start direct cross-strait shipping between Xiamen and Fuzhou in China and Kaohsiung in Taiwan.
""Everyone's worried about those sorts of developments. Shipping, aircraft, everything comes through here,"" said Ian Perkin, economist at the Hong Kong General Chamber of Commerce.
The shipping deal followed a June 1996 air accord which set up a ""genuine interaction"" between Taiwan, Hong Kong and China through the establishment of Taiwan-Hong Kong air routes.
The deal effectively granted a carrier controlled by communist China unprecedented access to Taiwan.
Michael Martin, assistant economist at Hong Kong's Trade Development Council, said the volume of goods involved in the first shipping deal agreed to last week was too small to have much of an impact, but any broader deal would affect Hong Kong greatly.
""If there were a change such that Taiwan and mainland China were to come up with a new agreement that would allow goods directly from Taiwan to China or the other way, that's a new ballgame. We're talking about a larger volume of goods or products,"" Martin said.
Hong Kong exports to Taiwan were valued at US$4.2 billion in 1996 with Taiwanese imports to Hong Kong valued at US$15.8 billion, of which US$10.8 billion were re-exported, many of them to China.
TDC figures also showed 11,254 Taiwanese projects in China and an accumulated investment of US$5.64 billion at the end of 1995, but this is by no means the end of the story.
Hong Kong accounts for about 60 percent of all investment in China, some of which is bound to originate in Taiwan but end up disguised as foreign joint ventures. Hong Kong invested US$80 billion in China in 1995.
",42
"Nicholas-Applegate Capital Management said on Wednesday it had agreed to buy Credit Lyonnais' Asian fund management unit in a deal industry experts described as yet another sign of industry consolidation.
""This would seem to be a fairly good purchase,"" said Christopher Day, former managing director at Thornton Management (Asia) Ltd. ""It's another sign of consolidation.""
U.S.-based Nicholas-Applegate has agreed to buy Credit Lyonnais International Asset Management-Asia (CLIAM-Asia) for an undisclosed sum, improving Nicholas-Applegate's access to Asia while extending CLIAM-Asia's reach around the world.
""This will further strengthen Nicholas-Applegate's seasoned team of global managers and give us improved access to markets and analysts in Hong Kong, Singapore, China and other Asian countries,"" Nicholas-Applegate managing partner Arthur Nicholas said in a statement.
Paul Mack, managing director of CLIAM-Asia, said the deal would benefit his group by providing access to global distribution networks and enhancing its existing product line.
""We expect to be launching a number of new retail products utilizing the Applegate skills and also we have access to Applegate's distribution mechanism, which will allow us to sell to America, which we haven't been able to do,"" Mack said.
Although no purchase price was disclosed, analysts said Nicholas-Applegate probably paid in the upper reaches of a usual band between 1.5 percent and three percent of total assets managed by the target, in this case US$700 million.
That works out to about US$21 million. Nicholas-Applegate, based in San Diego, manages total assets of US$30 billion.
Mack denied that its debt-laden French parent bank, Credit Lyonnais, put its Asian fund unit on the auction block to raise some cash to meet anticipated privatisation requirements.
""Credit Lyonnais were approached by Nicholas-Applegate with a view to buying the operation. We were not for sale by Credit Lyonnais. It was a buy rather than a sell,"" Mack said.
Credit Lyonnais has been rescued by the French government twice from collapse under the weight of its lending excesses, and has been under pressure to sell non-French assets to meet conditions set by the European Commission for approving further state aid for the bank.
But the deal has raised speculation that Credit Lyonnais will divest its successful brokerage in Hong Kong, and heighten interest in more mergers and acquisitions among fund managers.
""Asset management and broking are some of the few parts of Credit Lyonnais making money right now,"" said Day, now an independent consultant after having been laid off as a result of industry consolidation. ""And I would imagine a lot of people will be phoning up other asset managers,"" he added.
No layoffs are expected among CLIAM-Asia's 70 staff in four offices in Hong Kong, Singapore, London and San Francisco. In fact, Mack is expecting some personnel expansion to meet Nicholas-Applegate's requirements.
CLIAM-Asia will take the name of Nicholas-Applegate Capital Management.
",42
"Hong Kong's future leader Tung Chee-hwa has sparked fresh suspicions over China's plans for the territory by announcing changes to the lower tiers of government which critics see as a further rollback for democracy.
The move was followed on Tuesday by the release of a survey confirming a continued decline in political confidence in Hong Kong just days before the territory's return to Chinese rule.
On Monday Tung, who takes over as Hong Kong's chief executive on July 1, unveiled a system that will dilute democratic representation on second-tier government bodies through the appointment of a number of pro-China names.
Commentators welcomed the retention of all members of existing local councils and district boards but the Democratic Party, Hong Kong's most popular and vocal political group, saw the addition of pro-Beijing appointees as yet another attempt to roll back democracy in the dying days of British colonial rule.
""Mr Tung has put the old story back. It is a very bad message to the whole world that Hong Kong is going backward in terms of democracy,"" Democratic Party vice chairman Yeung Sum told government radio in Hong Kong.
""China resumes sovereignty over Hong Kong under the so-called (policy) 'Hong Kong ruling Hong Kong', (but) Mr. Tung has added the appointed system to the two councils as well as the district boards,"" said Yeung. ""It is very ironic.""
The confidence survey released on Tuesday was carried out by Baptist University of Hong Kong, which is monitoring local attitudes to the handover under its Transition Project.
""Political pessimism this time seems to have risen over the survey in February,"" political analyst Michael DeGolyer of Baptist University told Hong Kong radio.
The survey also underlines the division between economic and political confidence, with two-thirds of Hong Kong people confident about their economic future but uncertain about their political fate, DeGolyer said.
The findings confirm a prevailing attitude of ""doom and boom"" in Hong Kong, he said, with the stock market reaching new highs and red chips, or China-related stocks, roaring ahead on handover optimism while political confidence slides.
""Economic optimism has gone up, political pessimism has gone up. It's almost a kind of a schizophrenic attitude,"" he said.
Under Tung's changes, pro-Beijing names were handed the lion's share of 116 new appointed seats on urban and regional councils and district boards, the vast majority of whose existing members were elected under democratic reforms introduced i n 1994 by departing colonial governor Chris Patten.
Nine new members will be appointed to the Urban Council, which runs municipal affairs in Hong Kong proper while 11 new appointments will be made to the Regional Council, which performs municipal government functions in the New Territories.
Tung has also added another 96 appointed seats to Hong Kong's 18 District Boards, which advise the government on issues in various districts around the territory.
The changes, which take effect after the handover on July 1, complement plans to replace the territory's existing, elected legislature with an interim China-appointed body.
The interim legislature, which will govern Hong Kong until democratic elections promised within one year of the handover, has become a flashpoint of controversy between China and Western nations who object to the rollback of democracy in Hong Kong.
China, which was angered by Patten's reforms, has promised Hong Kong a staggered introduction of democracy.
",42
"Tigers ready to pounce or a litter of clawless wannabes?
Surrounded by the burgeoning states of Asia, Hong Kong is wondering just how long it can rely upon its traditional strengths -- proximity to China, developed markets, a huge and free port -- for prosperity into the next millennium.
Rival tiger states from Singapore to Jakarta are sharpening their claws and developing fast, preparing for China's arrival.
They are growing so fast that financial powerhouse Hong Kong has started to wonder how well-prepared it is to defend its position as China's primary financial service centre.
An inadequate education system, declining standards of English, rising costs and an under-skilled labour force are just some of the hurdles facing Hong Kong -- and grabbing the attention of some of Asia's youngest and fiercest tigers.
TIGERS UNSHEATH THEIR CLAWS
Tokyo and Singapore pose the most immediate threat.
Tokyo's loss of business to lower cost, less regulated rivals such as Hong Kong and Singapore was one of the key motivations for the shake-out now hitting Japan's financial sector, termed the Big Bang.
Many of the reforms will take effect before the 2001 deadline, allowing Tokyo to claw back business from Hong Kong's grasp - but the process could take a while, analysts said.
""Immediate gains may not be so large,"" said Takashi Kiuchi, head of economic research at LTCB Research Institute Inc.
Despite Tokyo's obvious size and strength, Singapore is considered the Asian tiger with the sharpest teeth -- and time is on its side.
""Tokyo is still in the early stage of its liberalisation program,"" said Eddie Lee, economist at Vickers Ballas in Singapore. ""And in five to 10 years time, Singapore would have an earlier foothold in the Chinese market. The Japanese at this point are still trying to sort out their balance sheets. We'll have an advantage.""
The city-state has already lured many Asian headquarters from Hong Kong either directly, or by luring those companies that might previously more naturally have gone to Hong Kong.
But Singapore should not get too complacent. Lurking on the horizon lies tiger cub Kuala Lumpur, one of Asia's most promising and aggressive financial centres.
Malaysia's political stability, plentiful cheap office space and political will to deregulate financial markets are attractive for multinationals seeking an Asian location.
Malaysia is cheap, dynamic and motivated, with rentals one-third of those in Singapore and one-quarter of Hong Kong's.
""It's very obvious that the infrastructure is being put in place, put in place very rapidly,"" said Patrick Tan, assistant director at ABN Amro Hoare Govett in Kuala Lumpur.
""Right now we're number three (behind Hong Kong and Singapore) but it's a question of time and momentum. It's not a question of how many years but more a question how fast - what sort of volume can be built up in the next couple of years.""
Even Taipei, undeterred by political awkwardness with China, will be watching Hong Kong carefully over the coming months and years for signs of a loss of openness and evenhandedness.
And Jakarta is working hard to build its role as an Asian middleman for international investors.
""Our investment banking industry is growing at the moment and investment banks from the United Kingdom and the U.S. are coming here,"" said Agung Prabowo, analyst with Indonesia's state-owned brokerage PT Danareksa Sekuritas.
""We do play a middleman role that can facilitate the new ideas or debt securities or equity securities, and there are investors here as well who can absorb new issuance.""
HONG KONG THREAT WITHIN NOT WITHOUT
Despite all the enthusiasm, economists warn that China's smooth economic emergence should not be taken for granted.
Growth rates in China are declining as the nation grapples with massive structural problems.
And the sort of problems afflicting Hong Kong also weigh on other regional centres.
""Hong Kong's probably got more or as many well-qualified people as anywhere else in the region, and also, this economy has managed to adapt itself very well over the years,"" said Simon Ogus, economist at SBC Warburg in Hong Kong.
The greatest threat to Hong Kong comes not from outside but within, Ogus warned.
""The key question for Hong Kong is: does the underlying legal regulatory structure under which that (China) business is conducted change. In which case, there will be a loss of competitiveness relative to other countries,"" Ogus said.
",42
"U.S. interest rates have been the focus for most investors in Asia lately, but one key development that has escaped much notice is the increasing divergence of the region's markets, Guinness Flight Asia Ltd said.
""Investors are becoming much more discerning, and market performance across the region is now highly divergent,"" Guinness Flight said in its second quarter Asian outlook.
""Rather than simply investing in Asia, funds are flowing to those markets where the investment story is strong and avoiding those where it is weak,"" the fund manager said in the recently released report.
This placed a greater onus on fund managers to get their asset allocations correct.
It was too easy for investors get caught up in the hype about the ""Asian growth miracle"", but rosy expectations for earnings growth have traditionally been linked to high headline rates for gross domestic product growth and less to what companies have been achieving, it said.
""High levels of bank lending growth and overheating property markets can also produce flattering results in the short term, but the longer-term sustainability of such earnings growth is more questionable.""
But long-term growth was available, it said. Asia is a highly dynamic region, but some growing pains are inevitable, reflected in the cyclical slowdown in a number of key export industries or structural problems in Thailand and South Korea.
""Nevertheless, companies that are well-managed and well-positioned have an excellent environment in which to prosper,"" Guinness Flight said.
To gain access to that growth, investors need to have a clear idea of which markets are the strongest. Stock picking has become increasingly important, it said.
By focusing on companies that constitute the bulk of index capitalisation, investors may miss many of the best opportunities. This partly reflects the undeveloped nature of these markets where blue chips account for the lion's share of turnover, commission and research, the report said.
Concentrating on small and medium-capitalisation stocks is time-consuming and difficult because the information sources are fewer, but Guinness Flight argued it was essential.
""Management quality is the key criterion,"" it said. ""This is very much 'growth investing' as good sustainable earnings growth and strong cashflow are indispensible if a company is to be successful and provide a good return to shareholders. Asia is a growth story and this is where it is happening.""
Guinness Flight called China a key prospect. Although tiny as an equity market, China has profound influence and a slow easing of monetary policy there boded well for the earnings outlook of Chinese companies over the next few years.
Guinness Flight is holding an overweight position in Hong Kong and raising Singapore to overweight in expectation of an electronics recovery. It is moving to underweight in Malaysia following greater economic uncertainty there.
Indonesia remains overweight on strong economic fundamentals, while Taiwan has been raised to neutral on strong domestic liquidity. The Philippines has been cut to underweight on a deteriorating current account, while South Korea continues to fail to address structural problems.
Thailand has shown no real signs of recovery, although indications are that the market may have reached its bottom, the report said.
The following is Guinness Flight's second quarter percentage weightings against the Morgan Stanley Capital Index Asia ex-Japan. (Figures in brackets show Guinness Flight's weighting versus Morgan Stanley's weighting):
Overweight: Hong Kong (34 vs 26.5), China (1 vs 0.5), Indonesia (7 vs 6.5), all unchanged. Singapore, increased (14 vs 12.5). Neutral: India, increased (7.0 vs 7.0), Philippines, reduced (4 vs 4), South Korea, (5 vs 5), Thailand, (5 vs 5) both unchanged. Underweight: Malaysia, reduced (16 vs 20), Taiwan, increased (7 vs 11.5).
",42
"The jury is still out on whether China will cut rates later this year, but Hong Kong is keeping its fingers crossed.
If China cuts rates, Hong Kong stands to gain -- sort of.
Economists said only certain sectors in Hong Kong would benefit from a Chinese rate cut, reflecting the uneven integration beween the two economies.
Trade and investment move easily across the border but banking and monetary systems remain separate.
China's inconvertible currency and capital account create an inevitable divide between banking systems, while both Britain and China have agreed to maintain two separate monetary systems under the ""one country, two systems"" policy that will guide Hong Kong back to Chinese rule on July 1.
""So the interest rate cut, if it materialises, won't have a significant impact on Hong Kong's economy but, of course, it does have an impact on those companies which have operations in China, particularly red chips,"" said George Leung, economic adviser at Hongkong and Shanghai Banking Corporation.
A rate cut would cut the financing costs for many red chips -- Hong Kong-listed companies with financial backing in China -- and, in all likelihood, this would fuel the red chip fever that already holds the Hong Kong stock market firmly in its grasp.
The companies most likely to gain are those who borrow in Chinese yuan rather than those red chips based and managed in Hong Kong, which normally borrow in foreign exchange.
Hong Kong's trade figures would also improve, Leung said.
In 1996, Hong Kong reported total exports of HK$1,397.7 billion (US$179.19 billion), of which re-exports -- goods shipped through Hong Kong for processing elsewhere -- accounted for HK$1,185.8 billion (US$152.03 billion)
China was responsible for a substantial HK$417.8 billion (US$53.56 billion), or 35 percent, of Hong Kong's re-exports.
China cut rates twice last year, and although state economists have insisted that current rate policy is ""appropriate"", economists in Hong Kong said China's economic and political backdrop is ripe for a dash of monetary easing.
First quarter gross domestic product rose 9.4 percent year-on-year against a 1996 growth rate of 9.7 percent.
Inflation is falling, with retail price inflation up 2.6 percent year-on-year in the first quarter and consumer price inflation 5.2 percent higher. China holds a 1997 inflation target of six percent but economists now expect this number could drop as low as three percent.
""On a macro(-economic) basis, with a healthy external environment, low inflation, slowing growth and rising unemployment, the appropriate policy is to ease monetary policy,"" said Kevin Chan, economist at Salomon Brothers.
Lower rates would also ease the burden on China's state-owned enterprises, which are laden with debt.
Hong Kong's return to Chinese sovereignty on July 1 and an important Communist Party Congress slated in October add a political imperative to the mix, said Dong Tao, senior economist at Schroders Investment Management.
""Traditionally, there aroured by all the Chinese, not just on the mainland but in Hong Kong and Taiwan,"" said Tao.
But these positive signs must be weighed against a Chinese leadership always wary of overheating, and anxious to avoid any possibility of a market crash, he said.
",42
"Fears are rising in Hong Kong that a ""symbolic gesture"" by the Democratic Party early on the territory's first day under China will turn nasty despite the Democrats' commitment to peaceful protest.
Hong Kong's largest party says it will occupy the chamber of parliament, expressing anger at the elected assembly's death as a globally-televised handover ceremony and gala takes place nearby.
""I'm really afraid (if) something goes wrong at this time, and it's not anybody's fault,"" said Bob Broadfoot, who manages the think-tank Political and Economic Risk Consultancy.
""That would be such a bad thing for Hong Kong right now and who wants that? If something like that happens, fingers will point and everyone will be blaming everyone else.""
In a move bound to irritate China, which regularly warns against ""subversion"", Democratic Party vice-chairman Yeung Sam confirmed a plan to protest the swearing-in of a new legislature after Hong Kong returns to Chinese control at midnight June 30.
The protest will highlight the most contentious issue of Hong Kong's return to China -- the Beijing-appointed interim legislature will replace the existing, democratically-elected parliament, to the dismay of democrats and the West.
Yeung said a delegation of Democrats is determined to enter the Legislative Council (Legco) chamber and, in a symbolic gesture, pledge support for democracy as well as China's resumption of sovereignty over Hong Kong through speeches issued from the chamber's balcony.
The protest will take place just as the new provisional legislature is being sworn in - a ceremony Western leaders including U.S. Secretary of State Madeleine Albright and British Prime Minister Tony Blair have pledged to avoid.
Future leader Tung Chee-hwa and police chiefs were not available to outline how they would respond.
Yeung on Wednesday reiterated his party's support for peaceful, non-violent protest but repeated earlier statements threatening ""radical"" action if the delegation was obstructed.
""I think it's better we wait and see,"" Yeung told Reuters, when asked what ""radical"" meant.
""I can only say we are determined to go back to Legco....We want to declare our determination in a symbolic gesture but we hope this can be carried out in a peaceful manner. So I will stop from speculating what we will do.""
He did, however, reveal that ""negotiations"" were still under way with Tung's office, which has apparently advised the Democrats against holding rallies.
""The thing is, can we come back to the Legco building? We are still talking about that,"" Yeung said.
The protest plans confirm expectations long held in Hong Kong that the Democrats would use the presence of more than 6,000 journalists from around the world to lobby for democracy in China's newest Special Administrative Region.
The plans are restricted so far to the Democratic Party, Hong Kong's loudest political group, but independent Democrat Emily Lau said other legislative groups had been invited to take part.
""We appreciate people have different ways of expression,"" Lau said. ""Is that confrontation? I certainly don't think that's confrontation...They just want to do some gesture. I don't think it's something that is really that intolerable. So I don't see why (the police would) want to create a scene.""
",42
"Hong Kong's Financial Secretary Donald Tsang took a political gamble by accepting a knighthood from Queen Elizabeth in the last days of British colonial rule, political analysts said on Monday.
Some believe his acceptance of the honour could antagonise China and ensure his early resignation from a sensitive post as the second most powerful bureaucrat in executive-led Hong Kong.
""All these guys are going to be transitional figures. Call me in a year and see if he's still around,"" said one leading political scientist who declined to be identified.
But others argue that China ignores such honours, which have been liberally bestowed upon members of Hong Kong's old and new elites.
""So I don't think it's that big an issue, especially given this environment where the Chinese are trying to absorb the British establishment,"" said Joseph Cheng, professor of political science at City University of Hong Kong.
Tsang, effectively finance minister, has made little public reference to the award, except to say that he remains committed to Hong Kong after 30 years in the civil service.
But some analysts said his decision to accept the honours, routinely given to top civil servants in Hong Kong, was significant just a few days before Britain hands back the colony on July 1.
Tsang's acceptance of the knighthood was thrown into high relief by civil service head Anson Chan's decision to decline the same honour, which would have made her a ""Dame"" in line with his ""Sir"" prefix.
The popular Chan, widely considered one of the most powerful women in Asia, first declined to be knighted in 1992 when her name cropped up as a possible contender for chief executive, an appointment she chose not to pursue.
The post went to Tung Chee-hwa, the billionaire shipping tycoon who will replace departing colonial governor Chris Patten at midnight on June 30.
""Not giving (Chan) a knighthood will probably protect her as she is the leader of the civil service,"" said Sunny Lo, professor of political science at the University of Hong Kong.
But it could also be an attempt to cement a relationship between Tung and Chan, who has very publicly announced her readiness to resign on principle if necessary after July 1.
""The British administration support the alliance between Anson Chan and Tung Chee-hwa and this seems to be confirmed in giving the knighthood to Tsang and not Chan,"" Lo said.
But he declined to be drawn on whether Tsang's acceptance of the award would make him vulnerable to Chinese antagonism in the same way Chan's refusal might protect her from it.
City University's Cheng argued that the issue was, to all intents and purposes, irrelevant.
""The vast majority of these people accept them,"" he said, referring to Hong Kong's honoured elites. Such titles are so common they are virtually meaningless, Cheng said.
""The knighthood will not affect Tsang's future career. He's already reached the top level so having the knighthood won't make any difference,"" Lo said.
",42
"Hong Kong regulators said on Thursday they are closely watching a dispute between Taiwan and Hong Kong over two Hong Kong-listed call warrants linked to the Taipei index.
""This is something we're keeping an eye on,"" Bill Weeks, spokesman for Hong Kong's Securities and Futures Commission (SFC), told Reuters.
Taiwan is threatening legal action after the Stock Exchange of Hong Kong on Wednesday listed the two call warrants linked to the Taiwan weighted index, one issued by Peregrine Derivatives Ltd  and the other by Union Bank of Switzerland.
Weeks said the SFC approved the concept of listing derivative warrants in Hong Kong, but the precise form of the warrants was left up to the Hong Kong exchange.
The Taiwan Stock Exchange on Wednesday said the Taiwan weighted index was its proprietary product and that it had ""serious concern and objection"" to the new products.
Sources said that rather than a regulatory issue, the current dispute appears to be more a legal matter involving copyright and trademark.
""Because these companies have not been authorised by the Taiwan Stock Exchange to use its index, the exchange has issued an urgent letter to the two firms to express serious concern and objection and reserves the rights for necessary legal actions,"" the Taiwan exchange said in a statement on Wednesday, shortly after the products were launched.
The Hong Kong stock exchange hit back by pointing out that similar products were listed and traded in Luxembourg.
These call warrants would improve Hong Kong's status as a trading centre for regional products and boost market liquidity, the Hong Kong exchange said.
""The exchange believes that the listing of the products will improve the liquidity of the underlying cash market and is in the best interest of all markets,"" the Hong Kong statement said.
The Hong Kong exchange is charging ahead with plans to list more regional derivative products. It has not imposed a transaction tax on any regional derivative warrants or convertible bonds.
Hong Kong stock exchange chief executive Alec Tsui said on Wednesday the exchange was publishing a monthly report on the latest developments supporting the listing and trading of convertible bonds or derivative warrants on underlying securities listed on 15 regional exchanges.
They are Tokyo, Osaka, Korea, Shanghai, Shenzhen, Taiwan, the Philippines, Thailand, Malaysia, Singapore, Jakarta, Australia, New Zealand, Bombay and the National Stock Exchange of India, Tsui said.
-- Hong Kong News Room (852) 2843 6470
",42
"Hong Kong's stock market has been reaching for record highs in anticipation of business as usual -- or maybe even better than usual -- after China takes control on July 1.
But the optimism is not shared by all.
As the handover approaches, the small but influential group surrounding former shipping magnate and future chief executive Tung Chee-hwa is having an anxiety attack about Hong Kong's competitiveness -- and with good reason, according to some.
Some of Tung's advisers even support intervening in Hong Kong's economy.
Everyone's inability to define, precisely, what it is that has made Hong Kong an economic marvel has prompted fears that some magical elixir will dissipate as soon as China takes charge at midnight on June 30.
A free port and strong markets, easy international access and firm defence of the rule of law are acknowledged as key underpinnings to Hong Kong's economic success.
But these features are common in cities around the world.
Most people believe that Hong Kong survives and thrives on a number of less quantifiable elements. Ranking high among these is the ""borrowed time, borrowed place"" mentality.
With the date July 1, 1997, etched in the backs of their minds, Chinese emigres worked against time in Hong Kong, using ingenuity and determination to transform themselves into some of the world's wealthiest people.
Often in the space of just a few years, the explosive energy of these time-sensitive tycoons spawned huge and diverse conglomerates, notable for their concentration of authority in the iron fist of the founder and his family.
But with China on the doorstep, Hong Kong has discovered that the days of rags-to-riches are not so much over as very, very different.
And that's where Hong Kong is having difficulty.
HONG KONG INC - JUST AN ACCIDENT?
Those who built Hong Kong Inc and know it best quietly fear its success was due more to accident than design, and that replication in the future will prove increasingly hard.
China's decision to slam its door shut following the 1949 Communist revolution forced Hong Kong to diversify away from its obvious strength as a deep-water port and trading entrepot.
Shanghai industrialists fled en masse to Hong Kong, bringing capital, know-how and drive, and a readiness to exploit cheap refugee labour flooding across the border from southern China.
""Hong Kong's natural advantage as an entry port to China disappeared. What emerged was an advantage in industry. Capital was there, management was there, labour was there,"" said Richard Wong, professor of economics at Hong Kong University.
It was a magic combination that established Hong Kong as a labour-intensive, low value-added manufacturing centre.
China's re-emergence into the world in the late 1970s merely added to the momentum. Hong Kong businessmen moved factories to where labour was cheaper -- into southern China.
It has been an intensive process that, 18 years later, is considered almost complete.
With the July 1 transition to Chinese rule now upon them, the Shanghai dynasties who made Hong Kong what it is today are asking, what next?
HONG KONG HARE RACING ASIAN TORTOISE
""We do not think that the present system can be sustained on its current trajectory,"" Massachusetts Institute of Technology (MIT) professors Suzanne Berger and Richard Lester said in their study, ""Made by Hong Kong"".
MIT argues that, at some point, Hong Kong is going to have to stop seeking lower costs and start adding value. Labour costs are rising in south China, and factories are moving elsewhere.
MIT believes the incoming generation of ""Made by Hong Kong"" tycoons will have to shed the ""make a quick buck"" attitude of the past and invest for the long-term -- and they should do so soon because rising regional competition is starting to expose some obvious flaws in Hong Kong's short-term approach.
Almost like the hare that dashed ahead of the tortoise in the nursery tale, Hong Kong's ad hoc path to success could end up taking longer than the slow but steady course plotted by Asian tortoises like Singapore.
Singapore has already outpaced Hong Kong as the world's most competitive economy according to Harvard economist Jeffrey Sachs, who cites its better-educated and skilled workforce.
Singapore's labour and housing costs are lower and its English standards higher than in Hong Kong, reflecting the island's early recognition of its role as an Asian service centre in an increasingly competitive region.
""We are only now starting to talk about crafting competitive plans to attract the industries of tomorrow -- years after Singapore,"" one Hong Kong businessman told MIT.
",42
"Hong Kong democracy activists will raise the stakes this week in a bid to bring international pressure on Beijing over its plans to curtail political and civil liberties in the territory.
Martin Lee, the leader of Hong Kong's Democratic Party who is in the United States to lobby against China's plans, will meet with U.S. Secretary of State Madelein Albright on Monday and U.S. President Bill Clinton and Vice President Al Gore sometime in the week.
Lee received a warm welcome last week in an address to the U.S. Senate's Foreign Relations Committee, in which he pleaded for U.S. support for democracy in the territory after it reverts to Chinese rule.
""How the U.S. and other Democratic countries of the world react to China's many breaches of the joint declaration will make the difference in whether Hong Kong remains the free society it is today or whether the democratic elections, human rights and the rule of law Hong Kong people have heretofore known and cherished will be extinguished,"" Lee told U.S. senators on Thursday.
Despite assurances of substantial automony under handover agreements, Beijing has begun moves to change civil liberties laws, including the Bill of Rights, a 1992 election law and a law on creation of political parties.
Future chief executive Tung Chee Hwa last week unveiled additional plans to restrict public protests and foreign funding for political organisations from July 1, when Hong Kong reverts to Chinese control after more than 150 years as a British colony.
Beijing considers the most recent proposals essential for compliance with the Basic Law, Hong Kong's post-handover constitution. But democracy activists in Hong Kong see them as further signs of an erosion of basic rights and freedoms now enjoyed by the territory's 6.4 million people.
""It is tantamount to taking away the rights...recognised by the constitution, that are recognised by international covenants,"" Democratic Party member Albert Ho said last week.
The proposals also have been condemned by the colonial government and last week drew admonition from the Clinton administration, which called them ""disturbing"".
Beijing reacted angrily to the comments, accusing Washington of meddling in Chinese affairs.
But a poll by a Hong Kong newspaper indicated that dissatisfaction with Tung was growing at home as well.
The poll of 803 people residents, released by the Ming Pao newspaper on Sunday, showed Tung's popularity has hit a new low since his office unveiled the plans to amend Hong Kong's civil liberty laws.
The newspaper said the rating of Tung's fitness for the post of chief executive had slipped 5 percent to 4.65 points on a scale of zero to 10. Meanwhile, his ""trustworthiness"" rating sank 10 percent to 4.35.
It said the survey was done after Tung's office made proposals on two key laws -- the Public Order Ordinance and the Societies Ordinance, to curb protests and foreign funding for political groups in Hong Kong after the British colony reverts to China on July 1.
As the sovereignty transition nears, however, nothing is expected to derail Beijing from implementing its plans.
""To Beijing, time is running out for dilly-dallying on procedural and formal matters. It is time for action and decision because there is work to do in the next 80 days,"" the South China Morning Post newspaper said.
Meeting across the border in the Chinese city of Shenzhen to avoid threats of legal action by the Democrats, future Hong Kong lawmakers on Saturday agreed on a formula to enact laws that would govern the territory after July 1.
Condemned by the Democrats as unconstitutional and illegal, the Chinese-annointed Provisional Legislature is proceeding with readings of about a dozen bills that Tung believes must be passed before July 1.
But concern is mounting that the Provisional Legislature, in its haste, will ram through loophole-filled laws that will be easy to undermine.
""Laws full of loopholes and ambiguities -- and a legislative process vulnerable to challenge -- would become a source of more friction and legal dispute,"" the South China Morning Post warned.
",42
"Rising corruption, declining English standards and an erosion in the overall quality of life cloud Hong Kong's future under China, the British Chamber of Commerce in the territory said on Thursday.
A survey of 196 British businesses operating in Hong Kong revealed key uncertainties for British business after the July 1 transition to Chinese sovereignty, despite an overall air of confidence in the future.
Half of those surveyed expected the rule of law to deteriorate, 72 percent forecast a decline in the quality of English and 85 percent were bracing for a rise in corruption.
""The overall message is one of British business confidence in Hong Kong, but that should be tempered by the realisation that business confidence is fragile,"" British chamber president Patrick Paul told reporters.
""Hong Kong has competitors within the region, such as Singapore and other locations, and I don't think Hong Kong can afford to be complacent,"" he said.
The survey revealed broad satisfaction with Hong Kong's communications network, its taxation and legal systems and its level of education.
But dissatisfaction surfaced in the costs of doing business, poor Sino-British relations and standards of English.
Looking to the future, most British businesses were optimistic about increased access to China, and they anticipated improvement in Sino-British trade as soon as handover-related hurdles were overcome.
But business costs, availability of skilled labour, English standards, quality of life and maintenance of the rule of law were all highlighted as sources of concern.
Echoing other surveys of ordinary Hong Kong people, a possible rise in corruption was by far the greatest source of worry associated with the return to Chinese sovereignty.
""The concern is whether or not that independent approach to dealing with corruption will be maintained,"" said chamber of commerce executive director Christopher Hammerbeck.
Paul said concerns about corruption flowing across the Chinese border into Hong Kong were offset by a highly transparent system that would quickly reveal any tampering, as well as an alert international business community.
""The British business community and the international business community will be watching,"" he said. ""If corruption becomes so bad that Hong Kong becomes a bad place for business -- I don't believe it will happen, but if it does -- business will doubtless vote with its feet.""
Even with a small rise in corruption, Hong Kong would remain one of the least-corrupt areas in Asia, he said.
Hammerbeck admitted that, as well as pollution, possible post-1997 discrimination against the British played a role in expectations of a deterioration in quality of life.
""It is a concern but that's not to say it will happen,"" he said.
",42
"When it comes to dollars and cents, Hong Kong is showing high confidence in its future -- and that is clearing some doubt on other fronts about the impact of China's takeover, according to political analysts.
""The high-performing economy here is underpinning confidence and social order,"" said Michael DeGolyer, political analyst at Hong Kong's Baptist University.
With the handover to China 41 days away, Hong Kong's economy is transmitting nothing but positive news.
The bellwether property market is booming.
The territory's Hang Seng index of blue chip stocks is constantly reaching for record highs, spurred by optimism about improved access to China and recent debt rating upgrades from rating agency Standard & Poor's.
A current Reuters survey of the territory's top companies confirmed overwhelming business confidence about the future.
Ordinary Hong Kong people are holding more and more of their financial assets in the local currency, a Credit Lyonnais survey revealed on Tuesday. A growing number of citizens are also sinking money into China-related stocks.
The Credit Lyonnais survey also portrayed a growing divide between political and economic confidence, also highlighted by DeGolyer's research.
While two-thirds of Hong Kong people are confident about the territory's political and economic future, only 40 percent were confident about its political future in isolation.
This proves the importance of a stable and prosperous economy to Hong Kong's future, DeGolyer said.
""The economy continuing to perform well is absolutely vital in making the transition a success. If the economy goes down the tubes, it will take political and social order with it.""
A key factor undermining political confidence is future Hong Kong leader Tung Chee-hwa's plans to roll back some civil liberties.
China argues that the legal changes simply return Hong Kong to the status quo before democratic changes initiated by departing colonial governor Chris Patten.
Planned changes requiring police permission for protest rallies and banning foreign funding for political groups are no more severe than those in most Western nations, Tung has said.
But Western governments object to changes in the context of China's pledge to allow Hong Kong to continue its own way of life for 50 years.
Given the political uncertainties, DeGolyer said it is crucial that Hong Kong's incoming administration ensures that the economy functions well.
Hong Kong had only to look at nearby Macau to see how important it is that the economy not be placed at risk.
With China already established as its sovereign, Macau is still administered by the Portuguese, but it has serious problems of crime and social disorder with increasingly frequent shoot-outs and killings.
""If the (Hong Kong) economy is messed up, if there are failures in the economy and rises in corruption like we see in Macau, then we will have the same kind of problems Macau is having right now,"" DeGolyer said.
",42
"Europe's envoy in Hong Kong on Thursday said the European Union had lost credibility by falling into public disarray over a resolution at the United Nations designed to censure China for human rights violations.
""We are now not as credible an interlocutor matching the commercial clout we have because we are not united,"" Etienne Reuter, head of the European Commission in Hong Kong, said in an interview with Reuters.
""We haven't helped our own image, and we haven't helped the cause of furthering human rights in China... It has certainly weakened our position here,"" the envoy said.
The Geneva resolution, sponsored by Denmark and backed by the United States, failed to win EU support when France said that recent human rights improvements by China suggested dialogue was better than confrontation.
This is the first year the EU has failed to back the resolution since the 1989 Beijing massacre, when China crushed democracy protesters in a bloody crackdown around Tiananmen Square.
""This means that...when (people in Hong Kong) look for help or support they will tend to look first to North America or maybe even to Japan, rather than believe the Europeans have the cards to play. That is, I think, the sad reality,"" Reuter said.
Denmark, the United States and human rights activists condemned the EU's silence, which fell in the year that Hong Kong reverts from British to Chinese rule.
The United States is also usually seen as the most outspoken defender of human rights in Hong Kong, but Reuter argued Europe also should have a role to play.
Under the ""one country, two systems"" formula, Hong Kong will retain considerable autonomy for 50 years as a Special Administrative Region within China.
But as the July 1 handover nears, concern is rising that many key freedoms enjoyed by Hong Kong people will soon be lost.
Moves by future Hong Kong leader Tung Chee-hwa to trim civil liberties have provoked condemnation from many sides in Hong Kong and prompted criticism from the United States.
Beijing responded by telling the United States to stop meddling in China's internal affairs.
The EU's Reuter said he hoped the ""Geneva debacle"" reminded Europe that its future influence in Hong Kong depended upon unity, particularly as the handover approaches.
""The indications for a smooth transition...are good, so I would not like to paint a dark scenario for the future, but I certainly think it is important for the Europeans to realise they can only be effective here if they are united,"" he said.
The incident also had drawn attention to Europe's urgent need for a common foreign policy, one geared more to common interests rather than values.
""You will always have realists versus idealists, and people thinking, 'Why should it be our job to be the world's policeman or the world's preacher?' (This) is a discussion which concerns everybody in Europe and not only France,"" he said.
An outstanding deal by an Airbus Industrie-led consortium to build a 100-seat plane in a Chinese joint venture had little to do with France's objection, Reuter said.
""I don't think people should think it's only because of a couple of Airbuses that France did not support the concept of the resolution in Geneva,"" he said.
French President Jacques Chirac is due to sign the deal during a visit to China in May, although Beijing said recently that more work was needed to finalise the contract and called upon the European side to offer better terms.
",42
"Increasing signs of an economic upswing in China have raised the question of how far speculation can be held responsible for a sudden flush of liquidity sweeping through China-related stocks in Hong Kong.
Brokerage W.I. Carr on Thursday said that improving economic fundamentals in China could be at least partly responsible for the red chip fever that has fuelled Hong Kong's outperforming stock market for months.
Dismissing any suggestion of a speculative bubble ripe for collapse, it said the soaring rally in Hong Kong red chips, or companies with financial backing in China, confirmed the beginning of a long and strong business cycle in China.
""The market is telling us something about where the Chinese economy is going and where company earnings in China are going in the future,"" said John Mulcahy, managing director of Indosuez W.I. Carr Securities in Hong Kong.
Red chips have gained on expectations of big returns from strong connections and asset injections by parents, often municipal and provincial governments. Many are trading at more than 35 times 1997 earnings, compared with the average Hong Kong blue chip ratio of 15.
Much of the rally is driven more by ""a wish and promise"" than evident earnings performance but growing signs of economic recovery in China suggest economic fundamentals could also be playing a role, Mulcahy said.
Corporate restructuring, rising productivity, disinflation and strong exports are far more responsible for strong Chinese markets than a sudden burst of liquidity from central bank credit easing last year, said economist Michael Taylor.
""Just as in other bull markets, this market is probably telling us something,"" Taylor said.
""And I believe the evidence is coherently pointing to ... the start of a long, sustained business cycle here based on restructuring and being characterised by disinflation and good trade performance,"" he said.
But Dong Tao, senior regional economist at Schroder Securities, disagreed. He said market rallies in Hong Kong and on the Shanghai and Shenzhen exchanges were being driven by liquidity seeking better returns than those offered by a depressed Chinese industrial sector.
""I don't think a turnaround in company profits will arrive this year. I haven't seen a turnaround in demand. I haven't seen that the price wars hurting companies' bottom lines are over,"" Tao said.
China's economy is currently split between a struggling real economy, dominated by debt-laden and loss-making state-owned enterprises, and excessive liquidity, he said.
Timing is the key, Tao said. China is still struggling with flat domestic demand and huge overcapacity following the 30-percent growth rates in fixed asset investment that marked the booming early 1990s -- but that will end at some point.
Taylor argued that improvements are already surfacing, with cuts of up to 15 percent of the workforce in places such as Shanghai linked to rising productivity -- boding well for an early improvement in corporate earnings growth.
But the risk of disinflation throughout Asia threatens to undermine China's gains and puts pressure on exporters to stimulate the real economy, Taylor said.
Chinese media recently reported that exports are not expected to maintain the 26.9 percent growth rate recorded between January and April this year.
China's focus on exports to solve its economic problems has excerbated political tensions, with the China-U.S. trade surplus expected to exceed US$50 billion this year compared to about US$40 billion last year.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Western Europe's envoy in Hong Kong said on Monday that he expected most European governments to ignore an Anglo-American boycott and attend the inauguration of an unelected provisional legislature on July 1.
""Officially I don't know yet what the position of our various governments will be but certainly from preliminary soundings I would not be surprised if most governments will attend the inauguration ceremony,"" Etienne Reuter said.
He is the European Union representative in Hong Kong, effectively ambassador for the 15-nation bloc.
To Western dismay, Hong Kong's elected parliament is to be scrapped when Britain hands the territory to China which has chosen an interim assembly instead. Britain and the United States say they will boycott the swearing-in ceremony but other countries like Australia have refused to snub Beijing.
The envoy told Reuters in an interview that European countries are deciding how to respond to China's invitation, and will probably discuss the issue on the fringes of Monday's EU summit in Amsterdam.
Moments after the handover ceremony, Beijing intends to inaugurate the new, China-appointed body as the legislature governing the Hong Kong Special Administrative Region.
British Prime Minister Tony Blair and U.S. Secretary of State Madeline Albright have pledged to avoid the inauguration to protest the dissolution of the existing chamber, which departing governor Chris Patten revised in 1994 with democratic reforms that angered China.
Britain has not asked for the EU's support for its boycott, and the absence of an official request suggests most European governments would probably accept China's invitation to attend.
""Formally, the U.K. has not asked for the partners to do something or support them on this and so far, the EU has never officially expressed a view on the legal status of the provisional (parliament) - although we have said it was unnecessary,"" Reuter said.
The provisional legislature will govern Hong Kong until elections are held within one year, as promised both by China and future Hong Kong leader Tung Chee-hwa.
""We also appreciate that the chief executive has promised that there will elections in the first year, that is part of the equation,"" Reuter said.
In all likelihood, China will simply not issue invitations to people who have said they will not attend to avoid losing ""face"", Reuter said.
Europe hoped for an auspicious start to relations with the Hong Kong SAR, and viewed as positive the appointments of Tung as chief executive and barrister Andrew Li as chief justice, Reuter said.
",42
"Hong Kong's future leader Tung Chee-hwa returned from meetings with top Chinese officials on Wednesday taking a softer line on controversial plans to restrict civil liberties after the handover to China.
Looking relaxed, the former billionaire shipping magnate said he was prepared to tolerate public calls for his resignation and even burning of his effigy after he takes the helm on July 1.
""I don't mind people calling for my resignation, burning my effigy. It's not a problem with me,"" Tung told reporters.
But he cautioned that he prized public order.
""Hong Kong society is now very stable, very good. It is something we are very proud of and I said it would be sad if in such a successful and peaceful society, lives started to change,"" he said.
Tung's relaxed approach and easy demeanour belied the storm of controversy created by his proposals, which would require police permission for public demonstrations and prohibit foreign funding for local political parties.
While defending his proposals as ""really far less restrictive"" than laws in most North American cities, Tung stressed the importance of good Sino-U.S. relations - a subject that surfaced in his talks in Beijing with Chinese Foreign Minister Qian Qichen and chief of Hong Kong policy Lu Ping.
""(Qian) has been in the United States recently, and I'm very glad that the relationship is developing well. It is a very positive development and that has very important implications for Hong Kong's future,"" Tung said.
His inner cabinet has already started to draw up legislation to change the laws - just hours after one of Tung's key advisers hinted that some relaxation of the original plans was possible after a three-week public consultation period.
""There are many proposals that have been put forward to us,"" Henry Tang told reporters earlier on Wednesday. ""In the consultation exercise, there are more liberal (proposals) than what is in the consultation document.""
Tung said he told Qian that handover arrangements were going well, and said they had agreed that there should be no change in existing tourist visa arrangements for all countries with Hong Kong consulates.
""We have talked about quite a few things but basically its been some time since we saw each other and ... he would like to know how everything is and I was able to assure him that everything was coming along very nicely,"" Tung said.
In a television broadcast earlier on Wednesday, Tung repeated his commitment to a democratic society in Hong Kong.
""Actually over the next 10 years, we have a very progressive but orderly development of a political structure which will become increasingly democratic,"" Tung said in an interview with CNBC Asia Television.
He was referring to the gradual democratisation envisaged in the Basic Law, Hong Kong's post-handover constitution promulgated by China in 1990.
Tung said Hong Kong was following a path of development set by other Asian nations.
""In Asia... economic success and freedom has preceded political development,"" he said. ""And in Hong Kong, of course, we have tremendous economic success and economic freedom, and political freedom...is something as a colony we really never had until about six years ago... we are now developing it.""
",42
"Recent interventions by some Asian central banks to defend their currencies did little to reassure disaffected institutional investors, who continue to avoid the region in droves.
Instead, the prospect of snapping currency pegs confirmed some deep-rooted concern about the region's economic fundamentals and growth prospects over the coming year.
""People have turned off Asia,"" said David Semple, regional strategist at Peregrine Asset Management.
""We're in a situation where we have a turndown in investment and economic growth. High income growth has not translated into high economic growth. And then there's asset price inflation.""
Exports have failed to recover as quickly as expected, prompting a downgrade in growth projections by some analysts.
Corporate earnings have also hit a trough, disappointing investors hoping for better exposure to the region's much-hyped economic growth rates.
""There were net outflows last week. We've had nothing but net outflows all this year,"" one head trader said.
In the meantime, the new buzz phrase in Asian investment circles, ""asset price inflation"", or the concoction of economic fundamentals that attracted the attention of speculators earlier this month, has highlighted some deeper problems.
""The bottom line is that they have to adopt a more flexible approach to their currencies,"" Semple said.
The argument goes something like this: Small, high-growth Asian nations lure foreign investment in offshore currencies, boosting foreign exchange reserves and putting strengthening pressure on the domestic exchange rate.
Because the currency is fixed, central banks instead raise interest rates to dampen inflationary pressure created by the availability of lots of cheap money, much of which found its way into the booming property market.
This, however, attracts even more foreign money seeking exposure to lucrative interest rate returns.
However, the real problem develops when the foreign investment leaves.
In the short-term, central banks under pressure have few alternatives but to spend money shoring up the currency.
If investors remain unconvinced, either by the currency defence or the economic fundamentals that attracted the speculation in the first place, a vicious cycle of disinflation gets underway with banks struggling under the weight of loans turned bad on assets worth less than the amount borrowed.
""I think Southeast Asia is now in the early stages of a correction of the asset spiral that occurred over the past five years,"" said R.K. Basu, UBS Securities economist in Singapore.
""We are now seeing an unwinding of this process in places like Thailand in particular, and there are fears that other countries in the region could face a deflationary spiral similar to what Japan has gone through over the past six years.""
So far, Southeast Asian nations under pressure have imposed credit controls rather than capital controls, but Basu still considers the Philippines and Indonesia at risk from the bout of deflation now expected to hound Thailand for two years or more.
""The Philippines is quite vulnerable to a reversal of the banking system's net foreign liabilities, which are the same thing as short-term capital inflows. If those capital inflows reverse, the amount of liquidity in the system will abate very quickly and that will cause asset prices to decline,"" he said.
",42
"Hong Kong's Financial Secretary Donald Tsang issued a strong message of stability and prosperity on Wednesday, just days before the territory's return to Chinese rule at midnight on June 30.
In an interview with Reuters, Tsang restated the continuation of Hong Kong's independent monetary system and fixed exchange rate after July 1, warning that any change in the system that has underpinned the territory's economic success for nearly 14 years would be unwise.
""It would be foolhardy to make a dramatic change of that system at the change of sovereignty,"" Tsang said.
""For me, the continuation of the linked exchange rate is fundamental in reassuring international investors that the systems in Hong Kong will remain unchanged.""
Tsang, who will remain as the second most powerful bureaucrat in executive-led Hong Kong after the handover, said the maintenance of Hong Kong's prosperity was a matter of national pride for China.
""Hong Kong as a prosperous economic centre is a matter of great national honour for China,"" he said. ""We will continue to be prosperous, the stock market will continue to be strong, all the economic indicators are robust,"" he said.
Apart from Hong Kong's close proximity to China's expanding economy, Tsang said four key features were responsible for the territory's past economic success and would determine its future prosperity -- rule of law, fair business practice, a corruption-free public service and the free flow of information.
""Our judicial system is respected, our legislative system is respected and we have a very good track record in that everyone will be treated fairly,"" Tsang said.
""We have a duty-free port, we have a totally convertible currency, making sure the market does not pose any impediment to foreign traders and foreign investors. So that is absolutely important, the level playing field.""
So is the free flow of information. Tsang said freedom of political reporting is just as important as economic reporting.
""If I were an investor I would want to know whether my money was sitting on a gold mine or a powder keg,"" he said.
One of the few areas where there could be change to coincide with the sovereignty switch was management of Hong Kong's massive cash pile, which might now gain from a less conservative investment strategy.
The Land Fund, the US$19 billion cash mountain generated from government property sales, will remain untouched in the short term.
But the Exchange Fund holding Hong Kong's war chest of US$63.8 billion in foreign exchange reserves could tolerate a greater risk profile now that the political uncertainty associated with the transition will soon be past, Tsang said.
But he issued a forceful reminder to those who suggest the money could be spent on infrastructure projects in southern China or on supporting new industrial sectors in Hong Kong, such as a high-technology industry.
""This is our money,"" he said, warning that legislative approval would be required to move funds outside the territory.
Those who hope to pressure Tsang into supporting their ideas could be in for a battle.
""As financial secretary, I have always been under pressure to change things, to shell out more money for pork-barrelling politics, for subsidising industry, for subsidising transport,"" Tsang said.
""I have a pretty tough skin on this. I know (where) Hong Kong's longer term interests lie, in my view, and I think we have got international bodies supporting my views and the local community generally agrees with me, too.""
-- Hong Kong newsroom (852) 2843 6441
",42
"One of Asia's most powerful women is drawing up a battleline in Hong Kong ready for an era of political uproar unseen elsewhere in the People's Republic.
Twenty-seven days before Britain hands the colony back to China, Hong Kong's top civil servant, is targeting a powerful group of businessmen surrounding future leader Tung Chee-hwa.
She is tough, charming Anson Chan. The 57-year-old Chinese administrator, dubbed ""an iron fist in a velvet glove,"" is one of Hong Kong's most popular personalities.
Headlines daily feature her in a tug-of-war for the political soul of the billionaire ex-shipping magnate, a China appointee under pressure to win the confidence of Hong Kong and the world.
A conservative without a political track record, he was suddenly called on to be Hong Kong's future chief executive, replacing the departing, reformist colonial governor Chris Patten.
As part of the colonial legacy, civil servants rather than elected politicians run the Hong Kong government, so the voice of Chan, their chief, carries unusual clout.
She acts as Patten's deputy and is also to become Tung's second-in-command.
Chan has chosen to assert her sweeping authority in the dying days of colonial rule in a face-off against a group of influential pro-China business cronies chosen by Tung to advise him on how to run Hong Kong.
The 6.4 million people of Hong Kong, unsure of the future under the red flag after the July 1 handover, are anxiously watching to see if an imminent showdown will crack open the new power structure.
Both Chan and the advisers will sit on the Executive Council, an inner cabinet positioned between the Chief Executive and the legislature.
""She's not exactly cracking the whip over Tung, but raising the flag over her own continued centrality,"" said Michael DeGolyer, political analyst at Baptist University of Hong Kong.
""She's saying Tung is ours, and he's not going to belong to, basically, sycophants and plutocrats.""
Chan, in a Newsweek interview this week, said she was less concerned about direct interference by China in Hong Kong's autonomy than she was about groups who might court interference ""either for misplaced motives or, worse still, for narrow, selfish, vested interests.
""Maybe some people feel that decisions affecting business are not in their interest. They may feel they should go up and appeal to various leaders. That would be very bad for Hong Kong,"" Chan said.
Pro-China politician Lau Siu-kai said the comments indicated that disagreements between Tung and his senior civil servants had reached crisis levels.
""It shows some senior officials are sceptical over the integrity, capability and poiltical orientation of the people appointed by Mr Tung,"" Lau told the South China Morning Post.
But DeGolyer dismissed speculation that her words signalled a widening rift between Tung and his senior civil servants.
""It's not so much a rift as it is (a demonstration) to other civil servants that she is the person in charge, and she will remain in charge. There will be no change,"" DeGolyer said.
""(She is saying) there is no difference between a governor appointed by far-away London and a chief executive appointed by far-away Beijing. They will continue on with business as usual.""
He described the new government as an engine going nowhere without a civil service to kick the transmission into gear.
""The engine can sit there are rev. all it wants but if the gears are not engaged, they're not going anywhere. And that's where she sits,"" he said.
Analyst Bob Broadfoot of the think-tank Political and Economic Risk Consultancy, said Chan significantly decided to speak out now because Executive Council rules will prevent her from doing so once the new government takes power.
Tung's decision to reappoint Chan, along with the entire top echelon of Hong Kong's civil service, was welcomed by the business and international community for its stabilising effect.
But in the Newsweek interview, Chan warned that Tung was unfamiliar with ""the way government machinery works.""
",42
"Hong Kong police are gearing up for all imaginable trouble during this year's handover to China -- from fireworks and street parades to protest rallies and guerrilla attacks, police said on Wednesday.
Assistant police commissioner Lee Ming-kwai outlined plans to cope with an event that government officials have said will be the biggest international media spectacle since South Africa's 1994 post-apartheid elections.
The centrepiece of the celebration around the handover is a joint Sino-British flag-changing ceremony at midnight on June 30 to be attended by about 4,000 dignitaries, including more than 60 well-known VIPs.
Of these 60, about 30 are foreign ministers, with the remainder made up of former prime ministers and presidents or chief executives of major corporations, Lee said.
About 7,200 journalists have registered to report on the event and police have been notified of more than 180 public celebrations.
The mix of fireworks, street parades, demonstrations and large-scale ceremonies across notoriously crowded and congested Hong Kong is posing a logistical and security nightmare.
""We have difficulties because, I must say, this is a unique historical occasion,"" Lee told a news conference.
""A lot of people want to celebrate, a lot of people want to celebrate extravagantly or in large scale,"" he said.
Police appealed through local media for cooperation from the British colony's 6.4 million population to ensure the huge jamboree celebrating its return to Chinese rule goes smoothly.
Lee said about 2,000 officers will be at hand for the handover ceremonies with the remainder of the 28,000-member force, along with 5,000 auxiliaries, working in the community, where many local celebrations are planned.
On Wednesday, police called on the public for early notification of public parties to allow coordination of events and keep the streets safe from clashes between different groups.
A special police task force created to handle handover security started planning and training a few years ago.
It is now bringing in X-ray machines, metal detector archways and explosives detectors along with extra explosives sniffer dogs and handlers to deal with the event.
Lee stressed that the force was ready to confront even the most extreme scenario, including guerrilla attacks.
""We've got plans to handle that sort of situation,"" he said, responding to questions about recent bomb threats in Britain by the Irish Republican Army (IRA).
""I cannot envisage a picture the same as London. In terms of social order, in terms of crime rate, Hong Kong is in a far better position and there is no indication the IRA will come to Hong Kong and cause a problem,"" Lee said.
""But, of course, we have to take note and take precautions.""
To gain experience, police travelled to a number of large-scale events, including World Bank meetings in Washington and Madrid, and four Conservative Party meetings in Britain, one of which was under heightened security because of an IRA threat.
Hong Kong has had no history of terrorism since the left-wing riots of China's Cultural Revolution spilled into the territory in the 1960s.
But in recent years, protests by pro-democracy groups have become common. There have also been bomb hoaxes recently, ostensibly by citizens upset by spiralling house prices.
And last week, vandals damaged a new bridge which former British prime minister Margaret Thatcher is due to inaugurate on Sunday.
",42
"Jardine Fleming appears to have come in from the cold as one of China's unwanted.
The investment banking arm of one of Hong Kong's oldest trading houses, or hongs, has been appointed underwriter for a large Hong Kong listing by a Chinese company following three years of exclusion from such deals.
Jardine Fleming director David Dodwell said the company is almost certain it will underwrite Ningguo Cement Co, the biggest supplier of cement to Shanghai and one of the fourth batch of Chinese enterprises approved to be listed overseas.
The appointment follows news of a letter penned by Lu Ping, director of the influential Hong Kong and Macau Affairs Office in Hong Kong, to various government agencies in China, including the China Securities Regulatory Commission.
Dodwell said the Ningguo appointment, believed to be the first of three China deals in the works, signals the end of a long campaign to get Jardine Fleming, 50 percent owned by Jardine Matheson Holdings Ltd, back into China's good books.
""We had seen evidence of companies in China not putting Jardine Fleming on a shortlist because of their impression that the company was not favoured in Beijing,"" Dodwell said.
Although Jardine Fleming has not actually seen the letter, word of the letter from Lu Ping was welcome.
""It would be fair to say that without explicit action from Beijing significant business breakthroughs in China would continue to be dogged,"" Dodwell said.
""Clearly if indeed it is true that letters have been sent to a number of agencies in Beijing by the Hong Kong and Macau Affairs Office, that must be of help to us,"" he said.
Jardine Fleming has just been appointed co-lead on an upcoming flotation by Dalian International (Holdings), the investment arm of the Dalian municipal government.
Other deals are also in the works.
Ningguo is Jardine Fleming's first underwriting appointment since 1994, when Jardine Matheson delisted from the Hong Kong Stock Exchange in favour of a London listing, acquired in 1992.
Jardine Fleming has been working actively to thaw relations with Beijing, which took offense to Jardine's support for political reforms proposed by Hong Kong's colonial Governor Chris Patten.
Many hours have been spent fostering improved relations with Beijing, the company said.
Jardine Fleming's extensive activities on the mainland were repeated in many face-to-face sessions with senior Chinese officials, culminating in a January meeting between Lu and Jardine Matheson director Charles Powell.
",42
"Tears flowed and eight bells tolled at a farewell for the Royal Navy in Hong Kong on Friday as Britain shut its HMS Tamar naval base in an end-of-empire retreat leading up to the colony's July 1 return to China.
Except during the Japanese occupation between 1941 and 1945, eight bells have rung three times a day for more than 100 years at HMS Tamar, marking the Royal Navy's watch over one of Britain's most prized colonial possessions.
First Sea Lord Admiral Sir Jock Slater, Governor Chris Patten and other dignitaries spoke of dignity and pride as the White Ensign was lowered, furled and folded at the base on Stonecutters Island in Hong Kong harbour.
""The White Ensign has just been lowered over this shore base but the values that it has stood for will, I hope, remain in this place: respect for law and for person, trust, duty and service,"" Patten told more than 200 sailors.
""But there is no cause for thinking sad thoughts, that there is dishonour in these endings. Nothing has melted away. There have been no defeats,"" Patten said.
""What the Navy has done is help to provide the stability that enabled commerce and industry to flourish and let Hong Kong develop into what it is today,"" said Commander Oliver Wright, who served 40 years with the Royal Navy from 1941 to 1981.
In a ceremony that drew tears from oldtimers saddened by the decommissioning of Britain's last naval base east of Suez, more than 200 seamen in stiff, white uniforms marched through the gates to an upbeat rhythm set by the Royal Marines' brass band.
HMS Tamar shut 100 years to the day that a vessel of the same name first arrived in Hong Kong waters. Its closure ended a 156-year association between the Royal Navy and Hong Kong.
The first naval officer to set foot in Hong Kong was probably Sir Edward Belcher, who landed on 25 January 1841 and drank to Queen Victoria's health on Possession Mount on Hong Kong Island. The Union flag was raised the following day.
Many younger naval officers were pragmatic about the end of such a long relationship,
""Hong Kong's time is up,"" said radio operator Steve McSevich. ""It's reverting to Chinese rule and there's no shame in that. The Chinese will leave it pretty much as it is.""
China, whose navy will occupy another site on Stonecutters Island, was not represented at the ceremony, another sign of the stalemate in Sino-British negotiations as the transition nears.
The only Chinese present were locally hired personnel, many of whom now have until June 30 to find new jobs.
The future of the HMS Tamar site is uncertain, but the three Peacock class patrol craft based there have been bought by the Philippines, which will take possession soon after July 1.
",42
"The grounding of Cathay Pacific's Airbus fleet is just the latest blow for Hong Kong's flagship carrier, and analysts warned the picture was unlikely to improve soon.
After a turbulent five years, Cathay Pacific was starting to represent good fundamental value, with strong management, a healthy balance sheet and promised expansion with the April 1998 opening of Hong Kong's new airport at Chek Lap Kok.
""There have been some problems but now things seem to be going their way,"" said K.Y. Ng at BZW Asia.
However, that has not translated into a positive share price performance, and many Hong Kong analysts -- including Ng -- have a sell recommendation on the stock.
""I'm not saying this counter is poor fundamentally,"" said Andrew Fernow at Vickers Ballas. ""But we don't think it can perform in line. The market is being driven by China-related factors and U.S. interest rates and Cathay isn't benefitting.""
Cathay's share price barely moved on news that its Airbus 330-300 fleet had been grounded because of problems with its Rolls-Royce Trent 700 engine.
From a high of HK$14.80 last June, the stock has been trading at about $12 per share for the past four months, failing to gain from record highs on Hong Kong's Hang Seng index. The stock closed Tuesday's morning session at HK$11.70.
""It's a laggard,"" another analyst said.
Most analysts said they were negative on Cathay before the Airbus grounding, but they were also unconvinced by reports of massive losses associated with the problem.
They estimated costs at about HK$200 million after compensation, and said it was unclear at this point how they would be managed. Some costs would be offset by a stronger yen.
Those analysts forecasting 1997 earnings at HK$3.6 billion were holding steady while those with higher estimates of HK$4.0 billion or above were expected to make downward revisions.
At a news conference on Monday the company declined comment on expected losses.
The engine failure is the latest blow for Cathay, which also faces labour unrest and a decline in Japanese tourism heading into what had expected to be a strong summer as travellers flock in for the territory's July 1 handover to China..
""That (Japanese tourism) would be a bigger factor than the loss of the engines,"" said Mark Simpson at Schroder Securities.
Analysts said Cathay's problems started with a strike in 1993 and culminated with China National Aviation Corp's (CNAC) threat last year to compete directly with Cathay in Hong Kong.
In a compromise deal, CNAC instead bought 36 percent of Hong Kong Dragon Airlines (Dragonair), mostly from Cathay Pacific and Swire Pacific Ltd
One of Hong Kong's oldest British ""hongs"" or trading houses, Swire owns 44 percent of Cathay with another 25 percent held by China's CITIC Pacific Ltd Swire and Cathay together hold about 26 percent of Dragonair.
China's evident interest in grabbing a piece of Hong Kong's lucrative aviation sector has cast a cloud over Cathay's future.
""What will the competitive picture be in Hong Kong (after Hong Kong reverts to China on July 1),"" asked Fernow. ""One can conclude it's not going to get better, it's going to get worse. The extent to which they will get routes in China is not known.""
If it does, Cathay will be competing against Dragonair, persuading some analysts to forecast a disposal of Cathay's stake in the airline. Others were expecting Cathay to move into high-margin North American routes dominated by overseas Chinese.
But rumours persist that, in the face of such uncertainty, Swire will divest its Cathay stake -- a rumour Swire has denied.
""What do you expect them to say,"" said another analyst. ""I'm getting tired of people putting the boots into this company.""
",42
"China's move to tighten up controls on red chip shares follows increasing signs that the country is ready to bite the bullet and confront its structural economic problems, economists said.
Both economic and political circumstances are ripe for a new set of policy initiatives following last February's death of paramount leader Deng Xiaoping, Geoff Lewis, chief economist with Dresdner Kleinwort Benson, wrote in a recent research note.
Lewis was not expecting any major policy announcement before Hong Kong's July 1 return to Chinese rule.
Yet on Friday, following the biggest one-day gain ever by Hong Kong's main index, China stepped in and announced new measures to tighten up controls on red chips, the unruly bunch of China-related stocks that have taken Hong Kong by storm.
The announcement followed a gain of 647.87 points, or 4.5 percent, in the Hang Seng index to a record 15,154.36.
China now will require all Chinese-controlled companies to obtain approvals before listing overseas.
Companies will also be required to get approvals for transfers of domestic assets into listed affiliates, a widespread activity that has prompted rampant speculation about the value of future asset injections.
""As economic views converge during the succession, so political stability increases and so does the chance of decisive policy implementation,"" Lewis wrote.
This apparent, renewed movement in economic policy follows a number of recent warnings from economists that China's growth rates are due to drop below expectations, and that deflationary pressures are mounting.
""We're not only seeing disinflationary pressures coming from within China, we're also seeing it reflected in the region as a whole. There are myriad sources of confirmation for this particular view, and I think China's disinflationary forces are going to become one of the major stories this year,"" Michael Taylor, economist with W.I. Carr said recently.
Both W.I. Carr and Dresdner Kleinwort Benson believe China's long-term economic prospects remain strong, but DKB has warned that deflation will add to other forces hampering growth rates, which have already started to fail to meet expectations.
China's first quarter gross domestic product grew by 9.4 percent against expectations of 10.2 percent, and reports have surfaced that the government has cut its short-term forecast to about seven percent in order to achieve a reduced long-term forecast of eight percent.
Earlier expectations saw China's economy expanding by 10 percent each year for the next decade.
""China has entered a new, disinflationary phase, and the rapid price rises characterising the early years of the economic reform process are unlikely to recur for the time being,"" said John Mulcahy, managing director, Indosuez W.I. Carr Securities.
Although the evident shift in government economic policy bodes ill for investors awaiting the return of the rip-roaring market rallies of the pre-1993 era, economists welcomed the new approach as yet another sign of China's economic competence.
""Long term, we are more confident about China's economic future than for many years: the problems are in the short term,"" Lewis said.
""Our confidence arises from a higher degree of economic literacy among the leadership. They -- in Beijing at least -- all seem to understand the costs of high inflation and the need for structural reform, which must be given a chance to work even if the short-term, consequences are negative.""
",42
"Hong Kong's top civil servant Anson Chan has signalled an open rift and rising tension in the new Beijing-approved administration to take over when Britain hands control back to China on July 1.
In two outbursts in as many weeks, the Chief Secretary has called for prompt elections, a credible legislature and respect for civil liberties - a clear warning to China.
Amid widespread doubt on the scope of freedom under Chinese rule, she said she was prepared to quit if asked to accept policies that clashed with her principles.
Chan, 57, is Hong Kong's top career administrator. She is deputy to departing colonial governor Chris Patten and has been asked to stay in the post as second-in-command to future leader Tung Chee-hwa.
Tung, a conservative and former shipping magnate, is waiting to take over at the head of a new administration that includes an assembly already chosen to replace the elected legislature.
Her tough words seemed to reflect speculation in Hong Kong of rifts opening up between Tung and his top officials, such as Chan and Financial Secretary Donald Tsang.
Her remarks were seen as a warning broadside just 28 days before the handover.""She is playing here her only trump card and I'm surprised she's had to play it this early,"" David Newman, political science professor at Lingnan College, told Reuters.
""I like to think I'm a loyal civil servant, but loyalty is not everything in my eyes,"" Chan told Newsweek International in the latest of a flurry of interviews by Hong Kong political leaders as the handover nears.
""There might be issues that are points of principle, and, as a matter of conscience, you feel you can't accept those decisions,"" she said. ""When that happens, you start asking yourself 'Do I stay or do I go?' And I think most people would know what my answer would be.""
""She is signalling she will have difficulty stomaching what the political appointees are going to try to do,"" Newman said.
""It is going to be very difficult for someone with high and sincere beliefs and a liberal mind to stand silently and watch what is going to go on around here,"" he said.
Touching on arguably the most important element of the handover to China, Chan expressed strong support for the gradual introduction of democracy.
But she called for public participation in the drawing up of the electoral system to ensure that Hong Kong does end up with a ""credible"" legislature.
Her comments appeared as Tung chided Britain for introducing democratic reforms without China's consent.
""The issue is that to go ahead without the consent of the future sovereign should not happen, it shouldn't have happened,"" Tung said in a British Broadcasting Corporation interview.
The reforms have become a major source of friction between Britain and China, prompting Beijing's vow to scrap Hong Kong's elected legislature on July 1. But departing governor Patten is far from remorseful.
""As it is, people in Hong Kong now have a few benchmarks,"" he said on Monday. ""They know what a free election is like.""
Chan's outspoken views drew praise from some commentators, but an editorial in the Hong Kong Standard newspaper said Chan had set ""a dangerous precedent"". ""Open challenges of this nature must not be allowed to happen,"" it said.
Bob Broadfoot, head of a think-tank, the Political and Economic Risk Consultancy, said the type of restrictions on the right to comment imposed on civil servants elsewhere did not apply in Hong Kong, where civil servants lead the government.
Broadfoot said he believed Chan and Tsang had decided to stay on to support Hong Kong through the transition, but he predicted their resignations within one year.
Chan is widely respected. ""A charmer and sophisticated with a core of steel,"" says one political insider.
She warned against any assault on the independence of the civil service by people with ""vested interests"" who were willing to invite China's intereference for their own benefit.
Chan said Tung was a man of principle but lacked  ""a really deep understanding of how government machinery works"".
",42
"Asian stocks face a jittery week, anticipating a rise in the U.S. Federal funds rate at the Federal Open Market Committee (FOMC) meeting on Tuesday.
Concerns about interest rates caused the U.S. Dow Jones index to fall this past week. The index fell 15 points on Friday to 6805 although rate fears weren't seen as a major factor for the day.
But the rate jitters are expected to be exacerbated in Asia by local factors ranging from Taiwan's ban on all pork exports due to an outbreak of deadly hog foot-and-mouth disease to continued gloom in Singapore because of poor export figures.
- - - -
HONG KONG - Share prices have taken a beating over recent weeks due to uncertainty over whether the U.S. interest rates will go up, but analysts said stocks could move higher once Tuesday's FOMC meeting is out of the way.
The blue-chip Hang Seng Index fell 247.23 points, or 1.94 percent, in the past week to close at 12,489.30 on Friday.
""If they announce a 25 basis point rise, Hong Kong will probably recover to around the 13,000 level because I think it (selling) is just overdone,"" said ING Barings sales director James Osborn.
Analysts said earnings growth was strong and that, whatever the Fed meeting brought, the uncertainty would be cleared and investors could focus on local fundamentals.
- - - -
TOKYO - Tokyo stocks are expected to plough higher as investors try to ensure the indices finish the fiscal year ending March 31 on a positive note, brokers said.
""Hopes that the government plans to revive the stagnant property market will provide psychological support and the start of a new trading month will make it easier -- for dealers especially -- to buy,"" said Hisao Suzuki, Yamaichi Securities Co Ltd deputy general manager.
The 225-share Nikkei benchmark index closed up 139.45 points, or 0.75 percent, at 18,633.16 on Friday, capping a five-session winning streak in which it gained 3.5 percent.
Brokers said the market will await any hints on details of a government scheme to improve land liquidity, which would help financial firms dispose of their bad property assets. The final plan will be unveiled on March 31.
- - - -
TAIPEI - Taiwan share prices are expected to consolidate in the week beginning March 24 following Taiwan's ban on all pork exports due to an outbreak of hog foot-and-mouth disease.
The ban sent the island's food and livestock shares tumbling on Friday. Brokers said food shares can expect more losses and recent government attempts to cool what is seen as an overheated stock market will also dampen sentiment.
The weighted index plunged 262.60 points to 8,230.07 on Friday, compared to an 8,275.57 finish a week earlier. Consolidation is now expected between 8,000 and 8,400 points.
- - - -
SINGAPORE - Singapore shares face an uncertain week with no signs of encouraging news to lift the market, dealers said.
""The outlook is uncertain for the week ahead -- what could be out there to lift us?"" said one broker, demoralised by a week which saw Singapore's main index hit a series of new lows.
The key Straits Times Industrials Index ended at 2,068.48 on Friday, down 66.98 on the previous week's close. It was battered by poor non-oil domestic export figures, worries over U.S. interest rates and disappointing corporate results.
- - - -
SEOUL - Failures among affiliates of the Sammi Group are expected to hit the Seoul stock market, brokers said.
They said Sammi's woes, and worries that liquidity would be tightened in response, sparked fears of more defaults by smaller companies, which are seen as vulnerable to tight credit.
""The underlying market sentiment is at its worst,"" said Lee Hee-myung of Samsung Securities.
The composite stock index closed on Friday at 627.08, 14.45 points, or 2.25 percent, lower than the previous Friday.
- - - -
BANGKOK - Thai stocks are expected to gain slightly on expectations of improvements in key economic data to be released on Thursday, brokers said.
Investors believe certain economic data such as the current account and balance of payments would improve, but concern about U.S. interest rates would weigh on sentiment, brokers said.
The Stock Exchange of Thailand (SET) index rose 1.03 percent in the week to close at 702.10 points on Friday.
- - - -
JAKARTA - Jakarta share prices are expected to remain mixed but trading would be relatively slow until the FOMC meeting.
Brokers said lingering concern over a possible competitor to bellwether stock Telkom could also hurt sentiment.
But brokers said the listing of three companies on three consecutive days from March 25-27 could boost market activity.
On Friday, the Jakarta Composite Index closed 7.03 points, or 1.06 percent lower, to 656.11 points, against the previous Friday's 666.84 close, a loss of about 1.6 percent on the week.
- - - -
KUALA LUMPUR - Malaysian stocks will focus on the FOMC meeting and Wall Street's response, analysts said.
But the market had already factored in a rate hike and could very well rise on the actual news itself, said one analyst.
""It's a good time to be buying stocks,"" he said.
The benchmark Composite Index of 100 large-capitalised stocks fell 29.53 points, or 2.38 percent to 1,212.94 on Friday against the March 14 close of 1,242.47.
- - - -
MANILA - Philippine shares are expected to stay stuck in a range s most investors would remain cautious ahead of the FOMC meeting and long Easter weekend, brokers said.
""We expect the same sideways trend next week. We might see trading pick up after the Easter holidays,"" said Poch Zamora, head dealer of Peregrine Securities.
Local shares drifted 33.14 points, or 1.03 percent, downward last week to settle at 3,201.65 points on Friday.
- - - -
SYDNEY - Australian shares are seen focused tightly on U.S. markets, with all eyes on a possible U.S. interest rate rise and the Dow's response.
The All Ordinaries index closed at 2,386.4, down 36.8 points or 1.5 percent for the week on increasing jitters about U.S. stocks, which are seen here as overvalued, and U.S. bonds.
""I think everybody is going to be waiting on what the bonds are going to do and what the Dow is going to do,"" Mercantile Mutual equities director Greg Matthews said.
- - - -
WELLINGTON - New Zealand shares ended strongly on Friday, rising 17 points after a poor week. Brokers said that although the gain was welcome, the New Zealand market lacked direction and all eyes are on the meeting to decide U.S. interest rates.
The NZSE-40 closed at 2,229.79, just 3.19 points, or 0.14 percent, higher than its 2,226.60 finish the previous Friday.
- - - -
DHAKA - Dhaka stocks suffered a record loss over the past week amid selling pressure triggered by the news that the country's power crisis was hurting the economy, brokers said.
But analysts said the market could recover as many investors might return to snap up now-cheaper stocks.
The Dhaka Stock Exchange benchmark index lost 249.82 points or 16.39 percent to 1,273.85 in the week to Thursday.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Merging the Hong Kong dollar with China's renminbi is impossible in the short-term and unlikely in the long-term, a panel of experts said on Monday.
A currency merger could only be contemplated once China's capital account is fully open, allowing for free movement of financial assets in and out of the country, they told a conference organised by the Far Eastern Economic Review. They said this could take at least five years.
""Economically, the fact that the Renminbi is still not a fully-convertible currency also argues against a possible merging of the Hong Kong dollar with the Renminbi as Hong Kong needs a convertible currency to maintain its status as an international financial centre,"" said T.C. Chan, head of investment banking for Citibank in Hong Kong.
But Hong Kong can still look forward to 50 years of autonomous control of its monetary system, as enshrined in agreements governing Hong Kong's reversion to Chinese control and the Basic Law, Hong Kong's mini-constitution.
""If we set aside the political considerations, which are largely judgmental, the merging of the Hong Kong dollar with the Renminbi is simply legally not possible,"" Chan said.
Reforming state-owned enterprises (SOEs) will be key to convertibility for China, said Andrew Freris, Bank of America managing director in Hong Kong.
The SOEs, plagued by debt, have compromised China's banking sector. SOEs must be reformed to return integrity to China's banks, Freris told the conference.
Only when the banking sector has reduced its exposure to the SOEs will China be able to establish a fully-functioning interbank market, which can then act as the vehicle to establish market-determined interest rates, Freris said.
""The market must have the capacity to allow domestic rates (to) rise far enough to attract or repel capital,"" he said. ""If you do not have fully operational market-determined interest rates, convertibility is a non-starter.""
Instead of anticipating the eradication of its own currency, Hong Kong should look forward to convertibility of the Chinese yuan for the opportunities it will present, Freris said.
""Hong Kong will be able to derive more business from fund flows in and out of China,"" he said. ""But I do think that two monetary systems will remain separate. The fact the renminbi becomes convertible will not affect the separateness of the two systems.""
The idea of two monetary systems co-existing within one sovereign state is not unusual, Freris argued.
Argentina countered hyperinflation for many years by allowing its freely convertible peso to function alongside a U.S. ""dollarised"" economy.
Brazil and Uruguay are similarly dollarised, with U.S. currency used for all major transactions, he said.
",42
"China's lumbering state firms are putting more effort into making products they can actually sell, but huge stockpiles of unwanted goods remain a blot on the economic landscape, officials said on Monday.
At the end of October the total amount of capital tied up in inventories of 380,000 enterprises across China had reached 540 billion yuan ($65 billion), 80 billion yuan more than at the beginning of 1996, State Statistical Bureau spokesman Ye Zhen said.
While some of the inventories were a result of normal production and marketing processes, much was ""unreasonable"", Ye told a news conference.
""Of the total 540 billion yuan in stocks, 150 billion yuan is unreasonable,"" he said but gave no details.
Many state-owned firms, long accustomed to mass-production for a command economy, have struggled to adjust to China's new consumer-led markets and continue to churn out millions of yuan worth of unsellable goods.
State media reported last week that excessive investment by enterprises in some industries had resulted in mountains of warehoused goods ranging from bicycles to wristwatches.
The stockpiles included about 1.5 billion unsold men's shirts -- about three shirts for every adult Chinese male.
Chinese officials say concentration of investment in certain industries has led to cut-throat competition resulting in losses, monopolies and local protectionism.
Beijing has vowed to curb blind investment by provinces in some industries, but economists say defiance from regional authorities will hamper the central government's efforts.
Ye said firms had progressively improved the quality of their investment in new production throughout 1996.
""Enterprises... are paying more attention to efficiency and to the quality and variety of their products,"" he said. ""Blind production has been reduced.""
The national sales rate for industrial products had risen to 96.27 percent in November from 93.04 percent in the first quarter, he said.
Large stockpiles held by state enterprises have compounded their difficulties in clearing interlocking ""triangular debt"" among firms unable to pay their bills to one another.
The value of ""outstanding accounts"", or funds owed, by 380,000 state firms had soared to 900 billion yuan by the end of October, up 100 billion yuan from the start of the year, Ye said.
He said state statisticians believed about one-third of the 900 billion yuan in debt was ""unreasonable"", apparently hinting that this might not be repayable.
($1=8.3 yuan)
",34
"China on Wednesday told U.S. President Bill Clinton not to worry about Chinese human rights and Hong Kong's future freedoms, saying Beijing's rights record spoke for itself and liberty in the British colony was assured.
Clinton said on Tuesday that Washington had made less progress than hoped in influencing Chinese rights policies and warned that Hong Kong's value to China might fall if liberties in the colony were lost after it returns to Beijing's rule.
""The national conditions of China and the United States are not the same and it is natural for different views on human rights to exist,"" said a Chinese Foreign Ministry spokeswoman in reaction to Clinton's comments.
The reaction -- exceedingly mild by Beijing's standards -- came as Chinese and U.S. officials met in the capital to discuss trade and human rights, issues that have long dogged the cross-Pacific relationship.
In its report on Clinton's remarks, China's official Xinhua news agency mentioned only the U.S. president's defence of his engagement policy towards China, and said nothing of his comment that liberty's advance in the authoritarian communist nation was inevitable.
Analysts said Beijing was determined to keep up the momentum of a recent Sino-U.S. rapprochement and would not allow it to be derailed by Clinton's remarks on Hong Kong and human rights.
Concerns over the future of the British colony, which reverts to China at midnight on June 30, were unfounded, the Chinese Foreign Ministry spokeswoman said.
China had guaranteed freedom for Hong Kong's people with its mini-constitution for the territory, the Basic Law, she said.
""Under the Basic Law the people of Hong Kong have full freedom and all democratic rights,"" she said. ""There is no basis or need for doubt or concern about this.""
China's own constitution and laws protected the rights of members of all its nationalities, she said.
""The efforts and achievements made by the Chinese government in this area are there for all to see,"" she said. ""Anyone who is not biased will reach a fair conclusion.""
A U.S. delegation arrived in Beijing on Tuesday for talks on human rights with Chinese officials, after a year in which almost all remaining members of the nation's tiny pro-democracy movement were either imprisoned or driven into exile.
The delegation was seeking concessions that could make it unnecessary this year for Washington to sponsor a U.N. resolution faulting China's rights policy, U.S. officials said.
A Western diplomat in Beijing said the delegation's arrival was a sign of Chinese and U.S. determination to bolster the recent warming in ties that has helped soften the impact of disputes over issues ranging from Taiwan to copyright piracy.
However, the delegation was unlikely to extract sufficient clear concessions from Beijing to make it politically viable for Clinton not to sponsor a critical resolution at the U.N. Human Rights Commission in March, the diplomat said.
Talks on issues such as human rights should take overall ties into account and should be carried out on a basis of equality, the Chinese spokeswoman said.
",34
"A Chinese dissident who spent years in jail after the 1989 pro-democracy demonstrations in Beijing has sent a rare open letter to parliament calling for legislation to hold back a rising tide of official corruption.
Former magazine editor and historian Bao Zunxin said he had written to the National People's Congress, or parliament, last week to push for tougher anti-corruption laws.
Legislation was needed to force more openness and fuller disclosure of officials' private assets and existing laws were inadequate to cope with endemic graft, the 58-year-old dissident said in a telephone interview.
""Without an end to corruption, there will not be a day of peace in our country,"" Bao wrote in his letter, a copy of which was faxed to news agencies by the Information Centre of Human Rights and Democratic Movement in China.
""Corruption has seeped into every level of the government, and requiring only officials above the county level to declare their property is far from enough,"" he wrote.
Petitions to parliament, always a risky venture for China's tiny band of dissidents, have in the past been either greeted with stony silence or followed by the detention of signatories.
Bao, who spent more than three years in prison for his role in the 1989 Tiananmen Square demonstrations that were bloodily crushed by the army, said he could not guess what the reaction to his letter would be but it was impossible to be optimistic.
Public security officials took Bao from his Beijing home in July for a week-long ""tour"" to Qingdao in eastern China after discovering he had granted an interview to a French reporter, he said.
Some dissidents see demands for action against corruption as a rallying call that can strike a chord among a populace bitter at the wealth and privilege enjoyed by some senior officials.
Anger at leaders and bureaucrats who use their power to amass wealth in China's new market economy helped send hundreds of thousands of Beijing residents into the streets in support of the 1989 student-led demonstrations in Tiananmen Square.
Many Chinese say graft has since spread even more as economic reforms continue to weaken social controls and multiply profit-making opportunities for those with political clout.
Bao's open letter follows a July appeal to parliament from leading dissident Liu Xiaobo for speedy legislation to curb corruption in the state media and to loosen the ruling Communist Party's monopoly on news.
Beijing has repeatedly declared war on graft, calling it a scourge that threatens the very basis of communist rule, but many Chinese say the campaigns have had only limited success.
Short-term actions such as the on-going ""Strike Hard"" anti-crime campaign were not enough to clean up China's government, Bao wrote in his letter to parliament.
""Corruption, especially systemic and all-pervasive corruption as in China, cannot be stopped with a short period of ""Striking Hard',"" he wrote.
""An effective system of (property) declaration should be made available to the public through legislation, and should have legal authority, openness, transparency and supervisory mechanism,"" he wrote.
",34
"China said on Sunday it expected to reach formal agreement with Tokyo on the details of Japan's latest batch of huge yen loans but warned that politics should not be allowed to get in the way of economic aid.
A Japanese mission long delayed by diplomatic tensions reached basic agreement with Chinese officials last month on the projects to receive 180 billion yen ($1.6 billion) earmarked for the first year of Tokyo's 1996-2000 soft loan package.
Talks on the loans had been stalled for months, after disputes over territory, history and China's nuclear testing programme chilled ever-sensitive ties, Japanese sources say.
""Japan and China plan to sign a formal contract on the implementation of the 1996 yen loans,"" the official China Daily Business Weekly said in a front-page report.
The newspaper did not say when the loans would be finalised but quoted officials of the Ministry of Foreign Trade and Economic Cooperation as warning politics should not be allowed to intrude on Sino-Japanese economic relations.
Some Japanese were trying to use financial assistance to put political pressure on China, but such action was unacceptable and would bring no benefits to Tokyo, it quoted Yu Zhensheng of the ministry's foreign financing administration as saying.
""China is against political conditions attached to economic cooperation,"" Yu said. ""We hope the two sides will make joint efforts to promote the healthy and steady development of Sino-Japanese economic ties.""
The loans, scheduled to total 580 billion yen between 1996 and 2000, were a crucial part of the economic relationship, he said.
Soft loans from Tokyo are widely seen in China as an unofficial form of reparation for the damage inflicted by Japan's imperial army as it raged across the nation between 1931 and 1945.
Sino-Japanese ties have in recent years been strained by differences over nuclear testing, a visit by Japanese Prime Minister Ryutaro Hashimoto to a shrine to his nation's war dead and a territorial dispute over islands in the East China Sea.
Japan, the only nation to have suffered atomic attack, last year froze grant-in-aid to China in a largely symbolic protest against Beijing's nuclear testing programme.
The far larger yen loans were not officially affected by the nuclear protest, but the November mission was the first since China conducted a nuclear test in May 1995 and Japanese sources say the two issues had been privately linked.
Propaganda barrages in Chinese state media keep wartime memories fresh and officials rush to condemn all possible signs of resurgent Japanese militarism, but diplomats say Beijing is keen to avoid threatening a vital economic relationship.
Japan had promised 1,610 billion yen worth of loans between 1979 and 1995, accounting for 40 percent of the total foreign government loans promised to China during the period, China Daily Business Weekly said.
The loans themselves have been a source of dispute, with the rise in the value of the yen in 1994 and 1995 sending their cost soaring. That prompted Chinese complaints and demands to be allowed to repay in U.S. dollars.
Tokyo refused, but the yen's later decline has blunted the issue as a potential source of conflict, and both sides have in recent months shown new willingness to restore amicable ties.
($1 = 113 yen)
",34
"More than 250 Chinese citizens have called on Beijing's top military leaders to take tough action in a dispute with Tokyo over a group of islands in the East China Sea, a petition organiser said on Sunday.
Beijing should send Chinese forces to the disputed Diaoyu Islands, known in Japan as the Senkakus, to destroy a makeshift lighthouse built there by a right-wing Japanese group in July, organiser Tong Zeng said in a telephone interview.
""We are calling for troops to be sent to get rid of the Japanese lighthouse,"" Tong said. ""Japan has violated our territorial integrity...we are very angry.""
The rare petition was addressed to Jiang Zemin, Chinese president and chairman of the Central State Military Commission, and to other top military leaders. It had been signed by 257 ordinary citizens, Tong said.
Petitioners included officials, retired servicemen, workers and students, he said.
Tong is a leading anti-Japanese campaigner in China whose high-profile approach led authorities to confiscate his passport and order him to leave Beijing temporarily during last year's 50th anniversary of the Japanese surrender.
Beijing and its arch-rival, Chinese Nationalist-ruled Taipei, both claim the Diaoyu Islands, which are located about 300 km (190 miles) west of Okinawa and 200 km (125 miles) east of Taiwan.
Tokyo says the uninhabited group has always been part of Japan.
The dispute over the islands' ownership flared in July after the Nihon Seinen-sha (Japan Youth Federation) moved to buttress Japan's claims by building an aluminium lighthouse on one of them, prompting howls of protest from China's state media.
""The Chinese side must take strong and concrete action to protect our nation's territorial integrity,"" the Chinese petitioners wrote in their appeal to Beijing.
The military should immediately remove the five-metre (16-ft) Japanese lighthouse, or at least should send warships to protect any Taiwanese or Hong Kong groups who attempted to destroy it, they said.
While China's Communist Party-controlled media quickly condemns any perceived signs of resurgent Japanese militarism, Beijing has in the past suppressed unofficial protests against Tokyo and campaigns for Japanese compensation for war victims.
Petitions to parliament judged hostile to the government have often prompted the detention of signatories, but Tong said the Diaoyu petition was a private move by ordinary people that would be welcomed by the Beijing leadership.
""There is nothing wrong with this action, this is to protect China,"" he said. ""I think the government could not but welcome it.""
",34
"China will retain controls over the price it pays farmers for grain even after reforms trumpeted as unifying the state-set price with that of the market, official media said on Monday.
Minister of state economic restructuring Li Tieying said last month China would this year unify the price for compulsory sales of grain to the state with market prices, a reform aimed at boosting the role of the market in the agricultural sector.
However, provincial authorities would continue to have the final say on the price they paid for grain, the Xinhua news agency on Monday quoted Wang Lingui of the State Grain Reserve Administration as saying.
""The purchasing price will be determined by governments at provincial levels on the basis of the market price,"" the official agency quoted Wang as saying.
Steep hikes in the official grain purchase price and falls in market prices caused by a record 480-million-tonne grain harvest in 1996 meant the time was right for reform, Wang said.
But he added that market trends would not be the only factors considered.
""The market price forms a principal basis for setting a purchasing price, but is not the only criteria,"" he said. ""Therefore, the purchasing price should not necessarily follow the market price.""
Grain traders said last month the difference between state purchase prices and market prices had narrowed to almost nothing, suggesting that merging the two would have little immediate impact.
But analysts said the government may be concerned that future bumper crops could force market prices down sharply, and in turn force farm incomes lower.
China's government has long paid lower-than-market prices for grain purchases to ensure state granaries are well stocked.
Beijing's communist leadership has for years tried to free grain prices, but all attempts have fallen foul of fears that uncontrolled rises could push food prices beyond the pockets of urban residents and spark social unrest.
A government spokesman last month voiced apparent unease about unifying state and market grain prices, saying farmers' enthusiaism for planting grain would be sapped if prices fell.
The annual state grain-collection quota of 50 million tonnes would remain unchanged under the planned reforms, allowing the state to guide grain production, stabilise the acreage sown and maintain stable grain price, Wang said.
""Meanwhile, building a protective price system, which will set a ceiling on the market price and the bottom line of the purchasing price, is a must,"" Xinhua quoted Wang as saying without elaborating.
The state price should be allowed to move over time to encourage farmers to hold on to their grain and so ease harvest-time pressures on state granaries, he said but gave no details.
",34
"China and the United States began talks to hammer out their textile trade differences on Tuesday with both sides voicing optimism that agreement could be reached before a Friday deadline.
Washington and Beijing had a productive first day of a scheduled three days of talks aimed at extending a bilateral textile accord and resolving a dispute over U.S. penalties on Chinese exports, said top U.S. textile negotiator Rita Hayes.
""Very productive morning,"" Hayes said, adding that much remained to be done. ""We still have lots of issues to resolve."" ""We are maintaining an optimistic attitude towards the prospects of these textile talks,"" Chinese Foreign Ministry spokesman Shen Guofang told a news briefing. ""The resolution of this problem will be beneficial for both sides.""
The 1994 Sino-U.S. textile pact had been scheduled to expire on December 31 last year but was extended by one month to allow the two sides to seek compromise on the terms of its renewal.
Washington and Beijing were also seeking to ease a dispute over Chinese exports of textiles via third countries that have prompted U.S. threats of multi-million dollar penalties and raised the spectre of a cross-Pacific trade war over the issue.
The Friday deadline for a renewed textile accord could not be pushed back once more -- but U.S. officials believed agreement would be reached in time, Hayes said before her talks at China's Ministry of Foreign Trade and Economic Cooperation.
""The deadline is January 31 and there are no more extensions, so we have to reach agreement,"" she told reporters, adding that sparring over textiles was not likely to lead to a trade conflict.
""We are in hopes that the consultations will continue the mood that they had in the previous consultations and that is that both sides are trying to get an agreement,"" she said.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Chinese spokesman Shen said Beijing wanted to sit down to study seriously U.S. views on the textile debate.
""I believe that none of us, including the U.S. side, hopes to see a trade war,"" he said.
China's large textile exports to U.S. and European customers have long been a source of diplomatic dispute but have in recent years become especially sensitive for U.S. trade officials eager to reduce Washington's swelling trade deficit.
Sino-U.S. ties have been strained by disputes over issues ranging from trade to Taiwan to human rights, but tensions have eased greatly in recent months and U.S. diplomats have suggested Beijing is keen to do more to balance the trade books.
As negotiatior Hayes discussed textile issues, U.S. trade official Lee Sands was due in the Chinese capital on Tuesday for meetings expected to focus on Beijing's long-stalled entry to the World Trade Organisation.
Beijing has been vocal in blaming Washington for blocking its accession to the global trade club, which China wants to join on the favourable terms accorded to developing countries.
",34
"Beijing's young people jostled and barged their way into the Chinese capital's Catholic churches late on Christmas Eve, saying that for one night a year midnight mass was the place to be seen.
Fashionably-dressed young men and women stood on their seats in St Joseph's church in the downtown Wangfujing shopping district to watch the mass, while regular church-goers fled outside for refuge from the crowd.
Around 10,000 people were expected to visit St Joseph's throughout the evening, with more than 1,000 cramming into the church for the Chinese-language midnight mass, staff said.
Only a small fraction of the visitors crowding into the Chinese-language mass and buying crucifixes or battery-powered musical Santa Claus dolls at the church shop were Christians, said congregation members.
""There are very few devotees here,"" said one worshipper in her 70s who said she was a daily visitor to the twin-domed church, which was established in 1655 by an Italian priest.
""They are all non-believers -- they don't understand this at all, they just think it's good entertainment,"" said the worshipper, who declined to be identified.
""I just came for fun,"" agreed one young visitor. ""I don't believe in God. In Beijing it is fashionable at the moment to come to church at Christmas.""
Groups of affluent young men and women in their sharpest outfits lent the normally solemn church grounds an air more akin to that of one of Beijing's mushrooming nightclubs.
""Everyone was lined up, you know, just like at a disco dance,"" said one U.S. visitor.
Hours before midnight mass, hundreds of mostly youthful onlookers strolled among the wooden pillars of St Joseph's, which was last rebuilt in 1905 after a devastating fire.
Seminarians of the official communist-controlled Chinese Catholic church, known as the Patriotic Catholic Association, handed out religious tracts.
Beijing has an estimated 70,000 Catholics, out of about four million nationwide. All are banned from acknowledging the spiritual leadership of the Vatican, with which China has no formal relations.
Just round the corner from St Joseph's in the upmarket Taiwan Hotel a more commercially-oriented Christmas was on offer, with special menus, festive trees and a choir to greet guests with seasonal songs.
Christmas was catching on in China, said the youthful Santa Claus posted outside the hotel's main restaurant to serve up good cheer to potential diners.
But for this Beijing Santa, karaoke was a more important festive ingredient than roast turkey or crackers.
""I'll be at this until midnight,"" he said. ""Then I think I'll head next door to sing a few songs.""
While few of the young church visitors to St Joseph's admitted to any deep religious feelings, hospital worker He Haiying said the visit to mass had other more secular benefits.
""It's a chance to have an exchange with Western culture,"" she said.
While the influx of young pleasure-seekers was a clear sign of the more open approach to Christianity that has largely replaced the official hostility of the past, regular church-goers felt the crowds were a mixed blessing.
""There are too many people, there's no place to sit,"" said the 70-something St Joseph's parishioner. ""We older people will come back in the morning for the six a.m. mass.""
",34
"China's troubled relations with the United States should improve in 1997, but disputes over Taiwan, trade and the return of Hong Kong to Beijing rule could easily sour ties, state media and analysts said on Thursday.
After lurching from crisis to crisis throughout much of 1995 and 1996, Beijing and Washington were both keen to develop new stability in the cross-Pacific relationship by toning down differences, said a Beijing-based Western diplomat.
""There will still be problems... but if things follow their present trajectory, I would say you won't have quite such big ups and downs as over the last couple of years,"" he said.
The November meeting in Manila between Chinese President Jiang Zemin and his U.S. counterpart Bill Clinton and the prospect of mutual state visits had presaged a possible period of Sino-U.S. warming, said the official Guangming Daily.
""But because a number of serious differences still exist, this road to the recovery and improvement of relations will again not be smooth,"" it said in a commentary.
U.S. policy towards Beijing's island rival Taiwan, the return of the British colony Hong Kong and China's long-delayed entry to the World Trade Organisation (WTO) would be crucial issues, it said.
Chinese concerns were rising over Hong Kong, which will revert to Beijing's rule at midnight on June 30 after more than 150 years as a British colony, the Western diplomat said.
Beijing leaders were aware that any sign of a harsh approach to democratic opponents of their Hong Kong policies would cause a storm of protest in a U.S. Congress already suspicious of Chinese intentions, he said.
""They are starting to get very worried, because they realise the Americans are going to focus on Hong Kong and it is going to give Congress another stick to beat them with,"" he said. ""It's pretty certain there's going to be a bit of friction involved.""
A Chinese analyst on Sino-U.S. economic relations said Hong Kong's return could add fuel to disputes over China's swelling trade surplus with the United States by combining the former colony's exports with those of the mainland.
""After Hong Kong's return, there will be some clashes over this matter,"" said the analyst, who declined to be identified.
Taiwan continued to be a key stumbling block, he said.
Sino-U.S. relations plunged in March 1996, when China -- angry at attempts by Taiwan to break out of diplomatic isolation -- carried out missile tests and war games in the Taiwan Strait before the island's first direct presidential elections.
Washington responded by sending two aircraft carrier battlegroups to the area, an action that infuriated Beijing.
The United States appeared to have adjusted its approach to the Taiwan issue in recent months, urging Taipei to tone down its campaign for international recognition, the diplomat said.
The Guangming Daily said Washington was still not taking enough account of China's real situation in talks on its WTO entry, which Beijing says has been stalled by U.S. objections.
""The (WTO) entrance fee is too high,"" echoed the Chinese analyst, adding that China's automobile and pharmaceutical industries would suffer if forced to face foreign competition.
If Beijing and Washington continued to try to limit the impact of such disputes on overall ties, 1997 could bring needed stability to the Sino-U.S. relationship -- plus a possible exchange of presidential visits, analysts said.
""Hong Kong is the key, if something doesn't go wrong with Hong Kong I would say this will be a much better year than 1996, and probably than 1995 as well,"" the diplomat said. ""They've been pretty bad years.""
",34
"China on Thursday ordered two 747 airliners from U.S. aviation giant Boeing Co in a multimillion dollar deal that Washington's ambassador to China said was hastened by upcoming visits by U.S. congressmen.
The two jets would be powered by engines from Pratt and Whitney, a subsidiary of United Technologies Corp, and would be delivered in 1999 to Air China, Beijing's international carrier, officials of the China Aviation Supplies Corp said.
Closure of the $383 million contract, which follows the purchase of three 747-400s by Air China in July last year, had been hastened by imminent visits to Beijing of about 35 U.S. congressmen, said U.S. ambassador James Sasser.
""This Boeing contract is something that has been under discussion for some time,"" Sasser told reporters. ""Clearly there was an effort to try to finalise this transaction on the eve of the visit of a number of senators and congressmen.""
One official bipartisan delegation of around 22 U.S. congressmen is scheduled to arrive in Beijing next week for talks with Chinese officials that are expected to include touchy issues such as the Sino-U.S. trade balance and human rights.
Relations between Washington and Beijing have long been battered by disputes over trade, Taiwan, copyright piracy and China's human rights record, but both sides say ties warmed in the latter half of 1996.
Chinese efforts to ease Beijing's swelling and highly sensitive trade surplus with the United States were likely to provide a boost to U.S. exports to China, Sasser said.
""I think you will see over the coming months an effort on the part of the Chinese to make additional purchases of U.S. goods, in an effort to try to even up as much as possible the present trade deficit with the United States,"" he said.
The United States says it has a trade deficit with China, reaching nearly $29 billion in the first nine months of last year. Beijing insists that its customs figures show a surplus in favour of the United States.
The ambassador declined to give details of the deals likely to be agreed or to say which sectors might benefit most.
Some U.S. businessmen say high-profile sales are among the earliest casualties of Sino-U.S. diplomatic spats, and Boeing has in the past hinted that it has lost deals to European archrival Airbus Industrie for political reasons.
Boeing officials at the Thursday signing declined to comment on whether the 747 contract had been hastened by the recent thawing in cross-Pacific ties, but Regional Director for Aircraft Contracts Arthur Abel said the deal was heartening.
""We are just very encouraged and optimistic about our long term relationship with China,"" Abel told Reuters.
A Boeing statement said the two 286-passenger 747 Combis it would supply to Air China marked a strong vote of confidence in the U.S. planemaker from an airline that already operated 45 of its aircraft.
Officials of the state-run China Air Supplies Corp also welcomed the deal, although they identified the ordered aircraft as 301-seat 747-400s.
",34
"Chinese lawmakers on Friday called for the ruling Communist Party to tighten control over the nation's armed forces, saying new defence legislation was essential to bring law to the military.
Members of the standing committee of the National People's Congress had agreed to submit a draft defence law for approval by a full parliamentary session, the Xinhua news agency said.
""It must be made clear in the law that absolute party leadership over the military must be strengthened,' to ensure a correct political path for the People's Liberation Army (PLA),"" the official agency quoted leading committee members as saying.
The three-million-strong PLA has for decades been considered the ""gun"" of the Communist Party (CCP), but analysts say leaders are keen to buttress their control in the face of concerns over the army's loyalty and its growing financial independence.
Beijing has tried to rein in the PLA's vast business empire and to strengthen the network of communist cadres charged with overseeing political education and policy among military ranks.
The 13-chapter defence law, which began to be drafted in September 1993, has reportedly been long delayed by high-level disagreement over the extent to which it should formalise the Party's leadership role.
The law is also expected formally to empower the military to crush rebellions and struggles for regional independence -- roles the army has already shouldered in the past.
""Most lawmakers expressed the view that formulation of the national defence law is crucial for the rule of law in the military field,"" Xinhua said.
Foreign analysts of the Chinese military say some army loyalties have been weakened by conflicting institutional interests, business activities and growing corruption.
Efforts to boost military loyalty by current party leaders -- few of whom enjoy the military credibility of their revolutionary forebears -- had been unrelenting since 1989, wrote analyst and scholar David Shambaugh earlier this year.
""No doubt the Party's efforts to ensure control over and gain the 'absolute loyalty' of the armed forces arise not only from the CCP leadership's own insecurities but also from the military's growing autonomy,"" Shambaugh wrote.
Concerns over the influence of the military's business activities were echoed by legislators reviewing the draft law.
The PLA should be banned from business for profit and military expenditure should be guaranteed by the government to make the armed forces concentrate on protecting state security, Xinhua quoted lawmaker Huang Yuzhang as saying.
Huang had also called for a commitment by China not to threaten the security of other nations to be added to the law to illustrate Beijing's policy of ""active defence"", it said.
Concerns that growing military power could herald future expansionism have risen among China's regional neighbours in recent years, as Beijing has moved to upgrade military technology and boost its power at sea and in the air.
China, which has in past decades fought fierce wars across several of its borders, says such fears are entirely unfounded.
The state should provide sufficient funds for the research and development of military technology and for more technicians to translate progress into combat power, Xinhua quoted PLA parliamentary deputy Cheng Shouliang as saying on Friday.
",34
"China's top prosecutors have vowed to crack down on corruption among the ranks of leading officials in the government and ruling Communist Party, state media said on Tuesday.
The call for tougher action to curb growing official graft came as senior leaders considered whether to punish scandal-hit former Beijing Party boss Chen Xitong for dereliction of duty.
In the first 11 months of 1996, Chinese procurators had begun action in 77,611 cases of corruption, bribery and economic crime and had dealt with 33,879 cases, up 9.4 percent compared with the same period of 1995, the China News Service said.
""China's legal organs will make more efforts to deal with major embezzlement and bribery cases involving officials next year,"" the official Xinhua news agency quoted Deputy Procurator General Liang Guoqing as telling a conference in Beijing.
Prosecutors would focus on major corruption cases involving leading officials in the ruling Communist Party, government and law enforcement agencies, Liang said.
The number of graft cases involving more than 10,000 yuan ($1,200) was growing fast, said the China News Service.
On Monday, a top Beijing official said China's party leadership was considering whether to have disgraced capital party boss Chen Xitong charged for dereliction of duty.
""Viewing the situation from the case of Wang Baosen, he (Chen) can't escape dereliction of duty,"" Beijing Vice-Mayor Zhang Baifa told reporters in a reference to a former Beijing vice-mayor who committed suicide last year after coming under investigation for corruption.
Investigators had uncovered no evidence to show that Chen, one of China's most influential men until he fell from power in the corruption scandal, was guilty of more serious wrongdoing.
Beijing has repeatedly launched crackdowns on graft, which senior leaders have called a cancer that threatens the Communist Party's grip on power, but many Chinese say enforcement of anti-corruption measures at senior levels is patchy at best.
""Procuratorial agencies at all levels should at all times make dealing with major cases, especially those involving crimes by leading officials, the key point in pushing the deepening of the war on corruption,"" the Xinhua Daily Telegraph said.
Anti-graft vigilance would be essential in 1997, a key year for China's economic reforms, it quoted procurator Liang as telling the five-day conference of prosecutors in the capital.
Construction officials have said that as much as 10 percent of the cost of new buildings can disappear into the pockets of contractors. Pharmaceutical salesmen say many doctors are only willing to prescribe drugs if they are paid to do so.
Public perceptions of endemic graft have pushed Beijing to seek new ways to stiffen flagging moral and fiscal rectitude among officials, who have seen their formal salaries trail far behind the incomes of entrepreneurs and private sector workers.
From January 1 next year the Ministry of Public Security would for the first time begin requiring China's police to swear an oath of loyalty, discipline and honesty, Xinhua said.
""This... is a way of getting police to show respect for the responsibility they bear,"" the agency said.
The oath would include pledges of loyalty first to the Communist Party, then to the people and the law.
Officers would also vow to be honest.
",34
"A Burmese minister has urged Tokyo to release a multi-billion yen loan suspended after the bloody suppression of Burma's democracy movement, but Japanese officials said curbs on lending were still in force.
Planning and development minister Brigadier General David Abel called on Japan to restart support for the upgrading of Rangoon's airport that was suspended in 1988 after the military bloodily crushed a pro-democracy uprising.
Speaking after a conference on regional cooperation held in China's southwestern Kunming city, Abel told reporters Japan's Overseas Economic Cooperation Fund (OECF) had itself proposed restarting the loan, worth over 20 billion yen ($185 million).
""We have signed an agreement with the OECF for them to continue the loan,"" Abel said on Saturday. ""They proposed it, so they should agree it.""
Some Japanese officials have long hoped to step up financial assistance to Burma, one of southeast Asia's poorest nations, but OECF officials said on Saturday that curbs on lending to the nation's ruling military junta remained in force.
""This (loan) was stopped due to the political situation in Burma in 1988,"" said Kenzi Yoshida of the OECF's operations department.
""The situation remains the same, it remains suspended,"" Yoshida said, adding that under government guidelines the state-backed fund had banned all new loans to Rangoon.
Differences of opinion over how to deal with Burma formed an unspoken backdrop to the Kunming meeting of ministers from the Mekong River region, which ended on Friday.
Ministers from six nations -- Burma, China, Cambodia, Laos, Thailand and Vietnam -- attended the conference but the meeting was backed by Asian Development Bank, which is funded and managed partly by western nations.
The leader of Burma's democratic opposition, Aung San Suu Kyi, is spearheading a campaign for sanctions to heap pressure on the ruling State Law and Order Restoration Council (SLORC) -- raising pressures in the west for economic action against the military rulers.
Western anger at the SLORC was fuelled in May when it detained more than 260 members of Suu Kyi's National League for Democracy (NLD) and in June following the death in a Rangoon jail of Danish honorary consul James Nichols.
A number of major Western firms have in recent months cut or scaled back investment in Burma following intense lobbying by activists protesting against its human rights record.
Burma's neighbours in the seven-country Association of Southeast Asian Nations have rejected calls for sanctions, favouring instead a policy of ""constructive engagement"" toward Rangoon.
Japan had last year considered resuming yen loans to Burma following the release of Nobel Peace prize Laureate Suu Kyi from almost six years of house arrest and suggestions that Rangoon would begin paying its debt arrears, Yoshida said.
Such ideas were shelved when suppression of the democracy movement continued and the arrears were not paid, he said.
""Both things have to be resolved,"" he said, adding Japan remained involved in only a few small-scale projects in Burma's electricity generation and transmission sectors.
",34
"Former U.S. president George Bush called on Thursday for an end to U.S. trade threats against China, saying more dialogue was needed between Washington and Beijing to mend cross-Pacific ties.
The United States should give China permanent Most Favoured Nation (MFN) trade status to end the annual diplomatic battle over its renewal, Bush said in a speech at a seminar in Beijing.
""I am very concerned about the rancour that sometimes rears its head these days,"" he said. ""There is too much China-bashing in the United States of America.""
Some members of the U.S. Congress had little understanding of China and how to deal with Beijing, Bush said.
""Threatening China does not work,"" he said. ""It might be good domestic politics in some quarters of the United States, but it does not bring about change, and it ought to stop.""
Relations between Washington and Beijing have been badly strained this year by disputes over trade, copyright theft, nuclear proliferation and Taiwan.
Washington needs a strategic dialogue with Beijing to iron out differences before they become major disputes and to help stabilise a bilateral relationship that was of unsurpassed importance, Bush said.
""We can start by granting permanent, unconditional MFN for China,"" he told the Chinese and U.S. businessmen and officials in a speech salted with nostalgic references to his experiences as a diplomat in Beijing during the 1970s.
MFN give favourable tariff treatment to Chinese goods imported into the U.S.
Sino-U.S. ties chilled in March when Chinese missile tests off the coast of rival Taiwan led Washigton to send two aircraft carrier battle groups into the area in a show of force.
In June, the two sides narrowly averted a multi-billion dollar trade war over intellectual property theft in China, while alleged sales of Chinese nuclear technology to Pakistan and Beijing's fat U.S. trade surplus have also strained ties.
Both sides say relations have warmed in the last few months but Bush said more was needed, advising Beijing to value the contribution of U.S. businessmen in China -- a group that has long campaigned for better ties and permanent MFN.
""American business is China's best ally in reducing the misunderstanding and suspicions that cloud our relationship from time to time,"" Bush said.
",34
"Chinese authorities have closed down 12 illegal compact disc production lines in just two weeks, but Beijing still has far to go to conquer the nation's army of copyright pirates, officials and analysts said on Thursday.
Tough action to curb theft of intellectual property rights had netted more than 10 million counterfeit products in 1996 and had won recognition even in Washington, which in June took China to the brink of trade war over the issue, officials said.
Officials in booming southern Guangdong province had shut down 12 music and video disc production lines since December 10 as part of a national crackdown on pornography and piracy, said Wang Ziqiang of the National Copyright Administration of China.
""We have uncovered quite a few pirate production lines... Guangdong province has taken very effective steps,"" Wang told Reuters in an interview.
The crackdown on pirates and pornographers had had clear successes, the Overseas Edition of the People's Daily quoted Minister of Culture Liu Zhongde as saying.
""This year...we have seized more than 10 million illegal audio-visual products and dealt with 6,912 illegal work units,"" Liu said, adding that Beijing had also strengthened the market in legitimate audio-visual products.
U.S. officials said this week that there were indications that China was doing a better job of enforcing the Sino-U.S. copyright accord that averted a trade war in June, with plant closures and tougher controls on imports of illegal equipment.
Washington has long accused Beijing of doing too little to curb the lucrative pirating of U.S. intellectual property rights. Beijing says it has moved faster than any other developing nation to clamp down on the underground industry.
While China was moving in the right direction on intellectual property, the efforts of the last year appeared to have had little lasting effect on the roaring retail market in pirated goods, said one Western industry consultant.
Blockbuster Hollywood movies were readily available on pirated video discs for as little 20-30 yuan ($2.40-3.60) per film despite the high-profile national crackdown, said the consultant, who declined to be named.
""There are lots of places to buy discs,"" he said. ""They are periodically raided, but afterwards the show goes on.
Pirate producers often had connections with local officials, making anything more than a cosmetic crackdown a potential battle of political wills between the central government and increasingly autonomous local authorities, he said.
Copyright official Wang said piracy was a problem found in most countries and was not something that could be eliminated by just a few years of tough action.
""The key point is the government's attitude to the problem,"" Wang said, adding that U.S. attitudes to China's copyright problems were far from even-handed.
""The (copyright) situation in some other countries is worse than here, but I don't think the United States is as strict with them,"" he said.
Officials have said Beijing plans to launch video rental counters in post offices as a way of curbing private rental shops that often offer cut-price pirate videos for hire.
($1=8.3 yuan)
",34
"China and the United States signed a new textile agreement on Sunday in an eleventh-hour deal that ended the threat of a cross-Pacific trade war and was hailed by both sides as a breakthrough.
U.S. officials said their main achievement was gaining assured access for the first time to Chinese textile markets, adding that it also granted China a U.S. import quota slightly larger than the previous 1994 textile pact.
Millions of dollars in penalties slapped by Washington on Chinese imports remained in force under the deal, although Beijing had agreed to withdraw its threat of retaliation, top U.S. textile negotiator Rita Hayes said after the signing.
""For the first time the United States has market access with China...and this is something we felt very strongly about,"" Hayes told reporters. ""It is now a situation that we have a level playing field.""
The four-year textile accord was signed by Hayes and Li Dongsheng, China's chief negotiator and director of the trade management department of the Ministry of Foreign Trade and Economic Cooperation.
Officials of both sides welcomed the deal, which was hammered out during negotiations that ran far beyond their original three-day schedule to become a gruelling six-day marathon topped by all-night sessions.
""After six days of hard work, the delegations have reached a rather ideal conclusion,"" said Chinese Foreign Trade Minister Wu Yi, who attended the signing ceremony.
Officials of both sides declined to give details of the accord, but Hayes said it would create U.S. jobs by allowing exports while slightly increasing China's U.S. import quota.
The talks focused on renewal of the 1994 textile accord and resolution of a dispute over U.S. penalties on Chinese exports, with market access for U.S. goods to China also a major stumbling block, officials said.
Breakthrough came during a one-day extension to the final deadline for renewal of the Sino-U.S. accord, which had originally been scheduled to expire on Dec. 31 but was extended by one month to allow time to reach a compromise.
""I think this morning at the beginning we were unhappy with each other, but now we have become friends,"" U.S. negotiator Li told Hayes during the signing of the accord.
The accord ended the threat of a Sino-U.S. trade war, which had loomed after Washington slapped $19 million in penalties on Chinese imports last September, accusing Beijing of shipping textiles through third countries to evade quota restrictions.
China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but delayed the action to allow time for further talks.
After the signing of the textile accord, Beijing announced it was calling off its retaliatory measures, but U.S. negotiator Hayes said Washington's penalties remained in force.
""The transshipment charges that were made in September still stand as they did,"" she said without elaborating.
Access to China's huge and growing markets was also an issue in other Sino-U.S. meetings in Beijing last week.
U.S. trade official Lee Sands held two days of talks in the Chinese capital to discuss China's delayed accession to the World Trade Organisation, long a source of bilateral friction.
""The agreement is once again proof that China and the United States can settle their trade disputes through negotiations based on equality and mutual benefits,"" said negotiator Li.
",34
"China showered the World Trade Organisation (WTO) with bouquets and blame on Tuesday, saying the body Beijing has long sought to join was important, but that it neglected poorer nations.
A meeting of the WTO's 128 member states in Singapore this month had taken a lopsided approach to differing international needs, said Foreign Ministry spokesman Shen Guofang.
""This meeting finally reached a common understanding, but at the same time we should realise that the result of this meeting was not balanced enough,"" Shen told a news briefing.
""It mostly reflected the relations and interests of the developed countries,"" he said.
Shen's comments came after the official China Daily newspaper published a front page report that suggested that after years of frustrated efforts to gain entry to the WTO, Beijing's enthusiasm was fading.
""Accession or not, China has become indifferent and doesn't care any more,"" it quoted Wu Jiahuang, director general of the customs administration's tariffs department, as saying.
Wu compared China's decade-long bid for entry to the General Agreement on Tariffs and Trade (GATT) and current attempts to join the WTO that succeeded it to a ""sunken boat"" and an ""ailing tree"", the newspaper said.
Western diplomats said Wu's comments were more a reflection of differing internal views on the importance of the global economy than a signal of a shift from Beijing's oft-stated desire for a seat in the world trade club.
Asked about the China Daily report, Shen said it did not necessarily reflect Beijing's formal position.
""We still feel the World Trade Organisation is a very important international organisation, although of course if China is not taking part then we should say it is incomplete,"" he said.
Beijing seeks to join the WTO on the favourable terms accorded to developing countries. But some members -- with the United States the most vocal -- argue that China's economy is too powerful to be given such treatment.
Beijing says it must be allowed a relatively long transition period to prepare key industries for the fierce foreign competition they would face under the WTO's freer trade rules.
China's leadership had concluded that negotiations with WTO members on its entry terms were politically tainted, Wu said.
The high-profile publication of Wu's downbeat views on WTO accession could be aimed at signalling that China was in no hurry to make concessions on terms, but was more likely an expression of internal differences, said one Western diplomat.
""They have their different interest groups in China, just as we have,"" he said. ""There are those who are charged with administering the tariffs and taking in the receipts and those who have a longer-term perspective on the whole thing.
""It doesn't change the basic fact that those who are charged with representing China in this matter do give us a different impression,"" he said.
Assistant Minister of Foreign Trade and Economic Cooperation An Min was quoted on the inside pages of the China Daily as saying early entry could boost investment.
""Optimistically speaking, the problem could be solved next year,"" An said.
",34
"China's war on destitution has been filling the pages of the state-controlled media, but the nation has little chance of meeting its target of wiping out absolute poverty by 2000, analysts said on Wednesday.
A week of banner headlines and front-page stories trumpeting the anti-poverty resolve of China's communist leadership reflected more the political importance of impoverished regions than real confidence targets could be achieved, they said.
Bringing new wealth to the 65 million Chinese struggling to survive with annual incomes below the 530 yuan ($64) official absolute poverty line was a vital state goal, state media said.
""We know that it's not particularly realistic. You can't just wave a wand and suddenly all these people just disappear,"" said a Western diplomat who specialises in poverty issues.
""They have had really good progress in the last five years but they haven't reached those targets -- and there doesn't seem to be a great deal of momentum built up to be able to meet those targets,"" the diplomat said.
State newspapers have packed their pages this week with months-old speeches and state resolutions, mixed with more recent reports of regional successes in easing the scourge of poverty in the nation's villages.
""Before the 21st century arrives, China will eliminate absolute poverty... The Chinese Communist Party will lead the people of the whole nation to cast off the stigma of destitution,"" said the Xinhua Daily Telegraph.
But in a commentary that accompanied the text of an October resolution on poverty, the official newspaper also appeared to reflect concern that high profile goals could be hard to meet.
China had been able to lift only an average of five million people a year from poverty over the last three years, less than half the targeted level, it said.
""If the pace of poverty alleviation in poor areas is not accelerated, that will mean the problem of feeding and sheltering around 40 million poor people will be carried into the next century,"" it said.
Even if all Chinese could be assured an annual income above the official absolute poverty line, the gap between China's urban haves and rural have-nots would linger for many years, said a Chinese agricultural development analyst.
""There is a lot of work to be done,"" he said, adding that poverty remained an issue in the areas around some of China's most prosperous eastern and coastal cities.
""Even in Beijing suburbs there are mountainous areas where the average income is still low,"" he said. ""They are not poor by national standards but they are still far behind (urban residents).""
The Western diplomat said one reason for the high profile accorded to anti-poverty pledges by senior leaders such as President Jiang Zemin and Premier Li Peng was the need to placate local leaders in more backward regions.
China's inland provinces have long complained they are being left behind by booming coastal regions, prompting promises of a westward shift in investment to help them to catch up.
""On the political level I think (the publicity) is closely related to the issue of building up the western and central provinces,"" the diplomat said.
It was unclear what the political results of failure to reach the targets would be, she said.
",34
"A sprawling new copper production group in China's southwestern Yunnan province is planning to boost minerals output in the nation's ""kingdom of non-ferrous metals"", senior company officials said on Friday.
Yunnan Copper Industry (Group) Co, which opened for business this month after the merger of Yunnan's biggest copper mines, bureaux and a major smelter, had mapped out a five-year plan to increase production, said general manager Zhou Paixiang.
Metals officials had ordered the group's creation to boost efficiency and make metals exploitation a bulwark of the economy in Yunnan, one of China's poorest provinces, group president Zou Shaolu told Reuters.
""Minerals resources are very rich here,"" Zou said in an interview. ""This is the 'kingdom of non-ferrous metals'.""
Output of electrolytic copper would be raised to 150,000 tonnes a year by 2000, increasing from 90,000 tonnes last year, said Zhou, the general manager.
The group's mines would wrest about 60,000 tonnes of copper ore a year from Yunnan's mountains, up from 45,000 tonnes, he said.
""Formation of the group will improve distribution of resources and personnel and bring the strengths of the companies into play,"" said Zou, the president. ""We have to find ways to raise productivity, together we are stronger.""
The shortfall between mine output and demand at its smelters would be made up by buying on the domestic and international markets, Zou said.
Copper imports for the smelters were expected to reach an annual 50,000 tonnes or more by 2000, he said. The Yunnan group already accounted for about one-ninth of China's copper output, he added.
Managers said copper would remain the core business of the sprawling group, which also mines minerals such as gold, silver and zinc and makes consumer goods ranging from traditional furniture to soft drinks.
The group's 3.14 billion yuan ($378 million) assets included hundreds of subsidiary companies, with only about one-half of its 34,000 employees involved in copper production.
The group would try to progressively spin off many of its ventures and would also move to reduce the heavy burden of its welfare commitments, Zhou said, adding that medical costs for its employees were a major expense.
The group's diversity helps protect against price fluctuations in the copper market, he said.
Copper prices slumped after the disclosure of huge trading losses by Japanese trading giant Sumitomo Corp, though they have since recovered some of the lost ground.
The Yunnan group planned to raise gold production to five tonnes a year in 2000 from three tonnes currently, boost silver output to 150 tonnes from 100 tonnes, zinc to 20,000 from about 10,000 tonnes and sulfuric acid to 300,000 tonnes from about 200,000 tonnes, managers said.
Shortages of capital were a major difficulty and the group was in talks with foreign companies to create possible joint venture projects, Zhou said.
""We have made some connections with foreign firms but so far we have no fixed plans,"" he said without giving further details.
",34
"China and the United States signed a new textile agreement on Sunday in an eleventh-hour deal that narrowly averted a multi-million dollar cross-Pacific trade war and was hailed by both sides as a breakthrough.
""China has the largest share of the U.S. market and we now have a share of the China market,"" top U.S. textile negotiator Rita Hayes said after the signing ceremony.
The fifth Sino-U.S. textile accord was signed by Hayes and Li Dongsheng, China's chief negotiator and director of the trade management department of China's Ministry of Foreign Trade and Economic Cooperation, and welcomed by officials of both sides.
""After six days of hard work, the delegations have reached a rather ideal conclusion,"" China's Foreign Trade Minister Wu Yi said.
The marathon talks that included at least two all-night sessions and dragged right through Saturday night had focused on renewal of the 1994 textile accord and resolution of a dispute over U.S. penalties on Chinese textile exports.
Market access for U.S. goods to China had been a major stumbling block.
Breakthrough came during a one-day extension of a January 31 deadline for multi-million dollar penalties on China's exports, and it was clear disaster was only averted at the eleventh hour.
""I think this morning at the beginning we were unhappy with each other but now we have become friends,"" Li told Hayes before the signing.
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise.
""This agreement eloquently demonstrates the common interests of the United States and China in developing trade and economic relations,"" state television quoted Li as saying.
Neither side gave details of the terms.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions. China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but delayed such action to allow time for further talks.
Hayes had said issues at the forefront in the final rounds of talks were two major demands -- the U.S. market access package and a level playing field for the textile industry.
""The agreement was a good start to 1997 for cross-Pacific relations,"" said U.S. embassy charge d'affaires William McCahill. ""This is a year of opportunity for Sino-U.S. relations.""
""(The deal) augurs very, very well for the year and the years ahead,"" he said.
Washington could have made significant cuts to China's textile quotas if agreement had not been reached.
Market access was an issue in other U.S.-China meetings in Beijing last week.
U.S. trade official Lee Sands held two days of talks in Beijing last week to discuss China's long-delayed accession to the World Trade Organisation, a source of bilateral friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
However, Chinese officials seemed pleased with the textile deal.
""The agreement is once again proof that China and the United States can settle their trade disputes through negotiations based on equality and mutual benefits, thus creating a stable environment for the long-term development of bilateral economic and trade ties,"" Li said.
",34
"Chinese President Jiang Zemin on Wednesday greeted future Hong Kong leader Tung Chee-hwa with a pledge of support and a vow not to tread on Hong Kong's right to autonomy after the British colony returns to Beijing rule.
The appointment of the tycoon who will lead Hong Kong from July 1 next year marked the dawn of new age, Jiang told reporters during a meeting with Tung in Beijing's Great Hall of the People.
""Of course, I will support him,"" Jiang told reporters. ""This is indeed the start of a new era.""
Tung, a shipping magnate who will become Hong Kong's first Chinese chief executive after more than 150 years of colonial rule by London, was in Beijing to meet leaders after his formal appointment on Monday by Premier Li Peng.
Jiang assured Tung that Beijing would stand by the terms of its Basic Law, which gives the territory a large degree of autonomy as a Special Administrative Region of China, the official Xinhua news agency said.
""In dealing with the question of Hong Kong we will strictly act in accordance with the Basic Law, and will never interfere in affairs belonging to the scope of autonomy of the Special Administrative Region,"" Xinhua quoted Jiang as saying.
Tung's first visit to Beijing since his appointment is being closely watched by Hong Kong residents keen to know more about his plans for the post-colonial adminstration and to learn whether current senior civil servants will keep their jobs.
Tung, who has urged Hong Kong's people to be sensitive to China's sovereign rights, has yet to give details of his plans for the post-colonial administration but has said he will discuss transition issues during the visit.
While China has said it will leave Hong Kong's free-wheeling capitalist system intact, it has made clear that the territory's leader's authority will have limits.
One of Tung's first tasks in the twilight of British rule will be to put together an advisory cabinet called the Executive Council and to decide which senior civil servants to keep -- a subject of much speculation among Hong Kong's boisterous media.
While interest has focused on Tung's intentions for current senior administrators, China said on Tuesday that it would make the final decision on important civil servants.
""For senior officials, they need the nomination of the top administrative official and to finally obtain appointment by the central government,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
Jiang, who in January signalled that the tycoon was China's favourite for chief executive by singling him out for a warm handshake at a reception, said China would stand by to assist if the tycoon ran into problems.
""If the chief executive needs help from the central government when he meets with difficulties, the central government will be bound to render full support,"" he said.
China has hailed Tung's appointment as the fruit of its principle of Hong Kong autonomy, but the selection process was dogged by protests from democrats who accuse Beijing of using a hand-picked committee to stage-manage the choice.
Beijing's critics believe it is likely try to control Hong Kong and its 6.3 million people from behind the scenes after the five-star Chinese flag is raised over the territory.
",34
"China and the United States reached agreement on Sunday to extend a deal on textiles, averting a multi-billion dollar trade war, an official with China's Ministry of Foreign Trade and Economic Cooperation said.
""The two sides will be signing the agreement in a ceremony shortly,"" the official said by telephone.
The eleventh-hour agreement followed marathon all-night talks between U.S. chief textile negotiator Rita Hayes and a team of Chinese officials on renewal of a 1994 textile accord and resolution of a dispute over U.S. penalties on Chinese textile exports.
Hayes had said on Saturday she was confident of accord in last-ditch talks after extending by a day a January 31 deadline for multi-million dollar penalties on China's exports.
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Hayes said earlier issues at the forefront in the final rounds of talks were two major demands -- the U.S. market access package and a level playing field for the textile industry.
Disagreement over market access in China appeared to be a major stumbling block, industry representatives said earlier.
Washington could have made significant cuts to China's textile quotas if an agreement had not been reached before the deadline.
Washington and Beijing were also seeking to ease tensions in the dispute over Chinese exports of textiles via third countries.
",34
"U.S. Secretary of State Madeleine Albright is to visit China in late February in a trip aimed at further improving ties that have warmed rapidly in recent months, the Foreign Ministry said on Thursday.
""China places great importance on this visit,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
Albright would hold talks with Chinese Foreign Minister Qian Qichen and a wide range of issues was expected to be discussed, Shen said.
Albright's first visit as Secretary of State comes at a time when relations between China and the United States are warming swiftly, with U.S. Vice President Al Gore reported to be preparing to visit Beijing in late March.
U.S. President Bill Clinton met China's President Jiang Zemin at the Asia-Pacific Economic Cooperation forum in Manila last November and the two agreed on an exchange of presidential visits, the first since early 1989.
""A major topic of the meeting of the two foreign ministers will be how to push forward relations on the basis of the presidential meeting,"" Shen said of Albright's visit.
Former U.S. Secretary of State Warren Christopher came to China last November on a fence-mending visit that both sides hailed as a major step in repairing ties ravaged by disputes for well over a year.
The announcement of Albright's China trip coincides with a flurry of visits by U.S. officials to Beijing.
A U.S. human rights team led by Sandra Kristoff, the National Security Council's chief Asia expert, and including Peter Eicher, director of the State Department's Bureau of Democracy, Human Rights and Labour, was to conclude two days of talks in Beijing on Thursday.
The U.S. team was in China on the eve of the release of Washington's annual worldwide human rights report that once again slams Beijing's record.
This year's report says that by the end of 1996 there were almost no active dissidents left in China who had not been jailed or exiled.
Officials said the team would seek concessions from Beijing on human rights that could make it unnecessary this year for Washington to co-sponsor a United Nations resolution critical of China's policy.
Albright has vowed to confront Beijing on its human rights record, trade issues and weapon sales abroad -- all thorns in Sino-U.S. ties -- but says relations between the two Pacific giants cannot be held hostage to any one issue.
China on Wednesday told Clinton not to worry about Chinese human rights and Hong Kong's future freedoms, saying Beijing's rights record spoke for itself and liberty in the British colony was assured.
Clinton said on Tuesday that Washington had made less progress than hoped in influencing Chinese rights policies and warned that Hong Kong's value to China might fall if liberties in the colony were lost after it returns to Beijing rule.
Senior U.S. trade official Lee Sands began talks in Beijing on Thursday to discuss China's delayed accession to the World Trade Organisation, long a source of cross-Pacific friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
Top U.S. textile negotiator Rita Hayes was also in Beijing for talks to hammer out a new textile accord with negotiations seen extending right up to a Friday deadline for agreement.
",34
"China and the United States made progress on Thursday in talks on a new textile accord but negotiations could stretch late into the night on the last day before a deadline for agreement, a U.S. trade official said.
""We hope to complete the talks tonight,"" chief negotiator Rita Hayes said after talks on Thursday morning with officials at China's Ministry of Foreign Trade and Economic Cooperation.
Progress had been made on market access, she said.
However, the two sides still had a long way to go on the third day of talks to renew a 1994 textile accord and resolve a dispute over U.S. penalties on Chinese exports, she said.
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the January 31 deadline, Hayes said.
""We still have a lot of issues, so that means a lot of work today, probably late into the night,"" she said. ""We are not going to give China another extension because we have already given them another month.""
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries, The United States has threatened multi-million dollar penalties and raised the spectre of a cross-Pacific trade war over the issue.
""I am always optimistic and I am in hopes that we will complete the round today... but that is something both sides have to work very hard on,"" Hayes said.
If an agreement was not reached in time, past practice showed that the United States could cut China's textile import quota significantly until a deal was struck, she said.
""I am in hopes that it won't come to that, China doesn't want it to come to that -- and certainly the States doesn't,"" she said.
In Washington, acting U.S. Trade Representative Charlene Barshefsky said on Wednesday the talks were proceeding fairly well.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Textiles are just one of a range of issues dogging a Sino-U.S. relationship that has long been strained by disputes over topics ranging from trade to human rights to Taiwan.
A U.S. delegation arrived in Beijing on Tuesday for talks on human rights with Chinese officials, after a year in which almost all remaining members of the nation's tiny pro-democracy movement have been either imprisoned or driven into exile.
U.S. trade official Lee Sands began talks in Beijing on Thursday to discuss China's delayed accession to the World Trade Organisation (WTO), long a source of cross-Pacific friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
Hayes said a key U.S. requirement was further opening of China's protected markets. ""What we are asking China for is upfront market access, before they join the WTO. We are still working out those differences.""
",34
"U.S. and Chinese officials have made a productive start to textile trade talks that are the last chance to hammer out a deal before a Friday deadline, top U.S. textile negotiator Rita Hayes said on Tuesday.
Hayes met Chinese trade officials on Tuesday for the first of a scheduled three days of talks aimed at extending a bilateral textile accord and resolving a dispute involving United States penalties on imports of Chinese textiles.
""Very productive morning,"" she said, adding that much remained to be done. ""We still have lots of issues to resolve.""
The 1994 Sino-U.S. textile accord had been scheduled to expire on December 31 last year but was extended by one month to allow the two sides to hammer out their differences on renewal.
Disagreement over textiles was not likely to lead to a cross-Pacific trade war but the Friday deadline would not be changed, Hayes said earlier.
""The deadline is January 31 and there are no more extensions, so we have to reach agreement,"" she told reporters before beginning negotiations at China's Ministry of Foreign Trade and Economic Cooperation.
""We are in hopes that the consultations will continue the mood that they had in the previous consultations and that is that both sides are trying to get an agreement,"" she said.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
The two sides failed to reach agreement on the issue in talks in the United States last month. Washington said then it would re-examine its decision to reduce quotas for Chinese textile imports.
China's textile sales to the United States have long been a sensitive point for U.S. trade negotiators eager to reduce Washington's swelling trade deficit.
Sino-U.S. ties have been strained by disputes over issues ranging from trade to Taiwan to human rights, but both sides say tensions have eased in recent months.
U.S. trade official Lee Sands was due in Beijing on Tuesday for meetings with Chinese officials that were expected to focus on China's long-delayed entry to the World Trade Organisation.
",34
"Hong Kong's leader-designate Tung Chee-hwa said on Thursday a series of meetings with China's top communist leaders had boosted his confidence in the future of the British colony under Chinese sovereignty next year.
Shipping magnate Tung also said he could foresee no problems in the territory that would require Beijing's help after the territory returned to China at midnight on June 30, 1997.
""At the moment I can see no problems that would require the special help of the central government,"" Tung told a news conference a day after Chinese President Jiang Zemin assured him of Beijing's full support after he takes office.
If such a situation were to arise, Tung said he would immediately ask for assistance from Beijing.
Jiang on Wednesday greeted Tung with a pledge of support and a vow not to tread on Hong Kong's right to autonomy after 150 years of British colonial rule come to an end.
The appointment of the tycoon turned chief executive designate to lead Hong Kong from July 1 next year marked the dawn of a new age, Jiang said.
Tung said he would return home with greater confidence in Hong Kong's future after his meetings in Beijing with Jiang and Premier Li Peng that set the communist seal of approval on his selection as Hong Kong's first leader of the post-colonial era.
China's leaders all stressed their sincerity in granting Hong Kong a high degree of autonomy under the principle of ""one country, two systems"", Tung said, referring to Beijing's pledge not to meddle with Hong Kong's capitalist system for 50 years.
""That gave me even more confidence in Hong Kong's future,"" he said.
Asked about the rank he expected to be accorded in China's communist or state bureaucracy, Tung stressed the unique position Hong Kong would hold after its return to China.
""I think I will not be ranked with anybody else because we are a special sitution,"" he said. ""We are going to exercise a high degree of autonomy.""
However, he urged Hong Kong's 6.3 million people to face the fact of China's decision to disband the territory's existing elected legislature after the handover and to replace it with its own appointed provisional body.
""The best way to minimise conflict is to recognise the reality of the provisional legislature,"" Tung said when asked how he would deal with potential conflicts caused by the existence of a Hong Kong-elected legislature as well as a Beijing-approved body in the run-up to the handover.
""There is a need for the provisional legislature to start meeting before July 1 because there is work that needs to be done in order to avoid a legal vacuum,"" he said.
Tung's first visit to Beijing since his appointment is being closely watched by Hong Kong residents keen to know more about his plans for the first post-colonial adminstration and to learn whether current senior civil servants will keep their jobs.
On the issue of civil servant appointments, Tung said this would be among his first duties when he returned, but gave no hint of his position or intentions.
""I do things rather methodically, step by step, and I will do that on this issue as well,"" he said.
Tung, who has warned Hong Kong's people to be sensitive to China's sovereign rights, has yet to give details of his plans for the post-colonial administration.
While China has said it will leave Hong Kong's free-wheeling capitalist system intact after the handover, it has made clear that the authoritiy of the territory's leader will have limits.
",34
"Hainan Airlines plans to buy 10 airliners from Boeing Corp in the next two years in a major fleet expansion to be funded by bonds, loans and China's first public airline share issue, company officials said.
The regional airline, which is based in the southern tropical island province of Hainan, had already agreed on a basic contract with the U.S. planemaker for four 737-400s and three 737-800s, said airline chairman and president Chen Feng.
Hainan Airlines was also waiting for approval from China's aviation authorities to buy three Boeing 767 aircraft for around $60-70 million each, Chen told Reuters in an interview in the provincial capital, Haikou.
Delivery of both the Boeing 737s and 767s was expected to begin in 1998, when Hainan Airlines also planned to bring into operation seven new Metro 23 light aircraft from U.S. manufacturer Fairchild Aircraft Inc, company officials said.
""Next year we plan to take about 20 aircraft,"" Chen said. ""It's big money... minimum $600 million.""
The airline, which currently operates nine Boeing 737s and a handful of turboprops and executive jets, would take out options on a further three 737-800s, said chief economist Li Bing.
""We have hired a lot of new pilots,"" Li said.
Part of the cost of the new aircraft would be covered by the airline's planned issue of about 80 million foreign currency B shares to be listed on the Shanghai bourse in the first quarter of this year, company officials said.
The issue, originally scheduled for last year, is expected to make Hainan the first airline to list publicly on one of China's two domestic exchanges.
The airline hoped to list two million domestic currency A shares in Shanghai shortly after issuing the dollar-denominated B shares, raising at least $30 million, Chen said.
""The money we get for the shares we will certainly use for fleet expansion,"" said economist Li, adding that proceeds would also be directed toward training and recruitment and would be far from enough to cover major aircraft purchases.
The airline planned to issue $300 million in bonds in the United States to help to finance fleet expansion and expected financial support from the U.S. Export-Import Bank, said Chen.
Li said the airline, which is 25 percent owned by American Aviation Investment, a fund partially controlled by U.S. financier George Soros, was waiting for approval from China's aviation authorities before signing the 737 deal.
Company officials said the turbulent diplomatic relationship between Washington and Beijing could sometimes make buying U.S. jets a sensitive political issue, but such considerations were not expected to delay approval of the 737 deal.
Sino-U.S. ties have warmed sharply in recent months, bolstered by high-level contacts and a January visit by U.S. congressmen that U.S. diplomats said helped to hasten the sale this month of two Boeing 747s to flagship carrier Air China.
That deal was followed on Monday by Boeing's announcement of a $68 million order for two 737s from China's Yunnan Airlines.
Hainan Airlines officials said they had seriously considered buying from Boeing's European arch-rival Airbus Industrie but had been put off by the training and technical costs of a switch from the U.S. manufacturer.
",34
"China on Tuesday slammed Washington for pursuing a policy of ""human rights diplomacy"" that was sabotaging Sino-U.S. ties and cultivating mistrust.
The China Daily newspaper said there were currently no prospects of a breakthrough in long-running disputes over China's human rights record that were hampering relations.
""U.S. human rights diplomacy is sabotaging the foundation of normal cooperation between the two countries and is cultivating mistrust,"" the English-language newspaper said in a signed commentary.
""Such U.S. human rights diplomacy has impeded Sino-U.S. ties.""
It said sensationalised human rights issues such as reports of repression in Tibet, the abuse of orphans and sales of organs from condemned prisoners had been used by Washington, which was following a policy of ""containment"" against Beijing.
""Out of self interest, the United States began to exploit human rights issues and contain China,"" it said. ""To defile China, the United States has not stopped publicly attacking China's human rights record.""
Washington rejects any suggestion it is pursuing a policy of containment of China, saying economic and political engagement with Beijing is the best way to push for protection of human rights.
Sino-U.S. differences over Beijing's treatment of political detainees and separatists in its restive Tibetan and northwestern Xinjiang regions have been overshadowed this year by disputes over trade, copyright piracy and Taiwan.
In June, the two sides narrowly averted a multi-billion dollar trade war over intellectual property theft in China.
Chinese missile tests off the coast of Beijing's arch-rival Taiwan in March prompted Washington to send two aircraft carrier battle groups to monitor the region.
Alleged sales of Chinese nuclear technology to Pakistan and Beijing's big trade surplus with the United States have also strained ties.
Both sides hailed a July visit to Beijing by U.S. national security adviser Anthony Lake as having warmed relations and increased mutual trust, but analysts say ties between the two Pacific powers are unlikely to remain smooth for long.
This year's U.S. presidential election would probably make the White House's policies toward China more ambiguous, the China Daily said.
""Sino-U.S. relations will likely be characterised by conjecture and sounding each other out -- encouraging distrust,"" it said.
",34
"China's move at the weekend to make the yuan convertible under the current account is cause for celebration among traders and businessmen, but Beijing's goal of full convertibility is still far off, analysts said on Monday.
News that the yuan had been made convertible under the current account from Sunday was little more than the final seal on a long process of currency liberalisation, but would be welcomed by traders and investors alike, they said.
""This announcement is more symbolic than substantial... because foreign and domestic investors have had easy access to swap centres and foreign exchange banks,"" said one investment analyst in Shanghai who declined to be identified.
The formalisation of increased convertibility was welcome and was also a vital step in China's long-delayed application for entry to the World Trade Organisation (WTO), said Adam Williams, chief representative of Jardine Fleming in Beijing.
""It's cause to celebrate,"" Williams said. ""This is not full convertibility, but it's a fair step towards it... It's good for everybody.""
State media has quoted central bank governor Dai Xianglong as saying December 1 marked formal Chinese compliance on current account convertibility under the International Monetary Fund's (IMF) Article VIII.
Article VIII is an undertaking to refrain from imposing restrictions on the making of payments and transfers for current international transactions, or from engaging in discriminatory currency arrangements.
Current account convertibility covers payment for trade in merchandise and services such as shipping, banking and tourism, as well as private transfers -- although analysts said currency conversion by ordinary Chinese remained restricted.
The analysts said China had long since dismantled the main barriers to IMF recognition of current account convertibility, leaving only technical issues to be resolved in recent weeks.
Beijing's move mainly signalled its confidence in the yuan's stability -- with foreign reserves at more than $100 billion -- and in the new-found efficacy of its macro-economic controls, said a Chinese analyst at a foreign bank in Beijing.
The official Xinhua news agency has quoted government experts as predicting stability for the yuan, arguing that the decision to boost convertibility reflected the smooth running of China's new currency exchange system since January 1994.
While China had come a long way in loosening controls on its currency, the final goal of full convertibility was still a distant one, the analysts said.
Central bank governor Dai told Reuters in a recent interview that China still needed a ""fairly long period"" before making the yuan convertible under the capital account and there was no timetable for doing so.
""The next step is convertibility on the capital account, which I would say is a fair way down the road yet,"" said one Beijing-based foreign analyst.
Beijing was concerned that large flows of funds could upset financial and stock markets and wanted to avoid a Mexican-style currency crisis, said a Western banker in Shanghai.
""Many capitalist countries in Asia, like Taiwan and South Korea, have foreign exchange controls so it is understandable for China to keep stringent foreign exchange controls,"" he said.
",34
"A state-sponsored group of Chinese academics has slammed a U.S. report that criticises Beijing for silencing dissent as a malicious and slanderous interference in China's internal affairs, official media said on Thursday.
The U.S. State Department 1997 report had violated the principles of the United Nations and ignored the progress China had made in protecting human rights, the official People's Daily quoted the scholars as concluding at a seminar in Beijing.
""The report is full of groundless accusations and intentional fabrications,"" the newspaper, mouthpiece of China's Communist Party, quoted Tian Dan of the China Society for the Study of Human Rights as saying.
""The United States government always 'reheats cold food', misleads public opinion and hopes to repeat its lies so often that they become true,"" Tian said.
The scholars' attack, which was carried by all major newspapers, was the first clear sign of Chinese anger at the January 30 U.S. report, which criticised Beijing for abusing basic freedoms and for wiping out overt political dissent.
China, which is eager to keep the momentum of the recent rapid warming in long-strained Sino-U.S. ties and has reacted with rare restraint to U.S. recent rights concerns, has yet to issue an official response to the State Department report.
All active Chinese dissidents had been jailed, detained or driven into exile in 1996, although there had been some widening of freedoms outside the political arena, the U.S. report said.
Both Washington and Beijing say relations have improved dramatically in recent months after two years of disputes over issues ranging from human rights to Taiwan to trade.
China's initially mild reaction to the U.S. report was a positive sign, but Beijing took 23 days to react to a similarily critical report last year and then unleashed a 7,000-word tirade that blasted Washington, a Western diplomat said on Thursday.
Such a diplomatic broadside could still emerge to rock ties this year, but it was unlikely to be quite as long, he said.
China's official Xinhua news agency quoted the scholars' seminar as saying the U.S. report's ""malicious and slanderous"" attack on Beijing's rights record had exposed its real aim of using the issue as an excuse to interfere in China's affairs.
The evidence provided in the report was mainly based on Western media reports, the statements of overseas pro-democracy activists and distortions of speeches of Chinese officials, Xinhua said.
Criticism over individual cases raised by Washington was factually wrong, it quoted the experts in rights, philosophy, history, law, social sciences and journalism as concluding.
The Chinese constitution had more articles on human rights protection than did the United States, while the U.S. judicial system lagged far behind in cracking down on crime and safeguarding citizens' freedoms, said Professor Dong Yunhu of the Chinese Communist Party's central academy.
""The U.S. government is not qualified to find fault with China in this respect,"" he said.
International human rights activists have long criticised China for its harsh treatment of dissent, its widespread of administrative detention without trial and its enthusiasm for executions as a means to deter rising crime.
Analysts say human rights will continue to be a major irritant in sensitive Sino-U.S. ties, despite attempts by both Washington and Beijing to ensure that the issue is not allowed to derail their recent rapprochement.
",34
"Tsingtao Brewery built its reputation as China's king of beers earlier this century by catering to thirsty foreign invaders.
But analysts warn that after years at the top, a complacent Tsingtao today is seeing a new breed of invader -- this time in the form of nimble foreign beer makers -- eat into its once-impregnable market share.
The brewery in eastern China's Shandong province, which in 1993 became the first Chinese company to list on the Hong Kong stock exchange has ""rested on their laurels for too long"", said one Beijing-based beer industry analyst.
While Tsingtao has begun to respond to the threat from foreign-funded joint ventures and upstart domestic brewing groups, it still relies too much on its traditional brand-name prestige and is being out-advertised by thirstier rivals, he said.
Company officials at the brewery's home in the scenic port city of Qingdao -- formerly Romanised as Tsingtao -- say they feel the pressure but are ready to fight back.
""We don't feel there is a crisis,"" said general manager Peng Zuoyi, the head of a new management team appointed earlier this year to boost the brewery's prospects.
Tsingtao plans to boost production to 500,000 tonnes this year, from 350,000 tonnes in 1995, and hike annual output to 1.4 million tonnes by 2000, Peng told reporters at the brewery.
LIFE CAN BE HARDER IN A MARKET ECONOMY
Under communist China's old command economy, Tsingtao was a luxury commodity in chronically short supply. But Peng said the market economy and the arrival of foreign brands were taking their toll.
""Before the foreigners came to China, almost all the high-class restaurants and hotels had our Tsingtao Beer,"" Peng said. ""In the market where we were once 100 percent, we now account for perhaps 70-80 percent.""
Against the glamour of foreign beers, Tsingtao touts its unique heritage as the premier domestic beer in one of the world's fastest-growing markets.
The company was founded in 1903 and initially targeted thirsty Germans living in the port city that Germany had wrested from a weak China.
Company officials say the beer also thrived during the Japanese occupation before and during World War Two.
The decades of state control that followed the communist revolution of 1949 were a factor behind Tsingtao's later neglect of its home market, said Elizabeth Cheng, head of China research at HSBC James Capel in Hong Kong.
""Now with the new management, hopefully they will be able to do something more dynamic,"" Cheng said.
A LACK OF TRANSPARENCY
Growing competition is not the only worry cited by analysts, who have long complained about a lack of transparency at the brewery, which is still 44 percent state-owned.
In 1994, the brewery drew investor ire when it was found to have lent out the foreign currency proceeds of its share flotations at high interest rates instead of investing them in its core business as promised.
Peng said that problem was mainly a misunderstanding.
""In some ways Chinese methods are not quite the same as international ones,"" Peng said, adding that lack of a clear investment plan had caused Tsingtao to put its money elsewhere.
The 4,000-strong workforce of the group, which has assets of 3.0 billion yuan ($360 million), is another potential concern.
""They are vastly overstaffed,"" said the Beijing-based analyst, a view seemingly borne out by the relaxed approach of many workers observed during a recent visit to the brewery.
Tsingtao says it still has up to 2.4 percent of the Chinese beer market, although the Economist Intelligence Unit (EIU) said last month that the share was now likely below 2.0 percent.
While life as a listed company would never be as easy as it was under the command economy, the analysts said Tsingtao was too much of a national symbol to be allowed to fail.
Tsingtao is also one of 10 domestic brewing groups that have been promised preferential loans and conditions from the government to help them compete with joint venture breweries.
""(Tsingtao is) troubled, but they will survive,"" said the Beijing-based analyst. ""They have very powerful backing... a lot of people do not want to see it go down the tubes.""
",34
"Washington's top textile trade negotiator said on Thursday talks with China on a textile accord were likely to stretch late into the night on the last day before a Friday deadline for agreement.
The two sides made progess but still had a long way to go on the third day of talks to renew their 1994 textile accord and resolve a dispute over U.S. penalties on Chinese exports, negotiator Rita Hayes told reporters.
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the January 31 deadline, Hayes said before resuming the talks with officials at China's Ministry of Foreign Trade and Economic Cooperation.
""We still have a lot of issues, so that means a lot of work today, probably late into the night,"" she said. ""We are not going to give China another extension because we have already given them another month.""
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries, The United States has threatened multi-million dollar penalties and raised the spectre of a cross-Pacific trade war over the issue.
""I am always optimistic and I am in hopes that we will complete the round today... but that is something both sides have to work very hard on,"" Hayes said.
If an agreement was not reached in time, past practice showed that the United States could cut China's textile import quota significantly until a deal was struck, she said.
""I am in hopes that it won't come to that, China doesn't want it to come to that -- and certainly the States doesn't,"" she said.
In Washington, acting U.S. Trade Representative Charlene Barshefsky said on Wednesday the talks were proceeding fairly well.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Textiles are just one of a range of issues dogging a Sino-U.S. relationship that has long been strained by disputes over topics ranging from trade to human rights to Taiwan.
Relations have improved dramatically in recent months, but many sources of potential dispute remain.
A U.S. delegation arrived in Beijing on Tuesday for talks on human rights with Chinese officials, after a year in which almost all remaining members of the nation's tiny pro-democracy movement have been either imprisoned or driven into exile.
U.S. trade official Lee Sands began talks in Beijing on Thursday to discuss China's delayed accession to the World Trade Organisation (WTO), long a source of cross-Pacific friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
Sands declined to answer reporters' questions about the talks, but Hayes said a key U.S. requirement was further opening of China's protected markets.
""What we are asking China for is upfront market access, before they join the WTO,"" she said. ""We are still working out those differences.""
",34
"Foreign lenders owed money by members of China's chaotic investment trust house sector risk an unpredictable official response in the case of default or collapse, rating agency Moody's Investors Service has warned.
Regulators struggling to rein in wayward trust houses were unlikely to rush to rescue those that failed, the agency said in a report issued just days after the central bank announced the closure of one of China's largest investment firms.
The People's Bank of China, the central bank, announced last week it had shut down the China Agribusiness Development Trust and Investment Corp (CADTIC) because of serious illegal and irregular business practices that had caused it huge losses.
""Moody's believes that regulatory support for institutions in trouble... will continue to be unpredictable, and will overall be less likely to be forthcoming from the central bank in the future,"" the agency said.
""Where little public interest is involved, it is probable that the central regulators would not be active in encouraging or financing a rescue, preferring a default in an attempt to impose some order on an increasingly chaotic system,"" it said.
The central bank's lack of political clout in dealing with the trust houses, some of which were mere speculative vehicles for powerful institutional sponsors, had resulted in a selective approach to dealing with their problems, it said.
Foreign lenders had so far been mostly repaid after the reported closure of more than 100 non-bank financial institutions in recent months, but such a policy was far from guaranteed, it said.
China has yet to announce detailed plans for creditors to CADTIC, which was backed by the Ministry of Agriculture, but analysts have suggested that at least some foreign companies with outstanding loans might lose out.
The central bank said repayment priority would be given to domestic individual creditors, with other lenders to be repaid after the liquidation of what was China's biggest trust after the China International Trust and Investment Corp (CITIC).
CADTIC's collapse highlighted the difficulties Beijing faces in policing the financial sector while managing the transition from strict central planning to the new market-style economy.
Regulators were likely to take a more supportive approach towards problems among China's largest state banks than towards those encountered by the trust houses, Moody's said.
The big four state banks -- the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China -- already received a great deal of government support on a daily basis, the agency said.
The banks would all be insolvent if their loan values were written down to reflect impairment, but resolution of this problem would require a complete restructuring of the state sector as well as bank recapitalisation, it said.
While China's other large commercial banks had much sounder finances, official support for them in the event of problems was uncertain, Moody's said.
Regulators could well tolerate the failure of a large bank if it was deemed to be the result of imprudence, illegality or incompetence, while struggling small banks were unlikely to receive any support at all, it said.
",34
"Chinese President Jiang Zemin on Wednesday called for tougher action to curb the spreading cancer of corruption, saying the war on graft was a vital struggle for the destiny of the nation and its ruling Communist Party.
The unity of Party and people was vital to bolster enthusiasm for developing China but was threatened by graft in communist ranks, the official Xinhua news agency quoted Jiang as telling the Party's Central Disciplinary Inspection Committee.
""The war against corruption is a serious political struggle for the hearts of the Party and the people and will affect the destiny of the Party and the state,"" said Jiang, who has staked much of his political credibility on curbing graft.
""On this issue our banner must be bright, our attitude steadfast and our work carried through with perseverance,"" he told a meeting of the disciplinary committee that was attended by Premier Li Peng and other leaders.
Corruption, almost unknown in China under the Stalinist rule of the late Chairman Mao Zedong, has boomed during nearly two decades of market-style economic reform.
China's top anti-graft official on Monday said Beijing had scored major successes in battling corruption in 1996 but called for greater efforts this year to fight abuses by officials eager to barter their bureaucratic clout for economic gain.
Disciplinary authorities had punished more than 116,000 people in 1997, up 14.3 percent from the year before, said disciplinary committee chairman Wei Jianxing.
More than 72,000 officials had owned up to using their positions to obtain better housing, with 74 percent handing over a total of 94 million yuan ($11.3 million) to pay for the housing, he said.
All too many of the Communist Party's 57 million members were forgetting its socialist traditions of gritty struggle and frugality, leading to increasing extravagence, waste and one-upmanship, said Jiang.
""The existence of such phenomena provides a hotbed that cloaks and allows the spread of even more serious problems of corruption,"" he said.
Analysts say Jiang, who in 1989 was plucked from his post as Shanghai party secretary to become anointed successor to paramount leader Deng Xiaoping, is anxious to win popular loyalties with his high-profile anti-graft campaign.
While the president and party chief has won some credit from the disgrace of corrupt officials as senior as former Beijing party chief and Politburo member Chen Xitong, many Chinese say results of the corruption crackdown have been patchy at best.
Party members at all levels had to do more to ensure honest government, Jiang told the disciplinary committee.
""Currently the situation of the war on corruption is still serious, the task of rectifying Party tendencies is still onerous and the development of the work uneven,"" he said.
China's communists should heighten their vigilance and build on their successes as they worked to modernise China, he said.
""The great success of 18 years of reform and opening and modernising construction strongly testifies that this party of ours is a good party,"" he said.
",34
"China and the United States made progress Thursday in talks on a new textile accord but negotiations could stretch late into the night on the last day before a deadline for agreement, a U.S. trade official said.
""We hope to complete the talks tonight,"" chief negotiator Rita Hayes said after talks Thursday morning with officials at China's Ministry of Foreign Trade and Economic Cooperation.
Progress had been made on market access, she said. But the two sides still had a long way to go on the third day of talks to renew a 1994 textile accord and resolve a dispute over U.S. penalties on Chinese exports, she said.
Washington could make significant cuts in China's textile quotas if agreement could not be reached before the Jan. 31 deadline, Hayes said.
""We still have a lot of issues, so that means a lot of work today, probably late into the night,"" she said. ""We are not going to give China another extension because we have already given them another month.""
The Sino-U.S. textile pact had been scheduled to expire on Dec. 31 but was extended by one month to give both sides time to hammer out a compromise.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries. The United States has threatened multi-million dollar penalties and raised the specter of a cross-Pacific trade war over the issue.
""I am always optimistic and I am in hopes that we will complete the round today ... but that is something both sides have to work very hard on,"" Hayes said.
If an agreement was not reached in time, past practice showed that the United States could cut China's textile import quota significantly until a deal was struck, she said.
""I am in hopes that it won't come to that. China doesn't want it to come to that -- and certainly the States doesn't,"" she said.
In Washington, acting U.S. Trade Representative Charlene Barshefsky said Wednesday that the talks were proceeding fairly well.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Textiles are just one of a range of issues dogging the Sino-U.S. relationship, which has long been strained by disputes over topics ranging from trade to human rights to Taiwan.
A U.S. delegation arrived in Beijing on Tuesday for talks on human rights with Chinese officials, after a year in which almost all remaining members of the nation's tiny pro-democracy movement have been either imprisoned or driven into exile.
U.S. trade official Lee Sands began talks in Beijing on Thursday to discuss China's delayed accession to the World Trade Organisation, long a source of cross-Pacific friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
Hayes said a key U.S. requirement was further opening of China's protected markets. ""What we are asking China for is upfront market access, before they join the WTO. We are still working out those differences.""
",34
"U.S. President Bill Clinton's commitment to pursue a deeper dialogue with Beijing in his State of the Union address is likely to reassure China that Washington is ready to take it seriously, analysts said on Wednesday.
The weight Clinton gave to boosting prickly cross-Pacific relations and his vow to visit China would be welcome signals from an administration that long appeared to put Beijing far down its list of priorities, said one Western diplomat.
""One of the things that has upset China about the Clinton administration is that it hasn't been treated as important enough,"" the diplomat said.
""The Clinton administration has now really realised the importance of Sino-U.S. relations,"" echoed a senior Chinese expert on U.S. policy.
""This year, it seems the Clinton administration plans to resolve Sino-U.S. problems and implement new policies,"" said the expert, who declined to be identified.
In his State of the Union address on Tuesday, Clinton said a deeper dialogue with China was vital for U.S. interests and vowed to exchange visits with Chinese President Jiang Zemin to boost cooperation and deal frankly with Sino-U.S. differences.
""An isolated China is not good for America,"" Clinton said. ""A China playing its proper role in the world is.""
The U.S. president's remarks came after months of rapid warming in a Sino-U.S. relationship that for years had been buffeted by diplomatic disputes over such issues as Taiwan, trade, copyright piracy and human rights.
The improvement in relations was bolstered by a series of high-level contacts, successful textile trade negotiations and by the charm offensive Beijing had aimed at members of the often-hostile U.S. Congress, the analysts said.
But weary diplomats in Beijing and Washington would have plenty of new worries to cope with in coming months, they said.
U.S. Secretary of State Madeline Albright's visit to China this month, while hailed by China as a boost to ties, would bring problems of its own if she followed through on promises to talk straight on Beijing's rights record, the diplomat said.
""If she has decided she's going to talk about human rights, the Chinese might not find it a very pleasant time,"" he said.
Washington's expected decision to back a motion condemning China for its rights policies at the United Nations Human Rights Commission in Geneva would also strain the new amity, he said.
""Those are the first few bumps that the relationship has to negotiate,"" he said.
Beijing was coming to believe that the Clinton administration was not the main source of U.S. opposition on such issues as human rights, the Chinese expert said.
""The Clinton administration doesn't want to pay more attention to the human rights issue, but it is under strong pressure from the U.S. media and Congress,"" he said.
The U.S. Congress was also the main stumbling block slowing China's entry to the World Trade Organisation (WTO), he said.
Beijing, which wants to join the global trade club on the preferential terms accorded developing nations, has long accused Washington of sabotaging its accession.
The Western diplomat said Beijing leaders were finally realising the importance of courting Congress, which China had for too long seen as no more than an equivalent of their own docile legislature.
Senior Chinese leaders have in recent weeks given visiting congressmen a warm welcome and the nation's propaganda machine has been relatively restrained in its reaction to a U.S. government report strongly critical of Beijing's rights record.
China's initially mild reaction to the report was a positive sign, the Western diplomat said. However he noted that Beijing had taken weeks to respond to a similar 1995 report and then unleashed a 7,000-word tirade blasting Washington.
Such a diplomatic broadside could still emerge to rock ties this year, but it was unlikely to be quite as long, he said.
",34
"Microsoft Corp on Tuesday launched a Chinese version of its Windows NT 4.0 software, saying the network operating system was a vital advance for the U.S giant into China's infant but fast-growing software market.
Microsoft, which saw its return to official favour in China marred when anti-communist phrases were found in its Windows 95 programme in September, was determined to lead the nation's growing software industry, company officials said.
""The speed at which computing is taking off here is really incredible,"" Microsoft Greater China Regional Director Bryan Nelson told a briefing before the launch of Windows NT 4.0.
While still small by international standards and plagued by copyright piracy that was costing Microsoft millions of dollars a year, the Chinese market was developing quickly, Nelson said.
""The marketplace is maturing very fast, there's a long way to go but it's extremely exciting,"" he said.
Windows NT 4.0, which combines the Windows 95 interface with more powerful 32-bit software for networks of personal computers, would sell mainly to large Chinese and foreign companies operating on the mainland, company officials said.
The system, released alongside Microsoft's Workstation 4.0 and equipped with a Chinese version of its Internet browser, was a key addition to the China product range, Nelson said.
""Products like NT for us are absolutely vital,"" he said, adding that the local version of Windows NT 4.0, which works with the simplified characters used on the mainland, was a step towards tapping Chinese enthusiasm for the Internet.
""The Internet in China is red hot,"" he said. ""There are so many projects... being done on the Internet and intranets that we can't service them all.""
Microsoft's Internet applications would allow controls on access to particular sites on the worldwide computer network -- a sensitive issue in China where officials have said they are keen to block sites deemed politically hostile or pornographic.
""You could call it censorship... (but) there's nothing different in our Chinese product than in our English versions,"" said Microsoft Regional Marketing Director Fernando de Sousa.
Demand for ways to control Internet access existed in Western markets as well, he said.
Nelson said Microsoft's ties with Chinese officials had more than recovered after the discovery of phrases once favoured by Beijing's Nationalist rivals in Taiwan in the Windows 95 programme.
Microsoft, whose negotiations with Beijing were once described by a Chinese official as a trial of strength, saw its return to favour threatened by phrases such as ""communist bandits"" and ""Taiwan independence"".
The discovery of the phrases forced Microsoft to temporarily stop shipping the system and prompted angry articles in Chinese newspapers about the U.S. firm's cultural insensitivity.
""It was a challenging time... (but) the follow-up has been a closer relationship,"" Nelson said, adding that Microsoft and Chinese officials had taken just six days to resolve the issue.
The company had lost more in terms of market momentum than in the financial outlay needed to correct the software and issue free updates to previous buyers, he said.
While copyright piracy continued to be a problem in China, with unlicensed use running at up to 95 percent for some applications, Microsoft had seen some improvment in the domestic market, Nelson said.
The company had seen no progress from Beijing's clampdown on pirates who exported counterfeit goods, he said.
",34
"Britain's final departure next year from its colony of Hong Kong will be sealed with a handshake, a British minister said on Tuesday, confirming the two countries would share one final last symbolic embrace.
Beijing's top Hong Kong policymaker had indicated he was willing to join the British territory's last imperial governor at a ceremony to mark its return to China, said Jeremy Hanley, Minister of State at the Foreign and Commonwealth Office.
Chinese official Lu Ping's willingness to join Britain's Governor Chris Patten in the limelight appeared to signal new willingness to set aside differences in the run-up to the colony's return to Beijing rule on July 1, 1997.
""I had confirmation from Lu Ping this morning that he is looking forward to shaking the governor's hand at the handover ceremony,"" Hanley told a news conference in Beijing.
London and Beijing have long bickered over the arrangements for Hong Kong's mid-1997 transition to Chinese rule after more than 150 years, with disagreement over the handover ceremony once so entrenched that the prospects for a joint event seemed doubtful.
Beijing, infuriated by Patten's drive to expand democracy in the colony ahead of its return, has tried to limit Britain's role, while London is keen to leave in imperial style.
Britain in March signaled that a joint ceremony was in doubt, with diplomatic sources reporting that the main hurdle in talks was China's insistence that Patten should not attend.
Hong Kong government radio reported late last month that Chinese and British negotiators could reach an outline agreement on the ceremony by the end of September, just nine months before the end of London's rule.
A willingness to share the podium with the governor could reflect a muting of Chinese anger at Patten, who has long been the butt of scathing editorials in the Beijing media.
Lu Ping has frequently shown reluctance to meet Patten during visits to the colony, although he has often had conferences with other British and Hong Kong officials.
Hanley said differences remained to be settled on handover arrangements, but added progress had been made.
""We've had very useful discussions,"" he said.
""On the handover ceremony, the Chinese government agree that it should be grand, solemn and dignified, and fitting to the historical importance of the event,"" Hanley said.
Britain and China say relations have warmed in recent months, boosted by high-level exchanges and a May trade visit to Beijing by British Deputy Prime Minister Michael Heseltine.
Differences remained over China's determination to scrap Hong Kong's elected legislature, known as Legco, Hanley said.
""It is unnecessary for Legco, which has been duly elected, to be replaced before the end of its term in 1999,"" he said.
While Hanley called for urgency to resolve outstanding disagreements before the 1997 handover, China's official Xinhua news agency quoted Lu Ping as saying ""minor differences"" did not necessarily have to be ironed out before the day arrived.
""We will try our best to solve minor differences before the first of July, 1997. If some of the differences cannot be solved by that day, it doesn't matter,"" Lu said. ""They can be resolved gradually by the Hong Kong people themselves.""
",34
"Chinese President Jiang Zemin on Wednesday greeted future Hong Kong leader Tung Chee-hwa with a pledge of support, saying the appointment of the tycoon turned chief executive designate marked the dawn of new era.
""Of course, I will support him,"" Jiang told reporters during a meeting in Beijing with Tung, who will lead the British colony after it returns to Chinese rule on July 1 next year.
""This is indeed the start of a new era,"" he said.
Tung, a shipping magnate who will become Hong Kong's first Chinese chief executive after more than 150 years of colonial rule from London, was in Beijing to meet senior leaders after his formal appointment on Monday by Premier Li Peng.
The visit is being keenly watched by residents in the territory eager to know more about Tung's plans for his first post-colonial adminstration and to learn whether current senior civil servants will keep their jobs.
Tung, who has warned Hong Kong's people to be sensitive to China's sovereign rights, has yet to give details of his plans for the post-colonial administration but has said he will discuss transition issues during his Beijing visit.
He declined to answer questions from reporters on the position of civil servants before beginning talks with Jiang in Beijing's cavernous Great Hall of the People.
It was Jiang who in January signalled that the tycoon was China's favourite for chief executive by singling him out for a warm, personal handshake at a reception in Beijing.
A 400-member, Beijing-controlled Selection Committee of Hong Kong residents last week made the choice official when a sweeping 80 percent majority of members backed the 59-year-old tycoon.
At a meeting at Beijing's Diaoyutai state guest house, Premier Li Peng gave Tung a certificate of appointment and congratulated him on his success. ""This is indeed an historic moment,"" Li told reporters.
Earlier on Wednesday, Tung met Foreign Minister Qian Qichen at the guesthouse, but neither he nor Qian made any public comment.
One of Tung's first tasks in the twilight of British rule will be to put together an advisory cabinet called the Executive Council and to decide which senior civil servants to keep -- a subject of much speculation among Hong Kong's boisterous media.
While heated interest has focused on Tung's intentions for current senior administrators, China said on Tuesday that it would make the final decision on important civil servants.
""For senior officials, they need the nomination of the top administrative official and to finally obtain appointment by the central government,"" Foreign Ministry spokesman Shen Guofang said at a news briefing.
China has hailed Tung's appointment as the fruit of its principle of Hong Kong autonomy, but the selection process was dogged by protests from democrats who accuse Beijing of using its hand-picked committee to stage-manage the choice.
Beijing's critics believe it is likely try to control Hong Kong and its 6.3 million people from behind the scenes after the five-star Chinese flag is raised over the territory.
The Beijing-backed Selection Committee that chose Tung is now preparing for the selection on Saturday of a 60-member, ""provisional legislature"" with which China plans to replace the existing, elected legislature on July 1.
Hong Kong's colonial governor Chris Patten has condemned the new legislature as undemocratic and has vowed not to cooperate with it.
",34
"After years of efforts to gain entry to the World Trade Organisation (WTO), China no longer cares whether it joins the global trade body, Tuesday's China Daily quoted a senior customs official as saying.
""Accession or not, China has become indifferent and doesn't care any more,"" the official newspaper quoted Wu Jiahuang, director-general of the customs administration's tariffs department, as saying.
Western diplomats in the capital said Wu's comments were more a reflection of differing internal views on the importance of the global economy rather than a signal of a shift away from Beijing's oft-stated desire to join the world's trade club.
Wu compared China's decade-long bid for entry to the General Agreement on Tariffs and Trade (GATT), and the current attempts to join the WTO that succeeded it, to a ""sunken boat"" and an ""ailing tree"", the China Daily said in a front-page report.
Beijing is seeking to join the WTO on the favourable terms accorded to developing countries, but some members -- with the United States most vocal -- argue that China's economy is too large and powerful to be given such treatment.
China's leadership had concluded that negotiations with WTO members on its entry terms were politically tainted, Wu said.
The high-profile publication of Wu's views on WTO accession could be aimed at signalling that China was in no hurry to make concessions on terms, but was more likely an expression of internal differences, said one Western diplomat.
""They have their different interest groups in China, just as we have,"" he said. ""There are those who are charged with administering the tariffs and taking in the receipts and those who have a longer-term perspective on the whole thing.
""It doesn't change the basic fact that those who are charged with representing China in this matter do give us a different impression,"" he said.
Customs officials declined to comment on Wu's remarks, but officials of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) said they represented a personal opinion and China's formal stance was unchanged.
MOFTEC's more cheerful view of WTO accession was reflected in the inside pages of the China Daily, which quoted assistant minister An Min as saying early entry could boost investment.
""Optimistically speaking, the problem (concerning China's WTO membership) could be solved next year,"" An said.
China says it must be allowed a relatively long transition period to prepare key industries for the fierce foreign competition they would face under the WTO's freer trade rules.
It was unrealistic to demand that China open its markets too wide too soon, the official People's Daily newspaper on Tuesday quoted MOFTEC Minister Wu Yi as saying.
Market opening was a gradual process that required economic stability and prosperity, she said.
Tariffs chief Wu said Beijing was puzzled by the actions of developed countries such as the United States, European Union members and Canada that slapped quotas on Chinese textiles but refused to allow China time to protect its key industries.
""In their anxiety to carve out markets in China, chief WTO member countries have ignored China's rightful reasons to protect its national industries,"" he said.
China had been able to expand international trade to 44 percent of gross national product by 1995, despite a decade of fruitless efforts to join GATT and the WTO, he said.
",34
"Beijing's rare use of United Nations clout to stall the Guatemalan peace process was a clear signal of China's determination to punish rival Taiwan's small band of diplomatic allies, analysts said on Sunday.
""Beijing simply will not let anyone forget the price they will pay for supporting Taiwan,"" said one Asian diplomat.
""They (China) clearly want to make sure Taiwan's allies learn a lesson, and if they break ties with Taipei, all the better.""
Beijing prefers to take a low-key approach to diplomacy at the United Nations, where it sees itself as a champion for developing nations, preferring abstentions to vetos on issues where it disagrees with the Security Council majority.
But to a leadership that has staked much of its credibility on its nationalist credentials, Taiwan is an issue so visceral that its usual diplomatic norms no longer apply.
The diplomatic anger that prompted China on Friday to veto a U.N. mission of 155 unarmed peacekeepers to disarm Guatemalan rebels was the product of Beijing's 48-year rivalry with the Nationalist-ruled island.
China has long worked to isolate Taiwan, which it has considered a renegade province since it became home to the defeated Nationalists at the end of a civil war in 1949.
Beijing sees diplomatic support for the island as backing for the splitting of China, or for Taiwanese independence.
The People's Daily, mouthpiece of China's ruling Communist Party, said Guatemala's warm ties with Taiwan left Beijing no choice but to exercise its U.N. veto to defend the motherland.
Guatemala had damaged China's territorial integrity, interfered in Beijing's internal affairs and hurt the feelings of the Chinese people, the newspaper quoted Foreign Ministry spokesman Shen Guofang as saying.
""We had no choice but to vote against the draft decision on peacekeeping,"" Shen said, adding that it was up to the Central American nation to resolve the situation.
""Let he who tied the bell on the tiger take it off,"" he said.
China has made clear it has no particular objection to the dispatch of a peace-keeping mission to Guatemala for three months to implement a U.N.-brokered accord agreed last month by the government and leftist rebels.
Guatemala's Taiwan ties alone were behind Beijing's decision to kill the mission, which was aimed at putting a final end to more than 36 years of war in which more than 100,000 people were killed and a further 40,000 ""disappeared"".
The Friday night vote left Beijing isolated 14-1 in the Security Council -- an ironic result coming just weeks after state media crowed over U.S. diplomatic isolation following Washington's use of its veto in a vote on U.N. leadership.
While China has long been considered a slumbering dragon at the United Nations, no issue is as likely to rouse the nation from its diplomatic quiet as Taiwan.
China has vowed to invade the island if it ever declares independence and has made non-recognition of the Taipei government the centrepiece of its international strategy.
The veto of the Guatemalan peace mission drew predictable fire in Taiwan, where the ruling Nationalist Party has long denied any dream of formal succession but says China must develop democracy before reunification can be considered.
""If Beijing pushes hard on Taiwan again and again, it will only push Taiwanese people farther away (from reunification),"" the China Times newspaper said in its Sunday editorial.
""The United Nations will become the main site (for Beijing) to suppress Taipei's diplomacy,"" said the United Daily News. ""The diplomatic war between the two sides is heating up.""
",34
"China on Monday crowed over an economic triumph in restraining inflation while retaining strong growth in 1996, and said it expected to do even better next year despite soaring state sector losses and slumping incomes.
China's gross domestic product was estimated to have grown 9.7 percent in 1996 to 6,780 billion yuan ($816 billion), with inflation slashed to 6.0 percent from 14.8 percent in 1995, the State Statistical Bureau quoted preliminary figures as showing.
Despite soaring losses in the lumbering state sector and falling incomes for many urban households, the statistics showed China's economy had returned safely to earth after a period of high-inflation runaway growth, said bureau spokesman Ye Zhen.
""The national economy maintained its rapid and stable growth, indicating a successful 'soft landing',"" Ye told a news conference in Beijing.
China would do even better in 1997, he said.
""Preliminary estimates show overall growth will continue with the same stability and high speed as this year,"" he said.
Annual economic growth in 1997 was expected to rise to 10.5 percent, while inflation -- which soared to a communist-era high of 21.4 percent in 1994 -- would stay at this year's level, Ye said.
China had set a target of 8.0 percent growth for 1996 to try to cool the economy, down from 10.2 percent last year and a sizzling 11.8 percent the previous year.
The 6.0 percent figure for 1996 retail price inflation, China's benchmark price index, was well below the government's 10 percent target for the year.
Consumer price inflation was estimated at about 8.3 percent, compared with 17.1 percent in 1995.
While some economists have expressed doubts about the accuracy of Beijing's inflation figures, it was clear that once-fierce price rises had been largely controlled, said Jason Kwok, chief economist at Citibank Hong Kong and China.
""It all tends to suggest that the macro-economy is doing very well this year,"" Kwok said in a telephone interview.
Two recent interest rate cuts and China's second-half turnaround of an earlier poor export performance meant growth could edge up next year even without a loosening of Beijing's 42-month-old tight credit policy, Kwok said.
Stable growth next year was likely to receive an external boost from an expected upward trend in exports, which the statistical bureau said had powered China to an estimated $16 billion trade surplus in 1996, he said.
Beijing would keep the lid on credit growth and continue to put high priority on restraining price rises, Ye said.
Some economists have suggested Beijing's success in reducing inflation and the two cuts in interest rates this year signal an imminent easing of the credit crunch, which has thrown a heavy burden on the already struggling state enterprises.
About 75 percent of state firms were losing money and total losses in the government sector had soared to 69 billion yuan between January and October, a rise of 45 percent compared with the same period of last year, Ye said.
""Although the situation improved after the second quarter, in general the problems remain very serious,"" he said.
Per capita incomes in urban households had risen 3.4 percent in real terms to 4,380 yuan in 1996, but the figures hid an income decline for many families, bureau officials said.
Incomes had failed to keep pace with inflation in about 30 percent of households, although for some, the retirement or death of a main wage earner rather than macro-economics were the main culprit, they said.
($1=8.3 yuan)
",34
"China Thursday ordered two 747 airliners from aviation giant Boeing Co. in a multimillion dollar deal that Washington's ambassador to China said was hastened by upcoming visits by U.S. congressmen.
The jets will be powered by engines from Pratt and Whitney, a subsidiary of United Technologies Corp., and were scheduled for delivery in 1999 to Air China, Beijing's international carrier, officials of the China Aviation Supplies Corp. said.
Closure of the $383 million contract, which follows the purchase of three 747-400s by Air China in July last year, had been hastened by imminent visits to Beijing of about 35 U.S. congressmen, said U.S. Ambassador James Sasser.
""This Boeing contract is something that has been under discussion for some time,"" Sasser told reporters. ""Clearly there was an effort to try to finalise this transaction on the eve of the visit of a number of senators and congressmen.""
One official bipartisan delegation of around 22 congressmen is scheduled to arrive in Beijing next week for talks with Chinese officials that are expected to include touchy issues such as the Sino-U.S. trade balance and human rights.
Relations between Washington and Beijing have long been battered by disputes over trade, Taiwan, copyright piracy and China's human rights record, but both sides say ties warmed in the latter half of 1996.
Chinese efforts to ease Beijing's swelling and highly sensitive trade surplus with the United States were likely to provide a boost to U.S. exports to China, Sasser said.
""I think you will see over the coming months an effort on the part of the Chinese to make additional purchases of U.S. goods, in an effort to try to even up as much as possible the present trade deficit with the United States,"" he said.
The United States says it has a trade deficit with China, reaching nearly $29 billion in the first nine months of last year. Beijing insists that its customs figures show a surplus in favour of the United States.
The ambassador declined to give details of the deals likely to be agreed upon or to say which sectors might benefit most.
Some U.S. businessmen say high-profile sales are among the earliest casualties of Sino-U.S. diplomatic spats, and Boeing has in the past hinted that it has lost deals to European archrival Airbus Industrie for political reasons.
Boeing officials at the Thursday signing declined to comment on whether the 747 contract had been hastened by the recent thawing in cross-Pacific ties, but Arthur Abel, Regional Director for Aircraft Contracts, said the deal was heartening.
""We are just very encouraged and optimistic about our long-term relationship with China,"" he told Reuters.
A Boeing statement said the two 286-passenger 747 Combis it would supply to Air China marked a strong vote of confidence from an airline that already operated 45 of Boeing's aircraft.
Officials of the state-run China Air Supplies Corp. also welcomed the deal, although they identified the ordered aircraft as 301-seat 747-400s.
",34
"A World Trade Organisation (WTO) without China is a global trade body with a missing limb, but the world's most populous nation still must meet basic criteria before gaining entry, a British minister said on Thursday.
A robust approach could be taken to Beijing's application for WTO membership, Ian Lang, president of Britain's Board of Trade, told a news conference in the Chinese capital.
""A WTO without China would be a WTO with a limb missing,"" Lang said in an speech to Chinese and British businessmen that was released to reporters at the news conference.
""We very much support China's application to join the WTO. However, we also believe that China's accession must be on the right terms,"" Lang said.
""It has to be...on the same terms on which other countries have membership of the WTO,"" Lang told the news conference. ""It is important not to dilute the strength of the WTO.""
Beijing has been seeking to join the global trade body with developing country status, but some Western nations maintain that China's economy is too big to warrant such treatment.
""I understand the anxieties that China has, it...still feels it has a considerable way to go in some areas,"" Lang said.
""There are certain fundamental elements to approaching membership of the WTO that can be approached fairly robustly,"" he said. He cited trade transparency, market access, tariffs and legal structures as areas that needed further exploration.
A WTO working group will meet later this year in Geneva to try to negotiate a deal that would allow China's accession, but China said last month its prospects appeared bleak.
Lang said China and Britain were expected to sign a memorandum of understanding next month that would let Chinese companies list on the London Stock Exchange (LSE).
Many cash-strapped Chinese companies are keen to apply for listing on overseas markets, but Chinese securities officials say agreement with the LSE has been long delayed by disputes between London and Beijing over Hong Kong.
Some 20 Chinese companies are listed in Hong Kong while a handful are traded in New York.
Lang said Sino-British ties were continuing to warm following high-level exchanges this year.
Relations between Beijing and London have been tested in recent years by disputes over the mid-1997 return of Hong Kong, now a British colony, to Chinese rule.
",34
"A ministerial conference of Mekong River nations on Friday agreed to push forward cross-border cooperation to build a prosperous future for the once war-torn region.
Growing trust among the six nations of the Greater Mekong Sub-region (GMS) would allow huge investment in what was being dubbed the ""last frontier of economic development"", said Bong-Suh Lee, Asian Development Bank (ADB) vice president.
""We can expect such investment to grow rapidly and reach a target of at least $1.3 billion by the turn of the century,"" Lee told a news conference after the meeting in China's southwestern Kunming city.
Ministers of Burma, Cambodia, China, Laos, Thailand and Vietnam agreed at the conference to pursue development of infrastructure projects aimed at knitting together a region long divided by bitter distrust and war.
The ministers approved work to map out strategies for the next 25 years of development along the mighty Mekong River.
The ADB, which backs the GMS programmes, had prepared $300 million in loans ready for investment in the region over the next three years, Lee told the conference.
Far greater sums would be needed to finance crucial projects such as a road connecting Bangkok to Phnom Penh and Vietnam's Ho Chi Minh City, said Gunther Hecker of the ADB's transport and communication department.
""The $300 million is the trigger element for others to follow,"" Hecker told Reuters. ""We lay the seeds.""
Lee said at least $9 billion would be needed to finance transport and telecommunications projects in the region, home to around 230 million people, and added that the private sector was appearing more willing to contribute.
""I have heard from many private investors that probably the GMS is the last frontier of economic development,"" he said.
Investor enthusiasm is relatively new to much of the Mekong River region, which was riven for decades by conflicts over ideology and borderlines.
China and Vietnam clashed repeatedly in the 1980s after a bloody border conflict in 1979.
Vietnamese troops fought Khmer Rouge guerrillas in Cambodia through the late 1980s while fighting was far from rare among many of the region's other borders.
GMS meetings had been vital in building trust in the region, conference participants said.
Priority GMS projects include a Kunming-to-Bangkok highway, a fibre-optic cable telecommunications loop through Laos, Vietnam and Cambodia and action to curb deforestation on the Mekong's upper reaches.
Ministers at the conference said the ADB should continue its role as organiser of regional projects but agreed on the need for closer coordination with other potential investors from the Association of Southeast Asian Nations (ASEAN) and other nations.
How coordination would be organised was not decided in detail, but observer Finn Nielsen of the World Bank said huge funding requirement in the region meant there was little chance of a turf war breaking out among development investors.
""There are more projects here than the ADB, the World Bank or anyone can handle, so that isn't a problem,"" Nielsen said.
",34
"China on Thursday slammed a plan by rival Taiwan to ship nuclear waste to North Korea, saying the scheme was a blatant attempt by Taipei to split the country and spoil Beijing's ties with its communist neighbour.
China was also concerned by the environmental implications of the January 11 contract under which Taiwan will ship up to 200,000 barrels of low-level nuclear waste to North Korea, Foreign Ministry spokesman Shen Guofang said.
""China's government and people express their resolute opposition to the actions of the Taiwan authorities,"" Shen told a news briefing in Beijing.
Taiwan's nuclear waste plan was a clear attack on Beijing's cherished goal of reunification with the Nationalist-ruled island, Shen said. China considers Taiwan a renegade province.
It was also an assault on China's diplomatic ties with Pyongyang, a Stalinist neighbour with which Beijing has for decades shared an alliance that Chinese propaganda has termed ""as close as lips and teeth"".
""(The Taiwan authorities') goal is also very clear: it is to destroy China's relations with the country concerned and obstruct the improvement and development of ties across the Taiwan Strait,"" Shen said.
Beijing has diplomatic relations with both Pyongyang and its arch rival Seoul, neither of which formally recognises Taiwan. North and South Korea are still technically at war after their 1950-53 conflict ended in a truce, not a peace accord.
While China says it cherishes its close alliance with cash-strapped North Korea, analysts say the relationship has been cooled in recent years by Beijing's ties with Seoul and by Pyongyang's reluctance to reform its moribund economy.
South Korea, which dropped diplomatic ties with Taipei in 1992 to formalise links with Beijing, has expressed concern that radiation from the Taiwanese waste could pollute the Korean peninsula -- a fear echoed by Shen.
""The technological demands of nuclear waste management are very serious,"" the Chinese spokesman said.
""If it is not managed properly or unexpected events occur it can pollute surrounding countries and regions,"" he said. ""The Chinese side is highly concernced about this.""
Taipei maintains the pact to ship low-level waste from Taiwan Power Co nuclear plants to North Korea complies with all international regulations and that shipments would be securely packed in steel barrels.
Despite escalating protests against the deal, Taiwan and North Korea forged ahead on Tuesday with preparations for an initial shipment of 60,000 barrels of waste.
Seoul and diplomatic ally Washington have long seen North Korean attempts to build a nuclear power industry as a potential cloak for the development of nuclear weapons that could shift the balance of power on the heavily militarised peninsula.
U.S. officials said this week said they saw no nuclear arms proliferation threat from the low-level waste shipments but signalled Washington was aware of Seoul's environmental fears.
",34
"China said Monday that it restrained inflation while maintaining strong economic growth in 1996 and it predicted it will do even better next year despite soaring government-sector losses and slumping individual incomes.
The State Statistical Bureau quoted preliminary 1996 figures showing China's gross domestic product grew at an estimated 9.7 percent to 6.8 trilliion yuan ($816 billion) while inflation fell to 6.0 percent from 14.8 percent.
Despite soaring losses in the state sector and falling incomes for many urban households, the statistics showed China's economy had returned safely to earth after a period of high inflation and runaway growth, bureau spokesman Ye Zhen said.
""The national economy maintained its rapid and stable growth, indicating a successful 'soft landing,'"" Ye told a news conference in Beijing.
China will do even better in 1997, he said.
""Preliminary estimates show overall growth will continue with the same stability and high speed as this year,"" he said.
Annual economic growth in 1997 was expected to rise to 10.5 percent, while inflation -- which soared to a communist-era high of 21.4 percent in 1994 -- will stay at this year's level, Ye said.
China has set a target of 8.0 percent growth for 1996 to try to cool the economy, down from 10.2 percent last year and a sizzling 11.8 percent the previous year.
The 6.0 percent figure for 1996 retail price inflation, China's benchmark price index, was well below the government's 10 percent target for the year.
Consumer price inflation was estimated at about 8.3 percent, compared with 17.1 percent in 1995.
While some economists have expressed doubts about the accuracy of Beijing's inflation figures, it was clear that once-fierce price rises have been largely controlled, said Jason Kwok, chief economist at Citibank Hong Kong and China.
""It all tends to suggest that the macroeconomy is doing very well this year,"" Kwok said in a telephone interview.
Two recent interest rate cuts and China's second-half turnaround of an earlier poor export performance meant growth could edge up next year even without a loosening of Beijing's 42-month-old tight credit policy, Kwok said.
Stable growth next year was likely to receive an external boost from an expected upward trend in exports, which the statistical bureau said had powered China to an estimated $16 billion trade surplus in 1996, he said.
Beijing will keep the lid on credit growth and continue to put high priority on restraining price rises, Ye said.
",34
"China's jailing of leading dissident Wang Dan is clear evidence of the kind of abuse that this week led a U.S. report to condemn Beijing for its rights record, the former student leader's father said on Friday.
All nations had the right and responsibility to concern themselves with human rights in other countries, said Wang Xianzeng, whose son was last year sentenced to 11 years in prison for plotting to overthrow the government.
""In Wang Dan's case, I know... the human rights situation is very bad,"" Wang Xiangzeng told Reuters by telephone.
""If (the United States) is seeking the truth in its concern with the Chinese human rights situation, then that is as it ought to be,"" he said.
In an annual human rights report on 193 countries released on Thursday, the United States accused China of effectively silencing public dissent against the government by detaining, jailing or driving into exile all known dissidents.
This year's hard-hitting report was released amid a dramatic improvement in Sino-U.S. ties that have long been rocked by disputes over issues ranging from rights to trade to Taiwan.
Analysts say Beijing, which stayed silent on the U.S. report on Friday and has recently reacted with uncharacteristic mildness to U.S. concerns over human rights and Hong Kong, is eager to keep up the positive momentum in cross-Pacific ties.
The recent Sino-U.S. rapprochement last October survived Wang Dan's jailing after a four-hour trial that was denounced by human rights activists as a politically-orchestrated sham.
Wang Xianzeng said his son, a former leader of 1989 pro-democracy demonstrations that were crushed by the army, had done nothing to justify the harsh sentence meted out by judges of the Beijing Number One Intermediate People's Court.
""Nothing Wang Dan did...offended against the laws of China, as his parents we cannot agree with such a heavy sentence and we cannot accept the verdict,"" Wang Xianzeng said.
He said both he and Wang Dan's mother, 61-year-old museum researcher Wang Lingyun, planned to visit their son next month at his prison in Jinzhou city in China's Liaoning province.
Wang, who served four years in jail for his role in the 1989 protests in Beijing's Tiananmen Square, was still suffering from numerous medical complaints that could not be treated at his draughty jail in China's frigid northeast, his father said.
""(Wang Dan) suffers many illnesses...they can't cope with serious complaints although they can deal with small problems or colds,"" he said.
Wang Dan was one of China's most articulate political dissenters between his parole from the 1989 sentence until he vanished into detention in May 1995.
His jailing and the later dismissal of his appeal were part of a series of hammer blows last year that all but silenced China's tiny band of pro-democracy activists.
U.S. officials have said human rights remain an important influence on Sino-U.S. relations, but have made clear that no one issue will be allowed to derail warming ties with Beijing.
China was not the only target of the U.S. State Department report, which also found problems with the rights records of allies Turkey, South Korea and Germany as well as Russia, Indonesia, Haiti and Nigeria.
Wang Xianzeng said it was only right for the international community to take an interest in the human rights records of different nations -- adding such interest could be mutual.
""China can also concern itself with human rights in the United States, can it not?"" he said.
",34
"China and the United States signed a new textile agreement on Sunday in an eleventh-hour deal that ended the threat of a cross-Pacific trade war and was hailed by both sides as a breakthrough.
U.S. officials said their main achievement was gaining assured access for the first time to Chinese textile markets, adding that it also granted China a U.S. import quota slightly larger than the previous 1994 textile pact.
Millions of dollars in penalties slapped by Washington on Chinese imports remained in force under the deal, although Beijing had agreed to withdraw its threat of retaliation, top U.S. textile negotiator Rita Hayes said after the signing.
""For the first time the United States has market access with China... and this is something we felt very strongly about,"" Hayes told reporters. ""It is now a situation that we have a level playing field.""
The four-year textile accord was signed by Hayes and Li Dongsheng, China's chief negotiator and director of the trade management department of the Ministry of Foreign Trade and Economic Cooperation.
Officials of both sides welcomed the deal, which was hammered out during negotiations that ran far beyond their original three-day schedule to become a gruelling six-day marathon topped by all-night sessions.
""After six days of hard work, the delegations have reached a rather ideal conclusion,"" said Chinese Foreign Trade Minister Wu Yi, who attended the signing ceremony.
Officials of both sides declined to give details of the accord, but Hayes said it would create U.S. jobs by allowing exports while slightly increasing China's U.S. import quota.
The talks focused on renewal of the 1994 textile accord and resolution of a dispute over U.S. penalties on Chinese exports, with market access for U.S. goods to China also a major stumbling block, officials said.
Breakthrough came during a one-day extension to the final deadline for renewal of the Sino-U.S. accord, which had originally been scheduled to expire on December 31 but was extended by one month to allow time to reach a compromise.
""I think this morning at the beginning we were unhappy with each other, but now we have become friends,"" U.S. negotiator Li told Hayes during the signing of the accord.
The accord ended the threat of a Sino-U.S. trade war, which had loomed after Washington slapped $19 million in penalties on Chinese imports last September, accusing Beijing of shipping textiles through third countries to evade quota restrictions.
China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but delayed the action to allow time for further talks.
After the signing of the textile accord, Beijing announced it was calling off its retaliatory measures, but U.S. negotiator Hayes said Washington's penalties remained in force.
""The transshipment charges that were made in September still stand as they did,"" she said without elaborating.
Access to China's huge and growing markets was also an issue in other Sino-U.S. meetings in Beijing last week.
U.S. trade official Lee Sands held two days of talks in the Chinese capital to discuss China's delayed accession to the World Trade Organisation, long a source of bilateral friction.
""The agreement is once again proof that China and the United States can settle their trade disputes through negotiations based on equality and mutual benefits,"" said negotiator Li.
",34
"China's last imperial eunuch has died in Beijing at the age of 93 after a life that spanned the end of a dynasty and a communist revolution that made a mockery of his castration.
Sun Yaoting, who served for seven years in the court of China's last emperor, died on Tuesday evening at his home in a Beijing temple, his biographer Jia Yinghua said on Thursday.
""He was the last eunuch in China,"" Jia said.
Sun, who was born on December 29, 1902 near the northern port city of Tianjin, had his genitals sliced away eight years later by a father eager to wield power and influence through a son in the court of China's Qing emperors, Jia said.
Months later revolution swept away the Qing dynasty that had ruled China for almost three centuries, signalling the end of a system of promotion by emasculation that had supplied Chinese emperors with servants and agents for thousands of years.
Sun's remains were laid out in traditional style at Beijing's Guanghua temple on Wednesday, with a gold cloth across his face, rings on his fingers and in a white silk shroud embroidered with imperial dragon and phoenix motifs, Jia said.
Sun had served China's Emperor Pu Yi during the final years of the last Qing ruler's residence in the Forbidden City after he was stripped of his imperial title in 1911.
He was appointed to administer Beijing's temples by the victorious communist revolutionaries after they swept to power in 1949, said Jia, author of ""The Secrets of The Last Eunuch"".
""He was a man of rare intelligence,"" Jia said, adding that when Sun revisited the Forbidden City in 1993 after a 70-year absence he had been able to point out historical inaccuracies in displays arranged by curators at the former home of China's emperors.
The eunuch's post-revolution security was shattered in 1966 when late Chairman Mao Zedong triggered 10 years of social ferment by launching the ultra-leftist Cultural Revolution.
Sun became an early victim of the radicalism embodied by the Red Guards, Mao's youthful socialist stormtroopers, who roamed China attacking anything seen as tainted by the feudal past.
Sun was sent back to his home village and in the chaos lost his precious genitals, which had been carefully preserved using traditional methods after his emasculation.
""They were thrown away by his family,"" Jia said. ""They were afraid of being implicated if the genitals were found by the Red Guards.""
According to Buddhist beliefs, a eunuch had to be buried with his penis to ensure successful reincarnation as a man.
""He used to joke about it,"" Jia said. ""He said: ""When I die I will come back as a cat or a dog'.""
Sun's adopted son and grandson would take his remains to his home village for further ceremonies on Friday before having them cremated in Beijing, Jia said.
The end of the imperial system was a source of lasting regret to Sun, who believed that -- like many a talented eunuch of old -- he would have come to wield huge power if Emperor Pu Yi had remained on the dragon throne, Jia said.
""That was the regret of his whole life,"" he said.
",34
"Japan's securities watchdog filed complaints with prosecutors on Tuesday alleging that Nomura Securities Co Ltd, Japan's biggest brokerage, and three former executives made illegal to payments to a client.
While the regulators did not identify the client, he is believed to be one of Japan's ""sokaiya"" racketeers, who extort money from corporations by threatening to disrupt shareholder meetings.
Japan's commercial law has prohibited payoffs to such racketeers since 1982.
Government sources said that the Securities and Exchange Surveillance Commission (SESC) complaints allege that Nomura and the employees made illegal payments to the client totalling 49.7 million yen ($417,600).
It was the first time that regulators have charged that the company was itself involved in the scandal. Nomura has repeatedly denied any participation in the scam, saying it was the work of three former executives.
It is now up to prosecutors to determine if there is enough evidence to file charges in the case.
In a sign that the probe may have a sweeping impact on Nomura, the SESC said that some of the improper orders were handled by more junior employees, which could bring more names into the scandal.
Nomura issued a statement apologising for the scandal.
""We deeply apologise for the inconvenience the scandal has caused to our customers and the public,"" it said.
""We are taking the complaints seriously...We will make a 'fresh start' to prevent a recurrence of such events.""
The government sources said the SESC would start drawing up proposals for civil penalties against Nomura immediately. But they added that it was too early to say how long it would take the SESC to present the proposals to the Finance Ministry.
Market sources say the Finance Ministry may suspend part of Nomura's operations, including stock dealing on its own account, for about three months as punishment for the scandal.
This would be the heaviest ever penalty imposed on a securities firm in Japan.
The scandal has already casted a long shadow over Nomura's business and prompted many clients to shun the financial powerhouse.
In March alone, Nomura's current profit dropped to about half the usual monthly levels due to the scandal, which cut its brokerage commissions and its share of the underwriting market, a company executive said in April.
Nomura's share of trading volume on the Tokyo bourse fell to 9.2 percent in March from 11.4 percent in February, toppling it from the top spot it had held since February 1992.
In the first fallout from the SESC action, the Ministry of Finance said late on Tuesday that Nomura was being suspended from taking part in Japanese Government Bond auctions and underwriting activities.
Nomura's admission in March that two of its directors were involved in transferring Nomura money into the account of a corporate client linked to a sokaiya racketeer was a major blow to the image of the Japanese brokering industry.
In 1991, Nomura and other leading Japanese brokerages were found to be paying improper compensation to favoured clients. Top executives at Nomura resigned that year over payments and revelations that affiliates had done deals with gangsters.
Nomura made a sweeping reshuffle of its top management late last month in an effort to win back public trust in the wake of the scandal. ($1=119 yen)
",10
"Sanwa Bank Ltd, one of Japan's top banks, intends to list its shares in New York as soon as possible in a bid to become a truly global player in the financial sector, its president said on Wednesday.
""We want to do so as early as possible.  We need to take various forward-looking measures including the listing (in New York),"" Naotaka Saeki told Reuters in an interview.
Sanwa Bank is one of Japan's six biggest commercial banks, with assets of 51.96 trillion yen at the end of last September.
Bank of Tokyo-Mitsubishi Ltd is the only Japanese bank listed in New York.
Financial sources said that Sanwa could not be listed on the New York Stock Exchange, however, until it had recorded a profit for three consecutive years.
After posting a parent current loss of 259.87 billion yen in 1995/96 to write off massive problem loans, including loans to failed mortgage firms, or ""jusen"", Sanwa has forecast a parent current profit of 50 billion yen for 1996/97, which ended March 31.
In 1996/97 Sanwa is disposing of 450 billion yen in problem loans, which would cover 48 percent of its estimated problem loans as of the end of March. The bank is scheduled to announce its 1996/97 business results later this month.
Saeki said he would not, however, declare that the bank's problem-loan mess was behind it.
He added that while the bank has been preoccupied with the disposal of problem loans for the past few years, it will now aim to boost its return-on-equity (ROE) ratio, a gauge of the efficiency of the use of capital, to 12 percent.
It also aims to increase its international capital adequacy ratio to 10 percent from an estimated 9.0 percent at the end of March 1997, he said.
Saeki added that the possibility of a major Japanese bank failure has virtually disappeared, as Japan's big banks have largely completed preparations to meet the stiff requirements to be imposed under the nation's early warning system, scheduled for launch in April 1998.
He added, ""Land prices are thought to have bottomed out, so the environment has also changed.""
Asked if Sanwa is seeking a merger partner, Saeki stated that the bank had no such intentions.
""In the past, in regulated markets, our predecessors might have thought that bigger is better. But now, with deregulation, we have various options,"" he said.
Even if a big Japanese bank merged with another big one, it would have few advantages in Japan because it is difficult to cut payrolls given Japan's social conventions, he said.
Saeki added, however, that Sanwa may form alliances with foreign financial institutions in specialised areas such as overseas leveraged buy-outs and mergers and acquisitions.
He also said that Sanwa would seriously study the possibility of setting up a financial holding company following the expected lifting of Japan's ban on such companies as part of its deregulation drive.
",10
"One month after giant Japanese brokerage Nomura Securities Co Ltd revealed a scandal involving suspected illegal deals, new president Masashi Suzuki is struggling to regain trust in the company.
""I have resolved to make my utmost efforts to restore the trust we have lost,"" Suzuki told Reuters in an interview.
""I must put things in order, as our staff and branch managers are struggling with hard times because of rebukes from customers,"" he said.
On March 6, Nomura announced that an internal probe had found that two of its directors had been involved in apparently illegal deals which involved transferring money from a Nomura account to a corporate client's account.
Prosecutors and officials from Japan's securities watchdog raided Nomura on March 25 in a sign of a widening probe into Nomura's role in payments to the corporate client, who has been linked to a ""sokaiya"", or racketeer.
Sokaiya extort money by threatening to expose dubious business practices or to disturb shareholders' meetings.
Suzuki, 61, added the post of president to his position as chairman on March 14 when Hideo Sakamaki stepped down from the post to take responsibility for the scandal.
""It is true that holding the positions of both president and chairman is something unusual. I want to return the company to healthy shape and then transfer the company (management) to the next generation, although I cannot say when,"" he said.
As one step to avoid any recurrence of wrongdoing, Nomura will establish a compliance committee made up of senior executives and chaired by the president, Suzuki said.
He added that the scandal, which comes after a similar embarrassment in 1991 over improper payments of compensation for losses and revelations of deals with gangsters, indicates there was no healthy checking system to stop any wrongdoing at the management level.
Suzuki said the scandal had not only hurt Nomura's image but would also erode future earnings.
The scandal had little impact on results for the business year which ended on March 31, but would have a severe impact on results in the current financial year, he said.
""We don't know exactly how severe the impact on earnings will be because it is not known whether and how much administrative punishment will be imposed, but it will be very severe.""
Market sources said Nomura's share of trading volume on the Tokyo Stock Exchange (TSE) fell to 9.2 percent in March from 11.4 percent in February, toppling it from the top spot it has held among brokerages since February 1992.
Daiwa Securities Co Ltd had 9.6 percent of the TSE market in March.
Major Japanese asset management firms and some institutional investors, as well as the huge California Public Employees' Retirement Fund, suspended business with Nomura soon after it revealed the suspected illegal deals.
But Suzuki said he was convinced Nomura could again become the securities house of choice by taking all possible measures to restore its customers' trust.
""Only (financial) companies offering a distinctive business strategy can survive in liberalised financial markets. While expected liberalisation of stockbroking commissions will slash commission income, our strategy will be to offer value-added financial services,"" he said.
Japan aims to deregulate its financial markets by 2001 under a ""Big Bang"" to catch up with reforms carried out more than a decade ago in Europe and North America.
",10
"Japan's troubled banks, which once turned a cold shoulder to foreign suitors, now appear ready to welcome foreign acquisitions that might help them survive an impending industry shake-out.
But foreigners are likely to be hesitant about tying the knot, industry sources and analysts said, given insufficient disclosure of bad loans at Japanese banks and the lack of a clear system in Japan to deal with losses at failed banks.
A Finance Ministry official added that, while links with foreign firms may help Japan's banks weather the ""Big Bang"" financial reforms planned by 2001, Japanese institutions would have to get their houses in order before entering such unions.
""Japanese banks are busy cleaning up their bad-loan mess right now,"" Sei Nakai, a deputy director general of the ministry's banking bureau, said in an interview.
Japan's hopes for a few foreign white knights were apparent when troubled Nippon Credit Bank Ltd (NCB) on Monday announced a radical restructuring programme, including a withdrawal from overseas operations.
President Hiroshi Kubota told reporters that the scheme would help make his bank more attractive for a tie-up or a merger with a foreign firm.
""In order to meet new challenges, there would be nothing wrong with a foreign bank taking us under its wing and bringing in a blue-eyed president,"" he said.
""We've even been talking to (foreigners) about a tie-up.... They express interest, but say we should first clean house,"" he added.
But David Threadgold, an analyst at BZW Securities, doubted such offers would come rushing in.
""This is an unprofitable banking market -- overcapacity, overregulated. I'm not sure there is going to be a big queue (to buy NCB or other Japanese banks).""
An executive at a foreign investment bank echoed this sentiment. ""While we are committed to remaining an active player in cash-rich Japanese markets, where individual assets total 1,200 trillion yen, we are not interested in making an unprofitable investment,"" he said.
Some Japanese industry sources said, however, that recent approaches by foreign firms belied such aloof talk.
A U.S. bank made overtures last year to Hokkaido Takushoku Bank Ltd about a possible takeover, while a European investment bank was reported to have made inquiries about acquiring a troubled small bank in northern Japan, they said.
On Monday, however, Hokkaido Takushoku Bank announced a merger with a regional bank, Hokkaido Bank Ltd.
The sources also said a major concern among foreign firms was insufficient disclosure by Japanese banks of problem loans backed by collateralised land, which became a heavy burden after a land and share price bubble burst in the early 1990s.
While the Finance Ministry said that problem loans at Japan's deposit-taking institutions totalled 29 trillion yen at the end of last September, Moody's Investors Service estimated the actual amount was at least three times larger.
""To exaggerate somewhat, under the Japanese criteria all loans are innocent unless proven guilty. Under the U.S. criteria, however, all commercial real estate secured loans are guilty unless proven innocent,"" it said in a recent report.
Personnel issues are also likely to make foreign firms think twice about uniting with Japanese banks, analysts said.
""No shareholder (of a foreign bank) would stand for it. Little specific pieces (of a bank's assets) could be attractive, but why would they want to buy a business when you can't reduce staff?"" said a foreign analyst.
",10
"Embattled Nomura Securities Co Ltd is expected to announce on Thursday the best results among more than 280 brokerages in Japan for the last business year, but prospects for the current year are gloomy.
Analysts said on Monday that Nomura's profits for the fiscal year which ended on March 31 should be far ahead of its competitors thanks to huge profits in bond trading and bond underwriting.
However, they added that business for Nomura in the 1997/98 year would be sharply undermined by a scandal, with the size of the expected profit drop depending on how hard the Finance Ministry comes down on Japan's largest brokerage after regulators complete their investigation.
Japanese prosecutors and securities watchdog are investigating Nomura for suspected illegal deals involving ""sokaiya"" racketeers, who extort money from a company by threatening to disturb shareholders' meetings.
In January, Nomura announced pre-tax, parent current profit of 103.69 billion yen ($829 million) for the first nine months of 1996/97, against 91.49 billion yen ($731 million) in actual current profit for the the full 1995/96 year.
""Nomura is expected to be the top in earnings in 1996/97 with profits of more than 100 billion yen ($800 million),"" said Ayako Sato, an analyst at UBS Securities Ltd.
Other analysts said they expect Nomura to post parent current profit -- pre-tax profit which includes gains and losses made on securities investments and other non-operating activities -- of between 120 billion ($952 million) and 140 billion yen ($1.11 billion).
In the first nine months, Nomura posted 81.82 billion yen ($654 million) in stock brokering commission against 105.66 billion yen ($845 million) in 1995/96. Net gains on bond trading stood at 66.33 billion yen ($530 million) in the first nine months against 71.54 billion yen ($572 million).
But industry sources said they would not be surprised if Nomura posts a loss in the current year because many institutional and corporate investors have suspended their business with Nomura since it revealed on March 6 that two of its directors were involved in the suspected illegal deals.
Nomura's share of trading volume on the Tokyo Stock Exchange fell to 9.2 percent in March from 11.4 percent in February, toppling it from the top spot it has held since February 1992.
If Nomura's market share falls by 10 percent, it will lose 12 billion yen ($96 million) in commissions, analysts said.
In addition, Nomura's underwriting business has also been hit by the scandal.
The business daily Nihon Keizai Shimbun reported last week that Nomura had underwritten only 2.5 percent of the domestic straight bonds issued so far in April, compared with 14 percent for all of the previous business year.
Three other big brokerages -- Daiwa Securities Co Ltd, Nikko Securities Co Ltd  8603 T and Yamaichi Securities Co Ltd -- are also scheduled to announce their 1996/97 results later this month.
Analysts estimate Yamaichi's parent current profit at nil in 1996/97 against profits of 15.13 billion yen ($121 million) in the profit in 1995/96, and Nikko to have profit of 40 billion yen ($320 million), down from a profit of 65 billion yen ($520 million).
They expect Daiwa to post profit of 60 billion yen ($480 million), down slightly from 62.56 billion yen ($500 million).
",10
"Japanese life insurers, already unhappy at having to help out ailing Nippon Credit Bank, are angry at the Finance Ministry which they say has ignored trouble at failed insurer Nissan Mutual Life for years.
""The responsibility of the Finance Ministry is heavy,"" a life insurance company official, who declined to be named, said on Friday.
""The ministry has not taken any appropriate action to inform Nissan insurance's policy holders of the company's troubles.
""Nissan's annual reports (over the past two years) did not give any hint that liabilities of the company would exceed its assets by 200 billion yen ($1.58 billion),"" he said.
On Friday, Japan suffered the first failure of a life insurance firm in its post-war history when Nissan Mutual Life Insurance Co was ordered by the Finance Ministry to start shutting down its business.
The president of the medium-sized insurer, Hiroshi Yonemoto, said at a news conference that the company had been suffering from excessive liabilities for the last three to four years, stemming from the bursting of Japan's ""bubble era"" of inflated real estate and stock prices in the late 1980s.
""We sharply increased our assets during the bubble economy period, but the bubble burst and low interest rates have continued.""
He said that the company had taken restructuring steps, but gave up such efforts and continuation of its business due to a loss in the last business year ended March 31.
The Finance Ministry, for its part, pointed the finger of blame for the firm's failure at the management of Nissan Life.
The financial situation of Nissan Life is ""abnormal"" and management responsibility is ""heavy"", Makoto Fukuda, a senior Finance Ministry official, told reporters.
He said that the ministry had found that Nissan Life's financial condition was substantially worse then when it conducted an inspection of the company in September 1995.
But he added: ""In September 1995, we did not think its business was in a crisis.""
Finance Minister Hiroshi Mitsuzuka pledged to protect Nissan Life's policy holders and the Life Insurance Association of Japan, an industry body representing life insurers, said it would work out a liquidation scheme.
Kenjiro Hata, chairman of the Life Insurance Association of Japan, said that a scheme to wind up Nissan Life was expected to be ready in two to three weeks.
Hata told reporters that the insurance body wants to seek capital contributions from major clients of of Nissan Life, such as Nissan Motor Co Ltd and Hitachi Ltd if a new company is set up to take over Nissan Life's business.
The insurer also owns shares in Nissan Motor and Hitachi.
However, industry sources said that it would take some time for the association to work out the scheme.
And even if a company is set up to take over Nissan Life's business, those life insurers who take over the policies of Nissan Life would have to bear a financial burden for a long time since nearly half of Nissan Life's assets are individual pension policies that have guaranteed high returns.
Normally, such high-yield policies account for only seven percent of a life insurer's assets. Protecting policy holders would mean guaranteeing the returns that have been promised until the policies mature, they said.
However, they said that members of the body, now totalling 44, would agree to cough up a total of 200 billion yen ($1.58 billion) to a new company to make up for the estimated excessive liabilities to protect Nissan Life's policy holders.
Earlier this month, ailing Nippon Credit Bank asked both life and non-life insurers to buy a total of 97 billion yen ($769 million) worth of ordinary shares to be newly issued under a radical restructuring plan which was supported by the Finance Ministry.
($1=126 yen)
",10
"The latest scandal at Nomura Securities has seriously damaged the industry's image and the brokerage will be hard-pressed to convince investors it can clean up its act, analysts and market sources say.
In the latest development, the California Public Employees' Retirement Fund said on Tuesday it was suspending business with Nomura. The action came in the wake of a scandal over illicit transactions that could be linked with corporate racketeers.
The fund said, however, that it did not plan to take legal action against Nomura.
Sources close to the company say Nomura, rocked by its second major scandal in six years, will likely unveil a programme at the urging of the Finance Ministry to avoid a recurrence of such shady backroom deals.
The steps are expected to include the establishment of a compliance committee made up of senior management, the sources said. They also said Nomura's senior executives will accept salary cuts to atone for the scandal, in addition to president Hideo Sakamaki's resignation last Friday.
But analysts said Japan's top brokerage was responsible for a grave loss of investor confidence in the ethics of the securities industry as a whole.
The revelations about improper movements of funds between accounts raise fears that profits made in customers' accounts may be moved to brokers' own accounts, destroying the trust between investors and brokerages, they said.
Nomura said on March 6 that two of its directors, who have since resigned, had made discretionary transactions with a corporate client and transferred profits from Nomura's own account to the client's account.
Japanese media have said the corporate client was a relative of a one-time racketeer, but Nomura said it could not confirm the identity of the client.
Japanese newspaper and television reports have said Nomura had obtained profits worth about 40 million yen ($325,000) from trading in shares of Fuji Bank Ltd that it funnelled to the client's account on March 15, 1995.
A spokesman for Nomura declined to comment on the reports.
But Kazumasa Niimi, a senior economist at the Japan Research Institute, said if the reports were true, it raised questions over whether Fuji's share price was affected by Nomura's trading.
He said the volume of trading in bank shares is generally small, meaning trades of that size could influence the market price.
While the investigation is still under way with no charges made, industry sources said the transactions may have violated securities laws banning stock price manipulation.
Industry sources say the investigation is also looking into whether Nomura transferred profits from the brokerage's own account to that of a favoured client and made discretionary transactions without a client's consent.
Nomura sources also said the deals in question were on handwritten order forms, which would be easier to alter than computer printouts usually used to keep a record of transactions.
If the profits are then revealed to have been funnelled to a racketeer, this would also violate the commercial code, they said.
Corporate racketeers, called ""sokaiya"", extort money from companies by threatening to disturb shareholders' meetings or by offering to prevent disruption of the proceedings. Japanese commercial law has banned such payoffs since 1992.
Nomura has remained silent on the repercussions of the scandal since its president's resignation on Friday, saying it cannot comment as the matter is under investigation.
It will hold a regular board of directors' meeting on Wednesday, but a spokesman said the topics for discussion have not yet been decided.
A government source told Reuters last week that the probe by Japan's securities watchdog, the Securities and Exchange Surveillance Commission, or SESC, is likely to take some time.
""In order to complete the investigation as soon as possible, an extraordinary amount of cooperation is needed from Nomura,"" he said.
He added that until recently, Nomura was not as cooperative as the authorities might have hoped.
In the last major scandal to rock Nomura, in 1991, two senior executives resigned from the board over revelations that the brokerage had compensated favoured clients for losses and that affiliates had dealt with gangsters. ($1=123 yen)
",10
"Scandal-tainted Nomura Securities Co Ltd said on Thursday that it could post parent current profits for the current business year despite expected penalties that would temporarily suspend some of its business.
Analysts said, however, that the results at Japan's biggest brokerage for 1997/98 would hinge on when and how hard the Ministry of Finance (MOF) comes down on Nomura after regulators complete their investigation.
Japanese prosecutors and the country's securities watchdog, the Securities and Exchange Council (SESC), are currently investigating Nomura's suspected illegal stock deals linked to a ""sokaiya"" racketeer.
Sokaiya extort money from companies by threatening to expose dubious business practices or to disturb shareholders' meetings.
The SESC is expected to recommend that MOF take punitive action against Nomura, and analysts said that whether Nomura posts a profit this year will depend on when a punitive suspension of operations would occur and how long it would last.
""If the SESC completes its investigation in May and the MOF's administrative punishment ends before the end of September, then Nomura would be able to escape the worst-case scenario,"" said Ayako Sato, an analyst at UBS Securities Ltd.
However, another analyst, who declined to be named, said if the punitive suspension continues into the second half of 1997/98, it might be difficult for Nomura to post a profit.
""If the investigation lasts a long time and the punishment affects Nomura's business in the latter half, it would seriously hurt earnings. It is possible for the company to post a loss,"" he said.
But he added that if the punitive action does not affect business in the second half, it would be possible for Nomura to post a parent current profit of up to 50 billion yen.  
Market sources said they expected the authorities could suspend Nomura's underwriting operations and stock dealing on its own account for up to three months as a penalty for the scandal.
On Thursday, Takamichi Arata, a Nomura director, said at a news conference: ""Even if our business is suspended, we will be able to post profits in the current business year because of a cutback in expenditures in April and thereafter.""
Analysts said, however, that speculation is growing that similar scandals may emerge at other big brokerages and this may delay investigations at Nomura.
""There is talk that the investigation will end after Japan's 'Golden Week' holiday (in the first week in May), but there is also speculation it may take a long time as regulators have started probes of similar wrongdoing at other big brokers,"" an analyst said.
Under Japan's Securities and Exchange Law, the SESC could advise the finance minister to take punitive administrative action against Nomura if it finds evidence of illegal activity. The heaviest penalty would be the revocation of securities licences and the suspension of business for up to six months.
MOF is currently awaiting the outcome of the investigation, a MOF official said, but he added that the focus is on whether Nomura violated the commercial code rather than securities law.
Japanese commercial law prohibits payoffs to racketeers. The securities law bans discretionary transactions and the transfer of a broker's trading profits to the account of a client, both actions which Nomura said two of its directors were suspected of undertaking.
James Fiorillo, an analyst at ING Baring Securities (Japan) Ltd, said he is rather optimistic, adding that Nomura's experience with a scandal in the early 1990s proved that the firm could quickly repair the damage caused by the latest dubious deals.
""In light of this, current forecasts that Nomura will take years to win back business and restore its reputation appear exaggerated,"" he said.
In addition to its stock broking and underwriting business, Nomura is also highly influential in the yen bond market and is Japan's top seller of foreign bonds.
",10
"The scandal surrounding Nomura Securities Co Ltd will force Japan's largest brokerage firm to lay low for a while, but most industry sources and analysts say the mighty firm will again rise to the top.
""It is unthinkable Nomura will fall to the depths of an ordinary firm since it has the strongest distribution network in Japan,"" said an executive at a foreign securities house.
He said the crackdown on Nomura was inevitable as part of Japan's move to create free, fair and global markets.
But he added, ""Nomura is not the only one of Japan's brokerages to keep ties with sokaiya racketeers and I don't think other local brokers have the nerve and ability to take over Nomura's market share.""
On Tuesday Japanese prosecutors raided Nomura in its widening probe into the brokerage's part in payments to a client linked to ""Sokaiya"" racketeers.
Japanese prosecutors and officials of the nation's securities watchdog have been investigating illegal payments by Nomura directors to a company run by a relative of a racketeer.
The payment was made to avoid disruption of a Nomura annual meeting, the deputy prosecutor said. Payoffs to racketeers violate Japan's commercial code and are punishable by law.
The scandal surfaced on March 6 when the powerful brokerage said internal probes had found out that the directors had made discretionary deals and funnelled profits raised through stock trading to a corporate client.
A government source said that the Securities and Exchange Surveillance Commission (SESC) was probing whether the firm itself was also involved.
Japanese newspapers reported on Wednesday that the raid by prosecutors may be aimed at another, potentially more embarrassing, scandal involving politicians and bureaucrats over convertible bonds.
""The raid by regulators was aimed at resolving a deep-rooted problem in Japan's securities industry,"" said Yushiro Ikuyo, first vice president of Smith Barney International.
""Racketeers exist in Japan but not as much as in western countries. The Finance Ministry and prosecutors must have been keen to clean up the problem before Big Bang reforms,"" he said.
Industry sources said the scandal has already eroded Nomura's earnings, particularly in the stock brokering business.
The Nikkei Financial Daily on Tuesday reported Nomura's share of trading volume at the Tokyo Stock Exchange (TSE) has fallen to 6.4 percent after standing at 14.3 percent two weeks earlier.
Major Japanese asset management firms, including Nomura's own Nomura Investment Management Co, several trust banks and life insurers as well as the California Public Employees' Retirement Fund suspended business with Nomura soon after it announced the suspected illegal deals.
The industry sources said that Nomura's stock brokering, dealings on its own account and underwriting business would likely be suspended for months, which may force Nomura to post losses in the coming business year starting April 1.
""Nomura's business will be damaged over the next year. Investors have already reacted harshly to the scandal,"" said an executive at an insurance company
Nomura is expected to post the highest parent current profit among domestic brokers of some 100 billion yen ($806 million) for the business year ending March 31, analysts said.
Traders said Nomura may be partially suspended from trading in bonds.
While this is expected to have little impact on the highly liquid government bond market, traders said the move could cause problems in the smaller corporate bond market, requiring borrowers to offer higher yields to investors.
($1=124 yen)
",10
"Moves by two of Japan's most troubled banks to tackle their massive problem loans are not enough to get in shape for Japan's sweeping ""Big Bang"" financial deregulation, analysts said on Tuesday.
Hokkaido Takushoku Bank Ltd, Japan's 10th biggest commercial bank, and regional bank Hokkaido Bank Ltd, both based in Sapporo, announced they would merge next April and withdraw from overseas operations by next March.
Long-troubled Nippon Credit Bank Ltd (NCB), the smallest of the nation's three long-term credit banks, separately announced that it will restructure, halting overseas operations, selling off its Tokyo headquarters and posting losses to dispose of problem loans.
""As for the merger agreement by the two Hokkaido banks to restructure their operations, it is not impressive at all,"" said Yushiro Ikuyo, first vice-president of Smith Barney International Inc.
""The restructuring programme announced by Nippon Credit Bank is quite drastic, but when taking into account the size of its massive problem loans, the programme falls short of solving its bad loan woes,"" he said.
Hokkaido Takushoku and NCB are among the nation's weakest banks.
The Moody's Investors Service ratings agency assigns its lowest ""E"" ratings to both institutions, along with Chuo Trust & Banking and Yasuda Trust & Banking.
""There are no U.S. banks which received an E rating. Banks with E ratings are those which have been supported (in Japan's regulated system) despite their inefficiency,"" a Moody's officer recently said.
After the announcement of the merger and the restructuring plans, a spokeswoman at Moody's said that analysts in Tokyo and New York were expected to hold a ratings meeting later in the day but did not say if any ratings would be changed.
The Hokkaido merger is seen as putting two problem institutions together, some analysts said.
""It's a step in the right direction but they are taking two banks with huge bad debt problems -- merge them together and you've got a colossal bad debt problem to deal with,"" said Brian Waterhouse, an analyst at HSBC James Capel.
""Unless we see some public funds being used to assist with this it is unlikely that they will deal with all their problem loans before the merger,"" he said.
Problem loans at Hokkaido Takushoku totalled 936 billion yen ($7.54 billion) at the end of last September, accounting for 13.34 percent of loans outstanding.
Hokkaido Bank said its problem loans totalled 167 billion yen ($1.34 billion) at the end of September, but financial analysts say the actual number is larger.
NCB will meanwhile dispose of 460 billion yen ($3.70 billion) in problem loans in 1996/97, enabling the bank to cover 48 percent of its problem loan portfolio.
However, Yukiko Ohara, an analyst at UBS Securities Ltd, said that NCB's restructuring is not enough to solve the problem loan mess.
""In order to tackle Japan's problem loan woes, you will have to set up a clear system to determine how public money will be used,"" she said. ($1=124)
",10
"Japanese prosecutors on Tuesday raided the country's biggest brokerage, Nomura Securities Co Ltd, in a dramatic sign of a widening probe into its part in payments to a client linked to racketeers.
The late afternoon raid on Nomura headquarters in central Tokyo was by both prosecutors and officials of the nation's securities watchdog, the Securities and Exchange Surveillance Commission (SESC).
The highly public raids, including tipoffs to the media that they were imminent, appeared to signal the Nomura incident could become a showcase as Japan seeks to clean up business practices and deregulate its economy.
Coinciding with the headquarters raid, another 90 officials swooped on 10 other locations and for the first time formally spelled out in detail what they were investigating.
Deputy chief prosecutor Kunihiro Matsuo told reporters the raids were to investigate a Nomura director's illegal payment of 38 million yen ($309,000) to a company run by a relative of a racketeer to avoid disruption of a Nomura annual meeting.
Matsuo said the other raids included searches of the homes of the racketeer or ""sokaiya"" and the Nomura director involved in the scandal, Shimpei Matsuki.
The scandal surfaced on March 6 and Matsuki and fellow director Nobutaka Fujikura resigned on March 10 after internal probes found they made discretionary deals banned under Japanese law and funnelled profits to a front company for the racketeer.
Sokaiya, often linked to ""yakuza"" crime syndicates, extort money by threatening to expose dubious business practices or to disturb shareholders' meetings -- called ""sokai"" in Japanese.
Nomura president Hideo Sakamaki stepped down on March 14 to atone for the scandal. He became an adviser to the company, and chairman Masashi Suzuki took over his position while retaining the chairmanship.
Nomura, one of the world's most powerful financial institutions, is involved in bond and share trading.
It exerts a powerful influence on every business in the yen bond market and is also Japan's top foreign bond seller.
The company has seen key foreign and domestic clients suspend business with it since the scandal broke.
Nomura has been a key player in Japanese financial markets for most of this century, including underwriting firms such as Sony Corp, which were part of Japan's postwar economic miracle.
In a scene akin to a Japanese film, 90 officials in business suits, led by a man with a briefcase, marched military-style through the front doors of Nomura's modernistic headquarters.
They firmly locked the doors, shutting out journalists gathered for a raid designed to have maximum publicity value.
Reports that the raids were imminent hit Nomura's share price, which ended the day down 20 yen (16 cents) at 1,440 ($11.70).
But brokers said the impact of the news was limited as the market had expected such a development.
""What the market is more concerned about is any punitive measures which will be taken against the brokerage,"" said Yasuo Ueki, Nikko Securities Co Ltd general manager.
""The punishment will probably have an effect on the firm's business and could have an impact on the whole brokerage industry as well,"" Ueki said.
The investigation comes six years after Nomura and other leading Japanese brokerages were hit by a scandal over improper compensation to favoured clients.
Top executives at Nomura resigned in 1991 over the improper compensation and revelations that affiliates had done deals with gangsters. ($1=123 yen)
",10
"The top executive at Japan's largest brokerage, Nomura Securities, was reported on Friday to be preparing to step down over a scandal that could result in stiff penalties for the securities firm.
In the latest chapter in the saga of the scandal-tainted House of Nomura, the brokerage is being investigated by Japan's securities watchdog over dubious deals that Nomura admitted on Thursday appear to have broken the law.
Japan's Jiji news agency said on Friday president Hideo Sakamaki had offered to step down once the investigation into the transactions had been completed.
Nomura declined to comment on the report but rumours were rife in the securities industry that such a management sacrifice was inevitable after the brokerage was hit by its second scandal in just six years.
Sakamaki's predecessor in the post stepped down over a similar scandal in 1991 over improper compensation of elite clients and links between Nomura affiliates and organised crime.
Financial authorities served notice on Friday that Nomura could expect stern treatment if the securities watchdog concludes that the deals did violate the law.
Finance Minister Hiroshi Mitsuzuka said the ministry will take any necessary strict steps against Nomura after the Securities and Exchange Surveillance Commission (SESC) completes its probe.
The case is another blot on the reputation of Japan Inc after a series of scandals over unauthorised trading in the bond and copper markets, shady oil deals and overly cosy ties in the ""iron triangle"" of politics, business and bureaucracy.
The two Nomura directors involved in the suspect deals apparently made discretionary transactions and moved profits raised from Nomura's own funds to a corporate customer's account, actions which are against the law, Nomura vice president Atsushi Saito said on Thursday.
He said he could not confirm reports the corporate client was run by a relative of a ""sokaiya"" racketeer, but said that the client had a longstanding relationship with the directors and family ties to a Nomura shareholder.
Sokaiya, often linked to Japan's ""yakuza"" crime syndicates, typically try to extort money from firms by threatening to expose dubious business practices.
Nomura is no stranger to controversy. It endured the stiffest penalties among Japan's Big Four brokers in the early 1990s when brokerages were found to have been compensating favoured clients for losses. Japan eventually banned brokers from making discretionary transaction contracts with clients as these give brokers free rein to make investment decisions.
In 1993, Nomura dropped a two-year libel suit against the British publisher of a bestseller that linked the company with insider trading, blackmailers and yakuza gangsters.
Nomura said that it had decided to drop its suit because the comments to which it took exception in the original English language version of the book, written by U.S.-born stockbroker Al Alletzhauser, did not appear in the Japanese translation.
Sakamaki's predecessor Yoshihisa Tabuchi was quoted at the time as saying failure to take action against the book would mean Nomura acknowledged the illegal acts described.
A top management change could hamper Nomura's ability to take swift, proactive steps to deal with Japan's ""Big Bang"" financial reforms, which aims for more transparency in the market, said Ayako Sato, an analyst at UBS Securities Ltd.
But, she added, ""I don't think Nomura will fall from the current top position even in the long term.""
In the past, illegal activity by brokers was punished by a partial business suspension but some industry officials warned that a more severe penalty could be imposed on Nomura this time, such as the suspension of sales and purchases on Nomura's own account.
Nomura shares fell on Friday, losing 50 yen to close at 1,530 yen.
",10
"Nippon Credit Bank Ltd, one of Japan's most-troubled banking groups, had 10 trillion yen ($81.3 billion) of its most senior debt cut to junk levels by Moody's on Friday,
Financial analysts said the move will raise costs for Nippon Credit and represented a vote of no-confidence in Japan's attempts to reform its financial sector.
The bank, in the middle of a restructuring program that is being closely watched by Japan's powerful Ministry of Finance, said the move was regrettable.
""We have to say that it is based on a complete misunderstanding, taking into account the environment surrounding our bank's business situation and other factors,"" the bank said in a statement.
Analysts said that the downgrading would be a serious blow for NCB and would raise its borrowing costs. As one of Japan's three long-term credit banks, NCB raises money through issuing debentures instead of taking deposits.
Moody's said it cut the ratings of NCB debentures to Ba1 from Baa3 as it expects NCB may ultimately require outside assistance because of its ""substantial unrealised losses"" in its loan portfolio. Such a rating puts the debentures below investment grade, commonly known as junk-bond status.
Analysts also said Moody's action showed the respected firm had doubts about the ability of Japan's financial authorities to deal with possible bank failures in the process of Tokyo's ""Big Bang"" reforms to liberalise markets by 2001.
It is the first time Moody's has given junk status to the senior debt of a Japanese bank.
The Ministry of Finance expressed surprise at the move.
""I really don't know what Moody's based their decision on,"" a senior MOF official told Reuters.
He also said that debentures issued by Japanese banks were secure and added that he did not expect any disruptions to financial markets due to concerns over NCB's financial health.
""But Moody's seems to be sceptical about Japan's monetary authorities. That's disappointing, but we have never left depositors with losses in case of failures at financial institutions,"" the official said.
Smith Barney International analyst Yushiro Ikuyo said that the action would quickly boost NCB's funding costs abroad.
Another analyst, who declined to be identified, said that insurers, who have been increasingly careful about their investment risks, may gradually reduce the amount of NCB debentures they buy.
""Moody's decision may force those investors to take a second look at purchasing NCB debentures. It could have an enormous impact on NCB's business.""
Brian Waterhouse, a senior analyst at HSBC James Capel Japan, agreed, saying that Moody's downgrading would rekindle persistent concerns about the extent of problem loans NCB owns and its funding difficulties.
Investors see international credit rating agencies such as Moody's and Standard & Poor's as being in the best position to judge the financial condition of NCB, he said.
Yields on five-year bank debentures issued by NCB jumped soon after the Moody's announcement.
But its share prices kept its earlier gains on technical buying-back, closing up 21 yen (17 cents) at 301 yen ($2.45) after hitting its all-time trading low of 177 yen ($1.43) on February 5.
""There is a great technical need to buy back the shares and the market turned a blind eye to the news of the downgrade,"" a broker at a medium-sized brokerage said. ($1=123 yen)
",10
"Japan's securities watchdog filed complaints with prosecutors Tuesday alleging that Nomura Securities Co Ltd, Japan's biggest brokerage, and three former executives made illegal to payments to a client.
While the regulators did not identify the client, he is believed to be one of Japan's ""sokaiya"" racketeers, who extort money from corporations by threatening to disrupt shareholder meetings.
Japan's commercial law has prohibited payoffs to such racketeers since 1982.
Government sources said the Securities and Exchange Surveillance Commission complaints allege that Nomura and the employees made illegal payments to the client totalling 49.7 million yen ($417,600).
It was the first time that regulators have charged that the company was itself involved in the scandal. Nomura has repeatedly denied any participation in the scam, saying it was the work of three former executives.
It is now up to prosecutors to determine if there is enough evidence to file charges in the case.
In a sign that the probe may have a sweeping impact on Nomura, the SESC said that some of the improper orders were handled by more junior employees, which could bring more names into the scandal.
Nomura issued a statement apologising for the scandal.
""We deeply apologise for the inconvenience the scandal has caused to our customers and the public,"" it said.
""We are taking the complaints seriously...We will make a 'fresh start' to prevent a recurrence of such events.""
The government sources said the SESC would start drawing up proposals for civil penalties against Nomura immediately. But they added that it was too early to say how long it would take the SESC to present the proposals to the Finance Ministry.
Market sources say the Finance Ministry may suspend part of Nomura's operations, including stock dealing on its own account, for about three months as punishment for the scandal.
That would be the heaviest ever penalty imposed on a securities firm in Japan.
The scandal has already casted a long shadow over Nomura's business and prompted many clients to shun the financial powerhouse.
In March alone, Nomura's current profit dropped to about half the usual monthly levels due to the scandal, which cut its brokerage commissions and its share of the underwriting market, a company executive said in April.
Nomura's share of trading volume on the Tokyo bourse fell to 9.2 percent in March from 11.4 percent in February, toppling it from the top spot it had held since February 1992.
In the first fallout from the SEC action, the Ministry of Finance said late Tuesday that Nomura was being suspended from taking part in Japanese Government Bond auctions and underwriting activities.
Nomura's admission in March that two of its directors were involved in transferring Nomura money into the account of a corporate client linked to a sokaiya racketeer was a major blow to the image of the Japanese brokering industry.
In 1991, Nomura and other leading Japanese brokerages were found to be paying improper compensation to favoured clients. Top executives at Nomura resigned that year over payments and revelations that affiliates had done deals with gangsters.
Nomura made a sweeping reshuffle of its top management late last month in an effort to win back public trust in the wake of the scandal.
",10
"Two of Japan's most troubled banks took action on Tuesday to end their long-running financial problems, with one finding a merger partner and the other finalising a radical restructuring.
The moves are seen as just the beginning of a drive by the the indebted banking industry to get ready for Japan's emerging ""Big Bang"" era of financial deregulation.
Hokkaido Takushoku Bank, Japan's 10th-largest commercial bank, said it will merge with the smaller Hokkaido Bank Ltd and cease its overseas operations to become a ""super-regional"" bank.
Such super-regionals use their local power base to build a large presence that rivals their big-city competitors.
Meanwhile, Nippon Credit Bank Ltd, one of three long-term credit banks in Japan, was expected to hold a news conference later in the day on a restructuring that would include an injection of government money and bankruptcy filings for its debt-ridden affiliates.
Hokkaido Takushoku said it had no choice but to retrench, ending lofty ambitions of being a global player in the banking world.
""We made the decision (on the overseas pullout) believing that it was inevitable to ensure leverage in our business while promoting bad loan write-offs,"" it said in a statement.
Hokkaido Takushoku said it and Hokkaido Bank would merge as equals by April 1998.
Both are headquartered in Sapporo, the largest city on Japan's northernmost main island of Hokkaido.
The merger will cut costs at the two banks and mean the elimination of 2,000 jobs.
It will also help Hokkaido Takushoku face its mountain of bad debts. The bank has long been considered the most troubled of Japan's major city banks and a merger candidate.
As part of the new focus it will shut down its six overseas branches in locations including New York and London and seven representative offices. It said the withdrawal from overseas operations would have only a limited impact on its business.
The two Hokkaido banks said they must be able to provide advanced financial services and be in strong financial condition in an era of deregulation in Japan's financial industry.
""We have reached the conclusion that the merger on an equal bases will best respond to the needs of the times,"" they said.
Hokkaido Takushoku will cut costs by 40 billion yen ($322 million) per year through steps such as rationalising overlapping branches in Hokkaido, Hokkaido Takushoku vice president Chuji Ohno told a news conference.
NCB's announcement of its overhaul is expected to include an end to most or all of its overseas operations.
As a long-term credit bank, NCB raises cash through issuing debentures rather than taking deposits.
Earlier in the day, it put three non-bank financial affiliates, estimated to have debts of 2.025 trillion yen ($16.3 billion), into bankruptcy protection.
The Japanese government, which has spoken of the benefits of deregulation and leaving the market alone, has meanwhile taken a strong hand in ensuring that NCB survives, urging other banks to accept newly floated shares to help it rebuild its capital base.
The Ministry of Finance (MOF) said on Tuesday that it had met with 12 banks and 30 insurance companies but did not give details of the discussions.
Financial analysts have criticised the NCB plan, saying it would further weigh down other big banks, which are themselves in far from robust financial health.
MOF also said it planned to use 80 billion yen ($645 million) from a special fund originally created to cope with bad loans from the collapse of ""jusen"" housing loan firms.
The jusen were hardest hit by the near-collapse of the real estate market when Japan's economic ""bubble"" burst in the early 1990s. The fallout from that is the main demon haunting all of Japan's financial world. ($1=124 yen)
",10
"A year after being formed in a Japanese financial ""megamerger"", the world's biggest bank is in better shape than its domestic rivals but faces tough challenges to become a genuinely global player, analysts say.
The creation of the Bank of Tokyo-Mitsubishi Ltd last April through the marriage of two prominent Japanese banks was touted as a good match with the potential to create a global institution in terms of quality as well as sheer size.
The bank has much to celebrate on its first anniversary -- a strong share price and a relatively light burden of bad loans, thanks to conservative lending policies by the individual banks in the investment boom of the 1980s and a pre-merger drive to clean up problem loans.
But analysts say Tokyo-Mitsubishi will have to grasp the challenge of Japan's ""Big Bang"" reforms and tackle efficiency and profitability problems to ensure sustained success and an international profile to match its giant proportions.
The merger of Bank of Tokyo and Mitsubishi Bank created the world's biggest bank in terms of assets, which exceed 70 trillion yen ($569 billion), blending Bank of Tokyo's strength in overseas operations with Mitsubishi's good domestic network.
""Of all Japanese banks, Tokyo-Mitsubishi has the greatest potential to become a winner in intensely competitive global financial markets,"" said Yoshinobu Yamada, an analyst at Merrill Lynch Japan Inc. But he said there was work to do.
""To be a winner amid fierce competition in deregulated markets, the key thing is to get rid of unprofitable businesses from the balance sheet.""
""Big Bang"" reforms aimed at making Japanese financial markets ""free, fair and global"" by 2001 will expose banks to greater competition both from domestic and international rivals. The proposed deregulation will lift barriers between various financial sectors that have hitherto protected the banks' business territory.
A Tokyo-Mitsubishi spokesman told Reuters the bank was aware of the challenges and opportunities presented by the Big Bang and was speeding up its streamlining plans. More concrete clues to the bank's strategy will emerge next week when it is due to reveal a three-year management plan.
""Our aim in the first year was harmonising the two banks' ways of business without inconveniencing our customers,"" the spokesman said.
Katsuhito Sasajima, an analyst at Nikko Research Center, said the benefits of the union have yet to be fully felt due to the initial cost of merging businesses and corporate cultures. ""The real test in getting maximum benefit from the merger will come in the next business year and thereafter,"" he said.
Analysts said its profits from the core banking business for the year to March 31, before bad loan write-offs, should be robust. But despite its strengths, in international terms the bank has a low ranking for efficient use of capital.
Some analysts said moves to cut back unprofitable assets may be hampered by the bank's desire to become an international player offering a variety of products.
In its reforms, Tokyo-Mitsubishi may also be held back by traditional Japanese corporate values stressing loyalty to key customers and a responsibility to protect jobs, even at the expense of the bottom line, analysts said.
""While foreign analysts say big banks like BOTM should cut lending to big corporate customers to boost profitability. I don't think they will do so even if the existing return on those loans is small,"" he said. ""Managers at Japanese banks do not pay much attention to shareholders but focus on the size of profits and job security for themselves and their employees.""
The bank stands out not only for its size but in the quality of its loans. Problem loans accounted for 3.4 percent of overall lending at the end of September, the second-lowest rate among Japan's top 20 banks.
The bank has said it aims to boost its return-on-equity (ROE) ratio -- a gauge of efficiency in the use of capital -- to 10 percent. But its ratio was a mere 0.87 percent in the first half of the current business year, from last April to September, compared with rates above 30 percent for many U.S. and European banks operating internationally, analysts said.
To streamline operations, Tokyo-Mitsubishi announced last year that it would cut its work force to 18,000 by the end of March 1999. At the end of September 1996, the number totalled 20,014. It also plans to cut domestic offices by 10 percent over the coming two years from 363 at the end of last March.
David Atkinson, a financial analyst at Goldman Sachs (Japan) Ltd, said in a report that Japanese financial markets are inefficient because banks have very large assets on their balance sheets at incredibly low levels of profitability.
""If city banks (such as Tokyo-Mitsubishi) do not restructure their existing balance sheets but go into Big Bang by simply adding new businesses, then there will be no winners,"" he said. ($1=123 yen)
",10
"Japanese workers are facing another year of marginal salary increases as traditional systems of fixed pay rises give way to greater wage flexibility and growing job insecurity.
With Japanese companies struggling to maintain competitiveness and profit margins in a tough global marketplace, employers are showing waning enthusiasm for the ""shunto"" spring wage talks in which pay hikes used to be standardised across industrial sectors.
Economists estimate that the average wage rise for Japanese salaried workers at big companies will be around 2.9 percent for the coming business year, which starts in April, against an actual 2.86 percent, or 8,712 yen ($72) per month increase for 1996/97 -- less than the rise targeted by labour unions.
The central group representing Japan's labour unions is seeking an average wage increase of 4.4 percent, or 13,000 yen ($108), this spring, similar to last year's target.
Under a system introduced 40 years ago, labour representatives and management hold their shunto ""spring offensive"" in February and March to seek unified wage increases through collective negotiations.
A fixed pay scale was one of the cornerstones of the lifetime employment system under which armies of salaried workers toiled long hours to fuel Japanese economic growth, assured of a rising paycheck in return for years of service.
But with more companies introducing merit-based pay and cutting costs to stay competitive, the power of labour unions to secure broad-based raises has ebbed.
This year, labour is calling for increased wages in light of the scheduled rise in the nation's consumption tax from three to five percent in April but the unions' bargaining power is limited, given the weak economy and a traditional reluctance to resort to strike action.
Economists say that while corporate earnings are projected to improve in 1996/97, helped by the weaker yen, management wants this to be reflected in bonus payments -- which are flexible -- rather than annual pay increases.
They say managers will not meet labour demands, given Japan's stable consumer prices and rising competition, particularly from other Asian countries with low wage costs.
Atsushi Ohsaka, a director at Asahi Bank Ltd, said that the ""shunto"" system had benefits for both management and labour when Japan had a job-for-life system -- at least for certain male salaried workers -- as well as seniority-linked pay and a growing economy. ""But the situation is changing,"" he said.
Under the traditional system, older workers would be paid more even if their productivity slowed, while some younger workers would get less than their performance merited.
Management feels it is difficult to maintain such a system in a mature economy and a rapidly ageing society, economists said. In addition, the gap between the relative financial strengths of individual companies and sectors is widening, making it hard to set standardised pay rises.
For instance, the Non-Government Railways Association, an employers' body, decided earlier this month that its members would each hold separate ""shunto"" talks with labour rather than collective ones.
Management and labour at Takeda Chemical Industries Ltd, an Osaka-based pharmaceutical company, are negotiating to introduce a system of performance-based pay from April, a company spokeswoman said.
Masao Yuki, executive vice president at Nikko Securities Co Ltd, recently said that the most important and urgent issue for Nikko was how to cut personnel costs while raising the salaries of talented young workers and maintaining overall morale. He acknowledged this would be a very difficult task and he had no specific ideas at this time.
Asahi Bank's Osaka said: ""It is inevitable that Japan's employment system as well as shunto will change at a time of economic globalisation and fierce international competition...But the change will be gradual...as humans are not just objects.""
",10
"Two of Japan's most troubled banks took action on Tuesday to end their long-running financial woes, with one announcing a radical restructuring and the other finding a merger partner.
The moves are seen as just the beginning of a drive by the the indebted banking industry to get ready for Japan's emerging ""Big Bang"" era of financial deregulation.
Nippon Credit Bank Ltd, one of three long-term credit banks in Japan, announced that it would cease overseas operations, sell off its Tokyo headquarters as well as other property and write off bad loans totalling 460 billion yen ($3.7 billion).
Hokkaido Takushoku Bank, Japan's 10th-largest commercial bank, meanwhile, said it will merge with the smaller Hokkaido Bank Ltd and cease overseas operations to become a ""super-regional"" bank.
NCB said the restructuring will boost earnings by 50 billion yen ($403 million) over the next five years. It hopes to gain 67 billion yen ($540 million) from the real estate sales and will also eliminate 600 jobs to cut costs.
Despite the moves, NCB president Hiroshi Kubota told a news conference that he cannot rule out the possibility of a tie-up or merger with other banks in the future.
Earlier on Tuesday, NCB put three non-bank financial affiliates under bankruptcy protection.
As a long-term credit bank, NCB raises cash through issuing debentures rather than taking deposits.
The Japanese government, which has spoken of the benefits of deregulation and leaving the market alone, has taken a strong hand in ensuring that NCB survives, urging other banks to accept newly floated shares to help it rebuild its capital base.
The Ministry of Finance (MOF) also said it planned to use 80 billion yen ($645 million) from a special fund created to cope with bad loans from the collapse of ""jusen"" housing loan firms.
Finance Minister Hiroshi Mitsuzuka told a news conference that the capital increase and disposing of bad loans ""will substantially improve NCB's business foundation and will contribute to the stability of financial systems both at home and abroad"".
Financial analysts have criticised the NCB plan, saying it would further weigh down other big banks, which are themselves in far from robust financial health.
In addition, some said the moves were too timid.
""The restructuring programme announced by Nippon Credit Bank is quite drastic, but when taking into account the size of its massive problem loans, the programme falls short of solving its bad loan woes,"" said Yushiro Ikuyo, first vice president of Smith Barney International Inc.
Hokkaido Takushoku said it had no choice but to retrench, ending lofty ambitions of being a global player in the banking world.
""We made the decision (on the overseas pullout) believing that it was inevitable to ensure leverage in our business while promoting bad loan write-offs,"" it said in a statement.
Hokkaido Takushoku said it and Hokkaido Bank would merge as equals by April 1998.
Both are headquartered in Sapporo, the largest city on Japan's northernmost main island of Hokkaido.
The merger will cut costs at the two banks and mean the elimination of 2,000 jobs.
It will also help Hokkaido Takushoku face its mountain of bad debts. The bank has long been considered the most troubled of Japan's major city banks and a merger candidate.
""It's a step in the right direction but they are taking two banks with huge bad debt problems -- merge them together and you've got a colossal bad debt problem to deal with,"" said Brian Waterhouse, an analyst at HSBC James Capel.
As part of the new focus it will shut down its six overseas branches in locations including New York and London and seven representative offices. It said the withdrawal from overseas operations would have only a limited impact on its business. ($1=124 yen)
",10
"The criminal complaint filed against Nomura Securities Co Ltd on Tuesday reveals a widening circle of players in a pay-off scandal that has rocked the firm, dashing its hopes for a quick end to the affair.
Japan's Securities and Exchange Surveillance Commission (SESC) filed a criminal complaint with prosecutors alleging that Nomura, two former executives and a former general manager compensated a client for investment losses, government sources said.
The sources said what was unusual about the latest scandal were revelations that company executives had asked junior staff to conduct illegal deals to compensate clients for stock trading losses for a long time.
But the securities watchdog decided not to take action against the junior staffers involved in the illegal deals, the sources said.
""The SESC decided not file a complaint against Nomura staff who had been actually involved in the transactions,"" a government source said.
Besides the brokerage, the SESC took action against former Nomura directors Shimpei Matsuki and Nobutaka Fujikura, both of whom resigned on March 10 as directors after Nomura's internal probe found they had made discretionary deals banned under Japanese securities law and funnelled profits to the corporate client.
The other was former general manager Osamu Fujita, who made the transactions under Fujikura's orders, the sources said.
They also said that Nomura continued the practice of making illegal compensation payments even after it was involved in an industry-wide loss compensation scandal in 1991.
Since the scandal was revealed by Nomura itself on March 6, the company's executives, including then president Hideo Sakamaki, insisted that they believed only the two former directors were involved in the pay-offs.
Sakamaki has since been forced to step down to take responsibility for the scandal.
With the SESC's latest move, the focus has now shifted to when the Finance Minister will impose penalties on Nomura and how severe they will be.
Analysts said that Nomura's business results for 1997/98 will depend on when and how hard the Ministry of Finance (MOF) comes down on Nomura.
If administrative penalties are severe and the ramifications extend into the second half of 1997/98, Nomura may be forced to post losses in 1997/98, they said.
The Japanese watchdog lacks the right to take punitive action itself but can recommend that the finance minister mete out administrative punishment and can ask prosecutors to take legal action against possible criminal violations.
Finance Minister Hiroshi Mitsuzuka has said that the ministry would impose strict penalties against Nomura if the SESC were to propose that administrative action be taken against the company.
The sources said the securities watchdog would start drawing up its recommendations for penalties against Japan's top brokerage now that it had filed a complaint with prosecutors.
However, they said it was too early to say how long it would take the SESC to present its proposals to MOF.
A senior Finance Ministry official said after the scandal was revealed that MOF was focusing on whether Nomura had violated the commercial code, rather than the securities law. If the SESC investigation finds that pay-offs were made to a racketeer, the ministry will impose severe administrative penalties against Nomura, he said.
However, the client at the centre of the latest Nomura scandal was not included in the complaints, as the SESC could not confirm the role of the client.
In late March, prosecutors said that the client was linked to a ""sokaiya"" racketeer. Sokaiya extort money from a company by threatening to disturb a shareholders' meeting, and Japan's commercial law has prohibited payoffs to racketeers since 1982.
",10
"Japanese prosecutors on Tuesday raided the country's biggest brokerage, Nomura Securities Co Ltd, in a dramatic sign of a widening probe into its part in payments to a client linked to racketeers.
The late afternoon raid on Nomura headquarters in central Tokyo was by both prosecutors and officials of the nation's securities watchdog, the Securities and Exchange Surveillance Commission (SESC).
The highly public raids appeared to signal that the Nomura incident could become a showcase crackdown as Japan seeks to clean up business practices and deregulate its economy.
Coinciding with the headquarters raid, 90 officials raided 10 other locations and for the first time formally spelled out in detail what they were investigating.
Deputy chief prosecutor Kunihiro Matsuo told reporters the raids were to investigate a Nomura director's illegal payment of 38 million yen ($309,000) to a company run by a relative of a racketeer to avoid disruption of a Nomura annual meeting.
Matsuo said the other raids included searches of the homes of the racketeer, or ""sokaiya,"" as well as the Nomura director involved in the scandal, Shimpei Matsuki, and other Nomura executives.
Police have said Sokaiya, often linked to ""yakuza"" crime syndicates, extort money by threatening to expose dubious business practices or to disturb shareholders' meetings -- called ""sokai"" in Japanese.
The scandal surfaced on March 6. Matsuki and fellow director Nobutaka Fujikura resigned on March 10 after internal probes found they made discretionary deals banned under Japanese securities law and funnelled profits to a front company for the racketeer.
Individuals found to have violated the law would face a fine of up to one million yen ($8,100) and a maximum one-year jail sentence. If the company is found in violation, the fine is up to 100 million yen ($813,000).
A government source said that the SESC had decided to search the firm's headquarters while investigations were still under way because of concerns that evidence could be hidden.
The company said on Tuesday it regretted the raids but would cooperate with investigators.
Nomura president Hideo Sakamaki stepped down on March 14 to atone for the scandal. Chairman Masashi Suzuki took over his position while retaining the chairmanship.
Nomura, as well as share trading, exerts a powerful influence on every business in the yen bond market and is also Japan's top foreign bond seller.
The company has seen key foreign and domestic clients suspend business with it since the scandal broke.
Nomura has been a key player in Japanese financial markets for most of this century, including underwriting firms such as Sony Corp, which were part of Japan's postwar economic miracle.
In a scene akin to a Japanese film, 90 officials in business suits, led by a man with a briefcase, marched military-style through the front doors of Nomura's modernistic headquarters.
They locked the doors, shutting out journalists gathered for a raid designed to have maximum publicity.
Reports of the raids hit Nomura's share price, which ended the day down 20 yen (16 cents) at 1,440 yen ($11.70).
""What the market is more concerned about is any punitive measures which will be taken against the brokerage,"" said Yasuo Ueki, Nikko Securities Co Ltd general manager.
""The punishment will probably have an effect on the firm's business and could have an impact on the whole brokerage industry as well,"" Ueki said.
The investigation comes six years after Nomura and other leading Japanese brokerages were hit by a scandal over improper compensation to favoured clients.
Top executives at Nomura resigned in 1991 over the improper compensation and revelations of deals with gangsters.
($1=123 yen)
",10
"The Industrial Bank of Japan Ltd (IBJ) is working on radical reforms of its corporate structure and staff policies to gear up for the approaching era of ""Big Bang"" deregulation, financial sources said on Wednesday.
The bank will announce the plan, which is being spearheaded by president Masao Nishimura, in the coming months, they said.
The move would be another sign of the drive among Japan's debt-burdened banking industry to boost efficiency ahead of the reforms, which aim to liberalise the financial markets by 2001.
Nishimura held a luncheon meeting with analysts last week and sent a strong signal that the bank would soon clarify its strategy for success in a competitive, deregulated environment after Big Bang, they said.
This could include performance-related pay and other mechanisms designed to reward expertise and initiative rather than seniority.
An IBJ spokesman confirmed that president Nishimura had the meeting with economists and analysts, but did not give further details.
IBJ is working on a programme which includes a change in its corporate structure and the introduction of pay based on individual merit, said the sources, who did not want to be identified.
In Japan, tinkering with personnel practices is widely considered taboo, particularly at big banks, which are generously staffed compared with their international counterparts.
IBJ is aiming to be an international investment bank offering a variety of products to corporate customers and also intends to use a financial holding company, they said.
Nishimura told the Nihon Keizai Shimbun recently that the bank was considering boosting efficiency by setting up a company with a bank, securities house and trust banking firm under its umbrella.
Japan is expected to lift a ban on establishing financial holding companies next year, they said.
Analysts said that under a holding company, barriers between banks, brokers and insurers could be broken down and major banks could streamline their financial groups and bail out weaker affiliates.
The sources said that a sense of crisis is needed at the management level of Japanese banks as the reforms aimed at deregulating Japanese financial markets by 2001 will expose banks to greater competition from both domestic and international rivals.
If IBJ were to announce a radical reform programme, it would probably be welcomed by investors, they said.
IBJ, the biggest of Japan's three long-term credit banks, provides long-term loans to big corporations by mainly obtaining funds through bank debenture issues, not deposits.
However, the businesses of long-term credit banks have been hurt by recent moves by corporate clients to raise funds through the securities market.
Worries about their business outlook have also increased as the proposed Big Bang deregulation will lift barriers between various financial sectors that have hitherto protected the banks' business territory, they said.
",10
"Japan suffered the first failure of a life insurance firm in its post-war history on Friday, when Nissan Mutual Life Insurance Co was ordered to start shutting down its business.
The Finance Ministry announced that it had instructed the medium-sized Tokyo-based life insurer to halt most business, except for servicing current customers, after the company said it had decided to wind up operations.
It was the first such order against a life insurance company since the nation's financial system was restructured after World War Two.
Financial analysts said the move would speed up a much-needed restructuring of Japan's life insurance industry.
Finance Minister Hiroshi Mitsuzuka told a news conference that his ministry had received a report from Nissan Life saying that it had come to a decision to discontinue business at an emergency board meeting held earlier on Friday.
""After receiving the report, I thought it was my duty as finance minister to deal with the problem in a swift manner and eliminate any worries,"" Mitsuzuka said.
Mitsuzuka pledged to protect all policyholders of Nissan Life in an attempt to avoid any resurgence of worries over the already fragile financial system, which has been hit hard by a series of bank failures and financial scandals.
But the Finance Ministry said it was not considering using tax money to liquidate Nissan Life as it did for failed ""jusen"" housing loan companies last year.
Mitsuzuka said Nissan Life's failure was due to its failure to manage its investment portfolio properly. Insurance companies typically rely on investment earnings for a large share of their earnings.
Mitsuzuka said there were no similar cases involving other Japanese life insurance companies.
Mitsuzuka said it was the first failure of a Japanese life insurance company in the postwar period and added: ""I hope to make it the last.""
Nissan Mutual Life suffered heavy losses through excessive stock and real estate investment during Japan's late-1980s ""bubble"" era of inflated asset prices.
A Finance Ministry official termed Nissan Life's financial situation ""abnormal"", with its liabilities exceeding assets by about 200 billion yen ($1.58 billion).
Although the firm had been striving to improve its business by itself, the hefty financial burden made it difficult for it to continue business.
Mitsuzuka said the ministry was preparing to announce who would manage the company's insurance policies and added that the life insurance association would likely become involved.
But he added that further discussions would be held on how to transfer insurance policies to other companies.
The news came as a surprise to the financial markets but there was no big sell-offs of shares or bonds and the Nikkei stock index ended the morning session with a small gain.
""The impact of Nissan Life was unexpectedly small, and that gave relief to the market,"" said Seiki Orimi, manager of the stock information service office at Dai-Ichi Securities Co Ltd. ($1=126 yen)
",10
"Japan's securities industry reacted cooly on Thursday to draft proposals by the ruling Liberal Democratic Party (LDP) to speed up the implementation of the government's ""Big Bang"" reform plan.
According to a draft report obtained by Reuters, the LDP's administrative reform panel proposes deregulating 19 financial areas from April, 1998, including abolishing the securities transactions tax and liberalising brokerage commissions on stock transactions.
The proposals also call for allowing banks' securities subsidiaries to engage in stock broking business in 1998/99; enabling banks to sell investment trust funds through their branch networks in the same year, and allowing leasing and credit firms to issue commercial paper from 1997/98.
""The financial areas in the report cover most areas in which deregulation must be considered,"" said Takashi Kanasaki, a managing director at Yamaichi Securities Co Ltd.
""But we don't think all the steps and the time tables to implement Big Bang reforms will be decided by the LDP alone as the Finance Ministry is also working out realistic steps to do so,"" he said.
Last November, Prime Minister Ryutaro Hashimoto unveiled a five-year plan to liberalise Japan's financial markets and catch up with reforms carried out more than a decade ago in Europe and North America.
A special committee of an advisory panel to the Finance Ministry is currently working out measures to realise the Big Bang"" reforms. It will finalise its proposals by June.
Industry sources said that the ministry would come up with necessary changes in financial laws by early next year.
A LDP source said that the report will be a blueprint for discussion among panel members in order to help the government finalise a broader deregulation package by the end of March.
Kanasaki said that he expected brokerage commissions on stock transactions and the securities transaction tax to be deregulated in 1998 as stated in the LDP's draft proposals.
""Unless Japan tries to cut trading costs by deregulating such areas as securities transactions tax and commissions next year, we will see a hollowing out of Tokyo financial markets because Japan will liberalise the foreign exchange control system next year,"" he said. ""Local investors will place orders for local stock transactions abroad if costs are cheaper there.""
The cabinet submitted a bill revising the foreign exchange control law to parliament earlier this week. It enables freer cross-border capital transactions and settlements by individuals and corporations from April, 1998.
Yasuyuki Fujita, a senior economist at Nomura Research Institute, said some of the LDP's draft proposals were not realistic.
He said discussions would be needed on how to allow banks' securities arms to join the stock broking business, as banks, major holders of Japanese stocks, can influence the corporate decision-making process.
Analysts said that it is still difficult to predict who would be the winners after Big Bang, although top commercial banks and brokers are likely candidates.
""All financial sectors agree on the general gist of the Big Bang reforms but they expect harsh problems in their business if specific issues are implemented,"" said Katsuhito Sasajima, an analyst at Nikko Research Centre.
",10
"Nomura Securities Co Ltd paid more than 70 million yen ($555,000) via stock deals into accounts linked to a racketeer, the securities firm's former president said on Tuesday.
Hideo Sakamaki, who stepped down from his post last month to take the blame for the payoff scandal, said internal Nomura investigations had discovered a total of five irregular stock deals through which the money was transferred.
Nomura announced on Tuesday that Sakamaki's replacement, Masashi Suzuki, would also resign, along with 15 board members, in a sweeping reshuffle of the company's top management resulting from the scandal.
Sakamaki, who was testifying before a committee of the Upper House of parliament, said that one of the irregular stock deals included a transaction involving more than seven million shares of a commercial bank on March 15, 1993.
Asked whether it was true that Nomura provided trading profits of more than 70 million yen ($555,000) through five suspected stock deals, Sakamaki said: ""I think the amount is something like that.""
It was the first time a Nomura insider had publicly revealed the amount of money transferred to the racketeer.
Prosecutors and the securities watchdog are investigating Nomura for deals involving the racketeer, or ""sokaiya"". Such racketeers extort money from a company by threatening to disrupt its shareholders' meetings.
A Japanese news service reported on Tuesday that the Ministry of Finance was likely to suspend some of Nomura's operations, including stock dealing on its own account, for about three months as a punishment for the scandal.
Asked if there were accounts at Nomura linked to other racketeers, Sakamaki said that he believed there were no such accounts.
He said that while he believed that only the two directors were involved in the payoffs, he was also responsible himself for causing the scandal as Nomura's top manager.
He said that Nomura would work out measures to avoid a recurrence of such a scandal. ($=126 yen)
",10
"Japan's major asset management firms said Monday they suspended business with scandal-tainted Nomura Securities after the top brokerage revealed suspected illegal deals.
The suspension will deal a serious blow to Nomura's business, reducing its commission income on bond and stock transactions -- 28.5 percent of its total revenue.
Even its own unit, Nomura Investment Management Co., said it would suspend business with the brokerage from Monday. Orders given to Nomura Securities by the investment management unit have accounted for about 20 percent of its total orders.
""We decided to take the action out of consideration for our customers, including foreign customers,"" said an official at Nomura Investment Management.
Asset managers have been under pressure from customers, particularly public pension funds, to halt orders to Nomura, which last week admitted to irregular deals apparently linked to corporate racketeers.
Nomura said two of its directors had apparently made deals that were discretionary transactions and moved profits raised from Nomura's own funds into a corporate client's account, practices banned under Japan's securities law. Media reports have linked the firm to a former ""sokaiya"" racketeer.
The two Nomura directors, who raised at least 70 million yen ($573,000) in profits in shady transactions, according to Monday's Asahi Shimbun newspaper, resigned their posts on Monday.
Nomura Chairman Masashi Suzuki also said Monday that the Finance Ministry had accepted his offer to resign as the head of the Japan Securities Dealers Association.
Company president Hideo Sakamaki is also reported to have offered to step down once the probe into the deals is complete.
The investigation may also determine whether Nomura's business with asset management firms will remain suspended.
An official at Nikko International Capital Management said the suspension of business would last at least until the Securities and Exchange Surveillance Commission decides whether to take punitive action against Nomura.
At least six major asset management firms suspended business with Nomura on Monday, including affiliates of Daiwa Securities, Nikko Securities, Bank of Tokyo-Mitsubishi and the Industrial Bank of Japan.
In 1991, when Nomura was embroiled in a similar scandal over improper compensation to elite clients, most of its stockbroking business was halted for more than a month.
At that time, the Finance Ministry also banned Nomura's underwriting of and bidding at auctions for government bonds for two months. Nomura was also ordered to voluntarily restrict its corporate divisions' business for several weeks.
But a more severe penalty, such as a suspension of buying and selling on Nomura's own account, may be on the horizon this time if the authorities conclude that the company itself was involved in illegal actions.
Nomura's vice president Atsushi Saito told reporters last week that the two directors made the deals on their own judgment and the company itself was not involved.
But even if administrative punishment takes place, analysts and market sources said that Nomura was unlikely to lose its position as Japan's top brokerage.
""I don't think Nomura will fall from the current top position even in the long term,"" said an analyst at one of Japan's Big Four brokerages, who asked not to be identified.
Another analyst said: ""In bond dealings, Nomura is the most influential and strongest. If Nomura's business is suspended by the regulators, it is market participants who face trouble in doing business, rather than Nomura.""
Some have turned a blind eye to the scandal altogether.
""Our company does not plan to suspend business with Nomura because of the scandal,"" one foreign asset management company official said. ""... There are no reasons to hold business if conditions Nomura offers are better than other brokers.""
",10
"Japan's major asset management firms said on Monday they had suspended business with scandal-tainted Nomura Securities after the top brokerage revealed suspected illegal deals.
The suspension will deal a serious blow to Nomura's business, reducing its commission income on bond and stock transactions -- 28.5 percent of its total revenue.
Even its own unit, Nomura Investment Management Co, said it would suspend business with the brokerage from Monday. Orders given to Nomura Securities by the investment management unit have accounted for about 20 percent of its total orders.
""We decided to take the action out of consideration for our customers, including foreign customers,"" said an official at Nomura Investment Management.
Asset managers have been under pressure from customers, particularly public pension funds, to halt orders to Nomura, which last week admitted to irregular deals apparently linked to corporate racketeers.
Nomura said two of its directors had apparently made deals that were discretionary transactions and moved profits raised from Nomura's own funds into a corporate client's account, practices banned under Japan's securities law. Media reports have linked the firm to a former ""sokaiya"" racketeer.
The two Nomura directors, who Monday's Japan's Asahi Shimbun said raised at least 70 million yen ($573,000) in profits in shady transactions, resigned their posts on Monday.
Nomura chairman Masashi Suzuki also said on Monday that the Finance Ministry had accepted his offer to resign as the head of the Japan Securities Dealers Association (JSDA).
Company president Hideo Sakamaki is also reported to have offered to step down once the probe into the deals is complete.
The investigation may also determine whether Nomura's business with asset management firms will remain suspended.
An official at Nikko International Capital Management said the suspension of business would last at least until the Securities and Exchange Surveillance Commission (SESC) decides whether to take punitive action against Nomura. He said the position would then be reviewed.
At least six major asset management firms suspended business with Nomura on Monday, including affiliates of Daiwa Securities, Nikko Securities, Bank of Tokyo-Mitsubishi and the Industrial Bank of Japan.
In 1991, when Nomura was embroiled in a similar scandal over improper compensation to elite clients, most of its stockbroking business was halted for more than a month.
At that time, the Finance Ministry also banned Nomura's underwriting of and bidding at auctions for government bonds for two months. Nomura was also ordered to voluntarily restrict its corporate divisions' business for several weeks.
But a more severe penalty, such as a suspension of buying and selling on Nomura's own account, may be on the horizon this time if the authorities conclude that the company itself was involved in illegal actions.
Nomura's vice president Atsushi Saito told reporters last week that the two directors made the deals on their own judgement and the company itself was not involved.
But even if administrative punishment takes place, analysts and market sources said that Nomura was unlikely to lose its position as Japan's top brokerage.
""I don't think Nomura will fall from the current top position even in the long term,"" said an analyst at one of Japan's Big Four brokerages, who asked not to be identified.
Another analyst said: ""In bond dealings, Nomura is the most influential and strongest. If Nomura's business is suspended by the regulators, it is market participants who face trouble in doing business, rather than Nomura.""
Some have turned a blind eye to the scandal altogether.
""Our company does not plan to suspend business with Nomura because of the scandal,"" one foreign asset management company official said. ""...There are no reasons to hold business if conditions Nomura offers are better than other brokers."" ($=122 yen)
",10
"Two of Japan's most troubled banks took action Tuesday to end their long-running financial woes, with one announcing a radical restructuring and the other finding a merger partner.
The moves are seen as just the beginning of a drive by the the indebted banking industry to get ready for Japan's emerging ""Big Bang"" era of financial deregulation.
Nippon Credit Bank Ltd, one of three long-term credit banks in Japan, announced that it would cease overseas operations, sell off its Tokyo headquarters as well as other property and write off bad loans totalling 460 billion yen ($3.7 billion).
Hokkaido Takushoku Bank, Japan's 10th-largest commercial bank, meanwhile, said it will merge with the smaller Hokkaido Bank Ltd and cease overseas operations to become a ""super-regional"" bank.
NCB said the restructuring will boost earnings by 50 billion yen ($403 million) over the next five years. It hopes to gain 67 billion yen ($540 million) from the real estate sales and will also eliminate 600 jobs to cut costs.
Despite the moves, NCB president Hiroshi Kubota told a news conference that he cannot rule out the possibility of a tie-up or merger with other banks in the future.
Earlier on Tuesday, NCB put three non-bank financial affiliates under bankruptcy protection.
As a long-term credit bank, NCB raises cash through issuing debentures rather than taking deposits.
The Japanese government, which has spoken of the benefits of deregulation and leaving the market alone, has taken a strong hand in ensuring that NCB survives, urging other banks to accept newly floated shares to help it rebuild its capital base.
The Ministry of Finance (MOF) also said it planned to use 80 billion yen ($645 million) from a special fund created to cope with bad loans from the collapse of ""jusen"" housing loan firms.
Finance Minister Hiroshi Mitsuzuka told a news conference that the capital increase and disposing of bad loans ""will substantially improve NCB's business foundation and will contribute to the stability of financial systems both at home and abroad.""
Financial analysts have criticised the NCB plan, saying it would further weigh down other big banks, which are themselves in far from robust financial health.
In addition, some said the moves were too timid.
""The restructuring programme announced by Nippon Credit Bank is quite drastic, but when taking into account the size of its massive problem loans, the programme falls short of solving its bad loan woes,"" said Yushiro Ikuyo, first vice president of Smith Barney International Inc.
Hokkaido Takushoku said it had no choice but to retrench, ending lofty ambitions of being a global player in the banking world.
""We made the decision (on the overseas pullout) believing that it was inevitable to ensure leverage in our business while promoting bad loan write-offs,"" it said in a statement.
Hokkaido Takushoku said it and Hokkaido Bank would merge as equals by April 1998.
Both are headquartered in Sapporo, the largest city on Japan's northernmost main island of Hokkaido.
The merger will cut costs at the two banks and mean the elimination of 2,000 jobs.
It will also help Hokkaido Takushoku face its mountain of bad debts. The bank has long been considered the most troubled of Japan's major city banks and a merger candidate.
""It's a step in the right direction but they are taking two banks with huge bad debt problems -- merge them together and you've got a colossal bad debt problem to deal with,"" said Brian Waterhouse, an analyst at HSBC James Capel.
As part of the new focus it will shut down its six overseas branches in locations including New York and London and seven representative offices. It said the withdrawal from overseas operations would have only a limited impact on its business.
",10
"Most of Japan's second-tier brokerages said on Wednesday that they would land in the red in the current business year because of tumbling Tokyo stock prices.
Many of the firms had previously expected to turn a profit for the 12 months to March 31 after making losses the year before, but the downward spiral in stock prices seen earlier this year has dashed their hopes of a robust bottom line.
The nine brokerages said the drop in the Tokyo stock market had forced them to take write offs on the shares they own in listed companies, particularly banks.
The stock slump, triggered by worries about the sputtering economic recovery and banking woes, also ate into commission income as investors shied away from the market.
""While we have profits from bond trading, we were forced, unexpectedly, to post appraisal losses on shareholdings because stock prices fell sharply from January onwards,"" an executive at Okasan Securities Co Ltd told a news conference.
The nine brokers which issued revised earnings forecasts on Wednesday were Okasan, Sanyo Securities Co Ltd, New Japan Securities Co Ltd, Kankaku Securities Co Ltd, Tokyo Securities Co Ltd, Cosmo Securities Co Ltd, Dai-Ichi Securities Co Ltd, Wako Securities Co Ltd and Yamatane Securities Co Ltd. The only other brokerage in the second tier, Kokusai Securities Co Ltd, did not revise its existing forecast, which is for a profit.
Predicted parent current losses ranged from 1.5 billion yen ($12.1 million) for Sanyo and Okasan to a hefty 22 billion yen ($178 million) at Kankaku. In 1995/96, the nine firms had suffered losses ranging from 1.0 billion yen ($8.1 million) at Cosmo to 18.11 billion yen ($147 million) at Sanyo.
The key Nikkei average finished at 18,493.71 on Wednesday compared with 21,406.85 at the end of fiscal 1995/96.
The firms said daily turnover on the Tokyo Stock Exchange for the fiscal year so far had been averaging about 380 billion yen ($3.08 billion), much lower than they had expected.
Analysts said that to ensure profits, the second-tier brokerages need the daily turnover to be 500 billion yen ($4.06 billion) or more. Medium-sized brokerages rely more heavily on business from small investors than the top-ranking ones.
Analysts said that the second-tier brokers need to further streamline their business to cut costs ahead of the likely liberalisation of brokerage commissions next year in Japan's broad deregulation drive.
Revenue has fallen sharply since the early 1990s, when Japan's asset ""bubble"" collapsed, but the brokerages have not managed to scale back costs to the same extent, they said.
""Some of second-tier brokerages are likely to join holding companies led by big banks in the future in line with Japan's Big Bang financial reforms,"" said Yukiko Ohara, an analyst at UBS Securites Ltd. ($1=123 yen)
",10
"Dozens of Japanese banks may close their foreign operations in the next few years as their huge problem loans make it hard to meet new capital requirements, analysts say.
Two of Japan's top 20 banks have already announced they will shut down their overseas branches, and some analysts say many others should follow suit, delivering possible boosts to profitability.
""Japanese banks must cut unprofitable assets overseas to boost return on equity,"" said Yushiro Ikuyo, first vice president of Smith Barney International Inc.
""All that many of them are doing overseas is providing services to Japanese customers, rather than doing business with local customers in host countries. They are doing Japanese business even in overseas markets.""
He said that over the next few years, the number of Japanese banks operating abroad could fall to about a third of the current 85. There are a total of 149 banks in Japan.
Earlier this month, two of Japan's most troubled banks, Nippon Credit Bank Ltd (NCB) and Hokkaido Takushoku Bank Ltd announced restructuring plans that included pulling out of overseas operations. Hokkaido also said it would merge with regional bank Hokkaido Bank Ltd.
Hokkaido Bank closed its overseas offices last year, saying they were not profitable.
Financial authorities, worried that Japan's banking problems could destabilise global financial markets, do not object to Japanese banks closing overseas.
Sei Nakai, senior deputy director-general of the Finance Ministry's banking bureau, recently told Reuters the ministry had proposed the step to NCB and Hokkaido Takushoku to avoid the possibility of Japanese banks troubling foreign creditors.
He also said the ministry might tell other Japanese banks to retreat ""quietly"" from their overseas operations if they were in trouble.
Analysts say tougher capital adequacy requirements scheduled to be introduced from the end of March 1998 under the auspices of the Bank for International Settlements (BIS) could encourage Japanese banks to close their international operations.
James Fiorillo, a financial analyst at ING Baring Securities (Japan) Ltd, said some Japanese banks were expected to try to boost their capital to meet the BIS requirements. But others would likely take a second look at continuing internationally.
Under BIS capital adequacy requirements set in the late 1980s, Japanese banks operating internationally need capital equivalent to a minimum of 8.0 percent of risk-weighted assets.
In 1995, the BIS set second-stage guidelines that factor in market risk when determining capital requirements. This means Japanese banks operating abroad will have to take into account risks from activities such as foreign exchange transactions and swaps when calculating adequacy ratios from this fiscal year.
Some analysts calculate that the introduction of these second-stage guidelines could cut international capital adequacy ratios of Japanese banks by up to 0.3 percent.
Katsuhiro Sasajima, an analyst at Nikko Research Center, said major commercial, trust and long-term credit banks and big regional banks would not abandon overseas operations.
But smaller regional banks burdened by problem loans would do so as their low credit ratings had made it increasingly expensive for them to raise capital, he said.
Sasajima said some Japanese banks would likely seek foreign partners in order to maintain their services abroad.
Earlier this month, NCB said it would tie up with Bankers Trust New York Corp to help turn some of its loans into cash and to maintain services to overseas customers.
",10
"A week after Japan's top brokerage, Nomura Securities, said two directors were involved in suspected illegal deals, speculation is spreading that similar scandals may emerge at other brokerages.
On Thursday, the share price of Daiwa Securities Co Ltd, Japan's second-biggest brokerage, plunged on speculation -- later denied -- that Daiwa would hold a news conference concerning a probe by Japan's securities watchdog, the Securities and Exchange Surveillance Commission (SESC).
A Daiwa spokesman told Reuters that the SESC had been conducting an inspection since March 3 but that it believed the checks were routine and were not related to any suspicious deals.
Two Nomura directors resigned on Monday after the brokerage said they made apparently illegal deals and funnelled funds to a corporate client which has been linked by Japanese media to a former ""sokaiya"" racketeer.
The incident comes six years after Japan's securities industry, including Nomura and other ""Big Four"" brokerages, was hit by a scandal over improper compensation to favoured clients.
Top executives at Nomura and Nikko Securities Co Ltd resigned in 1991 over the improper compensation and revelations that affiliates had done deals with gangsters.
Prime Minister Ryutaro Hashimoto took Nomura to task on Thursday for damaging the reputation of Japan's brokerage industry and confidence in the stock market.
""I cannot use any other words except 'extremely regrettable',"" Hashimoto said. ""I want Nomura at least to be aware again of the damage it has done to confidence in (Japan's) securities industry in international society.""
Hashimoto resigned as finance minister in 1991 over his ministry's failure to prevent the brokerage scandal and the SESC was set up in 1992 to improve industry surveillance.
Government and industry sources expressed regret that speculation over a potentially widening scandal had emerged but were tightlipped about any ongoing investigations.
Salesmen at other Big Four brokerages are also fielding questions from customers worried about a wider scandal.
""Our salesmen told me that customers have been asking whether we are involved in scandals as Nomura is,"" an official at one Big Four brokerage said. ""We must be patient about such doubts...but it is irritating and we are really upset.""
Some industry analysts also fear history may repeat itself. ""We may also see a wider investigation into this matter vis-a-vis other securities companies in Japan,""said James Fiorillo, a financial analyst at ING Baring Securities.
Nomura is already suffering repercussions from the incident, although the official probe has yet to be concluded. Major Japanese asset management firms, big trust banks and life insurers have suspended business dealings with Nomura, and Nippon Telegraph and Telephone Corp said it would take steps to alter its business ties with the brokerage.
Japan's Postal Life Insurance Bureau (Kampo) and Finance Ministry officials are waiting for the outcome of the SESC probe before deciding whether to suspend their bond business with Nomura, and other major Nomura clients also said they are watching the outcome of the SESC's probe.
""It is actually a big blow on our business,"" said a Nomura official, who declined to be named. ""Even before the SESC probe is concluded and the Finance Ministry decides to impose penalties, institutional investors have begun to punish us.""
",10
"Japanese life insurers may ask for support from banks to liquidate failed Nissan Mutual Life Insurance Co, industry sources said on Friday.
While life insurers have basically agreed to provide a total of 200 billion yen to help liquidate the firm, they are worried whether their contributions will be enough to cover losses resulting from the failure, they said.
Nissan Life was ordered by the Finance Ministry to start shutting down its business on April 25. It was the first failure of a life insurance firm in Japan in the post-war period.
Nissan Life's liabilities were estimated to have exceeded its assets by 200 billion yen.
""If the life insurance industry alone cannot cover the losses, we may ask for some kind of support from banks which have business ties with Nissan Mutual Life,"" one industry source said.
He said that there were more than 100 banks and credit associations with business ties to Nissan Life.
Koichi Yoshida, the president-designate of Sumitomo Life Insurance Co, said this week that banks should help sort out the collapse of Nissan Life.
An official at the Life Insurance Association of Japan, which was appointed by the Finance Ministry to work out a scheme to wind up Nissan Life, said it had not yet done so as it was still examining the firm's financial situation.
It will take three weeks or more to complete the inspection, the official said.
Association chairman Kenjiro Hata told reporters last month it may also seek capital contributions from major clients of Nissan Life -- Nissan Motor Co Ltd and Hitachi Ltd.
Industry sources said that Nissan Life policy holders would probably be asked to accept an increase in premiums or cuts in payments.
They said that the most likely liquidation scheme would involve the establishment of a joint company to take over Nissan Life's assets.
However, one estimate had shown that the new company could post losses of some 30 billion yen a year if conditions of existing insurance contracts were not changed, the sources said.
Nearly half of Nissan Life's 2.1 trillion yen in assets are individual pension policies that have guaranteed high returns. Many were contracted in the late-1980s bubble economy era.
When interest rates fell and the stock market languished following the collapse of the bubble economy, a large gap developed between investment yields and guaranteed returns to policy holders.
",10
"Japanese prosecutors on Tuesday raided the country's biggest brokerage, Nomura Securities Co Ltd, in a dramatic sign of a widening probe into payments to a client linked to racketeers.
The late afternoon raid on Nomura headquarters in central Tokyo was by both prosecutors and officials of the nation's securities watchdog, the Securities and Exchange Surveillance Commission (SESC).
The highly public raids, preceded by tipoffs to the media that they were imminent, appeared to signal that the action against Nomura could become a showcase as Japan seeks to clean up business practices and deregulate its economy.
Coinciding with the headquarters raid, another 90 officials swooped on 10 other locations and for the first time formally spelled out the suspicions in detail.
Deputy chief prosecutor Kunihiro Matsuo told reporters the raids were to investigate a Nomura director's illegal payment of 38 million yen ($309,000) to a company run by a relative of a racketeer to avoid disruption of a Nomura annual meeting.
Matsuo said the other raids included searches of the homes of the racketeer or ""sokaiya"" and the Nomura director involved in the scandal, Shimpei Matsuki.
The scandal surfaced on March 6 and Matsuki and fellow director Nobutaka Fujikura resigned on March 10 after internal probes found they made discretionary deals banned under Japanese law and funnelled profits to a front company for the racketeer.
Sokaiya, often linked to ""yakuza"" crime syndicates, extort money by threatening to expose dubious business practices or to disturb shareholders' meetings -- called ""sokai"" in Japanese.
Nomura president Hideo Sakamaki stepped down on March 14 to atone for the scandal. He became an adviser to the company, and chairman Masashi Suzuki took over his position while retaining the chairmanship.
Nomura, one of the world's most powerful financial institutions, is involved in bond and share trading.
It exerts a powerful influence on every business in the yen bond market and is also Japan's top foreign bond seller.
The company has seen key foreign and domestic clients suspend business with it since the scandal broke.
Nomura has been a key player in Japanese financial markets for most of this century, underwriting firms such as Sony Corp, which were part of Japan's postwar economic miracle.
In a scene akin to a Japanese film, 90 officials in business suits, led by a man with a briefcase, marched military-style through the front doors of Nomura's modernistic headquarters.
They firmly locked the doors, shutting out journalists gathered for a raid designed to have maximum publicity value.
Reports that the raids were imminent hit Nomura's share price, which ended the day down 20 yen (16 cents) at 1,440 ($11.70).
But brokers said the impact of the news was limited as the market had expected such a development.
""What the market is more concerned about is any punitive measures which will be taken against the brokerage,"" said Yasuo Ueki, Nikko Securities Co Ltd general manager.
""The punishment will probably have an effect on the firm's business and could have an impact on the whole brokerage industry as well,"" Ueki said.
The investigation comes six years after Nomura and other leading Japanese brokerages were hit by a scandal over improper compensation to favoured clients.
Top executives at Nomura resigned in 1991 over the improper compensation and revelations that affiliates had done deals with gangsters.
",10
"An investigation by Japan's securities watchdog into possibly illegal deals at Nomura Securities Co Ltd is unlikely to be concluded quickly, a government source said on Tuesday.
The Securities and Exchange Surveillance Commission (SESC) has been investigating since last September and the probe is now centred on whether and how Nomura provided profits to a corporate customer, the source told Reuters.
The source said the investigation is likely to take at least a few more weeks, and urged Nomura to cooperate fully.  
""To complete the investigation as soon as possible, extraordinary cooperation is needed from Nomura,"" he said, adding that until recently Nomura was not as cooperative as the authorities might have hoped.
Under the Securities and Exchange Law, the SESC could advise the finance minister to hand down administrative punishment if it finds evidence of illegal activity. The heaviest penalty would be revocation of brokerage licences and suspension of business for up to six months.
Under the law, the SESC could also pass the case to prosecutors to pursue legal action.  
Nomura said last week that two of its directors made deals suspected to be ""discretionary"" transactions, meaning they were done without the client's knowledge, and moved profits raised from Nomura's own funds into a corporate client's account, practices banned under Japan's securities law. Media reports have linked the firm with a former ""sokaiya"" racketeer.
Nomura Securities has said it could not confirm the media reports that the corporate client was run by a relative of a ""sokaiya"".
Sokaiya are people who extort money from a company by threatening to disturb a shareholders' meeting, or by offering to prevent a disruption of the proceedings. Japanese commercial law has prohibited paying off racketeers since 1982.
A Nomura spokesman said the company did not know how long it would take for the SESC to complete its investigation.
""We must make utmost efforts to restore people's trust... But we are now at a halfway stage (as the SESC investigation has not yet finished),"" he said.
He said two company executives involved in the irregular dealings scandal resigned as managing directors as of Monday, but said they would stay at the company to help its in-house investigation into the deals.  
Industry sources said that the longer the SESC investigation lasts, the greater will be the damage to Nomura's business and reputation.
An executive at a life insurance company said: ""I was very shocked at the news as Nomura, a leading company in Japan's securities industry, seems to have repeated its wrong-doing after similar scandals (in 1991).""
Several Japanese investment management companies have suspended business dealings with Nomura in light of the scandal.
""Such business suspensions will continue at least until the SESC completes its investigation and official actions are decided upon,"" the insurance executive said.
",10
"Heavily indebted Nippon Credit Bank Ltd said on Thursday it will tie up with New York blue chip Bankers Trust to help turn some of its loans into cash.
NCB, with a heavy load of real estate loans left over from the asset bubble of the 1980s, has been considered the most endangered large bank in Japan's faltering banking sector.
On April 1 it announced that it was retreating from the international arena. It also said that it was selling prime real estate and floating new shares to try to rebuild its capital base.
Under the alliance, Bankers Trust will help NCB ""securitise"" some of its loans, turning them into stocks or bonds that are sold to outside investors.
The tie-up with Bankers Trust will also enable NCB to maintain services to its customers after its planned withdrawal from overseas business, the two banks said.
NCB said that it would also consider a capital tie-up with Bankers Trust, which is on an expansion drive.
""We will consider limited capital participation in each other after the ongoing restructuring of NCB's capital is completed,"" the statement said.
Industry analysts said such an equity deal would be the first time a foreign bank has taken a stake in a Japanese bank.
But they said that it was very unlikely that Bankers Trust would take over NCB.
""(The tie-up) will make it easier for NCB to implement its restructuring programme, but its return on equity is too low for the U.S. bank to consider any takeover move,"" said Yoshinobu Yamada, analyst at Merrill Lynch Japan.
The market took the news well, with an increase in buying interest in NCB debentures. As one of Japan's three long-term credit banks, NCB raises the bulk of its cash through issuing debentures rather than taking deposits from customers.
In a blow to NCB's image, the debentures were recently downgraded to junk-bond status by Moody's Investors Service.
But Thursday's announcement won praise from regulators and the markets.
""The tie-up will contribute greatly to a smooth implementation of NCB's restructuring plan,"" the Bank of Japan said in a statement.
The deal was also cheered by the stock market, with NCB shares surging as much as 30 percent in afternoon trading. There was no trading for most of the day due to a surge of buy orders hitting the market.
When NCB announced its restructuring, President Hiroshi Kubota said the bank was very interested in getting help from a foreign partner, a rare statement for a Japanese corporate leader and seen as a sign of the difficult situation facing NCB in its attempt to get back on its feet.
",10
"Punitive actions by Japan's Finance Ministry against scandal-tainted Nomura Securities Co Ltd are unlikely for some time, even if Japan's securities watchdog files a complaint against Nomura this week with prosecutors, government sources said on Monday.
""The SESC (the Securities and Exchange Surveillance Commission) usually recommends punitive action to the Finance Minister after prosecutors complete their investigation of a case and decide whether to issue an indictment or not,"" one source said.
How long it takes prosecutors to complete their investigation is expected to depend on how far they intend to pursue the case, he added.
Over the weekend, Japanese newspapers reported that the SESC plans to file a complaint this week with prosecutors against former Nomura executives and against Nomura itself, after which Tokyo prosecutors plan to launch a full-scale investigation of the Nomura scandal.
Comment was not available from the SESC on Monday.
Since late March, prosecutors and the SESC have been investigating Nomura's role in suspected illegal payments to a corporate client linked to a ""sokaiya"" racketeer.
Government sources said that Nomura is suspected of violating the Securities and Exchange Law, by illegally using discretionary stock dealings to compensate the corporate client for stock trading losses, and the Commercial Code, by indirectly offering profits to the sokaiya.
""Sokaiya"" extort money from a company by threatening to disturb a shareholders' meeting or by offering to prevent a disruption of the proceedings by shareholders critical of the company. Japan's commercial law has prohibited payoffs to such racketeers since 1982.
By way of example, financial sources noted the case of a smaller brokerage, Chiyoda Securities Co Ltd, that was ordered by MOF in mid-March, 1996 to suspend some of its business.
The SESC had first asked prosecutors to bring criminal charges against Chiyoda as early as December 1995.
The SESC waited until Chiyoda itself and five executives were indicted in February, 1996, however, before making a proposal to MOF on penalising the brokerage.
Media reports in recent days suggested that the scope of the Nomura scandal was widening.
The Mainichi Shimbun reported on Monday that there were more than 20 Nomura accounts linked to ""sokaiya"" racketeers in 1995, not including the racketeer at the centre of the current scandal.
Nomura declined to comment, stating that the company views the Mainichi report as linked to the current incident under investigation by Japanese regulators. He also said that the company could not comment on accounts of its customers.
Mainichi said those accounts were opened at Nomura before 1991, when the brokerage was hit by a scandal involving improper payment of compensation for preferred customers' losses and revelations of deals between its affiliates and gangsters.
Mainichi quoted unnamed sources as saying that, after the 1991 scandal, Nomura cancelled accounts of problematic clients but it could not cut its relationship with racketeers.
It also quoted a former Nomura executive saying that Nomura transferred profits from trading on its own account to those racketeer-linked accounts, due to its desire to avoid any troubles at its annual shareholders' meetings, it said.
In the past month Japanese media have also reported that Dai-Ichi Kangyo Bank Ltd (DKB) made loans to the corporate client to help the sokaiya secure 300,000 Nomura shares in 1989, which gave him the right to propose the dismissal of executives at shareholders' meetings.
The newspapers have also said that prosecutors are investigating DKB loans for a possible link between the racketeer and the bank.
DKB repeatedly declined to comment on the reported loans.
",10
"Scandal-tainted Japanese brokerage Nomura Securities Co plunged into the red on a net basis last business year after incurring a hefty special loss due to a cash injection to a troubled subsidiary.
But the nation's biggest brokerage said on Thursday it enjoyed a healthy jump in its current profit in the year to March, helped by income from bond trading and underwriting.
Nomura, mired in controversy over a scandal linking it with ""sokaiya"" racketeers, said it posted a parent net loss 271.51 billion yen ($2.15 billion) in 1996/97 against a profit of 23.1 billion yen ($183 million) in 1995/96.
This largely reflects a special loss of 371 billion yen ($2.94 billion) resulting from Nomura's aid to its troubled financial affiliate Nomura Finance Co.
The brokerage meanwhile recorded a parent current profit of 124.19 billion yen ($985 million) in the year, up 35.7 percent year-on-year and the highest in six years. Current profit is pre-tax and includes gains and losses made on investments.
On a group basis, Nomura said it posted a net loss of 91.07 billion yen ($722 million) in 1996/97 after a profit of 81.27 billion yen ($645 million) the year before under U.S. accounting rules.
Japan's securities industry suffered a major setback last month when Nomura said two of its directors were involved in suspected illegal deals in which substantial sums of Nomura money were moved to the account of a corporate customer who was linked to a sokaiya.
The outlook for Nomura's business remains gloomy. It has already been hit hard by the scandal, which has led many clients to refrain from trading with it.
In March alone, Nomura's current profit dropped to about half the usual monthly levels due to the scandal, which cut its brokerage commissions and its share of the underwriting market, a company executive said on Thursday.
""As one might expect, the scandal has had an effect (on our profits),"" Nomura director Takamichi Arata told reporters. But he added it was hard to calculate the extent of the impact.
Arata said the brokerage hopes to post a parent current profit this month and in succeeding months by cutting operating costs.
Nomura was cutting its monthly operating expenditures to between 20.2 billion and 20.3 billion yen (about $161 million) per month in April, down two billion yen ($15.8 million) from March, he said. That would be 22 percent below the peak of 26 billion yen ($206 million) five years ago, Arata said.
Nomura's share of trading volume on the Tokyo bourse fell to 9.2 percent in March from 11.4 percent in February, toppling it from the top spot it had held since February 1992.
Analysts said the fate of Nomura's business this financial year hinges on how hard the Ministry of Finance comes down on the brokerage after regulators complete their investigation.
Japanese media reports say the authorities could suspend some of Nomura's operations, including stock dealing on its own account, for about three months as a penalty for the scandal.
Such a penalty would be the heaviest ever imposed on a securities firm in Japan.
Nomura on Monday announced that its president and 15 board members will resign on May 1 to take responsibility for the scandal. ($1=126 yen)
",10
"The president and 15 board members at Nomura Securities Co Ltd will resign to take responsibility for a racketeering scandal that has again sullied the name of Japan's biggest securities firm, the company announced on Tuesday.
The president, Masashi Suzuki, was appointed just a month ago after the resignation of his predecessor when the affair came to light.
The case is the latest to hit Japan's brokerage industry, where ties between companies and shadowy racketeers have long been a problem.
Prosecutors and the securities watchdog are investigating whether Nomura paid off the racketeer, known as ""sokaiya"", to avoid disruptions at its shareholders' meetings.
Junichi Ujiie, a Nomura managing director who will take over as president on May 1, told a news conference that his aim will be to establish a more open management system based on clear rules.
He said there was an atmosphere inside the company that discouraged free discussion among executives.
But one analyst said the reshuffle should help the brokerage transform that culture.
""I think the resignation of many executives will have a good impact on Nomura as it will make it easier for new management to reform its corporate culture,"" said Yushiro Ikuyo, first vice-president of Smith Barney International Inc.
It was not the first time that Nomura has been embroiled in scandal. In 1991 it was punished by regulators for improperly favouring certain clients.
In a separate case, news reports on Monday linked Yamaichi Securities Co to illegal deals, sparking threats of libel action by the firm.
Suzuki said that, while he had expected to transfer the company's management to the next generation after regaining public trust, Nomura's current situation was serious, requiring sweeping changes.
""Nomura is experiencing the worst crisis since it was founded,"" he said.
He said that Nomura was facing difficult problems, including continued investigation by regulators and expected administrative punishment by the Finance Ministry.
He also said Nomura's clients had increasingly been suspending business with the brokerage since the beginning of April and Nomura's employees were receiving complaints from customers.
Hideo Sakamaki, who resigned as Nomura's president last month when the scandal broke, said earlier on Tuesday that the company had paid more than 70 million yen ($555,000) via stock deals into accounts linked to a racketeer.
Sakamaki, who was testifying before a committee of the Upper House of parliament, said that one of the irregular stock deals included a transaction involving more than seven million shares in a commercial bank on March 15, 1993.
It was the first time a Nomura insider had publicly revealed the amount of money transferred to the racketeer.
A Japanese news service reported on Tuesday that the Ministry of Finance was likely to suspend some of Nomura's operations, including stock dealing on its own account, for about three months as punishment for the scandal.
An official at Nomura, who declined to be named, said that he welcomed the reshuffle.
""While I feel sympathy for the people who have to resign, Nomura employees are welcoming the decision,"" he said.
Morale at Nomura's branches has fallen since the scandal was revealed in March, but the sweeping executive reshuffle will help restore confidence in Nomura not only by investors but also by its employees, he said. ($1=126 yen)
",10
"Japan's Finance Ministry served notice on Friday that it may take punitive action against Nomura Securities Co Ltd over suspected illegal deals involving a corporate client.
Finance Minister Hiroshi Mitsuzuka told a news conference on Friday that the ministry would take strict measures, if necessary, after Japan's securities watchdog -- the Securities and Exchange Surveillance Commission (SESC) -- completes its investigation into the dubious deals.
Mitsuzuka said that it would be ""very regrettable"" if Nomura, Japan's biggest brokerage, was involved in illegal trading as reported.
On Thursday, Nomura publicly admitted that it was highly likely that two of its directors had been involved in illegal deals.
At a hastily called news conference, Nomura vice president Atsushi Saito said that Nomura had found out that the directors made deals regarded as discretionary transactions with a corporate client, and they also transfered profits from Nomura's own account to the client's account.
He said that both of the actions are illegal, and the SESC has been investigating the case.
The revelations are yet another blot on the reputation of Japanese business, already hurt by scandals over unauthorised markets trading, shady oil deals and cosy contacts between bureaucrats, politicians and corporate executives.
After the securities industry was hit by a scandal over compensating favoured clients for losses in the early 1990s, Japan banned brokers from making discretionary transaction contracts with clients as these give brokers free rein to make investment decisions.  
Brokerage industry officials said any punishment would not be imminent and could possibly take the form of a suspension of Nomura business.
Yasuo Ueki, general manager at Nikko Securities, said: ""Investigations take a long time to complete in the first place and as the market is at a crucial stage ahead of the end-March book closing, punishment measures will probably not be announced or carried out in a hurry.""
A market source said that in the past, illegal activity by brokers has resulted in a partial business suspension as the functions of the trading section of the brokerage cannot be halted completely.
However, there is a possibility that a more severe penalty, such as a suspension of buying and selling on Nomura's own account, could be imposed if the authorities conclude that illegal actions did take place, he said.
Nomura shares fell in the wake of the news conference, finishing 50 yen lower at 1,530 yen on the Tokyo Stock Exchange after being ask-only at the opening. But many analysts and market sources said that Nomura's business was unlikely to be greatly undermined by the news and that the stock price should prove resilient.
They also said that that the market had to some extent digested the scandal as the media reported on the suspected impropriety last year.
""I've told our boys it's great buy opportunity,"" said one foreign analyst.
Another securities analyst, Dresdner Kleinwort Benson International's Robert Garone, said: ""This is not devastating for Nomura or the brokerage industry.""
Ayako Sato, an analyst at UBS Securities Ltd, said, however: ""I reviewed the rating for Nomura after yesterday's news and reduced it to neutral from buy.""
She said that the topside of Nomura's shares would be heavy for a while until the stock market fully digests any punishment imposed on Nomura by regulators and its impact, if any, on Nomura's business.
But she said it was unlikely Nomura would lose its top ranking among Japanese brokerages. ""I don't think Nomura will fall from the current top position even in the long term,"" she said.
But any change in top management at the brokerage may hamper Nomura's ability to take swift, proactive steps to deal with Japan's ""Big Bang"" financial reforms, she added.
",10
"The resignation of the president of Nomura Securities Co Ltd on Friday should be only a first step by the country's top brokerage house in restoring its scandal-scarred image.
Analysts believe the resignation should just be to clear the decks so Nomura can carry out widespread management restructuring, including bringing in a young, untainted leader to help win back public trust.
In a hastily called news conference, Nomura president Hideo Sakamaki, 62, said that he had stepped down and would become simply an adviser to the firm. Chairman Masashi Suzuki, also 62, took over the post of president in addition to the chairmanship.
Sakamaki's resignation followed the departure of two Nomura directors who quit the brokerage last week after they were found to have made apparently illegal stock deals and funnelled funds to a corporate client linked by Japanese media to a former ""sokaiya"" racketeer.
Several analysts said the resignation stopped far short of the action needed to restore public trust.
David Threadgold, an analyst at BZW Securities Ltd, said although Sakamaki had resigned the failure to immediately announce his permanent replacement indicated the firm had not been able to find the right person to replace him.
Yushiro Ikuyo, first vice president of Smith Barney International Inc, said Nomura may take several years to recover from a scandal which was a repeat of similar incidents in the early 1990s.
Ikuyo said the fact there was a repeat scandal indicated there was a problem with Nomura's corporate mentality.
""Nomura has the potential to be a Japanese company which could be a winner in international competition and under Japan's ""Big Bang"" reforms as an investment bank,"" he said.
""To change the corporate culture, a drastic restructuring in management, such as the resignation of all senior executives, must be considered and a young and clean leader appointed,"" he said.
Prime Minister Ryutaro Hashimoto has vowed to carry out ""Big Bang"" financial reforms to implement substantial deregulation by 2001.
A securities analyst, who declined to be named, was sceptical that a wholesale clean-up could be carried out.
""All the top executives have great contacts with corporate Japan,"" the analyst said. ""In Japanese business, it's also going to be hard to find a 'Mr. Clean.'""
A senior Finance Ministry (MOF) official told Reuters this week the ministry is waiting the outcome of investigations by the country's securities watchdog over the suspect deals.
But the official said MOF was focusing on whether Nomura violated the Commercial Code, rather than securities laws.
""Sokaiya"" extort money from a company by threatening to disturb a shareholders' meeting, or offer to prevent a disruption of the proceedings by unruly shareholders.
Japanese commercial law has prohibited paying off racketeers since 1982.
Ironically, Sakamaki's presidency began in 1991 when top executives Setsuya Tabuchi and Yoshihisa Tabuchi (no relation) resigned after revelations the brokerage compensated elite clients for losses and affiliates dealt with organised crime.
The two Tabuchis, however, rejoined Nomura's board in 1995, triggering a controversy among Nomura employees because the two were regarded as a symbol of the firm's previous tainted corporate culture -- aggressively grabbing profits, even sacrificing small investors' interests.
New president Suzuki said that the two Tabuchis offered to resign from the board again. He said he would accept their offers which are not related to the scandals.
""My first priority is to restore confidence. I would like to transform the company to one with a healthy situation and transfer the company to the next generation,"" Suzuki said.
He said that he would take all possible steps to avoid a recurrence of wrongdoing but fell short of announcing details.
""Nomura is not a family-run company and Suzuki's position as both president and chairman is something irregular,"" an analyst at a major local brokerage said.
",10
"Two of Japan's most troubled banks took action on Tuesday to end their long-running financial woes, with one announcing a radical restructuring and the other finding a merger partner.
The moves are seen as just the beginning of a drive by the the indebted banking industry to get ready for Japan's emerging ""Big Bang"" era of financial deregulation.
Nippon Credit Bank Ltd, one of three long-term credit banks in Japan, announced that it would cease overseas operations, sell off its Tokyo headquarters as well as other property and write off bad loans totalling 460 billion yen ($3.7 billion).
NCB said the restructuring will boost earnings by 50 billion yen ($403 million) over the next five years. It hopes to gain 67 billion yen ($540 million) from the real estate sales and will also eliminate 600 jobs to cut costs.
Despite the moves, NCB president Hiroshi Kubota told a news conference that he cannot rule out the possibility of a tie-up or merger with other banks in the future.
Earlier on Tuesday, NCB put three non-bank financial affiliates under bankruptcy protection.
As a long-term credit bank, NCB raises cash through issuing debentures rather than taking deposits.
The Japanese government, which has spoken of the benefits of deregulation and leaving the market alone, has taken a strong hand in ensuring that NCB survives, urging other banks to accept newly floated shares to help it rebuild its capital base.
The Ministry of Finance (MOF) also said it planned to use 80 billion yen ($645 million) from a special fund created to cope with bad loans from the collapse of ""jusen"" housing loan firms.
Finance Minister Hiroshi Mitsuzuka told a news conference that the capital increase and disposing of bad loans ""will substantially improve NCB's business foundation and will contribute to the stability of financial systems both at home and abroad"".
Financial analysts have criticised the NCB plan, saying it would further weigh down other big banks, which are themselves in far from robust financial health.
Hokkaido Takushoku Bank, Japan's 10th-largest commercial bank, meanwhile, said it will merge with the smaller Hokkaido Bank Ltd and cease overseas operations to become a ""super-regional"" bank.
Such super-regionals use their local power base to build a large presence that rivals their big-city competitors.
Hokkaido Takushoku said it had no choice but to retrench, ending lofty ambitions of being a global player in the banking world.
""We made the decision (on the overseas pullout) believing that it was inevitable to ensure leverage in our business while promoting bad loan write-offs,"" it said in a statement.
Hokkaido Takushoku said it and Hokkaido Bank would merge as equals by April 1998.
Both are headquartered in Sapporo, the largest city on Japan's northernmost main island of Hokkaido.
The merger will cut costs at the two banks and mean the elimination of 2,000 jobs.
It will also help Hokkaido Takushoku face its mountain of bad debts. The bank has long been considered the most troubled of Japan's major city banks and a merger candidate.
As part of the new focus it will shut down its six overseas branches in locations including New York and London and seven representative offices. It said the withdrawal from overseas operations would have only a limited impact on its business.
Hokkaido Takushoku will cut costs by 40 billion yen ($322 million) per year through steps such as rationalising overlapping branches.
($1=124 yen)
",10
"The president and 15 board members at Nomura Securities Co Ltd resigned on Tuesday to take responsibility for a racketeering scandal that has again sullied the name of Japan's biggest securities firm.
The president, Masashi Suzuki, was appointed just a month ago after the resignation of his predecessor when the affair came to light.
The case is the latest to hit Japan's brokerage industry, where ties between companies and shadowy racketeers have long been a problem.
Prosecutors and the securities watchdog are investigating whether Nomura paid off the racketeer, known as ""sokaiya"", to avoid disruptions at its shareholders' meetings.
The new president, Junichi Ujiie, currently a Nomura managing director, told a news conference that his aim will be to establish a more open management system based on clear rules.
He said there was an atmosphere inside the company that discouraged free discussion among executives.
It was not the first time that Nomura has been embroiled in scandal. In 1991 it was punished by regulators for improperly favouring certain clients.
In a separate case, news reports on Monday linked Yamaichi Securities Co to illegal deals, sparking threats of libel action by the firm.
Suzuki said that, while he had expected to transfer the company's management to the next generation after regaining public trust, Nomura's current situation was serious, requiring sweeping changes.
""Nomura is experiencing the worst crisis since it was founded,"" he said.
He said that Nomura was facing difficult problems, including continued investigation by regulators and expected administrative punishment by the Finance Ministry.
He also said Nomura's clients had increasingly been suspending business with the brokerage since the beginning of April and Nomura's employees were receiving complaints from customers.
Hideo Sakamaki, who resigned as Nomura's president last month when the scandal broke, said earlier on Tuesday that the company had paid more than 70 million yen ($555,000) via stock deals into accounts linked to a racketeer.
Sakamaki, who was testifying before a committee of the Upper House of parliament, said that one of the irregular stock deals included a transaction involving more than seven million shares in a commercial bank on March 15, 1993.
It was the first time a Nomura insider had publicly revealed the amount of money transferred to the racketeer.
A Japanese news service reported on Tuesday that the Ministry of Finance was likely to suspend some of Nomura's operations, including stock dealing on its own account, for about three months as punishment for the scandal.
Asked if there were accounts at Nomura linked to other racketeers, Sakamaki said that he believed there were no such accounts.
He said that while he believed that only two former directors, who resigned last month, were involved in the payoffs, he was also responsible himself as Nomura's top manager at the time for causing the scandal.
He said that Nomura would work out measures to avoid a recurrence of such a scandal. ($1=126 yen)
",10
"Japan's deposit insurance system is expected to seek loans from banks through a tender later this year for the first time, financial sources say.
They said the move could fuel fears that funds available in the system may not be enough to protect depositors.
The tender would be aimed at repaying stopgap loans provided by the Bank of Japan (BOJ) to the semi-governmental Deposit Insurance Corp of Japan (DIC).
The DIC borrowed 500 billion yen ($4.13 billion) from the central bank last month to pay 1.03 trillion yen ($8.5 billion) to a liquidation scheme for failed credit union Kizu Shinyo Kumiai.
The tender would take place after June, when financial institutions make half-yearly payments of deposit insurance premiums, which will cover part of the BOJ loans, they said.
In the tender, which would not be mandatory, banks would indicate interest rates on loans and the DIC would select those with lower rates.
""After such a huge amount of money was used for the Kizu scheme, we are increasingly worried about whether and how the DIC will protect depositors' money in the event of any large bank failure in future,"" said a bank official.
The deposit insurance system, set up in 1971, is designed to help prevent a financial crisis and protect depositors from any financial failures.
The DIC was dormant until 1992, but it has used a total of 2.05 trillion yen ($16.9 billion) in the past five years to bail out troubled financial institutions and cover losses stemming from a series of financial failures since 1995.
In addition, the DIC must provide funds to help wind up already failed regional bank Hanwa Bank and small credit union Sanpuku Shinyo Kumiai, the sources said.
Finance Ministry officials also said recently that bank debentures issued by long-term credit banks may be covered by the deposit insurance system until March 31, 2001, in order to protect creditors holding the debentures.
An official of the DIC said, however, that it had sufficient funds to deal with possible future problems at financial institutions.
Under financial bills passed by parliament last June aimed at solving Japan's problem loan mess, the DIC boosted the insurance premiums which financial institutions pay by seven times, to 0.084 percent of total deposits from 0.012 percent.
This means the DIC will get 500 billion yen ($4.13 billion) in premiums a year until 2001, the official said. Under the financial bills, it can also borrow a total of two trillion yen ($16.5 billion) from the central bank as stopgap funds.
But analysts and even influential politicians are not optimistic.
Takeo Nishioka, secretary-general of Japan's main opposition New Frontier Party, said in a television programme last weekend that the present deposit insurance system could not cope with bank failures.
At the end of September, Japan's deposit-taking financial institutions had 29.23 trillion yen ($239 billion) of problem loans, of which 7.3 trillion yen ($59.8 billion) had not been covered by loan-loss provisions and collateral, Finance Ministry data shows.
Analysts say the actual amount of problem loans must be more than double the official figure. If regulators want to deal with insolvent financial firms seriously, there are potentially three measures they can take, analysts say.
The first is to boost deposit insurance premiums and the second is the use of loans provided by the Bank of Japan.
But the central bank is unwilling to have its money used to bail out financial institutions, and it is difficult to keep on increasing the premiums that institutions must pay the DIC.
""So the final source is public money, and politicians are beginning to try to establish measures to cope with the situation,"" said Katsuhito Sasajima, an analyst at Nikko Research Center.
But it is no easy task to establish such measures after a storm of public criticism that blew up last year over the use of 685 billion yen ($5.66 billion) in taxpayers' money to help resolve bad loans held at collapsed housing loan companies.
""The key is whether the authorities can avoid emotional reactions from the public,"" said Yoshinobu Yamada, an analyst at Merrill Lynch Japan. ""While we believe public money is needed to ensure the stability of Japan's financial system, it may take a long time to reach a decision."" ($1=122 yen)
",10
"Mitsui Fudosan Co Ltd, Japan's biggest real estate developer, hopes to rise above Japan's property slump and drum up new business by offering real estate investment services to foreign and small investors.
Income from consulting and coordinating for real estate projects, rather than owning and developing them, and from selling real estate-backed securities could eventually make up 20 to 30 percent of the company's profits, Mitsui Fudosan President Junichiro Tanaka said in a recent interview.
""The investment advisory business and the securitisation of real estate are promising businesses,"" Tanaka said, adding he was keen to attract foreign investment to Japan to help revitalise the sagging real estate market.
""Japan's real estate business must be globalised and we should try to improve our expertise in planning and coordinating real estate development projects,"" he said.
While Japan's real estate market appeared to be picking up, he said any major turnaround was at least another three years away.
The company's push into real estates services was apparent in last month's surprise winning bid for land held by Japan's former state-owned railway.
Forming a consortium that included a Singaporean firm, Alderney Investment Pte Ltd, and Matsushita Electric Works Ltd, Mitsui Fudosan and its partners put together plans for a 250 billion yen ($2.06 billion) office complex, including 138.2 billion yen ($1.14 billion) in land costs.
Mitsui Fudosan, which will cover seven percent of the total cost, will act largely as coordinator and consultant for the project, while Alderney will rent out office space and Matsushita Electric will set up its Tokyo headquarters there.
Junichi Shiomoto, an analyst at Nomura Research Institute, said this was Mitsui Fudosan's first new commercial development project in several years and appeared to reflect a belief that prices were bottoming out in Japan for some types of land.
Mitsui's Tanaka said trends in Japan's real estate market were indeed changing, after years of depressed prices sparked by the bursting of an asset price bubble in the early 1990s.
He expected the Japanese government to ease landholding taxes and building restrictions, after adopting in January a new basic land policy that focused on effective land use rather than the earlier goal of curbing high land prices.
""The ruling Liberal Democratic Party is serious (about land reform) and we expect various policies will emerge based on the new land policy,"" he said.
Tanaka said, however, that he did not expect land prices in Japan to go up over the coming three years or so.
He also said Mitsui Fudosan would continue working to cut its debts below the one trillion yen ($8.2 billion) mark over the next two years from 1.26 trillion yen ($10.4 billion) as of September 1996, a goal it announced last November.
""The current low interest rates are abnormal and what we are aiming to do is to cut our debts to improve our financial strength,"" he said.
He said the company also aimed to boost operating profits to 50 billion yen ($413 million) per year, compared with a forecast parent current loss of 70.3 billion yen ($580 million) in the business year to March 31, 1997. That loss largely reflected the sale of about 200 billion yen ($1.65 billion) of non-performing assets in the latter half of the fiscal year. ($1=121 yen)
",10
"Losses have mounted in a stock market slump that has dragged on for years, yet Japanese securities brokers still cling on.
But expected liberalisation of brokerage fees could be the final blow for some of the weaker securities houses.
Analysts and industry sources say small Japanese brokers are seriously considering closing down amid fears of a plunge in revenues from commission fees, and foreign brokerages are taking a more positive look at the advantages of acquiring local brokers.
""The number of Japanese brokers will likely fall to half the current level over the next five to 10 years,"" an official at a Japanese securities house said. ""Many small brokerages are likely to close down or to be liquidated.""
As seen in Europe and North America, some analysts say revenues from commission fees will fall by at least 30 percent within one or two years of deregulation, while others say they could fall by half within the initial year.
Prime Minister Ryutaro Hashimoto announced a five-year ""Big Bang"" plan last November to enable Japan to catch up with reforms carried out a decade ago in Europe and North America.
Japan will finalise procedures next month to implement the reforms, which include the timing of liberalising commissions and breaking down barriers between financial sectors. They may also include abolishing a system under which brokers must operate under licences granted by the Ministry of Finance (MOF), analysts say.
No Japanese brokers have voluntarily closed and handed back their licences to MOF since the licence system began in 1968.
But such moves are now in sight.
Industry sources say a small broker based in Osaka, Ogawa Securities Co Ltd, an affiliate of Yamaichi Securities, could be the first to go into voluntary liquidation, as Yamaichi may not give it financial aid.
Ogawa said last Thursday it had no plans at present to stop doing business. Yamaichi, meanwhile, says it is considering how it will deal with Ogawa's difficulties.
There are about 285 brokerages in Japan including 56 foreign firms, but only 25 brokers, all Japanese, are listed.
A senior MOF official told Reuters the ministry would accept voluntary liquidation by brokers. He added that brokerage fees should be liberalised in the final stages of the ""Big Bang"" process after other areas of the securities business have been deregulated.
""We are well aware that local brokers would face difficulties unless they are given a certain period of time to prepare for the liberalisation of brokering fees,"" he said.
Indeed, the financial strength of domestic brokers has deteriorated since the bursting of the late 1980s ""bubble"" of inflated asset prices.
Last month, the Big Four -- Nomura Securities, Daiwa Securities, Nikko Securities and Yamaichi -- and one of Japan's 10 second-tier brokerages, Kokusai Securities, announced parent current profits for 1996/97, ended March 31.
But the other nine second-tier brokers all said they expected parent current losses for 1996/97 due to stock price falls. They will announce their earnings figures this week.
Among the nine, Dai-Ichi Securities and Yamatane Securities said they would be reporting current losses for the seventh consecutive year.
Analysts say many of the second-tier brokers, which depend on stock commission fees for 50 to 60 percent of their revenues, are likely to eventually be acquired by big banks.
They also say medium-sized brokers face more urgent restructuring moves this year, such as mergers and seeking outside capital, because by law they must raise minimum capital reserves by the end of next March.
Meanwhile, one analyst said foreign brokerages and non-financial Japanese firms had begun seriously studying the possibility of taking over local brokers. ""Foreign securities houses are keen to strengthen underwriting and asset management businesses and they want to have more networks to do so.""
One solution for foreign brokerages worried whether they can cut payrolls to boost efficiency would be to increase the number of people working on a commission basis, he said.
""Japanese brokerages are now cheap. Even among second-tier brokerages, there are some firms you can buy for about 30 billion yen ($252 million),"" he said. ($1=119 yen)
",10
"Japanese prosecutors on Tuesday raided the country's biggest brokerage, Nomura Securities Co. Ltd, in a dramatic sign of a widening probe into its part in payments to a client linked to racketeers.
The late afternoon raid on Nomura headquarters in central Tokyo was by both prosecutors and officials of the nation's securities watchdog, the Securities and Exchange Surveillance Commission.
The highly public raids, including tipoffs to the media that they were imminent, appeared to signal that the Nomura incident could become a showcase as Japan seeks to clean up business practices and deregulate its economy.
Coinciding with the headquarters raid, another 90 officials swooped on 10 other locations and for the first time formally spelled out in detail what they were investigating.
Deputy chief prosecutor Kunihiro Matsuo told reporters the raids were to investigate a Nomura director's illegal payment of 38 million yen ($309,000) to a company run by a relative of a racketeer to avoid disruption of a Nomura annual meeting.
Matsuo said the other raids included searches of the homes of the racketeer and the Nomura director involved in the scandal, Shimpei Matsuki.
The scandal surfaced on March 6 and Matsuki and fellow director Nobutaka Fujikura resigned on March 10 after internal probes found they made discretionary deals banned under Japanese law and funnelled profits to a front company for the racketeer.
The ""sokaiya"" racketeers, often linked to ""yakuza"" crime syndicates, extort money by threatening to expose dubious business practices or to disturb shareholders' meetings -- called ""sokai"" in Japanese.
Nomura President Hideo Sakamaki stepped down on March 14 to atone for the scandal. He became an adviser to the company, and Chairman Masashi Suzuki took over his position while retaining the chairmanship.
Nomura, one of the world's most powerful financial institutions, is involved in bond and share trading. It exerts a powerful influence on every business in the yen bond market and is also Japan's top foreign bond seller.
The company has seen key foreign and domestic clients suspend business with it since the scandal broke.
Nomura has been a key player in Japanese financial markets for most of this century, and has underwritten firms such as Sony Corp., which were part of Japan's postwar economic miracle.
In a scene akin to a Japanese film, 90 officials in business suits, led by a man with a briefcase, marched military-style through the front doors of Nomura's modernistic headquarters.
They firmly locked the doors, shutting out reporters who gathered to witness the raid, which was designed to have maximum publicity value.
Reports that the raids were imminent hit Nomura's stock, which ended the day down 20 yen (16 cents) at 1,440 ($11.70).
But brokers said the impact of the news was limited as the market had expected such a development.
""What the market is more concerned about is any punitive measures which will be taken against the brokerage,"" said Yasuo Ueki, Nikko Securities Co Ltd general manager.
""The punishment will probably have an effect on the firm's business and could have an impact on the whole brokerage industry as well,"" Ueki said.
The investigation comes six years after Nomura and other leading Japanese brokerages were hit by a scandal over improper compensation to favoured clients.
Top executives at Nomura resigned in 1991 over the improper compensation and revelations that affiliates had done deals with gangsters.
",10
"Despite the pressures caused by a weak Tokyo stock market, Japan's top 20 banks will stick to their plans to dispose of 4.5 trillion to 5.0 trillion yen worth of problem loans for the 1996/97 year to March 31, banking analysts said on Thursday.
In the first half of 1996/97, the 20 banks had already unloaded problem loans worth 2.37 trillion yen by loan loss provisions and other measures.
""Though stock prices are weaker, (big) banks are moving ahead to dispose of problem loans as they had planned,"" said Yukiko Ohara, UBS Securities Co Ltd.
On Thursday, the 225-share Nikkei average ended up 30.64 points, or 0.16 percent, at 19,021.56.
A spokeswoman at Dai-Ichi Kangyo Bank Ltd said that the bank had not changed its plans to dispose of about 330 billion yen of problem loans in 1996/97.
A spokesman at Yasuda & Banking Co Ltd also said it will go ahead with its plan to dispose of about 300 billion yen in problem loans for 1996/97.
As of the end of September, the 20 banks had 17.4 trillion yen in problem loans, the Finance Ministry said.
But many analysts have said that the actual amount is more than double that because of falling land prices and the huge exposure to construction and non-bank financial sectors.
Some of the stronger banks, such as Bank of Tokyo-Mitsubishi Ltd, will set additional loan loss reserves for the bad loans sold to the Cooperative Credit Purchasing Co Ltd (CCPC) in the latter half of 1996/97, analysts said.
The CCPC was set up in 1993 to buy problem loans and recover those loans. Between March 1993 and September 1996, it bought 9,075 problem loans for 5.23 trillion yen against a total book value of 12.92 trillion yen.
But banks will need to fill the gap between the sale price to CCPC and the current low value of the loan's collateralized land, because land prices have dropped about 70 to 80 percent from the peak levels, analysts said.
Merrill Lynch Japan Inc analyst Yoshinobu Yamada said that many of the top 20 are able to cut the amount of their publicly-known problem loans to manageable levels in 1996/97 or in the next business year, if stock prices do not fall sharply from current levels at the end of March.
Shares in the banking sector  O#BNK.T weakened on Thursday on renewed selling spurred by a growing belief that the shares had already reached their upward limits, brokers said.
Sentiment was still bearish for the banking sector on worries over the bad loans.
But bank shares will not recover from a simple disclosure and a write-off of their bad loans, unless each bank shows a strong will to boost profitability and to cope with Tokyo's ""Big Bang"" financial deregulation, Ohara said.
Yamada said he expects low interest rates in the latter half of the current business year would increase operating profits at the 20 banks by about 10 percent from 4.07 trillion yen projected last November by the banks for 1996/97.
But Japan's economic recovery is slow, so new problem loans may emerge, he said.
""For bank shares to recover, authorities must ensure the stability of the financial system, even if by injecting public money into it, and also give their assurance that the economic recovery will not falter,"" he added.
Tokyo Equities (+81-3-3432-9998)
",10
"The top executive of Japan's leading brokerage, Nomura Securities Co Ltd, resigned from his post on Friday to atone for a scandal over suspected illegal deals.
Nomura said president Hideo Sakamaki stepped down as of Friday and became an adviser to the company. Chairman Masashi Suzuki takes on the job of president in addition to the chairmanship.
""As the top official of the company, I think I should take responsibility,"" Sakamaki told a news conference.
The scandal broke last week when Nomura said two of its directors, who subsequently resigned, had made apparently illegal deals and funnelled funds to a corporate client linked by Japanese media to a former ""sokaiya"" racketeer.
The president's resignation, which was widely expected, comes amid signs that the scandal may be widening as suspicion falls on other prestigious Japanese brokerages.
Nomura's Sakamaki said the scandal was not endemic in the company itself, but added he did not know whether other Nomura executives were involved in the suspected illegal deals, which are being investigated by the nation's securities watchdog.
The brokerage pledged to strive to win back public trust.
""My first priority is to restore confidence,"" chairman Suzuki told the same news conference. ""We will take all possible measures to avoid any repetition of such scandals.""
Sokaiya, often linked to ""yakuza"" crime syndicates, typically try to extort money from firms by threatening to expose dubious business practices or to disturb shareholders' meetings -- called ""sokai"" in Japanese.
Companies have also been known to hire sokaiya to muzzle legitimate shareholders' questions at the annual meetings.
The case is another blot on the reputation of corporate Japan after a spate of scandals over unauthorised trading in financial markets, shady oil deals and overly cosy ties in the ""iron triangle"" of politics, business and bureaucracy.
Speculation is also spreading that similar scandals may emerge at other brokerages.
Finance Minister Hiroshi Mitsuzuka said on Friday that regulators will likely probe Japan's other ""Big Four"" brokerages after reports that the corporate client cited in the Nomura scandal as having sokaiya links also holds accounts at other leading securities houses.
""It's hard to believe the authorities will sit by after such reports. It's common sense for them to conduct an appropriate investigation,"" he said.
Nomura had been widely expected to make a top management sacrifice to express remorse over its second scandal in just six years. In 1991, senior Nomura executives Setsuya Tabuchi and Yoshihisa Tabuchi (no relation) resigned over revelations the brokerage had compensated favoured clients for losses and that affiliates had dealt with gangsters.
The fate of the two Tabuchis, who rejoined Nomura's board in 1995, was being watched by some analysts for clues to how serious the brokerage was about internal reform. Nomura said on Friday that the two will quit the board again.
The scandal is a potentially serious blow to Nomura's business as well as its reputation, as a number of financial firms, including one in the Nomura group, have suspended dealings with the brokerage pending the outcome of the probe by the Securities and Exchange Surveillance Commission (SESC).
Nomura also faces a possible shareholder suit seeking compensation for any losses resulting from the scandal.
Leading credit rating agency Moody's Investors Service said on Friday that short-term financial damage may be limited but Nomura faces the challenge of strengthening management control, restoring its reputation and regaining business momentum.
",10
"Losses have mounted in a stock market slump that has dragged on for years, yet Japanese securities brokers still cling on.
But expected liberalisation of brokerage fees could be the final blow for some of the weaker securities houses.
Analysts and industry sources say small Japanese brokers are seriously considering closing down amid fears of a plunge in revenues from commission fees, and foreign brokerages are taking a more positive look at the advantages of acquiring local brokers.
""The number of Japanese brokers will likely fall to half the current level over the next five to 10 years,"" an official at a Japanese securities house said. ""Many small brokerages are likely to close down or be liquidated.""
As seen in Europe and North America, some analysts say revenues from commission fees will fall by at least 30 percent within one or two years of deregulation, while others say they could fall by half within the initial year.
Prime Minister Ryutaro Hashimoto announced a five-year ""Big Bang"" plan last November to enable Japan to catch up with reforms carried out a decade ago in Europe and North America.
Japan will finalise procedures next month to implement the reforms, which include the timing of liberalising commissions and breaking down barriers between financial sectors. They may also include abolishing a system under which brokers must operate under licences granted by the Ministry of Finance (MOF), analysts say.
No Japanese brokers have voluntarily closed and handed back their licences to the finance ministry since the licence system began in 1968. But such moves are now in sight.
Industry sources say a small broker based in Osaka, Ogawa Securities Co. Ltd., an affiliate of Yamaichi Securities, could be the first to go into voluntary liquidation, as Yamaichi may not give it financial aid.
Ogawa said recently it had no plans at present to stop doing business. Yamaichi, meanwhile, says it is considering how it will deal with Ogawa's difficulties.
There are about 285 brokerages in Japan, including 56 foreign firms, but only 25 brokers, all Japanese, are listed.
A senior finance ministry official told Reuters the ministry would accept voluntary liquidation by brokers. He added that brokerage fees should be liberalised in the final stages of the ""Big Bang"" process after other areas of the securities business have been deregulated.
""We are well aware that local brokers would face difficulties unless they are given a certain period of time to prepare for the liberalisation of brokering fees,"" he said.
Indeed, the financial strength of domestic brokers has deteriorated since the bursting of the late 1980s ""bubble"" of inflated asset prices.
Last month, the Big Four -- Nomura Securities, Daiwa Securities, Nikko Securities and Yamaichi -- and one of Japan's 10 second-tier brokerages, Kokusai Securities, announced earnings for the year ended March 31.
But the other nine second-tier brokers all said they expected losses for the year due to stock price falls. They will announce their earnings figures this week.
Among the nine, Dai-Ichi Securities and Yamatane Securities said they would be reporting losses for the seventh consecutive year.
Analysts say many of the second-tier brokers, which depend on stock commission fees for 50 percent to 60 percent of their revenues, are likely to eventually be acquired by big banks.
Medium-sized brokers face more urgent restructuring moves this year, such as mergers and seeking outside capital, because by law they must raise minimum capital reserves by the end of next March, they said.
Meanwhile, one analyst said foreign brokerages and non-financial Japanese firms had begun seriously studying the possibility of taking over local brokers.
""Foreign securities houses are keen to strengthen underwriting and asset management businesses and they want to have more networks to do so,"" the analyst said.
",10
"A major reshuffle of executives at scandal-tainted Nomura Securities Co Ltd should help the brokerage transform its corporate culture and restore investors' trust, analysts and company sources said on Tuesday.
""I think the resignation of many executives will have a good impact on Nomura as it will make it easier for new management to reform its corporate culture,"" said Yushiro Ikuyo, first vice-president of Smith Barney International Inc.
The drastic reshuffling was a surprise, and could be what is needed to help encourage small investors to return to Japan's stock markets, he added.
Earlier on Tuesday, Nomura announced that president Masashi Suzuki will resign on May 1 and will be replaced by managing director Junichi Ujiie.
Nomura also said that 15 company board members, including five vice presidents and four senior managing directors, will resign on April 30 and become company advisers.
Suzuki, who will retain his chairmanship but lose his right to represent the company, told a news conference that the executives will not join in the decision-making process after they become advisers and are expected to leave Nomura to join companies affiliated with Nomura.
",10
"Troubled Nippon Credit Bank Ltd said on Thursday it expected to unveil a restructuring plan in early April, and banking sources said it would include selling real estate and shutting down some operations overseas.
In a hastily called news conference, Tadao Iwaki, senior managing director of NCB, denied a newspaper report that the restructuring plan was all set.
""We have been for long time working on a restructuring plan,"" he said.
He said the bank could not give a specific date to unveil the plan until earnings results for the current business year ending March 31 become clearer.
Banking sources told Reuters that the plan would include shutting down some overseas branches and sale of real estate including its Tokyo headquarters.
NCB's Iwaki said the steps were among the measures which should be considered.
It is the second time in the past two months that the bank has held a news conference to deny various reports, the last time to deny that it is on the verge of collapse.
Analysts said that while the bank denied the rumours last month, the financial markets have been waiting for its restructuring programme because of persistent fears about the future of the bank, which has been reeling from the weight of problem loans.
Last week, Moody's Investors Service cut the ratings on NCB's debentures to junk levels as it said it expect NCB may ultimately require outside assistance due to its massive problem loans.
As one of Japan's three long-term credit banks, NCB raises money mainly through issuing debentures instead of taking deposits.
On Wednesday, Bank of Japan Governor Yasuo Matsushita told reporters that the central bank is ready to help debenture-issuing lending institutions if they are in trouble, a clear allusion to Nippon Credit.
""If the restructuring plan reported in the Nihon Keizai were true, it would be ultimate programme designed to realise Japanese authorities' pledge, too big to fail,"" said one analyst, who declined to be named.
The Ministry of Finance (MOF) asked commercial banks if they would help out Nippon Credit in its efforts at restructuring, the banking sources also said.
They said a senior MOF official visited their offices asking them if they would want to buy new shares to be issued by NCB in order to boost the ailing bank's capital.
""Any attempt to pass on the costs of restructuring Nippon Credit Bank should raise new concerns about remaining contingent liabilities for the stronger financial institutions,"" Salomon Brothers Asia said in its report.
Another analyst said that Nippon Credit's denial about the report indicates that the restructuring plan may face a hard time winning approval from private-sector banks.
",10
"Australia's Trust Bank has begun looking for a strategic equity partner, inviting offers for a 49 percent stake and announcing plans to put the small, 162-year-old bank on the map.
But Australian banks need not apply, nor any foreigners which do not share Trust Bank's ambition to expand beyond the shores of Australia's small island state of Tasmania, managing director Paul Kemp told Reuters.
""We will be very keen to sort out anybody who thinks they can come in and make a quick killing,"" Kemp said.  
""They won't really get to first base with us.""
Kemp was responding to media speculation that prospective partners would be interested in acquiring the stake to enable it to issue credit cards in Australia.
""We would have a broader vision than just that for the franchise. It (a partner) would really need to be an organisation with a broad vision of the expansion of financial services, not just confined to credit cards,"" he said.
Trust bank, which has assets of about A$1.8 billion and is the dominant home lender in Tasmania, has just four branches elsewhere in Australia. But the bank has national ambitions.
",30
"The world's biggest miner, RTZ-CRA, said on Wednesday it needed to polish its public image after it came under attack for the second time in as many weeks.
A fortnight after protesters swarmed on the group's London annual meeting, Australian trade unionists and conservationists infiltrated a shareholders' meeting in Melbourne, criticising its record on human rights, labour and environmental issues.  
RTZ-CRA's Australian chairman, John Uhrig, and some of the protesters, speaking as Australian shareholders or their proxy, engaged at times in shouting matches inside the meeting hall.
Trade unionists from Australia's coal and iron ore industries accused RTZ-CRA of intimidating workers, while others claimed it refused to stand up against human rights abuses.
Uhrig strongly denied the accusations and appeared to feel protesters were hijacking the meeting, insisting other shareholders be allowed to speak.
He finally called on a vote to have the meeting closed.  
But later, speaking to reporters, he said work needed to be done to improve the group's public image. ""In the general community, I am sure we have a job to do,"" Uhrig said.
The company needs to do more work in Australia to improve its public image than probably elsewhere in the world, because the group enjoys such a high profile here, he added.
He referred in particular to RTZ-CRA's labour relations.
""The general public really does not understand what we have done and maybe that needs to be explained,"" Uhrig said.
",30
"Australian transport and health care group Mayne Nickeless Ltd said on Thursday it aimed to sell its stake in the nation's second telecommunications carrier by July, saying it needed to get its hands on that ""bag of gold"".
Bob Dalziel, managing director of Mayne Nickless, which has a 25 percent stake in Optus Communications Pty Ltd, estimated to be worth about A$1 billion, made the remark after Mayne reported what it characterised as a reasonable half-year net profit.  
Net earnings after abnormal items fell 13.8 percent to A$43.14 million for the six months to end December, but managing director Bob Dalziel said the result hid a rise in underlying profitability and he forecast a strong full-year result.
""We are seeing ourselves well placed now to have a very strong year result,"" he told a news conference.
But the result and bullish outlook were overshadowed by the financing of Mayne's Optus investment, which cost nearly A$20 million in interest payments over the half year and has, in the words of one analyst, become a noose around the company's neck.  
Dalziel said he had assured ratings agencies Standard and Poor's and Moody's Investors Service that Mayne aimed to sell its stake by July and virtually ruled out a float of Optus by then.
Until Optus was dragged late last year into a legal battle for control of its pay-television associate, Optus Vision, Mayne planned to dispose of the stake via a market float of Optus.
""I don't think the float is relaistic in the short term unless we want to do it while litigation is occurring ... because our goal is to exit our Optus investment by June, July,"" Dalziel said.
",30
"The world's biggest miner, RTZ-CRA, announced a major realignment of its sprawling empire on Wednesday and removed any doubt that London was its capital.
The group, born of a 1995 merger of London-based RTZ Plc and Australian-based CRA Ltd, said it would now manage its global businesses along six main product lines.
These were aluminium, copper, energy, industrial minerals, iron ore, and gold and other minerals. Together they reaped revenues of around US$8 billion for the group in calendar 1996 from operations on all six continents.
RTZ-CRA said it would shrink its Melbourne office, CRA's home base and until now the group's ""other"" headquarters. It will halve the staff there, shedding 100 jobs, and leave the office with a support role only. A total of 200 jobs will go worldwide.
The announcement provoked an angry response in parts of the Australian press. One newspaper said that CRA had been ""buried under the RTZ shake-up"".
CRA chairman John Uhrig said that the merger, which maintained the two firms' separate listings, had so far not produced a better outcome for shareholders.
""It would have been surprising if it had in its first year of operation,"" Uhrig told a news conference in Melbourne.
In London, RTZ-CRA executive chairman Robert Wilson told reporters the group would take a one-off restructuring charge of US$40 million this year, and expected to gain annual cost savings of $50 million to $60 million by 1998.
The reorganisation leaves Australian-based executives to manage the aluminium, energy and iron ore businesses from Brisbane, Melbourne and Perth. London handles the rest and remains the sole group headquarters.
The Salt Lake City office of its Kennecott copper operation in the United States as well as the group's Johannesburg office would be closed, the company said.
The new structure shifts the focus of management away from a geographical view of the world, where operations differ by country, toward a single management for each global business.
It ensures RTZ-CRA does not become an unwieldy bureaucracy unable to compete with more nimble rivals which deal in just one commodity, the group said.
""RTZ-CRA is a big company by the standards of the industry,"" executive chairman Wilson said. ""We are striving to obtain benefits of scale without the bureaucracy that goes very often with size.""
Chief executive Leon Davis gave examples where, under the current structure, copper operations and coal mines were under several different leaderships across the globe.
""These are barriers that are artificially created and we are intent on removing them,"" Davis told the news conference.
""It will eliminate duplication, lower our costs and improve our efficiency,"" he added.
Mining analysts welcomed the move. One viewed it as confirmation the RTZ-CRA marriage, made without any shares actually changing hands, was effectively a cheap buy-out of CRA.
""If anyone thought the DLC (dual-listed structure) was anything other than a buy-out on the cheap, they should assess this little move because they are virtually wiping out Melbourne head office,"" a Sydney-based analyst told Reuters.
The analyst said he expected the group to eventually transform the dual-listed structure into the one company, although in London Wilson denied that the changes would undermine the dual-structure.
RTZ-CRA has already proposed to ditch its double-barrelled name and become known, subject to shareholder approval this year, as Rio Tinto. RTZ's shares would then trade in London as Rio Tinto Plc and CRA's stock in Australia as Rio Tinto Ltd.
A Melbourne-based analyst said the cementing of London as the group's headquarters came as no surprise. ""It doesn't make any sense to have two head offices,"" he said.
",30
"Two big U.S. power companies said on Monday they would continue investing billions of dollars in Asian energy assets to help drive profits at home.
Michigan-based CMS Energy Corp and Minnesota-based NRG Energy Inc, which last month combined to buy control of Australia's richest power station and coal mine, said they were eyeing other major investments in Australia and Southeast Asia.
""Both companies here are very active in the Asian region,"" said David Weaver, of CMS Asia, after settling the A$4.75-billion (US$3.7-billion) Australian purchase.
""This is not the first pot shot at a project. This is part of a very clear strategy of building a business across the region, not just picking up the odd project...""
Weaver and the U.S.-based chiefs of CMS and NRG were in Melbourne to present the Victoria state government a cheque for the Loy Yang A power station and coal mine.
The sale of the 2,000-megawatt plant, the most efficient in Australia, stands as the nation's single biggest privatisation.
CMS, which took 50 percent of Loy Yang, and NRG, which took 25 percent, said on Monday they would be natural partners for other major investments in Australia or elsewhere in the region.  
""There will be, before too long, another large project where we would work together, whether that be here or in Southeast Asia,"" said NRG's Asia-Pacific chief, David Scaysbrook.
""Both companies are actively interested in pursuing privatisations...,"" he told a joint media briefing.
He cited Indonesia, saying it was looking to sell a part or all of its electricity generating system, as well as possible sales of state-owned assets in the Philippines and Thailand.
CMS aims to build its offshore asset base to 40 percent of the group, with Southeast Asia the likely home for most of this capital, said CMS chief operating officer Vic Fryling.
CMS now has 20 percent of its US$9 billion asset base in offshore investments and is active in 10 Asian countries.
It runs India's only independent power station, a gas-fired plant in Andhra Pradesh state. It also runs three plants in the Philippines and is developing a gas business there, Weaver said.
""We are looking at the commercial nuclear plants in the Philippines,"" he added.
CMS is an integrated energy company that spreads its investment from gas exploration to electricity generation. NRG focuses mainly on electricity generation.  
NRG is soon to close a deal on building and operating a joint venture coal-fired power station in West Java, Indonesia.
The deal, to be closed in four to six weeks, will be followed by ""our second deal in Asia in the next few months"", said NRG's Scaysbrook. He said the investment involved gas-fired power generation but declined to say more.
NRG's parent, Northern States Power Co, is dependent on NRG for earnings growth and, in turn, NRG is looking to Asia to help deliver, said NRG chief executive David Paterson.
""We (NRG) have committed to them (NSP) that we will provide 20 percent of their earnings by the year 2000, and we are a little bit less than half of that at the moment,"" Paterson said.
(A$1 = US$0.78)
-- Melbourne bureau, 613-9286-1421,t
",30
"The consortium believed to be the winning bidder for Australia's Loy Yang A power station has minimised the U.S. dollar-component of the A$4.75 billion deal to about US$500 million, a corporate source said on Tuesday.
""There's no massive splash from a foreign exchange point of view,"" the source, who is close to the bidding, told Reuters.
The consortium said to have won the bidding comprises U.S. utilities CMS Energy Corp, with about 50 percent, and NRG Energy Inc and Horizon Energy Investments Ltd, each with about 25 percent.  
Local currency dealers said they thought about A$400 million to A$500 million cover had been taken on Monday ahead of the deal's announcement, which is likely at about midday.
Horizon is a vehicle for Australian institutions led by Macquarie Bank's Infrastructure Trust of Australia Group Ltd.
The consortium's capital structure is designed around a high gearing ratio of around 75 percent, with bank debt, indexed bonds and subordinated debt accounting for almost A$3.6 billion of the A$4.75 billion bid, sources said.  
All of the debt and a quarter of the equity component will be raised in Australia, leaving the balance of the equity to be funded offshore, the Melbourne source said.
""There's no big tranche of offshore dollars greater than what was done in the past for Yallorn and Hazelwood,"" he said.
The Victoria state government's earlier sale of its Yallorn and Hazelwood power stations involved around US$500 million in foreign equity, the source said.
The Loy Yang A consoritum's foreign exposure was already covered, he added.  
""We have mitigated already but, given the capital structure of the deal, there is a negligible impact from a foreign exchange point of view,"" the source said.
-- Melbourne bureau 613-9286-1421
",30
"Australian banking and insurance group Colonial Ltd hopes to make a strong share-market debut on Monday after major investors rushed its A$690 million (US$535 million) float.
On the eve of its listing on the Australian and New Zealand exchanges, Colonial announced it had priced the share offer at A$3.10 per share for institutional investors, well above the shares' net asset backing of A$2.48 each.
Colonial had given an ""indicative range"" of between A$2.50 and A$2.90 as a guide to institutions, but on Sunday it said the limited number of shares on offer drew bids well above that.
Institutional bids closed on Friday.
Of the total 235 million shares on offer, institutions could bid for only two-thirds, ensuring they paid a handsome premium to the price paid by retail investors in the first stage of the offer.
Colonial sold shares to members of the public for a fixed price of A$2.60 each this month. Each share, for both retail and institutional shareholders, comes with an option to buy more.
""We are delighted...,"" Colonial managing director Peter Smedley told a news conference in Melbourne.
""One would hope for a premium over the institutional price (on listing),"" he added.
Colonial becomes only the second life office to list on the Australian Stock Exchange, after one of its bigger rivals, National Mutual Holdings Ltd, listed last October.
Australia's biggest, the Australian Mutual Provident Society (AMP), will soon follow. It plans to shed its old mutual structure and list in Australia and New Zealand next year.
Colonial has total assets of A$29.7 billion and is the only local life office with a bank, Sydney-based Colonial State Bank.
It will list with a register of over 500,000 shareholders, including its former Asian insurance partner, Jardine Matheson Holdings Ltd, which has secured a major stake.
Colonial will use some of the proceeds of the float to fund its recent decision to buy out Jardine's half interest in their Asian business for US$163 million.
Colonial has, like National Mutual, focused on Asia to grow its business.
It has applied for a licence to sell life insurance in China and has operations across Southeast Asia, including Hong Kong, Singapore, Indonesia, the Philippines and Thailand. Its traditional offshore markets are Britain, New Zealand and Fiji.
Colonial's Smedley indicated on Sunday the company had tried to weed out the stags from the long-term investors in the float.
He said Colonial had tried to identify investors ""perceived to be long term"" when allocating shares to institutions.
",30
"Australian paper and packaging group Amcor Ltd on Thursday reported a big fall in half-year profit and said higher paper prices and fatter margins were still over six months away.
Amcor announced a 34 percent slide in net profit before abnormal items to A$140.6 million for the six months to December 31, a little below the average market forecast of A$145 million and accompanied by a dour outlook for the rest of 1996/97.
Amcor blamed the fall on a steep fall in paper prices since they hit historic highs in the same six months of 1995/96.  
A squeeze on margins from customers in the packaging businesses also dragged earnings down, despite an overall rise in production volumes, it added.
""It just kind of limped along,"" Amcor managing director Don Macfarlane said of the half-year trading conditions.
So did the company's share price, which closed 14 cents lower at A$8.35 on Thursday, reflecting what brokers said was Amcor's bearish comments about the rest of 1996/97 to June 30.
",30
"Australian financial services group Colonial Ltd made a strong debut on the Australian share market on Monday, its share price soaring on listing.
In early trading, Colonial shares opened at A$3.31, well above the A$3.10 paid by institutional investors in the company's public share offer, which closed last Friday.
The opening price eclipsed the A$2.60 paid by members of the public in the A$690 million float, but those who took their stag profits and ran on Monday failed to make a lasting impression.  
In late morning trade, Colonial shares were trading around the opening price, giving the company a market capitalisation of A$1.9 billion and putting it in the top 50 Australian companies.
""We are obviously delighted that we have come on with a premium. It's a strong market response,"" Colonial managing director Peter Smedley said after watching the opening share price flash up on the stock exchange boards in Melbourne.
Colonial on Monday became only the second life office to list on the local exchange, after one of its bigger rivals, National Mutual Holdings Ltd, debuted last October.
",30
"Australian retailer Coles Myer Ltd is praying a cold, wet winter will cheer up the group's struggling apparel business and add new growth to annual profit.
Chief executive Dennis Eck, speaking after Coles announced another firm rise in quarterly sales, said he remained cautious about the profit outlook for its three main apparel businesses.
""That (apparel) is the thing that most concerns us,"" Eck told Reuters on Thursday.  
Earlier, Coles posted a 6.5 percent rise in sales revenue to A$4.559 billion for the quarter ended April 27, bringing total sales for the year to date to A$14.5 billion, up 5.7 percent.
Coles' best-performing supermarkets division again led the result, recording a 12.3 percent jump in sales revenue for the quarter compared with the same quarter a year ago.
The group's once-struggling merchandise group, especially its Kmart chain of stores, also improved, posting a 5.8 percent rise in sales revenue, including fatter profit margins at Kmart.  
But sales at Coles' women's wear business, Katies, as well as its Target discount stores and its Myer Grace Bros department store chain, which both rely heavily on clothing sales, were all down.
Eck said fashion sales depended on extremes of weather and that a wet, cold winter could help revive them.
""I'm hoping for cold and rain for 20 more days and that would be nice,"" he said. ""It's a nice cold rainy day and May is when you really sell through your winter.""
A Sydney-based retail analyst agreed the weather had helped prolong weakness in Coles apparel sales.  
""One of the reasons why this quarter has been so bad (for apparel) is this incredible Indian summer we have been having, and fashion needs extremes of weather,"" he told Reuters.
Some economists have argued apparel sales are the victim of a long-term shift in spending patterns, with entertainment and other consumer items competing for household incomes.
But Eck defended Coles' apparel businesses and rejected a suggestion it sell Katies, its only speciality fashion business.
""If you take straight apparel as a category, it represents...no more than 16 percent of our business, including Katies,"" he said.  
""We are happy to be in that segment. We think we have a very good balance to the retail category that we sell, and we are not in the mood to make short-term decisions on cyclical events.
""When apparel gets good again, it will be very nice to own a specialty apparel business,"" Eck said.  
Weak apparel sales were offset in the third quarter by strong sales from the supermarket and Kmart businesses, enabling Eck to stick to his forecast of steady second-half profits.
""We...(had) stated that we expected a similar percentage growth in the second-half profit after tax to that experienced in the first half, excluding property disposal profits and abnormals,"" Eck said in a statement.
""We are still of that view, subject to conditions remaining stable.""  
Analysts are forecasting Coles to report, on average, a net profit before abnormals of A$326.7 million for the year to July 27, according to an April survey by Barceps forecasting service.
Coles reported a pre-abnormal net profit of A$302 million in 1995/96.
-- Melbourne bureau 61-3 9286-1421
",30
"Australia's top bank, National Australia Bank Ltd (NAB), is expected to report half-year net earnings of over A$1 billion (US$780 million) on Thursday, putting it on track for another record full-year result.
Banking analysts contacted by Reuters have forecast NAB to report a net profit of A$1.13 billion to A$1.17 billion for the half-year to March 31, a rise of up to 17 percent on a year ago.
Such a result would dwarf the interim earnings of NAB's major rivals, with Westpac Banking Corp forecast to report on Wednesday a net profit of up to A$620 million.
The only other major bank with an end-September balance date, the Australia and New Zealand Banking Group Ltd, reports its interim earnings on May 22, with one Melbourne analyst tipping a half-year net profit of A$630 million.
A half-year result of upwards of A$1.1 billion would put NAB on course for an annual net profit of up to A$2.47 billion for 1996/97, surpassing last year's record A$2.102 billion, according to analysts' forecasts.
NAB's strong profit growth comes despite shrinking lending margins and hot competition for home mortgages in Australia.
While Commonwealth Bank of Australia has sacrificed margins to build market share, and an acquisitive Westpac has gone shopping for asset growth, NAB has used marketing to boost its share of home loan assets, analysts said.
NAB's offshore assets -- four banks in Britain, Northern Ireland and Ireland, as well as Michigan National Bank and Bank of New Zealand -- have also lessened its overall exposure to Australia's weak housing sector, a Melbourne analyst said.
""They are also very aggressive on costs,"" the analyst said.
NAB, the most efficient of the big banks, aims to lower its cost-to-income ratio to 40 percent by year 2000 from 53 percent.
NAB is also likely to buck the trend on charges for bad debts in its interim result, the Melbourne analyst said.
""For NAB, we have them going down still. I think that's due primarily to some write-backs,"" he said. But he predicted worsening bad debts across the banking sector in the near-term.
Increased fee income is likely to cushion the major banks against further margin squeeze, said Colonial Investment Management's senior investment manager, Martin Hickling.
NAB is also cutting costs offshore, he added.
""They have been earning sub-normal levels of returns over the last couple of years and they have been doing work in terms of improving those returns,"" Hickling told Reuters.
NAB, ranked Australia's top bank on Monday in a survey by accountants KPMG, is also seen as the most likely to gobble up one of the other majors.
But the government has ordered a freeze on big bank mergers until it sees competition for banking services heat up further.
",30
"French insurance giant Axa-UAP is to be awarded a coveted licence to sell life insurance to China's emerging middle classes, the group's Asian subsidiary said on Friday.
Australian-based National Mutual Holdings Ltd, owned 51 percent by Axa-UAP, said Chinese authorities had advised its parent verbally that a licence would be granted.
The announcement, which confirmed a Reuter report from Shanghai on Tuesday, sent the shares of National Mutual to a record high on the expectation it would run the China business.
Shares in National Mutual Asia Ltd, the Hong Kong-listed Asian business arm of National Mutual, were also firmer.
""Obviously it's good that the greater Axa group of companies has secured a licence to operate in China,"" National Mutual Holdings managing director Geoff Tomlinson told Reuters.
But he cautioned investors in National Mutual not to get ""too excited"" about the announcement, saying it was not clear if the National Mutual group would play any role in Axa's success.
The licence itself could still be 18 months away, he added.
""Until we understand the conditions that apply to the granting of this licence, it is impossible to state what role National Mutual Holdings or National Mutual Asia may play in the development of the business,"" Tomlinson said.
As well, one Sydney insurance analyst said, there was a risk National Mutual had angered Chinese authorities by confirming they intended to grant the parent company a licence.
""They were with (German insurer) Allianz and they withdrew the licence and that's a possibility (with Axa-UAP) as well,"" Macquarie Equities analyst Tony Jackson told Reuters.
China told Allianz AG Holding in November it would be granted a licence, but the licence was thrown in doubt after European Trade Commissioner Sir Leon Brittan broke the news.
Allianz has since been awarded the licence and will soon join only a handful of foreign life insurers operating in China.
China's insurance market, still in its infancy, was once almost monopolised by the state-owned People's Insurance Group, but it has gradually opened up to local and foreign competition.
National Mutual hopes its 69 percent-owned National Mutual Asia subsidiary will own the China business, in a joint venture with local partner China Everbright-IHD Pacific Ltd.
But Axa-UAP shareholders are unlikely to hand ownership of such a potentially lucrative business to a subsidiary, Macquarie Equities' Jackson said.
""It would be just a gift to minority interests,"" he said.
Axa-UAP shareholders have only an effective 28 percent interest in National Mutual Asia, and would prefer the Hong Kong company managed the China business for a fee, he added.
National Mutual shares hit a record high of A$2.10 after the announcement, but then fell back to end at A$1.98, up four cents on Thursday's close.
(A$1 = US$0.77)
",30
"Australia's A$6 billion (US$4.68 billion) car industry could grind to a halt from late next week due to a crippling strike at a key supplier, industry sources said on Tuesday.
The four major manufacturers -- Ford, Toyota, General Motors Holden and Mitsubishi Motors -- have warned local production lines will be shut down if the strike drags on much longer.
The strike, in its fourth week, has crippled Melbourne's Martin Bright Steel factory, which holds a key position in the local car-parts industry supplying the car-makers.
""Obviously if supply of anything dried up, we would not be able to keep producing. We are keeping a watching brief,"" said Ford Australia's public affairs general manager, Wendy Perkins.
""We are still going and expect to be until at least Friday week (May 16),"" she told Reuters.
The steel plant, owned by industrial group Email Ltd, is the supplier to TRW Steering and Suspension Australia Ltd, which is a monopoly supplier of power steering units to car-makers.
TRW Steering and Suspension managing director Michael Laufer declined to comment on Tuesday, but an industry source said the firm could only keep going for another two weeks.
TRW has supplied car makers for the past three weeks by finding substitute parts for the power steering units, but this is a stop-gap measure, the source said.
""The automotive companies have gone along with the substitution...but it's different material and they would prefer us to go back to the Martin Bright specifications,"" he said.
About 130 workers walked off the job at the steel plant on April 11 in a dispute over wages. They have since picketed the site, preventing Email from moving stock out to its customers.
In letters sent last week to Australia's labour market watchdog, the Industrial Relations Commission, car-makers said they would be forced to halt production and stand down thousands of workers from this week if the strike did not end quickly.
But on Tuesday, Ford, Toyota and Mitsubishi told Reuters they could now maintain full production for at least another week, but perhaps for not for much longer.
Toyota and Mitsubishi spokesmen told Reuters production was guaranteed for at least ""this week"". Holden, which had warned it would be forced to shut down a production line on Thursday, said it did not now see disruptions to production ""at this stage"".
The four car-makers' have combined sales revenue of about A$6 billion, including over A$2 billion in export sales, and along with car-part manufacturers employ 45,000 people, according to the Federal Chamber of Automotive Industry.
The Martin Bright Steel dispute has also hit other suppliers to the car-making industry. ""I am sure there are half a dozen others on the brink,"" the source said.
The Australian Manufacturing Workers Union (AMWU), which wants a 15 percent wage rise over two years for the Martin Bright Steel workers, said on Tuesday the strike could escalate.
""We are talking about a major escalation of the dispute if they try to break that picket,"" AMWU organiser Craig Johnston told Reuters. A spokesman for Email was not available.
(A$1 = US$0.78)
",30
"A state-owned power station and coal mine in Australia sold on Tuesday for A$4.86 billion in the nation's single biggest privatisation.
A consortium comprising U.S. utilities CMS Energy Corp and NRG Energy Inc and Australian investors was awarded the prized assets by the Victoria state government.
The sale, announced by state premier Jeff Kennett, followed a tight bidding war involving some global heavyweights of the electricity-generating industry, including other U.S. utilities American Electric Power Co Inc and AES Corp.  
The sale of the 2,000 megawatt power station and coal mine overshadows last year's sale of half of Commonwealth Bank of Australia as the biggest Australian privatisation.
The national government reaped A$4.0 billion for disposing of its 50.4 percent stake in the bank.
The sale of Loy Yang A, the most efficient electricity generator in Australia, comes as private generators clamour to enter Australia's emerging national energy market.
As a first major step in the development of a free market in electricity, Victoria and its bigger state neighbour, New South Wales, will merge their markets from the end of this month.  
""We believe that there's a great opportunity here,"" CMS Energy vice-president David Weaver told reporters in Melbourne after the sale announcement.
CMS, which has 50 percent equity in Loy Yang A, and its partners have paid roughly 14 times the operation's forecast underlying earnings for the year to June 30, 1997.
The Loy Yang A estate, which includes Australia's largest coal mine producing 30 million tonnes a year, is seen earning A$335 million before interest, tax and depreciation in 1996/97.  
Due to the depreciation and interest costs to be borne by the new owners, the operation is unlikely to pay any tax for the next few years at least, government sources said.
NRG Energy Inc has a 25 percent stake in Loy Yang A.
Australian institutions led by Macquarie Bank's Infrastructure Trust of Australia Ltd also hold 25 percent.
Horizon Energy Investment Ltd, the vehicle for the Australian-held equity, plans to issue some or all of its shares in Loy Yang A to the public next year in a stock exchange float.  
As conditions of sale, Horizon cannot be floated within a year of sale while CMS and NRG may not sell down, or out, of Loy Yang A before two years. The sale will be settled on May 13.
About 77 percent of the purchase price will be borrowed, with syndicated bank debt of A$2.9 billion, inflation-indexed bonds of A$350 million and subordinated debt of A$300 million.
The bank debt is being coordinated by the Australian and New Zealand Investment Bank (ANZIB) and involves 10 other lead-managers: NationsBank, Banc National de Paris (BNP), Sumitomo, WestLB, First Chicago NBD Bank, Indosuez, ABN Amro Bank, Deutsche Bank, National Australia Bank (NAB) and AMP.  
""We expect this acquisition will contribute to CMS Energy's earnings in 1997 and beyond,"" CMS Energy president and chief operating officer Victor J. Fryling said in a statement.
The winning consortium bid A$4.75 billion for Loy Yang A, but it also assumed liabilities worth A$109 million, enabling the government to say the sale was worth A$4.86 billion.
The sale takes to A$18 billion the amount of money raised by once heavily debt-laiden Victoria government from the sale of electricity assets over the past two years.  
The net proceeds of A$4.75 billion to the state government from Loy Yang A will be used to slash Victoria's public-sector debt back to about A$14.5 billion, Kennett said.
More electricity assets are set to follow, including the state's transmission grid, PowerNet Victoria, which the Victoria government hopes will raise up to A$2.5 billion.
It could be sold as early as this year.
-- Melbourne Bureau 613-9286-1421
",30
"Australia's biggest bank, National Australia Bank Ltd (NAB), said on Thursday it would consider any opportunity to merge with a local life office.
Managing director Don Argus told Reuters that NAB remained an acquisitive bank, even though its hands were tied on mergers with other major domestic rivals by government policy.
""That's an option, yes, because we have a liability driven strategy,"" he said when asked if NAB would consider merging with a domestic life office or forming an alliance with one.
NAB has placed heavy emphasis on asset growth, but it is now trying hard to grow the deposit side of its business. Life offices manage major pools of deposited funds.
NAB recently made a failed bid for the New South Wales state government's Axiom funds management arm, which has A$18 billion of funds under management. Axiom was sold for A$240 million to London-based funds group Deutsche Morgan Grenfell.
""We have been an acquisitive bank for something like 10 years and our strategy is well known -- it's opportunity and price,"" Argus said.
Australia's life offices have begun to compete with banks in lending, in line with the global convergence of financial service industries.
Under revised government policy announced in April, the nation's two major life offices, the Australian Mutual Provident Society and National Mutual Holdings Ltd, are allowed to merge with any of the major banks.
National Mutual is controlled by French insurer Axa SA
Other major life offices are Colonial Ltd, which lists on the Australian Stock Exchange next week, and Mercantile Mutual, a unit of ING Group NV.
Earlier on Thursday, NAB announced a 14.1 percent jump in half year net profit to A$1.14 billion but said it faced increasing competitive pressures. Even so, Argus said NAB hoped to achieve at least match this record result in the second half.
Argus was also critical of government policy on financial sector reform, saying delays in finalising the new rules were making the local big banks takeover targets for foreign competitors.
NAB, which has profitable bank operations in the United Kingdom, the United States, and New Zealand, was a keen supporter of allowing big bank mergers in its submission to the Wallis inquiry into the financial system.
In its response to the Wallis report, the national government said on April 9 that it would not allow mergers among the big four banks at the moment but would permit them to merge with major life offices and would also permit takeovers by foreign banks.
NAB, the largest and most profitable of Australia's private banks with an asset base of nearly A$190 billion, ended Thursday trade with a market capitalisation of A$27.1 billion.
It overshadows the other three banks, Commonwealth Bank of Australia, Westpac Banking Corp, and the Australia and New Zealand Banking Group Ltd which are valued at between A$12.6 billion and A$13.7 billion.
-- Mark Bendeich, Melbourne bureau 613-9286-1421
",30
"Australian steel-maker The Broken Hill Pty Co Ltd (BHP) on Tuesday announced the closure of Australia's oldest steel-making plant, an industrial icon which it said could no longer match its Asian competitors.
BHP's Newcastle mill, a milestone in the nation's industrial development when opened in 1915, will shut down its blast furnaces by the end of 1999 as part of a major overhaul of BHP's global steel business, the company said.  
BHP chief executive John Prescott, who like his predecessors forged his early career at Newcastle, was unsentimental in announcing the closure, which will end 2,500 workers' jobs.
""The fundamental purpose of all the change is to ensure a viable industry going forward,"" Prescott told reporters.
""We are not walking away from the steel industry,"" he added.
BHP now faces possible industrial action from trade unions, one of which said the closure would directly and indirectly destroy up to 12,000 jobs Australia wide.  
A mass meeting of Newcastle workers at the site next Friday is expected to consider calling a strike against the company, an Australian Workers Union (AWU) official said.
The AWU's Newcastle secretary, Mauri Rudd, told Reuters that a strike, if called, would try to block BHP exports.
BHP, Australia's biggest company, is also a major exporter of Australian coal, iron ore, liquefied natural gas and manganese.
",30
"Australian aluminium producer Comalco Ltd said on Wednesday its smelting division was back in profit and that major expansion work was starting to pay off.
Comalco, which plunged into the red in calendar 1996 after a rotten year of low aluminium prices and high costs, said it had turned a ""reasonable"" profit for the first three months of 1997.
Comalco is owned 67 percent by global mining giant RTZ Corp Plc-CRA Ltd, soon to be renamed Rio Tinto.  
Speaking at the company's annual meeting, chairman Leigh Clifford also announced a new pot line at its majority-owned Boyne Island smelter in Queensland would be running at full steam from the third quarter of 1997.
The A$1 billion expansion, in which Comalco has a 59.25 percent stake, as well as recent expansions and upgrades at its Tasmanian and New Zealand smelters, will take the company's share of total output to over 650,000 tonnes in 1998, he said.
The world aluminium market is also improving, with the London Metal Exchange price averaging 74 U.S. cents per pound so far in 1997, Clifford said. It averaged 70 cents in 1996.  
""Aluminium demand is strong in Asia and North America and the outlook for the industry is robust,"" Clifford said.
Brokerage HSBC James Capel expects Comalco to report a net profit before abnormals of about A$120 million in 1997, assuming a firm rise in aluminium price in the second half of the year.
""A chunk of that earnings will be as much a function of increased production volumes as price,"" HSBC James Capel analyst Unit Safak told Reuters.
Comalco reported a bottom-line loss of A$16.8 million on a joint-venture basis for 1996, after abnormal losses before tax of A$93.8 million.  
The closure of Comalco's kaolin plant at its bauxite mine in Weipa, in north Queensland, and workforce restructuring accounted for most of the abnormal losses.
By the end of 1997, Comalco expects to have shed 600 workers since September last year, chief executive Terry Palmer said.
With about 80 percent of workforce restructuring complete, cost reductions played a part in first quarter profits, he said.
""The impact (of lower costs) has been pretty solid,"" Palmer told reporters after the brief meeting.  
Comalco, the only one of RTZ-CRA's business not performing in the most efficient quartile of the world's producers in 1996, hopes to reach that benchmark in 1998.
""I think to get to those sorts of levels you have to look at well into next year,"" Palmer said.
Comalco was not prepared on Wednesday to say when it would decide on the site for its remaining major project, a A$1 billion alumina refinery.
The refinery is to be sited in Sarawak, Malaysia, or at Gladstone, Queensland, depending on which site offers the better deal on price and security of power supply.  
In Queensland or Malaysia, the refinery would be powered by gas.
-- Melbourne bureau 61-3 9286-1421
",30
"Tibet's exiled spiritual leader, the Dalai Lama, urged Australia on Monday to press China into talks over the future of the remote Himalayan region and said he was ready to visit Beijing in the right ""atmosphere"".
Seen by Beijing as the leader of a pro-independence movement in Tibet, the Dalai Lama said he wanted to ask Australian Prime Minister John Howard to press China into opening a dialogue on the political future of Tibet.
""In case I have the opportunity of meeting (Howard), the main thing which I want to mention is...to appeal to the Australian government to help to materialise meaningful negotiations with the Chinese government,"" the Dalai Lama told a news conference in Melbourne.
A meeting with Howard, who returns from an overseas trip toward the end of the Dalai Lama's two-week trip, has yet to be arranged, but Howard has not ruled out talks despite warnings from Beijing against official contact with the Tibetan god king.
China has already chided New Zealand Prime Minister Jim Bolger for meeting the Dalai Lama in Wellington last week.
Australian Foreign Minister Alexander Downer met the Dalai Lama on his arrival in Sydney on Saturday night, but said later that the talks were unofficial.
The Dalai Lama, exiled from Tibet since 1959, told the news conference the prospects for negotiations with Beijing had faded since his emissary met China's paramount leader Deng Xiaoping in 1979, partly due to domestic politics and frosty Sino-U.S. relations.
""At the moment the Chinese government, their main concern is to simply show the world and also their own people they are a big nation... No-one can influence them,"" he said.
The Dalai Lama, who wants a form of regional autonomy for Tibet, suggested that Beijing's ""one China-two systems"" policy governing its takeover of Hong Kong next year, and its goal of reunification with Taiwan, could serve as a model for Tibet.
""All these things are the more humane way,"" he said, adding he was ready to visit Beijing. ""As soon as some appropriate atmosphere develops, I am ready to visit China,"" he added.
The 1989 Nobel Peace Prize winner also accused China of continuing to detain his seven-year-old spiritual deputy, the Panchen Lama.
""My Panchen Lama in effect is the youngest political prisoner. Seven years old. How sad,"" he said of Tibet's second holiest monk, believed to be the reincarnation of the 10th Panchen Lama who died in Beijing in 1989.
""According to (my) information, he is somewhere near Beijing, as a prisoner under house arrest,"" the Dalai Lama said, adding that he feared for the boy's life.
China last month denied it was holding the boy but refused to recognise him as the 11th Panchen Lama. Beijing has instead installed its own new Panchen Lama, a boy of the same age.
""Tibetan Buddhist culture at the moment is facing a threat of extinction ...Whether intentionally or unintentionally, some kind of cultural genocide is taking place in our country,"" the Dalai Lama said.
",30
"Australia's Industrial Relations Commission (IRC) is due to award the nation's lowest paid workers a wage rise on Tuesday, a decision that could have profound implications for inflation and monetary policy.
Australian financial markets generally expect the AIRC to award workers a wage rise of A$10 to A$15 per week.
The Industrial Relations Commission will hand down its decision on the trade union movement's claim for national wage rises at 0400 GMT (2 p.m.) in Sydney.  
The decision will be keenly watched not only by workers and their employers, but by the Reserve Bank of Australia (RBA), which has repeatedly warned of the threat real wage rises pose to the nation's recent record of low inflation.
The Australian Council of Trade Unions (ACTU) has asked the IRC to grant Australia's lowest paid workers a wage rise of A$20 per week as well as a 8.75 percent rise in minimum rates of pay.
The RBA estimated the claim, if granted in full, would swell the nation's total wages bill by 1.6 percent, taking the current rate of wages growth to about 5.5 percent, well above the central bank's comfort zone of up to 4.5 percent.  
A complete victory by the ACTU on Tuesday would not only be expected to hasten a rise in official interest rate, now expected in early 1998, but would in the view of employers send the jobless rate sharply higher.
""If the ACTU claim were granted, unemployment would race past a million, inflation would rise well above its current level, interest rates would lift and investment growth would come to an immediate halt,"" a peak employer group has warned.  
The Australian Chamber of Commerce and Industry said it believes the ACTU's ""living wage"" claim would increase the national wages bill by more like 4.8 percent, based on an industry survey showing most workers were covered by the claim.
But financial market economists are more sanguine than the captains of industry, predicting the Industrial Relations Commission will leave minimum rates of pay alone and grant a wage rise of between A$10 and A$15 per week for the lowest paid.
This would still exceed the government's position, which is to support a rise of A$8 per week for the lowest paid.  
""We don't expect them to give twenty-something dollars (a week). Probably between A$10 and A$15,"" National Australia Bank chief economist Alan Oster told Reuters on Monday.
""I think once you are up around A$20, you are...starting to cause some jitters,"" he added.
The Commonwealth Bank of Australia expects the commission to award a pay rise of A$10 to A$12, which it said would be consistent with underlying inflation remaining at the lower end of the RBA's target range of two to three percent.  
Bankers Trust expect a wage rise of between A$11 and A$14, but warn that the ""wild card"" will be if higher paid workers try to stay well ahead of the pack and seek similar pay rises.
""If a modest A$11 to A$14 outcome were to eventuate as expected, however, we do not think this would upset relativities greatly and therefore should dampen the risk of large follow-on wage claims,"" Bankers Trust said in a research report.
The wage decision comes at a tense moment for the financial markets and central bank, with inflation data for the March quarter to be released on Wednesday. Economists are tipping 2.1 percent underlying inflation, year on year.  
-- Melbourne bureau 61-3 9286-1421
",30
"Australia's labour market watchdog is expected to award the nation's lowest-paid workers a wage rise on Tuesday in a move that is likely to have profound implications for inflation and interest rates.
Financial markets are on tenterhooks as the Industrial Relations Commission prepares to arbitrate in an old-style showdown between the trade union movement and employers.
The Australian Council of Trade Unions (ACTU) has asked for a wage rise of A$20 (US15.50) per week for the lowest paid, as well as rises in minimum rates of pay of up to 8.75 percent.
Employers oppose it, saying it will harm the economy.
The central bank has also expressed concern at the ACTU's so-called ""living wage"" claim, which seeks to help workers left behind in Australia's move away from centrally-fixed wages toward individual deals hammered out on the factory floor.
The Reserve Bank of Australia (RBA) estimates the claim, if granted in full, would swell the nation's total wages bill by 1.6 percent, taking the rate of wages growth to about 5.5 percent, well above the bank's comfort zone of 4.0-4.5 percent.
Employers go further, saying Australia's jobless rate would jump sharply higher as industry adjusted to the higher labour costs by shedding staff.
""If the ACTU claim were granted, unemployment would race past a million, inflation would rise well above its current level, interest rates would lift and investment growth would come to an immediate halt,"" a peak employer group has warned.
Australia's jobless rate was at 8.7 percent in March, and has been stuck at or above 8.5 percent since early 1995.
The Australian Chamber of Commerce and Industry has said it believes the ACTU's claim would increase the national wages bill by more like 4.8 percent, based on an industry survey showing more workers were covered by the claim than commonly thought.
Financial markets are also jumpy, with inflation data for the March quarter to be released on Wednesday, the day after the commission's decision is handed down.
""You never know which way they (the commission) are going to jump. It's a fairly big week...,"" National Australia Bank chief economist Alan Oster told Reuters on Monday.
Market economists are tipping 2.1 percent underlying inflation for the year to March, comfortably within the RBA's target range of two to three percent.
Economists predict the commission will hand down a compromise on Tuesday, leaving minimum rates of pay alone and granting a wage rise of between A$10 and A$15 per week.
This would exceed the government's position, which is to support a rise of A$8 per week for the lowest paid, but would not move the RBA to lift interest rates sooner than expected, they said. Rates are currently tipped to rise late in 1997.
(A$1 = US$0.77)
",30
"Bougainville's secessionist rebel leader Francis Ona said he feared his mountainous, jungle-clad South Pacific island would be destroyed by mining if it failed to win independence from Papua New Guinea.
Ona, political leader of the rebels, said in a rare interview aired on Australian radio on Tuesday he believed Papua New Guinea would allow the remote, resource-rich island to be plundered by foreign miners.
""Bougainville seems to be on top of a big mineral resource. We truly believe that all the island of Bougainville is under threat of destruction by these foreign companies,"" Ona told the Australian Broadcasting Corporation.
Papua New Guinea on Sunday announced it wanted to buy back the foreign interest in Bougainville's giant Panguna copper mine, closed in 1989 after sabotage attacks by rebels.
Papua New Guinea Prime Minister Sir Julius Chan said the buy-back scheme would result in a financial compensation package for landowners and, along with the hiring of mercenaries, was aimed at ending the nine-year rebellion.
Development of the mine fuelled secessionist sentiment among Bougainvilleans who felt they were not sharing in its wealth.
The mine, which opened in 1972, swelled the Papua New Guinea government's coffers by producing 160,000 tonnes of copper concentrate annually, increasing local resentment on the island. The mine also produced copper and silver.
Ona, president of the rebels' self-declared Bougainville Interim Government, said the Panguna mine would be restarted and four other mines approved if the independence struggle failed.
He named four other areas he said were ripe for mining, including Buka, a small island a short canoe ride to the north of Bougainville where Papua New Guinea troops are based.
""Without independence Papua New Guinea is going to enforce those five mines on Bougainville,"" Ona said.
Chan has said he wants to buy control of the Panguna mine from global mining group RTZ-CRA, which owns 53.6 percent of the mine operator Bougainville Copper Ltd.
Mining analysts have said it would take three to four years to restart the Panguna mine and that a political solution was essential for any mining activity on Bougainville.
Ona and other rebel leaders were targetted for capture in mid-1996 when the Papua New Guinea government launched an offensive to snatch control of rebel-held areas on the island.
Since the demise of ""Operation High Speed"", Papua New Guinea has hired a British-based supplier of mercenaries, Sandline International, to train troops for a mission to Bougainville.
The presence of 40 mercenaries now in Papua New Guinea has attracted strong criticism from Australia, New Zealand, Britain, the United States and South Africa.
The Bougainville conflict has claimed hundreds of lives since sporadic guerrilla warfare first broke out on the island in 1988, and has attracted charges of human rights abuses by both troops and rebels.
",30
"Australia's biggest retailer Coles Myer Ltd on Thursday reported a 41-percent surge in half-year earnings, its first profit rise in almost two years.
The result buoyed Coles' once-sinking share price, which rose despite a weaker market, and followed a two-year nightmare of sliding profits, shareholder anger and consumer thrift.
Coles, which pockets about 18 cents in every retail dollar spent in Australia, reported a net profit of A$273.6 million (US$217 million) for the half-year ended January 26, compared with A$194.5 million a year ago.
Before abnormals, net earnings leapt 23 percent to a better-than-expected A$229 million, boosting the shares 13 cents above Wednesday's close to a high of A$6.04 before easing back.
""We see this as a very good first step on a road to recovery,"" chief executive Dennis Eck told reporters.
Coles' performance has now recovered to the levels of its year ended July 1995, one of its most profitable ever, he added.
Coles gave a bullish forecast for 1996/97 annual profit, predicting more strong profit growth in the second half-year and looking forward to a quieter time in the nation's newspapers.
Coles is rising from the ashes of poor management and board turmoil.
In late 1995, a controversy surrounding Coles' largest shareholder and then chairman, Solomon Lew, erupted in the nation's media. At one point, media baron Rupert Murdoch accused Lew of thuggery and trying to stifle newspaper coverage.
The row focused on a transaction that cost Coles A$18 million and benefitted a company associated with Lew by a similar sum. Lew denied any impropriety but stepped down as chairman in 1995 in the first of several board shake-ups.
Coles managing director Peter Bartels quit in December, handing the reins over to Eck who appeared on Thursday to be relieved Coles was no longer in the headlines.
""For a couple of months, our staff was quite happy to see us out of the press,"" Eck said.
Retail analysts are tipping Coles to report annual net profit of around A$310 million in 1996/97. One analyst said profit forecasts for Coles might now edge a little higher, but improving sentiment was mainly behind the firmer share price.
""I think the retail market is picking up, but it's still tough out there,"" the Melbourne-based analyst said.
The half-year results highlighted Coles success in improving profit margins. The 23 percent rise in pre-abnormal profit was struck on a 5.4 percent increase in sales to A$9.945 billion.
""What is important are people's expectations of the turnaround now. I think that's why the stock is where it is, on anticipation of much better margins and profit,"" a broker said.
Coles is not the only big retailer to weather tough trading conditions and investor scepticism.
Upmarket retailer and rival David Jones Ltd is now feeling the heat. Its chief executive resigned this week on the eve of the company reporting a 50 percent dive in half-year net earnings.
(A$1 = US$0.79)
",30
"Australian financial services group Colonial Ltd on Thursday reported a bottom-line loss of A$38 million for calendar 1996 after booking A$158 million in abnormal items after tax.
The result, down from a post-abnormal net profit of A$24 million in 1995, was hit by major ""one-off"" restructuring costs from the group's demutualisation and changes within its Colonial State Bank business, Colonial's accounts show.  
Earlier, the group announced to the stock exchange that its pre-abnornmal net profit fell 28 percent to A$120 million in 1996, partly dragged lower by weaker investment returns.
",30
"A new diamond mine looks likely to go ahead in north Australia after one of its backers on Thursday described a final feasiblity study on the project as ""encouraging"".
Base metals miner Aberfoyle Ltd, which has a minority interest alongside diamond group Ashton Mining Ltd in the Merlin project in the Northern Territory, said the study was now virtually complete.
""I think both companies have previously said they expected this to be developed into a project, albeit not at a large scale initially,"" Aberfoyle managing director Mike Eager told Reuters.
""I think it's probably on track for that sort of conclusion,"" Eager said.
The feasibility study, prepared by engineering consultants Bateman-Kinhill, has been discussed by the two owners and could be decided upon as early as this month.
The report is due before Ashton's board on June 19.
Aberfoyle said both companies would make a final decision by the end of the September quarter.
Ashton owns 77.5 percent of Merlin. Aberfoyle has the rest.
The feasibility study assumes a modest start to mining, with stage one annual capacity of 500,000 tonnes of ore. Ashton has already said the first stage would cost about A$20 million (US$15.2 million).
The joint venture partners plan to develop some open pits before evaluating Merlin's underground mining resource and proceeding to a stage two expansion.
""We are still encouraged by what we have seen by the further work on site and the further (work on the) feasibility study and certainly there is no reason for discouragement,"" Eager said.
The Merlin prospect contains about 12 kimberlite pipes -- rock formations associated with diamonds -- and only three of them have been bulk sampled for diamonds so far, he said.
The sampling results suggest further upside to the project, Eager added.
""There's evidence in at least some of the pipes that there's an improvement in stone quality and perhaps in grade ... at the perimeters of the pipes,"" he said.
Ashton reported late last year that diamonds recovered from Merlin were described as being 35 percent gem quality, with the remainder near gem quality.
In its March quarter production report, Ashton said the results of recent cutting and polishing tests on 25 Merlin diamonds had been ""very encouraging"".
Ashton, which is owned 46.95 percent by Malaysia Mining Corp Bhd, owns 40.1 percent of the world's biggest diamond mine, the Argyle mine in northwest Australia.
(A$1 = US$0.76)
",30
"Zinc producer Pasminco Ltd said on Wednesday it hoped to run to the Australian stock market soon with a major share issue to help fund the development of the roughly A$1 billion Century zinc project.
Pasminco has engaged brokerages J.B. Were and SBC Warburg as underwriters for the equity issue, said the company's executive general manager of finance, Bronwyn Constance.
""Within three months we could be announcing what we are doing and going to the market,"" she told Reuters.  
Pasminco is looking to the equity and debt markets to raise up to about A$1 billion to fund the development of the Century zinc deposit, one of the world's largest in northern Australia.
Pasminco has also approached banks, both domestic and international, to negotiate a syndicated loan, Constance said.
A lead group of banks will be announced in the next month or so, she added. She declined to name the banks being considered.
Pasminco, which has conditionally agreed to buy the Century project and associated deposits for A$345 million from global miner RTZ-CRA, has yet to decide the mix of equity and debt needed to fund the development, Constance said.
",30
"Loss-making airline Ansett Australia said on Wednesday it would not survive unless it made major changes to turn the business around.
Ansett executive chairman Rod Eddington, in his first major speech since his appointment last year, said the airline needed to sell out of resorts and other non-core assets, even if this meant wearing a loss.
He said Ansett must free up cash and improve its operating performance to fund the airline's expanding core business, including eight new aircraft it needed to rationalise its fleet.  
The contract for the new aircraft orders, said to be worth over A$2 billion, is a close contest between European aircraft consortium Airbus Industrie and Boeing Co.
Ansett is owned equally by Air New Zealand and media group News Corp.
In a frank assessment, Eddington called Ansett an excellent airline but a poor business which needed to cut unit costs but at the same time increase customer service.
""Unless Ansett changes, it won't survive in the medium to long term,"" he told the National Aviation Press Club.  
""There's no point in taking any business to the market until it's in pretty robust shape. Ansett is a long, long way away from that now,"" he said.
""It takes time ... it takes two to three years, not two to three months,"" he added.
The decision on Ansett's new long-term fleet plan, expected to be made by the board early in the second half of 1997, will be crucial to Ansett's future, Eddington said.
It is a close call between Airbus's A330-200 and Boeing's 767-300. ""It's the closest one I have been part of,"" he said.  
Eddington foreshadowed another poor result for the year to June 30, 1997, saying that profits were ""thin on the ground"".
He would not even discuss Ansett's level of gearing which, according to the airline's balance sheet at June 30 last year, means that for every A$1 of equity, Ansett owes A$9 in debt.
""If we were floating at the moment, it would make things a little difficult,"" Eddington said.
The Australian Competition and Consumer Commission (ACCC), the country's competition watchdog, could also make life difficult for Ansett's alliance with Air New Zealand.  
ACCC approval will be needed for the two carriers to go ahead and work together on ground services, information technology, procurement and marketing and sales, he said.
""This work will ultimately lead to an application for ACCC authorisation,"" Eddington said.
-- Melbourne bureau 613-9286-1421
",30
"Australia's Woodside Petroleum Ltd on Wednesday announced it would ramp up exploration spending this year as it sought to diversify away from the lucrative gas fields of the North West Shelf.
Woodside unveiled its aggressive exploration programme for calendar 1997, much of its centred outside the offshore North West Shelf fields, after reporting a 58 percent surge in annual net earnings to A$191 million for 1996.
Woodside's shares shot up on the profit announcement, which was in line with market expectations.  
The stock closed at the day's high of A$8.97 on Wednesday, up 31 cents on Tuesday's close, confirming the market's bright view of Woodside.
Woodside said it would more than double exploration spending in 1997 to a record A$120 million with over half of this being thrown at the company's interests in the Timor Sea.
""Certainly this is an order-of-magnitude increase in non-North West Shelf exploration activity,"" Akehurst told a news conference in Melbourne.
Woodside plans to drill 12 to 14 exploration wells, including eight or nine outside the North West Shelf, he added.  
Akehurst also announced in North West Shelf's proven reserves, with ultimate gas recovery leaping 60 percent to 24.4 trillion cubic feet (tcf) at the end of 1996.
Oil reserves rose 11 percent to 175 million barrels and condensate reserves were up 21 percent to 690 million barrels.
Woodside expressed confidence the North West Shelf would meet the 30 tcf in gas reserves needed to justify a doubling of LNG capacity to meet growing demand from Japanese customers.
""Quite clearly we see considerable upside...,"" Akehurst said, citing estimated possible reserves of 45 tcf.  
Equal partners in the North West Shelf are Woodside, The Broken Hill Pty Co Ltd, The British Petroleum Co Plc, Japan Australia LNG (MiMi) Pty Ltd, a partnership of Mitsui & Co Ltd and Mitsubishi Corp, Chevron Corp and the Royal Dutch/Shell Group.
The six partners plan to double annual LNG production to 14 million tonnes by 2003 at a capital cost of A$6 billion.
The North West Shelf partners and owners of the nearby Gorgon gas field have been discussing the prospects of merging the two developments, with a view to expanding the North West Shelf's existing LNG plant further.  
""I think the exciting prospect is to see how we can move on from there and look for opportunities with third parties to expand that project,"" Akehurst said.
He said he would welcome any proposal to merge Gorgon with North West Shelf production ""to cooperate on a sixth and seventh train"". Currently, the North West Shelf partners plan to expand their Burrup Pensinsula plant to five trains.
Chevron, Texaco Inc and Shell each hold two-seventh stakes in Gorgon, with Mobil Corp owning one-seventh.
-- Melbourne bureau 613-9286-1421
",30
"Australia's powerful Maritime Union launched rolling bans on Indonesian shipping on Wednesday to protest against the arrest of Indonesian labour leaders and Canberra's ""failure"" to press Jakarta on human rights.
The lightning bans, called at short notice and designed to hold up ships for 24 hours, could apply on an irregular basis to all types of commodity exports to Indonesia, the union said.
Jakarta said the union's move could hurt bilateral ties.
""Such kind of incidents are regretted and will harm the efforts to build up relations between the two countries,"" Foreign Ministry spokesman Ghaffar Fadyl said in Jakarta.
""Probably this kind of thing will have the strongest reaction from the business sector who are most affected,"" Fadyl told Reuters. He declined to comment further.
Indonesia, Australia's nearest Asian neighbour, bought A$2.4 billion (US$1.9 billion) worth of Australian commodities in 1995, covering grains, minerals, livestock and refined petroleum.
""The bans are to protest against the recent arrests of independent labour leaders Muchtar Pakpahan and Dita Sari and the continuing repression following the July riots in Jakarta,"" the union said in a statement.
The bans were also a response to Australian Prime Minister John Howard's failure in Jakarta this week to press Indonesia on the issue of human rights and democracy, the union said.
During his visit to Indonesia, Howard reaffirmed Australia's commitment to close ties.
The first ship to be hit by the rolling bans will be the Bogasari Empat, due to arrive in Fremantle on Australia's west coast late on Wednesday to load 32,500 tonnes of wheat.
The ship will load wheat as scheduled but will be delayed for 24 hours before being able to depart, union assistant secretary Vic Slater told Reuters.
""It delays things,"" Slater said of the bans. ""In terms of the economy, I don't think it has any effect on the Australian economy.""
Pakpahan, leader of the Indonesian Labour Welfare Union (SBSI), has been charged with subversion in connection with riots that rocked the Indonesian capital on July 27. The crime of subversion is punishable by death.
Five people died and 149 were injured in the Jakarta riots, Indonesia's official Human Rights Commission has said. Scores of buildings were set ablaze in the unrest, which was the worst in Jakarta since anti-Japanese riots there in 1974.
The riots followed a police raid on the headquarters of the minority Indonesian Democratic Party (PDI) to evict supporters of Megawati Sukarnoputri, who had been ousted as party leader by a government-backed faction the previous month.
Labour activist Dita Sari was arrested before the July 27 riots over a labour strike in Surabaya, media reports have said.
The Australian rolling bans are in line with a world-wide campaign against Pakpahan's arrest by the International Transport Workers' Federation, which represents more than five million workers in 120 countries, the Maritime Union said.
""Muchtar Pakpahan is an independent and moderate union leader who has even won the respect of the U.S. embassy (in Jakarta),"" Slater said.
U.S. Assistant Secretary for East Asian and Pacific Affairs Winston Lord met Pakpahan in his Jakarta cell last Friday.
The Maritime Union has 10,000 members working around Australia as seamen and waterside workers.
",30
"Australian oil and gas producer Woodside Petroleum Ltd is expected on Wednesday to report a 44 percent surge in annual profit, after the first full year of production from its new offshore Wanaea-Cossack fields.
Petroleum analysts have forecast Woodside to post a net profit before abnormal items of between A$194 million and A$217 million for calendar 1996, according to a survey by profit forecasting service Barceps.
The average of the forecasts is A$202.8 million, a 44 percent leap on 1995's pre-abnormal result of A$140.5 million.  
But analysts told Reuters the 1996 result could have been better than the forecasts suggested had Woodside ironed out production problems at the new Wanaea-Cossack operation in 1996.
""We had (a forecast of) A$212 million at the beginning of the year and we had to pare that back because of the production problems at Wanaea,"" said David Cliff, analyst with brokerage Burdett, Buckeridge and Young.
The brokerage is now expecting a pre-abnormal profit of A$196.6 million for 1996.  
The Wanaea-Cossack fields came on stream in November 1995, but a series of technical and weather-related problems has plagued production. Output has rarely reached design capacity of around 115,000 barrels per day (bpd).
The Cossack-Pioneer rig is still producing at well below capacity. Production was running at 65,000 bpd in mid-February but it had briefly dipped to 40,000 bpd earlier in the month due to another technical problem, the company said.
""It looks like it's going to be ongoing throughout this year, which is quite a surprise because they kept saying that 'we will fix it in three months'...,"" Cliff told Reuters.  
""Now they are admitting it is a very difficult problem and they might not be able to fix it at all this year without a major shutdown. We are revising our numbers (for 1997).""
Wanaea-Cossack fieldS are within the North West Shelf, of which Woodside, the operator, has an equal sixth share.
Its partners are The Broken Hill Pty Co Ltd, The British Petroleum Co Plc, Japan Australia LNG (MiMi) Pty Ltd -- a partnership of Mitsui and Co Ltd and Mitsubishi Corp -- Chevron Corp and the Royal Dutch/Shell Group.  
Woodside's hedging book also helped keep a lid on profits in 1996, analysts said. Forward sales in 1996 are thought to have fetched an average oil price of around US$19 a barrel, below the average of spot crude prices for the year, they added.
Macquarie Bank analyst Peter Best said Woodside's outlook remained strong, with reserves climbing and its half-owned Laminaria and Corallina oil fields in the Timor Sea coming on stream around 1999.
""Once Laminaria starts in say around 1999, earnings jump to close to A$500 million ... and they are sustainable at those levels for the foreseeable future,"" Best told Reuters.  
-- Melbourne bureau 61-3 9286-1421
",30
"Industrial conglomerate Pacific Dunlop Ltd will announce another heavy fall in annual net profit on Friday, with abnormal losses possibly sinking the bottom line into red ink, stock analysts said on Thursday.
PacDun, dogged by litigation over problems with its U.S.-made cardiac implants and by weak economic growth at home and abroad, has already softened the blow by warning investors last May that annual profit would be 35 percent lower.  
The warning pared forecasts of pre-abnormal net profit down to an average of A$162 million for the year to June 30, said BZW Investment Management's BARCEPS forecasting service.
This compares with a 1994/95 pre-abnormal result of A$251 million and a first-half pre-abnormal result of A$118 million.
But the group -- a major international producer of rubber consumer goods, car batteries and tyres, industrial cables and clothing -- is likely to book a large net abnormal loss of up to A$300 million, Macquarie Equities analyst Greg Dring said.  
Pacific Dunlop's troubled U.S. medical equipment unit, Telectronics, which accounted for A$60.5 million in abnormal losses in 1994/1995, will again incur big provisions for costs associated with its pacemaker leads, he said.
Dring estimated that these provisions could account in 1995/96 for about A$200 million of a total net abnormal loss estimated at up to A$300 million, he added. He said he assumed the group would not book a tax benefit on these losses.
",30
"Australia's central bank is out to make a buck -- preferably a foreign one.
The conservative, pin-striped officials of the Reserve Bank of Australia (RBA) are quietly but aggressively building up a business in printing foreign currency.
Deep inside a heavily guarded concrete fortress on the outskirts of Melbourne, the RBA's printing presses are already turning out as many foreign banknotes as Australian notes.
Thai baht, Singapore dollars, Indonesian rupiah and Kuwaiti dinars have all rolled off the bank's presses under printing deals with offshore central banks.
Like the new generation of Australian banknotes, the foreign banknotes are all made of plastic using patented technology promoted world-wide by the RBA as the scourge of counterfeiters.
""The RBA is very keen to see this technology adopted internationally,"" said Robert Larkin, chief executive of the RBA's printing division, Note Printing Australia.
Plastic banknotes of the type made by the RBA, which each feature a small transparent ""window"" to foil counterfeiters, last much longer in circulation than paper banknotes. A paper note can be in tatters in months; plastic can last four years.
PLASTIC REIGNS
Now that all Australian notes are printed on polymer, not paper, the RBA does not need to print nearly as many banknotes. Its printing presses were becoming idle.
About 600 million local banknotes rolled off the RBA's presses each year before the switch to plastic notes from 1988. Now they churn out only 150 million Australian banknotes a year.
""We are victims of our own success, but at the same time we have liberated capacity for export opportunities,"" the printing division's sales manager, Michael Beedle, told Reuters.
So the bank is globe-trotting for new business, trying to convince other central banks to go plastic.
""Significant numbers of countries have done or are currently undertaking trials (on the plastic notes) virtually around the world,"" the RBA's Larkin said. Printing presses do not need any modification to cope with the plastic notes, he said.
Within three years, the RBA hopes that 75 percent of the banknotes rattling off its Melbourne presses will be for export.
But competition for the export dollar -- or lira, rupee or whatever currency is up for grabs -- is cut-throat.
Canadian commercial printers Dura Note and Domtar Inc also make plastic banknotes, while the world's few commercial paper banknote printers fiercely guard their turf, Larkin said.
""The industry is reluctant to move away from a 300-year-old technology and there's strong resistance from printers to put plastic through the printing press,"" the RBA's Beedle said.
MONEY-MAKING JOINT VENTURE
The RBA is not only targetting central banks that do not print their own banknotes. For central banks with their own presses, it wants to sell them the blank polymer notes on which they can print their own designs.
The RBA and British-based UCB Films Plc, a unit of Belgian chemicals and drugs group UCB, have formed a A$1.5 million (US$1.16 million) equal joint venture, Securency, to market the blank notes. RBA and UCB will split the profits.
Securency is ambitious and is eyeing two of the most prized of all banknote printing jobs -- the new Euro scheduled to come into circulation from 2002, as well as the greenback.
""The two biggest markets to go for other than China and India would be the U.S. one-dollar bill and the Euro. That's what we have set our targets on,"" Securency general manager Myles Curtis told Reuters in Melbourne.
But Securency has foresaken any hope of persuading European monetary authorities to make their first Euro a plastic one.
""We probably missed the boat first time around because they are already starting to consider the manufacture of the note, but they will have to look at the next generation,"" Curtis said.
The greenback is also a tantalising prospect, after an attempt to replace the U.S. one-dollar note with a new coin met a hostile public reaction.
""The US$1 note represents 50 percent of their manufacturing capability,"" he said, adding that a polymer note would allow the Federal Reserve to stay with a note but slash printing costs.
HOT MONEY
Though polymer banknotes are considered rugged enough for the Australian public, they are feeling the heat in Europe.
A man writing from Bratislava has told The Economist magazine how he accidentally tumbled-dried an Australian note in the pocket a pair of jeans.
""The banknote I left in my jeans emerged shrunken and distorted,"" he wrote.
Undaunted, Securency believes plastic money will eventually find its way into wallets around the world.
There is also an environmental spin-off. In Australia, worn-out banknotes are shredded and recycled to make, among other things -- plastic garbage bins and flower pots.
(A$1 = US$0.7765)
",30
"An Australian state-owned power station and coal mine sold on Tuesday for A$4.86 billion (US$3.65 billion) in the nation's single biggest privatisation.
A consortium comprising U.S. utilities CMS Energy Corp and NRG Energy Inc and Australian institutional investors was awarded the prized assets by the Victoria state government.
""We are very proud owners,"" said David Scaysbrook, managing director of NRG Australia Ltd, a unit of NRG.
The sale followed a tight bidding war involving some global heavyweights of the generating industry, including other U.S. utilities American Electric Power Co Inc and AES Corp and Hong Kong utility China Light and Power Co Ltd.
The sale of the 2,000 megawatt power station and coal mine overshadows last year's sale of half of the Commonwealth Bank of Australia as the biggest Australian privatisation.
The national government reaped A$4.0 billion for disposing of its 50.4 percent stake in the bank.
The sale of Loy Yang A, the most efficient electricity generator in Australia, comes as private generators clamour to enter Australia's emerging national energy market.
As a first major step in the development of a free market in electricity, Victoria and its bigger state neighbour, New South Wales, will merge their markets from the end of this month.
""We believe there's a great opportunity here,"" CMS Energy vice-president David Weaver told reporters in Melbourne.
CMS, which has 50 percent equity in Loy Yang A, and its partners have paid roughly 14 times the operation's forecast underlying earnings for the year to June 30, 1997.
NRG Energy Inc takes a 25 percent stake in the Loy Yang A estate, which comes with Australia's biggest coal mine producing 30 million tonnes a year.
Australian investors led by Macquarie Bank's Infrastructure Trust of Australia Ltd hold the remaining 25 percent.
Horizon Energy Investment Ltd, the vehicle for the Australian-held equity, plans to issue some or all of its shares in Loy Yang A to the public next year in a stock exchange float.
As conditions of sale, Horizon cannot be floated within a year of sale while CMS and NRG may not sell down, or out, of Loy Yang A before two years. The sale will be settled on May 13.
""We expect this acquisition will contribute to CMS Energy's earnings in 1997 and beyond,"" CMS Energy president and chief operating officer Victor J. Fryling said in a statement.
The winning consortium bid A$4.75 billion for Loy Yang A, but it also assumed liabilities worth A$109 million, enabling the government to say the sale was worth A$4.86 billion.
The sale takes to A$18 billion the amount of money raised by the once heavily debt-laiden Victoria government from the sale of electricity assets over the past two years.
More electricity assets are set to follow, including the state's transmission grid, PowerNet Victoria, which the Victoria government hopes will raise up to A$2.5 billion.
New South Wales state has resisted selling its state-owned generators, but on Tuesday said it would put its TAB betting agency on the market in a A$1.0 billion share float.
Australia's debt and equity markets have been flooded by the sale of state assets over the past few years, including such business icons as Qantas Airways Ltd and the Commonwealth Bank.
But the biggest is yet to come. The national government plans to sell a third of telecommunications giant Telstra Corp this year for an expected tag of at least A$8.0 billion.
",30
"Australia's biggest bank, National Australia Bank, on Thursday reported record half-year net earnings but said it felt vulnerable to foreign takeover.
Unveiling a A$1.14 billion (US$885 million) profit for the six months ended March 31, managing director Don Argus suggested a government freeze on mergers between the four big local banks had exposed all of them to the threat of foreign takeover.
He said NAB felt vulnerable.
""I certainly do, particularly when some of our friendly merchant banks from the Northern Hemisphere tell you that you're at the top of the 'Hit Parade',"" Argus told reporters.
The most profitable of Australia's banks and ranked its top bank by KPMG management consultancy, NAB has been seen as a likely predator if big bank mergers in Australia are approved.
But the freeze remains despite an official inquiry into the Australian financial system recommending last month that the big banks as well as major life offices be allowed to merge.
The government wants the ban on big-bank mergers to stay until competition widens and intensifies. But it has opened the way for a foreign bank to swoop on one of the big four.
Argus on Thursday criticised the government's position, warning competition was unrelenting and would put the group's ability to deliver further record profits under pressure.
The warning sparked sell orders on NAB shares, which ended at $A18.11 on Thursday, down 23 cents on Wednesday's close but still at historical highs.
Offshore income bolstered NAB's performance, with earnings growth from its six bank subsidiaries in the United Kingdom, Ireland, the United States and New Zealand.
Even Asia, a small part of NAB's international business, has begun to ""put its head up now with some decent black figures"", Argus said. Net profit from the Asian business more than doubled to A$15 million from A$6 million a year ago.
Offshore income now accounts for 37 percent of NAB's net earnings. This offers the bank some protection from Australia's fragile housing market and will ensure it continues to outperform its domestic rivals, banking analysts said.
""All the banks are doing it very tough in Australia at the moment,"" a Melbourne-based analyst said.
Argus said NAB would start to feel the pinch of lower interest rates in the curent half-year, ending September 30, but felt the bank could match last year's second-half result.
""We would like to think we could,"" he said.
If so, NAB would achieve a record annual net profit of about A$2.24 billion, just under state-owned telecommunication carrier Telstra's Australian record profit of A$2.3 billion in 1995/96 (July/June). (A$1 = US$0.7760)
",30
"The Australian state of Victoria announced on Monday the nation's biggest gas privatisation, unveiling plans to sell its gas monopoly, Gascor.
Victoria Treasurer Alan Stockdale made the announcement at a gas reform conference, where one industry consultant estimated the sell-off would reap around A$4 billion for the government.
Gascor will be be split into three separate, competing distributors by July 1, ahead of their sale from mid-1998.  
The Victoria government has already sold over A$13 billion worth of electricity assets, making it the leader in efforts to set up a national free market for energy.
""Gascor is currently ill-equipped to compete in the fast approaching national gas market,"" Stockdale told the conference.
""It is the vision of this government to create an integrated energy market that will deliver low-cost energy to industry and householders, providing Australia with an important boost to its competitiveness...,"" he added.  
Gascor has 1.4 million customers throughout Melbourne, 50 towns in rural Victoria and some border towns in New South Wales state. Its balance sheet shows net assets of A$1.14 billion.
Interest in the Gascor businesses, to be known by individual names, is likely to come from private power utilities already operating in Australia and from new foreign entrants.
""I think a lot of the companies currently involved in electricity will also be interested in gas,"" said Walter Dewe, a a consultant who once headed a national taskforce on gas reform.
""I think there will be new ones that missed out for electricity and also gas companies,"" he told Reuters.  
Offshore interest in Australia's emerging national energy market has come chiefly from the Britain and the United States.
A consortium led by Britain's National Power Plc spent A$2.35 billion last year to buy Victoria's Hazelwood coal-fired power station.
Earlier, another consortium headed by British-based Powergen Plc bought another Victoria generator, Yallourn Energy, for A$2.43 billion.
U.S. utility Edison International has a controlling stake in another coal-fired power plant through its Edison Mission Energy unit.  
U.S.-based Northern States Power Co is also eyeing the Australian market, declaring it was ""hell-bent on acquisitions"" in Australia this year.
Under the terms of the Victoria privatisation, gas prices will be capped below the cost of inflation until the year 2001.
Until then, only major gas consumers will be able to shop around among gas companies for the best deal, with all other consumers able to do so in 2001, regardless of where they live.
The move comes as plans are being drawn up to link the two biggest states, Victoria and New South Wales, with new pipelines to create a seamless gas market in the country's southeast.  
-- Melbourne bureau 613-9286-1421
",30
"The world's biggest miner, RTZ-CRA, announced a major realignment of its sprawling empire on Wednesday and removed any doubt that London was its capital.
The group, born of a 1995 merger of London-based RTZ Plc and Australian-based CRA Ltd, said it would now manage its global businesses along six main product lines.
These were aluminium, copper, energy, industrial minerals, iron ore, and gold and other minerals. Together they reaped revenues of around US$8 billion for the group in calendar 1996 from operations on all six continents.
RTZ-CRA said it would shrink its Melbourne office, CRA's home base and until now the group's ""other"" headquarters. It will halve the staff there, shedding 100 jobs, and leave the office with a support role only.
CRA chairman John Uhrig said in outlining the changes that the merger, which maintained the two firms' separate listings, had so far not produced a better outcome for shareholders.
""It would have been surprising if it had in its first year of operation,"" Uhrig told a news conference in Melbourne.
The restructuring leaves Australian-based executives to manage the aluminium, energy and iron ore businesses from Brisbane, Melbourne and Perth. London handles the rest and remains the sole group headquarters.
The Salt Lake City office of its Kennecott copper operation in the United States as well as the group's Johannesburg office would be closed, it added.
The new structure shifts the focus of management away from a geographical view of the world, where operations differ by country, toward a single management for each global business.
It ensures RTZ-CRA does not become an unwieldy bureaucracy unable to compete with more nimble rivals which deal in just one commodity, the group said.
Chief executive Leon Davis gave examples where, under the current structure, copper operations and coal mines were under several different leaderships across the globe.
""These are barriers that are artificially created and we are intent on removing them,"" Davis told the news conference.
""It will eliminate duplication, lower our costs and improve our efficiency,"" he added.
Mining analysts welcomed the move. One viewed it as confirmation the RTZ-CRA marriage, made without any shares actually changing hands, was effectively a cheap buy-out of CRA.
""If anyone thought the DLC (dual-listed structure) was anything other than a buy-out on the cheap, they should assess this little move because they are virtually wiping out Melbourne head office,"" a Sydney-based analyst told Reuters.
The analyst said he expected the group to eventually transform the dual-listed structure into the one company.
RTZ-CRA has already proposed to ditch its double-barrelled name and become known, subject to shareholder approval this year, as Rio Tinto. RTZ's shares would then trade in London as Rio Tinto Plc and CRA's stock in Australia as Rio Tinto Ltd.
A Melbourne-based analyst said the cementing of London as the group's headquarters came as no surprise. ""It doesn't make any sense to have two head offices,"" he said.
",30
"Australian financial services group Colonial Ltd made a strong debut on the Australian share market on Monday, its share price soaring on listing.
Colonial shares closed at A$3.31 (US$2.56), well above the A$3.10 paid by institutional investors in the company's public share offer, which closed last Friday.
The market price eclipsed the A$2.60 paid by members of the public in the A$690 million float, but those who took their stag profits and ran on Monday failed to dent the price.
The closing price, just four cents off the day's high, gives the company a market capitalisation of A$1.9 billion and puts it in the top 50 Australian companies. A whopping 32.3 million shares traded hands during the day
""We are obviously delighted that we have come on with a premium. It's a strong market response,"" Colonial managing director Peter Smedley said after watching the opening share price flash up on the stock exchange boards in Melbourne.
Colonial on Monday became only the second life office to list on the local exchange, after one of its bigger rivals, National Mutual Holdings Ltd, made its debut last October.
Australia's biggest, the Australian Mutual Provident Society, will soon follow. It plans to shed its old mutual structure and list in Australia and New Zealand next year.
Smedley said he did not feel the share offer had been priced too low. ""I think the end result is a reflection of the fact we have set the price well,"" he told reporters.
""There was very heavy over-subscription from the public and a very positive response from institutions.""
Each share issued came with an underwritten option to buy more, enabling the company to raise another A$200 million between September this year and June 1998.
Colonial also made a strong debut on Monday on the New Zealand exchange, wher it has a secondary listing.
""It's certainly been an outstanding success,"" said Melbourne-based broker Kevin Lourey, of Peake Lands Kirwan.
Colonial is devoting some of the float proceeds to development of its life insurance business in Asia.
The group is spending US$163 million to buy out its old Asian partner, Jardine Matheson Holdings Ltd, from their equal life insurance joint venture based in Hong Kong.
Colonial has applied for a licence to sell life insurance in China and has operations across Southeast Asia, including Hong Kong, Singapore, Indonesia, the Philippines and Thailand.
Its traditional offshore markets are Britain, New Zealand and Fiji.
Colonial will also use A$50 million of the float proceeds to complete the 1994 purchase of the State Bank of New South Wales, now renamed Colonial State Bank.
Colonial has total assets of A$29.7 billion and has forecast a net profit before preference dividends of A$180 million for calendar 1997, a-50 percent rise on its 1996 earnings.
(A$1 = US$0.7745)
",30
"Australian industrial conglomerate Pacific Dunlop Ltd has dived into red ink in an effort to put two years of ""sobering"" financial woes behind it, declaring on Friday a full-year loss of A$132 million.
The group's earnings for the year to June 30 included a net abnormal loss of A$296 million, reflecting management's decision to cast off its troubled U.S. medical equipment unit and book over A$80 million in restructuring charges and asset writedowns.  
""This is a clean-out result and it gives both myself and my managenent team an absolutely clean slate on which to write the next chapter of Pacific Dunlop's history,"" group managing director Rod Chadwick said in announcing the result.
Pacific Dunlop's recent history has been dominated by severe problems faced by its Telectronics subsidiary, which is now up for sale after a defect in one of its cardiac-implant products effectively put the unit out of business for 13 months.
""We have so far had six deaths from this problem over the last two years,"" Chairman John Gough told reporters.  
The problem was first detected in Telectronics Accufix pacemaker lead in late 1994.
Telectronics' losses accounted for A$340 million of gross abnormal losses, including a provision of A$91 million for the expected loss on the eventual sale of the business.
""We are in very advanced negotiations,"" said Gough, who called the problem with the pacemaker leads ""in many ways ... an act of God"" and unforeseeable.
",30
"An Australian biotechnology firm has registered what it claims to be a unique vaccine against the world-wide problem of salmonella poisoning in chickens and hopes to register the vaccine for cattle as well.
The vaccine, registered with Australia's National Registration Authority for Agricultural and Vetinerary Chemicals, is the only salmonella vaccine able to be used on chicken eggs, Bioproperties Australia Pty Ltd said on Wednesday.  
""There's no vaccine in the world that can do that presently,"" said managing director David Tinworth, who estimated total annual sales of ""tens of millions of dollars"" if the vaccine was able to be sold internationally.
""We can actually inject this vaccine into the egg before it hatches because most of the salmonella spread into the poulty industry are in the hatcher,"" he told Reuters.
Bioproperties has successfully trialled the genetically manipulated vaccine in both chickens and cattle, the national government's Genetic Manipulation Advisory Committee, which oversaw the trials, confirmed to Reuters on Wednesday.  
The company has also applied to register the vaccine domestically for use in cattle, Tinworth told Reuters. ""The registration is in process,"" he added.
Vaccine sales into the poultry industry will begin at the end of this year, and Bioproperties plans to begin sales into local dairy and cattle industries within 18 months, he said.
""We are seeking registration in the whole of Europe (through the European Community) and the U.S.,"" Tinworth said.
To develop the vaccine, Bioproperties secured a sub-licence on a patent registered in the United States for a technique known as gene depletion, he said.  
Bioproperties sub-contracted the vaccine research work to the Royal Melbourne Institute of Technology, which used the patented gene-depletion technique to develop a benign salmonella bacterium which stimulated the immune system.
Unlike existing salmonella vaccines, the gene-depleted vaccine carries no risk of inducing salmonella infection, Tinworth said. ""This vaccine is totally safe in the sense that it cannot cause salmonelosis,"" he added.
Bioproperties will pay royalties on sales to both the U.S. patent-holder Praxis and the institute.  
It is now working with Wyeth Australia Ltd, a unit of U.S. pharmaceutical group American Home Products Corp, to register a salmonella vaccine for humans, Tinworth said.
Such a vaccine would be well suited for use on immuno-supressed people such as AIDS sufferers, he added.
However, the company's initial market will be the huge poultry market, which slaughters an estimated 22 billion broilers each year, Tinworth said, adding the vaccine would be priced below current poultry vaccines at one U.S. cent per dose.
-- Melbourne Bureau 613-286-1421
",30
"Australia's biggest retailer Coles Myer Ltd on Thursday reported a 41 percent surge in half-year earnings, its first profit rise in almost two years.
The result buoyed Coles' once-sinking share price, which firmed despite a weaker market, and follows a two-year nightmare of sliding profits, controversy and tight-fisted consumers.
Coles, which pockets nearly 18 cents in every retail dollar spent in Australia, reported a net profit of A$273.6 million for half-year ended January 26, against A$194.5 million a year ago.  
Before abnormals, net earnings leapt 23 percent to a better-than-expected A$229 million, boosting the shares 10 cents above Wednesday's close to A$6.01 (US$4.74) in morning trade.
""What is important are people's expectations of the turnaround now. I think that's why the stock is where it is, on anticipation of much better margins and profit,"" a broker said.
Coles also on Thursday gave a bullish forecast for the full year ending July 27, suggesting it expected more double-digit profit growth in the second half of 1996/97.
",30
"Australian financial services group Colonial Ltd made a strong debut on the Australian share market on Monday, its share price soaring on listing.
In early trading, Colonial shares opened at A$3.31 (US$2.56), well above the A$3.10 paid by institutional investors in the company's public share offer, which closed last Friday.
The opening price eclipsed the A$2.60 paid by members of the public in the A$690 million float, but those who took their stag profits and ran on Monday failed to dent the price.
In late morning trade, Colonial shares were trading around the opening price, giving the company a market capitalisation of A$1.9 billion and putting it in the top 50 Australian companies.
""We are obviously delighted that we have come on with a premium. It's a strong market response,"" Colonial managing director Peter Smedley said after watching the opening share price flash up on the stock exchange boards in Melbourne.
Colonial on Monday became only the second life office to list on the local exchange, after one of its bigger rivals, National Mutual Holdings Ltd, made its debut last October.
Australia's biggest, the Australian Mutual Provident Society, will soon follow. It plans to shed its old mutual structure and list in Australia and New Zealand next year.
Smedley said he did not feel the share offer had been priced too low. ""I think the end result is a reflection of the fact we have set the price well,"" he told reporters.
""There was very heavy over-subscription from the public and a very positive response from institutions.""
Each share issued came with an underwritten option to buy more, enabling the company to raise another A$200 million between September this year and June 1998.
Colonial also made a strong debut on Monday on the New Zealand exchange, wher it has a secondary listing.
""It's certainly been an outstanding success,"" said Melbourne-based broker Kevin Lourey, of Peake Lands Kirwan.
Colonial is devoting some of the float proceeds to development of its life insurance business in Asia.
The group is spending US$163 million to buy out its old Asian partner, Jardine Matheson Holdings Ltd, from their equal life insurance joint venture based in Hong Kong.
Colonial has applied for a licence to sell life insurance in China and has operations across Southeast Asia, including Hong Kong, Singapore, Indonesia, the Philippines and Thailand.
Its traditional offshore markets are Britain, New Zealand and Fiji.
Colonial will also use A$50 million of the float proceeds to complete the 1994 purchase of the State Bank of New South Wales, now renamed Colonial State Bank.
Colonial has total assets of A$29.7 billion and has forecast a net profit before preference dividends of A$180 million for calendar 1997, a-50 percent rise on its 1996 earnings.
(A$1 = US$0.7745)
",30
"Shares in Crown Ltd, Australia's most successful casino tumbled on Friday as nervous investors cashed in their chips weeks before the company opens the nation's biggest casino complex aimed at Asian gamblers.
Crown shares closed at a 16-month low, completing a rapid 27 percent slide from grace since mid-January when concerns about rising costs and delays at the A$1.55 billion (US$1.23 billion) complex began to shake confidence in the company.
Crown, which plans to move into its new riverside home in Melbourne in April, has also raised investors' eyebrows with its lavish attempts to attract the region's biggest gamblers.
It uses private jets to bring its best customers into the country and also plans to buy a private golf course, estimated to be worth about A$40 million, for their exclusive use.
In addition, it is negotiating to buy the management rights to its own casino from major shareholder Hudson Conway Ltd for an estimated A$300 million. Crown owns the casino but Hudson manages it for a fee.
To fund its ambitions, Crown has raised over A$500 million in equity and debt since August. On Thursday, it announced a rights issue of shares, spooking investors further.
""It's just the continued raising of capital. People are now at the stage where they really do not believe perhaps that this is the last one,"" a casino industry analyst told Reuters.
Investors are also uncertain about its Asian strategy. ""People have no understanding how big that market is and how much of that market Crown will be able to attract ...,"" she said.
The company's profit outlook was downgraded in an independent accountant's report which came to light last month.
But Crown has said its earnings outlook remains bright and denied on Friday its new complex had run into big cost overruns.
The total estimated cost of the project has risen to A$1.55 billion from the company's December estimate of A$1.25 billion.
""There's obviously been additional expenditure on plant, property and equipment, but we are fairly happy with that level of expenditure,"" Crown spokesman Gary O'Neill told Reuters.
Crown has pinned most of its hopes on Asian gamblers, who account for about one-third of the firm's revenues. Crown hopes to take this to over 60 percent after opening its new complex, which it says is being fitted out with Asian tastes in mind.
But the impending opening has coincided with a backlash against Australia's gamble on the casino industry, both by investors as well as political, community and business leaders.
Australia now boasts 14 casinos.
Investors see the industry as saturated while other businesses, especially retailing chains, regard it as a threat to their own slice of the consumer dollar.
Prime Minister John Howard also stepped into the debate this month, ordering an investigation into the levels of gambling after official figures showed A$1 in every A$200 spent by Australians ended up on casino tables.
He said gambling threatened to become a ""national blight"". ""I think ... we're at saturation level as far as gambling facilities in Australia are concerned,"" Howard said.
(A$1 = US$0.79)
",30
"Australia's Foreign Investment Review Board (FIRB) said on Tuesday it would probe French insurer Axa-UAP's move into China, insisting it must hand ownership of Asian businesses to its Australian subsidiary.
""The board will critically examine the matter,"" a FIRB spokesman told Reuters by telephone from Canberra.
""It's a major matter -- absolutely,"" he added.
Axa-UAP said last week Chinese authorities had given it the green light to sell life insurance in China.  
The announcement hardly mentioned Axa-UAP's 51 percent owned Australian-based subsidiary, life office National Mutual Holdings Ltd, which is the Axa group's Asian arm.
National Mutual, which had separately applied for a licence to operate in China, has said it is not clear what role, ""if any"", the Australian company will play in Axa's China business.
When Axa bought 51 percent of National Mutual in 1995, the Australian government agreed to the foreign investment on the condition the parent make National Mutual its Asian arm.  
The government's FIRB approved the foreign investment provided Axa ""transferred its existing life insurance interests to National Mututal Holdings"" and pursue ""its Asia Pacific life insurance business strategy through that company"".
Insurance analysts have speculated Axa would retain ownership of the potentially lucrative China business, but would pay National Mutual's 69-percent subsidiary, Hong Kong-based National Mutual Asia, to manage it.
But the FIRB spokesman said the board, in approving Axa's investment in National Mutual, cleary intended for Axa to hand ownership of its Asian businesses to the Australian company.  
""It means ownership,"" the spokesman said.
FIRB will seek dialogue with both Axa and National Mutual in order to examine how the China business will be run, he said.
Ultimately, if the conditions of Axa's investment in National Mutual were found to be breached, the government could move to enforce those conditions, he added.
""There are powers under the Foreign Acquisitions and Takeovers Act which enable the government to enforce compliance with the conditions of approval,"" he said.
""There are penalties available...,"" he added. He declined to comment further.  
In an earlier case, the Australian government ruled that Canadian company CanWest Global Communication Corp  CCSs.TO had to reduce its stake in the Ten Group Ltd because it was inconsistent with the government's foreign investment policy.
-- Melbourne bureau 61-3 9286-1421
",30
"The former chief of Australia's biggest retailer was jailed on Wednesday for four years for defrauding the company of A$4.46 million (US$3.47 million) in what the judge called a 1980s case of greed and excess.
Former Coles Myer Ltd chief executive Brian Quinn, convicted last month of using company funds to make lavish renovations to his Melbourne mansion, stood ashen-faced in the courtroom and nodded in meek resignation at the sentence.
Judge Geoff Eames ordered that Quinn, 60, who ran the company for six years until he retired in 1992, not be eligible for parole until he had spent two and a half years in prison.
Eames accused Quinn of greed, vanity and extravagance and said he had shown no remorse.
""It was extravagance and excess to such a degree to be demonstrative of the fact that you did not intend to pay for the work yourself,"" he told Quinn.
""It is impossible to escape the conclusion that what occurred here was motivated by greed,"" Eames added.
Quinn, dressed smartly in a grey suit and burgundy tie, was immediately escorted back to prison after the sentence. He has been held in custody since his conviction on April 19.
Quinn had denied that between 1982 and 1988 he and the head of Coles Myer's maintenance department conspired to falsely claim the money spent on renovating Quinn's home as work done on Coles supermarkets and other company properties.
Work on the house included adding another storey, building a tennis court and building an eight-car garage. Interior work included installation of a mirror worth A$15,000.
A string of prominent Australians, including Victorian state premier Jeff Kennett and the leader of Australia's trade union movement, gave character testimony to the court last month.
But judge Eames said Quinn, a former board member of Australia's central bank, had clearly felt his talents deserved more in the way of reward than his handsome salary packages.
""The company was not ungenerous. It was the height of vanity to believe that your talents had not been sufficiently rewarded,"" the judge said.
""It remains a criminal offence to plunder the assets of a company, whatever the opinion held by the thief of his own worth to the company.""
Later, one of Quinn's close friends, Bruce Bingham, said the Quinn family was considering an appeal against the severity of the sentence.
Bingham drew a comparison with 1980s high-flier Alan Bond, who was sentenced to four years' jail in February for his role in Australia's biggest case of corporate fraud, worth A$1 billion. ""Mr Quinn, he has been a victim,"" Bingham said.
Quinn has repaid over A$3 million of the funds defrauded. (A$1 = US$0.78)
",30
"Australian paper and packaging giant Amcor Ltd, continuing a run of depressing profit results and forecasts, said on Tuesday that it hoped the worst would be over in 1996/97 (July/June).  
Amcor managing director Don Macfarlane said full-year net profit would be lower than the A$338.8 million achieved in 1995/96 but he saw paper prices rising from early calendar 1998.
""If you read the things we have said since the half-year (profit announcement) you would have to come to that conclusion,"" Macfarlane told Reuters.
""Hopefully this is the worst of it,"" he added.
His comments followed a statement in which Amcor said second half results would be lower than a year-ago and than the 1996/97 first half. There would also be some significant write-downs.
",30
"Australia's car-makers face massive disruption from next week due to a prolonged strike at a steel plant supplying the industry, car-makers said on Tuesday.
The four major manufacturers -- Ford, Toyota, General Motors Holden and Mitsubishi Motors -- have warned production will be shut down if the strike drags on.
The strike, in its fourth week, has crippled industrial group Email Ltd's Martin Bright Steel factory in Melbourne. The plant is the sole supplier to TRW Steering and Suspension Australia Ltd, which makes power steering units.  
The subsidiary of U.S. car-parts giant TRW Inc is a monopoly supplier to local car-makers, an industry source said.
The Australian Manufacturing Workers Union (AMWU), which wants a 15 percent wage rise over two years for the Martin Bright Steel workers, said on Tuesday the strike could escalate.
The 130 striking workers at Martin Bright Steel have been picketing the factory since April 11, preventing Email from moving stock out to its customers, an AMWU official said.
""We are talking about a major escalation of the dispute if they try to break that picket,"" AMWU organiser Craig Johnston told Reuters.  
""I think you will see a reaction that not even the employers are counting on,"" he added.
A spokesman for Email was not immediately available.
In letters sent last week to Australia's Industrial Relations Commission, car-makers said they would be forced to halt production and stand down thousands of workers from this week if the strike was not resolved quickly.
But on Tuesday, Ford, Toyota and Mitsubishi said they could now maintain full production for at least another week, but perhaps for not for much longer.  
""We are still going and expect to be until at least Friday week (May 16),"" said Ford Australia's public affairs general manager, Wendy Perkins.
""Obviously if supply of anything dried up, we would not be able to keep producing. We are keeping a watching brief.""
Toyota and Mitsubishi spokesmen told Reuters production was guaranteed for at least ""this week"".
TRW Steering and Suspension managing director Michael Laufer declined to comment on Tuesday, but an industry source said the firm could only keep going for another two weeks.  
TRW has kept car-makers supplied over the past three weeks by finding a contractor to make substitute parts for the power steering units, but this is a stop-gap measure, the source said.
""The automotive companies have gone along with the substitution ... but it's different material and they would prefer us to go back to the Martin Bright specifications,"" he said.
The Martin Bright Steel dispute has also hit other suppliers to the car-making industry. ""I am sure there are half a dozen others on the brink,"" the source said.
-- Melbourne bureau 613-9286-1421
",30
"Shell Australia Ltd said it wants to integrate the huge North West Shelf and Gorgon gas projects off northwest Australia and that talks with its partners would soon enter a ""constructive"" phase.
Shell, a part owner in each project, dismissed as absurd the option of developing Gorgon as a stand-alone project with its own greenfield liquified natural gas (LNG) plant, and said it was working to jointly develop Gorgon and the North West Shelf.  
""It's been our contrivance for the last year to bring it (Gorgon) in,"" Shell Australia chief executive Roland Williams told Reuters in an interview late on Thursday night.
""I believe we can look for quite constructive discussions on this now."" Williams did not give a timetable for a decision.
""Everybody wants to do the right thing. We have got to try and understand each other,"" he said.
Shell owns a sixth of the North West Shelf project, which has a total production capacity of 7.5 million tonnes per annum (MTPA) through its LNG plant on the Burrup Pensinsula.  
The other partners are The Broken Hill Pty Co Ltd, the MiMi consortium, Chevron Corp, British Petroleum Co and Woodside Petroleum.
Shell also owns two-sevenths of the nearby Gorgon gas field, which has the capacity to produce 6 MTPA but is still subject to feasibility studies. The other partners are Chevron, Texaco Inc and Mobil Corp unit Ampolex Ltd.
Shell and other main players in the two projects are under pressure from the Western Australia state government to decide soon on the future development of the state's LNG industry.  
""There's no question we must expand,"" Williams said, adding that he and the visiting chairman of the Royal Dutch/Shell Group's committee of managing directors, Cor Herkstroter, spoke to Western Australia premier Richard Court in Perth this week.
""The Japanese market want that capacity and we have a wonderful position there, so Shell is absolutely 110 percent behind the need to expand capacity in Western Australia,"" he said. But, Williams added, ""It is frankly absurd in building another LNG plant on the north sea front of Western Australia.""  
""Our attitude to Gorgon is very straight forward. For God's sake don't go and waste the money building another grass-roots plant in Western Australia. We've got one of the best in the world at the Burrup Pensinsula,"" he said.
""You can pipe all the gas in there.""
Japanese gas and power utilities take the bulk of North West Shelf LNG and have agreed to buy an additional 6.8 MTPA from next decade, paving the way for a A$5 billion expansion of the North West Shelf project to double capacity at the Burrup plant.
The extra capacity would start to come on stream in 2003 and reach around 14.7 mtpa two years later, Williams said.  
The North West Shelf and Gorgon partners should optimise the resources, developing the lowest-cost reserves first, he said.
""On the Burrup Pensinsula we have world's nicest LNG plant and offshore we have wave after wave of gas. We can produce gas from there I think till the end of the next century.
""What you do is to optimise your up-front economics,"" Williams said. ""You take obviously the cheapest gas to liquify earliest, because if you are going to put in A$5 billion into an investment, you are looking for the best cash flow in the first year of operation. Gorgon will go into there, and we are very happy to cooperate on that....""  
The MiMi partner in the North West Shelf project is a 50-50 joint venture between Mitsui & Co Ltd and Mitsubishi Corp.
-- Melbourne Bureau 613-9286-1421
",30
"Australian paper and packing group Amcor Ltd is expected on Thursday to report a sharp fall in half-year profit after a tumble in world paper prices.
Stock analysts have on average forecast the company to post a net profit before abnormals of about A$145 million for the six months ended December 31, a fund manager told Reuters.
The average forecast compares with a result of A$213.5 million for the same period a year earlier, when paper prices soared, but is broadly in line with the previous half-year.  
""In the second half of last year (1995/96), they made A$142 million and really that's what people are looking for,"" a Sydney-based analyst told Reuters.
Paper prices, which impact heavily on Amcor's earnings, touched historic highs towards late calendar 1995 but came back to earth last year.
""Paper prices have probably fallen on average by around 25 to 30 percent,"" Macquarie Equities analyst Philip King said.
""They probably hit their bottom in the June quarter of 1996 and since then they have been pretty flat,"" he told Reuters.  
Sluggish economic growth at home and abroad as well as stiff competition in Amcor's packaging businesses in Australia and New Zealand also kept a lid on half-year earnings, analysts said.
The group's container packaging and fibre packaging divisions accounted for over half of Amcor's earnings before interest and tax in 1995/96. Both would report a slight fall in earnings for the half-year, against a year ago, analysts said.
Amcor's loss-making Holfelder fibre-packaging business in Germany was again expected to detract from the group's half-year result, they said.  
Amcor had begun a cost-cutting drive at the German box-maker and says it would approach break-even in 1996/97.
But the paper division would shoulder most of the expected fall in half-year earnings, analysts said.
Its profit could be roughly half the A$173 million it earned before interest and tax in the first half-year of 1995/96, the fund manager said.
The silver lining in Amcor's result should be its outlook, which analysts described as positive.  
Domestic and world economic growth was set to underpin stronger earnings in 1997/98, with some signs of improvement evident already, they said.
One analyst warned of a risk that paper price would show renewed weakness, but others saw prices firming and margins fattening in the packaging businesses in 1997/98.
""For some significant improvement you have to look at '98...,"" the Sydney analyst said.
-- Melbourne bureau 613-9286-1421
",30
"Australian steel-maker The Broken Hill Pty Co Ltd (BHP) on Tuesday announced the closure of Australia's oldest steel-making plant, an industrial icon which it said could no longer match its Asian competitors.
The Newcastle mill, a milestone in the nation's industrial development when it opened in 1915, will shut down its blast furnaces by the end of 1999 as part of a major overhaul of BHP's global steel business, the company said.
BHP chief executive John Prescott, who like his predecessors forged his early career at Newcastle, was unsentimental in announcing the closure, which will end 2,500 workers' jobs.
""The fundamental purpose of all the change is to ensure a viable industry going forward,"" Prescott told reporters.
""We are not walking away from the steel industry,"" he added.
BHP now faces possible industrial action from trade unions, one of which said the closure would directly and indirectly destroy up to 12,000 jobs Australia wide.
A mass meeting of Newcastle workers at the site, north of Sydney, next Friday is expected to consider calling a strike against BHP, an Australian Workers Union (AWU) official said.
The AWU's Newcastle secretary, Mauri Rudd, told Reuters that a strike, if called, would try to block BHP exports.
BHP, Australia's biggest company, is also Australia's biggest exporter of coal and a major exporter of Australian iron ore, liquefied natural gas and manganese.
The Newcastle plant, at the foot of the coal-rich Hunter Valley, was opened in World War One as the first big step toward downstream processing of Australia's vast mineral resources.
The Australian government described the decison to end steel-making at Newcastle as disappointing. New South Wales state Premier Bob Carr went further.
""To lose such a chunk of steelmaking capacity is tragic, not just for the workers but for this country and its capacity to make things,"" Carr told reporters after the announcement.
But investors applauded the decision, sending BHP shares sharply higher and buoying the broader Australian market. BHP shares closed on Tuesday at the day's high of A$17.87, up 49 cents or 2.7 percent on Monday's close.
The announcement of Newcastle's demise as a steel-maker was buried in a company statement outlining BHP's goal to move away from the weakest parts of steel business to its strengths.
The statements followed a year-long review of BHP's position in the rapidly changing global steel business. BHP Steel aims to slash well over A$500 million from its cost base.
The review identified BHP Steel's strengths as downstream steel products for use in offshore construction and car-making industries, especially in Asia and the Pacific Rim.
Newcastle's rod and bar mills will be retained and developed into the centre for BHP's rod, bar and wire business. BHP's Geelong rod mill and Sydney wire mill will also close in 1999.
BHP Steel chief executive Ron McNeilly made it clear that in the business of raw steel-making, BHP lagging behind its chief East Asian competitor, South Korea's Pohang Iron and Steel Co.
Pohang has already achieved the industry's productivity benchmark of 1,000 tonnes per worker per year, while Taiwan's China Steel Corp aims to match this by year 2000, he said.
",30
"Global miner RTZ-CRA on Wednesday announced a major relignment of its sprawling minerals empire and removed any doubt that London was its capital.
The group, born of a 1995 merger of RTZ Plc and CRA Ltd, said it would now manage its world-wide businesses along six main product lines -- aluminium, copper, energy, industrial minerals, iron ore, and gold and other minerals.
It also said it would downsize its Melbourne office, CRA Ltd's headquarters, halving the number of jobs there and reducing its role to a support function.  
CRA chairman John Uhrig said in outlining the changes that the merger, which maintained the two firm' separate listings, had so far not produced a better outcome for shareholders.
""It would have been surprising if it had in its first year of operation,"" Uhrig told a news conference in Melbourne.
The restructure leaves Australian-based executives to manage the aluminium, energy and iron ore businesses from Brisbane, Melbourne and Perth. London handles the rest and remains the sole group headquarters, RTZ-CRA said.  
The Salt Lake City office of its Kennecott copper operation in the United States as well as the group's Johannesburg office would be closed, it added.
The new structure shifts the focus of management away from a geographical view of the world, where operations differ by country, toward a single management for each global business.
It eliminates problems of overlapping time zones and managements, ensuring the group does not become an unwieldy bureaucracy unable to compete with rivals dealing in just one commodity, the group said.  
Chief executive Leon Davis gave examples where, under the current structure, copper operations and coal mines were under several different leaderships across the globe.
""These are barriers that are artificially created and we are intent on removing them,"" Davis told the news conference.
""It will eliminate duplication, lower our costs and improve our efficiency,"" he added.
Mining analysts welcomed the move, with one seeing it as confirmation the RTZ-CRA marriage, made without RTZ making a takeover bid, was effectively a cheap buy-out of CRA.  
""If anyone thought the DLC (dual-listed structure) was anything other than a buy-out on the cheap they should assess this little move because they are virtually wiping out Melbourne head office,"" a Sydney-based analyst told Reuters.
The analyst said he expected the group to go a step further and rationalise its assets and then transform the dual-listed structure into the one company.
RTZ-CRA has already proposed to ditch its double-barrelled name and become known, subject to shareholder approval this year, as Rio Tinto. RTZ's shares would then trade in London as Rio Tinto Plc and CRA's stock in Australia as Rio Tinto Ltd.  
A Melbourne-based analyst said the cementing of London as the group's headquarters came as no surprise. ""It doesn't make any sense to have two head offices,"" he said.
That would come as cold comfort for the 100 people whose jobs have been scrapped in Melbourne under the reorganisation.
But RTZ-CRA said it would carry out the job cuts as painlessly as possible. ""The group will provide both practical and financial assistance to help their transition,"" it said.
-- Melbourne bureau 61-3 9286-1421
",30
"Australia's Trust Bank said on Friday a locally listed insurer and two offshore institutions had expressed interest in buying a 49 percent stake in the bank.
Trust Bank managing director Paul Kemp declined to name the three groups but said such an early response to the bank's quest for a long-term strategic partner was a good sign.
""We have had three expressions that are potentially worth listening to,"" Kemp told Reuters.  
They were from a local insurer, an unlisted offshore insurer and another offshore financial instution, thought to be a bank, which approached the Trust Bank through an intermediary.
Tasmania-based Trust Bank announced in March that it was looking for a strategic partner to take a 49 percent stake, hopefully by early 1998.
The bank then plans to issue 41 percent of its equity to the public by the end of 1998 and embark on national expansion.
Trust Bank is effectively owned by a community trust and, like mutual societies, has no shareholders.  
It has net assets of A$143 million, implying a total value of A$257 million, based on the goodwill paid in the sale of another regional Australian bank, BankWest Ltd, in 1995.
One insurance analyst said the most likely local insurer to have expressed an interest in taking a stake in Trust Bank was Sydney-based GIO Australia Holdings Ltd.
National Mutual Holdings Ltd has ruled out any interest in acquiring a banking licence, saying it is no longer worth paying a premium due to convergence in the industry.
Colonial Ltd already owns a bank.  
The analyst said it was unlikely any of the other seven listed insurers would be interested.
""I imagine it's probably GIO, but it doesn't sound to me like it would be a big issue whether it got it or not,"" the Melbourne-based analyst told Reuters.
The value of a bank to an insurer would be the bank's distribution network, the analyst said.
But Trust Bank's branch network is confined mainly to Tasmania state, its home market.
It has just four branches outside Tasmania.  
Trust Bank's Kemp said the bank would soon choose a big global accountancy firm to help it identify a partner. It is also drafting an information memorandum for potential partners.
Kemp insisted a banking licence was still a valuable asset for non-bank institutions. ""You are going to get an immediate foothold in the Australian market place,"" he said.
""You are going to acquire a franchise which has considerable value, you are going to get a distribution network. You are going to hire a level of expertise,"" he said.  
Trust Bank has ruled out any of the other local banks as a strategic partner, saying none of them would be interested in fulfilling Trust bank's broader ambitions.
-- Melbourne Bureau 613-9286-1421
",30
"APEC ministers agreed on Friday on further trade and investment liberalisation in the telecommunications sector, but recognised they cannot drag China into the forum's agenda of trade liberalisation.
""There has been an agreement by all economies to adopt the strategy of going towards open trade and liberalisation in the trade in telecommunications,"" Australian telecommunications minister Richard Alston told reporters.  
The Australian minister said China was connecting 15 million telephone lines a year, but still had one of the lowest penetration rates of fixed telephone lines amongst members of the APEC (Asia Pacific Economic Cooperation) forum.
""The challenges and the enormity of scale of operations of that country can hardly be compared to countries such as PNG (Papua New Guinea) and Brunei ... and so that is why you would have to allow for different views,"" he said at the end of the three-day meeting.  
Alston said he was also hopeful that Malaysia, which was the only member of the APEC group not to come to the meeting, to attend future meetings.
Malaysia did not attend the initial APEC telecommunications ministers meeting in Seoul in 1995.
""We would all hope Malaysia will over time see the benefits that derive from collective discussions,"" Alston said.
""I think the high level of interest amongst the 17 economies, that will benefit Malaysia, even in absence.""  
Alston, who hosted the second APEC ministerial meeting on telecommunications and the information industry, said APEC could not push member countries to conform to a uniform policy.
""It is not a regional government. It is not intended to drag unwilling players along a path that the majority thinks desirable,"" said Alston in reply to a question about reports that China was reluctant to adopt telecom liberalisation.
""Whilst there might be some domestic reservations about particular aspects, the overall guiding principles are well recognised. You simply don't find a member economy that does not espouse the principles of the reforms in this area,"" he said.  
Although there were no tangible projects to come out of the meeting, ministers agreed on further collaboration on working groups to look at telecommunications for rural development, distance education, information sharing and the environment.
""It would be very short sighted if we simply committed ourselves to physical rollout without taking into account the effect to the natural environment,"" Alston said.
Alston said rapid technological change in informational technology and telecommunications had thrown up new challenges, such as dealing with the acceptance of electronic commerce and taxation issues that go along with it.  
""Undoubtably there will a reluctance to fully embrace electronic commerce and all of its manifestations, until we do solve problems of privacy,"" Alston said.
Alston said he expected electronic commerce to be a growing industry once encryption and security issues had been resolved, but taxation issues will start become more important.
""It hasn't yet reached the stage of being an avalanche of siphoning off the revenue from the taxation authorities, but it clearly has some potential in that regard and I think all member economies are aware of the need to handle the issue,"" he said.  
The next meeting of telecom ministers is in Singapore in mid-1998. APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
-- Sydney Newsroom 61-2 373-1800
",23
"Cinema and theme park operator Village Roadshow Ltd said it expected stronger second half earnings fuelled by the expansion of its cinema operations.
""The second half has already started stronger and we are going to start seeing the full six month contribution from the European acquisition and also the contribution from new cinemas we have opened up,"" group general manager Peter Foo told Reuters in an interview.
Village earlier reported a 27 percent rise in net profit to A$26.1 million for the 1996/97 first half.  
Foo said the group was always looking at new opportunities for its cinema expansion, but he would not add if the company was looking at any new countries for expansion.
Cinemas account for the single largest revenue contribution from Village's operation, with about 40 percent of the A$172.95 million in 1996/97 first half sales coming from cinemas.
The remainder its split between radio and theme parks.
Foo said Village was not interested in acquiring the resort island businesses of Qantas Airways Ltd, which the airline has up for sale. The resorts include Great Keppel, Brampton, Bedarra and Lizard Islands offshore Queensland.  
""We are not interested at this stage, we want to focus on our cinema rollout,"" Foo said. He said the company was happy with its existing holiday resort business, Daydream Island.
Village is about 19 percent owned by MAI Plc, a unit of United News and Media Plc. Foo said Village was looking at working with the British media group in some areas.
""We are looking at more co-production work,"" Foo said. Village also has film and television production operations.
Village's radio interests are held through its 53 percent stake in Austereo Ltd, which announced earlier an 11 percent rise in 1996/97 first half profit to A$17.15 million.  
Village shares closed one cent higher at A$4.26.
-- Sydney Newsroom 61-2 9373-1800
",23
"Australian government-owned Telstra Corp reported a 38.4-percent fall in net profit for the 1996/97 first half as the costs of shedding almost a third of its workforce started to ring up for the telephone carrier.
Telstra, which is to be partially privatised by the end of the year, also said it was in talks with global telecom carriers about forming possible alliances.
""We are dancing with everyone, but we haven't taken anyone home from the dance yet,"" chief executive officer Frank Blount told reporters after the results announcement.
The Australian carrier reported a net profit after abnormals of A$742.0 million (US$585.4 million) in the six months to December 31, 1996, compared with A$1.20 billion a year ago.
Redundancy costs were A$1.03 billion in the half-year period with staff levels down by 7,000 during the half to about 69,500. Under Telstra's plan announced last September about 22,000 jobs are to go by the end of fiscal 1998/99.
Revenue grew by 4.6 percent to A$7.77 billion in the December half. Blount said first-half revenue was pressured by a slowing economy and increased competition.
It was unlikely revenue would grow any faster for the rest of the year to June 30, 1997, Blount said.
""I think the economy is picking up, but we are still seeing softness in revenue, but it is still growing about the same level as in the first half,"" Blount told reporters.
Telstra is to face stiffer competition in 1997/98 due to the deregulation of the local telecommunications markets from July 1, 1997, although few foreign telecom groups so far have openly stated they would enter the Australia market.
British Telecom Plc (BT) and U.S. telecom giant AT&T Corp have, however, been tipped to enter the local market.
Blount said Telstra had been in talks with BT and its partner MCI Communications Corp, AT&T Corp and the Global One consortium about possible alliances.
""We have had talks with Global One...we have had talks with AT&T...and we have continuing talks with BT/MCI,"" Blount said. Excluding the abnormal losses, Telstra reported a 16.1-percent rise in net profit to A$1.40 billion.
The result was well received by the Australian government, which said the partial Tesltra float is still on for the end of 1997. The government gets to pocket A$625 million in dividend payments from the carrier.
""I think the company is very well placed for privatisation,"" communications minister Richard Alston told reporters in Canberra. ""We're still hopeful that (the sale) will occur before the end of the calendar year,"" Alston said
The government last year moved to sell one-third of Telstra for a projected A$8.0 billion, but recent estimates put the sale price much higher.
(A$=US$0.7890)
",23
"The Asia-Pacific region should work towards lowering telephone charges to stimulate usage and promote economic growth, Australian Telecommunications Minister Richard Alston said on Thursday.
""An important emphasis of our work must be to ensure that users benefit from progress being made in telecommunications,"" Alston told the second Asia-Pacific Economic Cooperation (APEC) telecommunications ministers meeting.
""At the most basic level this means providing access to people who have lacked it, by extending the reach of networks and by lowering prices to ensure that genuine access is available to all our people,"" Alston said.
""Our experience is that real cost reductions are possible, but they are less likely to be achieved under monopoly arrangements,"" he said.
Alston cited Australia's example. In June, privately owned telecommunications and pay television group Optus Vision started to offer local telephone calls at 20 cents per call, which was 25 percent cheaper than that charged by state-owned Telstra.
Australia's six-month-old conservative government plans to sell one-third of Telstra in the 1997/98 financial year to June.
The three-day APEC ministers meeting aims to co-ordinate a regional telecommunications policy, also known as Asia-Pacific Information Infrastructure (APII).
""The development of the APII will encourage business activity and growth in the region. It will increase the investment funds available for the provision, expansion and modernisation of telecommunications networks,"" Alston said.
Alston, who is hosting the APEC meeting, said lower prices for telecommunications services, telephones, on-line and interactive services would stimulate economic activity.
""It remains a paramount objective of APEC to ensure that these trade and investment flows are able to occur by removing barriers through liberalising reforms,"" he said.
A more sophisticated telecommunications infrastruture in the Asia-Pacific region would result in the provision of more services and employment opportunities, Alston said.
""Consumers and businessess, both large and small, will benefit from increased activity in information services with lower prices and the availbility of a greater range of services,"" Alston said.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
",23
"APEC ministers agreed on Friday to further trade and investment liberalisation in the telecommunications sector, but recognised they cannot drag China into the forum's agenda of trade liberalisation.
""There has been an agreement by all economies to adopt the strategy of going towards open trade and liberalisation in trade in telecommunications,"" Australian Telecommunications Minister Richard Alston told reporters.
Alston, who hosted the second Asia Pacific Economic Cooperation (APEC) ministerial meeting on telecommunications and the information industry, said APEC could not push member countries to conform to a uniform policy.
""It is not a regional government. It is not intended to drag unwilling players along a path that the majority thinks desirable,"" Alston said when asked about reports that China was reluctant to adopt telecom liberalisation.
""Whilst there might be some domestic reservations about particular aspects, the overall guiding principles are well recognised. You simply don't find a member economy that does not espouse the principles of the reforms in this area,"" he said.
Alston said China was connecting 15 million telephone lines a year but still had one of the lowest penetration rates of fixed telephone lines among the 18 APEC nations.
""The challenges and the enormity of scale of operations of that country can hardly be compared to countries such as PNG (Papua New Guinea) and Brunei...and so that is why you would have to allow for different views,"" he said at the end of the three-day meeting.
Alston said he was hopeful Malaysia, the only member of the forum not to attend, would be at future meetings. Malaysia also did not attend the initial APEC telecommunications ministers meeting in Seoul in 1995.
""We would all hope Malaysia will over time see the benefits that derive from collective discussions,"" Alston said.
Although there were no tangible projects from the meeting, ministers agreed on further collaboration on working groups to look at telecommunications for rural development, distance education, information sharing and the environment.
""It would be very short-sighted if we simply committed ourselves to physical rollout without taking into account the effect on the natural environment,"" Alston said.
Rapid technological change has brought new challenges such as dealing with the acceptance of electronic commerce and the taxation issues that go with it, he said.
""Undoubtedly, there will be a reluctance to fully embrace electronic commerce and all of its manifestations until we do solve problems of privacy,"" Alston said.
He said he expected electronic commerce to be a growing industry once encryption and security issues had been resolved, but taxation issues will start become more important.
""It hasn't yet reached the stage of being an avalanche of siphoning off the revenue from the taxation authorities, but it clearly has some potential in that regard and I think all member economies are aware of the need to handle the issue,"" he said.
The next telecom ministers' meeting is set for Singapore in mid-1998. APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.
",23
"Optus Communications Pty Ltd, Australia's second largest telecommunications carrier, said on Wednesday it expects a strong result for the year to June 30 and aimed for a sharemarket float in 1997 despite litigation delays.
Optus also formally reported a net profit of A$58.9 million (US$46.4 million) in the six months ended December 31, 1996, up from A$7.1 million a year earlier.
Sales rose 31.2 percent to A$1.19 billion, buoyed by a strong lift in revenue from its mobile phone business. Sales are expected to continue the strong trend in the 1996/97 second half, chief operating officer Phil Jacobs told Reuters.
""It will be somewhere (near) a similar amount,"" Jacobs said.
""We are expecting a very strong result for the full year,"" Optus chief executive officer Ziggy Switkowski told reporters at a briefing after the results announcement. Optus reported a profit of A$60.3 million for the 1995/96 year.
Optus still planned a sharemarket float in calendar 1997 but that would have to await the outcome of litigation between its pay television offshoot, Optus Vision, and free-to-air television station Seven Network Ltd, Switkowski said.
Asked if Optus Communications would postpone its float beyond this year, Switkowski said: ""No, not at all. The float is clearly held up by the process of the litigation. Once the litigation is resolved, the board will meet and make decisions about how the float should proceed.
""The timetable for this year is still very much our desire,"" Switkowski said.
However, Switkowski said there was a possibility Optus's planned float would clash with the timing of the sale of one-third of the government-owned Telstra Corp, Australia's biggest carrier, which is seen by analysts as a far bigger capital-raising operation than for Optus.
""It is not impossible that those floats will happen about the same time, we will see later this year,"" he said.
Switkowski would not comment on the litigation battle which, if Optus loses, could see it forced to sell its Vision stake at a discount to Seven.
Optus Communications has pumped about A$605 million into Optus Vision, which is currently rolling out its cable network to 2.5 million homes or 40 percent of Australian households at a cost of about A$3.0 billion.
The full deregulation of the Australian telecommunications industry on July 1, 1997, would pressure margins, Jacobs said.
""There is no doubt that there will be erosion in some areas of our business as competition comes in...but we fully expect that erosion of (market) share would be more than offset by the continued growth of the business,"" Jacobs said.
Australian telecommunications analysts welcomed the result, but described post-deregulation as a ""big unknown"" for Optus.
""The rest of this year looks all right, but the big question mark is next year, with all the new players coming into the market. It's hard to know what effect it is going to have on Optus,"" one Sydney-based analyst said.
Market analysts expect global operators such as British Telecom and the U.S. giant AT&T to enter a deregulated Australian market later this year.
Optus was set up in 1992 as a partial deregulation of the local market, which was previously a government monopoly.
The Sydney-based group is 25 percent owned by Australian transport group Mayne Nickless Ltd and 24.5 percent each owned by Cable and Wireless Plc of Britain and U.S. telephone carrier BellSouth Corp Inc.
The remainder is owned by Australian institutions.
",23
"Australian cinema operator Hoyts Cinema Ltd reported on Wednesday a half year net profit in line with expectations and announced further expansion plans in Latin America by entering the Chilean cinema market.
Hoyts said it made a net profit of A$13.1 million for the six months to December 31 and that it was confident of achieving its net profit forecast of A$22 million for the 1996/97 year.
Hoyts chief executive Peter Ivany said the first half result was largely helped by its screening of ""Independence Day"" a film about an aliens attack on Earth.  
""The results are pleasing and in line with our prospectus forecast,"" Ivany said. ""As indicated in the prospectus, we expect to declare an interim dividend of four cents in July 1997 and a final four cent dividend in November 1997.""
""We are very confident we can meet the forecasts,"" Ivany told reporters after the release of the results.
Hoyts, which currently operates cinema screens in Australia, New Zealand, United States and Mexico, unveiled further expansion plans with a move into Chile, where it plans to operate 42 screens in the capital Santiago.  
Ivany said Hoyts had spent the past 18 months researching countries where cinema exhibition markets were underderveloped. ""Chile represents one of these underdeveloped markets.""
He said Hoyts planned to spend A$47 million on further expansion in Latin America over the next four to five years.
Ivany said Hoyts was looking at another market in Latin America and had an office in Brussels where it was assessing its European strategy.
He said Hoyts planned to open another 270 screens by the end of calendar 1997, bringing the total number of screens to be operated by the group to 1,400 by the end of the year.  
Ivany said the funds spent on expansion would depend on how many countries Hoyts entered. ""At the moment we have a plan to be in 10 markets over the next 10 years.""
""A$500 million is what we orginally have indicated and after we went out to the market it got closer to A$600 million,"" said Ivany in reponse to a question on how much Hoyts will spend on expansion over the next five years.
Ivany said about 80 percent of the A$600 million is expected to be spent on its existing markets, mainly in the United States and Australia with the balance to be spent on new markets.  
He said Hoyts would look at the international operations of U.S. cinema operator United Artists Theatre Circuit if they became available.
""If United Artists were in a position where they formally looked to sell some parts of their businesses, then if they declare that publicly and, they haven't, then we would look at it,"" Ivany said.
United Artists owners, Merrill Lynch Capital Partners Inc and Tele-Communications Inc, have not said the company or any of its businesses are for sale.  
""Our financial structure is amongst the top in the industry and we have the flexibility to be able to take up opportunities as they come along,"" Ivany said.
Hoyts is 47.5 percent owned by U.S.-based investment group Hellman and Friedman Capital.
However, the result and the expansion plans failed to excite the market. At 4.10 p.m. (0510 GMT), Hoyts shares were one cent down at A$2.67.
Hoyts shares listed on the Australian Stock Exchange at A$2.40 last August
-- Sydney newsroom 61-2 9373-1800
",23
"The Australian government appointed stockbrokers on Thursday to manage the proposed sharemarket float of its telecommunications carrier Telstra Corp, which will be the nation's largest privatisation.
The float is estimated to raise a minimum of A$8.0 billion (US$6.32 billion) -- and perhaps much more.
Finance Minister John Fahey said he wanted the Telstra float, through the sale of a third of the government's 100-percent stake, to go through by the end of the year.
""I want it ready to go to the market this year, this calendar year,"" Fahey told reporters.
""But I am not saying it will,"" he said. He added it was unclear whether the float of other international telephone companies would affect the float timing. France Telecom and Italy's state-owned Stet are also planned for sale this year.
Australian brokers J.B Were & Son, U.S.-based CS First Boston and European based ABN AMRO/Rothschild had been appointed global co-ordinators for the float, Fahey said.
He said J.B Were, Ord Minnett of Australia,  CS First Boston, U.S.-Australian consortium Goldman Sachs/Macquarie Bank, Daiwa of Japan, ABN AMRO/Rothschild and German owned Deutsche Morgan Grenfell were appointed joint lead managers.
The float would not be underwritten in Australia, where 65 percent of the offer is to be sold. But the shares offered in the United States would be underwritten and listed on the New York Stock Exchange, the minister said.
Two percent of the offer is set aside for Telstra employees and foreign investors are entitled to 35 percent.
Fahey would not comment on how much the government expects to raise from the partial sale of Telstra. ""I want to get optimum value for taxpayers of Australia,"" Fahey said.
Australia's Liberal-National Party coalition government was elected just over a year ago promsing to sell one-third of Telstra, with A$1.0 billion of the sale proceeds going to set up an environment fund.
The float of Telstra will far exceed other privatisations by the Australian government in recent years. The sale of Commonwealth Bank of Australia raised a total of A$8.0 billion, in two separate tranches, and the 1995 float of Qantas Airways Ltd raised A$1.45 billion.
The announcement was a boon to Australia's stockbroking community whose Christmas bonuses will be swelled by the Telstra float. The bidding for the Telstra deal was contested by 30 broking firms, which were invited to lodge proposals.
(A$1 =US$.79)
",23
"Australian flag carrier Qantas Airways Ltd on Thursday reported a 2.4 percent rise in net profit for the 1996/97 first half, but warned its Japan routes were unlikely to repeat the profitability of the early 1990s.
Qantas, 25 percent owned by British Airways Plc, reported a net profit of A$151.6 million (US$116.42 million) for the six months ended December 31, which was towards the higher end of market expectations.
For the 1996/97 year to June 30, the airline said it aimed to at least match the A$246.2 million net profit recorded in the full 1995/96 fiscal year.
The growth in profit was largely due to the airline's cost cutting programme, chairman Gary Pemberton told reporters.
Qantas has cut costs by over A$1.0 billion in the past three years. Sales rose 2.5 percent to A$3.97 billion for the fiscal half-year, with A$2.03 billion coming from its domestic operations.
Overall passenger revenue was flat, with revenue falling in its North American, Japanese, and other Asian markets.
Revenue from Japan fell about 30 percent to A$315 million in the first half. Qantas did not expect the contribution from the Japanese market to improve in the second half.
""It won't improve significantly,"" finance director Gary Toomey told reporters.
""Major changes in the Japanese market resulted in virtually no net contribution. This is a sharp contrast to the situation three years ago when the Japan route accounted for the bulk of Qantas international profits,"" Pemberton said in a statement.
""There is fundamental change occuring in distribution in the travel industry in Japan. It is becoming less structured, there is more competitive pricing,"" Qantas managing director James Strong told reporters.
""The economic situation is not very buoyant in Japan, the currency has been very strong, so it is a combination of all of those factors,"" Strong said.
Yield, a measure of revenue to the number of passengers, was likely to remain lower than in previous years due to the structural change in the Japanese tourism market, Pemberton told Reuters after the news conference.
Australia's share of Japan's tourism market has fallen by half a percent to 4.9 percent between the 1993/94 and 1995/96 fiscal years, even though more Japanese go on overseas holidays. Group revenues were not expected to grow quickly, fuel prices were forecast to remain high and price competition was expected to continue in most markets, Qantas said.
""The outlook is therefore for relatively modest fleet expansion and an undiminished drive for efficiency improvements and cost reductions to increase profits,"" it said.
The first half result was also hit by higher fuel prices. Qantas had absorbed increases of over A$50 million, net of hedging gains. At constant fuel prices, operating profit before tax would be up over 21 percent on a year earlier, it said.
""Looking beyond 1996/97, the airline will continue to expand, but at a slower rate than the very high levels of the last three years,"" Pemberton said.
(A$1=US$.7860)
",23
"Australian television broadcaster Seven Network Ltd on Wednesday reported a 31.5 percent fall in net profit for the half year to December 31 as the network started to account for tax.
A slightly better performance in the second half of the 1996/97 year is expected, compared with the same period a year earlier, giving a stronger full year result, Seven's managing director Gary Rice told Reuters in an interview.
Seven, about 15 percent owned by Rupert Murdoch's News Corp Ltd, reported a fall in net profit to A$63 million (US$47.55 million) in the half, from A$91.88 million a year earlier, after paying A$34.3 million in tax.
Seven, 20 percent owned by its chairman Kerry Stokes, also unveiled earnings for Metro-Goldwyn-Mayer (MGM) for the first time since it jointly took control of the Hollywood studio with United States billionaire Kirk Kerkorian late last year.
MGM reported earnings before interest, tax, depreciation and amortisation (EBITDA) of US$16.7 million in the period from October 10 last year to December 31 on an operating revenue of $228.7 million, Seven said in a statement.
""We are very happy with the progress at MGM,"" Rice said.
However, the MGM figures were not included in Seven's group result.
The second half of the year to June 30, 1997, should show some operational improvements, Rice said. ""I think in relative terms, I would expect to see a slight improvement in general performance terms in the second half.""
Asked if he saw a better performance for the whole year, Rice replied: ""Yes."" The network also declared a half year dividend of 4.5 cents, steady with the same period in 1995/96.
Analysts forecast Seven to report a net profit before abnormals of A$59 million to A$65 million for the first half.
Seven has nearly exhausted its tax credits following losses racked up by previous owner, fugitive Australian businessman Christopher Skase, whose business empire collapsed after a failed US$1.5 billion takeover bid for MGM in 1989.
Although it did not expect to pay tax for another two years, accounting standards required recognition of the income tax expense, Seven said.
Seven reported a 3.2 percent rise in operating profit to A$96 million for the 26 weeks to December 28, a company record and also within market expectations. Seven said the result was achieved despite a softening in the advertising market.
Sales for the television network rose 16 percent to A$418.3 million for the half, boosted by advertising revenue from its coverage of the Atlanta Olympics last year and the acquisition of regional TV group Sunshine Broadcasting in December 1995.
The coverage of the Atlanta Olympics produced a small gross profit and it recorded an abnormal gain of A$3.2 million on the sale of Sunshine Broadcasting's radio asset, Seven said.
Rice said he was optimistic about meeting targets.
""I think we will meet our financial targets and I think our performance will be quite strong in every respect,"" he said.
""We have had a reasonable January, February is not bad. We achieved budget in January and we will go close to achieving budget in February. So it's not bad, but it hasn't really kicked at this stage.""
Seven shares were carried to a strong finish as the overall market hit a record close. The company's shares closed five cents stronger to A$4.18 after spending most of the day's below Tuesday's close.
(A$ = US$0.7550)
",23
"Sydney Harbour Casino Holdings Ltd chief executive officer Neil Gamble said on Monday he expected to get a long awaited tax break for high spending gamblers from the New South Wales (NSW) government soon.
""I expect an imminent decision from the government and I am quite confident that they will give the go ahead for a favourable tax regime,"" Gamble told Reuters in an interview.
Gamble said the NSW state government had told him they would be making their decision in the first quarter of 1997.
",23
"Australian government-owned Telstra Corp reported a 38.4-percent fall in net profit for the 1996/97 first half as the costs of shedding almost a third of its workforce started to ring up for the telephone carrier.
Telstra, which is to be partially privatised by the end of the year, also said it was in talks with global telecom carriers about forming possible alliances.
""We are dancing with everyone, but we haven't taken anyone home from the dance yet,"" chief executive officer Frank Blount told reporters after the results announcement.
The Australian carrier reported a net profit after abnormals of A$742.0 million (US$585.4 million) in the six months to December 31, 1996, compared with A$1.20 billion a year ago.
Redundancy costs were A$1.03 billion in the half-year period with staff levels down by 7,000 during the half to about 69,500. Under Telstra's plan announced last September about 22,000 jobs are to go by the end of fiscal 1998/99.
Revenue grew by 4.6 percent to A$7.77 billion in the December half. Blount said first-half revenue was pressured by a slowing economy and increased competition.
It was unlikely revenue would grow any faster for the rest of the year to June 30, 1997, Blount said.
""I think the economy is picking up, but we are still seeing softness in revenue, but it is still growing about the same level as in the first half,"" Blount told reporters.
Telstra is to face stiffer competition in 1997/98 due to the deregulation of the local telecommunications markets from July 1, 1997, although few foreign telecom groups so far have openly stated they would enter the Australia market.
British Telecom Plc (BT) and U.S. telecom giant AT&T Corp have, however, been tipped to enter the local market.
Blount said Telstra had been in talks with BT and its partner MCI Communications Corp, AT&T Corp and the Global One consortium about possible alliances.
""We have had talks with Global One...we have had talks with AT&T...and we have continuing talks with BT/MCI,"" Blount said. Excluding the abnormal losses, Telstra reported a 16.1-percent rise in net profit to A$1.40 billion.
The result was well received by the Australian government, which said the partial Tesltra float is still on for the end of 1997. The government gets to pocket A$625 million in dividend payments from the carrier.
""I think the company is very well placed for privatisation,"" communications minister Richard Alston told reporters in Canberra. ""We're still hopeful that (the sale) will occur before the end of the calendar year,"" Alston said
The government last year moved to sell one-third of Telstra for a projected A$8.0 billion, but recent estimates put the sale price much higher.
Telstra is spending about A$3.5 billion on the rollout of its cable network around Australia, which carries its pay television service Foxtel that it owns jointly with Rupert Murdoch's News Corp Ltd.
Telstra's share of losses from Foxtel in the half was A$49 million, finance director Paul Rizzo told reporters.
""I am not concerned about the losses of Foxtel, because they are not that far off track, they are very close to plan,"" Blount said. ""Of course we are having losses in pay TV, that is the business,"" he said.
A$=US$0.7890
",23
"Australian television broadcaster Seven Network Ltd said on Monday the advertising market was fairly ""tough"" but the group was meeting its budget targets.
""It's a fairly tough market but we are going all right. We are on track for our budgets,"" Seven managing director Gary Rice told Reuters in a telephone interview.
Seven, which is 15 percent owned by Rupert Murdoch's News Corp Ltd, reported a jump in net profit to A$115.13 million in the year to June 30 from A$41.26 million in 1994/95.
Last year's result was hit by an advertising rate bungle.  
Rice described the 1995/96 year result as ""satisfactory"". But Rice said it was too earlier to forecast earnings for 1996/97. He said there was unlikely to be much of an impact from its Australian broadcast rights to the Atlanta Olympics in July.
""There is no short term gain or advertising dollars from an event like the Olympics,"" Rice said.
Seven has focussed on building up its news and current affairs programming over the past year, which should increase costs, but also increase revenue.
""I have said that would have a net impact on costs,"" he said.  
Asked if the costs associated with the news and current affairs programming initiatives had cut into margins, Rice repiled: ""Not substantially, because it has also had a revenue benefit.""
Seven, which is also 20 percent owned by its chairman Kerry Stokes, reported a 15.2 percent rise in sales to A$671.15 million in 1995/96.
In July, Seven teamed up, in a surprise move, with United States billionaire investor Kirk Kerkorian to back a management buyout of Hollywood film studio Metro-Goldwyn-Mayer Inc (MGM) for US$1.3 billion from French bank Credit Lyonnais.  
Rice said there would be nothing in the short term coming out from Seven's link to MGM, but in a few years there may be some joint efforts. ""I think you will see down the track some joint promotion and the marketing of certain things.""
""There will probably minimal returns out of MGM in the short term, but it is not a major cost in terms of potential payback,"" Rice said.
""Hopefully from a shareholder point of view, you will see some benefits flowing to Seven as we go down the track. We are looking at three or four years before we get maximum benefit from MGM,"" he said.  
Rice said the company had made not a decision yet about exercising its option in Optus Vision, which would increase its stake in the pay television and telephony group to 15 percent from two percent.
""We don't have a view one way or the other, we don't have to make a decision until then, we don't have enough information at the moment,"" Rice said.
Seven shares closed six cents lower at A$3.75 on low volume.
-- Sydney newsroom 61-2 9373 1800
",23
"Australia's largest contruction group Leighton Holdings Ltd is expected to report a jump of more than 20 percent in pre-abnormal net profit for the six months ended December 31 when it reports on Thursday, analysts said.
Analysts contacted by Reuters forecast Leighton would report a pre-abnormal net of between A$33 million and A$35 million for the 1996/97 first half.
Last year, Leighton, which is about 46 percent owned by German construction group Hochtief AG, reported a net profit of A$27.10 million for the 1995/96 first half.  
The expected stronger profit is also likely to see the first half dividend raised to between 7.5 and 8.5 cents a share from 6.5 cents a year earlier.
""They should have a good result out of Asia, contract mining should continue to throw up good results and the casino should make a reasonable contribution,"" said John North, an analyst with brokers J.B. Were and Son.
Leighton is the contractor for the A$1.0 billion Sydney casino development.
North forecast Leighton would report a half year net profit before abnormals of A$34 million.  
Analysts said they expect Leighton to report another record annual profit in the 1996/97 year to June 30, with estimates of around A$80 million. Leighton reported a net profit of A$70.21 million in 1995/96.
""From an earnings perspective, the outlook is quite reasonable for the next couple of years,"" said Simon Shakeshift, a property analyst at Macquarie Equities.
Shakeshift sees Leighton reporting a net profit of A$35 million in the half year and declaring a dividend of eight cents a share. He forecasts a full year net profit of A$79 million.  
One Sydney-based analyst, who asked not to be named, forecast a net profit before abnormals of A$33 million and a half year dividend of 7.5 cents.
The analyst said Leighton is also likely to report an abnormal loss from the sale of its 29.6 percent stake in Singapore construction group IPCO International Ltd.
Leighton said last year it would make a loss of about A$5.8 million on the sale of the IPCO stake.
Analysts said they expect Leighton to maintain its level of work-in-hand of more than A$3.0 billion.
Leighton shares closed steady at A$5.80 on Monday.  
-- Sydney newsroom 61-2 9373-1800
",23
"Muhammad Yunus may have the travel itinerary and packed schedule of an international banker, but that is where the comparisons stop.
He wears not pinstripes, but the traditional, billowing Bangladeshi panjami. He eschews five-star hotels and stays instead with friends and supporters around the world.
Yet Yunus is Bangladesh's most successful banker, a man who has gained international renown for doing the unthinkable.
Yunus is head of Grameen Bank, which makes money out of lending money to some of the world's poorest people. Ninety-four percent of Grameen's borrowers are women, and the bank makes loans to people with no collateral or credit rating.
To the traditional banker this may sound like financial suicide, but Grameen has attracted more than two million customers since it started in 1976 and its lending philosophy has spread to over 50 countries.
Yunus, founder and managing director of Grameen Bank, says his strategy works -- 98 percent of loans get repaid, a banker's dream, and most borrowers escape from their poverty trap.
""Our goal is to take the poor people out of poverty as many ways as possible,"" Yunus told Reuters during a visit to Australia to meet Grameen supporter groups and politicans.
AID GOES TO BUREAUCRACY, NOT POOR
Some of the world's biggest bankers are now listening to Yunus's cry against poverty. The World Bank has appointed him chairman of its policy advisory group in its lending programmes to the poor.
The world's first Micro-Credit Summit, held last month in Washington, set out to ensure that 100 million of the world's poorest families, especially women, receive credit by the year 2005. A large part of the credit programmes will be based on policies used by the Grameen Bank, which is 92-percent owned by its borrowers. The rest is owned by the Bangladesh government.
The formation two years ago of CGAP (the Consultative Group to Assist the Poorest), with the financial backing of the World Bank and European Commission, is an endorsement by the World Bank of Yunus's vision.
The CGAP has a budget of US$291 million to set up micro-lending banks around the world. Yunus wants to make sure all of this money reaches the people that need it and that it is not chewed up by bureaucracy.
""We are saying exactly US$291 million should reach the hands of the poor people and you make the minimum out of service charges and we are suggesting a mechanism to do that,"" he said.
""Most of the aid money gets dried up in the servicing of the aid. I am not blaming the bureaucracy itself. I am simply saying the design is wrong,"" said the former economics professor.
The world aid system also has its faults, Yunus told Reuters before a public lecture to a packed unversity audience.
BUBBLE UP, NOT TRICKLE DOWN
If he is not giving lectures in foreign countries he is receiving prizes or honorary degress and meeting supporters.
Each year about US$60 billion is given in aid by the World Bank and other government agencies, but these funds fail to meet their market -- the poor, Yunus said.
This aid has been given to large infrastructure projects on the trickle-down economic theory rationale, but these do not create sustainable employment, said the U.S. educated banker.
Yunus' idea for Grameen Bank came when he returned to newly-independent Bangladesh in 1972 to become head of the economics department at Chittagong University. He found that the theories he was teaching were not working -- just outside the university walls people lived in squalor.
Almost half of Bangladesh's 112 million people live below the poverty line and about 68 percent of the population are illiterate.
The 57-year-old banker knew that poverty was not due to laziness or lack of intelligence but a lack of capital in order to raise cows, make stools or pedal rickshaws.
Grameen Bank now has 12,600 staff who visit 36,000 of Bangladesh's 68,000 villages each week to meet their 2.1 million customers. In 1996 the bank loaned about US$400 million with the average loan at $150. The bank has two loans -- a one-year self employment loan and a 10-year housing loan.
MICRO-CREDIT ONLY PART OF SOLUTION
""It (capital) is a very important part of alleviating poverty, but it is not the only one,"" said Yunus, tipped by United States President Bill Clinton as a future Nobel Peace Prize winner.
""But other pieces become easier to fit in when you have created this centrepiece, then you can add the health piece, you can add education,"" said Yunus, who also plans to provide health care insurance, solar heating and cellular telephone services to Grameen customers.
""Our goal is to get these 2.1 million families out of poverty in the next five years in Bangladesh,"" Yunus said.
""Worldwide we shall look for a day when all the poor people are out of poverty.
""If it can be done in Bangladesh with 2.1 million families, it can be done worldwide. It is just a question of will.""
",23
"Australian flag carrier Qantas Airways Ltd on Thursday reported a 2.4 percent rise in net profit for the 1996/97 first half, but warned its Japan routes were unlikely to repeat the profitabiliy of the early 1990s.
Qantas, 25 percent owned by British Airways Plc, reported a net profit of A$151.6 million for the six months ended December 31, a result towards the higher end of market expectations which ranged from A$116 million to A$154 million.
For the year to June 30, the airline said it aimed to at least match the A$246.2 million net profit recorded in 1995/96.  
Qantas said revenues were not expected to grow quickly, fuel prices were forecast to remain high and price competition was expected to continue in most markets.
Future capacity expansion would be limited by the rate of productivity gains. ""The outlook is therefore for relatively modest fleet expansion and an undiminished drive for efficiency improvements and cost reductions to increase profits.""
Qantas chairman Gary Pemberton told reporters the growth in first half profit was largely attributable to the airline's cost cutting programme which is aimed to offset the anticipated slowdown in the rate of revenue growth.  
Pemberton said cost savings of A$237 million had been made in the half year, and full year cost savings were expected to exceed the airline's target of A$430 million.
Sales rose 2.5 percent to A$3.97 billion for the half, with A$2.03 billion coming from its domestic operations.
Overall passenger revenue was flat, with revenue falling in its North American, Japanese, and other Asian markets.
Revenue from Japan fell about 30 percent to A$315 million in the first half. Qantas did not expect the contribution from the Japanese market to improve in the second half. ""It won't improve significantly,"" finance director Gary Toomey told reporters.  
""Major changes in the Japanese market resulted in virtually no net contribution. This is a sharp contrast to the situation three years ago when the Japan route accounted for the bulk of Qantas international profits,"" Pemberton said in a statement.
Qantas' international routes recorded earnings before interest and tax of A$168.3 million in the first half, compared with A$163.3 million a year earlier, while domestic earnings fell to A$88.2 million from A$93.0 million.  
""There is fundamental change occuring in distribution in the travel industry in Japan. It is becoming less structured, there is more competitive pricing,"" managing director James Strong said.
""The economic situation is not very buoyant in Japan, the currency has been very strong, so it is a combination of all of those factors,"" Strong said.
Pemberton told Reuters after the news conference that the fall in contribution from Japan would not be made up from tourism growth to Australia from other Asian markets.  
""No it won't compensate. They are different markets, there is a different yield structure and customer profile.""
He said other Asian markets, which included South Korea and Taiwan, were very competitive and historically operated on lower yields than the Japanese market had done in the recent past.
Pemberton said the first half result was also hit by higher fuel prices. Qantas had absorbed increases of over A$50 million, net of hedging gains. At constant fuel prices, operating profit before tax would be up over 21 percent on a year earlier.  
""Looking beyond 1996/97, the airline will continue to expand, but at a slower rate than the very high levels of the last three years,"" Pemberton said.
Passenger numbers had grown more than 32 percent and capacity by more than 27 percent since December 1993.
Investors welcomed the result pushing Qantas shares up four cents to A$2.46 at 0400 GMT, while the broader market fell.
-- Sydney newsroom 61-2 9373-1800
",23
"Qantas Airways Ltd is expected to fly slightly above its prospectus net profit forecast of A$237 million for the year to June 30, 1996 but analysts said 1996/97 results could hit some turbulence over current wage talks.
Australian aviation analysts expect Qantas to report an annual net profit before abnormals of between A$237 million and A$249 million. The airline is expected to pay a second half dividend of 13 cents, making a total of 16.5 for the year.  
Analysts said the Qantas result would be helped by lower costs, on which the airline has focussed since it became a publicly-owned company in July 1995.
""We have got an official figure of A$237 (million), but I really expect it to be around the A$240 to A$245 million mark and that would be largely driven by the cash flow being steered towards paying off debt,"" a Melbourne analyst said.
ANZ McCaughan aviation analyst Yasmin Allen expects Qantas to report a profit of A$237 million for 1995/96. ""I would not be surprised to see it come in above that,"" Allen told Reuters.  
Another Melbourne-based aviation analyst forecast Qantas to report a net profit right on the prospectus forecast of A$237 million while one Sydney-based analyst forecast a net profit before abnormals of A$239.1 million for the year.
""They have done well on the cost reduction side and they have seen the market grow, but they have lost market share, so add all that up and I think they will come out about square,"" the second Melbourne-based analyst said.
Last week the Department of Transport released data showing that Qantas, including wholly-owned Australia Asia Airlines, had a 37.9 percent international market share in April.  
Qantas, which is 25 percent owned by British Airways Plc, forecast in its 1995 prospectus that its international market share would be 41.1 percent for the June 30, 1996 year.
Qantas, known as the 'flying Kangaroo' estimated a one percentage point variation from this forecast would affect the bottom line profit by A$48 million.
However, analysts said they were more interested in comments about Qantas' outlook for the 1996/97 year, as costs may increase, arising from current wage talks, renewed domestic competition, and continued pressure on international routes.  
Qantas has offered an eight percent pay rise over two years over two years on condition that productivity reforms are implemented, but unions want productivity gains to be rewarded by a wage rise over and above the eight percent offer.
Qantas shares took a dive to a record low of A$1.87 on July 24 as the market got the jitters that management had conceded to union pressure and award a wage rise above eight percent.
The unions initially made a claim for two consecutive annual wage rises of 10 percent but last month, Qantas chief executive James Strong said this claim would wipe out the airline's profit if successful.  
Qantas shares have now moved back to familiar territory and on Tuesday were trading at A$2.17.
Analysts expect Qantas to report a net profit before abnormals of between A$260 million to A$273 million for 1996/97, but some analysts said they would be ready to mark down these numbers if there were some very negative comments from Qantas.
They said the planned purchase by Air New Zealand Ltd of a 50 percent stake in local airline Ansett Airlines Ltd may pressure the 1996/97 results  
""People have known what 96 will look like but 97 is going to be a different story for a whole mix of things and there should also be some impact from a combined Ansett/Air New Zealand when that starts to happen later this year,"" the Sydney analyst said.
-- Sydney Newsroom 61-2 373 1800
",23
"The success of Australia's film industry, basking in the international spotlight after a spate of worldwide hits, has spurred Hollywood talent scouts to search down under for the next ""Shine"" or ""Babe"".
This has been evident at Sydney's ""Tropfest"" short film festival, which attracted representatives from Hollywood agency William Morris and the Cannes film festival for the first time.
The festival has drawn big-name judges, too. This year's included George Miller, the producer of box-office hit ""Babe"", while actress Nicole Kidman and ""Portrait of a Lady"" director Jane Campion were judges last year.
Oscar-nominated Geoffrey Rush was to attend but went to Los Angeles to collect his Screen Actors' Guild Award for best actor in ""Shine"", said John Polson, Tropfest's founder and director.
Now seen as the nation's premier short-film festival and a talent pool of film-makers, the first Tropfest four years ago saw just 50 film buffs squashed into a Sydney cafe one night to watch their home-made films on a television set.
""Although it started as a bit of a joke, it is seen by many people as a legitimate thing to win,"" Polson said.
""I know many people out there in the commercial (advertising) field, who are just desperate to win Tropfest and get some sort of acclaim from their peers,"" Polson told Reuters.
""Previous winners each year they have gone on to big and better things,"" said Polson, who is also an actor.
Gregor Jordan won the 1995 Tropfest with his film ""Swinger"" and went on to win the Cannes Film Festival jury prize for best short film. Last year's Tropfest winner, Jonathon Ogilvie, was a Cannes finalist with his work ""This Film is a Dog"".
NEARLY 200 ENTRIES
TV stuntman Nat Edgerton won this year's Tropfest with ""Deadline"" over nearly 200 other films, almost double the number entered in 1996. The first Tropfest drew just eight entries.
Because of the increase in films, Polson decided to show them in February and March at cafes on Sydney's cappuccino strip -- Victoria Street -- near the King Cross red light district.
The month-long festival, which ends on March 23, has become big business. This year's festival cost about A$180,000 (US$141,000) -- the first Tropfest cost Polson about A$800.
Tropfest takes its name from the Tropicana Cafe in Victoria Street, seen as a popular hangout for aspiring film-makers. The cafe still has a strong link with the festival, donating a year's supply of coffee to a winner of its own choice.
""I saw it (Tropicana) in those days as the place where people were most guilty of sitting around and talking about movies and not actually out there making them,"" Polson said.
""The festival is about encouraging people to make films, it is not just about screening them. We could be a festival where we just get the best short films from around the world.""
The only criterion for a Tropfest entry is that the film must be seven minutes long and have a pickle in it. Last year it was a teaspoon and the year before that it was a coffee bean.
Tropicana was the sole host of the first two festivals. In its third year the festival crowd took up the whole of Victoria Street, and this year, 13,000 people filled Victoria Street and the local park, where the films were simulcast by satellite.
POPULAR BLEND
Mixing films and coffee has proved a popular blend in Sydney and Polson plans to take this combination to cafes around Australia with the help of satellite technology.
""What I want to do next year is have a link-up with other cafes in capital cities around Australia so that we have a national film festival happening simultaneously,"" Polson said.
The boom in local short-film festivals is attributed both to Australians'love of film viewing and the international success of Australian films.
""I think people are realising that it is just as satisfying, if not more so, to...watch 10 or 12 succinct, strong and well executed ideas as it is to go and watch a feature,"" Polson said.
In recent years, Sydney has hosted the Flickerfest and Metfest festivals, and Melbourne the St Kilda festival.
Ansett Airlines has started begun showing short films on its flights and TV's Seven Network Ltd is about to begin a 30-minute programme of shorts. Both are partly owned by media mogul Rupert Murdoch, who also has 50 percent of Australian pay television network Foxtel, which has the right to show the Tropfest films.
",23
"Upmarket retailer David Jones Ltd reported on Wednesday a 50 percent fall in net profit for the 1996/97 first half and said it expected to make the appointment of its new chief executive officer (CEO) soon.
David Jones, which is currently without a chief following the resignation of Chris Tideman on Monday, reported a net profit of A$22.34 million in the 26 weeks ended January 25, compared with a net profit of A$44.64 million a year ago.
The retailer also said the 1996/97 year net profit would be lower than the previous year.  
Chairman Richard Warburton said the retailer would also review five or six of its underperperforming stores, but would not say if that meant store closures, but added that David Jones was also committed to its store expansion programme.
Tideman, who joined the company in 1994, made a surprise resignation on Monday, citing personal reasons.
Responding to reports that there was shareholder pressure on Tideman to resign, Warburton said Tideman left of his own will and that there was no pressure from the board or shareholders.  
Tideman oversaw the refloat of David Jones in November 1995 from the corporate remains of the debt-laden Adelaide Steamship Co Ltd, which cash-starved David Jones for most of the latter part of its 15-year ownership tenure.
""We expect to make an annoucement within days, not weeks,"" Warburton said about the chief executive appointment.
Warburton said the half year results were helped by a good January, but described the result as ""disappointing.""
""February saw a bit of a correction from the January upturn, but we have seen a slight increase in March,"" Warburton said.  
""Over the balance of the year, the company will continue to focus on implementing initiatives in product, consumer service and systems,"" the company said in the results statement.
""However, at this stage it is anticipated that the profit before tax level in the second half will be below the same period last year,"" the company said.
David Jones warned in early January that its first half profit would be up to 50 percent below forecast due to a lacklustre retail trading environment.  
Warburton said today the company did not expect any material improvement in retail trading conditions in the second half, adding that three reductions in official interest rates in 1996 had yet to filter through to the retailing sector.
Finance director Robert Wright said today David Jones' 1996/97 profit would be within analysts forecasts of between A$32 million and A$37 million.
David Jones sales fell one percent to A$782.58 million in the 1996/97 first half.  
Warburton said the retailer would review about five or six of its 30 stores department stores which were underperforming and not returing any shareholder vale.
He said about one-third of David Jones stores were performing very well, another third were making a profit, but could be improved, while the final third were underperforming and not returning any shareholder value.
""You have got a final third that's just not producing shareholder value. They are not necessarily losing money but they are not increasing shareholder value,"" he said.  
""Out of that third a half, I believe, with a bit of hard work and creative juices could take them above the line, the other half we have to look at very, very closely.""
""So you can see we have about five or six stores to look at, that does not necessarily mean closure. It may mean you have to look at different things to do with those stores,"" he said.
At 2.50 p.m. (0350 GMT), David Jones shares were two cents lower at A$1.72 with 487,292 shares traded.
-- Sydney newsroom 61-2 9373-1800
",23
"Tabcorp Holdings Ltd managing director Ross Wilson said the betting agency and gaming group was on track to meet its forecasts for the 1996/97 year and was eyeing the New South Wales (NSW) Totalisator Agency Board (TAB).
""Typically, you have a slight downturn in the second half, because you haven't got the Spring Carnival,"" Wilson told Reuters in a telephone interview. ""But certainly we are still looking okay and on track for our forecasts for the year.""
Tabcorp earlier reported a 17.5 percent rise in net profit to A$51.21 million in the six months ended December 31, 1997.  
Wilson said January and February are up on the same period a year earlier but were down on the November and December period.
""You always have a downturn in gaming in January, February and March as people flock to the beaches and it has happened again this year,"" said Wilson from Tabcorp's head office in Melbourne.
Tabcorp, which was floated by the state government of Victoria in 1994, reported a net profit of A$87.17 million in the year to June 30, 1996.
He said Tabcorp has a strong balance sheet to fund any major acquisitions and maintain high dividend payouts.  
""We have no debt, we have about A$90 million in cash and the business is a strong cash flow business so with a balance sheet like that you have significant funding capacity,"" Wilsons said.
Wilson said Tabcorp had a market capitialisation of A$1.8 billion and shareholders funds of A$800 million.
He said the group was interested if the NSW government decided to sell its TAB betting business. The Labor government in NSW has yet to say publicly whether it would privatise the TAB, but it is expected to announce plans to sell this year.
""Obviously if the terms were right we would be very interested being involved in it,"" he said.  
Wilson said Tabcorp would also be interested in any privatisation by the Queensland government of its TAB business.
Queensland, New South Wales and Victoria are Australia's three major racing states. He said he did not expect any slowing in the growth rate of Australia's booming gaming industry.
""Whilst we have had significant growth over the last few years, both nationally and in Victoria, we see that growth being maintained, with compound growth of 10 percent plus through to at least 2000,"" he said.
However, he said there would be some effect from the opening of the permanment Crown Ltd casino later this year.  
""There is no doubt that when you have a brand new venue like the casino opening up and it is very large it will attract a lot of lookers...and it might have some initial impact but we don't think it will have any long term impact,"" Wilson said.
The A$1.6 billion Crown casino complex is expected to open in Melbourne around April-May.
Tabcorp surprised the sharemarket last year with a special dividend of 12 cents a share for the 1995/96 second half on top of a 10 cents a share final dividend.
Wilson did not rule out another special dividend in the 1996/97 year.  
""We closed last year with A$110 million in cash, we paid something like A$66 million in this last period and...I always said we are happy to pay out a high dividend pay out ratio based on our cash flow forecasts,"" Wilson said.
""Then clearly if opportunities do not arise, then we are happy to continue the high pay out ratios,"" he said.
Tabcorp raised its first half dividend to 11 cents a share in the first half, up from nine cents a year earlier.
Tabcorp shares ended six cents lower at A$6.02.
-- Sydney newsroom 61-2 9373-1800
",23
"The Asia-Pacific region should work towards lowering telephone charges to stimulate usage and promote economic growth, Australian Telecommunications Minister Richard Alston said on Thursday.
""An important emphasis of our work must be to ensure that users benefit from progress being made in telecommunications,"" Alston told the second Asia-Pacific Economic Cooperation (APEC) telecommunications ministers meeting.  
""At the most basic level this means providing access to people who have lacked it, by extending the reach of networks and by lowering prices to ensure that genuine access is available to all our people,"" Alston said.
""Our experience is that real cost reductions are possible, but they are less likely to be achieved under monopoly arrangements,"" he said.
Alston cited Australia's example. In June, privately owned telecommunications and pay television group Optus Vision started to offer local telephone calls at 20 cents per call, which was 25 percent cheaper than that charged by state-owned Telstra.  
Australia's six-month-old conservative government plans to sell one-third of Telstra in the 1997/98 financial year to June.
The three-day APEC ministers meeting aims to co-ordinate a regional telecommunications policy, also known as Asia-Pacific Information Infrastructure (APII).
""The development of the APII will encourage business activity and growth in the region. It will increase the investment funds available for the provision, expansion and modernisation of telecommunications networks,"" Alston said.  
Alston, who is hosting the APEC meeting, said lower prices for telecommunications services, telephones, on-line and interactive services would stimulate economic activity.
""It remains a paramount objective of APEC to ensure that these trade and investment flows are able to occur by removing barriers through liberalising reforms,"" he said.
A more sophisticated telecommunications infrastruture in the Asia-Pacific region would result in the provision of more services and employment opportunities, Alston said.  
""Consumers and businessess, both large and small, will benefit from increased activity in information services with lower prices and the availability of a greater range of services,"" Alston said.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
-- Sydney newsroom 61-2 9373-1800
",23
"Australian appliance, packaging and wine group Southcorp Holdings Ltd on Tuesday reported a 22.3 percent rise in first half net profit and tipped a record result for the year to June 30.
Southcorp posted a net profit after abnormals of A$64.92 million for the six months ended December 31, 1996, compared with A$52.36 million a year earlier.
""We are now on track to meet our year-end forecast and our year-end forecast is broadly in line with market expectations,"" chief executive officer Graham Kraehe told reporters.  
Kraehe said market expectations were around A$130 million net profit before abnormals. Southcorp reported a net profit of A$124.22 million in 1995/96, which included a record second half profit of A$64.3 million.
""Each business, we expect, in the full year, as they have in the last two periods, to grow earnings over the corresponding period,"" he said.
Kraehe said the forecasts were dependent on there being no significant downturn in the Australian economy.
""On that basis, we are very confident that 1996/97 will be another record year for Southcorp.""  
The December 1996 half results showed a profit improvement for all three divisions, with its appliance division growing the strongest despite lower sales.
Kraehe said in a statement the strong appliance division result reflected cost cuts and better productivity, supported by the launch of a range of new whitegoods products.
But its American Water Heater business, formerly called Mor-Flo, continued to make losses although they were half of the A$2.1 million loss in the June 1996 period.
Group sales fell 0.5 percent to A$1.30 billion in the first half and dividends were steady at 8.25 cents a share.  
Kraehe said Southcorp was still on the prowl for more acquisitions in the wine business, particularly in overseas markets, and also add-on acquisitions in packaging.
""For acquisitions, we are looking at, internationally in wine and in areas in packaging, which add on to our core businesses, either in Australia, North America or Asia.""
""We are also looking at some Asian development, which will essentially be greenfield development,"" Kraehe said.
Southcorp is currently building a manufacturing plant in Dalian, China, to make steel and aluminium cans.  
""Whatever we do (in wine), if it is in Australia or if it is something offshore, the end result is that it is going to be able to better serve the international markets, that says that the probability is that it (acquisition) is going to be offshore,"" Kraehe said.
""In Australia our primary focus is to continue to invest in our our strong vineyard and winery facilities...with a heavy focus on red (wine),"" he said.
Southcorp made two wine acqusitions in Australia in 1996 but had no plans to raise new funds for any more purchases.  
""Our gearing has come down to a pretty comfortable level, if we wanted to do something major, particularly something major in wine, that could cause us to look at means of raising capital,"" Kraehe said.
""But generally speaking we could fund an acquisition and development programmes within our existing cash flow,"" he said.
Southcorp's net debt to equity fell to 63.7 percent in the December half, from 72.1 percent a year earlier.
Southcorp shares closed steady at A$4.56. The shares hit a record high of A$4.66 last Tuesday.
-- Sydney newsroom 61-2 9373-1800
",23
"Television broadcaster Seven Network Ltd is expected to report a rise in net profit for the first half of the 1996/97 year, helped by an acquisition and by regaining market share, analysts said.
Analysts contacted by Reuters expect Seven Network to report a net profit of between A$59 million and A$65 million for the 26 weeks ended December 28. Seven reported a net profit of A$91.88 million in the 1995/96 half, but no tax was paid.
Seven, expected to report half year results on Wednesday, has said it expects to pay full income tax during 1996/97.  
Seven has not paid a full tax rate since it relisted on the Australian Stock Exchange in 1993.
Seven's 1996/97 half is a week shorter than the 27 week period in the 1995/96 half. Analysts said comparing the two periods over a 27 week period, Seven's pre-tax profit would be A$96.5 million up from A$93 million a year earlier.
Analysts said on a like-for-like basis, Australia's second largest commercial television network is expected to report underlying profit growth.  
J.B. Were & Son media analyst Craig Connelly forecast a pre-tax profit of A$92 million for the 1996/97 half compared with A$93 million a year earlier.
Connelly forecast A$60 million net profit for the group.
Vince Pepe, media analyst at Burdett, Buckeridge and Young forecast Seven to report a net profit of about A$59 million to A$60 million. ""But I would not be surprised if they went above that,"" Pepe told Reuters.  
A Sydney-based media analyst forecast Seven to report a net profit of A$71.5 million in the half year and a pre-tax profit of A$103.2 million. Another Melbourne-based analyst forecast a half year net profit of A$65 million.
The Sydney analyst said the result would be partially boosted by the purchase of Queensland-based television network Sunshine Broadcasting in late 1995 for about A$110 million.
""The first five months were tough but December seemed to pick up for them,"" Pepe said.  
Most analysts estimated Seven, which is 23 percent owned by the group's chairman Kerry Stokes, to keep the half year dividend steady at 4.5 cents a share but one analyst forecast the dividend to rise to five cents a share.
Analysts said there could be a chance that Seven might report earnings for Hollywood studio Metro-Goldwyn-Mayer (MGM), in which it invested US$250 million last year to take control of the studio along with U.S. investor Kirk Kerkorian.
They said MGM lost money on some film releases last year and overall losses for the studio could be running at about US$10 million a month.  
However analysts said MGM's estimated losses should not impact Seven's result as the interest costs associated with the financing on the MGM investment will be capitialised.
Analysts also said Seven would at best make a small profit on the broadcasting of the Atlanta Olympics in August, with most analysts expecting the network to break even on the Games.
Seven, which is 15 percent owned by Rupert Murdoch's News Corp Ltd, is expected to report pre-tax profit of about A$130 million in the 1996/97 year, up from A$120 million reported in the 53 weeks to June 29, 1996.  
The full year dividend is estimated at between 17.5 and 18.5 cents a share, compared with 17.5 cents in the 1995/96 year.
Seven shares closed five cents up at A$4.15 on Friday.
-- Sydney newsroom 61-2 9373-1800
",23
"St George Bank Ltd managing director Jim Sweeney said on Thursday the bank is aiming to achieve higher costs savings from the Advance Bank Australia Ltd merger than the A$140 million currently targetted.
""We are on the public record as saying that we want to take A$140 million out. Our private aim is to do better than that,"" Sweeney told Reuters in a telephone interview.
""I am not going to go to the market with any disappointing news on the cost front over the next 12 to 18 months,"" Sweeney said.  
The St George-Advance merger cleared its final hurdle on Tuesday, when the Supreme Court of New South Wales approved Advance's capital reduction programme as part of the scheme of arrangement between the two Sydney-based banks.
Sweeney said the merged bank, which will trade as St George, will have a bigger balance sheet which will enable it to introduce new products which could, in turn, increase revenue.
""We are paying a huge amount of attention to costs, but we are also paying a huge amount of attention on the revenue side and there are a number of things that we will announce in the next couple of weeks that will also give that a major boost.""  
""There is something in the pipeline that we are quite excited about, which we think is a revenue advantage compared with others,"" said Sweeney, but would not add further details.
Sweeney said the merged bank, which would double the size of St George to a bank with A$40 billion in assets, would look at outsourcing some of its activities in order to reduce costs.
""We are really looking at everything that gets done in the bank...and we want to strip the place down and start again.""
""We are questioning everything...for instance do you need to manage your own mortgages? could these things be outsourced? do you you need to own your own mainframe?,"" Sweeney said.  
Sweeney said the country's mortgage market was patchy. The main lending product of St George, which changed from a building society to a bank in 1992, is mortgages.
""It is very patchy. I have been disappointed that the new cottage (home) starts haven't been stronger than what they are.""
""St George on its own has been writing some very handsome figures over the last few months, but it seems to be that other organisations are experiencing similar situations and some are not going too well at all,"" Sweeney said.
Australia's latest housing data showed housing finance fell 2.9 percent in November.  
St George would have a market capitalisation of over A$4.00 billion after the merger, based on current prices making it one of the countries top 25 listed companies.
But, Sweeney said the merger did not mean that the bank was takeover-proof. National Australia Bank Ltd has a 6.8 percent stake in St George and has been seen by some investors as a predator for St George.
""I don't think in the long run that any publicly-listed company is takeover proof,"" Sweeney said. Results of the Wallis Inquiry into Australia's financial system, which are due in March, may loosen current bank ownership rules.  
The Advance takeover was St George's fifth takeover attempt of a fellow regional bank over the past two years, but Advance was also the largest bank St George tried to take over.
""Whilst we have certainly had some disappointments through a range of different reasons, if you were ever going to suceed (in a takeover) this was the one to succeed with because it's the one with one fell swoop makes an enormous amount of difference."" St George's offer values Advance at over A$2.6 billion. The merger is expected to be formally complete on January 29, but it is expected to take around two years to integrate the two banks.
-- Sydney newsroom 61-2 9373-1800
",23
"Seven Network Ltd's managing director Gary Rice said on Wednesday that he expected a slightly better performance in the second half of 1996/97 than a year earlier.
""I think in relative terms, I would expect to see a slight improvement in general performance terms in the second half,"" Rice told Reuters in a telephone interview. Asked if he saw a better performance for the whole year, Rice replied: ""Yes.""
Seven earlier reported a 31.5 percent fall in net profit to A$62.98 million in the 26 weeks to December 28.  
Asked if the advertising market would be stronger overall in 1996/97 compared with 1995/96, Rice said: ""I think it will be marginally better than last year - difficult to call at this point."" He added there was signs of improvement in advertising from some sectors.
He said Seven has no plans for further major cost cuts at the network. In October, the broadcaster retrenched 43 staff in an effort to streamline costs.
Seven invested US$250 million in Hollywood studio Metro-Goldwyn-Mayer (MGM) for control of the studio with United States billionaire Kirk Kerkorian late last year.  
MGM reported earnings before interest, tax, depreciation and amortisation (EBITDA) of US$16.7 million in the period from October 10 last year to December 31 on an operating revenue of $228.7 million.
""We are very happy with the progress at MGM,"" Rice said.
Seven's second half result is traditionally weaker than the first half.
The network, which is 20 percent owned by its chairman Kerry Stokes, reported a net profit of A$115.13 million for the 1995/96 year, compared with A$41.26 million a year earlier.
But Seven did not account for tax in these two years.  
Seven, which is also 15 percent owned by Rupert Murdoch's News Corp Ltd, said although it does not expect to pay tax for another two years, accounting standards required recognition of this income tax expense in the half year results. It said tax amounted to A$34.3 million in the half.
Sales rose 16.3 percent to A$418.28 million in the six months to the end of December.
At 2.05 p.m. (0205 GMT), Seven shares were one cent down at A$4.12, but were firmer than the level before the results were released.
-- Sydney newsroom 61-2 9373-1800
",23
"News Corp Ltd shares soared on Tuesday after Rupert Murdoch's media empire struck a deal with satellite television group EchoStar Communications Corp to offer U.S. subscription television service.
News Corp shares were the most actively sought in Australia, with over A$120 million worth traded pushing News' ordinary shares up 37 cents or 5.51 percent to A$7.09 and News' prefered shares up 40 cents or 7.1 percent to A$6.03.
News Corp ordinary shares closed at a three month high, while the prefered shares ended at a four month high.  
""It is a bit of a manic depressive this stock. It has been depressed for the past 18 months and now it is about to go manic,"" said Greg Matthew, executive director of equities at fund managers Mercantile Mutual.
Under the deal, News Corp, which owns the U.S. Fox television network, would contribute satellites, cash and other assets of US$1 billion from its American Sky Broadcasting (AskyB) unit in return for a 50 percent stake in EchoStar. MCI Communications Corp, a partner in ASkyB and nine percent sharehodler in News Corp, will hold 10 percent of the venture, News will hold 40 percent and EchoStar 50 percent.  
The deal is estimated to be worth about A$2.6 billion to Murdoch's media empire or about 65 cents per News Corp share, one Sydney-based broker said.
Officials with both companies said the alliance would enable the company to respond to the growing popularity for pay television services, currently dominated by cable TV operators.
""Our goal is not to be complimentary to cable, we want to eliminate cable,"" said Charles Ergen, chief executive officer of EchoStar. The service is scheduled to start in early 1998.  
""Jointly we will create a dynamic and promising new competitive force in the subscription marketplace,"" Murdoch said in a statement.
The alliance will operate under the Sky name and is expected to lose around US$500 million in its first year but it should reach break-even by 1999 and generate more than US$1 billion in operating cash flow by the year 2002, the companies said.
""Everyone thought AskyB would break even probably as far out as 2003, they are now saying it would break even by 1999, so the market quite likes that,"" one Sydney-based broker said.  
The deal is also likely to step up the challenge to existing U.S. satellite television operators, DirecTV, which is owned by General Motors Corp's Hughes Electronics and AT&T Corp, and Primestar, which is owned by of cable TV operators.
News Corp, also controls Britain's leading pay-TV provider BSkyB Plc and has a satellite TV joint venture in Japan, JSkyB, that is expected to begin full service next year.
Murdoch also confirmed at a news conference after the deal announcement that News Corp has held friendly talks with Japanese electronics and entertainment gaint Sony Corp about Sony acquiring a stake in JSkyB.  
Brokers said they also liked the News Corp comments that it planned to sell US$800 million of non-core assets and that it had raised its earnings forecast for its U.S. TV interests by US$500 million over the next three years.
The new Sky service is expected to include seven satellites, more than 500 channels, retransmission of local TV stations in markets representing more than 75 percent of all U.S. television households and low consumer entry cost.  
-- Sydney newsroom 61-2 9373-1800
",23
"Upmarket retailer David Jones Ltd, expected to report a sharp fall in half year profit on Wednesday, is shopping around for a new chief executive just as retailing conditions are expected to turn for the better.
Analysts said Chris Tideman who resigned as CEO on Tuesday was the victim of a weak retail environment at a time when David Jones was spending more on opening new stores and restructuring.
David Jones has disappointed investors since it listed in November 1995 with its failure to match prospectus forecasts.  
""I think the cycle worked against them,"" a Melbourne retailing analyst said.
""They have underperformed the cycle and that is a bit of a shame. That reflects the costs of the new store openings.""
Analysts said Tideman may have been trying to do too much at one time. David Jones was introducing new systems to manage its inventory as well as increasing its range of private label merchandise and restructuring its buying department.
The retailer had also restructured its South Australian operations and announced plans to expand into Western Australia and New Zealand.  
""They have committed themselves to a lot of new stores and so far the new stores they have opened up ... are loss making and they have committed themselves to other new stores so their cost structure is a bit pumped up,"" said Simon Shakesheff a retail analyst at Macquarie Equities.
David Jones' share price has hardly been above its A$2.00 issue price since the float. The group is due to release its results for the 26 weeks to January 25 on Wednesday.
In January, the retailer said it expected its results to be up to 50 percent down on a year ago.  
Tideman cited personal reasons for leaving and the company said he would return to Britain.
Analysts expect David Jones to report a net profit before abnormals of between A$20 million and A$22 million.
The dividend is expected to be about three cents a share for the 1996/97 first half.
David Jones reported a net profit before abnormals of A$44.2 million for the 1995/96 first half and a dividend of six cents a share. Analysts estimate the full 1996/97 year result to be between A$34 million and A$38 million.  
The retailer reported a net profit of A$67.53 million in the 1995/96 year, which was up on the 1995 prospectus forecast of A$64.6 million, but its 1995/96 sales were below forecasts.
Analysts were mixed about the outlook. Some said the new chief had a tough job ahead due to re-invigorated Coles Myer Ltd owned Grace Bros-Myer department stores and the entry into the local market by Britain's Marks & Spencer.
But other analysts said Australia's retail outlook for 1997 had improved and that the restructuring of David Jones was almost complete, meaning the new chief should not have as bumpy a ride as Tideman since he joined the group in 1994.  
""It could be a dream job, coming in at the bottom of the cycle and six months away from full systems implemention,"" said John Burgess, a retail analyst at Pru-Bache Securities.
""We have had two bad Christmases in 1995 and 1996,"" Burgess said. ""You will reach the bottom of the spending cycle in the next two quarters, so you have spending on the rise, albeit slowly, towards the end of 1997,"" he said.
Analysts said David Jones may even announce the new chief executive on Wednesday. Investors reacted positively to Tideman's exit, pushing up the shares by three cents to A$1.74. About 1.21 million shares had traded by 2.15 p.m. (0315 GMT).
",23
"Members of the Asia Pacific Economic Cooperation (APEC) forum must accelerate liberalisation in the fast-growing telecommunications sector, an Australia official told an APEC meeting on Wednesday.
Telecommunications Minister Richard Alston said the world's US$2.0 trillion telecommunications and information technology market presented huge investment opportunities.
""APEC leaders and ministers have...consistently confirmed a clear agenda for APEC to liberalise the telecommunications environment,"" Alston said told the meeting of APEC telecommunications ministers.
""This meeting aims to accelerate this agenda by identifying areas where further work is needed and by endorsing new forward looking intiatives,"" he added.
Total global telecommunications investment for 1996 is estimated to be about US$161 billion, said John Legere, president and chief executive officer of AT&T Asia Pacific.
Australia's telecommunications industry, meanwhile, was growing faster than the nation's economy -- a similar story to other APEC nations, Alston said.
The U.S. telephone giant, which has a presence in every market in the Asia Pacific, is keen to expand in the region through further investment, Legere told Reuters in an interview.
""Asia-Pacific is by far the fastest growing area in the world. The telecommunications services per density is the lowest in the world. AT&T sees Asia-Pacific as one of the key markets it needs to tap into for future growth,"" Legere said.
Legere said the industry investment opportunities would be diverse, from mobile communications to fixed telephone lines, as well as the Internet, on-line and entertainment services.
Australia's Alston gave a local example on the investment opportunities that have been created since the country started deregulating its telecommunications market in 1992 and which is to be fully deregulated by July 1, 1997.
Australia's two largest telecommunications carriers state-owned Telstra Corp and Optus Communications are investing A$7.5 billion on laying their respective fibre optic cable networks to carry telephony, on-line and interactive services.
""We shall continue to pursue and encourage private sector investment and provide for a liberalised telecommunications environment,"" he said.
Indonesia is also in the process of opening up its telecommunications market and had attracted a large flow of funds as a consequence, said Jonathon Parapak, secretary general of Indonesia's telecommunications department.
Parapak told Reuters that Indonesia, which has a low fixed telephone penetration rate, planned to invest over US$10 billion, with most of the funds coming offshore, in the five years leading to 1999.
""We needed this foreign investment as we knew we could not do it by ourseleves,"" Parapak said.
Indonesia had at the end of 1995 1.7 telephone lines per 100, but the country plans to have five telephone lines per 100 people by the year 2000, Parapak said.
The APEC ministers hope to agree on a policy framework for the telecommunications and information industry by Friday, the final day of the APEC meeting.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.  
""This meeting aims to accelerate this agenda by identifying areas where further work is needed and by endorsing new forward looking intiatives,"" he said.
Alston told the second APEC telecommunications ministers meeting that the world's telecommunications and information technology industry was currently worth US$2.0 trillion.
Australia's telecommunications industry was growing faster than the nation's economy -- a similar story to other APEC nations, he said.  
World telecommunications investment for 1996 is estimated to be about US$161 billion, said John Legere, president and chief executive officer of AT&T Asia Pacific.
The U.S. telephone giant, which has a presence in every market in the Asia Pacific is keen to expand in the region through further investment, Legere told Reuters in an interview.
""Asia-Pacific is by far the fastest growing area in the world. The telecommunications services per density is the lowest in the world. AT&T sees Asia-Pacific as one of the key markets it needs to tap into for future growth,"" Legere said.  
Legere said the industry investment opportunities would be diverse, from mobile communications to fixed telephone lines, as well as the Internet, on-line and entertainment services.
Australia's Alston gave a local example on the investment opportunities that have been created since the country started deregulating its telecommunications market in 1992 and which is to be fully deregulation on July 1, 1997.
Australia's two largest telecommunications carriers, state-owned Telstra Corp and Optus Communications, are investing A$7.5 billion on laying their respective fibre optic cable networks to carry telephony, on-line and interactive services.  
""We shall continue to pursue and encourage private sector investment and provide for a liberalised telecommunications environment,"" he said.
Indonesia is also in the process of opening up its telecommunications market and had attracted a large flow of funds as a consequence, said Jonathon Parapak, secretary general of Indonesia's telecommunications department.
Parapak told Reuters that Indonesia, which has one of the lowest fixed telephone penetration rates, planned to invest over US$10 billion, with most of the funds coming from offshore, in the five years leading to 1999.  
""We needed this foreign investment as we knew we could not do it by ourseleves,"" Parapak told Reuters in an interview.
Indonesia had at the end of 1995 1.7 telephone lines per 100, but the country plans to have five telephone lines per 100 people by the year 2000, Parapak said.
The APEC ministers hope to agree on a policy framework for the telecommunications and information industry by Friday, the final day of the APEC meeting.  
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
-- Sydney newsroom 61-2 9373-1800
",23
"The opening of Australia's two largest casinos later this year is likely to put more pressure on the nation's already struggling small casinos, analysts said.
Crown Ltd is set to open the A$1.6 billion Crown casino in Melboure in May, making it Australia's largest, while Sydney Harbour Casino Holdings Ltd (SHC) is expected to open the A$1.0 billion Sydney casino later this year.
""There is going to be a clear operational performance between Crown and Sydney, and the rest,"" said Paul Xavier at brokers BNP Equities.  
""Those two will pull away from the pack,"" Xavier told Reuters. Australian casino analysts expect earnings for Crown and SHC to jump once the permanment casinos open.
But the earnings outlook for Australia's smaller casinos is not so rosy. Breakwater Island Trust, which operates the Townsville casino in north Queensland, reported a 65 percent fall in net profit for the six months ended December 31, 1996.
Breakwater said this week it was cautious about the outlook.
The three local casinos run by Casinos Austria International Ltd (CAIL) have all had operational problems recently and their future performance is uncertain, analysts said.  
The Reef Casino Trust, which owns the Casinos Austria-managed Reef Casino in the north Queensland city of Cairns, has been forced to seek a capital injection by its bankers to reduce its debt of A$105 million.
Casinos Austria is also in a row with Indonesian businessman Robby Sumampow, the owner of the Christmas Island casino in the Indian Ocean, with Sumampow wanting CAIL to leave the loss making casino.
Since the opening of Sydney's temporary casino in late 1995, the operating performance of the Canberra casino, which is also operated by CAIL, has been badly hit, analysts said.  
""These (small) casinos, if they are relying on their local market, it would just be a flat business and if they want to get the junket market they will be fighting bigger Australian casinos,"" said Richard Wolf, an analyst at Bell Securities.
Last month Australia's richest man and most renowned gambler Kerry Packer bought management control at the Sydney casino and Crown is looking to buy the management contract at the Melbourne casino from Hudson Conway Ltd.
""The industry is undergoing some rationalisation -- a lot of the changes seem to evolve around management issues,"" said Jenny Owen, tourism and leisure analyst at Macquarie Equities.  
""It all about the size of the market. I don't know if Australia is large enough to support 14 casinos, when you only have 18 million people,"" Owen told Reuters.
However, analysts said it would too hard to predict if Packer's move into the Sydney casino would spark rationalisation amongst local casinos. Packer also has a stake in Crown casino, which has triggered rumours of a merger between the two.
Packer's purchase was not the only change in casino ownership recently. The downmarket Alice Springs casino in the Northern Territory was recently sold to Malaysian investors and the Adelaide casino is expected to be put up for sale.  
Analysts said it was still early days to say what impact the new Sydney and Melbourne casinos would have on the industry.
""When the Crown and Sydney permanment casinos open they will be a world first - there are no casino monopolies like this in any major city in the world. The only ones built to this size are in Las Vegas and Atlantic City,"" one casino analyst said.
""So nobody knows what is going to happen when these casinos open up their doors, there is no benchmark,"" the analyst said.
-- Sydney newsroom 61-2 9373-1800
",23
"Building materials group Boral Ltd is expected to report a lower net profit before abnormals for the six months to December 31 on Wednesday, but the results should show signs of an improving housing market, analysts said.
Building material analysts contacted by Reuters forecast Boral to report a pre-abnormal net profit of between A$89 million and A$93 million for the 1996/97 half year, compared with A$120 million a year earlier.
Analysts said although the first half was likely to be down on a year ago it should be up on the 1995/96 second half.  
BZW Australia building material analyst Greg Burns forecasts Boral to report a pre-abnormal net profit of A$89 million for the December half.
""Non-residentials are as strong as an ox, and it has been for many quarters, and housing, as far as approvals are concerned, bottomed in September,"" Burns told Reuters.
""I just think the six months to December will not have enough good news in it to get too excited,"" Burns said.
ANZ Securities building materials analyst Sean Cooney estimates Boral to report a pre-abnormal net profit of A$93 million for the six month period.  
Cooney said Australian building material companies had been reporting disappointing results for some time and Boral was unlikely to any exception.
Last week Pioneer International Ltd reported a 18.3 percent fall in net profit for the 1996/97 first half.
""Things have looked worst than some people have expected in Australia's housing market and because Boral has got a fairly significant exposure compared to the others, you expect it to be a bit more worse hit then the others,"" Cooney told Reuters.
ABN AMRO Hoare Govett analyst Fabian Babich forecast a net profit before abnormals of A$90 million for the first half.  
Merrill Lynch building materials analyst Michael Brown forecast a first half pre-abnormal net profit of A$90 million.
John North at J.B. Were & Son also estimated Boral to report a pre-abnormal net profit of A$90 million.
Analysts said they expected Boral to pay a first half dividend of 7.5 cents.
In November, Boral said it would maintain a 7.5 cents per share dividend for the December half, the same amount it paid in the 1995/96 second half.
Boral paid a 10.5 cents dividend in the 1995/96 first half.  
Although analysts were in a narrow range for the first half result, forecasts for the 1996/97 full year varied from A$163.8 million to A$190 million for pre-abnormal net profit.
Boral reported a net profit before abnormals of A$170.9 million for the year to June 30, 1996.
Shares in the Sydney-based group have traded in a range between A$2.91 and A$3.70 since June 1996, when they were around A.
At 1.45 p.m. (0245 GMT), Boral shares were two cents lower at A$3.48.
-- Sydney newsroom 61-2 9373-1800
",23
"Television broadcaster Seven Network Ltd on Wednesday reported a 31.5 percent fall in net profit for the half year to December 31 as the network started to account for tax.
But managing director Gary Rice said he expected a slightly better performance in the second half of the 1996/97 year, compared with the same period a year earlier.
Seven, about 20 percent owned by chairman Kerry Stokes, said net profit fell to A$62.98 million in the half, from A$91.88 million a year earlier, after paying A$34.3 million in tax.  
The first half result was boosted by an abnormal profit of A$1.30 million from the sale of radio stations.
Analysts forecast Seven to reported a net profit before abnromals of A$59 million to A$65 million for the first half.
However, the result received a muted response from traders with Seven's shares down on Tuesday's close despite the overall market hitting a record high.
Seven, which is also 15 percent owned by News Corp Ltd, also unveiled earnings for Metro-Goldwyn-Mayer (MGM) for the first time since it took control of the Hollywood studio with United States billionaire Kirk Kerkorian late last year.  
Seven said MGM reported earnings before interest, tax, depreciation and amortisation (EBITDA) of US$16.7 million in the period from October 10 last year to December 31 on an operating revenue of $228.7 million.
""We are very happy with the progress at MGM,"" Rice said.
However, the MGM figures were not included in Seven's group result.
""I don't think you can read too much into those (MGM) numbers,"" one Melbourne-based media analyst said.  
Rice told Reuters in a telephone interview: ""I think in relative terms, I would expect to see a slight improvement in general performance terms in the second half.""
Asked if he saw a better performance for the whole year, Rice replied: ""Yes."" The network also declared a half year dividend of 4.5 cents, steady with the same period in 1995/96.
Seven reported a 3.2 percent rise in operating profit to A$96 million for the 26 weeks to December 28, a company record and also within market expectations.
Seven said the result was achieved despite a softening in advertising market.  
Sales for the television network rose 16 percent to A$418.3 million for the half, boosted by advertising revenue from its coverage of the Atlanta Olympics last year and the acquisition of Sunshine Broadcasting in December 1995.
Seven said its coverage of the Atlanta Olympics produced a small gross profit and it recorded an abnormal gain of A$3.2 million on the sale Sunshine Broadcasting's radio asset.
Seven has nearly exhausted its tax credits following losses racked up by previous owner, fugitive Australian businessman Christopher Skase, whose business empire collapsed after a failed US$1.5 billion takeover bid for MGM in 1989.  
Seven said although it did not expect to pay tax for another two years, accounting standards required recognition of this income tax expense.
Rice said he was optimistic about meeting targets.
""I think we will meet our financial targets and I think our performance will be quite strong in every respect,"" he said.
""We have had a reasonable January, February is not bad. We achieved budget in January and we will go close to achieving budget in February. So it's not bad, but it hasn't really kicked at this stage.""
At 3.15 p.m. (0400 GMT), Seven shares were steady at A$4.13.  
-- Sydney newsroom 61-2 9373-1800
",23
"Australian Internet service provider OzEmail Ltd on Thursday launched long-distance telephone calls over the Internet at a quarter the cost charged by existing Australian phone companies Telstra Corp and Optus.
OzEmail, which is based in Sydney but listed on the technology-heavy NASDAQ market in the United States, said users do not need a personal computer for the new service. A call can be made from any telephone by dialling a number which then connects the call to the Internet and the destination.
The new service, called a world first by OzEmail, was launched with former Australian Prime Minister Paul Keating making the first call to Mark Roberts, telecommunications analyst at Montgomery Securities in the United States.
""Today, I am pleased to launch what I am confident will become one of the major means by which we will communicate with the rest of the world,"" Keating told reporters at the launch.
Keating described the call's quality as being equal to or better than a call on a cellular phone. Under OzEmail's new service, calls to the U.S. and Britain would cost A$21 (US$27) per hour compared with about A$77 charged by Telstra and Optus.
""Calls over the Internet are less expensive because of the superior bandwidth utilisation of the Internet as compared to the traditional technology employed by telephone companies,"" OzEmail chief executive Sean Howard told reporters.
The service would initially be exclusive to OzEmail's 100,000-plus Internet customers, who would only be able to place long-distance calls within Australia and to New Zealand, the United States and Britain in the early stages, Howard said.
After two months the service would be made available to the public with the residential market targeted first, Howard said. The reach of its calls will then be expanded to Japan, Hong Kong and Italy, with Taiwan and another Asian country a possibility.
Calls can only be made from Australia or by Australians travelling overseas, as regulations prevented OzEmail from providing the service to citizens of other countries.
Keating said: ""It opens up a new market, particularly for low-income families that were previously excluded from the long-distance market because of the high cost.""
Under Keating's term as prime minister, which ended in March 1996, Australia started deregulating its telecommunications industry, which will become fully deregulated on July 1, 1997.
The current coalition government of Prime Minister John Howard is also planning to sell a third of state-owned Telstra, which could raise an estimated A$8.0 billion (US$6.2 billion).
Any valuation on Telstra could be affected by the impact of cheaper telephone calls over the Internet, Keating said.
""This might even lower the valuation of Telstra, but I don't have to worry about that anymore,"" a smiling Keating said.
Australian telecommunications analysts agreed that cheaper telephone service via the Internet would be a threat to both Telstra and Optus, which also plans a share-market float.
""Local telephony over the Internet has been a threat to the carrier market for some time and that is why Telstra and Optus are trying to get involved in the Internet and carry more Internet traffic,"" one Sydney-based telecoms analyst said.
""I don't think they (Telstra and Optus) will be encouraging local calls over the Internet,"" the analyst said.
(A$1 = US$.775)
",23
"Australia's flag carrier Qantas Airways Ltd is expected to post a flat result for the six months ended December 31, 1996, as a higher Australian dollar and higher fuel charges keep profits under pressure.
Analysts contacted by Reuters expected Qantas to report on Thursday a pre-abnormal net profit of between A$116 million and A$154 million with most estimates around A$148 million.
Qantas, which is 25 percent owned by British Airways Plc, reported a pre-abnormal net profit of A$148.1 million in the 1995/96 first half.  
All analysts agreed that the Qantas results would be largely affected by the higher Australian dollar and increased jet fuel price. The local dollar hit a six-year high of US$0.8215 in December, but was back around US$0.7650 on Tuesday afternoon.
""On the international side, there will be some yield pressure compounded by the stronger Australian dollar,"" said one Sydney-based aviation analyst, who forecast a net profit before abnormals of A$154 million for the first half.
""On the domestic side there will be some yield pressure but they have managed to increase their market share,"" he said.
Qantas' cost cutting programme was seen helping the shield the airline from a lower profit.
""I would not be forecasting an increase in profit if it wasn't for the cost cutting,"" the analyst said.
Qantas increased its cost cutting target by A$100 million to A$430 million in 1996/97 in November after cutting A$468 million out of costs in the 1995/96 year.
J.B Were & Son aviation analyst Justin Arter forecasts Qantas to post a pre-abnormal net profit of A$148 million.
Analysts expect Qantas keep the half year dividend steady at 6.5 cents a share.
However, another Sydney-based analyst, who also asked not to be identified, forecast Qantas to report a pre-abnormal net profit of A$116 million for the half, citing currency and higher jet fuel prices as impacting on the first half result.
Paul Xavier, aviation analyst at broker BNP Equities, expected Qantas to report a lower pre-abnormal net profit of A$141 million for the six month period.
""There has been a bit of a lag effect between the costs increasing and the ability to pass that on through increased fares to passengers,"" said Xavier, referring to his profit forecast.
Qantas increased local fares in the second half of 1996.
A Melbourne-based aviation analyst forecast Qantas to report a pre-abnormal net profit of A$152.4 million for the half.
Generally, conditions were expected to be better ofr Qantas in the second half.
""Hopefully fuel prices will come back a little bit and the second half will be stronger,"" the Melbourne analyst said.
He added the falling Australian dollar should also help the second half result.
The Australian dollar is currently trading over US$0.7600.
Analysts' forecasts for Qantas' pre-abnormal net profit for the year to June 30, 1997 from A$230 million up to A$260 million.
Qantas reported a net profit of A$246.2 million in the 1995/96 year. Analysts said the cost cutting programme should start to yield better results in the 1997/98 year.
Analysts were also mixed on their views Qantas share price, which has risen about 17 percent since the end of November. Some said it was a hold, while others said it still held good value.
At 2.35 p.m. (0335 GMT), Qantas shares were one cent down at A$2.33. -- Sydney newsroom 61-2 9373-1800
",23
"Australia's biggest gambler Kerry Packer, a patron of Las Vegas casinos, on Monday raised his stakes in the local burgeoning casino industry with the acquisition of management control at Sydney Harbour Casino.
Packer's media group Publishing and Broadcasting Ltd (PBL) said it would spend A$340 million (US$265 million) on a 10 percent stake in Sydney Harbour Casino Holdings Ltd (SHC) and 85 percent of the management contract of the casino from U.S. casino operator Showboat Inc.
PBL's investment both in the management contract and the shares of SHC would show very attractive financial returns over time, PBL chairman Brian Powers said in a statement.
""This transaction represents a major move into the gaming industry for PBL and provides us with an ideal base from which to build a substantial business in this dynamic industry,"" Powers said.
""This advances our strategic goal of building a third core business alongside our television and publishing businesses,"" he said. PBL also has a option over part of Showboat's remaining 16.1 percent stake in SHC.
Showboat president and chief executive officer Kell Houssels said in the statement the transaction provided an opportunity to realise a superior return on its investment, while maintaining a major ownership position in the Sydney casino.
Packer, Australia's richest man, has sought control of the Sydney casino for the past three years. In 1994 Packer led a consortium to bid for the 12-year Sydney casino licence, but lost out to the Showboat led consortium in December 1994.
Since losing the Sydney casino license bid, Packer interests have launched several legal actions against Showboat for the award of the licence by the New South Wales (NSW) government.
Packer's punt on SHC shares have already made him a profit as shares in both the casino owner and PBL rose strongly after the deal was announced before Monday's sharemarket open.
In early afternoon trade, SHC shares were at a record high of A$2.27, a 34 cent or 17.61 percent rise in active trade, while PBL shares were 25 cents higher at A$6.35.
The deal was good for both companies as Packer's influence was likely to yield a tax-concession for the casino on the high-roller market, which is seen boosting cash flow for both the casino and PBL, Australian market analysts said.
SHC owns the only legal casino in Australia's largest city and has battled the New South Wales state government for the past 16 months to get a similar tax rate to other Australian casinos.
""I think Packer will probably get the tax-break from the government,"" one Sydney-based casino analyst said. ""I expect there will be some tax-break announcement this month,"" he said.
The Sydney casino is seeking a 10 percent tax concession from the state government on big spending gamblers, mainly from Asia, compared with the present tax rate of 27 percent.
PBL is also expected to end the disappointing run of operating results the casino has reported since it opened a temporary casino in September 1995. The casino is expected to open a A$1.0 billion permanment casino later this year.
Packer also has a 10 percent stake in Melbourne casino operator Crown Ltd and about 20 percent of Hudson Conway Ltd, which in turn owns 37 percent of Crown.
""Given the Packer-Hudson Conway type of relationship it looks like there is a bit more to come out of this one,"" said Richard Wolf, a casino analyst at Bell Securities.
(A$1 = 78 U.S. cents)
",23
"The consortium building the Sydney 2000 Olympic stadium on Thursday closed the books on an innovative funding scheme that turned into one of Australia's biggest market flops.
Stadium Australia had hoped to offset some of its A$660 million (US$515 million) construction costs through the sale of 34,400 ""Gold Passes"" giving investors a mixture of Olympic tickets, equity and stadium membership.
But investors and sports fans alike shunned the A$364.4 million (US$286.05 million) offer, leaving underwriters facing a massive funding shortfall.
Analysts and local media put the gap at up to A$240 million, which would make it one of Australia's biggest share flops and mean big losses for the four firms that underwrote the issue.
A spokeswoman for Stadium Australia said it expected to release the results of the float late next week, even though the issue officially closed on Thursday afternoon.
Sydney Organising Committee for the Olympic Games (SOCOG) president Michael Knight, who is also Olympics minister in the New South Wales government, agreed on Thursday that the Stadium Australia float likely fell short.
""It is not a direct concern to either the government or to SOCOG, although obviously we would prefer that the stadium float was better subscribed than is apparently the case,"" Knight told reporters.
The disappointment comes hard on the heels of the unexpected departure of SOCOG chief executive Mal Hemmerling, although the issue was unrelated. Hemmerling was replaced by Sandy Hollway, who worked for former prime minister Bob Hawke.
It also follows financial difficulties experienced by the Australian Olympic Committee, which has lost millions of dollars investing in a Queensland casino.
The Stadium Australia offer has been open for almost six months, more than twice as long as most share offers.
Its offer of 34,400 gold packages at A$10,000 each and 600 platinum passes at A$33,000 each opened on October 7, and its closing date has been extended twice due to lack of demand.
The gold packages include a seat at every stadium session of the 2000 Olympic Games, stadium membership for 30 years and 1,000 shares in the stadium company itself. The platinum package includes two priority seats and membership privileges.
Australian stockbrokers said the offer was too expensive given that average income in Australia was only A$36,000.
""Nobody is going to buy just one ticket, with a family you are more likely to buy four, so it's going to cost A$40,000,"" said one Sydney-based broker.
""Not many people can spend that sort of money, particularly if there is no guarantee on what events are going to be held there after the Olympics,"" the broker said.
The four underwriters of the stadium offer are ANZ Securities, Deutsche Morgan Grenfell, Macquarie Bank Ltd and ABN AMRO Hoare Govett.
""If there is a shortfall, (and) that appears to be the case, after today they will still have a considerable period of time to trade their way out of trouble,"" Knight said of the four.
The underwriters must fund the project regardless of whether all the packages are sold, thus guaranteeing the completion of the 110,000-seat stadium, which is due to open in 1999 in time for a season of pre-Olympic competitions.
""The money is absolutely guaranteed, the stadium construction is rocketing ahead and will not be affected in any way by the difficulties the underwriters are facing in recouping the money,"" Knight said.
The stadium is being built by a consortium led by private Australian construction group Multiplex Constructions Pty Ltd, British investment bank Hambros Plc and Japanese building contractor Obayashi Corp.
(A$=US$.7850)
",23
"Business demands for cheaper telephone services will propel liberalisation in the telecommunications markets of the APEC region, a U.S. telecommunications official said on Friday.
Larry Irving, a telecommunications adviser to U.S. President Bill Clinton, said the biggest advocates of change of telecommunications law were business leaders looking for better service and lower prices.
""The biggest proponent is not the telecom companies it is the industrialists, who are demanding better services and cheaper prices,"" said Irving, who is head administrator of the National Telecommunication Informational Agency (NTIA).
""It is becoming a competitive edge, countries cannot afford not to liberalise their telecom markets,"" Irving told Reuters at a meeting of APEC telecommunications ministers in Australia.
Countries that liberalise telecommunications markets would create more telecom-related jobs than those retaining state-owned monopolies, he said, citing Chile, Mexico and New Zealand as APEC countries with open telecommunications markets.
Irving said 400,000 jobs were created in the United States last year in telecommunications and information technology industry or about one-fifth of all new jobs in the U.S. economy.
Chile's Undersecretary of Communications Gregorio San Martin Ricci said more jobs have been created in his country's telecommunications industry since the South American nation deregulated the market in the late 1980s.
""There are now nine companies providing local telephone services and six firms provide long distance calls, compared with two companies in the late 1980s, which has meant more jobs,"" San Martin told Reuters in an interview.
A deregulated telecommunications market has also made Chile more internationally competitive, the Chilean minister said on the last day of the three-day meeting of ministers of the Asia Pacific Economic Cooperation (APEC).
""Before our markets used to be so far away, because we are right down the bottom of South America, but with good telecommunications our customers are now very close and distance is no longer a problem,"" San Martin said.
Fellow Latin American delegate, Carlos Mier Y Tieran, director general of Mexico's telecommunications department, said his nation also took steps in the 1980s to deregulate its telecommunications market in order to become more competitive.
""There is no question that it has made us more competitive, but we realised we had to open it to private investment because we could not afford to do it ourselves,"" Mier Y Tieran said in an interview.
Mier Y Tieran said about US$11 billion had been invested in Mexico's telecommunications market over the past six years.
""In many ways Mexico has a geographical advantage, we are a neighbour to the biggest market in the world, the United States, we are part of APEC on the Pacific coast and Europe on the Atlantic side, and we are historically connected to the rest of Latin America, but to take advantage of this we need good infrastructure and if we don't we will lose out,"" he said.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
",23
"Australian media group Publishing and Broadcasting, controlled by billionaire Kerry Packer, on Wednesday reported a lower 1996/97 first half net profit due to weaker television and magazine advertising sales.
PBL, which is about 45 percent owned by the Packer family, reported a net profit of A$104.30 million (US$82 million) in the six months ended December 31, 1996, down from A$107.66 million a year earlier.
However the Sydney-based media group noted the 1995/96 result had been boosted by an abnormal gain, and said earnings before interest and tax (EBIT) would be slightly higher in the year to June 30, 1997 compared with the previous year.
""The group overall should end this financial year in EBIT terms slightly ahead of last year,"" said PBL managing director James Packer, Kerry's only son.
""Our television and magazines divisions continue to operate in a very soft advertising market, with little prospect of any significant improvement in the second half,"" he said.
PBL is Australia's largest magazine publisher, while the Nine Network is the nation's largest TV network. Overall sales fell 2.2 percent to A$581.56 million for the half.
Earnings from PBL's Nine Network television network were likely to be flat in the second half, compared with a year earlier, due to higher costs associated with additional movies becoming available, Packer said.
Despite the profit drop, PBL raised its dividend payment to shareholders to nine cents a share from seven cents a year ago.
PBL's third arm, its Enterprise division, includes its 15 percent investment in Australia's oldest newspaper group John Fairfax Holdings Ltd, U.S. film production house Regency Enterprises and Australia satellite TV operator Australis Media.
Kerry Packer has long held an ambition to take over the Fairfax newspaper empire, publisher of the Sydney Morning Herald, the Age and business daily Australian Financial Review.
""Our strategic goals towards Fairfax remain unchanged and we await the outcome of the government's review of the cross-media laws,"" James Packer said.
The Liberal-National government is expected to announce by mid-1997 the results of its cross-media ownership laws.
Under the current cross-media regulations, media owners are not allowed to have large shareholdings in both broadcast and print media in the same market.
Australian media analysts said PBL's first half result was a little stronger than expected. They said the full year result was unlikely to include any contribution from Packer's recent investment in the Sydney casino.
PBL shares ended one cent up at A$6.35 after shedding 14 cents earlier in the day.
(A$1=US$0.7860)
",23
"Peace could be about to break out in Australia's pay television war as the industry's biggest investors, telecoms carriers Telstra Corp and Optus Communications Pty Ltd, turn to other battles.
Both face upcoming sharemarket floats and new struggles in a soon-to-be deregulated telephone market.  
Any peace deal could see rationalisation amongst the three main players in Australia's pay-TV industry, Foxtel, Optus Vision and Australis Media Ltd, which between them have racked up losses of nearly A$1.5 billion since 1993, when satellite-TV operator Australis was formed.
The rationalisation may include each pay TV operator sharing cable and satellite facilities and an end to exclusive programming, which are expensive, analysts said.  
""I think if they can rationalise the pay TV industry, it is a positive for everyone. No one is going to lose out,"" one Sydney-based telecommunications analyst said. He added it could swell the market valuations of both Telstra and Optus.
The first signs of peace emerged earlier this month when both Optus and Telstra during the release of their respective profit results for the six months to December 31, 1996 confirmed they were in talks with each other about sharing infrastructure.
""People are in a more conciliatory mood now, than they have been for a long time,"" the telecommunications analyst said.  
Telstra is currently committed to spending about A$4 billion on rolling out its fibre-optic cable network to four million Australian homes, which carries its Foxtel pay TV service, which it jointly owns with Rupert Murdoch's News Corp Ltd.
Optus Communications' 46.5 percent owned Optus Vision is spending A$3.0 billion on a rival cable network.
The duplication of networks is a concern to Telstra chief executive Frank Blount, who said this month he was talking to Optus about these issues. ""Yes, we are talking about all of our initiativies in the industry,"" Blount told a news conference. The cost of the two networks is making losses until almost next century, both Telstra and Optus have said.
It is these loss-making areas that potential investors are nervous about. They want them fixed before they take a punt on the Telstra and Optus floats, which are both earmarked for 1997.
""Both are to face the rigours of the stockmarket and both of them have to turn around what are big black holes,"" said Bob Peters, media strategist at brokers ANZ Securities.
However, any rationalisation of Australia's pay-TV industry will depend on the outcome of the courtroom drama between Optus Vision shareholders and television broadcaster Seven Network Ltd, which has a two percent holding in Optus Vision.  
Seven, which is 15 percent owned by Murdoch's News Corp, has accused fellow Optus Vision shareholders, Kerry Packer's Publishing and Broadcasting Ltd, telecom group U.S. West Inc and Optus Communications, of breaching an agreement.
If Seven wins the court case it could be entitled to buy Optus Vision at a discount.
The outcome of court action, may be settled outside the courtroom as one of the parties has confirmed to Reuters it is in talks with the other about reaching an agreement.  
This agreement could be the catalyst for the pay-TV industry shake-up and see Optus Communications taking over the Optus Vision network and it would then be able to strike a new deal with Telstra about sharing his other's networks, analysts said.
But any agreement between Telstra and Optus over pay-TV needs the approval of anti-monopolies watchdog, the Australian Competition and Consumer Commission (ACCC), which prevented a merger attempt between Foxtel and Australis last year.
The Seven-Optus Vision courtroom brawl has already stalled the planned float of Optus Communications.  
Telstra's float could be held up if it does not clear up its liability to Foxtel, which is paying A$4.5 billion to Australis for a supply of movies over 25 years, analysts said. The Australian government wants Telstra to float by the end of 1997. The settlement in January between arch rivals Rupert Murdoch and Kerry Packer over the broadcasting of the Murdoch-backed Super League football competition following a meeting of the two on Murdoch's yacht off New Zealand's Bay of Islands at the end of last year, paves the way for more deals, analysts said.
""The changing relations between Packer and Murdoch may have a lot to do with it as well,"" ANZ's Peters said.  
""It is complicated and it will take a while to resolve, but it is heading in the right direction,"" Peters said.
",23
"The surprise purchase by Australia's biggest gambler, Kerry Packer, of control at the Sydney casino was welcomed by investors and analysts on Monday.
Shares in Sydney Harbour Casino Holdings Ltd (SHC), which owns the Sydney casino and Packer's Publishing and Broadcasting Ltd (PBL), were both up after the deal.
Analysts said the deal was good for both companies as Packer's influence was likely to yield a tax-concession for the casino on the high-roller market, which is seen boosting cash flow for both the casino and PBL's coffers.  
Under the deal, PBL will buy 10 percent of SHC for A$1.85 per share from Showboat Inc and pay the U.S. casino operator A$240 million for management control of the casino.
The casino deal is likely to put any plans Packer has of controlling newspaper publisher John Fairfax Holdings Ltd on the back-burner, analysts said.
PBL has a 15 percent stake in Fairfax and Packer has said he would like to control Fairfax.  
SHC, which holds a 12-year monopoly to operate the only legal casino in Australia's largest city, has battled with the New South Wales (NSW) state government for the past 16 months to get a similar tax rate to other Australian casinos.
""I think Packer will probably get the tax-break from the government,"" one Sydney-based casino analyst said. ""I expect there will be some tax-break announcement this month,"" he said.
The Sydney casino is seeking a 10 percent tax concession from the NSW government on big spending gamblers, mainly from Asia, compared with the present tax rate of 27 percent.  
SHC chief executive Neil Gamble told Reuters last month the tax-break could equate up to A$100 million in new revenue and about A$10 million to the casino's bottom line profit.
Analysts said PBL would improve the running of the casino, which has consistently failed to meet its profit forecasts.
",23
"Singapore's Communications Minister Mah Bow Tan said on Thursday that APEC members must strike a balance between liberalising their telecommunications market and maintaining local control.
""One of the things we are discussing, what are the benefits of liberalisation, as opposed to the need to protect local companies from being swamped,"" Mah said after addressing Asia Pacific Economic Coooperation (APEC) forum telecommunications ministers here.
""The benefits of liberalisation are clear, but also we need to balance that benefit with making sure that it is not just foreign companies that make all the profits,"" Mah told Reuters in an interview.
""So that is part of the bargaining, of discussions, that is taking place in this meeting,"" said Mah, who has offered to hold the next meeting of APEC's telecommunication and information technology ministers in Singapore in mid-1998.
Mah said there were massive investment requirements in the infrastructure of the region's telecommunications industry, with most of this investment likely to come from the private sector.
""In dollar amounts there is a lot of money to be invested, but the question is, who gets to take part in that investment,"" said Mah, who will be in talks with other APEC telecommunications ministers until Friday.
""If you take everybody into account there are a lot of investment opportunities and this is one of the areas of potential, not just for our (Singapore) companies but for companies in other countries like America, Canada, Australia and Japan,"" Mah said.
In May, Mah brought forward Singapore's plans to end the local telephone monopoly by state-controlled Singapore Telecom to the year 2000 from 2007. However, Singapore plans to open its cellular phone market to competition next year.
Last month, Mah also announced a further sell-down of Singapore Telecom, which will leave the government owning 75 percent of the telephone carrier.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
",23
"Australian corporate profits, largely in line with expectations in the latest earnings season just finished, are on the mend after 18 months of disappointment, analysts said.
Overall earnings still fell but analysts are optimistic that profits for the year to June 30 should show an overall rise as economic growth gathers pace and commodity prices trend higher. The results also reflected cost cutting, as companies tear into costs to deliver earnings growth in Australia's low inflation environment, analysts said.  
Craig Drummond, head of research at brokers J.B. Were & Son, said earnings per share (EPS) for industrial companies was 1.7 percent up while resource company EPS was down four to five percent.
The drop in resource earnings, due mainly to lower commodity prices and a higher Australian dollar, pulled overall earnings slightly down, Drummond said.
He said this corporate earnings season marked the end of disappointing profits that industrial groups have posted over the past 18 months. He said both industrial and resource profits should rise in the second half of 1996/97 and calendar 1998.  
""The market is not really worried about this half year result and we should start with banks having reasonable results in May,"" Drummond said.
Three of Australia's four largest banks, National Australia Bank Ltd, Westpac Banking Corp and Australia and New Zealand Banking Group Ltd, are to report their 1996/97 first half results in May.
David Rees, equity strategist at brokers BT Securities: ""I think compared with 12 months ago there have been a lot of signs of improvement. I think compared with what people were expecting, ... it is pretty close to line ball.""  
Commonwealth Bank of Australia, pastoral and energy group Wesfarmers Ltd and retailers Woolworths Ltd and Coles Myer Ltd all reported better-than-expected profits.
""I think what is important for the market is what happens next and our view is that given the evidence of cost cutting and restructuring, given what has happened, we are looking for improvements across a whole range of companies,"" Rees said.
Rees said there should also be earnings improvements coming from the growth in Australia's capital expenditure (capex), which the government expects to be about 17 percent for 1996/97.  
""What we are now looking for is the follow through from capex ... to the bottom line,"" Rees said. Analysts said many companies improved their 1996/97 half profits by cost cutting.
Marcus Tuck, economist at HSBC James Capel, said: ""Generally the cost cutting has been good and you could say that managers are slowly learning to deal with a low inflation environment.""
Australia, which has enjoyed 22 quarters of continuous economic growth, has only seen three quarters with inflation rates above five percent and has had 12 quarters since June 1991 with an inflation rate below two percent.  
With the results season out of the way, investors are currently more concerned about the outlook for U.S. interest rates, said Mark O'Brien, head of equities at Australian Mutual Provident Society (AMP).
""The results that have been coming out having been largely in line. Very quickly once they (investors) realised the results weren't going to be disappointing, they turned their attention to U.S. interest rates,"" O'Brien said.
-- Sydney newsroom 61-2 9373-1800
",23
"The long-awaited turnaround in Australia's housing market is expected to occur during 1997 but it is unlikely to signal a repeat of the boom seen in the 1980s or the most recent peak in the 1993/94 year.
Lower immigration levels Australia are seen as a major reason for the subdued demand for housing, analysts said.
However the anticipated housing recovery would be welcomed by building material companies, hardware chains and consumer goods manufacturers, who have blamed the recent housing slump for a fall in profits over the past 18 months.  
House construction is expected to total 127,200 homes in the 1996/97 year to June 30, up from 124,550 a year earlier, according to the government's housing forecaster, the Indicative Planning Council (IPC).
However this forecast is in doubt, according to building industry body, the Master Builders Association (MBA), which has said total building approvals needed to rise by around 17 percent to meet the 1996/97 forecast.
The 1996/97 forecast is well down on the 182,000 homes built in the 1993/94 high point and the 177,000 level reached in the previous peak in 1988/89.  
IPC forecasts housing starts to average 138,000 a year to the 1999/2000 year.In the three years to 1993/94 homes built averaged 177,000 per year.
""The markets won't take off without a substantial push from overseas migration, which of course is not particularly popular at the moment,"" said Jim Sibree, property consultant at consultancy BIS Shrapnel.
Australia has been caught-up in a debate over immigration started last year by independent politician Pauline Hanson whose call in September for a freeze on immigration appears to have struck a chord with many voters.  
The Australian government expects to take in about 86,000 immigrants during 1996/97, down from 96,000 in 1995/96 and well below the levels taken in the 1980s when the intake averaged between 130,000 and 140,000 a year.
The number of people leaving Australia has averaged between 27,000 and 30,000 over the past decade.
Overseas migration is seen as the major determinant of growth of the housing markets in Sydney and Melbourne, Australia's two largest cities, both with populations of over three million.  
""Migration would have to go through the 100,000 level before it could give a major boost to the Sydney and Melbourne markets,"" Sibree told Reuters.
Australia has taken about 5.5 million immigrants since the end of World War Two, representing almost a quarter of the nation's current population of 18 million.
The government current population projection is about 23 million in 30 years.  
Christianna Cobbold, executive director of policy at the , Housing Industry Association (HIA) said the Australian housing market was unlikely to repeat the growth it recorded over the past 20 years, since the end of the ""White Australia Policy.""
""In the longer term I don't think we are going to see the massive growth we have seen in the past 15 or 20 years. We just don't have that sort of population growth,"" Cobbold said.
Cobbold said the HIA plans a study into the effects of immigration on Australia on economic, social and cultural levels. The study is expected to be completed by mid-1997.
-- Sydney Newsroom 61-2 9373-1800
",23
"News Corp Ltd shares soared on Tuesday after Rupert Murdoch's media empire struck a deal with satellite TV group EchoStar Communications Corp to offer U.S. subscription television service.
News Corp shares were the most actively sought in Australia, with over A$120 million (US$93 million) worth traded. News' ordinary shares jumped 37 cents or 5.51 percent to A$7.09 and non-voting preferred shares 40 cents or 7.1 percent to A$6.03.
""It is a bit of a manic depressive this stock. It has been depressed for the past 18 months and now it is about to go manic,"" said Greg Matthew, executive director of equities at fund managers Mercantile Mutual.
Under the deal, News Corp, which owns the U.S. Fox television network, would contribute satellites, cash and other assets of US$1 billion from its American Sky Broadcasting (AskyB) unit in return for a 50-percent stake in EchoStar.
MCI Communications Corp, a partner in ASkyB, will acquire a portion of News Corp's stake in the venture, bringing News Corp's ownership to 40 percent compared with 10 percent for MCI and 50 percent for EchoStar.
The deal is estimated to be worth about A$2.6 billion to Murdoch's media empire or about 65 cents per News Corp share, one Sydney-based broker said.
Officials with both companies said the alliance would enable the company to respond to the growing popularity for pay television services, currently dominated by cable TV operators.
""Our goal is not to be complimentary to cable, we want to eliminate cable,"" said Charles Ergen, chief executive officer of EchoStar. The service is scheduled to start service early 1998.
""Jointly we will create a dynamic and promising new competitive force in the subscription marketplace,"" Murdoch said in a statement.
The alliance will operate under the Sky name and is expected to lose around $500 million in its first year but it should reach break-even by 1999 and generate more than $1 billion in operating cash flow by the year 2002, the companies said.
""Everyone thought AskyB would break even probably as far out as 2003, they are now saying it would break even by 1999, so the market quite likes that,"" the Sydney broker said.
Brokers said they also liked News Corp's comments that it planned to sell US$800 million of non-core assets and that it had raised its earnings forecast for its U.S. TV interests by $500 million over the next three years.
The new Sky service is expected to include seven satellites, more than 500 channels, retransmission of local TV stations in markets representing more than 75 percent of all U.S. television households and low consumer entry cost.
The deal is also likely to step up the challenge to existing U.S. satellite television operators, DirecTV, which is owned by General Motors Corp's Hughes Electronics and AT&T Corp and Primestar, which is owned by a group of cable TV operators.
News Corp, also controls Britain's leading pay-TV provider BSkyB and has a satellite TV joint venture in Japan, JSkyB, that is expected to begin full service next year.
Murdoch also confirmed at a news conference after the deal announcement that News Corp has held friendly talks with Japanese electronics and entertainment gaint Sony Corp about Sony acquiring a stake in JSkyB.
News Corp ordinary shares closed at a three month high, while the preferred shares ended at a four month high.
(A$=US$.7750)
",23
"Building products group Boral Ltd shares topped the turnover charts on Friday as investors ploughed into the building material sector on the back of a change of sentiment for the recently depressed housing sector.
Boral shares jumped 13.6 cents or 3.71 percent to close at A$3.806 on a turnover of 8.8 million shares. The shares ended off their intra-day high of A$3.91, which was their highest level since March 1994.
Fellow building material groups Pioneer International Ltd and CSR Ltd also recorded strong gains.  
Pioneer shares closed at their highest level since the 1987 sharemarket crash, up 14.4 cents or 3.55 percent at A$4.20, while CSR shares ended 14 cents or three percent higher at A$4.81, its highest level since August 1994.
""I think there is just a lot of sentiment around the stocks, people want to get set for the upturn,"" said Chris Haynes, a building materials analyst at broker BT Securities.
Australian housing finance data due out next Thursday are expected to show further recent evidence that the industry is set for an upturn after a two year depression, with construction activity picking up by mid-1997.  
""There is no doubt in people's mind that the physical cycle has turned and that should have been evident three or four months ago, but it takes a while before people are convinced,"" said John North of J.B Were & Son.
Analysts said institutions may have been behind the heavy share trading in Boral, as not many major insitutions have the stock in their portfolio.
""The thing with Boral is that no major institution is on the register, so there are some people who are a little bit worried by not having any of the stock,"" BT's Haynes said.  
Both Boral and Pioneer recently reported lower profits for the six months to December 31, 1996. CSR reported in December.
On Tuesday, Boral reported a net profit of A$93.16 million for the 1995/96 first half, down from A$169.71 million in the 1995/96 first half, but it said it expected a higher profit for the second half to June 30.
Last week, Pioneer reported a net profit of A$112.7 million for the first half, down from A$138.0 million a year earlier.
But, Pioneer said it expected a lower full year profit due to lower returns from its investment in petroleum refiner Ampol.  
However, the current corporate earnings season is seen as reporting mainly in line results with many better than expected results. Analysts said the solid earnings season is also a reason for the change in sentiment for the cyclical stocks.
""The reporting season has significantly decreased the risk attached to the future profit outlook for the sector,"" said Fabian Babich at ABN AMRO Hoare Govett.
Babich said there was also evidence that volumes are up.
""So if volumes are going up and you have achieved costs savings and you have sold off underperforming businesses, what is going to happen to your profits?...they are going to go up.""  
The only Australian building material group to miss out on the big price jumps was James Hardie Industries Ltd, which had prior to today being the strongest share price performer in the sector ove rthe past 12 months.
James Hardie shares rose one cent to A$3.84 on Friday.
""Hardie is more of a growth story, the others are more of a cyclical story,"" JB Were's North said.
Australia's building material index jumped 2.57 percent and was one of the few rises on Friday with the broader All Ordinaries index down 8,9 points to 2,438.5 points.
-- Sydney newsroom 61-2 9373-1800
",23
"Demands for cheaper telephone services by businesses would drive liberalisation in the telecommunications markets of the APEC region, said Larry Irving, a telecommunications adviser to U.S. President Clinton
""The biggest advocates of change of telecommunications law aren't the United States, Australia or New Zealand, it is the business people in those countries, who want better service and lower prices,"" Irving told Reuters in an interview.  
""The biggest proponent is not the telecom companies, it is the industrialists, who are demanding better services and cheaper prices,"" said Irving, who is head administrator of the National Telecommunication Informational Agency (NTIA).
""It is becoming a competitive edge, countries cannot afford not to liberalise their telecom markets,"" said, Irving, who is attending a meeting of APEC telecommunications ministers here.
Countries that liberalise their telecommunications markets would create more telecom-related jobs than those that retain state-owned monopolies, Irving said, citing Chile, Mexico and New Zealand as APEC countries with open  markets.  
Irving said 400,000 jobs were created in the United States last year in telecommunications and information technology industry or about one-fifth of all new jobs in the U.S. economy.
Chile's undersecretary of communications Gregorio San Martin Ricci said more jobs have been created in his country's telecom industry since the South American nation deregulated the market in the late 1980s.
""There are now nine companies providing local telehony services and six firms provide long distance calls, compared with two companies in the late 1980s, which has meant more jobs,"" San Martin told Reuters in an interview.  
A deregulated telecom market has also made Chile more internationally competitive, the Chilean minister said on the last day of the three-day meeting of the telecom ministers of Asia Pacific Economic Cooperation (APEC) forum.
""Before our markets used to be so far away, because we are right down the bottom of South America but with good telecommunications our customers are now very close and distance is no longer a problem,"" San Martin said.  
Fellow Latin American delegate, Carlos Mier y Tieran, director general of Mexico's telecommunications department, said his nation also took steps in the 1980s to deregulate its telecom market in order to become more competitive.
""There is no question that it has made us more competitive, but we realised we had to open it to private investment because we could not afford to do it ourselves,"" he told Reuters in an interview.
Mier y Tieran said about US$11 billion had been invested in Mexico's telecommunications market over the past six years.  
""In many ways Mexico has a geographical advantage, we are a neighbour to the biggest market in the world, the United States, we are part of APEC on the Pacific coast and Europe on the Atlantic side, and we are historically connected to the rest of Latin America, but to take advantage of this we need good infrastructure and if we don't we will lose out,"" he said.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the United States.
-- Sydney newsroom 61-2 9373-1800
",23
"Australia's second largest telecom carrier Optus Communications Pty Ltd said on Wednesday it expects a strong result for the June 30 year and still aimed for a sharemarket float in 1997, despite litigation delays.
Optus also formally reported a net profit of A$58.9 million in the six months ended December 31, 1996, up from A$7.1 million a year earlier. The result was first announced last week by its 25 percent shareholder Mayne Nickless Ltd.
""We are expecting a very strong result for the full year,"" Optus chief executive officer Ziggy Switkowski told reporters.  
Optus reported a profit of A$60.3 million for the 1995/96 year, which compared with a loss of A$17.0 million in 1994/95.
Sales rose 31.2 percent to A$1.19 billion, buoyed by a strong lift in revenue from its mobile business.
Chief operating officer Phil Jacobs told Reuters he expected sales to continue the strong trend in the 1996/97 second half.
""It will be somewhere by a similar amount,"" Jacobs said.
Switkowski said Optus still planned a sharemarket float in calendar 1997, but a float would have to await the outcome of the litigation between its 46.5 percent owned associate Optus Vision and television station Seven Network Ltd.  
Asked at a media briefing if Optus Communications would put off its float past this year, Switkowski said: ""No, not at all the float is clearly held up by the process of the litigation, once the litigation is resolved, the board will meet and make decisions about how the float should proceed going forward.""
""The timetable for this year is still very much our desire,"" Switkowski said.
However, Switkowski said there was a possibility that Optus' planned float may clash with the timing of the sale of one third of government owned Telstra Corp, which would be a far bigger capital raising than Optus.  
""It does appear that the Telstra float will be at the latter part of the year, so when our schedule is clarified and indeed when the Telstra schedule is clarified, we will have a look at what that means to us,"" Switkowski said.
""It is not impossible that those floats will happen about the same time, we will see later this year,"" he said.
Switkowski would not comment on the litigation between Optus Vision and Seven or Vision's local telephony services launched mid-1996 to break Telstra A$5 billion market monopoly.
But Optus' Jacobs said Optus Communications had other strategies besides using Optus Vision for the local call market.  
Optus Communications has pumped about A$605 million into Optus Vision, which is currently rolling out its cable network to 2.5 million homes or 40 percent of Australian households.
""It has never been Optus Vision's intention to cable up to 100 percent of Australia's population,"" Jacobs told reporters.
""It has been our intention as Optus Communications to offer our services to a wide a customer base as possible and we have from the very beginning looked at a multiple strategy to get to those customers,"" Jacobs said.
If Optus Vision loses its legal battle with Seven, Optus forced to sell its Vision stake at a discount to Seven.  
Jacobs said the full deregulation of Australia's telecom market on July 1, 1997 would put pressure on margins across all of its businesses, but this would be more than offset by growth in the overall telecommunications market.
""There is no doubt that there will be erosion in some areas of our business as competition comes in...but we fully expect that erosion of share would be more than offset by the continued growth of the business,"" Jacobs said.
Optus is also owned 24.5 percent each by Cable and Wireless Plc of Britain and U.S. telephone carrier BellSouth Corp Inc. The remainder is owned by Australian institutions.  
-- Sydney newsroom 61-2 9373-1800
",23
"The Australian government appointed stockbrokers on Thursday to manage the proposed sharemarket float of its telecommunications carrier Telstra Corp, which will be the nation's largest privatisation.
The float is estimated to raise a minimum of A$8.0 billion (US$6.32 billion) -- and perhaps much more.
Finance Minister John Fahey said he wanted the Telstra float, through the sale of a third of the government's 100-percent stake, to go through by the end of the year.
""I want it ready to go to the market this year, this calendar year,"" Fahey told reporters.
""But I am not saying it will,"" he said. He added it was unclear whether the float of other international telephone companies would affect the float timing. France Telecom and Italy's state-owned Stet are also planned for sale this year.
Australian brokers J.B Were & Son, U.S.-based CS First Boston and European based ABN AMRO/Rothschild had been appointed global co-ordinators for the float, Fahey said.
He said J.B Were, Ord Minnett of Australia,  CS First Boston, U.S.-Australian consortium Goldman Sachs/Macquarie Bank, Daiwa of Japan, ABN AMRO/Rothschild and German owned Deutsche Morgan Grenfell were appointed joint lead managers.
The float would not be underwritten in Australia, where 65 percent of the offer is to be sold. But the shares offered in the United States would be underwritten and listed on the New York Stock Exchange, the minister said.
Two percent of the offer is set aside for Telstra employees and foreign investors are entitled to 35 percent.
Fahey would not comment on how much the government expects to raise from the partial sale of Telstra. ""I want to get optimum value for taxpayers of Australia,"" Fahey said.
Australia's Liberal-National Party coalition government was elected just over a year ago promsing to sell one-third of Telstra, with A$1.0 billion of the sale proceeds going to set up an environment fund.
The float of Telstra will far exceed other privatisations by the Australian government in recent years. The sale of Commonwealth Bank of Australia raised a total of A$8.0 billion, in two separate tranches, and the 1995 float of Qantas Airways Ltd raised A$1.45 billion.
The announcement was a boon to Australia's stockbroking community whose Christmas bonuses will be swelled by the Telstra float. The bidding for the Telstra deal was contested by 30 broking firms, which were invited to lodge proposals.
However any of the appointed brokers for the managment of the Telstra float would be barred from managing the proposed float of rival telecom group Optus Communications Pty Ltd as it would be a conflict of interest, Fahey said.
""They will not be able to take part in other transactions which the Commonwealth (government) considers to be a conflict of interest and that includes taking part in a public offer of some other telecommunications group,"" Fahey said.
Optus plans a share market float later this year, but the float is held up by court action.
(A$1 =US$.79)
",23
"Seven Network Ltd chairman Kerry Stokes said on Wednesday that Seven would probably sell pay-tv firm Optus Vision to an international phone company if it was successful in litigation against Optus Vision shareholders.
Seven claims in its court action that fellow shareholders in Optus Vision had breached the Optus Vision shareholders' agreement. Seven, a two percent shareholder in Optus Vision, has said successful litigation would mean it would be allowed to acquire Optus Vision at a discount to its full valuation.  
""We are talking to some international companies, mainly telecommunications and informational technology companies,"" Stokes told Reuters in a telephone interview.
Stokes, who owns about 20 percent of Seven, said Seven would have 12 months in which it would be required to sell Optus Vision, which is spending A$3 billion on a fibre optic cable network around Australia carrying pay TV and telephone services.
Stokes said there was more interest from companies in using the Optus Vision assets for telephone services than for pay TV.
He added that none of the firms he had spoken to have any existing interest in Australia's pay television industry.  
On Monday, Seven said it had two offers to buy the rest of Optus Vision, one for A$648.74 million and the other for A$533.80 million. It said it had 10 days to consider and respond to the offers.
Asked if Seven would pay anymore than the A$648.74 million offer, Stokes replied: ""No, we won't have to."" He said that under the shareholder agreement, the Optus Vision shareholders would be required to sell at those prices.
Australia's telecommunications industry is to be fully deregulated on July 1.  
Stokes said there had been a lot of interest in the Optus Vision assets.
""You wouldn't be able to build that kind of infrastructure for the prices we will be able to get it at,"" Stokes said.
Other Optus Vision shareholders involved in the battle with Seven are Optus Communications Pty Ltd and U.S. West unit Continental CableVision, each of which own 46.5 percent, and Kerry Packer's Publishing and Broadcasting Ltd, which has a five percent stake in the pay TV group.
Ligitation between Seven and the other Optus shareholders is to be heard in the New South Wales Supreme Court on February 24.  
Optus Communications is 25 percent owned by Mayne Nickless Ltd. The balance is owned by Australian institutions.
Seven earlier on Wednesday reported a 31.5 percent drop in net profit in the 26 weeks to December 28 as the company started to account for income tax after exhausting its tax credits from operating losses racked up by previous owners.
Seven is also 15 percent owned by News Corp Ltd, which owns 50 percent of pay television network Foxtel, which is a rival to Optus Vision.
Shares in Seven closed five cents up at A$4.18 on Wednesday.
-- Sydney newsroom 61-2 9373-1800
",23
"Australia's oldest newspaper group John Fairfax Holdings Ltd is expected to unveil sharply lower 1996/97 half year earnings on Friday, but analysts say the results may show the worst is over.
Media analysts contacted by Reuters estimated Fairfax to report a net profit before abnormals of between A$37 million and A$42 million for the first half. Fairfax reported a 23.2 percent fall in net profit to A$62.43 million for the 1995/96 half.  
However, they said the result should show improving advertising revenue in the second quarter, along with lower newsprint costs.
""They have certainly seen a pick up in ad volumes. It is still down on last year but nowhere near as much down as in the first quarter,"" said Nola Hodgson, analyst at HSBC James Capel. Hodgson tips a net profit of A$38 million to A$39 million, with the dividend remaining at 3.5 cents for the half.
Vince Pepe at broker Burdett Buckeridge and Young estimated Fairfax to report a net profit of A$40 million for the half and A$75.1 million for the 1996/97 year.  
Fairfax reported a net profit before abnormals of A$102 million in the 1995/96 year (July/June).
Fairfax profits have been tumbling for the past 18 months on higher newsprint costs and falling advertising revenue, the latter a sign of a weak labour market.
""The pick-up in the ANZ job ads was some encouragement,"" Pepe said.
On Monday, the closely-watched ANZ job advertisment series for January rose a seasonally adjusted 3.3 percent, the largest gain in a year.  
""Ad volumes are still down, but we are starting to see signs of life in real estate and employment,"" James Capel's Hodgson said.
One Sydney-based analyst forecast Fairfax to report a net profit of A$37 million, while another, who also asked not to be named, estimated the newspaper publisher to report a net profit of A$42 million.
Analysts were mixed about the second half as the first six months is traditionally Fairfax's stronger with advertising volumes associated with the Christmas period usually boosting the bottom line.  
Kerry Packer's Publishing and Broadcasting Ltd (PBL) owns about 15 percent of Fairfax and has never been shy of his intention to own Fairfax.
""This is not a company about earnings. The key issue is whether Packer is going to make a bid for it,"" the analyst said.
Canadian media baron Conrad Black sold his 25 percent Fairfax stake last year, frustrated by the government's refusal to change foreign ownership laws for Australian media assets, which prevented Black from securing 50 percent control as he wished.  
Analysts expect Fairfax to report an annual net profit of between A$75 million to A$84 million, an indication that some are forecasting a stronger second half.
Fairfax's classified advertisments, which were dubbed by media baron Rupert Murdoch as ""rivers of gold"", are often viewed as a reflection of the Australian economy. Most economists tip the local economy to grow stronger in 1997.
However, another media analyst, who also asked not to be named, said the market was not really concerned about Fairfax earnings and was instead preoccupied with a potential change in Australia's media ownership laws, which are under review.  
Black sold a 19.9 percent stake to New Zealand's Brierley Investments Ltd. Brierley plans to buy the rest of Black's stake if its gets Fairfax shareholder approval at a meeting on February 24.
Fairfax shares closed four cents lower on Tuesday at A$3.04.
-- Sydney newsroom 61-2 9373-1800
",23
"Muhammad Yunus may have the travel itinerary and packed schedule of an international banker, but that is where the comparisons stop.
He does not wear a banker's pinstripes, but the traditional, billowing Bangladeshi panjami. He eschews five-star hotels and stays instead with friends and supporters around the world.
Yet Yunus is Bangladesh's most successful banker, a man who has gained international renown for doing the unthinkable.
Yunus is head of Grameen Bank, which makes money out of lending money to some of the world's poorest people. Ninety-four percent of Grameen's borrowers are women, and the bank makes loans to people with no collateral or credit rating.
To the traditional banker this may sound like financial suicide, but Grameen has attracted more than two million customers since it started in 1976 and its lending philosophy has spread to over 50 countries.
Yunus, founder and managing director of Grameen Bank, says his strategy works -- 98 percent of loans get repaid, a banker's dream, and most borrowers escape from their poverty trap.
""Our goal is to take the poor people out of poverty as many ways as possible,"" Yunus said during a visit to Australia to meet Grameen supporter groups and politicans.
Some of the world's biggest bankers are now listening to Yunus's cry against poverty. The World Bank has appointed him chairman of its policy advisory group in its lending programmes to the poor.
The world's first Micro-Credit Summit, held last month in Washington, set out to ensure that 100 million of the world's poorest families, especially women, receive credit by the year 2005. A large part of the credit programmes will be based on policies used by the Grameen Bank, which is 92 percent owned by its borrowers. The rest is owned by the Bangladesh government.
The formation two years ago of CGAP (the Consultative Group to Assist the Poorest), with the financial backing of the World Bank and European Commission, is an endorsement by the World Bank of Yunus's vision.
The CGAP has a budget of $291 million to set up micro-lending banks around the world. Yunus wants to make sure all of this money reaches the people that need it and that it is not chewed up by bureaucracy.
""We are saying exactly $291 million should reach the hands of the poor people and you make the minimum out of service charges and we are suggesting a mechanism to do that,"" he said.
""Most of the aid money gets dried up in the servicing of the aid. I am not blaming the bureaucracy itself. I am simply saying the design is wrong,"" said the former economics professor.
The world aid system also has its faults, Yunus said in an interview before a public lecture to a packed unversity audience.
If he is not giving lectures in foreign countries he is receiving prizes or honorary degress and meeting supporters.
Each year about $60 billion is given in aid by the World Bank and other government agencies, but these funds fail to meet their market -- the poor, Yunus said.
This aid has been given to large infrastructure projects on the trickle-down economic theory rationale, but these do not create sustainable employment, said the U.S.-educated banker.
Yunus' idea for Grameen Bank came when he returned to newly-independent Bangladesh in 1972 to become head of the economics department at Chittagong University. He found that the theories he was teaching were not working -- just outside the university walls people lived in squalor.
Almost half of Bangladesh's 112 million people live below the poverty line and about 68 percent of the population are illiterate.
The 57-year-old banker knew that poverty was not due to laziness or lack of intelligence but a lack of capital needed for agriculture or industry.
Grameen Bank now has a staff of 12,600 who visit 36,000 of Bangladesh's 68,000 villages each week to meet their 2.1 million customers. In 1996 the bank loaned about $400 million with the average loan at $150. The bank has two loans -- a one-year self employment loan and a 10-year housing loan.
""It (capital) is a very important part of alleviating poverty, but it is not the only one,"" said Yunus, who has been mentioned as a possible future Nobel Peace Prize winner.
""But other pieces become easier to fit in when you have created this centrepiece, then you can add the health piece, you can add education,"" said Yunus, who also plans to provide health care insurance, solar heating and cellular telephone services to Grameen customers.
""Our goal is to get these 2.1 million families out of poverty in the next five years in Bangladesh,"" Yunus said.
""Worldwide we shall look for a day when all the poor people are out of poverty... If it can be done in Bangladesh with 2.1 million families, it can be done worldwide. It is just a question of will.""
",23
"British broadcaster Carlton Communications Plc on Wednesday reported an 11 percent rise in half-year earnings helped by a strong growth in advertising revenue.
Carlton, which operates ITV commercial television licences for London weekday TV, the English Midlands and the west of England, raised pre-tax profits to 158.6 million pounds ($262.5 million) from 143.3 million after a one-off loss of around 4.0 million pounds.
Lifting half-year dividend by 12 percent to 4.9 pence and sending the company's shares jumping, chairman Michael Green pledged that the group would continue to invest in businesses -- and boost prospects.
""We have maintained our clear focus, built up our market leading positions and enhanced both our profitability and our prospects for future growth,"" he said in the results statement.
""We will continue to build on this approach and make sure Carlton makes the best of its excellent prospects.""
The results helped restore some enthusiasm in Carlton's shares, which have been underperforming the market by around 15 percent in the last three months. By mid-morning, the stock leapt 18.5 pence to 517.5p.
Carlton, whose library boasts over 7,500 hours of TV programmes including almost 1,000 films, said its core broadcast business was one of the main drivers behind profits, seeing a 19 percent rise on the operating level to 72.6 million pounds.
An 11 percent rise in advertising revenues, higher programme sales and a 5.2 million pound trading contribution from newly acquired businesses such as Westcountry TV helped boost earnings.
Robert Jolliffe, media analyst at ABN AMRO Hoare Govett, is forecasting unchanged full-year pretax profits of 343 million pounds and said the performance of some of Carlton's divisions -- such as its products arm -- had been ""extraordinarily strong"" at the half-way stage.
""Carlton airtime sales continue to dominate ITV. They've seen good market share gains and a strong London market -- so they've done very well in the first half,"" he added.
Carlton's share of ITV's advertising revenue edged up to 32.58 percent from 31.75 percent while telecoms, financial services and airline groups raised advertising spend in a battle to win new clients and keep old ones.
But some brokers, such as BZW, are warning that the advertising revenue outlook over the next four to five years in Britain should be questioned against a background of increasing competition, analysts say.
Another highlight in Carlton's results was its fast-growing Quantel division, which designs and manufactures tapeless editing and broadcasting systems for the film and television industry worldwide.
Operating profits leapt 28 percent to 26.2 million pounds, fulfilling expectations of rapid growth. Some analysts expect new product launches to feed through into the bottom line in the next 12-18 months.
But Carlton's video division cast a pall over results, with operating profits slipping to 36.2 million pounds on 12 percent lower turnover of 242.4 million.
Chairman Green blamed the slow start to the year on the timing of releases and variations in the mix of the business, but added that he was optimistic about making progress in the second half.
Analysts are awaiting news on whether Carlton and its partners in British Digital Broadcasting (BDB) have been awarded key digital terrestrial TV licences in Britain.
Carlton in January joined rival TV giant Granada Group Plc and Rupert Murdoch's dominant pay-per-view broadcaster British Sky Broadcasting Group Plc to form the formidable BDB.
BDB wants to offer some 15 subscription channels. The group faces competition from Digital Television Network (DTN), owned by Nasdaq-listed NTL Inc -- but in what has been dubbed a classic case of David versus Goliath, most analysts tip BDB as the winner.
Carlton, which has a cash pile of 166 million pounds, said it expected the Independent Television Commission watchdog to award the licence by the end of June.
""Digital terrestrial television brings enormous opportunities to Carlton,"" Green stated.
($ = 0.604 British Pounds)
",24
"British cable operator Telewest Communications Plc disappointed the market on Wednesday by reporting widening annual losses and telephony and cable television margins that were below expectations.
The group also told Reuters it might delay building out its national network because of heavy investments needed to provide multi-channel digital television and because of its plans to link up its seven franchise areas with its own fibre optic network.
Annual losses before tax widened to 249.9 million pounds ($397.3 million) from 114.67 million pounds while turnover jumped to 290.27 million pounds from 144.78 million, excluding the effect of franchise aquisitions.
Telewest will lose its position as Britain's biggest cable operator after the expected completion in the next few weeks of a merger between Cable and Wireless Plc's Mercury unit and three other cable operators.
The company, which announced fourth quarter and final subscriber figures in January, saw its shares slip three pence to 117-1/2p in slim trade after the results.
Alan Lyons, telecoms analyst at brokers ABN AMRO Hoare Govett said he was disappointed that the company's telephony margins came in at 67 percent and at 42 percent for its cable television operations.
He had been looking for margins of 70 percent and 45 percent respectively. ""That really bodes badly for the business and that's what I'd take as the main bear point from the results,"" he said.
Symptomatic of the growing competition faced by cable firms, Telewest's finance director Charles Burdick said the group might seek to raise more funds for investment plans as fierce price wars keep a lid on margins.
Telewest, which has about 900 million pounds of debt, has secured a 1.2 billion pound bank facility of which it has so far drawn about 100 million pounds.
Burdick said Telwest was considering ""cherry picking"" or slowing down the building of its parts of its national network, which covers 65 percent of the country, in 1998 and 1999 to concentrate on offering digital television as the services comes fully on stream.
Telewest, along with Bell Cablemedia Plc and NYNEX CableComms, has already signed a deal with General Instrument of the U.S. in an attempt to gain the advantage over satellite broadcaster BSkyB in supplying set-top boxes for digital TV and information services.
Telewest, which wants to complete the rollout of its national network by 2000, also wants to link up its regional areas by the end of this year by laying new lines or leasing lines from other operators.
In this way, it can by-pass high interconnection prices charged by dominant telecoms players such as British Telecommunications Plc and Mercury.
Capital expenditure over the year rose 31 percent to 515.6 million pounds and Burdick said Telewest expected to spend a similar amount this year. ""This year will be another year of substantial build,"" he said.
Telewest said average monthly revenue per cable television subscriber edged up to 22.95 pounds from 21.11 pounds in 1995, although average residential telephony revenue billed per line slipped to 20.26 pounds from 20.69 pounds because of a tariff price war with BT.
In business telephony, attempts to remain competitive helped drive the average revenue per line eight percent lower to 54.5 pounds per month.
Telewest, along with other cable companies, has been placed on CreditWatch with negative implications by Standard & Poor's credit rating agency because of slower than anticipated network buildouts and competitive pressures from rivals such as BT and BSkyB.
Higher-than-expected capital expenditure and debt levels and a delay in operating cash flow generation in the industry has concerned the American agency.
But Burdick said Telewest had the best credit rating of all cable companies at BB plus and had had a ""very productive meeting"" with S&P.
""We expect to have a response as a company and industry at the end of the month,"" he said.
($ = 0.629 British Pounds)
",24
"Diversified British leisure company First Leisure Corp Plc said on Tuesday first half profits slipped five percent and warned that early second half trading was not as good as expected.
The group, which operates nightclubs, fitness centres and bingo clubs, said pre-tax profits in the six months to end-April fell to 17.2 million pounds ($28.7 million) on turnover of 88.8 million pounds.
Although profits were at the top-end of expectations, a negative trading statement which noted that its ailing bingo hall division was still not improving, sent the group's shares falling 17.5 pence to 318.5p as some analysts scaled back full year profit forecasts.
An interim dividend of 2.64p per share was also below expectations of 2.7-2.75p.
""The results were a bit disappointing,"" said one leisure analyst at a leading brokerage. ""We will have to look at our estimates again.""
First Leisure, which blamed some good weather in May for keeping customers out of its indoor leisure businesses, said its bingo hall division remained its top priority and it pledged innovations to win back consumers in the next year.
Chairman Michael Grade admitted that the group had made operational mistakes in the past. But he told reporters that, with a new management team at the division, the group should be able to turn it around.
Grade joined the company in January after quitting as chief executive at Channel 4.
""I don't believe there is any evidence to suggest that the British public has given up playing Bingo,"" he said. ""Bingo is the second biggest leisure activity after angling in the country. We're not getting our share of it...we got it wrong operationally.""
First Leisure, which has a 100 million pound development programme in place, says there is plenty of growth in its dancing and sports divisions -- both in the family entertainment centres and health and fitness operation.
But the group said it had underestimated its competitors' response when it came into the bingo market. Amid little evidence of a consumer boom, Grade noted lottery scratch cards had also taken their toll on market share.
Although Grade declined to be specific, he said the group had to give the restructuring time to effect a turn-around.
""I don't want to put a time frame on it,"" he told a telephone conference call. ""All I would say is that I am not known for having unlimited patience and I'm watching the situation very carefully indeed.""
The group's bingo halls saw comparable sales in the first half fall 25 percent as fewer people were attracted, and traded at a loss of 1.3 million pounds after pre-opening costs and administration charges.
At current trading levels, the business is expected to report a flat result for the second half. First Leisure plans to complete an initial development programme of 20 new generation bingo halls in 1997/98.
Grade declined to comment on market talk that First Leisure might be taken over by a company such as leisure company Rank Group Plc.
""This is a very independent business. It thrives on being independent and I intend to keep it that way,"" he said. ""I'm here for the long term.""
",24
"U.S. Midwestern local telephone company Ameritech Corp. said Friday it was in merger or acquisition talks with several European security monitoring firms worth $200 million to $500 million each.
""There are some serious negotiations going on,"" Ameritech's international affairs director Dennis LaComb told Reuters.
Chicago-based Ameritech hopes to double its current $4.0 billion in European investments over the next few years, said LaComb, who said he was in London until Saturday on a ""courtesy visit.""
""The majority of our investment internationally is in Europe. This is a very important area for us,"" he said.
Over the past six years, the Midwestern ""Baby Bell"" has taken stakes in privatisations abroad in countries such as Hungary and New Zealand.
LaComb said that security monitoring -- using telephone lines to link customers' home alarm systems to police stations -- was a natural business direction for the $31.3 billion telecommuications company to take.
Ameritech, which is facing its first taste of competition in its local market, is the second-biggest U.S. security monitoring company and hopes to become the European market leader.
The first deals are likely to be struck in Germany and France, although the company said it was also looking at firms in Scandinavia and was considering Britain.
Unlike some of its sister Baby Bells, Ameritech has no current designs on becoming a global telecommunications player.
Instead, it wants to focus its international strategy on regional telecommunications, communications such as alarm systems and exporting its knowledge of customer services and of operating in competitive markets to telecommunications firms, such as Portugal Telecom SA, which are on the verge of privatisation.
Ameritech's foreign ventures so far include stakes in Telecom Corporation of New Zealand, a local, long distance and cellular phone and satellite television service provider, Poland's Polska Telefonia Komorkowa and Norway's NetCom GSM, two cellular telephone operators.
It has partnered with Germany's Deutsche Telekom AG to take a stake in Hungary's incumbent Matav Rt telecommunications operator and also holds a stake in Belgacom, the Belgium national operator.
International investments also include a joint venture in China's regional cellular operator ChinaCom.
",24
"The BBC announced ""historic"" plans to break into the domestic commercial television market on Monday, linking up with British satellite cable broadcaster Flextech Plc to offer up to eight new pay television channels.
Flextech, majority-owned by America's biggest cable television group Tele-Communications International Inc, is contributing 22 million pounds ($35.2 million) of equity and can make 118 million pounds in credit facilities available to the ventures.
Flextech and BBC Worldwide, the BBC's commercial arm, announced in September an agreement to form a joint venture to create a series of mainly digital subscription television channels in Britain, the Channel Islands, the Isle of Man and the Irish Republic.
After months of talks, 36 separate legal agreements and six major research programmes, the two groups said that they planned to form two joint ventures to combine the BBC's archive, scheduling and production skills with Flextech's funds and multi-channel TV management and marketing knowledge.
The principal deal will be to develop and launch  mainly digital new pay-television channels in Britain.
The second is to buy out and develop in analogue, and later in digital formats, what is currently UK Gold, one of the most successful channels transmitted by one of British Sky Broadcasting 's multi-channel packages.
""The joint ventures with the BBC represent a major opportunity for the long term development of Flextech and the consolidation of its position in the multi-channel television market in the UK,"" Flextech's chief executive Roger Luard said.
Dubbed Horizons, Showcase, Style, One-TV, Arena, Learnings, Catch-up TV and Sports Entertainment Network, the eight planned channels include factual programmes, comedy and drama, leisure and lifestyle, the youthful spirit of Radio 1 on TV, music and arts, education, sports news and analysis and recently-transmitted programmes on BBC1 and BBC2.
Under terms of its licence, the BBC has to show its programmes first for free to domestic British audiences who fund the corporation though television licence fees.
""These channels will have widespread appeal and will, we believe, play an important role in the future growth and development of multi-channel television,"" Luard said.
Flextech and BBC Worldwide will take a 50 percent stake in the two ventures for up to 30 years. The service will be rolled out towards in late 1997.
Adam Singer, the president and chief operating officer of TINTA, told a news conference he expected to see ""close to $1.0 billion coming back to the BBC over the next three or four years"" through its pay TV deals in Britain and North America.
BBC Worldwide is developing channels for the U.S. and other markets with Discovery Inc, a sister firm to TINTA.
""Outside the UK, the BBC is probably the last, great, under-utilised English language library in the world,"" Singer said.
BBC Worldwide is keen to stress that its move into commercial television will benefit both the company and its national audience -- that pays its licence fee -- by supplementing its licence income ""in a meaningful way"".
And the deals leave Flextech, which will receive most of the cash flow until its debt is repaid, as a serious contender to British satellite broadcaster BSkyB as a key pay television programme provider.
Flextech and the BBC confirmed that they would give the first option for the transmission of up to five of the digital channels to BkyB and its partners.
BSkyB has linked up with Carlton Communications Plc and Granada Group Plc to form British Digital Broadcasting in a bid for licences to operate up to three, domestic, multi-channel digital frequencies.
Flextech, which simultaneously reported flat annual pretax, pre-exceptional losses of 16.8 million pounds, is buying out pay-TV channels UK Gold and UK Living by issuing 34.95 million shares to owners media groups Pearson, America's Cox Communications Group and BBC Worldwide.
The deal is worth about 269.9 million pounds and values UK Gold at about 210.1 million pounds and UK Living at 104 million pounds.
In return, Cox, Pearson and BBC Worldwide will take a 13.3, 5.6 and 3.5 percent stake respectively in Flextech.
TINTA, meanwhile, says it will fulfil Flextech's financial obligations to the principal joint venture ""in certain circumstances"" if Flextech fails to do so. ($ = 0.624 British Pounds)
",24
"M.A.I.D Plc, Britain's electronic business news and data service, said on Thursday it was poised to announce fresh deals to expand its reach while also promising profitability in 1997.
Dan Wagner, founder and chief executive, said in an interview that having tied up International Business Machines Corp, Thorn Business Communications, Nokia Ab, Oy and CompuServe Corp, M.A.I.D was in final discussions with more partners.
""You can expect more substantial, global alliances to be tied up within the next few months that we've been working on for quite some time,"" he said.
Wagner said new partners were likely to be telecoms groups, major publishing groups and online companies that would allow M.A.I.D, whose corporate customer base trebled to 3,800, to reach more business people.
The company sent its shares jumping in relief after fourth quarter and annual figures pointed to a turnaround of the group's fortunes.
Annual pretax losses came in at 7.03 million pounds ($11.2 million) compared to 4.05 million in the previous year, but fourth quarter losses narrowed sharply.
""All the sceptics out there are already cooking their hats,"" crowed Wagner.
By 1100 GMT, the shares had jumped 16p to 188-1/2.
""We have now stabilised our costs against the background of continued increasing revenues in both the core business and through alliance relationships,"" Chairman Michael Mander said in the results statement.
""We are well positioned for profitable growth in 1997 and beyond.""
Pointing to ""phenomenal"" customer growth, even in the highly-competitive U.S. online market, Wagner said MAID was placing markers in all areas needed to build a long-term position in the future of electronic publishing.
M.A.I.D has already partnered with the South China Morning Post, the top English language newspaper with about 93 percent of news-stand sales in Hong Kong and with iafrica.com, the leading South African internet service provider, to expand the business in Africa and Asia.
About 70 percent of services offered by M.A.I.D are based on research data.
But the group also provides real-time news with its LiveWire services, which allows users to be alerted to pre-selected, requested headlines as they appear.
Personalised access to 27 live newswires, ranging from the British regulatory stock exchange wire to U.S. news agency Associated Press, costs 150 pounds per month for 20 desks, Wagner said.
This sharply undercuts similar services from news and information services Reuters Holdings Plc and Bloomberg, he said, although the product is aimed at individual business people rather than trading rooms.
The deal with Nokia allows clients to access share price and foreign exchange information on hand-held devises and the Thorn deal allows high-speed access to the Internet computer network from hotel rooms.
M.A.I.D says that because its electronic services are mainly research, rather than news, it is not threatened by companies providing news directly on the Internet.
""Ours is a supermarket of intelligence,"" Wagner said. ""News is one element our of brokerage research, country and economic research, market research, company research.
""The threat of the Internet is non-existent, the opportunity is enormous.""
($ = 0.626 British Pounds)
",24
"Shares in Carlton Communications and Granada surged on Tuesday after Britain's two biggest commercial television groups were awarded three key licences to operate multi- channel digital terrestrial TV in the country.
Pay television giant BSkyB, which had been the third member of the consortium called British Digital Broadcasting, was told by the industry regulator to sell its 33 percent stake because of competition concerns.
Carlton and Granada, whose shares rose 10p to 526.5p and 13p to 848.5p respectively, will buy out BSkyB's one-third stake and become joint owners of the new company.
BSkyB, whose largest shareholder is media tycoon Rupert Murdoch's News Corp Ltd, wields effective control over pay TV. It will still provide programmes such as its top movie and sports channels for the group for 75 million pounds ($125.1 million).
However, telecoms watchdog Oftel said it had warned  the Independent Television Commission (ITC) regulator, which awarded the new licences, against allowing BSkyB to provide programmes.
""According to (our) analysis, the participation of BSkyB either as a consortium member or as a long term supplier of certain pay TV services, in particular sports programming, raised substantial competition concerns in the pay TV network and conditional access market,"" it said.
British Digital Broadcasting, which beat a rival bid  to operate the licences from Digital Television Network, owned by America's cable and broadcast group NTL Inc, said it was a great day for British television.
""For British television, going digital ranks alongside the change from black-and-white to colour,"" said Michael Green, the chairman of British Digital Broadcasting (BDB).
""Digital means more choice for viewers. You will be able to receive extra free and subscription television channels through your existing aerial and television. No dish. No cable.""
As both bidders for digital terrestrial licences had made it ""abundantly clear"" that they had wanted all three, the ITC said it had awarded them all to BDB because it had given more assurances than its rival that proposed services could be established and maintained.
BDB, which hopes to be profitable in around five years, plans to pump 300 million pounds into the venture to build the infrastructure, get its technology in place and its programmes organised.
Some analysts say BSkyB stands to gain more from providing the programmes for BDB than being an equity partner. The move into digital broadcasting is the next step in the development of BSkyB, which has grown into one of Britain's most successful companies.
But the group has seen its shares dive over the last week on reports that it would be forced to sell its BDB stake and by the loss of top executives.
On Tuesday, the shares hit a new year low of 452p after a report that soccer clubs were mulling their own TV service when their deal with the pay-tv giant ends in 2001.
The Financial Times said a consultants' report had advised the soccer Premier League that its 670 million pound, four-year deal with BSkyB, which has been crucial in attracting customers to BSkyB's satellite services, represents only half the value of the TV rights.
BSkyB plans to launch 200-channel digital satellite TV in Britain next year.
In comparison, digital terrestrial television, which Britain is pioneering and which involves transmitting digital signals from land-based transmitters to standard roof-top aerials, offers only up to 30 channels.
BDB says that although only 25 percent of homes in Britain pay for extra TV channels, it has research which shows that a ""very large number"" of homes would like extra choice, would be prepared to pay for it and would like to receive a service without having to install a dish or lay a cable.
With a pocket calculator-sized decoder which plugs into TV sets, viewers will receive current terrestrial channels -- BBC1, BBC2, ITV, Channel 4 and Channel 5 -- as well as additional channels such as a free 24-hour news service from the BBC.
A joint venture between the BBC and cable group Flextech Plc will also initially provide four new subscription channels. ($ = 0.599 British Pounds)
",24
"Cable and Wireless Communications, Britain's new cable giant, said on Monday it might seek further acquisitions as it set the formal stage for its complex formation and partial flotation.
Releasing 36 pages of detailed documents slightly ahead of schedule, new chief executive Graham Wallace said the merger of four cable telephone and television companies announced in October offered a unique range of products and services.
Nevertheless, the new company, which plans to list 14.7 percent of its shares in London and New York in the next few weeks, might go back on the acquisition trail.
""Here we've formed the (UK's) largest cable company, so we've taken the first step in the consolidation of the industry -- and we'll look at other acquisitions as and when they will arrive,"" Wallace said during a telephone conference call with journalists.
But he added: ""We have a scale and mass here that gives us a significant advantage. We certainly don't need to be any larger.""
Valued at between 4.0 and 7.0 billion pounds ($11.2 billion) by analysts, the merger brings together Cable and Wireless's Mercury subsidiary and the British cable television units of NYNEX Corp and Bell Canada's Bell Cablemedia Plc and Videotron.
The new company, which will serve about 1.2 million telephony and 580,000 cable TV customers, will provide a broad range of local, national and international voice and data services, and in certain regions, multichannel television and internet computer services.
It hopes to complete its broadband cable and local telephony networks by investing some 110 million pounds over two years and offer services to more than six million residential customers. It also wants to serve almost all small and medium-sized businesses within its 45 cable franchise areas.
The group will spend another 180 million pounds over the same period on so-called set top box, with which customers can receive multi channel television services.
It hopes to launch a formidable attack on the dominance of British Telecommunications Plc in telephony. Regulatory restrictions prevent BT from offering broadcasting services.
The formal offers from Cable and Wireless Communications to shareholders of the merger partners were launched on Monday as well as financial details of the company. Bell Cablemedia promptly recommended that its shareholders accept the offer.
Cable and Wireless Communications' pro forma revenues for the year to March 31, 1996, were 1.90 billion pounds with net income of 44 million pounds.
Since the merger was announced, talk has mounted that a global telecoms alliance such as the Global One partnership of Deutsche Telekom, France Telecom and America's Sprint Corp might take a stake in the venture.
With 14.7 percent of Cable and Wireless Communications (C&WC) due to be floated in London and New York, the next few weeks will provide new shareholders with the opportunity to join the group -- or give old partners a chance to leave.
Newspapers have tipped Bell Canada as being a likely candidate to sell what will be a 14.2 percent stake and end its exposure to the Britain's stagnant cable market.
But Wallace declined to comment on alliance speculation or Bell Canada's (BCM) long-term strategic plans, saying only: ""(BCM) is very happy with the investment that it has in C&WC as far as we are aware.""
France Telecom confirmed last week that it was in talks with Cable and Wireless about the cable venture becoming the British partner of the Global One alliance.
Wallace said Cable and Wireless, which will have a 52.6 percent stake in the new company, wanted to remain a majority shareholder and would consider further investment of its own if its current partners backed out.
Britain will be C&WC's short-term focus, But Wallace said the group is also eyeing continental Europe.
Analysts are keenly awaiting the partial float so that the market can value the business which has assets worth 4.5 billion pounds.
The first closing date for the offers is April 25. The listings will immediately follow completion.
Under the terms of the offer, each Bell Cablemedia (BCM) ordinary share receives 0.69389 C&WC ordinary shares.
The offer for NYNEX CableComms shareholders includes a deal of 0.330714 C&WC ordinary shares for each NYNEX CableComms UK ordinary share.
Around 65 percent of BCM and 67 percent of NYNEX shareholders have said they would accept the offer. ($ = 0.623 British Pounds)
",24
"Music companies are waiting for the world to rock to a new sound that will entice consumers back into record stores and drive up sluggish global sales.
Without new global best sellers and an economic upturn, few analysts expect the global market to bask in the double-digit growth seen from 1984 to 1994 when people lined about around the block to get the latest records such as pop group R.E.M.'s ""Monster.""
Discounting among retailers, international piracy of cassettes and compact discs and an ageing population, whose first stop at the mall might be a book store rather than a record store, have all hit the more mature markets.
Global sales of pre-recorded music reached $39.8 billion in 1996, a 5.5 percent growth in retail value over 1995. Four billion compact discs, cassettes and records -- 4 percent more than in 1995 -- were sold.
But the rate of growth is slowing. In retail value, global growth was 6 percent in 1995 and a hefty 15 percent in 1994.
The figures, compiled by the International Federation of the Phonographic Industry (IFPI), which represents the world's record firms, confirm that growth in developing markets is surging. But more mature markets such as North America have been hit by static sales and falling prices.
David Chermont, media analyst at Merrill Lynch, said that investors had become used to the lack of ""mind-blowing"" growth, however, in an industry which is made up of a mix of growth and cyclical markets that wax and wane with economic confidence.
""Double-digit growth is not sustainable even in the healthiest markets,"" he said. ""I feel quite comfortable.""
Another analyst, who declined to be identified, noted, ""The whole industry can explode if a new sound suddenly arrives on the scene that starts driving sales.""
Meanwhile, the main engine of growth has shifted away from the mature, developed markets, the figures show.
The IFPI said, ""In 1996 around 70 percent of the world's music growth was generated in less developed markets -- in particularly from Latin America and Asia.""
""This compares to only 20 percent in 1993, when global growth was at a similar level to 1996.""
But the trade body brushed aside concerns that the industry was under serious threat by technology such as CD-ROMs, booming international piracy and because the babies borne during the rocking 1960s were now approaching middle age and no longer bought music.
""There is a huge potential in music,"" Nic Garnett, director general of IFPI, told a seminar during London Music Week, noting that the global market had surged from $27 billion to almost $40 billion in the last five years. ""This is very much a thriving, global business,"" he said.
""No market is that mature where the exciting process of new artists coming through cannot re-ignite (it),"" he added. But he called on governments to protect the intellectual property business with copyright laws that prevent ""pirates"" from copying and re-selling cassettes or compact discs at vastly cheaper prices.
Piracy is one of the most serious crimes threatening the $35 billion U.S. recording industry and represents losses of over $2 billion every year, the IFPI said.
Five big music companies control about two thirds of the market -- PolyGram NV of the Netherlands; Japan's Sony Corp.; Warner, part of Time Warner Inc.; Germany's Bertelsmann AG; and EMI Group Plc of Britain.
",24
"British commercial TV giant Granada Group on Wednesday tabled a formal 711 million pound ($1.2 billion) agreed bid for its neighbour Yorkshire-Tyne Tees Television although some shareholders remained opposed the price.
(corrects dollar conversion).
Yorkshire Tyne-Tees Chairman Ward Thomas called on institutional investor Mercury Asset Management to rethink its opposition to the 11.75 pound per share bid, which he said was a good price.
""I hope on reflection they will come into line,"" he told Reuters in an interview, adding that any speculation that a counter bidder may offer a higher price might well be ""just poppycock"".
MAM, who Thomas said had been the most vocal opponent of the takeover price, declined to comment amid speculation that it had bought some of its five percent Yorkshire stake at 13 pounds a share.
Thomas said he had received no indication from United News & Media Plc about how the company would vote its 14 percent Yorkshire stake amid talk that managing director Clive Hollick may launch a counter bid.
""I've no idea whether Clive Hollick will or not,"" said Ward. ""But I would have thought his target is much more likely to be HTV Group Plc.
""But if he does, well the shareholders will be happy and MAM will be right and I will be wrong.""
Granada, which already owns 27 percent of Yorkshire, is offering two new Granada shares and 1,825.32 pence in cash for every three Yorkshire shares -- an offer Thomas said he had agreed to by telephone while on a holiday in the South of France just over two weeks ago.
The companies said that Yorkshire would pay an interim dividend of 7.5 pence.
Thomas said in the offer statement that although Yorkshire had fully recovered from problems that beset it in 1993 -- when it plunged into the red and its share price collapsed to around 1.20 pounds -- it was operating in an increasingly competitive market.
""As a result, your board now believes that a combination with the Granada broadcasting business is in the best interest of shareholders and will safeguard the future of Yorkshire and Tyne Tees Television and their ability to provide for the areas they serve,"" he said.
Shares in Yorkshire-Tyne Tees traded were slightly firmer after a sobering trading statement limited gains, rising 2.5p to 1,157.5p having earlier scaled to a high of 11.70 pounds.
""What's hurting the (Yorkshire) shares is its trading statement...It's a pretty damning indictment of what's happening,"" said one analyst who asked not to be named.
Yorkshire said it expected a disappointing second quarter, citing lower-than-expected growth in ITV advertising revenue and a failure to increase market share.
The statement also said the company believed total advertising revenue growing for commercial television ITV would show only minimal growth during the first half of 1997. It blamed the slowdown on the launch of a new channel and industry-wide weakness.
Granada chairman Gerry Robinson remained unperturbed, and said the two companies' existing airtime and international programme sales arrangements provided a solid foundation for a merger.
""We believe that the strategic arguments in favour of the combination are both powerful and widely accepted,"" he said.
Granada, whose interests span broadcasting, leisure, hotels and catering, owns the independent television (ITV) franchise for north-west England, which is adjacent to Yorkshire's area.
The deal will need regulatory approval, and Robinson said earlier this month he believed it would take some two months to complete even if everything went smoothly. ($ = 0.599 British Pounds)
",24
"Telecoms analysts in London were amused on Monday by Portugal Telecom SA's gaffe in stating that Telefonica de Espana SA had linked up with America's MCI Communications Corp.
Despite Telefonica's denials that a deal had been signed with MCI, the partner of British Telecommunications Plc, most analysts expect a four-way alliance to be announced and said such a deal was already reflected in BT's share price.
BT announced earlier that its Concert venture with MCI was forming a strategic partnership with Portugal Telecom but declined to comment on whether a similar deal had been struck with Telefonica's international arm Tisa.
""I'd say it's a bit of an 'oops' situation and someone has probably got egg on their face,"" laughed one analyst.
Another noted: ""It looks to me a bit like a cock-up for Portugal Telecom."" But he added: ""It is becoming obvious that the four are going foward together. It should be good news.""
Apart from winning exposure to Brazil through today's alliance with Portugal Telecom, Concert has little direct presence in other South American countries.
But a deal with Telefonica's international arm Tisa will add the rest -- the booming markets of Peru, Argentian, Chile, Venezuela, Colombia and Puerto Rico -- to its growing geographic portfolio.
John Tysoe, telecoms analyst at SocGen, said he would welcome a deal with both Iberian partners because it would ""close the door"" for Concert on the Americas. MCI is already the second largest carrier of international telephone traffic from the U.S. to Latin America.
Because few expect Telefonica to be able to remain in its current alliance in Europe, AT&T -led Unisource, while joining arch-rival Concert in Latin America, analysts expect Telefonica to abandon Unisource.
Without Telefonica, analysts said Unisource would be severely weakened and this could force AT&T to rethink its European strategy.
""The benefit for Concert of joining forces with Telefonica is that they weaken AT&T while at the same time strengthening themselves,"" Tysoe said.
""The more people join in Concert, the less attractive AT&T's option is,"" he added.
Another analyst noted that Telefonica had always been understood to want to be on the side of Portugal Telecom ""so that they don't need to fear that Portugal Telecom will invade Spain and vice versa"".
The analyst, who declined to be named, added that he had expected BT and MCI to take a five percent stake in Portugal Telecom, rather than the 1.5 percent holding they had agreed on.
""You could argue they are now spending their money more wisely and they are not going to invest that much in Portugal Telecom because they need money elsewhere,"" he noted.
Although few believe that Telefonica will allow a partner to buy a stake in Tisa, BT is expected to try to break into the booming Asian markets. Analysts say BT is in talks with most strong players, including the likes of Singapore Telecommunications Ltd.
While global telecoms alliances such as Concert fall over themselves trying to plug holes in their geographic portfolios and make up for the growth lost in more mature markets, some analysts warn that not all strategic investments will be successful.
""Overall, it is more important to look at the core business which, for Concert, is the U.S. and UK -- and there, prices will only go one way -- down,"" said the analyst. ""Volumes will presumably also not continue to grow as healthily as they are growing at the moment.
""Perhaps not in the next week or two, but certainly within 1997, people will be much more sober,"" he warned.
BT's transatlatic roadshows should pay off on Tuesday when shareholders are expected to approve the group's planned 12.3 billion pound ($20 billion) merger with MCI.
Analysts then expect the group to stop what one called ""its marketing machine"" and start concentrating again on its operations.
-- London Newsroom +44 171 542 7987
",24
"Talks about Britain's Cable and Wireless Plc joining a grand telecoms alliance spanning the United States, France and Germany highlights the urgency with which companies are jostling to plug gaps in their global reach.
France Telecom said on Wednesday it was in talks with the British group about C&W joining Global One, one of three main world partnerships racing to offer lucrative communications services to multinational firms.
""There are talks with Cable and Wireless and they centre on whether the company can become the British partner for Global One,"" chairman Michel Bon said.
The disclosure was spurred by a report that Britain's Cable and Wireless Plc was mulling a potential $15 billion bid for America's Sprint Corp that was quickly knocked down by Sprint and its partner France Telecom.
The Wall Street Journal reported that C&W had held talks with France Telecom, which along with Deutsche Telekom AG owns 10 percent of Sprint, about supporting a bid.
Sprint noted that a hostile takeover by Cable and Wireless and France Telecom was impossible because of standstill agreements with its European partners under which their stakes in the U.S. group cannot be increased without its permission.
Analysts have been tipping a closer alliance between the two groups for months, although most believe a link-up will be sealed by Global One taking a stake in C&W's cable venture, Cable and Wireless Communications.
U.S. telecoms giant AT & T Corp has formed a loosely-knit alliance called Unisource/World Partners, and British Telecommunications Plc has formed Concert Plc with its U.S. partner MCI Communications Corp .
A record merger and acquisition boom has been predicted in the $800 billion world telecoms industry, spurred by tumbling trade barriers as the domestic revenues of telecoms firms are squeezed by increasingly tough competition.
Analysts predict that world trade liberalisation, spurred by international treaties, will lead to the formation of mega-carriers that will try to capture the entire traffic of multinational firms with offices in the U.S., Europe and the Far East.
A deal between Concert and Spain's Telefonica  to create a formidable telephone network spanning the Americas may be announced this week, industry sources said on Wednesday.
America and Britain, which have led the liberalisation of world telecom markets, are setting the pace for mergers.
In the last 12 months, mergers have run to tens of billions of dollars as carriers such as MFS WorldCom , BT and MCI, Bell Atlantic and NYNEX and SBC and Pacific Telesis announced merger plans.
But the big mergers are also starting to show the strain of coordinating global management.
Some analysts warn that although C&W, with its attractive asset bases in Britain and Asia, is probably one of the most sought-after telecom partners, it is not a ""natural bedfellow"" with France Telecom.
""Commercially speaking, there's a huge amount of tension within Global One,"" said Paul Staples, head of the telecoms team at merchant bank Schroders.
Staples thinks only the political will of the French and German governments is keeping Global One together in its current form.
""I'm in the camp that says I'd be surprised if Global One was in its current form in two years time,"" he said.
The group has not resolved the issue of what to do in markets outside France, Germany or the U.S. and are often bumping up against each other in Asia Pacific, pursuing potentially conflicting investment strategies.
Unlike BT and MCI's Concert alliance that aims to offer seamless services to corporate customers, Global One's partners do not see their alliance as an investment vehicle to extend coverage, he noted.
""They see it as a standardised marketing agreement,"" he said.
France Telecom is also embroiled in a partial privatisation at home and needs a period of stability before embarking on big, new ventures.
""The market will not tolerate France Telecom senior management going off on a frolic of their own,"" Staples said.
Institutions are looking for the company to concentrate first on its domestic customers and running an efficient business, he said.
($ = 0.628 British Pounds)
",24
"Tumbling trade barriers are triggering huge telecom alliances as companies struggle to straddle the world and offer lucrative services to multinational companies.
But not even the biggest telecoms companies know where the revolution will end.
AT&T Corp. Chairman Robert Allen was quoted last year as saying: ""One could reasonably expect the chairman of AT&T to know what his corporation will be 10 years from now. He doesn't.
""One could, within reason, expect the chairman of AT&T to be able to predict how technology will transform his business a decade hence. He can't.
""At least, he should know who his major competitors will be in 2005. Stumped again.
""But here is what he does know: something startling, intriguing and profound is afoot.""
Some telecom analysts warn that large-scale investment at a time of global expansion and competition will hit the margins and revenues of former cash-rich monopolies.
""Of the world's major telecom companies, I would not be surprised if one of them, in the next five to 10 years, becomes perceived as a high risk company,"" said Andrew Harrington, telecoms analyst at Salomon Brothers.
As telecom companies jostle to fill the gaps in the global reach of their business, analysts are predicting an unprecedented surge of mergers and acquisitions in the $800 billion world telecom industry.
World trade liberalisation is expected to lead to global mega-carriers that will try to capture the entire profit margin from the traffic of multinational firms with offices in the United States, Europe and the Far East.
Harrington estimates that the top 5,000 multinational corporate customers account for 15-20 percent of global telecom revenue. To be able to service them, carriers need asset bases in all the countries where they operate.
While analysts agree that competition will become ferocious, some brush aside those who urge caution and argue that explosive growth will help maintain the margins of well-placed companies.
""Something like two-thirds of the world's population live more than a day's walk away from the nearest telephone,"" said John Tysoe, telecoms analyst at brokers SocGen. ""There's a whole world out there waiting to get in touch.""
In the last 12 months, potential mergers have run to tens of billions of dollars as carriers such as MFS WorldCom, British Telecommunications Plc and MCI Communications Corp., Bell Atlantic and SBC/Pacific Telesis announced plans to join forces.
Because the cost of making calls is expected to reflect more closely the cost of delivering them, consumers will soon no longer pay the vastly inflated prices that have helped line the pockets of bloated national carriers.
The advent of high bandwidth cable and modern switching systems also means that, according to some broker estimates, the cost of delivering a telephone call is about a thousand times cheaper than 40 years ago.
A number of firms, facing margin-shrinking competition at home and aiming to service corporations, have formed three main global partnerships.
BT and its American partner MCI have formed an alliance called Concert; Deutsche Telekom, France Telecom and Sprint have linked up to form Global One.
AT&T, the world's second largest telecom company, has also set up loosely-knit partnerships called Unisource and World Partners.
Telecommuncations used to be rather simple: Spend money to fix your network, cut capital expenditure and staffing levels and wait for the cash to start piling up.
The more money is spent on a network, the greater the cash flows allowed by regulators to support its renewal, and the greater the potential free cash-flow improvement, when savings are eventually enjoyed.
But a brave, new world is on the horizon, and the only telecoms stocks Harrington tips for investors are those which enjoy double-digit growth, are gaining share in their existing markets, and have assets in place to execute strategic plans -- or have a unique niche.
Such firms could include Cable and Wireless, Britain's second biggest telecom company, which analysts say combines an attractive home asset base with rare access to booming Asian markets.
C&W has a majority stake in Hong Kong Telecommunications, described as one of the best assets in Asia because it is not only majority held by non-government investors, but has potentially unique access to China and already faces competition at home.
BT is also hoping that its planned takeover of MCI will make it more attractive as a potential partner to Asian companies such as Japan's Nippon Telegraph and Telephone Corp., the world's largest telecom company.
",24
"Britain's Independent Television Commission (ITC) watchdog said on Wednesday it had every confidence in its decision to award three key licences to run digital terrestrial television despite a possible legal challenge.
Digital Television Network (DTN), which is owned by American cable and broadcasting group NTL Inc, says it might seek legal redress and challenge the ITC's decision on Tuesday to award the licences to its rival British Digital Broadcasting (BDB) consortium.
But an ITC spokeswoman said: ""We are always ready to defend our decisions in a judicial review. But this is really a matter for DTN to decide.""
BDB is jointly owned by Britain's biggest commercial television groups, Carlton Communications Plc and Granada Group Plc. Pay-TV giant British Sky Broadcasting Group Plc will be the main programme supplier.
The ITC conceded that DTN's programme plans for the digital era were more innovative than those of BDB. But they tended to appeal more to a niche audience than BDB's suggested diet of mainly popular Sky movies and sport.
The ITC emphasised that there were other criteria in choosing a winner, such as ensuring the success and promotion of digital terrestrial TV.
""Taking all the criteria as a whole, BDB had the stronger package,"" a spokeswoman said.
Digital terrestrial television, which is likely to be launched in Britain next year, will allow customers to receive up to 30 channels broadcast from conventional transmitters to domestic aerials.
BSkyB, which has enjoyed a near-monopoly position in the British subscription television market, supplies popular sports and movies to both cable and satellite services. It also plans to launch 200-channel digital satellite services next year.
Analysts and lawyers contacted on Wednesday thought  any attempt to seek legal redress would have at best a slim chance of success.
""I think on balance I wouldn't expect this to succeed,"" said one corporate lawyer. ""But any litigation is pretty unpredictable. The weakness in any case is that the ITC has clearly appreciated the difficulty and taken steps as they have seen it to meet that.""
The ITC has asked BSkyB to drop its plans to take a 33 percent BDB stake -- which Carlton and Granada are now buying for 75 million pounds ($125.1 million) -- on competition grounds.
DTN, meanwhile, is still seeking legal advice.
""We're still considering our options ranging from doing nothing at all to...either a judicial review or discussions with other bodies. We haven't come down in any way on any decision,"" a spokesman said.
But he welcomed the advice given to the ITC by the telecommunications watchdog, Oftel, that awarding the licences to BDB might be anti-competitive.
Oftel director general Don Cruickshank had warned the ITC that allowing BSkyB to be either an equity partner or a long-term supplier of pay-TV programmes raised ""substantial competition concerns"".
In the meantime, Oftel is inviting views from all interest parties on its general competition analysis so it can use the comments in other cases.
""The way we are analysing the effects of one adjacent market on another is of extreme relevance to the markets we regulate,"" a spokeswoman said.
She added that the decision to award the licences to BDB despite Oftel's advice was a matter for the ITC.
""We're bound to look at competition issues but they look at much wider issues,"" she said. ""We can give our advice -- but that's as far as we go."" ($ = 0.599 British Pounds)
",24
"British Telecommunications Plc flexed its muscles on Thursday, saying it would not hesitate to launch a legal challenge to any government windfall tax on its profits.
Reporting a rise in annual pretax profits to 3.2 billion pounds ($5.3 billion) from 3.02 billion, chairman Sir Iain Vallance said the group owed it to its investors to attempt to fight any Labour plans to tax its earnings.
""If we are stung in a big way for this tax and if it can be challenged legally, we owe it to our shareholders to challenge it,"" Vallance told BBC radio.
But he added the company would be ""very sad"" to start a partnership with Labour, which swept to power on May 1 for the first time in 18 years, on such a footing.
""I would not have voted Labour had (a windfall tax on BT) been in the manifesto,"" Vallance told reporters.
The government says it will levy a one-off tax on what it calls the ""excess profits"" of privatised utilities, whose large executive salaries and surging dividend payments to shareholders have enraged consumer groups.
Labour, which wants to raise money to help get the young and long-term unemployed back to work, declines to identify the firms it plans to target and BT's comments found favour with another potential target -- BAA.
The British airports operator is taking legal advice and accused Labour of ""verging on irresponsibility"" by not detailing who would be hit.
Unlike water and electricity companies, which are resigned to the tax, BT's Vallance charged that it would be ""perverse"" to line up BT with utilities for punishment.
""We're not a monopoly, not a utility, heavily regulated, have very low call charges, an excellent customer service record, we're very important for the UK in getting jobs in the information society that we're in at the moment and therefore why tax us?"" he asked.
But he said BT would not pull out of its ""superhighway"" agreement with Labour, whereby it will wire up for free schools and hospitals. It is hoping for an early release from a ban on using its main network for broadcasting.
While BT was in a fighting mood, it also threw a challenge to its industry regulator Oftel. BT accuses Oftel of suggesting ""unduly harsh"" curbs on the prices BT charges rivals for carrying calls on its network.
Oftel has published a consultation paper suggesting that a basket of so-called ""interconnect"" prices should fall between 6-12 percent below the rate of inflation.
But finance director Robert Brace told reporters that even the lower end of this range was too harsh -- on top of a one-off price cut of 10-20 percent -- and would harm infrastructure investment in Britain.
""In extremis, we would be prepared to challenge it (the price regime) at the Monopolies and Mergers Commission,"" he said, adding that interconnect charges in Britain were about one third of those in other countries.
Thursday's results from BT, which left its shares barely changed at 450.5p, are likely to be its last in its current form.
Once its ambitious $20 billion merger with its American partner MCI Communications Corp is cleared by U.S. regulators, a new company called Concert Plc, will be floated in London and New York.
BT on Wednesday won approval from European regulators for what is the biggest transatlantic merger in history.
With final approval expected in autumn, Concert will be the second biggest company in terms market value on the London stock exchange.
Andrew Harrington, analyst at Salomon Brothers, says Concert appears to be the best positioned global carrier in a rapidly consolidating telecoms industry.
But he warns that 50 percent of BT's revenues and 66 percent of its profits depend on an increasingly competitive domestic business.
BT, which raised total dividends 6.l percent to 19.85p, said despite fierce price wars it was increasing its domestic market share amid a strong growth in demand for its products and services.
But price cuts in the year came to 840 million pounds -- nearly six percent of its 14.9 billion pound turnover.
BT maintained its inland call volume growth at seven percent although annual international call volume growth slipped a touch -- also to seven percent.
A strengthening pound also hit BT's international call sales. Together with a 14 percent price cut in the year, international turnover fell 8.6 percent, BT said. ($ = 0.608 British Pounds)
",24
"The prospect of a multi-billion pound windfall tax on Britain's cash-rich utilities on Tuesday received a boon from a key parliamentary report saying some utility regulation had put shareholders before consumers.
Britain's opposition Labour Party, which is well ahead of Prime Minster John Major's Conservative Party in opinion polls in the run-up to a May 1 election, welcomed the all-party select committee report on the gas and electricity industries.
Labour is making much of having discovered possibly the first tax that is popular with consumers who have been enraged at tales of soaring profits, dividends and fat executive pay packages awarded to the executives of monopoly utilities.
The select committee said it agreed with energy regulators that initial price controls after privatisation around seven years ago had ""unduly favoured shareholders over customers"".
But it added that despite ""dramatic"" profit increases of gas and electricity companies, it may not be surprising that mistakes had been made because there had been little experience of utility privatisation elsewhere in the world.
Calling for more openness to allow regulators to set appropriate price limits, the committee also insisted that regulators had begun to swing the balance back to consumers.
Both electricity and gas prices have fallen since privatisation amid increasing competition. The report also endorsed the British way of setting pricing formulas by linking allowable charges to inflation.
The extraordinary profits amassed by electricity and water groups since privatisation in 1990 and 1989 took even some share and industry analysts by surprise, as savage job cuts and relatively lenient cash flow levels allowed by regulators helped fill company coffers.
Labour says it wants to fund a ""welfare-to-work"" programme with a minimum of 3.0 billion pounds ($4.8 billion) from a one-off profits tax, although speculation is rife that in order not to fall foul of expected legal challenges, the tax may include other companies.
Shares fell as a Labour source confirmed that its tax net, should it win the election, was likely to entangle both airports operator BAA Plc and phone giant British Telecommunications Plc.
Any other names on Labour's list remain a mystery, with Labour saying only that a tax will be ""non-discriminatory"" and affect all utilities that were sold off at an under-valuation and operate under ""lax regulatory regimes"".
BAA, which runs London's Gatwick and Heathrow airports, and BT both continue strenuously to deny that they are utilities. BAA's shares fell 14.5 pence to 506.5p.
But two of Britain's biggest electricity companies -- Southern Electric Plc and Eastern Electricity, now part of former Hanson subsidiary Energy Group -- took the opportunity to cut prices by over seven percent.
""There is growing consensus of the need to reform utility regulation to put the consumer first,"" said John Battle, Labour's energy minister. ""The select committee's report is a welcome contribution to that debate.""
The Parliamentary committee also said there was not enough competition in Britain's electricity generation market, which is still dominated by giants National Power Plc and PowerGen Plc, and suggested making the two companies sell off more of their power plants.
""The possibility of the further sale of capacity by the two main generators should not by excluded,"" the committee said. ($ = 0.630 British Pounds)
",24
"Psion Plc, the British hand-held computer company, saw its shares plummet by almost one fifth on Monday as a slowdown in sales overshadowed the launch of a key new product it said was ""light years"" ahead of its rivals.
The shares dived to close at to 407.5p, a loss of 97.5p or 19.2 percent, having hit an earlier low of 400p. Some analysts said the stock, which was also hit by concerns over the continued strength of sterling, could fall to as little as 350p over the next six months.
Psion, which launched the first handheld Organiser 13 years ago, said its new chequebook-sized Series 5 product was the first fully-functional, pen-orientated, portable computer that fits into a hand -- driving palmtop computing into the 21st Century.
But chairman David Potter conceded that the group's performance would be affected until the new 32-bit computers had become established.
The statement was interpreted by some analysts as a potential profit warning.
""It's not inconceivable that Psion could earn less profit this year than last year,"" warned Keith Woolcock, analyst at brokers Merrill Lynch.
The strength of sterling had knocked about three percentage points off gross margins and with the promise of a new product, sales of older computers had turned sluggish as customers held out for the new machines, analysts noted.
""The new machines will not be in a position to be sold in volumes before the autumn -- so Psion is going to have a big problem,"" Woolcock noted.
The problem Psion faces is a familiar one.
The company saw its profits fall in 1984, before it was floated, when it launched its Organiser and struggled to switch from one big selling product to another.
But Woolcock said that while over-optimism ahead of the launch may have driven shares up too high, in terms of sophistication, the new computer was not in the same ""corner of the universe"" as those of its competitors.
While rivals such as Microsoft Corp were introducing chaos into Psion's market, such a computer giant would only become a serious threat in one or two years, he added.
""The upside is that Psion can come through this,"" Woolcock said. ""We know that they now have some new partners...they have a great product, a good brand name and if Psion can position itself as an antidote to the blandness which Microsoft's products seem to represent -- it's got a great future,"" he said.
Psion, which said it was initially selling 10,000 of the new computers each month, hopes to boost sales to nearly 40,000 by September or October.
Potter told reporters in a telephone conference call that the new computer, which is compatible with Microsoft office products, Lotus Smartsuite and Corel/Wordperfect, was expected to account for nearly 40-50 percent of annual turnover by next year.
Two models in the Series 5 range -- the 8MB and the 4MB, which are being retailed at 499.95 pounds ($817) and 439.95 pounds respectively -- will be available in 50 countries and eight languages. ($ = 0.612 British Pounds)
",24
"A plan by disgruntled French luxury goods group LVMH to spin off the brewing, food and burger businesses in a planned merger between Guinness Plc and Grand Metropolitan Plc is winning some analysts' sympathy.
But Bernard Arnault, the chairman of LVMH Moet Hennessy Louis Vuitton, smarting from having been sidelined in a proposed 23.8 billion pound ($39.2 billion) merger despite his 14.2 percent Guinness stake, has taken the market by surprise.
In two share raids he has snapped up a 6.29 percent stake in GrandMet and spent around 800 million pounds in an effort to leverage a better negotiating position, analysts said on Friday.
He is now the largest shareholder in both of the hopeful merger partners.
A merger between the two British giants to form a new group called GMG Brands brings together an empire stretching from Johnnie Walker and Bell's whisky, Gordon's Gin, Smirnoff Vodka, and Guinness' traditional stount to the Burger King fast food chain, Haagen Dazs ice-cream and Green giant canned vegetables.
Despite some concerns that a hurried sale of unrelated businesses might not get the best or prices, most analysts expect GMG Brands to eventually spin off at least Burger King -- which one said stuck out like a ""sore thumb"".
""The fact is GrandMet has a spirits and food business together and there isn't any clear logical fit,"" noted one analyst, who declined to be named. ""So perhaps on that basis it would seem sensible to spin it off.""
Analysts said the added value in the planned merger, which is awaiting European and U.S. regulatory clearance, was clearly in the spirits division.
But the food businesses are also more than mere chicken feed. Excluding Burger King, they could be worth 5.0-6.0 billion pounds -- on conservative estimates, some said. And that cash could be spent in emerging markets in an earnings enhancing way.
""I think there is added value putting the sprits divisions together,"" noted another analyst. ""By spinning off the other pieces, LVMH...wants to capture as much of that extra value for its own shareholders as it possibly can.""
Separately, credit rating agency Standard & Poor's  on Friday placed its 'A-1'-plus commercial paper rating of LVMH Moet Hennessy Louis Vuitton (LVMH) on CreditWatch with negative implications following announcement of LVMH's increased stake in GrandMet and its intention to exercise its option to purchase the 34 percent stake in Moet Hennessy owned by Guinness PLC.
S&P said the acquisitions would place further pressure on the French company's existing financial profile, which had already been stretched in 1996 by the purchase of a 61 percent stake in Duty Free Shopping.
It said the move also reflected uncertainties regarding the possibility that LVMH may further increase its stake in GrandMet to obtain a blocking position regarding the proposed Guinness merger.
While Arnault piles up his bargaining chips amid mounting speculation that he may raise his GrandMet stake to 10 percent, U.S. competition authorities requested more information on the planned merger.
The European Commission, which has until 2200 GMT to decide whether to conduct a second-stage probe, is expected to follow suit.
In the meantime, Arnault can convene an extraordinary general meeting if he raises his stake to 10 percent, and put his views to shareholders and the board.
But in order to block the bid, he needs more than 24 percent of GrandMet shares.
While analysts and the companies are braced for LVMH's next move, few believe it realistic to expect the French company to buy such a large stake despite its threats. Such a move would push the price up too high, only to fall back significantly once the bid was blocked, they said.
""I don't think that's a viable strategy,"" noted one.
While GrandMet was holed up in a meeting and unavailable to comment, Guinness said only that as far as it was concerned, it was pressing ahead with the merger.
""We are confident it will go through at the end of the year and we're watching the developments with interest,"" a company spokesman said.
By 1210 GMT, GrandMet shares were trading at 598p, a loss of 5-1/2p, while Guinness stock slipped 6-1/2p to 598-1/2p.
--London Newsroom +44 171 542 7717 ($ = 0.607 British Pounds)
",24
"British Telecommunications Plc said on Thursday it might launch a legal challenge if a windfall tax on its profits was imposed by Britain's new Labour government.
Reporting a rise in annual pretax profits to 3.2 billion pounds ($5.3 billion) from 3.02 billion, chairman Sir Iain Vallance said the group owed it to its shareholders to try and prevent the government taxing its earnings. BT shares were up two pence at 1120 GMT to 451-1/2p.
""If we are stung in a big way for this tax and if it can be challenged legally, we owe it to our shareholders to challenge it,"" Vallance told BBC radio.
But he added the company would be ""very sad"" to start a partnership with Labour, elected on May 1, on such a footing.
The government said it would impose a one-off windfall tax on what it calls the ""excess profits"" of privatised utilities, whose large executive salaries and surging dividend payments to shareholders have enraged consumer groups into alleging consumers have been short-changed.
Labour has declined to identify the companies it plans to target. But some analysts said BT could be hit with a one-off tax of 1.0-1.5 billion pounds.
Vallance said it would be ""perverse"" to line up BT with privatised utilities, which include many electricity and water companies, for punishment. But he said BT would not pull out of its ""superhighway"" agreement, whereby it would provide free computer services to schools and hospitals in return for an early release from a ban on using its main network for broadcasting.
""We're not a monopoly, not a utility, heavily regulated, have very low call charges, an excellent customer service record, we're very important for the UK in getting jobs in the information society that we're in at the moment and therefore why tax us?"" he asked.
From its menial beginnings as a Post Office appendage, BT has grown meteorically into a formidable telecoms giant whose network of alliances span most of the globe.
BT on Wednesday won approval from European regulators for its proposed merger with its American partner MCI Communications Corp -- the biggest transatlantic merger in history.
The $20 billion deal will create a new company called Concert Plc and only faces one more hurdle -- U.S. regulators. Approval is expected by the autumn.
Finance director Robert Brace told Reuters that BT and MCI's Concert Communications, which provides innovative global services to high-margin, multinational clients, was set to break even this financial year.
He said the business was ""clearly"" ahead of its two loss-making rivals, the Global One partnership between Deutsche Telekom, France Telecom and America's Sprint Corp and the Unisource/World Partners alliances headed by America's AT&T Corp.
""We've got a backlog of orders of $1.5 billion, the customers love it, it's growing fast,"" he said. ""It's the start of big improved services for multinationals around the world...""
Concert, whose last gap in its geographical coverage remains Asia, boasts business from around 3,500 customers in 41 countries with annual revenues of around $500 million.
Andrew Harrington, telecoms analyst at Salomon Brothers, said Concert appeared to be the best positioned global carrier in a rapidly consolidating global telecoms industry.
But he warned that 50 percent of BT's revenues and 66 percent of its profits depended on its domestic business.
BT, which raised total dividends 6.l percent to 19.85p, said despite fierce price competition, it was increasing its market share in Britain amid a strong growth in demand for its products and services, while keeping a tight control on prices.
But inland telephone call turnover was virtually unchanged at 4.874 billion pounds.
BT said price cuts in the year amounted to more than 800 million pounds -- nearly six percent of its 14.9 billion pound turnover.
A strengthening pound also hit BT's international call sales. Together with a 14 percent price cut in the year, international turnover fell 8.6 percent, BT said. ($ = 0.608 British Pounds)
",24
"British Telecommunications will start talks with European regulators within the next week about its planned $20 billion merger with America's MCI after the deal was overwhelmingly backed by investors on Tuesday.
MCI shareholders approved the ambitious deal two weeks ago, leaving regulatory clearance the last hurdle to the creation of Concert Plc -- a ""global supercarrier"" with annual revenues of more than 25 billion pounds ($40.5 billion) and 43 million customers.
A BT spokesman said the company remained confident of winning a green light from both the European Commission, the U.S. Federal Communications Commission and the U.S. Department of Justice by autumn.
But he could not confirm speculation that Brussels might demand two minor concessions which include modifications to the two groups' dominant position in audio and video conferencing and guarantees that competition can have reasonable access to Concert's transatlantic facilities.
The EC is due to report by June 11 on BT's plans to buy the 80 percent it does not already own of MCI Communications Corp, the aggressive, U.S. long-distance operator that has become the second, long-distance carrier in the U.S. behind phone giant AT & T Corp.
Ahead of expected regulatory approval, a resounding 98.5 percent of BT's 2.3 million shareholders backed the merger, sweeping aside concerns raised by some analysts that a 30 percent premium which BT is paying is a high price for control.
The deal creates the world's fourth largest telecoms group in terms of sales after Japan's Nippon Telegraph and Telephone Corp (NTT), America's AT&T and Germany's Deutsche Telekom.
""I have reservations about the merger,"" said pensioner Stella Garton-Brown, who has been a small shareholder in BT since the company was privatised in 1984. ""I'm not always sure that bigger is best.""
But powerful financial institutions, that own about 73 percent of BT, tend traditionally to back company boards.
Some analysts put down a surge in BT's share price during key transatlantic roadshows over the last weeks to proof of support for what will be the biggest transatlantic deal in history. Others put the share price down to index-linked buying.
Sir Iain Vallance, the chairman of BT and co-chairman designate of Concert, told shareholders that because of the development of new technology and the globalisation of the booming $650 billion telecoms market, the merger would bring benefits that BT could not deliver alone.
Concert combined the feistiness of the younger, fast-growing MCI with the stability of BT -- ""the world's best market defender coupled with the world's best market attacker"", he said.
BT and MCI currently hold about six percent of the global telecoms market, which is expected to top one trillion dollars by 2000. But Vallance said: ""We want to go after the other 94 percent.""
Concert wants to provide clients around the globe with local, long distance, international and mobile phone services as well as multi-media, Internet-based services and systems integration for business clients.
The group plans to be represented in key countries across the world so it can focus on winning high-margin, multinational clients that analysts estimate account for about 15-20 percent of global telecoms revenue.
A deal with MCI also opens up the world's largest telecoms market to BT -- the United States is home to 40 percent of the largest multinational company headquarters. BT also hopes to take a share of the lucrative local market through MCI as this is opened up to competition.
MCI shareholders will receive 5.4 Concert shares for each MCI share and $6.0 cash. BT shareholders get a 2.2 billion pound special dividend and total dividend for this year of 19.85p.
BT has promised that the merger, after an initial five percent earnings dilution, will yield savings from combining overlapping services of 1.5 billion pounds over the first five years and 500 million pounds pre-tax annually after that.
But merchant banks such as Robert Fleming are sceptical about company forecasts of a six percent annual dividend rise as increasing competition is set to dampen healthy call volumes and drive down prices nearer to the relatively marginal cost of delivering them.
Fleming says BT's gearing level might surge to 150 percent in the next three years and has downgraded its recommendation on BT to ""sell"" because it says the group's valuation looks stretched against other European telecom groups.
The merchant bank's gearing calculation includes a 1-1.2 billion pound windfall tax if Britain's opposition Labour Party wins the May 1 election and an approximate 1.6 billion pound acquisition of the remaining 40 percent of BT's mobile phone business Cellnet.
It also includes other investments in Europe and key Asia Pacific markets, where Concert has yet to build a large presence. ($= 0.616 British Pounds)
",24
"British Telecommunications Plc and America's MCI Communications Corp looked set to sweep into South America amid differing reports on Monday that they had linked up with two key Iberian telephone operators.
A statement by BT that it had formed a strategic alliance with Portugal Telecom SA was confused by the English version of a similar announcement from the Portuguese company, which added that MCI had also formed a pan American joint venture with Spain's Telefonica de Espana.
BT, whose own statement made no reference to Telefonica, declined to comment. An MCI official in Lisbon further complicated the issue by saying the deal between MCI and Tisa, Telefonica's international arm, had been announced in ""error"".
A BT spokeswoman said only: ""We're pleased to be announcing Portgual Telecom today. We wouldn't comment on any other rumour or speculation but we are conscious that there is a lot of interest in the future of Telefonica.""
The announcements of new alliances come one day before BT's shareholders vote on its ambitious 12.3 billion pound ($20 billion) merger with MCI, America's second biggest long-distance carrier, called Concert Plc.
Investors, who are expected to back the deal despite concerns about the high price BT is paying, are likely to welcome any link up with Iberian phone groups which would create a formidable telephone network spanning Europe and the Americas.
Portugal Telecom will now become the exclusive distributor of Concert Communications Services, telecoms services with which Concert hopes to link high-margin, multinational business clients around the globe.
To reinforce the alliance, BT is taking a one percent and MCI a 0.5 percent stake in the $7.0 billion Portuguese company during its next stage of privatisation, expected later this year. A BT executive will be invited to take a seat on the company's board.
Despite BT's reticence in commenting on any imminent partnership with Telefonica, the company says it does want to explore opportunities in South America, where Portugal Telecom has formed an alliance with operator Telebras in the largest telecoms market, Brazil.
Brazil accounts for nearly 40 percent of South America's booming telecoms industry and its addition to the expanding Concert geographic jigsaw complements MCI's presence in 17 South American countries.
BT added: ""In addition, the companies will also seek other opportunities in the $36 billion Latin American communications market which is expected to grow to over $60 billion by the year 2000.""
Tisa dominates the fast-growing South American markets of Peru, Argentina, Chile, Venezuela, Colombia and Puerto Rico.
The flagship Spanish operator has been openly seeking a U.S. partner and an announcement is expected in the next few days.
Telefonica insisted that no deal with Concert had been signed on Monday and added that it was still in talks with both Concert and AT&T. Meanwhile Portugal Telecom said that it was also in negotiations with other international partners which may take a stake in the company.
Some London analysts had expected Concert to take a  five percent stake in the Portuguese operator.
Analysts say any link-up with Concert will herald a sea-change in the European telecoms alliance landscape and come as a blow to BT's arch rival in Europe, America's AT&T.
Speculation has been mounting that Telefonica is on the brink of announcing a long-rumoured exit from a rival partnership to Concert -- AT&T's Unisource alliance with Dutch, Swedish and Swiss telecoms groups.
Any loss of the Spanish operator, which holds a 25 percent stake in Unisource, would be the latest setback for AT&T which has been hoping to use the alliance as the vehicle for its European expansion.
Analysts at SBC Warburg say an alliance between Concert and Telefonica ""makes strategic sense for all involved"".
""Concert would become a formidable global carrier...(while Telefonica) would not only join the leading global seamless alliance but also increase the strategic value of its Latin American investments..."", the broker said in a recent report.
BT, which already has operations in more than 30 countries and employs 120,000 staff, has already formed joint ventures in the top six non-UK markets worth $135 billion, that include the key German and French markets.
Its Concert service portfolio, which it has developed with MCI, is available in 800 cities around the world.
The remaining vital gap in its global reach remains Asia, where BT has been attempting to link up with Japan's Nippon Telegraph and Telephone Corp, the world's biggest telecoms firm. ($ = 0.614 British Pounds)
",24
"Mounting concerns about the loss of both two top executives and an equity stake in terrestrial digital TV sent shares in pay-television giant BSkyB diving further on Monday and analysts forecasts more weakness to come.
Around 1.7 billion pounds ($2.8 billion) has been wiped off the value of British Sky Broadcasting since last week and some analysts said the shares, which fell 14.5p to 483p in afternoon trade, could tumble to 350p.
""There has quite clearly been a re-rating in the last week and I think it's going to continue,"" said Jason Crisp, media analyst at brokers SocGen.
Another broker said only in ""wildly optimistic"" cases could the shares be valued even at 450p.
Negative weekend newspaper reports helped compound last week's share falls sparked by a report in the Financial Times that BSkyB could be shut out of the bidding for new digital TV licences, experts said.
The Financial Times reported last week the television watchdog, the Independent Television Commission, had told BSkyB it should drop its one-third stake in a consortium with commercial TV groups Carlton Communications and Granada Group.
BSkyB was enjoying an effective monopoly on pay- television and the watchdog was concerned about market domination, the FT said.
The report, which remains unconfirmed, followed last week's announcement that BSkyB's respected chief executive Sam Chisolm was stepping down and deputy managing director David Chance was becoming a consultant.
SocGen's Crisp said the stock, which had hit an intraday 1997 high of 669p on February 14, had been vastly over-rated and should be trading nearer 400p.
He noted apart from the possible loss of its equity stake in its digital terrestrial TV consortium, called British Digital Broadcasting, and the loss of two very talented and experienced staff, flat satellite dish sales and rising operating costs were hitting the shares.
""All these things make you think it should be on a more typical PE (price earnings ratio) multiple of other big media companies,"" he added.
At 400p, the stock would have a more reasonable PE of 22 times next year, compared to one nearer 30 times before the share correction, Tysoe said.
Credit Suisse First Boston was even more negative. ""We'd just re-iterate from our call last week that fundamental value on BSkyB is about 450p even in wildly optimistic cases, about 350-400p in more reasoned scenarios,"" it stated in a note.
But Mike Woodcock, media analyst at Nikko, said the share price fall had been overdone and he would recommend buying the shares under five pounds.
He said that in the short-term, the news on BDB, a business he valued at around 400 million pounds, was positive from a financial point of view.
Compensation is tipped by the Financial Times at 75 million pounds. BSkyB can also keep some 100 million pounds which it was going to invest in the joint venture.
""Is the news of BDB and Sam Chisolm stepping down enough to warrant 1.7 billion pounds being wiped from the value of BSkyB? I would say no,"" Woodcock said. ""The real benefits for BSkyB are in the provision of programming rather than in the equity stake.""
But he said as traditionally high operating margins were squeezed -- partly because payments to show English Premier League soccer are set to rise to 160 million pounds per year from August -- he was expecting flat pre-tax profits of 309 million pounds in 1998 and 1997.
Other longer-term concerns, he said, were about how independent BSkyB was from media tycoon Rupert Murdoch's News Corp Ltd, its leading shareholder -- and how much News Corp would benefit from the success of the pay-television giant.
The ITC hopes to decide by the end of this month on whether to award digital terrestrial television licences to BDB or a rival consortium run by cable and broadcast group NTL Inc.
",24
"Tumbling trade barriers are triggering huge telecoms alliances as companies struggle to straddle the world and offer lucrative services to multinational companies.
But not even the biggest telecoms companies know where the revolution will end.
U.S. giant AT&T Corp's chairman Robert Allen was quoted last year as saying: ""One could reasonably expect the chairman of AT&T to know what his corporation will be 10 years from now. He doesn't.
""One could, within reason, expect the chairman of AT&T to be able to predict how technology will transform his business a decade hence. He can't.
""At least, he should know who his major competitors will be in 2005. Stumped again.
""But here is what he does know: something startling, intriguing and profound is afoot.""
A FUTURE FRAUGHT WITH DANGERS
Some telecom analysts warn that large-scale investment at a time of global expansion and competition will hit the margins and revenues of former cash-rich monopolies.
""Of the world's major telecom companies, I would not be surprised if one of them, in the next five to 10 years, becomes perceived as a high risk company,"" says Andrew Harrington, telecoms analyst at Salomon Brothers.
BOOM IN MERGERS FORECAST
As telecoms companies jostle to fill the gaps in the global reach of their business, analysts are predicting an unprecedented surge of B mergers and acquisitions in the $800 billion world telecoms industry.
World trade liberalisation is expected to lead to global mega-carriers that will try to capture the entire profit margin from the traffic of multinational firms with offices in the United States, Europe and the Far East.
Harrington estimates that the top 5,000 multinational corporate customers account for 15-20 percent of global telecoms revenue. To be able to service them, carriers need asset bases in all the countries where they operate.
EXPLOSIVE GROWTH MAY HELP MARGINS
While analysts agree that competition will become ferocious, some brush aside those who urge caution and argue that explosive growth will help maintain the margins of well-placed companies.
""Something like two thirds of the world's population live more than a day's walk away from the nearest telephone,"" says John Tysoe, telecoms analyst at brokers SocGen. ""There's a whole world out there waiting to get in touch.""
In the last 12 months, potential mergers have run to tens of billions of dollars as carriers such as MFS WorldCom British Telecommunications Plc and MCI Communications Corp, Bell Atlantic /NYNEX and SBC/Pacific Telesis announced plans to join forces.
MARKET FORCES BATTER TELECOM MONOPOLIES
Because the cost of making calls is expected to reflect more closely the cost of delivering them, consumers will soon no longer pay the vastly inflated prices that have helped line the pockets of bloated national carriers.
The advent of high bandwidth cable and modern switching systems also means that, according to some broker estimates, the cost of delivering a telephone call is about a thousand times cheaper than 40 years ago.
A number of firms, facing margin-shrinking competition at home and aiming to service corporations, have formed three main global partnerships.
BT and its American partner MCI have formed an alliance called Concert; Deutsche Telekom, France Telecom and America's Sprint have linked up to form Global One.
AT&T, the world's second largest telecoms company, has also set up loosely-knit partnerships called Unisource and World Partners.
Telecommuncations used to be rather simple: Spend money to fix your network, cut capital expenditure and staffing levels and wait for the cash to start piling up.
The more money is spent on a network, the greater the cash flows allowed by regulators to support its renewal, and the greater the potential free cash-flow improvement, when savings are eventually enjoyed.
But a brave, new world is on the horizon, and the only telecoms stocks Harrington tips for investors are those which enjoy double-digit growth, are gaining share in their existing markets, and have assets in place to execute strategic plans -- or have a unique niche.
CABLE & WIRELESS PROVIDES A RARE ASSET BASE
Such firms could include Cable and Wireless, Britain's second biggest telecoms company, which analysts say combines an attractive home asset base with rare access to booming Asian markets.
C&W has a majority stake in Hong Kong Telecommunications, described as one of the best assets in Asia because it is not only majority held by non-government investors, but has potentially unique access to China and already faces competition at home.
'CONCERT' IS BANKING ON JAPAN
BT is also hoping that its planned takeover of MCI will make it more attractive as a potential partner to Asian companies such as Japan's Nippon Telegraph and Telephone Corp, the world's largest telecoms titan.
But the MCI deal has led rating agency Standard & Poor's to put BT on ""CreditWatch with negative implications.""
""The expected downgrade of BT's (AAA) ratings reflect the company's increased business risk and weakened business profile resulting from its ($22 billion) acquisition of MCI,"" S&P said last month.
Nevertheless, most analysts welcomed the proposed merger as a strategic necessity to create a viable, competitive group with a broad geographical reach.
As the U.S. market opens further, and since Europe created its single market in 1988, around 80 percent of the global telecoms market, by revenue, will be either completely or substantially deregulated by 1998 compared with about 20 percent today.
""The next two years will see the most significant period of reform in telecommunications history,"" says Salomon Brothers's Harrington.
",24
"Britain's new cable giant, Cable and Wireless Communications, said on Monday it might seek further acquisitions as it set the formal stage for what analysts dubbed a fearfully complicated creation and partial flotation.
The planned merger of four cable telephone and television companies, announced in October, was detailed in a hefty 800-page document.
It brings together Cable and Wireless Plc's Mercury subsidiary and the British cable TV units of NYNEX Corp and Bell Canada -- NYNEX CableComms, Bell Cablemedia Plc and Videotron.
""Here we've formed the (UK's) largest cable company. So we've taken the first step in the consolidation of the industry -- and we'll look at other acquisitions as and when they will arrive,"" chief executive Graham Wallace told journalists during a telephone conference call.
But he added: ""We have a scale and mass here that gives us a significant advantage. We certainly don't need to be any larger.""
Analysts have valued CWC, which plans to list 14.7 percent of its shares in London and New York in the next few weeks, at between four and seven billion pounds ($6.4 to $11.2 billion).
With dominant telephone giant British Telecommunications Plc restricted from offering broadcast services, CWC's main rival is cable group Telewest Communications Plc.
CWC chairman Richard Brown declined to be drawn on acquisition targets or potential alliance partners and said no talks were being held during the quiet period up to flotation.
Brown said CWC, majority owned by Cable and Wireless, was well positioned to achieve long-term growth.
""We will be customer-led, we will be market-driven,"" Brown told a news conference. ""We will have the necessary scope to achieve real market penetration over technologically advanced networks,"" he added.
Ahead of the listings, the company is prevented from releasing detailed financial information about what it insists are ""substantial"" synergy benefits.
In the meantime, it is giving what one analyst called ""tantalising hints"" about savings.
CWC, which will pay no tax for two years, will close most of its seven customer support centres, some national support centres, three of four company headquarters, rationalise its 12,500 workforce and save on marketing.
It might also buy Cable and Wireless's small European unit, Cable and Wireless Europe, which provides communications services in eight western European countries.
Although Britain will be its short-term focus, the venture will also be Cable and Wireless's vehicle for European expansion.
""While one can clearly see the huge opportunities, it's very difficult to know what it all adds up to,"" said James Golob, analyst at Deutsche Morgan Grenfell.
""It would be nice to have a bit more quantification of what the benefits and opportunities really are.""
With assets worth about 4.5 billion pounds, the new group plans to provide a broad range of local, national and international voice and data services and, in certain regions, multichannel television and internet computer services.
It hopes to complete its broadband cable and local telephony networks by investing some 110 million pounds over two years and offer services to more than six million residential customers by 2001. It also wants to serve almost all small and medium-sized businesses within its 45 cable franchise areas.
The group will spend another 180 million pounds over the same period on so-called set top boxes, with which customers can receive multi-channel television services.
Since the merger was announced, talk has mounted that a global telecoms alliance such as the Global One partnership of Deutsche Telekom, France Telecom and America's Sprint Corp might take a stake in the venture.
Newspapers have tipped Bell Canada as being a possible candidate to sell its 14.2 percent stake and end its exposure to Britain's stagnant cable market.
France Telecom confirmed last week that it was in talks with Cable and Wireless about the cable venture becoming the British partner of the Global One alliance.
But Wallace declined to comment, saying only that as far as he was aware, Bell Canada was very happy with its investment.
Cable and Wireless, which will have a 52.6 percent stake in CWC, wants to remain a majority shareholder and will consider boosting its investment if partners backed out, Wallace said.
CWC's proforma pretax profits jumped to 93 million pounds in the last nine months from 46 million in the 12 months to March 1996. Earnings per share doubled to 6.0 pence. The group does not plan to pay a dividend initially.
Around 65 percent of Bell Cablemedia (BCM) and 67 percent of NYNEX shareholders have said they would accept the share offer in the new company. ($ = 0.623 British Pounds)
",24
"Shares in Cable and Wireless Plc surged on Friday on market hopes that Britain's second biggest telecoms company was poised to seal a deal with China, ending some uncertainty over the future of its biggest asset -- Hong Kong Telecom.
The stock jumped 26.5p to 524p by 1130 GMT after Hong Kong Telecommunications Ltd announced that C&W was in discussions with China on future cooperation.
""We understand that these discussions are continuing but there is no certainty as to how and when these will be concluded or as to their effect in relation to Hong Kong Telecom,"" the company said in a statement.
C&W, which declined to comment further, has said it has been in talks with China for some time. But the statement fuelled market hopes that a deal was imminent.
With Hong Kong reverting to Chinese rule at midnight in just 24 days, analysts expect C&W to be encouraged to reduce its near 59 percent stake in the main telephone service provider on the island -- in return for growth opportunities on the booming Chinese mainland.
A sharp rise in Hong Kong Telecom's (HKT) shares to a new year high of HK$19.25 also assumes significant mainland Chinese access, analysts say.
However, some experts say that although the potential for growth in China is indisputable, the ability to make attractive returns from investments in that growth remains unproven.
But with a deal widely expected, analysts are now focusing on how big a stake C&W would sell, at what discount, whether the Chinese would offer an asset swap -- or if C&W gets cash, how it would match the hefty returns HKT used to generate when reinvesting disposal proceeds.
""There could be a scenario whereby Hong Kong Telecom just swaps some assets with the Chinese...in return for a certain percentage in HKT which would solve the Chinese cash burden,"" said one analyst, who declined to be named. ""They have to lay a lot of lines over the next couple of years. Then it's a question of what the Chinese are going to give up? You're not going to be running the Beijing telephone company,"" he added.
China has already secured a 7.74 percent stake in Hong Kong Telecom at a 15 percent discount via a company called China Everbright Group, which is directly under the supervision of China's State Council.
""Holdings in other British-controlled Hong Kong companies have in the past been sold to the Chinese at substantial share price discounts,"" notes C&W's brokers, ABN AMRO Hoare Govett.
But it adds: ""A deal in Hong Kong would reinforce the bull case for C&W by removing uncertainty over prospects, while underpinning sum of the parts valuations of the company, which suggests that the shares are worth around 650p.""
Few analysts believe C&W will want to lose majority control of HKT, which contributes 65-70 percent of its profits and offers a robust return on equity of 49 percent, according to Reuters Security 3000 data.
But some say the British company may have to reach a compromise with China, albeit ""kicking and screaming"".
Nevertheless, a sale could leave C&W with 1.0 billion pounds ($1.6 billion) or more to invest.
Deals tipped by experts include a share buy-back or special dividend at both C&W and HKT, buying the remaining 50 percent in C&W's mobile venture One2One from its joint-owner, U S West Inc, or telecoms investments in the Chinese mainland. ($ = 0.615 British Pounds)
",24
"British Telecommunications and MCI Communications Corp. are sweeping into the South America market in a major move.
British Telecom announced on Monday that it has formed a strategic alliance with Portugal Telecom which would give it access to South America's biggest market, Brazil.
The Portuguese company, however, then said in a statement that Washington-based MCI had simultaneously formed a pan-American joint venture with Spain's Telefonica de Espana.
That statement sparked confusion when British Telecom declined to confirm it, Telefonica denied a deal was signed, and MCI in Lisbon said it was announced in error. The exact nature of the error remained unclear.
The announcements came one day before British Telecom's shareholders vote on its ambitious 12.3 billion pound ($20 billion) merger with MCI, America's second biggest long-distance carrier, called Concert Plc.
Speculation about an imminent deal between Telefonica's South American arm Telefonica Internacional (TISA) and Concert has been sweeping the market for weeks.
A British Telecom spokeswoman said only, ""We're pleased to be announcing Portugal Telecom today. We wouldn't comment on any other rumur or speculation.""
Analysts were amused at what appeared to be a gaffe by Portugal Telecom. Most expect a four-way alliance to be announced soon.
If Telefonica opts for Concert, the only major hole in the Anglo-U.S. group's geographic jigsaw remains Asia.
some analysts warned that not all investments will be successful in increasingly competitive markets.
""Overall, it is more important to look at the core business which, for Concert, is the U.S. and the UK. And there, prices will only go one way -- down,"" noted one analyst who declined to be identified.
To reinforce the alliance, British Telecom is taking a 1 percent and MCI a 0.5 percent stake in the $7 billion Portuguese company during its next stage of privatisation, expected later this year. A British Telecom executive will be invited to take a seat on the company's board.
Telefonica, which separately insisted that no deal with MCI had been signed yet, plans to announce a U.S. partner within the next three weeks.
Analysts say any link-up with Concert will herald a sea-change in the European telecommunications alliance landscape and be a blow to British Telecom's arch rival in Europe, AT&T Corp.
",24
"U.S. local telecoms company Ameritech Corp said on Friday that it was in merger or acquisition talks with several European security monitoring firms worth $200-$500 million each.
""There are some serious negotiations going on,"" Ameritech's international affairs director Dennis LaComb told Reuters.
Chicago-based Ameritech hopes to double its current $4.0 billion European investments over the next few years, said LaComb, who was in London until Saturday on a ""courtesy visit"".
""The majority of our investment internationally is in Europe. This is a very important area for us,"" he said.
Over the past six years, the so-called ""Baby Bell"" -- which was spun off from U.S. telecoms giant AT & T Corp in 1983 -- has taken stakes in privatisations abroad in countries such as Hungary and New Zealand. The group has what it calls a conservative approach of ""focused and disciplined"" investment.
LaComb said that security monitoring -- such as using telephone lines to link up customers' home alarm systems to police stations -- was also a natural business direction for the $31.3 billion telecoms group to take.
Ameritech, which is facing its first taste of competition in its local market in the U.S. upper Midwest, is America's second biggest security monitoring group and hopes to become the pan-European market leader.
The first deals are likely to be struck in Germany and France, although the company said it was also looking at firms in Scandinavia and was considering Britain.
Some analysts warn that competition in the local U.S. phone markets coupled with a regulatory delay in allowing Regional Bell Operating Companies (RBOCs), or ""Baby Bells"", to branch out into the long distance American market does not bode well for shareholder value.
As long distance and other telecoms rivals invade RBOCs' territories and fat margins, brokers such as Salomon Brothers see the former monopolies losing at least 30 percent of their market where they used to earn 45-50 percent cash flow margins. These could fall to 35 percent, they say.
Unlike some of its sister Baby Bells, Ameritech has no current designs on becoming a global telecoms player.
Instead, it wants to focus its international strategy on regional telecoms, communications such as alarm systems and exporting its knowledge of customer services and of operating in competitive markets to telecoms firms, such as Portugal Telecom SA, that are standing on the privatisation launchpad.
Ameritech's European ventures so far include stakes in Telecom Corporation of New Zealand, a local, long distance and cellular phone and satellite television service provider, Poland's Polska Telefonia Komorkowa and Norway's NetCom GSM, two cellular telephone operators.
It has partnered with Deutsche Telekom AG to take a stake in Hungary's incumbent Matav Rt telecoms operator and also holds a stake in Belgacom, the Belgium national operator.
International investments also include a joint venture in China's regional cellular operator ChinaCom.
-- London Newsroom +44 171 542 7972
",24
"Cable and Wireless Plc, Britain's second biggest telecommunications company, reported record annual results on Wednesday but said it was biding its time before choosing any global partners.
C&W, which confirmed it was still in talks with telecoms alliances such as Global One, said pre-tax profits after exceptional items jumped 12 percent to 1.42 billion pounds ($2.3 billion) in the year ended March 31.
But stripping out one-off items, profits were only two to four percent higher than last year, analysts said.
The company, which raised its total dividend 11 percent to 11.1 pence for the year to March 31, said greater demand in its businesses around the world and a management focus on improving productivity had boosted performance.
Group turnover, including C&W's share of associated undertakings, rose 13 percent to just over 7.0 billion pounds. Although underlying profits were in line with expectations, the shares fell 20p to 492.5p.
Analysts were split on why the shares were being marked down. Some cited profit taking and others blamed concerns over C&W's cable venture, uncertainty over its key Hong Kong business and restlessness that the company appeared to be ignoring key European and U.S. markets in its drive for expansion -- at least in the short term.
Andrew Harrington, telecoms analyst at Salomon Brothers, remains unperturbed. ""The results were pretty good across the board. There are a lot of one-offs which have to be taken out but at an underlying level, they were at the top half of the range of expectations,"" he said.
C&W's chief executive Richard Brown promised that the company was just beginning to build long-term growth.
""We are seizing opportunities to expand our revenues in fresh, innovative ways,"" said chief executive Richard Brown in the results statement.
The company last month merged its British telephone subsidiary Mercury with three cable television companies to create the country's biggest cable group called Cable and Wireless Communications, which some analysts say will boost the bottom line within a couple of years.
Finance director Robert Lerwill told Reuters that the group continued to talk with suitors such as the Global One alliance of Deutsche Telekom, France Telecom and America's Sprint Corp.
But he noted: ""There's nothing specific on any conversations with Global One worth commenting on.
""People have been approaching us and are interested in us, which demonstrates our global reach and the appeal we have for many of these global alliances.""
Global One needs access to the British market as well as C&W's key Asian business interests, which boast a nearly 60 percent stake in lucrative Hong Kong Telecommunications Ltd .
Hongkong Telecom contributed just over one billion pounds to annual operating profits and 2.67 billion pounds to group turnover.
A partnership with Global One would also allow C&W to tap the key European telecoms markets, such as France and Germany, which are heading for liberalisation next year.
""If we did in some way get associated with another alliance, then (continental) Europe is the place where there is more to go for,"" Lerwill said.
C&W, which says it will use Cable and Wireless Communications as its springboard for European expansion, has limited access to that continent since pulling out of its German alliance with VEBA AG in February.
One question mark which hangs over C&W is its holding in Hongkong Telecom. With only weeks to go before the British colony reverts to Chinese control, speculation has been sparked that China may pressure C&W into reducing its majority stake.
But C&W insists there is no requirement for it do so. Instead, it welcomed more direct Chinese involvement in Hongkong Telecom last week, seeing it as a sign that the Chinese are likely to use the company as their principal telecoms partner in Hong Kong.
China Everbright, which reports to China's State Council (cabinet), bought a 7.7 percent stake in the Hong Kong company from CITIC Pacific, which is seen by analysts to be more independent.
Some analysts expect further Chinese investment in Hongkong Telecom, combined with new growth opportunities for the Hong Kong firm on the Chinese mainland.
But Adrian Goodall, telecoms analyst at SBC Warburg, said: ""The potential for growth in China is indisputable, although the ability to make attractive returns from investment in that growth may be a tough proposition.""
",24
"Cable and Wireless Plc, Britain's second biggest telecommunications company, reported record annual profits on Wednesday but said it was biding its time before choosing any global partners.
C&W, which confirmed it was still in talks with telecoms alliances such as Global One, said pre-tax profits after exceptional items jumped 12 percent to 1.42 billion pounds ($2.3 billion).
The company, which raised its total dividend 11 percent to 11.1 pence for the year to March 31, said improved demand in its businesses around the world and increased productivity had boosted performance.
Group turnover, including C&W's share of associated undertakings, rose 13 percent to just over 7.0 billion pounds. Underlying profits were in line with expectations and the shares eased 6.6p to 506p at 1140 GMT.
""The results were pretty much in line with expectations after stripping out about 180 million pounds of one-offs. We won't be changing our forecasts,"" ABN AMRO Hoare Govett analyst James Ross said.
But C&W's chief executive Richard Brown said in the results statement that the company was just beginning to build long-term growth: ""We are seizing opportunities to expand our revenues in fresh, innovative ways.""
The company last month merged its British telephone subsidiary Mercury with three cable television companies to create the country's biggest cable group called Cable and Wireless Communications, which some analysts say will enhance the bottom line within a couple of years.
Finance director Robert Lerwill told Reuters in an interview that the group continued to talk with suitors such as the Global One alliance of Deutsche Telekom, France Telecom and America's Sprint Corp.
But he noted: ""There's nothing specific on any conversations with Global One worth commenting on.
""People have been approaching us and are interested in us -- which demonstrates our global reach and the appeal we have for many of these global alliances.""
Global One is keen to gain access to the British market as well as C&W's key Asian business interests including its ace card -- a near-60 percent stake in lucrative Hong Kong Telecommunications Ltd.
Hong Kong Telecom contributed just over 1.0 billion pounds to annual operating profits and 2.67 billion pounds to group turnover.
A partnership with Global One would also allow C&W to tap the key European telecoms markets, such as France and Germany, which are heading for liberalisation next year.
Despite owning a small subsidiary called Cable and Wireless Europe, C&W has limited access to continental Europe. ""If we did in some way get associated with another alliance, then (continental) Europe is the place where there is more to go for,"" Lerwill said.
C&W says it will use Cable and Wireless Communications as its springboard for European expansion.
One question mark which hangs over C&W is its holding in Hong Kong Telecom. With only weeks to go before the British colony reverts to Chinese control, speculation has been sparked that China may pressure C&W into reducing its majority stake.
But C&W insists there is no requirement for it do so. It welcomed more direct Chinese involvement in Hong Kong Telecom last week, seeing it as a sign the Chinese are likely to use the company as their principal telecoms partner in Hong Kong.
China Everbright, which reports to China's State Council, bought a 7.7 percent stake in the Hong Kong company from CITIC Pacific, which is seen by analysts to be more independent.
Some analysts expect further Chinese investment in Hong Kong Telecom, combined with new growth opportunities for the Hong Kong firm on the Chinese mainland.
But Adrian Goodall, telecoms analyst at SBC Warburg, said: ""The potential for growth in China is indisputable, although the ability to make attractive returns from investment in that growth may be a tough proposition.""
",24
"Japan's Nippon Telegraph and Telephone Corp is in talks with France's Cie Generale des Eaux about taking a stake in its French railway venture, a CGE unit said on Tuesday.
The talks could bring the world's biggest telecoms group closer to one of its keenest suitors -- British Telecommunications Plc.
CGE's subsidiary Cegetel, in which BT is investing 1.1 billion pounds ($1.8 billion) to take a 25 percent stake, confirmed the talks after a source close to CGE told Reuters in London NTT was considering a 9.9 percent stake in CGE's railway venture, Telecom Developpement, TD.
""Generale des Eaux is in talks with NTT,"" a source close to the French company told Reuters.
Cegetel, which is France's second telecoms operator and majority-owned by CGE, can take a stake of up to 49.9 percent in TD. But it might limit its holding to 40 percent and seek a minority partner to take the balance, the source said.
BT, with its U.S. partner MCI Communications Corp , has been trying to gain a foothold in the lucrative Asian markets for years as has been openly courting NTT.
Asia remains the last gap in BT and MCI's global jigsaw of deals that span the globe, offering sophisticated communications services mainly to high-margin, corporate customers.
Although BT and NTT are collaborating in a bid to secure the second national licence in Singapore, BT has so far failed to clinch a closer deal with the company in Japan.
The Japanese company, which is looking to make its first foreign investment in a key European market, has been eyeing the 117 billion franc ($20 billion) French telecom market since the summer when it started talks about joining Cegetel, the source said.
Analysts say Cegetel is well-placed to launch as assault on monopoly France Telecom when the market, which is expected to grow to 187 billion francs by 2003, is eased open to competition in 1998.
But Cegetel's partners -- CGE, BT, Germany's Mannesmann AG and SBC Communications Inc of the U.S. -- were unwilling to make place for the Japanese heavyweight by selling part of their stakes in a pivotal European market.
However in February, Cegetel was selected to run a network owned by Societe Nationale des Chemins de Fer (SNCF) via the state-owned rail group's subsidiary, Telecom Developpement.
The move boosted Cegetel's position as second national operator, giving it access to 8,000 kilometres of optic fibre across the country, as well as radio links, which will be expanded to some 12,000 kilometres in the next six years.
It also opened up the possibility of a deal with NTT.
Cegetel, which already runs France's second-biggest mobile telecommunications network SFR, plans to buy at least 40 percent of the shares in TD, leaving up to 9.9 percent for the right strategic partner.
""(Cegetel) can go up to 49.9 percent in a partnership where this partner will be a minority partner,"" the source said, adding that talks with NTT have now centred on this venture.
He declined to divulge how much the stakes were worth.
Although NTT is not the only potential minority partner in talks with CGE, the source declined to name other parties.
""It is quite possible that nothing happens for a year,"" he noted.
Investment bankers expect NTT to be looking to gain a toe-hold in the top four or five European markets and say they would be surprised if efforts are being focused exclusively on France.
The company has not been short of suitors. NTT, which was in December freed by the government to pursue international business, controls virtually all of the local network in Japan as well as having a large presence in Asia.
There are three main global alliances that are eager to link up with NTT; BT and MCI's Concert, Global One; which incorporates France Telecom, Deutsche Telekom AG and America's Sprint Corp and U.S. telecoms giant AT & T Corp's loosely-knit global alliance World Partners/Unisource.
($ = 5.747 French Francs)
",24
"USA Global Link, the U.S.-based callback group that is poised to offer cut-price worldwide phone services via the Internet, said on Thursday it was in strategic alliance talks with up to 30 international companies.
Among sought-after partners are companies such as cable television firms and power groups -- any company that can provide the U.S. group with a distribution network to reach customers, the company said.
Vice president Ginger Taylor told Reuters that talks with up to three companies in each of the 10 countries the company hopes to expand into were in the ""final stages"".
In the next 60-90 days, USA Global Link plans to launch what it calls the world's first telephone-to-telephone service that routes calls over the Internet, does not require computers, and will slash the cost of international calls by up to 90 percent.
Vast cost savings are assured because the group says it can circumvent the artificially inflated international accounting and settlement rates that national telecoms giants charge for beginning and ending calls.
In an attempt to shake up the ""stifling control"" and ""smothering bureaucracy"" of giant telecoms firms, the group's Global Internetwork system will be launched initially in 10 countries including the U.S., Japan, the UK, France, Germany, South Africa, Hong Kong, Indonesia and South Korea.
""This is the death of accounting rates. It also heralds the death of the PTTs (telecoms giants),"" the group's president Larry Chroman told reporters and brokers in London.
USA Global Link has long been trying to use the Internet to develop a system based on inexpensive computer technology that will vastly undercut phone giants' prices and force telecoms cartels to give up their traditional stranglehold on markets.
Chroman says the firm wants to become one of the world's most powerful telecoms players by snatching market share away from telecoms giants as the price of delivering calls plunges to nearer cost prices.
USA Global Link, which amassed revenues of $240 million last year and wants to float a stake of about 10 percent in New York this year, said: ""The money is there, but we need strategic partners.""
Sceptics of the bullish noises emitted by companies such as USA Global Link say plans to expand worldwide could be hampered by delays because the groups need a myriad of agreements to reach the end user before it can offer its service.
But most agree that the technology to offer such a low-cost service is there.
The Iowa-based company hopes that agreements with local Internet service providers, lease line and marketing deals will allow it to offer prices of 25 cents per minute from Europe to anywhere in the world.
The company, 20 percent owned by Indonesia's state-owned PT Indonesian Satellite, wants to capture 10-15 percent of the European telecoms market within the next 18 months.
With a mere 240 employees, the four-year-old company says it is not burdened by the cash requirements of other telecoms companies and has far fewer costs. It plans to invest 300 million stg in its global network.
Calls using the service will be instantly transformed from analogue into digital signal and transmitted via the Internet anywhere in the world, the company says.
It says quality, a common problem with this type of call, will be equal to or better than current calls routed by satellite and far better than first-generation Internet telephony.
-- London Newsroom +44 171 542 7987
",24
"The BBC announced ""historic"" plans to break into the domestic commercial television market on Monday, linking up with British satellite cable broadcaster Flextech Plc to offer up to eight new pay television channels.
Flextech, majority-owned by America's biggest cable television group Tele-Communications International Inc, is contributing 22 million pounds ($35.2 million) of equity and can make 118 million pounds in credit facilities available to the ventures.
Flextech and BBC Worldwide, the BBC's commercial arm, announced in September an agreement to form a joint venture to create a series of mainly digital subscription television channels in Britain, the Channel Islands, the Isle of Man and the Irish Republic.
After months of negotiations, the two companies announced that, subject to shareholder approval, they planned to form two joint ventures which will combine the BBC's diverse archive, scheduling and production skills with Flextech's multi-channel television management and marketing knowledge.
The principal deal will be to develop and launch, mainly in digital format, a number of new pay-television channels in Britain.
The second is to buy out and develop in analogue and, in due course, in digital formats what is currently UK Gold, one of the most successful channels transmitted by one of British Sky Broadcasting 's multi-channel packages.
""The joint ventures with the BBC represent a major opportunity for the long term development of Flextech and the consoldiation of its position in the multi-channel television market in the UK,"" Flextech's chief executive Roger Luard said.
Dubbed Horizons, Style, Learning, Arena, Showcase, Sports Entertainment Network, One-TV and Catch-up TV, the eight planned channels include documentaries, consumer, educational and arts programmes, drama, comedy, sport, music and high profile programmes to be aired shortly after first transmission on BBC1 and BBC2.
Under terms of its licence, the BBC has to show its programmes first for free to domestic British audiences who fund the corporation though television licences.
""These channels will have widespread appeal and will, we believe, play an important role in the future growth and development of multi-channel television,"" Luard said.
Flextech and the BBC confirmed that they would give the first option for the transmission of up to five of the digital channels to British satellite operator BSkyB 's consortium.
BSkyB has linked up with Carlton Communications Plc and Granada Group Plc to form British Digital Broadcasting in a bid for licences to operate up to three domestic ""multiplexes"", multi-channel digital frequencies.
Flextech, which simultaneously reported flat annual pretax, pre-exceptional losses of 16.8 million pounds, said that to buy out pay-TV channels UK Gold and UK Living, it would issue 34.95 million shares to media groups Pearson, America's Cox Communications Group and BBC Worldwide.
The deal is worth about 269.9 million pounds and values UK Gold at about 210.1 million pounds and UK Living at 104 million pounds.
In return, Cox, Pearson and BBC Worldwide will take a 13.3 percent, 5.6 percent and 3.5 percent stake respectively in Flextech.
After buying the 75 percent equity share capital of UK Gold and 68.75 percent UK Living, that it does not already own, Flextech will then sell on the 65 percent share capital of UK Gold for 87.75 million pounds.
On completion of the deals, Flextech will own 50 percent of the equity share capital of each joint venture and 100 percent of UK Living.
Tele-Communications International Inc (TINTA), meanwhile, has agreed to offer its financial muscle to the main deal.
The U.S. group will fulfil Flextech's financial obligations to the principal joint venture ""in certain circumstances"" if Flextech fails to do so.
TINTA's subsidiary UAEH owns 50.9 percent of the voting rights in Flextech, representing 46.5 percent of the group's issued share capital.
After completion of two joint ventures with BBC Worldwide and following the share issue to Cox, Pearson and BBC Worldwide, UAEH will hold 36.1 percent of Flextech's shares.
In order to preserve its majority voting rights, UAEH will be granted a special voting share.
($ = 0.624 British Pounds)
",24
"B.A.T Industries Plc said on Monday that its U.S. subsidiary would pay $1.7 billion as its share of a downpayment on a landmark deal between the tobacco industry, legislators and public health authorities.
Amid concern that thorough scrutiny awaits a  controversial U.S. proposal under which tobacco groups could pay $358 billion over 25 years, B.A.T said it might withdraw its support for the deal if it were significantly changed during the legislative process.
B.A.T, whose Brown & Williamson (B&W) unit is the third largest cigarette-maker in the U.S. with brands such as Kent and Lucky Strike, saw its shares slump to close 22.5p weaker at 566.5p.
But most analysts said the deal was broadly positive, and some said the shares could eventually climb to 670p.
Under the agreement, the tobacco industry has accepted tougher regulation on both their products and advertising in return for immunity from big legal claims.
However individual claims can still be brought, albeit under significant restrictions including no claim for punitive damages.
Tobacco companies have also been forced to concede that tobacco is addictive and the money raised by the levy will be used to pay for treating smoking-related illnesses.
Although few analysts said they were surprised at the broad details of the deal, Mark Duffy, tobacco analyst at SBC Warburg, said the settlement was tougher than the market had been originally expecting.
""The share price is valuing (B.A.T's) U.S. tobacco business at nil -- and given that most future cash flows of that business will be going to the U.S. government, then that's how it should be valued,"" he said.
The deal has so far only been struck with U.S. state attorneys, plaintiff's lawyers and public health representatives and still needs to win the approval of the U.S. Congress.
B.A.T welcomed an end to financial uncertainty which has been dogging the industry amid the threat of escalating legal claims by victims of smoking-related diseases such as lung cancer.
""Although B&W remains confident that it would ultimately win these cases, B.A.T's shareholders and B&W's employees should benefit from the removal of financial uncertainty and its replacement with a greater degree of financial predictability,"" the group stated.
The irony of the settlement, according to Duffy, is that the tobacco industry had agreed to a settlement at a time when its recent track record in court was good.
But other analysts welcomed the settlement, saying that although cigarette prices would have to be raised significantly to pass the costs onto consumers, chunky payments by the industry to ward off its foes had been expected.
""Obviously volumes will go down, but that's what we're used to seeing in the UK...but the industry's profits still go up -- although by not very much,"" noted Nick Bunker, analyst at HSBC James Capel.
""I think fair value (for B.A.Ts shares) is somewhere around 650-670p.
But he warned: ""It'll take time. There will be a lot of uncertainty as we go through the whole Congressional process and lots of days when people will panic a bit when it looks like things are going badly.""
Some analysts said they expected B.A.T to turn its attention now to a demerger of its tobacco and insurance businesses in an effort to boost shareholder value.
Simon Willis, analyst at Charterhouse Tilney, said he thought a demerger more likely when B.A.T was trading nearer five pounds rather than six.
Shares in Britain's biggest cigarette manufacturers Imperial Tobacco Group Plc and Gallaher Group, which are facing a string of law suits by lung cancer victims, were also sharply lower on Monday.
Imperial closed at 393.5p, a loss of 13.5p, and shares in Gallaher Group Plc, Britain's biggest cigarette maker, ended 19.5p weaker at 280.5p.
",24
"Music companies are waiting for the world to rock to a new sound that will entice consumers back into record shops and drive up sluggish global sales, analysts said on Tuesday.
Without new global best sellers and an economic upturn, few analysts expect the global market to bask in the double digit growth seen from 1984 to 1994 when queues eager for records such as pop group R.E.M.'s ""Monster"" stretched from music shops.
Discounting among retailers, international piracy of cassettes and compact discs and an ageing population, whose first stop on the high street might well be a book shop rather than a record store, have all hit the more mature markets.
Global sales of pre-recorded music reached $39.8 billion in 1996, a 5.5 percent growth in retail value over 1995. Four billion compact discs, cassettes and records -- four percent more than in 1995 -- were sold.
But the rate of growth is slowing. In retail value, global growth was six percent in 1995 and a hefty 15 percent in 1994.
The figures, compiled by the International Federation of the Phonographic Industry (IFPI) which represents the world's record firms, confirm that growth in developing markets is surging. But more mature markets such as North America have been hit by static sales and falling prices.
David Chermont, media analyst at Merrill Lynch, said that investors had become used to the lack of ""mind-blowing"" growth, however, in an industry which is made up of a mix of growth and cyclical markets that wax and wane with economic confidence.
""Double-digit growth is not sustainable even in the healthiest markets,"" he said. ""I feel quite comfortable.""
Another analyst, who declined to be named, noted: ""The whole industry can explode if a new sound suddenly arrives on the scene that starts driving sales.""
Meanwhile, the main engine of growth has shifted away from the mature, developed markets, the figures show.
The IFPI said, ""In 1996 around 70 percent of the world's music growth was generated in less developed markets -- in particularly from Latin America and Asia.""
""This compares to only 20 percent in 1993, when global growth was at a similar level to 1996.""
But the trade body brushed aside concerns that the industry was under serious threat by technology such as CD-ROMs, booming international piracy and because the babies borne during the rocking 1960s were now approaching middle age and no longer bought music.
""There is a huge potential in music,"" Nic Garnett, director general of IFPI, told a seminar during London Music Week, noting that the global market had surged from $27 billion to almost $40 billion in the last five years. ""This is very much a thriving, global business,"" he said.
""No market is that mature where the exciting process of new artists coming through cannot re-ignite (it),"" he added. But he called on governments to protect the intellectual property business with copyright laws that prevent ""pirates"" from copying and re-selling cassettes or compact discs at vastly cheaper prices.
Piracy is one of the most serious crimes threatening the $35 billion U.S. recording industry and represents losses of over $2.0 billion every year, the IFPI said.
The U.S., which together with Canada accounts for 31 percent of the global music market, saw growth fall to only two percent in value terms. The Canadian market fell by six percent.
But Europe remains the world's largest region for music sales, accounting for 34 percent of the market.
Britain, boosted by the popularity of groups such as the Spice Girls and Oasis, saw sales rise seven percent to $2.71 billion. But the Netherlands and Italy saw sales growth of only two percent, less than inflation. Germany and France clocked up eight and six percent respectively.
Latin America was the fastest-growing region, with total sales up by almost 30 percent. With an upturn of the economy, Brazil showed a 33 percent rise in sales that catapulted it into the seat of the world's sixth latest market.
In Asia, Malaysia, Thailand and Taiwan saw over 20 percent sales growth while the Japanese market remained almost static at two percent. Australia was up by 14 percent.
Five big music companies control about two thirds of the market -- PolyGram NV of the Netherlands, Japan's Sony Corp, Warner -- part of Time Warner Inc of the U.S. -- Germany's Bertelsmann AG, and EMI Group Plc of Britain.
",24
"One 2 One, the British mobile telephone company jointly-owned by Cable and Wireless Plc and U S West Inc, said on Thursday that it was not in talks about joining Cable and Wireless Communications.
Analysts have speculated that the digital cellular company may join CWC, Britain's biggest telephone and television cable company formed by the merger of C&W's Mercury 'phone unit with the three British cable divisions of NYNEX Corp, Bell Cablemedia Plc.
Such a deal would involve U S West selling its 50 percent stake in One 2 One, because the U.S. company is also a major shareholder in CWC's main cable rival -- Telewest Communications Plc.
But One 2 One's managing director Jan Peters told reporters at a business briefing: ""There are no plans to do that and no negotiations to do that.""
Peters said both investors were ""very committed"" to One 2 One, adding that the cellular company could reap synergies from striking distribution, marketing and packaging deals with both CWC and Telewest, which would not involve any structural changes to the companies.
Other future joint deals might also involve CWC or Telewest buying airtime from One 2 One and using it for their own packages and brands.
""We're working with both of them, looking at the options,"" Peters said.
One 2 One -- which has shown marked recovery from a lack of network coverage and what critics described as poor marketing -- was unveiling four, new customer packages designed to expand its business by broadening its appeal.
Available from June 3, the new ""time plan"" deals -- called One 2 Weekend, One 2 30, One 2 100 and One 2 200 -- offer either up to 200 minutes of free voice, fax or data calls nationally or unlimited free weekend local calls.
Monthly service charges from 17.50 stg for One 2 Weekend to 40 stg for One 2 200 compare favourably with similar packages offered by rivals Cellnet Orange Plc and Vodafone Group Plc.
But Peters said the new launches were not part of a new price war in an increasingly competitive market, but rather a move to improve packaging to reduce customer confusion amid a myriad of different package offerings.
One 2 One, one of Britain's newest cellular operators that was launched in September 1993, has won 620,000 customers and captured around 8.8 percent of the national mobile market.
The company, which has doubled year-on-year growth and revenues, said key annualised revenues per subscriber were tracking rivals at around 420 stg compared to Orange's 442 stg, Cellnet's 474 stg and Vodafone's 542.
Total capital expenditure of 970 million stg is planned to March 1998 and national coverage should be boosted from a current 85 percent to 95 percent of the population by the end of this year.
One 2 One's losses widenden to 276 million stg last year as it rolled out its network. But the company said it was on track to break-even on the operating cash level in 1998.
-- London Newsroom +44 171 542 7987
",24
"General Cable, the loss-making British cable television and telecoms group, on Thursday turned four executives of a data network group into millionaires under a ""golden handcuff"" deal.
General Cable is buying Imminus Ltd, a national managed-data network services company, for 33 million pounds ($53 million) -- 16 million of which will go to the network's four directors to stay with the company.
After reporting wider annual pretax losses of 29.8 million pounds, finance director David Miller told a news conference that it was the right acquisition, at the right time, at the right price.
Amid speculation that the group had held takeover talks with rivals such as Telewest Communications Plc or Comcast UK Cable Partners Ltd as consolidation sweeps the industry, General Cable said its role was to maximise shareholder value.
Although the company is keeping its options open, it said it saw no advantage in merging or being taken over in the short term.
Chairman Sir Anthony Cleaver noted that the group would continue to talk to others in the industry ""because one never knows what is going to happen"".
""In a room full of marriageable people, we are a very pretty girl,"" Miller told a news conference.
Last year, Cable and Wireless Plc announced that its British unit Mercury was merging with three other cable companies to create Cable and Wireless Communications -- Britain's biggest cable group.
General Cable, which has completed 57 percent of its regional network and plans to roll out the rest by 2001, said it had no plans to become a national operator.
It has three franchise areas, in Yorkshire, northern England, Birmingham, central England, and west of London.
Imminus, which made a pretax profit of 2.76 million pounds in 1996 and was bought at 7.5 times historic EBIDTA (earnings before interest, depreciation, tax and amortisation), comes with a national licence.
This allows General Cable, which hopes to get its own national licence at the end of this year, to offer its voice and data services to business customers outside its regional franchise areas.
Imminus offers value-added services allowing firms to link remote personal computers and terminals throughout Britain through a leased private network and will form part of General Telecommunications -- General Cable's new brand name for its telecoms services.
General Cable reported positive operating cash flow at 8.7 million pounds, 42,900 new television customers, 40,700 new residential telephone customers and 12,500 new business lines.
Penetration, when customers take up the service available in their neighbourhood, remained largely static but the company blamed price competition for a slight fall in revenues per subscriber in both residential telephony and cable television.
Churn levels -- cancelled subscriptions -- fell in cable television to 21 percent from 28 percent and remained static on the residential telephony side at 17 percent despite price wars in the industry, the group said. ($ = 0.626 British Pounds)
",24
"Mounting concerns about the loss of both two top executives and an equity stake in terrestrial digital TV sent shares in pay-television giant BSkyB diving further on Monday and analysts forecasts more weakness to come.
Around 1.7 billion pounds ($2.8 billion) has been wiped off the value of British Sky Broadcasting since last week and some analysts said the shares, which fell 14.5p to 483p in afternoon trade, could tumble to 350p. News Corp Ltd is the largest shareholder in BSkyB.
""There has quite clearly been a re-rating in the last week and I think it's going to continue,"" said Jason Crisp, media analyst at brokers SocGen.
Another broker said only in ""wildly optimistic"" cases could the shares be valued even at 450p.
Negative weekend newspaper reports helped compound last week's share falls sparked by a report in the Financial Times that BSkyB could be shut out of the bidding for new digital TV licences, experts said.
The Financial Times reported last week the television watchdog, the Independent Television Commission, had told BSkyB it should drop its one-third stake in a consortium with commercial TV groups Carlton Communications and Granada Group.
BSkyB was enjoying an effective monopoly on pay- television and the watchdog was concerned about market domination, the FT said.
The report, which remains unconfirmed, followed last week's announcement that BSkyB's respected chief executive Sam Chisolm was stepping down and deputy managing director David Chance was becoming a consultant.
SocGen's Crisp said the stock, which had hit an intraday 1997 high of 669p on February 14, had been vastly over-rated and should be trading nearer 400p.
He noted apart from the possible loss of its equity stake in its digital terrestrial TV consortium, called British Digital Broadcasting, and the loss of two very talented and experienced staff, flat satellite dish sales and rising operating costs were hitting the shares.
""All these things make you think it should be on a more typical PE (price earnings ratio) multiple of other big media companies,"" he added.
At 400p, the stock would have a more reasonable PE of 22 times next year, compared to one nearer 30 times before the share correction, Tysoe said.
Credit Suisse First Boston was even more negative. ""We'd just re-iterate from our call last week that fundamental value on BSkyB is about 450p even in wildly optimistic cases, about 350-400p in more reasoned scenarios,"" it stated in a note.
But Mike Woodcock, media analyst at Nikko, said the share price fall had been overdone and he would recommend buying the shares under five pounds.
He said that in the short-term, the news on BDB, a business he valued at around 400 million pounds, was positive from a financial point of view.
Compensation is tipped by the Financial Times at 75 million pounds. BSkyB can also keep some 100 million pounds which it was going to invest in the joint venture.
""Is the news of BDB and Sam Chisolm stepping down enough to warrant 1.7 billion pounds being wiped from the value of BSkyB? I would say no,"" Woodcock said. ""The real benefits for BSkyB are in the provision of programming rather than in the equity stake.""
But he said as traditionally high operating margins were squeezed -- partly because payments to show English Premier League soccer are set to rise to 160 million pounds per year from August -- he was expecting flat pre-tax profits of 309 million pounds in 1998 and 1997.
Other longer-term concerns, he said, were about how independent BSkyB was from media tycoon Rupert Murdoch's News Corp Ltd, its leading shareholder -- and how much News Corp would benefit from the success of the pay-television giant.
The ITC hopes to decide by the end of this month on whether to award digital terrestrial television licences to BDB or a rival consortium run by cable and broadcast group NTL Inc.
",24
"Vodafone Group, Britain's biggest mobile telephone group, raised headline annual profits by 13.5 percent on Tuesday and said it was plotting to overhaul its distribution strategy to kick-start sluggish market growth.
Vodafone, which boasts more than four million customers worldwide, lifted pre-tax profits to 539 million pounds ($880.8 million) -- the top-end of analyst expectations -- including gains from disposals.
Turnover grew 25 percent to 1.749 billion pounds and dividends rose 20 percent to 4.81p.
A maiden operating profit from its international operations of 10.5 million pounds helped boost profits and analysts expect overseas investments to take up the reins of future group earnings amid increasing competition and price cuts at home.
Vodafone's chief executive Chris Gent told Reuters in an interview that subscriber growth in Britian was likely to continue to slow this year -- and Vodafone might cut tariffs next year to help attract new customers.
Vodafone last reduced tariffs around two years ago. But since then, its biggest purely digital rival -- Orange Plc -- has rolled out its network and the smallest operator in Britain, One 2 One, will also soon have a national network.
""I can see it (price cuts) happening again in the summer or autumn of 1998,"" Gent said.
Vodafone also plans to unveil new distribution plans next month, including rationalising its 12 brands under one or two names and introducing a unified billing system to help win fresh subscribers, Gent told Reuters.
One 2 One, jointly owned by Britain's Cable and Wireless Plc and U S West Inc, highlighted cut-throat competition in the market by repackaging tariffs last month -- and prompted concerns that Britain is ripe for a rash of price cuts.
Mobile telephone penetration is currently stuck around 13 percent in Britain, compared to around five percent in France, 7.5 percent in Germany and the Netherlands -- and a hefty 29 percent in Sweden.
Gent, who is hoping that British penetration will rise to 15 percent next year, expects the group to win only 350,000 to 400,000 net new subscribers this year, a touch lower than last year's 415,000 level.
""I suspect this year will be similar to last year -- perhaps a little bit down but not much,"" he said, adding: ""I believe we'll see accelerated growth in the UK once we get beyond 15 percent penetration.""
Last year already saw subscriber growth levels fall  34 percent from 1995/96 levels. Analysts note that Finland, which has almost three times the British penetration levels, is growing faster in a quarter than Britain did in the whole of last year.
But broker SBC Warburg adds: ""In our view, renewed growth is a question of 'when' rather than 'if'.""
Gent puts down unenthusiastic growth to fewer incentives to win customers and a high level of churn -- when subscribers end contracts -- while customers migrate from its older analogue network to its digital services.
Vodafone has around 1.3 million customers on its analogue network and some 1.6 million digital subscribers.
The company saw its market share slip 1.5 percent to 40 percent and the key average revenue per subscriber figure -- the amount of profit the company makes on each of its customers -- fell to 427 pounds from 481 pounds.
Vodafone is now growing faster internationally than in Britain and Gent expects 650,000 new customers to take up its international affiliates' services this year.
Brokers Lehman Brothers expects overseas interests to contribute 279 million pounds by 1999/2000 -- and analysts expect Vodafone's shares, trading unchanged at 271.5p on Tuesday -- to start reflecting this value over the next nine months.
Although Vodafone said it was not actively seeking new licences, it will consider acquisition opportunities.
The company said it was ""very likely"" to exercise its option to raise its holding in SFR, France's second network operator, to 20 percent this year. ($ = 0.611 British Pounds)
",24
"London telecoms analysts are split about the prospects of Britain's Cable and Wireless Communications, the telephone and television cable company that made its market debut on Monday.
CWC started trading, as expected, at around 300 pence per share and rose to 309 pence before edging back to 299.5, valuing the group at around 4.46 billion pounds.
CWC, which was formed last year when the Mercury subsidiary of Cable and Wireless Plc merged with the three cable TV units of NYNEX Corp and Bell Canada, floated a 14.7 percent stake in London and New York.
Brokers Lehman Brothers says a 4.5 billion pound implies an enterprise value of about 6.0 billion pounds, assuming pro forma net debt at the end of 1996 at 1.5 billion stg. The valuation assumes a 700-800 million stg premium to the sum of the parts, assuming a valuation of Mercury of 2.0 billion pounds.
""The timing required to accomplish the technical integration of the various parts as well as the investments necessary to establish the new brand on a nation-wide basis suggest that at 4.5 billion stg, CWC assets are fairly valued.""
With 2.3 billion pounds of capital expenditure, CWC plans to complete its sophisticated broadband cable and local telephone networks and offer its services to six million customers by 2001.
However, other analysts, such as Richard Jones at brokers Yamaichi and Andrew Harrington at Salomon Brothers, were more bullish.
Jones is recommending buying the stock up to 350 pence per share. Harrington values the shares at 438p and the company at 6.5 billion pounds.
Harrington argues that CWC's network cost structure has a competitive advantage against its main telephony and multi-channel television provider -- British Telecommunications Plc and satellite broadcaster British Sky Broadcasting Group Plc.
""It's got 50 percent fewer employees per line than BT,"" he said. ""We think CWC has a unique competitive advantage in the provision of multi-channel TV and telephony. I think it's going to exceed expectations in the next year.""
CWC's core business will be the telephony provided by Mercury. Initially, 91 percent of revenues will come from telephony and only nine percent from entertainment, but it will be the first company to be able to bundle multi-channel television and telephony.
Nevertheless, some analysts are cautious about the new company's prospects. Cable television companies have yet to make a profit in Britain's stagnant market.
""On a longer-term view, any valuation becomes almost entirely dependent on your view of what the longer-term penetration rate is going to be for telephony and cable TV,"" noted one analyst, who declined to be named.
He said BT would move into broadcasting by 2001 at the latest, when current regulatory restrictions are lifted, and the group was likely to move into interactive services such as home shopping and home banking sooner.
""Put that alongside the impact of BT's on-going marketing muscle in basic telephony, combined with the impact of digital terrestrial TV and digital satellite TV, and I think that will all serve to put a brake on our expectations of long-term cable TV penetration,"" he said.
Oliver Ehrenberg, telecoms analyst at Robert Fleming, says CWC is not worth more than 3.75 billion pounds -- and says his valuation is already stretched.
But Harrington brushed aside these concerns, noting that BT's network will need a lot of investment to upgrade its telephone lines so they can support multi-channel TV and interactive services.
""Everything BT can do Cable and Wireless Communications can to better and sooner,"" he said.
-- London Newsroom +44 171 542
",24
"Urgent calls for a global regulatory framework to help combat the risk of crime in the borderless world of the Internet computer network were stepped up on Wednesday by a high-level think tank.
The Centre for the Study of Financial Innovation (CSFI) said that without effective regulation, the Internet could generate a wave of financial scandals, undermine national regulation of financial markets and leave consumers without effective protection.
But in what it called the most comprehensive study make on the potential impact of the Internet on the financial services industry, the Finance Ministry and Bank of England-backed CSFI said the Internet also offered vast opportunities to financial services.
The computer network offered an ""intensely low-cost distribution medium"" -- up to 10 times lower than others -- CSFI director Andrew Hilton told Reuters television.
The CSFI also warned against paranoia, noting that objective information about crime in cyberspace was still scarce.
The extensive use of cryptography -- encoding data, establishing its authenticity and preventing its undetected modification and unauthorised use -- also meant business in cyberspace was more secure than giving a credit card number to a store over the telephone.
The CSFI also suggested a ""kitemark"" to identify regulated firms on the Internet, a greater use of ""firewalls"" or ""sheep dips"" -- anti virus programmes for automatically blocking intruders and for seeking out those who have gained access to unauthorised data -- and tighter security procedures imposed on staff.
""The biggest vulnerability of all is negligence,"" the report said.  But without the proper infrastructure, financial services over the Internet could fizzle out.
Hilton conceded that banks, brokers and even exchanges could go out of business as new players emerged with no ""legacy"" costs sunk in bricks and mortar.
But he added: ""It could happen. But I think it would be wrong to say it will happen because many of these institutions will also be the beneficiaries of the Internet.
""They are quick, they can adapt and effectively dominate this new medium. But they do have legacy systems and these are costs they are carrying that a new entrant might not have,"" he said.
But with the prospect of a global market, the concepts of local regulation might also quickly become outmoded -- as might the notion of a service being provided from one place.
""The movement towards a global marketplace would logically point to a movement to global regulation,"" said Andrew Large, the chairman of Britain's top financial watchdog the Securities and Investment Board, in a foreword to the report.
""Whether, or how quickly, this might happen is not clear,"" he added.
Regulators could attempt the difficult task of  maintaining local jurisdictional control by imposing requirements focing firms to limit access to Web sites.
They could also recognise standards of regulation which allow authorised financial services firms to offer services in any other jurisdiction, Large suggested.
The report, the product of eight working groups of over 120 people from 70 institutions, said that traditional financial service providers, particularly banks, could play a major role in promoting consumer confidence in the Internet.
Insitutions are the service providers and are in a position to supply the payments infrastructure for electronic commerce and underpin its credibility.
""For financial service companies, the Internet poses a threat, but also a major new business opportunity,"" the CSFI said.
",24
"Cable and Wireless Communications (CWC), Britain's new cable telephone and television company, made its market debut on Monday valued at around 4.5 billion pounds ($7.3 billion), in line with analyst expectations.
A free float of 14.7 percent of the new group, which was formed last year when the Mercury subsidiary of Cable and Wireless Plc merged with the three cable TV units of NYNEX Corp and Bell Canada, started at 300 pence per share and moved up to 306p in early trade.
The dual flotation on both the London and New York stock exchanges was scheduled for 1330 GMT to coincide with the opening of the American market.
Analysts had expected CWC -- which will provide local, national and international voice, data, multi-channel TV and Internet services -- to be valued at an average of 4.5 billion pounds.
Despite bringing together cable TV groups NYNEX CableComms Group , Bell Cablemedia Plc and Videotron, CWC's core business will be the telephony provided by Mercury.
Although this makes it British Telecommunications Plc's biggest rival, some analysts believe that BT, valued at around 28 billion pounds, will have nothing to fear until at least the middle of next decade.
Before it rolls out its network, CWC will have only 1.1 million residential and 80,000 business telecom customers compared to BT's 20.5 million residential and seven million business clients.
But with 2.3 billion pounds of capital expenditure and initial debt of 1.3 billion pounds, CWC plans to complete its sophisticated broadband cable and local telephone networks and offer its services to six million customers by 2001.
BT is currently banned from using its comprehensive network for direct broadcasting services.
Nevertheless some analysts are cautious about the new company's prospects.
""On a longer-term view, any valuation becomes almost entirely dependent on your view of what the longer-term penetration rate is going to be for telephony and cable TV,"" noted one analyst, who declined to be named.
He said BT would move into broadcasting by 2001 at the latest, when current regulatory restrictions are lifted, and the group was likely to move into interactive services such as home shopping and home banking sooner.
""Put that alongside the impact of BT's on-going marketing muscle in basic telephony combined with the impact of digital terrestrial TV and digital satellite TV and I think that will all serve to put a break on our expectations of long-term cable TV penetration,"" he said.
But other analysts, such as Richard Jones at brokers Yamaichi and Andrew Harrington at Salomon Brothers, welcomed the transformation of Mercury from a typical telecoms group into a ""much more exciting and dynamic"" telephony and entertainment provider.
Jones is recommending buying the stock up to 350 pence per share. Harrington values the shares at 438p and the company at 6.5 billion pounds.
""Everything BT can do Cable and Wireless Communications can to better and sooner,"" he said.
Harrington argues that CWC's network cost structure has a competitive advantage against BT, its main rival on the telephony side, and satellite broadcaster British Sky Broadcasting Group Plc, its main rival on the multi-channel television side.
""It's got 50 percent fewer employees per line than BT,"" he said. ""We think CWC has a unique competitive advantage in the provision of multi-channel TV and telephony. I think it's going to exceed expectations in the next year.""
CWC hopes to be first to roll out its 200-television channel service, possibly by autumn.
The company will ditch the four brand names and instead use that of its majority shareholder -- Cable and Wireless. A huge marketing campaign is planned to ensure that the name wins public recognition.
Now that the partial flotation is out of the way, analysts will be eyeing Global One, a partnership of Deutsche Telekom AG, France Telecom and America's Sprint Corp, which needs access to Britain and has been in talks with Cable and Wireless about the CWC venture.
The two North American partners in CWC, which together hold a 32.7 percent stake, have not seen great returns for their investments in Britain's stagnant cable market so far and might be willing to sell all or some of their stakes, some analysts say.
But with the privatisation of France Telecom delayed, no imminent deal is expected. ($ = 0.616 British Pounds)
",24
"Forget applets, baud rates and java. Computer experts say they don't matter -- not without cryptography.
With new technology fuelling an explosive growth in communication over the Internet, companies are looking to cash in on developing codes so tough they will render information unintelligible.
Cryptography -- encoding data, establishing its authenticity and preventing its undetected modification and unauthorised use -- is seen as the key to the future of the booming virtual business world.
But throw in terms, abbreviations and acronyms such as TTPs (trusted third parties), LEAKs (law enforcement access to keys), key escrow, key recovery and algorithms -- and confusion reigns.
""I've been working in this industry for four years and I don't know what some of the terms mean,"" complained a member of the high-powered audience at the snappily-named ""Encryption Feasibility Summit"" in London last month.
INTERNET MARKET DRIVES ECONOMIC GROWTH
Nearly 200 million people expect to be connected over the Internet in the next few years.
Investment bankers Takumo Amano and Robert Blohm say the Internet market is the single most important factor behind the strength of the United States economy.
They estimate that as business on the Internet met demand for software, hardware products and communications lines, it contributed some $200 billion, or roughly three percent, to last year's U.S. gross domestic product.
But while everyone agrees that it is vital to encourage electronic commerce by allowing secure transactions across international borders, law enforcers and the business community stand diametrically opposed on how to do it.
REGULATION DEBATE
Should encryption, which hides data from both computer-hacking corporate rivals and the police, be regulated? And if so, how?
""There are two approaches,"" says David Hendon, the British government's Internet regulation expert at the Department of Trade and Industry (DTI).
""One is the fear that strong encryption will become available on the Internet. The other is the fear that it will not become available on the Internet.""
The drawn-out debate has spawned new creatures -- cryptoanarchists (those wanting no controls on cryptography), cryptofascists (those wanting total government control) and the middle-of-the-roaders -- crytoconservatives and cryptoliberals (those believing in some controls).
IS NATIONAL SECURITY AT RISK?
While companies say they need to keep transactions over the Internet secret, governments are reluctant to accept technology that, for the first time, might make legally intercepted messages unreadable.
What is not at issue is whether cryptography, like a spell checker, will soon be available on all software. It will.
The issue is how impenetrable it should be and whether state security agencies should have access to the keys, or algorithms, that can unscramble codes.
Codes come in various ""bits"" -- or key lengths. The longer the ""bit"", the tougher the code is to crack.
While companies say they won't do business over the Internet unless they can use the toughest security available, governments are afraid that such codes will prevent them from uncovering crimes ranging from international guerrilla warfare to child pornography.
THE AMERICAN ANSWER
The U.S. government bans top U.S. software firms, like Netscape Communications Corp, from exporting their toughest 128-bit encryption technology.
To the outrage of companies, U.S. export laws permit only ready exports of not more than 40-bit keys for all but a narrow category of products for financial transactions.
""Too many consumers have heard about successful computer hackers. Without strong encryption, electronic commerce cannot advance beyond where it is today -- a nascent industry with less than approximately $500 million in total sales,"" says Netscape.
THE BRITISH SUGGESTION
In Britain, a consultation paper on cryptography regulation suggests licensing trusted third parties -- those firms offering cryptographic services to the public.
To qualify for a licence, companies might have to store copies of the keys that decode their users' private files so that law enforcers, and some private parties, can intercept communications under certain circumstances.
Critics complain that they no longer understand the definition of trusted third parties. ""It seems to have changed from who the user trusts to who the government trusts,"" noted one speaker at the encryption conference.
Another added: ""I'm beginning to wonder whether there is a third party I can trust to tell me which third party to trust.""
Encryption is not new. A range of technologies designed to encrypt data that is stored and transmitted in cyberspace has been used by military and diplomatic governmental bodies for years.
Although some companies already encrypt internal electronic information, the technology has not been open to full, international commerce.
INTO THE REALM OF INTERNATIONAL LAW
With multinational, lawful access to electronic data also at stake without multinational policies, international bodies such as the European Commission and the Organisation for Economic Co-operation and Development (OECD) have muscled in on negotiations that are moving in the direction of international law.
After a year of talks with more than 100 government and business representatives, the OECD has called on countries to avoid creating unjustified obstacles to trade in the name of cryptography policy.
Publishing eight, non-binding, recommendations, the 29-country group did not rule out giving governments access to keys to unlock encrypted material. But it also suggested that the right to privacy should be respected.
General Motors, the world's biggest car maker operating in 170 countries and employing 745,000 staff, is calling for prompt multinational agreements that will allow it to choose its own encryption requirements which will be legal in all the countries in which it operates.
""If we fail here, it is going to have devastating economic consequences for us,"" says James Dunn, a representative of General Motors International Operations.
",24
"Investors on both sides of the Atlantic are likely to approve an ambitious $23 billion merger between British Telecommunications and U.S. phone group MCI, analysts said on Wednesday.
But some analysts are growing increasingly cautious about the proposed deal -- the largest transatlantic merger.
""Sooner or later the market will realise that 30 percent is too much of a premium to pay (for control of MCI),"" said Oliver Ehrenberg, telecoms analyst at Robert Fleming.
Shareholders in MCI Communications Corp, America's second biggest long-distance carrier, were voting on the merger on Wednesday, while BT investors are due to vote on April 15.
One key investment institution in London said it remained largely neutral on the deal.
""It looks as if it has some advantages but it also looks like quite a high price,"" the institution, which asked not to be identified, told Reuters.
Top BT executives have been meeting large institutions to discuss the rationale for buying the 80 percent of MCI that BT does not already own.
But BT, whose shares outperformed the market during a recent road show to market the deal to investors on both sides of the Atlantic, said the response from most had been ""very positive"".
""Obviously there is a large amount of money at stake,"" a BT spokesman said. ""I think generally speaking people understand why we are doing it...There is a very good business case for why it is being done.""
The merger between BT and entrepreneurial MCI, which the two groups expect to clear regulatory hurdles by the autumn, will create a powerhouse called Concert Plc.
The combined business will have annual revenues of more than 25 billion pounds ($41.2 billion), annual cash flow of about 7.5 billion pounds and 43 million business and residential customers.
Concert wants to provide clients around the globe with local, long distance, international and mobile phone services as well as multi-media, Internet-based services and systems integration for business clients.
BT has promised that the merger, after an initial five percent earnings dilution, will yield savings from combining overlapping services of 1.5 billion pounds over the first five years and 500 million pounds pre-tax annually after that.
The United States is the world's largest telecoms market. It is also home to 40 percent of the world's largest multinational company headquarters -- some of the most valuable customers for global telecoms alliances.
While analysts expect powerful institutional investors to back BT in its attempt to gain a firmer foothold in the U.S. telecoms market, some have questioned whether a 2.5 billion pound premium for the rest of MCI will yield the ""tremendous growth prospects"" promised by the two companies.
""We hear the arguments brought foward to support the deal, but we do question whether the merger will translate into enhanced returns for former BT shareholders,"" says Ehrenberg.
BT promises continuing dividend growth. But MCI, which plans hefty investments to grab a share of the local U.S. telecoms market, says the major attraction of the deal is BT's strong financial resources.
""With increased competition and enormous investment demands, we think investors will increasingly wonder whether Concert can really increase its dividends by six percent per annum for the forseeable future...,"" Ehrenerg says.
Fleming, which says the company's gearing level might surge to 150 percent in the next three years, has downgraded its recommendation on BT to ""sell"" because it says the group's valuation looks stretched against other European telecom groups.
BT has already raised its intitial gearing projection from around 65 percent to 80 or 90 percent since last November.
But Fleming's gearing calculation includes a 1-1.2 billion pound windfall tax if Britain's opposition Labour Party wins the May 1 election, an approximate 1.6 billion pound acquisition of the remaining 40 percent of BT's mobile phone business Cellnet as well as other investments in Europe and Asia.
SBC Warburg is less negative. The broker has recommended buying the stock, saying BT will create ""substantial value"" in its international investments and growth businesses.
Its official share price target is 480 pence. BT's shares climbed 4p to 431.5p on Wednesday. ($ = 0.606 British Pounds)
",24
"Orange Plc, Britain's youngest mobile telephone company, reported a bigger loss on Tuesday in its first full year since flotation but said subscriber numbers continued to show healthy growth.
Pretax losses in the year rose to 229.1 million pounds ($367.4 million) from 140.5 million in 1995, while turnover jumped 171 percent to 619 million pounds, including acquisitions.
Analysts, who do not expect the company to become profitable at the operating level before 1998 because of heavy investments to build its network, had pencilled in annual pretax losses of around 231.1 million pounds.
Orange, hoping to build on a reputation for innovation, which has given it a 11.5 percent market share despite its late market entrance, said its customer base now topped 850,000.
Managing director Hans Snook said the company, which plans to reach 96 percent of the British population by the end of the year and hopes to win mobile licences in Greece and the Netherlands, was ""ideally positioned for further growth"".
Snook said he expected 40 percent of the British to use mobile phones in the next decade, up from 11.7 percent now.
""Scandinavian countries now have about 30 percent penetration and are growing, Australia has about 25 percent, the U.S. has 17 percent and we're sitting here with 11-12 percent -- it's silly.
""A lot of people are now predicting 40 percent penetration 10 years from now and I think that looks very do-able,"" he told Reuters in an interview.
Orange, which was floated last March at 205 pence per share, initially saw its stock slump to 157.5 pence before recovering over the last few months to trade at 218 on Tuesday, a rise of four pence on the day.
Fears that a sharp drop in subscriber growth was pointing to a permanent slowdown hit Britain's four mobile operators last year but were eased when subscriber numbers picked up again at the end of 1996.
But some analysts still believe Orange is overvalued.
Andrew Harrington, telecommunications analyst at Salomon Brothers, questioned whether Orange's past good performance could continue in a market where overall revenue growth was slowing and there were fewer differences in the products that mobile rivals were selling.
""To get to Scandinavian-type penetration levels, presumably we are going to have to go to Scandinavian-type revenue per subscriber levels, which are about one-third below where we are now,"" he said.
Snook says the all important average retained revenue per Orange subscriber will rise from around 442 pounds per year, partly because dominant telecoms player British Telecommunications last month raised the price of a call to Orange phones from its fixed lines.
""Current incoming call revenues are about 60 pounds per month. If that doubles, it will add a fair chunk to average revenues for 1997,"" Snook said.
Orange says it has the lowest ""churn rate"" -- customers disconnecting or being excluded for bad debt or fraud -- in the industry.
At 18.6 percent, it has risen from 18.1 percent in 1995 but Orange's calculations still put this well below the industry average of 28 percent clocked up by rivals Vodafone Group Plc, Cellnet and One-2-One.
Snook said foreign expansion projects apart from those in the Netherlands and Greece were on the back burner.
Backed by main shareholder Hong Kong conglomerate Hutchison Whampoa, Orange is hoping to be the chosen partner to take a 30 percent stake in the cellular arm of Greek national operator OTE this month.
Orange raised 1.2 billion pounds via a debt facility in December 1995 for its British expansion plans and since then has withdrawn about 785 million pounds.
Meanwhile, Orange customers will be able to make calls in more than 50 countries by the end of the year using handsets developed by Motorola that operate at both 1800 and 900 MHz.
The new handsets should be on offer by April or May. ($ = 0.623 British Pounds)
",24
"Cable and Wireless Communications (CWC), Britain's biggest and newest cable telephone and television group will float a 14.7 percent stake in London and New York early next week.
The flotation, which is not big enough to propel the new company into the FTSE, has been expected since CWC was formed in 1996 by merging the Mercury unit of Britain's Cable and Wireless Plc with the three British cable TV units of NYNEX Corp and Bell Canada.
The recommended offer for shares in CWC, which has been valued by analysts at an average of around 4.5 billion pounds ($7.3 billion), closed on Friday at 1330 GMT and experts expect trading to start on Monday at 1330 GMT.
No confirmation of the level of acceptances was expected before 1600 GMT, but the offer was recommended and over 65 percent of shareholders accepted the deal when CWC's complex prospectus was issued in March.
Richard Brown, the incoming chairman of CWC and chief executive of Cable and Wireless, says the company will be customer-led and market-driven and has promised a flotation immediately after the offer closes.
After the merger, there will be only one brand name  -- Cable and Wireless -- and a huge advertising campaign is planned ensure the name wins public recognition.
With assets worth about 4.5 billion pounds, CWC will provide a broad range of local, national and international voice and data services and, in some regions, multichannel TV and internet computer services.
Despite bringing together cable TV groups NYNEX CableComms, Bell Cablemedia Plc and Videotron, CWC's core business will be the telephony provided by Mercury. It will be British Telecommunications's main rival.
But with initially only 1.1 million residential telecom and 80,000 business customers compared to BT's 20.5 million residential and about seven million business clients, some analysts say the new company will only pose a serious threat to BT in the middle of the next Century.
""I don't see CWC as a threat (to BT) in the short and medium term,"" said Oliver Ehrenberg, telecoms anlayst at Robert Flemming.
Initially, around 91 percent of revenues will be derived from telecoms and only nine percent from TV entertainment, although this is expected to grow.
The company hopes to be the first to roll out its 200-channel service ahead of its rivals, which include satellite broadcaster BSkyB, possibly by autumn.
CWC plans to complete its broadband cable and local telephony networks by investing some 110 million pounds over two years and offer services to more than six million residential customers by 2001.
It also wants to serve almost all small and medium-sized businesses within its 45 cable franchise areas.
Another 180 million pounds will be spent over the same period on so-called set top boxes, with which customers can receive multi-channel television services.
But with 2.3 billion pounds of capital expenditure in the first two years and initial net debt of 1.3 billion pounds, Ehrenberg does not expect investors to receive a dividend before 2001 at the earliest.
Cable and Wireless, which will have a 52.6 percent stake in CWC, wants to remain a majority shareholder and has said it will consider boosting its investment if partners back out.
NYNEX and Bell Canada, which are facing increasing competition at home, have not so far seen great returns for their investments in Britain's stagnant cable market.
France Telecom says it has held talks with Cable and Wireless about CWC becoming the British partner of its Global One alliance with Deutsche Telekom AG and America's Sprint Corp.
Analysts note that if Global One wants to link up with CWC, it is more likely to convince the North Americans to sell out rather than chase a small amount of shares in the open market next week -- which could become expensive.
CWC had pro forma revenues of 1.9 billion pounds with net income of 44 million pounds in the year to March 1996.
",24
"Any strategic deal between Spain's Telefonica and British Telecommunications Plc's Concert partnership would instigate a sea-change in the European telecoms alliance landscape, analysts said on Thursday.
Such an alliance would throw down the gauntlet to BT's arch-rival, America's AT & T Corp, and provide the U.S. telecoms giant with the latest in a series of setbacks.
""I think it will lead AT&T to seriously question its European position,"" says Paul Staples, head of telecoms research at merchant bank Schroders.
Telefonica's chairman Juan Villalonga said in Madrid that he did not expect any future partner to take a stake in the company's key South American subsidiary TISA. But he did not rule out a share swap between Telefonica and a foreign operator.
Speculation is mounting that Telefonica de Espana is on the brink of announcing a long-rumoured exit from AT&T's Unisource alliance with Dutch, Swedish and Swiss telecoms groups.
Villalonga said the group, which has long been seeking a U.S. partner and has been in talks with major players including AT&T and BT's Concert alliance partner, MCI Communications Corp, expected to announce a deal in four to six weeks.
Industry sources say Telefonica is likely to tie up with BT and MCI to create a key alliance spanning Europe and the Americas.
BT, which announced earlier that Austria's main telecoms group PTA had selected Concert as a strategic partner, declined to comment on what it called ""rumour and speculation"".
Telefonica's TISA dominates the booming South American markets of Peru, Argentina, Chile, Venezuela, Colombia and Puerto Rico and a link-up would be a boon for BT and MCI.
Neither of the two companies, which hope to complete a 12.5 billion pound ($20 billion) merger this year, have major, direct operations in South America to date.
But the potential loss of the flagship Spanish operator, which holds a 25 percent stake in Unisource, would be a blow to AT&T which had been hoping to use Unisource as the vehicle for its European ambitions.
""Telefonica would be a useful addition to BT and a yet one more setback for AT&T,"" said Steve Scruton, telecoms analyst at Credit Lyonnais Lang.
Analysts, who say cracks in the Unisource alliance wall have been visible for some time, were supported on Thursday by Villalonga who declined to rule out a break with the alliance.
Some analysts say Unisource, which posted a loss of $154.9 million in the first nine months of 1996, is the weakest of the three main global alliances.
It does not have a product and is more of a service guarantee club, so that a minimum quality standard is given to customers in each of the alliance partners' countries, they say.
Concert, on the other hand, has a product which is sold to clients and distributed via other telecoms players. Global One, the alliance of Deutsche Telekom, France Telecom and America's Sprint Corp has its own services and sales force.
Any deal with Telefonica would also mean that BT, which entered the Spanish market in 1993, would align itself with a former rival in a key European market.
But Oliver Ehrenberg, telecoms analyst at Robert Flemings, notes that Telefonica was enjoying a domestic EBIDTA (earnings before tax, interest, depreciation and amortisation) margin of around 62 percent -- the highest on the European continent.
""If there is any market on the continent we think BT should aggressively enter, we think it should be Spain,"" he said.
If Telefonica does abandon Unisource, all eyes will be on Italian telecoms holding company STET (Societa Finanziaria Telefonica per Azioni Spa), which is one of the few major European operators that remain unattached.
A falling FTSE 100 helped drag BT's shares lower. But trading at a loss of 3.5p at 458p, they were still outperforming the top 100 blue chips as the company continues its hard sell of its planned MCI merger to institutions in road shows.
($ = 0.624 British Pounds)
",24
"A tough price review of British Gas Plc by industry regulator Clare Spottiswoode has heralded a new era for Britain's utility watchdogs as they at last show their teeth, analysts said on Wednesday.
Sector watchdogs have borne the brunt of derision and mockery over several years while lucrative utility companies' shares surged, apparently unruffled by regulatory price curbs.
Last March, electricity regulator Stephen Littlechild was even forced to reopen a price review on the 12 cash-rich electricity companies, having been embarrassed by the firms' largesse to their investors as they fended off hostile bids.
""It does look like regulators aren't going to have the wool pulled over their eyes any longer,"" said one analyst who declined to be named.
""They're quite astute these days and they are getting pretty wise to these companies.""
Consumers, regulators say, will now feel more of the benefits of the controversial privatisation of Britain's gas, water and electricity industries.
Spottiswoode went some way on Wednesday towards meeting British Gas's objections to her earlier proposal of a maximum 28 percent cut in the prices charged by TransCo, the British Gas pipeline subsidiary, when she suggested a 20 percent one-off reduction in its charges.
But analysts said Spottiswoode had already set a new agenda with her initial proposals in May that sent gas shares plunging.
Two subsequent reviews by the power watchdog on Northern Ireland Electricity and National Grid, the power transmission network, have mirrored her unrelenting stance.
""I see May 13 as being a landmark date in terms of regulation,"" said Nigel Hawkins, utilities analyst at Yamaichi.
""That day we saw the first regulator being fairly savage on a company and, above all, actually saying that if you're heavily cash-negative from year to year -- so be it.""
Despite British Gas's continued insistence that the planned Transco price curbs could cost the group 10,000 jobs, Spottiswoode's final proposals do show that there is scope during the consultation period to moderate positions.
Consumers will nevertheless see gas bills fall by 30 pounds ($46.44) next year, rising to 50 pounds in 2001.
There has also already been a 50 pound reduction in bills this year when electricity companies passed on to consumers the money they received from the sale of their National Grid shares.
To the outrage of British Gas, Spottiswoode initially proposed a one-off cut of 20-28 percent followed by annual price reductions at a rate of five percent below inflation per year.
She now wants Transco to cut prices by only 2.5 percent annually after the first big chop. Some analysts see the group's revenues being reined in by about 400 million pounds per year.
""She's been more lenient than some had expected, but I still think it's a very tough review,"" noted one analyst.
Littlechild is proposing cutting the Grid's prices by between 20 and 26 percent next year, followed by a cut in annual prices of four percentage points below inflation.
His final proposals will be published in September and until then, the company will be locked in last-minute battles with its regulator.
The Grid may see its revenues slashed by about 1.2 billion pounds over four years. But with transmission costs only accounting for seven percent of bills, electricity consumers may get between four and five pounds off annual bills.
Northern Ireland Electricity will see 60 million pounds wiped from its revenues. Average household power bills will fall by about 40 pounds in Northern Ireland.
Despite the concessions, British Gas still strongly opposes the way its regulator has written down the value of TransCo.
So the prospect of a Monopolies and Mergers Commission investigation may still loom. ($1=.6460 Pound)
",24
"The global empire of British Telecommunications Plc and MCI Communications Corp. charged into the vast Spanish-speaking world Friday, leaving them with only Asia to conquer.
In a long-expected move, BT confirmed that flagship Spanish telecoms carrier Telefonica de Espana SA would join its Concert alliance, enabling it to pursue the booming Latin American telecommunications market, which is expected to be worth $60 billion by 2000.
The deal, which was unwittingly revealed by Concert's newest parter, Portugal Telecom, earlier this week, was seen as a blow to AT&T Corp., BT's arch-rival, and heralds a major change in the telecommunications landscape across the Americas and Europe.
In its new deal with Concert, Telefonica is taking a 1 percent stake in BT and BT is taking a 2 percent stake in the Spanish group. Each deal is worth about 280 million pounds ($457 million).
""This is good news although it had been expected in the market,"" said Jim McCafferty, an analyst at ABN AMRO Hoare Govett.
With a fiber-based network that includes a marine link between Spain and Latin America, the companies plan to establish a state-of-the-art communications portfolio offering voice, data, internet/intranet and video stretching from Alaska to South America.
In a seemingly inexorable journey across the world, Concert now offers seamless global communications services to customers in 41 countries, focusing on high-margin, multinational corporate customers.
The latest deal with Telefonica means that BT, which entered the Spanish market in 1993, aligns itself with a former rival in a key European market.
International telecommunnications groups like Concert are trying to plug holes in their coverage and make up for growth lost in home markets due to increasing competition. But some experts are also stepping up warnings that vast investments abroad might be too risky.
One such investment, which has sparked some concern among the analyst community, is BT's proposed $20 billion merger with MCI. The planned deal, which won overwhelming shareholder support Tuesday, is awaiting regulatory clearance in Brussels and the United States.
BT expects to win final approval for what will be the largest transatlantic merger in history by the fall.
BT says it is in constant talks with telecoms operators in the last, major gap in global geographic jigsaw -- the lucrative Asia-Pacific region.
Concert, which needs to service multinational firms with offices in Japan, has been trying to forge a link with Nippon Telegraph and Telephone Corp., the world's biggest telecommunications group.
Concert is competing against AT&T-led partnerships such as Unisource and World Partners as well as Global One, an alliance between Deutsche Telekom AG, France Telecom and America's third long-distance carrier, Sprint Corp.
The addition of Telefonica came just four days after BT clinched a strategic alliance with Portugal Telecom that opens the door on South America's biggest market, Brazil.
The Internacional SA (Tisa) subsidiary will manage a new 50-50 joint venture called Telefonica Panamerica MCI, which will dig deeper into the $36 billion South American continent.
Tisa already dominates Latin America's communications with an empire spanning Argentina, Brazil, Chile, Peru, and Argentina and is well-placed to take advantage of the continuing privatisation trend in the region.
",24
"Privatisation, the flagship economic policy of Margaret Thatcher's Conservatives, was good to British Telecommunications.
From its menial beginnings as a Post Office appendage, the company has grown meteorically into a formidable, telecoms giant whose network of alliances span most of the globe.
The sale of BT in 1984 began what was dubbed ""the long march of privatisation"" under 18 years of Conservative rule which has been emulated by governments around the world.
The Conservative legacy has transformed British industry and even helped inspire the former communists of eastern Europe.
But this march could come to a shuddering halt following the Labour Party's landslide victory in Britain's May 1 election.
It is not that New Labour, created from the roots of a party that traditionally favoured state ownership, necessarily wants to protect nationalised firms from being pressed by shareholders into delivering efficiencies. It doesn't.
It's just that there is little left to privatise. As one commentator pointed out: ""Most of the family silver is long gone, what remains is little more than the teaspoons.""
Led by former Conservative prime minister Margaret Thatcher, the government triggered a controversial and comprehensive privatisation programme which raised more than 68 billion pounds ($110.4 billion) for the Treasury's coffers.
Industries from aerospace, airlines, buses, railways, coal, electricity, gas, steel, telecommunications and water went under the hammer.
The former Conservative chancellor (finance minister) Kenneth Clarke says privatised companies now contribute 2.6 billion pounds a year in taxes compared with 37 million when they were in state hands.
""Whether you support privatisation is a litmus test of whether you seriously support free enterprise,"" Clarke said.
BT, MODEL PRIVATISED TELECOMS COMPANY
BT, whose 14.2 billion pound sale 13 years ago was one of the biggest the world had seen, has created a model privatised telecoms company.
In 1984, BT was a true monopoly. It operated its network, supplied the services and telephone equipment and employed 245,000 staff. Quality of service was mixed, waiting times for new lines long and mobile telephony barely existed.
From such an unprepossessing start, a much leaner BT last year launched the biggest transatlantic merger in history, proposing to buy America's second long distance carrier MCI Communications Corp for $20 billion.
Together, BT and MCI will form Concert Plc, a powerful alliance whose empire connects 41 countries.
BT, currently valued at around 28 billion pounds, still dominates the British telecoms market. But it faces increasing competition from 150 rivals in the domestic market and 46 international carriers.
However, some observers say its success owes more to the strategic cunning of its executives and break-neck speed of new technology rather than Conservative party policy.
Others blame an over-hasty privatisation to raise cash for tax cuts for driving the company to seek its global fortune with an American carrier rather than with its British rival, Cable and Wireless Plc.
BT's planned 33 billion pound merger with C&W, which would have brought with it vital access to the lucrative Asian telecoms markets, was abandoned last May -- partly because of concerns that regulators might block the deal.
George Pitcher, chief executive of management consultancy Luther Pendragon, believes corporate liberation in Britain has been simultaneously stifled by heavy-handed and ill-considered regulation.
""BT and Cable and Wireless would have been a huge force and a great opportunity for Britain,"" Pitcher says.
British Gas, which was privatised as a monopoly, has been regulated into break-up and may well be taken over. Eleven of 12 electricity suppliers have snapped up -- seven by U.S. groups keen on their cash-spinning powers.
TV AMBITION'S THWARTED
An unrelenting regulatory rein has also prevented BT from realising another of its ambitions -- turning into a television broadcaster.
The Conservative government banned BT from taking on the mainly American cable TV firms at their own game because it feared they might not survive such a market onslaught.
Consequently, consumers have had to wait years for cable groups to offer TV services which BT, with its established network, could have provided much sooner.
Ironically Labour, which has accused the government of short-changing consumers in its rush to sell state assets, promised to promptly lift the ban if it came to power.
Nevertheless, the early liberalisation of the telecoms industry has created one of the most competitive markets in the world -- and BT is exploiting its lead.
While British regulators might have frowned at a merger between BT and C&W, it was the apparent openness of the British market that paved the way for BT's proposed merger with MCI.
U.S. regulatory clearance for the deal hinges on whether Britain is deemed to be as open to U.S. carriers as America is to British ones. Approval is widely expected by autumn.
With other European telecoms markets only due to be liberalised from next year, no other European carrier was in a position to launch such a deal. ($ = 0.616 British Pounds)
",24
"A huge bid by Britain's Cable and Wireless Plc (C&W) for America's Sprint Corp may be possible but does not look feasible in the short term, analysts said on Wednesday.
C&W, Britain's second biggest telecommunications group, declined to comment on a Wall Street Journal report that it was mulling a possible $15 billion bid for 80 percent of Sprint to create a telecoms giant spanning the United States and key European and Asian hubs.
Analysts have long tipped an alliance called Global One between Sprint, America's third long-distance telecoms group, German giant Deutsche Telekom AG and France Telecom as the ""perfect partner"" for C&W.
But some said the report that C&W was considering buying the 80 percent of Sprint not already owned by the French and Germans appeared premature.
Oliver Ehrenberg, telecommunications analyst at Robert Fleming Securities, said he thought such a bid was not feasible as Cable and Wireless was still completing a complicated cable merger with two American groups to form Cable and Wireless Communications.
With a usual bid premium of 30 percent, 80 percent of Sprint could cost around $16 billion. C&W has a market capitalisation of only $18 billion, Ehrenberg noted.
""Given the high gearing levels C&W will have after the Cable and Wireless Communications deal -- gearing will be about 90 percent -- I don't think that this deal is financially feasible,"" he said.
C&W, which last month pulled out of a German alliance called Vebacom which plans to compete against Deutsche Telekom, has said it regularly talks to other players including Sprint, Deutsche Telekom, France Telecom and U.S. phone giant AT & T Corp.
But some analysts said any deal between Global One and C&W was more likely first to focus on Cable and Wireless Communications, C&W's national cable deal with the subsidiaries of NYNEX Corp and Bell Canada International Inc.
""This makes sense. But for C&W to buy Sprint is cutting out a lot of intermediary steps that would probably be necessary,"" said another analyst who declined to be named.
Cable and Wireless Communications is valued by analysts at between four and seven billion pounds and market talk is rife that when 15 percent of the group is floated in London and New York in about two months, one of the U.S. partners may sell out to Global One.
""Who knows, but everyone is talking to everyone in this fast moving world,"" said the analyst.
There has been an increasingly urgent rush to form new partnerships after international treaties were hammered out to open global telecoms markets.
Mergers over the last year, such as one planned between British Telecommunications Plc and MCI Communications Corp, have run to tens of billions of dollars.
C&W, whose chief executive Richard Brown is a former Sprint executive, can offer Global One access to two key markets that the partnership lacks -- Britain and Asia, partly through its lucrative stake in Hong Kong Telecommunications Ltd.
The Wall Street Journal reported that no formal, direct offer had been made to Sprint and that so far C&W had only held talks with France Telecom about supporting a bid.
While France Telecom declined to comment on specific talks, it has met C&W and said Global One was looking at improving access to Asian markets.
""Cable and Wireless have been around to see us, among many others, to talk about Global One,"" a spokesman said in Paris.
But Ehrenberg said that although C&W was probably seeking to expand its multinational operations, he did not believe the company would first talk to France Telecom before approaching Deutsche Telekom.
""For the Germans, I think that would be quite an offence if they had not been asked well in advance about whether they would be interested in Cable and Wireless joining the triumvirate of these three companies,"" he said.
""This (report) does not feel right,"" he added.
($ = 0.628 British Pounds)
",24
"Cigarette companies fighting lawsuits in Florida are being haunted in courtrooms by best-selling novelist John Grisham's ""Runaway Jury,"" a tale of jury manipulation at a tobacco trial.
In ""Runaway Jury,"" a tobacco industry operative commissions a burglary and other crimes as part of a juror-tampering campaign.
The novel's title has become shorthand for anti-tobacco lawyers who are concerned that life might imitate art -- something that angers the lawyers representing tobacco firms.
""We are up here and having to defend against a fictitious novel, and I don't know why,"" attorney Ed Moss of Brown & Williamson said on Monday at a Miami hearing before a class-action suit against cigarette makers. ""This is ridiculous.""
""We have not and will not go out and investigate the jurors,"" Moss said.
Moss, speaking for Brown, a unit of B.A.T. Industries of Britain, and eight other tobacco companies, pledged to Dade County Circuit Court Judge Robert Kaye that the tobacco companies would not use private investigators, jury experts or researchers in selecting jurors in the class-action suit.
Such techniques, while costly, are legal and are frequently used in high-profile U.S. trials in the belief that the backgrounds of jurors determine likely votes on legal issues. Investigators hunt out information about jurors that might allow them to be barred from hearing a case.
Anti-tobacco lawyers repeatedly assert that tobacco companies, with their deep ranks of lawyers and strong financial resources, can easily outmatch them in jury selection.
There was no evidence of any improper juror investigations by tobacco companies at any time, Moss said.
Potential jurors for an individual lawsuit starting on Monday against RJR Nabisco RJ Reynolds Tobacco in Jacksonville, Florida, were also being asked whether or not they had read ""Runaway Jury"", published last year by Doubleday and on the best-seller lists for months.
And lawyers pressing a third case, the State of Florida's lawsuit to recover medical spending on sick smokers, have also complained in court hearings about potential pressures by tobacco companies on jurors.
Lawyer Stanley Rosenblatt, pressing the Miami class-action suit on behalf of Norma Broin and an estimated 60,000 other sick, non-smoking flight attendants, said the tobacco companies were capable of shaping a jury through those outside means.
He welcomed Moss's pledge to rely only on a written questionnaire and in-court inquiries to select jurors for the scheduled June 2 trial.
But Rosenblatt also urged Kaye to keep secret the names of all potential jurors and, as an added safeguard, to identify jurors only by number during a trial expected to last eight to 12 weeks.
",33
"Tobacco industry lawyers Wednesday accused the judge hearing a second-hand smoking suit of failing to reject potential jurors with anti-cigarette prejudices.
Another five people, including a freelance television-news producer opposed by tobacco lawyers, passed initial questioning on Wednesday in the class-action case, bringing to 16 the people in the potential-jurors pool.
Court officials said 80 or more potential jurors will be needed to find the six-member jury and the 12 alternates to decide whether U.S. cigarette makers are liable for lung cancer and other smoking-related ailments among 60,000 non-smoking flight attendants. Jury selection is expected to continue for several weeks.
Jury selection began on Monday, and Dade County Circuit Court Judge Robert Kaye has intermittently asked follow-up questions to potential jurors after rival lawyers finish probing individuals' attitudes toward tobacco use, big tobacco companies and their own smoking habits.
Kaye, who accused tobacco lawyers late Tuesday of muddling the minds of prospective jurors, on Wednesday put questions to a Miami police department payroll clerk after she told Edward Moss, a lawyer for Brown & Williamson, the U.S. cigarette business of B.A.T Industries of Britain, she believed cigarettes should be banned. She also said she was initially more sympathetic to the flight attendants than to the tobacco defendants such as Philip Morris.
Kaye subsequently asked if she could put aside her sympathies and make a fair decision based on evidence presented during the trial and the woman said she could.
Moss protested immediately after the woman left the courtroom.
Moss said the judge's questioning was unfair to the tobacco companies and asked that the woman be eliminated from consideration because she was biased against cigarette companies. ""Her responses indicate the defendants have a different burden than the plaintiffs,"" Moss said.
""That is a matter for the court to decide,"" Kaye said, refusing to block the woman.
A similar clash occured late Tuesday, when Kaye accused the tobacco lawyers of manipulative questioning of jurors and Moss said the judge should not question the jurors.
Kaye also rejected a tobacco lawyer's request that a freelance television-news producer be blocked. The woman said she had sued a big corporation several years ago and had worked on stories about cigarettes for a Miami station but that she could weigh the evidence fairly.
Other people questioned and allowed to pass into the prospective jurors pool included a Pan American jet dispatcher and an office worker with two young children.
Jury questioning has been slow, with each side spending 20 minutes or more querying each person. Next week, the court will question jurors only on Monday and Tuesday because of a break for a Jewish holiday.
",33
"Eastman Kodak Co secured only a partial exit from bruising copier wars with a $684 million sale of its copier-marketing and service operations to Britain's Danka Business Systems Plc.
Prompted by chronic financial weakness, highlighted by the fact Kodak's copier sales of $1.8 billion yield only $20 million in annual operating profits, the sale prompted segment leader Xerox Corp to throw down the gauntlet to Danka.
""They're on our turf now and are going to have to chase us to win business,"" said Xerox executive Gill Hatch.
Hatch predicted the Danka-Kodak deal on Monday would bring pricing pressures to the copier business. ""Suffice to say that Danka has been aggressive, and will continue to be aggressive,"" Hatch said.
According to Danka chief executive Dan Doyle, the acquisition and a 10-year alliance with Kodak will give high-flying Danka a full line of copiers to offer low, middle and upmarket customers around the world.
Kodak is retaining its manufacturing and development operations in copiers, as well as some key technology.
The remaining Kodak businesses will have about $600 million a year in sales, or a third of its former turnover. Danka will be its main customer as the primary distributor of Kodak copiers and printers.
""Danka's growth will be our growth,"" said Kodak co-chief operating officer Carl Kohrt.
Kohrt predicted Kodak's rump copier businesses would be profitable by the end of 1997 and that the transaction, netting Kodak about $600 million in cash, would be immediately accretive to earnings. The deal should close by December 31.
Analyst Gary Schneider of Bear Stearns said he had hoped Kodak would have quit copiers entirely and will have to prove to Wall Street it can turn around the financial performance of the remaining copier businesses.
""The question is what kind of normalized earnings can you get out of those,"" he said.
Monday's deal is just the latest bit of corporate trimming at Kodak, which has spun off and sold businesses, generating some $8 billion. The company has in the 1990s exited pharmaceuticals, household goods and chemicals.
The company said last winter it wanted to exit or reposition its copier businesses because its financial performance was subpar and promised little hope for a turnaround as it stood.
Kohrt said the deal with Danka will stimulate sales of Kodak copiers. ""What we've really needed is pull-through from the market,"" he said.
Danka chief executive Dan Doyle said Kodak's strong focus on big customers needing high-volume copiers and services dovetailed with Danka's traditional presence among low and middle-market customers.
News of the deal boosted Danka's American Depositary Receipts, which closed up 6-5/8 at 36-1/2. Kodak closed down 1/2 at 71-3/4.
",33
"Philip Morris Cos Inc shareholders on Thursday voted down by a margin of more than nine to one a shareholder proposal that the firm adopt the same standards on marketing to youths outside the United States that it put in place domestically two years ago.
The proposal to extend the limitations to overseas markets was opposed by Philip Morris chief executive Geoffrey Bible and the board of directors.  
""It's absolutely hypocritical for Mr Bible to hail the company's youth access program at home ... and at the same time not apply the same standard anywhere else,"" said shareholder Edward Sweda, an anti-tobacco activist and a lawyer with the Tobacco Control Resource Center in Boston.
Philip Morris' U.S. program -- Action Against Access -- eliminated mail sales of Marlboro, L&M and other Philip Morris cigarettes and give-aways of cigarettes at public gatherings.  
The company also added warnings against youth sales to its cigarette packs and began lobbying for state laws to force shopkeepers to check for proof of age, Philip Morris spokeswoman Karen Daragan said.
""The intent (of the U.S. program) is to keep sales to places were IDs can be checked,"" she said.
But shareholder activists noted that this action was limited to the United States and the shareholder proposal cited data showing how effective Philip Morris cigarette advertising was outside the United States.  
It quoted one study saying 95 percent of children in Hong Kong recognized the Marlboro brand name and a World Health Organization forecast that seven million youths who take up smoking in the developing world will die from smoking-related diseases by 2025.
Bible did not speak directly to the proposal at the meeting but Philip Morris said in the company's proxy for the annual meeting that the company has long opposed sales of cigarettes to young people and a single style of marketing was wrong for a global company selling food, beer and tobacco products in 180 nations.
""Your management thinks it makes more sense for the company to continue to take action against youth access in a manner that recognizes the diversity of markets in which the company operates,"" the company said.
Top tobacco companies are secretly bargaining with anti-tobacco forces on a $300 billion or more deal to resolve much U.S. tobacco litigation and likely sharply reduce the marketing of cigarettes in the United States.
--Miami newsroom 305 374-5013
",33
"General Electric Co. Chief Executive Jack Welch defended his $28.2 million in salary, bonuses and incentives for 1996, telling shareholders Wednesday that market forces determined pay packages for top U.S. executives.
""The issue is the competitive marketplace,"" he told a critic at GE's annual meeting. ""The market is willing to play at a certain level ...""
Stockholders at the meeting defeated a proposal to limit Welch's pay to $1 million unless put to a shareholder vote.
The proposal to limit Welch's pay received 9 percent of the votes cast, with 91 percent backing Welch's existing compensation arrangements.
Bill Patterson of the AFL-CIO group of labour unions, a supporter of the effort to put a cap on Welch's paycheck, said Welch's compensation was 148 times more than that paid on average to GE's 239,000 employees.
The proposal was made by a Teamsters union pension fund.
Patterson said the pay, even with Welch's highly acclaimed management successes and the stellar stock market performance of GE's shares since he became chief executive 16 years ago, was a source of bitterness and cynicism for many GE workers.
Welch said he was well paid and was benefitting from the labour of all GE's employees. He noted that stock options were now distributed to some 22,000 GE employees, as opposed to only 200 as recently as 1988.
Big pay packages, including deferred compensation plans, were needed to retain top performers, Welch said. He said some top GE executives, such as the current head of AlliedSignal Inc. had left the company for more pay and broader opportunities.
Welch, the latest U.S. chief executive to be criticised for high compensation, last year received $6.3 million in salary, $15.1 million from a long-term incentive programme and $6.2 million by excercising options on GE stock.
He was also paid almost $600,000 in benefits, such as life insurance, according to GE's proxy statement.
Walt Disney Co. stockholders, including several leading institutional investors, two months ago challenged a 10-year pay package given Chairman Michael Eisner worth as much as $771 million. Twelve percent of Disney shares were voted against the Eisner pay package.
One study said CEO pay rose about 20 percent in 1996 and 16 percent in 1995.
",33
"Office Depot stopped building superstores when it agreed to merge with Staples Inc and will have to scramble to regain its footing if it remains alone, industry analysts said on Friday.
""They need to circle the wagons and begin rebuilding management and decide what kind of company they want to be,"" said Mark Mandel of The Chicago Corp. ""They've lost lots of momentum.""  
The deal to combine Staples and Office Depot, reached in September, would have created a dominant force in office-supply retailing with about 1,000 stores. Rival OfficeMax has between 700 and 800 superstores.
But federal regulators earlier on Friday struck a blow that was potentially fatal to the transaction, saying such a combination would cripple price competition for office supplies in some markets.
The companies denounced the decision by the Federal Trade Commission (FTC), and Staples chief executive Thomas Stemberg told reporters Staples may challenge the FTC ruling in court.  
""Computer sales collapsed and paper prices were deflating but their margins held up,"" McMullin said. ""And the infrastructure's in place.""
But McMullin said the rejection by the FTC and the prospect of a court battle were clouding Office Depot's outlook.
Staples shares rose after the FTC ruling and closed at 21-7/8, or 5/8 higher. Office Depot shares dropped 6 to 13, after having fallen as low as 12, or roughly the price at which they were trading before the September merger announcement.
""Staples is up and Office Depot is down. If they were going to get together, you'd expect more harmony,"" McMullin said.
((-- Miami newsroom, 305-374-5013))
",33
"Knight-Ridder Inc is playing to its traditional strengths with a $1.65 billion acquisition of four newspapers from Walt Disney Co and an announcement it was putting another electronic unit on the block.
""Knight-Ridder tends to like big city newspapers,"" said John Morton, an independent industry analyst.  
In recent years Knight-Ridder has sold off a cable-television business for a net gain of almost $150 million and Knight-Ridder Financial, an also-ran in the fiercely competitive real-time news segment, for $275 million.
On Friday, the company, which owns newspapers in Miami, Philadelphia and Detroit, added the Fort Worth Star-Telegram, the Kansas City Star and two others to its existing stable of 38 newspapers.
In 1996, Miami-based Knight-Ridder bought the Contra Costa Times in California and three other newspapers.  
Morton estimated Knight-Ridder, which generates 80 percent of revenues from newspapers, had paid 12 to 13 times cash flow for the properties. ""That's the going rate,"" he said.
Knight-Ridder said it would issue preferred shares to finance the deal. Morton estimated the newspapers annual cash flows would more or less cover interest costs on the properties.
""But they are buying newspapers that are already running (profit) margins that Knight-Ridder is trying to reach at its own papers,"" Morton said. ""Maybe it puts them in position to enlarge their overall margins.""  
Knight-Ridder's top managers have pressed for several years to improve financial performances at its newspapers, a campaign yielding labor concessions at its Miami and Philadelphia properties and contributing to a 19-month strike in Detroit.
Once a power in electronic information for professionals, Knight-Ridder said it was going to divest Knight-Ridder Information Inc. It gave no details of when a deal might be secured.
""The information business is very competitive; the newspaper business isn't,"" Morton said.
Knight-Ridder still saw opportunity in electronic distribution of news and information but at the local consumer level. Its San Jose Mercury paper has an innovative and popular Internet service.
Morton said he expected Wall Street would be put off by the deal when stock trading resumed on Monday. Knight-Ridder shares were not trading after hours on Friday.
((-- Miami newsroom, 305-374-5013))
",33
"Knight-Ridder Inc agreed on Friday to buy the Kansas City Star and three other daily newspapers owned by ABC Inc, a division of Walt Disney Co, for $1.65 billion.
It also said it was going to divest Knight-Ridder Information Inc, its on-line information service for business and professional users, which includes Dialog and DataStar.
The transaction, the latest of several by a company that had once been a power in electronic information for professionals, focuses Knight-Ridder more squarely than ever on newspapers.
Owner of the Miami Herald and Detroit Free Press, Knight-Ridder remains the second-largest newsaper group behind Gannett Co. Inc.
""The information business is very competitive; the newspaper business isn't,"" said John Morton, an independent newspaper analyst.
The Disney/ABC newspapers include The Kansas City Star, the Fort Worth and Arlington (Texas) Star-Telegrams, the Belleville (Ill.) News-Democrat and The Times Leader in Wilkes-Barre, Pa., it said. Revenue for the group was $500 million in 1996.
Last year, Knight-Ridder sold its Knight-Ridder Financial business news unit for about $275 million to Global Information Corp. It also got out of the cable television business, reporting an after-tax gain earlier in 1997 of $130 million to $150 million.
""Kansas City and Fort Worth are models of locally edited, reader-friendly and marketing savvy publications. Both evidence strong on-line literacy as well. All of these are critical qualities in today's competitive environment,"" said Chairman Tony Ridder.
He said much of the company's revenus comes from medium and smaller-market newspapers, and the Belleville and Wilkes-Barre papers ""will be strong contributors to that group. Both papers have shown steady revenue increases since 1993, with profit growth and strong margins.""
ABC was purchased by Disney in 1996 for $19 billion. The company has since said it planned to divest some of its publishing entities, but it has not been specific.
Because of the proposed purchases, Knight-Ridder's earnings during the first 12 months will be diluted by about 10 percent. Minimal dilution will occur during the second year and earnings will show gains during the third year, Knight-Ridder said.
Knight-Ridder said it would finance the deal by issuing $660 million in convertible preferred stock and assuming $990 million of pre-existing debt. It also said it planned to buy back at least 15 million common shares during the next 12 months.
Morton said the Disney/ABC papers were already strong performers financially and that the operating monies from the papers would more or less cover the new interest payments Knight-Ridder will be making.
Wall Street would be put off by the deal when stock trading resumes on Monday, since many institutional investors worry about the long-term outlook for newspapers, Morton said. Knight-Ridder was not trading in after-hours dealings Friday.
Knight-Ridder is an international communications company engaged in newspaper publishing, business news and information services, among other things.
Knight-Ridder said the deal should close within 60 days.
",33
"General Electric Co. Chief Executive Jack Welch defended his $28.2 million in salary, bonuses and incentives for 1996, telling shareholders Wednesday that market forces determined pay packages for top U.S. executives.
""The issue is the competitive marketplace,"" he told a critic at GE's annual meeting. ""The market is willing to play at a certain level ...""
Stockholders at the meeting defeated a proposal to limit Welch's pay to $1 million unless put to a shareholder vote.
The proposal to limit Welch's pay received 9 percent of the votes cast, with 91 percent backing Welch's existing compensation arrangements.
Bill Patterson of the AFL-CIO group of labor unions, a supporter of the effort to put a cap on Welch's paycheck, said Welch's compensation was 148 times more than that paid on average to GE's 239,000 employees.
The proposal was made by a Teamsters union pension fund.
Patterson said the pay, even with Welch's highly acclaimed management successes and the stellar stock market performance of GE's shares since he became chief executive 16 years ago, was a source of bitterness and cynicism for many GE workers.
Welch said he was well paid and was benefitting from the labor of all GE's employees. He noted that stock options were now distributed to some 22,000 GE employees, as opposed to only 200 as recently as 1988.
Big pay packages, including deferred compensation plans, were needed to retain top performers, Welch said. He said some top GE executives, such as the current head of AlliedSignal Inc. had left the company for more pay and broader opportunities.
Welch, the latest U.S. chief executive to be criticized for high compensation, last year received $6.3 million in salary, $15.1 million from a long-term incentive program and $6.2 million by excercising options on GE stock.
He was also paid almost $600,000 in benefits, such as life insurance, according to GE's proxy statement.
Walt Disney Co. stockholders, including several leading institutional investors, two months ago challenged a 10-year pay package given Chairman Michael Eisner worth as much as $771 million. Twelve percent of Disney shares were voted against the Eisner pay package.
One study said CEO pay rose about 20 percent in 1996 and 16 percent in 1995.
",33
"There will be more smoke than fire when Philip Morris Cos. Inc. holds its annual meeting with shareholders Thursday.
Meeting in Richmond, Va., amid reports tobacco companies are pondering a $300 billion landmark settlement, analysts say it is unlikely Philip Morris will tip its hand.
""No comment. No comment. No comment. I've heard it a hundred times,"" said Roy Burry, a tobacco industry analyst at Oppenheimer & Co. ""The industry is shut down on this.""
Philip Morris holds 50 percent of the U.S. cigarette market and is a lead negotiator in talks with anti-tobacco forces aimed at resolving massive legal claims against the industry.
Geoffrey Bible, chief executive of Philip Morris, and the head of RJR Nabisco, the No. 2 U.S. tobacco group, have participated in the talks, sources familiar with the bargaining have said. The latest round of talks, in Chicago, ended Monday.
U.S. regulation of cigarette makers and other non-monetary issues have so far dominated the talks, according to sources. But the Wall Street Journal said Tuesday that rivals of Philip Morris are pushing for lock-step cigarette price increases by all companies to pay for a proposed fund for sick smokers.
RJR Nabisco Holdings Corp., according to the paper, quoting unnamed sources, is particularly worried that the financially thriving Philip Morris might forgo price increases in order to grab market share from smaller rivals such as No. 2 RJ Reynolds Tobacco Co.
Analysts discounted the likelihood of such a pact, saying mutual pricing would violate U.S. antitrust laws and would go against the widespread retail practice of selling all cigarettes within a category at the same price.
""There are a thousand different ways other than pricing to get customers to buy your cigarettes,"" said analyst Emanuel Goldman of Paine Webber.
A spokesman for Philip Morris declined to comment on the talks.
At the Philip Morris annual meeting, scheduled to begin at 9 a.m. EDT, activist shareholders are expected to present proposals urging the company to eliminate the suspected carcinogen benzo(a)pyrene from its cigarettes and that outside directors doing substantial business with Philip Morris stay out of meetings setting executives salaries.
A third shareholder proposal, sponsored by The Sisters of Charity of New York, urges Philip Morris to adopt in developing countries the same limits on marketing cigarettes to young people it has adopted in the United States.
The company's board opposes all the proposals.
One activist group supporting the proposals, INFACT of Boston, will also have protestors outside the Philip Morris Manufacturing Centre, INFACT executive director Kathryn Mulvey said.
INFACT played a leading role during the 1970s and 1980s in a boycott of Nestle over alleged mismarketing of infant formula in poor countries and charges Philip Morris with unfair lobbying of government officials.
INFACT also wants Philip Morris to change its marketing practices in developing countries, she said.
Mulvey said the widely reported, historic talks between cigarette makers and anti-tobacco organisations had had no effect on INFACT's plans to protest.
""There's nothing that we've heard ... that has anything to do with marketing to kids in developing countries or influence peddling,"" Mulvey said.
",33
"Liggett Group's pact breaking away from other cigarette makers will spur few defections in the stretches of the southern United States where tobacco has been king for centuries.
""Tobacco farmers will continue to have a market, regardless of the success or failure of the suits,"" North Carolina State Attorney General Mike Easley said.
Tobacco is North Carolina's single biggest crop and the plant's broad, brown leaves sustain thousands of manufacturing, financial and other jobs.
""Tobacco supports 200,000 families in North Carolina,"" said Sean Walsh, a spokesman for state Gov. Jim Hunt.
Tennessee, Virgina, South Carolina, Kentucky and Georgia are also major tobacco-growing states.
The maker of Chesterfields and L&M branded cigarettes, Liggett last week rocked the tobacco business and Wall Street by agreeing to settle lawsuits with 22 state attorneys general
Liggett promised to pay 25 percent of its pre-tax profits for the next quarter century and label its cigarettes as addictive substances. It also agreed to hand over to the attorneys general internal documents which might bolster multi-billion dollar claims against other cigarette makers.
No cigarette company but Liggett, a unit of Brooke Group, has made such a deal. Other cigarette makers, such as Philip Morris and RJR Nabisco, fiercely condemned the pact.
""It'll give everybody something to talk about, but I don't think it will cause any adverse effects in the short term,"" said William Graham, a retired Farm Credit Services loan officer in Proctorville, in southeastern North Carolina.
""I just don't think people are aware of just how much tax money tobacco generates in this country,"" he said.
""What I want to say is not fit to print,"" said tobacco grower Grady Britt of Broad Ridge, also in southeastern North Carolina, where tobacco has been a mainstay for more than 200 years.
Other growers worried that the Liggett pact was another sign that tobacco, also a major export accounting last year for about 20 percent of the U.S. net agricultural trade surplus, was headed for hard times.
""The government's going to take tobacco away from us, but they aren't going to give anything back,"" said Newberry Mitchell, a grower since the early 1960s.
""All this decision is going to do is give the government more ammunition to classify tobacco as a drug and regulate it,"" said Erskine Floyd, another grower who lives in Barnesville, North Carolina.
Easley, the North Carolina attorney general, has not filed a lawsuit against cigarette makers and said the settlement on Thursday was less important than it appeared.
He described Liggett, the fifth-ranked cigarette maker with only a sliver of the market, as a minor industry player and said the legal grounding for the lawsuits by the attorneys general was shaky.
",33
"Pan Am Corp. said Wednesday it was open to acquisitions and other business opporunities with an eye to expanding its four-jet Pan American World Airways, centred in south Florida.
But a spokesman for the start-up airline with the legendary name of a defunct pioneer in commercial aviation declined to comment on a report Pan Am was in acquisition talks with larger regional rival Carnival Air Lines.
Last July, Pan Am agreed to pay about $100 million for Carnival Air. But the transaction was called off after Pan Am examined the carrier's books and sought to rework the terms.
""We have said we will look at opportunities,"" Pan Am spokesman Jeff Kriendler said.
He declined to discuss any pending transactions, including one reported by the Miami Herald that Pan Am was once again in talks with Carnival Air about a merger.
Gabriel Gabor, a spokesman for privately held Carnival Air, also declined to comment on any contacts between the two companies but said Carnival Air had considered several possible deals.
""Over the course of 18 months, we have various talks about mergers, acquisitions and other business deals,"" Gabor said. ""But nothing is in ink.""
A combination of Pan Am and Carnival Air, owned by Micky Arison, chief executive of leading cruise-ship operator Carnival Corp., would create a much larger regional airline with a total of 31 jets and more than 2,200 employees. Annual revenues would be an estimated $400 million, with operations centred in south Florida.
""All these small airlines are trying to fill the void left by Eastern, but no one has done it yet,"" said airline industry analyst John Pincavage at Dillon Read. Eastern Airlines was long the dominant carrier in Florida until it went out of business in the early 1990s.
Pincavage said all small airlines had been hurt by the ValuJet crash in the Florida Everglades last May 11, in which 110 people died, and had a disappointing third quarter last year. Bigger rivals posted very high profits in that period, one of the strongest for airlines of the year.
Shares of Pan Am, whose namesake once had as many as 160 jets but floundered in 1991, were down $1.375 to $10 on the American Stock Exchange.
",33
"Cigarette companies will face one of their biggest legal challenges in four decades Monday when the first ever class-action anti-smoking case goes to trial in a Florida court.
""This is the first of the big ones,"" Richard Daynard, an anti-smoking activist who heads the Tobacco Products Liability Project at Northeastern University in Boston, said of the case, known as Broin vs. Philip Morris Co., et al.
In addition to being the first class-action lawsuit against the tobacco industry, the case is also being watched very closely because the plaintiffs -- 60,000 airline flight attendants -- are not themselves smokers.
That fact will prevent the cigarette companies from using one of their traditional defences -- that smokers are aware of the possible health risks of smoking and voluntarily chose to smoke.
The $5 billion Broin case was brought by airline flight attendants who claim their lung cancer and other tobacco-related illnesses were caused by passengers' cigarette smoke. Smoking was banned on U.S. airliners in 1988.
""One of the most successful defences for tobacco companies is that the smokers knew of the risks,"" said Professor Michael Zimmer of the Seton Hall School of Law in New Jersey. ""In secondhand smoke, you don't have that.""
Lawyers said the ranks of tobacco attorneys representing the 10 companies named in the lawsuit will challenge and probe the testimony of experts called by Stanley and Susan Rosenblatt, the Miami husband-and-wife attorney team pressing the Broin lawsuit. The case is named for Norma Broin, 42 and suffering lung cancer.
Among the witnesses for the flight attendants will be two former U.S. surgeon generals and physicians and scientists drawing on a decade or more of research on secondhand smoke, Stanley Rosenblatt said.
A Harvard University study published last week which found a strong link between heart disease and secondhand smoke is a boon for the flight attendants, Rosenblatt and other attorneys said.
A lawyer for Philip Morris declined to discuss the details of the case, other than to say the tobacco companies expected to prevail.
Zimmer said the Rosenblatt's case may be weakened by the two-stage trial structure, since little of the individual suffering and pain will be telegraphed to the jurors as the attorneys battle over statistics and scientific methodology.
""In class-action suits, juries want a human element and the plaintiffs won't have that,"" Zimmer said.
""A loss in Broin would make the companies ever more desperate,"" said Daynard, a pioneer in promoting lawsuits against cigarette companies.
Other multibillion-dollar lawsuits by the states of Mississippi, Florida and Texas, and another class-action lawsuit in Miami, are scheduled for trial in coming months.
All are part of a four-decade legal assault which may be costing the industry as much as $600 million a year to counter.
A loss in the Broin case might also unleash another wave of class-action and other individual lawsuits against U.S. cigarette makers, which already face an estimated 1,000 current claims in the United States, lawyers said.
The Broin case, which wound through Florida courts for six years, comes to trial just as state governments and cigarette companies are negotiating a deal likely to block many types of anti-tobacco suits and settle the 29 lawsuits brought by state attorneys general.
The landmark talks may also yield industry acceptance of stiff U.S. marketing and sales regulations and creation of a $300 billion pool to pay for the medical care of sick smokers.
",33
"Bloodied in court and so unpopular at home that Hollywood has made the tobacco executive its corporate villain of choice, U.S. cigarette makers remain diversified cash-generating machines with hot overseas markets.
Last year, tobacco exports from the United States were worth $5.24 billion, or roughly 20 percent of the country's total net agriculultural surplus.  
Cigarette export volumes rose 5.5 percent to a record 243.9 billion, with Japan the biggest buyer of American cigarettes, according to an industry group.
""For the big companies, overseas demand is exploding,"" said Roy Burry, an analyst at Oppenheimer & Co.
And the big cigarette companies, with the exception of No. 5 Liggett Corp, are highly diversified with interests in food and beverages and other sectors.  
""The real problem for these businesses is the uncertainty,"" said one analyst who assesses the industry's U.S. legal risks as very high. ""You have all these wonderful businesses mucked up with cigarettes.""
Both Philip Morris Cos Inc and RJR Nabisco Holdings Corp, which together command well over half the U.S. cigarette market, generate half or slightly more of their revenues from snacks, beer, cereals and desserts.
""They are growing at more than 10 percent, and the cash they generate will be used to expand overseas or buy back stock,"" Burry said.  
Analyst Anton Brenner at UBS Securities said the big U.S. companies were building warehouses and plants overseas, especially in Eastern Europe and Asia, where cigarette sales are growing very quickly
""For better or worse, American cigarettes are better products,"" Brenner said.
Yet the industry took another shock on Thursday, when Liggett, a unit of Brooke Group Ltd, agreed to cooperate with 22 state attorneys general suing tobacco companies for government spending on health care for smokers.  
Liggett commands only a sliver of the U.S. cigarette market, with Chesterfield and other brands, and has been unprofitable for many years. But the deal prompted one of the attorneys general, who accuses the industry of conspiring to hide the dangers of cigarettes, to liken the event to police turning ""the wheelman"" of a gang of thieves.
Hundreds of other suits, filed by individuals and lawyers pressing class-action cases, are making their way through the courts.  
Two class-action suits, including one on behalf of flight attendants allegedly injured by second-hand smoke on aircraft, are scheduled to go to trial in Florida this year.
And in Hollywood, writers have taken up depicting tobacco executives as villains.
""The Practice,"" a legal drama on U.S. television telling a serialized tale of an elderly man suing over the death of his wife, a smoker, is just one of several films and shows in production with anti-tobacco themes.
",33
"Tobacco company lawyers defending against the $5 billion Broin secondhand-smoke lawsuit are ahead in the race to seat favorable jurors, repeatedly knocking out nurses and others who say secondhand smoke probably causes disease, according to trial consultants.
""Tobacco's been really lucky at getting out people with knowledge about smoking and health -- all those nurses,"" said one Florida trial consultant after five days of jury picking for the Broin trial. ""The plaintiffs must be crying.""
Thirty-two people, out of more than 75 closely questioned by rival lawyers and the trial judge, passed initial screening last week and may be among the six chosen to decide whether or not cigarette giants such as Philip Morris and RJ Reynolds Tobacco are liable for heart ailments and other smoking-related diseases among 60,000 flight attendants who never smoked.
The flight attendants, including Norma Broin, a 42-year-old employee of American Airlines who had lung cancer, allege that cigarette smoke from passengers aboard U.S. passenger jets caused their illnesses. Smoking on U.S. jets was banned in 1988.
""The tobacco lawyers are maneuvering very well to get jurors excused for cause,"" said Stanley Rosenblatt, who along with his wife is pressing the landmark flight-attendants lawsuit. ""They don't want anyone educated who knows that secondhand smoke causes disease.""
The trial consultants monitoring jury-picking agreed, with one saying the perfect juror for the tobacco industry would be a conservative white male smoker with minimal formal education.
""You could hear a groan in the courtroom when that snuff user got bumped,"" said one consultant, referring to a Caucasian father in his thirties who dismissed the flight attendants' lawsuit as ridiculous. ""They really wanted him.""
By contrast, the Rosenblatts ideally want mothers in the jury pool with at least a college education, a distaste for smoking and a healthy suspicion of big institutions such as highly profitable tobacco companies, the consultants said.
Tobacco lawyers declined to comment, but the trial consultants, speaking on a promise of anonymity, said, ""Anyone in the health industry is good for the Rosenblatts and bad for the tobacco companies.""
Several nurses, including a nun who described smoking as a vice since it was harmful to both smokers and non-smokers, were challenged successfully by tobacco lawyers for causes such as an anti-tobacco bias. Like the Rosenblatts, the tobacco lawyers later in the jury-picking can block as many as 27 people from the jury without any explanation.
While many people questioned last week objected to smoking on health grounds, only one person, a bank executive with two small children, said she had a strong bias against ""powerful and influential tobacco companies.""
A dozen or more prospective jurors said U.S. airlines that employed the flight attendants were responsible for any sicknesses caused by secondhand smoke and not the tobacco companies. The airlines are sheltered from the lawsuits by U.S. workers' compensation laws, passed in the early 1900s, lawyers said.
Among the people chosen as standby jurors were a civil engineer, a newspaper-truck driver, a waiter, a painter and a retired police-department dispatcher. Some were smokers or ex-smokers and many were non-smokers.
Rosenblatt and the trial consultants said they were at this time unconcerned about the jury's eventual composition since another 30 or so standbys had to be chosen and discretionary challenges can always be used. Jury selection is to continue Monday and Tuesday and resume again on June 16.
The consultants said rulings by trial Judge Robert Kaye of Dade County Circuit Court on standby jurors at first seemed to favor the flight attendants, but later tilted toward tobacco companies.
The judge has twice reversed decisions on standby jurors, including knocking out a Miami television-news producer on Thursday whom a day earlier he had let into the standby group over tobacco lawyers' objections. Kaye reversed himself after seeing a two-minute news story she had produced on the marketing of flashily packaged micro-brand cigarettes such as Black Death and City.
Late on Friday, Kaye changed course again and ordered that jury questioning be done in groups of six, instead of by individual examination, as a way of accelerating jury selection.
",33
"Any sweeping settlement between state governments and tobacco companies will leave standing a great many anti-smoking lawsuits, including a $5 billion claim scheduled for a June 2 trial, plaintiff lawyers said on Friday.
Some 1,000 anti-tobacco lawsuits currently exist in U.S. courts against tobacco companies, according to Richard Daynard of the Tobacco Products Litigation Project at Northeastern University.
The June 2 trial, in a suit filed by attorney Stanley Rosenblatt, is a landmark case because it is both the first class-action suit against cigarette makers to survive preliminary legal challenges and the first trial involving environmental tobacco smoke.
Norwood Wilner, another Florida attorney who secured a $750,000 jury judgment against the Brown & Williamson unit of B.A.T Industries in 1996, has no plans to delay his next trial, an aide said.
""We have a trial date of Aug. 4, for another lady with lung cancer,"" Jenny Stieger said. Wilner also expects to try another case in November, Stieger said.
Wilner lost a suit this month on behalf of smoker Jean Connor, who died of lung cancer, against RJ Reynolds Tobacco Co., a unit of RJR Nabisco Holdings Corp. The maker of Winston and Salem brand cigarettes will also be the defendant in the August trial on the claim of Joann Karbinyk, Stieger said.
Another anti-tobacco lawyer, Ronald Acosta, has two tentative trial dates scheduled for summer in U.S. District Court in Tampa.
Other cases expected to come to trial this year include another class-action on behalf of Florida smokers in September and a secondhand-smoke case in Mississippi brought by the family of a non-smoking barber who allegedly died of cancer caused by customers smoking in his shop.
Tobacco companies and the 29 state governments suing the industry for billions of dollars in healthcare spending on smokers have been negotiating a potential settlement for weeks.
While there were some reports that the negotiators were making progress in their negotiations, Mississippi Attorney General Mike Moore said Friday that a settlement was not imminent. He said he hoped to know within two weeks whether a deal could be reached.
",33
"The judge overseeing the state of Florida's lawsuit against tobacco companies on Friday ordered the release of eight documents handed over by Liggett Group for use against other cigarette makers.
West Palm Beach Circuit Court Judge Harold Cohen ordered the documents kept sealed until a ruling by a higher court on an expected appeal. The papers contain evidence of tobacco-industry fraud, according to a retired judge who reviewed them. .  
The eight documents are largely notes from meetings among tobacco company lawyers planning defenses against liability lawsuits in past decades.
They are among documents Liggett Group, a unit of Brooke Group, agreed to turn over to state attorneys general as part of a settlement announced on March 20 to shelter Liggett from liability claims.
Attorneys for Philip Morris Cos and other tobacco companies argued that William Rutter, the retired judge appointed by Cohen to review 20 Liggett documents, had made procedural mistakes.  
The tobacco industry lawyers also argued Rutter had asked too little proof from the Florida state lawyers before overriding client-attorney shelter usually given such papers and that there was meager evidence of industry fraud.
Cohen rejected all the arguments and asked that any appeals be quickly handled by a higher court since he was intent on going ahead with an August trial.
Stephen Krigbaum, an attorney in West Palm Beach, Florida, for Philip Morris, said an appeal of Cohen's decision would be made quickly.
""We think it is wrong on the facts and wrong on the law,"" Krigbaum said.
Cohen also said secret talks involving tobacco companies and attorneys generals on a sweeping settlement of outstanding cigarette litigation would not delay the trial.
""It should be clear to all parties, counsel, and the appellate court that alleged 'secret settlement negotiations' will have absolutely no effect on the commencement of trial in this case ...,""  he wrote.
((-- Miami newsroom, 305-374-5013))
",33
"Fresh from a Supreme Court victory, Florida's anti-tobacco activists were bracing for a legislative assault on the innovative law allowing the state to sue cigarette makers.
Although bloodied by past failures to repeal the 1994 law, which undoes many of the tobacco industry's best legal defences, opponents said Tuesday the campaign to repeal Florida's third-party medical liability act would continue through the current legislative session scheduled to last until May.
""The fight goes on,"" said Jodi Chase, general counsel for Associated Industries of Florida Inc., a business group prominent in the repeal campaign.
Bills to repeal the medical-liability law have been introduced in both houses of the Florida legislature. A repeal bill was vetoed by Gov. Lawton Chiles two years ago and an effort to override his veto failed in 1996.
On Monday, the Supreme Court refused to take up a tobacco industry challenge to the constitutionality of the law but did not deal with the crux of the challenge and left open the possibility of considering the matter after a trial.
Lawyers for both Florida and cigarette makers said the Supreme Court action makes it even more likely a trial in a billion-dollar lawsuit against the tobacco industry will go ahead as scheduled on August 4 in West Palm Beach, Fla.
""The arena now will be the Florida legislature,"" said Harold Lewis, chief inspector general for Chiles.
Lewis said the governor and allies inside and outside state government expected tobacco companies and others pushing repeal to launch a full-press media and lobbying offensive, even though some top legislators have said a vote on repeal bills was unlikely this year.
A spokesman for Philip Morris Cos. Inc., the world's biggest cigarette maker and one of the defendants in the West Palm Beach case, said the company rarely discusses its lobbying efforts but that lawyers were preparing for trial.
Lewis said 60 or more lobbyists were working against the bill and that he expected millions of dollars to be spent on the effort.
A group working with Chiles, the Coalition to Clear the Air for Florida Taxpayers, is preparing a media and organising campaign to support the law, according to executive director Beth Labasky.
The group, composed of health organisations and school groups, is calling its campaign, ""Tobacco: Florida's Public Enemy Number One"", and expects to spend under $1 million on advertising, consultant Ron Sachs said.
Smith Barney tobacco industry analyst Martin Feldman said a constitutional challenge to the Florida law was highly likely to be heard by the Supreme Court if cigarette makers lose in the West Palm Beach trial.
""The Supreme has specifically provided the option of considering the industry's claim at a date in the future, and quite possibly as part of an appeal -- should that prove necessary,"" Feldman said in a report.
",33
"Liggett Group's pact breaking away from other cigarette makers has failed to shake the confidence of tabacco growers in North Carolina, where the crop has been king for centuries.
""Tobacco farmers will continue to have a market, regardless of the success or failure of the suits,"" North Carolina State Attorney General Mike Easley said.
Tobacco is North Carolina's single biggest crop and the plant's broad, brown leaves sustain thousands of manufacturing, financial and other jobs.  
""Tobacco supports 200,000 families in North Carolina,"" said Sean Walsh, a spokesman for state Gov. Jim Hunt.
North Carolina is America's biggest producer of tobacco. Tennessee, Virgina, South Carolina, Kentucky and Georgia are also major tobacco-growing states.
The maker of Chesterfields and L&M branded cigarettes, Liggett last week rocked the tobacco business and Wall Street by agreeing to settle lawsuits with 22 state attorneys general.  
Liggett promised to pay 25 percent of its pre-tax profits for the next quarter century and label its cigarettes as addictive substances. It also agreed to hand over to the attorneys general internal documents which might bolster multi-billion dollar claims against other cigarette makers.
No cigarette company but Liggett, a unit of Brooke Group, has made such a deal. Other cigarette makers, such as Philip Morris and RJR Nabisco, fiercely condemned the pact.  
""It'll give everybody something to talk about, but I don't think it will cause any adverse effects in the short term,"" said William Graham, a retired Farm Credit Services loan officer in Proctorville, in southeastern North Carolina.
""I just don't think people are aware of just how much tax money tobacco generates in this country,"" Graham said.
""What I want to say is not fit to print,"" said tobacco grower Grady Britt of Broad Ridge, also in southeastern North Carolina, where tobacco has been a mainstay for more than 200 years.  
Other growers worried that the Liggett pact was another sign that tobacco, also a major export accounting last year for about 20 percent of the U.S. net agricultural trade surplus, was headed for hard times.
""The government's going to take tobacco away from us, but they aren't going to give anything back,"" said Newberry Mitchell, a grower since the early 1960s.
""All this decision is going to do is give the government more ammunition to classify tobacco as a drug and regulate it,"" said Erskine Floyd, another grower who lives in Barnesville, North Carolina.
Easley, the North Carolina attorney general, has not filed a lawsuit against cigarette makers and said the settlement on Thursday was less important than it appeared.
He described Liggett, the fifth-ranked cigarette maker with only a sliver of the market, as a minor industry player and said the legal grounding for the lawsuits by the attorneys general was shaky.
",33
"There will be more smoke than fire when Philip Morris Cos Inc holds its annual meeting with shareholders on Thursday.
Meeting in Richmond, Va. amid rumors tobacco companies are pondering a $300 billion landmark settlement, analysts say it is unlikely Philip Morris will tip its hand.
""No comment. No comment. No comment. I've heard it a hundred times,"" said Roy Burry, a tobacco-industry analyst at Oppenheimer & Co. ""The industry is shut down on this.""  
Philip Morris holds 50 percent of the U.S. cigarette market and is a lead negotiator in secret talks with anti-tobacco forces aimed at resolving massive legal claims against the industry.
Geoffrey Bible, chief executive of Philip Morris, and the head of RJR Nabisco, the number two U.S. tobacco group, have participated in the secret talks, sources familiar with the bargaining have said. The latest round of talks, in Chicago, ended on Monday.  
U.S. regulation of cigarette makers and other non-monetary issues have so far dominated the talks, according to sources. But the Wall Street Journal said on Tuesday that rivals of Philip Morris are pushing for lock-step cigarette price increases by all companies to pay for a proposed fund for sick smokers.
RJR Nabisco Holdings Corp, according to the paper, quoting unnamed sources, is particularly worried that the financially thriving Philip Morris might forgo price increases in order to grab market share from smaller rivals such as number two RJ Reynolds Tobacco Co.  
Analysts discounted the likelihood of such a pact, saying mutual pricing would violate U.S. antitrust laws and would go against the widespread retail practice of selling all cigarettes within a category at the same price.
""There are a thousand different ways other than pricing to get customers to buy your cigarettes,"" said analyst Emanuel Goldman of Paine Webber.
A spokesman for Philip Morris declined to comment on the talks.  
At the Philip Morris annual meeting, scheduled to begin at 0900 EDT (1300 GMT), activist shareholders are expected to present proposals urging the company to eliminate the suspected carcinogen benzo(a)pyrene from its cigarettes and that outside directors doing substantial business with Philip Morris stay out of meetings setting executives salaries.
A third shareholder proposal, sponsored by The Sisters of Charity of New York, urges Philip Morris to adopt in developing countries the same limits on marketing cigarettes to young people it has adopted in the United States.
The company's board opposes all the proposals.  
One activist group supporting the proposals, INFACT of Boston, will also have protestors outside the Philip Morris Manufacturing Center, INFACT executive director Kathryn Mulvey said.
Two INFACT members will be costumed as Marlboro and Virginia Slims cigarettes handing out cash to a third, dressed as Uncle Sam, as the expected hundreds of shareholders arrive, Mulvey said.
INFACT played a leading role during the 1970s and 1980s in the boycott of Nestle over alleged mismarketing of infant formula in poor countries and charges Philip Morris with unfair lobbying of government officials.
INFACT also wants Philip Morris to change its marketing practices in developing countries, she said.
Mulvey said the widely reported and historic talks between cigarette makers and anti-tobacco organizations had had no effect on INFACT's plans to protest.
""There's nothing that we've heard ... that has anything to do with marketing to kids in developing countries or influence peddling,"" Mulvey said.
-- Miami newsroom - 305-374-5013.
",33
"Leading cruise ship operators looking to repeat their success at home by exporting some of American culture abroad will have to tailor their sea-going holidays to local markets and tastes.
Industry executives at an international trade convention said that Europe and Asia could be promising markets for Carnival Corp., Royal Caribbean Cruises Ltd. and others in the flourishing North American leisure cruise business, which barely existed three decades ago.
""The major North American lines are well positioned to grow internationally, as long as they acknowledge the major cultural and business differences,"" P&O/Princess Cruises Chairman Tim Harris said during a panel discussion last week.
North American cruises lines, offering trips to the Caribbean and along the West Coast of the United States to Alaska, are enjoying strong domestic business.
Bookings at Carnival Cruise Lines, the main unit of Miami-based Carnival Corp., are up 37 percent in the three months through last Monday while shipboard berths rose only 13 percent, Canrival Cruise Lines President Robert Dickinson said.
Still another sign of the sector's health in the United States is that Walt Disney Co. will next year make its seawater debut by offering cartoon-themed cruises aboard two new ships from Port Canaveral in central Florida.
The industry is on a ship-building spree, with the just-launched Carnival Destiny capable of carrying 2,600 passengers while Royal Caribbean is building new ships that can carry 3,100 apiece.
But the customers are overwhelmingly from the United States and Canada and the offerings are unmistakably American -- whether aboard mass-marketer Carnival, which describes its increasingly gigantic vessels as fun ships, or other lines catering to richer tastes.
That is not all bad, the executives said, but more offerings tailored to national and regional tastes will likely be required in Asia and Europe.
""The right ships have to go to the right places with the right food,"" said Celebrity Cruises Inc. President Richard Sasso. Celebrity is an Overseas Shipholding Group Inc. affiliate.
Both Carnival, the industry leader with almost 27 percent of all cruise berths, and number two Royal Caribbean are already active overseas and employ different strategies.
Royal Caribbean competes in Europe but does little beyond hiring multilingual crews to adapt the onboard accomodations, food and entertainment from those it offers on seven-day trips from Miami, company chairman Richard Fain said.
""Our ships offer an American experience in Europe, not a European experience,"" Fain said. The European tours are aimed mostly at Americans.
""We are carrying more Europeans in the Caribbean than in Europe,"" Fain said.
Carnival, which expects to carry more than 1 million passengers in 1997, is taking a multi-pronged approach by acquiring the Italian cruise operator Costa and buying into British tour group Airtours Plc.
Carnival also has a joint venture with Hyundai Group of Korea to provide cruise holidays in Asia.
""Those three strategies were deployed to offer products in those markets for people in those markets,"" Dickinson said.
Harris of Peninsular and Oriental Steam Navigation Co. affiliate P&O/Princess Lines said business arrangements must also be fitted to foreign markets.
Kirk Lanterman, chairman of Carnival affiliate Holland America Line-Westour, said the overseas cruise markets were already substantial.
He said about 3 million people each year take cruises on small lines offering national or ""ethnic"" foods, entertainment and accommodations and about 500,000 non-Americans travelled on the lines operating from south Florida and elsewhere in North America.
Lanterman also warned his peers against diluting the character of their popular lines.
""It's very difficult to make these ships different for non-Americans without making it unsatisfactory for Americans,"" Lanterman said.
",33
"The Florida judge in the Broin secondhand-smoke lawsuit on Thursday said he may undo the class-action status of the case, a move that would likely delay the start of a trial, scheduled for Monday.
Dade County Circuit Court Judge Robert Kaye said during a hearing that even if tobacco companies were found liable by a jury for injuries caused by secondhand smoke, the claims of an estimated 60,000 plaintiffs might be too cumbersome for a single trial.  
Kaye said determining the direct linkage of secondhand smoke to individual ailments and setting the amounts due each of the non-smoking flight attendants covered by the Broin suit might be nearly impossible.
""I am very concerned about these issues,"" Kaye said.
The judge, who is also weighing a tobacco-industry request that fraud and conspiracy allegations be dropped from the suit, gave no indication when he might rule. Another pre-trial hearing was scheduled for Friday.  
Kaye five years ago knocked down the class-action status of the Broin case, first filed in 1991, but was overturned three years ago by a Florida appeals court, which ordered a trial after hearing tobacco company arguments the case was too cumbersome.
In a class-action suit, a few plaintiffs claim damages on behalf of a broader group with similar injuries. All share in damage payments, if there are any.  
The Broin case, named after American Airlines flight attendant Norma Broin, alleges that cigarette smoke aboard U.S. passenger jets caused the lung cancer and other ailments of thousands of non-smoking flight attendants. In-flight smoking in the United States was banned in 1988.
In court on Thursday, tobacco company lawyers asked Kaye to end the class-action status of the Broin suit and said each of the claims needed to be tried individually, since many factors beyond cigarette smoke may have caused the flight attendants' injuries.  
""This cannot proceed as a class action without dissolving into 60,000 individual trials,"" said Hugh Whiting, an attorney for R.J. Reynolds Tobacco Co, a unit of RJR Nabisco Holdings Corp.
Susan Rosenblatt, an attorney pressing the Broin case, said people with like injuries could be grouped for determining damages if the tobacco companies should be found liable in the first stage of the trial. Such sessions would be ""relatively simple,"" she said.  
She also said a financial settlement might be worked out with the tobacco companies if a jury should rule against them. ""They don't like to talk about that but it's a possibility,"" she said.
Tobacco companies have yet to pay a single dollar in damages, despite four decades of U.S. lawsuits, but they are now in secret talks with government officials that might end some of the court actions against the industry.  
Kaye asked Rosenblatt what would happen if he should end the class-action status of Broin. She said she and her co-counsel and husband, Stanley Rosenblatt, were not now prepared for such a late change.
((--Miami newsroom, 305-374-5013))
",33
"Sterling Software Inc's $165 million purchase of Texas Instruments Inc software unit will close on June 14 and will help Sterling's financials almost immediately, the company's chief executive said on Wednesday.  
""Three or four minutes,"" Sterling Williams told Reuters when asked how long Sterling Software would spend integrating Texas Instrument's 1,300 staff and 62 facilities around the world. ""It will enhance both profits and revenues almost immediately,"" Williams said.
Williams also said Sterling Software's cash holdings, enlarged greatly by last fall's spinoff of Sterling Commerce Inc, remain largely intact after the Texas Instruments' deal and will be used to pay for more acquisitions.  
Founded in 1981 and with more than two dozen acquisitions to its credit, the company will have some $600 million in cash after the Texas Instruments' check is written, Williams said.
""The biggest opportunities out there are in applications software,"" Williams said. ""Size doesn't attract or repel us.""  
Applications software groups, such as the Texas Instruments' business Sterling is buying, help design new software for big organizations and cobble together different computer systems.
Sterling is also interested in companies which produce software for big computer systems, Williams said.  
The Texas Instruments' acquisition announced a month ago will add $250 million in annual revenues to Sterling Software and better than double to half the portion of Sterling Software revenues which come from applications software operations, Williams said.
Sterling had fiscal 1996 revenues of about $440 million.  
Williams said Sterling Software's top executives had spent the past month meeting TI Software's managers around the world and had clear, detailed plans for weaving the unit into Sterling.
He said cost savings would come through cuts in research and administration and that layoffs would likely be minimal. The combined sales forces would allow broader marketing of Sterling Software's products and services, he said.
""Our ramp up basically takes place before the announcement,"" he said. ""But there is a settling-in phase where you make course corrections.""  
The combination would stimulate sales growth in Sterling's applications operations, which had been flat in fiscal 1996 after fast growth in the early 1990s, Williams said.
He declined to discuss detailed forecasts.
TI's customers will be largely new ones for Sterling and acceptance of the deal among customers seems to be good, Williams said.
""Not a single customer called and said he was worried,"" he said.
Sterling Software shares rose 5/8  and closed at 32-1/4.
((--Miami newsroom, 305-374-5013))
",33
"A former U.S. surgeon general will testify in a class-action trial that cigarette makers blunted efforts in the 1970s to warn Americans on the dangers of second-hand smoke, a plaintiffs' lawyer said Monday.
Dr. Jesse Steinfeld and another former surgeon general not yet named will testify on behalf of an estimated 60,000 non-smoking flight attendants claiming damages for illnesses allegedly caused by second-hand smoke on passenger jets, attorney Stanley Rosenblatt said.  Surgeon general is the highest medical post in the federal government.  
A jury trial in Dade County Court is scheduled to begin on June 2 and will be the first class-action suit to come to trial in the United States against the tobacco industry.  It is but one case in a wide courtroom assault on cigarette makers.
In a class-action suit, used in the past against asbestos makers on behalf of victims of lung diseases, a small group seeks damages on behalf of a much larger number of people with like injuries.
A second class-action suit on behalf of all Florida smokers is scheduled for trial in Miami in September.  
""He will testify that the tobacco industry did everything it could to impede the information from getting to the public, from getting to the scientific community,"" Rosenblatt said, referring to Steinfeld during a pre-trial hearing.
Steinfeld is also scheduled to testify for Mississippi, whose attorney general is suing tobacco companies to recoup the cost of treating sick smokers through its Medicaid program. Twenty-one other states, including Florida, have filed similar suits.  
Rosenblatt accuses Philip Morris Cos Inc and other leading cigarette makers of purposely misleading Americans and conspiring with one another on hiding the medical risks of second-hand smoke to sustain corporate profits.
Rosenblatt gave no details of the promised testimony.  No opposing lawyer representing tobacco companies at the hearing commented on Rosenblatt's statement, which came during a dispute over the exchange of witness lists.
Other spokesmen for the tobacco industry were not immediately available.  
Susan Rosenblatt, the second member of the husband-and-wife legal team bring the class-action suit, said the plaintiffs will also call a former tobacco company employee.  The witness has said under pre-trial questioning that he was instructed to destroy scientific findings pointing to the health risks of second-hand smoke, she said.
The plaintiffs, who include Norma Brion, a non-smoking flight attendant for 13 years diagnosed with lung cancer, also will call an Australian cardiologist who will tesify that his research linking second-hand smoke and heart diseases was blocked by tobacco companies, the Rosenblatts said.  
Circuit Court Judge Robert Kaye said at the hearing he may name an outside lawyer to review some 1,500 industry documents the Rosenblatts want for the trial.  The tobacco lawyers oppose the use of the documents, the great bulk are not public.
Kaye also extended until March 24 a deadline for the Rosenblatts to deliver a list of witnesses to tobacco-industry lawyers.  Hugh Whiting, a tobacco company lawyer, said the delay was harming his industry's defense.
Defendants in the case include the Brown & Williamson unit of B.A.T Industries Plc, RJR Nabisco Holdings Corp and the Lorillard unit of Loews Corp.
((-- Miami newsroom, 305-374-5013))
",33
"Top Citicorp managers have testified before a grand jury probing allegations of possible money laundering involving former Mexican President Carlos Salinas de Gortari's brother, Citicorp Chief Executive Officer John Reed said Wednesday.
Reed, answering a shareholder at the giant banking company's annual meeting, neither identified the executives nor said how many had given secret testimony but emphasised that Citicorp was cooperating fully with the grand jury.
Raul Salinas, now jailed in Mexico on murder and illicit enrichment charges, was accused in February by a Swiss prosecutor of receiving huge sums of money from major drug cartels. Some $100 million was found in Raul Salinas' Swiss bank accounts.
Both Raul Salinas and his brother, the former Mexican president now in self-imposed exile in Ireland, deny any connections to illegal drug operators.
Reed told reporters immediately after the meeting that he himself had not been summoned by the grand jury, a panel of citizens which reviews police evidence for the possible filing of criminal charges.
A Citicorp spokesman declined to say how many executives had testified before the grand jury, believed to be meeting in New York. Citicorp is based in New York.
Questioned by shareholders about the offshore transfers, reportedly as high as $120 million, by Citicorp on behalf of Raul Salinas de Gortari, Reed said the global banking group had no apparent financial liability.
""To the best of our knowledge -- and we have looked, looked and looked -- we have no liability,"" Reed said.
He said Citicorp has not set aside any funds for possible fines, and a representative of Citicorp auditor Peat Marwick said it had not questioned that decision.
Citicorp has so far spent $4 million on legal fees for the Salinas inquiry, Reed said. The fees include a lawyer for Amy Elliott, the banker who handled the Salinas accounts from New York, the spokesman said.
""Her behaviour met with our standards, and she is an employee in good standing,"" Reed said.
",33
"General Electric Co chief executive Jack Welch successfully defended his $28.2 million in salary, bonuses and incentives for 1996, telling shareholders on Wednesday that market forces determined pay packages for top U.S. executives.
""The issue is the competitive marketplace,"" Welch told a critic at GE's annual meeting. ""The market is willing to play at a certain level ....""
Shareholders at the meeting defeated a proposal to limit Welch's pay to $1 million unless put to a shareholder vote.  
The proposal to limit Welch's pay received nine percent of the votes cast, with 91 percent backing Welch's existing compensation arrangements.
Bill Patterson of the AFL-CIO group of labor unions, a supporter of the Welch pay proposal made by a Teamsters union pension fund, said Welch's compensation was 148 times more than that paid on average to GE's 239,000 employees.
Patterson said the pay, even with Welch's highly acclaimed management successes and the stellar stock market performance of GE's shares since he became chief executive 16 years ago, was a source of bitterness and cynicism for many GE workers.  
Welch said he was well paid and was benefitting from the labor of all GE's employees. He noted that stock options were now distributed to some 22,000 GE employees, as opposed to only 200 as recently as 1988.
Big pay packages, including deferred compensation plans, were needed to retain top performers, Welch said. He said some top GE executives, such as the current head of AlliedSignal Inc had left the company for more pay and broader opportunities.  
Welch, the latest leading U.S. chief executive to be criticized for high compensation, last year received $6.3 million in salary, $15.1 million from a long-term incentive program and $6.2 million by excercising options on GE stock. He was also paid almost $600,000 in benefits, such as life insurance, according to GE's proxy statement.
Walt Disney Co shareholders, including several leading institutional investors, challenged at the company's annual meeting two months ago a 10-year pay package given chairman Michael Eisner worth as much as $771 million. Twelve percent of Disney shares were voted against the Eisner pay package.
One study said CEO pay rose about 20 percent in 1996 and 16 percent in 1995.  
	 -- Miami newsroom - 305-374-5013
",33
"A Miami television journalist who produced a news report on niche-brand cigarettes was knocked from the pool of standby jurors in Florida's $5 billion secondhand smoke trial on Thursday.
The unidentified female television-news producer was among 15 people questioned by judge and lawyers on Wednesday. She said she had produced a television report for Fox station WSVN Channel 7 on cigarette marketing, scheduled for broadcast that evening. Despite tobacco lawyers objections, she was placed in the pool of potential jurors to sit on the trial, expected to last eight weeks or longer.
Tobacco company lawyers again on Thursday asked Dade County Circuit Court Judge Robert Kaye to remove the freelance news producer, saying her piece negatively portrayed tobacco companies and reflected a bias making her unsuitable to fairly decide whether the defendants are liable for the smoking-related illnesses of 60,000 non-smoking flight attendants.
A tape of the short television report on flashily packaged Black Death, City and other so-called micro-brand cigarettes favored by some young smokers was shown in court and included interviews with shopkeepers, young smokers and a spokeswoman for the American Cancer Society.
Stanley Rosenblatt, an attorney pressing the class-action suit, said the television report had been very likely edited by other journalists and did not necessarily reflect the mindset of the news producer.
But Kaye sided with the tobacco lawyers and removed the woman from the standby jurors pool, saying, ""The appearance that it was weighted would make it inappropriate for her to be seated.""
After four days of jury selection, the standby jurors pool numbers 18. Some 60 are needed to seat a jury of six. A second round of screening will be required to find between six and 12 alternates before testimony can begin in the landmark trial, a court official said.
A nurse, a college student and an immigrant from Mexico were placed in the standby pool on Thursday. People excused by Kaye include a nun who described smoking as a vice and the sure cause of diseases she has seen firsthand as a nurse and several people with schooling or vacation plans fixed firmly during June and July.
Kaye late on Wednesday said he was reconsidering a Rosenblatt request that prospective jurors be questioned in groups as a way of speeding up jury selection. Tobacco company lawyers objected, saying that since smoking and attitudes about secondhand cigarette smoke were hot-buttom matters people had to be questioned separately.
A court official said Kaye would likely decide on group questioning of prospective jurors on Friday or later. Kaye earlier this week refused a similar request from Rosenblatt.
Jury questioning for the trial, the first on secondhand smoke claims, is likely to run through at least mid-June, in part because the jury selection next week will occur only on Monday and Tuesday because of a break for Jewish holidays.
AMB.N
",33
"Two words sure to be heard at Thursday's annual shareholder meeting by Philip Morris Cos Inc are ""no comment.""
Questions about the top tobacco group's role in historic settlement talks that may end in a cigarette-industry payout of $300 billion or more are certain to arise when Chief Executive Geoffrey Bible meets shareholders at Philip Morris' sprawling manufacturing plant in Richmond, Virginia, activists and industry analysts said.
",33
"In Miami, the cruise-ship capital of the world, business is bright with bountiful bookings but eyes are warily looking up the Florida coast to where The Walt Disney Co. is readying its sea-going debut.
Essentially landlocked until next year, Disney is the 800-pound gorilla of U.S. holiday-making and currently operates hotels and leading theme parks, such as its Disney World in Orlando. To many in cruising, Disney is already a leading rival for vacation dollars.
Disney, adding attractions in Orlando, Fla., and eager to keep its customers staying with Disney for longer vacations, is indeed offering week-long cruises from Port Canaveral, Fla., on its cartoon-themed ships that include stays at its parks and a visit to a Disney island in the Bahamas.
The company is already taking bookings for April, 1998, and many in the industry see Disney aiding all cruise ships -- and not just the Disney Magic and Disney Wonder due next year -- as Disney broadens a market which draws mainly older customers.
""They are great marketers,"" Royal Caribbean Cruises Ltd. Chief Financial Officer Richard Glasier said before the industry's recent Seatrade Cruise Shipping Convention here. ""They'll open up new aspects of the business.""
Disney is renowned for family entertainment and leisure, a segment leading cruise operators courting mass markets want to win, too. An existing cruise service under a third-party licensing agreement with Disney has not had a major role in the cruise market, executives said.
""Disney promotion will add more power in marketing than this has ever seen,"" said Peter Kowal, general manager of the Cruise Holidays travel-agents chain.
On Wall Street, many worry the industry's ship-building spree is getting ahead of itself and that weak fare pricing evident last year will become chronic. Disney's two ships, weighing 85,000 tons and carrying 1,740 passengers each, will aggravate those worries.
But bookings at Carnival Corp., the industry leader with 26.9 percent of the sector's 116,616 berths worldwide, and No. 2-ranked Royal Caribbean have been very strong this year, even with the addition of many new, very large ships.
""The tone of business is terrific,"" Glasier told investors last week.
Larger ships, including the just christened Carnival Destiny, the world's biggest at 100,000 tons and 2,600 berths, are much more efficient and much more attractive to vacationers, industry executives said.
A Royal Caribbean ship features a decktop golf course and some big ships have multi-deck atriums. The race to be bigger continues, with Royal Caribbean contracting last year to buy two ships capable of carrying 3,100 people and weighing 130,000 tons. Until this decade, few cruise ships carried more than 1,000 passengers or weighed more than 50,000 tons.
Glasier said Royal Caribbean's big ships generate twice or three times the cash flow of older ships, partly because of higher fares and more on-board shops but also because of cheaper operating costs on a per-passenger basis.
Disney's entry also comes as leisure cruising is consolidating and as the industry tiptoes toward globalization from its North American stronghold. Asia, especially, is seen as a promising market.
""There's a lot of interest in the emerging markets in Asia,"" Carnival Cruise Lines President Bob Dickinson said.
Outside North America, where trips to Caribbean islands out of Florida and to Alaska from the West Coast are most popular, the markets are relatively small. Europe, the most developed market behind the United States and Canada, is only 20 percent the size of the North American one.
Carnival late last year announced a $300 million acquisition of Costa Crociere SpA, Europe's leading cruise operator, and earlier bought a stake in British tour company Airtours. The company has also reached a joint venture with Hyundai Merchant Marine for an Asia cruise offering.
""We are attempting to source passengers outside the United States,"" Royal Caribbean's Glasier said.
Royal Caribbean is studying the Asian market and may create a separate brand for the market, Glasier said.
""In Asia, the product should be different. We would probably do that with a different brand,"" Glasier said.
",33
"Cigarette makers bargaining with anti-tobacco activists on settling smoking lawsuits have talked little about money and are dwelling on tighter government regulation of tobacco and eliminating sales pitches to youths, sources said Friday.
""Less than 5 percent of the time in those rooms was spent on money,"" said one participant in the talks, who spoke on condition of anonymity.
The talks -- which began behind closed doors about two weeks ago between top industry executives and an array of anti-tobacco leaders -- are expected to resume Sunday in Chicago, a source familiar with the negotiations said.
A second session is planned for Monday, with an early break for the Passover holiday. The source said no other talks were planned for next week.
One set of key players in the talks, the state attorneys general suing tobacco companies over Medicaid costs, was struggling to coordinate its approach, according to Ed Cafasso, spokesman for Massachusetts Attorney General Scott Harshbarger.
In the United States, Attorneys general are the top legal officials in the individual states.
Washington politicians and some health groups have objected to some publicized proposals as tepid and a reported $300 billion settlement as too little.
News on Wednesday of the talks, a landmark in the 40 years the tobacco industry has steadfastly fought lawsuits and restrictions on its products, still cheered Wall Street.
Investors Friday again raised tobacco company stock prices on speculation that a comprehensive litigation and regulatory settlment, even with a price tag as high as $300 billion, was imminent.
Stock in Philip Morris Cos. Inc., the biggest U.S. tobacco company, rose $2.625 to $44.25 in consolidated New York Stock Exchange trading. RJR Nabisco Holdings Corp. whose R.J. Reynolds Tobacco Co. is No. 2, rose $1.25, also on NYSE.
The American Stock Exchange Tobacco Index rose 7.68 points, or 2.67 percent, to 295.47.
Also helping tobacco stocks was the news that the federal judge overseeing a tobacco industry challenge to new, strict government curbs on cigarette marketing had postponed his decision for a second time.
A decision from U.S. District Judge William Osteen in Greensboro, N.C., is now expected no sooner than Wednesday.
Attorney Steven Berman, who represents several state governments in the talks, said, ""I don't have any feeling for the pace, but we'll keep talking as long as we're making progress.""
Published reports have said the industry might pay as much as $300 billion over 25 years into a compensation fund for smokers who fall sick with lung cancer and other diseases.
In return, the tobacco industry would get broad shelter from lawsuits and higher stock market valuations on their thriving tobacco and non-smoking businesses. Industry analysts generally approve of a settlement, although some say the industry is unlikely to pay as much as $300 billion.
Several attorneys involved in the talks said the prime issues for the attorneys general were winning restrictions on selling cigarettes to people under 18, unambiguous declarations by the cigarette companies on smoking's health risks, and a pledge from the industry to develop safer cigarettes.
""The fourth is money,"" said John Hough, an assistant attorney general in Washington state.
",33
"A Florida judge rejected a request from tobacco companies that the start of the first-ever trial of a class-action lawsuit against cigarette makers be delayed until December.
Dade County Circuit Judge Robert Kaye said in an order dated Friday that the trial of the lawsuit filed on behalf of thousands of flight attendants would begin as scheduled June 2 in Miami.
The lawsuit being pressed by Miami lawyers Stanley and Susan Rosenblatt claims damages on behalf an estimated 60,000 non-smoking flight attendants suffering from lung diseases and other ailments allegedly caused by secondhand smoke on U.S. passenger jets.
Tobacco attorneys warned Kaye in a hearing a week ago that much pretrial examination of witnesses and other work remained to be done by both sides and that the closely watched case would be chaotic without full preparation.
Hugh Whiting, an attorney for RJ Reynolds Tobacco, a unit of RJR Nabisco, told Kaye last week that only one out of five expert witnesses scheduled for the trial had been questioned by tobacco company lawyers. As many as 120 other witnesses needed to be questioned as well before June 2, he said.
He suggested the trial be pushed back to Dec. 15.
""... The court explicitly told all counsel, and parties were put on notice, that the court felt this was ample time to prepare, considering the fact that this case was filed in 1991 ...,"" Kaye wrote in his order.
Kaye also issued an order formalising the appointment of Florida lawyers Michael Salmon and Irwin Block to review, in private, three batches of industry documents for possible use by the Rosenblatts at trial. The judge said in court last week that he intended to name the two to the task.
Tobacco company lawyers claim that many of the papers are covered by legal privileges.
The  case is formally known as Norma Broin et al vs. Philip Morris Cos. Inc. et al.
Kaye's orders came as a trial in another lawsuit against a tobacco company was taking place in Jacksonville, Fla. The family of Jean Connor, a 49-year-old woman and long-time smoker who died of lung cancer two years ago, sued R.J. Reynolds Tobacco Co.
In addition, more than two dozen state governments have filed lawsuits seeking $30 billion in Medicaid costs of treating smokers.
",33
"WEST PALM BEACH, Fla, March 26, Reuter - A Florida judge on Wednesday ordered Liggett Group to immediately deliver internal industry documents for possible use in the state of Florida's lawsuit against U.S. tobacco companies.
Courts in Texas and Illinois have issued similar orders since Thursday, when Liggett Group, the fifth largest cigarette maker, owned by Brooke Group, struck a sweeping deal with 22 states suing the tobacco industry for an estimated $30 billion spent on medicaid costs for treating sick smokers.  
The Florida judge, Harold Cohen of Palm Beach County Circuit Court, also ordered an accelerated review within 10 days of about 20 Liggett documents which attorneys for the state of Florida claim affect public safety.
Under Florida law, trade-secret protections and client-lawyer privilege ordinarily safeguarding internal documents can be overriden if matters of public safety are at stake.
Florida Attorney General Bob Butterworth in court urged Cohen to review the Liggett papers and afterwards told reporters the 20 documents, which he said he had not seen, would be made public if the judge agrees that public health was at issue.  
""These documents are devastating to the industry,"" Butterworth said.
Cohen said he would assign William Rutter, a retired judge aiding in the pre-trial screening of contested documents, to review the 20 documents in 10 days and to make a recommendation to him. A hearing on that recommendation will be held April 14, Cohen said.  
Cohen ruled after Murray Granick, an attorney for Philip Morris Cos, said a temporary restraining order on distributing the LIggett documents secured last Thursday in North Carolina did not preclude private review of the papers by other judges in tobacco cases.
Granick said the judge in North Carolina, who had issued the temporary restraint last week, had late yesterday amended his order removing any constraints on other judges looking at the papers in private.  
Granick said, in court, that the tobacco companies fighting the lawsuits wanted to protect the privacy privileges of their clients. He also said that some of the Liggett documents drawn from industry-wide talks over the years would, if released, violate the rights of the tobacco companies.
Cohen has scheduled an August 4 start to a jury trial on the Florida lawsuit, the second after Mississippi's expected to come to trial.
Florida is claiming $1 billion or more for tobacco-related Medicare spending and has won the right to pursue much higher monies if the tobacco companies are found to have operated as racketeers under a state conspiracy law.
The tobacco companies deny any conspiracy and claim the state has itself produced cigarettes for prison inmates and benefitted in many other ways from their businesses.
-- Miami newsroom, 305-374-5013
",33
"Leading cruise ship operators looking to repeat their U.S. successes by exporting another bit of American culture will have to tailor their sea-going holidays to local markets and tastes.
Top industry executives at an international trade convention said Europe and Asia could be very promising markets for Carnival Corp, Royal Caribbean Cruises Ltd and others in the flourishing North American leisure cruise business, a sector which barely existed three decades ago.
""The major North American lines are well positioned to grow internationally ... as long as they acknowledge the major cultural and business differences,"" P&O/Princess Cruises chairman Tim Harris said during a panel discussion.
North American cruise lines, offering trips to the Caribbean and along the west coast of the U.S. to Alaska, are enjoying very strong domestic businesses.  Bookings at Carnival Cruise Lines, the main unit of Carnival Corp, are up 37 percent in the three months through last Monday on a 13 percent rise in shipboard berths, Carnival Cruise Lines President Robert Dickinson said.  
But the customers are overwhelmingly from the U.S. and Canada and the offerings are unmistakably American -- whether aboard mass-marketer Carnival, which describes its increasingly gigantic vessels as fun ships, or the more genteel lines competing with upmarket amenities.
That's not all bad, the executives said, but more offerings tailored to national and regional tastes will likely be required in Asia and Europe.  ""The right ships have to go to the right places with the right food,"" said Celebrity Cruises Inc President Richard Sasso.  Celebrity is an Overseas Shipholding Group Inc affiliate.  
Both Carnival, the industry leader with almost 27 percent of all cruise berths, and number two Royal Caribbean are already active overseas and employ different strategies.
Royal Caribbean competes in Europe already but does little beyond hiring multilingual crews to change the on-board accomodations, food and entertainment from those it offers on seven-day trips from Miami, company chairman Richard Fain said.
""Our ships offer an American experience in Europe, not a European experience,"" Fain said.  
The European tours are aimed mostly at Americans, he said. ""We are carrying more Europeans in the Caribbean than in Europe,"" Fain said.
Carnival, which expects to carry more than one million passengers in 1997, is taking a multi-pronged approach by acquiring the Italian cruise operator Costa and buying into UK tour group Airtours Plc.Carnival also has a joint venture with Hyundai Group to provide cruise holidays in Asia. ""Those three strategies were deployed to offer products in those markets for people in those markets,"" Dickinson said during the panel discussion.  
In addition, the company dispatches Carnival-branded ships on itineraries beyond its Caribbean stronghold to lure past Carnival passengers looking for different destinations.
Harris of Peninsular and Oriental Steam Navigation Co affiliate P&O/Princess Lines said business arrangements must also be fitted to foreign markets.  He recalled his company, with its long history of ocean-going passenger transport, found it had to cut out its network of company-owned ticket offices and learn to rely on travel agents to sell its leisure-cruise berths.  
Several executives said the early cruise successes in Asia of the Star line, a regional operator, might be an example to the big operators with their current lion's share of the global market who are eyeing that region.
Kirk Lanterman, chairman of Carnival affiliate Holland America Line-Westour, said the overseas cruise markets are very substantial already.  He said some three million people each year take cruises on small lines offering national or ""ethnic"" foods, entertainment and accomodations and about 500,000 non-Americans traveled on the lines operating from south Florida and elsewhere in North America.
Lanterman also warned his peers against diluting the character of their popular lines.
""It's very difficult to make these ships different for non-Americans without making it unsatisfactory for Americans,"" Lanterman said.
((-- Miami newsroom, 305-374-5013))
",33
"Ordinarily seated at the rear of a courtroom, behind deep ranks of dark-suited corporate lawyers fighting anti-cigarette lawsuits, is the mystified legal defender of Dosal Tobacco Co.
""What am I doing here?"" Jose Martinez often asks as he fidgets through yet another courtroom hearing in one of the high-profile tobacco cases heading for trial.
Martinez, of the Miami law firm Martinez, Gutierrez & DeCordoba, puts that question to judges and to plaintiff attorneys pressing lawsuits on behalf of sick smokers, non-smokers claiming injuries from other people's cigarette fumes and the State of Florida, which is seeking tobacco money for Medicaid costs.
""We're just a small manufacturer, a family operation. We shouldn't be here,"" Martinez insists to anyone who will listen.
Dosal -- now swept up in one of the great legal battles of the century -- is a tiny family-owned company based in Opa-Locka, a poor city north of Miami built by a real estate developer with a fanciful taste for Moorish architecture.
It makes but a few million cigarettes a year -- compared with Philip Morris Cos. Inc., the largest cigarette maker in the world, which last year shipped nearly 231 billion cigarettes in the United States alone.
Still, Dosal's name appears in three anti-tobacco lawsuits in Florida and another in Michigan, along with deep-pocketed giants such as RJR Nabisco Holdings and Philip Morris, which last year had more than $35 billion in tobacco sales.
Dosal's main customer is the Florida prison system, which sells Dosal's DTC brand cigarettes in regular and king-sized lengths to the smokers among the state's 50,000 inmates.
Even so, Dosal is named in the state's lawsuit against tobacco companies.
Dosal also makes a brand or two favoured by elderly Cuban emigres in south Florida, including Competidora.
""They buy bulk tobacco and make cigarettes on machines in Opa-Locka. It's a very small operation,"" Martinez said. ""And the customers for the Cuban brands are old and dying.""
Good-humoured and joking much of the time, Martinez is deadly serious about eliminating the legal threat to Dosal.
In addition to filing formal requests that Dosal be dropped, he presses plaintiff lawyers informally with arguments on the futility of suing a company with limited financial resources.
""I ask every day,"" Martinez says.
If kept in the lawsuits, including the so-called Broin class-action suit scheduled to go to trial Monday in Miami, Dosal could be made to pay a share of any monetrary judgment. The lawyers pressing the Broin case intend to ask for $5 billion or more in damages.
And while the tobacco industry has yet to pay out a dollar in court damages after four decades of litigation, leaks in the industry's defences are widely seen on Wall Street and elsewhere.
The Broin case, being brought on behalf of an estimated 60,000 ailing and non-smoking flight attendants by lawyers Susan and Stanley Rosenblatt, is the first of several multibillion-dollar lawsuits coming to trial this year against U.S. cigarette makers.
""It's their fault,"" Martinez said, pointing to the Rosenblatts during a courtroom interview this week after a hearing in the Broin case, filed more than six years ago.
""All the other suits copied theirs.""
Martinez said the Rosenblatts, who have named 10 defendants in the Broin lawsuit, were also responsible for the Michigan anti-tobacco lawsuit which has targeted Dosal and other cigarette makers.
""I don't think we have even sold any cigarettes in Michigan,"" Martinez said.
",33
"The judge in the Broin secondhand-smoke trial ruled on Tuesday that prospective jurors be questioned separately out of fear that strongly felt differences over tobacco may unduly influence others and perhaps even influence the outcome of the $5 billion case.
Judge Robert Kaye said that, while he was eager to get a jury in place, he was worried about possible fallout from news stories on the trial and feared that inflammatory opinions expressed in open court might unfairly influence a verdict.
Individual questioning of potential jurors in the case, known as Broin vs. Philip Morris et al, would continue ""so as to not infect the rest of the panel with some dangerous remarks,"" Kaye ruled.
In the historic case -- the first class action and first secondhand-smoke case against the tobacco industry to go to trial -- some 60,000 non-smoking airline flight attendants are suing nine cigarette companies for maladies they claim were caused by smoke from airline passengers' cigarettes.
In the first two days of jury selection prospective jurors expressed widely varying opinions about cigarette smoking.
One said secondhand smoke very likely caused disease in non-smokers while another compared lawsuits against tobacco companies for smoking-related illnesses to suing Kentucky Fried Chicken for Americans' high cholesterol.
Jury selection has been slow, with only five out of 29 individuals examined Monday making an initial cut.
Six jurors and between six and 12 alternate jurors are needed for the trial, which is expected to turn on dense statistical arguments and detailed evidence from scientists and physicians.
Participants in the case do not expect testimony to begin until at least next week.
Lawyers for the two sides clashed Tuesday over procedures for questioning of potential jurors.
Stanley Rosenblatt, an attorney pressing the class-action lawsuit named for lung-cancer survivor Norma Broin, told Kaye he wanted to ask more questions of potential jurors than he can manage in the 20 minutes to 30 minutes he has so far spent on each person.
Rosenblatt said he would be willing to ask the questions of large groups in order to save time.
But David Hardy, an attorney for two tobacco companies, said the questioning of individual potential jurors separated from others was vital.
""There were several comments, which if heard by a group, would have prompted a presumption of a poisioned panel,"" Hardy said, referring to early questioning of potential jurors.
Rosenblatt argued that the risk of any influence from an individual comment was slight and could be handled with instructions from the judge.
""If someone disagrees with a terrible opinion, we can deal with that,"" Rosenblatt said.
The judge ruled, however, that individual questioning would continue.
Kaye already had placed limits on attorneys talking to reporters and barred the identification and photography of potential jurors, who are identified only by number.
He also assured lawyers in court that the 200 or more people awaiting questioning were in courthouse rooms with televisions tuned only to non-news programmes.
Kaye later dismissed, at the tobacco companies' request, a retired truck driver who said he had quit smoking after 23 years and believed strongly that secondhand smoke was dangerous.
""When people smoke around you, do you ask them to stop?"" Hugh Whiting, another tobacco company attorney, asked the man.
""I move from around them,"" the man said.
""Because it makes you sick?""
""That's right. I'm very delicate,"" the man said.
Kaye also excused a college student who said a two-month trial would prevent her from taking a course in sociology.
Other people questioned Tuesday included an organiser of Miami's annual Orange Bowl Parade and a retired police dispatcher who quit smoking when cigarettes rose to 50 cents a pack. ""I was too cheap,"" she said.
Rosenblatt has said he intends to ask for $5 billion or more in damages if tobacco companies are found liable for the lung cancer and other tobacco-related ailments among the flight attendants. Smoking on U.S. passenger jets was banned in 1988.
",33
"Ordinarily seated at the rear of a courtroom, behind deep ranks of dark-suited corporate lawyers fighting anti-cigarette lawsuits, is the mystified legal defender of Dosal Tobacco Co.
""What am I doing here?"" Jose Martinez often asks as he fidgets through yet another courtroom hearing in one of the high-profile tobacco cases heading for trial.
Martinez, of the Miami law firm Martinez, Gutierrez & DeCordoba, puts that question to judges and to plaintiff attorneys pressing lawsuits on behalf of sick smokers, non-smokers claiming injuries from other people's cigarette fumes and the State of Florida, which is seeking tobacco money for Medicaid costs.
""We're just a small manufacturer, a family operation. We shouldn't be here,"" Martinez insists to anyone who will listen.
Dosal -- now swept up in one of the great legal battles of the century -- is a tiny family-owned company based in Opa-Locka, a poor city north of Miami built by a real estate developer with a fanciful taste for Moorish architecture.
It makes but a few million cigarettes a year -- compared with Philip Morris Cos. Inc., the largest cigarette maker in the world, which last year shipped nearly 231 billion cigarettes in the United States alone.
Still, Dosal's name appears in three anti-tobacco lawsuits in Florida and another in Michigan, along with deep-pocketed giants such as RJR Nabisco Holdings and Philip Morris, which last year had more than $35 billion in tobacco sales.
Dosal's main customer is the Florida prison system, which sells Dosal's DTC brand cigarettes in regular and king-sized lengths to the smokers among the state's 50,000 inmates.
Even so, Dosal is named in the state's lawsuit against tobacco companies.
Dosal also makes a brand or two favored by elderly Cuban emigres in south Florida, including Competidora.
""They buy bulk tobacco and make cigarettes on machines in Opa-Locka. It's a very small operation,"" Martinez said. ""And the customers for the Cuban brands are old and dying.""
Good-humored and joking much of the time, Martinez is deadly serious about eliminating the legal threat to Dosal.
In addition to filing formal requests that Dosal be dropped, he presses plaintiff lawyers informally with arguments on the futility of suing a company with limited financial resources.
""I ask every day,"" Martinez says.
If kept in the lawsuits, including the so-called Broin class-action suit scheduled to go to trial Monday in Miami, Dosal could be made to pay a share of any monetrary judgment. The lawyers pressing the Broin case intend to ask for $5 billion or more in damages.
And while the tobacco industry has yet to pay out a dollar in court damages after four decades of litigation, leaks in the industry's defenses are widely seen on Wall Street and elsewhere.
The Broin case, being brought on behalf of an estimated 60,000 ailing and non-smoking flight attendants by lawyers Susan and Stanley Rosenblatt, is the first of several multibillion-dollar lawsuits coming to trial this year against U.S. cigarette makers.
""It's their fault,"" Martinez said, pointing to the Rosenblatts during a courtroom interview this week after a hearing in the Broin case, filed more than six years ago.
""All the other suits copied theirs.""
Martinez said the Rosenblatts, who have named 10 defendants in the Broin lawsuit, were also responsible for the Michigan anti-tobacco lawsuit which has targeted Dosal and other cigarette makers.
""I don't think we have even sold any cigarettes in Michigan,"" Martinez said. (
",33
"U.S. billionaire Wayne Huizenga shrugged off lawsuits filed by two Japanese motor giants, saying on Tuesday that the AutoNation car-retailing arm of his Republic Industries Inc never aspired to control one of every five Toyota and Honda sales in the United States.
Both Toyota Motor Corp and Honda Motor Co Ltd have filed suits in U.S. courts against AutoNation, one of several buyout companies prowling the tens of thousands of independent car retailers in the United States.
Each company wants AutoNation to stop buying retailers which sell its cars. In its suit filed last week, Honda said AutoNation was cheapening its Honda and Acura brands.
Both companies limit the number of dealerships which can be owned by one proprietor and have said AutoNation wants to control 20 percent of their U.S. sales.
""We never said 20 percent and we never expected to get that much,"" Huizenga told the annual shareholders meeting of Republic. ""We know we will be partners with them.""
A renowned businessman credited with creating giant video-retailer Blockbuster and Waste Management Corp, Huizenga said AutoNation could take minority stakes in Toyota and Honda dealerships or use other techniques for tapping into the strong sales flows of highly popular Toyota and Honda vehicles.
""There are ways to accomplish what we want,"" Huizenga said.
Huizenga is chairman and co-chief executive of Republic, an auto-services, home-security and garbage-hauling conglomerate which has bought dozens of small car dealerships and other businesses in the past 18 months using Republic's high-flying shares in stock-swaps.
But Republic's shares are 25 percent or more off their highs, at least in part to investors worries that rivals are beginning to narrow AutoNation's lead in consolidating used and new car dealerships.
Ford Motor Co executives last week briefed dealers in Indianopolis, Indiana, on a voluntary and highly innovative plan to gather together about 18 Indianapolis-area Ford and Lincoln-Mercury dealerships into five or six giant sales outlets with stand-alone, satellite service facilities for light repairs and warranty work.
The giant centres, similar to the 11 AutoNation superstores now operating, would be owned by Ford and by participating dealers, a Ford spokesman has said.
Ford is looking to test the concept in two or three medium-sized markets in the next two to three years with an eye to a possible public offering.
""We welcome that,"" Republic president Steve Berrard said. ""We think it's a great endorsement.""
Besides AutoNation, Circuit City Stores Inc.'s CarMax and others are using many of the customer-friendly techniques pioneered by General Motors Corp's Saturn unit to court the two of every three Americans who hate to haggle.
Both GM and Chrysler Corp have had programmes to reduce their dealership ranks through consolidation and buy-outs, but neither has proposed as radical a restructuring of its distribution system.
-- Miami newsroom, 305-374-5013
",33
"The prize in their hands, the question now is whether Ted Turner and Gerald Levin will feud or combine to exploit the golden opportunities being offered by the merger of Time Warner Inc. and Turner Broadcasting System.
The companies, whose merger will create the world's largest media group, won approval on Thursday for their year-old deal from the Federal Trade Commission. The Federal Communications Commission is expected to give its approval soon, and final approval by shareholders of both companies is scheduled for Oct. 10.
While it is already known that Levin, the Time Warner chairman, and Turner, founder and head of Turner Broadcasting, will occupy the top spots at the new Time Warner, analysts wonder about their chemistry.
The low-key Levin will be chairman and chief executive while the flamboyant Turner, who created Cable News Network and other major media properties, will be vice-chairman.
""The management side remains unclear, the division of duties remains unclear,"" said Smith Barney analyst Jill Krutick.
""They have very different management styles,"" said analyst Dennis McAlpine of Josephthal Lyon & Ross. ""A lot depends on which Ted you get -- Ted the imaginative, creative and dynamic or Ted the meddler,"" he said.
Both Turner and Levin have pledged to cooperate, but only time will tell if the two strong-willed managers will be able to co-exist at top of the huge company.
In addition, the roles of second-tier executives at Turner Broadcasting have not been announced. Speculation about departures picked up when severance packages worth $29 million for eight Turner officials became public.
Analysts said, however, the business fundamentals of the combination were strong.
Together the companies will control top-tier programming and distribution systems for filmed entertainment and will have real strength with cable operators and advertisers both in the United States and elsewhere.
Aside from being the nation's No. 2 cable-TV operator, Time Warner owns the Warner Bros. movie studios and Time, People, Sports Illustrated and Fortune magazines.
In addition to CNN, Turner Broadcasting also owns film and TV studios, a cartoon cable-TV channel and the Atlanta Braves and Atlanta Hawks sports teams.
Turner has been assigned oversight of the combined company's cable-television programming, services such as The Cartoon Network and TNT.
But whether or not Time Warner's own cable-programming service, Home Box Office, will be placed under Turner is still not known, McAlpine said.
He also said it was unknown whether the film and TV production studios now owned by Turner Broadcasting -- Castle Rock and New Line Cinema -- would be report to Turner or be assigned to the executives running the highly successful Warner Brothers studio operations.
There is also the possibility the two Turner studios could be sold. Krutick said she expected decisions on selling the Turner studios, including Castle Rock, which is being shopped around, to be taken up very quickly after the merger closes.
""If they can unwind an asset, one that's duplicative, and pay down debt, I think they will,"" said Krutick.
",33
"First Joe Camel won a reprieve and now the Marlboro Man may be getting a longer lease of life -- at least outside the United States.
Philip Morris Cos. Inc. shareholders voted on Thursday by a margin of more than nine-to-one to reject a shareholder proposal that the company limit its marketing to youths outside the United States in the same way that it does domestically.
It was the second time this month the shareholders of a leading U.S. tobacco company have defended an advertising campaign credited with selling billions of cigarettes.
RJR Nabisco Holdings Inc. shareholders on April 16 voted down a shareholder proposal to do away with its Joe Camel cartoon character, which promotes Camel cigarettes around the world. Critics say Joe -- a camel who wears a Bogartesque trenchcoat -- encourages people under 18 to smoke.
Philip Morris, whose Marlboro cigarette ads are spearheaded by the rugged Marlboro Man cowboy figure, is the biggest maker of tobacco products in the world after the Chinese government.
At least one model who appeared as the Marlboro Man in advertising campaigns around the world has died of smoking-related illness.
The proposal to extend the company's limitations on domestic marketing to foreign markets was opposed by Philip Morris chief executive Geoffrey Bible and the board of directors.
The company said it has long opposed sales of cigarettes to young people but that a single style of marketing was wrong for a global company selling food, beer and tobacco products in 180 nations.
""It's absolutely hypocritical for Mr. Bible to hail the company's youth access programme at home ... and at the same time not apply the same standard anywhere else,"" said shareholder Edward Sweda, an anti-tobacco activist and a lawyer with Tobacco Control Resource Centre in Boston.
Philip Morris's U.S. programme, launched two years ago and called Action Against Access, eliminated mail sales of Marlboro, L&M and other Philip Morris cigarettes and give-aways of cigarettes at public gatherings.
The company also added warnings against youth sales to its cigarette packs and began lobbying for state laws to force shopkeepers to check for proof of age, Philip Morris spokeswoman Karen Daragan said.
Top tobacco companies are privately negotiating with anti-tobacco forces on a $300 billion or more deal to resolve much U.S. tobacco litigation and likely sharply reduce the marketing of cigarettes in the United States.
",33
"The prize in their hands, the question now is whether Ted Turner and Gerald Levin will feud or combine to exploit the golden opportunities being offered by the merger of Time Warner Inc. and Turner Broadcasting System.
The companies, whose merger will create the world's largest media group, won approval on Thursday for their year-old deal from the Federal Trade Commission. The Federal Communications Commission is expected to give its approval soon, and final approval by shareholders of both companies is scheduled for Oct. 10.
While it is already known that Levin, the Time Warner chairman, and Turner, founder and head of Turner Broadcasting, will occupy the top spots at the new Time Warner, analysts wonder about their chemistry.
The low-key Levin will be chairman and chief executive while the flambuoyant Turner, who created Cable News Network and other major media properties, will be vice-chairman.
""The management side remains unclear, the division of duties remains unclear,"" said Smith Barney analyst Jill Krutick.
""They have very different management styles,"" said analyst Dennis McAlpine of Josephthal Lyon & Ross. ""A lot depends on which Ted you get -- Ted the imaginative, creative and dynamic or Ted the meddler,"" he said.
Both Turner and Levin have pledged to cooperate, but only time will tell if the two strong-willed managers will be able to co-exist at top of the huge company.
In addition, the roles of second-tier executives at Turner Broadcasting have not been announced. Speculation about departures picked up when severance packages worth $29 million for eight Turner officials became public.
Analysts said, however, the business fundamentals of the combination were strong.
Together the companies will control top-tier programming and distribution systems for filmed entertainment and will have real strength with cable operators and advertisers both in the United States and elsewhere.
Aside from being the nation's No. 2 cable-TV operator, Time Warner owns the Warner Bros. movie studios and Time, People, Sports Illustrated and Fortune magazines.
In addition to CNN, Turner Broadcasting also owns film and TV studios, a cartoon cable-TV channel and the Atlanta Braves and Atlanta Hawks sports teams.
Turner has been assigned oversight of the combined company's cable-television programming, services such as The Cartoon Network and TNT.
But whether or not Time Warner's own cable-programming service, Home Box Office, will be placed under Turner is still not known, McAlpine said.
He also said it was unknown whether the film and TV production studios now owned by Turner Broadcasting -- Castle Rock and New Line Cinema -- would be report to Turner or be assigned to the executives running the highly successful Warner Brothers studio operations.
There is also the possibility the two Turner studios could be sold. Krutick said she expected decisions on selling the Turner studios, including Castle Rock, which is being shopped around, to be taken up very quickly after the merger closes.
""If they can unwind an asset, one that's duplicative, and pay down debt, I think they will,"" said Krutick.
",33
"Tobacco companies could face a double-digit drop in U.S. sales when they pass on the cost of a possible $300 billion deal to settle massive legal claims.
Analyst Gary Black of Sanford Bernstein said U.S. consumption would drop about 12 percent, based on the experience of past price increases.
But industry analysts also said Thursday the reported $300 billion paid over 25 years was probably on the high side.
""It's much too high. I think it's an opening shot by the anti-tobacco lobby,"" said Martin Feldman of Smith Barney.  
The talks to end government, individual and class-action suits seeking billions of dollars in damages cover proposals for a $300 billion fund for sick smokers; sharp limits on advertising; and regulation of tobacco by the Food and Drug Administration.
A deal may take weeks or months, but passage by Congress of laws sheltering the industry from lawsuits will probably take a year or two, analysts said. Some anti-tobacco senators in Washington have already questioned the terms.  
A 12 percent drop would cut industry leader Philip Morris' pre-tax profits by about $500 million a year and the profits of RJR Nabisco Holdings Corp -- the second largest U.S. cigarette maker -- by some $170 million, Sanford Bernstein's Black said.
Roy Burry, analyst at Oppenheimer & Co, said the price rises would likely be gradual, costing the industry only $6 billion in the first year after a deal and the effects would vary from company to company.
Shipments at Philip Morris, with its market-dominant Marlboro brand, would fall only about six percent.  
""We would start with a 25 cent initial increase, or 10-15 percent, and a six percent decline in volume,"" he said of Philip Morris.
Feldman said in a report that cigarette consumption is not necessarily controlled by prices. In many countries, taxes constitute a much greater share of retail prices than in the United States. Taxes on a typical 20 cigarette pack account for 29 percent of the retail price in the U.S., but for 77 percent in Ireland, 74 percent in Australia and 56 percent in Canada.
The analysts said a global settlement, even with a $300 billion price tag, would raise the value of tobacco properties because many legal worries would have been cleared away.
Black expected that, over time, Philip Morris would rise to around 60 from 42-1/4 on Thursday and RJR Nabisco to 48 from 32-3/4.
Feldman agreed, saying: ""The businesses will remain very profitable and the legal risks that have been keeping valuations down will have disappeared.""
-- Miami newsroom 305-374-5013.
",33
"Any sweeping settlement among state governments and tobacco companies would leave standing a great many anti-smoking suits, including a $5 billion claim scheduled for a June 2 trial, plaintiff lawyers said on Friday.
""It's a lousy settlement for my clients and the American people,"" said Stanley Rosenblatt, one of two lawyers pressing the Broin class-action suit here on behalf of flight attendants claiming injuries from secondhand tobacco smoke.  
Rosenblatt's case goes to trial on June 2 and is a landmark, because it is both the first class-action suit against cigarette makers to survive preliminary legal challenges and the first trial of a claim of damage from second-hand smoke.
Some 1,000 anti-tobacco lawsuits currently exist in U.S. courts against tobacco companies, according to Richard Daynard of the Tobacco Products Litigation Project at Northeastern University.  
Norwood Wilner, another Florida attorney who secured a $750,000 jury judgment against the Brown & Williamson unit of B.A.T Industries Plc in 1996, has no plans to delay his next trial, said his legal aide, Jenny Stieger.
""We have a trial date of August 4, for another lady with lung cancer,"" Stieger said.
Wilner on May 5 lost a suit on behalf of smoker Jean Connor, who was killed by lung cancer, against RJ Reynolds Tobacco Co, a unit of RJR Nabisco Holdings Corp.  
Reynolds, the maker of Winston and Salem brand cigarettes, will also be the defendant in the August trial on the claim of Joann Karbinyk, Stieger said.
Another anti-tobacco lawyer, Ronald Acosta, has two tentative trial dates scheduled for summer in U.S. District Court in Tampa, Florida. Wilner expects to try still another case in November, Stieger said.  
Other cases expected to come to trial in 1997 include another class-action on behalf of Florida smokers in September and a secondhand smoke case in Mississippi brought by the family of a non-smoking barber who allegedly died of cancer caused by the cigarette smokers awaiting haircuts in his shop.
According to published reports, in part challenged by Mississippi Attorney General Michael Moore, tobacco companies and the 29 state governments suing the industry for billions in healthcare spending on smokers are near a deal limiting the number and type of lawsuits which could be brought by smokers.  
The Wall Street Journal said the proposed terms would make it nearly impossible for future smokers to sue cigarette makers for lung cancer and other common tobacco-related illnesses. ""The global settlement is not a done deal,"" said Stieger. ""There is not a whole lot of support for a deal messing with the tort system.""
Attorney Rosenblatt said during a pre-trial hearing for the Broin class-action suit that the tobacco industry and the attorneys general would reach a settlement.  Tobacco lawyers would then go to ""a friendly court"" and ask it to halt the Broin trial.  
""I don't think that's going to be successful, but that's the plan,"" he said.
Michael Russ, a lawyer for Brown & Williamson, told Reuters as the hearing broke for lunch: ""If that is the plan, I don't know about it.""
(( -- Miami newsroom - 305-374-5013 ))
",33
"North Carolina's attorney general on Friday questioned the legal utility of the industry documents Liggett Group has promised to hand over for use against fellow cigarette companies.
Liggett, a unit of Brooke Group, on Thursday agreed as part of a settlement with 22 state governments suing it to deliver internal documents that may help the states press their cases against Philip Morris and others.
""It's hard to see how Liggett Group would give up evidence of criminal behaviour,"" Easley said.  
Easley has not filed a suit like 22 of his peers seeking compensation for billions of dollars spent by state governments on treating sick smokers. He favors a legislative resolution.
North Carolina is the biggest tobacco-producing state in the country and home to leading manufacturers. Its governor has allied with the tobacco industry in fighting federal limits on marketing cigarettes, especially to young people.  
The contents of the documents has not been made public. And tobacco company lawyers have secured an order barring the delivery until at least March 31, when a North Carolina state judge will hear arguments on whether not the Liggett handover would violate lawyer-client privileges for other companies.
Easley dismissed as ""aggressive"" remarks by attorneys general announcing the Liggett deal on Thursday that the internal documents would be crucial in proving allegations of a conspiracy among the tobacco companies.
A Liggett promise to pay 25 percent of pre-tax profits for a quarter of a century was worthless, he said, because Liggett has not been profitable in many years.
""It would appear that the (plaintiff) attorneys only wanted to get some papers,"" Easley said.
Easley backed a bill in the North Carolina legislature that would regulate cigarette marketing to children.
The courtroom battles against the tobacco industry would be resolved only by a sweeping new law from Washington, Easley said.
",33
"Republic Industries, Inc., expanding its nationwide car dealership network, said Wednesday it agreed to acquire two more companies in Florida for a total of $62 million in stock.
The dealerships are Gulf Management Inc., which operates Lexus of Tampa Bay and Lexus of Clearwater, Fla.; and the Steve Moore General Motors automotive group of Palm Beach, Fla., which includes Chevrolet, Cadillac, Pontiac, Oldsmobile, Buick and Geo brands.
The deals include all related real estate, and are subject to manufacturer and government approval.
The dealerships' owners will retain their responsibilities under long-term employment agreements, Republic said.
Republic, led by Florida billionaire Wayne Huizenga, owns the nation's largest chain of new vehicle dealerships and is building a chain of used car megastores it operates under the AutoNation USA brand name.
Republic also owns National Car Rental System Inc., Alamo Rent-A-Car Inc. and has agreed to acquire Spirit Rent-A-Car.
Until last summer, Republic had mainly been a waste management company. Its aggressive strategy of creating a nationwide auto dealership network has sparked lawsuits by Japanese motor giants Toyota Motor Corp. and Honda Motor Co. Ltd. to block Republic's plan to acquire their outlets in major U.S. markets.
Each company wants AutoNation to stop buying retailers which sell its cars. In its suit filed last week, Honda said AutoNation was cheapening its Honda and Acura brands.
Both companies limit the number of dealerships which can be owned by one propietor and have said AutoNation wants to control 20 percent of their U.S. sales.
Huizenga this week shrugged off the lawsuits, saying that AutoNation never aspired to control one of every five Toyota and Honda sales in the United States.
""We never said 20 percent and we never expected to get that much,"" Huizenga told the annual shareholders meeting of Republic on Tuesday. ""We know we will be partners with them.""
Huizenga, credited with creating giant video-retailer Blockbuster and Waste Management Corp., said AutoNation can take minority stakes in Toyota and Honda dealerships or use other techniques for tapping into the strong sales flows of highly popular Toyota and Honda vehicles.
""There are ways to accomplish what we want,"" Huizenga said. Fort Lauderdale, Fla.-based Republic's stock was off 94 cents at $27.375 on Nasdaq in afternoon trading.
",33
"Quickly expanding Republic Industries should meet full-year 1997 share-profit estimates of $0.70, Republic chief financial officer Mike Karsher said on Monday.
All four Republic segments, including car retailing, performed well in the first quarter and the diversified services group expects to accelerate the pace of openings of its AutoNation used-car superstores in 1997, Karsher told Reuters.  
But Karsher cautioned the four or five new superstores being added to the 1997 schedule would not add to 1997 full-year profits since the outlets typically incur initial losses until sales volume picks up.
Republic is on an acquisition campaign. In the past six months it bought major car-rental agencies such as Alamo and car dealerships in many parts of the United States.
For the first quarter, Republic reported a doubling of share profits to $0.08 from the same period in 1996.
Karsher said the share profits were $0.01 higher than a consensus of Wall Street analysts forecasts.  
Net income grew even faster to $28.9 million from $12.4 million as revenues rose to $1.504 billion from $1.016 billion.
The company has greatly expanded its share base with its stock-swap acquistions and had average shares outstanding in the first quarter of 374 million, up from 283 million a year earlier.
""All four business segments had very good quarters,"" he said.
Republic has opened three AutoNation stores so far in 1997 and had planned to open 10 more this year, but was adding four or five stores.
""We are pleased with the performance of the AutoNation stores,"" he said.
Beyond auto sales and rentals, Republic sells security services and operates waste haulage businesses.
-- Miami newsroom - 305-374-5013.
",33
"A former U.S. surgeon general will testify in a class-action trial that cigarette makers blunted efforts in the 1970s to warn Americans about the dangers of second-hand smoke, a plaintiffs' lawyer said on Monday.
Dr. Jesse Steinfeld and another unidentified surgeon general, the highest medical post in the federal government, will testify on behalf of an estimated 60,000 non-smoking flight attendants claiming damages for illnesses allegedly caused by second-hand smoke on passenger jets, attorney Stanley Rosenblatt said.
A jury trial in Dade County Court is scheduled to begin June 2 and will be the first class-action suit to come to trial in the United States against the tobacco industry. It is but one case in a wide courtroom assault on cigarette makers.
In a class-action suit, used in the past against asbestos makers on behalf of victims of lung diseases, a small group seeks damages on behalf of a larger number of people with similar injuries.
A second class-action suit on behalf of all Florida smokers is scheduled for trial in Miami in September.
""He will testify that the tobacco industry did everything it could to impede the information from getting to the public, from getting to the scientific community,"" Rosenblatt said, referring to Steinfeld during a pre-trial hearing.
Steinfeld is also scheduled to testify for Mississippi, whose attorney general is suing tobacco companies to recoup the cost of treating sick smokers through its Medicaid programme. Twenty-one other states, including Florida, have filed similar suits.
Rosenblatt accuses Philip Morris Cos. and other leading cigarette makers of purposely misleading Americans and conspiring with one another to hide the medical risks of second-hand smoke to sustain corporate profits.
Rosenblatt gave no details of the promised testimony. His statement came during a dispute over the exchange of witness lists.
""There's simply no credible evidence that second-hand smoke causes disease,"" Michael York, a lawyer representing Philip Morris, said later. ""We're still very confident that our case is solid and that we will prevail.""
Susan Rosenblatt, the second member of the husband-and-wife legal team bringing the class-action suit, said the plaintiffs will also call a former tobacco company employee. The witness has said under pre-trial questioning that he was instructed to destroy scientific findings pointing to the health risks of second-hand smoke, she said.
The plaintiffs, who include Norma Brion, a non-smoking flight attendant for 13 years who was diagnosed with lung cancer, also will call an Australian cardiologist who will tesify that his research linking second-hand smoke and heart diseases was blocked by tobacco companies, the Rosenblatts said.
Circuit Court Judge Robert Kaye said at the hearing that he may name an outside lawyer to review some 1,500 industry documents the Rosenblatts want for the trial. The tobacco lawyers oppose the use of the documents, the great bulk of which are not public.
Kaye also extended until March 24 a deadline for the Rosenblatts to deliver a list of witnesses to tobacco-industry lawyers. Hugh Whiting, a tobacco company lawyer, said the delay was harming his industry's defence.
Defendants in the case include the Brown & Williamson unit of B.A.T Industries, RJR Nabisco and the Lorillard unit of Loews Corp.
",33
"Philip Morris Cos. Inc. Chief Executive Geoffrey Bible said Thursday that the world's largest cigarette maker was open to ""reasonable measures"" aimed at resolving anti-tobacco lawsuits in the United States.
Bible declined to comment on negotiations between cigarette companies and anti-smoking forces on a possible resolution of hundreds of lawsuits and stricter regulations facing the beleaguered but highly profitable industry.
But he told shareholders at the company's annual meeting that ""we will listen and explore all reasonable measures.""
He also said Philip Morris was willing to work with government officials to hammer out new regulations on tobacco sales, even as the industry fights a court battle against tough new restrictions on sales, especially to minors, put in place by the Food and Drug Administration earlier this year.
""We are willing to work with responsible government representatives and others on a balanced system,"" Bible said.
He did not spell out what initiatives he might consider, other than to say Philip Morris favoured restrictions on young people buying cigarettes and two years ago launched a programme to limit people under 21 from obtaining cigarettes.
""We do not want kids to smoke,"" Bible said.
Anti-smoking groups have said the industry targets its advertising to encourage young people to smoke.
At the meeting, Philip Morris shareholders rejected a shareholder proposal that the company adopt the same standards on marketing to youths outside the United States that it put in place domestically two years ago.
Bible also said Philip Morris would continue fighting the of hundreds of individual, state and class-action suits it faces ""vigorously.""
Tobacco executives have met for the first time in recent weeks with state officials and anti-smoking activists on possibly settling the massive litigation against the industry.
Negotiators said on Wednesday they had met on Sunday and Monday in Chicago but reported that no deal was imminent, a White House official said after negotiators from both sides briefed White House deputy counsel Bruce Lindsey.
Published reports have said the industry might pay as much as $300 billion over 25 years into a compensation fund for smokers who fall sick with lung cancer and other diseases. In return, cigarette makers would get broad shelter from lawsuits and would likely see higher stock market valuations on their tobacco and non-smoking businesses.
Outside the Philip Morris meeting, about 20 protesters wearing giant Marlboro cigarette costumes greeted shareholders arriving for the meeting at the company's biggest plant.
""Shame on Philip Morris,"" read signs carried by the protestors from INFACT, a Boston-based anti-smoking group that says Philip Morris uses its lobbying to harm public health.
Marlboro, Philip Morris' best-known brand, helps the company capture about 50 percent of all domestic cigarette sales.
Other protestors wore big ""Uncle Sam"" hats and took play money from the people dressed as Philip Morris cigarettes.
A spokeswoman for Philip Morris said the INFACT protestors were welcome to voice their opinions.
Philip Morris stock rose 87.5 cents to $41.625 on the New York Stock Exchange.
",33
"Tobacco-industry lawyers in the $5 billion Broin secondhand smoke case on Tuesday touched off a testy outburst from the trial judge, who accused them of muddling the minds of prospective jurors with trick questions.
""We pull them apart,"" Dade County Circuit Court Judge Robert Kaye told Edward Moss, an attorney for Brown & Williamson, a unit of B.A.T Industries of Britain. ""We are playing with their heads.""
Kaye, speaking towards the end of a second, slow day of jury selection in the landmark trial, criticised the questions put to jurors by Moss and attorneys for other big tobacco companies such as Philip Morris Cos Inc. and R.J. Reynolds Tobacco as too firmly aimed at uncovering anti-smoking attitudes among the prospective jurors.
""You have been playing with people's heads for two days ...,"" Kaye said.
Kaye said smoking was a widely controversial practice, making it impossible to find a fully neutral jury of six and as many as a dozen alternative jurors to hear the case. Florida law only required that jurors be able to put aside their prejudices and decide on the evidence presented, he said.
Stanley Rosenblatt, an attorney for the 60,000 sick flight attendants represented in the Broin class-action suit, said, ""These are consumate mind games that are being played by very skilful lawyers. Their problem is that they are looking for people that live in a cave ... uninformed people.""
The clash came after the questioning of a young musician who said her voice had been harmed from secondhand smoke while singing in nightclubs. But, under follow-up questioning by Kaye, she said she could set aside her belief that cigarettes should be banned in the United States and decide a verdict just on the evidence presented at the trial.
Kaye refused a tobacco lawyers request that the musician be bumped as prejudiced against cigarette makers but she can be dropped later if the tobacco lawyers choose to use one of 27 juror challenges they may make without explanation.
The woman was just one of six prospective jurors who survived some six hours of courtroom questioning on Tuesday. The other five included an organiser of Miami's annual Orange Bowl parade, a retired police dispatcher and a bookings manager for Royal Caribbean Cruise Lines. Eleven people have now made past the initial round of attorney queries.
At least a dozen more people are to be questioned on Wednesday, Kaye said.
Earlier, the judge sided with tobacco lawyers who opposed a Rosenblatt request that prospective jurors be questioned in groups, instead of one by one. Kaye said that, while he was eager to get a jury in place, he was worried about possible fallout from news stories on the trial and feared that inflammatory opinions expressed in open court might unfairly influence a verdict.
Individual questioning of potential jurors in the case, known as Broin vs. Philip Morris et al, would continue ""so as to not infect the rest of the panel with some dangerous remarks,"" Kaye ruled.
In the historic case -- the first class action and first secondhand smoke case against the tobacco industry to go to trial -- non-smoking airline flight attendants are suing nine cigarette companies for maladies they claim were caused by smoke from airline passengers' cigarettes.
In the first two days of jury selection prospective jurors expressed widely varying opinions about cigarette smoking.
One said secondhand smoke very likely caused disease in non-smokers while another compared lawsuits against tobacco companies for smoking-related illnesses to suing Kentucky Fried Chicken for Americans' high cholesterol.
Rosenblatt has said he intends to ask for $5 billion or more in damages if tobacco companies are found liable for the lung cancer and other tobacco-related ailments among the flight attendants. Smoking on U.S. passenger jets was banned in 1988.
",33
"Philip Morris Cos. Inc. Chief Executive Geoffrey Bible said Thursday that the world's largest cigarette maker was open to ""reasonable measures"" aimed at resolving anti-tobacco lawsuits in the United States.
Bible declined to comment on negotiations between cigarette companies and anti-smoking forces on a possible resolution of hundreds of lawsuits and stricter regulations facing the beleaguered but highly profitable industry.
But he told shareholders at the company's annual meeting that ""we will listen and explore all reasonable measures.""
He also said Philip Morris was willing to work with government officials to hammer out new regulations on tobacco sales, even as the industry fights a court battle against tough new restrictions on sales, especially to minors, put in place by the Food and Drug Administration earlier this year.
""We are willing to work with responsible government representatives and others on a balanced system,"" Bible said.
He did not spell out what initiatives he might consider, other than to say Philip Morris favored restrictions on young people buying cigarettes and two years ago launched its own program to limit people under 21 from obtaining cigarettes.
""We do not want kids to smoke,"" Bible said.
Anti-smoking groups have said the industry targets its advertising to encourage young people to smoke.
Bible also said Philip Morris would continue fighting the of hundreds of individual, state and class-action suits it faces ""vigorously.""
Tobacco executives have met for the first time in recent weeks with state officials and anti-smoking activists on possibly settling the massive litigation against the industry.
Negotiators said on Wednesday they had met on Sunday and Monday in Chicago but reported that no deal was imminent, a White House official said after negotiators from both sides briefed White House deputy counsel Bruce Lindsey.
Published reports have said the industry might pay as much as $300 billion over 25 years into a compensation fund for smokers who fall sick with lung cancer and other diseases. In return, cigarette makers would get broad shelter from lawsuits and would likely see higher stock market valuations on their tobacco and non-smoking businesses.
Outside the Philip Morris meeting, about 20 protesters wearing giant Marlboro cigarette costumes greeted shareholders arriving for the meeting at the company's biggest plant.
""Shame on Philip Morris,"" read signs carried by the protestors from INFACT, a Boston-based anti-smoking group that says Philip Morris uses its lobbying to harm public health.
Marlboro, Philip Morris' best-known brand, helps the company capture about 50 percent of all domestic cigarette sales.
Other protestors wore big ""Uncle Sam"" hats and took play money from the people dressed as Philip Morris cigarettes.
A spokeswoman for Philip Morris said the INFACT protestors were welcome to voice their opinions.
Philip Morris stock rose $1 to $41.75 in midday trading on the New York Stock Exchange.
",33
"Fresh from a high-court victory, Florida's anti-tobacco activists are bracing for a legislative assault on the innovative law allowing the state government to sue cigarette makers.
Although bloodied by past failures to repeal the 1994 law, which undoes many of tobacco industry's best legal defenses, opponents said on Tuesday the campaign to repeal Florida's third-party medical liability act would continue through the current legislative session scheduled to last until May.  
""The fight goes on,"" said Jodi Chase, general counsel for Associated Industries of Florida Inc, an employers trade group prominent in the repeal campaign.
Bills to repeal the medical-liability law have been introduced in the upper and lower houses of the Florida legislature. A repeal bill was vetoed by Gov. Lawton Chiles two years ago and an effort to override his veto failed in 1996.
""The arena now will be the Florida legislature,"" said Harold Lewis, chief inspector general for Chiles.  
Lewis said the governor and allies inside and outside state government expected tobacco companies and others pushing repeal to launch a full-press media and lobbying offensive, even though some top legislators have said a vote on repeal bills was unlikely this year.
On Monday, the U.S. Supreme Court refused to take up a tobacco industry challenge to the constitutionality of the law but did not deal with the principal at issue in the industry's challenge and left open the possibility of considering the matter after a trial.  
Lawyers for both Florida and cigarette makers said the Supreme Court action makes it even more likely that a trial in the billion-dollar lawsuit against the tobacco industry will go forward as scheduled on August 4 in West Palm Beach, Florida.
A spokesman for Philip Morris, one of the defendants in the West Palm Beach case, said the company rarely discusses its lobbying efforts but that the company's lawyers were continuing to prepare for trial.
Lewis said 60 or more lobbyists were working against the bill and that he expected millions of dollars to be spent by the repeal forces.  
A group working with Chiles, the Coalition to Clear the Air for Florida Taxpayers, is preparing a media and organizing campaign to support the law, according to executive director Beth Labasky.
The group, composed of health organizations and school groups, is calling its campaign, ""Tobacco: Florida's Public Enemy Number One"", and expects to spend under $1 million on advertising, consultant Ron Sachs said.
Smith Barney tobacco-industry analyst Martin Feldman said a constitutional challenge to the Florida law was highly likely to be heard by the U.S. Supreme Court if cigarette makers lose in the West Palm Beach trial.
""The Supreme Court has specifically provided the option of considering the industry's claim at a date in the future, and quite possibly as part of an appeal -- should that prove necessary,"" Feldman said in a written report.
-- Miami newsroom, 305-374-5013
",33
"Quaker Oats Co. conceded defeat Thursday in efforts to turn around its struggling Snapple beverage unit and agreed to sell it for $300 million -- $1.4 billion less than it paid for the business -- to Triarc Cos. Inc., the owner of rival Mistic beverages.
The selling price -- far below the $1.7 billion Quaker paid for the premium beverage company in 1994 -- disappointed Wall Street, but analysts said they were pleased that Quaker did the deal.
""It was a fire sale price ... The bad news is the investment has been a disaster, the good news is they're trying to put it behind them,"" said John McMillin, a food industry analyst at Prudential Securities, a brokerage and investment bank.
Snapple's ready-to-drink teas and juices virtually invented the premium soft drink market and remain a leader, with more than $500 million in 1996 sales. But Snapple has lost money ever since Chicago-based Quaker -- better known for its breakfast cereals and Gatorade sports drinks -- bought it.
Snapple sales fell 8 percent in the United States and Canada in 1996, the company reported last month.
""The decision to sell Snapple was reached after an extensive review of various shareholder value-building options by management,"" said Quaker Chairman William Smithburg in a statement.
""After reviewing all possible options, we decided it was in the shareholders' interest to remove the financial burdens and risks Snapple brought to the portfolio and better focus on our value-driving businesses,"" Smithburg said.
New York-based Triarc, the buyer, owns the Mistic drinks business, a Snapple rival. It also owns Royal Crown soft drinks, Arby's Inc. fast-food restaurants and other businesses.
""With respect to Triarc, this transaction is very positive ... it is complementary to Triarc's existing position in Mistic, which is fruit juices, while Snapple is mostly teas,"" said Michael Branca, a food industry analyst at Lehman Brothers, a brokerage and investment bank.
""In addition, Triarc's beverage management is highly respected in the beverage distribution business ... Snapple could well be reborn under Triarc,"" Branca said.
Following announcement of the deal, Quaker's stock rose 87.5 cents to $38.375 in early afternoon trading on the New York Stock Exchange. Triarc rose $1.50 to $17.25.
Quaker said it would take a non-cash pretax charge of about $1.4 billion, or $8.40 a share, in its first quarter, to record the loss on the sale.
The company also said it would be able to recoup about $250 million in taxes paid on previous capital gains, ""making the cash value of the transaction approximately $550 million.""
A Quaker spokesman said the tax consideration was a key part of the company's decision to sell Snapple to Triarc now.
The spokesman added that Triarc, which could not immediately be reached, has indicated it intends to transfer virtually all Snapple employees with the business.
Triarc said in a statement it expected to close the deal by the end of June, subject to customary conditions, including government antitrust clearance.
Besides Snapple, Quaker's other products include Gatorade, which continues to dominate the sports drink market, and cereals, such as Quaker oatmeals, Cap'n Crunch and Life.
""Quaker still has the crown jewels -- Gatorade and the cereals -- and performance in those businesses has been pretty good,"" said food industry analyst George Staphos of the investment bank and brokerage of PaineWebber.
Quaker said that as a result of the sale, its earnings -- excluding the one-time loss -- were expected to increase by about 10 cents a share in 1997 as debt is reduced and Snapple losses removed.
For all of 1996, Quaker earned $248 million, or $1.80 a share, on revenues of $5.2 billion.
""The monkey is finally off Quaker Oats' back,"" said John O'Neil, food industry analyst at BT Securities.
",22
"Four companies have approached Angeion Corp about becoming distribution partners with the Plymouth, Minn.-based medical devices maker, chief executive Whitney McFarlin said.
In an interview with Reuters on Monday, McFarlin said. ""We have four very real potential partners, two domestic and two international. We believe there will be an investment made in our company by one or more of these companies.""  
Angeion shares have slumped since last spring on a series of events that analysts say have left it looking like an also-ran in the fast-growing, $500 million market for implantable defibrillators, or ICDs -- small electronic devices placed in the body and wired to the heart to keep it from beating too fast.
""This whole issue of uncertainty has clearly impacted our stock.... But we're positioned to be a fourth player in this market,"" McFarlin said, speaking at a Raymond James investors conference here. ""Don't count Angeion out.""  
The ICD market is dominated by Guidant Corp, Medtronic Inc and Ventritex Inc, which has agreed to be acquired by St. Jude Medical Inc.
St. Jude had been Angeion's distribution partner, but the two companies are in the process of separating. Medtronic in November won an arbitration decision awarding it access to certain Angeion patents.
McFarlin said Angeion and St. Jude are still in negotiations, but he expects to complete the divorce this month. ""We're going to come out of it very reasonably,"" he said.  
Angeion, which is selling ICDs in Europe, had revenues of $3 million in its fiscal year ended July 31. McFarlin said the company expects revenues in its current fiscal year in the area of $8 million.
""I don't see a lot of impact from a strategic partner this fiscal year,"" McFarlin said.
The company expects to file a product marketing application this summer with the U.S. Food and Drug Administration for its Sentinel 2000 and Sentinel 2010 and related lead systems, McFarlin said.  
A supplemental application for its Sentinel 2020 is expected to follow shortly later, he said.
Angeion's stock has also been weighed down by a securities fraud case stemming from 1991 and involving a group of stockbrokers who manipulated Angeion's share price.
""That was done by a group of outside brokers and has nothing to do with the company.... There is no exposure, but every time another story comes out, it says 'Angeion.' It drives me to distraction,"" McFarlin said.
",22
"The tough job of reversing the steady decline of Snapple sales passed Thursday from Quaker Oats Co, which couldn't pull it off, to a firm that rescued the similar Mistic beverage line last year, but which is itself in transition.
In agreeing to acquire Snapple for $300 million in cash, Triarc Cos Inc took on a task at which Quaker labored for 2-1/2 years without success. At the same time, Triarc's deal cast a new light on its pending plans to spin off its beverage and fast-food businesses, analysts said.  
Buying Snapple could affect the proposed spinoff of Mistic, Royal Crown soft drinks and Arby's restaurants into a new company, said Triarc spokesman Martin Shea. ""We're waiting for an IRS ruling"" on the spinoff, he said.
The effect could be a plus, said analysts, who suggested the deal shows Triarc is serious about making sense out of its jumble of assets and becoming a player in consumer brands.
""This new management team at Triarc is damn good,"" said Wheat First Butcher Singer food industry analyst John Maxwell.
Based in New York, Triarc was pieced together during the anything-goes junk-bond era by Victor Posner, analysts said.  
Posner exited when Triarc was taken over by financiers Nelson Peltz and Peter May in 1993. They have since followed a course of asset redistribution aimed at rationalizing Triarc's businesses and attracting more Wall Street attention.
In the past four years, Triarc has gained new respect, sold 16 businesses, paid off $500 million in debt and raised $200 million in cash, Shea said.
The firm bought Mistic for $95 million in 1995. In 1996, the juice line posted sales of $130 million. Triarc's Royal Crown soft drink line had 1996 sales of about $175 million, said Triarc beverage chief executive Michael Weinstein.  
""We know how to make a brand succeed,"" Weinstein said.
That knowledge will be needed to turn around Snapple. The brand virtually invented the premium soft drink category, and it remains the market leader. But Snapple sales have declined every year since 1994. Last year, they were $551 million, down eight percent from 1995, Quaker reported.
Quaker, the Chicago-based food giant, acquired Snapple in December 1994 near the height of its popularity for $1.8 billion, including acquisition costs. The sale price agreed to this week with Triarc will force Quaker to post a $1.4 billion one-time loss in its first quarter.  
""The (Snapple) investment's been a disaster"" for Quaker, said Prudential Securities food analyst John McMillin.
Wall Street treated Quaker kindly Thursday, however, following the announcement of the sale, reflecting some relief that the company finally sold off the money-losing unit.
Shares in Quaker -- which retains such crown jewel products as Gatorade and several cereal brands -- closed up 1/4 at 37-3/4. Shares in Triarc closed up 1-5/8 at 17-3/8.
((--Chicago Newsdesk 312-408-8787))
",22
"Quaker Oats Co. conceded defeat Thursday in its effort to turn around its struggling Snapple beverage unit and agreed to sell it for $300 million -- $1.4 billion less than it paid for the business -- to Triarc Cos. Inc., the owner of rival Mistic beverages.
The selling price -- far below the $1.7 billion Quaker paid for the premium beverage company in 1994 -- disappointed Wall Street, but analysts said they were pleased that Quaker did the deal.
""It was a fire sale price ... The bad news is the investment has been a disaster, the good news is they're trying to put it behind them,"" said John McMillin, a food industry analyst at Prudential Securities, a brokerage and investment bank.
Snapple's ready-to-drink teas and juices virtually invented the premium soft drink market and remain a leader, with more than $500 million in 1996 sales. But Snapple has lost money ever since Chicago-based Quaker -- better known for its breakfast cereals and Gatorade sports drinks -- bought it.
Snapple sales fell 8 percent in the United States and Canada in 1996, the company reported last month.
""The decision to sell Snapple was reached after an extensive review of various shareholder value-building options by management,"" said Quaker Chairman William Smithburg in a statement.
""After reviewing all possible options, we decided it was in the shareholders' interest to remove the financial burdens and risks Snapple brought to the portfolio and better focus on our value-driving businesses,"" Smithburg said.
New York-based Triarc, the buyer, owns the Mistic drinks business, a Snapple rival. It also owns Royal Crown soft drinks, Arby's Inc. fast-food restaurants and other businesses.
""With respect to Triarc, this transaction is very positive ... it is complementary to Triarc's existing position in Mistic, which is fruit juices, while Snapple is mostly teas,"" said Michael Branca, a food industry analyst at Lehman Brothers, a brokerage and investment bank.
""In addition, Triarc's beverage management is highly respected in the beverage distribution business ... Snapple could well be reborn under Triarc,"" Branca said.
Triarc Beverage Group Chief Executive Michael Weinstein said his company plans to apply similar marketing principles to Snapple that it used to turn around the Mistic line.
Triarc will consult distributors and review the consumer research on Snapple, and ""Then we're going to move like hell to do some really cool, innovative things in packaging and product and advertising to try to build the brand back up again,"" Weinstein said.
Triarc bought the Mistic juices line from a sole proprietor for $95 million in August 1995. It had sales of about $130 million in 1996.
""We have a track record in this category with Mistic, of taking a brand that was slumping and applying some basic principles ... to it. We know how to make a brand succeed. We're more entrepreneurial,"" Weinstein said.
Quaker's stock rose  25 cents to $37.75 in consolidated trading on the New York Stock Exchange, while Triarc rose $1.625 to $17.375.
Quaker said it would take a non-cash pretax charge of about $1.4 billion, or $8.40 a share, in its first quarter, to record the loss on the sale.
The company also said it would be able to recoup about $250 million in taxes paid on previous capital gains, ""making the cash value of the transaction approximately $550 million.""
A Quaker spokesman said the tax consideration was a key part of the company's decision to sell Snapple to Triarc now.
The spokesman added that Triarc had indicated it intends to transfer virtually all Snapple employees with the business.
Triarc said it expected to close the deal by the end of June, subject to customary conditions, including government antitrust clearance.
Besides Snapple, Quaker's other products include Gatorade, which continues to dominate the sports drink market, and cereals, such as Quaker oatmeals, Cap'n Crunch and Life.
""Quaker still has the crown jewels -- Gatorade and the cereals -- and performance in those businesses has been pretty good,"" said food industry analyst George Staphos of the investment bank and brokerage of PaineWebber.
""The monkey is finally off Quaker Oats' back,"" said John O'Neil, food industry analyst at BT Securities.
",22
"North American garbage companies can be expected to continue picking over each others' assets as big firms sell off money-losers and small players consolidate, the top executives of the biggest haulers and handlers of waste said on Monday.
At a conference held by the Raymond James brokerage and investment bank, a half dozen trash hauling companies made presentations to investors. In all the talks, asset strategy figured prominently.  
In the top tier of the industry, the two biggest U.S. firms -- WMX Technologies Inc and Browning Ferris Industries Inc -- control about a quarter of the $35 billion solid waste market.
Both WMX and BFI are fast shedding non-core and unprofitable operations as they reposition and rationalize after years of undisciplined acquisitions, analysts said. At the same time, Canadian giant Laidlaw Inc is transforming itself into a transportation company and leaving the solid waste market, as well as the $3.5 billion hazardous waste market, in which it had dominated in North America.  
At the lower levels, fast-growing mid-sized companies -- such as USA Waste Services Inc, United Waste Systems Inc and Superior Services Inc -- are playing the consolidation game. By sifting through the giants' dross and snapping up deals from among dozens of small, private firms, the mid-cap players are growing rapidly.
""At the end of the day, you'll have an industry that has sorted through its asset base so that several companies will be better positioned,"" said Todd Holmes, vice president at Browing Ferris, based in Houston.  
Trash hauling and handling turned into a hot business in North America in the 1970s with the rise of environmentalism and stricter government regulation of polluters. Riding a wave of rapid consolidation in a highly fragmented industry, innovators like WMX and BFI experienced explosive growth. In its first 20 years, industry leader WMX made 2,000 acquisitions.
But the boom years ended in the 1990s with a levelling of environmental regulation, greater market concentration among companies and a surplus of supply in several key markets.  
In addition, added Laidlaw chief executive James Bullock, ""The focus of solid waste handling is migrating away from landfill to recycling, which has lower (profit) margins and suffers from the vagaries of commodity prices.""
For WMX and BFI, too, growth by acquisition hit an inevitable ceiling as the pool of affordable targets dried up.
""The consolidation strategy was unsustainable for us,"" said WMX chief financial officer John Sanford.
Oak Brook, Ill.-based WMX reacted to these changes by diversifying in the 1990s into related businesses, but the strategy failed, leading to shareholder disappointment.  
Laidlaw, based in Burlington, Ont., has separated itself from its solid and hazardous waste operations. It still owns sizable stakes in the successor companies -- Laidlaw Environmental Services and Allied Waste Industries Inc -- but expects to sell its interests, valued at a combined $1.2 billion.
""Over time, you will see us exit our investments in both of those,"" Bullock said in an interview with Reuters.
At the next level down, growth by acquisition continues. The business has virtually no barriers to entry -- any outfit with a half-dozen garbage trucks can get a route and make itself a takeover target.
As a result, Bullock said, ""The little guys are still playing the consolidation game...They can be successful at that for a while.""
",22
"The board of directors of WMX Technologies Inc. Wednesday rallied around its Chief Executive Phillip Rooney following a direct attack on his leadership by a major stockholder.
An investment group led by financier George Soros called Tuesday for Rooney's ouster and proposed a slate of nominees for the board of the largest U.S. garbage-hauling company.
In response, the WMX board said it ""unanimously reaffirmed its support for Phillip B. Rooney and his leadership of the company during his seven months as chief executive officer.""
The exchange did little but aggravate the acrimonious struggle involving WMX, Soros and other large shareholders.
""I don't think they could really escalate the animosity any higher than it already is,"" said James Kelleher, industry analyst at the Argus Research firm in New York.
The New York-based Soros group and other investors, including the Lens Fund in Washington, D.C., have been pressuring WMX to improve its performance for months.
WMX, based in Oak Brook, Ill., said last week that it was cutting 3,000 jobs and shedding $1.5 billion in assets in a broad effort to refocus on its core waste management business.
On Tuesday, the Soros group expressed dissatisfaction with the restructuring plan, proposed removing Rooney and named four individuals to its alternate slate of board nominees.
Even with a 5.2-percent stake in WMX, the Soros group cannot dictate the company's future, especially in the face of widespread small shareholder skepticism about the large shareholders' motives.
""They can make a lot of noise and smoke, but when everything is done, their effectiveness is limited ... This thing is far from over,"" Kelleher said.
WMX last week reported a fourth-quarter loss of $461 million after charges, vs. a profit in the year-ago period of $49.6 million. It  reported revenues for all of 1996 of $9.18 billion, compared with $9.05 billion in 1995.
WMX said Wednesday that the board nominees do not qualify for consideration at the company's annual meeting this year.
""The documents we received from the Soros group attempting to nominate four individuals for election as directors of the company arrived after the filing deadline and contained incomplete information,"" WMX said in a statement.
WMX added that its board was committed to search for the best possible candidates and its nominating committee had agreed to consider the Soros nominees later this year.
""Our board is absolutely committed to attracting the best directors possible. We want to make sure we are serving the interests of all of our stockholders,"" WMX said.
If Soros does not prevail before or during the WMX annual meeting scheduled for early May, time may be on his side.
""WMX is far from out of the woods and is likely going to have a few more painful quarters, which will strengthen Soros' hand so that he might succeed next time,"" Kelleher said.
The WMX board said that Rooney, a long-time manager of the company's waste management business, was the right leader for the company as it concentrates on that industry.
WMX also said an important component of its restructuring plan was adding new, independent perspectives to its board and reiterated it had hired an executive recruiting firm to find appropriate candidates.
WMX's stock, which fell 9 percent last week, was up 50 cents at $32.75 in heavy volume on the New York Stock Exchange.
",22
"Merger and acquisition activity is expected to pick up this year in the beleaguered U.S. nursing homes and sub-acute care facilities industry.
After miserably under-performing the market over the past two years, stocks of nursing home companies have bifurcated into ""haves and have-nots,"" analysts said.
A few top companies are at the point where they have worked through some problems. Their stock values have absorbed market uncertainties about Medicare and Medicaid reform, and the next year or two look uncustomarily predictable, analysts said.  
At the same time, the have-nots of the business continue to be dogged by company-specific difficulties that have held down their values, presenting possible bargains.
""There is a divergence in valuations and the industry is in the process of changing ... it is perhaps on the verge of an urge to merge,"" said Donaldson Lufkin & Jenrette healthcare industry analyst John Hindelong.
Talk of more rapid consolidation was fueled Monday by Louisville, Ky.-based Vencor Inc's agreement to acquire TheraTx Inc, of Alpharetta, Ga., for $550 million in cash, convertible securities and debt assumption.  
""There seem to be a lot of companies or pieces of companies that are sort of being walked about...There's just a lot of activity,"" said National Securities healthcare industry analyst Michael LeConey.
""Sentiment is improving among the companies in the better half of the industry. You may see some consolidation,"" said ABN AMRO Chicago Corp healthcare industry analyst Gregory Moerschel.
The U.S. nursing home and sub-acute care industry -- comprising about 15,000 facilities nationwide -- enjoys a compelling demographic and structural profile, analysts said.  
As baby-boomers age and managed care drives more medical procedures and patients out of high-cost acute-care hospitals, owners of facilities that can look after the aged and the chronically or mildly ill would seem to stand to benefit.
""Just looking at the numbers, this industry should be booming, but it isn't,"" said John Cumming, chief executive of WDI Capital Markets Inc, a healthcare investment banking firm.
Growth by acquisition has been the rule in the highly fragmented industry and few firms have shown themselves able to manage it well. The result often has been over-expansion, disarray and restructuring, analysts said.  
After a bumpy two years, top-tier players -- such as Vencor and Manor Care Inc -- are in a position to snap up smaller firms, analysts said. Also seen as likely acquirers are Genesis Health Ventures Inc and Integrated Health Services Inc in the home healthcare market.
Identified by some analysts as possible targets were Burbank, Calif.-based Summit Care Corp and Retirement Care Associates Inc, of Atlanta.
Retirement Care said Thursday it purchased 1.95 million more shares of Contour Medical Inc, a manufacturer of orthopedic and rehabilitative products. The transaction boosted Retirement Care's stake in Florida-based Contour to about 65.3 percent of total outstanding common stock.  
Neither Retirement Care nor Summit could be reached for further comment.
Sun Healthcare Group Inc was seen as likely doing a major deal soon, although some analysts said it would be a buyer and others said it would be a seller.
Albuquerque, N.M.-based Sun announced Thursday it acquired nine nursing home and assisted living facilities from  Clipper Affiliates in New Hampshire for $12 million plus assumption of leases at $6 million per year. A spokeswoman for Sun declined to comment on speculation of the possibility of a larger transaction.
Companies seen as pressured to make strategic moves of some sort were industry giant Beverly Enterprises Inc, Living Centers of America Inc, GranCare Inc and Horizon/CMS Healthcare Corp.
((--Chicago Newsdesk 312-408-8787))
",22
"Guidant Corp expects no material impact on its financial results from a halt in shipments to Europe of its Ventak AV implantable defibrillator, chief executive Ronald Dollens said Tuesday.
In an interview with Reuters, Dollens said, ""We don't think it's material. We can't imagine it would be more than $1 million for us, even as a top-line phenomenon, because we feel we'll be back on the market in four to six weeks in Europe.""
The company said Monday it stopped shipments of the heartbeat-regulating device due to technical problems.  
About 200 of the devices have been implanted in people since the Ventak AV was approved for sale in Europe in November. It is not approved for sale in the United States.
The problem with the device is mechanical and cannot be fixed by reprogramming, Dollens said. Depending on the patient, if a problem is present and needs to be fixed, removal and replacement would be necessary, he said.
He added Guidant does not foresee the situation delaying expected U.S. Food and Drug Administration clearance. ""We don't think it will impact U.S. launch timelines,"" he said.  
""We expect to have it (on the market) for the majority of the second half of 1997 in the U.S. We're staying with that,"" Dollens said.
Shares in Indianapolis-based Guidant were up 1-1/8 to 56-1/8 following announcement Tuesday of year-end results that saw sales for the year hit $1.05 billion, up 13 percent over 1995. Net income rose 48 percent to $149.9 million on the year, excluding certain one-time items.
""When 1997's over, we will be looking at growth rates very similar to what we saw in 1996 on the top line,"" Dollens said.
Sales in the company's vascular intervention segment for the quarter were down year-over-year, but up slightly from the third quarter, he said.
""We think we've turned that corner. And we launched two new dilatation catheters within the quarter. So the month coming out of the quarter was much stronger than the month when we entered the quarter. We expect to continue to see quarter-to-quarter growth on vascular intervention sales,"" he said.
((--Chicago Newsdesk 312-408-8787))
",22
"Eli Lilly & Co is fighting in Kentucky this week to end the last major legal battle still lingering from Prozac's liability troubles of the early 1990s.
The Indianapolis-based drug giant Wednesday asked the Kentucky Court of Appeals to halt a hearing set for Thursday in Louisville before Jefferson Circuit Judge John Potter.
Potter's hearing would likely reveal publicly how and for how much Lilly and plaintiffs agreed to end a landmark case involving Prozac and a 1989 mass murder in Louisville.  
Lilly wants to keep the details of the agreement under wraps, although it conceded for the first time Monday that the so-called Joseph Wesbecker case was settled, at least in part.
For months, the company had said only that it reached a pre-verdict agreement in the case and that an unspecified amount of money changed hands as a result.
""We acknowledge that after the jury verdict, the high-low agreement provided for settlement of the compensatory and punitive damage phases of the trial,"" said Lilly spokesman Edward West Wednesday in a telephone interview.  
That acknowledgment allowed Potter to amend the Wesbecker verdict to say the case was ""dismissed as settled"" -- a legal intricacy he and Lilly have wrangled over since 1994.
""After nearly two-and-a-half years of this, we and the plaintiffs said to (Potter) Monday ... enter your corrected judgment. If that's what you think you need to do to be at peace with this matter, then do that,"" West said. ""It's time to put this matter to rest ... We have nothing to hide.""  
Wall Street considers the disputed deal that ended the Wesbecker case a non-event. Analysts said major drug companies often pay plaintiffs ""hush money"" in liability cases, but Lilly has fought any revelations by Potter's court about the company's arrangement with the Wesbecker plaintiffs.
""There is a confidentiality agreement in place ... We've honored that,"" West said.
In 1989, while on Prozac and other drugs, 47-year-old Joseph Wesbecker walked into his former workplace in Louisville with an AK-47 assault rifle and went on a shooting rampage.  
He killed eight people, wounded 12, and then committed suicide.
Survivors of the Standard Gravure Printing plant massacre and victims' families sued Lilly for $50 million, alleging that Prozac drove Wesbecker to his horrible end. A flood of more than 160 similar legal actions followed and Prozac came under national legal and scientific scrutiny.
Potter presided over the 47-day Wesbecker lawsuit trial in late 1994 and early 1995.  
The jury found Lilly not liable in the case and Potter dismissed it. But in April 1995, he had second thoughts because he said he suspected the case had been secretly settled out of court. He filed a motion that the verdict be changed to say that the case was ""dismissed as settled.""
Lilly fought the motion, but the Kentucky Supreme Court ordered Potter to look into the matter because, the court said, it suspected ""there may have been deception, bad faith conduct, abuse of the judicial process or perhaps even fraud.""  
An investigation was conducted by a lawyer for the Kentucky attorney general's office. The probe revealed the nature and cost of the pre-verdict agreement that Lilly has since acknowledged making. But many of the facts surrounding the agreement, including its price-tag, remain under wraps.
Potter declined to comment Tuesday on the objectives of the hearing he hopes to convene.
West said, ""Judge Potter ... has stated on the record he intends to release the aggregate amount of the agreement.""
To this day, Lilly defends Prozac as safe and has been backed by panels of medical experts. Until this week, the company also contended it had never lost or settled any of the Prozac court cases. Despite the settlement of the damages phase of the Wesbecker trial, West said, the fact remains that the jury cleared Lilly on the question of liability.
""They heard everything about Prozac and decided that the product had nothing to do with Wesbecker's actions,"" he said.
((--Chicago Newsdesk 312-408-8787))
",22
"St. Jude Medical Inc said Thursday it will do more analysis of its proposed purchase of Ventritex Inc because of the deaths of three recipients of heartbeat-regulating devices made by Ventritex.
""With a product quality issue like this, obviously it causes additional analysis to be done and we're involved in doing that,"" St. Jude spokesman Peter Gove told Reuters.
""Based on what we know today, we are moving forward"" with the acquisition,"" Gove said. ""But we are going to do, as you might expect, additional due diligence.""  
At the same time, Ventritex general counsel Mark Meltzer confirmed that a third patient implanted with a Ventritex implantable defibrillator died on January 22.
The company was notified a day or two later and it promptly advised the U.S. Food and Drug Administration, he said. The identity of the patient is not being disclosed.
""I can say that it's not a different kind of problem. It is the problem which is being addressed by reprogramming. Unfortunately this death occured before the patient could be reprogrammed,"" Meltzer said.  
An FDA spokeswoman said the agency is investigating.
On January 16, Ventritex said it had been authorized by the FDA to begin reprogramming 5,605 implantable defibrillators implanted in living patients. The company said then that component failures in the devices were believed to be associated with the deaths of two patients.
Shares in Ventritex fell 1-1/4 to 18-1/8 in heavy trading Thursday on speculation about the death and its possible impact on the proposed $505-million St. Jude-Ventritex deal.
""The market is speculating that St. Jude might attempt to reprice the transaction,"" said Piper Jaffray medical technology analyst Arch Smith.
St. Jude was advised by Ventritex of the third death, Gove said. ""We've kept in very close contact with them through this whole thing,"" he said.
Meltzer said substantial progress has been made in Ventritex's efforts to find the patients who carry the 5,605 implantable defibrillators that need to be reprogrammed. He said he was unaware of any change in the St. Jude deal.
""We are basically where we were when the first two indicents were exposed,"" Gove said.
""We are working very closely with Ventritex. We think they're handling this as responsibly as they can ... We certainly wouldn't rule out continued discussion with them. We'll have an opportunity to sit down with them once they've determined the extent of the situation,"" Gove said.
((--Chicago Newsdesk 312-408-8787))
",22
"BBI Healthcare Corp, the company to be formed by the merger of Bergen Brunswig Corp and Ivax Corp, will target earnings growth of 15 percent or more and return on equity of 15 percent or better, said Bergen chief financial officer Neil Dimick.
""At a minimum, our objective would be to grow earnings at greater than 15 percent,"" Dimick said at an investors conference here Tuesday held by the Raymond James brokerage and investment bank.  
The Bergen-Ivax merger is proceeding as planned, said Bergen chief executive Donald Roden.
Orange, Calif.-based Bergen is the largest U.S. distributor of generic drugs, while Miami-based Ivax is a generic drug manufacturing giant.
The two agreed in November to a stock-for-stock merger in which Ivax shareholders will get 0.42 shares of BBI for each Ivax share, and Bergen shareholders will get one share of BBI for each Bergen share. After the merger, BBI will be about 56 percent owned by Ivax shareholders and the remainder by Bergen shareholders, the companies said.  
Roden will be BBI chief executive. Ivax chief executive Phillip Frost and Bergen chief executive Robert Martini will be co-chairmen of BBI, while Dimick will be BBI chief financial officer, the companies said.
BBI will be a vertically integrated company handling generic drugs and other healthcare products from the research lab, through production and distribution, the companies said.
Bergen also announced Tuesday that it has developed an electronic, on-line catalog and historical purchasing database service for generic drugs and healthcare products. ""Catalog users will have instant access to more than 300,000 products offered by any and all of our subsidiaries,"" Roden said.
The on-line service will make purchasing data going back 24 months available via computer, Bergen said.
The electronic catalog is scheduled to be delivered to customers in June, Bergen said.
",22
"Profits were up at McDonnell Douglas Corp in 1996, but the results and the 1997 outlook it reported Thursday were just the sort it likely anticipated months ago in deciding to merge with Boeing Co.
""McDonnell Douglas entered into this deal because they knew this sort of thing was on the horizon in 1997,"" said Ken Herbert, aerospace research director at the consulting firm of Frost and Sullivan.
Revenues slipped to $13.83 billion in 1996 from $14.33 billion in 1995, said the St. Louis-based aerospace firm.  
Profits for the year were $788 million, up from $707 million in 1995. Fourth-quarter profits were up, as well, to $207 million from $187 million a year ago before a one-time charge. But the fourth-quarter earnings per share figure of $0.98 came in below Wall Street's expectations, which ranged from $0.99 to $1.06, according to First Call.
Military aircraft margins were below expectations, said A.G. Edwards aerospace analyst Kent Newcomb.
In a conference call, McDonnell chief financial officer James Powell said military aircraft margins were about 11.7 percent in the fourth quarter, below the third quarter level.  
""It was largely down as a result of an award fee on the C-17 program that was in the third quarter. We didn't have an award period in the fourth quarter on the C-17 program. We also had some impact from the strike in St. Louis coming through in the fourth quarter,"" Powell said.
Margins in the missiles business were also down, Powell said. ""That is largely accounted for by R&D costs on the Delta III (launch vehicle) program,"" which are peaking, he said.
This year is expected to be a good one, Powell said. ""We look for 1997 to be another record year in terms of earnings. We expect cash flow to be strong, as well,"" he said.  
The company expects 1997 revenues to be boosted by expanded production of C-17 cargo planes and F-15 fighter jets, both of which will help boost 1997 profit margins in the military business, he said.
But he also said 1997 deliveries of commercial aircraft are expected to be flat. ""Basically, they're about the same as those for 1995 and 1996,"" he said.
Analysts said the 1996 results were only mildly disappointing. But, added A.G. Edwards aerospace analyst Kent Newcomb, ""I'm not sure it matters anymore.""
What does matter is the long-term outlook for McDonnell, which would be shaky without Boeing, analysts said.
Virtually pushed out of the fighter aircraft business and increasingly a bit player in commerical airliners, McDonnell had little future as a stand-alone concern, which its managers had in mind when deciding to proceed with Boeing, said S&P Equity Group analyst Joseph Harari.
""More than just whatever poor result they may have had for this quarter, they were looking even further out into the future,"" Harari said.
On the proposed $15-billion Boeing merger, Palmer said McDonnell is working on getting its U.S. Federal Trade Commission and other regulatory filings in order. ""We're intending to file very shortly,"" he said.
Regarding the explosion last week of a Delta II rocket made by the company, he said, ""At this point in time, it's really premature to comment. We don't have a whole lot of information. We're unable to ... even venture a guess as to what impact it may have.""
((--Chicago Newsdesk 312-408-8787))
",22
"Vencor Inc moved Monday to broaden its services by agreeing to buy TheraTx Inc in a nearly $550 million deal that analysts said signals more consolidation in the nursing homes and services industry.
""The nursing home industry, in general, is ripe for consolidation. It wouldn't surprise me if there were more of these types of transactions,"" said Donaldson Lufkin & Jenrette healthcare industry analyst John Hindelong.
Shares in TheraTx closed up 3-1/2 to 16-5/8, below the $17.10 per share cash offer from Louisville, Ky.-based Vencor.  
Analysts said shares in Alpharetta, Ga.-based Vencor failed to trade up to the offer on unjustified worries about the 60- to 90-day projected wait until closing.
""The deal is basically done. There's not a lot of risk here. It's a great arbitrage play,"" said Dean Witter analyst Scott Mackesy.
Vencor and TheraTx said jointly Monday that their merger was approved by both boards of directors. Vencor said it expects to begin its tender offer on February 14. The deal is expected to close within 90 days, the companies said.
Vencor shares closed unchanged at 32-1/2.  
Buying TheraTx -- for $354 million in cash, about $100 million for outstanding convertible securities and debt assumption -- will add a key element to Vencor's line.
""This will make Vencor the only company out there that can offer the long-term care hospital, the nursing home and the contract services,"" said D.A. Davidson analyst Robert Thornburg.
Vencor is the largest U.S. long-term care hospital company. It also has sub-acute care units, nursing homes and specialty care centers for respiratory therapy.  
Last spring, Vencor served notice of its intentions to be a major player by acquiring Hillhaven Corp HIL.N for $1.9 billion.
""Vencor wants very much to be big and this makes them bigger,"" Hindelong said of the TheraTx deal. ""It's probably not the last major acquisition that they'll make.""
Analysts said Vencor expects the deal to be accretive to earnings in the second half of 1997.
Public since 1994, TheraTx operates 29 nursing homes and sells rehabilitation services under contract to dozens of other nursing home companies.  
Like others in the field, its stock for months has been weighed down by uncertainty about the U.S. Health Care Financing Administration's rewrite of Medicare reimbursement rules for such services.
""It was just a cloud hanging over their heads. So there was a lot of incentive on the part of (TheraTx chief executive) John Bardis to go out and do something like this,"" said Arneson Kercheville analyst Jay Somaney.
Given its recent history of market perception problems, TheraTx is getting a good price at $17.10, analysts said.
""I think it's a pretty good valuation,"" said Robertson Stephens analyst Sheryl Skolnick. ""Truth be told, earnings estimates have been drifting downward and analyst support for the stock has been drifting away.""
She added that one potential winner in the deal could be NovaCare Inc, of King of Prussia, Pa.
""Novacare will be the only one left that will be seen as independent of a competitor by the free-standing nursing home or small chains out there...It leaves you with one independent player who will gain market share,"" Skolnick said.
((--Chicago Newsdesk 312-408-8787))
",22
"Diametrics Medical Inc plans to be profitable by the 1998 third quarter and generate revenues of $3.5 million this year, $8 million in 1997 and $18 million in 1998, said chief executive David Giddings.
""Our objective is to have our first profitable quarter in the third quarter of '98,"" Giddings said in an interview with Reuters at a Dain Bosworth conference here on Wednesday.
He said Diametrics -- a maker of hospital-bedside blood gas analysis systems -- has failed to deliver on its promises in the past, but he added, ""That wasn't on my watch.""  
Diametrics reported a 1995 year-end loss of $23 million.
The company expects to launch its new IRMA SL blood gas analyzer system this month. ""The way the market should judge us is by what we do over the next three months,"" he said.
He added that the company has several options before it in the way of possible corporate alliances.
The IRMA is a portable, four-pound instrument that measures blood levels of oxygen, acidity, carbon dioxide, electrolytes and red blood cell volume much faster than competing systems requiring analysis to be done in the hospital laboratory.  
The SL version adds features not seen in older models.
Shares in Diametrics were up 3/8 at 5-1/4.
One year ago, Diametric shares traded as high as 12, but delays in delivering new products wrecked Wall Street forecasting models and the stock suffered.
Giddings started with six-year-old Diametrics in April after a management shake-up prompted by the company's failure to move beyond the research and development phase.
Shortly after arriving, Giddings pushed through an 18- percent workforce cut and said Wednesday he would not rule out the possibility of further cuts, depending on results.
The Roseville, Minn.-based company's work force now numbers 174 people, down from 223.
""We have a goal of being profitable in the third quarter of 1998 and we will do what it takes to hit that objective in terms of our cost base,"" Giddings said.
",22
"Pier 1 Imports is targeting earnings growth this year near the high end of its annual objective of 15 to 18 percent over the life of a five-year business plan, Chief Executive Clark Johnson said Wednesday.
""The Street has got us up toward the higher end of that range and I think we have an internal goal to do better than that, but that's an internal goal and it's not a forecast,"" Johnson told Reuters in an interview after a presentation to investors at a Raymond James conference here.  
Raymond James projects the retailer will report fiscal 1997 earnings of $1.25 per share, up 19 percent from $1.05 for fiscal 1996 ended February 28.
Johnson said Pier 1 projects sales this year will rise about $100 million. The company, which has 725 stores in North America plus joint ventures in England, Mexico and Japan, posted fiscal 1996 sales of $944.6 million.
He said the company will open 53 stores this year and close about 25. Remodeling and remerchandising of store layouts is also under way throughout much of the chain, reflecting a change in product lines, he said.  
At the end of its fiscal year last month, Pier 1 stopped selling apparel. It is beefing up its home furnishings offerings in response to what it sees as changing consumer attitudes. ""The Martha Stewart syndrome is alive and well in America,"" Johnson said.
""There's been a shift in consumer spending away from apparel, and even in this past holiday season away from consumer electronics and toward home furnishings,"" he said.
Pier 1 is also launching a bridal registry program that Johnson said is expected to take further advantage of the trend toward higher sales of furniture, fixtures and other items for the home.
The company operates a joint venture in England called ""The Pier."" Johnson said it is expected to break even this year after losing money last year.
He said expansion in Japan continues. ""We think it's possible to eventually have about 200 stores in Japan,"" he said.
",22
"In reply to a report issued last week by two Wall Street drug industry analysts, Eli Lilly and Co said it is unaware of physicians having problems switching schizophrenia patients from older treatments to Lilly's new antipsychotic drug, Zyprexa.
""We are not hearing anything from our prescribing physicians, sales representatives or clinical investigators that would indicate a problem upgrading patients to Zyprexa,"" said Lilly vice president Gary Tollefson. ""On the contrary, Zyprexa prescriptions, including refills, continue to grow.""  
Shares in the Indianapolis-based drug manufacturing giant closed down 2-1/2 to 86-5/8 Thursday, extending a week of choppy declines from a 52-week high of 95 on February 24.
Fahnestock & Co analysts Louis Webb and Irena Djurovich issued a report February 26 that said physicians are having trouble switching patients to Zyprexa and that expectations for the drug's sales potential may be inflated.
A follow-up report on February 28, issued after the analysts talked with Lilly, said the Zyprexa switching problems persisted. Contacted Thursday, Webb said, ""We stand by our original report.""  
The February 26 report said, ""The Director of Ambulatory Services for Outpatient Psychiatry for Bellevue Hospital in New York City expressed to us that about a third of his patients that were switched to Zyprexa from Risperdal and other antipsychotics had experienced a return of psychotic symptoms."" Risperdal is a competing anti-schizophrenia drug made by New Jersey-based Johnson & Johnson.
The March 3 Lilly rebuttal quoted Dr. David Nardacci, Director of Ambulatory Services for Outpatient Psychiatry at Bellevue, saying, ""As a practicing clinician, it is not customary for me to communicate with the analyst community.""  
He said, ""I was never told the results of my conversations were to be for publication. I take exception to the one-third figure italicized in the report and would like to state that for patients with prominent negative symptoms or severe EPS (extrapyramidal symptom) histories, Zyprexa should be considered alongside Risperdal as a first-line agent.""
Nardacci could not immediately be reached.
Zyprexa was approved by the U.S. Food and Drug Administration for U.S. sale in October, setting off a contest for market share between Lilly and Johnson & Johnson. Abbott Laboratories Inc, Zeneca Group Plc and Pfizer Inc are expected to join the fray soon with new drugs.
Estimates of the size of the U.S. schizophrenia drug market vary widely, ranging from $1 billion to $4.5 billion, with about 2.5 million Americans suffering from the disorder.
Risperdal and Zyprexa, both fairly new, are already competing against older medications, including generically available haloperidol and Sandoz AG's Clozaril.
((--Chicago Newsdesk 312-408-8787))
",22
"Polaris Industries Inc., best known for its snowmobiles, said Wednesday it will begin building motorcycles, riding its small-engine expertise into a market no major U.S. company other than Harley-Davidson Inc. has dared test in 40 years.
Minneapolis-based Polaris said it is developing a highway cruiser motorcycle that will be named Victory and be available to consumers in the spring of 1998.
""We've built pretty much all of it from scratch. The engine was designed in the USA and it's going to be made in the USA,"" said Matt Parks, who will be general manager of the new Polaris motorcycles unit.
Polaris is the world's largest maker of snowmobiles and is among the world's top three makers of all-terrain vehicles, or ATVs, and personal watercraft.
""We've competed successfully against Honda, Yamaha, Kawasaki and Suzuki in our other businesses. ... Entering the motorcycle market is a logical extension of our diversification strategy,"" said Polaris Chief Executive Officer Hall Wendel.
Besides the legendary Harley-Davidson, there are only two other, much smaller U.S. motorcycle makers -- Salt Lake City-based ATK America Inc., a maker of specialised off-road machines, and Buell Motorcycle Co., which is 49 percent owned by Milwaukee-based Harley and also located in Wisconsin.
Polaris said its cruiser will compete with Harley's machines, as well as similar heavy bikes from Honda and others. The company declined to disclose price or design specifications.
Polaris said it expects its existing customers will be among early buyers. ""Customers who ride Polaris products are a loyal group who crave adventure, love the outdoors, and embrace the sense of freedom that our machines deliver. Furthermore, some 30 percent are already active motorcyclists,"" Wendel said.
The worldwide market for cruiser motorcycles is estimated at over 200,000 units annually, and sales of cruiser motorcycles have nearly doubled in the last five years, Polaris said.
Engines for Polaris products are presently built in-house or by Japan's Fuji Heavy Industries Ltd., which makes Subaru-brand cars, or by a Fuji-Polaris joint venture, Robin Manufacturing, in Hudson, Wis.
Engines for the new motorcycles will be built at the Polaris engine plant in Osceola, Wis., and the motorcycles will be manufactured at the company's Spirit Lake, Iowa, plant, the company said.
On Feb. 4, Polaris reported 1996 sales of $1.19 billion, up 7 percent from $1.11 billion in 1995. Annual profits were $62.3 million, up 2 percent over the previous year. Polaris said it expected 1997 sales to decline from the 1996 level but still show another year of record-setting profits.
""Expenses related to the development of the company's motorcycles are reflected in its expectations for 1997 net income in excess of 1996's record level,"" Polaris said.
",22
"Boehringer Mannheim Corp, a unit of privately held Corange Ltd, said data released Monday at an American College of Cardiology conference leveled the playing field between Boehringer and Genentech Inc in the market for clot-busting drugs to treat acute heart attack.
""What this study showed was comparability between the two products.... Essentially, at this point it will be a marketing fight,"" said Gregory Fulton, director of marketing for Boehringer's pharmaceuticals unit.  
Results from the GUSTO III study showed that Boehringer's Retavase did not save more lives than Genentech's Activase, better known as TPA, researchers reported. In the trial, 10,139 patients received Retavase, while 4,921 patients received TPA. Both drugs, as well as another called streptokinase, are commonly administered within six hours after a heart attack.
""Retavase...did not provide statistically significant benefit in 30-day mortality as compared to (TPA),"" Genentech said in a statement released in conjunction with reporting of the data.  
As a result, Genentech said, Retavase failed to score the win which Boehringer had hoped for from the study -- proof that the drug is better than TPA, long the dominant drug in the field.
""We do not dispute that. The results were very clear,"" said Boehringer's Fulton. At the same time, he said, GUSTO III showed the two drugs to be roughly comparable and Boehringer is ""very happy with that.""
The researchers reported that the study's 30-day mortality rate was 7.43 percent for Retavase, versus 7.22 percent for TPA; total intracranial bleeding rate for Retavase was 0.91 percent and 0.88 percent for TPA; and total stroke rate for Retavase was 1.67 percent and 1.83 percent for TPA.
""GUSTO III reinforces the role (TPA) plays in savings lives every day,"" Genentech vice president of clinical research Dr. David Stump said in a statement.
",22
"Humana Inc. reported lower quarterly profits Tuesday, mainly due to charges for restructuring, but the stock in the big health maintenance organization rose on optimism over its new president's ambitious turnaround plan.
The 4.9-million member HMO -- fifth largest in the United States among for-profit HMOs -- posted fourth-quarter net income of $22 million, or 13 cents a share, after charges, down from $49 million, or 30 cents a share, in the 1995 quarter.
Quarterly premium revenues were $1.81 billion, up from $1.49 billion in the year-ago period.
For the full year, Humana said net income plunged 94 percent to $12 million, or 7 cents a share, from $190 million, or $1.17 a share. The company reported revenues of $6.7 billion, up from $4.6 billion in 1995.
The stock of the Louisville, Ky.-based Humana rose 37.5 cents to $18.75 on the New York Stock Exchange after rising as high as $19.25.
""What the stock is responding to is Humana's outlining a pretty aggressive action plan. ... They're making the organization more lean and mean,"" said Gary Frazier, a health care industry analyst with the Bear Sterns brokerage.
When Gregory Wolf became president of Humana in September, he took over a company that once had led the managed health care industry, but had more recently seen its star fade as it expanded into unprofitable areas.
Wolf had previously been president of Emphesys Financial Group Inc., which Humana acquired in October 1995.
With the help of a new executive staff, Wolf is pushing through a tough plan to cut costs and withdraw Humana from money-losing markets.
""He's made some very intelligent moves,"" said Ed Keaney, health-care industry analyst with the Volpe Welty brokerage.
In the fourth quarter, Humana took a special charge against earnings of $10 million after taxes related mainly to severance costs for elimination of 700 to 900 jobs this year from its roughly 18,000-member work force.
The company has sold or is selling money-losing operations in Alabama, Washington, D.C., and other markets.
In the second quarter, Humana took a special charge against earnings of $130 million after taxes to restructure the Washington health plan, provide for expected insurance losses, close 13 service areas and discontinue unprofitable products in three markets.
As a result, the company said total enrollment in its commercial health care plans fell by 69,100 members last year, by 87,500 members in January alone and is expected to decline by 115,000 members this quarter.
""Our plans to withdraw from certain markets and price business commensurate with the underlying risk are proceeding on schedule,"" Wolf said.
The company's medical-loss ratio -- a key measure of profitability -- improved to 82.8 percent in the fourth quarter from 83.1 percent in the third quarter, but was up from 81.5 percent in the year-ago period.
Analysts said they were impressed with Wolf's plan for reversing Humana's fortunes but noted the company unveiled a turnaround plan once before that was never fully achieved.
""I want to see a little more of a turn in earnings before I'm sure this action plan is taking hold,"" Frazier said.
",22
"WMX Technologies Inc. Chief Executive Officer Phillip Rooney has resigned, the company said Tuesday, just a week after his ouster was demanded by an investment group controlled by financier George Soros.
Under severe pressure from Soros and other WMX investors, Rooney said he quit to save WMX, the nation's largest garbage hauling company, from ""being distracted by the current public debate over the leadership of the company.""
WMX Chairman Dean Buntrock will be acting chief executive while the board of directors searches for a new chief to come from outside the Oak Brook, Ill.-based firm, WMX said.
WMX's stock rose $1.875 to $34.75 on the New York Stock Exchange, as Wall Street took the news as a sign that the company hopes to accelerate its restructuring.
""Rooney's departure signals that WMX may pick up the pace a little bit,"" said Richard Sporrer, an industry analyst at the Parker/Hunter investment bank and brokerage in Pittsburgh.
WMX on Feb. 4 unveiled plans to divest $1.5 billion in assets, cut 3,000 jobs and buy back 50 million shares of stock in an effort to appease shareholders and refocus the business. Market reaction to the sweeping plan was lukewarm, however, and major shareholders have continued pressuring the company.
Rooney's resignation may further signal WMX's determination to meet its critics head-on at the upcoming early May annual shareholders meeting, where some analysts expect a heated battle for control of the company.
""WMX put up Phil Rooney as their sacrifical child to get Soros off their back. ... The board will now be able to point to some substantive changes that it's made,"" said James Kelleher, an industry analyst with Argus Research in New York.
""It's going to very much blunt the message that Soros and Lens can bring to shareholders,"" Kelleher said.
He was referring to Lens Fund, a Washington, D.C.-based investment group that also owns a large block of WMX shares.
Soros and Lens were not immediately available for comment.
Rooney, 52, had been chief executive only since June 1996. Previously, he was WMX chief operating officer from 1984 to 1996. Buntrock, 65, founded the company and was chief executive from 1968 until 1996.
",22
"Minnesota Mining & Manufacturing Co chairman and chief executive L.D. DeSimone said the company is comfortable with 1997 earnings estimates ranging from $4.05 to $4.20 per share for 1997.
In an interview with Reuters Tuesday, DeSimone said, ""Within that range, at this point in time, we feel that there's nothing different we should say.""
Profits in 1996 were $3.63 per share.
DeSimone said the company is maintaining its target of earnings gains exceeding 10 percent annually.  
""Things can happen. The currency has gotten a lot worse,"" he said. ""But we think that up to this point, we've had some mitigation of that with all sorts of programs. But there's a limit there, too. We feel pretty good about fulfilling those kinds of numbers.""
In remarks to industry analysts also made Tuesday, 3M chief financial officer Giulio Agostini said about 1,000 employees in the United States and Europe late in the fourth quarter of 1996 left 3M through voluntary separation. ""About an additional 500 people in Europe will depart 3M under similar programs in the first half of this year,"" he said.  
Agostini said St. Paul, Minn.-based 3M expects raw materials prices to be slightly lower in 1997 than in 1996, ""producing a small benefit to cost of good sold.""
He said capital spending for 1997 is expected to be about $1.3 billion, compared to $1.1 billion in 1996.
The total shares outstanding of 3M is expected to be reduced by about four million in 1997 from its level at the end of 1996 of 416.8 million, Agostini said.
DeSimone said 30 percent of 3M's 1996 sales came from products introduced within the past four years, maintaining a traditional benchmark of the technology-based company.  
3M said 10 percent of 1996 sales came from products introduced within the past 12 months.
A more than 12-percent jump in fourth-quarter selling, general and administrative expense, compared to a jump for the entire year of only about half that, came on accounting adjustments and higher advertising costs, DeSimone said.
""We don't think that's continuing. What we see for SG&A is a gradual decline to something a little under 25 percent of sales. We might get to that level over the next year, year-and-a-half,"" DeSimone said.
The company's effective tax rate was 35.0 percent for the fourth quarter and 35.8 percent for 1996, ""slightly better than last year,"" Agostini said. ""We don't anticipate a significant change in our tax rate in 1997,"" he said.
Shares in 3M were up 1-1/8 to 83-1/4 in late trading after the company reported fourth-quarter operating earnings of $0.90 per share, beating the First Call consensus estimate by $0.02. Earnings in the year-ago quarter were $0.63 per share on an operating basis.
""Volumes were encouragingly good. Margins were modestly weaker than I'd anticipated they might be relative to the revenue growth projection,"" said Schroder Wertheim analyst Michael Ellman. Overall, however, he said, ""Aggregate volume growth was 12 percent. That's smoking. That's darn good.""
((--Chicago Newsdesk 312-408-8787))
",22
"Vencor Inc. has a definitive agreement to acquire Theratx Inc., another health care service provider, for $354 million, or $17.10 per share, in cash, the companies said Monday.
Vencor said it expected to begin a tender offer for all of Theratx's roughly 20.7 million shares on Feb. 14.
Theratx's stock shot up $3.50 to $16.625 on Nasdaq. Vencor was unchanged at $32.50 on the New York Stock Exchange.
""This will make Vencor the only company out there that can offer the long-term care hospital, the nursing home and the contract services,"" said D.A. Davidson analyst Robert Thornburg.
Vencor is the nation's largest long-term care hospital company. It also has sub-acute care units, nursing homes and speciality care centres for respiratory therapy. Last spring, Vencor acquired Hillhaven Corp. for $1.9 billion.
""Vencor wants very much to be big and this makes them bigger,"" Hindelong said of the Theratx deal. ""It's probably not the last major acquisition that they'll make.""
Analysts said Vencor expected the deal to boost earnings in the second half of 1997.
Vencor said it expected to close the deal within 90 days.
Vencor, based in Louisville, Ky., said the acquisition would broaden its menu of contract services, which includes subacute, rehabilitation and respiratory therapy services to nursing and subacute centres.
Vencor operates an integrated, long-term healthcare network with 38 long-term acute care hospitals, 279 nursing centres, 41 institutional pharmacies and, through its Atria Communities affiliate, 23 independent and assisted living communities.
Theratx, which went public in 1994, operates 29 nursing homes and sells rehabilitation services under contract to dozens of other nursing home companies.
Like others in the field, its stock for months has been weighed down by uncertainty about the U.S. Health Care Financing Administration's rewrite of Medicare reimbursement rules for such services.
""It was just a cloud hanging over their heads. So there was a lot of incentive on the part of (Theratx CEO) John Bardis to go out and do something like this,"" said Arneson Kercheville analyst Jay Somaney.
",22
"Option Care Inc is comfortable with a Wall Street 1997 earnings estimate of $0.41 per share, compared to $0.33 per share before a one-time charge in 1996, said chief executive Erick Hanson.
In an interview with Reuters, Hanson said the Bannockburn, Ill.-based home healthcare company is targeting annual revenue growth of 25 to 30 percent. ""We have a pretty good pipeline and a plan to be able to achieve that,"" he said.
The company's thinly traded shares were unchanged at 5-5/8 late Wednesday. Management owns 70 percent of the stock.  
Started in California as a home infusion services franchiser, Option Care was bought in 1991 by healthcare entrepreneur and venture capitalist John Kapoor, who took it public the following year. Kapoor remains chairman and owns 60 percent of the company. Hanson came aboard two years ago.
Option Care and its franchisees operate 190 facilities in 39 states, with heavy concentrations in California, Georgia, Ohio, Illinois and Pennsylvania.
Home healthcare firms sell services and products to people with cancer, AIDS and other medical disorders requiring intravenous drug treatment or other relatively complex care.  
As the managed care revolution has driven more patients out of expensive hospital beds, home healthcare has emerged as a hot industry. Nursing home companies, hospitals, HMOs and others are rushing to get into it, chiefly by acquiring home healthcare specialty firms such as Option Care.
Amidst this rapid consolidation, Option Care stands out as the largest remaining pure play in the market for home infusion therapy, or intravenous medication administration.
The company is diversifying into related home healthcare businesses, however, so that it will eventually resemble more broadly based home healthcare firms, Hanson said.  
Large, diversified competitors include Apria Healthcare Group Inc and Olsten Corp, Hanson said.
Option Care is going about its transition by acquiring its better home infusion franchises and smaller independent firms, as well as home nursing agencies, medical equipment sellers and respiratory therapy service providers. Option Care did 12 acquisitions in 1996 -- five franchises, seven independents.
""Our strategy is to buy strong franchises in targeted regions, then surround them with complementary services through acquisitions,"" Hanson said. ""Our objective is to be fully integrated by the end of 1999 in at least seven states.""  
""What we're saying is that with one phone call, one stop, we can provide any type of home care,"" Hanson said.
Option Care recently received a $30 million credit line from a group of banks. ""We're investigating during the next 12 to 18 months the possibility of putting more equity in play,"" Hanson said, adding that Kapoor is ""very much open to reducing his position, but he also doesn't want to walk away from it because he thinks it's a good place for his money.""
((--Chicago Newsdesk 312-408-8787))
",22
"Allegiance Corp chief financial officer Peter McKee said the company is comfortable with a Wall Street consensus 1997 earnings estimate of $1.55 per share, compared to 1996 operating earnings of $1.15 per share.
The consensus estimate that's out on the street at the present time is about $1.55 ... That would be consistent with the long-term goal,"" McKee said in a Reuters interview.  
Gross profit margin for Allegiance was 20.4 pct for the fourth quarter. ""There's continued pressure on it. We don't know exactly where it's going to fall, but we feel that it will be in that twenty range,"" McKee said.
In the same interview, Allegiance chief executive Lester Knight said the company is seeing some price increases on the distribution side of its business. But, he added, ""Some of the manufactured products have continued to have a lot of competitive pressure and we've seen some prices decline.""
Sales for 1996 were about $4.38 billion. ""Our sales for 1997 will be roughly flat,"" McKee said.  
In 1998 and beyond, Allegiance expects to match or slightly exceed the market growth rate of two to three percent, McKee said. Flat 1997 sales were expected as part of a plan to shift into more profitable businesses, Knight said.
The company's effective income tax rate was 35 percent in the fourth quarter, McKee said. ""We had 35 percent in the fourth quarter and we would anticipate having a tax rate in that magnitude going forward,"" he said.
The net debt-to-capital ratio was about 57 percent in the fourth quarter. ""We still want to get it down into the mid-40s over time,"" McKee said, declining to give a deadline.  
While still a small expense for Allegiance, research and development was $8.1 million in 1996, up from $6.6 million in 1995.
""We anticipate increasing that by roughly 25 percent to close to $10 million in '97. Over the next few years, you will see us putting a little more emphasis on R&D,"" McKee said.
Knight said Allegiance expects soon to announce another Best Value Product distribution program with the Kendall International Inc unit of Tyco International Ltd.
""You're going to see a deal with Kendall announced very shortly,"" Knight said.  
He said a price war in the hospital supply distribution industry involving Allegiance, spun off in September from Baxter International Inc, and competitors has wound down.
""The whole industry has come to the bottom of that price war and has started to expand those distribution margins ... I would say that price war is over,"" Knight said.
Allegiance is eyeing some possible acquisitions to expand its self-manufactured products business, he said.
McKee said, ""We plan as we go forward in our free cash flow to use roughly half of it for paying down debt, and half of it for cash acquisitions.... We've committed that we have free cash flow averaging about $100 million per year for the next five years.""
((--Chicago Newsdesk 312-408-8787))
",22
"A halt in shipments of generic blood glucose test strips distributed by Chronimed Inc could reduce the company's fiscal third-quarter earnings by as much as $0.06 per share if they are not resumed during the quarter, said chief financial officer Norman Cocke.
""If we ship none of (the strips) in the quarter, we're forecasting it could be up to $0.06 per share adverse impact,"" Cocke said in an interview with Reuters. ""If the thing is resolved very soon, and it could be, then there is no impact.""
Shares in Chronimed were off 2-7/8 to 12-1/8.  
The consensus of analysts' estimates for Chronimed earnings for the quarter ending in late March is $0.14 per share, he said. The company earned $0.11 per share in the three-month period ended March 29, 1996.
Quik Check strips are manufactured by privately held Diagnostic Solutions Inc, of Irvine, Calif., and designed for use with the popular OneTouch blood glucose monitor for diabetics manufactured by Johnson & Johnson.
The strips are the only generic option to J&J's branded OneTouch strips. Minneapolis-based Chronimed is the exclusive distributor of Quick Check strips.  
Shipments of the strips were voluntarily halted by Diagnostic and Chronimed in December after the U.S. Food and Drug Administration raised questions about the consistency of the blood test results they render, Cocke said.
""Diagnostic Solutions is working with (the FDA) actively to reach resolution, but we have gotten no signal, if you will, as to when that would occur,"" Cocke said.
Chronimed is uncertain as to what led the FDA to question and test the Quik Check strips, but added the agency routinely monitors the product quality in blood glucose test markets.  
""We are investigating this company,"" said an FDA spokeswoman, regarding Diagnostic Solutions. She declined further comment.
In fiscal 1996, Chronimed realized slightly less than 10 percent of its revenues on Quik Check strip sales, Cocke said.
In early 1995, Quik Check strip production was put on hold for six months by Diagnostic as the company worked on improving its manufacturing efficiency and quality. Output resumed in August 1995. ""Their volume of shipment and their general consistency of quality has been very good and quite to our satisfaction since then,"" Cocke said.  
Volpe Welty industry analyst Ann Logue said the Quik Check business is very profitable when it is active. But she questioned why Chronimed, which has several other growing lines of business, chooses to stay with it. ""There's evidence that this supplier is somewhat unreliable,"" she said.
Chronimed is committed to the product, Cocke said. ""We've had our difficulties with it, but we think we can work through them,"" he said, adding that Chronimed's independent testing of the strips shows they comply with industry standards.
The generic Quik Check sells for about 20 percent less than J&J's branded strip in the drugstore, Cocke said.
Diabetics must check their blood glucose levels several times daily. Most do so by pricking a finger and dabbing the drop of blood onto a paper strip that is then inserted into a machine that tests it for glucose level.
Diagnostic Solutions could not be reached for comment.
((--Chicago Newsdesk 312-408-8787))
",22
"St. Jude Medical Inc's proposed $505 million stock acquisition of Ventritex Inc will likely proceed, said chief financial officer Stephen Wilson.
In an interview Thursday with Reuters, Wilson discussed the company's duty to look into the three recent deaths of patients implanted with Ventritex medical devices.
But he said that, as serious as the deaths are, ""It's not the kind of thing that results in St. Jude Medical not wanting to move forward with the transaction.""
Shares in St. Jude were up 3/8 to 36-7/8.  
""So many good things have been put in place and we did work very hard and very long to make that happen. It really would be, in my view, very unfortunate if this transaction didn't move forward,"" he said.
Ventritex last week confirmed the death of a third recipient of one of its implantable defibrillators, devices that regulate heartbeat. Wilson gave Ventritex high marks on handling the problem so far and said St. Jude intends to get a full understanding of the situation.
""What we don't think makes any sense is for us to be breathing over their backs,"" Wilson said.  
He declined to comment on Wall Street speculation that the transaction price might be renegotiated down.
""Clearly, we do need to go in and do some due diligence so that we understand whether or not there has been any impact on the franchise value,"" he said.
He estimated that federal regulatory review of the deal may take another three to four weeks.
""In the best set of circumstances, at this point, we might get a first-quarter closing. If not, then hopefully we get an early second-quarter closing,"" he said.
Shares in Ventritex were up one to 19.  
Concerning St. Jude's additional analysis of the impact on the deal of the deaths, Wilson said: ""One of the things that we'll do is talk to some of the physician customers out there to see how they feel about the way it was handled. Then, most importantly, how they feel about Ventritex and its products moving forward. That's the real key question.""
He said St. Jude has not set a date to start additional due diligence, but is in close contact with Ventritex. He added that St. Jude expects to see sales of more than $1 billion in 1997.
""Even without Ventritex, we will exceed $1 billion,"" Wilson said.
((--Chicago Newsdesk 312-408-8787))
",22
"The boards of RightChoice Managed Care Inc and parent Blue Cross and Blue Shield of Missouri are moving to calm relations with regulators, return to profitability and ensure company control is firmly in the hands of chief executive John O'Rourke.
The three-pronged strategy was highlighted Tuesday when the boards said talks about a possible combination of RightChoice and BJC Health Systems had been halted, putting an end to a project conceived and launched last year by two top executives who were fired on Wednesday.  
In an interview with Reuters, O'Rourke said the talks with BJC -- a St. Louis hospital organization -- were called off primarily for business reasons.
""It was clear as we proceeded in the discussion with BJC that the kind of deal that was being considered...would not be acceptable to the national Blue Cross association,"" he said.
But he added that the boards of RightChoice and the Missouri Blues meant to show their support for him as well.
""The other part of the decision was...a vote of confidence in the company and in the management team that had just been hired to direct the company,"" he said.  
RightChoice expects to return to profitability later this year.
""We're really projecting, at least at this point in time, that we will return to profitability by the third or fourth quarter,"" he said.
The St. Louis-based company lost $3.7 million on revenues of $170.2 million in the fourth quarter, compared with a profit of $4.9 million on revenues of $154.6 million a year earlier. Wall Street registered its disapproval of the announcement of the halted BJC talks by driving shares in RightChoice down 3-1/2 to close Tuesday at 13-3/8.  
On the day of the management shake-up, O'Rourke was in the office of Missouri Department of Insurance director Jay Angoff with an offer to make peace, he said.
In May 1996, the Missouri Blues sued Angoff seeking a declaratory judgment that all applicable laws had been followed in the 1994 restructuring creating RightChoice.
The Blues also sought a permanent injunction barring the department from taking certain actions against the company.
In August, the department blocked a proposed share transaction in which RightChoice would have purchased 1.5 to 2.0 million of its own shares from the Blues.  
Then on December 31, a Missouri judge ruled the Blues had ""abused or exceeded their legal authority"" in undertaking the reorganization that created RightChoice three years earlier.
Heimburger vowed to fight the court ruling. Meanwhile, under his watch, RightChoice lost money in its third and fourth fiscal quarters.
In February, O'Rourke was named chairman and chief executive of RightChoice, replacing Heimburger. O'Rourke had previously been president and chief executive of HealthLink Inc, which RightChoice acquired in 1995.
""I have a mandate from the board to...improve the profitability of the company, to improve the public image and to address our regulatory issues,"" O'Rourke said.
The Missouri Blues' appeal of the December 31 court ruling is still pending and the share transaction proposal remains on hold, O'Rourke said.
((--Chicago Newsdesk 312-408-8787))
",22
"Under pressure from angry stockholders to restructure, WMX Technologies Inc. said Wednesday it agreed to sell for $626 million the 19 percent stake it holds in ServiceMaster L.P., a provider of services ranging from lawn chemicals to household maids.
Oak Brook, Ill.-based WMX, the nation's largest garbage hauler, is in the midst of a broad restructuring intended to appease dissatisfied stockholders and refocus its business.
On Feb. 4, it unveiled plans to divest $1.5 billion in assets, cut 3,000 jobs and buy back 50 million shares of stock.
WMX Chief Executive Officer Phillip Rooney resigned Tuesday, just a week after his ouster was demanded by an investment group controlled by financier George Soros.
WMX owns or has rights to acquire 29.035 million restricted shares of ServiceMaster, including an option to purchase 1.875 million shares that would be cancelled as part of the transaction, the companies said.
""Although our investment in ServiceMaster has provided exceptional returns to our shareholders, WMX is returning to a highly focused waste management services company and we believe our investments should be limited to core business activities,"" said WMX Chairman and acting Chief Executive Dean Buntrock. ""With this transaction, we are well along the way toward achieving our goal announced two weeks ago of monetizing an additional $1.5 billion of non-core assets.""
The stock sale is expected to be completed on or before April 14, the companies said.
Following the news, WMX's stock was off 37.5 cents at $34.375, while ServiceMaster rose 12.5 cents at $25.50 on the New York Stock Exchange.
""The transaction is expected to be immediately additive to ServiceMaster earnings per share and will provide significant, incremental tax benefits to ServiceMaster,"" said ServiceMaster Chief Executive Carlos Cantu.
""It also eliminates market uncertainties regarding the status of the WMX shares,"" he said.
Cantu said ServiceMaster intends initially to finance the stock repurchase with bank financing.
ServiceMaster's network of service companies includes ServiceMaster Consumer Services and ServiceMaster Management Services, and ServiceMaster Diversified Health Services and International. Its Consumer Services unit owns and franchises TruGreen-ChemLawn, Terminix, ServiceMaster Residential and Commercial Services, Merry Maids, American Home Shield, AmeriSpec and Furniture Medic.
Analysts said the sale of the ServiceMaster stake and Rooney's resignation may signal that WMX intends to speed up its restructuring and meet its critics head-on at the upcoming May 9 annual shareholders meeting, where some expect a heated battle for control of the company.
",22
"MGI Pharma Inc is reorienting its marketing efforts for Salagen, a drug for dry mouth in head and neck cancer patients, but it's still unable to predict when the company will turn a profit.
In an interview with Reuters, chief executive Charles Blitzer said Salagen is growing slowly. ""There's a lot we're learning about Salagen that we didn't understand back when it was being touted as a $100-million product,"" he said.
On the job since April, Blitzer said he is revamping the sales effort for the drug, which stimulates salivation.  
The Minnetonka, Minn.-based company has yet to post a sustainable profit. It lost $0.18 per share in 1995 and $0.82 per share in 1994. Dain Bosworth projects a loss of $0.34 per share this year and $0.15 per share in 1997.
""There's a question about whether we can be profitable in a sustained way in 1997,"" said chief financial officer James Adam.
The new strategy, bolstered by research data, encourages use of the drug during radiation treatments for head and neck cancer, rather than after treatment to relieve dry mouth, or xerostomia. A new sales force has been trained and fielded.  
""We're going to continue to make a steady and slow, but sure, impact in the head and neck cancer arena,"" Blitzer said.
Dain Bosworth last week lowered its estimate of the annual market for Salagen to $10-$12 million from $75 million. The firm cut its consolidated revenue estimate for MGI to $9.1 million for 1996 from $10.5 million, and to $12.4 million for 1997 from $22.4 million. Revenues were $13.3 million in 1995.
The company still expects to file a supplemental new drug application in the fourth quarter with the U.S. Food and Drug Administration seeking clearance to sell Salagen as a treatment for Sjogren's Syndrome, Blitzer said.  
Sjogren's is an autoimmune disease that damages the salivary glands and most commonly affects post-menopausal women. The target population for the disorder numbers about 400,000 patients, compared to about 25,000 for xerostomia.
Data from completed clinical trials for Sjogren's may also indicate Salagen can relieve dry eye, or kerato conjunctivitis seca, with a target population of 10 million, Blitzer said. Salagen sales in the second quarter were $1.46 million, up 75 percent over the year-ago level.
Aside from Salagen, MGI continues to develop some anti-cancer compounds. Renewed attention was drawn to one, MGI 114, in July when the National Cancer Institute voted to fund a series of trials with it, he said.
MGI on Monday completed a secondary, 1.2 million-share stock offering that yielded proceeds of $5.6 million to be devoted to ""late-stage in-licensing opportunities"" of promising anti-cancer compounds, Blitzer said.
MGI shares were up 1/8 at 5-1/4 Tuesday. In mid-1994, they traded as high as 11.
Chicago newsdesk 312 408 8787
",22
"Market confidence that St. Jude Medical Inc will proceed with its proposed acquisition of Ventritex Inc supported both stocks Friday, although analysts debated whether the deal might be repriced.
Shares in Ventritex were up 1/4 to 18-3/8, even though the company confirmed Thursday that a third patient implanted with one of its heartbeat-regulating devices died January 22.
""The fact that this stock has not moved much on the news of the third death indicates the market thinks this deal is going to go ahead,"" said Needham & Co analyst Jeffrey Barnes.  
Shares in St. Jude were up 5/8 to 37-3/4. The company has said it is going forward with the Ventritex deal, but will do more analysis due to the deaths of the three patients.
""I still feel the transaction is going to go through. The issue is terms,"" said UBS Securities analyst Samuel Navarro.
Analysts were focused on assessing the scope and cost to Ventritex of finding and fixing technical problems with 5,605 implantable defibrillators of the sort tied to the deaths.
Ventritex could not be reached for comment.
The company has likely found and reprogrammed about half of the defibrillators that could malfunction, analysts said.  
Estimates of the cost to Ventritex of finding and fixing the rest of the devices, plus any potential legal liability that could result, varied widely. One analyst put it at $4 million, another at $10 million. Even at the higher figure, Barnes said, ""It's hardly a deal-buster.""
Whether it is a deal-bender remains to be seen. ""These two companies definitely need each other. The big question mark is to what extent is the problem wih Ventritex's Cadence product a limited problem or a widespread problem ... The pricing will really depend on how bad the problem is,"" said Prudential Securities analyst Charlene Lu.  
St. Jude has agreed to buy Ventritex in a stock swap valued back in October at about $22.50 per Ventritex share, or $505 million altogether.
""You're looking at a $4 discount today because everyone's nervous that St. Jude is going to cut the deal or walk away ... But there's no indication that St. Jude would walk away or cut the price,"" said Dillon Read analyst Matthew Dodds.
With Ventritex trading at such a sizable discount to the offer price, analysts said, arbitrageurs were stepping in to buy the shares and assume the risk of more surprises between now and the expected closing of the deal in March or April.
((--Chicago Newsdesk 312-408-8787))
",22
"Biogen Inc expects to begin European marketing of Avonex, a multiple sclerosis drug, within the next 30 days and expects European sales eventually to match U.S. sales, President and Chief Operating Officer James Tobin said Wednesday.
At a Raymond James investors conference here, Tobin said, ""I would expect we'll be on the European market within the next 30 days ... Ultimately, I would expect that our sales in Europe would approach our level of sales in the U.S.""  
Avonex sales in 1996 totalled $76.5 million. Biogen's total 1996 sales were $277 million, up from $151.7 million in 1995. Biogen launched U.S. sales of Avonex -- the biotechnology pioneer's first major proprietary product -- in May 1996. Its sales have greatly boosted the company's revenue stream, previously comprised chiefly of royalties for hepatitis B vaccines and alpha interferon patents licensed to large pharmaceutical companies.  
Avonex reduces the frequency and severity of multiple sclerosis flares and competes with Schering AG's Betaseron, as well as the recently approved Copaxone from Teva Pharmaceuticals Industries Ltd.
Biogen plans to expand revenues and earnings by selling more Avonex and getting it approved for uses other than multiple sclerosis, in addition to out-licensing other technologies, Tobin said.
Biogen hopes to soon out-license Hirulog, a blood-thinning agent. ""We have found someone who is interested,"" Tobin said.
The company also has new possible products in the pipeline, including a renal disorder treatment called OP-1, which is being developed jointly with Creative BioMolecules Inc , as well as other compounds.
""The point is that Biogen is not a one-drug story,"" Tobin said.
((--Chicago Newsdesk 312 408-8787))
",22
"Polaris Industries Inc., best known for its snowmobiles, said Wednesday it will begin building motorcycles, riding its small-engine expertise into a market no major U.S. company other than Harley-Davidson Inc. has dared test in 40 years.
Minneapolis-based Polaris said it is developing a highway cruiser motorcycle that will be named Victory and be available to consumers in the spring of 1998.
""We've built pretty much all of it from scratch. The engine was designed in the USA and it's going to be made in the USA,"" said Matt Parks, who will be general manager of the new Polaris motorcycles unit.
Polaris is the world's largest maker of snowmobiles and is among the world's top three makers of all-terrain vehicles, or ATVs, and personal watercraft.
""We've competed successfully against Honda, Yamaha, Kawasaki and Suzuki in our other businesses. ... Entering the motorcycle market is a logical extension of our diversification strategy,"" said Polaris Chief Executive Officer Hall Wendel.
Shares in Polaris rose 37.5 cents to $26.25 on the New York Stock Exchange trading.
Besides the legendary Harley-Davidson, there are only two other, much smaller U.S. motorcycle makers -- Salt Lake City-based ATK America Inc., a maker of specialised off-road machines, and Buell Motorcycle Co., which is 49 percent owned by Milwaukee-based Harley and also located in Wisconsin.
Polaris said its new cruiser will compete with Harley's machines, as well as similar bikes from Honda and others. The company declined to disclose price or design specifications.
""It seems there is a market opportunity,"" said Beth Burnson, an industry analyst at the ABN-AMRO Chicago Corp brokerage and investment bank here.
In recent years, Harley has been unable to make enough cruiser motorcycles to meet booming demand, leaving a hole in the market, Burnson said.
""Japanese companies have been able come up with Harley copycats that people will buy off the showroom floor if they don't want to wait two years for a Harley. That's the part of the market that Polaris can target,"" Burnson said.
Polaris said it expects its existing customers -- an estimated 30 percent of whom are motorcyclists already -- will be among early buyers. The worldwide market for cruiser motorcycles is estimated at over 200,000 units annually, and sales of cruiser motorcycles have nearly doubled in the last five years, Polaris said.
With personal watercraft sales expected to slump this year due to overstocking in 1996, and snowmobile sales flat, Polaris has relied for growth recently on strong ATV sales, said Scott Ciccarelli, an analyst at the Gerard Klauer Mattison brokerage and investment bank in New York.
Challenging Harley, against which it has never competed, may be tough for Polaris, but moving into motorcycles is a logical next step for the company, he said.
""They've been hinting toward this for the last two years or so,"" Ciccarelli said.
Engines for Polaris products are presently built in-house or by Japan's Fuji Heavy Industries Ltd., which makes Subaru-brand cars, or by a Fuji-Polaris joint venture, Robin Manufacturing, in Hudson, Wis.
Engines for the new motorcycles will be built at the Polaris engine plant in Osceola, Wis., and the motorcycles will be manufactured at the company's Spirit Lake, Iowa, plant, the company said.
On Feb. 4, Polaris reported 1996 sales of $1.19 billion, up 7 percent from $1.11 billion in 1995. Annual profits were $62.3 million, up 2 percent over the previous year. Polaris said it expected 1997 sales to decline from the 1996 level but still show another year of record-setting profits.
""Expenses related to the development of the company's motorcycles are reflected in its expectations for 1997 net income in excess of 1996's record level,"" Polaris said.
",22
"Under pressure from angry stockholders to restructure, WMX Technologies Inc. said Wednesday it agreed to sell for $626 million the 19 percent stake it holds in ServiceMaster L.P., a provider of services ranging from lawn chemicals to household maids.
However, critics of the nation's largest garbage hauler stepped up their attacks, demanding more top-level resignations a day after Phillip Rooney quit as chief executive.
Nell Minow, a principal at Lens Inc., said WMX Chairman and Acting Chief Executive Dean Buntrock, 65, should stay on the job long enough to find a new CEO, and then step down.
Moreover, Minow said Lens would like to see WMX Chief Financial Officer John Stanford -- appointed only two weeks ago -- reassigned or otherwise removed from his post.
Washington, D.C.-based Lens owns a small stake in WMX and is working closely with another investment group headed by financier George Soros. The Soros group owns 5.2 percent of the company.
Oak Brook, Ill.-based WMX is in the midst of a broad restructuring intended to appease dissatisfied stockholders and refocus its business. On Feb. 4, it unveiled plans to divest $1.5 billion in assets, cut 3,000 jobs and buy back 50 million shares of stock.
WMX owns or has rights to acquire 29.035 million restricted shares of ServiceMaster, including an option to purchase 1.875 million shares that would be cancelled as part of the transaction announced Wednesday, the companies said.
""Although our investment in ServiceMaster has provided exceptional returns to our shareholders, WMX is returning to a highly focused waste management services company and we believe our investments should be limited to core business activities,"" Buntrock said.
""With this transaction, we are well along the way toward achieving our goal announced two weeks ago of monetizing an additional $1.5 billion of non-core assets,"" he said.
The stock sale is expected to be completed on or before April 14, the companies said.
WMX's stock fell 62.5 cents to $34.125 while ServiceMaster rose 25 cents to $25.625, both on the New York Stock Exchange.
""The transaction is expected to be immediately additive to ServiceMaster earnings per share and will provide significant, incremental tax benefits to ServiceMaster,"" said ServiceMaster Chief Executive Carlos Cantu.
""It also eliminates market uncertainties regarding the status of the WMX shares,"" he said.
Cantu said ServiceMaster intends initially to finance the stock repurchase with bank borrowings. Duff & Phelps Credit Rating Co. said Wednesday it may downgrade ServiceMaster's debt, pending further details of the transaction's financing.
Buntrock, 65, founded WMX and was chief executive from 1968 until June 1996. At that time, he was replaced as chief executive by Rooney, who resigned Tuesday, just a week after his ouster was demanded by the Soros group.
Earlier this month WMX named John Sanford as its new chief financial officer. Formerly WMX treasurer, he replaced James Koenig, who became executive vice president.
Minow said Lens is dissatisfied with Sanford. ""The new one I would like to see reassigned, as well, or gone,"" Minow said. ""They need to bring in an outsider.""
WMX spokesman William Plunkett, responding to Minow's comments on the CFO, said, ""John Sanford has been in this job very briefly and he is an experienced financial executive. He is well regarded among our investors and is actively engaged in the process of enhancing shareholder value.""
He declined further comment.
Downers Grove, Ill.-based ServiceMaster's network of service companies includes ServiceMaster Consumer Services and ServiceMaster Management Services, and ServiceMaster Diversified Health Services and International. Its Consumer Services unit owns and franchises TruGreen-ChemLawn, Terminix, ServiceMaster Residential and Commercial Services, Merry Maids, American Home Shield, AmeriSpec and Furniture Medic.
",22
"United Wisconsin Services Inc expects its medical-loss ratio to decline to levels not seen in years as long as Washington does not spring another healthcare reform initiative on the HMO industry.
In an interview with Reuters, United Wisconsin chief executive Thomas Hefty said the ratio -- the share of premium revenues spent covering HMO members' healthcare costs -- could fall into the seventies. ""The loss ratio is higher than we would like, but we're seeing, particularly in our small-group PPO unit, an improvement over last year,"" Hefty said.  
United Wisconsin finished its second quarter in June with its medical-loss ratio at 81.9 percent, down from 88.3 percent a year earlier. Hefty said it could fall to the seventies.
Premium revenues that are left over after covering member costs constitute the bulk of profits for a health maintenance organization, or HMO. ""We think the industry overall is poised for a better 1997 and 1998,"" Hefty said. ""Probably the biggest uncertainty in the market is the reaction to the election.""
When the Clinton administration unveiled its healthcare reform proposal in 1994, medical cost inflation plummeted and HMO profits soared.  
When healthcare reform failed, medical cost inflation roared back and profits suffered industry-wide. These trends have moderated recently, Hefty said, but he added that Hillary Clinton's speech at the Democratic Convention caused concern.
""It said that if the Democrats have a big victory, we'll see healthcare reform again with all of the interplay on the psychology of patients and physicians,"" he said.
In the meantime, Hefty said he sees room for premium hikes to boost HMOs' profits. ""In our market in Wisconsin, we compete against Humana and United Healthcare and both of them have been taking strong pricing action,"" he said.
""We're out there with price increases. Underlying healthcare trends have been coming down again,"" Hefty said.
Enrollment at United Wisconsin is growing, as well ""The Milwaukee HMO has a lost a little bit of enrollment with price increases, but we're still overall up a couple percent"" due to enrollment gains in the company's rural HMOs, he said.
""Our strategy is to keep looking for the rural markets ... We think those are good markets. You get better margins and we've shown the ability to not only get those margins, but get operating costs down,"" Hefty said.
",22
"Stericycle Inc said it is comfortable with Wall Street estimates of an operating-basis break-even third quarter, a fourth-quarter operating profit and a profitable year for the first time in 1997.
""The Dillon Read report has us punching through on an operating profit in the fourth quarter of this year, with break-even at the operating line in the third quarter...We're very comfortable with a profitable year,"" chief executive Mark Miller said in an interview Tuesday with Reuters.  
Stericycle lost $2.4 million, or $0.30 per share, in 1996.
As for the possibility of moving into the black in the first quarter, Miller added: ""We're going to be pretty close.""
In business since 1989, Deerfield, Ill.-based Stericycle has never turned a profit and its stock has languished below its $9 per share initial public offering price of last August.
Shares were unchanged at eight on very light volume Tuesday.
Boosted by a recent acquisition, accelerating internal growth and the withdrawal from the market of some key rivals, Stericycle looks to 1997 as a possible breakout year.  
At its present run rate, Stericycle 1997 revenues would be ""north of $36 million,"" Miller said.
Although 1996 revenues were just $24.5 million, Stericycle is the second-largest player in a $1 billion U.S. market from which larger competitors are fleeing.
Houston's Browning-Ferris Industries Inc remains the largest medical waste handler, but BFI is selling assets as part of a back-to-basics restructuring. If BFI decided to exit, Miller said: ""We would obviously love to buy it.""  
In December, Stericycle acquired the bulk of Waste Management's medical waste business for $11 million in cash and notes. Waste Management parent WMX Technologies Inc is also in the midst of a corporate restructuring.
Canada's Laidlaw Inc is also in the process of separating itself from the medical waste business. The remainder of the market is divided among many smaller firms.
""We see ourselves as the best consolidator opportunity for the vast majority of sellers,"" Miller said.  
More market share may become available to Stericycle beginning this summer as major hospitals with on-site waste incinerators confront new federal emission regulations.
""We think that will create new opportunities,"" he said.
While hospitals remain Stericycle's core business, sales and marketing is focused on physician offices, nursing homes, laboratories, outpatient surgical centers and clinics.
These smaller generators of waste present Stericycle with fatter profit margins and better growth opportunities as managed healthcare drives more medical procedures out of of acute care hospitals and into sub-acute facilities.
""These are the people that really need the outsourcing that we offer,"" Miller said.
Alternate site business was up 59 percent in the fourth quarter year-over-year, while the core hospital business was up 13 percent in the fourth quarter.
Partly as a result, the company's overall 1996 revenues grew 15 percent over 1995, while margins expanded 33 percent.
((--Chicago Newsdesk 312-408-8787))
",22
"Baxter International Inc is comfortable with the First Call consensus 1997 earnings forecast of $2.36 per share, compared to $2.11 per share for 1996, said Baxter chief financial officer Harry Kraemer.
In an interview Thursday with Reuters, Kraemer said, ""We're very comfortable with that. I would say that's a very reasonable number.""
He said the Deerfield, Ill.-based healthcare products giant expects 1997 revenues to be in the $6.5-billion range, up from $5.43 billion reported for 1996.  
""If you start off with the $5.5 billion that we have today, you add Immuno for another almost $700 million and you put in a little growth ... it would be fair to say we'd be somewhere in the $6.5 billion range for 1997,"" he said.
He said Baxter continues to anticipate closing its $623-million acquisition of Switzerland's Immuno International AG by mid-year.
The company expects to post charges on acquired in-process research and development related to buying Immuno and Research Medical Inc, Kraemer reiterated. But he said the size of those charges still has not been determined.  
He said closing of the $236-million acquisition of Research Medical is expected by the end of the first quarter.
Research Medical's results will not likely have an impact on Baxter's until the second quarter, he added.
""Immuno will be non-dilutive in '97 and will be accretive beginning in 1998. For RMI, which obviously is a much smaller transaction, it will be slightly dilutive in 1997 and will be accretive in 1998 and beyond,"" he said.
Baxter expects gross profit margin to rise this year over last. ""I would expect to see our gross margin increase during 1997 ... as much as a half a point is realistic,"" he said.  
Gross profit margin was 44.6 percent for the quarter just ended, down from 46.2 percent a year earlier. ""The fourth quarter of last year was much higher than our trends.... We just had a blip in the fourth quarter last year,"" he said.
Gross margin for 1996 was 44.7 percent, down from 45.0 percent in 1995. Baxter offset the decline by cutting selling, general and administrative costs as a percentage of sales to 21.0 percent in 1996 from 21.5 percent in 1995, Kraemer said.
Sales in Baxter's renal business grew faster than in the past, in ""low double digits"" on the quarter, and hit $1.3 billion for the year, Kraemer said.  
The renal business consists primarily of clinics that sell dialysis services to patients with kidney disease. Baxter's chief competitor in the U.S. market is Fresenius AG.
In the United States, fourth-quarter renal sales were down ""in low-single digits, virtually almost flat"" compared to year-ago results, Kraemer said. The decline was less steep than in the third quarter, however, he said, adding there has been an easing in the price war with Fresenius.
""There was a significant price competition the first couple of quarters, which has now levelled out,"" he said.
For 1996, Baxter's cardiovascular group had sales of $855 million, the biotechnology group had sales of $1.3 billion, and the intravenous systems group had sales of $2 billion.
Looking ahead, Kraemer said Baxter expects sales to grow more than 20 percent in 1997. ""We think we're going to generate at least an incremental $300-$400 million in cash flow. We will grow our net earnings after tax in the low double-digits. We do believe, beyond 1997, that we'll grow our earnings in 1998 and 1999 in the mid-teens,"" he said.
((--Chicago Newsdesk 312-408-8787))
",22
"The Food and Drug Administration said Thursday it was investigating the death of a third recipient of a heartbeat-regulating electrical device called an implantable defibrillator made by Ventritex Inc.
""We have received a report of a third death of a patient with one of the Ventritex defibrillators. We are investigating,"" FDA spokeswoman Sharon Schneider said.
""We do not know exactly the nature of the problem. We don't know whether this third death was caused by this same problem that appears to have caused the other two deaths,"" Schneider said in a telephone interview.
The stock of Sunnyvale, Calif.-based Ventritex fell $1.25 to $18.125 Thursday on market rumours about the death and its possible impact on a proposed $505 million stock purchase of Ventritex by St. Jude Medical Inc.
A spokesman for St. Jude, of St. Paul, Minn., said the company planned to take a closer look at the deal because of the three deaths believed to be associated with Ventritex devices.
""Based on what we know today, we are moving forward"" with the acquisition, said St. Jude spokesman Peter Gove. ""But we are going to do, as you might expect, additional due diligence ... With a product quality issue like this, obviously it causes additional analysis to be done.""
Ventritex general counsel Mark Meltzer said a patient implanted with a Ventritex implantable defibrillator died on Jan. 22. He said the company was notified a day or two later and it promptly advised the FDA and St. Jude.
The identity of the patient is not being disclosed.
On Jan. 16, Ventritex said it had been authorised by the FDA to begin reprogramming 5,605 implantable defibrillators in patients. The company said then that component failures in the devices were believed to be associated with the deaths of two patients.
An implantable defibrillator, or ICD, is a device about the size of a pocket pager that is implanted in the chest or abdomen and connected to the heart by internal wires. Like a pacemaker, the ICD regularly sends small electrical shocks to the heart. But where a pacemaker keeps the heart from slowing down, an ICD keeps it from beating too rapidly.
Meltzer said substantial progress has been made in Ventritex's efforts to find the patients who carry the 5,605 implantable defibrillators that need to be reprogrammed. He said he was unaware of any change in the St. Jude deal.
",22
"Pharmacia & Upjohn Inc reinforced Wall Street pessimism about its short-term outlook Wednesday with comments that showed it will not meet profit margin and cost-savings targets set under former leadership.
On a punishing day generally for drug stocks, shares in London-based Pharmacia were off only 7/8 to 36-7/8, however, indicating the stock may already be near a low, analysts said.
""In terms of the stock really turning around, you've got possibly another six months of dead money,"" said Smith Barney pharmaceutical industry analyst Jane Kearns.  
Several analysts cut their profit estimates for the drugmaker after it said it would likely have to postpone its goal of a 25-percent operating profit margin by 1998.
The company also said its objective of $500 million in cost savings to be achieved through the merger that created Pharmacia & Upjohn has changed. Some portion of those savings will no longer flow to the bottom line, but will be put into investments in new product development and marketing, it said.
Both the margin and cost savings goals were set under the leadership of John Zabriskie, who unexpectedly resigned last month as chief executive of the Swedish-American concern.  
""What they acknowledged today is that ... with the departure of John Zabriskie, they are a little less focused on strictly meeting the goals that he set out,"" said Cowen & Co drug industry analyst Ian Sanderson.
""Part of the reason that Zabriskie was forced out was there was disagreement between him and the Pharmacia management over just how aggressivley to move on these things,"" Sanderson said.
Pharmacia & Upjohn is signalling a new direction for the company that is focused less on meeting investor expectations and more on building its long-term sales base, analysts said.  
""The Zabriskie strategy was 'deliver expected numbers at any cost,' whereas the new management is saying they don't want to sacrifice long-term growth for short-term gains,"" said independent drug industry analyst Hemant Shah.
Some analysts said they doubted all along that the company could hit the targets it set out in the merger that created it 16 months ago from the combination of Upjohn Co, of Kalamazoo, Mich., and Sweden's Pharmacia AB.
""I don't think there was anybody at the company willing to make the tough cuts,"" said Oppenheimer & Co drug industry analyst Steven Gerber.  
""Our vantage point on this merger from a couple years ago has been that it was a combination of two companies that should have been bought out and that were both afraid to make the necessary cuts ... We think there's a common management goal on both sides of the Atlantic, which is primarily job preservation. So nothing's changed,"" Gerber said.
The company said it continues its search for a new CEO.
The naming of a new chief will be a key event in the company's short history, as will presentation in mid-April of data on Detrusitol, a urinary incontinence treatment, at the American Urological Association meeting in New Orleans. ""This is one of P&U's biggest potential new drugs,"" Kearns said.
If the data look good, Wall Street expectations will be met. ""If the data are not positive, the stock is really going to take a tough hit,"" Kearns said.
The company Wednesday reported 1996 operating-basis profits of $998 million on sales of $7.2 billion, up from $940 million in profits on 1995 sales of $6.9 billion. Operating margin in 1996 was 19.8 percent, up from 18.3 percent in 1995.
((--Chicago Newsdesk 312-408-8787))
",22
"Health Care and Retirement Corp expects to maintain its rapid rate of profit growth and is open to a large strategic transaction if the right one comes along, its chief financial officer said on Monday.
In an interview with Reuters, Geoffrey Meyers said Health Care recorded earnings growth of more than 20 percent in every quarter since the company went public in 1991.  
""The $1.47 is 19 percent growth for this year. And 18 to 20 percent for the year after is something we've been giving guidance on,"" Meyers said.
The Toledo, Ohio-based company reported 1996 revenues of $782 million, versus 1995 revenues of $713.4 million.
""Our underlying growth rate in revenues is about 10 percent. We made an acquisition this year of a company called Milestone that will add another three, four percent. So we're up somewhere in the mid-teens this year in our revenue growth,"" he said.  
Regarding Wall Street speculation that Health Care & Retirement may join in the merger wave sweeping through the nursing home and sub-acute care industry, Meyers said, ""We certainly have the financial capability to do a large deal.""
He said, ""We would be interested in the right kind of large deal, but we're not just going to do one to do one.""
",22
"By selling its Snapple beverage business for $300 million, Quaker Oats Co on Thursday both disappointed and relieved Wall Street.
The price was far lower than analysts following the company said they had hoped Quaker would be able to get.
""It was a fire-sale price.  I'd been using $600 to $700 million"" as an estimated value for Snapple, said Prudential Securities food industry analyst John McMillin.
At the same time, analysts said they were relieved that Quaker was ending its disastrous Snapple venture.  
""The monkey is finally off Quaker Oats' back,"" said BT Securities food industry analyst John O'Neil.
Shares in Quaker were up 3/8 to 37-7/8 in late morning on heavy volume, after trading as high as 39-1/2.  Shares in Triarc Cos Inc, which is buying the Snapple line from Quaker, were up one to 16-3/4 after trading as high as 18.
Triarc owns the Mistic and Royal Crown beverage lines, as well as Arby's Inc fast-food restaurants and liquefied petroleum and specialty dyes and chemicals businesses.  
Chicago-based Quaker bought Snapple for $1.8 billion, including acquisition costs, two-and-a-half years ago near the height of the alternative beverage brand's popularity.
Since the purchase, widely seen by analysts as overvalued, Quaker has struggled with the line of ready-to-drink teas and juices.  Snapple sales declined eight percent in the United States and Canada in 1996, and the business ran at a cash loss, the company reported last month.
""The bad news is the (Snapple) investment's been a disaster; the good news is they're trying to put it behind them,"" McMillin said.
Quaker's other products include Gatorade, which continues to dominate the sports drink market, and cereals, such as Quaker oatmeals, Cap'n Crunch and Life.
""Quaker still has the crown jewels -- Gatorade and the cereals -- and performance in those businesses has been pretty good,"" said PaineWebber food industry analyst George Staphos.
((--Chicago Newsdesk 312-408-8787))
",22
"The board of directors of WMX Technologies Inc. Wednesday rallied around its Chief Executive Phillip Rooney following a direct attack on his leadership by a major stockholder.
An investment group led by financier George Soros called Tuesday for Rooney's ouster and proposed a slate of nominees for the board of the largest U.S. garbage-hauling company.
In response, the WMX board said it ""unanimously reaffirmed its support for Phillip B. Rooney and his leadership of the company during his seven months as chief executive officer.""
The exchange did little but aggravate the acrimonious struggle involving WMX, Soros and other large shareholders.
""I don't think they could really escalate the animosity any higher than it already is,"" said James Kelleher, industry analyst at the Argus Research firm in New York.
The New York-based Soros group and other investors, including the Lens Fund in Washington, D.C., have been pressuring WMX to improve its performance for months.
WMX, based in Oak Brook, Ill., said last week that it was cutting 3,000 jobs and shedding $1.5 billion in assets in a broad effort to refocus on its core waste management business.
On Tuesday, the Soros group expressed dissatisfaction with the restructuring plan, proposed removing Rooney and named four individuals to its alternate slate of board nominees.
Even with a 5.2-percent stake in WMX, the Soros group cannot dictate the company's future, especially in the face of widespread small shareholder scepticism about the large shareholders' motives.
""They can make a lot of noise and smoke, but when everything is done, their effectiveness is limited ... This thing is far from over,"" Kelleher said.
WMX last week reported a fourth-quarter loss of $461 million after charges, vs. a profit in the year-ago period of $49.6 million. It  reported revenues for all of 1996 of $9.18 billion, compared with $9.05 billion in 1995.
WMX said Wednesday that the board nominees do not qualify for consideration at the company's annual meeting this year.
""The documents we received from the Soros group attempting to nominate four individuals for election as directors of the company arrived after the filing deadline and contained incomplete information,"" WMX said in a statement.
WMX added that its board was committed to search for the best possible candidates and its nominating committee had agreed to consider the Soros nominees later this year.
""Our board is absolutely committed to attracting the best directors possible. We want to make sure we are serving the interests of all of our stockholders,"" WMX said.
If Soros does not prevail before or during the WMX annual meeting scheduled for early May, time may be on his side.
""WMX is far from out of the woods and is likely going to have a few more painful quarters, which will strengthen Soros' hand so that he might succeed next time,"" Kelleher said.
The WMX board said that Rooney, a long-time manager of the company's waste management business, was the right leader for the company as it concentrates on that industry.
WMX also said an important component of its restructuring plan was adding new, independent perspectives to its board and reiterated it had hired an executive recruiting firm to find appropriate candidates.
WMX's stock, which fell 9 percent last week, was up 50 cents at $32.75 in heavy volume on the New York Stock Exchange.
",22
"Wheelabrator Technologies Inc indefinitely deferred a $350-million Dutch auction stock buyback because its parent company -- WMX Technologies Inc -- has no chief executive, said Wheelabrator chief financial officer Robert Gagalis on Tuesday.
In an interview with Reuters, Gagalis said, ""We wanted to maintain some flexibility to get a new CEO up to speed on Wheelabrator's business and how it fits into WMX and all those kinds of things.""
Shares in Wheelabrator were off one to 12-7/8.  
Wall Street analysts said the Dutch auction deferral was a surprise that stirred new doubts about WMX and its majority owned Wheelabrator subsidiary.
""Whenever you put off something like this, it's just going to create uncertainty in investors' minds,"" said A.G. Edwards industry analyst Tore Stole.
Wheelabrator, based in Hampton, N.H., had announced in February that it would increase its stock repurchase program to 30 million shares, including a Dutch auction to take place in the second quarter of this year. In a Dutch auction, a price is set, then lowered until a responsive bid comes in.  
Analysts speculated that Wheelabrator may have been displeased with initial indications of prices likely to be paid in such an auction. But that was not the case, Gagalis said. ""The rationale for the change in strategy was tied to WMX's search for a new CEO,"" he said.
The Wheelabrator auction was to have been just one part of a massive restructuring of WMX and affiliates that otherwise is progressing. The Waste Management Inc unit of WMX said last week it agreed to sell most of its Canadian assets to the Canadian unit of USA Waste Services Inc -- the latest step in WMX's plan to divest $1.5 billion in assets.  
Under pressure from unhappy shareholders, WMX -- the largest U.S. garbage hauler -- also is in the process of finding a new chief executive, cutting 3,000 jobs, and doing its own Dutch auction for $1 billion. ""They're making progress,"" said Parker/Hunter industry analyst Richard Sporrer.
Analysts were unsure about the broader meaning of the Wheelabrator deferral, especially when viewed in light of the resignation last month of WMX chief executive Philip Rooney, architect of the WMX restructuring strategy.  
Tuesday's news could signal that Rooney's plans are being back-burnered, said Edward Jones analyst William Fiala. ""It would make sense because they're going to have a new CEO ... and they're going to want him to have more say in the decisions affecting the future of the company,"" Fiala said.
Gagalis said he is unaware of any further impending delays or changes in the WMX shake-up. He said WMX plans to proceed with its own, $1-billion Dutch auction in April.
""In terms of all the other aspects of the WMX plan, I think everything else is being implemented as previously announced,"" Gagalis said.
Sporrer said, ""Not having a CEO will stretch out to some degree the restructuring efforts they've been talking about. But I don't think it will be material ... Waste Management has spent a lot of time thinking through these changes. I don't think they're going to back off.""
((--Chicago Newsdesk 312-408-8787))
",22
"Jones Medical Industries Inc chief executive Dennis Jones said Friday in an interview that he is comfortable with the First Call consensus earnings forecast of $0.23 per share for the fourth quarter.
""That $0.23, I'm comfortable with that,"" Jones told Reuters. ""Which puts it at $0.79 for the year.""
St. Louis-based Jones earned $0.16 per share, as restated for a three-million-share pooling acquisition of privately held Daniels Pharmaceuticals, in the fourth quarter a year ago and $0.50 per share in all of 1995, Jones said.  
Shares in Jones were down 1-1/4 to 31-3/4 on heavy trading, extending a bumpy week for the drug company.
""It's huge volume, unbelievable,"" Jones said. ""I guess they're trying to find out what the valuation should be.""
Throughout last year, Jones' stock price was extremely volatile, starting 1996 near 10, climbing through the summer to 50 by September, then sliding in the past four months.
Earlier, institutional holding of the stock had grown to over 50 percent from 15 percent of total outstanding shares, Jones said. ""Of those, a lot of them were momentum players, and it looks like they've lightened up,"" he said.  
The company expects to report year-end financial results in the second week of February, Jones said.
Jones has made four acquisitions since August, 1995. The company focuses on buying products from large pharmaceutical companies or others that have somehow not lived up to their sales potential, and breathing new life into them.
""I would like to keep that pace going. We have the ability financially and I think we have the ability from a management perspective ... We're sitting on $45 million in cash, essentially no debt and I think about $100 million of debt capacity,"" Jones said.
((--Chicago Newsdesk 312-408-8787))
",22
"Troubled auto lender Mercury Finance Co. said Thursday it won an extension of its short-term credit line with Bank of America, but analysts said permanent refinancing remains Mercury's most critical need.
""The trick will be to get some permanent financing in place and then get the thing up and running again,"" said James Inglis, financial services analyst at Philo Smith & Co.
Extension of the $50 million, short-term loan is still a major advance, said Mercury Chief Executive William Brandt.
Mercury's creditors granted waivers allowing extension of its credit line with Bank of America to June 10. The waivers permit Mercury to continue to pledge assets as collateral on the $50 million credit facility. The previous waiver period had been for only 30 days, Chicago-based Mercury said.
""This 90 day extension is a tangible demonstration of confidence in Mercury,"" Brandt said in a statement. ""The expanded waiver period gives the company breathing room to focus on operations and on the exploration of long-term financing alternatives.""
The company said it is talking with holders of $22 million of subordinated debt about their interest payments.
Mercury faces a federal investigation and several shareholder lawsuits after its January announcement that it had to restate financial results to show lower profits due to accounting irregularities.
The company lost more than $2 billion in market capitalisation after its stock price plunged on the news of the restatement. The stock fell in January from $14 to less than $2 per share. It rose 25 cents to $2.875 in mid-day trading on the New York Stock Exchange.
Under the terms of the waivers, during the 90-day period, Mercury will resume interest payments on nearly all of its roughly $1 billion in debt and will pay any past-due interest.
Mercury received the $50 million in short-term financing from Bank of America a month ago. It is being used to meet daily operating expenses and interest payments.
The 90-day extension is ""certainly a good sign,"" said Katrina Blecher, financial analyst at Gruntal & Co. ""I don't think it was unexpected,"" she said. ""But they have to get permanent financing. My gut says they'll probably be able to do it. I would certainly would not write the company off.""
",22
"CardioThoracic Systems Inc is exceeding its internal targets for increasing the number of cardiac surgeries done worldwide using equipment for operating on a beating heart without cracking the chest.
At each of 12 centers around the world, surgeons are doing about 11 surgeries per month with the company's new devices, up from none a year ago, said chief executive Richard Ferrari.
""We're above our target"" for procedure rates, he said on Monday in an interview with Reuters prior to a presentation to investors here at a Dain Bosworth conference.  
To date, more than 200 minimally invasive direct coronary artery bypass, or MIDCAB, surgeries using the company's equipment have been performed. Three-quarters of the surgeries have been single blood-vessel grafts, with one-quarter involving multiple-vessel bypasses. The complication rate of one percent is lower than traditional procedures, Ferrari said.  
The Cupertino, Calif.-based company is gearing up to train more surgeons to use its equipment. ""If we're doing everything perfectly, we'll graduate 80 surgical teams per quarter,"" Ferrari said, adding he is confident that some Wall Street expectations for CardioThoracic may be met.
The company is comfortable with analysts' estimates of 1997 sales reaching about $11 million, versus no revenue this year. ""That is a fair number,"" Ferrari said.
Piper Jaffray projects sales rising to $50.5 million in 1998 and $108.9 million in 1999.  
CardioThoracic also is comfortable with analysts' projections of a loss of $1.48 per share this year and a loss of $1.38 per share next year, Ferrari said.
Chief financial officer Steve Van Dick said, ""We'll reach breakeven in mid- to early-1998, with just a slight profit. I don't expect we will end 1997 in the black.""  
Capturing even a small part of the 1.9 million heart revascularizations done annually in the United States would make its revenue projections achievable, Ferrari said. Each single-use MIDCAB toolkit is priced at about $2,500. ""For 1997, CTS' projection is 4,000 procedures. In 1998, it's 17,000 and in 1999, it's 50,000,"" he said.
The total cost of a MIDCAB procedure is about $15,000 -- less than an open-heart coronary artery bypass graft and equal to or more expensive than some other alternatives.  
MIDCAB is performed using devices allowing the surgeon to work on a beating heart through small holes in the chest, eliminating the need for the huge incision and cardio-pulmonary bypass circuit that are standard in open-heart surgery.
Larger companies, such as Medtronic Inc and Genzyme Corp, are moving into the young market for MIDCAB equipment. ""It legitimizes a lot of things we've been saying for a while,"" Ferrari said.  
While larger competitors may pose a competitive threat, Ferrari said CardioThoracic feels secure in its lead in research and development, patent protections and regulatory filings. ""We have much more knowledge about this than they do. We have a huge start ... It's a couple of years,"" he said.
The U.S. Food and Drug Administration in May gave marketing clearance to two of CardioThoracic's five MIDCAB tools -- the access platform and the stabilizer.
A 510k application for marketing clearance has been filed with the FDA for a distal perfusion device. The company expects to file 510k's for a stitcher and an artery harvester this month, Ferrari said.
The company continues to expect to have the entire tool kit approved for more active marketing by early 1997, he said.
The company wants to do its own marketing and distribution in the United States, but will seek partners for non-U.S. markets. ""There have been some people who have expressed some preliminary interest in what we're doing,"" he said.
The company is seeking European Union marketing approvals. ""We've not focused on the Japanese market yet,"" Ferrari said.
",22
"Patterson Dental Co expects to report fiscal third-quarter earnings in the range of $0.41 to $0.42 per share, well above the First Call consensus of $0.37 per share, said chief executive Peter Frechette.
In an interview with Reuters, Frechette said, ""In terms of net income for this quarter, we would expect to be between $8.9 and $9.1 milllion. That translates to $0.41 or $0.42 per share for the third quarter which ended January 25.""
Patterson, the largest U.S. dental products distributor, had net income of $0.32 per share in the year-ago quarter.  
The prior-year period did not benefit from sales of Patterson's Colwell division, which it acquired in October from Deluxe Corp. Patterson chief financial officer Roanld Ezerski said the company paid nearly $60 million in cash for Colwell, which makes stationery and office supplies and markets them to healthcare providers.
""In the quarter, our performance really benefitted from a stronger performance from the Colwell acquisition ... It is clearly performing better than anticipated,"" Frechette said.
For the nine-month period ended January 25, Frechette said Patterson expects earnings of $1.06 to $1.07 per share.  
Patterson had net income of $0.92 per share in the third quarter of the preceding fiscal year.
For all of fiscal 1997, Wall Street projects earnings of $1.46 per share for St. Paul, Minn.-based Patterson, according to the First Call consensus of four analysts' estimates.
""We feel we can exceed that number,"" Frechette said.
Patterson expects to post third-quarter results next week.
Frechette said incremental sales and earnings from the Colwell unit are being realized before Patterson has had a chance to leverage Colwell sales with its own sales force.
Shares in Patterson were up 1/2 to 29 in early trading.  
Patterson sells dental equipment, supplies and other products and services in the United States and Canada. Canadian sales account for less than 10 percent of total revenues, but have posed a challenge in recent quarters.
""We would expect for the (third) quarter to report a sales increase in Canada of about 6.1 percent ... Due to competitive pressures in Canada, we would also expect to report an operating loss in Canada,"" Frechette said.
In the second quarter, Canadian sales declined 4.1 percent. ""The Canadian marketplace is not terribly robust,"" Frechette said, but he added progress is being made.  
""When we look at the U.S. market, we would expect for the quarter to report an increase of about 8.6 percent"" in sales, Frechette said. ""That included a very strong supply sales quarter. Supplies were up about 11.2 percent, which obviously translates into equipment being softer for the quarter.""
Ezerski said equipment sales for the quarter would be ""above prior year, but not as good as second quarter.""
In the second quarter, equipment sales were up 10.4 percent year-over-year.
Patterson on January 25 had about 800 sales representatives, up from 760 a year earlier. Increased staffing occured mostly in the United States, Frechette said.
Sales of the Cerec 2 and KCP 1000, both newly introduced dental care products, are progressing as expected, he said.
((--Chicago Newsdesk 312-408-8787))
",22
"Humana Inc. reported lower quarterly profits Tuesday, mainly due to charges for restructuring, but the stock in the big health maintenance organisation rose on optimism over its new president's ambitious turnaround plan.
The 4.9-million member HMO -- fifth largest in the United States among for-profit HMOs -- posted fourth-quarter net income of $22 million, or 13 cents a share, after charges, down from $49 million, or 30 cents a share, in the 1995 quarter.
Quarterly premium revenues were $1.81 billion, up from $1.49 billion in the year-ago period.
For the full year, Humana said net income plunged 94 percent to $12 million, or 7 cents a share, from $190 million, or $1.17 a share. The company reported revenues of $6.7 billion, up from $4.6 billion in 1995.
The stock of the Louisville, Ky.-based Humana rose 37.5 cents to $18.75 on the New York Stock Exchange after rising as high as $19.25.
""What the stock is responding to is Humana's outlining a pretty aggressive action plan. ... They're making the organisation more lean and mean,"" said Gary Frazier, a health care industry analyst with the Bear Sterns brokerage.
When Gregory Wolf became president of Humana in September, he took over a company that once had led the managed health care industry, but had more recently seen its star fade as it expanded into unprofitable areas.
Wolf had previously been president of Emphesys Financial Group Inc., which Humana acquired in October 1995.
With the help of a new executive staff, Wolf is pushing through a tough plan to cut costs and withdraw Humana from money-losing markets.
""He's made some very intelligent moves,"" said Ed Keaney, health-care industry analyst with the Volpe Welty brokerage.
In the fourth quarter, Humana took a special charge against earnings of $10 million after taxes related mainly to severance costs for elimination of 700 to 900 jobs this year from its roughly 18,000-member work force.
The company has sold or is selling money-losing operations in Alabama, Washington, D.C., and other markets.
In the second quarter, Humana took a special charge against earnings of $130 million after taxes to restructure the Washington health plan, provide for expected insurance losses, close 13 service areas and discontinue unprofitable products in three markets.
As a result, the company said total enrollment in its commercial health care plans fell by 69,100 members last year, by 87,500 members in January alone and is expected to decline by 115,000 members this quarter.
""Our plans to withdraw from certain markets and price business commensurate with the underlying risk are proceeding on schedule,"" Wolf said.
The company's medical-loss ratio -- a key measure of profitability -- improved to 82.8 percent in the fourth quarter from 83.1 percent in the third quarter, but was up from 81.5 percent in the year-ago period.
Analysts said they were impressed with Wolf's plan for reversing Humana's fortunes but noted the company unveiled a turnaround plan once before that was never fully achieved.
""I want to see a little more of a turn in earnings before I'm sure this action plan is taking hold,"" Frazier said.
",22
"Triarc Cos Inc plans to apply the same marketing principles to Snapple that it used to turn around the Mistic beverage line -- minus Dennis Rodman -- said Triarc Beverage Group chief executive Michael Weinstein.
""We used Dennis in our Mistic commercials this year, which was perfect,"" Weinstein said in an interview with Reuters.
But the quirky Chicago Bulls basketball forward is unlikely to be endorsing Snapple, which Triarc said Thursday it will acquire from Quaker Oats Co for $300 million.
""No, no.  Dennis is the Mistic guy,"" Weinstein said.  
Edgy advertising, careful attention to distributor relationships, colorful labelling and a focus on cold-bottle street sales comprised Triarc's successful formula for Mistic and will set the tune for Snapple, too, he said.
After the deal with Quaker closes, Triarc will consult distributors and review the consumer research on Snapple. ""Then we're going to move like hell to do some really cool, innovative things in packaging and product and advertising to try to build the brand back up again,"" Weinstein said.
Snapple sales in 1996 were about $550 million, down eight percent from 1995 under Quaker's unsuccessful management.  
Triarc has not yet set Snapple sales targets and is taking a long-term approach, Weinstein said.  ""Our focus is on 1998. You can't take over a brand and then snap your fingers and have it turn around overnight.  But we believe that there are lots of opportunities for growth,"" he said.
Taking on Snapple will nearly triple Triarc's beverage revenues.  ""I'm going to be busy.  I'm going to have to start coming in in the afternoons now,"" he said.
New York-based Triarc is a diversified company that is 25-percent owned by financiers Nelson Peltz and Peter May. They bought it from Victor Posner in 1993 for $72 million.  
Since then, Triarc has sold off 16 businesses, paid off $500 million in debt and raised $200 million in cash.  The objective, said Triarc spokesman Martin Shea, has been to create a consumer brands business.
Triarc bought the Mistic juices line from a sole proprietor for $95 million in August 1995.  Mistic had sales in 1996 of about $130 million.
""We have a track record in this category with Mistic, of taking a brand that was slumping and applying some basic principles ... to it. We know how to make a brand succeed. We're more entrepreneurial,"" Weinstein said.
Snapple, the brand that virtually created the premium soft drinks category, was bought by Chicago-based Quaker two-and-a-half years ago but has lost money ever since.
((--Chicago Newsdesk 312-408-8787))
",22
"WMX Technologies Inc chairman and acting chief executive Dean Buntrock should stay on the job long enough to find a new CEO, then step down, said Nell Minow, a principal at Lens Inc, a major WMX stockholder.
In an interview with Reuters, Minow said, ""Any successor worth his salt is not going to want the job if (Buntrock) is going to be too involved ... It doesn't have to be right away, but I think (Buntrock) should recognize that.""
Buntrock, 65, founded Oak Brook, Ill.-based WMX and was chief executive from 1968 until June 1996.  
At that time, Buntrock was replaced as chief executive by Phillip Rooney, formerly WMX chief operating officer. On Tuesday, Rooney resigned, just a week after his ouster was demanded by an investment group controlled by financier George Soros, another major shareholder of WMX.
Earlier this month, under shareholder presssue, WMX named John Sanford as its new chief financial officer. Formerly WMX treasurer, he replaced James Koenig, who became executive vice president. Minow said Lens is dissatisfied with Sanford.
""The new one I would like to see reassigned, as well, or gone,"" Minow said. ""They need to bring in an outsider.""  
Lens and other shareholders are unhappy with the WMX CFO's office, according to Minow. ""It's their inability to meet their projections, their inability to let a year go by without some special charge, that I think speaks very badly for the credibility of that office, to say nothing of (WMX's) muddled, overall structure,"" she said.
Regarding the search for a new CEO, Minow said, ""We'd like to see someone who's got a proven track record in a turnaround situation. We want to see someone who's willing to put his money where his mouth is by being willing accept most of his pay in options.""  
Shares in WMX were down 3/4 to 34 at midday following its announcement that it agreed to sell its entire 19-percent stake in ServiceMaster LP for $626 million in cash.
WMX is undertaking a broad restructuring meant to appease shareholders and refocus the company on its core business, but its efforts so far have done little to silence its critics. The continuing battle between the company and the closely allied Soros and Lens groups is centering on board control.
WMX spokesman William Plunkett said four of 12 board seats will come open at the May 9 annual meeting. The Soros group has named a slate of four individuals it would like to see elected. Minow said Lens supports the Soros slate.
Plunkett said WMX expects Buntrock and director Peer Pedersen to stand for reelection, leaving two seats up for grabs. ""The nominating committee is actively reviewing candidates now ... They welcome suggestions from all our shareholders,"" Plunkett said.
Regarding Minow's comments on the CFO, Plunkett said, ""John Sanford has been in this job very briefly and he is an experienced financial executive. He is well regarded among our investors and is actively engaged in the process of enhancing shareholder value.""
He declined further comment.
((--Chicago Newsdesk 312-408-8787))
",22
"Consolidation in the nursing home and sub-acute medical care services industry accelerated Tuesday with the announcement of two mergers involving companies long rumored to be shopping for deals.
Healthsouth Corp said it agreed to acquire Horizon/CMS Healthcare Corp in a stock transaction valued at $1.6 billion, including debt assumption.
In addition, Sun Healthcare Group said it agreed to buy Retirement Care Associates Inc and Contour Medical Inc for $328 million in stock and cash.  
Both deals underline Wall Street speculation that the highly fragmented industry is rapidly consolidating. ""This is far from over and will probably go on for a while,"" said Schroder Wertheim analyst William McKeever.
Birmingham, Ala.-based Healthsouth, with 1995 revenues of $1.55 billion, operates the largest U.S. chain of rehabilitation hospitals and other specialty medical centers.
Horizon/CMS, based in Albuquerque, N.M., runs the nation's second-largest rehab hospital chain, but also has 267 nursing homes and other healthcare businesses. At closing, Horizon/CMS was up 2-1/2 to 16-3/4. Healthsouth was down 2-1/4 to 40-7/8.  
Healthsouth said it would evaluate strategic alternatives for Horizon's nursing home and other non-rehab businesses, in which analysts said Healthsouth likely has little interest.
Sun Healthcare, also based in Albuquerque, said its acquisition of Atlanta-based Retirement Care, and its majority owned Contour affiliate, will boost Sun's total roster of nursing homes to 380 in the United States and United Kingdom.
Combined with Retirement Care, Sun said it expects to have annual revenues of about $2 billion. ""Sun expects to realize significant business synergies from the acquisition of Retirement Care Associates and Contour Medical,"" it said.
Last week, Louisville, Ky.-based Vencor Inc agreed to acquire TheraTx Inc, of Alpharetta, Ga., for $550 million, prompting analysts to predict more mergers and acquisitions ahead.
Vencor is the largest U.S. operator of long-term care hospitals and runs sub-acute care units, nursing homes and other businesses. TheraTx provides rehab services under contract and operates 29 nursing homes.
((--Chicago Newsdesk 312-408-8787))
",22
"Police sealed off South Korea's embassy and consular office in China's capital Beijing on Thursday after one of North Korea's top officials was reported to have sought asylum from Seoul.
Dozens of police were posted along the quiet, tree-lined streets around the South Korean embassy's consular section in the diplomatic district of Beijing and had sealed roads leading into the area.
""No one is allowed to come through here,"" one policeman told a Chinese trying to reach the consular section, housed in a two-storey building in a garden compound, to apply for a visa.
Police declined to say whether the area had been sealed off after Seoul announced on Wednesday that Hwang Jang-yop, a senior aide to the North's leader Kim Jong-il, had sought asylum at its embassy in Beijing, along with his assistant Kim Dok-hong.
At the main South Korean embassy in a glass and concrete office block in central Beijing, Chinese police prevented anyone approaching the fourth floor office.
""This is Chinese territory, you are not on embassy ground so you have to leave,"" one Chinese police officer said.
South Korean embassy officials were unavailable to comment, and secretarial staff said they were all in meetings.
China's Foreign Ministry said it had no immediate statement on the situation.
An official at the North Korean embassy in Beijing repeated allegations by Pyongyang that Hwang, one of 11 secretaries on the powerful secretariat of the Workers' Party, must have been kidnapped.
The official refused to comment further, saying the statement by North Korea's Foreign Ministry on Wednesday that Hwang's defection was ""inconceivable and impossible"" was correct.
""If it is true that Hwang Jang-yop is in the South Korean 'embassy' in Beijing, it is obvious that he has been kidnapped by the enemy. We are seeking information from the Chinese side through relevant channels,"" the Korean Central News Agency quoted the Pyongyang Foreign Ministry spokesman as saying.
""If it is brought to light that the South Korean authorities kidnapped him and describe him as seeking ""asylum,"" we will regard it as a serious incident without precedent and take due countermeasures,"" he said.
""We expect that the Chinese side will take appropriate measures in this regard,"" the spokesman added.
A South Korean unification ministry spokesman in Seoul said on Thursday the North's claim was ""preposterous"". He said South Korea aimed to step up diplomatic efforts to grant Hwang's wish to seek asylum.
Hwang, 73, is one of the chief architects of North Korean communism, and would be the highest ranking Pyongyang official ever to seek asylum in the South.
He is credited with playing a leading role in shaping the policy of Juche, a brand of fanatic self-reliance providing the ideological underpinning for the world's last Stalinist state.
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
",43
"Talks between South Korea and China have failed to resolve the fate of a senior North Korean defector holed up for an eighth day in Seoul's mission in Beijing, Seoul officials said on Wednesday.
The impasse came despite signals from the Stalinist North that it might be ready to give up Pyongyang ideologue Hwang Jang-yop without a fight.
""Unfortunately, we have not made any real progress in our talks with China,"" South Korean Foreign Ministry spokesman Lee Kyu-hyung said of the drama centred on Hwang, who has sought asylum in Seoul's heavily-guarded consular compound in Beijing.
Lee denied a report by Japan's Yomiuri newspaper that China and South Korea had basically agreed that Hwang could leave Beijing for asylum in South Korea as early as this week.
The newspaper said Beijing had demanded a meeting with Hwang to confirm his desire to defect and had insisted on a signed promise from South Korean President Kim Young-sam pledging not to use the incident for political gain.
""It is too early to talk about when Hwang could leave Beijing,"" Lee said in Seoul.
South Korean officials in Beijing said talks with Chinese officials were still going on but declined to comment on the content of the negotiations, saying only that a solution was expected to take some time.
""We haven't got any results so far,"" embassy spokesman Chang Moon Ik said. Embassy officials had not met counterparts from the North, he said.
China had insisted Hwang's case be resolved through dialogue between rivals South and North, a Seoul Foreign Ministry official said.
""We are telling the Chinese that there's no dialogue channel and it is impossible to resolve a sensitive defection issue in direct talks with the North,"" said the official, who asked not to be identified.
""But with North Korea changing its attitude, we hope there will be progress in our negotiations,"" the official said.
The Stalinist North has hinted it may be ready to give up attempts to win back Hwang, ranked 24th in the Pyongyang hierarchy and architect of its governing ideology of Juche, or strict self-reliance.
North Korean leader King Jong-il appeared to indicate Pyongyang's less hardline approach when he was quoted by state radio on Tuesday as saying ""cowards"" should get out.
Another Japanese newspaper reported that a top North Korean official visiting Beijing had said Pyongyang would not fight the defection of Hwang, who sought refuge in Seoul's Beijing mission last Wednesday.
China, dragged as an unwilling third party into the latest crisis in the world's last Cold War standoff, has repeated its plea to both countries to act with restraint to resolve the affair.
Beijing is in a quandary over how to usher Hwang out of China without angering an old communist comrade or a new capitalist friend.
China appeared nervous about Pyongyang's intentions, sending three armoured personnel carriers, a crowd control truck and armed police to guard the sedate streets around the mission while officials seek an end to the impasse.
",43
"Chinese President Jiang Zemin, seeking to ensure his grip on power after the death of paramount leader Deng Xiaoping, called on the army on Tuesday to obey only the ruling Communist Party.
The People's Liberation Army, whose backing Jiang needs to ensure political control, should toe the party line, Jiang told a meeting of army delegates to the National People's Congress, or parliament.
""On this vital political issue that concerns the future and destiny of the party, the state and the nation, there must not be the slightest ambiguity or vacillation,"" the official Xinhua news agency quoted Jiang as saying.
Jiang, who also holds the posts of Communist Party chief and chairman of the powerful Central Military Commission, never served in the armed forces and has tried hard to win army support to bolster his position as Deng's political heir.
Deng died on February 19 aged 92.
Jiang has since moved to cement his position as China's supreme ruler, urging the nation to rally around the party with him at its core.
On Tuesday, Jiang called on army members of parliament to ""seek no fame, status and promotion (and) give priority to the party"", Xinhua said.
""Our army has always followed what the party says,"" he told the meeting, which was attended by generals Liu Huaqing, Zhang Zhen, Zhang Wan'nian and Chi Haotian. All of them are vice-chairmen of the military commission while Chi also serves as defence minister.
Jiang told his audience that the party's leadership had enabled military victories of the past and made the armed forces stronger.
But he said the drive to modernise the three million strong army had created a range of problems and warned officers not to step outside the law while performing their duties.
""Cadres at various levels must run the army with strict discipline and according to law and do their routine ideological and managerial work in a meticulous way,"" he said.
The army that ushered in nearly five decades of communist rule has benefited immensely from capitalist-style reforms launched by Deng in the late 1970s, running luxury hotels, factories and dealing in real estate.
Told by Beijing to make money for itself to supplement its budget, the army has also been widely accused of smuggling and other official abuses of power in its drive to do so.
China has set a defence budget of 80.6 billion yuan ($9.7 billion) this year, a rise of 12.7 percent over actual spending for 1996.
Western military analysts say total defence spending is considerably higher than the published figures.
Beijing defends its hefty increases in military spending by saying the base figure is still low and inflation has cut buying power.
",43
"The Beijing-appointed committee handling Hong Kong's return to Chinese rule wrapped up a two-day session in Beijing on Saturday with an endorsement of China's plans to scrap some civil liberties after the takeover.
Just one of the 150 members of the Preparatory Committee voted against the motion to approve Beijing's plans to scrap or rewrite sections of Hong Kong's statute book after it regains control of the British colony on July 1 this year. A further 10 members abstained.
""I do not agree with the abolishing of some of the ordinances, which include the Bill of Rights ordinances and the public order ordinance,"" said Frederick Fung, chairman of the Hong Kong Association for Democracy and People's Livelihood, who cast the sole dissenting vote.
On Friday Fung had handed a letter to Chinese Foreign Minister Qian Qichen protesting against Beijing's proposed changes, such as rolling back on rights and on public assembly.
""They were talking about striking out the laws, which I could not agree to because I could not find anything that is contradictory to the Basic Law,"" said Allen Lee, chairman of the pro-China, pro-business Liberal Party, who abstained.
Hong Kong's post-colonial leader Tung Chee-hwa, who attended the crucial committee meeting in Beijing, supported the moves, saying the liberties of the territory's 6.3 million people were already enshrined in its mini-constitution, the Basic Law.
""I think things are being done in a very orderly, proper manner,"" Tung told reporters on Saturday. ""The Basic Law explicitly provides freedom and our rights.""
However, Tung stressed Hong Kong's right to make its own decisions after it elects a legislature in 1998.
""After 1998 we are masters of our own house, we can decide what is right for ourselves, what is right for our community.""
Beijing's plans to repeal or amend 25 of Hong Kong's laws and ordinances, including parts of the Bill of Rights as well as regulations on public assembly, have prompted protests from Britain and democracy activists in the colony.
Hong Kong Governor Chris Patten called the committee's decision to back the measures ""disturbing"".
""Once again we have the impression of legal arguments hastily thrown together, policies made up as we go along,"" Patten said in a statement following the vote.
Washington has expressed concern over the proposed changes. Britain has summoned the Chinese ambassador to lodge a protest and Foreign Minister Malcolm Rifkind plans to pursue the issue at a meeting with his Chinese counterpart Qian next month.
China has defended the move, saying only that those provisions that contradict laws dealing with international affairs or national defence will be removed.
Following the Preparatory Committee's motion to recommend Beijing's planned legal changes for the colony, the proposals will now go to China's National People's Congress, its rubber-stamp parliament, for ratification, Tung said. He gave no timetable.
The 25 laws and articles to be repealed or altered include some that are the product of recent British-led reforms while others are the trappings of the colonial era.
The committee also voted to legitimise Tung's pre-handover official work and that of the controversial provisional legislature, hand-picked by Beijing to replace an elected body.
It supported a measure granting Tung the authority to decide whether some incumbent civil servants would serve after the handover and the power to appoint more members to municipal and district bodies, a move critics say will dilute the voice of Hong Kong's pro-democracy camp.
",43
"The South Korean flag on Friday flew at half-mast at Seoul's mission in Beijing where a senior Pyongyang defector is holed up, talks on his fate stalled by the death of China's paramount leader Deng Xiaoping.
Chinese and South Korean officials had met on Thursday despite the death of Deng the previous night over what to do with high-level Pyongyang ideologue Hwang Jang-yop, who sought refuge in Seoul's consular compound last week, a Seoul embassy official said.
However, signs emerged that the meeting was aimed at keeping open a channel for dialogue in case of emergency rather than seeking to find a swift solution on the fate of Hwang, Pyongyang's highest level defector, who has been marooned in the mission for 10 days.
The embassy official declined to comment on whether the talks had focused on resolving Hwang's fate and said a solution to the Cold War drama in the Chinese capital was unlikely to come soon due to the death of Deng late on Wednesday.
""It is very hard to say when the situation will be over,"" said an embassy official who declined to be identified.
The death of the North's revolutionary ally Deng was the second blow to Pyongyang from Beijing in a week after Hwang, a senior aide to North Korea's top leader Kim Jong-il, arrived at Seoul's consular office on February 12.
China on Thursday declared six days of mourning for Deng and officials in Seoul said they would temporarily refrain from raising the defection issue with Chinese officials.
""China and South Korea share the same Asian tradition and you just don't want to disturb mourning people,"" a Seoul foreign ministry official said.
The defection of Hwang, ranked 24th in the hierarchy of the secretive Stalinist state, has forced China to walk a diplomatic tightrope between communist ally North Korea and new business partner South Korea.
Officials in Seoul have said a short-term delay in the talks over Hwang would not seriously affect his fate since his departure from Beijing was not imminent.
""The dialogue with China is always operating and we can contact the Chinese side anytime,"" the embassy official said.
A hint at change in Pyongyang's stance on Hwang's flight came on Monday when its Foreign Ministry said it would dismiss Hwang if he defected.
The North had earlier persisted in its claim that South Korea had abducted Hwang, charges dismissed by Seoul as preposterous.
Another official in South Korea said a videotape of Hwang confirming his defection had been passed to Chinese officials before hints emerged that North Korea might be ready to walk away from its fight to get Hwang back.
China appeared wary of Pyongyang's intentions, setting up a police cordon around Seoul's compound and sending three armoured personnel carriers and a riot control truck to guard the approaches to the mission.
On Wednesday, China announced to its people for the first time that Hwang had entered the embassy of South Korea in Beijing, signalling that the Chinese government believed he had gone there of his own free will.
South Korea, in an apparent bid to encourage Pyongyang to end the confrontation, announced on Thursday it would send $6 million in food aid to the North, which is suffering chronic food shortages made worse by devastating floods.
",43
"A funeral cortege bearing the body of paramount leader Deng Xiaoping arrived at Beijing's Babaoshan cemetery for cremation on Monday as China began paying last respects to the man who transformed the nation.
A white van bedecked with black and yellow ribbons, the colours of mourning, carried Deng's body at a stately pace on its last journey to the cemetery in western Beijing where Chinese communism's heroes are traditionally laid to rest.
""Scatter Hot Tears for Comrade Xiaoping,"" read a banner with black characters and held up by a group of people outside the military hospital where Deng's body has lain since he died last Wednesday aged 92.
Hundreds of armed police, a fraction of the huge security force activated as China treads carefully along the road of political transition, lined streets along the 2.5-km (1.5-mile) route to the cemetery.
The cortege moved at a pace slightly faster than walking to allow thousands of mourners lining the route a last glimpse of the man who ruled China for 18 years with a unique mixture of capitalist-style policies under communist control.
""I have come to say goodbye to Deng Xiaoping,"" said one young man.
As the cavalcade moved past, people stood on roofs of nearby buildings or climbed up lamp posts for a better view.
But some local residents did not know Deng's body was to be moved on Monday and were upset that their routine was disrupted.
""Hey, move it, some of us have to go to work,"" grumbled one middle-aged woman pushing her bicycle through the crowd.
Outside Babaoshan stood hundreds of workers bused in from from the nearby steel works.
One manager of the giant state-run enterprise, Yue Wenhui, 44, asked why he was willing to wait outside on a wintry day, said: ""The weather is good. It is as cloudy as our hearts.""
Deng, an early opponent of the leadership cult around his predecessor Chairman Mao Zedong, made clear he wanted his death to be followed by more restrained mourning than the near-hysteria that followed Mao's demise in 1976.
No foreign dignitaries have been invited to attend Tuesday's memorial rites, to be held in Beijing's Great Hall of the People. Deng's ashes will be scattered at sea.
State media publicised a request by Deng's family that his body not be put on display, his corneas be donated to an eye bank and his body offered for medical dissection before cremation.
China has sought to present an image of stability and continuity in the aftermath of Deng's death, painfully aware of the tumult that has often followed the death of strongmen throughout China's history.
Since his death authorities have heightened their security watch around the capital and especially in Tiananmen Square, the vast central space where, in 1989, student-led protests were crushed by troops and tanks at Deng's behest.
So far, the public has seen a display of unanimity at the top of China's communist power structure, with the supreme leader's hand-picked successor, Jiang Zemin, vowing to keep China on the road of economic reform.
But Chinese political analysts said cracks were appearing in the facade and Jiang, who holds the top state, party and military posts and is now the most powerful man in China, may be trying to throw his weight around too soon.
",43
"A Hong Kong member of the Chinese committee handling the territory's return handed a letter to Chinese Foreign Minister Qian Qichen on Friday protesting against Beijing's plan to dilute civil liberties laws.
Frederick Fung, chairman of the Hong Kong Association for Democracy and People's Livelihood, handed the letter to Qian just before the start of a two-day plenary session of the 150-member Preparatory Committee in Beijing's Great Hall of the People.
""I gave a document to him in the hope he will study it,"" Fung told reporters. ""I have a different view on the Preparatory Committee proposal to repeal several provisions of the Bill of Rights.""
Beijing's plans to repeal or amend a list of 25 Hong Kong laws and ordinances, including parts of its Bill of Rights, will be debated at the session of the caucus responsible for shaping Hong Kong's future in the countdown to the handover this year.
The announcement this month from Beijing, which said the laws contradicted Hong Kong's future mini-constitution the Basic Law, has sparked outrage in the British colony and forceful objections from London and its allies.
""I feel if it doesn't violate the Basic Law it should not be retracted,"" Fung told reporters.
""If the Preparatory Committee abolishes the provisions of the Bill of Rights it will create unnecessary worries and be detrimental to Hong Kong's prosperity and stability after 1997,"" Fung said in his letter, a copy of which was seen by Reuters.
Fung's protest followed an attack on Thursday by Hong Kong Governor Chris Patten who lashed out at what he called China's repugnant proposal to dilute Hong Kong's civil liberties after it recovers the British colony at midnight on June 30.
""On the Bill of Rights, not only does it not contradict the Basic Law, but is necessary for implementing... the two regulations on adapting human rights conventions to Hong Kong,"" said the letter by Fung, who is also a member of the territory's Beijing-appointed provisional legislature.
""I believe the abolition of the above bill will bring instability to the rule of law in the future special region,"" he said. Fung's group advocates democracy for Hong Kong but through cooperation rather than confrontation with Beijing.
Fung also voiced opposition to China's decision to repeal recent Hong Kong regulations formally allowing political parties, warning that Beijing's decision to return to the British colonial era system would affect Hong Kong stability as well as its credibility.
""I believe that to restore these provisions is totally against developing toward the casting off of colonialism and against the principle of Hong Kong people governing Hong Kong,"" he said in the letter.
Hong Kong's post-colonial leader Tung Chee-hwa, who is attending the crucial committee meeting in Beijing, argued in defence of Beijing's move that the international community had misconstrued the situation.
U.S. President Bill Clinton has expressed concern. Britain summoned the Chinese ambassador in London order to lodge a protest and Foreign Minister Malcolm Rifkind plans to pursue the issue in a meeting with Qian next month.
Qian has insisted the transition process is going well.
",43
"Talks in Beijing on the fate of a senior Pyongyang defector have made progress but have not clinched a deal despite a personal bid by North Korea's foreign minister to break the deadlock.
""There has been some headway. Negotiations are still going on,"" Chang Moon-ik, spokesman for the South Korean embassy in Beijing, said on Tuesday about talks on Hwang Jang-yop, who sought refuge in Seoul's Beijing consulate four weeks ago.
Hwang, a senior North Korean ideological theoritician and top aide to supreme leader Kim Jong-il, has been stranded in the consular compound since February 12 while the three nations negotiate his fate.
Officials in South Korea said on Monday they expected a breakthrough this week in talks with China aimed at securing Hwang's passage out of Beijing, but Chang said it was unlikely he would be moved in the next few days.
""Final arrangements have yet to be done... There has been no final decision,"" Chang said by telephone.
China said on Tuesday that North Korean Foreign Minister Kim Yong-nam visited Beijing last Saturday in what analysts said was an apparent bid by Pyongyong to break the three-way deadlock.
Hwang, chief architect of Pyongyang's ruling ideology of Juche, or self-reliance, is the highest North Korean official to flee the Stalinist state.
Chinese Foreign Ministry spokesman Cui Tiankai played down Kim's visit, saying he was only passing through the Chinese capital on his way to Africa and his trip ""did not touch on any special problem"".
Weeks of talks over Hwang's fate, interrupted by the death of China's paramount leader Deng Xiaoping last month, have failed to produce an accord as Beijing finds itself torn between an old communist ally and a new capitalist friend.
Analysts say Hwang will likely end up in Seoul but Beijing is anxious to help North Korea save face by being seen to give due consideration to the hermit nation's concerns.
""We want to bring Mr Hwang to Seoul directly but if that is not possible we can make other arrangements,"" embassy spokesman Chang said. Korean sources have said Hwang may be whisked away to another country, possibly in Southeast Asia.
Armed Chinese police backed by armoured personnel carriers and a crowd control truck maintained a tight security cordon around Seoul's consular compound, in Beijing's normally sedate diplomatic quarter, where Hwang is holed up.
Beijing has appealed to North and South Korea to stay calm during attempts to end the diplomatic standoff sparked by Hwang's defection.
Chinese Foreign Minister Qian Qichen said last week Beijing was still investigating Hwang's case and hoped for a solution as soon as possible.
North Korea initially accused the South of kidnapping Hwang, then changed its hardline stance by saying that if he really had defected he was a traitor and would be dismissed.
Beijing, which sent its armies to fight on Pyongyang's side during the 1950-1953 Korean War, established diplomatic links with Seoul only in 1992.
",43
"Residents of China's capital voiced emotions ranging from shock and sadness to cold indifference after waking on Thursday morning to news of the death of paramount leader Deng Xiaoping.
Extra police on Beijing's sunlit lanes and the bright red national flag flying at half-mast in Tiananmen Square were the only hints of a break from a routine after the early morning announcement that the greatest communist reformer of the 20th century was dead.
""My first reaction is great shock,"" said Liu Hongxin, a 21-year-old student waiting for a train in the pre-dawn chill at Beijing's main railway station.
Deng, the gravel-voiced mastermind of 18 years of reform that turned China from a backward Stalinist state into an emerging economic superpower, died of respiratory failure in an advanced stage of Parkinson's disease late on Wednesday. He was 92.
""I feel a great sadness,"" said snack vendor Xie Weicai as he prepared his pavement stove for the morning's business, but his regret was not universal among the capital's residents.
But others had quite different reactions.
""I would consider losing 100 yuan ($12) much sadder than the death of Deng Xiaoping,"" said one taxi driver on an early morning shift. ""It has nothing to do with me.""
It was business as usual on the capital's streets, with residents busy opening shops and crowding onto buses to go to work, in stark contrast to the paralysis that gripped China with the passing of Chairman Mao Zedong in 1976.
""Then we cried like we lost our father and mother,"" said one driver parked near Deng's central Beijing residence. ""Now everyone is indifferent.""
Analysts said the initial calm would probably be matched by a period of low-key political activity as China's leadership adjusted to the post-Deng era.
""There is going to be a lull,"" said Tai Ming Cheung, an analyst at Kim Eng Securities in Hong Kong. ""There may be a certain amount of policy paralysis... but beyond that I don't see any great changes.""
Deng's death would prompt a surge in jockeying for political position among China's communist leaders, who are already preparing their positions for the crucial 15th Party Congress to be held in October, he said.
Deng's anointed heir, Communist Party chief Jiang Zemin, is considered favourite to assume the senior revolutionary's mantle of leadership, but analysts say Deng's death will also give rival pretenders to power a chance to boost their influence.
Police, some carrying assault rifles, stood guard at the end of the nearby lane in central Beijing where Deng had lived and patrolled the lanes around the Zhongnanhai government compound near the Forbidden City, former abode of China's emperors.
In Tiananmen Square, focus of pro-democracy protests in 1989 that were crushed on Deng's orders, residents and visitors gathered to see the dawn raising of China's flag.
The bright red flag emblazoned with five gold stars was raised to half-mast by a soldier of the People's Liberation Army, one of a squad that had marched up from the Forbidden City with bayonets at their shoulders.
While most bystanders were still unaware of Deng's passing, a few who braved the morning chill on the square -- still festively decorated for the Chinese Lunar New Year this month -- had heard the news and had come to say goodbye.
""I saw the news on the television this morning and came over to watch the flag-raising,"" said one factory worker from China's central Anhui province. ""I wanted to pay my respects.""
",43
"China has sounded an alarm over local authorities who kidnap and extort to protect regional interests, saying such actions are forms of corruption that are eating away at the power of the ruling Communist Party.
Beijing, already in the throes of a fierce anti-corruption drive, would launch a nationwide crackdown on abuse of local power from April to June this year, said the weekly magazine Outlook in an edition issued in Beijing on Monday.
The official magazine lashed out at regional authorities who protect local companies, who kidnap and extort and falsify books to safeguard local earnings.
Many courts and law authorities give favourable judgments to local firms or offices in cases involving parties from other regions of China, it said.
""Most often their goal is to protect the interests of a local party to the case and some aim to obtain greater legal costs or financial returns,"" the magazine said.
Such phenomena were a form of corruption and a result of growing ""individualism"" that threatens Communist Party rule.
""The nature of it is departmental selfishness, a mountain stronghold mentality and cliquism, and in the end it is closely linked to the everything-for-profit mentality of extreme individualism,"" the magazine railed.
Such actions resulted in obstruction of central government decrees and seriously weakened both ruling Communist Party and state, it said.
Chinese President and party chief Jiang Zemin has tried to stamp out abuse of official power, saying corruption is a virus that threatens the party's 47-year grip on power.
Analysts say the results of his anti-graft drive have been patchy at best, hampered by local officials who run virtual fiefdoms far from the centre of power in Beijing.
Many regional authorities had illegally seized the bank funds or assets of firms from other regions operating in their localities. Some had even resorted to kidnapping to extract money from outsiders, the magazine said.
""Most glaring is the method of illegally detaining hostages to demand payment of debts. Some methods are abominable and the results extremely serious,"" Outlook said without elaborating.
Lawyers and legal offices had committed serious ethical offences in bowing to the demands of local bosses by mishandling or pigeon-holing cases or by providing false evidence, it said.
""Some lawyers do not use facts as a foundation or the law as their yardstick and provide legal services for local departments trying to obtain illegal benefits,"" it said.
Banks and other financial organs had often hindered legal investigations by creating false accounts or receipts to help local units evade inspection or debt, it said.
Local firms or units that violated tax or customs laws could expect to be let off easy by officials, paying fines instead of facing criminal punishment or being slapped with more lenient penalties, it said.
""Some industrial, commercial and tax offices refuse to give information about local firms to other areas, or sometimes give out false information or supply fake evidence to help local enterprises evade responsibilities,"" it said.
",43
"When China's Chairman Mao Zedong died the news paralysed the nation, but 20 years later the passing of paramount leader Deng Xiaoping is mere office chatter in a country radically changed by his policies.
Some Chinese responded on Thursday to Deng's death with sadness and others with cold indifference. There was no great outpouring of grief of the kind that accompanied Mao's death in September, 1976.
When Mao died at age 82, weeping crowds poured out of factories and offices.
""It was like a family had lost its mother or the sky had collapsed,"" said a woman who was at high school then.
""We cried like we lost our father and mother,"" said a driver parked near Deng's residence in central Beijing. ""Now everyone is indifferent.""
Beijing announced six days of mourning for Deng, whose death at 92 on Wednesday closed the book on almost two decades of rule that transformed China into a budding economic powerhouse.
But in streets and offices it was business as usual, with no outward displays of grief. Street markets bustled and factories of the new economic powerhouse that Deng created hummed with activity.
""I am a little sad over Deng, but not shocked. People knew early on that Deng's health was poor,"" said a clerk bustling off to work.
""Deng doesn't measure up to the likes of Mao,"" said a 62-year-old sunflower seed vendor. ""I don't care one bit about Deng's death.""
Residents and political analysts said the greater freedom created by Deng's reformist economic policies changed the way Chinese regarded their leaders.
""This indicates people's attitudes towards the death of leaders has matured -- their minds are free,"" said a Chinese analyst who declined to be identified.
",43
"Chinese police cordoned off a South Korean embassy compound and North Korean diplomats waited outside as a senior Seoul official began talks in Beijing on the apparent defection of a top Pyongyang official.
Kim Ha-jung, a special adviser to South Korean Foreign Minister Yoo Chong-ha, arrived in Beijing and sat down at once for talks with Chinese officials on the diplomatic crisis, South Korean embassy officials said.
Chinese police blocked streets to Seoul's consular section in the sedate, tree-lined diplomatic district of Beijing, and embassy officials said Hwang Jang-yop, a senior aide to North Korean leader Kim Jong-il, and his assistant were inside.
Hwang, 73, is one of the chief architects of North Korean communism, and would be the highest ranking official from the world's last Stalinist state to seek asylum in the South.
China avoided direct comment after finding itself in the eye of a diplomatic storm involving its old communist comrade, Pyongyang, and new commercial ally, Seoul, and chose instead to appeal for calm.
""Regarding the passage through Beijing city by Hwang Jang-yop, we were not notified in advance,"" a Foreign Ministry spokeswoman said.
""We hope the parties concerned can deal with this matter calmly and on the basis of the overall circumstances, and appropriately handle this in the interests of the peace and stability of the Korean peninsula,"" she said.
In a sign of the suspicion that underscores dealings between North and South, South Korean embassy officials accused North Koreans of trying to force their way into the consular office and had called for Chinese police protection.
Diplomats from Pyongyang sat in parked cars outside the consular compound and waited outside the embassy, watching from behind the police cordons.
""Last night, North Korean people who we believe were from the embassy tried to enter our consular section,"" embassy spokesman Chang Moon Ik told reporters. Chinese police on guard prevented the North Koreans from entering, he said.
""We have asked the Chinese government to protect our embassy compound... against North Koreans and any unexpected (incidents),"" he said.
He dismissed Pyongyang's charges that Hwang, one of 11 secretaries on the powerful secretariat of North Korea's ruling Workers' Party, had been kidnapped by the South, saying Hwang had voluntarily sought asylum.
""He came by taxi without any notice,"" Chang said.
North Korean diplomats stood by the kidnapping charge.
""I think South Korea has kidnapped these two officials,"" said one of several North Korean officials waiting in the office tower housing Seoul's embassy. ""The impossible has happened.""
An official at the North Korean embassy repeated a Pyongyang Foreign Ministry statement that accused Seoul of kidnapping Hwang and urged Beijing to sort out the mess.
""If it is brought to light that the South Korean authorities kidnapped him and describe him as seeking 'asylum', we will regard it as a serious incident without precedent and take due countermeasures,"" the Korean Central News Agency quoted a Pyongyang Foreign Ministry spokesman as saying.
""We expect that the Chinese side will take appropriate measures in this regard,"" the spokesman added.
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
",43
"Chinese President Jiang Zemin, who assumed supreme power when Deng Xiaoping died last week, on Tuesday delivered the eulogy for the patriarch before 10,000 of the nation's elite in Beijing's Great Hall of the People.
His voice breaking, Jiang wiped tears from his eyes. ""The people of China love Comrade Deng Xiaoping... we miss comrade Deng Xiaoping.""
Jiang stood in front of a huge portrait of Deng, beneath which lay a casket containing his ashes, covered with a crimson hammer-and-sickle Communist Party flag.
As the funeral began, sirens and whistles sounded nationwide for three minutes as a mark of respect for the man who brought unprecedented prosperity to the world's most populous nation while keeping tight communist control.
""Grieve in silence,"" Premier Li Peng said, calling the three minutes of mourning as the thousands of Communist Party and government leaders stood to attention, heads bowed.
On the trading floor of the Beijing commodities exchange, traders stood silently with their heads bowed in front of an electronic screen showing live coverage of the funeral, which began at 10 a.m. (0200 GMT).
Chinese police cleared Beijing's Tiananmen Square soon after dawn, throwing a security net over the vast arena that is a potent symbol of China and a focus for expressions of grief as well as demonstrations of anger.
Chinese authorities were determined to prevent a repeat of the student-led demonstrations that convulsed Beijing in 1989 after the death of another Communist Party luminary.
No foreign dignitaries have been invited to the funeral but all eight Chinese television channels beamed the memorial live.
On Monday, television showed China's millions indelible images of their dead leader lying in state, his face pale and puffy, in the presence of solemn political leaders and grief-stricken relatives.
It was just the sort of lingering display of his remains that Deng -- contemptuous of the personality cult around his predecessor Mao Zedong -- had forbidden.
""Deng looked at peace,"" the Xinhua news agency said.
Political analysts questioned however whether the patriarch would have been at ease with the way his successors have handled the delicate transition period.
Funerary music played as China's elite and his grieving family bowed their heads before a huge portrait of Deng on the stage in the main hall.
""Eternal Glory to Comrade Deng Xiaoping who enjoys the love and esteem of the people of the whole party, the whole army and people of all ethnic groups throughout China,"" read a streamer hanging from one huge balcony.
Beijing streets were virtually deserted as citizens watched the ceremony on state television.
",43
"China on Thursday hinted at ethnic unrest in Moslem Xinjiang as a senior official called for unity in the western region that was rocked by separatist bomb attacks last week.
""Xinjiang ...must further improve ethnic unity, protect social stability and do a better job of building up Xinjiang,"" the official People's Daily quoted Vice-Premier Li Lanqing as saying.
Li made no direct reference to the series of deadly bombings in Xinjiang's capital Urumqi on February 25, the day Beijing held funeral rites for late leader Deng Xiaoping.
The Chinese vice premier's remarks to Xinjiang delegates at the National People's Congress, or parliament, were one of the few signs in the national media that the region had once again been shaken by ethnic unrest.
Chinese police have arrested at least 20 ethnic Uighurs in Urumqi and Yining near Xinjiang's border with Kazakhstan, exiled Uighur nationalists said from the Kazakh capital of Almaty.
""At least 20 ethnic Uighurs have been arrested...but the real number may be even higher because we have no information whether new arrests took place last night,"" Kakharman Khozhamberdi, head of a local Uighur association, told Reuters in Almaty.
Officials and residents in Urumqi and Yining, contacted by telephone from Beijing, were unaware of the total number of people arrested in the attacks.
Three bombs hidden on public buses blew up within minutes of each other in Urumqi on February 25 in an apparently coordinated attack. A fourth bomb failed to explode.
The Xinjiang Daily said on Wednesday that authorities had arrested several people suspected of planting bombs and of selling detonators used in the attacks that killed nine people and wounded 74.
Police were interrogating the suspects and had launched a manhunt for others still at large, the regional newspaper said.
China's official media outside the Moslem region ignored the incident.
Moslem separatists say they want to set up an independent ""East Turkestan"" in Xinjiang, a region that is home to many Turkic-speaking people such as the Uighur ethnic minority.
Exiled Uighur nationalists have claimed responsibility for the latest attacks.
Parliament's vice-chairman Wang Hanbin on Thursday introduced revisions to China's criminal law setting stiffer punishment for stirring up ethnic hatred and making it a capital crime to use race or religion to endanger state security.
""People in some places are stirring up hatred among ethnic groups in an attempt to undermine unity among them,"" Wang told parliament.
In early February, an anti-Chinese riot erupted in Yining, about 50 km (31 miles) from Xinjiang's border with Kazakhstan. Chinese officials said nine people were killed.
The riot was one of the largest, most violent demonstrations for independence in Xinjiang since the 1949 communist takeover.
Beijing, unnerved by the spectre of turmoil along its borders, had put the Lanzhou Military Region, which oversees Xinjiang, on alert against further unrest, Hong Kong's Sing Tao Daily newspaper said on Wednesday.
",43
"In a show that Deng Xiaoping may not have wanted, China's state television gave his 1.2 billion people a lingering last look at the body of their deceased patriarch on Monday as official mourning moved into high gear.
Draped with the crimson hammer-and-sickle flag of Chinese communism and showered with flower petals, the body was shown lying in state at Beijing's 301 Military Hospital as grim-faced leaders and weeping relatives filed past.
Deng, who died on Wednesday aged 92, had expressly forbidden the elaborate public grieving that has attended the deaths of top Chinese leaders in the past.
But China Central Television's main evening newscast, the most widely watched broadcast in the country, effectively overruled him by devoting its main evening news to emotional scenes of farewells to his body before its cremation on Monday.
Pale and puffy, the body was repeatedly shown lying on a bier surrounded by grieving members of China's elite and elaborate funeral wreaths of plastic flowers.
Soviet-trained technocrat President Jiang Zemin, Deng's hand-picked successor, led an official group of mourners that included all members of the ruling Communist Party politburo and other senior government and party leaders.
Jiang, looking ill at ease, shook hands with Deng's weeping family but said nothing. He led the mourners in the three traditional bows of respect to the body and is expected to read the eulogy at official memorial rites in Beijing's Great Hall of the People on Tuesday.
After a slow and stately funeral cortege to the Babaoshan cemetery where revolutionary veterans are traditionally cremated, Deng's body lying in a glass-topped bier was carried into a final anteroom by an honour guard of eight soldiers..
Sonorous music played in the background as Deng's grey-haired wife, Zhuo Lin, and other family members were shown sobbing and wailing.
One of his three daughters, Deng Nan, bent down to embrace and kiss her father's forehead, clinging to his body. Another daughter, Deng Rong, cried out ""You are not dead!""
The television pictures seemed clearly aimed at stirring an emotional response among the 1.2 billion people Deng ruled for 18 years, but who have shown little open grief at his death last week at the age of 92.
People lining the funeral courtege's route from the hospital to the cemetery -- most of whom were marshalled to attend by their work units -- were shown crying quietly and tenderly affixing white paper flowers of mourning to their jackets.
In sobbing interviews, one after another pledged to honour Deng's memory and to forge ahead with his ideals.
""Scatter Hot Tears for Comrade Xiaoping"" read one banner held by mourners along the route.
",43
"China has vowed to smash plots aimed at disrupting stability in Xinjiang after a spate of bomb attacks which shook the far western region last month.
Illegal religious groups and ethnic separatists were the main forces working to undermine social stability in the mostly Moslem region, said a commentary in the Xinjiang Daily seen in Beijing on Tuesday.
""We must maintain a high degree of vigilance for that very small number of bad people who endanger the security of the state and the public, jeopardise social stability and engage in violent terrorist activities,"" the commentary said in the official newspaper's March 5 edition.
""Just let them show their heads and we will... foil their plots and strike at their puffed-up arrogance,"" it said.
The prominent front-page commentary followed a series of bomb attacks that killed nine and wounded 74 in the restive region last week.
Three bombs planted on buses blew up within minutes of each other in the regional capital Urumqi on February 25 in an attack apparently coordinated to coincide with funeral rites in Beijing for paramount leader Deng Xiaoping.
A fourth bomb failed to explode.
Another bomb blew up a bus in Beijing last week during rush hour, killing at least two people and injuring 30, but Chinese officials said on Monday there was no evidence linking the deadly blast with the Urumqi attacks.
The newspaper made no mention of any bombings but quoted a senior central government official from Xinjiang as saying authorities would win the battle against those who sought to destroy national unity.
""We have resolute faith in our victory over ethnic splittist activities,"" the newspaper quoted Ismail Amat, Minister of the State Nationalities Affairs Commission, as saying.
""There is no opportunity for splittist activities, which go against the tide of history and the wishes of peoples of all ethnic groups,"" Amat said. ""Failure is inevitable.""
The Xinjiang Daily said last Wednesday an unspecified number of suspects were in custody for having made and planted the bombs, while others were thought to have sold detonators for the explosives.
Exiled Uighur nationalists in the Central Asian state of Kazakhstan claimed responsibility last week for the bombings and said Chinese police had arrested at least 20 ethnic Uighurs in Urumqi and Yining near Xinjiang's border with Kazakhstan.
Chinese officials declined to comment on the arrests in the Xinjiang bombings, saying only that authorities were investigating.
""We are in the process of solving it,"" Foreign Ministry spokesman Cui Tiankai told a regular news briefing on Tuesday.
Moslem separatists want to set up an independent ""East Turkestan"" in Xinjiang, home to many Turkic-speaking people, including those of the Uighur ethnic minority.
In early February, an anti-Chinese riot erupted in Yining in Xinjiang. Chinese officials said nine people were killed in the riot -- one of the largest, most violent demonstrations for independence in Xinjiang since the 1949 communist takeover.
",43
"Chinese police cordoned off a South Korean embassy compound on Thursday and North Korean diplomats lurked outside as an official from Seoul met the most senior North Korean to defect from the Stalinist state.
But Beijing officials, apparently angered by Seoul's decision to export its latest row with Pyongyang into China, avoided meeting Kim Ha-jung, a special adviser to South Korean Foreign Yoo Chong-ha, South Korean sources said.
South Korean embassy officials had earlier said the Seoul Foreign Ministry envoy was meeting Chinese officials to discuss the fate of the defector, Hwang Jang-yop, a senior aide to North Korean leader Kim Jong-il.
Chinese police blocked streets to Seoul's consular section in the sedate, tree-lined diplomatic district of Beijing, and embassy officials said Hwang and his assistant were inside.
Hwang, 73, is one of the chief architects of North Korean communism, and the highest ranking official from the world's last Stalinist state to seek asylum in the South.
Kim met Hwang in the consular office, South Korean sources said. No other details were available.
China avoided direct comment after finding itself in the eye of a diplomatic storm involving its old communist comrade and a new commercial ally and major source of investment, choosing instead to appeal for calm.
""Regarding the transit through Beijing by Hwang Jang-yop, we were not notified in advance,"" a Foreign Ministry spokesman said, in a signal of China's anger.
""We hope the parties concerned can deal with this matter calmly and on the basis of the overall circumstances, and appropriately handle this to safeguard the peace and stability of the Korean peninsula,"" the spokesman added.
Previous, low-profile defectors from the North have made their way quietly through China, apparently after making contact with the South Korean embassy, but Seoul did not publicise their journey until they were out of China.
Seoul announced Hwang's defection on Wednesday.
South Korean Foreign Minister Yoo Chong-ha was to meet his Chinese counterpart Qian Qichen in Singapore on Friday morning at 9 a.m. (0100 GMT) to discuss the diplomatic crisis.
In a sign of the suspicion that underscores dealings between North and South, South Korean embassy officials accused North Koreans of trying to force their way into the consular office and called for Chinese police protection.
Diplomats from Pyongyang sat in parked cars outside the consular compound and waited outside the embassy, watching from behind police cordons.
""Last night, North Korean people who we believe were from the embassy tried to enter our consular section,"" embassy spokesman Chang Moon Ik told reporters. Chinese police on guard prevented the North Koreans from entering, he said.
""We have asked the Chinese government to protect our embassy compound... against North Koreans and any unexpected (incidents),"" he said.
He dismissed Pyongyang's charges that Hwang, one of 11 secretaries on the powerful secretariat of North Korea's ruling Workers' Party, had been kidnapped by the South, saying Hwang had arrived in a taxi and voluntarily sought asylum.
North Korean diplomats stood by the kidnapping charge.
""I think South Korea has kidnapped these two officials,"" said one of several North Korean officials waiting in the office tower housing Seoul's embassy. ""The impossible has happened.""
""We expect that the Chinese side will take appropriate measures in this regard,"" a North Korean official said.
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
",43
"China on Tuesday played down fears over the health of paramount leader Deng Xiaoping that were fuelled after Communist Party chief Jiang Zemin cut short an out-of-town trip to visit the ailing patriarch.
""There has been no big change in Comrade Deng Xiaoping's health,"" Foreign Ministry spokesman Tang Guoqiang told a news briefing, but he gave no details of what would constitute a major change in the health of the fragile 92-year-old patriarch.
Tang declined to say if there had been a small change.
Officials of the State Council, or cabinet, who usually answer queries about Deng's health with the official line that he is as well as can be expected for a man of his age, could say only they were investigating the situation. Chinese sources said on Monday that Communist Party chief Jiang Zemin and Premier Li Peng both cut short provincial trips last weekend to return to Beijing to visit Deng.
Officials declined to comment directly on a tide of rumours washing around the Chinese capital concerning Deng's condition but diplomats said his health had likely deteriorated recently.
""It's been clear for a while that things have been...going downhill,"" said one Western diplomat.
One indication of Deng's worsening state was that officials and family members had backed off from forecasts that Deng would travel to Hong Kong to witness Beijing's resumption of rule over the British colony at midnight on June 30, the diplomat said.
""Clearly things are a bit on shaky ground,"" the diplomat said.
Taiwan's United Daily News quoted the island's top official on mainland affairs, Chang King-yuh, as saying Deng's condition was serious. Officials said they were closely monitoring his health.
Diplomats have said one barometer of Deng's health in China's highly-secretive political system is the travel of top leaders and close family members, with few considered willing to be caught out of town or abroad if Deng were close to death.
Chinese officials in the Philippines said visiting Defence Minister Chi Haotian would not change his travel plans there and Beijing's mission in Israel said Vice-Premier Li Lanqing would not interrupt his current trip to Israel and Iran.
Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded central Beijing compound close to the Forbidden City, home for centuries to China's emperors.
A Hong Kong newspaper reported at the weekend that the architect of China's sweeping economic reforms was rushed to hospital last Thursday after a massive stroke that followed an earlier, mild stroke.
Doctors said that if Deng's stroke had been a haemorrhage he could have died within hours. If it was the formation of a blood clot, he could last days or weeks, they said.
Rumours about Deng's health surface periodically and often have a direct impact on China-related bourses, where Deng's demise is seen by some as a potentially destabilising factor.
Worries over Deng's health helped to push shares on Shanghai and Shenzhen stock exchanges sharply lower by their close on Tuesday and also rocked share prices in Taiwan and Hong Kong.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival when he appeared frail and faltering. He is thought to be in fragile health and with fading lucidity.
",43
"Deng Xiaoping was an avid bridge player who relished a croissant and a glass of milk, loved playing at the seaside with his grandchildren and did not balk at sending in the army to crush unarmed, rebellious students.
Chain-smoking until his fingers were stained brown and fond of keeping a spittoon at his feet in meetings with foreign dignitaries, the diminutive ruler possessed a personality as peppery as the cuisine of his native Sichuan province.
""Unsentimental and humorless, he seemed to have few qualms of conscience, and little compunction to ingratiate himself with others through convivial chatter,"" wrote Orville Schell in his book ""Mandate of Heaven"".
He was a ""nasty little man"", former U.S. Secretary of State Henry Kissinger said of the man who ruled China for the 1980s and much of the 1990s and stood just 1.50 metres (5 ft) in the white socks he preferred.
He failed equally to charm Britain's Margaret Thatcher.
But Deng was a man who didn't seem to care about what people thought -- even when it cost him his political career.
In 1966, as Chairman Mao Zedong was setting in motion a devastating campaign to weed out opposition to his leadership, Deng flaunted expected codes of loyalty by evading mandatory attendance of a series of revolutionary operas.
Finally coerced into making an appearance, he dozed off in mid-performance, unconcerned that he was making a lifelong enemy of Mao's wife, Jiang Qing, who designed the operas and had Deng banished far from Beijing in ensuing political purges.
Unrepentant and unfazed, Deng busied himself with a small garden in central Jiangxi province, growing cabbages, potatoes and garlic to supplement the meagre salary he drew as a worker at a tractor repair factory.
It was in internal exile that Deng grew to love the game of bridge, honing his skill by playing all four positions alone and carefully studying the intricacies of strategy.
It became a lifelong passion -- many of his favoured aides were bridge partners. But he never played for money, requiring only that the loser crawl around on all fours under the table.
Alhough Deng had shed all his official posts by 1990, he still retained one title at the time of his death on Wednesday -- honorary chairman of the China Bridge Players Association. Bridge was, in his words, ""a game for great personalities"".
A youth spent in France in the 1920s instilled in the young revolutionary a lifelong penchant for croissants and milk.
Hoping to acquire some of the pastries on a visit to a United Nations meeting in 1974, Deng took advantage of a stopover in Paris to buy 100 croissants, returning to share them with premier Zhou Enlai and other friends from his Paris days.
He also smoked two packs a day of Panda-brand cigarettes -- a half-filter, half-tobacco cigarette available only to China's top leaders. He gave up the habit in 1989.
He was also not averse to a swig of the fiery white Chinese liquor that is de rigeur for toasting at banquets. Unable to afford spirits when in the political wilderness, he drank beer.
He kept fit with daily walks around his spacious compound down a narrow, leafy alley in central Beijing and swam each summer at the seaside resort of Beidhaihe, where he would take a dip in the ocean for an hour every day, come rain or shine.
Always mindful of puritan communist values of frugality and modesty, Deng never appeared dressed in anything other than an austere Mao suit of blue or grey.
He relaxed on his 1979 tour of the United States when he endeared himself to his hosts by accepting a pair of cowboy boots from singer John Denver, donning a 10-gallon cowboy hat and riding around a Texas rodeo in a stagecoach.
Deng was also an ardent fan of soccer -- China's most popular sport -- and watched 50 of the 52 matches in the 1990 World Cup.
Deng set himself apart from Mao, who was worshipped in a frenzied personality cult, preferring to keep a low, private profile.
He cherished his role as a husband and father, finding time to spend with his five children, bringing his grandchildren along on official tours and playing with them at the beach.
""He is rather philosophical on the question of personal fate... optimistic in the face of adversity,"" Deng's daughter Deng Rong once wrote of her father.
",43
"Three time-bombs planted on buses blew up in rapid succession in China's restive far west, killing at least four people and shattering the nation's calm in the delicate aftermath of the death of patriarch Deng Xiaoping.
Police patrolled streets and checked suspicious bags and packages on Wednesday in Urumqi, capital of the mainly Moslem region of Xinjiang, following the blasts in the city on Tuesday afternoon.
""I think at least four to five people were killed, including one child who died instantly,"" said a Xinjiang television station official, who declined to be identified.
""People are full of fear, and the city is on high alert,"" said the TV station official.
The blasts, which officials said injured at least 60, occurred within minutes in separate parts of the city, which is the centre of Chinese control over the region and its ethnic Uighur population.
The explosions occurred on the same day as the final rites were being observed in far-off Beijing for Deng Xiaoping, the paramount leader who strictly enforced the integrity of China against separatist threats.
In an ironic twist, one bomb went off on Tuanjie (Unity) Street. A fourth was found before it detonated, a local government official said without elaborating.
Despite the widespread fear of further unrest, state media in Urumqi and elsewhere in the county have not reported the incidents.
""Everybody knows about it but nothing has been said officialy,"" said a local resident contacted by telephone.
It was the first known violence in Xinjiang, a region that Moslem separatists call East Turkestan, since anti-Chinese riots in Yining on February 5 and 6 left nine people dead.
No one has claimed responsibility for Tuesday's blasts. Xinjiang, bordering Afghanistan, Pakistan and three mostly Moslem Central Asian states, was shaken last year by attacks on officials and Moslem leaders regarded as pro-Beijing.
Chinese leaders have expressed concern over the threat from Islamic fundamentalism, visiting Israeli Foreign Minister David Levy said in Beijing.
""I think we have a very similar view on this,"" he said.
""Every attempt to turn religion into a weapon becomes extremely dangerous, it is something that knows no boundaries,"" Levy said. ""It is like sand, it can be transported by the wind from one place to another.""
Tuesday's bombs exploded at around 6.40 p.m. (1040 GMT). ""People in Urumqi usually finish work at seven, so not too many people were injured or killed,"" the TV official said.
Urumqi residents recounted Tuesday's few minutes of terror.
""The Number 44 bus exploded near the Agricultural Bank,"" said a young Uighur woman. ""A trishaw driver was killed, he was lying on the ground covered with blood.
""All the windows of the bus were broken. Several minutes later, police sealed the spot. Policemen, riot police and armed police could be seen everywhere,"" she added.
""Residents were ordered to stay at home or at their (work) units. We are terrified. Many people go to work by taxi or buses provided by the units,"" she said.
Another bomb wrecked a Number Two bus, tearing off the roof. The third explosion was on a Number 10 bus, but no details were available.
""When I heard the explosion, I felt as if the sky had collapsed,"" said a Uighur witness. ""Many people in the store rushed out to look. I was too terrified to go out.
""Today buses are running again, but there are policemen at every station, they check people and bags,"" the witness said.
""I hate the people making the explosions. Our life is much better than before. I don't understand why they destroy stability and make trouble for ordinary people.""
Number Two buses have been a target before.
""This kind of explosion happened in 1992, I think, as the Number Two bus runs on the major route through downtown,"" said a bus station worker.
",43
"The China-appointed committee handling the handover of Hong Kong voted on Saturday to support Beijing's decision to roll back civil liberties after the British colony returns to Chinese rule this year.
Just one of the 150 members of the Preparatory Committee voted against the motion to approve Beijing's plans to rewrite sections of Hong Kong's statute book after it regains control of the colony on July 1.
A further 10 committee members abstained from the vote, which was held at the close of a two-day session in Beijing.
""I do not agree with the abolishing of some of the ordinances, which include the Bill of Rights ordinances and the public order ordinance,"" said Frederick Fung, chairman of the Hong Kong Association for Democracy and People's Livelihood, who cast the sole dissenting vote.
""They were talking about striking out the laws, which I could not agree to because I could not find anything that is contradictory to the Basic Law,"" said Allen Lee, chairman of the pro-China, pro-business Liberal Party, who abstained.
China says its Basic Law, a mini-constitution for Hong Kong, will fully protect the colony's future autonomy and its residents' political and civil rights.
Beijing's plans to repeal or amend 25 of Hong Kong's laws and ordinances, including parts of the Bill of Rights as well as regulations on public assembly, have prompted protests from Britain and democracy activists in the colony.
Hong Kong Governor Chris Patten slammed the plan on Thursday as a repugnant proposal to dilute the territory's civil liberties.
China has defended the move, accusing Western media of distorting the nature of the proposed changes and saying that only those provisions that contradict laws dealing with international affairs or national defence will be removed.
Hong Kong's post-colonial leader Tung Chee-hwa, who is attending the crucial committee meeting in Beijing, has supported Beijing, saying the international community has misconstrued the situation.
""I think things are being done in a very orderly, proper manner,"" Tung said on Saturday. ""The Basic Law explicitly provides freedom and our rights.""
Following the Preparatory Committee's motion to recommend Beijing's planned legal changes for the colony, the proposals would now go to China's National People's Congress for a final decision, Tung said but gave no timetable.
Some of the 25 laws and articles set to be repealed or altered include some that are the product of recent British-led reforms while others are the trappings of the colonial era.
",43
"Premier Li Peng said on Saturday China would pursue a foreign policy of opening to the world pioneered by late leader Deng Xiaoping, citing ties with the United States and Europe as of particular importance.
Li, speaking at the start of the annual session of China's National People's Congress, or parliament, placed less emphasis on relations with Japan, China's neighbour and biggest trading partner.
He delivered his speech in Beijing's Great Hall of the People, a Maoist-era auditorium evocative of an earlier, less outward-looking period in communist China's foreign policy.
""China will unswervingly pursue the policy of opening to the outside world...,"" Li said after he and 2,800-odd parliamentary deputies had observed a brief silence for Deng, who died on February 19 aged 92.
""We wish to see further improvement in Sino-U.S. relations and the strengthening of Sino-European relations,"" he said, without going into detail.
China this week marked the 25th anniversary of the Shanghai Communique -- the starting point for the process of normalising Sino-U.S. relations -- by criticising Washington for failing to honour the terms of its agreements.
Relations between China and the United States deteriorated in 1995 and early 1996 due to disputes ranging from Taiwan to pirated software and illegal garbage shipments, and have improved only in recent months.
Both sides seemed happy with this week's visit to Beijing by new U.S. Secretary of State Madeleine Albright.
Li referred to ties with Japan briefly.
""Sino-Japanese relations were once obstructed. We wish to see a normal development of relations between the two countries,"" he said.
Recent strains between the World War Two foes have included a flare-up in a long-standing dispute, also involving Taiwan and Hong Kong, over ownership of islets called Diaoyu in Chinese and Senkaku in Japanese.
Li said China opposed interference in the internal affairs of other countries -- an apparent jab at outsiders who take China to task over its human rights record.
China is to announce on Sunday a 14.7 percent incrrease in its defence budget for 1997, Chinese sources said, but Li said China had no aggressive intentions.
""A developed China will not constitute a threat to any other country,"" he said.
Beijing defends its large increases in military spending by saying the base figure is still low and inflation cuts purchasing power.
China denies charges it is becoming a threat in Asia or to the rest of the world, but its military build-up has caused anxiety among neighbours.
The three-million-strong People's Liberation Army , the biggest in the world, ruffled feathers in the region in March 1996 when it held missile tests and war games close to Taiwan just before the island's presidential election.
",43
"Chinese police cordoned off a South Korean embassy compound and North Korean diplomats waited outside as a senior Seoul official was due for talks with Beijing on the apparent defection of a top Pyongyang official.
Dozens of Chinese police blocked streets to South Korea's consular section in the sedate, tree-lined diplomatic district of Beijing, and embassy officials said Hwang Jang-yop, a senior aide to the North's leader Kim Jong-il, was holed up inside.
China remained silent as it found itself at the centre of a diplomatic crisis involving its old communist comrade, Pyongyang, and new commercial ally, Seoul.
South Korea sent Kim Ha-jung, a special adviser to Foreign Minister Yoo Chong-ha, to Beijing on Thursday morning for talks with Chinese officials on the fate of Hwang who it said had sought asylum along with his assistant Kim Dok-hong.
In a sign of the suspicion that underscores dealings between North and South, South Korean embassy officials accused North Koreans of trying to force their way into the consular office.
Diplomats from Pyongyang sat in parked cars outside the consular compound and waited outside the embassy, watching from behind the police cordons.
""Last night, North Korean people who we believe were from the embassy tried to enter our consular section,"" embassy spokesman Chang Moon-Ik told reporters.
Chinese police on guard around the compound had prevented the North Koreans from entering, he said.
He dismissed Pyongyang's charges that Hwang, one of 11 secretaries on the powerful secretariat of North Korea's ruling Workers' Party, Jong-il, had been kidnapped by the South, saying Hwang had voluntarily sought asylum.
""He came by taxi without any notice,"" the spokesman said.
North Korean diplomats stood by the kidnapping charge.
""I think South Korea has kidnapped these two officials,"" said one of several North Korean officials waiting in the office tower housing Seoul's embassy. ""The impossible has happened.""
An official at the North Korean embassy repeated a Pyongyang Foreign Ministry statement that accused Seoul of kidnapping Hwang and urged Beijing to sort out the mess.
""If it is brought to light that the South Korean authorities kidnapped him and describe him as seeking 'asylum', we will regard it as a serious incident without precedent and take due countermeasures,"" the Korean Central News Agency quoted a Pyongyang Foreign Ministry spokesman as saying.
""We expect that the Chinese side will take appropriate measures in this regard,"" the spokesman added.
Beijing is caught in the wrangle between North Korea, one of its last remaining socialist allies, and the capitalist South, which has become an important trading partner and source of investment.
Hwang, 73, is one of the chief architects of North Korean communism, and would be the highest ranking Pyongyang official ever to seek asylum in the South.
He is credited with playing a leading role in shaping the policy of Juche, a brand of fanatic self-reliance providing the ideological underpinning for the world's last Stalinist state.
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
",43
"An actor who played Deng Xiaoping in a recent movie release says he wants to avoid being typecast in the golden role now that the Chinese patriarch has exited the earthly stage.
Beijing actor Shi Xin debuted as the late paramount leader in ""Battles for Glory over Taihang Mountains"", an action-packed tale of the diminutive ruler's World War Two exploits which premiered in December.
Since then he has been offered Deng roles in five other films. ""My teachers, classmates and friends all say I'm going to get stuck in this one role,"" Shi, 25, told Reuters.
""I don't think that's right. If the day comes that I can play another role, I will be hardworking and earnest in my acting,"" Shi said.
Deng, one of Chinese communism's greatest revolutionaries as well as its most spectacular reformer, died aged 92 last Wednesday. That was also Shi's 25th birthday.
""At first I really didn't believe it,"" Shi said. ""I feel connected to him in some way.""
Plucked from the Central Drama Institute at age 23 to act the part of Deng, Shi said he found it tough to play the pint-sized patriarch, who despite his larger-than-life status as China's de facto emperor stood just 150 cm (five feet) tall.
""Deng Xiaoping was an incredible, a great man,"" Shi said. ""So when I got this role my heart was very heavy.
""To make the transition to playing such a great man was very difficult and gave me a lot of pressure, because I am so young,"" Shi said.
""My biggest challenge was losing weight,"" the 170-cm (5 ft 8 inch) Shi said. ""For the filming I didn't eat any staple foods. I mostly ate tomatoes and cucumbers.""
To prepare for the most important role of his career, Shi holed up in a classroom where he pored over books and photo albums to glean every detail about Deng's life and times.
""Although everyone felt I did a pretty good job, I still think I lacked a lot,"" he said, but added that the complexity of Deng's peppery persona could entice him into future films.
""Deng Xiaoping is not an average character. Playing him is something I will work on my whole life,"" he said.
Released last December, ""Battles for Glory"" failed even to recoup its shooting costs of just nine million yuan ($1.08 million), one-ninth of which came from central government coffers, said director Qin Yan.
Qin said she hoped Deng's death would rekindle interest in the man who helped lead the Communist Party to victory in 1949 and whose reforms sparked one of the fastest economic booms the world has seen.
Beijing had ordered cinemas across China to interrupt their normal fare of Hong Kong kung fu films and Hollywood blockbusters and instead roll over six films about Deng, including ""Battles for Glory"", Qin said.
""This film now has a mythological aspect to it,"" Qin said. ""We can cherish his memory and remember him through this film.""
Managers at several theatres in the capital were not so sure. They took Deng off their marquees on Saturday in the face of poor customer response to tales of his exploits.
""We sold one ticket,"" one manager said, noting that the same films had been running almost continuously on television since Deng's death was announced.
",43
"A North Korean embassy official warned on Sunday that Pyongyang would respond with force if the South compelled the highest-level defector from the Stalinist state to go to Seoul.
""If the South uses force to move him to South Korea we will respond with force,"" said a North Korean diplomat standing outside the heavily-guarded South Korean mission in Beijing where Hwang Jang-yop took refuge last Wednesday.
""We are determined to prevent them from taking him to the South,"" said the official, who declined to give his name.
""If he really defected why don't they let journalists interview him so he can say it for himself?"" the official, one of several keeping vigil outside Seoul's consular office in the sedate, tree-lined diplomatic district in Beijing, told Reuters.
Tensions between the two Koreas have heightened further since two suspected North Korean agents on Saturday shot and seriously wounded a defector, who is a relative of Pyongyang leader Kim Jong-il's ex-wife, in Seoul.
The South Korean government called an emergency meeting of security-related ministers to discuss the attack later on Sunday, officials said.
Korean police said the victim, Li Il-nam, known in South Korea as Lee Han-yong, is the nephew of Sung Hye-rim, former wife of Kim Jong-il.
In Beijing, Chinese police have surrounded the South Korean embassy building, laying spikes on roads to the mission to prevent cars approaching and bringing in a huge water cannon truck in case of trouble.
A bullet-proof car was parked outside the door of the mission where Hwang, Pyongyang's top ideologue and a senior aide to leader Kim Jong-il, sought asylum along with an assistant.
The North Korean diplomat repeated charges that Hwang was kidnapped by Pyongyang's arch-rival, South Korea.
Seoul has dismissed the accusation as ""preposterous"", saying Hwang turned up at South Korea's consular office in a taxi.
Hwang was expected to remain marooned in the mission for a fifth day, with Beijing was unlikely to give in to his request for asylum in Seoul until after North Korea celebrates the 55th birthday of its top leader, Kim Jong-il, on Sunday.
The Pyongyang diplomat said he was certain Hwang would never forget such an important day in the North Korean calendar.
""Hwang, deep in his mind, will be thinking of this day and we believe he will celebrate it as well,"" the diplomat said.
In a letter reported to be written by Hwang and released by the Seoul authorities, the man who ranked 24th in Pyongyang's hierarchy has charged that his homeland has become a dictatorship racked by famine.
Hwang, the scholarly architect of North Korea's national ideology of Juche, or self-reliance, was reported to be adamant he wanted to go to South Korea -- and nowhere else.
""I will die here if my determination to go to South Korea cannot be realised,"" Hwang said in a statement released by Seoul authorities.
Hwang has become the focus of a Cold War tussle between the two Koreas, arch-enemies since their 1950-53 war ended only in a truce -- and a severe embarrassment to China.
China played for time as it agonised over a diplomatic quandary -- how to usher Hwang out of Beijing without offending its old socialist comrade or its new capitalist friend.
Beijing has appealed for calm on the Korean peninsula, where two of the world's largest armies face each other, while it investigates.
South Korea appeared to fall in with Beijing's approach after a meeting between its Foreign Minister Yoo Chong-ha and his Chinese counterpart Qian Qichen in Singapore on Friday failed to break the deadlock.
""I think we have started a good discussion with China and we have to wait and see,"" Yoo said in Singapore on Saturday. ""I dont think that it's right now to make any judgment on this.""
China has appealed for calm and warned that it may take some time to decide what to do with Hwang. Diplomats said China may have little choice but to follow Hwang's wishes.
",43
"More and more Chinese suitors are using Valentine's Day as an excuse to open their hearts to the ones they love but rose merchants reaping huge profits may be even more passionate about the traditional lovers' day.
Banned as bourgeois decadence in China's ultra-leftist 1966-76 Cultural Revolution, Valentine's Day has since emerged as an opportunity for shy lovers to make public expressions of affection -- and as a red-letter day for flower sellers.
The Beijing Flower Supermarket, which supplies the capital with 80 percent of its fresh flowers, expects to see sales jump 400 percent on Valentine's Day this year, said one salesman with a company affiliated with the market.
""I estimate the market will sell about one million flowers,"" Kong Li of the Beijing Huaxianzi Flower Delivery Co said in an interview. ""Valentine's Day is our most lively day.""
FROM RED BOOKS TO RED ROSES
Scenes of fanatical Red Guards waving little red books of Chairman Mao Zedong's quotations have given way to a growing army of amorous youth bearing red roses, who are more passionate about the opposite sex than about the latest political pronouncements from Beijing.
""The Chinese love excitement and a reason to get worked up. Valentine's Day is an excuse to do that,"" Kong said.
""When there were no flowers, Chinese used other ways to express their feelings. Now that we have fresh flowers more people like to give them as gifts,"" Kong said.
Nearly two decades of market-oriented reforms launched by paramount leader Deng Xiaoping have mixed the forces of the market with those of the heart, with lucrative results for pedlars of petals.
A budding flower industry emerged in China in the mid-1980s but it wasn't until Deng put his seal of approval on the country's capitalist-style reforms in 1992 that the sector really started to bloom, Kong said.
""Flowers have become more popular mainly because of the reforms and opening up,"" he said.
A ROSE FOR HALF A WEEK'S INCOME
Fresh roses for Valentine's Day are flown to wintry Beijing mainly from major growing areas around the southern boomtown of Guangzhou in Guangdong province and Kunming in the temperate southwestern province of Yunnan, Kong said.
Many roses are also imported from the Netherlands, he said.
Demand for roses on Valentine's Day can send the price of a single flower soaring to 50 yuan ($6.00), or half a week's income for an average urban resident.
Beijing's flower dealers normally purchase domestic roses for around five yuan each from southern growers but the price can jump as high as 15 yuan in the run-up to Valentine's Day, Kong said.
Retail prices can be more than double that by the time the flowers hit the stalls in Beijing.
""We can sell a Chinese rose for 25 yuan on Valentine's Day. Imported ones can sell for 50 yuan,"" he said. An average city dweller made about 420 yuan a month in 1995.
Flower sellers who rent stall space at the state-run flower market reap huge profits from the mark-ups.
""I can make 10,000 yuan in profit on a good day like Valentine's Day,"" said Liu Cheng, manager of one stall.
FASHIONABLY HIP YOUTH ARE GENEROUS LOVERS
Whereas institutional buyers such as hotels and corporations made up the bulk of business in the past, ordinary residents with more money in their pockets are increasingly becoming the mainstay of the industry, Kong said.
""One guy last year bought 900 roses for Valentine's Day,"" stall manager Liu said.
Trend-conscious young people were sending more flowers to friends and relatives for birthdays and at the new year as well as on Valentine's Day, Kong said.
""It's mostly young people in their 20s,"" Kong said. ""Most of those who buy flowers are well-educated and cultured.""
Kong predicted the Beijing flower market would double within three years, but hefty prices could be a thorn in the side for less well-off Chinese hoping to send their sweethearts a token of their affection.
""Fifty yuan a rose? I think I'd give some chocolates instead,"" one Beijing resident said when asked if he would purchase flowers for his wife on Valentine's Day.
($1 = 8.3 yuan)
",43
"Chinese authorities have imposed a curfew on a town in the mainly Moslem region of northwestern Xinjiang after at least 10 people were killed in a separatist riot last week, officials and local residents said on Monday.
At least 10 people were killed and many wounded last Wednesday when 1,000 Moslem separatists of the Uighur ethnic minority rampaged through Yining, smashing cars, burning shops and beating up Han Chinese to protest against Beijing rule.
""Both Han Chinese and Uighurs were killed or injured,"" a propaganda official said by telephone from Yining in the near the border with Kazakhstan.
A Chinese source with close links to the government said the separatist riot was among the most violent for many years in Xinjiang, where Moslems are in the majority and ethnic Han Chinese make up just 38 percent of the population.
""A circular has been issued and broadcast on television ordering people not to go out after dark,"" said one local resident, a Han Chinese. ""We don't go out after the sun sets. There is a curfew every night.""
Local officials described the riot as a small incident fuelled by unidentified ""foreign hostile forces"" and refused to say how many people had been killed or injured.
However, the Chinese source said at least 10 people had been killed, including one police officer, and many wounded and arrested.
""One police officer was stabbed to death,"" said the source, who declined to be further identified.
The Hong Kong-based Ming Pao newspaper said rioters set fire to the bodies of those killed. About 100 were wounded, it said.
The rioters attacked ethnic Han Chinese on sight, smashed cars and set fire to shops, forcing local authorities to send out about 1,000 police and paramilitary People's Armed Police to quell the riot, one Han resident said.
""They said they wanted the Han out of Xinjiang,"" he said.
The riot erupted after a Chinese policeman tried to arrest a man of the ethnic Uighur minority, the Chinese source said.
""The police tried to arrest a Uighur criminal suspect but the suspect and his family resisted arrest,"" the source told Reuters by telephone.
""The scene attracted neighbours and onlookers and the crowd swelled to more than 1,000 and turned into rioting,"" he said. ""The police were called in and fired teargas to dispel the crowd.""
The demonstrators, shouting anti-Chinese slogans, had marched on a government building and police had asked them to disperse, said the propaganda official in Yining, about 700 km (440 miles) northwest of the Xinjiang capital, Urumqi.
""There was a demonstration and they shouted slogans calling for Han Chinese to be driven out of Xinjiang and for Xinjiang to be split from the motherland,"" he said, adding that the rioters had ""used the pretext of religion"".
The festival to mark the end of Ramadan, the Moslem month of fasting, fell at the weekend, overlapping with China's celebration of the biggest holiday in its calendar, the lunar new year, last Friday.
Xinjiang, considered by many Chinese a wild frontier territory, has a long history of ethnic clashes between the native population of mainly Moslem ethnic minorities and the ruling Han Chinese.
",43
"Chinese paramount leader Deng Xiaoping's death paves the way for his anointed heir Jiang Zemin to assume the reins of power after seven years of waiting in the wings for his patron to pass away.
President and Communist Party chief Jiang who takes full power with Deng's death is a technocrat and career communist with a sure grasp of Chinese politics but a personal history that has little in common with that of his revolutionary predecessors.
Jiang, who combines the largely symbolic title of president with the really powerful roles of Communist Party general secretary and chairman of the Central Military Commission, was widely seen as a bland compromise candidate when he shot to power from relative obscurity in 1989.
The former tractor factory manager has fought to emerge from the shadow of patriarch Deng, who died of respiratory failure at the age of 92 late on Wednesday.
Until his death, there was little doubt that Deng, ageing and wracked by Parkinson's disease, was the final arbiter of Chinese policy.
Jiang was dismissed at first by foreign analysts as a powerless transitional figure whose rule would end with Deng's death. But he has in recent years promoted allies and dominated the middle ground on policy to bolster his position as the favoured successor.
He has shown himself an astute politician, edging his way through a minefield of enemies and rivals to consolidate a grip on power that appeared unshakable as Deng's influence waned.
He was appointed party chief after Zhao Ziyang, a reformist closely associated with Deng, was toppled by hardliners who accused him of supporting the 1989 democracy movement that swept China until crushed by the army in Beijing on June 4, 1989.
Unlike Deng or his predecessor Chairman Mao Zedong, Jiang has no experience of war or the military, which impairs his standing with China's three million-strong army.
When Jiang became the party's third leader in as many years in 1989, he was a dark-horse candidate little known outside Shanghai, where he had served as mayor and then local party boss.
""Brought to power in the wake of the events of 4 June, 1989, he is someone who was 'neither here nor there' in the opinion of many observers, and therefore was the ideal man for the job,"" Laurence Brahm of Naga Group Ltd wrote in a profile.
Thickset and bespectacled, Jiang speaks to visitors in a soft-spoken manner and radiates little aura of power, Westerners who have met him said.
""He speaks like a factory manager, not the leader of a country,"" said one.
But whatever his manner, when Jiang speaks China listens.
He used a highly publicised 12-part television documentary on the life of Deng last month to portray himself as Deng's anointed, and actual, heir.
His tough stand on Taiwan, an island Beijing regards as a renegade province, when he mobilised the army to hold war games off the island before its March 1996 presidential elections, boosted his stature at home.
He has also nurtured his image as an international statesman, chatting in English with President Bill Clinton and overseeing a thaw in ties in 1996 that appeared set to culminate in his long-held dream of a state visit to Washington.
Born in July 1926, Jiang graduated in electrical engineering from Shanghai's Jiaotong university in 1947, and worked as deputy head of first a food factory and then a soap factory.
After being trained at Moscow's Stalin Automobile Factory from 1955 to 1956, Jiang was appointed deputy chief mechanic responsible for power supplies at the Number One Car Plant in Changchun, in China's northeast.
He went from there to administrative posts at engineering factories and research institutes in several cities.
Jiang held a number of posts in state bureaux related to electronics, culminating as Electronics Minister from 1983 to 1985.
His rise to party prominence began in 1982 with election to the party's Central Committee. Members of the policy-making Politburo and its elite standing committee are drawn from the 175-strong Central Committee.
Jiang became a member of the powerful Politburo in 1987, but only entered the standing committee with his elevation to General Secretary in June 1989.
Becoming mayor and deputy party secretary of Shanghai in 1985, Jiang moved into the city's top party job in April 1988, and from there was catapulted to Beijing to take up China's top job.
Jiang is married and has two grown sons, one of whom studied for a graduate degree in the United States.
An English speaker who enjoys painting and classical Chinese poetry, he has been shown in state-controlled media as trying to relax after work by playing an upright piano.
Official photographs of Jiang at his piano show him still wearing a dark Western suit with his red tie pulled tight.
He is known to enjoy singing karaoke, and joined Philippine President Fidel Ramos in a rendering of Elvis Presley's Love Me Tender in a relaxed moment at the end of the Asia-Pacific Economic Cooperation forum in Manila in November, 1996.
",43
"China is growing more aware of the importance of human rights in Sino-U.S. ties, but Washington still plans to sponsor a U.N. resolution slamming Beijing unless further progress is made, diplomats said on Monday.
A visiting team of U.S. officials that held talks last week on a range of issues including human rights had left feeling confident Beijing was aware of the importance of rights in the cross-Pacific relationship, one Beijing-based diplomat said.
""The Chinese correctly identify human rights as an area where there's a continuing danger that the relationship's momentum could be negatively affected,"" the diplomat said.
Unless Beijing improved its handling of fundamental freedoms, Washington expected to co-sponsor a United Nations draft resolution in Geneva condemning China's record, he said.
Beijing has succeeded in quashing such resolutions for the past six years with the support of developing nations, many of which have faced criticism from Washington over human rights.
The United States was pressuring China to release political prisoners, allow Red Cross inspection of its prisons and abide by U.N. covenants on civil, political and economic rights, the first diplomat said. ""If we do not see discernible progress in the areas... we will go ahead with the resolution,"" he said.
The U.S. State Department last week released its annual human rights report, which slammed Beijing for abuses of basic freedoms, saying all active dissidents had either been jailed or driven into exile.
Such pressure and calls by Western nations for Beijing to lighten its heavy-handed treatment of political dissidents had helped achieve release of several prisoners of conscience, a third diplomat said.
Beijing last month released on parole Hong Kong journalist Xi Yang, jailed in 1994 for stealing state secrets, and last November freed leading dissident Chen Ziming to receive medical treatment.
""Those people probably would not have been released were it not for international expressions of human rights concerns over the long term,"" the diplomat said.
Strict limits remained on personal and political freedoms in China but the liberalisation of the economy was steadily eroding Beijing's authoritarianism, the first diplomat said.
""The average Chinese person enjoys a range of personal freedoms that is far, far greater than any of us or them would have imagined 15 years ago,"" he said.
New U.S. Secretary of State Madeline Albright had vowed to fully engage the Chinese on human rights while not allowing Sino-U.S. ties to fall prey to bickering over any one issue, he said.
""This is an administration that really is committed to full, across the board engagement with China on as many tracks as we can move the relationship,"" he said.
A series of high-level visits this year would help keep on track Sino-U.S. ties, which have been plagued by rows over such issues as human rights, trade and Taiwan, he said.
Albright is expected to visit China in late February and Vice President Al Gore is to come in late March. U.S. President Bill Clinton and his Chinese counterpart Jiang Zemin have agreed to an exchange of state visits, the first since 1989.
The diplomats said U.S. officials would continue to raise the human rights issues with the Chinese at every opportunity.
""It is a kind of conversation we have with China and other countries that is going to be there as far ahead as we can possibly see,"" the first diplomat said.
",43
"Busy Chinese took the death of Deng Xiaoping in their stride on Friday, praising the patriarch for the economic miracles he created but blaming him for social ills such as corruption and unemployment.
The day after the announcement of the passing of the man whose reforms gave Chinese unprecedented freedom, residents in Beijing bustled off to work, street markets buzzed with activity and factories churned out their goods.
""Deng was a great man, people will miss him and appreciate him for greatly improving their living standards in such a short time,"" a retired factory worker said in her home in Beijing.
""It's not something we common people can worry about,"" said a Beijing taxi driver of Deng's passing. ""I still need to make money.""
Deng's 18-year rule, which transformed China from a backward hermit nation into an economic powerhouse, ended on Wednesday night when he died from complications linked to the advanced stages of Parkinson's disease. He was 92.
""Deng was a man who changed China's history and guided China into the world from being an isolated country,"" said a former official in the southern boomtown of Shenzhen who abandoned his government post to go into business.
An editor in a state-run publishing house in Beijing said her company would hold an informal discussion session on Deng's ideology on Friday afternoon.
""Just for half a day we will take a look at his spirit and study the thoughts of Deng Xiaoping,"" the editor said.
However, some Chinese said Deng's achievements in freeing China from the collectivist shackles clamped on it by the late Chairman Mao Zedong would be overshadowed by the social ills unleashed by his policies.
""I don't want to totally reject Deng, but Deng set a bad example for China's rulers in the aspect of corruption,"" said a 30-year-old musician in Beijing.
""Deng's family members all get good treatment in society. There must be great changes in China in the future,"" he said.
Market competition created by Deng's reforms had forced the closure of state-run industries in many regions, swelling the ranks of the jobless.
""Many state firms here have collapsed and their officials have no capacity to manage them,"" said one girl, a high school student in Daixingganling in the northeastern province of Heilongjiang, a stronghold of socialist industry.
""My parents and I just feel some uncertainty, some worry. We feel no confidence,"" she said by telephone.
Another legacy of Deng, the bloody June 4, 1989, crackdown on student-led demonstrations centred on Beijing's Tiananmen Square, would leave a stain on later assessments of the diminutive patriarch.
""They shouldn't have fired their guns on the common people. They should have used peaceful means to solve the situation,"" the publishing editor said.
""History will deliver an accurate judgment,"" she said.
Some doubted that President Jiang Zemin, picked by Deng to assume the mantle of power, had the political mettle to lead China into the 21st century.
""China really needs a powerful leader like Deng to guide it forward,"" said a government clerk in the Tibetan capital Lhasa.
""Although the third generation of leaders is becoming more sophisticated...I'm worried that new leaders may not be so determined in making decisions,"" another businessman in Shenzhen said.
",43
"A Hong Kong member of the Chinese committee handling the territory's return handed a letter to Chinese Foreign Minister Qian Qichen on Friday protesting against Beijing's plan to dilute civil liberties laws.
Frederick Fung, chairman of the Hong Kong Association for Democracy and People's Livelihood, handed the letter to Qian just before the start of a two-day session of the 150-member Preparatory Committee in Beijing's Great Hall of the People.
""I gave a document to him in the hope he will study it,"" Fung told reporters. ""I have a different view on the Preparatory Committee proposal to repeal several provisions of the Bill of Rights.""
Beijing's plans to repeal or amend a list of 25 Hong Kong laws and ordinances, including parts of its Bill of Rights, will be debated at the session of the caucus responsible for shaping Hong Kong's future in the countdown to the handover this year.
The announcement this month from Beijing, which said the laws contradicted Hong Kong's future mini-constitution the Basic Law, has sparked outrage in the British colony and forceful objections from London and its allies.
""I feel if it doesn't violate the Basic Law it should not be retracted,"" Fung told reporters.
""If the Preparatory Committee abolishes the provisions of the Bill of Rights it will create unnecessary worries and be detrimental to Hong Kong's prosperity and stability after 1997,"" Fung said in his letter, a copy of which was seen by Reuters.
Qian defended the move, accusing Western media of distorting the nature of the proposed changes and saying only those provisions that contradicted laws dealing with international affairs or national defence would be removed.
""Hong Kong's Bill of Rights...will be preserved and only those provisions that override other laws will be deleted,"" state television quoted Qian as saying.
""The Western media in recent days has made it sound like we have suddenly proposed changing a large number of laws or even that we would move the mainland's laws to Hong Kong,"" he said.
""Our overall guiding principle is to reflect the Basic Law's regulation of changing as little as possible the original laws of Hong Kong,"" he said.
Fung's protest followed an attack on Thursday by Hong Kong Governor Chris Patten who lashed out at what he called China's repugnant proposal to dilute Hong Kong's civil liberties after it recovers the British colony at midnight on June 30.
""I believe the abolition of the... Bill (of Rights) will bring instability to the rule of law in the future special region,"" said the letter by Fung, who is also a member of the territory's Beijing-appointed provisional legislature.
Fung voiced opposition to China's decision to repeal recent Hong Kong regulations allowing political parties, warning that Beijing's decision to return to the British colonial era system would affect Hong Kong's stability as well as its credibility.
""I believe that to restore these provisions is totally against developing toward the casting off of colonialism and against the principle of Hong Kong people governing Hong Kong,"" he said in the letter. Fung's group advocates democracy for Hong Kong through cooperation not confrontation with Beijing.
Hong Kong's post-colonial leader Tung Chee-hwa, who is attending the crucial committee meeting in Beijing, argued in defence of Beijing's move that the international community had misconstrued the situation.
U.S. President Bill Clinton has expressed concern. Britain summoned the Chinese ambassador in London order to lodge a protest and Foreign Minister Malcolm Rifkind plans to pursue the issue in a meeting with Qian next month.
",43
"At least two people were killed and about 30 taken to hospitals when a bomb exploded on a public bus in Beijing during rush hour on Friday, Chinese sources and officials said.
The explosion occurred in Beijing's western shopping district of Xidan at around 6:30 p.m. (1030 GMT), engulfing a bus in flames and sending passengers scrambling to escape, a witness said.
""There was a great flame and a 'boom' sound and then people jumped out of the bus,"" a young man who was working nearby at the time of the blast said.
""One woman came out with her hair on fire.""
A Chinese source said at least two people were killed in the bomb blast.
Workers at an emergency centre near the bustling commercial area said they had picked up about 30 injured people and sent them to various hospitals for treatment.
A young man who said he saw the explosion blow the windows out of the back of the bus reported seeing about nine people seriously hurt.
A police official said that some people were suffering from burns but he declined to give further details.
The motive was not immediately known and it was unclear if police had made any arrests.
China's state media regularly report on bombings, arson and other violent attacks by disgruntled workers or jilted lovers.
The bombing followed a string of similar attacks by Moslem separatists in the far western region of Xinjiang.
Three bombs planted on buses blew up within minutes of each other on February 25 in the region's capital of Urumqi in an attack apparently coordinated to coincide with funeral rites in Beijing for paramount leader Deng Xiaoping.
A fourth bomb failed to explode.
Authorities had arrested seven suspects in the attacks that killed nine people and wounded 74, according to a pro-Beijing newspaper in Hong Kong.
One Beijing resident said witnesses told him police, ambulances and fire trucks had rushed to the scene of the explosion on Friday.
The wreckage of the bus was quickly towed away, and police cordoned off the area for about one hour.
Several hours later, broken glass was still scattered on the street as uniformed and plainclothes police patrolled nearby.
Police had set up check points around the capital and were stopping cars, checking identification of drivers and searching vehicles.
Exiled Uighur nationalists in neighbouring Kazakhstan claimed responsibility for the Xinjiang bombings and for a similar, previously unreported attack near the Kazakh border on Monday.
Moslem separatists want to set up an independent ""East Turkestan"" in Xinjiang, home to many Turkic-speaking people, including the Uighur ethnic minority.
",43
"A South Korean official on Tuesday said progress had been made in talks with China over the fate of the most senior leader to flee Pyongyang but terms of his departure from Beijing were still undecided.
Hwang Jang-yop, a senior North Korean ideologue and top aide to supreme leader Kim Jong-il, has been stranded in Seoul's mission in Beijing since February 12 while the three nations negotiate his fate.
""There has been some headway. Negotiations are still going on,"" said Chang Moon-ik, spokesman for the South Korean embassy in Beijing.
Officials in South Korea said on Monday they expected a breakthrough this week in talks with China aimed at securing Hwang's passage out of Beijing but Chang said it was unlikely he would be moved in the next few days.
""Final arrangements have yet to be done first. There has been no final decision,"" Chang said by telephone.
Weeks of talks over Hwang's fate, interrupted by the death of China's paramount leader Deng Xiaoping last month, have failed to produce an accord as Beijing finds itself torn between an old communist ally and a new capitalist friend.
""We want to bring Mr Hwang to Seoul directly but if that is not possible we can make other arrangements,"" Chang said. Korean sources have said Hwang may be whisked away to another country, possibly in Southeast Asia.
Analysts say Hwang will likely end up in Seoul but Beijing is anxious to help North Korea save face by being seen to give due consideration to the hermit nation's concerns.
Hwang, chief architect of Pyongyang's ruling ideology of Juche, or self-reliance, is the highest North Korean official to flee the Stalinist state.
His defection has placed extra strains on ties between the two Koreas, arch-enemies since the 1950-53 civil war ended in an uneasy ceasefire.
Armed Chinese police backed by armoured personnel carriers and a crowd control truck maintained a tight security cordon around Seoul's consular compound where Hwang is holed up in Beijing's normally sedate diplomatic quarter.
Beijing has appealed to North and South Korea to stay calm during attempts to end the diplomatic standoff sparked by Hwang's defection.
Chinese Foreign Minister Qian Qichen said last week Beijing was still investigating Hwang's case and hoped for a solution as soon as possible.
North Korea initially accused the South of kidnapping Hwang, then changed its hardline stance by saying if he really had defected he was a traitor and would be dismissed.
Beijing, which sent its armies to fight on Pyongyang's side during the Korean War, established diplomatic links with Seoul only in 1992.
",43
"China and the United States have made headway in talks on Beijing's accession to the World Trade Organisation, with Washington keen to move ahead at the start of President Bill Clinton's second term, diplomats said on Monday.
Visiting U.S. trade official Lee Sands held talks with his Chinese counterparts last week on Beijing's long-stalled application for entry to the WTO and a Beijing-based diplomat said there was a sense of optimism both sides were making progress.
""We have not fixed any deadline yet but things are really moving with some momentum here and we very, very much want to have China in the organisation,"" the diplomat said.
""There is...at their highest levels a recognition again that this is important to both of our interests,"" another diplomat said.
China now had a golden opportunity to resolve the continuing dispute over its WTO entry because U.S. trade officials wanted to kick off Clinton's second term with a major victory, the diplomat said.
""The more sort of politically savvy (Chinese) that we've conversed with on WTO recognise that there is a year of real opportunity here,"" the diplomat said.
""These are moments that China would, in its own self interest, be well-advised to seize,"" he said.
China's entry into the global trade body has been an issue of intense bilateral debate, with Beijing seeking membership under the favourable terms accorded developing countries and Washington arguing its economy is too big for such special treatment.
""We can perhaps during the course of the next year work constructively to try and come up with something which would end this process and bring China into the WTO,"" the diplomat said.
China failed in its bid to gain WTO membership at the inception of the world body in 1995 because of stiff resistance not only from the United States but also from Europe and Japan.
Washington has said Beijing must comply with a ""road map"", and issues still on the negotiating table included removal of non-tariff barriers, standardisation of customs procedures and elimination of subsidies to domestic industries, diplomats said.
""What you have to do is provide opportunities for industries to be able to trade fairly and on a level playing field,"" the second diplomat said.
China's trade surplus with the United States had swollen to about $38.9 billion in 1996 from about $34 billion in 1995, he said. Beijing says its figures show a net trade deficit with Washington.
The growing trade gap has increasingly become a source of cross-Pacific friction, with U.S. industries demanding more access to the huge Chinese market as China's economy continues to boom, the first diplomat said.
While many senior Chinese officials were becoming more aware of the benefits WTO membership could bring to China, Beijing would have to be prepared to shoulder the responsibilities that came with being a world trade power.
""They become big players on a big stage, but you don't do that irresponsibly,"" the first diplomat said.
",43
"China urged calm on Friday as it negotiated with South Korea on the fate of a top North Korean asylum-seeker stranded in Seoul's mission in Beijing and waiting Pyongyang officials said they wanted to lure the turncoat home.
China warned of a drawn-out standoff after it was dragged unwillingly into the squabble between the two bitter enemies and found itself faced with making a decision that must anger either an old communist comrade or a new friend and wealthy investor.
Hwang Jang-yop, the leading North Korean ideologue who has said he wants to leave a country run as a dictatorship, spent a third day with an aide in Seoul's consular office as a Chinese bullet-proof car waited at the door and dozens of police surrounded the building.
Chinese Foreign Minister Qian Qichen met his South Korean counterpart Yoo Chong-ha in Singapore but the talks failed to break a deadlock over the 73-year-old defector, the most senior Pyongyang official to flee the North.
""This incident happened all of a sudden, so we need more time to investigate,"" Qian told reporters after the meeting.
Qian urged both Koreas ""to treat this matter with a cool and calm manner, to keep peace and stability"".
""It can't be solved so quickly as imagined,"" Chinese spokesman Guo Chongli told reporters in Singapore.
Seoul's Yoo said Friday's talks were ""good"".
South Korean officials said talks would resume through diplomatic channels in Seoul and Beijing,
Diplomats say China may have little choice but to give in to the defector's wishes, thus angering one of its last remaining socialist allies and raising fears of new tensions on the divided Korean peninsula, where two of the world's largest armies face each other.
Seoul sees the highest-level defection from the Stalinist North as a major coup that could produce a treasure trove of intelligence on a secretive government it fears is plotting its destruction.
For Pyongyang, the loss of the chief architect of its national ideology of Juche, a doctrine of fanatic self-reliance, is another blow on top of destabilising food shortages.
It is a slap in the face for Pyongyang's top leader Kim Jong-il, whose 55th birthday party on Sunday was intended to smooth the way for his formal accession to the posts of state president and general secretary of the ruling Worker's Party.
Hwang was a close adviser to Kim Jong-il and one of 11 secretaries on the powerful secretariat of the Workers' Party.
In the sedate, tree-lined diplomatic district of Beijing, dozens of Chinese police cordoned off Seoul's consular section, where Hwang reportedly spent the day reading.
Hwang, who could face summary execution or a lifetime in the gulag if he goes back to the North, was in good health and sleeping well, a South Korean embassy spokesman said.
A North Korean official standing outside the police cordon said Pyongyang had no plans to storm the compound to recover a countryman Pyongyang had said was kidnapped.
""We are waiting here for him to come out and then ask him to come back,"" said the official who declined to identify himself.
""If China allows him to go to South Korea then we will be disappointed,"" said another North Korean, one of about 10 waiting beyond the police cordon, trademark badges of the late North Korean leader Kim Il-sung pinned to their lapels. ""It will be regrettable.""
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953 which ended with a truce, not a peace treaty. China fought on North Korea's side in the conflict.
",43
"China's largest zinc producer, Liuzhou Zinc Products Co, is tormented by water: there's either too much or too little.
The plant in the southern region of Guangxi struggles to stay open against fierce summer floods while low river water levels in winter often rob the factory of the hydropower it needs to keep its production lines running, officials said.
Average production at the plant fell to about 88 percent of capacity last year from a previous 95 percent after torrential summer rains flooded some 90 percent of the factory grounds, Jiang Wenjie, deputy director of the plant, said.
The high waters caused about 80 million yuan ($9.6 million) in damage and forced the closure of a zinc oxide production line for three months, Jiang told Reuters in an interview.
Damage from the floods has since been repaired and 1997 output will rise above last year's, he said.
""We see output of all our products hitting 95 percent of capacity this year,"" he said.
No visible traces remain of last year's floods but a recent tour of the factory grounds revealed workers standing idle because a power outage had shut down all production lines.
""This happens often in winter because water levels are too low to generate power,"" said one official, who asked not be identified.
The power outages had been worked into production plans, he said.
RISING PROFITS, SHARE LISTING SEEN IN 1997
Last year's floods had cut into the company's profits, which fell to an after-tax 10.32 million yuan last year on sales of 608 million yuan, Jiang said.
Profits were just half of those in 1995, Jiang said, but forecast they would rise to about 21 million yuan this year.
Sales were seen at 630 million yuan in 1997, he said.
The company's production of zinc ingots was seen hitting 33,200 tonnes in 1997 while output of zinc oxide would top 50,000 tonnes, he said.
""With the development of China's automobile and construction industries...the market for zinc oxide will increase gradually,"" he said.
China had some 40 plants turning out 170,000 tonnes of zinc oxide annually, he said, adding that domestic demand was about 130,000 tonnes a year.
The smelter's output of zinc alloys would hit 1,900 tonnes in 1997, output of zinc sulphate 3,800 tonnes and that of zinc powder about 1,700 tonnes, he said.
Production of lithopone, used in low-grade paints, would reach 28,500 tonnes but domestic demand was expected to slump as rising living standards fuelled the market for higher quality paints, he said.
Liuzhou Zinc had fixed assets of 250 million yuan, a registered capital of 101.5 million yuan and was 79.41 percent state-owned, Jiang said.
The firm had applied to list domestic currency A shares on the stock market in the southern town of Shenzhen, he said.
""We expect approval by the end of this year,"" he said but declined to give further details.
EXPORT TARIFF CUT NOT HELPFUL
Jiang gave a lukewarm welcome to a recent central government decision to cut zinc export tariffs in 1997.
Beijing's move to lower the temporary export tariff on zinc to zero in 1997 from 5.0 percent last year would have little effect on the plant's exports due to government quotas on the metal, Jiang said.
""Our exports won't be more than 20 percent of our output this year,"" he said.
That compared to exports of 45 percent of production in 1993, he said.
""There are still quotas on zinc exports,"" he said.
""The central government still has controls over the zinc industry,"" he said. ""They want to ensure domestic demand is met.""
EXPORTS TO GROW
The plant would export its products to 20 countries in 1997, he said.
Zinc oxide exports would head mainly to the United States, Japan, South Korea and southeast Asia, Jiang said but declined to give further details.
China produced about 1.07 million tonnes of zinc last year, down 0.32 percent from 1995, official figures show. Zinc output in December alone was 94,900 tonnes.
Domestic zinc demand is seen hitting 870,000 tonnes in 1997, up 6.1 percent from last year, the figures show.
The smelter sourced about 85 percent of its supply of zinc concentrate from mines in Guangxi, the southern province of Guangdong and Yunnan province in the southwest, he said.
The plant would not import zinc concentrate within the next five years, he said.
($1 = 8.3 yuan)
",43
"South Korea on Monday hinted that talks with China over the fate of a senior North Korean defector sheltering in Seoul's mission in Beijing could drag on while Beijing is busy with its annual parliament session.
""We didn't get any resolution from the Chinese government so far,"" South Korean Embassy spokesman Chang Moon-ik said of the negotiations over Hwang Jang-yop, the Stalinist nation's top ideologue.
Hwang has been holed up in Seoul's consular compound in Beijing since February 12, surrounded by Chinese police with assault rifles, an anti-riot truck and armoured personnel carriers.
Chang declined to say when a resolution to the Cold War standoff being waged in the Chinese capital could be expected, saying Chinese officials were preoccupied with the annual session of the National People's Congress (NPC), or parliament.
""I think they are very busy because the national assembly is going on,"" he said, adding that Seoul officials were continuing to maintain contacts with their Chinese counterparts.
In his annual government work report made to the opening session of the congress on Saturday, Chinese Premier Li Peng made no mention of the crisis, but said Beijing hoped for stability on the Korean peninsula.
""The Chinese government has all along attached importance to and worked hard for the maintenance of a stable situation in the Korean peninsula,"" Li said.
The NPC opened on Saturday and is to meet for two weeks.
The new interruption comes shortly after the talks were stalled when China observed six days of mourning for the death of paramount leader Deng Xiaoping.
Beijing has found itself entangled in the showdown between the rival Koreas and now is trying to resolve the crisis without offending an old communist comrade or a new business partner.
Analysts say China is almost certain to grant Hwang safe passage to Seoul, but wants to help its hermit neighbour save face by being seen to give Pyongyang's concerns due attention.
The defection of Hwang, a senior aide to top leader Kim Jong-Il and the architect of the North's ideology of strict self-reliance, further strained ties between the Koreas. But there have been signs in recent days the crisis may be easing.
Pyongyang, which at first insisted Hwang had been kidnapped by South Korean agents, has since vowed to dismiss the ideologue if he had in fact defected.
Near famine conditions in North Korea and apparent disaffection among some members of the ruling elite has prompted a string of defections in recent months.
In another daring flight from North Korea, a man whose family reportedly fell foul of Pyongyang's communist government arrived at Seoul international airport on Sunday after hiding out in China since October 1992.
Last Thursday, a North Korean woman in her 20s fled barefoot to the South through the heavily mined and guarded Demilitarised Zone that has split the Korean peninsula since the end of the 1950-53 Korean War.
Adding to an impression of instability, the country's defence minister and his deputy died in quick succession last month, and the prime minister was replaced.
",43
"Negotiators from China and the United States resumed last-ditch talks on Saturday to hammer out a new textile accord and a deal on market access after extending for a day the deadline for a cross-Pacific trade war.
Chief U.S. textile negotiator Rita Hayes said she was confident of an agreement on Saturday in a fifth day of talks with officials of China's Ministry of Foreign Trade and Economic Cooperation.
""We felt like we had made tremendous progress and we are looking to complete negotiations today,"" she told Reuters before leaving for the ministry. ""You're always positive you can reach an agreement but you have to balance it out.""
Hayes and Chinese officials wrangled late into Friday night to try to iron out problems in renewing a 1994 textile accord and to resolve a dispute over U.S. penalties on Chinese exports.
The United States had extended by a day the deadline for agreement on a new textile accord with China, Hayes said.
""I felt like it was important to extend it, the deadline, for one day... so we could get a fresh start this morning,"" Hayes said as she left for the eleventh-hour talks.
""We did not complete the agreement... so we felt like we'd have one extra day to complete it,"" she said. ""We didn't finish last night so we are re-evaluating where we are and will continue negotiations this morning.""
She said the U.S. side was still focusing on two major demands -- its market access package and a level playing field for the textile industry.
""The two main things that we have been consistently concerned about are the market access that China has to the United States... and also making sure that it is balanced, that we have a market access package from China,"" she said.
Disagreement over market access in China appeared to be a major stumbling block, industry representatives said earlier.
However, they said hopes for a deal were high, with Hayes and her team believed to be putting the finishing touches to the text of an agreement.
""I expect the reason for the talks not wrapping up is market access,"" said National Retail Federation vice-president Robert P. Hall said on Friday. ""This is an issue that is not traditionally part of apparel bilaterals.""
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the previous deadline of January 31, Hayes has said. The United States would not give China another extension of the deadline, she said.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries.
",43
"China on Wednesday called for a solution to the crisis over a North Korean official holed up in Seoul's mission in Beijing, hinting for the first time the senior ideologue had sought refuge of his own free will.
In the first mention in its domestic media of the Cold War drama unfolding in its capital, China indicated that Hwang Jang-yop, a senior aide to North Korea's top leader Kim Jong-il, had willingly sought refuge in Seoul's consular compound.
""After his arrival in Beijing on February 11, Hwang stayed at the (North Korean) embassy in Beijing,"" Xinhua said, quoting sources at the Foreign Ministry.
""He left there in the morning of the following day and ran away into the embassy of (South Korea) in Beijing,"" it said in a report broadcast on state radio.
Pyongyang, which previously maintained Hwang was kidnapped, has hinted it may be ready to give up attempts to win back the man ranked 24th in the North's hierarchy and the designer of its governing ideology of Juche, or strict self-reliance.
""It is hoped that the relevant parties will, with a calm and objective attitude, judge the nature of this incident and work to seek a proper solution to it,"" Xinhua said.
Hwang remained stranded in Seoul's heavily guarded consular compound after talks between South Korean and Chinese officials failed to resolve his fate depite signs that Pyongyang was willing to soften its hardline stance.
""Unfortunately, we have not made any real progress in our talks with China,"" South Korean Foreign Ministry spokesman Lee Kyu-hyung said of moving Hwang, who took refuge in the embassy last Wednesday.
Beijing has found itself an unwilling third party in the drama but has indicated it hopes the two Koreas can sort out the problem themselves. Officials in Seoul have said such a solution is impossible.
""We are telling the Chinese that there's no dialogue channel and it is impossible to resolve a sensitive defection issue in direct talks with the North,"" said a Foreign Ministry official, who asked not to be identified.
South Korean officials in Beijing said talks with Chinese officials were continuing but declined to comment on their content, saying only that a solution was likely take some time.
""But with North Korea changing its attitude, we hope there will be progress in our negotiations,"" the official said.
North Korean leader Kim Jong-il appeared to indicate Pyongyang's less hardline approach when he was quoted by state radio on Tuesday as saying ""cowards"" should get out.
Pyongyang said it would take strong action if it turned out Hwang was kidnapped but would fire him if he had turned traitor on his Stalinist homeland, a Foreign Ministry statement said.
China appeared nervous about Pyongyang's intentions, sending three armoured personnel carriers, a crowd control truck and armed police to guard the sedate streets around the mission while officials seek an end to the impasse.
",43
"A powerful earthquake struck northwest China on Saturday, killing at least two people and injuring three in an area where about 50 people died in a tremor in January, officials said.
The earthquake measuring 6.0 on the open-ended Richter scale jolted Jiashi county in the northwestern region of Xinjiang at 2.04 p.m. (0604 GMT), an official with the local office of the State Seismological Bureau said.
""It is now known that two people have died and two have been seriously injured,"" the official said. A seismological official in the regional capital of Urumqi said a total of three people had been injured.
The tremor badly frightened the district's residents, many of whom are sheep herders or cotton farmers, and sent people spilling out into the streets, said one official with a local television station.
""It was really strong. Our building and everything in it was rattling, the building shook really fiercely,"" the television official said.
""Everyone ran out of their houses in terror, but most went back inside when it stopped shaking,"" she said, adding that many buildings around her office building had cracked, though none had collapsed.
Many of the area's residents lived in earthen houses that are easily damaged by earthquakes and the casualty toll could rise, the Urumqi official said.
""We're not yet sure how many houses have collapsed. We only know initially that there were maybe more than 1,500 houses,"" the Jiashi official said. ""Houses that are a bit shoddy might be done for now and are not fit to live in,"" she said.
Authorities in Jiashi had started relief activities and aid teams from other parts of Xinjiang were preparing to move in to help, the official in Urumqi said.
""Relief activities are just getting under way,"" he said.
Government officials in Jiashi could not immediately be reached for comment.
The tremor was one of several aftershocks from an earthquake of 6.4 magnitude that caused widespread damage and killed up to 50 people in Jiashi on January 21, the Jiashi seismological official said.
""This one was much smaller than the last earthquake,"" she said, adding that an aftershock of 5.0 that jostled Jiashi last week had barely been felt.
That aftershock was from a tremor measuring 5.3 earlier in February, she said. No casualties were reported in either of the smaller quakes.
The January earthquake caused widespread damage and killed up to 50 people in the area and the district has since been rocked by hundreds of aftershocks. More aftershocks were expected, officials said.
",43
"For ordinary Chinese, the era of Deng Xiaoping was one in which the government lifted its heavy hand from their daily lives and gave them freedom to move house, change jobs, dress as they pleased and say what they wanted.
Much of the intimate and intrusive control built up under the late chairman Mao Zedong disappeared.
""Getting the government 'off the backs' of average Chinese, in order to free their essential commercial instincts, will be one of Deng's most enduring legacies,"" wrote sinologist David Shambaugh in ""Deng Xiaoping - Portrait of a Chinese Statesman"".
One of the most obvious revolutions was in fashion.
The ubiquitous blue and grey Mao suits that were a symbol of revolutionary purity have been replaced by a rainbow of colours and designs.
Mini-skirts, body-hugging T-shirts, high-heeled shoes and make-up are among the new looks -- fostered by almost racy fashion magazines -- that Chinese women have taken up.
In the years of Maoist fervour a woman risked public criticism, at the very least, if she looked anything but as plain and unexceptional as possible. Perms were banned.
On the cultural front, a diet of revolutionary television soap operas, propaganda movies and anodyne songs about loving the party was spiced up.
Television viewers were offered a taste of foreign soap operas. The U.S. show ""Baywatch"" with its scantily clad female life guards won a following, while home-made films touched on the taboo issue of sex and the stars began to kiss -- although nudity remained off-limits.
Shopping was transformed from a complicated chore in which permits or ration cards were required to buy anything from rice and cakes to a bicycle.
Under Deng, money bought almost anything.
Even housing, for decades one of the most tightly held of state monopolies, came on to the market.
Tens of millions of people began to travel, flooding into cities from the countryside in search of jobs and to set up businesses, living in houses they found for themselves and forcing the police to relax curbs on household registration.
After years of bans and red tape, people just went ahead and moved, throwing themselves on the marketplace to find a job and a home.
A law that banned unmarried couples from staying with each other overnight became a thing of the past.
The intrusive interrogation, and possible punishment, that accompanied a request for an abortion was replaced by a more pragmatic approach. Doctors didn't bother to ask questions.
Divorce became a personal matter and no longer an excuse for employers to call in sparring spouses for lengthy sessions to counsel against breaking up the marriage.
A Chinese unhappy with his work under Mao knew that his was a job for life. Under Deng, an employee could resign and find another job of his choice.
The personal file that charts the life of every Chinese still follows him from post to post. But now, a Chinese has the freedom to place the file with a personnel exchange centre, for a fee, thus expanding the freedom to swap jobs without begging permission from whoever holds the file.
A Chinese can crack jokes at the expense of once sacrosanct leaders without the risk of prison. Freedom to express an opinion exists -- at least in the privacy of one's own home.
But even under Deng these new freedoms have their limits.
One of Deng's slogans was ""seize with both hands"".
While one hand held economic liberalisation in its grasp, the other gripped political control, particularly intolerance of opposition as manifested in the crackdown on student-led protests in June 1989 that exposed the popular threat to the Communist Party's hold on power.
Deng's message was clear: stay out of politics, don't challenge the party and you can do pretty much as you want.
""Under Mao, the rule was: anything that is not permitted is forbidden. Under Deng, it was: anything that is not illegal is allowed,"" said one banker.
",43
"Talks to try to resolve the fate of a high-level Pyongyang defector who has taken refuge in Seoul's mission in China entered an eighth day in Beijing on Wednesday amid signs the North may let him go.
""Negotiations in various channels are going on,"" South Korean embassy spokesman Chang Moon Ik said of the crisis centred on North Korean ideologue, Hwang Jang-yop, who is marooned at Seoul's heavily-guarded consulate in Beijing.
Chang declined to reveal whether China, dragged as an unwilling third party into the latest crisis in the world's last Cold War standoff, was involved in the discussions.
He also hinted at doubts over reports that the Stalinist North was ready to abandon attempts to recover Hwang, ranked 24th in the hierarchy of the Stalinist state and a senior aide to top leader Kim Jong-il.
A major Japanese newspaper reported that a top North Korean official visiting Beijing had said Pyongyang would not fight the defection of Hwang, who sought refuge in Seoul's Beijing mission last Wednesday.
Kim Jong-u, head of North Korea's Overseas Economic Cooperation Committee, indicated at a meeting with international investment groups in Beijing that Pyongyang was ready to let Hwang go, the economic daily Nihon Keizai Shimbun said.
""That is what the government has decided,"" it quoted Kim as saying. ""The matter is already closed. He has already been dismissed.
""Betraying the people when the country is in great difficulty is an unforgiveable act. Because of his old age we will not pursue him,"" the newspaper quoted Kim as saying.
South Korean embassy officials said they were aware Kim Jong-u was in Beijing but could not confirm his statements.
""We don't know about his intentions or activities in Beijing,"" the embassy's Chang said.
Seoul officials were still analysing a statement released by Pyongyang's Foreign Ministry on Monday hinting that the enigmatic country was softening its hardline stance on the betrayal by one of its top ideologues, Chang said.
In a sign that Pyongyang could be coming to terms with the Hwang's loss, the Foreign Ministry had said North Korea would take strong action if Hwang was kidnapped, but that he would be fired if he had spurned his Stalinist homeland.
""It will take time to clarify the real meaning of the statement,"" Chang said.
Pyongyang officials had steadfastly maintained that the South abducted the scholarly architect of North Korea's governing ideology of Juche, or strict self-reliance. Seoul has dismissed the charge as preposterous.
The new tone on Hwang's departure appeared to be backed by comments by North Korean leader Kim Jong-il broadcast on state radio that ""cowards"" should get out.
However, China appeared nervous about Pyongyang's intentions, stationing three armoured personnel carriers in the sedate streets around the mission where Hwang is marooned.
A crowd control truck armed with water cannon and a bullet-proof car have been parked outside the mission for days while officials seek an end to the impasse.
Beijing, in a quandary over how to usher Hwang out of China without angering an old communist comrade or a new capitalist friend, has repeated its plea to both to act with restraint to resolve the affair.
",43
"Chinese authorities have imposed a curfew on a town in the restive northwestern Xinjiang region after at least 10 people were killed in a separatist Moslem riot last week, officials and local residents said on Monday.
At least 10 people were killed and many wounded when about 1,000 Moslem separatists of the Uighur ethnic minority rampaged through Yining last Wednesday, smashing cars, burning shops and beating up Han Chinese to protest against Beijing rule.
""Both Han Chinese and Uighurs were killed or injured,"" a propaganda official said by telephone from Yining in the Yili Kazakh Autonomous Prefecture near the border with Kazakhstan.
A Chinese source with close links to the government said the riot was among the most violent for many years in Xinjiang, where Turkic-speaking Uighurs are in the majority and ethnic Han Chinese make up just 38 percent of the population.
""A circular has been issued and broadcast on television ordering people not to go out after dark,"" said a Han resident.
""We don't go out after the sun sets. There is a curfew every night.""
""We don't dare to go out,"" said a Han businessman, adding that Yining was rocked by a similar, smaller riot in August.
Officials described the riot as a small incident fuelled by ""foreign hostile forces"" and refused to say how many people were killed or wounded. Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
However, the Chinese source said at least 10 people had been killed, including one police officer, and many wounded and arrested.
""One police officer was stabbed to death,"" said the source, who declined to be further identified.
The riot erupted after a Chinese policeman tried to arrest a Uighur, he said. ""The police tried to arrest a Uighur criminal suspect but the suspect and his family resisted arrest.""
""The scene attracted neighbours and onlookers and the crowd swelled to more than 1,000 and turned into rioting,"" he said.
""The police were called in and fired teargas to dispel the crowd.""
Rioters attacked ethnic Han Chinese on sight, smashed cars and set fire to shops, forcing local authorities to send out about 1,000 police and paramilitary People's Armed Police to quell the violence, the Han businessman said.
""Many people died,"" he said. ""Probably some 100 people were wounded.""
Hong Kong's Ming Pao newspaper said rioters set fire to the bodies of those killed.
The demonstrators, shouting anti-Chinese slogans, had marched on a government building and police had asked them to disperse, said the propaganda official in Yining, about 700 km (440 miles) northwest of the Xinjiang capital, Urumqi.
""There was a demonstration and they shouted slogans calling for Han Chinese to be driven out of Xinjiang and for Xinjiang to be split from the motherland,"" he said, adding that the rioters had ""used the pretext of religion"".
Xinjiang, considered by many Chinese as a wild frontier territory, has a long history of ethnic clashes between the native population of mainly Moslem ethnic minorities and the ruling Han Chinese.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after a series of violent clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
Last May, Beijing ordered tighter controls along Xinjiang's lengthy border to block the smuggling of weapons and subversive materials from nearby central Asian states.
",43
"U.S. and Chinese negotiators were locked in last-ditch talks on Saturday to try to hammer out a new textile accord and a deal on market access after extending by a day a deadline for a cross-Pacific trade war.
Chief U.S. textile negotiator Rita Hayes said she was confident of an agreement on Saturday in a fifth day of talks with officials at China's Ministry of Foreign Trade and Economic Cooperation.
""We felt like we had made tremendous progress and we are looking to complete negotiations today,"" she told Reuters before leaving for the ministry. ""You're always positive you can reach an agreement but you have to balance it out.""
Hayes and Chinese officials wrangled late into Friday night to try to iron out problems in renewing a 1994 textile accord and resolve a dispute over U.S. penalties on Chinese exports.
The United States had extended by a day the deadline for agreement on a new textile accord with China, Hayes said.
""I felt like it was important to extend it, the deadline, for one day... so we could get a fresh start this morning,"" Hayes said before resuming the eleventh-hour talks.
""We did not complete the agreement... so we felt like we'd have one extra day to complete it,"" she said. ""We didn't finish last night so we are re-evaluating where we are and will continue negotiations this morning.""
U.S. officials said they hoped for a deal by the end of Saturday.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Hayes said the U.S. side was still focusing on two major demands -- its market access package and a level playing field for the textile industry.
""The two main things that we have been consistently concerned about are the market access that China has to the United States... and also making sure that it is balanced, that we have a market access package from China,"" she said.
Disagreement over market access in China appeared to be a major stumbling block, industry representatives said earlier.
However, they said hopes for a deal were high, with Hayes and her team believed to be putting the finishing touches to the text of an agreement.
""I expect the reason for the talks not wrapping up is market access,"" said National Retail Federation vice-president Robert P. Hall said on Friday. ""This is an issue that is not traditionally part of apparel bilaterals.""
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the previous deadline of January 31, Hayes has said.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries.
",43
"Weeping crowds mourning the death of Deng Xiaoping swamped the hamlet where China's political patriarch was born, prompting authorities to send armed police to keep order, officials said on Friday.
Thousands of mourners flocked to Paifang village in Guang'an county in the southwestern province of Sichuan, some falling to their knees and weeping, said an official at Deng's former residence, now a museum.
""There are a lot of people crying, some of them young, but most of them are older,"" the official said by telephone.
""Some old people have knelt on the ground and wept. Their faces were covered in tears,"" he said.
Deng, architect of market-oriented reforms that transformed China into a rising superpower, passed away on Wednesday night aged 92.
Officials at Deng's old courtyard abode, which normally saw some 100 visitors a day, were unable to handle the flood of people that broke over the hamlet after Deng's death was announced early on Thursday.
""About 3,000 people came here yesterday,"" the official said. ""Today there will be more.""
""It's extremely crowded in here,"" he said. ""Anywhere there is room to stand is crowded with people.""
Officials sent the paramilitary People's Armed Police to maintain order at the museum, which had been converted into a makeshift shrine to Deng, he said.
""Although there are a lot of people, everything is orderly,"" the official said, adding that no incidents had been reported.
A large photograph of Deng hung over the courtyard entrance, crowned by a black banner with white characters reading ""Mourn Deng Xiaoping With Sorrow"", he said.
""One young fellow cried and said 'Without Deng there would not be the happy life of today',"" the official said.
Mourners, many wearing black armbands and holding white, handmade paper flowers, filed past the photograph, bowing or kneeling in front of a table heaped with cypress branches symbolising uprightness and longevity.
Some of those paying their last respects to Deng had come from distant Guangzhou and Shenzhen in the southern province of Guangdong, a booming region that owed its prosperity to his ambitious capitalistic reforms, another museum official said.
""Taxis, shops, hotels...and those who have come to Guang'an for business or as tourists are displaying white flowers to show their grief over Deng Xiaoping,"" the China News Service said.
The outpouring of sadness and reflection in Paifang contrasted with the bustling streets of Beijing, where flags flying at half-mast on the second day of official mourning were the only sign of a break from routine.
The Supreme People's Court, China's top judicial body, ordered all courts to ensure strict law enforcement and to safeguard social stability, the official Xinhua news agency said.
Political transitions in communist China in the past have been fraught with difficulty and the deaths of some previous senior leaders have triggered mass protests.
",43
"""Don't puff up an ox skin,"" Chinese say to braggarts, but in the Year of the Ox, China expects to have much to puff about.
""It is a good time to settle domestic affairs and put your house in order,"" says a horoscope in The Handbook of Chinese Horoscopes by Theodora Lau for the year that begins on Friday.
China's communist rulers have already started to make sure their house is in order for the arrival of the ox, but they will have to toil like farm beasts to push through their ambitious agenda.
China's leaders have already taken the theme that 1997 will be one of the most significant years in the history of the People's Republic -- founded by Chairman Mao Zedong in the Year of the Ox in 1949 -- as their signature tune for the year.
Hong Kong reverts to Chinese sovereignty at midnight on June 30 after more than 150 years of British colonial control, and a crucial Communist Party congress that will chart China's path for the next five years is to be held later in the year.
""The Year of the Ox will be an auspicious year,"" Foreign Minister Qian Qichen recently predicted.
He invoked bovine metaphors to try to soothe worries over the change of sovereignty in Hong Kong amid protests against Beijing's plans to roll back civil rights in the territory.
""With lowered heads we are working as hard as oxen,"" said Qian, who heads the committee handling Hong Kong's return.
Many Chinese bureaucrats have already been yoked into the task of preparing the enormous document that will be issued when China's most powerful officials gather late in the year for the five-yearly Communist Party congress that will reshuffle top jobs and set policy into the 21st century.
The new party line and who will get what job are matters for intense speculation among Chinese, but the horoscope book is unequivocal in its advice for the new year.
""Better stick to routine and support conservative policies,"" it says.
China analysts say it is unlikely that party chief and state president Jiang Zemin -- born in the Year of the Tiger -- would risk anything other than a cautious and conservative approach in a year that could see confirmation of his supremacy as paramount leader Deng Xiaoping passes from the scene.
For those born in the Year of the Ox, the arrival of one's birth animal can herald inauspicious events, one Chinese analyst said.
""To have the year of your birth come around is not always good luck,"" the Chinese analyst said.
The 1949 genesis of the communist state was an ox year, and officials have said political stability is key to ensuring Beijing can accomplish its goals without a hitch this year.
""For the rebels, it may be worthwhile to point out that although the stoical Ox is soft-spoken, he carries a big stick, and this is his year,"" says Theodora Lau's handbook.
Average Chinese may be more concerned about where the beef is with the dawning of the Year of the Ox, the second year in the 12-animal Chinese lunar cycle.
China's booming economy and greater exposure to Western culinary habits has fuelled demand for beef and milk among urban hip Chinese who grew up on a diet of pork.
Beef output has seen double-digit growth for several years and the number of dairy cows in Beijing has doubled to 60,000 from 10 years ago.
Business is booming at 100 outlets of U.S. hamburger giant McDonald's nationwide, with many Chinese parents likely to take their children for a burger as part of new year festivities.
One traditional Chinese delicacy not likely to be found on the fast-food chain's menu is ox penis, a dish said to confer upon the diner the bull's reputed sexual stamina.
",43
"China on Thursday hinted at ethnic unrest in Moslem Xinjiang as a senior official called for unity in the western region that was rocked by separatist bomb attacks last week.
""Xinjiang ...must further improve ethnic unity, protect social stability and do a better job of building up Xinjiang,"" the official People's Daily quoted Vice-Premier Li Lanqing as saying.
Li made no direct reference to the series of deadly bombings in Xinjiang's capital Urumqi on February 25, the day Beijing held funeral rites for late leader Deng Xiaoping.
Li's remarks to Xinjiang delegates at the National People's Congress, or parliament, were one of the few signs in the national media that the region had once again been shaken by ethnic unrest.
Three bombs hidden on public buses blew up within minutes of each other in Urumqi in an apparently coordinated attack. A fourth bomb failed to explode.
The Xinjiang Daily said on Wednesday that authorities had arrested several people suspected of planting the bombs and of selling detonators used in the attacks that killed nine people and wounded 74.
Police were interrogating the suspects and had launched a hunt for others still at large, the regional newspaper said.
Official media outside the region ignored the incident.
Parliament's vice-chairman Wang Hanbin on Thursday introduced revisions to China's criminal law setting stiffer punishment for stirring up ethnic hatred and making it a capital crime to use race or religion to endanger state security.
""People in some places are stirring up hatred among ethnic groups in an attempt to undermine unity among them,"" Wang told parliament.
In early February, an anti-Chinese riot erupted in Yining, about 50 km (31 miles) from Xinjiang's border with Kazakhstan. Chinese officials said nine people were killed.
The riot was one of the largest, most violent demonstrations for independence in Xinjiang since the 1949 communist takeover.
Moslem separatists say they want to set up an independent ""East Turkestan"" in Xinjiang, home to many Turkic-speaking people such as the Uighur ethnic minority.
Exiled Uighur nationalists in neighbouring Kazakhstan on Tuesday claimed responsibility for the latest attacks.
Beijing, unnerved by the spectre of turmoil along its borders, had put the Lanzhou Military Region, which oversees Xinjiang, on alert against further unrest, Hong Kong's Sing Tao Daily newspaper said on Wednesday.
",43
"A funeral cortege bearing the body of paramount leader Deng Xiaoping arrived at Beijing's Babaoshan cemetery for cremation on Monday as China began paying last respects to the man who transformed the nation.
The cortege was led by four black cars followed by a white van bedecked with black and yellow ribbons, the colours of mourning in China, that served as the hearse for Deng's body. The van was flanked by two Red Flag limousines.
Hundreds of armed police lined the streets along the 2.5 km (1.5 mile) route to the cemetery from a military hospital, where Deng's body has lain since he died last Wednesday aged 92.
The cortege of about 30 vehicles moved at a pace slightly faster than walking to allow thousands of mourners lining the route a last glimpse of the man who ruled China for 18 years.
""I have come to say goodbye to Deng Xiaoping,"" said one young man as the cavalcade moved past.
China has sought to present an image of stability and continuity in the sensitive aftermath of the passing of Deng, who transformed China by pursuing capitalist-style reforms while maintaining Communist Party control.
Since his death, authorities have heightened security around the capital and especially in Tiananmen Square, the vast central space where the country will commemorate Deng with official memorial rites at the Great Hall of the People on Tuesday.
No foreign dignitaries have been invited to the funeral. Deng's ashes will be scattered at sea.
Deng, an early opponent of the leadership cult around his predecessor the late Chairman Mao Zedong, made clear he wanted his death to be followed by more restrained mourning than the near-hysteria that followed Mao's demise in 1976.
Chinese sources said the military had been placed on alert to deal with potential ethnic unrest or any other threat to stability as China negotiates the delicate first days of political transition.
So far, the public has seen a display of unanimity at the top of China's communist power structure, with the supreme leader's hand-picked successor, Jiang Zemin, vowing to keep China on the road of economic reform.
But Chinese political analysts said cracks were appearing in the facade and Jiang, who holds the top state, party and military posts and is now the most powerful man in China, may be trying to throw his weight around too soon.
State media have publicised a request by Deng's family that his body not be put on public display, that his corneas be donated to an eye bank and that parts of his body be offered for medical dissection.
",43
"Chinese authorities have imposed a curfew on a town in the mainly Moslem region of northwestern Xinjiang after at least 10 people were killed in a separatist riot last week, officials and local residents said on Monday.
At least 10 people were killed and many wounded last Wednesday when 1,000 Moslem separatists of the Uighur ethnic minority rampaged through Yining, smashing cars, burning shops and beating up Han Chinese to protest against Beijing rule.
""Both Han Chinese and Uighurs were killed or injured,"" a propaganda official said by telephone from Yining in the Yili Kazakh Autonomous Prefecture near the border with Kazakhstan.
A Chinese source with close links to the government said the separatist riot was among the most violent for many years in Xinjiang, where Moslems are in the majority and ethnic Han Chinese make up just 38 percent of the population.
""A circular has been issued and broadcast on television ordering people not to go out after dark,"" said one local resident, a Han Chinese. ""We don't go out after the sun sets. There is a curfew every night.""
Local officials described the riot as a small incident fuelled by unidentified ""foreign hostile forces"" and refused to say how many people had been killed or injured.
However, the Chinese source said at least 10 people had been killed, including one police officer, and many wounded and arrested.
""One police officer was stabbed to death,"" said the source, who declined to be further identified.
The Hong Kong-based Ming Pao newspaper said rioters set fire to the bodies of those killed. About 100 were wounded, it said.
The rioters attacked ethnic Han Chinese on sight, smashed cars and set fire to shops, forcing local authorities to send out about 1,000 police and paramilitary People's Armed Police to quell the riot, one Han resident said.
""They said they wanted the Han out of Xinjiang,"" he said.
The riot erupted after a Chinese policeman tried to arrest a man of the ethnic Uighur minority, the Chinese source said.
""The police tried to arrest a Uighur criminal suspect but the suspect and his family resisted arrest,"" the source told Reuters by telephone.
""The scene attracted neighbours and onlookers and the crowd swelled to more than 1,000 and turned into rioting,"" he said. ""The police were called in and fired teargas to dispel the crowd.""
The demonstrators, shouting anti-Chinese slogans, had marched on a government building and police had asked them to disperse, said the propaganda official in Yining, about 700 km (440 miles) northwest of the Xinjiang capital, Urumqi.
""There was a demonstration and they shouted slogans calling for Han Chinese to be driven out of Xinjiang and for Xinjiang to be split from the motherland,"" he said, adding that the rioters had ""used the pretext of religion"".
The festival to mark the end of Ramadan, the Moslem month of fasting, fell at the weekend, overlapping with China's celebration of the biggest holiday in its calendar, the lunar new year, last Friday.
Xinjiang, considered by many Chinese a wild frontier territory, has a long history of ethnic clashes between the native population of mainly Moslem ethnic minorities and the ruling Han Chinese.
",43
"China on Tuesday played down fears over the health of paramount leader Deng Xiaoping that were raised after Communist Party chief Jiang Zemin cut short an out-of-town trip to visit the ailing patriarch.
""There has been no big change in Comrade Deng Xiaoping's health,"" Foreign Ministry spokesman Tang Guoqiang told a news briefing, but gave no details of what would constitute a major change in the health of the fragile 92-year-old patriach.
Tang declined to comment when asked if there had been a small change.
Officials of the State Council, or cabinet, were unable to give their usual official response to queries about Deng's health -- that he is as well as can be expected for a man of his age -- saying merely they were investigating the situation.
Chinese sources said on Monday that Communist Party chief Jiang Zemin and Premier Li Peng both cut short out-of-town trips last weekend to return to Beijing to visit Deng.
Officials declined to comment directly on a tide of rumours washing around the Chinese capital that Deng's physical condition has deteriorated or that he suffered a stroke.
In Taipei, the mass circulation United Daily News quoted the top policymaker on mainland affairs, Chang King-yuh, as describing Deng's condition as serious. Officials said they were closely monitoring the Chinese leader's health.
Party chief Jiang, who is also state president and head of the army, returned at the weekend, cutting short an unpublicised visit to the communist revolutionary base of Ganzhou in central Jiangxi province, said one Chinese source close to the party.
Premier Li Peng also flew back to Beijing at the weekend, abruptly curtailing a tour of the booming southern province of Guangdong because of Deng's deteriorating health, said the source, who asked not to be identified. Officials in Guangdong confirmed Li had left early.
The two leaders returned to Beijing where they visited Deng, the source said.
Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded central Beijing compound close to the Forbidden City, home for centuries to China's emperors.
Diplomats have said one barometer of Deng's health in China's highly-secretive political system is the travel of top leaders and close family members, with few considered willing to be caught out of town or abroad if Deng were close to death.
Vice-Premier Li Lanqing was abroad on a visit to Israel and Iran, and Defence Minister Chi Haotian was in the Philippines, where officials said he would not change his travel plans.
A Hong Kong newspaper reported at the weekend that the architect of China's sweeping economic reforms was rushed to hospital last Thursday after a huge stroke that followed an earlier, mild stroke.
Doctors said that if Deng's stroke had been a haemorrhage he could have died within hours, while if it was a thrombosis, or formation of a blood clot, he could last days or weeks.
Rumours about Deng's health surface periodically and often have a direct impact on China-related bourses, where Deng's demise is seen by some as a potentially destabilising factor.
Worries over Deng's health helped to push shares on Shanghai and Shenzhen stock exchanges sharply lower by their close on Tuesday and also rocked share prices in Taiwan and Hong Kong.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival when he appeared frail and faltering on a visit to Shanghai. He is now believed to be in fragile health and with fading lucidity.
Deng retired from his last official position in 1990, but China's elderly leaders exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up a power base.
",43
"Earthgrains Co, the baked goods concern spun off less than a year ago by beer brewer Anheuser-Busch Cos Inc, aims to expand geographically through acquisitions in a consolidating industry.
""How fast we do it will depend on how those properties become available and what we have to pay for them. But we are looking for geographic expansion through acquisitions,"" Chairman Barry Beracha said in an interview .
Earthgrains made a presentation at an analyst conference here.  
Earthgrains serves about 35 percent of the U.S. population with a presence in the Southeast, Midwest, Southwest and Far West.
The company, which was shed in March 1996, made a few acquisitions in late 1996 in Mississippi, West Virginia and Texas. Those deals helped expand Earthgrains' reach and took some excess capacity out of the baking industry.
""The key for us is to use the industry consolidation as a way to improve our profitability and improve shareholder value and not just get bigger,"" Beracha said.  
While geographic expansion through acquisitions will be the main driver of Earthgrains' future growth, Beracha said the company is also looking to increase revenues, including with new products.
The company, which is the third-largest producer of fresh baked goods with brands like IronKids, recently launched fresh bagels under its Earth Grains brand. It is also testing other products, all of which fall in the higher end of the bread and baked goods category.  
Earthgrains sees a greater willingness for consumers to pay more for products that promise better flavor or enhanced nutrition. Beracha pointed to recent sales data that showed per capita bread consumption in pounds is flat, but sales revenues are up.
Earthgrains, which also produces refrigerated dough in both the United States and Europe and has a European bakery operation, posted third quarter sales of $523 million. Adjusting for facilities and businesses that were closed or sold, sales rose 3.9 percent.
On the profit side, Earthgrains posted a dramatic turnaround, with third quarter earnings of $0.91 a share, compared with a year-ago loss of $0.91 a share before extraordinary items.
""In our first year...we've exceeded most people's expectations,"" Beracha said. ""The really good news behind that is there's still a long way to go.""
((Reuters Chicago Newsdesk  312-408-8787))
",36
"DeKalb Genetics Corp, which reported better-than-expected fiscal first quarter results, said Monday it expects higher margins and increased market share for its key U.S. and Canadian seed corn operations this year.
""We have already said that we will be $4 per unit in gross margins better in North American seed,"" Thomas Rauman, chief financial officer, said in an interview.  ""And we have stated we expect to sell more seed corn this year than last year.""  
International income, which nearly doubled to $5.9 million in the first quarter ended November 30, likely will be up by a double-digit percentage for all of fiscal 1997, Rauman added.
He declined to comment specifically about earnings for the year.  But analysts said DeKalb, the number two North American seed corn supplier with about an 11 percent market share, will see sharply higher earnings in fiscal 1997.
Dain Bosworth analyst Bonnie Wittenburg raised her fiscal 1997 earnings estimate to $1.42 a share from $1.35.  DeKalb earned $1.03 a share in fiscal 1996.  
In the first quarter, international results were ""ahead of schedule,"" Rauman said, enabling the company to post a profit of $0.12 a share, compared with a year-ago loss of $0.01.
NatWest Securities analyst Mark Wiltamuth said the consensus for the first quarter had been a loss of $0.02 a share.  The seed company typically loses money in the first quarter since it has no earnings then in North America.
""We feel very good about North American operations,"" Rauman said. ""Our seed orders are very strong this year.""
Early cash sales, a good indicator of future seed demand, are up this year from last year, Rauman added.  
Based on these early cash sales, Wittenburg said she believes DeKalb will at least meet its goal of increasing seed corn market share in the U.S. and Canada by one-half to one full share point.
DeKalb gained a full market share point last year. The top seed corn supplier in the U.S. and Canada is Pioneer Hi-Bred International Inc.
In its swine operations, in which DeKalb sells breeding stock to farmers, Rauman said the first quarter results were below last year, primarily due to higher feed costs.
Swine earnings for the year, however, are expected to be higher than last year, Rauman added.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Kmart Corp. said Monday it may merge its Builders Square stores with Waban Inc.'s HomeBase business in a deal that would create the nation's third largest home improvement chain.
The deal, which reflects consolidation in the highly competitive home improvement retail niche, would also complete Kmart's exit from specialty retailing.
""What this will do is complete (Kmart's) strategy of divesting non-core businesses,"" Michael Conn, Gruntal & Co. retail analyst, said.
Kmart said if a deal was completed, the Los Angeles-based investment group Leonard Green & Partners L.P. would hold a majority interest in the new company. Kmart, based in Troy, Mich., and Waban, headquartered in Natick, Mass., would each retain minority interests.
The proposed new company would have about 250 stores in 25 states with annual revenues of nearly $4 billion.
""We've been looking for the opportunity to combine Builders Square, a regional business, with another party...in a consolidating industry,"" Robert Burton, director of Kmart's investor relations, said.
Builders Square's stores are largely in the Midwest and central United States. HomeBase has 84 stores in 10 Western states.
""It makes perfect sense,"" First of Michigan analyst Daniel Poole said of the combination.
But he added that Home Depot, which operates retail stores for the do-it-yourself customer and home remodeler, still poses stiff competition for the new company that will be formed by combining Builders Square and HomeBase.
Marvin Rich, Kmart's executive vice president of strategic planning, finance and administration, said the proposed transaction was part of his firm's plan for the disposition of Builders Square.
He said Kmart intends to reclassify Builders Square as a ""discontinued operation"" in its year-end financial statements and record a net loss of $350 million to $400 million from discontinued operations.
Burton said the combination of Builders Square and HomeBase could be completed in Kmart's fiscal first quarter, which ends in April.
""While we are in the preliminary stages of this transaction, all parties are interested in the potential opportunity that could come from combining these similar home improvement operations,"" Rich said.
""Clearly, there is opportunity here to create a large, financially liquid home improvement business which can be competitive on a national basis,"" Rich said.
Waban, which operates BJ's Wholesale Clubs as well as the HomeBase chain, said that as a result of its talks with Kmart it was suspending plans to spin off the BJ's unit.
""This (Kmart) transaction has the potential to provide Waban and its shareholders greater value than our previously announced plan to separate our BJ's Wholesale Club and HomeBase divisions through a tax-free spin-off of BJ's,"" Waban President Herbert J. Zarkin said in a statement.
He said that if a sale of HomeBase was concluded, the company would use the proceeds to retire corporate debt and for general corporate purposes, including the repurchase of common stock.
Kmart previously shed its specialty retail concepts, selling off to the public several companies including Borders Group Inc, The Sports Authority Inc. and OfficeMax Inc.
In 1994, Leonard Green & Partners acquired PayLess Drug Stores Northwest Inc. from Kmart and merged it with Thrifty Corp. to form Thrifty Payless Inc. That chain was recently acquired by Rite Aid Corp.
K-Mart stock closed up 12.5 cents at $11.25 on the New York Stock Exchange.
",36
"McDonald's Corp. just turned up the heat in the fast-food business.
If franchisees go along with the plan, the world's largest restaurant chain will launch its biggest nationwide promotion ever, featuring 55-cent sandwiches, down from about $1.95 for a Big Mac, according to franchisee sources.
The plan is a bold stept to lure customers into McDonald's restaurants in the face of intense competition in the nation's giant fast-food industry.
McDonald's, which has more than 20,000 units worldwide and more than 12,000 in the United States, declined to give specifics on its plan. Spokesman Jack Daly said the Oak Brook, Ill.-based company hopes to launch a ""national value-price promotion.""
Pointing to a current promotion on Chicken McNugget sandwiches, which analysts said has helped McDonald's build sales this month, Daly said, ""It's in that same spirit.""
Charles Gonzales, a McDonald's franchisee with two units in the San Francisco area, said the nationwide promotion would feature a different sandwich for 55 cents each month when a customer buys french fries and a drink at the regular price.
The promotion, he added, is expected to start with the Big Mac hamburger, which is usually priced between $1.90 and $1.99, and will include breakfast sandwiches as well, he said.
But the promotion, to be presented to franchisees on Thursday, could spark a price war, analysts said. That prospect worried investors who drove fast-food stocks sharply lower.
""Everyone will have something for 55 cents. Now it's a zero-sum game again,"" said Piper Jaffray analyst Allan Hickok.
But Dean Witter analyst David Adelman said Wendy's International Inc. and Burger King, a unit of Grand Metropolitan Plc, may not match McDonald's price promotions right away.
""There are a lot of things (companies can do) to enhance value without directly cutting prices,"" Adelman said, including increasing the frequency of regular promotions.
Earlier, Burger King said it had no plans to change its prices. Wendy's officials were not immediately available.
McDonald's stock tumbled $2.625 to $44.625 and Wendy's slid $1.50 to $20.75 on the New York Stock Exchange, where the shares were among the most active issues. American shares of Britain's Grand Metropolitan Plc, which owns Burger King, fell $1 to $30.625, also on the NYSE.
Dean Witter's Adelman said it remained to be seen if the McDonald's plan will bring in more customers. ""We have much more jaded consumers today,"" he said, noting price cuts were not ""new news.""
Gonzales noted some franchisees oppose price promotions since they often do not boost customer traffic enough to offset lower sandwich prices. Moreover, regular customers may be tempted to order whatever sandwich is being offered that month instead of higher-priced menu items, he said.
Daly, however, said increased sales volume is expected to offset lower menu prices. ""Margins (are) a function of volume,"" he added.
Dick Adams, chairman of the Consortium, an independent association of McDonald's franchisees, said he expected the promotion plan to be approved.
""They (franchisees) are going to vote for it,"" Adams said. ""They are being told that it's the only plan that is available.""
He said McDonald's was expected to present the plan in a satellite broadcast to operators across the country on Thursday.
McDonald's has been looking to boost domestic sales, which have been pressured because of competition. In a December 1996 memo to owners and operators, Jack Greenberg, chairman of McDonald's U.S.A. said, ""We must re-energise and focus our U.S. marketing efforts and develop a national value proposition.""
",36
"Hershey Foods Corp, already the top U.S. producer of chocolate and other confections, is looking to establish a presence in the cookie and sweet snack market.
""It's a much bigger category,"" William Christ, chief financial officer, said of the sweet snack category, which reaps about $30 billion annually in U.S. sales.
By contrast, chocolate and other candy has about $11 billion in annual U.S. sales.  
To go after the sweet snack market, Christ said, Hershey will look for acquisitions and develop products on its own -- including some ""hybrids"" that combine cookies with its trademark candies.
For example, Hershey has launched Reese's Crunchy Cookie Peanut Butter Cup, which combines a chocolate cookie and a peanut butter cup.
""There's a fine line right now between candy bars and cookies,"" Christ said in an interview here, where the company presented at an analyst conference on Wednesday. ""Certainly there are areas that we're interested in"" within the sweet snack category.  
Outside the sweet category, the future is less certain for Hershey's dry pasta business, where it is the U.S. leader.
High flour prices coupled with intense price competition have nibbled away at profit margins, although the dry pasta business remains profitable, Christ said.
""There's no plan to say today that we're sellling our pasta operations,"" Christ said. ""As wheat prices go lower, it (dry pasta) could move closer to the growth category.""  
Christ said he believes Hershey's dry pasta operations, a business it has participated in for more than 30 years, has the lowest costs in the United States.
""It still performs well,"" he added. ""But it's not a chocolate performer. It doesn't have the same kind of margins.""
Pennsylvania-based Hershey, whose products include Hershey's chocolate bars and Twizzlers licorice candies, added to its leading presence in the U.S. candy market with the $437 million acquisition in late 1996 of Leaf North America.  
The Leaf acquisition launched Hershey into the top spot among U.S. non-chocolate confectionary companies. Leaf's, whose products are one-third chocolate and two-thirds non-chocolate, has brands that include Jolly Rancher hard candies.
As the Leaf integration continues, Christ said one of the issues that remains is whether Hershey will keep Leaf's manufacturing and distribution assets in the Midwest. Hershey's manufacturing and distribution are largely concentrated on the East and West Coasts.
Hershey previously said the Leaf acquisition will cause ""modest"" dilution in 1997, which Christ said will probably amount to $0.05 to $0.10 a share in 1997. Analysts currently peg Hershey's 1997 earnings at $2.25 to $2.30 a share in 1997, before dilution, he added.
((Reuters Chicago Newsdesk  312-408-8787))
",36
"Dean Foods Inc, which staged a turnaround in the fiscal third quarter with earnings more than double a year ago, expects to make an acquisition in the fourth quarter, potentially in the fluid milk business.
""We are probably talking to more companies today than ever (before),"" William McManaman, chief financial officer, said in a telephone interview.
Potential acquisition targets include fluid milk processors and or a small company that would complement Dean Foods' specialty segment, which makes coffee creamer, he said.  
McManaman said he expected Dean Foods to close at least one acquisition ""in the not too distant future,"" and likely in the current fiscal fourth quarter.
Acquisitions in the past have been a growth engine for Franklin Park, Ill.-based Dean Foods. Earlier, it posted better than expected third quarter earnings of $0.51 a share, up from $0.17 a year ago. Earnings reflected improvements in all of its segments, including dairy, vegetables, pickles and specialty foods.
Prudential Securities analyst John McMillin called the third quarter results a ""positive surprise.""  
""It's a company that's getting its act together,"" McMillin said.
Last year, Dean Foods undertook a strategic review of all its operations, which included closing or disposing of several plants, streamlining vegetable operations, and cutting costs.
""We've pulled back in a number of areas and ridded ourselves of a lot of poor performing pieces,"" McManaman said. ""Now we have to grow our cores a lot faster than in the past.""
For example, Dean Foods' pickle operations earned $7.8 million in the quarter, up from $4.9 million a year ago, although sales declined to $82.6 million from $88.0 million.  
""We eliminated a couple of...products where we were not making a lot of money and customers where we were not making a lot of money,"" McManaman said, actions that cut pickle sales but boosted earnings.
Vegetable sales in the quarter dropped to $143.4 million from $146.5 million, reflecting lower inventories and higher prices that trimmed some sales. But the division posted a profit of $8.5 million, benefiting from lower costs, compared with a year-ago loss of $547,000.
On the dairy side, earnings were $27.0 million, up from $13.5 million last year, while sales gained to $443.1 million from $409.2 million.
""Our volume in the fluid milk business was up over four percent in the quarter, and we didn't make any acquisitions,"" McManaman said. ""That's increased volume or market share in the markets in which we compete.""
Dean Foods shares were up 5/8 at 33-7/8 after trading as high as 34-3/8 earlier in the day.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Dayton Hudson Corp. said Friday its Mervyn's division is pulling out of Florida and Georgia and will close 10 other stores as part of its efforts to turn around that retail division.
The actions to pare a total of 35 outlets from Mervyn's chain of 300 stores are part of an ongoing consolidation of the over-saturated retail market.
""It's no secret that the retail industry is 'over-stored,'"" Pamela Rucker, a spokeswoman for the National Retail Federation, said. ""Consolidations are taking place ... Those retailers and those retail establishments that aren't performing are the ones that are going to close.""
Mervyn's 25 stores in Florida and Georgia are modestly profitable, but their operating margins were below the chain average, Dayton Hudson spokeswoman Susan Eich said.
""We did have high fixed costs in terms of distribution and advertising (in Florida and Georgia) and limited market penetration,"" she said. ""Given those two realities, it made more sense to exit those markets.""
Out of the 300 stores that Mervyn's has currently, 128 are based in California. Dayton Hudson currently has a total of 1,101 stores, including 736 Target discount department stores, its largest division.
Dayton said the actions at Mervyn's will result in a pretax charge of $134 million against its earnings for the fiscal fourth quarter, ending in late January.
It said the charge also covers previously announced plans to dispose of four Marshall Field's stores in Texas and close a Marshall Field's store in Park Forest, Ill. Marshall Field's is part of Dayton's Department Store Division.
The Mervyn's and Marshall Field's closings will cut a total of $505 million in annual revenue for Dayton and trim about $30 million in annual operating profit, Eich said. But that reduction in profit is expected to be largely offset by interest savings.
Dayton Hudson's operating profit for fiscal 1995 was $1 billion.
The company said Dillard Department Stores Inc. agreed to buy 10 of 18 Mervyn's locations in Florida and J.C. Penney Co. Inc. agreed to purchase three of seven Georgia locations.
The remaining properties are expected to be sold to a variety of other purchasers, it added.
Dayton said that, as a result of the real estate transactions, it expected to generate about $350 million in cash, which will be used to reduce debt and pursue growth opportunities such as opening more Target units.
Dayton has been trying to turn around its Mervyn's division and profitability has been above plan, Eich said. For the first nine months of fiscal 1996, Mervyn's operating profit was $157 million, up from $37 million a year ago.
But Mervyn's sales for the fiscal year-to-date up to Jan. 4 were down 4.3 percent, below the company's plan to have at least flat sales at stores opened for a year or more, Eich added. The company's fiscal year lasts until the end of January.
""I'm sure Florida and Georgia are the areas where they're missing plan the most,"" Merrill Lynch analyst Daniel Barry said.
Piper Jaffray analyst Saul Yaari said he has been looking for Dayton Hudson to shed all of its Mervyn's division, focusing the company more on its Target division.
""We're looking for a total disposition of Mervyn's over the next few years,"" he said.
However, Dayton Chairman Robert Ulrich said in a statement that all three retail divisions -- Target, Mervyn's and Department Stores -- are core to the company's overall corporate strategy.
""We remain committed to ... improving the performance of the corporation and believe that this real estate repositioning will help us strengthen our competitive position and achieve our long-term financial goals,"" Ulrich said.
Dayton Hudson shares were up $1.375 at $38.25 on the New York Stock Exchange in early afternoon trading.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Maytag Corp., boosted by its Hoover floor care line, said on Thursday its earnings for the fourth quarter more than doubled from a year ago as the company returned to profitability for the full year.
Maytag said Hoover posted double-digit gains in sales for the quarter and the year.
Looking ahead, however, Maytag said it saw a slow start for its earnings in 1997, as it shoulders marketing costs for several new products, including another Hoover upright floor cleaner, refrigerators and washing machines.
""Overall, we expect our earnings performance to start slowly but to pick up after mid-year, when much of the sales and earnings impact from these product introductions will begin to be realised,"" Chairman Leonard Hadley said in a statement.
The company said its 1996 profits were helped by lower raw material costs and four months of results from its joint venture partner in China, Hefei Rongshida, which is one of that country's leading washing machine manufacturers.
""The joint venture with RSD in China, which we announced in September 1996, also contributed positively to the corporation's results, and we continue to be very enthusiastic about that business opportunity,"" Hadley said.
For the fourth quarter, Newton, Iowa-based Maytag reported earnings of $35.3 million, or 36 cents a share. That compared with year-ago earnings of $16.6 million, or 16 cents a share, a year ago that included about $24 million in charges.
""It was a good quarter,"" said Natwest Securities analyst Susan Gallagher, adding that the results were in line with Wall Street expectations.
For the year, Maytag posted a profit of $136.4 million, or $1.34 a share, after $41.5 million in restructuring and debt charges. In 1995, Maytag had a net loss of $20.5 million, or 19 cents a share, after taking $186.8 million in charges or one-time losses.
Maytag's sales for the year of $3 billion were about equal with the 1995 level, which included $181.2 million from divested operations. Sales from ongoing operations, including new ventures, rose 5 percent in 1996, the company said.
Major appliance sales for the fourth quarter increased from a year ago, Maytag said. But major appliance sales for the full year were flat with 1995, with the Maytag and Jenn-Air premium brands selling well, while value-priced brands were off somewhat. Maytag's brands also include Magic Chef and Admiral.
Refrigeration sales in particular were weaker in 1996 due to competition and a sharp decline in private-label sales to national accounts.
Sales of Maytag-brand commercial laundry equipment increased during the year, along with the company's share of the commercial laundry market.
Maytag will launch several new products in 1996, including a new Hoover upright floor cleaner in the second half of the year. It will launch new top-mount refrigerators, with a freezer compartment on top, in February, followed by side-by-side models in late 1997 and early 1998.
Maytag also will launch a new horizontal axis washing machine in March, starting with equipment for commercial laundries. Horizontal axis washing machines, a technology that is popular in Europe, do not use an agitator.
""A lot of trains are pulling into the station at once,"" Maytag spokesman Tom Schwartz said of the company's schedule of new product launches.
Maytag said it expects its Dixie-Narco vending machine equipment business to improve its earnings in 1997. Dixie-Narco's operating results were break-even for the fourth quarter and operating profits declined 54 percent for the year to $10.7 million.
Maytag's stock was unchanged at $20 on the New York Stock Exchange in afternoon trading.
",36
"Ralcorp Holdings Inc, which cut itself in half through recent divestitures, is trying to slash costs to return its cereal business to profitability by next year while scouting for possible acquisitions.
""We want to continue to grow internally and opportunistically,"" Joe Micheletto, president, said in an interview here after making a presentation at an analysts conference.  
But for Ralcorp, which was spun off by Ralston Purina Co in March 1994, recent moves have continued to make the company smaller, not bigger.
Last month, it completed the sale of its branded cereal and snack business to General Mills Inc in a $570 million deal. That left Ralcorp with annual cereal sales of $274 million from private-label -- or grocery store brand -- cereal only, down from $660 million.
That sale also left Ralcorp with an infrastructure that is too large for the pared-back business.  
The plan now is to make cutbacks to return cereal to profitability in fiscal 1998, Micheletto said.
""For us to realize the full potential of our industry-leading position in private label cereal, we must first correct this imbalance in our cost structure,"" Micheletto said in the text of a speech given to analysts.
As previously reported, Ralcorp will take a $20 million charge in its second quarter related to staff cuts and other costs.  
The sale of the branded business, which included the Chex cereal line, was precipitated by intense price competition that put the squeeze on that line's profits.
""It was more valuable in someone else's hands than in ours,"" added Patrick Farrell, vice president of investor and public relations for Ralcorp.
Ralcorp also sold its ski resort operation in a $310 million deal to Vail Resorts Inc on January 3. Ralcorp holds a 22.7 percent stake in Vail, which the company may keep or sell, depending on what generates the most shareholder value, Micheletto said.
Debt-free and with an expected $15 million to $20 million in cash from accounts receivable, Ralcorp is looking to grow its remaining businesses, which also include private label crackers and cookies and Beech-Nut baby food, he added.
Ralcorp will be looking for acquisitions, likely in grain- based products, with an emphasis on private label products.
""We will strike when the iron is hot, if that's a year from now or six months or now or tomorrow,"" Micheletto said.
   ((Reuters Chicago Newsdesk  312-408-8787))
",36
"Kellogg Co, whose profits for 1996 are under pressure from price cuts and promotions, threw down the gauntlet that it will take the necessary steps to preserve its category leadership, which may mean further discounts, analysts said.
""They (Kellogg) might cut prices again or increase promotions again,"" said Donaldson, Lufkin and Jenrette analyst William Leach.
On Wednesday, Chairman Arnold Langbo said Kellogg will direct its efforts away from deep price promotion.  
""..However, we are unwilling to see our leadership position compromised,"" Langbo added in a statement.
Earlier this year, Kellogg, General Mills Inc and the Post Cereal division of Philip Morris Cos Inc cut retail prices in an effort to spark a sluggish category.
""On balance consumers want lower prices still,"" Smith Barney analyst David Rabinowitz said. ""They'll either get that in the form of lower list prices or extraordinarily high levels of promotion.""  
While many analysts had expected Kellogg to report earnings below last year's $3.48 a share, the magnitude of the potential decline did come as a surprise for some.
""Their guidance has been much different,"" added Leach, who had been projecting full-year earnings of $3.15 a share.
In July, analysts said Kellogg was still guiding them that earnings for 1996 would match 1995 levels.
According to First Call, the consensus for 1996 earnings has been $3.35 a share, with a range of $3.15 to $3.50.  
Kellogg said it now believes earnings for the third quarter will be about 20 percent below the $1.05 per share earned in the 1995 period. It added that while earnings per share will grow in the fourth quarter, results for the full year will be less than $3.48 a share.
Kellogg said its results for the third quarter were hurt by competitive promotions in the U.S. cereal category.
In a report issued in late August, BT Securities analyst John O'Neil said there had been a disparity in promotional spending among major cereal manufacturers. Post, he said, continued some discounting and General Mills maintained an Olympics-themed promotion while Kellogg reduced promotion efforts after cutting prices.
""The impact was a loss of market share"" for Kellogg, O'Neil wrote.
Reuters Chicago Newsdesk - 312-408-8787
",36
"The stock of Kellogg Co. fell Thursday after it warned about lower earnings this year and sparked concerns that it could resort to increased promotions to protect its leading market share, analysts said.
The leading producer in the $9 billion U.S. ready-to-eat cereal market said late Wednesday that its third-quarter earnings would be about 20 percent below the $1.05 a share it earned a year earlier, when it posted net income of $230 million.
Kellogg also said that, while it expected earnings will increase in the fourth quarter, its full-year profits for 1996 will be less than the $3.48 a year it earned in 1995. For all of 1995, Kellogg posted net income of $761.6 million before one-time charges.
Kellogg's stock was off $1.125 to $67.375 in afternoon trading on the New York Stock Exchange Thursday.
Kellogg made the announcement just after the close of trading on the NYSE Wednesday and in after-hours electronic trading its stock had fallen as low as $66.125.
The Battle Creek, Mich.-based company blamed competitive promotions by others in the cereal category for the decline in its third-quarter profits.
Earlier this year Kellogg and other leading cereal makers cut retail cereal prices. At the same time, Kellogg reduced promotional spending, such as offering special discounts in supermarkets.
Kellogg said it has cut back on promotional spending for more than two years.
""We will continue to direct our efforts away from deep price promotion; however, we are unwilling to see our leadership position comprised,"" Chairman Arnold Langbo said in a statement issued late Wednesday.
Analysts interpreted that as a warning that Kellogg might cut prices further or increase its own promotional spending if competitors continue their promotional practices in an effort to gain market share.
Kellogg accounts for nearly one-third of the U.S. cereal market, followed by General Mills Inc. with about one-quarter of U.S. sales. Third-place Post Cereals, including its Nabisco brands, accounts for about 17 percent of the U.S. market.
""It appears that Kellogg will be forced to deviate from its strategy of reducing promotions and will increase promotions to defend its market share,"" BT Securities analyst John O'Neil said.
On Thursday O'Neil reduced his estimate for Kellogg's 1996 earnings to $3.10 a share from $3.30 and his 1997 estimate to $3.60 a share from $3.70.
""If competitors do not scale back their promotional spending, (Kellogg) may reaccelerate its own spending or resort to another price cut,"" Goldman Sachs analyst Nomi Ghez wrote in a report.
Earlier this year Kellogg had predicted its earnings for 1996 would match the $3.48 a share it earned in 1995.
While many analysts at the time questioned Kellogg's ability to meet that target, the magnitude of the drop in the current earnings outlook took the market by surprise.
",36
"Quaker Oats Co. Thursday reported a profit for the fourth quarter, reversing a year-ago loss, but said its Snapple beverage business was unprofitable and continued to be a disappointment.
Quaker said Snapple's U.S. and Canadian sales dropped 8 percent in 1996, with volume down 11 percent. Sales of its six-flavor Diet Snapple line, however, rose 23 percent in 1996.
Chicago-based Quaker said it earned $18.1 million, or 12 cents a share, in the fourth quarter, compared with a loss of $47.8 million, or 36 cents a share, in the 1995 period. Excluding a $40.8 million pretax restructuring charge in the 1995 fourth quarter, Quaker posted a year-ago operating loss 18 cents a share.
Fourth quarter revenues were $1.06 billion, down 10 percent from $1.18 billion a year earlier, which included $90.3 million from divested businesses.
For the full year, Quaker said it earned $244 million, or $1.80 a share, which included a $113.4 million gain on divested business. In 1995, it earned $720 million, or $5.39 per share, with a $1.05 billion gain.
Sales last year were $5.20 billion, 13 percent below the previous year's $5.95 billion, which included $796.9 million from divested businesses.
""This was a rebound year in which our largest, value-driving businesses -- U.S. and Canadian foods and worldwide Gatorade -- increased their operating profits,"" Chairman William Smithburg said in a statement.
A $100 million cutback in advertising and marketing costs in 1996 also helped results, analysts added.
In a conference call, Smithburg said Quaker was committed to at least 10 percent real earnings growth in 1997. ""We're going to try like crazy to do even better than that,"" he said.
Quaker management again pledged to turn around Snapple, which it bought over two years ago for $1.8 billion.
""We need to stabilise (Snapple's) volume"" in 1997, Smithburg said. ""Our goal is to operate Snapple at cash positive in 1997.""
Cash positive means Snapple is expected to be profitable, excluding goodwill charges of about $50 million a year.
Quaker surprised some analysts by not taking a charge in the fourth quarter to reduce Snapple's value. Analysts had expected Quaker to take a large writedown for Snapple, potentially as high as $1 billion.
Smithburg declined to comment on speculation and rumours that Quaker was looking to sell Snapple, a fruit-flavored and iced tea beverage business, and its Gatorade sports drink.
He said Quaker's management continues to review steps to ""create value for shareholders,"" but declined to be specific.
Gatorade, Quaker's largest brand, had a strong year in 1996, Smithburg said, with sales volume rising 6 percent in the fourth quarter and 4 percent year-to-date.
Gatorade is launching this year a ""Frost"" line of Gatorade beverages that will feature a ""cooling taste,"" Smithburg said. ""The trade acceptance has been nothing short of terrific.""
Smithburg said the company's hot cereals business had a strong year, with sales volume up 9 percent.
Ready-to-eat cereals, such as Cap'n Crunch and Life, gained 3 percent in volume for 1996. The value-priced line of bagged cereals grew more than 40 percent in the year.
Quaker stock was down 62.5 cents at $35.875 in afternoon trading.
",36
"Breakfast cereal price wars may make consumers smile, but they're putting frowns on faces at some of the nation's largest cereal makers.
Industry analysts said Kellogg Co., the No. 1 cereal maker, is expected to report flat earnings for the latest quarter, while Ralcorp Holdings Inc., a big maker of store brand cereal, was likely to report lower earnings.
Price cuts and promotions in the $9 billion cereal business have hurt results at both companies, analysts said.
Kellogg, based in Battle Creek, Mich., has lost sales to competitors such as General Mills Inc., its biggest rival, which cut prices early last year. General Mills' earnings rose 7.5 percent in its latest quarter, on an increase in market share sparked partly by promotions.
The price cutting, started by Post Cereal, forced Kellogg, General Mills and others to follow suit. Post, a unit of Philip Morris Cos. Inc., does not report results separately.
Kellogg said in November that it would take steps to counter the price cuts and other promotions that eroded its market share to about 33 percent from 35 percent, analysts said.
While its counterattacks appear to be paying off -- analysts said Kellogg's market share seems to have risen a bit in December -- they are also pressuring earnings.
""(Kellogg's) domestic earnings are clearly going to be down on lower sales and some increase in marketing spending,"" said Goldman Sachs analyst Nomi Ghez.
In October Kellogg said earnings fell 31 percent in the third quarter, hurt by promotions by rivals. It pledged at the time that earnings growth would resume in the fourth quarter, analysts said, but most are forecasting flat or slightly lower results. For the 1995 fourth quarter, Kellogg earned $166.7 million, or 77 cents a share.
Kellogg also moved to diversify its breakfast food business last month when it bought Lender's Bagels from Kraft Foods Inc. for $455 million.
Quaker Oats Co., a maker of cereals and other food products, is expected to report an operating profit for the fourth quarter, compared with a loss a year ago. But Quaker is also expected to take a charge in the quarter to write down the value of its Snapple beverage business.
""The issue for Quaker is how big of a charge they take for Snapple,"" said BT Securities analyst John O'Neil.
Quaker said in a recent Securities and Exchange Commission filing that it was reviewing a possible writeoff related to Snapple. A Quaker spokesman declined to comment on the possibility of a charge in the fourth quarter.
Among other food companies, Sara Lee Corp. is expected to report a strong increase in earnings, with the biggest improvement in its meat and bakery division, said Donaldson, Lufkin and Jenrette analyst William Leach.
Analysts said CPC International Inc., which makes Hellman's mayonnaise, Mazola corn oil, Skippy peanut butter and Thomas' English muffins, would report a smaller than normal rise in quarterly earnings, due to high corn costs. Corn refining accounts for 15 percent of CPC's sales, which were $8.4 billion in 1995.
",36
"Tony the Tiger is going global -- and he's adding chocolate-flavored Frosted Flakes in the United States.
Kellogg Co., the leading U.S. cereal maker, said Tuesday it will launch Frosted Flakes in the world's two most populous countries -- China and India -- and also in Thailand, starting this month.
This will expand international marketing for Frosted Flakes, the top-selling U.S. cereal backed by Kellogg's Tony the Tiger emblem. Frosted Flakes are already sold in markets such as Europe, Latin America, Australia and South Africa.
Battle Creek, Mich.-based Kellogg, which accounts for about one-third of the $9 billion U.S. cereal market, also said it will begin selling a chocolate-flavored version of Frosted Flakes -- Cocoa Frosted Flakes -- in the United States next month.
Cocoa Frosted Flakes are fat-free and cholestrol-free, the company said.
Frosted Flakes is the industry's top-selling cereal in the United States and ranks second worldwide behind Kellogg's Corn Flakes, Kellogg spokesman Anthony Hebron said.
The new markets for Frosted Flakes reflect Kellogg's efforts to expand its international cereal business, which has been growing at a faster rate than its U.S. operations, analysts said.
Donaldson, Lufkin and Jenrette analyst William Leach said he estimated Kellogg's international cereal sales grew by about 4 percent in 1996, a rate it is expected to match in 1997.
By contrast, Kellogg's domestic volume was down about 4 percent in 1996, Leach added.
In the United States, Cocoa Frosted Flakes cereal is part of Kellogg's efforts to jump-start sluggish sales and volume growth.
""One product by itself doesn't do it,"" Schroder Wertheim analyst Robert Cummins said of Kellogg's efforts in the United States. ""You have to have a steady stream of new products.""
Late last year, Kellogg launched Honey Crunch Corn Flakes, a new variety of its long-standing Corn Flakes cereal. By late 1996, Honey Crunch Corn Flakes held about a 1.2 percent market share, the company said.
Internationally, nations like China, with a population of 1.2 billion, offer long-term sales potential for Kellogg's. But Leach cautioned the Frosted Flakes launch will not have an immediate impact on Kellogg's earnings since there is not a widely established cereal market in some nations.
""Cereal is a breakfast habit that is not common to all humanity,"" Leach added.
Starting Wednesday in China, Kellogg will introduce Tony's Flakes, a reference to Frosted Flakes' Tony the Tiger.
The cereal will be launched in Thailand, which has a population of more than 60 million, under the name Kellogg Corn Frosties on March 25, when a new plant is expected to be opened there.
In India, with a population of nearly 1 billion, the product will be introduced later this year as Kellogg's Frosties.
Kellogg has been selling Corn Flakes, Rice Flakes and Wheat Flakes in China since 1995. In India, it has sold Corn Flakes, Wheat Flakes and Basmati Flakes, made from a type of rice, since 1994.
Battle Creek, Mich.-based Kellogg also plans additional marketing support for Frosted Flakes in several countries outside the United States.
""Our cereal business is showing good growth in high-potential growth markets in Asia, Latin America and southern Europe,"" Hebron of Kellogg said. ""And, in more established markets like Australia, Canada and Mexico.
Kellogg stock dropped 75 cents to $68.25 in consolidated afternoon trading on the New York Stock Exchange.
",36
"General Mills Inc., the maker of Cheerios and Wheaties breakfast cereals, Wednesday reported higher earnings for its fiscal third quarter, despite a drop in total sales and domestic cereal volume.
Looking ahead, Minneapolis-based General Mills said some of its product lines, including cereal, have continued to see softer sales. Analysts said that may mean the company may post a smaller increase in earnings for fiscal 1997, which ends in May, than originally expected.
""We had weak volume in January and February. Some of that softness has extended into the first half of March,"" Eric Larson, senior vice president, investor relations, said. ""We need to get that turned around.""
General Mills, which also makes Betty Crocker cake mixes and Hamburger Helper, earned $122.8 million, or 78 cents a share, in the third quarter ended Feb. 23. That was up from year-earlier earnings of $116.3 million, or 73 cents a share. Sales dropped to $1.29 billion from $1.31 billion.
Third quarter earnings were in line with analysts' estimates.
General Mills said its domestic retail packaged food volume declined 1 percent in the third quarter, and cereal unit volume was down 3 percent in the quarter.
For the first nine months of the year, however, General Mill's cereal sales volume was up 4 percent, outpacing the industry's 1 percent growth.
Excluding its recent acquisition of branded cereals from Ralcorp Holdings Inc., including the Chex line, General Mills' cereal market share for the first nine months was up nearly a percentage point to 24 percent.
General Mills is the second-largest U.S. cereal market behind Kellogg Co., which accounts for about one-third of the domestic cereal market.
Schroder Wertheim managing director Robert Cummins said that, despite General Mill's year-to-date gains, the total U.S. cereal market has declined for several months, including in early March.
""They talk about this being a transition period for consumers,"" Cummins said. ""(Cereal) prices on the shelf are lower, but there are fewer promotions.""
After a ""very quiet third quarter"" in terms of marketing, Larson said, General Mills will roll out new promotions in the fourth quarter that will tie-in with the movie, ""The Lost World: Jurassic Park.""
Analysts said the company indicated its earnings for fiscal 1997 would beat the $476.4 million, or $3 a share, it earned in fiscal 1996. But earnings likely will not be as high as the $3.10 a share that many analysts had been predicting.
To meet the $3.10 estimate, Larson said General Mills would have to see total domestic sales volume growth above the 4 percent increase it posted in the first nine months of the year.
""We need to see volume slightly above our nine-month trend line rate to achieve the estimate,"" he added.
Analysts added that the company indicated it was more comfortable with earnings estimates around $3.05 a share.
""(Fiscal 1997 earnings of) $3.10 would be a best-case scenario,"" BT Securities analyst John O'Neil said. ""For that to happen, things would have to turn around, and you can't always predict a turnaround."" O'Neil cut his fiscal 1997 earnings estimate to $3.07 a share from $3.10.
General Mills stock was down $1.75 at $63 in afternoon trading on the New York Stock Exchange.
",36
"General Mills Inc said Wednesday it expects a recovery in sales volume in the $9.0 billion U.S. ready-to-eat cereal market, in which it is the number two player.
""The fundamentals of the category are encouraging now,"" General Mills Chairman Stephen Sanger said in an interview.
In the past 12 months, the total U.S. cereal category saw a 1.5 percent rise in physical sales volume, compared with growth of only 0.5 percent in the prior 12 months.  
While Sanger declined to predict total cereal growth in the near term, he said he believes that domestic volume gains will ""move back toward that long-term trend three percent category growth.""
Despite the recent slump in overall cereal sales, the U.S. ready-to-eat cereal market's per capita consumption has grown to 11.4 pounds in 1996 from 9.3 pounds in 1986, Sanger said.
While facing competition from other foods, cereal's share of the  breakfast market grew over the past five years to nearly 30 percent from 28.8 percent, he added.  
To combat sluggish cereal sales in prior years, U.S. cereal makers have cut prices and stepped up new product launches. Looking ahead, new products will continue to play an important roll in boosting company sales and expanding the U.S. cereal category, Sanger added.
After launching Betty Crocker Dutch Apple and Cinnamon Streusel cereals last fall, General Mills will introduce one more cereal by the end of fiscal 1997 in May.
General Mills said its cereals that are two years old or less, including its Frosted Cheerios, have a 3.4 percent market share.  
After its recently completed acquisition of branded cereals from Ralcorp Holdings Inc, General Mills gained about 2.5 percentage points of domestic market share, for a total of 27 percent.
While that deal narrowed the gap between General Mills and market leader Kellogg Co, which accounts for roughly one-third of the U.S. cereal market, Sanger said he has no plans to make a run for the top spot.
""We're not fixated on somebody else's (market) share,"" Sanger said. ""They (Kellogg) have been a strong market leader...and they still are. There's every likelihood that their market share will grow in the future with the new products that they're bringing out."" 
To boost sales of all its products -- ranging from cereal to Betty Crocker baking mixes and Hamburger Helper skillet dinner mixes -- General Mills will launch a marketing tie-in in its fiscal fourth quarter with the release of ""The Lost World"" movie.
General Mills said promotions will involve 45 brands in the United States and Canada. Cereal Partners Worldwide, General Mills' European cereal venture with Nestle SA, will tie into the promotion, which will include a special ""Jurassic Park Crunch"" cereal, brownies with ""dinosaur footprints"" and dinosaur macaroni shapes in Hamburger Helper.
 ((Chicago newsdesk, 312-408-8787))
",36
"CPC International Inc. said Wednesday it will spin off its corn refining operations to shareholders so it can concentrate on producing consumer foods like Hellmann's mayonnaise, Mazola corn oil and Skippy peanut butter.
""The fit of those businesses (corn refining and packaged foods) is not as good as it was,"" CPC Chairman C.R. Shoemate said in a telephone interview. ""Going forward they will be able to grow ... faster by focusing on the key drivers of each of those businesses.""
The stock market applauded the move, sending CPC's shares up $2 to $84 on the New York Stock Exchange in afternoon trading.
""I think it's a good strategic move,"" Donaldson, Lufkin and Jenrette analyst William Leach said.
CPC's corn refining operations yield high-fructose corn syrup, a sweetener; corn starch; dextrose, a food ingredient and sweetener, and traditional corn syrup.
Although corn refining was profitable in 1996, that business was a drag on CPC's overall earnings due to dramatic swings in the corn market, the company said.
CPC reported net income of $580 million last year, up from $539 million a year ago.
After shedding the corn business, CPC will concentrate on its global packaged food, bakery and food service businesses, which analysts called among the best in the industry.
""I think that the company will finally come into its own in terms of recognition of the quality and growth potential that it has,"" Schroder Wertheim analyst Robert Cummins said.
After the spin-off, CPC will be a global branded packaged food company with grocery products, baking and food service operations. Sales from these businesses amounted to $8.5 billion in 1996.
CPC's branded grocery and foodservice businesses operate in 62 countries worldwide. CPC has a large and profitable packaged food business in North America, although 60 percent of its total packaged food business is in Europe, Latin America, Asia and Africa.
The spun-off company will be the third-largest corn refiner worldwide with sales of $1.5 billion, excluding non-consolidated joint ventures.
About two-thirds of the corn refining operations are in the United States and roughly one-third in Latin America, where it has about a 60 percent market share.
In North America, CPC's corn refining business is the leading producer of dextrose and corn starch, Shoemate said.
Corn refining joint ventures and technology agreements in Asia and Africa are small in terms of overall profits currently. ""But they are great starter positions for the longer term,"" Shoemate said.
Shoemate said the spin-off is expected to be completed in about 10 months, pending approvals, including a ruling by the Internal Revenue Service that it will be tax-free to CPC and its shareholders.
CPC, based in Englewood Cliffs, N.J., said it did not expect to assign any of its existing debt to the new company.
However, it may launch an initial public offering of stock in the new company before distributing the new shares to existing shareholders, it said.
Konrad Schlatter, currently senior vice president and chief financial officer of CPC International, will be chairman and chief executive of the new corn refining company.
Samuel Scott will be president and chief operating officer of the new company and will be responsible for the day-to-day operations of the business.
",36
"McDonald's Corp. just turned up the heat in the fast-food business.
If franchisees go along with the plan, the world's largest restaurant chain will launch its biggest nationwide promotion ever, featuring 55-cent sandwiches, down from about $1.95 for a Big Mac, according to franchisee sources.
The plan is a bold step to lure customers into McDonald's restaurants in the face of intense competition in the nation's $100 billion fast-food business, industry analysts said.
McDonald's, which has more than 20,000 units worldwide and more than 12,000 in the United States, declined to give specifics on its plan. Spokesman Jack Daly said the Oak Brook, Ill.-based company hopes to launch a ""national value-price promotion.""
Pointing to a current promotion on Chicken McNugget sandwiches, which analysts said has helped McDonald's build sales this month, Daly said, ""It's in that same spirit.""
Charles Gonzales, a McDonald's franchisee with two units in the San Francisco area, said the nationwide promotion would feature a different sandwich for 55 cents each month when a customer buys french fries and a drink at the regular price.
The promotion, he added, is expected to start with the Big Mac hamburger, which is usually priced between $1.90 and $1.99, and will include breakfast sandwiches as well, he said.
But the promotion, to be presented to franchisees on Thursday, could spark a price war, analysts said. That prospect worried investors who drove fast-food stocks sharply lower.
""Everyone will have something for 55 cents. Now it's a zero-sum game again,"" said Piper Jaffray analyst Allan Hickok.
But Dean Witter analyst David Adelman said Wendy's International Inc. and Burger King, a unit of Grand Metropolitan Plc, may not match McDonald's price promotions right away.
""There are a lot of things (companies can do) to enhance value without directly cutting prices,"" Adelman said, including increasing the frequency of regular promotions.
Earlier, Burger King said it had no plans to change its prices. Wendy's officials were not immediately available.
McDonald's stock tumbled $2.625 to $44.625 and Wendy's slid $1.50 to $20.75 on the New York Stock Exchange, where the shares were among the most active issues. American shares of Britain's Grand Metropolitan Plc, which owns Burger King, fell $1 to $30.625, also on the NYSE.
Dean Witter's Adelman said it remained to be seen if the McDonald's plan will bring in more customers. ""We have much more jaded consumers today,"" he said, noting price cuts were not ""new news.""
Gonzales noted some franchisees oppose price promotions since they often do not boost customer traffic enough to offset lower sandwich prices. Moreover, regular customers may be tempted to order whatever sandwich is being offered that month instead of higher-priced menu items, he said.
Daly, however, said increased sales volume is expected to offset lower menu prices. ""Margins (are) a function of volume,"" he added.
Dick Adams, chairman of the Consortium, an independent association of McDonald's franchisees, said he expected the promotion plan to be approved.
""They (franchisees) are going to vote for it,"" Adams said. ""They are being told that it's the only plan that is available.""
He said McDonald's was expected to present the plan in a satellite broadcast to operators across the country on Thursday.
McDonald's has been looking to boost domestic sales, which have been pressured because of competition. In a December 1996 memo to owners and operators, Jack Greenberg, chairman of McDonald's U.S.A. said, ""We must re-energise and focus our U.S. marketing efforts and develop a national value proposition.""
",36
"Michael Foods Inc said Wednesday it is considering options for its potato operations, including possibly divesting the business that includes frozen french fries and refrigerated potatoes.
""We're going to be looking over the next couple of quarters as to what we're going to do with that total potato business,"" Gregg Ostrander, president, said in an interview here.  
The options being explored by the company, whose largest business is extended shelf-life and processed eggs, include potentially divesting the entire potato operation.
""That's one of the things we're going to explore,"" Ostrander said. ""We're going through a lot of options now.""
He said no decisions have been made as yet.
Michael Foods was among the companies presenting at an analyst conference here. Its potato product business accounted for 12 percent of the company's operating earnings in 1995.  
Minnesota-based Michael Foods is currently ""number seven or eight"" in frozen french fries, which continues to operate in the red, Ostrander said.
Its refrigerated potato product business is the leader in both the retail and food service categories, and continues to grow, but at a slower rate than previously, he said.
The company posted an operating profit in 1995 of $35.2 million and net earnings of $17.6 million.
Michael Foods continues to grow its egg products business, which accounted for 59 percent of its operating earnings in 1995. The company will soon close on its acquisition of Papetti's Hygrade Egg Products Inc, extending its product line in food service and retail liquid eggs.
While Papetti's and Michal Foods egg businesses will be run separately, Ostrander said he sees the potential to reap $8 million to $15 million in synergies, starting in the fourth quarter of this year.
The Papetti's deal will give Michael Foods access to East Coast egg processing operations, complementing its existing Midwest operations.
((Reuters Chicago Newsdesk  312-408-8787))
",36
"The stock of Kellogg Co. fell Thursday after it warned about lower earnings this year and sparked concerns that it could resort to increased promotions to protect its leading market share, analysts said.
Kellogg's stock fell $1.125 to $67.375 in afternoon trading on the New York Stock Exchange.
The leading producer in the $9 billion U.S. ready-to-eat cereal market said late Wednesday that its third-quarter earnings would be about 20 percent below the $1.05 a share it earned a year earlier, when it posted net income of $230 million.
Kellogg also said that, while it expected earnings will increase in the fourth quarter, its full-year profits for 1996 will be less than the $3.48 a year it earned in 1995. For all of 1995, Kellogg posted net income of $761.6 million before one-time charges.
The Battle Creek, Mich.-based company blamed competitive promotions by others in the cereal category for the decline in its third-quarter profits.
Earlier this year Kellogg and other leading cereal makers cut retail cereal prices. At the same time, Kellogg reduced promotional spending, such as offering special discounts in supermarkets.
Kellogg said it has cut back on promotional spending for more than two years.
""We will continue to direct our efforts away from deep price promotion; however, we are unwilling to see our leadership position comprised,"" Chairman Arnold Langbo said in a statement issued late Wednesday.
Analysts interpreted that as a warning that Kellogg might cut prices further or increase its own promotional spending if competitors continue their promotional practices in an effort to gain market share.
Kellogg accounts for nearly one-third of the U.S. cereal market, followed by General Mills Inc. with about one-quarter of U.S. sales. Third-place Post Cereals, including its Nabisco brands, accounts for about 17 percent of the U.S. market.
""It appears that Kellogg will be forced to deviate from its strategy of reducing promotions and will increase promotions to defend its market share,"" BT Securities analyst John O'Neil said.
On Thursday O'Neil reduced his estimate for Kellogg's 1996 earnings to $3.10 a share from $3.30 and his 1997 estimate to $3.60 a share from $3.70.
""If competitors do not scale back their promotional spending, (Kellogg) may reaccelerate its own spending or resort to another price cut,"" Goldman Sachs analyst Nomi Ghez wrote in a report.
Earlier this year Kellogg had predicted its earnings for 1996 would match the $3.48 a share it earned in 1995.
While many analysts at the time questioned Kellogg's ability to meet that target, the magnitude of the drop in the current earnings outlook took the market by surprise.
",36
"Tate & Lyle Plc said Tuesday its U.S. subsidiary A.E. Staley continues to face reduced profit margins for high fructose corn syrup, a sweetener.
Fructose contract prices for 1997, which largely have been set, are lower than a year ago, as are corn costs, said Larry Pillard, chief executive of London-based Tate & Lyle.
""On a margin basis (factoring out corn cost changes) they are maybe slightly lower,"" Pillard told Reuters at an analysts' conference here.  
Pillard blamed lower margins on overcapacity in the U.S. fructose industry. Staley's output accounts for a little over 20 percent of total U.S. fructose production.
To balance the softness in fructose margins, Staley has shifted some output to other corn-based products, including ethanol, starch used by the paper industry, and specialty food starches.  
""In addition to that, we've continued our very aggressive cost-reduction initiatives at Staley,"" Pillard said. ""Yes, we'd like higher margins in fructose. But we're not completely dissatisfied with Staley. We're still very bullish on the corn refining business.""
He added that U.S. fructose demand continues to grow by four to five percent a year.
Pillard acknowledged that ""in a worst case scenario"" it may be another two or three years before demand in the U.S. catches up with fructose supplies.  
But one promising variable is the potential for greater demand for fructose in Mexico.
Beyond fructose, Tate & Lyle is investing in number of value-added products, including a lactic acid plant it likely will build in the United States and a citric acid joint venture in India.
Tate & Lyle, as a producer of sweeteners and starches, is already expanding its global presence, with investments in developing markets.
Those investments, which have totaled $250 million over the past few years and spread over four continents -- is projected to generate a return on invesment of over 20 percent after five years, according to Simon Gifford, group finance director for Tate & Lyle.
Investments have been made in Mexico, central and eastern Europe, Asia and Africa.
Tate & Lyle also is building a world-scale starch plant in northern France, which will use wheat as a raw material.
""That will be completed by the end of this calendar year,"" Gifford said. ""We will start getting returns after commissioning in the second half of next year.""
	 ((Chicago newsdesk 312 408-8787))
",36
"Bagel sales continue to heat up as more restaurants open across the United States, but the number of companies that will be doing most of the baking is expected to narrow.
""It's a consolidating category,"" said Morgan Stanley analyst Howard Penney.
For now, much of that consolidation in the $2.3 billion industry will involve smaller, regional chains being acquired by the larger, publicly traded firms.
Later on, access to capital is expected to be a key factor in determining which players emerge as dominant, analysts said. That competition appears to favor, in particular, the No. 2 chain, Einstein/Noah Bagel Corp..
""If you were to handicap the race to supremacy on that factor alone (access to capital), it would be hard not to arrive at the conclusion that Einstein is going to be the dominant chain,"" Piper Jaffray analyst Allan Hickok said.
Einstein/Noah Bagels currently has more than 315 stores in 27 states and the District of Columbia.
""We're now No. 2 in bagels but expect to be No. 1 by the end of 1997,"" said Einstein spokesman Gary Gerdemann, adding the company planned to open 300 to 350 stores this year.
Bruegger's Bagel Bakeries, a unit of Quality Dining Inc., now ranks No. 1 with 450 units in 37 states. It plans to open a ""triple-digit number"" of new stores this year, said Chris Romoser, a spokesman for Bruegger's. He did not give an exact figure.
""The category is growing by leaps and bounds,"" Romoser said. ""We believe there is a lot more room for growth.""
Jack Grumet, chairman of Manhattan Bagel Co., a chain of about 300 units, said much of that growth comes as small, independent units are gobbled up by the larger players.
""We see a lot of consolidation,"" Grumet said. ""There's a lot of fear in the minds of the smaller guys with two, four, six, eight stores"" as the large chains survey their markets.
He added that Manhattan Bagel, which plans to add 120 to 160 units this year through franchisees or area developers, gets offers from independents to purchase their stores.
The expanding industry reflects America's growing appetite for bagels, which date back to the late 17th century.
Sales in 1996 were an estimated $2.3 billion, up from $1.6 billion in 1995 and only $429 million in 1993, according to the Independent Bakers Association, citing industry figures.
""It's really a substitute for bread and for doughnuts,"" said Michael Evans, chairman of BAB Holdings Inc., which operates Big Apple Bagels.
Evans said BAB hopes open 70 to 80 units this year, expanding its network of 162 stores.
Bagel sales include products sold in grocery stores, which in the aggregate are still the leading outlet. To tap into the popularity of the bagel, breakfast cereal giant Kellogg Co. last year bought Lender's Bagels, a line of frozen grocery store bagels.
Eateries that bake fresh bagels, however, say they do not compete with the grocery stores.
""They are two separate outlets,"" Evans said, adding consumers often acquire a taste for bagels at the grocery store and then discover hot-from-the-oven products at restaurant chains.
""Lender's has done us a great favor,"" Evans said. ""It has educated the consumer...""
",36
"Lower U.S. retail prices and tighter profit margins have raised the performance bar for cereal brands, with those that fail to capture adequate market share quickly losing a spot on the grocery shelf.
""The cereal aisle is one of the most competitive aisles in the grocery store. As a result, to remain on the shelves, products have to meet increasingly high expectations,"" said Joseph Rutledge, a spokesman for General Mills Inc, the second largest U.S. cereal marker.  
While cutting slow-selling products is a long-standing marketing practice, analysts and industry sources said the process has intensified.
""There is such intense scrunity on the grocery shelf -- what's moving and how fast is it selling -- that you are going to see a tremendous culling out of all these cereals,"" said Anne Tynion, president of North River Strategies Inc, a consumer and corporate brand consulting firm.
In 1995, General Mills axed Hidden Treasures and Sprinkle Spangles and launched Frosted Cheerios, its most successful new cereal. Rutledge said the events were unrelated.  
The weeding-out of stock-keeping units, or SKUs, is being done by both by cereal manufacturers and retailers, analysts said. In cereal, each variety and box-size is a separate SKU.
""There is evidence that companies are rationalizing their slower-moving, lower-market share SKUs,"" BT Securities analyst John O'Neil said.
For cereal makers, the need to phase out slow-selling products has intensified with the recent cuts in retail prices, which have pressured profit margins. To make up for lost profits, cereal companies must focus attention on the best-sellers in the grocery store, analysts added.  
Pat Browne-Riso, a spokeswoman for number-three Post Cereal, a unit of Philip Morris Cos Inc, said elimination of poor sellers is a natural process driven by consumer demand.
""For example, if a certain size product is preferred over another, or as new products are introduced, we would (do) our best to optimize our space on the shelf as best as possible,"" Browne-Riso said.
For retailers, recent cutbacks in promotional spending by cereal makers -- such as offering discounts on wholesale purchases that may not be passed on entirely to consumers -- is prompting grocers to take a closer look at what is selling.  
""It comes back to the efforts of the manufacturers to roll back the promotional spending, which will provide the impetus for the retailers to exercise category management practices,"" SBC Warburg analyst Chris Jakubik said.
Scanner data, collected at the grocery check-out counter, has provided key information on cereal brand sales.
""It (scanning) has totally changed the grocery environment,"" Tynion of North River Strategies said.
Kellogg Co, the top U.S. cereal maker, declined to comment on its marketing strategies.
-- Reuters Chicago Newsdesk - 312-408-8787
",36
"Kellogg Co. Friday reported a profit for the fourth quarter, reversing a year-ago loss, but said the U.S. and British breakfast cereal markets remained difficult.
The largest producer in the $9 billion U.S. ready-to-eat cereal market, Kellogg's domestic cereal sales fell in the quarter, spokesman Richard Lovell said. He would not elaborate, though analysts said the drop was about 5 percent.
Kellogg, whose brands include Kellogg's Corn Flakes and Rice Krispies, had a profit of $87.3 million or 42 cents a share, in the quarter, compared with a loss of $71.6 million, or 33 cents a share in the 1996 quarter.
The results included restructuring and other charges of $110.7 million in the latest quarter and $369 million in the 1995 quarter.
Sales fell 6 percent to $1.56 billion from $1.66 billion.
The restructuring is meant to save at least $160 million in savings this year and in future years, it said.
Excluding charges and extraordinary costs, Kellogg's earnings amounted to 78 cents a share in the quarter, compared with 77 cents a share in the 1995 period, which was in line with Kellogg's own projections.
Analysts said lower marketing expenditures helped the company hit its earnings target for the quarter. Because of that, ""the quality of earnings in the quarter was not good,"" said Robert Cummins, managing director of Schroder Wertheim.
Lovell said marketing expenditures declined but would not say how much. Total selling and administrative expense fell nearly 15 percent to $540.7 million from $633.5 million.
""It seems like they're cutting off their nose to spite their face by cutting back marketing when sales volumes are declining,"" said Donaldson, Lufkin and Jenrette analyst William Leach.
Lovell said spending on marketing was likely to rise this year from 1996 levels. Selling and administrative costs for 1996 dropped about 4 percent to $2.5 billion.
Analysts said some of the increased promotional spending will go for new cereals that Kellogg expects to launch in 1997. The company introduced Kellogg's Honey Crunch Corn Flakes cereal in the United States in September, which garnered a strong a 1.3 percent market share, Kellogg's said.
""While the U.S. and U.K. remain challenging, we are encouraged by the contribution of new cereal products in both markets,"" Kellogg Chairman Arnold Langbo said in a statement.
Internationally, cereal sales volume rose, Lovell said, with analysts estimating the increase at 4 percent to 6 percent.
Kellogg, which also makes Nutri-Grain snack bars, said convenience foods had a double-digit sales gain in the quarter. ""We look forward to the continued growth of this business, both in the U.S., where we have recently acquired Lender's Bagels, and through expansion to new international markets,"" Longbo added.
Overall, global volume grew 2 percent in the quarter and 1 percent for all of 1996.
Looking ahead, Kellogg repeated that it expected a low double-digit percentage increase in earnings for 1997, compared with 1996. The first quarter, however, is expected to be down from the $212.2 million, or 99 cents a share, earned in the first quarter of 1996.
Kellogg's stock rose $1 to $69 in afternoon trading on the New York Stock Exchange.
",36
"Breakfast cereal price wars may make consumers smile, but they're putting frowns on faces at some of the nation's largest cereal makers.
Industry analysts said Kellogg Co., the No. 1 cereal maker, is expected to report flat earnings for the latest quarter, while Ralcorp Holdings Inc., a big maker of store brand cereal, was likely to report lower earnings.
Price cuts and promotions in the $9 billion cereal business have hurt results at both companies, analysts said.
Kellogg, based in Battle Creek, Mich., has lost sales to competitors such as General Mills Inc., its biggest rival, which cut prices early last year. General Mills' earnings rose 7.5 percent in its latest quarter, on an increase in market share sparked partly by promotions.
The price cutting, started by Post Cereal, forced Kellogg, General Mills and others to follow suit. Post, a unit of Philip Morris Cos. Inc., does not report results separately.
Kellogg said in November that it would take steps to counter the price cuts and other promotions that eroded its market share to about 33 percent from 35 percent, analysts said.
While its counterattacks appear to be paying off -- analysts said Kellogg's market share seems to have risen a bit in December -- they is also pressuring earnings.
""(Kellogg's) domestic earnings are clearly going to be down on lower sales and some increase in marketing spending,"" said Goldman Sachs analyst Nomi Ghez.
In October Kellogg said earnings fell 31 percent in the third quarter, hurt by promotions by rivals. It pledged at the time that earnings growth would resume in the fourth quarter, analysts said, but most are forecasting flat or slightly lower results. For the 1995 fourth quarter, Kellogg earned $166.7 million, or 77 cents a share.
Kellogg also moved to diversify its breakfast food business last month when it bought Lender's Bagels from Kraft Foods Inc. for $455 million.
Quaker Oats Co., a maker of cereals and other food products, is expected to report an operating profit for the fourth quarter, compared with a loss a year ago. But Quaker is also expected to take a charge in the quarter to write down the value of its Snapple beverage business.
""The issue for Quaker is how big of a charge they take for Snapple,"" said BT Securities analyst John O'Neil.
Quaker said in a recent Securities and Exchange Commission filing that it was reviewing a possible writeoff related to Snapple. A Quaker spokesman declined to comment on the possibility of a charge in the fourth quarter.
Among other food companies, Sara Lee Corp. is expected to report a strong increase in earnings, with the biggest improvement in its meat and bakery division, said Donaldson, Lufkin and Jenrette analyst William Leach.
Analysts said CPC International Inc., which makes Hellman's mayonnaise, Mazola corn oil, Skippy peanut butter and Thomas' English muffins, would report a smaller than normal rise in quarterly earnings, due to high corn costs. Corn refining accounts for 15 percent of CPC's sales, which were $8.4 billion in 1995.
",36
"Quaker Oats Co may take as much as a $1.0 billion write-down for its Snapple beverage business, analysts said on Monday, but the charge may not show up in its fourth quarter earnings report, expected next week.
""I think it could be close to $1.0 billion,"" BT Securities analyst John O'Neil said of the charge to write-down the ongoing value of Snapple.
""The probability is reasonably high that they do (take a write-down),"" added Credit Suisse First Boston analyst Michael Mauboussin. He added a write-down could be about $1.0 billion.  
Quaker spokesman Ronald Bottrell said a review of Snapple operations is continuing, but declined to comment on whether the company plans to take a charge.
In November, Quaker said it would review Snapple to see if it must take a charge to reduce the carrying value of the business it bought about two years ago for $1.8 billion including acquisition costs.
""I don't have any comment on that other than to say the timing of that is not dictated when we would issue the fourth quarter press release or any calendar event,"" Bottrell said. ""It would have to do with the internal accounting process.""  
Sanford Bernstein analyst Steven Galbraith said he believes Quaker is compelled to take a charge for Snapple. ""It's clearly an impaired asset,"" he said.
Quaker could avoid taking a write-down to reduce the carrying value of Snapple if it sold that business along with its Gatorade sports beverage, Galbraith said.
Speculation continues that Quaker is looking to sell both Snapple, which it has said will have an operating loss in 1996, and Gatorade, its largest single brand, analysts said.  
If the two beverage businesses were sold together, Galbraith said Quaker might be able to offset a gain from Gatorade with the loss from Snapple. He values the two businesses together at about $3.0 billion.
""If I didn't see a charge this quarter (for Snapple), I would raise eyebrows, meaning something is up,"" Galbraith said.
Quaker Oats has repeatedly declined to comment on speculation that it was likely to sell Snapple and Gatorade.
""I will tell you again it is our policy not to comment on rumors and speculation,"" Bottrell said.
Many names have surfaced in the past as possible suitors for Quaker's beverage businesses, including Procter & Gamble Co, Coca-Cola Co, PepsiCo Inc and Cadbury Schweppes Plc.
None of the companies in the past has commented on the speculation. ((Reuters Chicago Newsdesk (312) 408-8787))
",36
"A 90-cent increase in the U.S. minimum wage will have little short-term impact on most fast food restaurants, since the competition for workers is keeping pay rates above the federally mandated standard.
""The (real) 'minimum wage' is what the closest McDonald's pays or it could be the local Pizza Hut,"" George Goulson, senior vice president of A&W Restaurants Inc, said.
But longer term, the industry fears that workers, who are already making more than the new minimum wage, will be looking for a raise to maintain the pay premium.  
Earlier Tuesday, President Clinton signed into law the first rise in the minimum wage in five years, boosting the wage to $5.15 an hour from $4.25.
""Our average crew wage is about $5.20 (an hour) so short-term there is not going to be any impact,"" said Denny Lynch, spokesman for Wendy's International Inc, which operates 4,307 restaurants in the United States.
But higher minimum wages will raise total wages by about $500,000 over the next 12 months at American Restaurant Partners L.P., which operates 62 Pizza Hut restaurant franchises.  
""If you raise someone who started in the last two months (to the new minimum wage level), you also have to raise everybody else,"" said Terry Freund, chief financial officer of American Restaurant Partners.
Beyond the minimum wage requirements, competition for workers, from cooks to delivery drivers, has forced many fast-food chains to pay up to hire good help, particularly in metropolitan markets. That competition is being driven by an increase in restaurant openings.
""There are neighborhoods where we have to pay $6.00 an hour to $6.50 or $7.00 to get"" good workers, Lynch added.  
Fast-food industry executives said there has been competition for workers since the late 1980s, although the increase in restaurant openings is making the search for employees more intense.
Another problem for quick-service restaurants is that wage competition from other employers often lures experienced workers away. A fast-food worker, for example, may be able to bring home more pay as a waiter or waitress at a casual dining establishment where they could receive $50 or $60 a night in tips, executives said.
""For QSRs (quick service restaurants)...it's even tougher to keep the kids,"" Roger Lipton, president of Lipton Financial Services, said.
Reuters Chicago Newsdesk  312-408-8787
",36
"The worst may be over for Quaker Oats Co's Snapple beverage business, which has posted operating losses for the two years since it was acquired for $1.8 billion.
""I suppose Snapple has declined all that it is going to decline,"" Robert Cummins, managing director of Schroder Wertheim, said on Thursday.
To be sure, Quaker still faces challenges to recover the hefty investment it made in the Snapple iced tea and fruit-flavor beverage business.  
""To get the return on this investment, they still have a long way to go,"" Goldman Sachs analyst Nomi Ghez said.
Quaker Chairman William Smithburg, speaking to reporters in Naples, Florida, after a presentation at an analyst conference, again acknowledged that Snapple had been a disappointment. Snapple's sale volume declined in 1996 from the previous year, and it posted an operating loss before amortization.
For 1997, Smithburg reiterated that he expected a turnaround for Snapple, promising to an end to operating losses.  
""We believe the business can be stabilized and run for positive cash,"" Smithburg said.
Being cash positive means Snapple would post a profit after amortization costs.
Smithburg declined to give a sales projection for Snapple in 1997. Analysts have said previously that flat sales and reduced costs would help the beverage line break even this year.  
""At least they'll ebb the bleeding,"" said SBC Warburg analyst Chris Jakubik, who expects Snapple to break even this year.
Disappointing results at Snapple have prompted speculation that Quaker might look to get rid of the business. Quaker has been rumored to be shopping Snapple around to prospective buyers.
Smithburg declined to comment on any rumors or potential merger and acquisition activity.
But he reiterated that Quaker would continue to ""evaluate all options for the business.""  
""The first order of business is to run it better,"" Smithburg said.
He said the company had improved Snapple's distribution system and planned more aggressive promotion of the Diet Snapple line, which enjoyed a 20 percent rise in sales in 1996 and gains of 30 percent during the last four months.
((Chicago newsdesk, 312-408-8787))
",36
"General Mills Inc, the number-two U.S. cereal maker with a roughly 27-percent market share, said Wednesday it expects record performance in fiscal 1997.
""We expect to finish the year with record earnings, record volume and record market share,"" General Mills Chairman Stephen Sanger said in an interview here after a presentation at an analysts' conference.  
In fiscal 1996, Minneapolis-based General Mills earned $3.00 a share with sales of $5.42 billion.
The company also reaped seven percent domestic volume growth and 13 percent international volume growth in fiscal 1997.
For the first nine months of the year, General Mills, which makes cereals, Betty Crocker baking mixes, Hamburger Helper skillet dinner mixes, fruit snacks and yogurt, is expected to reach its volume target of four percent growth, Sanger added.  
As previously reported, General Mills expects a recent decline in cereal prices will reduce earnings for fiscal 1997, which ends in May, by about $0.20 a share. Its recently completed acquisition of the branded cereal and snacks business of Ralcorp Holdings Inc, as previously disclosed, is expected to reduce earnings by about $0.05 a share.
In the first half of fiscal 1997, General Mills posted a profit of $1.80 a share, up one percent, and sales of $2.88 billion, up six percent.
Earnings in the first half were relatively flat, Sanger said, partly because of the cereal price reduction, while sales benefited from some strong promotion.
""The second half will be a bit of the flip of that with modest volume growth, but stronger earnings,"" Sanger said.
Looking ahead, Sanger said General Mills' goal continues to be to grow earnings per share ""over the long term,"" and to post a return on capital of at least 25 percent.
""That's certainly what our goal will be for next year,"" he added.
((Reuter Chicago newsdesk (312) 408-8787))
",36
"Wm. Wrigley Jr Co said Thursday it is looking for ways to help revitalize the domestic chewing gum market, which saw about a one percent drop in physical sales volume in 1996.
""We have to bring new news to the category...either in advertising, merchandising (or) improved products,"" William Piet, vice president of corporate affairs and corporate secretary, said in an interview after a presentation at an analysts' conference here.  
Piet cautioned that last year's decline in the overall domestic chewing gum market does not signal ""a disaster,"" adding that the industry has been growing at an average annual rate of 2.5 percent.
""It's a knock on the door,"" Piet said of the decline.
Despite the decline in the domestic market, Wrigley's chewing gum brands at the end of 1996 surpassed about a 50 percent market share, up a little more than one point.  
North America accounts for roughly 46 percent of Wrigley's business, but Wrigley continues to grow overseas. This year it will add Cambodia to the list of some 120 countries where it sells products. Cambodia will be supplied out of a new replacement factory in the Philippines, along with Indonesia, Malaysia, Thailand and Vietnam.
Wrigley also plans to begin construction this spring for a new factory in Russia. That plant, which was previously announced, is expected to be in operation in early 1999.
With the Russia facility, Wrigley will have plants in 13 countries outside the United States.
Piet said growth in the international market varies from year to year, but said over 10 years the growth rate has been about four times that of the domestic market.
((Chicago newsdesk, 312-408-8787))
",36
"ConAgra Inc said Tuesday its spread of operations across the food chain -- from seed distribution to meat processing and frozen foods -- is a positive for the company that outweighs its exposure to the commodity markets.
""I see it as a great positive,"" ConAgra Chairman Philip Fletcher said in an interview Tuesday. ConAgra was among the food companies presenting at an analyst conference here.  
In the past, ConAgra has faced some criticism for having commodity-sensitive operations that could be a drag on its value-added foods such as its $1.5 billion Healthy Choice line.
""As you look around the globe with the doubling of the population by 2030, they aren't going to be buying frozen foods in a lot of those markets,"" Fletcher said. ""But they sure...are going to be buying a lot of chicken, hogs and...grain (products)...I see the front end of the chain providing us, frankly, a lot more opportunity for the next five or so years than the back end of the chain.""  
Across its scope of food operations, ConAgra continues to seek out acquisitions that typically contribute about one-third of its earnings growth over time, Bruce Rohde, vice chairman, added.
""Every year we do a dozen or so (acquisitions),"" he said.
Fletcher said acquisitions are scouted out by top executives at its various operating divisions, who must then ""sell"" the idea to the corporation.
""We think the acquisition process is one of our strengths,"" Fletcher added.  
Beyond acquisitions, ConAgra continues to grow by new product introductions, particularly in its grocery products division. In the first half of fiscal 1997, ConAgra's grocery products posted a 26 percent rise in operating profits.
""The key driver these days is to make our food much more easy to prepare,"" David Gustin, president of ConAgra Grocery Products, said.
While studies indicate a desire to eat more at home, consumers continue to shy away from traditional cooking.
""This requires a drastic change in our attitude toward what the definition of convenience is,"" Gustin said.
For many consumers, he added, this means meal preparation times of five to 10 minutes.
ConAgra's new products aimed at greater convenience include its Butterball-brand baked chicken and Healthy Choice Hearty Handfuls microwaveable stuffed sandwiches.
Other new products being launched by ConAgra include a line of popcorn snack cakes under its Orville Redenbacher's brand.
((Chicago newsdesk, 312-408-8787))
",36
"Summit Medical Systems Inc., said Monday its 1996 revenues will be ""substantially less"" than what it reported last week due to accounting discrepancies discovered by its new chief financial officer, who resigned after less than a week on the job.
The company, which makes computer-based information systems for the healthcare industry, said it expected to revise downward the $19.5 million in revenues it reported in 1996, and could also cut revenues for 1995 and 1994 as well.
Company officials were not available to comment.
Summit's shares fell by $1.44, or 30 percent, to $3.31 in afternoon trading on the Nasdaq market.
Volpe, Welty & Co. analyst Chris Paul said Summit was believed to have about $40 million in cash and roughly 10.5 million shares.
""So it's trading below its cash value,"" he said. Still, he added, the cash the company is believed to have was ""providing a base for the shares.""
Minneapolis-based Summit said a preliminary review of its books indicated that revenues for the past three years had been overstated by between $4 million and $6 million -- or between 8 percent and 12 percent of the total.
Summit said the concerns over its revenues stem from the erroneous recognition of some revenues from the sales of software and related services.
Paul said the company did not provide any further explanation to analysts on a conference call.
""Summit Medical is extremely concerned by the discovery of accounting errors and is working vigorously to correct past mistakes and to establish stricter management controls and policies,"" Chief Executive Kevin Green said in a statement.
The company also announced that it planned to eliminate an unspecified number of jobs and establish a cost reduction programme to reduce annual expenses by 20 percent.
That programme is expected to result in an unspecified charge in the current quarter for employee severance and other costs, it said.
Last Wednesday, Summit reported 1996 revenues of $19.5 million, up from $17.7 million in 1995. It also posted a net loss for the year of $10.4 million, compared with a year-ago loss of $7.2 million.
The exact size of the adjustments to revenue and the years in which they apply will not be determined until an extensive audit is completed, the company said Monday.
Summit said that Donald Haas, who joined the company as chief financial officer last Monday, resigned Saturday -- after informing management that some 1996 revenue had been incorrectly recognised.
The company said that Haas told management on Thursday, the day after the company reported its 1996 results, that it had incorrectly recognised revenue during 1996 in some circumstances.
Management immediately began a review of these issues, it added.
""The company's auditors, Ernst & Young LLP, have expanded the scope of their audit and are performing additional audit procedures based in part on the questions raised by Mr. Haas,"" Summit said in its statement.
Summit added that it had retained the law firm Dorsey & Whitney LLP to investigate the matter with the assistance of independent accounting advice from Arthur Andersen LLP.
The company said it expected to announce corrected financial information by the end of March.
The likely downward revision of revenues for at least a year comes at a time when Summit is in the midst of a product transition, said Paul.
The transition, Paul explained, is to a single platform for Summit's computerized information system, which collects and analyses patient data and likely outcomes. This anlaysis enables health care providers to monitor and potentially change a patient's treatment.
",36
"Swiss pharmaceutical company Roche Holding AG agreed on Wednesday to acquire Tastemaker, an international manufacturer of food flavorings, from two U.S. chemical companies in a deal worth about $1.1 billion.
St. Louis-based Mallinckrodt Inc., which also makes drugs and other medical products, and Hercules Inc. of Wilmington, Del., each said they expected to net $550 million from the transaction.
Tastemaker, a Cincinnati-based company that makes flavoring and citrus specialities used in foods and beverages, has about 1,280 employees in the United States, Holland, England, Mexico, Australia and Japan. It had 1996 sales of about $320 million.
Roche said Tastemaker will be strategic fit with its Givaudan-Roure unit, an international fragrances, flavors and aroma chemicals business. Givaudan-Roure had consolidated sales of 1.4 billion Swiss francs ($981 million) in 1996.
Roche's other core businesses include pharmaceuticals, vitamins and fine chemicals, and diagnostics.
For Mallinckrodt and Hercules, the deal enables the two companies to shed a venture that they formed in 1992 by combining their smaller food ingredient and flavors businesses.
""We've said that we would look for the best way to create value (from the Tastemaker venture),"" Hercules spokeswoman Amy Binder said.
She added that Hercules, a speciality chemical company, will use its cash proceeds to repurchase shares. Hercules shares gained 62.5 cents to $47 on the New York Stock Exchange in afternoon trading.
Mallinckrodt said it expected to use part of its proceeds to buy back up to $250 million in stock over the next 18 months and also will look for acquisitions to build its human health care business.
Mallinckrodt's $550 million deal with Roche includes the Swiss company assuming about $500 million of Mallinckrodt debt. That, analysts said, puts Mallinckrodt in a better position to make acquisitions.
Last August, Mallinckrodt said it would seek a buyer for its Tastemaker venture and would ""explore options"" for its animal health division while focusing on its core businesses of speciality chemicals and human health care.
""We have said explicitly that we expect to use proceeds from (Tastemaker) and from our animal health business ... for strategic acquisitions,"" said Cole Lannum, director of investor relations for Mallinckrodt.
Asked if a potential sale of the animal health business was pending, Lannum said it was ""certainly possible that we'll have a deal by the end of the fiscal year"" which ends in June.
Future acquisitions for Mallinckrodt likely would be in the hospital supply area, which includes pharmaceuticals. Mallinckrodt makes analgesic drugs, diagnostic imaging agents, medical devices and other pharmaceutical products.
""Mallinckrodt gets the liquidity that they're looking for to reinvest in their core business, especially on the medical side,"" A.G. Edwards analyst Gary Stevenson said of the deal.
Mallincrkrodt's stock fell 25 cents to $40.25 in late afternoon after trading as high as $41.50 earlier in the day on the New York Stock Exchange.
Roche is a worldwide research-based health care group with 50,000 employees in more than 100 countries. It recorded 1996 sales of about 16 billion Swiss francs ($11.2 billion).
",36
"Former Archer Daniels Midland Co. executive Mark Whitacre, who acted as an informant in an antitrust investigation, filed suit on Monday against the Federal Bureau of Investigation agent who allegedly recruited him.
In his suit, filed in the U.S. District Court of the Central District of Illinois, Whitacre charged FBI Agent Brian Shepard with allegedly violating his constitutional rights, inflicting emotional distress, and assault and battery.
Because the suit targets Shepard in his official capacity as an agent, Whitacre is effectively suing the FBI, according to a legal expert.
""It would be tantamount to suing the whole FBI,"" said Chicago attorney James Shapiro, who is a former assistant U.S. Attorney.
The FBI press office in Washington, as a matter of policy, declined to comment on Whitacre's lawsuit. ""We couldn't discuss or comment on pending litigation,"" an FBI spokesman said.
A Justice Department spokesman was not immediately available, and an FBI spokesman in Springfield, Ill., also was not available for comment.
The lawsuit is the latest twist in the legal tangle involving Whitacre, who said he acted as a government informant from 1992 through 1995 to assist in the Justice Department's antitrust probe of Decatur, Ill.-based Archer Daniels Midland, one of the world's largest processors of corn and other crops.
Whitacre had been president of ADM's BioProducts Division until he was fired in August 1995. ADM has charged that Whitacre allegedly stole about $9 million from it.
Whitacre has denied those charges, saying he received the money in off-the-books payments that allegedly were authorized by ADM officials.
In October 1996, as part of the antitrust probe, ADM pleaded guilty to two counts of fixing prices of lysine, a feed additive, and citric acid, which is used in food, beverages and other products. ADM agreed to pay $100 million in fines, a record for antitrust actions.
In December 1996, Whitacre was indicted for allegedly conspiring to fix prices of lysine. Also indicted at that time were Michael Andreas, former vice chairman of ADM and son of Chairman Dwayne Andreas, and Terrance Wilson, a former group vice president.
Whitacre, Michael Andreas and Wilson have pleaded not guilty to those charges.
In his lawsuit, filed in Urbana, Ill., Whitacre said he had repeatedly discussed with Shepard a grant of immunity in exchange for cooperating with the antitrust investigation.
Whitacre said he wanted to seek out an attorney regarding his role as a informer. He alleged that Shepard kept him from obtaining an attorney, in violation of his constitutional rights under the 1st and 5th Amendments.
Whitacre also claimed in his lawsuit that there were episodes when Shepard allegedly became ""angry, shouted, directed abusive language"" toward him and threatened him with criminal prosecution if he sought the counsel of an attorney.
In the lawsuit, Whitacre also claimed that in late February or early March 1993, Shepard allegedly struck him with a hard-sided briefcase.
He further charged that Shepard kept him from seeking medical treatment for depression and suicidal tendencies, which exacerbated his manic depression.
Whitacre said he attempted suicide on Aug. 9, 1995.
Separately, in U.S. District Court in Chicago, Cheil Jedang Ltd. of Seoul, South Korea, entered a guilty plea to charges of fixing lysine prices. The company agreed to pay a $1.25 million fine, which was suspended until the end of the ADM litigation.
",36
"ReliaStar Financial Corp chairman John Turner said Monday his company's $488 million merger deal with Security-Connecticut Corp would broaden the insurance products sold by both firms.
""We identified Security-Connecticut as a company that was positioned in the market with both product lines and distribution that fit very well with ours. They were strong where we weren't so strong, and we had products that we were sure their distribution chain could sell,"" Turner said in a telephone interview.  
The merger of the two companies in a stock-for-stock transaction, which values Security-Connecticut at $47 a share, is expected to result in at least $7.0 million in annual pretax cost reductions.
Another $2.0 million may be saved with the planned consolidation of ReliaStar's and Security-Connecticut's New York operations, Turner added.
But ReliaStar expects to reap the main benefit of the deal on its top line.
""The big payoff is in the cross-selling,"" Turner said.  
For example, Minneapolis-based ReliaStar has variable life and annuity products that expand Security-Connecticut's offerings. Avon, Conn.-based Security-Connecticut has second-to-die universal life and term life products, which cover two lives, that complement ReliaStar.
""Cross-selling works best when products and distribution are complementary and not redundant,"" Dain Bosworth analyst J. Chris Sergeant. ""It's set up to be successful.""
Turner said the deal will not hurt earnings in 1997 and will be ""a little accretive"" in 1998, which also reflects a planned $100 million share buyback of ReliaStar stock.  
Security-Connecticut shares were up eight at 45-1/2 at midday, reflecting the offer price.
""I think it's a good deal,"" Nutmeg Securities analyst Ira Zuckerman said. ""ReliaStar picked up an excellent marketing operation.""
ReliaStar shares were off 1/4 at 59, which Sergeant said reflects the near-term neutral earnings impact.
""The stock has done very well already,"" he said.
One advantage for Security-Connecticut in the deal is gaining access to a stronger balance sheet to back up the claims paying ability of its life insurance operation. That, Sergeant said, opens the potential for an upgrade by ratings agencies.
Turner said the Security-Connecticut deal fits its criterion of a 16 percent return on equity and will not derail its goal of a 13 percent increase in earnings per share.
""What we say is we intend to attain (these goals) without acquisitions, but we also readily recognize that consolidation is occurring in our industry,"" he added.
After the Security-Connecticut deal, ReliaStar would become the 11th largest publicly held life insurance holding company in the United States.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Former Archer Daniels Midland Co. executive Mark Whitacre, who acted as an informant in an antitrust investigation, filed suit on Monday against the Federal Bureau of Investigation agent who allegedly recruited him.
In his suit, filed in the U.S. District Court of the Central District of Illinois, Whitacre charged FBI Agent Brian Shepard with allegedly violating his constitutional rights, inflicting emotional distress, and assault and battery.
Because the suit targets Shepard in his official capacity as an agent, Whitacre is effectively suing the FBI, according to a legal expert.
""It would be tantamount to suing the whole FBI,"" said Chicago attorney James Shapiro, who is a former assistant U.S. Attorney.
The FBI press office in Washington, as a matter of policy, declined to comment on Whitacre's lawsuit. ""We couldn't discuss or comment on pending litigation,"" an FBI spokesman said.
A Justice Department spokesman was not immediately available, and an FBI spokesman in Springfield, Ill., also was not available for comment.
The lawsuit is the latest twist in the legal tangle involving Whitacre, who said he acted as a government informant from 1992 through 1995 to assist in the Justice Department's antitrust probe of Decatur, Ill.-based Archer Daniels Midland, one of the world's largest processors of corn and other crops.
Whitacre had been president of ADM's BioProducts Division until he was fired in August 1995. ADM has charged that Whitacre allegedly stole about $9 million from it.
Whitacre has denied those charges, saying he received the money in off-the-books payments that allegedly were authorised by ADM officials.
In October 1996, as part of the antitrust probe, ADM pleaded guilty to two counts of fixing prices of lysine, a feed additive, and citric acid, which is used in food, beverages and other products. ADM agreed to pay $100 million in fines, a record for antitrust actions.
In December 1996, Whitacre was indicted for allegedly conspiring to fix prices of lysine. Also indicted at that time were Michael Andreas, former vice chairman of ADM and son of Chairman Dwayne Andreas, and Terrance Wilson, a former group vice president.
Whitacre, Michael Andreas and Wilson have pleaded not guilty to those charges.
In his lawsuit, filed in Urbana, Ill., Whitacre said he had repeatedly discussed with Shepard a grant of immunity in exchange for cooperating with the antitrust investigation.
Whitacre said he wanted to seek out an attorney regarding his role as a informer. He alleged that Shepard kept him from obtaining an attorney, in violation of his constitutional rights under the 1st and 5th Amendments.
Whitacre also claimed in his lawsuit that there were episodes when Shepard allegedly became ""angry, shouted, directed abusive language"" toward him and threatened him with criminal prosecution if he sought the counsel of an attorney.
In the lawsuit, Whitacre also claimed that in late February or early March 1993, Shepard allegedly struck him with a hard-sided briefcase.
He further charged that Shepard kept him from seeking medical treatment for depression and suicidal tendencies, which exacerbated his manic depression.
Whitacre said he attempted suicide on Aug. 9, 1995.
Separately, in U.S. District Court in Chicago, Cheil Jedang Ltd. of Seoul, South Korea, entered a guilty plea to charges of fixing lysine prices. The company agreed to pay a $1.25 million fine, which was suspended until the end of the ADM litigation.
",36
"McDonald's Corp. Thursday reported a 12 percent rise in fourth-quarter profits, in spite of weaker U.S. results, and said it plans to cut back on its restaurant expansion.
The nation's biggest fast-food restaurant chain said its income rose to $410.0 million, including a $48.7 million after-tax charge, from $366.8 million a year ago.
The charge reflects the company's plans to close about 115 low-volume satellite units across the United States this year. As of Dec. 31, McDonald's had 2,218 satellite units, which typically have a limited menu and are located in non-traditional sites like shopping malls.
""These are really the sites that didn't pan out,"" said McDonald's Chief Financial Officer Mike Conley.
In 1997, McDonald's said it plans to open fewer satellite restaurants, while emphasizing full-scale units. As a result, McDonald's is trimming its overall restaurant opening plan for 1997 to between 2,400 and 2,800, compared with a previous target of 2,500 to 3,200.
""Going foward we think our emphasis is going to be traditional restaurants,"" Conley said in an interview.
McDonald's said more than 70 percent of the new restaurants will be outside the United States. In the past, about two-thirds of McDonald's new units have been outside the United States.
The fast-food giant, with more than 21,000 units worldwide, including 12,000 in the United States, said it is working to improve its U.S. results.
In the fourth quarter, McDonald's said its U.S. operating income fell 28 percent, including the charge, to $217.7 million. Excluding the charge, U.S. operating income fell 4 percent.
As analysts had expected, McDonald's said its domestic same store sales -- measuring results from units open at least a year -- were down in the fourth quarter and for all of 1996 compared with a year earlier.
Offsetting the decline domestically was a 14 percent gain in international operating income and an 11 percent rise in sales in the fourth quarter.
In the United States, however, McDonald's performance fell short of its goals, according to Jack Greenburg, company vice chairman and chairman-U.S.A. ""In 1997, our focus will be squarely on improving sales at existing restaurants through improvements in marketing, service and menu,"" he said in a statement.
Conley said McDonald's will continue to be aggressive on pricing in the face of competition, but declined to give any specifics.
""We want to provide the best value to our customers ... and a big part of it is price,"" he said. ""You'll see us being aggressive on price-value as we always have been.""
Schroder Wertheim analyst Wayne Daniels said he expects McDonald's to launch more national price promotions in 1997, as opposed to its current practice of giving franchisees the option to offer local promotions.
""(McDonald's) average ticket did climb during 1996,"" when it launched higher-priced premium sandwiches such as the Arch Deluxe, Daniels said. ""I do think that they will reverse that somewhat as they are a little more aggressive on national price promotions.""
Conley said McDonald's will continue to work on food taste, but said changes would be ""evolutionary and not revolutionary.""
""So don't expect a spate of new products,"" he said. ""That's really unlikely.""
McDonald's stock gained $1.125 to $46.375 on the New York Stock Exchange.
",36
"ConAgra Inc said Tuesday its U.S. beef business, which saw a sharp decline in profits in the first half of fiscal 1997, is showing strong signs of recovery in the second half.
""In the second half, the beef business has shown significant improvement,"" especially compared with weak results a year ago, Lee Lochmann, president of ConAgra Refrigerated Foods Cos, said in an interview. ConAgra was among several food companies presenting at an analysts' conference here.  
In the first half of fiscal 1997, ConAra said its U.S. beef operating earnings were hurt by tighter cattle supplies. Looking ahead, Lochmann said he expects a good supply of cattle in the United States through the summer and into the fall.
While U.S. cattle supplies are expected to tighten later in calendar 1997, Lochmann does not anticipate a severe decline.
""Certainly everything we're looking at would indicate it's not going to be as severe a correction as previous cattle cycles,"" he said.  
But an outlook for a tighter U.S. beef market opens some opportunities for ConAgra's Australian beef business, where operating margins have improved considerably, Lochmann said.
""As American beef markets begin to firm up more, and they will because of supply, Australia is going to be in very good shape for us,"" Lochmann said. ""It's a natural hedge for us. They (Australian beef operations) become much more competitive from an export standpoint.""
ConAgra already exports about 93 percent of the beef it processes in Australia to Japan, Korea, Canada, Mexico and, potentially, the United States.
Currently, beef exports to the United States from Australia are not significant because of low cattle prices in the United States, which makes it difficult to compete.
""But that is going to change,"" Lochmann said.
	 ((Chicago newsdesk 312 408-8787))
",36
"Vita Food Products Inc, which sells kosher seafood and other specialty products, is scouting for acqusitions that could help it boost annual sales four-fold within the next five years.
""With the right mix of acquisitions, I think we could do $75 million to $100 million (in sales) annually. We've (also) got some things that could really take off internally,"" Stephen Rubin, president, said in an interview. ""I'd like to see it (the sales target reached) before five years.""
Vita's sales amounted to $21.4 million in 1995.  
The company, with products such as salmon and herring sold under the Vita brand, expects to complete at least one acquisition by the end of the year, Rubin said.
Acquisition targets include companies that sell kosher food or products that could later be certified as kosher. One of the targets is related to seafood, he added.
Rubin added that Vita could also acquire a regional, non-kosher food company and take it national under the existing brand name through Vita's distribution network.
Over 95 percent of Vita's sales, however, are kosher products.  
Jay Dembsky, Vita's chief financial officer, estimated that the kosher food market overall is growing by 10 to 11 percent annually, whereas the overall food industry grows only in line with the population.
Kosher food, he added, appeals to consumers beyond those adhering to Jewish dietary laws. Kosher food carries ""a perception of higher quality,"" Dembsky said.
Vita also hopes to reap higher sales in 1997 from two new products that were rolled out in the fourth quarter of 1996 -- a line of hummus, a Middle Eastern dish made from chick peas, and frozen salmon burgers.
""We expect to see meaningful impact in 1997 from these products,"" Dembsky said.
Vita, which went public earlier this year at $6.00 a share, said it would make secondary offerings in the future if it needed to raise capital for acquisition programs, Rubin said.
Vita shres were up 1/8 at 5-1/8.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Kmart Corp. said Monday it may merge its Builders Square stores with Waban Inc.'s HomeBase business in a deal that would create the nation's third largest home improvement chain.
The deal, which reflects consolidation in the highly competitive home improvement retail niche, would also complete Kmart's exit from speciality retailing.
""What this will do is complete (Kmart's) strategy of divesting non-core businesses,"" Michael Conn, Gruntal & Co. retail analyst, said.
Kmart said if a deal was completed, the Los Angeles-based investment group Leonard Green & Partners L.P. would hold a majority interest in the new company. Kmart, based in Troy, Mich., and Waban, headquartered in Natick, Mass., would each retain minority interests.
The proposed new company would have about 250 stores in 25 states with annual revenues of nearly $4 billion.
""We've been looking for the opportunity to combine Builders Square, a regional business, with another party...in a consolidating industry,"" Robert Burton, director of Kmart's investor relations, said.
Builders Square's stores are largely in the Midwest and central United States. HomeBase has 84 stores in 10 Western states.
""It makes perfect sense,"" First of Michigan analyst Daniel Poole said of the combination.
But he added that Home Depot, which operates retail stores for the do-it-yourself customer and home remodeler, still poses stiff competition for the new company that will be formed by combining Builders Square and HomeBase.
Marvin Rich, Kmart's executive vice president of strategic planning, finance and administration, said the proposed transaction was part of his firm's plan for the disposition of Builders Square.
He said Kmart intends to reclassify Builders Square as a ""discontinued operation"" in its year-end financial statements and record a net loss of $350 million to $400 million from discontinued operations.
Burton said the combination of Builders Square and HomeBase could be completed in Kmart's fiscal first quarter, which ends in April.
""While we are in the preliminary stages of this transaction, all parties are interested in the potential opportunity that could come from combining these similar home improvement operations,"" Rich said.
""Clearly, there is opportunity here to create a large, financially liquid home improvement business which can be competitive on a national basis,"" Rich said.
Waban, which operates BJ's Wholesale Clubs as well as the HomeBase chain, said that as a result of its talks with Kmart it was suspending plans to spin off the BJ's unit.
""This (Kmart) transaction has the potential to provide Waban and its shareholders greater value than our previously announced plan to separate our BJ's Wholesale Club and HomeBase divisions through a tax-free spin-off of BJ's,"" Waban President Herbert J. Zarkin said in a statement.
He said that if a sale of HomeBase was concluded, the company would use the proceeds to retire corporate debt and for general corporate purposes, including the repurchase of common stock.
Kmart previously shed its speciality retail concepts, selling off to the public several companies including Borders Group Inc, The Sports Authority Inc. and OfficeMax Inc.
In 1994, Leonard Green & Partners acquired PayLess Drug Stores Northwest Inc. from Kmart and merged it with Thrifty Corp. to form Thrifty Payless Inc. That chain was recently acquired by Rite Aid Corp.
K-Mart stock closed up 12.5 cents at $11.25 on the New York Stock Exchange.
",36
"McDonald's Corp. has turned up the heat in the fast-food business.
If franchisees go along with the plan, the world's largest restaurant chain will launch its biggest nationwide promotion ever, featuring 55-cent sandwiches, down from about $1.95 for a Big Mac, according to franchisee sources.
The plan is a bold step to lure customers into McDonald's restaurants in the face of intense competition in the nation's $100 billion fast-food business, industry analysts said.
McDonald's, which has more than 20,000 units worldwide and more than 12,000 in the United States, declined to give specifics on its plan. Spokesman Jack Daly said the Oak Brook, Ill.-based company hopes to launch a ""national value-price promotion.""
Pointing to a current promotion on Chicken McNugget sandwiches, which analysts said has helped McDonald's build sales this month, Daly said, ""It's in that same spirit.""
Charles Gonzales, a McDonald's franchisee with two units in the San Francisco area, said the nationwide promotion would feature a different sandwich for 55 cents each month when a customer buys french fries and a drink at the regular price.
The promotion, he added, is expected to start with the Big Mac hamburger, which is usually priced between $1.90 and $1.99, and will include breakfast sandwiches as well, he said.
But the promotion, to be presented to franchisees on Thursday, could spark a price war, analysts said. That prospect worried investors who drove fast-food stocks sharply lower.
""Everyone will have something for 55 cents. Now it's a zero-sum game again,"" said Piper Jaffray analyst Allan Hickok.
But Dean Witter analyst David Adelman said Wendy's International Inc. and Burger King, a unit of Grand Metropolitan Plc, may not match McDonald's price promotions right away.
""There are a lot of things (companies can do) to enhance value without directly cutting prices,"" Adelman said, including increasing the frequency of regular promotions.
Burger King said it had no plans to change its prices. Wendy's officials also said they won't cut prices in response to McDonald's plan.
McDonald's stock tumbled $2.625 to $44.625 and Wendy's slid $1.50 to $20.75 on the New York Stock Exchange, where the shares were among the most active issues. American shares of Britain's Grand Metropolitan Plc, which owns Burger King, fell $1 to $30.625, also on the NYSE.
Dean Witter's Adelman said it remained to be seen if the McDonald's plan will bring in more customers. ""We have much more jaded consumers today,"" he said, noting price cuts were not ""new news.""
Gonzales noted some franchisees oppose price promotions since they often do not boost customer traffic enough to offset lower sandwich prices. Moreover, regular customers may be tempted to order whatever sandwich is being offered that month instead of higher-priced menu items, he said.
Daly, however, said increased sales volume is expected to offset lower menu prices. ""Margins (are) a function of volume,"" he added.
Dick Adams, chairman of the Consortium, an independent association of McDonald's franchisees, said he expected the promotion plan to be approved.
""They (franchisees) are going to vote for it,"" Adams said. ""They are being told that it's the only plan that is available.""
He said McDonald's was expected to present the plan in a satellite broadcast to operators across the country on Thursday.
McDonald's has been looking to boost domestic sales, which have been pressured because of competition. In a December 1996 memo to owners and operators, Jack Greenberg, chairman of McDonald's U.S.A. said, ""We must re-energise and focus our U.S. marketing efforts and develop a national value proposition.""
",36
"Pioneer Hi-Bred International Inc is launching 28 new corn hybrids this year, which it hopes will help reverse over the next few years a recent drop in its leading seed corn market share.
""We feel very good about the 28 new hybrids that we're introducing in 1997,"" Richard ""Rick"" McConnell, senior vice president and director of research, said in a telephone interview. ""We think we're going to be able to position those well in 1997 for customers to get a good look at, and will be able to build volume up very quickly for '98 and '99...""  
Of the 28 new corn hybrids that Pioneer is introducing, eight have the Bt gene to fight off the European corn borer, a serious insect pest, McConnell said.
These Bt corn varieties are part of a host of genetically altered, or transgenic, corn hybrids that are being developed and launched by Pioneer and other agricultural companies.
Although Pioneer's share of the North American seed corn market is four times that of its nearest competitor, the need to develop unique biotech crops has leveled the playing field, analysts noted.  
""It (biotechnology) has made the other players seem a lot bigger. They (Pioneer) did not move as quickly and as early on biotechnology,"" Piper Jaffray analyst George Dahlman said. ""They have done an amazing job of catching up.""
In addition to Bt corn, Pioneer's other transgenic products include soybeans that can withstand the use of Monsanto Co's Roundup herbicide. Pioneer also will have limited quantities of corn that can resist Liberty herbicide, which is produced by AgrEvo, a venture between Hoechst AG and Schering AG.  
Pioneer is developing corn that can resist Roundup, but it may be 1998 or 1999 until it is introduced, McConnell said.
For this year, McConnell declined to project Pioneer's North American corn market share, which in fiscal 1996 dropped to 44 percent from 45 percent. DeKalb Genetics Corp, the number two player, has an 11 percent market share in corn.
He linked the market share loss in 1996 in part to the fallout from disease and insect problems that hurt two Pioneer hybrids in 1995. Those problems are being addressed with new corn hybrids.  
Piper Jaffray's Dahlman said he expects Pioneer's market share will be about flat in fiscal 1997 ending in August compared with 1996.
To bolster its future product lineup, Pioneer would consider collaborating with other players, including some outside the agricultural industry, McConnell said. ""There will be other biotech boutiques that we will want to work with,"" he added.
Pioneer currently collaborates with Mycogen Inc, an agricultural biotech company, and Human Genome Sciences Inc, which is involved in a DNA project with Pioneer.
While Pioneer targets 20 percent return on equity and double-digit percentage growth in earnings per share, it will not shy away from investing in technology, McConnell said.
""We're not looking to shoot ourselves in the foot with short-term issues just to achieve those goals,"" McConnell said. ""We'll make the appropriate investments.""
	 ((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Interstate Bakeries Corp chairman Charles Sullivan said Thursday he backs analysts' earnings estimates of $0.35-$0.40 a share for the company's third quarter. (Corrects timeframe from fiscal 1997)
""We told them (analysts) we're not uncomfortable with that,"" Sullivan said in an interview here after a presentation at an analysts' conference.  
In the year ago third quarter, the company earned $0.11 a share.
Sullivan said the anticipated growth in third quarter earnings reflects reduced costs, higher revenues and increased sales of branded products.
Interstate, the largest baker and distributor of fresh bakery products in the United States has brands including Wonder, Hostess and Dolly Madison.  
Moving forward, Interstate said it plans to extend those brand lines with new products, seeking to appeal to children with offerings like bubble gum flavored mini muffins and to adults with improved low fat Hostess Twinkies.
Interstate also began rolling out last month a fat-free Wonder bread, which it expects will appeal to an older consumer.
The company is also looking to extend its reach in the United States, looking for acquisitions in a consolidating industry.
Sullivan said Interstate plans to acquire an existing bakery operation, west of the Mississippi River. He would provide no other details.
That deal would help offset lost revenue from government-ordered divestitures after Interstate's 1995 purchase of Continental Baking Co, he said.
((Chicago newsdesk, 312-408-8787))
",36
"ReliaStar Financial Corp. said Monday it would acquire Security-Connecticut Corp. in a stock exchange deal worth $488 million, including debt.
Minneapolis-based ReliaStar said the deal, which values Security-Connecticut Corp. of Avon, Conn., at $47 a share, will broaden the insurance products sold by both firms.
""We identified Security-Connecticut as a company that was positioned in the market with both product lines and distribution that fit very well with ours. They were strong where we weren't so strong, and we had products that we were sure their distribution chain could sell,"" ReliaStar Chairman John Turner said in a telephone interview.
Based on Friday's closing price of $59.25 for ReliaStar common stock, Security-Connecticut stockholders would receive 0.7932 of a share of ReliaStar common stock for each share of Security-Connecticut common stock.
The transaction, valued at $488 million, includes ReliaStar's assumption of $75 million of Security-Connecticut debt, the companies said.
The combined company would have assets under management of $19.9 billion and $241.4 billion of life insurance in force, making it the nation's 11th largest life insurance company.
Following the news, Security-Connecticut's stock jumped $8 to $45.50 in consolidated afternoon trading on the New York Stock Exchange, while ReliaStar dropped 50 cents to $58.75, also on the NYSE.
ReliaStar said the merger was expected to result in at least $7 million in annual pretax cost reductions. Another $2 million may be saved with the planned consolidation of ReliaStar's and Security-Connecticut's New York operations, Turner added.
Turner said some jobs were expected to be eliminated as a result of the deal but added that the number had not been determined. ReliaStar employes about 3,500 people and Security-Connecticut about 400.
ReliaStar expects to reap the main benefit of the deal in its revenues.
""The big payoff is in the cross-selling,"" Turner said.
For example, ReliaStar has variable life and annuity products that expand Security-Connecticut's offerings. Security-Connecticut has second-to-die life insurance policies, which cover two people such as a husband and wife, and term life products that complement ReliaStar.
""Cross-selling works best when products and distribution are complementary and not redundant,"" Dain Bosworth analyst J. Chris Sergeant said in a phone interview. ""It's set up to be successful.""
""I think it's a good deal,"" Nutmeg Securities analyst Ira Zuckerman said. ""ReliaStar picked up an excellent marketing operation.""
ReliaStar Financial provides individual life insurance and annuities, employee benefits, reinsurance, retirement plans and mutual fund services. Security-Connecticut specialises in life insurance and annuity products sold through independent general agents nationwide.
After the close of the merger, Security-Connecticut's two subsidiaries, Security-Connecticut Life Insurance Co. and Lincoln Security Life Insurance Co., will become part of ReliaStar Financial, the companies said.
""ReliaStar and Security-Connecticut are a perfect complement to each other in both products and distribution,"" Security-Connecticut Chairman Ronald Jarvis said in a statement.
Jarvis will continue to serve as chief executive of Security-Connecticut Life Insurance Co. and will be a member of the boards of ReliaStar Life Insurance and ReliaStar Bankers Security Life Insurance, two wholly owned units of ReliaStar Financial Corp. He also will be part of the ReliaStar Management Committee.
The deal is subject, among other things, to approval by Security-Connecticut stockholders.
ReliaStar said that, as part of the deal, it would issue some 7 million additional shares of common stock, but the actual number of shares to be issued would be determined when the transaction is completed. ReliaStar also proposed buying back up to $100 million in its stock as part of the transaction.
",36
"Anheuser-Busch Cos Inc, which set records for sales, profit and beer volume in 1996, said Wednesday it continues to aim for a double-digit percentage increase in its earnings per share in 1997.
""Our projection for this year is double-digits...EPS growth,"" W. Randolph ""Randy"" Baker, chief financial officer, said in a telephone interview.
Anheuser, which brews Budweiser and Michelob beer, earned $2.21 a share from continuing operations in 1996, up 11 percent from $1.99 in 1995, both before extraordinary items.  
For the fourth quarter, it earned $0.30 a share, in line with analysts' expectations, compared with earnings from continuing operations, and excluding charges, of $0.27 a share in the 1995 fourth quarter. The year-ago fourth quarter results exclude $160.0 million in costs for closing a Tampa, Fla., brewery and $74.5 million in costs for wholesale inventory reductions.
""As we end 1996 and begin 1997, we do so in a position of great competitive strength and we have set the stage for significant long-term earnings growth for 1997,"" Baker said.  
Gross sales for 1996, before excise taxes, were a record $12.6 billion in 1996, up four percent from 1995.
Anheuser said it sold a record 91.1 million barrels of beer in 1996, up 4.1 percent from 1995. Adjusting for an inventory reduction in 1995, beer volume grew 2.8 percent.
The company also boosted its leading domestic market share in 1996 by 1.1 points to 45.2 percent.
""The volume growth remains very, very good,"" Oppenheimer and Co analyst Roy Burry said. ""That's the problem.""
With Anheuser being the only U.S. major brewer to gain market share, competition has intensified, Burry said.  
In spite of the increased competition, Baker said Anheuser implemented about a three percent price increase, equal to $0.10 to $0.15 per six-pack of beer, in much of the United States this month. This followed a similar price increase in seven states in September and October of 1996.
He said it is too soon to tell if the price increases are holding. But preliminary reports indicate Anheuser's major competitors are following the price move on their premium brands in a majority of markets, he added.
Internationally, Anheuser reaped a double-digit increase in sales volume in 1996, Baker said, continuing a trend for this business.
International brewing profit dropped slightly in 1996 compared to 1995, due in part to increased marketing expenses.
Anheuser has been building its overseas beer business with ventures and investments in foreign brewers. In December, it increased its ownership in Grupo Modelo SA de CV to 37 percent for an investment of about $550 million.
The company said its Busch Entertainment theme park subsidiary made a significant contribution to earnings in 1996, with its fifth consecutive year of record attendance and profitability.
((Reuters Chicago Newsdesk  312-408-8787))
",36
"Quaker Oats Co. Thursday reported a profit for the fourth quarter, reversing a year-ago loss, but said its Snapple beverage business was unprofitable and continued to be a disappointment.
Quaker said Snapple's U.S. and Canadian sales dropped 8 percent in 1996, with volume down 11 percent. Sales of its six-flavor Diet Snapple line, however, rose 23 percent in 1996.
Chicago-based Quaker said it earned $18.1 million, or 12 cents a share, in the fourth quarter, compared with a loss of $47.8 million, or 36 cents a share, in the 1995 period. Excluding a $40.8 million pretax restructuring charge in the 1995 fourth quarter, Quaker posted a year-ago operating loss 18 cents a share.
Fourth quarter revenues were $1.06 billion, down 10 percent from $1.18 billion a year earlier, which included $90.3 million from divested businesses.
For the full year, Quaker said it earned $244 million, or $1.80 a share, which included a $113.4 million gain on divested business. In 1995, it earned $720 million, or $5.39 per share, with a $1.05 billion gain.
Sales last year were $5.20 billion, 13 percent below the previous year's $5.95 billion, which included $796.9 million from divested businesses.
""This was a rebound year in which our largest, value-driving businesses -- U.S. and Canadian foods and worldwide Gatorade -- increased their operating profits,"" Chairman William Smithburg said in a statement.
A $100 million cutback in advertising and marketing costs in 1996 also helped results, analysts added.
In a conference call, Smithburg said Quaker was committed to at least 10 percent real earnings growth in 1997. ""We're going to try like crazy to do even better than that,"" he said.
Quaker management again pledged to turn around Snapple, which it bought over two years ago for $1.8 billion.
""We need to stabilize (Snapple's) volume"" in 1997, Smithburg said. ""Our goal is to operate Snapple at cash positive in 1997.""
Cash positive means Snapple is expected to be profitable, excluding goodwill charges of about $50 million a year.
Quaker surprised some analysts by not taking a charge in the fourth quarter to reduce Snapple's value. Analysts had expected Quaker to take a large writedown for Snapple, potentially as high as $1 billion.
Smithburg declined to comment on speculation and rumors that Quaker was looking to sell Snapple, a fruit-flavored and iced tea beverage business, and its Gatorade sports drink.
He said Quaker's management continues to review steps to ""create value for shareholders,"" but declined to be specific.
Gatorade, Quaker's largest brand, had a strong year in 1996, Smithburg said, with sales volume rising 6 percent in the fourth quarter and 4 percent year-to-date.
Gatorade is launching this year a ""Frost"" line of Gatorade beverages that will feature a ""cooling taste,"" Smithburg said. ""The trade acceptance has been nothing short of terrific.""
Smithburg said the company's hot cereals business had a strong year, with sales volume up 9 percent.
Ready-to-eat cereals, such as Cap'n Crunch and Life, gained 3 percent in volume for 1996. The value-priced line of bagged cereals grew more than 40 percent in the year.
Quaker stock was down 62.5 cents at $35.875 in afternoon trading.
",36
"McDonald's Corp.'s plan to offer deep discounts on its fast food, including 55-cent sandwiches, is a risky promotion that could hurt profits and sour relations with franchisees, analysts said Thursday.
""I think that (price promotion) strategy is flawed, to put it bluntly,"" said analyst Roger Lipton of Lipton Financial Services.
Instead of cutting prices, Lipton added, McDonald's needs to focus on ""higher-quality products and better service.""
McDonald's, which beefed up its menu offerings last year with a new ""Deluxe"" line of sandwiches, defends its products with its sales figures.
""We're a global leader. We serve 35 million customers around the world each day,"" said McDonald's spokeswoman Anna Rozenich. ""Certainly we're doing something right.""
Under the proposed promotion plan, the fast-food giant would feature one sandwich -- such as its Big Mac -- for 55 cents when a customer also buys french fries and a drink.
Short term, that will bring more customers into McDonald's, said Josh Rosen, an analyst at ABN AMRO Chicago Corp.
But longer term, the 55-cent promotion, which is expected to apply to a different sandwich each month, could backfire. ""By selling a Big Mac at 55 cents, you are telegraphing to consumers that's what it's worth,"" said Rosen.
However, Merrill Lynch analyst Peter Oakes applauded the 55-cent promotion, which he said will help McDonald's build incremental customer traffic. He said the promotion is akin to McDonald's ""extra value meals,"" which were launched six years ago and became McDonald's most successful item in the last 10 years.
Some franchisees are concerned, however, that the promotion, which could run about 12 months, may hurt profit margins.
""McDonald's is intent on raising top line sales and showing (positive) U.S. (same store) sales,"" said Dick Adams, head of the Consortium, a group of independent McDonald's franchisees. ""Franchisees are interested in top line sales, but only as it relates to bottom line profits.""
McDonald's, which has not commented on the details of its planned promotion, said its interests are aligned with those of its more than 2,700 franchisees in the United States.
""When our franchisees are doing well, we're doing well,"" McDonald's Rozenich said. About 80 percent of McDonald's U.S. restaurants are franchises.
Many of McDonald's U.S. franchisees have been upset by lower U.S. same-store sales trends, which some have blamed on the fast-food giant's rapid expansion, franchise sources said.
""Cannibalization (when a new unit draws sales away from an existing one) is a big issue with a lot of people,"" said one franchisee, who asked not to be named.
While competitors such as Wendy's International Inc. and Burger King, a unit of Grand Metropolitan Plc, said they will not follow with price cuts, McDonald's promotion likely will draw some customers away.
""They're going to take some business from people. There is a segment of the population that will gravitate to McDonald's to buy Big Macs at 55 cents,"" said Sid Feltenstein, chairman of A&W Restaurants Inc., a chain of 800 units.
However, based on current menu prices at a downtown Chicago McDonald's, a customer would pay $3.01 for a 55-cent Big Mac along with a medium-sized french fries and medium-sized drink. That would be a savings of 48 cents compared with the $3.49 Big Mac extra value meal at the same McDonald's.
Asked Feltenstein: ""Are people to go out of their way to save (48 cents)?""
",36
"Quaker Oats Co. may take a charge of up $1 billion to write-down its money-losing Snapple beverage business, analysts said Monday, but the charge may not show up in its fourth quarter earnings report expected to be announced next week.
""I think it could be close to $1 billion,"" BT Securities analyst John O'Neil said of the charge to write-down the value of Snapple.
In November, Quaker said it would review Snapple, which it acquired about two years ago for $1.8 billion, to see if it must take a charge to reduce the value of the business on its balance sheet.
""The probability is reasonably high that they do (take a write-down),"" said Michael Mauboussin, analyst at Credit Suisse First Boston. He also believed that it could be about $1 billion.
Quaker spokesman Ronald Bottrell said a review of Snapple's operations was continuing, but declined to comment on whether the company planned to take a charge.
Steven Galbraith, an analyst at Sanford Bernstein said he believed that Quaker would be compelled to take a charge for Snapple. ""It's clearly an impaired asset,"" he said.
Quaker could avoid taking a write-down to reduce the carrying value of Snapple if it sold that business along with its Gatorade sports beverage, Galbraith said.
Speculation continues that Quaker is looking to sell both Snapple, which it has said will have an operating loss in 1996, and Gatorade, its largest single brand, analysts said.
If the two beverage businesses were sold together, Galbraith said Quaker might be able to offset a gain from Gatorade with the loss from Snapple. He valued the two businesses together at about $3 billion.
""If I didn't see a charge this quarter (for Snapple), I would raise eyebrows, meaning something is up,"" Galbraith said.
Quaker Oats has repeatedly declined to comment on speculation that it was likely to sell Snapple and Gatorade.
""I will tell you again it is our policy not to comment on rumours and speculation,"" Bottrell said.
Many names have surfaced in the past as possible suitors for Quaker's beverage businesses, including Procter & Gamble Co., Coca-Cola Co., PepsiCo Inc. and Cadbury Schweppes Plc.
None of the companies in the past has commented on the speculation.
Quaker's stock was off $1 cents at $37.375 on the New York Stock Exchange in afternoon trading.
",36
"Summit Medical Systems Inc., said Monday its 1996 revenues will be ""substantially less"" than what it reported last week due to accounting discrepancies discovered by its new chief financial officer, who resigned after less than a week on the job.
The company, which makes computer-based information systems for the healthcare industry, said it expected to revise downward the $19.5 million in revenues it reported in 1996, and could also cut revenues for 1995 and 1994 as well.
Company officials were not available to comment.
Summit's shares fell by $1.44, or 30 percent, to $3.31 in afternoon trading on the Nasdaq market.
Volpe, Welty & Co. analyst Chris Paul said Summit was believed to have about $40 million in cash and roughly 10.5 million shares.
""So it's trading below its cash value,"" he said. Still, he added, the cash the company is believed to have was ""providing a base for the shares.""
Minneapolis-based Summit said a preliminary review of its books indicated that revenues for the past three years had been overstated by between $4 million and $6 million -- or between 8 percent and 12 percent of the total.
Summit said the concerns over its revenues stem from the erroneous recognition of some revenues from the sales of software and related services.
Paul said the company did not provide any further explanation to analysts on a conference call.
""Summit Medical is extremely concerned by the discovery of accounting errors and is working vigorously to correct past mistakes and to establish stricter management controls and policies,"" Chief Executive Kevin Green said in a statement.
The company also announced that it planned to eliminate an unspecified number of jobs and establish a cost reduction program to reduce annual expenses by 20 percent.
That program is expected to result in an unspecified charge in the current quarter for employee severance and other costs, it said.
Last Wednesday, Summit reported 1996 revenues of $19.5 million, up from $17.7 million in 1995. It also posted a net loss for the year of $10.4 million, compared with a year-ago loss of $7.2 million.
The exact size of the adjustments to revenue and the years in which they apply will not be determined until an extensive audit is completed, the company said Monday.
Summit said that Donald Haas, who joined the company as chief financial officer last Monday, resigned Saturday -- after informing management that some 1996 revenue had been incorrectly recognized.
The company said that Haas told management on Thursday, the day after the company reported its 1996 results, that it had incorrectly recognized revenue during 1996 in some circumstances.
Management immediately began a review of these issues, it added.
""The company's auditors, Ernst & Young LLP, have expanded the scope of their audit and are performing additional audit procedures based in part on the questions raised by Mr. Haas,"" Summit said in its statement.
Summit added that it had retained the law firm Dorsey & Whitney LLP to investigate the matter with the assistance of independent accounting advice from Arthur Andersen LLP.
The company said it expected to announce corrected financial information by the end of March.
The likely downward revision of revenues for at least a year comes at a time when Summit is in the midst of a product transition, said Paul.
The transition, Paul explained, is to a single platform for Summit's computerized information system, which collects and analyzes patient data and likely outcomes. This anlaysis enables health care providers to monitor and potentially change a patient's treatment.
",36
"BAB Holdings Inc, which is still digesting its $29 million acquisition of Chesapeake Bagel Bakery, said it expects to buy more independent chains to expand its national presence as bagels grow in popularity.
""We probably get a call a week from independent bagel companies looking to be acquired,"" said Michael Evans, president of BAB, which operates Big Apple Bagels.
He added that while BAB is open to acquisitions, the focus in the near-term is integrating Chesapeake, which the company agreed to acquire earlier this year.  
Going forward, BAB will operate stores under the Big Apple Bagels and Chesapeake names, he added.
The opportunity to expand reflects the growing popularity of bagels, which have become a staple for many Americans as a substitute for bread, Evans said.
Evans reiterated that BAB, which will have 285 units after it completes its Chesapeake acquisition, hopes to have 800 units at the end of five years.
""If you take all the national chains, we have maybe 1,000 to 1,100 units. We're a long way from market saturation,"" Evans added in an interview.  
Analyst Ernest Andberg of R.J. Steichen & Co said bagel restaurants are in their infancy in terms of growth potential. ""There is significant room to grow chains now,"" he said.
R.J. Steichen, which was the underwriter for BAB when it went public in November 1995, rates the stock a buy.
Also adding units are Quality Dining Inc's Bruegger's Corp, the largest U.S. bagel chain, Einstein/Noah Bagel Corp, and Manhattan Bagel Co Inc, Andberg said. He added he believes BAB is well positioned to expand particularly in smaller markets in part because its units require a relatively modest capital investment.  
Andberg added that BAB, which is headquartered in Chicago, makes its bagels from scratch on premise, which eliminates distribution concerns to serve smaller markets.
Evans said BAB, which has both franchised units and a growing number of company-owned stores, sees a ""huge potential"" in secondary markets. He added BAB would locate in a smaller city if it could draw from a surrounding population base of 25,000 to 35,000 people.
Evans said BAB also hopes to expand its Brewster's Coffee Co, which it acquired recently, including units in smaller towns.
Evans declined to give earnings and sales growth targets for BAB, which had a net loss in fiscal 1995 of $0.19 a share due to expansion costs. Earlier this month, BAB said it expects fiscal 1996 revenues, excluding the Chesapeake acquisition, to more than triple 1995 revenues of $2.0 million.
Reuters Chicago Newsdesk - 312-408-8787
",36
"After 19 months of sometimes violent confrontations, six striking newspaper unions on Friday made an unconditional offer to return to work at Detroit's two major daily papers.
Al Derey, head of the Metropolitan Council of Newspaper Unions, said the action was not an act of surrender but a tactic to expose the papers to potentially huge financial losses if they do not agree to a fair contract.
""Our position is this strike has not ended. This is simply a new strategy to try to win a fair and decent contract from two corporate giants that don't have any souls,"" a visibly emotional Derey told a news conference.
About 2,500 distribution, pressroom, newsroom and mailroom workers walked off their jobs at the Detroit Free Press and Detroit News in July 1995 after contract talks collapsed.
The papers are editorially indepdendent and have separate owners but have been published under a joint operating agreement since 1989.
Knight-Ridder Inc. owns the Free Press. The News is owned by Gannett Co. Inc.
A representative from Detroit Newspapers Inc, the joint operating agency, could not be reached for comment.
The papers have published every day since the strike began, although early on they only published a single joint edition. More than 400 of the original strikers have cross picket lines. The papers have hired about 1,400 replacements.
Since the start of the strike, which has often erupted in violent confrontations between supporters and private security guards, circulation at the papers has fallen 30 percent. Advertising revenues are down between 15 percent and 20 percent.
Derey told reporters the advertising boycott has cost the papers a combined $250 million, and 700,000 readers have dropped subscriptions. But because the newspapers ""still don't get it,"" he said the unions need to adopt a new strategy.
If the papers reject the return-to-work offer, they could be liable for back pay from the time the offer was made if they were found to have commited unfair labor practices, said Derey. That amounts to $250,000 a day, or $1 million a year, he said.
The action Friday is a controversial one for many union members, who are staunchly opposed to returning to work. But Derey appealed for their support.
""This wasn't the only strategy and it isn't the easiest, but it is the best way we've got to take on these corporate powers and get us moving again down the road to a fair contract,"" he said.
One local labor analyst said the union's move was an acknowledgement the strike as a means of leverage has reached the point of diminishing returns. But it does force management to make some difficult decisions.
""What the unions are doing now is upping the legal ante,"" said Steve Babson, labor program specialist at Wayne State University's Labor Studies Center.
If the papers do not agree to take back all of the striking workers, they could be liable for the back pay penalities if they commited unfair labor practices, a legal process that could take years to resolve, he said.
The Detroit regional director of the NLRB has accused the companies of unfair labor practices, finding they did not bargain in good faith. The company appealed that decision to an administrative law judge, who has not yet issued a ruling.
",48
"Ford Motor Co. Wednesday threatened to halt production at three plants in Michigan and Ohio if Johnson Controls Inc. and the United Auto Workers did not work out a solution to a nine-day strike.
Ford's action would idle about 6,800 hourly workers and suspend production of two of its best-selling and most profitable vehicles, the Expedition full-size sport/utility and F-Series pickup trucks.
Ford spokeswoman Francine Romine-MacBride said the automaker told UAW locals Wednesday afternoon if an agreement was not reached by Thursday, production will stop at the end of the regular afternoon shift that day.
Plants that would be affected are in Wayne, Mich., Lorain, Ohio, and Avon Lake, Ohio.
About 500 UAW workers at two Johnson Controls plants walked off the job on Jan. 28 when talks broke down on a new contract with the Milwaukee-based company. The plants, located in Plymouth, Mich., and Oberlin, Ohio, make seats for the Expedition and Econoline and Club Wagon full-size vans.
The action marks Ford's most public and aggressive action to push the two sides toward a resolution since it refused to accept seats made by non-union replacements several hours after the strike began.
Negotiations resumed Wednesday afternoon after breaking off Tuesday, Johnson Controls spokesman Jeff Steiner said.
Thinking the strike would end quickly, Ford has been continuing to make Expeditions and Econolines with temporary seats and storing the vehicles in nearby lots. By the end of production today, the company will have about 6,800 Expeditions and 6,300 Econolines without proper seats.
Dealers had a 26-day supply of Expeditions on their lots at the end of January. The industry typically considers a 60-day supply to be ideal.
Ford officials expressed concern that Johnson Controls would have problems meeting Ford's ongoing requirements in addition to catching up to Expeditions and Econolines already made.
""We really truly believed there would be an early settlement and that's clearly not the case,"" Romine-MacBride said.
In additions to Expeditions, Ford makes its popular F-Series pickups at truck plant in Wayne, where 4,000 UAW members work.
The Lorain plant does final assembly of Econolines and Club Wagons. About 1,500 workers would be affected by a shutdown. Production of the Thunderbird and Cougar cars would be affected, although those lines already were idled for separate reasons.
At the Avon Lake plant, which makes frames for the commercial vans, 1,300 workers would be affected. Frame production of the Mercury Villager and Nissan Quest minivans would not be affected, Ford said.
Ford officials declined to comment on how much the strike was likely to cost Ford.
UAW spokesman Karl Mantyla declined to comment on Ford's action. Steiner at Johnson Controls said the company was aware of Ford's position and was committed to settling the strike as soon as possible.
The two sides were at odds over pay levels for a new contract. The union says it wants the same hourly rate of $14 to $16 that competitors pay. But Steiner said Johnson Controls has put forth a competitive offer.
""We feel we've got a fair and reasonable package on the table that compares favourably to what the UAW has agreed to at other supplier plants,"" he said.
",48
"When thousands of auto dealers rolled into Las Vegas for their annual convention last year, there was much clamour over the looming onslaught of no-haggle superstores.
As dealers prepare for this year's gathering, which starts Saturday in Atlanta, the juggernaught is upon them.
Republic Industries Inc., the company controlled by billionaire investor Wayne Huizenga of Blockbuster Video fame, is on a buying spree that may have already made it the largest auto dealer group in the nation.
Within two months, Republic, which includes the AutoNation USA superstore chain, has gone from owning no new-car franchises to six dealer groups.
In the meantime, officials at CarMax, the auto superstore chain owned by Circuit City Stores Inc., said earlier this month they would consider buying existing dealerships and adding more new-car outlets as part of their expansion plans.
""I think it's got a lot of dealers rattled,"" said John Sinclair, owner of Sinclair Ford of Festus in Festus, Mo.
The sweeping changes prompted industry trade magazine Automotive News to ask in its most recent edition: ""Apocalpyse Now?""
Before its latest purchase, Montgomery Securities estimated Republic's 1997 franchised dealership revenues at $2.5 billion. That puts it ahead of the previous largest group, Hendrick Automotive Group, which has estimated 1997 revenues of $2.4 billion.
The explosive growth of Republic, CarMax and others comes as Detroit's Big Three automakers have backed off their traditional resistance to publicly owned dealerships.
Ford Motor Co. Chairman Alex Trotman told dealers in Las Vegas a year ago that the No. 2 automaker had no plans to follow Chrysler Corp. and award a new car franchise to an auto superstore.
But the automaker reversed its position in December when it formed an alliance with Republic that resulted in the sale of Ohio-based Mullinax Management, one of the country's biggest Ford dealers, to Republic.
Ford Chief Financial Officer John Devine said earlier this week the automaker still believes the private enterprise system is the best for the industry.
But he added, ""We also have to recognise that changes are here and more changes are going to come.""
How profitable and successful the superstores ultimately become remains to be seen. But in the short term, they are helping turn the tradition-bound retail car industry upside down. Armed with capital, the auto superstores have taken sophisticated mass-market retail concepts honed in such places as consumer electronics stores and applied them to the new and used vehicle market.
The results are huge lots of high-quality, pre-certified used cars. Buyers who dread walking into an old-fashioned car dealerships enter the new superstores to find user-friendly computer kiosks and childrens' play areas. Salaried sales representatives offer low-pressure help, vehicles at no-haggle prices and 30-day bumper-to-bumper warranties.
""I think there's going to be a revolution in the car business,"" Fred Ricart, owner of Ricart Ford in Columbus, Ohio, said earlier this month during a panel discussion at the Automotive News World Congress.
Ricart, whose own dealership is structured in an auto mall format, believes traditional dealers can overcome their negative sterotypes and compete. But he says they have to find new ways of improving and measuring customer loyalty and satisfaction.
""The advantage the superstores have is they've got a clean slate going in,"" he said.
The National Automobile Dealers Association's 80th Annual Convention and Equipment Exposition will be held at the Georgia World Congress in Atlanta, from Feb. 1-4.
",48
"Marathon labor contract talks dragged Saturday at a key auto supplier, with some progress being reported in a bid to avoid a strike that would quickly halt light truck production at General Motors Corp.
Bargainers for American Axle & Manufacturing Inc and the United Auto Workers (UAW) had been talking for 35 hours straight as of 5 p.m. Saturday, seeking to hammer out terms for a new three-year contract that would cover 7,200 hourly workers.
A midnight Friday strike deadline set by the UAW expired without any picket action. Union members remained on the job Saturday, as the company proceeded with its normal weekend operations of limited production and maintenance work.
""There is progress,"" said a person familiar with the talks who asked not to be named. ""The attitudes are good.""
A strike at American Axle's five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y., would shut down light truck production at GM's 11 North American truck plants within days, and create more supplier hardships for Ford Motor Co.
American Axle, which was spun off from GM in 1994, supplies rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company makes axle shafts that are used by Ford in its F-150 pickup trucks, Expedition and Explorer sport/utilities and some rear-drive passenger cars, although inventories of those supplies are not as critical as the GM parts. It also makes axles for a small number of Chrysler Corp. light truck products.
Tight inventories among axle suppliers means GM's light truck plants would run out of parts by early next week, analysts said. The world's largest automaker could lose after-tax profits of $20 million a day if it were forced to suspend light truck production, analysts said.
American Axle and the UAW are at odds over wages and other economic issues as the union seeks to impose on the company the same pattern contract the Big Three automakers agreed to for about 400,000 UAW members last fall.
Automakers guaranteed jobs for 95 percent of their current workforce in a contract that provides $2,000 lump sum payments in the first year and wage hikes of three percent in the second and third years. The pact allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
American Axle, however, wants to start new hires at a lower rate and extend the time it takes to reach the full rate to six years, union officials said. The Big Three pact has a ""grow- in"" rate of three years.
But if the company were forced to match the Big Three pattern it would be at a severe cost disadvantage against its competitors, a company spokesman has said.
The American Axle talks have drawn attention because they mark the first time a GM spin-off has had to negotiate a new contract.
Meantime, a UAW strike against Johnson Controls Inc, a key seat supplier for Ford, entered its 19th day Saturday with no settlement.
",48
"Ford Motor Co's long-shot bid to sit down first with the United Auto Workers union paid off, but analysts wondered Wednesday what the automaker had to give up in exchange for being the Big Three's lead-off negotiator.
""Everyone wants to be first, and that's obviously a plus for Ford in that regard,"" said J.P. Morgan analyst David Bradley. ""The question is, what price did they have to pay to be first?""  
Since January, analysts and other auto industry observers believed Chrysler Corp would be the UAW's choice to start contract talks, although last month some thought General Motors Corp had a good shot.
Union officials acknowledged Tuesday that Ford was selected, but they declined to comment beyond that. Ford executives also declined to comment other than to say the automaker is ""encouraged"" by the tone of the talks.
Analysts speculated Ford may have expressed some willingness to help union organizing efforts among its supply base.  
That would address job security issues that are crucial to the UAW as the union faces a shrinking membership base.
In return, the union may have agreed to consider a contract that spans more than the traditional three years.
""I think (Ford) would love to have a five or six year agreement,"" said Michael Ward, an analyst at PaineWebber Inc. ""It strengthens Ford's position with the UAW.""
A big unknown is how willing Ford is to limit the number of components it buys from outside suppliers, a process known as outsourcing.  
But James Harbour, president of Troy, Mich.-based industry consultant Harbour and Associates Inc, said Ford does not have the breadth of engineering talent to bring large numbers of parts in-house.
""I think probably the biggest thing they could give them is to say we'll work with suppliers and ask them to join the union,"" said Harbour.  ""Membership is the issue this year.""
Not being the lead-off company has in the past been bad news for the two automakers not selected because of the pattern style of bargaining that imposed terms on them.
But analysts said that is not necessarily the case this time.  
Unlike prior years, negotiations are continuing with GM and Chrysler.  And there are signs the traditional pattern process is no longer as firm as it used to be.
Bradley noted that by holding out, GM has also not lost any negotiating power. ""For now, GM is powder-dry.  They haven't given up any leverage, which they would have had to do to be first,"" he said.
In picking Ford, which employs about 104,000 UAW members, the union starts with a company that is recognized as having the best labor relations among the Detroit's Big Three.
Analysts said the relative labor peace has given Ford better work rules and allows it more flexibility to use overtime to increase production.  It also has spared the company costly strikes that have hit GM and Chrysler.
The downside, according to Wall Street analysts, is that Ford has not been as aggressive in farming out work to less expensive outside suppliers -- something GM is focusing on.
",48
"Investigators fought frigid, wind-blown snow on Friday trying to recover the remains of 28 adults and one infant killed when a commuter plane crashed into a field and left a blackened crater.
Investigators found the plane's ""black box"" cockpit voice recorder and flight data recorder late on Friday, the NBC and ABC television networks reported, quoting sources close to the investigation.
The devices usually provide investigators with detailed information on the final seconds before a crash.
Hampering the search for both human and aircraft remains were temperatures falling to near zero Fahrenheit (minus 18 Celsius) and ground blizzards that created near white-out conditions.
Workers were able to stay in the wooded field for no more than 15 to 20 minutes at a time, said John Hammerschmidt, senior member of the National Transportation Safety Board.
""There is a crater out there"" hiding some of the wreckage, he said, including propellers, engines and engine assemblies from the 30-seat, Brazilan-built Embraer 120 operated by Delta Comair.
In addition, eight-foot (2.5 metre) high brush covered with snow from the storm during which the plane crashed on Thursday made recovery efforts difficult, Hammerschmidt said.
""There are remains just all around the entire scene,"" he said. Local police had removed some of the remains to a morgue and families of some of the victims were taken to a nearby motel, where teams of counsellors were on hand.
Hammerschmidt said the 28 adults and one ""babe in arms"" aboard the twin-engine propjet lifted off from Cincinnati at 2:53 p.m. EST, and the plane crashed and 3:52 p.m. during its approach to Detroit's Metropolitan Airport.
He said the pilot, Dann Carlsen, 43, of Williamstown, Kentucky, was very experienced and was a flight instructor. He also said the plane was equipped with de-icing systems for the wings, the leading edge of the propellers and for the engines.
Hammerschmidt refused to speculate on whether ice was a factor in the crash. USA Today said a pilot in the vicinity reported icing conditions at about the same altitude the doomed plane was flying minutes before it crashed.
The Cincinnati Post quoted an unidentified Comair pilot on Friday as saying the Embraer 120 can suffer wing icing problems despite a system designed to break up ice through a pneumatic rubber strip on the wing that is inflated and deflated in bad weather.
Michael Bragg, a professor of aeronautical and astronautical engineering at the University of Illinois in Champaign, told Reuters that some eyewitness accounts of the crash point to a ""classic horizontal tail stall.""
Such stalls have long been considered a problem with smaller propjet planes, he said. Ice on the the horizontal part of the tale can disrupt the airflow that keeps a plane flying level. When flaps are deployed in such a situation, Bragg said, the plane stalls and dives.
Monroe County Sheriff Tillman Crutchfield told a news conference the recovery of the bodies would last into the weekend.
Those killed included Maureen DeMarco, 37, a teacher from Englewood, Colorado, who was en route to Detroit to attend a memorial service for her brother, Brian Scully, who died on Dec. 22 in the crash of an Airborne Express cargo plane in Virginia.
Also killed was Keita Takenami, 47, a quality control manager at Toyota Motor Corp.'s car assembly plant in Georgetown, Kentucky, and Dexter Adams, 41, a Procter & Gamble Co. purchasing executive.
Wreckage from the crash was strewn over a tight area of about 200 yards (190 metres) by 100 yards (94 metres), Crutchfield said.
In a news briefing in Erlanger, Kentucky, Comair senior vice president Charles Curran said the airline would defer to the NTSB for all future information on the crash.
Cincinnati-based Comair is a regional carrier that flies commuter routes for Delta. Hammerschmidt said the company has 91 planes in its fleet.
The three Cincinnati-based crew members were Carlsen, First Officer Kenneth Reece and Flight Attendant Darinda Ogden, Comair said.
Flight 3272 had been cleared for approach to Detroit Metropolitan Airport when air traffic controllers lost radar contact, Comair's Curran said on Thursday. No distress signals were sent, he said.
",48
"United Auto Workers union bargainers continued to negotiate with  American Axle Manufacturing Inc past a midnight Friday strike deadline as workers held off on putting up picket lines.
About 7,200 UAW members were poised to walk off their jobs at five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y., if no agreement was reached on a new three-year contract. A person answering the phone at UAW Local 262 in Detroit said at midnight members had not received any official word the deadline had been extended.
A strike at American Axle could cripple the company's largest customer, General Motors Corp, within days.
The two sides are at odds over wages and other economic issues as the union seeks to impose on American Axle the same pattern contract the Big Three automakers agreed to for about 400,000 UAW members last fall. Automakers guaranteed jobs for 95 percent of their current workforce in a contract that provides $2,000 lump sum payments in the first year and wage hikes of three percent in the second and third years.
American Axle, which was spun off from GM into a private company in 1994, supplies virtually all of the rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company also makes axles for Chrysler Corp. and axle shafts for Ford Motor Co..
Tight inventories at American Axle and Dana Corp., the other primary axle maker in the United States, means GM's light truck plants would run out of parts by early next week, analysts said.
Burnham Securities Inc. analyst David Healy estimated GM could lose $20 million a day in after-tax profits if it was forced to suspend light truck production. Labor strife cost the world's largest automaker $1.2 billion in 1996.
The American Axle talks have drawn attention because they mark the first time a GM spinoff has had to negotiate a new contract. When the firm was spun off under former Chrysler manufacturing chief Richard Dauch, it agreed to uphold terms of the previous UAW contract, which expired last September.
Union officials have said the company is balking at following the Big Three pattern deal hammered out last fall. The contract allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
American Axle, however, wants to start new hires at 60 percent of the base wage -- and extend the time it takes to reach the full rate to six years. The Big Three pact has a ""grow-in"" rate of three years.
",48
"U.S. investigators began the grim task on Friday of digging through a snow-covered field to recover the bodies of 29 people killed on Thursday when a commuter plane crashed during a snowstorm near Detroit.
Officials said National Transportation Safety Board (NTSB) investigators would focus on retrieving bodies before looking at the wreckage of the Delta Comair plane.
""We're going to be doing the body recovery first, and the NTSB investigation secondly,"" Monroe County Sheriff Tilman Crutchfield told a news conference in Monroe, a town about six miles (10 km) from the crash site.
He added that NTSB officials briefly examined the site on Thursday night but had not located the plane's cockpit voice and data recorders.
The Comair plane, an Embraer Brasilia 120 en route to Detroit from Cincinnati, crashed in a snowy field just west of Monroe in Raisinville Township, Mich., about 25 miles (40 km) southwest of Detroit.
Those killed included a teacher from Englewood, Colorado, who was en route to Detroit to attend a memorial service for her brother who died on December 22 in another air crash,
A temporary morgue has been set up at the Custer Airport near Monroe and NTSB officials were expected to be at the crash site by mid-morning.
Wreckage from the crash was strewn over a tight area of about 200 yards (190 metres) by 100 yards (94 metres), Tilman said. Although emergency workers covered the crash site with tarpaulins overnight, he added that snow showers would hamper recovery efforts.
""The weather certainly complicates the situation with the blowing snow,"" Tilman said. ""It certainly hampers the situation and is going to make the recovery more difficult.""
Cincinnati-based Comair, an independent carrier that flies commuter routes for Delta, said the 30-seat plane was carrying 26 passengers and three crew members.
The airline sent 30 members of its emergency response team to Michigan on Thursday, according to David Siebenburgen, President of Comair.
""They are there to assist the families, the NTSB and the FAA (Federal Aviation Administration) in any way they can during this ordeal,"" Siebenburgen said.
Flight 3272 had been cleared for approach to Detroit Metropolitan Airport when air traffic controllers lost radar contact, Comair's Curran said on Thursday. No distress signals were sent, he said.
Comair said the plane has been with the company since February 1992 and had its most recent maintenance checkup on Nov. 20, 1996. The airline denied an earlier report the plane had been grounded two days earlier for rudder problems.
",48
"The head of General Motors Corp.'s  Chevrolet Division said Monday he wants customers to be able to buy a new car or truck in 90 minutes -- down from the six to eight hours it often takes today.
Chevrolet also plans to expand a pilot program called Custom XPress Delivery, whereby buyers of popularly configured Blazers can receive the sport/utility vehicle one day after they sign the papers.
""Customers shouldn't have to wait six to eight weeks to take delivery on a new vehicle with the color and options they want,"" said John Middlebrook, general manager of Chevrolet, GM's largest single division.
The changes are part of a series of what Chevrolet calls ""Brand Critical Standards"" the division plans to roll out on a national level this year.
""Today, building a quality product is just the price of entry,"" Middlebrook said in a speech at the Automotive News World Congress here. ""Dealership experiences set us apart and help make the difference between winning and losing a loyal customer.""
Middlebrook predicted that changes to the distribution system, dealership culture and retail process will be the industry's dominant focus into the 21st century.
Driving the changes are customer demands for better service and better treatment from the existing new car sales process, one he said has not changed in more than 80 years.
He cited the rapid rise of new companies such as Car Max and AutoNation. Often called ""Big Box"" retailers, the new stores offer a wide selection of certified used cars, as well as new cars, at no-haggle prices.
""The bottom line is that customers' expectations are changing and will continue to drive change into the retail sales process for automobiles,"" he said.
Another area Chevrolet wants dealers to change is the selling process itself. Many sales representatives now spend 20 percent of their time helping a customer settle on a new vehicle, and 80 percent negotiating over the price. Chevrolet wants those numbers reversed.
""Our stores have to convey an image that is consistent with the Chevrolet brand. Customers should feel genuine trust when they walk into a Chevrolet dealership,"" he said.
Chevrolet is continuing its plan to reduce the number of dealerships. Eventually, the division wants 4,000 in the United States instead of the current 4,400, said Middlebrook.
Talking to reporters later, Middlebrook said dealers should have ""good availabitity"" of Chevrolet's new Venture minivan when advertising begins in February or March. However, he warned that overall inventories will be tight.
""We're going to be short because I think demand will exceed supply,"" he said, adding that Chevrolet plans to make and sell 70,000 to 75,000 of the new minivans in 1997.
Despite flat total U.S. minivan sales during the last several months, Middlebrook predicted the segment will grow 25 percent over the next five years as buyers from more demographic groups need the practicality they offer.
""As you look at the minivans and their acceptibility, it's across the total age spectrum. We're seeing more and more retirees in a minivan when they retire,"" he said. ""Minivans are going across the entire market spectrum -- much like station wagons used to.""
Middlebrook said segment leader Chrysler Corp. remains the GM's top competitor in the minivan market. In addition to GM, Toyota Motor Corp. will enter the market with a new front-wheel drive product called the Sienna in the fall.
Last week, Toyota executives said they expect to sell all of the 50,000 to 60,000 Sienna's they can produce in the first model year it is on the market.
",48
"Bargaining between union and American Axle Manufacturing Inc. negotiators was expected to continue up to the midnight Friday deadline to avoid a strike that would quickly paralyse General Motors Corp.'s U.S. light truck production.
About 7,200 United Auto Workers union members were ready to walk off the job at five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y., if no agreement was reached on a new three-year contract.
American Axle, which was spun off from GM into a private company in 1994, supplies virtually all of the rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company also makes axles for Chrysler Corp. and axle shafts for Ford Motor Co.
Tight inventories at American Axle and Dana Corp., the other primary axle maker in the United States, means GM's light truck plants would run out of parts by early next week, analysts said.
""They can't have more than two days supply because there is no excess capacity in the industry,"" said James Harbour, president of Harbour & Associates Inc., a Troy, Mich.-based consulting firm.
Burnham Securities Inc. analyst David Healy estimated GM could lose $20 million a day in after-tax profits if it was forced to suspend light truck production. Labour strife cost the world's largest automaker $1.2 billion in 1996.
The American Axle situation is the latest labour dispute to flare up in the automotive supplier industry since the beginning of the year. Analysts say they signal a new era as the UAW steps up efforts to organise more component workforces and bring pay levels in line with those of the Big Three.
""It's the next phase of the evolution of change,"" said Donna Parolini, president of International Business Development Corp., a Troy, Mich. supplier consulting firm.
UAW membership among independent, or non-Big Three, suppliers has dropped dramatically over the last 20 years so that now less than 20 percent of the independent parts workers belong to the UAW, she said.
The American Axle talks are notable because they mark the first time a GM spin-off has had to negotiate a new contract. When the firm was spun off under former Chrysler manufacturing chief Richard Dauch, it agreed to uphold terms of the previous UAW contract, which expired last September.
Union officials have said the company is balking at following the Big Three pattern deal hammered out last fall. That contract guarantees employment for 95 percent of current workers, and allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
Amrican Axle, however, wants to start new hires at 60 percent of the base wage -- and extend the time it takes to reach the full rate to six years. The Big Three pact has a ""grow-in"" rate of three years.
Last month, two Johnson Controls Inc. seat plants were hit with strikes by newly organised UAW workers. As of the Friday an agreement had not been reached in the 18-day-old strike.
The walkouts prompted Ford to take the unprecedented action of refusing to accept seats made by non-union replacements. Ford later signed up Johnson Controls' main competitor, Lear Corp., to supply it with seats for the Expedition full-size sport utility vehicle, one of those affected by the strike.
Parolini released figures Friday that showed the global supplier industry consolidating at a faster rate than previously thought. By the end of this year, there will be about 8,000 suppliers -- down from 30,000 in 1988.
In the past 22 months, there have been more than 320 acqusitions or mergers valued at a total of $32 billion. The mergers will likely result in layoffs as the companies seek to gain efficiencies. For instance, Parolini said companies such as Lear and Johnson Controls have issued internal mandates to reduce headcount by 20 percent next year.
",48
"General Motors Corp. said Tuesday its fourth quarter earnings fell by more than half as labour strife slashed production and took a $700 million bite out of profits.
The world's largest automaker earned $786 million, or 92 cents a share, in the fourth quarter, down from $1.6 billion, or $1.95 a share, in the 1995 fourth quarter. All figures exclude results from Electronic Data Systems Corp., which was spun off last June.
GM's fourth quarter revenues fell to $40.95 billion from $41.35 billion.
For all of 1996, GM earned $4.95 billion, or $6.06 a share, down from $6.03 billion, or $7.14 a share. Revenues for the year rose to $164.1 billion from $160.3 billion.
U.S. and Canadian auto workers struck GM plants in October and November, while a United Auto Workers strike at two Dayton, Ohio, brake plants crippled GM's North American production for more than two weeks.
The strikes cut GM's full-year earnings by $1.2 billion and were largely responsible for a fourth quarter loss of $124 million in GM's core North American automotive operations. A year earlier, GM earned $603 million in North America.
""Clearly our 1996 fourth-quarter and calendar-year results were impacted by the strike-related production losses in the United States and Canada and are not indicative of GM's potential for continued profit improvement,"" GM Chairman John Smith said.
Smith also blamed GM's disappointing 1996 results on factory changeovers for new models and higher expenses for incentives and advertising.
GM's fourth quarter also included several extraordinary items that brought down earnings by $762 million, or 99 cents a share, including the $700 million in strike costs, a $157 million loss on the sale of four parts plants a $167 million charge related to GM's new UAW contract.
In addition, the fourth quarter also included a separate, favourable tax gain of $262 million.
The strikes also ate into 1996 profit-sharing checks for GM's union workers. GM said U.S. 282,000 represented workers in the United States will receive about $300 each -- less than half of the $800 they recived last year and a pittance of the $7,900 that Chrysler Corp. workers will get this year.
GM said 76,000 eligible salaried workers also will receive 1996 profit-sharing checks based on their level of pay and responsibility.
GM Chief Financial Officer J. Michael Losh promised that the 15 new car and truck models that GM is now introducing would bring long-awaited gains in North American market share and profitability in 1997.
GM's U.S. car and truck market share fell to 31 percent in 1996 from 32.4 in 1995.
""As we look forward to 1997, GM will get the bulk of its improvements here in North America, and we do expect to improve year-to-year,"" Losh told reporters.
The automaker will need the gains to offset a worsening picture in its international operations. GM officials told analysts not to expect increases in international profits for 1997 because of the slumping car market in Europe and spending for new plants in Poland, Argentina, Thailand and China.
GM's fourth quarter international profits fell to $353 million from $498 million a year ago. For the 1996 full year, they fell to $1.5 billion from $1.6 billion in 1995.
In Europe, GM's fourth quarter profits fell 60 percent to $99 million as retail incentive soared to $580 per car from $326 a year earlier.
GM's worldwide wholesale vehicle sales fell 7.1 percent to 1.99 million cars and trucks, with North American shipments off 11.4 percent and international shipments up 0.5 percent.
Analysts said the results were disappointing, but contained a few bright spots, including an increase in GM's year-end cash reserve to $17 billion from $10.2 billion at the end of 1995 and $14.5 billion on September 30, 1996.
""It's a good news, bad news quarter,"" said Burnham Securities analyst David Healy. ""It suggests that if 1997 is normal and largely free of strikes, it ought to be another good year for cash generation.""
Cash beyond GM's $13 billion reserve goal may be used to boost stock repurchases, analysts said. Losh said GM wanted to move quickly on the $2.5 billion buyback plan announced Monday. GM stock closed down $1.125 at $60.75 on the New York Stock Exchange.
",48
"In what may be a break in a 15-day strike against a maker of automotive seats, negotiators for Johnson Controls Inc. and the United Auto Workers spoke for several hours late Monday and early Tuesday.
The renewed discussions came hours after Ford Motor Co. said it would re-start its Expedition production line with seats from Lear Corp., Johnson Control's chief competitor in the auto seat business.
""We're hopeful there will be some additional discussions,"" said JCI spokesman Jeff Steiner.
No talks were held later Tuesday, but Steiner characterised the negotiations as being adjourned, compared with previous sessions where talks broke off completely. The two sides had not spoken since late Thursday, Feb. 6.
Unable to agree on terms for a new contract, about 500 UAW members at JCI seat plants in Plymouth, Mich., and Oberlin, Ohio, walked off the job Jan. 28. In addition to the Expedition full-size sport/utility, the plants make seats for Ford's Econoline and Club Wagon full-size vans.
Ford refused to accept seats made by non-union replacement workers, but continued making vehicles in hopes the strike would be settled soon. After it made 14,800 Expeditions and Econolines without seats, Ford last Friday suspended production on three assembly lines in Michigan and Ohio, idling 6,800 workers.
The automaker reversed direction again Monday, saying it was devising plans to resume Expedition production with seats from Lear. The popular sport/utility, introduced last fall, is one of Ford's most profitable vehicles, earning what analysts estimate at $10,000 each in pre-tax profits.
The Expeditions are made only at Ford's Michigan Assembly plant in Wayne, Mich. Once production resumes, some 4,000 of the 6,800 workers idled would go back to work. The shutdown has been a costly one for Ford. In addition to losing 840 Expeditions a day, the plant has also been forced to halt production of the hot-selling F-150 pickup trucks.
Steiner confirmed that JCI has moved fabrication equipment and frame-making tools out of the Plymouth plant and into its metal seat frame plant in Cadiz, Ky. The plant, which is represented by the United Steelworkers union, is one of six JCI facilities that has union representation. Milwaukee, Wis.-based JCI has a total of 34 plants in the United States.
JCI chose the Cadiz plant because it has extra floor space to accommodate the machinery, Steiner said. Under the plan announced Monday, JCI will make frames for both Lear and Ford. Lear will produce second and third row seats for Expeditions, and Ford will make front-row seats at its Chesterfield, Mich., trim plant.
",48
"The Explorer from Ford Motor Co., one of the brightest stars in the sport utility segment, looks headed to its first ever sales incentives.
Explorer, the best-selling four-door vehicle in the country for nearly two years, is facing its stiffest competition since it was introduced six years ago.
Ironically, some of that will come from the new Expedition full-sized sport utility that Ford is now introducing. The Explorer is also battling subsidised leases on competitive models that have made Chrysler Corp. Cherokees available for as little as $199 a month.
""We expect by the end of the year, they will most likely have begun some type of national programme on the Explorer,"" said Wesley Brown, director of global product analysis at CSM Forecasting, a consultant in Farmington Hills, Mich.
In a research report published earlier this week, Salomon Brothers analyst Jack Kirnan predicted Ford will launch lease incentives and other marketing support on the Explorer in the next 60 days.
""We strongly suspect that the all-new Expedition full-size sport utility will begin to cannibalize some sales from the Explorer, which alone should force Ford to implement incentives on the vehicle,"" said Kirnan.
Ford executives have said the Expedition, based on a modified platform of the new F-150 pickup truck, will steal 10 percent to 15 percent of the smaller Explorer's sales. Analysts believe Ford's internal projections have underestimated the Expedition's effects.
Explorer sales are already being hurt by the new Mercury Mountaineer, which is taking production capacity away from its sister Ford Division vehicle.
Including sales from August announced Thursday, Explorer sales have dropped five months in a row. For the month, sales were 27,615, down 10.7 percent. So far this year, sales of the sport utility were 264,996, 3.5 percent ahead of 1995.
Ford did not act as it were worried about hurting sales when it priced the 1997 Explorer. After quietly raising prices $200 at the end of the 1996 model year, Ford boosted the price for most Explorers another $315, one of the steepest in the model line. Going along with the price hikes, however, are some improved equipment features for the 1997 model year.
Jim Bright, a Ford Division spokesman, declined to discuss the possibilty of Explorer incentives. He noted the Explorer has faced tough competition before.
""We've never had a penny of incentive money on Explorer,"" he said. ""People keep coming after us. To date, we have not had to take that action.""
",48
"Fearsome of injuries caused by deploying airbags, consumers polled by a market research firm gave safety a lower ranking when choosing a new vehicle for the first time in four years, according to a study released on Sunday.
The biggest drop came with regard to airbags, which have been linked to the deaths of dozens of children and small adults by federal safety regulators.
The number of people who gave driver and passenger side air bags a very important or important rating fell to 57 percent from 82 percent the previous year, according to the report conducted by the Dohring Co. Inc., a Glendale, Calif.-based market research firm.
Respondents who said those air bags are ""not at all important"" in their purchase decision jumped to 24 percent from 6 percent.
""No doubt the safety reports of physical injury have contributed to this,"" Rik Kinney, senior vice president of Dohring Co. ""This is the first time since we started doing this study in 1993 that the importance of all safety-related equipment declined.""
Kinney said 96 percent of those surveyed had seen or heard media reports of potential injuries from airbags. Harm to children ranked as the single biggest fear, with 45 percent of those listing that as a concern.
The study was conducted in January 1997 from a random sample of 1,253 consumers in all 50 states. The poll's margin of error is 2.8 percent.
In other findings, the Dohring study found the number of people who have purchased or will shop at a new car dealership have access to on-line information serivces was up 10 percent to 38 percent.
But the study found that 81 percent of those talked to would still want to test drive a vehicle, even if they researched it over a computer on-line service. Only 4 percent plan to use an on-line service to buy their vehicle.
The study also found that 28 percent of the respondents would rather buy their next used car from a new car dealership that has a manufacturer's certified program, vs. 15 percent who said they would go to a used car superstore.
Kinney said the study was paid for by Dohring. But he acknowledged the company receives 99 percent of its revenues from by selling research to automakers, dealer advertising associations and individual auto dealerships.
",48
"When General Motors Corp.'s former Chairman Roger Smith forked over $5.1 billion for Hughes Aircraft Co., he envisioned an industrial Goliath that would develop space-age technologies for every-day cars.
Nearly 12 years the later, the verdict is mixed on Smith's grand plan, analysts said Thursday.
Raytheon Corp.'s agreement to purchase the Hughes defence operations is valued at $9.5 billion -- more than covering the original cost of the entire company bought from the Howard Hughes Medical Institute in June 1985.
If 100 percent of the Hughes-linked GM Class H stock were valued at Thursday's closing stock price of just under $63 a share, Hughes would be worth $25.2 billion. Under the structure before the proposed sale, about 25 percent of the Class H shares were traded publicly, with the rest held by GM.
Financially, GM's purchase of Hughes has paid off handsomely for the world's largest automaker.
But from the perspective of integrating Hughes and GM products, the experiment has not panned out, some analysts say.
One attempt was a heads-up instrument display like those used on fighter jet cockpits that was incorporated into Oldsmobiles and Pontiacs -- but never went anywhere.
""The idea of synergistically combining aerospace technology into the automobile business, and applying GM's advanced mass production technology to the high-cost aerospace business, was an idea straight out of cloud cuckoo-land and it never happened,"" said David Healy, an analyst at Burnham Securities Inc.
""Roger Smith was a terrible manager but a great investor,"" Healy added.
Analysts also pointed out that when GM's industry dominance slipped in the mid-1980s, the money it tapped for Hughes was unavilable to sink into sorely needed new car and truck programmes.
Indeed, Hughes Chairman C. Michael Armstrong acknowledged Wednesday that GM does not need to own Hughes to get the benefits of its radar and other aerospace technology.
But other analysts argued that GM has reaped untold strategic benefits from Hughes that are not readily visible to outside observers. One of the first benefits GM received was a vast improvement in its systems engineering capabilities, said David Cole, director of the University of Michigan's Centre for the Study of Automotive Transportation.
GM's EV1 electric car, the industry's first electric vehicle designed from the ground up, would not have been possible without Hughes' Delco Electronics Corp. unit, which developed the inductive charging system, as well as the lead-acid batteries.
Another Hughes product appearing on GM vehicles is the OnStar navigation and security system. GM plans to offer the $895 optional system on vehicles outside its Cadillac division by the 1998 model year.
Cole said there were numerous other applications for Hughes' technology, including future electric vehicle platforms and other vehicles that incorporate hybrid technologies.
""Financially, it was excellent,"" said Cole. ""The problem is that a lot of people outside don't see the level of integration.""
",48
"Ford Motor Co. halted light truck assembly lines at three plants Friday as planned because of a strike at a seat supplier, but signed up another company to help it clear out the backlog of 7,700 Expeditions built without proper seats.
Following an appeal from Ford Chairman Alex Trotman, Lear Corp. Chairman Kenneth Way agreed to have his company make seats for Ford's Expedition full-size sport utility vehicle once the walkout is settled, according to sources in the supply industry.
Under the arrangement, Lear, which already is a large Ford supplier, would make second and third row seats for the Expedition, said Donna Parolini, president of International Business Development Corp., a consulting firm in Troy, Mich.
Front seats for the vehicles are being made by Ford's Chesterfield, Mich., trim plant, Ford officials have said. Ford spokesman Bert Serre said the plant has been making a limited number of seats, less than 20 an hour.
Ford suspended all production at its Michigan Assembly in Wayne, which makes the Expedition and F-Series pickup trucks, after the United Auto Workers and Johnson Controls Inc. failed to settle a strike, which entered its 11th day Friday.
Ohio plants affected were the Econoline and Club Wagon full-size van assembly line in Lorain and a frame production line at Ohio Assembly in Avon Lake. About 6,800 workers were idled as a result of the action.
Industry analysts said the strike has Ford in a huge bind. The Expedition is one of its most profitable and popular vehicles, earning Ford an estimated pre-tax profit of $10,000 each. Under normal production, it makes 840 vehicles at day Michigan Truck, the only plant where the Expedition is made.
But to avoid angering its own UAW workers, Ford refused to accept seats made by non-union replacement workers. It had been making the vehicles with temporary seats. But after making about 14,800 Expeditions and Econolines without proper seats, Ford decided to shut production down completely.
""To interrupt Expedition production for any extended period of time would hurt Ford financially in North America,"" said Michael Robinet, managing director of CSM Forecasting in Farmington Hills, Mich.
Because Ford and Lear do not want to provoke the UAW, Lear, which has unionized plants, would not start producing seats until the strike is over, said Parolini. Another issue prohibiting Lear from making seats immediately is the fact that it buys seat frames from the same Johnson Controls facility that assembles seats for Ford.
Shutting down Expedition production means an extension of the three- to six-month wait that many consumers already face. Introduced last fall, the Expedition has been a huge hit with buyers looking for a sleek, larger sport utility.
""The reception of this vehicle has been the highest of anything I've seen since the original Mustang,"" said Lou Stanford, owner of Varsity Ford in Ann Arbor, Mich., one of the largest Ford dealers in the country.
About 500 UAW members struck Johnson Controls seat plants January 28 in Plymouth, Mich., and Oberlin, Ohio, when talks broke down on a new contract.
Jeff Steiner, a spokesman for Johnson Controls' automotive unit, said no talks occurred Friday after they broke off late Thursday. No new negotiations were scheduled for the weekend.
Steiner declined to characterize the discussions, which have restarted and collapsed several times since the strike began over terms for a new contract.
",48
"American Axle & Manufacturing Inc. reached a tentative contract with the United Auto Workers minutes before a strike deadline Monday morning, sparing General Motors Corp. a potentially punishing work stoppage.
Details of the agreement were withheld pending ratification by about 7,200 UAW members at five plants in Detroit, Three Rivers, Mich., Buffalo, N.Y., and Tonawanda, N.Y., later this week.
UAW President Stephen Yokich and Vice President Richard Shoemaker released a statement describing the pact as ""an excellent new agreement."" Company officials did not return telephone calls.
The tentative contract was reached 15 minutes before the 7 a.m. strike deadline. Union and company bargainers negotiated through a midnight Friday deadline and nearly non-stop over the weekend, while UAW members stayed on the job and refrained from putting up picket lines.
But by late Sunday evening no agreement had been reached, and UAW officials set the Monday strike deadline to put more pressure on the company.
American Axle supplies rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear- drive cars, as well as parts for other passenger cars.
A strike would have forced the world's largest automaker to suspend production at its 11 North American light truck plants within two days, according to analysts, because of tight axle inventories throughout the auto industry. That could have cost GM $20 million a day in profits, analysts said.
A work stoppage would also have added to Ford Motor Co.'s supplier headaches. American Axle makes axle shafts for Ford's F-150 pickup trucks, Expedition and Explorer sport utility vehicles, as well as some rear-drive cars. The company also makes a small number of parts for Chrysler Corp.
GM spokesman Gerald Holmes said Monday the automaker did not alter its contract with American Axle to pave the way for a settlement.
""We had no part in it at all,"" he said.
American Axle was spun off from GM in 1994 to a group of investors led by former Chrysler manufacturing chief Richard Dauch. As part of the deal, the components maker agreed to honour the terms of the 1993-96 UAW-GM contract.
In the talks that wrapped up Monday -- the first time a GM spin-off had to negotiate a new contract -- UAW officials had been pressing for American Axle to follow the pattern the Big Three agreed to during their contract talks last fall.
Company officials were reluctant to do that, however, claiming that would put them at a competitive disadvantage with their competitors.
",48
"Bargaining between union and American Axle Manufacturing Inc. negotiators was expected to continue up to the midnight Friday deadline to avoid a strike that would quickly paralyze General Motors Corp.'s U.S. light truck production.
About 7,200 United Auto Workers union members were ready to walk off the job at five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y., if no agreement was reached on a new three-year contract.
American Axle, which was spun off from GM into a private company in 1994, supplies virtually all of the rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company also makes axles for Chrysler Corp. and axle shafts for Ford Motor Co..
Tight inventories at American Axle and Dana Corp., the other primary axle maker in the United States, means GM's light truck plants would run out of parts by early next week, analysts said.
""They can't have more than two days supply because there is no excess capacity in the industry,"" said James Harbour, president of Harbour & Associates Inc., a Troy, Mich.-based consulting firm.
Burnham Securities Inc. analyst David Healy estimated GM could lose $20 million a day in after-tax profits if it was forced to suspend light truck production. Labor strife cost the world's largest automaker $1.2 billion in 1996.
The American Axle situation is the latest labor dispute to flare up in the automotive supplier industry since the beginning of the year. Analysts say they signal a new era as the UAW steps up efforts to organize more component workforces and bring pay levels in line with those of the Big Three.
""It's the next phase of the evolution of change,"" said Donna Parolini, president of International Business Development Corp., a Troy, Mich. supplier consulting firm.
UAW membership among independent, or non-Big Three, suppliers has dropped dramatically over the last 20 years so that now less than 20 percent of the independent parts workers belong to the UAW, she said.
The American Axle talks are notable because they mark the first time a GM spin-off has had to negotiate a new contract. When the firm was spun off under former Chrysler manufacturing chief Richard Dauch, it agreed to uphold terms of the previous UAW contract, which expired last September.
Union officials have said the company is balking at following the Big Three pattern deal hammered out last fall. That contract guarantees employment for 95 percent of current workers, and allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
Amrican Axle, however, wants to start new hires at 60 percent of the base wage -- and extend the time it takes to reach the full rate to six years. The Big Three pact has a ""grow-in"" rate of three years.
Last month, two Johnson Controls Inc. seat plants were hit with strikes by newly organized UAW workers. As of the Friday an agreement had not been reached in the 18-day-old strike.
The walkouts prompted Ford to take the unprecedented action of refusing to accept seats made by non-union replacements. Ford later signed up Johnson Controls' main competitor, Lear Corp., to supply it with seats for the Expedition full-size sport utility vehicle, one of those affected by the strike.
Parolini released figures Friday that showed the global supplier industry consolidating at a faster rate than previously thought. By the end of this year, there will be about 8,000 suppliers -- down from 30,000 in 1988.
In the past 22 months, there have been more than 320 acqusitions or mergers valued at a total of $32 billion. The mergers will likely result in layoffs as the companies seek to gain efficiencies. For instance, Parolini said companies such as Lear and Johnson Controls have issued internal mandates to reduce headcount by 20 percent next year.
",48
"A commuter plane heading for Detroit in a heavy snowstorm crashed in a remote wooded area south of the city on Thursday, killing all 30 on board, officials said.
The Embraer-120, operated as flight 3272 by Comair, a regional carrier based in Cincinnati, crashed at 3:50 p.m. EST (2050 GMT) near the town of Ida about 25 miles (40 km) from Detroit near the Raisin River.
Comair operates as a feeder for Delta Airlines.
A nearby resident, Thomas Marino, said he heard the plane flying low overhead while shoveling snow off his driveway.
""I heard a jet flying very low. Then a loud boom, a vibration. I didn't see the fireball,"" he told Reuters. ""It sounded low, but planes fly low all the time over here, especially when it's overcast.""
Much of the region had been hit by a storm which dumped a half foot (15 cm) or more of snow. There was no confirmation, however, that weather played a role in the crash.
Marino said he drove one-half mile (0.8 km) to the crash site, but could only see smoke and rescue workers swarming around.
He said the plane crashed into what looked like a farm field, just south of the Raisin River.
Television film footage showed only a blackened gash in a snowy field.
The National Transportation Safety Board in Washington said the plane carried 25 passengers, two pilots and three flight attendants and that none survived.
The flight originated in Cincinnati.
One man who lived near the crash site told a Detroit radio station there was an ""unbelievable"" explosion and fireball when the plane crashed.
Any plane carrying 70 or less is considered a commuter flight though some routinely operate under the same safety and flight rules that govern larger aircraft.
In October 1994, icing caused a French-built American Eagle ATR-72 to crash in northern Indiana, killing all 68 on board. The plane's manufacturer later made revisions to de-icing equipment.
CNN reported that the Brazilian-made Embraer-120 has been involved in 13 other crashes since 1986 where lives were lost, including an accident in Georgia that killed former Senator John Tower.
",48
"Launching a fresh assault on the U.S. minivan market, Toyota Motor Co. introduced its 1998 Sienna at the North American International Auto Show Wednesday, describing the vehicle as the ""Camry of minivans.""
But capacity constraints will prohibit the Sienna from loosening Chrysler's Corp.'s iron grip on the 1.1 million unit market.
Designed in Japan, the Sienna features more conservative styling than the Chrysler products, which dominate the U.S. market for the popular vehicles about a 46 percent stake.
Toyota's low-key approach carried over to the introduction of its new vehicle.
Shunning the rappeling executives and mock thunderstorms of other automakers at the show, Toyota simply pulled back a black curtain, without fanfare, to reveal the vehicle.
The front-wheel-drive Sienna will be built off a slightly longer version of the Camry sedan platform. It will come with essentially the same 3.0 litre V6 engine and four-speed automatic transmission as the Camry.
Like minivans from Chrysler and General Motors Corp., the Sienna will offer an optional fourth door on the driver's side.
Pricing has not been determined. But Dave Illingworth, general manager of the Toyota Division in the United States, said it will be below the more than $30,000 pricetag the Previa started at and will be aimed at the middle of the minivan market.
The rear-wheel drive Previa, which was introduced in 1990, will be dropped when the Sienna goes on sale in the fall, Illingworth said.
Toyota expects to sell 50,000 to 60,000 Siennas -- all it will be able to produce at its plant in Georgetown, Ky. The facility has annual volume capacity of about 500,000 units, but is also responsible for making the Camry and Avalon.
Illingworth said Toyota has no plans for additional capacity expansion in North America and does not expect to start producing the Siennas in Japan for export to the U.S. market.
By replacing the poor-selling Previa, Toyota is hoping to give existing Toyota buyers a durable, moderately priced alternative.
""This is an attempt to keep our buyers in the franchise,"" he said. ""I don't see us challenging Chrysler.""
Neither does Dennis Pawley, executive vice president of manufacturing for Chrysler, who attended the Sienna unveiling. Although the minivan segment of the market has not grown for about six months, Pawley said the battle for market share is not likely to hurt Chrysler, which has the most loyal minivan owners.
""This is going to hurt GM and Ford (Motor Co)  much more than it's going to hurt our sales,"" he said.
But Richard Wagoner, president of GM's North American Operations, said the automaker plans to gain share when its new line of minivans begin arriving in heavier volumes throughout this year. However, he added, ""We never underestimate Toyota.""
Susan Jacobs, who runs the industry consulting firm Jacobs & Associates, said the tight production volumes indicates Toyota will sell all it can make of the new vans. She predicted the Sienna's conservative looks will not hurt its sales.
""You don't need to be the style leader to succeed in minivans,"" she said.
",48
"Investigators fought frigid, wind-blown snow on Friday trying to recover the remains of 28 adults and one infant killed when a commuter plane crashed into a field and left a blackened crater.
John Hammerschmidt, senior member of the National Transportation Safety Board, told reporters the cockpit voice and flight recorders had not been recovered but that he was sure they would eventually be found.
The devices usually provide investigators with detailed information on the final seconds before a crash.
Hampering the search for both human and aircraft remains were temperatures falling to near zero Fahrenheit (minus 18 Celsius) and ground blizzards that created near white-out conditions. Workers were able to stay in the wooded field for no more than 15 to 20 minutes at a time, he said.
""There is a crater out there"" hiding some of the wreckage, he said, including propellers, engines and engine assemblies from the 30-seat, Brazilan-built Embraer 120 operated by Delta Comair.
In addition, eight-foot (2.5 metre) high brush covered with snow from the storm during which the plane crashed on Thursday made recovery efforts difficult, Hammerschmidt said.
""There are remains just all around the entire scene,"" he said. Local police had removed some of the remains to a morgue and families of some of the victims were taken to a nearby motel, where teams of counsellors were on hand.
Hammerschmidt said the 28 adults and one ""babe in arms"" aboard the twin-engine propjet lifted off from Cincinnati at 2:53 p.m. EST, and the plane crashed and 3:52 p.m. during its approach to Detroit's Metropolitan Airport.
He said the pilot, Dann Carlsen, 43, of Williamstown, Kentucky, was very experienced and was a flight instructor. He also said the plane was equipped with de-icing systems for the wings, the leading edge of the propellers and for the engines.
Hammerschmidt refused to speculate on whether ice was a factor in the crash. USA Today said a pilot in the vicinity reported icing conditions at about the same altitude the doomed plane was flying minutes before it crashed.
The Cincinnati Post quoted an unidentified Comair pilot on Friday as saying the Embraer 120 can suffer wing icing problems despite a system designed to break up ice through a pneumatic rubber strip on the wing that is inflated and deflated in bad weather.
Michael Bragg, a professor of aeronautical and astronautical engineering at the University of Illinois in Champaign, told Reuters that some eyewitness accounts of the crash point to a ""classic horizontal tail stall.""
Such stalls have long been considered a problem with smaller propjet planes, he said. Ice on the the horizontal part of the tale can disrupt the airflow that keeps a plane flying level. When flaps are deployed in such a situation, Bragg said, the plane stalls and dives.
",48
"General Motors Corp. said Tuesday its fourth quarter earnings fell by more than half as labour strife in the second half of the year cost it $700 million in profits.
The world's largest automaker earned $786 million, or 92 cents a share, in the fourth quarter, down from $1.59 billion, or $1.95 a share, in the 1995 fourth quarter. All figures exclude results from Electronic Data Systems Corp., which was spun off last June.
Revenues fell to $40.95 billion from $41.35 billion.
For all of 1996, GM earned $4.95 billion, or $6.06 a share, down from $6.03 billion, or $7.14 a share. Revenues for the year rose to $164.1 billion from $160.3 billion.
Workers from the United Auto Workers union and Canadian Auto Workers union struck GM last fall after talks broke down on a new three-year contract. In March 1996, a UAW strike at two Dayton, Ohio, brake plants crippled GM's North American production for more than two weeks.
All told, GM said work stoppages in the United States and Canada reduced its full-year earnings by $1.2 billion on an after-tax basis.
""Clearly our 1996 fourth-quarter and calendar-year results were impacted by the strike-related production losses in the United States and Canada and are not indicative of GM's potential for continued profit improvement,"" GM Chairman John Smith said.
The strikes also took a bite out of the 1996 profit sharing checks for GM's union workers. GM said 282,000 represented workers in the United States will receive about $300 each -- less than half of the $800 each received last year.
GM said 76,000 eligible salaried workers will receive 1996 incentive payments, with payments rising with the level of pay and responsibility. By comparison, Chrysler Corp. announced last week its U.S. workers will each receive an average of $7,900 in profit sharing.
GM's 1996 fourth quarter results included several one-time accounting items, including a $157 million loss on the sale of four Delphi parts plants to Peregrine Inc. and a $167 million charge for lump sum payments to UAW members as part of its new labour contract.
Including the strike-related effects, the one-time items brought down GM's fourth quarter earnings by $762 million, or 99 cents a share. However, the fourth quarter also included a separate, favourable tax gain of $262 million.
GM's North American operations, its core automotive group in the United States, had a net loss of $124 million vs. a profit of $603 million in the year-ago quarter. For the year, the North American unit, which includes Delphi Automotive Systems, earned $1.2 billion, down from $2.4 billion.
The automaker's international operations reported net income of $353 million for the quarter, down from $498 million a year ago. For all of 1996, GM's international profits were $1.5 billion, down from $1.6 billion in 1995.
Worldwide car and truck deliveries from GM dealers for the quarter were 1.9 million units vs. 2.02 million a year earlier. That reduced the automaker's worldwide market share to 15.5 percent for the quarter from 17.3 percent.
GM's U.S. market share also fell, to 30.2 percent in the fourth quarter from 33.5 percent a year ago. Unit deliveries in the United States were 1.08 million down from 1.20 million.
In his statement, Smith also blamed the lower 1996 results on production changeovers, higher advertising and ""consumer-influence"" expenses related to new-product launches. The average U.S. retail incentive for the fourth quarter was $739 a vehicle, up from $518.
""We have more new cars and trucks going into the market now than any time in the last 15 years,"" he said. ""In fact, about 20 percent of the 1997 production will be for the new models launched in 1996. Those new cars and trucks are key to our plans to aggressively increase market share in the United States this year.""
GM stock was down $1 at $60.875 in afternoon trading on the New York Stock Exchange.
",48
"Federal investigators said on Sunday an examination of engine wreckage from the Delta Comair crash showed the crew tried to shut off the right engine and activate a fire extinguisher system.
Although the pilots took three steps to cut the engine, investigators said they had found no indication there was a fire on the plane when it slammed into a snowy field in rural south-east Michigan late on Thursday afternoon.
""There is no indication of an in-flight fire,"" National Transportation Safety Board (NTSB) official John Hammerschmidt told reporters at a briefing.
Hammerschmidt said the cockpit voice recorder showed the pilot began a 30-degree banking turn to the left and after three seconds of a stable turn the angle increased.
""Over the next eight-second period of time, the angle of bank increased to approximately 40 degrees. At that point the aircraft departed controlled flight. All data ended approximately 17 seconds after it departed controlled flight,"" he added.
Hammerschmidt, and the lead NTSB investigator on the scene Richard Rodriguez, did not offer an explanation for the plane's left turn and apparent right engine problems.
Hammerschmidt said that on Monday investigators would begin decontaminating the wreckage and moving it to a building at the local fairgounds where it would be subject to further examination. NTSB officials said they expected to wrap up most on-site work by the end of the week.
Also on Monday investigators in Washington D.C. will resume their study of the ""black box"" cockpit voice recorder and flight data recorder that were recovered from the wreckage of the Brasilia aircraft, built by Embraer of Brazil.
A local church held a packed memorial service on Sunday attended by relatives of the victims, some of whom visited the scene where a simple memorial had been made from bales of hay.
A blue and white sign perched on a hay bale said, ""In memory of the passengers and crew of Comair Flight 3272, from the community of Monroe County and southeast Michigan.""
Investigators braved below-zero windchills for the third day in a row on Sunday, retreiving body parts and continuing their probe into the crash, which occurred as the plane was on approach to Detroit Metropolitan Airport from Cincinnati.
Monroe County Medical Examiner David Lieberman said work crews were making good progress in identifying the remains of the 26 passengers and three crew members killed when the plane nosedived to the ground from about 4,000 feet (1,200 metres).
",48
"Workers striking two Johnson Control Inc. seat assembly plants Tuesday scored a major victory when Ford Motor Co. said it would refuse to accept non-union made seats until the dispute is resolved.
""We had a huge, huge victory here today,"" Bob King, director of United Auto Worker Region 1A, told a boisterous crowd of strikers and supporters outside of the plant in Plymouth, Mich., a suburb west of Detroit.
More than 300 workers at the plant walked off the job at 6 a.m. Tuesday after talks on a new contract broke down late Monday. The strike drew hundreds of other chanting supporters.
About 200 employees of a Johnson Controls seat plant in Oberlin, Ohio, also struck the company when their talks collapsed. Workers at both plants agreed last fall to be represented by the UAW in a new labour contract.
The Plymouth plant provides final assembly for seats that go into Ford's hot-selling Expedition full-size sport utility vehicle, which is made at the nearby Michigan Truck plant in Wayne, Mich. The Ohio plant makes seats for Ford's Econoline full-size vans.
Johnson Controls officials did not return telephone calls. In a statement, the company said it will make ""every effort"" to continue seat production at both plants, including hiring temporary and permanent replacement workers, if necessary.
Representatives from Ford said they had to consider their own union workforces when they were affected by supplier disputes. Ford is generally regarded as having the best labour relations of Detroit's Big Three.
""We're not accepting seats made by the non-union employees of Johnson Controls,"" said Ford spokesman Bill Carroll.
As of midday Tuesday, no new talks were scheduled.
UAW spokesman Karl Mantyla said the union was seeking wage parity with other seat suppliers, such as Lear Corp. which pays hourly wages of $14 to $16. Mantyla would not say what Johnson offered, but said the company ""did not get close to that.""
The UAW is also pressing for resolution of unfair labour practice claims. After workers agreed to be represented by the UAW, Mantyla said Johnson dropped its entry pay rate to $9 an hour from $9.50, cut out a 401(k) retirement plan, and barred union supporters from displaying UAW buttons at company meetings.
In its statement, the company said the UAW rejected what Johnson termed a reasonable and fair offer.
",48
"Ford Motor Co. said Wednesday profits jumped 82 percent to $1.2 billion in the fourth quarter as it rebounded from product launches that held profits down a year earlier.
Ford, the last of the Big Three Detroit automakers to report fourth-quarter results, said the earnings equaled $1 a share. The results reflected a total of $132 million in special charges, including costs related to Ford's decision to cut 3,500 jobs last year.
In the 1995 quarter, Ford earned $660 million, or 49 cents a share. Sales rose to $38.8 billion from $34.6 billion.
Excluding one-time items, Ford's fourth quarter income was $1.10 a share -- higher than the $1.02 a share forecast by analysts, according to First Call, which tracks estimates.
Although Ford appears to be making headway in cost reduction, analysts were not overly impressed, noting that sales of high-profit light truck products are booming.
""They were not great, especially in view of the fact that they are selling a lot trucks,"" said Maryann Keller, an analyst with Furman Selz & Co.
Ford Chairman Alex Trotman said in a statement that automotive earnings will improve in 1997, because the company has successfully completed its highest-volume launches in North America and Europe.
""We're starting 1997 in a much stronger competitive position,"" he said.
Trotman said Ford expects better results for all of 1997 in Europe, where the company is moving to cut costs. Ford also predicted smaller losses in South America for 1997, he added.
""Overall, we are on track,"" he said.
Meantime, Ford Chief Financial Officer John Devine told reporters that cost-cutting will reach new heights in 1997. For the first time, Ford expects 1997 costs to be below those of the prior year.
The fourth quarter results capped a mixed year for the automaker in which strong profits from its Financial Services Group were needed to offset a steady flow of red ink from overseas operations.
Earnings for all of 1996 rose 7 percent to $4.4 billion, or $3.65 a share, from $4.1 billion, or $3.34 in 1995. Ford's worldwide automotive operations posted net income of $1.6 billion, down from $2 billion. Financial Services earned a record $2.8 billion in 1996, up 33 percent over 1995.
Revenues for the year climbed to $147.0 billion from $137.1 billion in 1995.
Ford's core U.S. automotive operations, which contribute about 65 percent of total automotive revenues, reported profits of $628 million for the fourth quarter, compared with $168 million a year ago.
Ford continued to have problems overseas, but there were signs of progress in turning those operations around. Ford's European loss for the quarter rose to $88 million from $48 million. But excluding $127 million in severance charges in the 1996 quarter, the operating results showed a $39 million profit, versus a $26 million operating profit last year.
In South America, where Ford has struggled in the Brazilian market, the fourth quarter net loss was $287 million, compared with a $112 million loss a year ago.
""I thought the fourth quarter was an okay quarter. What was most important was improvement on the cost front,"" said Ronald Glantz, an analyst at Dean Witter Reynolds.
On Tuesday, General Motors Corp. said strike costs slashed fourth quarter earnings by 50 percent to $786 million. Chrysler Corp. last week said fourth quarter earnings fell to $807 million, down from $1.04 billion.
Ford's stock lost 12.5 cents to close at 32.375 on the New York Stock Exchange.
",48
"Ford Motor Co. said Wednesday that its profit jumped 82 percent to $1.2 billion in the fourth quarter as it rebounded from product launches that held profits down a year earlier.
Ford, the last of the Big Three Detroit automakers to report fourth-quarter results, said it earned $1 a share. The results included a $132 million charge for one-time items.
A year earlier, Ford earned $660 million, or 49 cents a share. For all of 1996, Ford's net income rose 7 percent to $4.45 billion, or $3.64 a share.
Fourth-quarter revenues were $38.8 billion vs. $34.6 billion. Revenues for the year climbed to $147.0 billion from $137.1 billion in 1995.
""We have successfully completed our highest-volume launches in North America and Europe,"" Ford Chairman and Chief Executive Officer Alex Trotman said in a statement.
""We're starting 1997 in a much stronger competitive position,"" he said. ""We expect automotive earnings to improve in 1997.""
Ford's core U.S. automotive operations, which contribute about 65 percent of total automotive revenues, reported profit of $628 million for the fourth quarter, compared with $168 million a year ago.
Ford continues to benefit from strong sales of F-Series pickup trucks, Explorer sport/utility vehicles, and its new Expedition full-size sport/utility.
About 55 percent of Ford's U.S. automotive sales in 1996 were light truck products, the segment that includes pickups, minivans and sport/utilities.
But Ford continued to have problems overseas. The company's non-U.S. automotive operations lost $238 million in the quarter, up from a loss of $152 million, due primarily to losses in Europe and South America.
Ford's European loss for the quarter rose to $88 million from $48 million a year ago. But it was less than the $472 million it lost in the third quarter.
In South America, where Ford has struggled in the Brazilian market, the fourth quarter loss was $287 million, compared with $112 million a year ago.
Trotman said Ford expects better results for all of 1997 in Europe, where the company has launched several cost-cutting moves.
He also predicted improving results for Brazil and Argentina and said Ford is expecting smaller losses in South America for all of 1997, and is targeted to break even in 1998.
""We have the right plans in Brazil and Argentina to restore our strength and profitabilty, although we know it will take some time as we introduce new products, build a new organization and restore the dealer body,"" he said. ""Overall, we are on track.""
Ford's stock lost 25 cents to $32.25 in early trading on the New York Stock Exchange.
",48
"The domestic auto industry's chief lobbyist predicted Tuesday that the Republican-led Congress will accept President Clinton's challenge to tone down partisan feuding and develop a better working relationship.
Andrew Card, president and chief executive officer of the American Automobile Manufacturers Association, said the group generally supports the agenda Clinton outlined after his inaguration Monday of a leaner government and a balanced federal budget.
""The second Clinton administration presents both opportunities and concerns to the auto industry,"" Card said during a lunchtime address to the Automotive Press Association.
In general, Card said federal regulators need to do a better job of understanding the domestic issues facing the Big Three automakers and work harder at opening up global markets, where the biggest growth potential lies.
""There is a natural tension between government and industry, and I think that natural tension is good,"" he said. ""But the government has to recognise a role that is increasingly in favour of the industry rather than against it.""
The AAMA represents General Motors Corp., Ford Motor Co. and Chrysler Corp. from large offices in Washington D.C., Detroit and nine regional sites around the country. The Detroit automakers employ about 700,000 people directly and account for about 4.5 percent of the nation's gross domestic product. Including suppliers and dealers, work generated by the Big Three is responsible for 2.3 million jobs, Card said.
He said he wants the federal government to step up pressure on the Japan to boost the value of the yen. A cheaper yen allows Japanese automakers to produce vehicles in Japan at a lower cost than what the domestic automakers can produce them for in the United States.
""I am very, very troubled that the yen is at about a 46-month low,"" Card said.
AAMA believes the market should be allowed to set the true value of the yen, and not the government of Japan, which has been pushing the yen down against the dollar and other currencies, he said. The yen is now worth about 118 to the dollar, up dramatically from 79, where it was 18 months ago.
On other matters, Card warned that ""irresponsible standards"" proposed for the National Ambient Air Quality Standards could seriously affect U.S. economic growth. The Clean Air Act requires the U.S. Environmental Protection Agency to review the standards periodically.
The comment period for the standards ends Feb. 18. The new rules are due in June, but Card said he hopes the government delays that date.
",48
"Federal-Mogul Corp unveiled a massive restructuring Thursday that dumps its four-year effort to build a global auto parts retail empire and returns the firm to its core manufacturing and distribution business.
The Southfield, Mich.-based auto supply firm said it will take a total of $264 million in pre-tax charges to cover the restructuring and special one-time items from the fourth quarter. Investors approved of the action, pushing the stock up $1.50 to $25 a share.  
Nicholas Colas, an analyst at CS First Boston, said the move is a prudent one for the company, which had no in-house retail expertise when it began to expand in that area.
""Basically, the grand vision of having an international third world distribution and retail business is gone,"" he said. ""This is much more playing to the company's historical strengths.""
The moves mark a reversal of the efforts by former chairman and chief executive officer Dennis Gormley, who was forced to resign in September after pressure from the board.  
Gormley spent about $500 million on acquisitions since 1992, although a company spokeswoman said less than one-third of that was related to the international retail expansion.
""Our retail operations are good viable businesses that can be operated better by someone else,"" said Federal-Mogul Chairman and Chief Executive Officer Dick Snell, who announced the restructuring 95 days after he assumed the company's top post.  
Snell was formerly the CEO of Tenneco Inc's automotive unit. He said in a statement there will be further restructuring that will generate positive cash flow, adding the company expects a ""positive economic value added"" by 1998.
Colas said future restructuring charges will range from $5 million to $7 million in the next couple of years. He said Snell told analysts Federal-Mogul has a goal of nine to 10 percent return on capital by the end of 1997, and 12 percent by the end of 1998.
""The guiding light at this company has shifted from trying to create earnings growth to creating shareholder value,"" said Colas.
Federal-Mogul, which had $2.03 billion in 1996 sales, also said it will slash about 2,900 jobs, equal to 18.5 percent of its worldwide workforce of 15,700. The charges resulted in a net loss of $220.2 million for the fourth quarter, compared to a loss of $49.1 million for the 1995 period.
The company makes a broad range of products, ranging from engine bearings, oil seals and pistons to lighting and electrical components, for the auto, farm and construction vehicle industry.
",48
"Ford Motor Co.'s sales tumbled 6.3 percent in the month of August as the No. 2 automaker reported worse-than-expected results Thursday in both its car and normally strong light truck business.
Ford reported U.S. sales of 297,726, down from 317,621 in the year-ago month. Sales of domestically produced cars fell 6.8 percent on a daily selling basis to 134,110. Sales of its pickup trucks, minivans and sport/utility vehicles totalled 161,549, a decline of 4.4 percent.
In a slight to Ford's quest for its Taurus to be the best-selling car for 1996, its sales for the first eight months slipped behind those of its nemisis, Honda Motor Co.'s Accord, by 1,409 units.
Results from Ford, the last automaker to report, capped a mixed month for Detroit's Big Three and contributed to a 2.3 percent total industry decline to 1,307,858 units for August.
Total sales of North American-built cars were off 6.7 percent to 608,140. That was partially offset by a 3.7 percent increase in domestically produced light trucks, to 513,376.
The seasonally adjusted annual selling rate finished the month at a healthy 15.8 million units. However, analysts said factors provided by the U.S. Department of Commerce to compute the rate artifically inflated it by about 500,000 units.
Those same factors made the July rate seem weak at 14.3 million units, analysts said. In August 1995, the rate was 15.7 million units, the second-highest of the year.
Ford portrayed its August sales slump as part of the expected drop-off in second-half sales for 1996.
""As anticipated, the automotive market has slowed somewhat since earlier this year,"" said Robert Rewey, Group Vice President of Marketing and Sales. ""In recent months we've seen interest rate increases for automotive financing that clearly have influenced industry-wide demand.""
Ford said vehicles sold at a seasonally adjusted annual rate of 15.8 million unit sales for the first five months of 1996. The automaker continues to forecast 1996 total industry U.S. sales at 15.4 million to 15.5 million units. Sales for all of 1995 were 15.1 million.
At least one analyst welcomed the lower August industry numbers, saying they might make the Federal Reserve Board re-think any possible interest rate hikes.
""The lower the better,"" said Lehman Brothers analyst Joeseph Phillippi. ""Maybe they'll keep the Fed quiet.""
In August, Ford's normally strong light truck business was hurt by a decline in government sales, competitive pricing pressures and production shortages of key F-150 models.
F-Series sales inched up 1.7 percent to 58,095.
Explorer sales, which have fallen in recent months due to the production startup of its sister, the Mercury Mountaineer, were down almost 11 percent to 27,615.
On the car side, Contour sales sank 35 percent to 10,487, while Mystique sales were down 18 percent to 5,041. Taurus sales were 25,570, a 2 percent increase, which brought total sales this year to 250,212. But that was not enough to top the Accord, which sold 251,621 cars year-to-date.
Ford said it has scheduled a nearly 14 percent increase in fourth-quarter North American truck production, to 632,000 units, to meet expected future demand for its popular F-Series.
Car production is scheduled to fall 4 percent to 431,000 for the same period. Total fourth-quarter North American output is forecast at 1,063,000, an increase of about 5 percent from the fourth quarter of 1995.
On Wednesday, General Motors Corp. said total car and truck sales fell 7.9 percent, led by a nearly 14 percent drop in passenger car sales.
Chrysler Corp. was the only one of the Big Three to post a sales increase. It reported earlier this week that sales rose 9.2 percent, helped by a strong performance from minivans, sport/utilities and pickup trucks.
",48
"Ford Motor Co. Wednesday threatened to halt production at three plants in Michigan and Ohio if Johnson Controls Inc. and the United Auto Workers did not work out a solution to a nine-day strike.
Ford's action would idle about 6,800 hourly workers and suspend production of two of its best-selling and most profitable vehicles, the Expedition full-size sport utility and F-Series pickup trucks.
Ford spokeswoman Francine Romine-MacBride said the automaker told UAW locals Wednesday afternoon if an agreement was not reached by Thursday, production would stop at the end of the regular afternoon shift that day.
Plants that would be affected are in Wayne, Mich., Lorain, Ohio, and Avon Lake, Ohio.
About 500 UAW workers at two Johnson Controls plants walked off the job on Jan. 28 when talks broke down on a new contract with the Milwaukee-based company. The plants, located in Plymouth, Mich., and Oberlin, Ohio, make seats for the Expedition and Econoline and Club Wagon full-size vans.
The action marks Ford's most public and aggressive action to push the two sides toward a resolution since it refused to accept seats made by non-union replacements several hours after the strike began.
David Healy, an analyst at Burnham Securities Inc, said Ford's move could serve as a ""wake-up call"" for the union, but also could end up hurting the automaker's first quarter earnings. Ford makes about $10,000 before taxes on each Expedition, he said, and does not have much flexibility to recoup lost production.
""Ford is in a sense shooting itself in the foot,"" Healy said.
Negotiations resumed Wednesday afternoon after breaking off Tuesday, Johnson Controls spokesman Jeff Steiner said.
Thinking the strike would end quickly, Ford has been continuing to make Expeditions and Econolines with temporary seats and storing the vehicles in nearby lots. By the end of production today, the company will have about 6,800 Expeditions and 6,300 Econolines without proper seats.
Dealers had a 26-day supply of Expeditions on their lots at the end of January. The industry typically considers a 60-day supply to be ideal.
Ford officials expressed concern that Johnson Controls would have problems meeting Ford's ongoing requirements in addition to catching up to Expeditions and Econolines already made.
""We really truly believed there would be an early settlement and that's clearly not the case,"" Romine-MacBride said.
In additions to Expeditions, Ford makes its popular F-Series pickups at truck plant in Wayne, where 4,000 UAW members work.
The Lorain plant does final assembly of Econolines and Club Wagons. About 1,500 workers would be affected by a shutdown. Production of the Thunderbird and Cougar cars would be affected, although those lines already were idled for separate reasons.
At the Avon Lake plant, which makes frames for the commercial vans, 1,300 workers would be affected. Frame production of the Mercury Villager and Nissan Quest minivans would not be affected, Ford said.
Ford officials declined to comment on how much the strike was likely to cost Ford.
UAW spokesman Karl Mantyla declined to comment on Ford's action. Steiner at Johnson Controls said the company was aware of Ford's position and was committed to settling the strike as soon as possible.
The two sides were at odds over pay levels for a new contract. The union says it wants the same hourly rate of $14 to $16 that competitors pay. But Steiner said Johnson Controls has put forth a competitive offer.
""We feel we've got a fair and reasonable package on the table that compares favourably to what the UAW has agreed to at other supplier plants,"" he said.
",48
"Daily circulation at Detroit's two strike-bound newspapers fell by a third in the first quarter of 1996 from a year ago, according to the first audited figures released since the strike began.
Combined daily circulation of the Free Press and Detroit News was down 33 percent at 576,698 for the January-through-March period, Detroit Newspapers Inc., the joint operating agency that runs two papers, said Friday.
The number, as verified by the Audit Bureau of Circulations, was below the 624,980 that the papers say they distributed, because ABC could not confirm payment or collection for all the papers.
The circulation drop from the same three months in 1995 roughly coincides with the 25 percent to 30 percent decline newspaper officials have acknowledged since the strike began in July 1995.
About 2,500 pressroom, mailroom, delivery and newsroom employees from six unions walked off the job in a dispute over proposed work rule changes and job cuts. Knight-Ridder Inc. owns the Free Press. The News is owned by Gannett Co. Inc..
Circulation for the combined Sunday edition as counted by the Audit Bureau declined to 769,594, a 29 percent drop from 1,085,677 in the year-ago period. Detroit Newspapers said they distributed 844,335 combined Sunday papers.
The Audit Bureau, which contacted thousands of subscribers, had trouble guaranteeing that all of the subscriptions had been paid. They also found some readers were reluctant to admit they read the struck papers, the newspapers said.
Detroit Newspapers officials said they have concentrated more on delivering papers during the strike than on collecting for them.
""As time has gone by, we have been increasingly successful at re-establishing all of our distribution procedures, including billing and collection,"" said Rob Althaus, senior vice president of circulation, in a statement.
The newspapers said their combined daily net paid circulation in the April-through-August period has increased by 25,000, or 4.5 percent, using the Audit Bureau criteria for calculating paid subscribers. Sunday circulation for the same period grew by 18,000, or 2.4 percent.
Roger Kerson, a spokesman for the striking unions, said the audited figures reinforce the unions' position that it was too costly to produce papers under strike conditions.
""They show a critical and devastating loss of readership,"" said Kerson. ""I hope the admission of these horrible circulation numbers will lead to some (bargaining) progress.""
No negotiations were held this week, although some meetings are scheduled for next week, the papers said.
",48
"Convinced there is no quick end in sight to a crippling seat supplier strike, Ford Motor Co. said Monday it was moving ahead with a plan to resume production of its Expedition full-size sport utilty vehicle with seats from another company.
Ford hopes to finalize its restart efforts by the middle or end of this week, said spokesman Bert Serre. Lear Corp., the substitute seat supplier, plans to start making the seats later this week.
The automaker halted production of the Expedition and Econoline and Club Wagon full-size vans early Friday afternoon, idling 6,800 workers in Michigan and Ohio.
Ford had hoped a 14-day strike by about 500 United Auto Workers union members at two Johnson Controls Inc. seat plants would be settled. In deference to its own union workforce, Ford refused to accept seats made by non-union replacements.
Ford, however, made 7,700 Expeditions and 7,100 Econolines without seats, before it ran out of storage room and grew concerned over Johnson Controls' ability to meet the backlog and regular production demand. Over the weekend, Ford made its own labor negtiators available to help resolve the dispute.
""From our position, we're disappointed that Johnson Controls and the UAW haven't been able to reach a settlement. We've done everything we could,"" said Serre. ""Now, we've made the decision to act.""
The seat agreement with Lear is a temporary one, company officials said. Lear spokeswoman Leslie Touma would not disclose what Detroit area plant will make the seats. Touma also declined to comment on what reaction Lear's unionized workers might have to the company's decision.
""Ford is a valued Lear customer, and we're trying to help them out during this time,"" she said.
Ford will first focus on putting seats in new Expeditions built once production resumes, said Serre. It will then turn its attention to the backlog of Expeditions built without seats. The Expedition is one of Ford's most profitable vehicles, generating an estimated $10,000 in pre-tax profits, according to analysts.
Johnson Controls and the UAW have not held discussions since Thursday, and none are scheduled, Steiner said. The two sides are at odds over terms for a new contract.
",48
"It is probably a good thing the National Automobile Dealers Association annual convention will not be returning any time soon to Atlanta, where the CarMax superstore has made a big splash.
Acting on a request from CarMax management, a local policeman forced three reporters out of the CarMax lot in the Atlanta suburb of Norcross, telling them people associated with the convention were banned from the store.
A momentary lapse of Southern hospitality? Hardly. The incident ranks as only one more illustration of the friction, fear and outright hostility caused by the new breed of used car superstores and mega dealers.
Although the superstores now account for only a fraction of the 40.8 million used cars sold in 1996, H. Wayne Huizenga's Republic Industries Inc. is on a relentless campaign to buy new vehicle dealerships.
Republic, which owns the AutoNation USA chain, added two more dealer groups this week, lifting estimated 1997 revenues to more than $2.8 billion, the single largest in the country.
Together, the CarMax and Republic models are taking the industry by storm, and in the process are tearing apart a system traditional franchised dealers have known for 80 years.
CarMax in particular drew a steady stream of criticism from many dealers -- and some manufacturers -- at the convention, which wrapped up earlier this week.
Yale Gieszl, the top Toyota Motor Corp. executive in the United States, blasted CarMax during a press conference, saying Toyota would not grant a new car franchise to the company.
""I don't think size is equivalent to customer service,"" said Gieszl, executive vice president of Toyota Motor Sales USA Inc.
Officials at CarMax returned the favour by turning down all requests for tours of the Norcross store. The outlet is unique because it is the only CarMax to have a new car franchise, from Chrysler Corp., which was granted last year.
Morgan Stewart, a spokesman for Circuit City Stores Inc., which owns 80 percent of CarMax, said there were simply too many requests to accommodate the visitors.
""We had hundreds if not thousands of people showing up, looking for tours, and we had to keep our primary commitment, which was to serve customers,"" he said.
As for the reporters, Stewart said they should have first contacted Circuit City's public relations department at the company's Richmond, Va., headquarters.
Although the superstores have received much attention for emphasising a more friendly sales approach, many dealers remain unconvinced they can successfuly run the business side.
Vinje Dahl, who owns Dahl Ford in Davenport, Iowa, said it is not easy to operate used car businesses profitably on a local level, where an intimate knowledge of the market is key. Profit margins are razor-thin, and a dealership is considered doing well if its return on sales is 1.5 percent to 2 percent.
""We're in a buying business, we aren't really in a selling business,"" he said, adding, ""I don't think these guys are buying very smart.""
For now, CarMax sales are booming. For January sales from stores open at least a year were up 33 percent, while total sales rose 90 percent to $43.1 million, thanks to the addition of two new superstores.
CarMax, however, is not expected to report significant profits before 1999, said Nicholas Colas, an analyst with Credit Suisse First Boston.
Despite their grousing, many of the dealers privately expressed envy and amazement at the prices Republic is paying. Profitable dealerships typically sell for three to five times earnings, dealers said, but Republic is paying for dealer groups in stock that value the deals at 17 to 20 times earnings.
Colas said the fact the deals are for stock and not cash does carry some risk for those selling because their wealth is dependent on future growth and stock market valuation. But the pay-off could be big if they execute well.
Still, car dealers, a notoriously independent bunch, may be in for a rude shock if they sell out to companies whose stock is scrutinised by Wall Street.
""I don't think most dealers are cognizant of how quickly the world is changing around them, and how brutal public ownership is,"" said Colas.
",48
"Investigators of Thursday's Delta Comair crash were trying to determine on Saturday the nature of what they called ""an unexplained event"" shortly before the plane plummeted to the ground killing 29 people.
""Approximately one minute after leveling off at 4,000 ft (1,200 m) an unexplained event took place, normal operations ceased and the airplane crashed shortly thereafter,"" John Hammerschmidt, the National Transportation Safety Board chief spokesman told a news conference.
""At this juncture, it is an event we are trying to understand,"" he added.
NTSB investigators said they had determined something happened from listening to the ""black box"" cockpit voice recorder, but they refused to tell reporters what the pilots said.
Investigators were still reviewing the cockpit voice recorder and flight data recorder boxes at their laboratory in Washington D.C., said Hammerschmidt, who added that nothing had been ruled out in trying to determine the cause.
""The cockpit voice recorder indicated an uneventful routine orderly businesslike flight,"" he added.
Flight 3272 was enroute to Detroit from Cincinnati when it went down about 25 miles (40 kms) south of the airport in rural Monroe County in southeast Michigan on Thursday, killing 28 adults and one infant.
Hammerschmidt said eye-witnesses reported seeing the plane's wings rock (corrects from ""lock"") before it plunged out of the sky.
He said there was apparently a large amount of wing rocking (corrects from ""locking"") after which the plane briefly stabilised.
""They all indicated that the airplane stabilised, then the nose of the aircraft abruptly pitched down and descended vertically to the ground,"" he said.
Hammerschmidt said the NTSB had learned that 20 minutes after the crash the pilot of a DC3 aircraft reported icing 25 miles southwest of Detroit airport.
He said the previous crew of the doomed plane had on at least two occasions earlier in the day successfully used the entire de-icing system of the plane.
He said there were no strong winds at the time of the accident, cloud cover was at 1500 feet (457.2 metres) and visibility was one to three miles (1.6 to 4.8 km).
(Corrects cloud cover figures from 15,000 feet (4,570 metres).)
Capt. Dann Carlsen had a total of 5,329 flight hours and his co-pilot Ken Reece 2,582 hours, Hammerschmidt said, adding both ""were reported to be very good pilots.""
Both engines of the plane showed they were rotating and working on impact and all eight power blades showed damage consistent with fact they were rotating on impact.
Some observers had suggested the crash could have been caused by broken propeller blades. Propeller problems have been blamed for two previous fatal crashes involving the Brasilia model.
the Monroe county medical examiner said there were still remains to be removed and that the identification process was expected to begin on Saturday.
",48
"Amid a landscaped backdrop of bird calls, trees and a waterfall, Ford Motor Co. this week showed off a concept coupe with extra side doors, adjustable pedals and telescoping dashboard gauges.
Not far from Ford's display at the North American International Auto Show, Pontiac premiered the ""Rageous."" Another two-door concept car, or one-of-a-kind show car, the Rageous has enough room to carry a four-by-eight foot sheet of plywood when the tailgate is down. It even has a driver's side door compartment big enough to safely hold your pistol.
Extra doors. Larger trunks. Cupholders that warm up and cool down. It's a practical world out there, and automakers have gotten the message.
A walk around the show, which opens to the public on Saturday, turns up cars, sport/utility vehicles, pickup trucks and minivans with a raft of new features designed to make your vehicle as handy as can be.
The new Chevrolet Corvette has undergone structural changes that make it easier to climb into the low-slung sports car. Designers have added more than 12 cubic feet of cargo room -- enough to fit two sets of golf clubs into the trunk.
Volkswagen is testing the waters with a new two-door concept car called the Coupe CJ. Designed specifically for the American market, the car can seat four people comfortably. The trunk has nearly 15 cubic feet.
Chrysler Corp. is showing the Dakar, a concept version of its popular Jeep Wrangler that has four doors. It is just one of several new types of sport/utilities that automakers are displaying as they seek to carve up the fast-growing market into even smaller niches.
One of the more extreme sport/utility concepts is the Open View from Wilhelm Karmann GmbH, an auto industry supplier from Osnabrueck, Germany. Built off a Ford Explorer platform, the Open View has a retractable roof system that essentially turns the vehicle into a convertible sport/utility.
Perhaps the best example of burgeoning practicality is Ford's Mercury MC4 concept. Designed as a coupe, the car has two half doors that open to the rear. Access to the trunk is provided by two ""gull-wing"" lids that provide more loading versatility.
On the inside, drivers can adjust the sculpted seats, pedals and instrument gauges to fit their individual needs. The centre console has a pop-up screen, and there is an integrated child seat in the back.
""The MC4 is designed with the needs of today's diverse and active lifestyles in mind and shows that sports coupes can be practical when it comes to carrying passengers and their belongings in comfort,"" said Jack Telnack, vice president of corporate design at Ford.
Although the MC4 is not likely to ever see a dealer's showroom, Ford Automotive Operations President Jacques Nasser said some of the mechanical features are already being incorporated into future Ford vehicles.
Whether it's more head room or extra power outlets for cellular phones, the new features signal the struggle among automakers to get whatever kind of competitive edge they can, said David Cole, director of the University of Michigan's Centre for the Study of Automotive Transportation.
Gone are the days when there were vast quality differences between Japanese and domestic cars, he said. Now, automakers must find new ways to differentiate themseves from the increasing number of models in the market.
""What they're trying to do is get any kind of competitive advantage they can find,"" he said.
",48
"Federal-Mogul Corp hopes to pay off $185 million in debt in 1997, bringing its total debt to capital ratio to under 60 percent by the end of the year, Chairman and Chief Executive Officer Dick Snell said Thursday.
Snell told Reuters in an interview other goals for 1997 include hitting a return on invested capital of 12 percent, although the year's average will probably be below that.
Over the last three years, Federal-Mogul has been earning from 4.5 percent to six percent on its capital -- below its cost of capital of 12 percent.  
During 1998, Snell would like the company to be earning a 10 percent return on sales. ""Those are goals,"" he said. ""I think we have a reasonable chance of making it, but I'm not promising.""
The Southfield, Mich.-based auto parts supplier announced a broad restructuring Thursday that will take it out of the international retail business. The restructuring and other one-time items resulted in a $264 million pre-tax charge.
Federal-Mogul reduced its debt by $104 million in 1996. Debt-to-capital is 69 percent, although Snell said that will fall as the company sells off its retail operations.  
Snell said the company has been in contact with possible buyers of the retail operations. A single buyer for the whole package is unlikely, he said, noting the business could be sold in three to 10 different pieces. The firm paid a total of about $125 million for the retail operations.
""We're not going to give away the shareholders' assets,"" he said. ""We're going to demand a good value for them.""
Snell said further consolidations of its North American distribution system and European operations are likely on top of those already announced. Those will likely result in more headcount reductions over in the next few years.  
Federal-Mogul plans to add a new position of vice president of marketing to improve customer relations, Snell said. Finalsts have been selected for the job, which will also be responsible for shoring up the firm's after-market brands.
""We have some very, very good well known aftermarket brands that haven't had much of any in the way of market support the past several years, which I think is sort of the hidden opportunity this company has,"" he said.
As it digests the restructuring, Federal-Mogul will also be on the lookout for acquisitions that add to its core manufacturing businesses, said Snell. For instance, since the firm makes engine bearings, it makes sense for it to also offer pistons, he said.
Snell did not rule out the possibilty of an acquisition worth ""several hundred million"" in 1997 if the right opportunity arises.
Salomon Brothers analyst Darren Kimball said Snell, who has been on the job 95 days, impressed investors and analysts with the moves announced Thursday.
""This is the kind of stock where if the numbers work out, the stock is going to work out because people want to like him,"" he said.
",48
"Federal-Mogul Corp., dropping its four-year effort to build a global auto parts retail empire, unveiled a massive restructuring Thursday that returns it to its core manufacturing and distribution business.
The Southfield, Mich.-based company said it took a total of $264 million in pre-tax charges to cover the restructuring and special one-time items from the fourth quarter.
Federal-Mogul, which has about $2 billion in annual sales, also said it will slash about 2,900 jobs, equal to 18.5 percent of its worldwide workforce of 15,700.
The charges resulted in a net loss of $220.2 million for the fourth quarter, compared with a loss of $49.1 million for the 1995 period.
For all of 1996, the company lost $211.1 million, but would have posted a profit of $34.7 million before special items. In 1995 the company lost $9.7 million.
""We have realigned our growth strategy behind our core competencies of engineering, manufacturing and distribution,"" Chairman Dick Snell said in a statement. ""Our retail operations are good viable businesses that can be operated better by someone else.""
The company makes a wide variety of products, ranging from engine bearings, oil seals and pistons to lighting and electrical components, for the auto, farm and construction vehicle industry.
In afternoon trading, Federal Mogul stock was up $1.125 at $24.625 share on the New York Stock Exchange.
Nicholas Colas, an analyst at CS First Boston said the move was a prudent one for the company, which had no in-house retail expertise when it began to expand in that area.
""Basically, the grand vision of having an international third world distribution and retail business is gone,"" he said. ""This is much more playing to the company's historical strengths.""
Included in the restructuring is the planned sale of 132 international retail operations in Australia, Chile, Ecuador, Panama, Puerto Rico, South Africa, and Venezuela, and the planned sale or restructuring of about 30 wholesale operations in 10 countries.
The firm also plans to relocate product lines in its European manufacturing operations and cut the workforce; consolidate lighting products in Juarez, Mexico, and close a manufacturing facility in Indiana.
The company also plans to close two distribution warehouses in Kentucky, consolidate customer support functions in the United States and streamline administration and operational staff functions worldwide.
Included in that is the moving of European aftermarket management functions in Geneva, Switzerland, to manufacturing headquarters in Wiesbaden, Germany.
The moves are a complete reversal of the efforts by former Chairman and Chief Executive Officer Dennis Gormley, who was forced to resign in September after pressure from the board.
Gormley had spent about $500 million on acquisitions since 1992, although a company spokeswoman said less than one-third of that was related to the international retail expansion.
Federal-Mogul director Steve Miller took over on an interim basis until Snell was hired Nov. 8.
Snell said in a statement that there will be further restructuring. He said moves will generate positive cash flow, adding the company expects a ""positive economic value-added"" by 1998.
Colas said future restructuring charges will range between $5 million and $7 million in the next couple of years.
""The guiding light at this company has shifted from trying to create earnings growth to creating shareholder value,"" Colas said.
",48
"If Miss Manners, the nation's arbiter of proper taste and decorum, can find good things to say about car dealers, then the industry must be doing something right.
That was the message John Peterson, outgoing president of the National Automobile Dealers Association, delivered on Saturday in a speech that railed against the media and others who say traditional car dealerships are on the way out.
""It's time we stood up for what our industry is doing right out there,"" said Peterson. ""So, to our friends in the media, I say take a tip from one of your own, Miss Manners, and park that old stereotype of fast-talking salesmen in plaid coats and white bucks.""
According to Peterson, Miss Manners, whose real name is Judith Martin, wrote a column in 1996 after she shopped for a new car in which she said she was ""astonished"" at the ""dignified courtesy"" she found at a dozen dealerships she visted.
Peterson spoke at the opening day of the NADA's 80th annual convention and equipment exposition.
In his remarks, Peterson acknowledged the traditional dealer franchise system is facing numerous challenges from the explosive growth of used car superstores such as CarMax and AutoNation USA.
But he said traditional franchised dealers will remain the dominant system for selling new cars and trucks. In a year when the superstores grew rapidly, Peterson said franchised dealers boosted sales by three percent, increased profits by 25 percent, and finished the year with 23,000 dealerships in operation.
Of the approximately 15 million new light vehicles expected to be sold in 1997, 14.5 million will be sold by the current franchise system.
Peterson also took issue with critics who say car dealers do not respond to customers, saying a recent survey by the Newspaper Association of America indicated that more than 90 percent of new-vehicle buyers are satisified or very satisfied.
""No business is more poked at, picked at, anaylzed, written about and castigated for failing to live up to performance standards that no other business in the country is expected to meet,"" said Peterson.
In the NADA's keynote speech, Toyota Motor Corp's top executive in the U.S. told the audience that franchised new-car dealers will continue to be the cornerstone of the U.S. automotive retailing industry.
Yale Gieszel, executive vice president of Toyota Motor Sales USA Inc, said consumers -- and not auto superstores -- are driving the changes rocking the business.
""Large retail chains or automobile department stores are not the answer to the challenges we face. The current franchise system will not only survive, it will flourish,"" he said.
At a news conference afterward, Gieszel said he does not believe the large superstore chains can reap enough economies of scale that they can outperform local franchises. Gieszel also said Toyota is not convinced the large superstores can offer the close customer attention that individual dealers can.
",48
"Ford Motor Co. said Wednesday profits jumped 82 percent to $1.2 billion in the fourth quarter as it rebounded from product launches that held profits down a year earlier.
Ford, the last of the Big Three Detroit automakers to report fourth-quarter results, said the earnings equalled $1 a share. The results reflected a total of $132 million in special charges, including costs related to Ford's decision to cut 3,500 jobs last year.
In the 1995 quarter, Ford earned $660 million, or 49 cents a share. Sales rose to $38.8 billion from $34.6 billion.
Excluding one-time items, Ford's fourth quarter income was $1.10 a share -- higher than the $1.02 a share forecast by analysts, according to First Call, which tracks estimates.
Although Ford appears to be making headway in cost reduction, analysts were not overly impressed, noting that sales of high-profit light truck products are booming.
""They were not great, especially in view of the fact that they are selling a lot trucks,"" said Maryann Keller, an analyst with Furman Selz & Co.
Ford Chairman Alex Trotman said in a statement that automotive earnings will improve in 1997, because the company has successfully completed its highest-volume launches in North America and Europe.
""We're starting 1997 in a much stronger competitive position,"" he said.
Trotman said Ford expects better results for all of 1997 in Europe, where the company is moving to cut costs. Ford also predicted smaller losses in South America for 1997, he added.
""Overall, we are on track,"" he said.
Meantime, Ford Chief Financial Officer John Devine told reporters that cost-cutting will reach new heights in 1997. For the first time, Ford expects 1997 costs to be below those of the prior year.
The fourth quarter results capped a mixed year for the automaker in which strong profits from its Financial Services Group were needed to offset a steady flow of red ink from overseas operations.
Earnings for all of 1996 rose 7 percent to $4.4 billion, or $3.65 a share, from $4.1 billion, or $3.34 in 1995. Ford's worldwide automotive operations posted net income of $1.6 billion, down from $2 billion. Financial Services earned a record $2.8 billion in 1996, up 33 percent over 1995.
Revenues for the year climbed to $147.0 billion from $137.1 billion in 1995.
Ford's core U.S. automotive operations, which contribute about 65 percent of total automotive revenues, reported profits of $628 million for the fourth quarter, compared with $168 million a year ago.
Ford continued to have problems overseas, but there were signs of progress in turning those operations around. Ford's European loss for the quarter rose to $88 million from $48 million. But excluding $127 million in severance charges in the 1996 quarter, the operating results showed a $39 million profit, versus a $26 million operating profit last year.
In South America, where Ford has struggled in the Brazilian market, the fourth quarter net loss was $287 million, compared with a $112 million loss a year ago.
""I thought the fourth quarter was an okay quarter. What was most important was improvement on the cost front,"" said Ronald Glantz, an analyst at Dean Witter Reynolds.
On Tuesday, General Motors Corp. said strike costs slashed fourth quarter earnings by 50 percent to $786 million. Chrysler Corp. last week said fourth quarter earnings fell to $807 million, down from $1.04 billion.
Ford's stock lost 12.5 cents to close at 32.375 on the New York Stock Exchange.
",48
"Workers striking two Johnson Control Inc. seat assembly plants Tuesday scored a major victory when Ford Motor Co. said it would refuse to accept non-union made seats until the dispute is resolved.
""We had a huge, huge victory here today,"" Bob King, director of United Auto Worker Region 1A, told a boisterous crowd of strikers and supporters outside of the plant in Plymouth, Mich., a suburb west of Detroit.
More than 300 workers at the plant walked off the job at 6 a.m. Tuesday after talks on a new contract broke down late Monday. The strike at one point drew nearly 2,000 chanting supporters, prompting about than 100 police to turn out, some on horseback.
About 200 employees of a Johnson Controls seat plant in Oberlin, Ohio, also struck the company when their talks collapsed. Workers at both plants agreed last fall to be represented by the UAW in a new labour contract.
The Plymouth plant provides final assembly for seats that go into Ford's hot-selling Expedition full-size sport utility vehicle, which is made at the nearby Michigan Truck plant in Wayne, Mich. The Ohio plant makes seats for Ford's Econoline full-size vans.
Johnson Controls officials did not return telephone calls. In a statement, the company said it will make ""every effort"" to continue seat production at both plants, including hiring temporary and permanent replacement workers, if necessary.
But union members at the plant said the company abandoned that plan after Ford agreed to not accept seats made by non-union workers.
Representatives from Ford said they had to consider their own union workforces when they were affected by supplier disputes. Ford is generally regarded as having the best labour relations of Detroit's Big Three.
""We're not accepting seats made by the non-union employees of Johnson Controls,"" said Ford spokesman Bill Carroll.
Johnson Controls made no mention of the Ford decision in a statement issued late in the day. The company said no new negotiations have been scheduled.
UAW spokesman Karl Mantyla said the union was seeking wage parity with other seat suppliers, such as Lear Corp., which pays hourly wages of $14 to $16. Mantyla would not say what Johnson offered, but said the company ""did not get close to that.""
The UAW is also pressing for resolution of unfair labour practice claims. After workers agreed to be represented by the UAW, Mantyla said Johnson dropped its entry pay rate to $9 an hour from $9.50, cut out a 401(k) retirement plan, and barred union supporters from displaying UAW buttons at company meetings.
In its statement, the company said the UAW rejected what Johnson termed a reasonable and fair offer.
",48
"Chrysler Corp. Tuesday reported brisk sales of minivans and pickup trucks for August, pushing total U.S. sales for the automaker up 9 percent on a daily selling basis to 186,306.
The August total broke a company record for the month of 176,184 set in 1989.
Sales of light trucks, including popular Ram pickups and four-door minivans were 127,870, a 16.7 percent jump that marked the 11th consecutive month of rising light truck sales.
Domestically produced car sales came in weaker than some analysts had expected, falling 2 percent to 58,255 units.
Chrysler's strong light truck sales were helped by incentives on some Jeep sport utility models. Grand Cherokee sales rose 42 percent; Cherokee was up 52 percent; and Wrangler sales shot up 59 percent.
Total pickup sales were held back somewhat by low supplies of the Dakota, which is undergoing a model changeover. Dealers have a 35-day supply of the compact pickups -- about half of what the industry considers to be ideal.
Chrysler executives said they did not expect significant volumes of the new Dakotas to be available until October.
Steven Torok, executive director of sales and marketing operations, said Chrysler was not concerned about the slide in car sales. Total car sales were down 4 percent from August 1995, and off 24 percent from July.
August is often a seasonally weaker month than July, Torok said. Also, declines in the Dodge Stratus and Neon were partly attributable to model-year changeovers.
""Frankly, we saw our cars starting to firm up as the month went on, and we think we'll have a pretty good month in September,"" said Torok, adding September car sales will likely surpass those of August.
Torok said the No. 3 automaker was pleased with the breadth of its sales performance.
""What we see is a very even, consistent demand pattern,"" he said. ""Consumer sentiment seems to be not euphoric but consistent.""
Although car sales were slightly weaker, PaineWebber analyst Michael Ward said Chrysler's total numbers were still respectable because it was up against a strong year-ago performance.
Chrysler was the only one of the major automakers to report monthly sales on Tuesday. General Motors Corp. is scheduled to report sales Wednesday. Ward predicted it will post sales that are 4 percent to 5 percent below last year, with light trucks again offsetting weak car numbers.
Also on Tuesday, Subaru of America, a unit of Fuji Heavy Industries, reported U.S. sales up 18 percent to 10,361. Volvo Cars of North America, a unit of AB Volvo had August sales of 7,349, down almost 1 percent.
",48
"Federal-Mogul Corp., dropping its four-year effort to build a global auto parts retail empire, unveiled a massive restructuring Thursday that returns it to its core manufacturing and distribution business.
The Southfield, Mich.-based company said it took a total of $264 million in pre-tax charges to cover the restructuring and special one-time items from the fourth quarter.
Federal-Mogul, which has about $2 billion in annual sales, also said it will slash about 2,900 jobs, equal to 18.5 percent of its worldwide work force of 15,700.
The charges resulted in a net loss of $220.2 million for the fourth quarter, compared with a loss of $49.1 million for the 1995 period.
For all of 1996, the company lost $211.1 million, but would have posted a profit of $34.7 million before special items. In 1995 the company lost $9.7 million.
""We have realigned our growth strategy behind our core competencies of engineering, manufacturing and distribution,"" Chairman Dick Snell said in a statement. ""Our retail operations are good viable businesses that can be operated better by someone else.""
The company makes a wide variety of products, ranging from engine bearings, oil seals and pistons to lighting and electrical components, for the auto, farm and construction vehicle industry.
Federal Mogul stock closed up 87.5 cents at $24.375 on the New York Stock Exchange.
Snell, the former CEO of Tenneco Inc.'s automotive business, joined Federal-Mogul in early November. He earned high praise from analysts Thursday for his swift action and straightforward explantion of where the company is headed.
""This is the kind of stock where if the numbers work out, the stock is going to work out, because people want to like him,"" said Salomon Brothers analyst Darren Kimball.
Nicholas Colas, an analyst at CS First Boston, said the restructuring makes sense because the firm tried to expand in an area where it had no in-house retail expertise.
""Basically, the grand vision of having an international third world distribution and retail business is gone,"" he said. ""This is much more playing to the company's historical strengths.""
Included in the restructuring is the planned sale of 132 international retail operations in Australia, Chile, Ecuador, Panama, Puerto Rico, South Africa, and Venezuela, and the planned sale or restructuring of about 30 wholesale operations in 10 countries.
The firm also plans to relocate product lines in its European manufacturing operations and cut the work force; consolidate lighting products in Juarez, Mexico; and close a manufacturing facility in Indiana. The company also plans to close two distribution warehouses in Kentucky, consolidate customer support functions in the United States and streamline administration and operational staff functions worldwide.
The moves are a complete reversal of the efforts by former Chairman and Chief Executive Officer Dennis Gormley, who was forced to resign in September after pressure from the board.
Snell said in an interview that future restructuring in North America and Europe are likely, which could result in more job losses over the next few years, although not on the scale of Thursday's announcement.
At the same time, the firm will be on the lookout for acquisitions that could add to its core businesses, he said. For instance, since Federal-Mogul makes engine bearings, it makes sense for it also to offer pistons, Snell said.
",48
"National Transportation Safety Board (NTSB) investigators were preparing to examine the wreckage on Friday of a Delta Comair plane that crashed in a snowstorm on Thursday, killing all 29 people on board.
The commuter plane, an Embraer Brasilia 120 en route to Detroit from Cincinnati, crashed in Raisinville Township about 25 miles (40 km) southwest of Detroit.
NTSB officials arrived in Michigan on Thursday and immediately set up a command post in Ann Arbor, which is near the site of the crash. The wreckage was brought together under a tarpaulin to protect it from snow and was being guarded until the probe began.
Investigators met early on Friday to plan strategy for the probe and were expected to begin combing the mangled wreckage later in the day.
Cincinnati-based Comair, an independent carrier that flies commuter routes for Delta, said the 30-seat plane was carrying 26 passengers and three crew members.
The three Cincinnati-based crew members were Captain Dann Carlsen, First Officer Kenneth Reece and Flight Attendant Darinda Ogden, Comair said in a statement early on Friday.
The airline sent 30 members of its emergency response team to Michigan on Thursday, according to David Siebenburgen, President of Comair.
""They are there to assist the families, the NTSB and the FAA (Federal Aviation Administration) in any way they can during this ordeal,"" Siebenburgen said.
A news conference was scheduled by the airline for 8:30 a.m. EST (1330 GMT)  at Cincinnati airport in Erlanger, Ky.
Flight 3272 had been cleared for approach to Detroit Metropolitan Airport when air traffic controllers lost radar contact, Comair Senior Vice President of Marketing Charles Curran told a news briefing on Thursday. No distress signals were sent, he said.
Comair said the plane has been with the company since February 1992 and had its most recent maintenance checkup on Nov. 20, 1996. The airline denied an earlier report the plane had been grounded two days earlier for rudder problems.
Witnesses told local television crews the plane's engines made a sputtering sound before it crashed into the ground at a sharp angle. The plane exploded into a fireball that sent a black mushroom cloud into the air that left ""just pieces"" of the twin-prop airliner.
The area and much of the region had been hit by a storm which dumped six inches (15 cm) or more of snow. While air traffic was snarled in Chicago and other cities there was no confirmation that weather played a role in the crash.
In October 1994 icing caused a French-built American Eagle ATR-72 to crash in northern Indiana, killing all 68 on board. The plane's manufacturer later made revisions to de-icing equipment.
CNN reported that the Brazilian-made Embraer-120 has been involved in 13 other crashes since 1986 where lives were lost, including an accident in Georgia that killed former Senator John Tower.
",48
"MGM Grand Inc.  Wednesday announced a partnership with several prominent local civic and business leaders to build a casino in Detroit, joining a parade of high-profile suitors vying for three downtown gambling licenses.
MGM Chairman Terrence Lanni said following a news conference here that total investment in the proposed casino complex would be more than $400 million.
""It could be more -- I would expect it to be more,"" Lanni said.
Officials from MGM and the nine local partners, mostly African-American, refused to disclose details about the size and theme of their casino plans. They said it would be inappropriate to do so before an application is submitted and city leaders decide where the casino can be built.
Michigan voters last November approved legislation that would grant three licenses for operating casinos in Detroit, making it the largest American city to have legalised gambling.
Two local gambling groups that financed the pro-gambling lobbying efforts last fall are presumed to be in line for two of the licenses. Those companies are Greektown Casino LLC and Atwater Entertainment Inc.
In addition to MGM Grand, casino operators that have expressed interest in Detroit include Harrahs Entertainment Inc., Mirage Resorts Inc. and Circus-Circus Enterprises Inc.
Las Vegas-based MGM is known for its glitzy, entertainment-themed casinos, and Lanni made clear he envisions something similar for Detroit -- possibly involving a Motown theme.
""We're in the gaming entertainment business. We're competing for the entertainment dollar. Unless you have something that is very special, that is something people want to visit and re-visit, you're going to lose out to other entertainment venues,"" Lanni said.
In addition to its reputation, Lanni boasted that MGM has the financial might to build a casino and possibly a hotel in Detroit. The company has received a commitment to boost its line of credit to $1 billion from $600 million.
Lanni also stressed that MGM is a good corporate citizen that would help revitalise the lagging downtown Detroit area if its application was approved. But in an ironic twist, standing behind Lanni at the briefing was Alex Yemenidjian, MGM's president and chief operating officer.
Yemenidjian, who said nothing at the press conference, was a key part of the hostile takeover attempt of Chrysler Corp. by MGM controlling shareholder Kirk Kerkorian in April 1995. Kerkorian and his Tracinda Corp. eventually abandoned his effort and signed a truce with Chrysler.
Chrysler Vice Chairman Thomas Denomme was recently appointed chairman of the Michigan Gaming Control Board, the agency charged with licensing and regulating the new casinos.
It was unclear how Denomme would handle his position when it comes to ruling on the MGM application.
The local investment group is led by William Pickard, chairman of Regal Plastics Co. Other investors include Roy S. Roberts, general manager of General Motors Corp.'s Pontiac-GMC division; Anthony Grainer, president and CEO of Malan Realty Investors Inc.; and Dr. Arthur Johnson, retired Wayne State University vice president and vice chairman of New Detroit, Inc.
",48
"Talks aimed at averting a potentially crippling auto supplier strike at  American Axle & Manufacturing Inc continued on Saturday morning after bargainers worked past the midnight Friday deadline.
""The folks are still there, they worked through the night,"" said a person close to the negotiations who asked not to be named. ""They seem in good spirits.""
A strike at American Axle would virtually shut down light truck production at General Motors Corp's 11 North American truck plants within days, and create more supply hardships for Ford Motor Co.
United Auto Workers leaders have not officially extended the strike deadline, but they also have not authorized members to start picketing, union members said on Saturday.
About 7,200 UAW members were poised to walk off their jobs at five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y., on Friday night if no agreement was reached on a new three-year contract.
American Axle, which was spun off from GM in 1994, supplies rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company makes axle shafts that are used by Ford in its F-150 pickup trucks, Expedition and Explorer sport/utilities and some rear-drive passenger cars, although those supplies are not as critical as the GM parts. It also makes axles for a small number of Chrysler Corp. light truck products.
Tight inventories among axle suppliers means GM's light truck plants would run out of parts by early next week, analysts said. The world's largest automaker could lose after-tax profits of $20 million a day if it were forced to suspend light truck production, analysts said.
American Axle and the UAW are at odds over wages and other economic issues as the union seeks to impose on the company the same pattern contract the Big Three automakers agreed to for about 400,000 UAW members last fall.
Automakers guaranteed jobs for 95 percent of their current workforce in a contract that provides $2,000 lump sum payments in the first year and wage hikes of three percent in the second and third years. The pact allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
American Axle, however, wants to start new hires at 60 percent of the base wage -- and extend the time it takes to reach the full rate to six years, union officials said. The Big Three pact has a ""grow-in"" rate of three years.
But if the company were forced to match the Big Three pattern it would be at a severe cost disadvantage against its competitors, a company spokesman has said.
The American Axle talks have drawn attention because they mark the first time a GM spin-off has had to negotiate a new contract.
Meantime, a UAW strike against Johnson Controls Inc, a key seat supplier for Ford, entered its 19th day Saturday with no settlement.
",48
"Talks aimed at settling a dispute between the United Auto Workers and Johnson Controls Inc. continued Thursday afternoon, as Ford Motor Co. prepared to idle light truck production lines at three plants.
Johnson Controls spokesman Jeff Steiner said in a recorded message that talks were continuing as of mid-afternoon to resolve the strike, which entered its 10th day Thursday.
About 500 UAW workers walked off the job Jan. 28 at two Johnson Controls seat plants in Plymouth, Mich., and Oberlin, Ohio, after talks on a new contract collapsed.
The plants conduct final seat assembly for the Ford Expedition full-size sport utility, and Econoline and Club Wagons full-size vans.
With no sign that a settlement is near, Ford is sticking with plans to idle all of its Michigan Truck Assembly plant, and part of two other facilities in Ohio, said Ford spokesman Bert Serre.
On Wednesday, Ford said it would suspend production at the plants if the two sides did not resolve their issues, a move that would idle about 6,800 hourly workers.
Ford has refused to accept seats made by non-union labour, but has continued to make and store Expeditions and Econolines, using temporary seats to finish production.
When production of the current shifts concludes, Ford will have made 7,700 Expeditions and 7,100 full-size vans without regular seats, Serre said. He declined to comment on the how much the shutdown would cost the automaker.
Analysts have said Ford earns $10,000 in pre-tax profits on the Expedition, one of its most popular and profitable vehicles. Normally, Ford makes 42 Expeditions an hour, or 840 vehicles a day during two 10-hour shifts at Michigan Truck.
Because Ford makes its F-Series pickup trucks on the same line as the Expedition, the company said stopping Expedition production will also force it to halt F-Series assembly.
Ohio plants affected are the van assembly line in Lorain, and a frame production line at Ford's Ohio Assembly in Avon Lake.
Taking cues from Ford, Johnson Controls did not stand in the way of UAW organising efforts at the plants last fall. The UAW has been stepping up efforts to organise auto suppliers to boost its falling membership base.
The union says it wants seat workers at the two plants to receive pay levels competitive with other seat manufacturers. But Johnson Controls maintains its offer is competitive with what the UAW has accepted elsewhere.
",48
"One year after Chrysler Corp. stunned traditional car dealers by granting a new car franchise to the CarMax auto superstore chain, a senior Chrysler executive said Sunday the move has been a success.
""We think Car Max represents us well,"" said Tom Pappert, vice president of sales and service for Chrysler.
Pappert, who spoke to reporters at the National Automobile Dealers Association annual convention here, said competing dealers near the Norcross, Ga., Chrysler/Dodge CarMax dealership have begun to emulate many of CarMax's practices such as money-back guarantees and more generous warranties.
""It takes all of the guess work out of the used car process, and that's exactly what needs to happen,"" he said, noting the dealership has added new business and not stolen it from other Chrysler dealers.
Chrysler, the first of Detroit's Big Three to ally itself with one of the new superstores, has no plans to expand any more with CarMax, Pappert said. CarMax is a unit of Circuit City Stores Inc..
Like other automakers, Chrysler has a limit on the number of separate dealership storefronts a single owner can have, although exceptions are granted. The company limits owners to 10 separate dealerships in the country, six in a given regional sales zone, and two in a metropolitan area.
But Chrysler has adopted some of the superstore techniques at three new facilities being built in Texas, Maryland and Massachusetts. The stores will give as much exposure to used cars as new cars typically get. They will be set up in a mall-type layout and feature a personal greeter, child playrooms and a cafe.
The superstore concept, as well as dealerships owned by publicly traded companies, have been a source of concern voiced by dealers attending the convention, according to officials at both Chrysler and Ford Motor Co..
However, Pappert said the capital that publicly traded companies have access to can help dealers who find their profits squeezed by increasingly thin margins.
Profits are likely to come under even more pressure as more buyers use the Internet to research and purchase vehicles, said Pappert. He cited a Boston Consulting group study that forecast 25 percent of new vehicle sales will be over the Internet by 2000, adding he believes it will be higher than that.
""It's going north -- not south,"" Pappert said.
Separately, Ford Division General Manager Ross Roberts said the automaker has had discussions superstore groups, but has not reached any other letters of understanding like the agreement it signed recently with Republic Industries Inc., which owns the AutoNation USA chain.
Under the agreement announced in December, AutoNation can submit proposals to acquire existing Ford or Lincoln-Mercury dealerships. The pact also covers areas that Ford does not have dealerships and wants to start one.
Roberts said Ford has talked with large groups that do not meet the automaker's financial, territorial and cooperative standards.
",48
"As megadealer H. Wayne Huizenga continued to gobble up more new car franchises Monday, the National Automobile Dealers Association's top economist said traditional dealers are poised to grab more of the used vehicle market and exploit their superior parts service.
""All in all, we have a pretty favourable outlook in terms of our industry,"" Tom Webb, chief economist of NADA, told a news conference at the group's annual convention.
Webb's comments came hours after Huizenga's Republic Industries Inc. announced the purchase of Wallace Automotive Group, a six-dealer group that operates Ford, Nissan, Dodge, Mitsubishi and two Lincoln-Mercury dealerships in southeast Florida.
The deal, valued at $55 million, pushes Republic's total 1997 new dealer revenue estimates for 1997 to about $2.8 billion, a Republic spokesman said, erasing any doubt that Republic is now the largest new vehicle dealer group in the country in terms of revenues.
In a swipe at the superstore trend, Webb disputed the idea that selling large volumes of new or used vehicles will cut more costs or generate higher profits. One analysis conducted by NADA showed economies of scale benefits stop after 100 vehicles a month.
""People who think that just increasing volume is the answer are totally wrong,"" he said.
The new car market remains a mature one, Webb said, with average 1996 dealer profits per vehicle at about $40. The used vehicle segment is growing twice as quickly, he said, because franchisers are picking up more business from small, less-sophisticated used car operators, as well as people who no longer prefer trying to sell a car or truck themselves.
Traditional dealers now control about 31 percent of used retail unit sales and have a 50 percent share of the market in terms of revenue dollars, said Webb. Retail sales of used vehicles number between 40 million and 45 million a year, he said.
""I think the franchised dealer share will grow,"" he said.
Webb also believes franchised dealers can make gains with their parts and service operations, which he said consistently receive high quality rankings.
Webb said traditional dealers have an inherent advantage over superstores structured like CarMax, a unit of Circuit Cities Stores Inc. , because they have more than one profit centre. The CarMax chain now only makes money from one area -- used cars, according to Webb. But franchised dealers make money off used cars, parts and financing.
Franchised dealers have also benefited from growth in lending to higher-risk buyers. Even if those loans later become delinquent, it is not the dealer's problem, as he or she has already made money from the sale, Webb said.
He said he is not concerned about consumer debt levels hurting vehicle sales. Although some industry experts believe the overall selling cycle is becoming more stable, he said the industry still remains vulnerable to a downturn in the economy.
""A new vehicle is a very postponeable purchase,"" said Webb. ""So if the economy weakens, yes, we will suffer.""
For 1997, NADA predicts there will be a net loss of 100 to 150 dealerships, continuing a gradual consolidation that has been under way since the 1940s. According to NADA, there were 22,000 new vehicle dealers in 1996, more than 50,000 franchises and about 15,000 dealer principals.
",48
"After 19 months of sometimes violent confrontations, six striking newspaper unions on Friday made an unconditional offer to return to work at Detroit's two major daily papers.
Al Derey, head of the Metropolitan Council of Newspaper Unions, said the action was not an act of surrender but a tactic to expose the papers to potentially huge financial losses if they do not agree to a fair contract.
""Our position is this strike has not ended. This is simply a new strategy to try to win a fair and decent contract from two corporate giants that don't have any souls,"" a visibly emotional Derey told a news conference.
About 2,500 distribution, pressroom, newsroom and mailroom workers walked off their jobs at the Detroit Free Press and Detroit News in July 1995 after contract talks collapsed.
The papers are editorially indepdendent and have separate owners but have been published under a joint operating agreement since 1989.
Knight-Ridder Inc. owns the Free Press. The News is owned by Gannett Co. Inc..
A representative from Detroit Newspapers Inc, the joint operating agency, could not be reached for comment.
The papers have published every day since the strike began, although early on they only published a single joint edition. More than 400 of the original strikers have cross picket lines. The papers have hired about 1,400 replacements.
Since the start of the strike, which has often erupted in violent confrontations between supporters and private security guards, circulation at the papers has fallen 30 percent. Advertising revenues are down between 15 percent and 20 percent.
Derey told reporters the advertising boycott has cost the papers a combined $250 million, and 700,000 readers have dropped subscriptions. But because the newspapers ""still don't get it,"" he said the unions need to adopt a new strategy.
If the papers reject the return-to-work offer, they could be liable for back pay from the time the offer was made if they were found to have commited unfair labor practices, said Derey. That amounts to $250,000 a day, or $1 million a year, he said.
The action Friday is a controversial one for many union members, who are staunchly opposed to returning to work. But Derey appealed for their support.
""This wasn't the only strategy and it isn't the easiest, but it is the best way we've got to take on these corporate powers and get us moving again down the road to a fair contract,"" he said.
One local labor analyst said the union's move was an acknowledgement the strike as a means of leverage has reached the point of diminishing returns. But it does force management to make some difficult decisions.
""What the unions are doing now is upping the legal ante,"" said Steve Babson, labor program specialist at Wayne State University's Labor Studies Center.
If the papers do not agree to take back all of the striking workers, they could be liable for the back pay penalities if they commited unfair labor practices, a legal process that could take years to resolve, he said.
The Detroit regional director of the NLRB has accused the companies of unfair labor practices, finding they did not bargain in good faith. The company appealed that decision to an administrative law judge, who has not yet issued a ruling.
",48
"Contract talks resumed Sunday between American Axle & Manufacturing Inc. and the United Auto Workers union after bargainers took a rest break following about 36 hours of non-stop negotiations.
The two sides are attempting to hammer out a new contract for 7,200 UAW members at five plants in Detroit, Three Rivers, Mich., and Buffalo, N.Y. A strike would force General Motors Corp., to suspend production at its 11 North American light truck assembly plants within days, and cause more supplier headaches for Ford Motor Co..
Company and union officials began talking about 6 a.m. Friday and recessed talks around the dinnertime Saturday night. UAW leaders let a strike deadline expire midnight Friday without any picketing action. No new deadline was set.
""The mood is still good. Progress is being made,"" said a person close to the talks who did not want his name used.
A union spokesman could not be reached for comment. UAW members have continued to report for work and the company's normal weekend operations of limited production and maintenance have gone on uninterrupted.
American Axle, which was spun off from GM in 1994, supplies rear axles for GM's pickup trucks and sport utility vehicles, axles for the Camero and Firebird rear-drive cars, as well as various parts for other passenger car lines.
The company makes axle shafts that Ford uses in its F-150 pickup trucks, Expedition and Explorer sport/utilities and some rear-drive passenger cars. It also makes axles for a small number of Chrysler Corp. light truck products.
Tight inventories among axle suppliers means GM's light truck plants would run out of parts about two days after a strike begins, analysts said. A shutdown of light truck operations could cost GM $20 million a day in lost profits, analysts said.
The American Axle talks have drawn attention because they mark the first time a GM spin-off has had to negotiate a new contract. The UAW is trying to force the company to adopt the same pattern contract the Big Three automakers agreed to for about 400,000 UAW members last fall.
Automakers guaranteed jobs for 95 percent of their current workforce in a contract that provides $2,000 lump sum payments in the first year and wage hikes of three percent in the second and third years. The pact allows automakers to pay new hires at 70 percent of the starting base hourly wage of about $19.
The company claims the Big Three pattern would put it at a severe cost disadvantage with its competitors.
A UAW strike against Johnson Controls Inc., a key seat supplier for Ford, reached its 20th day Sunday with no settlement.
",48
"Czech engineering concern Skoda a.s. said on Thursday it had agreed with Czech steelmaker Trinecke Zelezarny a.s. to cooperate in steel production and privatisation projects.
Skoda said the deal would help make the ailing Czech steel industry more efficient through coordinating the modernisation of production in complementary areas.
Skoda, which makes heavy iron finished and semi-finished goods, said in a statement from its headquarters in Plzen that both companies would specialise and coordinate in unspecified areas of production, aiming to cut costs.
Skoda's spokesman Karel Samec said selected products would be manufactured in the cheaper of the two mills.
""This scheme will also be used in the future in other companies,"" Samec said in a statement. ""Cooperation and... participation in privatisation is necessary, bearing in mind the current stagnation of the steel production in the world.""
Samec declined to specify which privatisation projects Skoda had under consideration.
The Industry and Trade Ministry plans to sell 19 percent stakes of the 67 percent it holds in two other steel firms -- Nova Hut a.s. and Vitkovice a.s.
The plan has yet to be approved by the full cabinet.
Trinecke Zelezarny, one of the four biggest steelmills located in the northeastern town of Trinec, was partially privatised through a direct sale of a 51 percent stake to a domestic investment group and the government's voucher scheme.
A steel industry source told Reuters on Thursday that Skoda, which has rapidly acquiried companies in the post-Communist era, was also considering acquiring the troubled Poldi Ocel steel mill west of Prague.
Skoda's Samec told Reuters he ""was not aware"" of any plans that would lead to Skoda acquisitions in Nova Hut or Vitkovice, and that ""it was too early to talk about other projects"".
The government in 1993 agreed to sell a controlling stake in Poldi to the small Czech company, Bohemia Art which has never fully paid for its majority interest.
Production in Poldi came to a halt earlier this year because the company was not able to pay its energy bills.
Skoda was involved in inconclusive talks earlier this year on bailing out Poldi. Bankruptcy cases against Poldi are slowly moving through the courts.
Skoda, based in the western city of Plzen, makes everything from drink cans to trolleybuses and nuclear components and has shown a large appetite for acquisitions. It is no longer affiliated with the car maker Skoda Automobilova a.s.
-- Prague Newsroom, 42-2-2423-0003
",13
"Prime Minister Vaclav Klaus said on Tuesday that improving the regulation of beleaguered Czech capital markets was on his agenda, but he took a shot at critics who have said the improvement was coming too slowly.
Speaking at a banking and finance forum in Prague, Klaus said that ""we are searching for new forms of regulations.""
""But I disagree with those critics, mostly foreigners, who look at the existing quality of our capital markets and are surprised that they do not equal Wall Street, the City of London or any other well-established western financial centre yet,"" Klaus told the conference.
""Their high-brow attitude and their absolutist, almost doctrinal phraseology is something what does not help much.""
However Klaus, a professor of economics and fierce anti-regulation campaigner, added that finding the right extent of capital market regulation was an ""imminent task"".
Many foreign equity analysts and investors frequently criticise the Czech markets for a lack of quality company information and clear pricing of shares, insider trading, and poor oversight of numerous investment funds.
Many analysts use Poland and its more stringent capital market regulation as an example of why the Warsaw Stock Exchange attracts much more foreign investment than Prague.
Separately, Klaus said that the country had too many banks and investment funds, and many were poorly managed.
A crisis in small private banks peaked last year when Agrobanka, the fifth largest and the largest fully-private bank, was put under forced administration by the central bank, the last and largest in a dozen recent interventions.
Klaus said a liberal approach to granting banking and capital markets licences in the early 1990's came from the need for more private financial houses and competition, and nobody knew what the right number of institutions would be.
""We have too many banks and too many investment funds now, and we also know that not all of them function perfectly or are in the best possible hands,"" Klaus said.
The Finance Ministry's capital markets oversight office has recently stepped up its activity with a wave of actions against illegal asset-stripping by managers of mostly smaller Czech investment funds.
But the ministry is still under fierce criticism from investors and the media for a lack of activity.
Klaus has revealed a plan to gradually separate the capital market supervision from the Finance Ministry, a process which has started in February by creating a separate Securities Bureau within the ministry.
Under the plan, the Czech Securities Registry started publishing over-the counter trades registred at the centre earlier this year.
Klaus also admitted that a period at the start of the privatisation process in the early 1990's when state firms were not yet privatised led to a loss of many assets as state supervision relaxed but new owners were still not in place.
""This is something what the future privatising countries should avoid,"" Klaus told the conference.
-- Prague Newsroom, 420-2-2423-0003
",13
"A Czech cabinet decision to require deposits on consumer goods imports will be less harmful for inflation than the rejected option of import surcharges but may have little impact on the trade deficit, analysts said on Friday.
But they praised a government plan, revealed on Wednesday as part of an economic revival package, to cut public sector wage growth to 7.3 percent this year from the planned 11.9 percent, saying this would be more effective in pushing down demand for imported products than the deposit programme.
The analysts polled by Reuters said the deposit programme, which will come into effect on Monday, would not have a great impact on consumer prices.
Under the deposit scheme, importers will be required to deposit 20 percent of the value of imported consumer goods on an interest-free account for 180 days.
The commercial banks will channel the money from their branches to state-held development bank Konsolidacni Banka.
Industry and Trade Minister Vladimir Dlouhy, officially announcing the new measure on Friday, said he hoped the restriction would reverse the trend of the widening trade deficit, but did not make a more specific forecast.
""Deposits are a better way than an import surcharge, which would raise inflation, and import quotas, which would be unwelcome internationally,"" said ING Barings analyst Boris Gomez.
He saw little impact on the trade deficit from the deposit scheme but added that imports could fall as a result of a decline in domestic demand caused by lower wage growth.
""I believe that the government will be able to go ahead with the wage restrictions. The question is whether the private sector will follow,"" Gomez said.
Minister Dlouhy said the deposits would apply to some 30 percent of imports, including selected foodstuffs, cars, electronics, textile products, furniture, and appliances.
Vladimir Kreidl of investment bank Patria Finance said the wage growth limits were ""very drastic and ambitious"" and said staff were likely to be laid off in order to meet the target. ""If well implemented, the measures should benefit the economy...The trade deficit should be reduced by 30-50 billion crowns from the originally expected 200-220 billion (1997 deficit),"" Kreidl said.
The trade gap rose to 160.3 billion crowns last year from under 100 billion in 1995, and official estimates before imposition of the import deposits were projecting this year's deficit to range around 210 billion.
But Pavel Sobisek of Zivnostenska Banka said the import deposits would have virtually no impact on the trade balance.
""I am leaving my prediction (of the foreign trade deficit) unchanged at 180 billion,"" he said, adding that a major change could come only through a change of the exchange rate policy.
Analysts said the programme would have minimal impact on inflation, which fell to 6.8 percent year on year in March.
""The effect in the cost of imported goods would be a year-on-year increase in inflation of about 0.3-0.4 percent,"" said Jack Schrantz, head of research at Raiffeisen Capital and Investment in Prague.
""But this will be offset by other factors such as decreased government spending and a slowdown in the economy,"" he added.
Other measures taken by the cabinet include 25.5 billion in budget cuts, setting up an independent capital market oversight body, promoting exports, and fighting more intensively against economic crime.
The package also calls for speeding up privatisation of state-held companies, relaxation of monetary policy, and separation of banks' investment and commercial arms.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech government gave its final approval on Wednesday to a 20-year contract for natural gas supplies from Norway, ending total dependence on Russian gas, Industry and Trade Minister Vladimir Dlouhy said.
""The government today gave its final approval to the Norwegian option of diversifying imports of natural gas including the diversification of the transport route,"" Dlouhy told a news conference after a cabinet meeting.
The deal, approved by Czech and Norwegian ministers last month, angered officials at Russia's gas company RAO Gazprom which called the move economically unjustified.
Financial details have not been disclosed, but the Norwegian gas is expected to cost more than Russian supplies.
A consortium of Norwegian firms, including Statoil, Norsk Hydro ASA and Saga Petroleum A/S, is involved in the deal, though Norway must still decide which gas producing platforms will supply the Czechs.
Under the deal which begins on May 1, supplies would start at 1.4 million cubic metres a day, increasing to about three billion cubic metres annually.
The total supply as laid out by the agreement should be 53 billion cubic metres (bcm) over 20 years.
The Norwegian gas is to be delivered through a pipeline via northern Germany which feeds into the Czech Republic.
Czechs, who for the past half century have taken all of their natural gas from Russia, now consume around nine bcm of gas per year. Total consumption is expected to rise to 12-13 bcm after the turn of the century.
Russia's Gazprom is still expected to remain the main supplier to the Czechs, but Gazprom officials said last month the Norwegian incursion could hurt Gazprom's competitive position in Europe.
""Gazprom is closely following the development of events in the Czech Republic, and remaining its fundamental partner in the field of gas supplies, will do everything possible to widen co-operation,"" Gazprom said.
Prague said it picked Norway after considering potential deals with German, Dutch and British suppliers, as well as a second delivery route of Russian gas.
The deal also signals an expected push in the sector by Norway into central and eastern Europe. Statoil officials said at an initialling of the agreement last month in Prague that it was also looking to supply Poland and Hungary with natural gas.
-- Prague Newsroom, 420-2-2423-0003
",13
"Opposition leader Milos Zeman asked Czech parliament on Wednesday to approve a separate resolution which would ""clarify"" his concerns about a post-World War Two reconciliation pact with Germany.
But deputies in Zeman's own Social Democratic party (CSSD) admitted that the votes were probably were still there, without the extra resolution, to push the deal with Germany through parliament, and save the Czech government from embarrassment.
As debate dragged into a second day on the declaration -- already signed by the Prague and Bonn governments and approved by the German parliament -- Zeman demanded the accompanying rider, which the governing coalition has already rejected.
""I would want to believe this parliament would find the courage to express itself on the declaration in its resolution, as the parliament of a sovereign state,"" said Zeman, who chairs the lower house and the CSSD.
Czech Prime Minister Vaclav Klaus's three-party conservative coalition, which is two seats short of a majority in the lower house, has rejected any sort of extra resolution which may ""interpret"" the already-signed declaration.
In the accord, Bonn expresses regret for the 1938-45 Nazi occupation of the Czech lands and Prague its sorrow for brutality in post-war expulsion of 2.5 million ethnic Germans.
The text also includes German support for Czech membership of the European Union (EU) and the North Atlantic Treaty Organisation (NATO).
It also skirts around the most sensitive issues of direct compensation for property seized from the expelled Germans.
German politicians sympathetic to families of expellees, now mostly residing in southern Germany, have said that the issue of individual compensation for property was still open, despite the inter-governmental declaration.
Zeman said the comments made by German Chancellor Helmut Kohl, after he signed the document, and later by Finance Minister Theo Waigel, showed that Bonn considered the ""property problems"" still unresolved.
""These subsequent statements are the basic reason for my concern,"" Zeman told Czech parliament.
CSSD vice-chairman Karel Machovec said that while the add-on resolution, which has yet to be presented, might help ensure a larger majority for the declaration, he acknowledged the government probably had the votes to win.
""I know about three or four Social Democrats who would vote for the declaration,"" Machovec told Reuters, saying he would be among members voting in favour of the deal with Germany.
But debate in the Czech lower house looked set to continue late into the week, with small opposition parties attempting filibusters and other procedural moves to block the declaration from coming to a vote.
The ultra-right Republican Party and the Communist Party claim that the declaration lets Germany off lightly for Nazi attrocities and the dismemberment of Czechoslovakia.
",13
"The agriculture ministry said on Tuesday it plans to privatise Budejovicky Budvar n.p., makers of Czech Budweiser beer, via a management buyout, after lengthy talks with Anheuser Busch Cos broke down last year.
The head of the ministry's privatisation department, Jiri Stehlik, told Reuters that the plan would be to sell a 10 percent stake in Budvar to management with an option for them eventually to buy a further 41 percent.
The plan comes after protracted talks broke down last September with Busch over use of the Budweiser trademark and the U.S. company's interest in a minority stake in Budvar, based in the southern Czech city of Budejovice (Budweis).
The new plan fits the government's desire to privatise the makers of one of the country's most famous exports but keep the company primarily in Czech hands.
""This is the proposal of the (ministry), but the government decides on it, so it can change,"" Stehlik said.
He said the plan did not include a foreign partner in the first stage of the privatisation process, but added that it did not exclude later entry of a foreign investor. Stehlik declined to give further details of the plan.
Budvar, 100 percent state owned, is the maker of the Czech Budweiser, its flagship label. The beer is sold in many markets as Budvar.
The Czech government had delayed privatisation of the company while trying to settle a trademark dispute with Anheuser Busch, maker of the U.S. Budweiser, which has been battling with the small Czech cousin for most of the century.
The negotiations over the use of the ""Budweiser"" and ""Bud"" trademarks were aimed at resolving the row which prohibits the rivals from selling their labels in the other's key markets.
But talks broke down last September when Anheuser-Busch said it would market its brew in much of Europe under the ""Bud"" name.
Anheuser-Busch sells its beer under the Budweiser name in 11 European countries and under the ""Bud"" name in nine others.
Budvar is one of the five largest Czech breweries, and Budweiser is one of the country's best-known exports.
""Budweiser"" beer has been brewed for centuries in the city known also by the German name Budweis, but the trademark was not registered by the Czechs until late last century,
The trademark conflict with Anheuser-Busch, founded by German immigrants to the United States, began in 1911 when the American brewery first insisted that it had registered the brand name before the Czechs.
The Czech government considers Budvar as a part of its ""family silver"" of strategic holdings.
-- Prague Newsroom, 42-2-2423-0003
",13
"IBM Corp's Czech unit said on Monday it would appeal against a Defence Ministry decision to award a 1.3 billion crown deal to deliver an information system to a consortium of EDS and Digital Equipment Corp.
IBM said in a statement that EDS-Digital did not fulfil a tender condition that stipulated participation of only those companies which have acomplished projects in the Czech Republic to a similar extent.
""There are a number of reasons why we are appealing, we are still working on it,"" said IBM's spokesman Michal Urvalek. He declined to give more information on the appeal.
The IBM move comes on the heels of Unisys Corp's announcement on Thursday that it too would appeal the decision. Any appeals must be delivered to the ministry this week.
IBM placed third in the eyes of an 11-member committee evaluating bidders in the tender behind, Unisys which came in first and EDS-Digital, which won the contract after the ministry decided not to follow ratings.
Implementation of the staff information system is seen as a large step on the path to make the Czech army more compatible with armed forces of NATO countries, but finding its supplier has been a struggle.
Unisys won an original four billion crown supply tender which was abolished last year after Czech competition authorities found irregularities in the process.
The original tender was cancelled by the Defence Ministry, but the former Ministry for Economic Competition intervened and cancelled that decision before ordering a new tender itself.
Unisys and IDOM, a unit of Deloitte and Touche, were ousted from the new tender earlier this year for application violations, but were later allowed to re-enter the competition.
Unisys denied the mistakes, as revealed by the ministry, ever happened.
In announcing the winner, Defence Minister Miloslav Vyborny said that technical quality of EDS-Digital and Unisys bids was almost identical, but EDS was chosen because its offer was 109 million crowns cheaper.
After the Vyborny's announcement, Unisys immediately said it would and to go to the Economic Competition Office if necessary. On Monday Unisys officials added they could not rule out a request for police to investigate the tender proceedings.
""Our lawyers are investigating this possibility... but it is priority number two, a step after other possibilities fail,"" said Jiri Nykodym, of Unisys's Czech unit.
Unisys said Vyborny was wrong to take the decision since under tender rules, price should have been a decisive factor only if two bidders received identical scores from the commission.
""By decision... the tender rules were broken, and, in fact, the way of evaluation of bids was changed in the course of the tender at the moment when it became clear that... Unisys would have won the tender for the second time,"" Nykodym said.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech government on Wednesday directed three of its ministers to oversee an investigation into the failure of the bank Kreditni Banka a.s., Prime Minister Vaclav Klaus said.
The move comes after the press and opposition questioned official banking oversight in the case of the Plzen-based bank which was shut by the central bank last month after reportedly losing about 12 billion crowns.
Klaus told a news conference after a cabinet meeting that Czech National Bank (CNB) Governor Josef Tosovsky would join Finance Minister Ivan Kocarnik, Justice Minister Jan Kalvoda, and Interior Minister Jan Ruml in overseeing the probe.
""Bearing in mind the extraordinary importance of this matter, the govenrnment authorised the group of three ministers to specially inquire into this issue, using all existing standard mechanisms,"" Klaus said.
He said authorities have been investigating the Kreditni case since the central bank rescinded its licence in August.
Findings from the investigation might lead to changes in Czech legislation, Klaus said.
Local media reports have placed the blame for the failure of Kreditni Banka, majority owned by the largest Czech insurer Ceska Pojistovna a.s. , on a series of murky loans made to interests connected to shareholders.
The leader of the opposition Social Democrats, Milos Zeman, last weekend blamed Finance Minister Ivan Kocarnik and his ministry for lax supervision of the banks.
After Klaus's announcement, the central bank issued a statement on Wednesday, saying it welcomed the group of ministers looking at whether there was any criminal actions involved in Kreditni's failure.
It said combining the investigatory organs with, tax, legal, banking oversight, and capital market authorities, would help in ""uncovering illegal activity"" and determining its punishment.
""The CNB believes that through this work it will be possible to solve other cases as well in which the banking supervision has submitted a number of criminal reports on the basis of its knowledge gained in other banks,"" the central bank's statement said.
Eleven banks have fallen under CNB authority since the liberalisation of the sector began in earnest in 1992.
Klaus attributed the failures of the banks -- all of them small or medium sized -- to growing pains in the still-transforming post-Communist Czech economy.
""I am 100 percent persuaded that the dominant cause of these phenomenona... is the difficulity, fragility, complexity of banking in the transformation phase,"" Klaus said.
Klaus, in numerous previous speeches has declared that the ""transformation phase"" was over and the economy was ""in the fitness centre building muscle"".
But Klaus has been under pressure by opposition deputies who have demanded answers on the banking failures.
""The government condemns the way of politicising of this important situation by the opposition, which could intendidly or not, lead to the destabilisation of the the whole banking system,"" Klaus said.
-- Prague Newsroom, 42-2-2423-0003
",13
"Ceska Sporitelna a.s., the largest Czech savings bank, said on Thursday its 1996 audited net profit rose to 1.89 billion crowns ($65 million) from 263 million in 1995, using Czech acounting standards.
Speaking at a news conference, the bank's general director Jaroslav Klapal said the result was opening room for a higher dividend than last year's five crowns per share, but he declined to specify what the board's proposal would be.
Deputy CEO Kamil Ziegler said results under international accounting standards (IAS) would be released together with the bank's consolidated results in mid April.
""We think that the profit under international standards will be similar, probably little lower, by 100 million (crowns) at the most,"" Ziegler told reporters.
The bank's balance sheet dipped to 359 billion crowns at the end of last year from 368 billion in 1995 on losses from exposure on the interbank market, and concentration on client loans, Ziegler said.
""We are happy with this result, it is a reflection of our strategy of a shift from the interbank market,"" he said. ""This year, we expect the balance sheet total to rise by eight percent.""
Last year Sporitelna, the former communist monolith where most Czechs kept personal deposits, cut its interbank market exposure to 28.4 percent of total assets from 40 percent in 1995, while loans to clients rose to 42.1 percent from 34.4.
Ziegler said net interest income dipped to 13.39 billion from 13.65 billion in 1995, while non-interest income rose to 4.26 from 3.99 billion.
He said profits should also rise this year, but declined to give more details of Sporitelna's financial plans.
The bank's gross profit was the same as the net result, as the bank paid no income tax.
In 1995 the gross profit was 9.31 billion crowns, but net earnings were dramatically lower after auditors forced Sporitelna to set aside 7.1 billion into reserves to cover exposure in doubtfull loans.
In the 1996, accounting period Sporitelna said it put aside 4.66 billion crowns for reserves. Klapal said this figure should decline to 3.1 billion in 1997.
Klapal also said Sporitelna was interested in converting more shares into global depository receipts, after last year's tranche of some seven percent underwritten by Bankers Trust.
The director said Sporitelna would close 500 small branches this year of the total number of 1,700, and lay off 2,000 employees of the current 18,709.
The bank's capital adequacy ratio, calculated under CNB practices, fell to 8.86 percent form 10.98, as a result of rising proportion of loans to clients which are covered from 100 percent in the domestic calculation as opposed to loans to banks which only need 20 percent, Ziegler said.
The proportion of classified loans rose to 24.72 percent from 20.86 percent, also due to the change in loan structure, Ziegler said.
-- Prague Newsroom, 420-2-2423-0003 ($ = 29.08 Czech Crowns)
",13
"A debate in the Czech parliament over a sensitive post-World War Two reconciliation agreement with Germany dragged into a third day on Thursday, with small opposition parties trying various tactics to obstruct a vote.
Supporters of the Czech-German declaration, aimed at putting to rest more than 50 years of lingering political questions over World War Two and its aftermath, have tried to limit debate but a quick conclusion appeared unlikely.
The ultra-right Czech Republican Party, vehemently opposed to the declaration which has already been signed by the Prague and Bonn governments and approved by the German parliament, submitted its own counter-declaration.
In an unruly morning session of the Czech lower house, Republican deputy Josef Krejsa put forward a proposal calling for 305 billion marks ($180 billion) in compensation for the Nazi occupation of Czech lands, along with the freezing of all German assets in the Czech Republic until the money is paid.
Political analysts said the Republican intitiative had virtually no chance of being approved, but it formed the basis for a continuing series of speeches and tactics aimed at obstructing a final vote.
In the declaration, Bonn expresses regret for the 1938-45 Nazi occupation of Czech lands and Prague expresses its sorrow for brutality in the post-war expulsion of 2.5 million ethnic Germans.
It also sets up a fund for compensating victims of Nazi aggression, but does not address the issue of direct compensation for ethnic Germans whose property was expropriated.
The Republicans and the unreformed Communist Party say the declaration lets Germany off lightly for Nazi attrocities and the dismemberment of Czechoslovakia.
Bonn considers individual property questions still open but the Czech government has rejected this interpretation.
With the debate getting increasingly nasty, Czech Prime Minister Vaclav Klaus called an emergency meeting of his cabinet on Thursday in an effort to kill the Republican filibuster which threatens to go on for days.
The meeting resulted in a cabinet boycott of Thursday's regular parliamentary question and answer session, and a call for the house's immunity committee to investigate whether Republicans broke house rules, or the law, with abusive comments.
In an example of the tenor of the debate, Krejsa called Deputy Foreign Minister Alexander Vondra ""the anal speleologist of the awakening German empire"" for negotiating the deal with Bonn.
The Czech lower house suspended its rules to allow debate to continue all night and into Saturday if necessary, but Klaus indicated a decision might not come before next week.
He called on parliament to suspend its plans to take a nine-day break after the Saturday session.
""The government considers it to be beneficial that the chamber continues next week in the debate on the open item (declaration)... it will try after an agreement with all of you to find a way how this will be possible to be secured,"" Klaus told the house. ($ = 1.684 German Marks)
",13
"Prime Minister Vaclav Klaus said on Tuesday that improving the regulation of beleaguered Czech capital markets was on his agenda, but he took a shot at critics who have said the improvement was coming too slowly.
Speaking at a banking and finance forum in Prague, Klaus said that ""we are searching for new forms of regulations"".
""But I disagree with those critics, mostly foreigners, who look at the existing quality of our capital markets and are surprised that they do not equal Wall Street, the City of London or any other well-established western financial centre yet,"" Klaus told the conference.
""Their high-brow attitude and and their absolutist, almost doctrinal phraseology"" does not help much, he said.
However Klaus, a professor of economics and fierce anti-regulation campaigner, added that finding the right extent of capital market regulation was an ""imminent task"".
Many foreign equity analysts and investors frequently criticise the Czech markets for a lack of quality company information and clear pricing of shares, insider trading, and poor oversight of numerous investment funds.
Many analysts use Poland and its more stringent capital market regulation as an example of why the Warsaw Stock Exchange attracts much more foreign investment than Prague.
Separately, Klaus said that the country had too many banks and investment funds, and many were poorly managed.
A crisis in small private banks peaked last year when Agrobanka, the fifth largest and the largest fully-private bank, was put under forced administration by the central bank, the last and largest in a dozen recent interventions.
Klaus said a liberal approach to granting banking and capital markets licences in the early 1990's came from the need for more private financial houses and competition, and nobody knew what the right number of institutions would be.
""We have too many banks and too many investment funds now, and we also know that not all of them function perfectly or are in the best possible hands,"" Klaus said.
The Finance Ministry's capital markets oversight office has recently stepped up its activity with a wave of actions against illegal asset-stripping by managers of mostly smaller Czech investment funds.
But the ministry is still under fierce criticism from investors and the media for a lack of activity.
Klaus has revealed a plan to gradually separate capital market supervision from the Finance Ministry, a process which was started in February by creating a separate Securities Bureau within the ministry.
Under the plan, the Czech Securities Registry started publishing over-the counter trades registred at the centre earlier this year.
Klaus also admitted that a period at the start of the privatisation process in the early 1990's when state firms were not yet privatised led to a loss of many assets as state supervision relaxed but new owners were still not in place.
""This is something what the future privatising countries should avoid,"" Klaus told the conference.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech parliament began debate on Tuesday on a post-World War Two reconciliation agreement with Germany which the Prague government sees as key to EU and NATO membership. Opposition deputies call it a betrayal.
The pact faces a potentially long and unpleasant fight in the Czech lower house, especially from the ultra-right Republican Party and the Communists, who say it lets Germany off lightly for Nazi attrocities and the dismemberment of what was then Czechoslovakia.
Deputies voted narrowly to move the sensitive declaration, which was signed last month by Czech Prime Minister Vaclav Klaus and German Chancellor Helmut Kohl, to the top of the agenda for the session.
""The declaration was adopted in the (German parliament) two weeks ago with a large majority. I believe the Czech parliament will approach it in the same way,"" Klaus told the chamber.
In the accord, Bonn expresses regret for the 1938-45 Nazi occupation of the Czech lands and Prague its sorrow for brutality in post-war expulsion of 2.5 million ethnic Germans.
The text also includes German support for Czech membership of the European Union (EU) and the North Atlantic Treaty Organisation (NATO).
Klaus said the accord was an important international message that the Czech Republic does not have open political issues with its neighbours.
The declaration does not need to be ratified by parliament but a rejection by deputies would embarrass Klaus's minority coalition government, which wants as strong a show of support.
The Republicans have promised a filibuster in an attempt to block the declaration from coming to a vote, but political analysts believe the measure will pass, if just narrowly.
A vote, technically, could come later on Tuesday, but many expect the debate to take days.
The main opposition Social Democrats (CSSD) have not said if they will support the declaration and have sought a separate parliamentary resolution, partly on the grounds that the text does not acknowledge the legal validity of the Czechs' actions.
But Klaus told deputies that the accord respected legal norms in both states and did not question the results of the 1945 Potsdam conference, at which the Czechoslovak government was given the right to expel the ethnic Germans.
He also said the text did not affect Czechs' rights to property seized from the ethnic Germans.
The CSSD leadership has agreed to allow its members a free vote, probably ensuring that the government will get the votes it needs from the opposition to approve the accord.
",13
"The leading Czech opposition party, the Social Democrats (CSSD), confirmed chairman Milos Zeman and his confrontational style at a weekend national conference, while eliminating his main rivals.
But Zeman only partly succeeded in uniting the party leadership as he disposed most of his internal oppositon, including the more compromising deputy chairman Karel Machovec.
Still, the conference rejected one of Zeman's favourites for a senior party post, and confirmed as deputy chairwoman Petra Buzkova, the most popular Czech politician according to opinion polls, over Zeman's objections.
Despite achieving relative success in last June's elections -- where the CSSD finished a surpisingly strong second, stripping the conservative government's majority in parliament -- delegates elected Zeman with only 72 percent of the vote.
That was about 14 percentage points lower than at the 1996 national CSSD congress.
The leftist daily Pravo said Zeman's position will not likely be as solid in the party despite throwing off Machovec. Commentator Alexandr Mitrofanov said that it was likely that the new leadership ""would not give Zeman peaceful work in the circle of the faithful"".
Many Czech commentators criticised the CSSD on Monday for taking a more radical route.
The right-leaning daily Mlada Fronta Dnes said, ""Zeman's dream of showing the Social Democrats to the public as a serious alternative to the government dissolved... in the wind of partisan passions.""
It said the CSSD has defined itself as by showing diletantism and devoting time to elimination of internal enemies rather than to finding alternative solutions.
""Zeman bets on political superstition and carelessness of people othrwise adult and reasonable,"" wrote Jefim Fistejn in the frequently pro-governemnt daily Lidove Noviny.
Zeman has aimed at voters of unreformed communists and ultra-right republicans as a source of more votes, while Machovec was campaigning for a shift to the centre and less emotional clashes with the government.
An opinion poll released by the state-funded research agency IVVM on Monday showed the CSSD's gap with Prime Minister Vaclav Klaus's Civic Democratic Party grew in early March to 26 to 19 percent, from February support of 24 to 21 percent.
Over the four years of his chairmanship, Zeman has adopted a strictly anti-government rhetoric, and managed to lead the party from the opposition wilderness to a major force.
But the CSSD had a huge rift late last year when several deputies, including Machovec and budget committee chairman Josef Wagner, broke ranks in voting with the government on its 1997 balanced budget.
Delegates at the conference responded to Zeman's calls and voted to expell Wagner from the party, and denied the deputy chairman's post to Machovec.
In his keynote speech at the conference, Zeman called for a fast action on what he said was an impending economic crisis, and on white-collar economic crime, and fast action to reverse the growing trade deficit, including pro-export measures.
The party confirmed its support for Czech NATO and European Union membership, but repeated calls for a referendum on both.
",13
"The Czech Agriculture Ministry announced plans on Tuesday to privatise Budejovicky Budvar n.p., brewers of Czech Budweiser beer, through a management buyout after lengthy talks with Anheuser Busch Cos, which makes its U.S. namesake, broke down last year.
The head of the ministry's privatisation department, Jiri Stehlik, told Reuters that the plan was to sell a 10 percent stake in Budvar to management with an option for them eventually to buy a further 41 percent.
The plan comes after talks broke down last September with Busch over use of the Budweiser trademark and the U.S. company's interest in taking a minority stake in Budvar.
Budvar is based in the southern Czech city of Ceske Budejovice, the German name of which is Budweis.
The new plan fits the government's desire to privatise the makers of one of the country's most famous exports but keep the company primarily in Czech hands.
""This is the proposal of the (ministry), but the government decides on it, so it can change,"" Stehlik said.
The sale plan did not include a foreign partner in the first stage, but he added that it did not exclude the entry of one later. Stehlik declined to give further details of the plan.
The government has delayed Budvar's privatisation while trying to settle a trademark dispute with Anheuser Busch, maker of U.S. Budweiser, which has dragged on most of this century.
The negotiations over the use of the ""Budweiser"" and ""Bud"" trademarks were aimed at resolving the row which prohibits the rivals from selling their brands in each other's key markets.
But talks broke down last September when Anheuser-Busch said it would market its brew in much of Europe under the ""Bud"" name.
Anheuser-Busch sells its beer under the Budweiser name in 11 European countries and under the ""Bud"" name in nine others.
Budvar is one of the five largest Czech breweries, and Budweiser is one of the country's best-known exports.
Budweiser beer has been brewed for centuries but the Czechs did not register the trademark until late last century.
The conflict with Anheuser-Busch, founded by German immigrants to the United States, began in 1911 when the American brewery first insisted that it had registered the brand name before the Czechs.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech power utility CEZ a.s. on Wednesday reported lower first half profits as the effects of a prolonged battle over price agreements with regional distributors took a bite out of its bottom line.
Despite an unusually long winter that boosted first half revenues, company officials told a news conference that net profit, according to international accounting standards, eased to 5.95 billion crowns from 6.26 billion in the previous year.
They added the firm's net profit calculated according to Czech accounting standards fell year-on-year to 5.1 billion in the first half from 5.57 billion crowns.
CEZ, the country's largest firm in terms of revenues, and six out of the country's eight regional power distributors have been at odds for months over the terms of long-term supply agreements, and have been fighting over prices since last year.
CEZ's Petr Voboril said that in the first quarter, CEZ charged 1,020 crowns and last year's average price of 1,033 crowns per megawatthour as deposit payments in the second quarter while the agreements are sorted out, but even that wasn't enough to keep profits from slipping.
""Most of the distributors do not even pay the full provisional price. At the end of the first half they owed us almost two billion crowns,"" said Voboril, director of CEZ's planning and financial analysis department.
He told reporters that the drop would have been sharper if it was not partially covered by higher-than-planned energy sales due to the long winter.
CEZ operating revenues, according to international standards, rose to 28.51 billion crowns from 26.09 billion as the company raised its market share to 79.8 percent from 76.3 percent.
The firm still plans to post flat profit for the entire year, and to pay its first-ever dividend of 3.3 percent of the 1,000 crown nominal value of its shares, Voboril said.
CEZ posted an international standard 9.3 billion crown 1995 net profit, and an 8.1 billion crown Czech accounting net profit.
Until this year, CEZ has re-invested all earnings into its extensive desulphurisation programme and the construction of a nuclear power plant at Temelin.
CEZ shares dipped two crowns on the Prague Stock Exchange on Wednesday to 1,043 crowns, with most analysts saying the market had already discounted the lower profit figure.
But warned Jan Sykora, a broker with Prague's Wood and Company: ""There are still many unclear things. CEZ, despite the increase of market share, will rather lose its positions.""
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech consumer prices rose by what some analysts considered a surprisingly low 0.2 percent in August, after 1.0 percent in July, to put prices 9.6 percent up on the same month in 1995.
The result surprised analysts although it kept average inflation well over the government's 1996 target of eight percent.
Radek Maly, an economist with Citibank in Prague, said: ""It is very low, I expected the month-on month inflation to be over 0.6 percent, and the year-on-year figure to get over ten percent.""
The Statistical Bureau (CSU) said a hike in regulated natural gas and power prices sparked a 3.2 percent month-on-month increase in housing prices, the main impetus for August inflation.
Food, beverages and tobacco products actually showed a price drop in August of 1.4 percent, thanks to a 29.5 percent fall in potato prices and 25.9 percent decrease of vegetables.
""What was totally surprising to me was the fall in the foods index, and considering its (large) weighting, it obviously pulled the whole figure down. The whole structure looks very well,"" Maly said.
The CSU in July raised its average inflation forecast for the whole year to 9.0 percent, and Prime Minister Vaclav Klaus said the cabinet based its 1997 budget calculations on an inflation expectation of ""not below"" eight percent.
Klaus did not specify if he meant the year-on-year or the moving average rate.
Maly said the August result might help the 1996 figure to finish below nine percent, but nowhere near the government's earlier target.
The government has said it would aim to cut inflation by one percentage point every year after 1995's rate of nine percent.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech Finance Minister Ivan Kocarnik on Friday revealed details of his plan to restructure energy prices, which could pave the way to the rapid privatisation of energy distributors.
Kocarnik told a news conference his plan includes a two step rise in electricity, natural gas and heating rates for households, the first on July 1 and the second a year later.
He said he would seek cabinet consensus for the plan under which average electricity rates for households would rise 35 percent in July to 1.49 crowns per KWh, while the price for industrial customers would remain flat at 1.70 crowns per KWh.
Under the current pricing structure, household rates are cross-subsidised by revenues from industry.
""We have to eliminate, or reverse, this ratio,"" Kocarnik told reporters. He said gas prices would also increase by 35 percent in the first stage.
He added half the electricity rate hike would come in the form of a VAT increase on energy and fuels to 22 percent from five percent, while the other half would become revenue for suppliers.
Kocarnik said proceeds from the VAT increase, a step towards unifying tax rates and holding down consumption, would be used for social transfers to those most affected by the price hikes.
The minister said the second increase, planned for mid-1998, would only occur if the cost levels of energy companies required it.
The second stage calls for a 32 percent rise in electricity prices, a 21 percent gas price increase, and a 10 percent rise in heating prices. The ministry has already approved a 39 percent heating price increase to be carried out this year.
Kocarnik said the government's schedule of increasing energy prices slowly -- by about 10 to 15 percent every year -- was sending the wrong signal to consumers and producers, and created high inflation expectations.
The three-party governing coalition is due to meet in February to debate further deregulation of controlled prices, including rents.
A decision on further action in the energy sector will create good conditions for the often delayed privatisation of state holdings in energy companies, said Kocarnik.
""In the very forseeable future, I will submit a proposal on the privatisation of the distribution companies,"" he told the news conference.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech National Bank (CNB) Governor Josef Tosovsky said media reaction to the failure of Kreditni Banka a.s. last month temporarily destabilised the banking sector, but it is basically sound.
After closed-door testimony to a parliamentary banking commission, Tosovsky told reporters the system -- especially the four largest banks where most activity is centred -- is on a firm footing after a period of consolidation.
""It sounds parodoxical at the present time when its credibility is declining, but the banking sector is in very good health,"" Tosovsky said.
""The four biggest banks have a market value of about 110 billion crowns, while in 1990 they had a negative value... these banks represent more than 70 percent of the sector.""
The governor said the public uproar after the collapse of the medium-sized Plzen-based Kreditni Banka last month led to a decline in confidence in Czech banks, but he blamed the media and politicians for this.
He said the collapse caused a liquidity crunch in the system, but he declined to say which banks, if any, were threatened by the reaction.
""We rather consider it as a liquidity problem than anything else, but I obviously cannot give information about any concrete banks,"" he said.
Kreditni was the 11th bank to need help from the central bank, which tightened its oversight of operations in a move to consolidate the country's banking sector.
But the case of Kreditni, whose estimated losses totalled nearly 12 billion crowns, was followed by reports in local media that larger banks might be in trouble.
One report in the weekly Respekt claimed Agrobanka a.s., the largest fully private bank, had been ignored by the interbank lending market and was suffering liquidity problems.
The bank has yet to comment publicly on the report.
Then the chairman of parliament Milos Zeman, who leads the opposition Social Democrats, claimed in a television discussion programme that the largest savings bank Ceska Sporitelna a.s. had unspecified problems.
The bank strongly denied this, and said Zeman's remarks led to unusually high withdrawals in the following days.
Tosovsky said the CNB was prepared ""to function as the last resort creditor, in certain moments -- above all if there is a liquidity problem.""
Tosovsky, who sits on a select government committee investigating Kreditni's failure, said he would support a separate parliamentary commission probing the subject as well.
He said that after a three-year moratorium on granting new banking licences ended earlier this year with the CNB's awarding of two licences to a German and a British bank, the central bank might consider other candidates.
""We do not intend to seal off the market hermetically, so we are looking for a policy of something in between... and give a chance to quality institutions,"" Tosovsky said.
-- Prague Newsroom, 42-2-2423-0003
",13
"A plan on how the Czech Republic will diversify natural gas supplies, now coming solely from Russia, has been delayed for several weeks, the Industry and Trade Ministry said on Tuesday.
""We are gathering information, analysing it, and it's going to take several weeks (before a the issue is put before the government),"" ministry Spokesman Miroslav Konvalina told Reuters.
A plan had been expected to be submitted to the government sometime in January. Konvalina gave no reason for the delay.
Officials have declined to say which partners the government was considering, though government representatives have held talks on limited deliveries from Norway.
The Ministry is drawing up plans for four options for securing gas supplies, but has given no details. No matter which plan is excepted, Russia is expected to remain the dominant supplier.
The Ministry said the four options are being considered:
* Purchasing all natural gas from Gazprom, using two different shipping routes, with a long-term agreement until 2016, with price guarantees until 1998.
* Purchasing some Russian gas indirectly through Dutch company Nederlandse Gasunie NV, and Germany's Wintershall, a subsidiary of BASF. Gasunie would start supplies in 1998, delivering up to two billion cubic metres in 2005, with the agreement lasting until 2014.
In case of a fall in Russian supplies, it would deliver its own gas through Wingas, a joint venture of Wintershall (65 percent) and Gazprom (35 percent).
Wintershall offers a similar scheme, with deliveries starting on January 1 next year, rising to one billion cubic metres in 2000, under a deal until 2016. Negotiations with these firms are in the stage of initiating a supply contract.
* Finalising and maintaining the agreement for Norwegian gas, which has already been preliminarily approved this year, until 2017.
* A limited purchase from Mobil Europe Gas Inc, Germany's Brigitta Erdgas und Erdoel (BEB) and British Gas Plc.
The Czechs have ended their dependance on Russian crude oil by building a new pipeline to Germany, but are still completely dependant on supplies provided by Russia's Gazprom.
The Czech Republic consumes around eight to nine billion cubic metres of natural gas per year, but volumes are expected to rise to some 12-13 billion cubic metres by the turn of the century.
-- Prague Newsroom, 42-2-2423-0003
",13
"A Czech cabinet decision to require deposits on consumer goods imports will be less harmful for inflation than the rejected option of import surcharges but may have little impact on the trade deficit, analysts said on Friday.
But they praised a government plan, revealed on Wednesday as part of an economic revival package, to cut public sector wage growth to 7.3 percent this year from the planned 11.9 percent, saying this would be more effective in pushing down demand for imported products than the deposit programme.
The analysts polled by Reuters said the deposit programme, which will come into effect on Monday, would not have a great impact on consumer prices.
Under the deposit scheme, importers will be required to deposit 20 percent of the value of imported consumer goods on an interest-free account for 180 days.
The commercial banks will channel the money from their branches to state-held development bank Konsolidacni Banka.
Industry and Trade Minister Vladimir Dlouhy, officially announcing the new measure on Friday, said he hoped the restriction would reverse the trend of the widening trade deficit, but did not make a more specific forecast.
""Deposits are a better way than an import surcharge, which would raise inflation, and import quotas, which would be unwelcome internationally,"" said ING Barings analyst Boris Gomez.
He saw little impact on the trade deficit from the deposit scheme but added that imports could fall as a result of a decline in domestic demand caused by lower wage growth.
""I believe that the government will be able to go ahead with the wage restrictions. The question is whether the private sector will follow,"" Gomez said.
Minister Dlouhy said the deposits would apply to some 30 percent of imports, including selected foodstuffs, cars, electronics, textile products, furniture, and appliances.
Vladimir Kreidl of investment bank Patria Finance said the wage growth limits were ""very drastic and ambitious"" and said staff were likely to be laid off in order to meet the target.
""If well implemented, the measures should benefit the economy...The trade deficit should be reduced by 30-50 billion crowns from the originally expected 200-220 billion (1997 deficit),"" Kreidl said.
The trade gap rose to 160.3 billion crowns last year from under 100 billion in 1995, and official estimates before imposition of the import deposits were projecting this year's deficit to range around 210 bilion.
But Pavel Sobisek of Zivnostenska Banka said the import deposits would have virtually no impact on the trade balance.
""I am leaving my prediction (of the foreign trade deficit) unchanged at 180 billion,"" he said, addding that a major change could come only through a change of the exchange rate policy.
Analysts said the programme would have minimal impact on inflation, which fell to 6.8 percent year on year in March.
""The effect in the cost of imported goods would be a year-on-year increase in inflation of about 0.3-0.4 percent,"" said Jack Schrantz, head of research at Raiffeisen Capital and Investment in Prague.
""But this will be offset by other factors such as decreased government spending and a slowdown in the economy,"" he added.
Other measures taken by the cabinet include 25.5 billion in budget cuts, setting up an independent capital market oversight body, promoting exports, and fighting more intensively against economic crime.
The package also calls for speeding up privatisation of state-held companies, relaxation of monetary policy, and separation of banks' investment and commercial arms.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech Agriculture Ministry announced plans on Tuesday to privatise Budejovicky Budvar n.p., brewers of Czech Budweiser beer, through a management buyout after lengthy talks with Anheuser Busch Cos, which makes its U.S. namesake, broke down last year.
The head of the ministry's privatisation department, Jiri Stehlik, told Reuters that the plan was to sell a 10 percent stake in Budvar to management with an option for them eventually to buy a further 41 percent.
The plan comes after talks broke down last September with Busch over use of the Budweiser trademark and the U.S. company's interest in taking a minority stake in Budvar.
Budvar is based in the southern Czech city of Ceske Budejovice, the German name of which is Budweis.
The new plan fits the government's desire to privatise the makers of one of the country's most famous exports but keep the company primarily in Czech hands.
""This is the proposal of the (ministry), but the government decides on it, so it can change,"" Stehlik said.
The sale plan did not include a foreign partner in the first stage, but he added that it did not exclude the entry of one later. Stehlik declined to give further details of the plan.
The government has delayed Budvar's privatisation while trying to settle a trademark dispute with Anheuser Busch, maker of U.S. Budweiser, which has dragged on most of this century.
The negotiations over the use of the ""Budweiser"" and ""Bud"" trademarks were aimed at resolving the row which prohibits the rivals from selling their brands in each other's key markets.
But talks broke down last September when Anheuser-Busch said it would market its brew in much of Europe under the ""Bud"" name.
Anheuser-Busch sells its beer under the Budweiser name in 11 European countries and under the ""Bud"" name in nine others.
Budvar is one of the five largest Czech breweries, and Budweiser is one of the country's best-known exports.
Budweiser beer has been brewed for centuries but the Czechs did not register the trademark until late last century,
The conflict with Anheuser-Busch, founded by German immigrants to the United States, began in 1911 when the American brewery first insisted that it had registered the brand name before the Czechs.
-- Prague Newsroom, 42-2-2423-0003
",13
"The Prague Cultural Heritage Office is taking the Terminator head-on by rejecting plans for altering an historic city-centre building into a Planet Hollywood theme restaurant, a Czech daily said on Tuesday.
The heritage watchdog said designs for the film-kitsch cafe, one in a chain co-founded by Arnold Schwarzenegger, star of the Terminator films, would destroy some of the classic house's features in a UN protected heritage zone.
""It is a historically valuable object, and in a UNESCO reservation, therefore we can not allow its devastation,"" the daily Mlada Fronta Dnes quoted Ladislav Spacek from the office as saying.
Numerous licences are required for building in Prague's historical centre, as bureaus specialising in everything from architecture to anthropology are consulted before the final licence for opening the site is granted.
But local partners in the project said it will go forward.
Schwarzenegger, who founded the chain along with fellow screen stars Demi Moore, Bruce Willis and Sylvester Stallone and British entrepreneur Robert Earl, came to Prague in August to inaugurate construction by donating a laser gun from his latest sci-fi thriller ""Eraser"".
The heritage office said the planned destruction of the building's inner walls, in order to get more room for film projections, and permanently sealing windows facing a boulevard in Prague's banking district, would kill the house's character.
""They want to turn this attractive object into a dead house, that is unthinkable for us,"" Spacek told the paper.
The paper quoted local partner Prague Investments  as saying that Planet Hollywood would stick to its concept.
""I think that everything will be solved to the satisfaction of both sides,"" Jitka Cihakova said.
Officials from the heritage office and Prague Investments were not available for additional comment.
The site previously housed a stamp collector's shop and optician.
The construction has already gotten off to a rough start. Last week scaffolding collapsed, injuring one worker and demolishing a garden restaurant that Planet Hollywood installed in front of the future diner.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech ultra-right Republicans staged a small but noisy demonstration as German Chancellor Helmut Kohl arrived to sign a post-war reconciliation accord between the Czech Republic and Germany on Tuesday.
About a hundred supporters of the Republican Party yelled ""go home"" and ""Czech lands for the Czechs"" as Kohl arrived at Prague's Liechtenstein Palace to sign a joint declaration with Czech Prime Minister Vaclav Klaus.
Other protesters carried banners with slogans such as ""No more Munich"" -- a reference to the 1938 Munich Agreement which ceded the Sudetenland, then part of Czechoslovakia, to Germany.
Kohl waved to the demonstrators as he entered the palace.
In the accord, Bonn expresses its sorrow for the 1938-45 Nazi occupation of the Czech lands and Prague its regret for Czech brutality in the post-war expulsion of some 2.5 million Sudeten Germans.
It also includes German support for Czech membership of the European Union and the North Atlantic Treaty Orgainsation.
""This document has only one aim -- that is to finish Hitler's drive to the east and finalise the liquidation of our nation,"" Republican Party chairman Miroslav Sladek told the deomstrators.
""It is a revision of the results of the World War II,"" he said.
The Republicans, who won 18 of the 200 seats in parliamentary elections last June, and the Communists, who won 22, oppose the accord.
The communists say the declaration is a threat to Czech sovereignty.
The Czech Republic is a leading contender to be one of the first new members of the EU and NATO. However, many Czechs are wary about joining a new alliance after the years of Nazi occupation and Soviet domination.
One of the protestors, 64-year old Karel Valis, who said his parents were thrown out of Sudetenland when Hitler's Germany took it over, said Germans would use the declaration as a basis for taking over the Czech Republic.
""Since the 12th century Germans want to rule this area,"" he yelled. ""Next, Sudetens will want their property back.""
The declaration does not provide direct compensation for Sudenten Germans' confiscated property.
",13
"Wider trading in shares of the fast-growing Czech chemical and trade conglomerate Chemapol Group a.s. began this month with a whimper, and analysts see the stock hampered by opaque financial disclosure.
They said the still illiquid stock -- which first listed on the Prague Stock Exchange (PSE) last Thursday at 2,290 crowns ($82.76), dipped to 2,170 this week before Friday's fixing at 2,245 -- faced uncertainty because of recent acquisitions.
""The problem is information, we don't know where acquisitions were financed from, we haven't seen the balance sheet from last year,"" said Jan Zak of Atlantik Financial Markets.
Chemapol spent an estimated 12 billion crowns in an acquisition spree last year. It now controls about 70 companies with combined equity of about 20 billion crowns.
Analysts agreed it was potentially an interesting stock, but much more transparency was needed.
Anna Bossong, analyst at ING Barings, said Chemapol would have trouble with a planned 600 million crown issue of global depository receipts (GDR) expected later this year if the company is not more forthcoming.
""I think it would be very difficult. One of the problems this company has is a difficulty with transparency. Increased transparency would be the first thing foreign investors look to before they would invest into GDRs,"" Bossong told Reuters.
Chemapol originally planned the issue for the last year, but then delayed it, saying domestic investors had already sufficient demand for the nominal 826 million crowns in new shares issued last autumn.
Most of the new issue was gobbled up by existing shareholders which includes six major local banks -- Komercni Banka, Ceska sporitelna, IPB, Ceskoslovenska Obchodni Banka, Agrobanka and Union Banka -- and management.
Only a handful of shares have traded on the PSE since it was listed last week.
Chemapol's empire grew from an oil trading company -- a business it partially lost to local refineries -- to include major chemical companies, a small airline, a publishing house, an arms trading firm and sports franchises and clubs.
It is also competing in a tender for a more than one-third stake in the largest Czech defence firm, the debt-strapped jet maker Aero Vodochody a.s.
Chemapol's spokesman Vadim Petrov said the conglomerate is aiming to improve the information flow. ""That is a process we are working on intensively,"" he said.
It has yet to reveal 1996 results. Petrov said they would be released when an audit is finished, probably in April.
On January 1, the firm adopted a new structure creating sub-holdings grouping its distribution, trading, chemical, communications and real estate holdings.
""The new structure is quite good... the sub-holding arrangement is logical and the acquisitions, especially in the chemical industry, logically chain on,"" said Atlantik's Zak.
But Ondrej Vojtech of Akro Capital warned: ""The acquisition policy is known to be too broad-minded, and I have the feeling that they are trying to get money from everywhere.""
Petrov said this year Chemapol would try to stabilise and consolidate its holdings, and is not planning any large acquisitions, apart from the potential Aero stake.
The group posted audited net profit of 62.5 million crowns in 1995. It had total sales of over 40 billion crowns in 1995 and 29 billion crowns in the first half of 1996.
-- Prague Newsroom, 42-2-2423-0003 ($ = 27.66 Czech Crowns)
",13
"The Czech Republic appeared headed for its first budget deficit despite earlier reports by the fiscally-hawkish government that it had achieved a surplus for the fourth successive year.
""(We expect) the definitive results for 1996 will range around a deficit of 1.7 billion crowns,"" Deputy Finance Minister Miroslav Havel said on Wednesday in testimony to parliament's budget committtee.
The Czechs have had three surplus budgets since Czechoslovakia split in 1993.
Final data were due in the ministry on Wednesday but as local media paid close attention to whether monetarist Prime Minister Vaclav Klaus would maintain his fiscal winning streak, Havel said the trend was not positive.
He said that by Wednesday revenues totalled 482.8 billion crowns, while expenditures were 484.5 billion.
More bills may be delivered after the deadline, inflating expenditures further, Havel said.
The government made last-ditch efforts in December when the budget looked headed for a more than five billion crown deficit, by freezing some outlays until 1997, and requiring early repayment on credit granted to a deposit insurance fund.
The budget has been hampered by lower-than-expected tax revenue and delayed repayment on credits to Russia.
The 1996 budget was originally approved as a balanced budget totalling 497.6 billion crowns, but an autumn round of spending cuts knocked the forecast expenditure down to 491 billion crowns.
Parliamentary budget committee chairman Jozef Wagner, a member of the largest opposition party, the Social Democrats, said the 1996 deficit was not troublesome, but he was concerned with the effects government payment adjustments may have on the 1997 budget.
Part of the December stop-gap measures included postponing payment of 800 million crowns in state subsidies for housing loans which was due to the partially-privatised banks Ceska Sporitelna a.s. and IPB a.s.
Klaus, who calls balanced budgets the ""alpha and omega"" of his government, hailed initial reports of a 1996 budget surplus, made by the finance ministry soon after the new year, as a sign of the country's continued fiscal responsibility.
Parliament approved a fifth straight balanced budget plan in December, with both expenditures and revenues forecast at 549.1 billion crowns in 1997.
But the 1997 budget was based on economic growth of 5.4 percent, and many independent analysts have forecast growth for this year at under five percent, after growth between 4.0 and 4.5 percent for the whole of 1996.
Many have voiced concern that slower than expected economic growth might force the government to consider major changes in the 1997 budget to keep a much larger deficit at bay.
-- Prague Newsroom, 42-2-2423-0003
",13
"Engineering group Skoda a.s. said on Tuesday it had won an order to supply more than $170 million in trolleybuses to the city of San Francisco, the largest supply of Czech goods ever to the United States.
Skoda spokesman Jaroslav Hudec said the electric-powered buses would be produced in the Czech Republic and assembled at Skoda's subsidiary, Electric Transit International (ETI) in Baltimore.
""We consider victory in this tender to be an extraordinary success not only in view of the expected volumes of supplies...but also because the U.S. market is among the most prestigious and demanding in the world,"" Hudec said.
Plzen-based Skoda, no longer affiliated with the Czech car maker Skoda Automobilova a.s., has made an aggressive push into new markets, aiming to offer western-quality units with the comparative cost advantage of eastern European production.
The San Francisco contract would open the way for Skoda, an engineering conglomerate which makes goods ranging from nuclear power components to drink cans, to win more business in the United States, Hudec said.
""Considering the ecologisation of public transport in the U.S., Skoda Plzen has real chances to win further orders... and also bring the brand Skoda to the U.S. market in relation to other production of our factories,"" he said.
Skoda has made over 12,000 trolleybuses since 1936 -- many of which can be seen running in cities throughout the former communist bloc.
Local Czech media reports quoted ETI officials as saying the San Francisco order could be for about 250 single-section and higher capacity buses through to the year 2000.
The total for the order with details of the financial and technical conditions would be finalised by mid-year, Hudec said, but declined to give further details.
Earlier this decade Skoda won a contract to supply 54 trolley buses to the city of Dayton, Ohio, and founded a U.S. joint venture with private partners in Baltimore, ETI, to assemble the buses. Skoda holds a majority stake in ETI.
The Dayton supply is scheduled to be completed in 1998. Skoda said it is also pursuing joint ventures to build trolley buses in Russian and Iran.
Guy Creasy, equities analyst at IB Austria Securities in Prague, said that while the San Francisco order was indeed a positive signal for Skoda shares, lingering questions over the cost of recent acquisitions remained.
""I don't think (the order) is a drop in the bucket, but I don't think it will make the difference between profit and loss,"" he said. ""I don't think it will make us change (Skoda's share recommendation) to a 'buy'.""
Creasy said that it was not yet clear how earnings from the order would be divided with Skoda's U.S. partners.
Analysts have been wary about Skoda shares, awaiting 1996 results which should show the impact of buying two ailing Czech truck makers, Liaz a.s. and Tatra a.s..
Skoda shares gained 25 crowns in Tuesday's fixing on the Prague Stock Exchange to 871 crowns, reversing a downtrend in the stock which ended 52 crowns lower on Monday. The shares showed thin activity after the Tuesday fixing.
Skoda said in a statement on Monday that it planned to raise its basic equity by 2.5 billion crowns through an unspecified share issue still to be decided by shareholders.
The Czech state National Property Fund (NPF) in March said it would sell its remaining 8.7 percent stake in Skoda soon through the Prague share markets.
News of the San Francisco order comes as the Czech Republic has posted record trade deficits. The country's current account deficit topped eight percent of gross domestic product last year, up from four percent in 1995.
",13
"The Czech government expects the country's gross domestic product (GDP) to grow 5.4 percent in 1997 after an expected 5.1 percent this year, Prime Minister Vaclav Klaus said on Wednesday.
Speaking after a cabinet session discussing the 1997 budget proposal, Klaus said the new budget was based on an annual average inflation forecast of 8.6 percent for next year, down from a revised forecast of 9.0 in 1996.
The prime minister said the country's current account deficit could reach 5.8 percent of GDP in 1997, after a projected 5.7 percent this year.
The current account gap, caused by a balloning trade deficit, is expected to climb to about 150 billion crowns ($5.69 billion) this year from 96 billion in 1995.
""We expect that we will not yet turn around the trade deficit, nor the deficit of the current account,"" Klaus said.
He said the budget, which will go to the cabinet next week for final approval before going to parliament, was planned as his government's fifth straight balanced budget, with spending and revenues standing at 549.1 billion crowns.
The cabinet would propose cutting personal income taxes by raising the threshold for taxable income to 28,800 crowns from the current 26,400, and by widening the tax brackets for individuals.
Corporate tax should remain unchanged at 39 percent.
""The cabinet did not find more room (for tax cuts) other than the possibility to cut taxes in the level of about 2.8 billion crowns,"" Klaus told the news conference.
Klaus and his centre-right coalition partners made lowering taxes one of the cornerstones of their political programmes prior to June's parliamentary elections, in which they lost a majority in the lower house of the parliament.
Klaus said government consumption should show a relative decline when the growth of the economy was factored in, while household consumption should rise four percent and creation of fixed capital by 13 percent.
""That is a continuation of the fast investment wave, which is going on in this economy, which is the condition and guarantee of its positive development and export ability."" ($1=26.36 Czech Crown)
",13
"The Czech Agriculture Ministry announced plans Tuesday to privatise Budejovicky Budvar n.p., brewers of Czech Budweiser beer, through a management buyout after lengthy talks with Anheuser Busch Cos., which makes its U.S. namesake, broke down last year.
The head of the ministry's privatisation department, Jiri Stehlik, said in an interview that the plan was to sell a 10 percent stake in Budvar to management with an option for them eventually to buy an additional 41 percent.
The plan comes after talks broke down last September with Busch over use of the Budweiser trademark and the St. Louis-based company's interest in taking a minority stake in Budvar.
Budvar is based in the southern Czech city of Ceske Budejovice, the German name of which is Budweis.
The new plan fits the government's desire to privatise the makers of one of the country's most famous exports but keep the company primarily in Czech hands.
""This is the proposal of the (ministry), but the government decides on it, so it can change,"" Stehlik said.
The sale plan did not include a foreign partner in the first stage, but he added that it did not exclude the entry of one later. Stehlik declined to give further details of the plan.
The government has delayed Budvar's privatisation while trying to settle a trademark dispute with Anheuser Busch, maker of U.S. Budweiser, which has dragged on most of this century.
The negotiations over the use of the ""Budweiser"" and ""Bud"" trademarks were aimed at resolving the wrangle, which prohibits the rivals from selling their brands in each other's key markets.
Talks broke down last September when Anheuser-Busch said it would market its brew in much of Europe under the ""Bud"" name.
Anheuser-Busch sells its beer under the Budweiser name in 11 European countries and under the ""Bud"" name in nine others.
Budvar is one of the five largest Czech breweries, and Budweiser is one of the country's best-known exports.
Budweiser beer has been brewed for centuries. but the Czechs did not register the trademark until late last century,
The conflict with Anheuser-Busch, founded by German immigrants to the United States, began in 1911 when the American brewery first insisted that it had registered the brand name before the Czechs.
",13
"The Czech government announced a sweeping series of economic measures to jump start the economy on Wednesday, but admitted that even with the moves, GDP growth would slump badly in 1997.
In releasing the 11 page plan late Wednesday afternoon, Prime Minister Vaclav Klaus said cuts of almost five percent to budget expenditures, limits on public sector wage growth and a speeding up of privatisation would affect almost every Czech.
He said the measures are aimed not only at improving the economy, but also ""the completion of the concept of the transformation of the Czech economy.""
""Therefore it must be a very complex combination of individual measures, but also of explicit change of the original objectives of the government's policy,"" he said.
But Klaus told reporters that even with the measures, he would consider it a ""success"" if 1997 GDP growth reached half of the 5.4 percent, year-on-year growth rate forecast in the budget.
While the statement said monetary policy was not mentioned in the document because this area is for the central bank to decide, it nonetheless chided the central bank for its tight monetary policy.
""There must be an inverse development in monetary and fiscal policy,"" the statement said. ""Monetary policy, after the restriction in middle of the last year...(it) must make a move in the opposite direction,"" it said.
Added Klaus: ""There is an argument... That the state does not consider it rational to strive to alter the exchange rate. We are not altering the central parity of the crown and we are convinced that the fluctuation band plus and minus 7.5 per cent is fully sufficient.""
The crown is fixed daily by the central bank at +/- 7.5 percent of the mid-point of its dollar/mark basket.
The Czech economy has enjoyed several years of demand-led growth as industry imported technology and a sharp rise in wages provoked a consumer boom.
But industrial and construction output have both declined for two consecutive months and the burgeoning trade deficit, at a record 160.3 billion crowns in 1996, has shown no signs of letting up.
The government measures include:
*Some 25.5 billion crowns cuts in budget expenditure, originally approved at 549.1 billion crowns.
*A limiting of public sector wage growth to 7.3 percent, from an originally-planned 11.9 percent.
*A speeding up of privatisation, including banks.
*Tightening of capital market regulation, including the setting up of an independent watchdog and the separation of investment and commercial banking.
*Implementation of an import deposit programme forcing importers to place a still to be determined percent of the value of imports on interest-free deposit at the central bank.
The government also said it would propose a lowering of the corporate tax rate in 1998 to 35 percent from 39 percent this year, but some excise taxes would rise to help boost revenues.
",13
"U.S.-based Unisys Corp said on Tuesday it has appealed to the Czech Economic Competition Office a Defence Ministry decision awarding an army contract to a consortium of Electronic Data Systems and Digital Equipment Corp.
""Unisys submitted...a proposal for investigation of the decision of the Defence Minister of the Czech Republic,"" the company said in a statement.
Last week, Defence Minister Miloslav Vyborny rejected a first round appeal by Unisys and IBM Corp saying he believed his decision in March to award a 1.3 billion crown army information system deal to EDS-Digital was correct.
Vyborny chose EDS-Digital despite a recommendation by a steering committee to chose Unisys's bid.
""By this step (the appeal), Unisys is continuing in its effort for recognition of its victory in the public tender...because it is convinced of the seriousness of its arguments,"" the statement said.
Vyborny has said that he decided in favour of EDS-Digital due to the lower price of its bid. Unisys has said that price was not weighted in accordance with the tender rules, and that EDS-Digital's offer was not complete. EDS declined to comment.
Unisys won an original four billion crown supply tender last year, but it was cancelled in August when competition authorities found irregularities in the process.
Vyborny said after the second tender that the ministry had decided to ignore the recommendation of the tender committee also because some members's evaluations were far different than the rest of the committee.
Unisys has said it was suspicious that the original tender was abolished and rankings were changed when it won again.
""Unisys is proposing cancellation of the decision and hopes the government of the Czech Republic will deal with the situation around this strategic order,"" Unisys added.
A number of other Czech military tenders have been marked by controversy, sometimes including allegations of graft.
Installation of the staff information system is seen as a large step on the Czech army's path to compatibility with the North Atlantic Treaty Organisation's military command.
NATO leaders will decide in July which former communist countries will be invited to join the alliance. The Czech Republic is a front runner along with Poland and Hungary.
-- Prague Newsroom, 420-2-2423-0003
",13
"A U.S.-led consortium won a controversial Czech Defence Ministry tender on Thursday, but its American rival Unisys Corp immediately said it would appeal the decision.
Defence Minister Miloslav Vyborny announced that the consortium led by Electronic Data Systems Corp and Digital Equipment Corp had won a 1.3 billion crown ($44 million) information systems contract.
The battle to supply the system, which will help Czech armed forces to become compatible with the NATO alliance, has been long and bitter.
Unisys won an original four billion crown supply tender last August. But the tender was later cancelled when Czech competition authorities found irregularities in the process.
Vyborny said a commission set up to evaluate binds in the latest tender had actually put Unisys narrowly ahead of EDS-Digital. But the ministry had decided to ignore its recommendation due to the consortium's lower price and greater experience, he told an news conference.
Jan Vesely, director of the Czech unit of Unisys, said his company would first appeal directly to the ministry. ""In the event of a negative answer, there is the Economic Competition Office,"" he said.
Unisys said the EDS bid did not cover all the components which were required. EDS officials in Prague declined to comment and ministry officials were not contactable.
A number of other Czech military tenders have been marked by controversy, sometimes amid allegations of graft.
Installation of the staff information system is a large step on the Czech army's path to compatibility with the North Atlantic Treaty Organisation's military command.
NATO leaders will decide in July which former communist countries will be invited to join the alliance. The Czech Republic is a front runner along with Poland and Hungary.
Vyborny said EDS-Digital had put in a bid of 1.295 billion crowns while Unisys was nearly 109 million crowns more expensive.
The tender commission, which rated the bids but was not authorised to take any decision, put Unisys marginally ahead of EDS. Both were well ahead of International Business Machines Corp and Deloitte and Touche unit IDOM.
""(The bids of) two companies, Unisys and EDS, are in technical terms almost identical. In price terms, without question, the best bid was submitted by EDS,"" Vyborny said. ""The experience of EDS-Digital with staff information systems is greater. It is a bid offering a well-tested system which EDS has implemented in 14 NATO countries,"" he added.
Unisys said it was suspicious that the original tender was abolished and rankings were changed when it won again.
""We consider this decision on ranking in the public tender to be unobjective and unjustified, and we will surely appeal against it,"" the Unisys statement said. ($ = 29.46 Czech Crowns)
",13
"The Czech Republic took a large step on Wednesday toward ending more than 50 years of total dependence on Russia for natural gas, finalising a 20-year supply agreement with Norway.
Czech Industry and Trade Minister Vladimir Dlouhy told a business forum, including Norwegian King Harald, that the deal should allow for gas supplies to begin from May 1, and gradually wean Prague from Russian gas.
Although Prague's political domination by Moscow ended with its 1989 democratic revolution, the Czechs still rely on Russia for most of its energy needs and Russian raw materials remain a major element of Czech imports.
""I am pleased and honoured to say...that the final negotiations were completed,"" Dlouhy told the forum, which also included Norwegian government and business officials.
Dlouhy said that under the deal, supplies would increase from 1.4 million cubic metres a day to around three billion cubic metres annually. The total supply as laid out by the agreement should be 53 billion cubic metres (bcm).
The ministry was considering other options including potential deals with German, Dutch and British suppliers or a second delivery route of Russian gas.
But Dlouhy told journalists after the announcement: ""We picked Norway because it was economically very advantageous.""
No financial terms of the agreement were disclosed.
The deal is expected to be presented to the government in the coming weeks, which must first approve it before state-owned gas transporter Transgas will sign a final contract.
A consortium of Norwegian firms, including Statoil, Norsk Hydro ASA and Saga Petroleum ASA, is involved in the deal, though the Norwegian government must still decide which gas producing platforms the supplies will come from.
The deal, on the eve of a summit between U.S. President Bill Clinton and Russian President Boris Yeltsin where Czech NATO membership is to be discussed, also comes soon after Russia's ambassador to Prague hinted of economic reprisals should the Czechs join the western security alliance.
Czech officials say moves to build a pipeline linking Prague to Middle Eastern oil from the Adriatic Sea, to buy U.S. supplied nuclear fuel for Czech power plants, and the Norway gas deal, complete ""strategic long-term targets"".
Czechs consume around nine bcms per year of natural gas, with demand expecting to rise to 12 to 13 bcms after the turn of the century. Russia's Gazprom is still expected to remain a main supplier to the Czechs.
The deal also signals an expected push in the sector by Norway into central and eastern Europe. Statoil officials at the signing said the firm is also looking to supply Poland and Hungary with natural gas.
""There's a lot of interest to supply other central European countries as well,"" Egio Haaland, Statoil marketing manager for eastern Europe said, adding the amount of gas delivered to the Czechs would be just under what supplies to Hungary and Poland would be.
-- Prague Newsroom, 420-2-2423-0003
",13
"Czech engineering group Skoda a.s. said Tuesday it won an order to supply more than $170 million in buses to the city of San Francisco, the largest supply of Czech goods ever to the United States.
Skoda spokesman Jaroslav Hudec said the electric-powered buses would be produced in the Czech Republic and assembled at Skoda's subsidiary, Electric Transit International in Baltimore.
""We consider victory in this tender to be an extraordinary success not only in view of the expected volumes of supplies ... but also because the U.S. market is among the most prestigious and demanding in the world,"" Hudec said.
Plzen-based Skoda, no longer affiliated with the Czech car maker Skoda Automobilova a.s., has made an aggressive push into new markets, aiming to offer western-quality units with the comparative cost advantage of eastern European production.
The San Francisco contract would open the way for Skoda, an engineering conglomerate that makes goods ranging from nuclear power components to drink cans, to win more business in the United States, Hudec said.
""Considering the ecologization of public transport in the U.S., Skoda Plzen has real chances to win further orders ... and also bring the brand Skoda to the U.S. market in relation to other production of our factories,"" he said.
Skoda has made over 12,000 buses since 1936 -- many of which run in cities throughout the former communist bloc.
Local Czech media reports quoted ETI officials as saying the San Francisco order could be for about 250 single-section and higher capacity buses.
The total order will be finalised by mid-year, Hudec said.
Earlier this decade Skoda won a contract to supply 54 buses to the city of Dayton, Ohio, and founded ETI, a U.S. joint venture with private partners in Baltimore, to assemble the buses. Skoda holds a majority stake in ETI.
The Dayton project is to be completed in 1998. Skoda said it is also pursuing joint ventures to build buses in Russian and Iran.
",13
"Czech Foreign Minister Josef Zieleniec said on Thursday that a long-awaited Czech-German post-World War Two reconciliation treaty would not bring any change to laws which expelled millions of ethnic Germans.
Zieleniec told reporters he welcomed German Chancellor Helmut Kohl's statement on Wednesday that he hoped the sensitive document closing the book on the Nazi occupation of Czech lands and its aftermath would be signed by year's end.
But Zieleniec said there would be no tinkering with Prague's post-war laws which expelled and expropriated over 2.5 million ethnic Germans, known as Sudeten Germans, after the Czech lands were liberated from Nazi occupation in 1945.
""I want to say something clearly: the declaration will not at all mean not even a hint of a change of the Czech legal order,"" said Zieleniec.
""I am glad Mr. Chancellor spoke on this issue, it is a sign Czech-German relations are an important part of German political activity at present, and that these relations are in the focus of Germany's key politicians,"" he added.
Intensive bilateral talks on the declaration, now running for more than a year, have been held amid calls by politically powerful groups repesenting the expelled Germans for compensation from Prague.
The Czech government has given symbolic compensation to Czech victims of Nazi occupation, but the Bonn government has yet to offer compensation to the Czechs similar to payments made to victims of Nazism in other European countries.
The expelled Germans' groups, concentrated in southern Germany, have demanded the abolition of the post-war decrees issued by then-Czechoslovak President Edvard Benes.
Attempts to cancel the decrees by some individuals through Czech courts have failed.
Kohl pleaded for patience in his address to the Bundestag on Wednesday: ""We want to conclude this agreement this year,"" he said, adding that he wanted it to be symbolically crowned by a speech in Bonn by a representative of the Czech government.
After a meeting with ministers on Thursday Czech President Vaclav Havel, who has spearheaded Prague's warming of relations with Bonn despite holding a mostly ceremonial position, said he agreed with Kohl.
""There's nothing left but to say that it is good that Mr. Chancellor (Kohl) would like to have the declaration signed by the end of the year.""
",13
"The lower house of the Czech parliament ended four days of acrimonious debate on Friday by approving a post-World War Two reconciliation agreement with Germany already signed by both governments.
The parliamentary statement of approval for the declaration -- which includes a separate clause implying, in part, that post-war property restitution questions against the Czechs are closed --  was carried by 131 votes to 59.
Germany's parliament had already approved the declaration in January by a large majority.
The Czech debate over the sensitive agreement turned ugly at times amid stalling tactics by ultra-right Republican and Communist opposition deputies who see the pact as a sellout to Bonn, and who were trying to obstruct a final vote.
Approval of the declaration, expected to pass easily in the Czech upper house, is seen by the Prague government as a prerequisite for NATO and EU membership.
The pact also seals Germany's final post-war reconciliation with a neighbouring country.
The agreement expresses Bonn's regrets for the 1938-45 Nazi occupation of the Czech lands, and Prague's sorrow for Czech brutality in the post-war expulsion of 2.5 million ethnic Germans.
While the bilateral agreement sets up a fund for general victim compensation programmes, it does not directly deal with the thorny issue of restitution to expropriated ethnic Germans. Instead it says the issue should never again become a political consideration.
The parliamentary preamble approved with the declaration makes reference to speeches by Prime Minister Vaclav Klaus and Foreign Minister Josef Zieleniec introducing the measure this week in which both insist that post-war property restitution questions are closed.
Bonn insisted after the agreement was signed that individual property claims can still be made, but Klaus and Zieleniec both rejected this.
The largest opposition party, the Social Democrats (CSSD), demanded that references to the introductory speeches by Klaus and Zieleniec be included in the preamble -- especially because of their comments on property issues -- to ensure a large majority in favour of the declaration.
The preamble says simply that parliament, ""after listening to the prime minister... and foreign minister, and on the basis of the government's reasoning"", agrees with the declaration ""which expresses the will of both states to prevent the past from troubling the joint European future.""
Zieleniec said after the vote (corrects from ""after the speech"") that the preamble, which may raise eyebrows in southern Germany where most of the expellees now live, was not aimed at any specific issue, despite the CSSD's protests.
""It is a formulation which does not interpret the declaration nor does it stress any of its parts above others,"" Zieleniec said.
Top German politicians had cautioned the Czech parliament not to reinterpret the pact, which took nearly two years to negotiate.
",13
"Czech engineering group Skoda a.s. said on Tuesday it had won an order to supply trolleybuses worth more than $170 million to the city of San Francisco, the largest order of Czech goods ever to the United States.
Skoda spokesman Jaroslav Hudec said the electrically powered buses would be produced in the Czech Republic and assembled at Skoda's subsidiary, Electric Transit International (ETI) in Baltimore.
""We consider victory in this tender to be an extraordinary success not only in view of the expected volumes of supplies ... but also because the U.S. market is among the most prestigious and demanding in the world,"" Hudec said.
Plzen-based Skoda, no longer affiliated with the Czech car maker Skoda Automobilova a.s., has made an aggressive push into new markets, aiming to offer western-quality units with the comparative cost advantage of eastern European production.
The San Francisco contract would open the way for Skoda, an engineering conglomerate which makes goods ranging from nuclear power components to drink cans, to win more business in the United States, Hudec said.
""Considering the ecologization of public transport in the U.S., Skoda Plzen has real chances to win further orders... and also bring the brand Skoda to the U.S. market ...,"" he said.
Electric Transit International (ETI) President Ladislav Tetal said the order would virtually replace San Francisco's entire fleet of 300 buses, as the city retains only a few dozen younger vehicles.
He said the deal had no connection with San Francisco's landmark cablecar lines which will continue to be a symbol of the ""City by the Bay.""
The total for the order with details of the financial and technical conditions would be finalised by mid-year, Hudec said, but declined to give further details.
The deal must still be approved by the San Francisco Board of Supervisors in a vote scheduled for April 22, ETI said.
Skoda has made more than 12,000 trolleybuses since 1936 -- many of which can be seen running in cities throughout the former communist bloc.
Earlier this decade Skoda won a contract to supply 54 trolley buses to the city of Dayton, Ohio, and founded a U.S. joint venture with private partners in Baltimore, ETI, to assemble the buses. Skoda holds a majority stake in ETI.
The Dayton supply is scheduled to be completed in 1998. Skoda said it is also pursuing joint ventures to build trolley buses in Russia and Iran.
",13
"U.S.-based Unisys Corp said on Tuesday it had appealed to the Czech Economic Competition Office against a Defence Ministry decision awarding an army contract to a consortium of Electronic Data Systems and Digital Equipment Corp.
""Unisys has submitted...a proposal for investigation of the decision of the Defence Minister of the Czech Republic,"" the company said in a statement.
Last week, Defence Minister Miloslav Vyborny rejected a first round appeal by Unisys and IBM Corp saying he believed his decision in March to award a 1.3 billion crown army information system deal to EDS-Digital was correct.
Installation of the staff information system is seen as a large step on the Czech army's path to compatibility with the North Atlantic Treaty Organisation's military command.
Vyborny chose EDS-Digital despite a recommendation by a steering committee to chose Unisys's bid.
""By this step (the appeal), Unisys is continuing in its effort for recognition of its victory in the public tender...because it is convinced of the seriousness of its arguments,"" the statement said.
Vyborny has said that he decided in favour of EDS-Digital due to the lower price of its bid. Unisys has said that price was not weighted in accordance with the tender rules, and that EDS-Digital's offer was not complete. EDS declined to comment.
Unisys won an original four billion crown supply tender last year, but it was cancelled in August when competition authorities found irregularities in the process.
Vyborny said after the second tender that the ministry had decided to ignore the recommendation of the tender committee also because some members' evaluations were far different than the rest of the committee.
Unisys has said it was suspicious that the original tender was abolished and rankings were changed when it won again.
""Unisys is proposing cancellation of the decision and hopes the government of the Czech Republic will deal with the situation around this strategic order,"" Unisys added.
A number of other Czech military tenders have been marked by controversy, sometimes including allegations of graft.
NATO leaders will decide in July which former communist countries will be invited to join the alliance. The Czech Republic is a front runner along with Poland and Hungary.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech opposition Social Democrats (CSSD) sought to bury internal rifts at their party conference on Friday, aiming to convince the country they are ready to hold power.
The CSSD casts itself as a potential leader should Prime Minister Vaclav Klaus's conservative Civic Democratic Party (ODS) be unable to keep the sometimes fractious three-party ruling coalition together.
Although a general election is not scheduled until 1998, Klaus's government has wobbled since losing its firm majority in lower house elections last June.
CSSD chairman Milos Zeman opened the meeting with a call for party unity, appearing to take a shot at members who broke ranks in recent key votes in parliament.
""If we want to win the election, we can't be a bunch of anarchists,"" Zeman said in an opening speech. ""After approval of a majority decision we all have to pull in the same direction.""
The CSSD polled a strong second in last June's general elections just three percentage points behind the ODS thus reducing Klaus's coalition to a minority in the lower house, but it has been jolted by internal battles since then.
A party rift in December over the 1997 budget -- when a handful of rebel CSSD deputies broke ranks to allow the government's draft to survive -- drove a wedge between the party's moderate and more radical wings.
Analysts said the congress, in a steelworks meeting hall near the industrial centre of Ostrava, was crucial in casting the party's long-term political balance, with radicals from within pushing for party unity and a further shift to populism.
""Hardly anybody expects a shift toward more reasonable and factual policies... It can be said almost with certainity that the current confrontational course will be confirmed,"" wrote Vladimir Mlynar in the influential weekly magazine Respekt.
Party leaders will be elected again on Saturday, and the conference is to finalise a party platform on Sunday, with contentious points on the direction of economic reforms and confrontation with the cabinet expected to spur heated debate.
Opinion polls have shown little change in the Czech political landscape since the June elections.
Some analysts said that the more confrontational wing, led by chairman Zeman, would knock down a challenge from moderates who include first vice-chairman Karel Machovec.
Two of the four CSSD deputies who crossed over on the budget were later expelled from the party for, as Zeman said, ""damaging party interests"", and Zeman threatened to resign as chairman if the budget rebel Machovec is re-elected.
""Zeman is more of a radical, but he's on the edge. A victory of radicals, often former communists, would create space for the government coalition,"" said political science professor Jindrich Fibich of Prague's Charles University.
""Zeman knows he would lose centrist voters. I think there might be some type of a partial compromise between the two wings, but some of (the moderates) will have to go.""
Zeman is proposing that the congress should tighten control of party discipline and eliminate inter-party factions by concentrating more power in the chairman's hands.
But Zeman has also said he is willing to form a future coalition with the Christian Democrats (KDU-CSL), a centrist party which is the largest junior member of the government.
Still, said Fibich: ""If there is no compromise and the (CSSD) moderates are liquidated, KDU would stick more with the current coalition,"" said Fibich.
",13
"Opposition leader Milos Zeman urged the Czech parliament on Wednesday to approve a separate resolution to ""clarify"" his concerns about a post-World War Two reconciliation pact with Germany.
But deputies in Zeman's own Social Democratic party (CSSD) admitted that the votes were probably were still there to push the deal with Germany through parliament and save the Czech government from embarrassment.
On the second day of debate on the declaration, which has already been signed by the Prague and Bonn governments and approved by the German parliament, Zeman demanded the accompanying rider.
""I would want to believe this parliament would find the courage to express itself on the declaration in its resolution, as the parliament of a sovereign state,"" he said.
Prime Minister Vaclav Klaus's three-party conservative coalition, which is two seats short of a majority in the lower house, has rejected any sort of extra resolution which may ""interpret"" the already-signed declaration.
In the accord, Bonn expresses regret for the 1938-45 Nazi occupation of Czech lands and Prague expresses sorrow for brutality in the post-war expulsion of 2.5 million ethnic Germans.
The text also includes German support for Czech membership of the European Union (EU) and the North Atlantic Treaty Organisation (NATO).
It skirts around the most sensitive issues of direct compensation for property seized from the expelled Germans.
German politicians sympathetic to their families, who now mostly live in southern Germany, have said that the issue of individual compensation for property was still open, despite the inter-governmental declaration.
Zeman said comments made by German Chancellor Helmut Kohl after he signed the document, and later by Finance Minister Theo Waigel, showed that Bonn considered the ""property problems"" still unresolved.
""These subsequent statements are the basic reason for my concern,"" he said.
CSSD vice-chairman Karel Machovec said that while the additional resolution, which has yet to be presented, might help to ensure a larger majority for the declaration, the government probably had the votes to win.
""I know about three or four Social Democrats who would vote for the declaration,"" Machovec told Reuters, saying he would be among those voting for the deal.
The debate in the Czech lower house looked set to last late into the week, with small opposition parties attempting filibusters and other procedural moves to block the declaration from coming to a vote.
The ultra-right Republican Party and the Communist Party say the declaration lets Germany off lightly for Nazi attrocities and the dismemberment of Czechoslovakia.
",13
"A plan on how the Czech Republic will diversify natural gas supplies, now coming solely from Russia, has been delayed for several weeks, the Industry and Trade Ministry said on Tuesday.
""We are gathering information, analysing it, and it's going to take several weeks (before the issue is put before the government),"" ministry spokesman Miroslav Konvalina said.
A plan had been expected to be submitted to the government sometime in January. Konvalina gave no reason for the delay.
Officials have declined to say which partners the government was considering, though government representatives have held talks on limited deliveries from Norway.
The ministry is drawing up plans for four options for securing gas supplies, but has given no details. No matter which plan is accepted, Russia is expected to remain the dominant supplier.
It said the four options being considered are:
- Purchasing all natural gas from Gazprom, using two different shipping routes, with a long-term agreement until 2016, with price guarantees until 1998.
- Purchasing some Russian gas indirectly through Dutch company Nederlandse Gasunie NV, and Germany's Wintershall, a subsidiary of BASF AG. Gasunie would start supplies in 1998, delivering up to two billion cubic metres in 2005, with the agreement lasting until 2014.
In case of a fall in Russian supplies, it would deliver its own gas through Wingas, a joint venture of Wintershall (65 percent) and Gazprom (35 percent).
Wintershall offers a similar scheme, with deliveries starting on January 1 next year, rising to one billion cubic metres in 2000, under a deal until 2016. Negotiations with these firms are in the stage of initiating a supply contract.
- Finalising and maintaining the agreement for Norwegian gas, which was given preliminary approval this year, until 2017.
- A limited purchase from Mobil Europe Gas Inc, Germany's Brigitta Erdgas und Erdoel (BEB) and British Gas Plc .
The Czechs have ended their dependance on Russian crude oil by building a new pipeline to Germany, but are still completely dependant on supplies provided by Russia's Gazprom.
The Czech Republic consumes around eight to nine billion cubic metres of natural gas per year, but volumes are expected to rise to some 12-13 billion cubic metres by the turn of the century.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech engineering group Skoda a.s. , a local agent for U.S.-based McDonnell Douglas Corp. (MD) is proposing a barter deal be used to encourage the Czech government to buy MD's F/A-18 ""Hornet"" fighter aircraft.
Skoda's spokesman Karel Samec said on Wednesday his firm would provide trucks made at Skoda's troubled Tatra a.s. and other goods in return for planes which the cash-strapped Czech military is considering in an upgrade its fleet.
""McDonnell Douglas chose us as intermediator, but it depends on the Czech government and the Defence Ministry which has to decide if they want to buy any planes at all,"" he said.
""It's a barter deal. They would supply the fighters, and we would supply Czech goods to the States, namely Tatras and other things... And I know from the American side that this project has the support of the U.S. government,"" Samec added.
The Czechs along with former Warsaw Pact allies Poland and Hungary, all seen as frontrunners to join NATO, want to upgrade their fleets to be compatible with the military alliance.
McDonnell Douglas is competing against U.S. Lockheed Martin, makers of the F-16, Sweden's SAAB, which makes the ""Gripen"", France's ""Mirage"", and other groups to update a fleet of ageing Soviet-made Mig-21 planes.
However, the Czech government has delayed a decision on buying the planes as proposed cuts in defence spending have clouded the debate over the upgrading the army's aging fighters.
A spokesman at the Defence Ministry was not immediately avbailable for comment.
The Czech military has said it would need about 24 fighters to replace its old MiG-21s, while Hungary said it needs around 30 and Poland 100.
Samec said the deal would be for new or used F/A-18 ""Hornets"", and would help the heavily-indebted Tatra, whose production has fallen to a fraction of communist-era levels.
""It would be a penetration (for Tatra) into the world's most important market... and it is advantageous because the Tatras have Detroit Diesel motors, so it could be used perhaps in the U.S. army,"" said Samec.
None of the fighter producers has publicly stated a price at which they would sell their planes to the Czech government.
Analysts say the planes typically cost over $20 million a piece new without supplementary equipment and technology. A cheaper option would be to buy second-hand planes at a fraction of the cost.
",13
"CEZ a.s., the Czech Republic's main electricity generator, posted higher than expected 1996 profits on Friday, though company officials were not as optimistic about the company's bottom line this year.
CEZ said its preliminary 1996 net profit, calculated under international accounting standards, edged up to 9.7 billion crowns from 9.31 billion in 1995.
Under Czech accounting, which differs in areas such as interest payments, leasing payments and measuring profits and losses carried over from previous years, net profit dipped to 7.85 billion from 8.06 billion.
Petr Voboril, head of CEZ's planning department, said the result was slightly above the firm's expectations, adding that the company had funds to pay its first-ever dividend, expected to be between 30 and 45 crowns per share on the earnings.
""The profit is on the level where we expected, or little above that,"" Voboril told reporters and analysts.
Analysts too were encouraged by the figures and dividend announcement, though CEZ shares failed to immediately respond to the data, closing down five crowns at 1,055 on the Prague Stock Exchange.
""Based on IAS figures, the results were better than I expected...I expected about nine billion crowns so its slightly higher,"" said Miroslav Nosal, an analyst at Patria Finance.
""I expect the shares will respond favourably to the results and the fact that CEZ said dividends will be suggested to the shareholders at the AGM,"" he added.
CEZ officials have said several times that they would like to pay a dividend for 1996, but Voboril admitted the firm's majority shareholder, the state, may not be in favour of the move.
A spokeswoman at the minstry of industry and trade, which manages the state's 67 percent stake, told Reuters a final decision had yet to be made on whether the proposal would be approved.
""It's early for a final position. The ministry is considering the possibilities of dividend payments at CEZ and also the distribution companies,"" ministry spokeswoman Zuzana Fialova.
In addition, Voboril said the company expects 1997 profits to fall to the level of six billion this year as write-offs will increase.
He warned that the slow deregulation of energy prices and a less than desired price increase that CEZ may bill regional power distributors for electricity, as well as rising fuel prices and other costs, threatened to hit the company's perfomance in the future.
But he said that the company's creation of internal sources has been on and upward trend thanks to higher write-offs, despite profits falling under Czech standards, which are the basis for taxation and dividend payments.
Voboril said CEZ would tap international debt markets in the middle of this year with a bond issue, but declined to give more details.
In the results statement, prepared under international accounting standards, operating revenues grew by 9.4 percent last year to 55.4 billion, while operating expenses were up by 17.3 percent.
Earnings prior to tax fell 6.9 percent to 15.6 billion, but net profit rose due to a 20.8 percent decrease in tax payments, to 5.9 billion.
The company managed to increase its market share to 80 percent from 77 percent in 1995. Earnings per share rose to 180 crowns from 173, and return on equity fell to 10.4 percent from 11.1 percent.
Voboril said CEZ invested 22.3 billion crowns last year, and commissioned equipment worth 25 billion, including two hydroelectric power plants.
-- Prague Newsroom, 420-2-2423-0003
",13
"The Czech Republic appeared headed for its first budget deficit despite earlier reports by the fiscally-tough government that it had achieved a surplus in 1996 for the fourth successive year.
""(We expect) the definitive results for 1996 will range around a deficit of 1.7 billion crowns ($61.77 million),"" Deputy Finance Minister Miroslav Havel said on Wednesday in testimony to parliament's budget committtee.
The Czechs have had three surplus budgets since Czechoslovakia split in two in 1993.
Final data were due in the ministry on Wednesday but as local media paid close attention to whether Prime Minister Vaclav Klaus would maintain his fiscal winning streak, Havel said the trend was not positive.
He said that by Wednesday revenues totalled 482.8 billion crowns, while expenditures were 484.5 billion.
More bills may be delivered after the deadline, inflating expenditures further, Havel said.
The government made last-ditch efforts in December when the budget looked headed for a more than five billion crown deficit, by freezing some outlays until 1997, and requiring early repayment on credit granted to a deposit insurance fund.
The budget has been hampered by lower-than-expected tax revenue and delayed repayment on credits to Russia.
The 1996 budget was originally approved as a balanced budget totalling 497.6 billion crowns, but an autumn round of spending cuts knocked the spending forecast down to 491 billion crowns.
Parliamentary budget committee chairman Jozef Wagner, a member of the largest opposition party, the Social Democrats, said the 1996 deficit was not troublesome, but he was concerned with the effects government payment adjustments might have on the 1997 budget.
The December stop-gap measures included postponing payment of 800 million crowns in state subsidies for housing loans which were due to the partly-privatised banks Ceska Sporitelna a.s. and IPB a.s.
Klaus, who calls balanced budgets the ""alpha and omega"" of his government, hailed initial reports of a 1996 budget surplus, made by the finance ministry soon after the new year, as a sign of the country's continued fiscal responsibility.
Parliament approved a fifth straight balanced budget plan in December, with spending and revenues forecast at 549.1 billion crowns in 1997.
But the 1997 budget was based on economic growth of 5.4 percent, and many independent analysts have forecast growth for this year at under five percent, after growth between 4.0 and 4.5 percent for 1996.
Many have voiced concern that slower than expected economic growth might force the government to consider major changes in the 1997 budget to keep at bay a deficit much larger than that for 1996.
-- Prague Newsroom, 42-2-2423-0003 ($1=27.52 Czech Crown)
",13
"Pope John Paul arrived in Prague on Friday, saying he hoped his visit to the Czech Republic would bring a new step forward in the spiritual growth of all Czechs.
The 76-year old Pontiff, on his third visit to Prague since the fall of communism in 1989, was greeted at the airport by President Vaclav Havel and other Czech political and religious leaders.
Some 200 schoolchildren waved yellow and white Vatican flags as the Pope slowly descended the aircraft steps and shook Havel's hand before touching a bowl of Czech earth.
Pope John Paul said in a speech he hoped his visit would help bring about ""a fresh step forward in the ever-increasing spiritual and ethical growth"" of all Czechs.
He paid tribute to Havel, a former dissident playwright who spent several years in jail under communism, as being ""among those who brought about the rebirth of this country"".
The Pope is in the Czech Republic chiefly to mark the 1,000th anniversary of the death of St Adalbert, the first Czech bishop who also took the gospel to Poland.
Adalbert, or Vojtech in Czech, is seen by Catholics as a figure of spiritual significance for Europeans of all denominations.
""I am certain that the heritage of Christian values of which St Adalbert was a special witness in times marked by ignorance and cruelty will not leave indifferent those who, although far from belief, have at heart the civil, cultural and spiritual roots which have so profoundly marked the history of your homeland,"" the Pope said.
He also paid tribute to late Czech Cardinal Frantisek Tomasek, who for 40 years championed religious freedom in communist Czechoslovakia and died in 1992.
""He will certainly be rejoicing in heaven to see me return among his people...History is truly guided by the almighty hand of God,"" he said.
Havel said in his speech that Adalbert cherished a dream of European spiritual unity and saw his Czech homeland as part of the Christian community of the continent.
""This community was to be based on a spiritual and moral renewal and on readiness to embrace common values -- which is needed today just as it was then,"" Havel said.
The president said the martyred saint had left a legacy of peace, integration and unity which was shared by the many European nations commemorating his millennium.
The Pope's last visit to the Czech Republic, in May 1995, proved controversial when he canonised Jan Sarkander, tortured to death by Protestants in 1620. Some Protestants say Sarkander was a traitor who encouraged a Catholic invasion.
But Havel said Adalbert's tradition did not divide Czechs among themselves or with others.
""It unites our people across denominations and serves as a bridge linking us with our Central European neighbours as well as with other nations,"" he said.
The Pope, whose health has been fragile in recent years, walked slowly but unassisted and stood to deliver his speech.
He is to mark Adalbert's death with a mass for young people in the town of Hradec Kralove, some 100 km (60 miles) from Prague, on Saturday and hold another open air mass and an ecumenical service in the capital on Sunday.
",13
"Engineering group Skoda a.s. said on Tuesday it had won an order to supply trolleybuses worth more than $170 million to the city of San Francisco, the largest order of Czech goods ever to the United States.
Skoda spokesman Jaroslav Hudec said the electrically powered buses would be produced in the Czech Republic and assembled at Skoda's subsidiary, Electric Transit International (ETI) in Baltimore.
""We consider victory in this tender to be an extraordinary success not only in view of the expected volumes of supplies...but also because the U.S. market is among the most prestigious and demanding in the world,"" Hudec said.
Plzen-based Skoda, no longer affiliated with the Czech car maker Skoda Automobilova a.s., has made an aggressive push into new markets, aiming to offer western-quality units with the comparative cost advantage of eastern European production.
The San Francisco contract would open the way for Skoda, an engineering conglomerate which makes goods ranging from nuclear power components to drink cans, to win more business in the United States, Hudec said.
""Considering the ecologisation of public transport in the U.S., Skoda Plzen has real chances to win further orders... and also bring the brand Skoda to the U.S. market in relation to other production of our factories,"" he said.
ETI's president, Ladislav Tetal, told Reuters the order would virtually replace San Francisco's entire fleet of 300 buses, as the city retains only a few dozen younger units.
He said the deal had no connection with San Francisco's landmark cablecar lines which will continue to be a symbol of the ""City by the Bay"".
The total for the order with details of the financial and technical conditions would be finalised by mid-year, Hudec said, but declined to give further details.
The deal must still be approved by the San Francisco board of supervisors in a vote scheduled for April 22, ETI said.
Skoda has made over 12,000 trolleybuses since 1936 -- many of which can be seen running in cities throughout the former communist bloc.
Earlier this decade Skoda won a contract to supply 54 trolley buses to the city of Dayton, Ohio, and founded a U.S. joint venture with private partners in Baltimore, ETI, to assemble the buses. Skoda holds a majority stake in ETI.
The Dayton supply is scheduled to be completed in 1998. Skoda said it is also pursuing joint ventures to build trolley buses in Russia and Iran.
Guy Creasy, equities analyst at IB Austria Securities in Prague, said that while the San Francisco order was indeed a positive signal for Skoda shares, lingering questions over the cost of recent acquisitions remained.
""I don't think (the order) is a drop in the bucket, but I don't think it will make the difference between profit and loss,"" he said. ""I don't think it will make us change (Skoda's share recommendation) to a 'buy'.""
Creasy said that it was not yet clear how earnings from the order would be divided with Skoda's U.S. partners.
Analysts have been wary about Skoda shares, awaiting 1996 results which should show the impact of buying two ailing Czech truck makers, Liaz a.s. and Tatra a.s..
Skoda shares gained 25 crowns in Tuesday's fixing on the Prague Stock Exchange to 871 crowns, reversing a downtrend in the stock which ended 52 crowns lower on Monday. The shares showed thin activity after the Tuesday fixing.
Skoda said in a statement on Monday that it planned to raise its basic equity by 2.5 billion crowns through an unspecified share issue still to be decided by shareholders.
The Czech state National Property Fund (NPF) in March said it would sell its remaining 8.7 percent stake in Skoda soon through the Prague share markets.
News of the San Francisco order comes as the Czech Republic has posted record trade deficits. The country's current account deficit topped eight percent of gross domestic product last year, up from four percent in 1995.
",13
"The Czech parliament began debate on Tuesday on a post-World War Two reconciliation agreement with Germany which the Prague government sees as key to EU and NATO membership, while opposition deputies call it a betrayal.
It faces a potentially long and unpleasant fight in the Czech lower house, especially from the ultra-right Republican Party and the Communists, who claim it lets Germany off lightly for Nazi attrocities and the dismemberment of Czechoslovakia.
Deputies voted narrowly to move the sensitive declaration, which was already signed last month by Czech Prime Minister Vaclav Klaus and German Chancellor Helmut Kohl, to the top of the agenda for the session.
""The declaration was adopted in the (German parliament) two weeks ago with a large majority. I believe the Czech parliament will approach it in the same way,"" Klaus told the chamber.
In the accord, Bonn expresses regret for the 1938-45 Nazi occupation of the Czech lands and Prague its sorrow for brutality in post-war expulsion of 2.5 million ethnic Germans.
The text also includes German support for Czech membership of the European Union (EU) and the North Atlantic Treaty Organisation (NATO).
Klaus said the accord was an important international message that the Czech Republic does not have open political issues with its neighbours.
The declaration does not need to be ratified by parliament but a rejection by deputies would embarrass Klaus's minority coalition government, which wants as strong a show of support.
The Republicans have promised a filibuster in an attempt to block the declaration from coming to a vote, but analysts believe the measure will pass, if just narrowly.
A vote, technically, could come later on Tuesday, but many expect the debate to take days.
The main opposition Social Democrats (CSSD) have not said if they will support the declaration and have sought a separate parliamentary resolution, partly on the grounds that the text does not acknowledge the legal validity of the Czechs' actions.
But Klaus told deputies that the accord respected legal norms in both states and did not question the results of the 1945 Potsdam conference, at which the Czechoslovak government was given the right to expel the ethnic Germans.
He also said the text did not affect Czechs' rights to property seized from the ethnic Germans.
The CSSD leadership has agreed to allow its members a free vote, probably ensuring that the government will get the votes it needs from the opposition to approve the accord.
""I know about three or four Social Democrats who would vote for the declaration,"" CSSD vice-chairman Karel Machovec told Reuters, saying he was among those who would vote in favour.
The accord remains controversial in Germany, where relatives and supportes of the Sudeten Germans have demanded restitution of proerty confiscated by the Czechs.
""The Czech Republic in accordance with its legal order and many norms of international law, considers these ownership questions to be definitely closed,"" Czech Foreign Minister Josef Zieleniec told the house.
The parliamentary group of Klaus's Civic Democratic Party (ODS) on Tuesday rejected calls for a separate resolution which might provide a Czech interpretation of the declaration.
But Machovec said a separate joint resolution would ensure a larger majority in favour of the declaration.
",13
"The Czech government on Wednesday directed three ministers to oversee an investigation into the failure of the bank  Kreditni Banka a.s., Prime Minister Vaclav Klaus said.
Klaus told a news conference Czech National Bank (CNB) Governor Josef Tosovsky would join Finance Minister Ivan Kocarnik, Justice Minister Jan Kalvoda, and Interior Minister Jan Ruml in overseeing the probe.
""Bearing in mind the extraordinary importance of this matter, the government authorised the group of three ministers to specially inquire into this issue, using all existing standard mechanisms,"" Klaus said.
He said authorities have been investigating the Kreditni case since the central bank rescinded its licence in August.
Findings from the investigation might lead to changes in Czech legislation, Klaus said.
Kreditni Banka was majority owned by the largest Czech insurer Ceska Pojistovna a.s..
The leader of the opposition Social Democrats, Milos Zeman, last weekend blamed Finance Minister Ivan Kocarnik and his ministry for lax banking supervision.
The central bank on Wednesday welcomed the probe.
""The CNB believes that through this work it will be possible to solve other cases as well in which the banking supervision has submitted a number of criminal reports on the basis of its knowledge gained in other banks,"" the central bank statement said.
Eleven banks have fallen since the liberalisation of the sector began in earnest in 1992.
Klaus attributed the failures of the banks -- all of them small or medium sized -- to growing pains in the transforming post-Communist Czech economy.
""I am 100 percent persuaded that the dominant cause of these phenomenona... is the difficulity, fragility, complexity of banking in the transformation phase,"" Klaus said.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech engineering group Skoda a.s., a local agent for U.S.-based McDonnell Douglas Corp. (MD) is proposing a barter deal be used to encourage the Czech government to buy MD's F/A-18 ""Hornet"" fighter aircraft.
Skoda's spokesman Karel Samec said on Wednesday his firm would provide trucks made at Skoda's troubled Tatra a.s. and other goods in return for planes which the cash-strapped Czech military is considering in an upgrade its fleet.
""McDonnell Douglas chose us as intermediator, but it depends on the Czech government and the Defence Ministry which has to decide if they want to buy any planes at all,"" he said.
""It's a barter deal. They would supply the fighters, and we would supply Czech goods to the States, namely Tatras and other things... And I know from the American side that this project has the support of the U.S. government,"" Samec added.
The Czechs along with former Warsaw Pact allies Poland and Hungary, all seen as frontrunners to join NATO, want to upgrade their fleets to be compatible with the military alliance.
McDonnell Douglas is competing against U.S. Lockheed Martin , makers of the F-16, Sweden's SAAB, which makes the ""Gripen"", France's ""Mirage"", and other groups to update a fleet of ageing Soviet-made Mig-21 planes.
However, the Czech government has delayed a decision on buying the planes as proposed cuts in defence spending have clouded the debate over the upgrading the army's aging fighters.
A spokesman at the Defence Ministry was not immediately avbailable for comment.
The Czech military has said it would need about 24 fighters to replace its old MiG-21s, while Hungary said it needs around 30 and Poland 100.
Samec said the deal would be for new or used F/A-18 ""Hornets"", and would help the heavily-indebted Tatra, whose production has fallen to a fraction of communist-era levels.
""It would be a penetration (for Tatra) into the world's most important market... and it is advantageous because the Tatras have Detroit Diesel motors, so it could be used perhaps in the U.S. army,"" said Samec.
None of the fighter producers has publicly stated a price at which they would sell their planes to the Czech government.
Analysts say the planes typically cost over $20 million a piece new without supplementary equipment and technology. A cheaper option would be to buy second-hand planes at a fraction of the cost.
",13
"The Czech Republic officially ended its dependence on Russian natural gas supplies on Monday, signing a final delivery contract with Norwegian suppliers Statoil, Saga Petroleum and Norsk Hydro.
Officials from Czech state monopoly gas importer Transgas and the Norwegian suppliers signed the deal which will see some 53 billion cubic metres of gas transported to the Czech Republic over the nex 20 years.
Transgas Director Miroslav Grec told a news conference after a signing ceremony that deals were also completed with transporters Netra GmbH and Verbundnetz Gas AG to ship the gas from a north-German terminal at Emden to the Czech border.
""The contract was signed for 20 years, and supplies will start as soon as in May this year,"" Grec said.
The signing of the contract officially and effectively ends the Czech Republic's dependence on natural gas supplies by Russia's Gazprom. Czechs currently consume slightly over nine billion cubic metres (bcm) of natural gas per year, with projections of demand rising to 13.8 bcm in 2010.
Grec said supplies this year would reach some 0.4 bcm, and gradually rise to three bcm annually by 2002.
Statoil Executive Vice-President Peter Mellbye said his company was now looking into other central and eastern European countries to build on its sucessfull penetration into the Czech market.
""Transgas is our first, and therefore a very important partner (in the region),"" Mellbye said.
The partners denied to disclose price terms of the agreements. Verbundnetz officials said its delivery contract was worth ""about 600 million marks"".
Grec said that the introduction of competition in supplies would improve the negotiating position for future deliveries from Russia or elsewhere. The Czech Republic's delivery contract with Gazprom ends in 1998.
The Czech Republic has already diversified crude oil and nuclear fuel supplies to win independence from Russian sources it had been exclusively tapping in the communist era.
-- Prague Newsroom, 420-2-2423-0003
",13
"IBM Corp's Czech unit said on Monday it would appeal against a Defence Ministry decision to award a 1.3 billion crown ($45 million) deal to deliver an information system to a consortium of EDS and Digital Equipment Corp.
IBM said in a statement that EDS-Digital did not fulfil a tender condition that stipulated participation of only those companies which had accomplished projects in the Czech Republic to a similar extent.
""There are a number of reasons why we are appealing, we are still working on it,"" said IBM's spokesman Michal Urvalek. He declined to give more information on the appeal.
The IBM move comes on the heels of Unisys Corp's announcement on Thursday that it too would appeal the decision. Any appeals must be delivered to the ministry this week.
IBM placed third in the eyes of an 11-member committee evaluating bidders in the tender, behind Unisys which came in first and EDS-Digital, which won the contract after the ministry decided not to follow ratings.
Implementation of the staff information system is seen as a large step on the path to make the Czech army more compatible with armed forces of NATO countries, but finding its supplier has been a struggle.
Unisys won an original four billion crown supply tender which was annulled last year after Czech competition authorities found irregularities in the process.
The original tender was cancelled by the Defence Ministry, but the former Ministry for Economic Competition intervened and cancelled that decision before ordering a new tender itself.
Unisys and IDOM, a unit of Deloitte and Touche, were ousted from the new tender earlier this year for application violations, but were later allowed to re-enter the competition.
Unisys denied the mistakes, as revealed by the ministry, ever happened.
In announcing the winner, Defence Minister Miloslav Vyborny said the technical quality of EDS-Digital and Unisys bids was almost identical, but EDS was chosen because its offer was 109 million crowns cheaper.
After Vyborny's announcement, Unisys immediately said it would appeal to the Economic Competition Office if necessary. On Monday Unisys officials added they could not rule out a request for police to investigate the tender proceedings.
""Our lawyers are investigating this possibility...but it is priority number two, a step after other possibilities fail,"" said Jiri Nykodym of Unisys's Czech unit.
Unisys said Vyborny was wrong to take the decision since under tender rules, price should have been a decisive factor only if two bidders received identical scores from the commission.
""The tender rules were broken and in fact, the way of evaluation of bids was changed in the course of the tender at the moment when it became clear that...Unisys would have won the tender for the second time,"" Nykodym said.
-- Prague Newsroom, 420-2-2423-0003 ($ = 29.14 Czech Crowns)
",13
"UK defence to industrial giant GEC Plc said on Friday that it could impose up to 1,000 job cuts at its two newly-acquired businesses as part of the restructuring process announced in its results statement earlier.
Finance director David Newlands told Reuters that the job losses would hit in AG Power Transmission and Distribution and the Hazeltine Corp of the U.S., particularly the former.
The cost is expected to be 45 million stg of the total 160 million charge revealed earlier. Another 50 million of that total relates to asset write-downs at two other units.  
Newlands refused to name which two companies had seen reduced asset values, but he said that the move was necessary in order to dispose of them.
""We've had many offers for companies in the industrial group over the years - all have been well above the book value, except for these two."" He said he expected the first sale of those companies marked for disposal to take place before Christmas.
""We are trying to accelerate the disposal programme. But is takes two to tango,"" said Newlands, who refused to name the firms. The rest of the 160 million charge announced in Friday's results relates to restructuring within remaining firms.  
On the continuing strategic review, Newlands said ""George Simpson (the successor to former managing director Lord Weinstock) arrived in September and has been meeting with managers and getitng on with the task. We expect some announcement before we next speak to analysts in June/July.""
He said the group would divest ""Where a business is not making satisfactory returns on capital or has satisfactory growth prospects.""
Commenting on the sluggish state of the semi-conductor market, which saw lower profits in the first half, Newlands said he did not see a recovery until ""spring or summer of next year.""
GEC reported a sharp fallback in half year profits on Friday to 261 million stg from 402 million after taking the 160 million charge.
Underlying profits rose just 4.7 percent to 421 million. The interim payout was 3.26 pence versus 3.10 pence. --London newsroom +44 171 5427717
",8
"Crucial talks between the British and U.S. governments on clinching an open skies pact to free the transatlantic airline market were postponed for two weeks on Monday due to the illness of a senior British negotiator.
The talks had been due to kick off in Washington on Tuesday, with representatives from the British and U.S. governments as well as the main transatlantic carriers.
But a spokesman for the British government said: ""Our lead official is in hospital so the meeting has been cancelled. The talks have been postponed for a fortnight.""
News of the eleventh-hour grounding of talks came as the European Commission kicked off a separate series of private hearings in Brussels into the proposed British Airways and American Airlines alliance, which is conditional on an open skies pact being clinched.
British and U.S. carriers expressed regret that the Anglo-U.S. talks had been delayed. But sources reiterated that this round of talks had not been expected to deliver a final deal.
""It's not damaging. The two sides had been talking informally anyway and this round was never billed as the breakthrough round,"" one U.S. airline spokesman said. ""It was meant to deal with more boring issues like ground handling.""
The two sides are believed to have been inching closer, but Scott Yohe, senior vice-president of government affairs at Delta Air Lines Inc, told Reuters he believed full agreement was not possible in the current round. He said a deal is likely to emerge in subsequent talks.
But a number of other major hurdles need to be cleared. First the British government wants to try to link the open skies talks with the BA/AA alliance. The U.S. wants to keep the talks and alliance approval as two distinct issues.
Britain is still waiting for its competition watchdog, the Office of Fair Trading, to give a final verdict on the alliance after receiving responses from the airline industry.
In particular, airlines are waiting for a clarification on how BA should divest itself of 168 landing slots at London's Heathrow airport -- a condition for the BA/AA deal to be cleared by the Office of Fair Trading.
""Buying/selling of slots is fundamental to any (open skies) deal,"" said one U.S. airline spokesman.
Whether BA can sell them or must give them away remains a grey area. Britain says the decision lies with the government, but the European Commission says it has final jurisdiction and claims that selling slots is banned under EU law.
Another issue within the open skies framework is the argument by the British government for some protection for smaller airlines taking the full brunt of competition under an open skies regime.
Britain is trying to secure a dispute reconciliation procedure. This is believed to be for the benefit of players like Virgin Atlantic, the transatlantic carrier owned by entrepreneur Richard Branson's Virgin Group.
Another complicating factor is the chance of a British election being announced in the coming weeks, which could put the talks on the backburner.
With the opposition Labour Party riding high in opinion polls, one industry insider said that if there was a change of government ""there is the possibility that Labour will want to start from scratch.""
",8
"U.S. car giant Ford Motor Co dealt a blow to its Halewood plant in northwest England on Thursday, announcing 1,300 job cuts and apparently switching production of a new model to plants in Spain and Germany.
Just months after giving the factory its global quality award for 1996, Ford told workers and their union leaders the new version of its mid-range Escort model would not be built at Halewood near Liverpool, an unempolyment blackspot.
The proposed job cuts will reduce Halewood's workforce to just over 3,000, compared with a peak of 14,000 in the 1960s.
The workers believe the new model, due in 1999, will be built instead at Ford's plants in Valencia, Spain, and Saarlouis, Germany. Ford has not said where the new model will be built.
Angry trade unions, including the Transport and General Workers Union (TGW) and the AAEU, blamed the decision on what they see as a lack of legal protection for British workers.
Britain has opted out of European Union's Social Chapter, which sets out working conditions, making it ""cheaper to dump labour in the UK than on the continent,""one union boss said.
Ford attempted to soften the blow by saying Halewood could be the site to build a new vehicle, probably a multi-purpose people-carrier, but this remains at the concept stage. And Ford said that Halewood would continue to make the current Escort model through the year 2000.
""The actions we have announced today at Halewood assembly operations give the plant a realistic future, with an exciting new vehicle in the medium term, subject to approval and performance objectives being achieved,"" said David Gorman, European vehicle operations manager for Ford.
""We have had to take these steps to ensure our manned capacity is in line with our forecasts for sales,"" he said.
Industry analysts said the failure of the Escort rather than problems at the plant were largely behind this decision.
Ford of Europe is suffering mainly because people refuse to fall in love with the Escort-the small family car that competes with the Volkswagen Golf and Opel Astra, they said.
""People just didn't like the Escort. It was not as exciting as the competition, and Ford kept on having to revamp it,"" said Charles Young, director of Automotive Research at J.D.Power-LMC Automotive Forecasting.
Ford Europe lost $472 million in the third quarter of 1996, up from a loss of $320 million in the same 1995 period.
A Ford spokeswoman in Germany said the Halewood decision should be seen more in the context of Ford's continued over-capacity in Europe as a whole rather than in any purely national terms.
Halewood workers pledged to fight the proposals, with the TGW describing them as ""morally unacceptable"" and threatening nationwide action.
Union bosses said the Escort was a big seller in Britain and that some production should remain in the country.
The local community, the Speke area of Liverpool, already suffers unemployment of up to 39 percent and its crime rate has worsened as businesses have pulled out, residents said.
Landlord Mike Kelly of the Orient pub, the Ford workers' local, said, ""I don't think the government is interested in Liverpool.""
""I don't know how long this pub will be here now -- this place is becoming like a ghost town,"" he said.
Local residents complained that shops, banks and supermarkets have closed as businesses moved out of the area, and saw the problem getting worse with the Ford news.
Local Member of Parliament David Alton, an opposition Leberal Democract, told Reuters he had spoken to Ford, which said the jobs would be lost through voluntary redundancy.
""There's some good news in what they say as well -- that they're looking at Halewood as the probable European site for a planned new vehicle,"" Alton said.
""In Germany, if Ford closes its plant there, it has to pay its people 18 months pay in compensation. In the UK, we've got no Social Chapter, it's easier to shut us down,"" production line group leader Phil Gornall said.
Larry Brook of the MSF union added: ""Britain is the cheapest place to dump labour. We are fighting for the future of Halewood.""
Professor Garyl Rhys, a car industry expert at Cardiff University, said Halewood, now a model of industrial relations, was paying for the ""bad old days"" of the 1960s and 1970s, when the British car industry had a bad strike record.
""Because of the problems at Halewood and a number of other car plants in Britain, there was a reluctance to use them as sources for exports...You couldn't guarantee deliveries because of interruptions to production because of strikes,"" he said.
Ford cars were, however, the three biggest sellers in Britain in 1996, with the Escort ranked number two behind the smaller Fiesta and ahead of the Mondeo.
",8
"Anglo-U.S. conglomerate Hanson Plc Thursday reported a record 1.8 billion British pounds ($2.9 billion) in pretax profits for the last fiscal year before it began a four-way split of its operations on Oct. 1.
The group spun off Imperial Tobacco and Millennium Chemicals in the fall. Its energy group is due to be spun off by February, leaving behind the building group.
The final results showed profits topping forecasts and up sharply from 1.22 billion ($1.98 billion) last year.
But the figures were inflated by a one-time gain of 609 million pounds ($989 million), compared with a charge of 98 million pounds ($159 million) last year.
Earnings per share were 25.6 pence (14.6 cents) vs. 18.2 pence (29.5 cents) and a dividend of 1 pence (1.6 cents) will be paid.
Of the two divisions that will remain, building materials and equipment saw profits slip to 231 million pounds ($375 million) from 237 million ($385 million). Sales were 2.45 billion ($3.98 billion) vs. 2.1 billion ($3.4 billion).
The British arm continued to suffer from tough housing and construction markets, but some signs of a turnaround were evident. Buoyant U.S. conditions helped to outweigh the negative effects of the British building market.
Energy enjoyed sharply higher profits, with strong growth overseas and a further gain in British profit and market share. The surge reflected Eastern electricity company's first full contribution since its takeover.
Peabody Coal saw profits slip to 154 million pounds ($250 million) from 160 million pouinds ($260 million) as it sought to raise productivity levels.
Lord Hanson, chairman and co-founder of the empire in the throes of the four-way split, said prospects for its ""family of companies"" was very good.
But he was less happy about the progress of its share price performance which he said was ""very disappointing.""
The combined value of Hanson and the demerged companies was 195 pence ($3.17) on Dec. 1, 1995 and now stands at 150 pence ($2.43), said the chairman.
""This in no way represents either our earning capacity or future prospects,"" he said.
""Hanson's profit in each of the last five years has comfortably exceeded 1 billion sterling ($1.6 billion) and this year's result shows clearly that the momentum continues.""
Christopher Collins, Hanson vice chairman said in an interview that the market should take a longer view in judging the Hanson companies' value.
",8
"Once-mighty Anglo-U.S. conglomerate Hanson Plc reported a record 1.8 billion pounds ($2.9 billion) in pretax profits on Thursday, covering the last financial year before its demerger process began on October 1.
Lord Hanson, chairman and co-founder of the empire in the throes of a four-way split, said that prospects for its ""family of companies"" was very good.
But he was less happy about the progress of its share price performance which he said was ""very disappointing"".
The group floated Imperial Tobacco and Millennium Chemicals in the autumn. Its energy group is due to be demerged by February, leaving behind the rump building group.
The combined value of Hanson and the demerged companies was 195p on December 1, 1995 and now stands at 150p, said the chairman. ""This in no way represents either our earning capacity or future prospects.""
He added ""Hanson's profit in each of the last five years has comfortably exceeded one billion sterling and this year's result shows clearly that the momentum continues.""
Christopher Collins, Hanson vice chairman said in an interview that the market should take a longer view in judging the Hanson companies' value.
""Lord Hanson acknowledges that the share price is disappointing, given its earnings capacity. The time to judge is two years down the track,"" he said. But he declined to state what would be a more appropriate value.
The final pre-demerger results showed profits topping forecasts and up sharply from 1.22 billion last year.
But the figures were inflated by a one-off gain of 609 million pounds, compared with a 98 million charge last year. Earnings per share were 25.6 pence versus 18.2 pence and a dividend of one pence will be paid.
There was little extra information on the demerger process. Collins said the process remained ""on track"".
Looking at a breakdown of the peformance of the two divisions which will remain, building materials and equipment reported a slip in profits to 231 million pounds from 237 million. Sales were 2.45 billion verus 2.1 billion.
The British arm continued to suffer from tough housing and construction markets, but some signs of a turnaround were evident. Buoyant U.S. conditions helped to outweigh the negative effects of the British building market.
Energy enjoyed a ""substantial"" rise in profits ""showing significant growth overseas and a further increase in British profit and market share. Operating profits were 458 million versus 167 million, with sales up sharply to 3.74 billion versus 1.4 billion.
The surge reflected Eastern electricity company's first full contribution since its takeover. It turned in 303 million in profit, comapred to a seven million contribution the previous year.
Collins said ""Eastern has been a great success and peformed far in excess of our expectations.""
Peabody Coal saw profits slip to 154 million from 160 million as it sought to raise productivity levels which are up 12 percent.
Hanson shares, now trading without Imperial Tobacco and Millennium, stood at 80-1/2 pence at 1545 GMT, up 3/4p.
($1=.6161 Pound)
",8
"Anglo-American conglomerate Hanson Plc set the date for the final stage of its ambitious four-way demerger on Tuesday with the announcement that its Energy Group division will be spun off on February 24.
Energy Group, which is mulling a string of acquisitions in Britain and America, said it had started talks with a U.S. power marketing company.
The demerger, which is subject to shareholder approval, will give shareholders one Energy share for every 10 existing Hanson shares held. Hanson shareholders will be asked to vote on the proposal at an extraordinary general meeting on February 21.
Once Energy is split off as a separate company, to be listed in London and New York, the rump Hanson group will consist of a clutch of building firms.
""We are all very enthusiastic about the future of Energy and new Hanson and are convinced that both will benefit from enhanced focus on operations, profitability and future growth prospects,"" chairman Lord Hanson said.
The first two demergers of Britain's Imperial Tobacco and U.S.-quoted Millennium Chemicals took place last October.
Energy, which will be large enough to rank inside Britain's top 100 blue chips and the Fortune 500 in the U.S., is the last to be split off.
Its new management team is led by Derek Bonham, executive chairman, with two joint chief executives to run operations at the main businesses -- Peabody mining and Eastern, the British electricity division.
Bonham told a press briefing the group planned to target a number of acquisitions, particularly in the U.S., and admitted entering into ""exclusive and confidential"" talks with a U.S. power marketing company, subject to due diligence.
It is also examining generating deals in the U.S. and Britian, it said.
Peabody chief executive Irl Engelhardt told a press briefing that the coal group could use its knowledge of the U.S. market to help Energy exploit opportunities there.
Group finance director Eric Anstee said the group would ""take the cash generation of the coal and network businesses and use it where we see future growth in earnings -- the growing power sector"".
Eastern generated a total of 354 million pounds ($571 million) in cash flow in the year ended September 30, he said.
Energy, which owns Eastern, Britain's fourth largest electricity generator, said that worldwide demand for energy is expected to rise 34 to 46 percent between 1993 and 2010.
According to the U.S. Department of Energy, world electricity output is expected to grow 63 percent to 2010. Coal and gas will account for 41 percent and 17 percent of that generation level by 2010.
Energy, which is being sold with 1.4 billion pounds of debt, sees this, deregulation in world markets and privatisation as the key opportunities for the group.
Investor roadshows are being planned on both sides of the Atlantic, with 35 percent of Hanson's shares held in the U.S.
The group's annual turnover in the year to September 30, 1996 was 3.6 billion pounds, with pre-exceptional profits of 446 million pounds. Total assets are 5.7 billion pounds. ($1=.6199 Pound)
",8
"British defence to electronics giant General Electric Company signalled a key shift away from the management legacy of ex-chief Lord Weinstock this week by giving itself a leaner structure, analysts said on Thursday.
Zafar Khan, analyst at SocGen, said ""GEC has created a flatter structure, with divisional heads now reporting to Simpson directly creating a more modern-day business structure. There are more direct lines of control.""
George Simpson, who succeeded Weinstock as managing director last September, announced on Wednesday GEC would halve the number of its corporate divisions to five key business units -- GEC Alsthom, GEC Marconi, GPT, GEC USA and the industrial group of businesses.
The newly separated industrial group includes the industrial apparatus unit.
GEC also created a central committee with representatives from the key activities of finance, legal affairs, strategic planning, personnel affairs, marketing and technical issues.
Analysts said the move brought GEC's corporate structure up to date and created a leaner and clearer chain of command.
The key new change is GEC's decision to group together the main U.S. businesses -- the medical equipment manufacturer Picker International, petrol pump maker Gilbarco and printer maker Videojet.
One analyst said the company had informed him that the regrouping did not necessarily mean that industrials was being separated off for sale.
""It has indicated that the split in two (of the U.S. and industrials) was due to (former deputy managing director Malcolm) Bates resigning. The strategic review is still six to seven months down the line so GEC is damping down speculation for now,"" he said.
Even so, market watchers believe that industrial apparatus and consumer electronics are two likely candidates for divestment.
Andy Crispin at SocGen added that these were businesses with ""low margins and tough markets"" making them sell-off targets.
GEC finance director David Newlands told Reuters at its half year stage last December that the group had received a spate of offers which were mostly above book value.
Simpson stamped his first mark on the company at the half year stage by announcing a 160 million pounds ($261.5 million) restructuring charge and the possibility of up to 1,000 job cuts.
GEC shares have turned more sprightly since Simpson took the helm. The company's shares are approaching a two-year high at 411 pence, up 2-1/2p on Wednesday's close, compared to 271 pence per share in January 1995.
($1=.6119 Pound)
",8
"Stagecoach Plc, the transport group which has seen its share price rocket by 138 percent in the last year, predicted the biggest future growth coming from more acquisitions being made in the rail and bus sector overseas, its chairman told Reuters.
Brian Souter, executive chairman, added that Stagecoach's underlying gearing of 197 percent, excluding securitised debt which raises it to 567 percent, was not excessive and that the group was confident it had the financial scope to remain a deal-maker.  
""We are very comfortable about our gearing levels,"" said Souter, adding ""We would be in a position to make a major European acquisiton in the next year if needed.""
Commenting on how the group could continue to maintain its pacy growth which has helped fuel the share-fever in the stock, he said that its European ambitions had been ignited by the Swebus bus acquistion last year. Stagecoach was looking to make similar acquisitons in countries ""clustered in the region"". ""I also think there'll be overseas railways opportunities. These two will provide the biggest lump of growth in future - that's my prediction.""  
Responding to some analysts' comments about the high debt levels, Souter said the company expected to have 230 million stg in free cash in two to three years and stressed that 70 percent of its  current 830 million of total debt (including securitised loans) was fixed for seven years at 7.19 percent.
""This gearing question is an important one which we want to address with the market,"" said the chairman.
Turning to the UK bus unit, Souter said that although the group's aim to raise its share of the national market to 25 percent from 17 percent remained, it would not buy any bus companies for now because they were overpriced.  
""We are holding back on these deals because of the prices. Once the Labour (Party) is in place and we know their policies, then we can move. But for now we have a sabbatical on acquisitions in this area because of high prices and until we see what happens with the next govt.""
A UK election is due by May, with the opposition Labour Party riding high in opinion polls. Possible future takeover targets include MTL, the Liverpool bus company. ""We looked at it (MTL), Taybus and other big groups to see if they have value in them - Everything's on our shopping list,"" said the chairman.  
He said some bus company prices did not reflect the age of their fleets and ""we are not going to pay premium prices.""
The cash-cow of the group Porterbrook continues to perform well, he said. The rolling stock leasing company is expected to account for 50 percent of group profits for the full year, say analysts and Stagecoach is not arguing with that prediction.
""It has exceeded our initial expectations and we continue to be very happy with it,"" said the chairman. ""We are very comfortable with forecasts analysts are making.""
Also, Porterbrook is already in the throes of bidding for an upcoming 1.6 billion stg of orders due from the rail franchises.  
""Porterbrook has a big diet of investment in new trains in the industry, with 1.6 billion stg of new investment required under (UK passenger rail) franchise agreements within a five year period.""
""The industry has a stream of franchise decisions in the next six months and they (potential franchise customers) will place orders in next 12 months. The bulk of the 1.6 bln will be placed then,"" he said.
Stagecoach also has the South West Trains passenger rail franchise and is on the short-list for others. It said it was confident of winning at least another.
--London newsroom +44 171 5427717
",8
"Go-Ahead Group Plc, the UK transport company, and its French partner VIA-GTI are set to be announced as the preferred bidder for the Thameslink passenger rail franchise, industry sources told Reuters on Thursday.
An official announcement is expected from the Office of Passenger Rail Franchising (Opraf) imminently.
The joint venture, which is 65 percent owned by Go-Ahead and 35 percent by the VIA-GTI, is called GOVIA.  
Go-Ahead has already won the Thames rail franchise and GOVIA had been shortlisted for Thameslink, as well as ScotRail and Regional Railways North East.
The Thameslink rail franchise runs to Luton and Gatwick airports through the financial district of London and is seen as having great potential as a fast-link to these major UK airports.
Go-Ahead is a bus and rail operator. As well as becoming a player in the rail franchise market, it also has around eight percent of the UK bus market, with fleets running in London, Oxford and the north east of England.
The group has been among a number of UK bus companies to move into rail, fuelling growth in earnings, which has triggered a strong rise in its share price.
--London newsroom +44 171 5427717
",8
"Britain's double-decker bus could be at the cutting edge of an environmental breakthrough.
For the past two years a London bus operator has carried out experiments with an Arab inventor who says he has the solution to the black diesel-based pollution fumes that led Britain's air quality levels to break world safety standards last summer.
Hassan Assali linked up with the London and Liverpool bus company Merseyside Transport Ltd (MTL) in a two-year experiment to test his invention -- an oil recycler which he told Reuters cuts pollution levels by 50 percent and saves on lubricating oil by recycling it six to 10 times.
""Last summer there was big talk about stopping vehicles entering towns altogether as pollution levels were going through the roof.
""With this,"" said Assali cradling his recycler at his West London headquarters, ""we can cut the amount of oil used and dumped, cut pollution levels, plus save money.""
The recycler, invented by Assali who is managing director of the company behind it called Pinmore, has taken six years to develop and millions of pounds (dollars) of investment funded by an anonymous Palestinian backer.
The Pinmore recycler prototype was made by a gunsmith in London's East End because: ""It was the only way we could get the precision we needed,"" said Assali.
MADE IN CHINA
It is now being manufactured in China's Huzhan province and has sold 6,000 units at a cost of 250 pounds ($425.2) each.
Customers to date include an Algerian bus company which has ordered 3,000 recyclers and Saudi Arabia's frontier guards who bought 1,000 for their trucks -- ""They're constantly plagued by desert sand getting into the oil,"" added the inventor.
In November Assali held a conference in Oxford, England attended by more than 40 delegates from the transport industry, including bus companies.
At the conference MTL publicly endorsed the recycler after two years of tests on its oldest London buses. Professor Gordon Andrews of the fuel and energy department at Leeds University and a consultant to the motor industry, also agreed it worked.
Phil Locke, systems manager for group engineering at MTL, told Reuters: ""We've had a lot of success and it's given us tremendous savings. It's also given us smaller fuel emmissions, which are down sharply.""
He said the bus group's initial scepticism had vanished and it is now considering buying up to 2,000 recyclers for its fleet in London and Liverpool.
""We've had so many people approach us in the past with different systems and they say it works. But most don't. We took a gamble on Mr Assali and it's working,"" said Locke.
""I think it's been looked at by enough people and they see the benefits -- it has the chance of turning into a big thing.""
The reception from motor manufacturers like Nissan has been cooler, says Assali, despite the pressing environmental and health arguments to cut pollution.
Assali also says two major oil companies have called him to rubbish his work out of hand. ""I was afraid they would send a hit-man,"" he joked.
But he says the evidence is in his favour. Pinmore carried out experiments for two years in north London with MTL.
RECYCLING BUS
The experiment fitted one bus with a recycler and one without, said Assali. ""We said to the client ""Run these buses in the worst conditions possible - stopping, starting continuously and braking suddenly'.""
He claimed the old red Routemaster bus, the famous London symbol also renowned for belching black fumes, was fitted with the recycler in February 1995 and did not have to change its oil until July that year.
The London arm of MTL then invited Assali to its headquarters in Liverpool where ""I explained the invention to the top brass.""
Commenting on the financial benefits, he says that MTL as a company uses 40 tonnes of oil a year -- which can easily be cut by a sixth on average by using the recycler.
""We started with three principles in mind -- to save oil, maintain engine quality and to help the environment by cutting polluting emissions.""
The Pinmore filters the oil using a secondary filter controlled by a microprocessor.
The filter has a pyramid of discs, down which oil cascades. Discs are heated to 160 degrees, bringing oil to 120 degrees, hotter than the engine temperature. As oil trickles down the discs the contaminants, such as water, diesel fuel and gases evaporate.
The resulting vapour is fed into a chamber where it is burned off separately.
Very old vehicles like the red Routemaster buses, some of which are 25 years old, can run for 60,000 kilometres (37,280 miles) without changing the oil -- that is six times the normal distance.
FIRST BUSES, THEN THE WORLD
Pinmore has high hopes for its product and plans to take polluting vehicles by storm. ""We will hit the bus companies first and then the black cab market in London -- 23,000 cabs in total.
""We will then tackle the major UK cities -- Sheffield, Glasgow, Bradford. The market is massive. We could take it to Paris, Frankfurt, Berlin -- every diesel city in Europe.""
MTL now plans to set up a mobile laboratory where anyone can inspect the recycler and the test results.
""We're working towards helping others fight pollution. We're not trying to keep it to ourselves,"" said Locke.
""If we put it into the bus market first, then perhaps someone from the government will say ""If it works for buses then why can't it work for taxis or the private car?'."" ($1=.5880 Pound)
",8
"Britain's motor industry reported 1996 car registrations at a seven-year high on Tuesday, but admitted the figures masked problems of erratic retail sales, poor margins and the threat to exports posed by a surging pound.
Manufacturers faced the double whammy of sluggish domestic retail sales as imports continue to rise, while British exports are now exposed to the new worry of a rising pound.
The Society of Motor Manufacturers and Traders put a brave face on car-makers' problems, pointing to 1996 new car registration growth of 4.12 percent on 1995 levels to 2,025,450 -- the third highest annual total on record.
Registrations in December showed a monthly rise of 9.23 percent in December. But most of the annual growth was due to company fleet car sales and heavy discounting which has eaten into manufacturers' margins. Retail sales to private British buyers rose by a paltry 2.3 percent on the year.
While the SMMT said 1997 would continue to show some growth, analysts said the industry could not afford to be hit by the stronger pound abroad while the home retail market remains erratic and the fleet car market is artificially boosted by heavy discounting.
""We continue to see a rise in imports and while exports did well (in 1996) they are facing tougher times ahead thanks to the pound,"" John Lawson, analyst at Salomon Brothers.
Lawson said car-maker Rover Group, part of Germany's BMW, is the most exposed to sterling strength, with players like Ford Motors and General Motors better placed to switch some capacity or sourcing of components outside Britain if the pound continues to power ahead.
On sterling's gains, Ernie Thompson, chief executive of the SMMT, said ""Obviously it's (sterling strength) a risk.""
Arthur Maher, head of forecasting at analysts LMC International, said ""In the short term, UK exports are likely to impact on company financials rather than sales volumes.""
""If sterling appreciation looks structural, manufacturers may look to reduce vehicle specifications and renew efforts to boost productivity,"" he said.
The sales trend in Britain has shown imports rise to take 62.03 percent of the British market, up from 58.94 percent in 1995. In 1994 imports took just 52.82 percent of British car sales. The SMMT said the upward import pattern is set to continue for the next two years.
Analysts are also worried that retail sales have not moved in line with the consumer spending binge in other parts of the economy.
Margaret Pyne, head of economics at the SMMT, said ""The erratic nature of retail demand was particularly disappointing.""
Car retail sales did bounce back in the last quarter of 1996, but Maher said ""sales remain vulnerable to a post-election squeeze in 1997, with the retail consumer exposed.""
An election is due by May, with the possibility of a fiscal tightening afterwards which could dampen consumer spending.
Thompson warned that British car makers would continue to feel the pressure with ""intense competition and over-capacity hitting margins. Unless they start earning better profits it is difficult to see how they can afford to finance new models. That is a major concern throughout the world.""
Analysts like Maher said car-makers faced the double bind of cut-throat competition and overcapacity coupled with a more demanding breed of consumer wanting up-to-date innovations at yesterday's prices.
",8
"The British government warned on Friday it would refer the proposed transatlantic alliance between British Airways Plc and American Airlines to the Monopolies and Mergers Commission unless the carriers accepted a number of conditions.
Trade and Industry Secretary Ian Lang added that even if the conditions are met by both airlines, final clearance will hinge on an open skies deal being signed between the British and U.S. governments to liberalise transatlantic air traffic -- securing greater competition on the routes.
Lang backed conditions proposed by competition watchdog, the Office of Fair Trading, which was asked to re-examine the case last month.
He said in a statement, ""I agree...that without suitable undertakings the alliance would be likely to lead to a significant loss of actual and potential passengers, on those routes where BA and AA (American) currently compete and for all passengers on the transatlantic route between the UK and U.S.""
The comments came just minutes after the latest set of open skies talks ended in London, with no deal signed. Industry sources said there was no new date for fresh talks and blamed the deadlock on uncertainty over whether the BA/American deal would be cleared.
Both BA and American were both forming a response to the news and were unavailable to give an immmediate reaction.
The conditions for clearance of the alliance are that BA and American drop 168 slots at London Heathrow airport, the busiest in Europe.
The government also wants BA to drop a clause in its agreement with USAir which bars it from competing on transatlantic routes.
Also, both BA and American should be prepared to reduce services on the London to Dallas Ft Worth route in the event that a new entrant wishes to enter, because it was felt by the OFT that competition on this route would be hampered by an alliance.
The OFT has called for BA/American to allow third party access to their joint frequent flyer programme where the applicant does not have access to an equivalent scheme.
Lang said responses should be made to the OFT by 1700 GMT on January 10 1997.
But Will Whitehorn, spokesman for Virgin Atlantic Airways, a major rival on the UK-U.S. route, said ""I don't think they will be able to meet these conditions. I think it will go to the MMC...even if they complied with the conditions the alliance would still be anti-competitive.""
On the open skies talks, Whitehorn said that by linking the deal's clearance to an open skies pact, the British government was using its leverage to try and gain reciprocal access for British carriers into the restricted U.S. internal market.
United Airlines said it thought the OFT conditions imposed on the alliance were in step with its own views.
The current aviation agreement, dating back to March 1991, restricts transatlantic access to Heathrow to BA, American, Virgin Atlantic Airways and United Airlines.
The DOT has refused to comment on whether it will now be seeking to set a date for new open skies talks bearing in mind the OFT stipulation that alliance clearance hinges on transatlantic flight liberalisation.
Under the BA/American alliance, BA would coordinate its 244 flights a week to 22 U.S. destinations with American's 238 flights from seven U.S. airports to 12 European destinations.
",8
"The British government warned on Friday it would refer the proposed transatlantic alliance between British Airways Plc and American Airlines to the Monopolies and Mergers Commission unless the carriers complied with a number of conditions.
Trade and Industry Secretary Ian Lang added that even if the conditions are met by both airlines, final clearance will hinge on an open skies deal being signed between Britain and the United States to liberalise transatlantic air traffic -- securing greater competition on the routes.
Lang backed the undertakings proposed by competition watchdog the Office of Fair Trading (OFT), which was asked to re-examine the case last month.
""I agree...that without suitable undertakings the alliance would be likely to lead to a significant loss of actual and potential passengers, on those routes where BA and AA (American) currently compete and for all passengers on the transatlantic market route between the UK and U.S.,"" he said.
The comments came just minutes after the latest set of open skies talks ended in London, with no deal signed. Industry sources said there was no new date for fresh talks and blamed the deadlock on uncertainty over whether the BA/American deal would be cleared.
Both BA and American were forming a response to the news and were unavailable to give an immmediate reaction.
The conditions for clearance of the alliance are that BA and American drop 168 slots at London Heathrow airport, the busiest in Europe.
BA's initial response late on Friday was that ""unconditional divestiture of slots is unprecedented and if done it must be on the basis of fair market value"". It added that it would be ""prepared to take reasonable steps to assist the introduction of additional competition"".
The government also wants BA to drop a clause in its agreement with USAir which bars it from competing on transatlantic routes.
Also, both BA and American should be prepared to reduce services on the London to Dallas-Fort Worth route in the event that a new entrant wishes to enter, because the OFT felt that competition on this route would be hampered by an alliance.
It also suggested losing some slots on the London to Boston route. The OFT has called for BA/American to allow third party access to their joint frequent flyer programme where the applicant does not have access to an equivalent scheme. Lang said responses should be made to the OFT by January 10 1997.
Richard Hannah, analyst at UBS, said: ""There are only three obstacles to the deal -- one is the OFT conditions, two is the open skies pact and three is the anti-trust threat in the States. I would be surprised if a deal cannot be done.""
But Will Whitehorn, spokesman for Virgin Atlantic Airways, a major rival on the UK-U.S. route, said ""I don't think they will be able to meet these conditions. I think it will go to the MMC,"" adding: ""Even if they complied with the conditions the alliance would still be anti-competitive.""
On the open skies talks, he said that by linking the deal's clearance to an open skies pact, the British government was using its leverage to try and gain reciprocal access for British carriers into the restricted U.S. internal market. United Airlines also welcomed the OFT conditions to the deal.
The current aviation agreement, dating back to March 1991, restricts transatlantic access to Heathrow to BA, American, Virgin Atlantic Airways and United Airlines.
The DOT has refused to comment on whether it will now be seeking to set a date for new open skies talks in light of the OFT stipulation that alliance clearance hinges on open skies.
Under the BA/American alliance, BA would coordinate its 244 flights a week to 22 U.S. destinations with American's 238 flights from seven U.S. airports to 12 European destinations.
",8
"Britain could raise between 600 million and 1.5 billion pounds ($960 million to $2.4 billion) in net proceeds from the sale of the London Underground rail network, Steven Norris, a former transport minister now working on the Conservative Party election manifesto, said on Wednesday.
Norris, who is spearheading the ruling party's election campaign for London and the south-east of England, told Reuters he also believed the government is strongly examining the option of fare and service standard controls for the tube network.
In a telephone interview, Norris, who has been involved informally with government studies into a possible sale of the network, known as the tube, said he understood the sale proceeds figure excluded the cost of funding necessary investments.
The gross proceeds figure was put at between 1.4 billion and 2.5 billion pounds, he said. In the run up to Britain's general election, which must be held by May 22, London Underground has been turned into a ""political football"", government sources say.
As politicians among the ruling Conservatives and also the opposition Labour party believe that Londoners' votes may ride on the tube in more ways than one, there is great pressure on the government to submit a compelling case to the public.
Norris said he believed the government was also looking at a way of safeguarding service levels, much as the Department of Transport has already done with the national rail network.
A government source also told Reuters earlier that fare controls were on the cards under sell-off plans -- a crucial tactic for commuters who are likely to fear that higher fares would otherwise follow from privatisation.
""The key selling point of (national overground) rail privatisation to consumers was provision of fare controls and the need to maintain existing levels of service,"" the source told Reuters. ""So it is unlikely that those would not be maintained under the London Underground sale.""
The government source concluded, ""In a pre-election situation the government has to have reasons to do it which are presentable in the public eye.""
The comments came the day after opposition Labour leader Tony Blair, ahead in electoral opinion polls, said he was committed to keeping the tube in public hands and revitalising it through private sector investment.
Norris slammed Labour's plans to encourage private sector investment into the tube to maintain track, signalling, tunnels and for new trains as inadequate.
He said private finance projects in the underground worth 1.0 billion pounds were already underway.
The sale options being looked at by the government include a full scale sale, or selling the franchises to run individual tube lines, he said.
This is seen as a feasible route because the network currently runs each line as a separate business, with its own fleet of rolling stock. But Norris said franchises would have to be long enough to allow franchisees to recoup necessary investment in the network.
The network, some of which is more than a hundred years old, built in the Victorian era, faces a government budget freeze of 500 million pounds per annum in the next financial year.
That government subsidy will be slashed to 350 million in the year after and 150 million for the year after that.
A spokesman for the Department of Transport said the shortfall should be filled by an expected increase in the system's operating surplus (or profit) which is currently at 100 million pounds and seen growing up to 300 million.
($1=.6237 Pound)
",8
"Britain's opposition Labour Party outlined its blueprint for transport on Tuesday pledging no sell-off of the London Underground system, a partnership with the private sector on investment and a review of rail and bus regulation.
Labour leader Tony Blair kicked off the proceedings at an Industry Forum conference on transport by backing a public-private partnership to inject more investment into the cash-strapped metro system.
""It would offer Londoners a way between the status quo and dogmatic wholesale privatisation,"" he said.
The theme of partnership was emphasised by Blair and shadow transport secretary Andrew Smith who has shifted sharply away from the more interventionist policy approach of his predecessor Clare Short, according to transport industry figures.
Labour's revised transport vision promised tougher regulation, but no longer spoke of reversing the rail sell-off.
Instead, Smith said he envisaged using the private sector to invest in track maintenance, signalling, new trains and tunnel maintenance through long-term agreements for the underground.
On the overland rail network, Labour said it would be pushing policies which resulted in less road building and more traffic management.
This would be underscored by initiatives to tempt more passengers out of their cars and onto rail and buses. But Blair said the party did not want to ""demonise"" cars.
""I want to see an end to the debate couched in terms of road versus rail'. I am not interested in demonising the motor car. The focus of government policy needs to be offering people attractive alternatives to using their car. The task has to be getting a sustainable balance in car use,"" he told the conference.
As part of its effort to beef up the transport system as a viable alternative to cars, Labour promised a review of the regulation of buses and rail.
On rail, Smith criticised privatised infrastructure company Railtrack Plc for not meeting its investment obligations.
""As a natural monopoly whose performance is critical for the whole system, Railtrack must be held to account for the quality and effectiveness as well as the financial value of its investment programme and its property disposals. The first call on those should be for investment,"" said Smith.
Labour -- which leads in pinion polls ahead of a general election which must be held by May -- plans a four-point plan to move more freight onto rail and off roads.
As part of the that plan, Railtrack would be given more of a responsibility to develop freight business under a proposed code of conduct.
This would require Railtrack to provide information and introduce procedures for dealing with new freight business requests as part of a general obligaiton to promote develop freight. This would be enforced by the rail regulator, said Labour.
The freight plan also includes safeguarding of sites for depots under planning guidlines and raising safety and emission standards for road haulage. On regulation, Labour said said there was a need for a new framework for buses and the beefing up of the rail regulator's powers.
On compeititon law, Labour would launch a review to see whether changes are needed to allow co-operation between bus companies on issues like ticketing and time-tabling where it can benefit customers - an issue the industry has lobbied on.
Labour said Britain's lack of an integrated transport policy was already costing it 20 billion pounds ($32.07 billion) per annum, according to a survey from the Confederation of British Industry.
($1=.6237 Pound)
",8
"UK bus to rail group Go-Ahead Group Plc said on Wednesday that allegations by opposition Labour MP Dale Campbell-Savours of company representatives using inside information to clinch a rail franchise and benefit through share dealings was ""rubbish.""
In an interview with Reuters, Martin Ballinger, Go-Ahead managing director, hit back at the MP's allegation, which was made in Parliament late last night.
It was  ""absolute tosh,"" he said. ""Nobody made any money as no-one sold (their shares).""  
The comments were made in a statement by Campbell-Savours in the House of Commons, where Members of Parliament  (MPs) are protected from libel suits by parliamentary privilege.
But Ballinger warned the Labour MP ""I would certainly get my lawyers to take a look at any statements, so he better be careful what he says outside the (House of) Commons.""
""The last MP who said something silly about us -- I've got his apology hanging in my loo (toilet). If Campbell Savours says this outside the House of Commons I'll have another framed apology to hang in the loo."" said the transport group chief.
The allegations focus on its bid for the Regional Railways North East franchise, for which Go-Ahead was shortlisted on November 15.
Ballinger explained that in the bidding process it put in an ""indicative' bid based on information which had more up-to-date accounts details because it had existing British Rail managers within its bid team.
But Ballinger said that the franchise regulator Opraf had adjusted Go-Ahead's bid to bring the accounts information in line with other bidders.
""The final bids were all on basis of information available to all parties. There is no way we are in possession of price sensitive information -- that is rubbish,"" he said.
""The only thing available to us was the expertise of our managers.""
He said the sharp rise in its shares in recent months had been in line with the rest of the sector which had rallied.
Asked why Campbell Savours would make such accusations in light of Go-Ahead's defence, Ballinger replied: ""He wants to cast aspersions on the (Conservative government's) privatisation process and he likes to invent government sleaze.""
-- London Newsroom +44 171 542 7717
",8
"Tomkins Plc, the British baking-to-engineering combine, reported a sharp surge in half year profits on Monday but snuffed out hopes of a share buyback this year by flagging possible acquisitions instead.
Pretax profits for the six months to November 2 rose 34 percent to 168.8 million pounds ($284 million). The dividend rose to 3.06 pence from 2.7 pence the preceding year.
Executive chairman Gregory Hutchings said the results marked ""another period of outperformance for Tomkins"" and forecast the the shares should continue to outperform the sector.
Hutchings ruled out the possibility of returning the company's 366 million pound cash-pile to shareholders this year, saying in an interview: ""We see sufficient (acquisition) opportunities to hold onto our cash for the time being.""
Hutchings said the group was likely to make a number of smaller buys. ""It won't be one major deal, but it could be worth up to 200 million pounds,"" he said.
Rumours of a buyback in 1997 have helped push Tomkins shares ahead in recent weeks. Its shares on Monday reversed early gains, however, and were down four at 273-1/2p by 1115 GMT.
""The numbers were at the top end of what people were looking for and we've seen some early interest,"" one market-maker said. Analysts had expected profits of around 160 million pounds.
The outlook was also seen as promising.
""Prospects for the second half look encouraging, with the majority of our operations having healthy order books and satisfactory market conditions,"" Hutchings said.
He said Tomkins was delighted with its purchase last year of U.S. automotive and industrial product firm Gates Corp for $1.1 billion.
Gates contributed 259.5 million in sales and 20 million in profit in its first 14 weeks under Tomkins control.
A divisional breakdown of the Tompkins figures showed fluid controls had sales of 189.2 million versus 165.7 million pounds, with profits of 19 million versus 15.8 million.
Industry services saw sales rise to 219 million from 194 million, with profits of 12.5 million versus 12.1 million. Professional garden and leisure products saw sales of 276 million versus 271 million and profits down to 8.5 million from 8.9 million.
Industrial products sales rose to 317.3 million from 267.9 million, with profits of 34.3 million versus 28.5 million.
Milling and baking, which includes the Hovis bread brand, saw sales up to 351.3 million versus 333.8 million, with profits at 15.4 million versus 13.7 million.
Food products, including Bisto gravy and Robertson's jam range, saw sales up to 543.5 million from 501.8 million, with profits at 42.6 million versus 38.5 million.
Excluding currency effects, organic growth in group operating profit was up more than 10 percent on sales, which in turn rose by seven percent.
Unlike other major export groups, Tomkins has so far been left unscathed by the pound powering ahead against the dollar and mark.
Against the dollar, Tomkins said it was locked at $1.52 to the pound for the rest of the year. The amount of mark-denominated business was minimal, it said.
On market conditions, Tomkins said the U.S. was seen remaining firm. Britain was described as mixed, while the French market was expected to continue to suffer due to economic problems. ($1=.5950 Pound)
",8
"Britain was a step closer to completing the privatisation of passenger rail services on Thursday after announcing the preferred bidders for two more franchises which helped send the companies' shares soaring.
The Office of Passenger Rail Franchising (Opraf) said Great Western Holdings Ltd had been chosen as the preferred bidder for the North West Regional Railways franchise in northwest England.
Existing management and employees own 51 percent of the bid group, with FirstBus and 3i venture capital owning 24.5 percent each.
The Thameslink franchise was awarded to GOVIA which comprises of Go-Ahead Group Plc and French transport group VIA-GTI.
That leaves just three of the total 25 franchises to be awarded ahead of the deadline for the British election due by May 1997. Apart from the franchise for routes in Central England, the remaining deals are ScotRail and North East Regional Rail.
The franchise sales will completes the controversial privatisation of Britain's rail industry which began in 1995 and included the sell-off of rail infrastructure under Railtrack and the sale of the three rolling stock leasing companies.
Go-Ahead's commercial director Chris Moyes welcomed the news and told Reuters the line had huge potential because it provided a link from the financial district of London to Gatwick and Luton airports.
He said finalisation of the deal could add 100 million pounds ($162 million) of extra revenue to Go-Ahead's figures.
""We aim to capitalise on our existing commuter traffic and improve the links to the airports. There is enormous scope,"" he said pointing to the example of the fast-link Gatwick Express service from Victoria which serves the West London travellers.
Opraf also announced that a revised shortlist for Central Trains had been drawn up, cutting the orignal list of five to National Express Group and Straightforward Lines which contains FirstBus and the existing management team.
FirstBus chairman, Trevor Smallwood, said whoever won the Central deal, which covers routes in central England, could see revenues of around 70 million pounds.
His company must now make renewed presentations against National Express in a fight to the finish.
A final decision is expected in the next two weeks when financial details of each deal will be revealed including the service, investment and subsidy levels for the franchise term.
The latest round of winners saw their shares roar ahead in celebration, with Go-Ahead leading the pack with a 36 pence rise to 515 by the close. National Express was up 26 pence at 547 and FirstBus was up 12 1/2 pence at 241.
The sector has seen spectacular growth in share prices in the past year as more bus operators have moved into railways, taking advantage of the opportunities opened up by privatisation.
($1=.6172 Pound)
",8
"U.S. car giant Ford Motor Co announced 1,300 job cuts at its plant in northwest England on Thursday and unions immediately raised the spectre of strikes in the British automobile industry.
Just months after giving the Halewood factory near Liverpool its global quality award for 1996, Ford told union leaders the new version of its mid-range Escort would not be built there.
The new model is now likely to be built in Spain and Germany. Ford's proposed job cuts will reduce Halewood's workforce to just over 3,000, compared with a peak of 14,000 in the 1960s and around 4,500 now. Britain's Prime Minister John Major told parliament Ford's decision was ""very surprising"" and ""flies in the face of most investment decisions which are moving to the UK"".
Ford has not said where the new model will be built. But unions believe the new model, due in 1999, will be built instead at Ford's plants in Valencia, Spain, and Saarlouis, Germany.
The main unions, including the Transport and General Workers, announced they would be holding mass meetings at Ford plants around the country over the next week to see whether workers would take action in protest at the job cuts.
The workers will be asked to support a motion backing ""all necessary measures, including a ballot for strike action, to secure the future of Halewood and for an equal investment across Europe for all locations"".
British car factories were notoriously strike-prone in the 1960s and 1970s but have been barely touched by union action in recent years. Stoppages have fallen to record lows throughout industry in the 1990s.
Ford sweetened the pill by saying Halewood could be the site to build a new vehicle, probably a multi-purpose people carrier.
Angry workers blamed the decision to cut jobs in Halewood on what they see as a lack of legal protection for British workers.
Britain has opted out of European Union's Social Chapter, which sets out minimum working conditions, and its generally looser labour laws make it ""cheaper to dump labour in the UK than on the continent"", one union boss said.
""In Germany, if Ford closes its plant there, it has to pay its people 18 months' pay in compensation. In the UK, we've got no Social Chapter, it's easier to shut us down,"" production line worker Phil Gornall said on his way into the Halewood plant.
Industry analysts said Ford's need to cut costs and the failure of the Escort rather than problems at the plant were behind Ford's decision. The Escort's British market share fell to six percent in 1996 from 11 percent or more in the 1980s. Ford Europe lost $472 million in the third quarter of 1996, up from a loss of $320 million in the same 1995 period.
Professor Garyl Rhys, a car industry expert at Cardiff university, said Halewood, now a model of industrial relations, was paying for the ""bad old days"" of the 1960s and 1970s, when the British car industry had a bad strike record.
""Because of the problems at Halewood and a number of other car plants in Britain, there was a reluctance to use them as sources for exports...You couldn't guarantee deliveries because of interruptions to production because of strikes,"" he said.
Unemployment in the area around Halewood is already a major problem, with some local housing estates suffering from a jobless rate of nearly 40 percent.
Local residents complained that shops, banks and supermarkets have closed as businesses moved out of the area, and they seemed resigned to further decline.
""I don't think the government is interested in Liverpool,"" said Mike Kelly, landlord of the Orient pub, used by many of the Ford workers. ""I don't know how long this pub will be here now -- this place is becoming like a ghost town.""
",8
"British airports operator BAA Plc is expected to show taxable profits continuing to climb when it reports third quarter and nine-month results on Monday as the number of people travelling by air travel continues to rise.
Analysts predict that pretax profits for the nine months to December 31 will come in at between 392 million stg and 400 from 374 million pounds last time.  
Passenger traffic at its airports, which include the country's two biggest hubs of London Heathrow and Gatwick, rose 4.4 percent in the nine months to 76.62 million passengers.
But the company's prospects have been overshadowed by fears that Britain's opposition Labour Party could include BAA in its hit list for the windfall tax, which it has vowed to impose on former state-owned utilities should it win the election.
Labour says a certain number of utilities such as the water and power companies were sold off too cheaply by the Conservative government and led to ""fat cat"" executives overpaying themselves and their shareholders with the proceeds.  
BAA refuses to countenance the prospect, saying it has done everything the utilities should have done since it was privatised in 1987, investing in the business including plans to build a giant fifth passenger terminal at London Heathrow.
""We are not a utility, we are not a fat cat, we have not paid either special dividends or returned money to shareholders or made any mega acquisitions to get rid of our money,"" BAA's finance director Russell Walls said last November.
BAA reported pre-tax profits rose only 3.4 percent to 304 million stg in the six months to September 30 and earnings were up just 3.3 percent to 22.2 pence a share.  
But it said underlying pretax profits were up 10.5 percent and earnings up by 11.1 percent because it made a nine million stg exceptional gain in the comparable period a year ago.
It was also phasing out seasonal fluctuations in airport user charges, which had reduced income by 11 million stg in the first half but would be recovered in the second half.
With airport landing and passenger handling charges regulated under a five-year pricing formula, BAA is concentrating on trying to boost retail revenues from the shopping arcades it has built at most of its terminals.  
First half net retail income rose 10.7 percent to 224.5 million stg, with passengers spending an average of 4.20 stg each, 7.2 percent more than a year ago.
Total group revenue including retail was up 6.3 percent at 742 million stg. Income from airport user charges increased by 1.8 percent to 283 million stg. Revenue from property rose 7.7 percent to 112 million stg.
-- London Newsroom +44 171 542 7717
",8
"Wickes Plc, the British do-it-yourself retailer whose former bosses are being investigated for fraud, warned on Thursday it faced receivership unless investors backed its financial restructuring including a 53 million pound ($87.5 million) rights issue.
The recent discovery of accounting irregularities dating back five years forced the group to announce a major refinancing, including a cash call and the possible sale of its continental business.
Wickes chairman Michael von Brentano told shareholders that if investors voted against the plans at the extraordinary general meeting on January 6 ""it would be likely that the company would be placed in receivership.""
The rights issue is part of a shake-up which includes a capital reduction of 100 million pounds and new banking facilities of 52 million pounds. The refinancing aims to eliminate the deficit on the firm's profit and loss account.
The troubled company said in a statement: ""The directors believe that the group is now in a position where, if the proposals and proposed banking arrangements are implemented, it can build on its market position, return to profitability and deliver a successful ""New Wickes.""
Wickes accounting debacle, which was uncovered in June and triggered a share suspension, led to a major overstatement of profits, forcing the group to restate 1995 results. Revised accounts showed a 1995 loss before tax of 279.3 million pounds, 21.3 million more than originally reported.
Wickes said it expected to make a loss before tax in 1996 of not more than 56 million pounds, with losses of 52.7 million pounds reported for the nine months to September 28.
It will not pay an interim dividend in 1996 or 1997, but may pay a final dividend in 1997 and an interim for 1998.
Under the cash call itself, 37,822,310 new shares will be offered at 150 pence per new share with one new share for every 10 old shares. The rights issue proceeds will be used to cut group debt.
The chairman said the trading outlook for the group was improving with 1996 cumulative like-for-like sales growth of 4.1 percent over 1995.
He said the investigation into former Wickes bosses by the police and Serious Fraud Office (SFO) was not expected to result in any liability for the group.
The newly appointed chairman blamed the accounting bombshell on ""deliberate misrepresentation"" in accounting procedures, blaming ""serious mismanagement"" in group operations.
Von Brentano has pledged to clean up accounting procedures and has installed a new team to replace the old guard which has resigned, including former chairman and chief executive Henry Sweetbaum.
The SFO has already indicated that it will be interviewing all the former senior executives of Wickes as part of its investigation. No charges or arrests have been made to date.
($1=.6056 Pound)
",8
"Britain's Racal Electronics took the spotlight off a predicted slump in profits on Tuesday by announcing an alliance with its rival ITT Defence team in the race to win a two billion pound ($3.4 billion) defence contract.
Racal chief executive, David Elsbury, said the alliance with the U.S. consortium could yield joint savings of 100 million pounds in development costs for the British Armed Forces Bowman communications contract, due to be decided on by March 1997.
The contract is crucial to Racal's future earnings and those of its existing partner, Siemens of Germany. The winner of Bowman will get an estimated two billion pounds in follow-through export orders on top of the two billion contract value. It would create 6,500 new jobs, said Elsbury.
But Racal's chief warned of tough implications if the contract is lost. ""To win Bowman would be the prize. To lose Bowman, God forbid, we would still have a sizeable export market, but we would have to downsize the company.""
He said the move by Racal and partner Siemens to link up with their U.S. rival followed news from the British government of further delays to the award process.
Both sides' bids were in danger of running to 100 million apiece on research and developments costs, said Elsbury. Racal's costs to date are running at between 30 and 50 million, he said.
ITT Defence said in a statement that Racal and partner Siemens, who form the Yeomans consortium, had agreed to link with its own CrossBow group on technical, production and manufacturing resources for Bowman.
Racal said if they won the order, the companies would form a joint venture and each take a equity stake. Elsbury refused to comment on how the work would be split, but said ""We're happy with the arrangements.""
The alliance news helped arrest Monday's 18 percent freefall in Racal's share price when the group issued an eleventh-hour profit warning, which triggered angry responses from shareholders, ahead of Tuesday's half-year results.
Shares were up five and a half pence at 230 1/2 by 1200 GMT after closing 50 pence lower at 225 on Monday.
As forecast, results for the half year to October 11 showed pre-tax profits down to 21.2 million from 30.1 million. Profits were 20 million lower than was expected this summer and were hit by a 10 million charge relating to the Data products unit.
The half year payout was held at 2.10 pence and sales rose to 602 million from 502 million.
Full year profits are now seen at 50 million pounds after 20 million of charges. The results fiasco was blamed by Elsbury on last minute delays in foreign government defence orders, hitting the company's revenue targets.
News of the order slippage was only uncovered as late as last Friday. The defence orders were earmarked for the radio division which provides defence related equipment to foreign governments.
The radio division is undergoing a strategic review which is scheduled for completion by March. Other divisions, including network services, had shown strong profit growth. The recently acquired British Rail Telecoms business was described as a ""superb performer.""
Data Products is on the verge of a turnaround. ""In the second half we should see a profit. We haven't seen that for many years,"" said Elsbury.
($1=.5936 Pound)
",8
"Stagecoach Plc, the star performer of Britain's transport sector whose shares soared 138 percent in a year, promised on Friday more bumper growth this year fuelled by acquisitions overseas.
Outlining its strategy for 1997, executive chairman Brian Souter said the Scottish-based buses-to-railways group had not run out of steam and still could deliver growing returns.
He also tried to dampen concern about the size of group debt, with total gearing at 567 percent, saying it still had the financial scope to remain a deal-maker.
""We are very comfortable about our gearing levels. We would be in a position to make a major European acquisition in the next year if needed,"" he told Reuters in an interview.
The fast-growing group is set to target rail and bus firms in the Nordic region as well as examining the Pacific Rim.
Stagecoach, which started as a brother and sister team running the local bus company in Perth, Scotland, is now Britain's biggest transport operator having acquired privatised railway operations in southwest England, a rolling stock company and bus operations in England and Sweden.
On buying market share in the British bus market -- Stagecoach has 17 percent with the aim of reaching 25 percent -- Souter said he wanted to wait until the election due by May, which the opposition Labour Party is strongly-placed to win.
""We are holding back on these deals because of the prices,"" he said. ""Once the Labour (Party) is in place and we know their policies, then we can move. But for now we have a sabbatical on acquisitions in this area.""
On debt, he said: ""This gearing question is an important one which we want to address with the market.""
The 567 percent gearing includes securitised debt and falls to 197 percent once securitised loans are stripped out.
Stagecoach expects to have 230 million pounds in free cash in two to three years and stressed that 70 percent of its current 830 million ($1.36 billion) of total debt, including securitised loans, was fixed for seven years at 7.19 percent.
The Porterbrook UK rolling stock unit could turn in 50 percent of group profit, say analysts, a figure the company does not argue with. ""It has exceeded our initial expectations and we continue to be very happy with it,"" said Souter. ""We are very comfortable with forecasts analysts are making.""
Souter said the performance of the shares, which rocketed from 274 pence in December 1995 to the current level of 799-1/2, reflected the quality of underlying earnings.
Stagecoach said it ran all its businesses against a ""worst case scenario"" set of conditions: a market slump, interest rates hiked to 15 percent and an eight percent fall in passenger traffic. Souter said all businesses remained viable.
""I'm not saying our business is risk or recession free but these are great quality earnings.""
""Political and regulatory uncertainty are the only worries, but we're not as uncomfortable as we were six months ago.""
There are longer-term concerns about earnings once its South West Trains passenger rail franchise ends in 2003 and the termination of some Porterbrook train leasing deals around the same time. That would strip out a chunk of guaranteed earnings.
But for the nearer term, the bonanza looks set to keep running, with analysts predicting average year profits to April 30 at 98.2 million pounds, rising to 154 million thereafter.
Its last set of annual profits were 43.6 million. That growth will stem from Porterbrook and Swebus. One analyst said: ""Last year it was the best stock in the transport sector, so there can't be enormous upside left.
""But Mr Souter does have quite a big fan club in the City. He has very good business judgement and he's a specialist at investing in high-growth businesses sold off by the government at the wrong price."" ($1=.6119 Pound)
",8
"U.S. car giant Ford Motor Co said on Thursday it would cut 1,300 jobs at its Halewood plant near Liverpool, northwest England, or almost one third of the workforce, through a redundancy programme.
Ford's British operations said that the Halewood plant would not build the planned new model of the Escort car, due in 1999.
Production of the new model is likely to transfer to continental European factories in Spain and Germany.
However, Ford held out the possibility of Halewood becoming the European source of a planned new vehicle, which is still only a concept at this stage. It added that Halewood would continue to make the current Escort model through 2000.
""The actions we have announced today at Halewood assembly operations give the plant a realistic future, with an exciting new vehicle in the medium term, subject to approval and performance objectives being achieved,"" said David Gorman, European vehicle operations manager for Ford.
""We have had to take these steps to ensure our manned capacity is in line with our forecasts for sales,"" he said.
Local Liberal Democrat Member of Parliament David Alton told Reuters he had spoken to Ford, which said the jobs would be lost through voluntary redundancy. He said Halewood was in the running to be the European manufacturing site for a new vehicle, possibly in the family saloon range.
""There's some good news in what they say as well -- that they're looking at Halewood as the probable European site for a planned new vehicle,"" Alton said.
The proposed job cuts will reduce Halewood's workforce to just over 3,000, compared with a peak of 14,000 in the 1960s.
Management met trade union representatives on Thursday morning to discuss the cuts.
Workers expressed anger as they entered the factory, blaming ""flexible"" British labour laws and its opt-out from the European Union's Social Chapter, which sets out minimum working conditions in other EU countries.
""I can give you one reason why the job cuts are here. The Social Chapter,"" said production line group leader Phil Gornall.
""In Germany, if Ford closes its plant there, it has to pay its people 18 months pay in compensation. In the UK, we've got no Social Chapter, it's easier to shut us down,"" he said.
Larry Brook of the MSF union added: ""Britain is the cheapest place to dump labour. We are fighting for the future of Halewood.""
Even if a new family saloon is built at Halewood from the late 1990s, the plant would still have excess capacity, car industry experts said.
Production of the new Escort is now likely to be undertaken in Ford's plants in Valencia, Spain, and Saarlouis, Germany.
Professor Garyl Rhys, a car industry expert at Cardiff University, said Halewood, now a model of industrial relations, was paying for the  ""bad old days"" of the 1960s and 1970s, when the British car industry had a bad strike record.
""Because of the problems at Halewood and a number of other car plants in Britain, there was a reluctance to use them as sources for exports...You couldn't guarantee deliveries because of interruptions to production because of strikes,"" he said.
As a result, Halewood produced mostly for the home market.
That was fine when the Escort had 11 or 12 percent of the British market, as in the 1980s.
But by 1996 the Escort's market share had fallen to six percent and Halewood produced 110,000 cars rather than the 220,000 that an 11 percent share would require.
Ford cars were, however, the three biggest sellers in Britain in 1996, with the Escort ranked number two behind the smaller Fiesta and ahead of the Mondeo.
The Liverpool area has a higher than average jobless rate and one in three people is unemployed on some of the housing estates near the plant. Union leaders pledged to fight the cuts.
",8
"Four and a half thousand workers at U.S. car giant Ford Motor's Halewood plant in England face judgement day on Thursday when the management will meet unions to discuss the future amid rumours of job losses and closure.
Ford said last year it planned to take draconian action to end heavy losses in Europe and British newspaper reports claimed that Ford had now threatened to close the Halewood plant in northwest England.
However, last Sunday Ford said in Detroit, the U.S., that it would restructure but not close Halewood, with some job losses expected and a Ford UK spokesman said on Wednesday that reports of closure were speculative.
A report in Britain's Observer newspaper claimed that Ford planned to tell unions unless they agreed to more efficient working practices and 500 job losses the entire plant faced possible closure.
Ford UK's spokesman told Reuters the meeting with unions led by the Transport and General Workers Union (TGWU) is due on Thursday morning.
""A number of issues are on the agenda. Reports of plant closure and restructuring are all speculative,"" he said.
The spokesman added the meeting followed an internal review of all UK operations including the sister plant in Dagenham, London.
TGWU head of communications, Andrew Murray, said it all hinged on the future of Ford's Escort model, adding that a statement was expected after the meeting.
The next Escort version is due in 1999 and will be the first car engineered under Ford's new global product development structure called ""Ford 2000""
Analysts said it was unlikely that Ford would take the drastic measure of closing down a plant and axing all 5,000 jobs.
But Halewood is seen by some to be one of the least productive Ford plants in Europe.
Arthur Maher, head of European forecasting at LMC International, said ""Ford 2000 is about taking cost out of the organisation and reducing the number of (assembly) platforms.
""Europe is a big black hole for Ford in terms of money it's losing. It has too much capacity and the costs are above the levels they should be. Maybe Ford wants to try and extract further productivity improvements in return for some job security. I think that's where they are really coming from.""
He said a plant closure in the UK would be ""a big political decision in the run-up to an election in Britain (due by May 1997).""
",8
"Britain cleared CE Electric's 782 million pound ($1.3 billion) bid for regional electricity company (Rec) Northern Electric on Friday and analysts said the U.S. firm was now likely to net its prize.
""I think CE Electric will probably win, they already have 29 percent from the market in their back pocket, they have to be in pole position,"" said Nigel Hawkins of Yamaichi.
Trade and industry minister Ian Lang said in a statement approving the bid that CE Electric, which is 70 percent owned by U.S.-based CalEnergy, had given assurances addressing regulatory concerns including guarantees on Northern's financial and management resources.
CE Electric raised its bid to 650 pence per share from a previous 630 pence on December 6 and slapped a deadline of December 20 on acceptances. Northern has said the bid undervalues the company and that a price of 700 pence per share was indicated in talk
Northern says it has the backing of major investor Prudential Corporation, which owns more than 11 percent of its shares and has bought more at 600 pence apiece.
Prudential traditionally tends to back the target company's board in a hostile takeover situation. But in the latest war of words, CE Electric said it also had major investors on its side and was confident of victory.
""I believe investors will now back the offer. They have seen it cleared and there is no white knight (bidder) on the horizon. We are now confident of getting above the 50 percent threshold,"" said David Sokol, CE Electric's chairman and chief executive.
Northern shares jumped on news of the deal being cleared, rising 42-1/2p to close at 645p after sluggish sessions on concerns that the bid could be blocked.
But Northern's latest rebuttal said acceptance would mean shareholders ""giving up almost one pound per share in dividends over the next nine months and to forego a prospective 1997/98 yield of over 10.5 percent,"" after it forecast a final dividend for this year of 50 pence, up 17 percent.
""We think 650 pence still undervalues Northern, but with the market currently looking so jittery and the political atmosphere possibly changing, investors might find the offer very attractive,"" said one analyst who asked not to be named.
A general election is due within five months and the opposition Labour party, which is riding high in polls, has promised to introduce a one-off windfall tax on utilities and could also tighten up pricing regulation.
In its defence, Northern has outlined plans to realise value by merging its electricity and gas supply businesses with another regional player and it wants to develop a 50 megawatt gas-fired power station in a joint venture with Rolls Royce.
Everything now hangs on next Friday, with both sides keeping up the campaign to clinch support from big investors.
CE Electric has just under 30 percent of shares in the bag and four percent of acceptances, needing 50 percent of Northern shares to win.
Northern had already escaped the clutches of one predator -- conglomerate Trafalgar House -- last year, with a defence package totalling 560 million pounds. ($1=.6043 Pound)
",8
"British Steel saw its share price skid to a 12-month low on Thursday after a rash of profit downgrades from analysts who said the pound's surge against the mark could slash group profitability.
British Steel told Reuters that the pound's advance against the mark was ""a concern"" and reiterated that it was carrying out a cost-cutting review which could see some jobs being axed as a result of the currency factor.
Analysts at Natwest Markets cut their profit forecast for the current year and joined Merrill Lynch and SocGen in halving profit predictions for the year after, ending March 1998.
All three blamed sterling's relentless rise against the mark and said that not only were exports to Europe in danger, but imports to Britain were also on the up as customers chose the cheaper option.
One analyst said ""I think the pound will stay around the 2.60 Deutschemark level. The mark-based steel market is a big European market and the current exchange rate makes British Steel look expensive not just abroad but at home as well.
""British Steel is being hit on both fronts.""
The British group's shares are currently trading at 151- 1/2 pence per share, down two and a half pence on the day. The shares have not been this low since January 1996 and have retreated from a high of 201-1/2.
Merrill analyst Paul Compton said the pretax profit downgrade on Wednesday to 280 million pounds from 650 million for the year to March 1998 was purely due to the potential impact of the UK currency.
""British Steel was probably using 2.30 (marks) to the pound for 1996/97,"" said Compton. ""In 1997/98 it now looks like they will have to raise it to as much as 2.65 marks and the impact is around 350 million (on profits).""
Sterling is currently trading around the highest levels seen since it exited the European Exchange Rate Mechanism in late 1992. When Merrill made its forecast downgrade on Wednesday, the currency was trading at around 2.65 marks to the pound and $1.69.
SocGen analyst Andy Chambers told Reuters he had cut the British Steel pretax profit figures for the year to March 1998 to 400 million pounds from 700 million.
Industry sources said Natwest Markets had gone further by slashing the current year pretax profit forecast to March 1997 to 477 million pounds from 611 million. Natwest has cut its forecast for the following year to 355 million from 449.
All analysts reported that British Steel would be hit in European export markets which are mark/pound sensitive and that as the pound gains ground, the domestic market has also become vulnerable with customers buying cheaper imports.
Of British Steel's eight billion pounds in sales, the company said 50 percent is exported.
A spokesman for the steel giant said that up to three billion pounds of its total sales are sensitive to the pound/mark exchange rate.
",8
"CE Electric, the U.S. utility giant in the throes of a hostile takeover battle for Northern Electric Plc, said on Friday it was confident of winning and claimed it had several institutional investors behind it.
Speaking just after the UK government had given clearance to a takeover deal, David Sokol, chairman and chief executive of the U.S. group, said: ""I believe investors will now back the offer, they have seen it cleared and there is no white knight (bidder) on the horizon. We are now confident of getting above the 50 percent threshold,"" needed to clinch the deal.  
Sokol said he had spoken to a number of big invetors who indicated privately they would back the 650p per share offer. ""They think that 650 pence is a very full price."" So far, Northern has 30 percent of Northern shares in the bag and acceptances for four percent. The U.S. utility chief was unfazed by reports in the press that major shareholder Prudential Corp Plc, which holds over 11 percent, was going to back the Northern Board.
Northern confirmed in a statement that Prudential had bought extra shares at 600 pence per share.
But Sokol said the ""economics of the bid are compelling.""  
""You just have to look at the facts,"" he said. ""The stock was at 495 pence per share before we came in with our (first) bid (at 630 pence per share).
""The stock will plummet if it's not accepted. Add to that the fact that the FTSE 100 index is looking at a correction. Here is an opportunity to take a very large profit, cash in the bank and add to that factor that Northern's proposal does not offer value.""
Northern's defence has said the company is worth more than 650, with some analysts claiming the company is holding out for 700 pence per share.
The UK electricity firm has mentioned plans to realise value by merging its electricity and gas supply businesses with another regional player. It also wants to develop a 50 megawatt gas-fired power station in a joint venture with Rolls Royce.
--London Newsroom +44 171 542 7717
",8
"Racal Electronics Plc, the defence to communications group hit by a profit warning on Monday which flagged poor interim results on Tuesday, has blamed last minute delays in foreign government defence orders hitting its revenue targets.
David Elsbury, chief executive, told Reuters, that news of the order slippage was only uncovered as late as last Friday. The defence orders were earmarked for the radio division which provides defence related equipment to foreign governments.  
After meeting with advisers over the weekend, the group decided to revise its profit outlook down. He cited the example of one South American government forced to put back its order after being hit by changes in copper prices.
The division is already undergoing a strategic review which is expected to report back in March.
Elsbury stressed that although orders have been pushed back to next year, none have been lost.
He said other divisions, including network services, had shown strong profit growth, citing the recently acquired British Rail Telecoms business as a ""superb performer.""
Data Products is on the verge of a turnaround. ""In the second half we should see a profit. We haven't seen that for many years,"" said Elsbury.
--London newsroom +44 171 5427717
",8
"Crucial talks between the British and U.S. governments on clinching an open skies pact to free the transatlantic airline market were postponed for two weeks on Monday due to the illness of a senior British negotiator.
The talks had been due to kick off in Washington on Tuesday, with representatives from the British and U.S. governments as well as the main transatlantic carriers.
But a spokesman for the British government said: ""Our lead official is in hospital so the meeting has been cancelled. The talks have been postponed for a fortnight.""
News of the eleventh-hour grounding of talks came as the European Commission kicked off a separate series of private hearings in Brussels into the proposed British Airways and American Airlines alliance, which is conditional on an open skies pact being clinched.
British and U.S. carriers expressed regret that the Anglo-U.S. talks had been delayed. But sources reiterated that this round of talks had not been expected to deliver a final deal.
""It's not damaging. The two sides had been talking informally anyway and this round was never billed as the breakthrough round,"" one U.S. airline spokesman said. ""It was meant to deal with more boring issues like ground handling.""
The two sides are believed to have been inching closer, but Scott Yohe, senior vice-president of government affairs at Delta Air Lines Inc , told Reuters he believed full agreement was not possible in the current round. He said a deal is likely to emerge in subsequent talks.
But a number of other major hurdles need to be cleared. First the British government wants to try to link the open skies talks with the BA/AA alliance. The U.S. wants to keep the talks and alliance approval as two distinct issues.
Britain is still waiting for its competition watchdog, the Office of Fair Trading, to give a final verdict on the alliance after receiving responses from the airline industry.
In particular, airlines are waiting for a clarification on how BA should divest itself of 168 landing slots at London's Heathrow airport -- a condition for the BA/AA deal to be cleared by the Office of Fair Trading.
""Buying/selling of slots is fundamental to any (open skies) deal,"" said one U.S. airline spokesman.
Whether BA can sell them or must give them away remains a grey area. Britain says the decision lies with the government, but the European Commission says it has final jurisdiction and claims that selling slots is banned under EU law.
Another issue within the open skies framework is the argument by the British government for some protection for smaller airlines taking the full brunt of competition under an open skies regime.
Britain is trying to secure a dispute reconciliation procedure. This is believed to be for the benefit of players like Virgin Atlantic, the transatlantic carrier owned by entrepreneur Richard Branson's Virgin Group .
Another complicating factor is the chance of a British election being announced in the coming weeks, which could put the talks on the backburner.
With the opposition Labour Party riding high in opinion polls, one industry insider said that if there was a change of government ""there is the possibility that Labour will want to start from scratch.""
",8
"Anglo-U.S. auto-components-to- aerospace giant LucasVarity, said on Tuesday it was sifting through some offers for the 13 companies earmarked for disposal under its post merger corporate shake-up.
Victor Rice, chief executive, told Reuters he expected the group to be in ""active negotiations"" on the sale of some of the non-core units quite soon. Only eight of the 13 businesses marked for sale were named in the restructuring statement released earlier. Rice said that major businesses like aerospace and electronics were not among the unnamed five.  
Rice refused to comment on how soon he expected the first disposals to go through.
The restructuring plans will be accelerated leading to the divestment of 13 business and 3,000 job cuts worldwide over two years.
Rice said the post-merger savings were ""virtually double"" original expectaions, with annual operating savings seen at 120 million stg by January 31 1999.
The criteria for divestment were those firms which ""neither fitted into the core strategy of the company or contributed economic added value.""
He said the process of raising cost efficiency continued and concluded that he was ""pretty excited for the future.""
--London newsroom +44 171 5427717
",8
"Britain cleared U.S. utility CE Electric's 782 million pound ($1.29 billion) hostile takeover bid for Northern Electric on Friday, just days ahead of a final deadline for shareholders to accept the offer.
Removing the first hurdle to the deal, trade and industry minister Ian Lang said in a statement: ""CE Electric has given me assurances to address the regulatory concerns...These include assurances relating to Northern's financial and management resources and to maintaining Northern's financial status.""
The 650 pence-per-share bid, which electricity supply group Northern has said ""short changes"" investors, closes next Friday.
Northern says it has the backing of major investor Prudential Corporation, which owns more than 11 percent of its shares and has bought more at 600 pence apiece.
Prudential traditionally tends to back the target company's board in a hostile takeover situation. But in the latest war of words, CE Electric said it also had major investors on its side and was confident of victory.
""I believe investors will now back the offer. They have seen it cleared and there is no white knight (bidder) on the horizon. We are now confident of getting above the 50 percent threshold,"" said David Sokol, CE Electric's chairman and chief executive.
""The decision for shareholders is now crystal clear. You just have to look at the facts. The stock was at 495 pence per share before we came in with our (first) bid (at 630 pence).
""The stock will plummet if it's not accepted. Add to that the fact that the FTSE 100 index is looking at a correction. Here is an opportunity to take a very large profit, cash in the bank.""
Northern shares were up sharply on news of the deal being cleared, rising 41 pence to 643.50. The British utility's share price had been sluggish in recent sessions on fears that the deal could be blocked.
But Northern's latest rebuttal said acceptance would mean shareholders ""giving up almost one pound per share in dividends over the next nine months and to forego a prospective 1997/98 yield of over 10.5 percent.""
Northern's defence has said it is worth more than 650 pence a share, with some analysts saying it is holding out for 700 pence.
The electricity firm has outlined plans to realise value by merging its electricity and gas supply businesses with another regional player. It also wants to develop a 50 megawatt gas-fired power station in a joint venture with Rolls Royce .
Everything now hangs on next Friday, with both sides keeping up the campaign to clinch support from big investors.
CE Electric has 30 percent of shares in the bag and four percent of acceptances, needing 50 percent of Northern shares to win.
Northern had already escaped the clutches of one predator -- conglomerate Trafalgar House -- last year. The electricity group won the day with a 560 million pound defence package.
But the package -- awash with cash -- prompted the electricity regulator to take a closer look at bumper industry profits, resulting in tougher price controls which wiped billions of pounds off shares in the sector. ($1=.6043 Pound)
",8
"Tomkins Plc, the British baking-to-engineering combine, reported a sharp surge in half year profits on Monday but snuffed out hopes of a share buy-back for now as its chairman flagged possible acquisitions instead.
Pretax profits for the six months to November 2 rose 34 percent to 168.8 million pounds ($284 million), with the dividend up to 3.06 pence from 2.7 pence the preceding year.
Gregory Hutchings, executive chairman, said the results marked ""another period of outperformance for Tomkins"".
But Tomkins shares saw earlier gains slip away as buy-back hopes were dashed and profit-takers cashed in their spoils from last week's gains. This left Tomkins down 3 1/2 pence at 274 in an upbeat market by mid-afternoon.
Hutchings ruled out the possibility of returning Tomkins's 366.8 million pound cash-pile to shareholders this year. ""We see sufficient (acquisition) opportunities to hold on to our cash for the time being,"" he told Reuters in an interview.
The group was likely to make a number of smaller buys. ""It won't be one major deal, but it could be worth up to 200 million pounds,"" he said. If the acquisition opportunities failed to come through the group would reconsider ways of returning value to investors, he added.
One trader summed up market sentiment. ""The main thing is the chairman has knocked speculation about a share buy-back on the head. The shares have had a good run and they were great results and a lot of people would be looking to take profits now,"" he said.
Tomkins was disappointed by the reaction to its latest set of bumper profits, blaming the anti-conglomerate climate which has buffeted shares in major firms such as Hanson Plc, mid-way through its demerger.
The results showed earnings per share growth for the 12th year in a row and the outlook for the second half was also seen as promising.
""Prospects for the second half look encouraging, with the majority of our operations having healthy order books and satisfactory market conditions. We are delighted with the purchase of Gates (Corp for $1.1 billion last year) which has proved entirely consistent with our expectations,"" said Hutchings.
Looking at a divisional breakdown, Gates contributed 259.5 million in sales and 20 million in profit in its first 14 weeks. It is seen turning in eventual savings of $12 million per annum and the group plans capital expenditure of $85 million a year.
Fluid controls saw sales of 189.2 million, with profits of 19 million versus 15.8 million.
Industry services saw sales rise to 219 million, with profits of 12.5 million versus 12.1 million. Professional garden and leisure products, including the Smith & Wesson gun-maker, saw sales of 276 million and profits down to 8.5 million from 8.9 million.
Industrial products sales rose to 317.3 million, with profits of 34.3 million versus 28.5 million. Milling and baking, which includes the Hovis bread brand, saw sales up to 351.3 million, with profits at 15.4 million versus 13.7 million.
Food products, which includes Bisto gravy and the Robertson jam range, saw sales up to 543.5 million, with profits at 42.6 million versus 38.5 million. Excluding currency effects, organic growth in group operating profit was up more than 10 percent on sales which rose by seven percent.
Unlike other major export groups, Tomkins has so far been left unscathed by the pound surging against the dollar and mark owing to its hedging policy. Its mark-denominated business was minimal, it said.
On market conditions, Tomkins said the outlook for the United States was to remain firm, with Britain described as mixed. The French market is expected to continue to suffer due to economic problems. However, its French sales are very small. ($1=.5950 Pound)
",8
"The British government warned Friday that it would refer the proposed trans-Atlantic alliance between British Airways Plc and American Airlines to Britain's Monopolies and Mergers Commission unless the carriers complied with a number of conditions.
Trade and Industry Secretary Ian Lang added that even if the conditions were met by both airlines, final clearance would hinge on an open skies deal between Britain and the United States to liberalise trans-Atlantic air traffic, which would create greater competition on the routes.
Lang said he supported conditions proposed by Britain's Office of Fair Trading, which was asked to examine the case last month.
""I agree ... that without suitable undertakings the alliance would be likely to lead to a significant loss of actual and potential passengers, on those routes where BA and AA currently compete and for all passengers on the trans-Atlantic market route between the UK and U.S.,"" he said.
His comments came just minutes after the latest set of open skies talks ended in London with no deal signed. Industry sources said there was no new date for fresh talks and blamed the deadlock on uncertainty over whether the British Airways-American deal would be cleared.
The conditions for clearance of the alliance were that British Airways and American drop 168 slots at London Heathrow airport, the busiest in Europe.
American's parent, AMR Corp., said it did not view the terms as a ""deal breaker."" However, it called the conditions ""more severe"" than those imposed by other regulatory authorities on similar airline alliances.
British Airways's initial response was that ""unconditional divestiture of slots is unprecedented and if done it must be on the basis of fair market value."" It added that it would be ""prepared to take reasonable steps to assist the introduction of additional competition.""
The government also wants British Airways to drop a clause in its agreement with USAir that bars it from competing on trans-Atlantic routes, and said both British Airways and American should be prepared to reduce services on the London to Dallas-Fort Worth route in the event that a new entrant wishes to enter.
It also suggested losing some slots on the London-to-Boston route. The Office of Fair Trade called for British Airways/American to allow third-party access to their joint frequent flyer programme where the applicant does not have access to an equivalent programme.
Lang said responses should be made to the Office of Fair Trading by Jan. 10, 1997.
",8
"Four and a half thousand workers at U.S. car giant Ford Motor Co's Halewood plant in England face judgement day on Thursday when the management will meet unions to discuss the future, amid reports of 1,500 jobs cuts or full plant closure.
A report on the British Broadcasting Corporation (BBC) news service said late on Wednesday that Ford was set to announce the axing of 1,500 jobs at Thursday's meeting.
But a spokesman from Ford refused to comment on the rising tide of speculation about the plant's future.
""Ford has issued no statement to the press on a reduction in the workforce or restructuring of any plants in Britain,"" said the spokesman on Wednesday.
A statement is due from the company at midday on Thursday. The unions involved, led by the Transport and General Workers Union, will hold a press briefing at the plant.
But the unions also said late on Wednesday that they were unaware of any confirmation of job cuts from Ford ahead of the make-or-break meeting.
Ford's group boss Alex Trotman warned last year the group planned to take draconian action to end heavy losses in Europe and British newspaper have reported in recent days that Ford threatened to close the Halewood plant in northwest England unless new productivity targets were met.
Britain's Observer newspaper said Ford planned to tell unions unless they agreed to more efficient working practices and 500 job losses the entire plant faced possible closure.
But last Sunday Ford said in Detroit it would restructure but not close Halewood, with some job losses expected.
TGWU head of communications, Andrew Murray, said it all hinged on the future of Ford's new Escort model.
The next Escort version is due in 1999 and will be the first car engineered under Ford's new global product development structure called ""Ford 2000"".
Analysts said it was unlikely Ford would take the drastic measure of closing down a plant and axing all 5,000 jobs.
But Halewood is seen by some to be one of the least productive Ford plants in Europe.
Arthur Maher, head of European forecasting at LMC International, said: ""Ford 2000 is about taking cost out of the organisation and reducing the number of (assembly) platforms.
""Europe is a big black hole for Ford in terms of money it's losing. It has too much capacity and the costs are above the levels they should be. Maybe Ford wants to try and extract further productivity improvements in return for some job security. I think that's where they are really coming from.""
Industry observers believe manufacturing of the new Escort could be switched to Ford's other plants in Spain or Germany.
",8
"Embattled Channel Tunnel operator Eurotunnel Plc assured investors on Monday that the financial fallout from last November's fire would not hit its debt rescue plan or derail long-term growth.
""The board...believes that the November fire should not have any significant effect on the long-term financial performance of the company, nor will there be any need to review the financial restructuring plan,"" said Eurotunnel in a statement.
The blaze swept through one of the cross-channel tunnels, causing a partial shutdown and reduced services. But Eurotunnel gave evidence that sales had survived the fire, with passenger numbers sharply up and the outlook for 1997 encouraging.
Richard Hannah, analyst at UBS, said: ""The fact that the refinancing will not have to be restructured is the key message for investors.""
A special shareholder meeting had been due in April to consider the debt refinancing, which was clinched in October. But Eurotunnel said it had now delayed that to June when full services would resume once tunnel repairs had been completed.
Eurotunnel said its banking syndicate had used the delay to ask the remaining syndicate of bankers to extend the debt standstill arrangement to December. It began in September 1995 and runs for 18 months.
Eurotunnel chairman Patrick Ponsolle also said he hoped to agree details of the debt deal with its steering group of banks before March. Ponsolle was speaking to Reuters before a news briefing on the year's outlook in Folkestone, England.
In the first major trading review since the fire, Eurotunnel reported that unaudited estimated turnover for 1996 was 450 million pounds ($752.5 million), up from 300 million in 1995.
The group said the sales growth was achieved ""despite a substantial loss of revenue in the last seven weeks (of 1996)"".
Thirteen million passengers travelled through the tunnel last year by the Le Shuttle car service or the Eurostar passenger trains, up from eight million the previous year.
The board described the outlook for 1997 as encouraging as the cross-channel ferry industry was cutting capacity in a move which holds out the prospect of firmer pricing.
Eurotunnel believes that once full services resume by June it should be able to raise its market share in the second half.
""This market share should be comparable to, if not higher than, autumn 1996, and revenues at the end of this year should be higher than at the end of 1996,"" it said.
""As expected, Eurotunnel has provided a morale booster,"" said Hannah. Growth in sales was in line with expectations. Passenger numbers had been expected to increase after a change of ownership in the Eurostar passenger train service last April.
It was taken over by London and Continental Railways with the aim of raising sales dramatically.
Looking at a breakdown of the latest Eurotunnel traffic data, Eurostar increased passenger numbers by 67 percent to 4.86 million for the full year, and by 69 percent for the 11 months up to the November fire which led to a temporary closure.
Le Shuttle car tourist traffic rose 70 percent to 2.07 million cars in 1996, with bus traffic up 148 percent to 57,692 coaches. Le Shuttle freight traffic was up 33 percent to 519,003 trucks for the year.
Eurotunnel shares edged up 1/2 pence to 76-1/2 in London and rose 10 centimes to 7.00 francs in Paris.
($1=.5979 Pound)
",8
"BAA Plc, the British airports group behind Europe's biggest hub at London Heathrow, reported a 6.2 percent rise in nine month pretax profits on Monday as the group remained on a steady course of profitability for the year.
Pretax profits for the period ended December 31 were 397 million pounds ($636.5 million), with total revenue up to 1.06 billion pounds versus 987 million pounds.
In the nine months 76.6 million passengers travelled through BAA's airports which also include Gatwick and Stansted in London.
Sir John Egan, chief executive, said the figures represented ""strong performance across the board"".
Airport and traffic charge revenue stood at 385 million pounds, up 5.5 percent. Retailing revenue was 475 million, up 10 percent resulting in net retail income of 331 million, up 11 percent and property income rose 8.4 percent to 168 million pounds.
The solid looking set of figures failed to spark the market. Shares were down seven pence at 525 pence per share.
""It was a steady result but nothing terribly exciting,"" one senior dealer said. ""The overall market is a bit weak this morning and the shares are just reflecting that weakness.""
Commenting on the outlook, Egan welcomed the greater certainty which followed the Civil Aviation Authority's publication of its regulatory review for the coming five years.
That review said there was no need for BAA to divest any of its aiports in the UK and recommended a price control of RPI (retail price index) minus three percent.
The price control applies to its airport service charges, but around half of BAA'c sales now come from the shopping malls installed inside its airports.
BAA is also moving overseas, submitting bids to run overseas airports.
In a separate development, BAA group finance director Russell Walls said it had decided to cut back its stake in a bid group to run three Australian airports.
""We are cutting our stake in agreement with our other partners. The bid had too high a foreign content,"" he said. But Walls denied there was any prompt from the Australian government to reduce its dominance in the consortium, which includes Australian fund managers.
Bids have been put in for airports in Melbourne, Brisbane and Perth. ($1=.6237 Pound)
",8
"Northern England's glittering record of inward investment was tarnished this week by news of 1,300 jobs being axed at Ford Motor Co's Halewood plant, denting the region's record of attracting foreign firms.
Cheap local labour, flexible employment rules and government laws to keep trade unions on a tight leash have all combined to entice foreign investors into northern England.
The long list includes companies like Japan's Nissan Motor Co, Germany's Siemens, South Korea's Samsung Co and General Motor Co's British unit Vauxhall.
Prime Minister John Major said the cuts went against the trend. Chancellor of the Exchequer Kenneth Clarke was more philosophical, saying on Thursday: ""You can't win them all.""
Professor Charles Bean of the London School of Economics, said Major's decision to stay out of the European Union's Social Chapter employment protection meant: ""We have low firing costs.
""So foreign companies are more likely to create jobs here when times are good and axe them in the UK first when times get tough.""
But business chiefs in other northern regions were keen to play up the investment bonanza they have enjoyed.
Northern Development Co spokeswoman Christine Kennedy said in an interview: ""Foreign investment has provided the building blocks for a regeneration in the north,"" after traditional industries like mining and shipbuilding declined.
Local business leaders in the north west of England also stressed that the Ford move was a one-off set against a good track record of inward investment within the region as a whole.
Inward', the north west's corporate development body, said that 2,600 jobs were created in the region in the financial year 1995/96.
Thirty one companies invested capital expenditure of 117.3 million pounds ($196.2 million) in the north west of England including the television shopping channel QVC which will create 1,100 jobs in Knowsley, Liverpool. That figure is seen doubling by 1998.
Liverpool Chamber of Commerce policy executive Peter Rigby, told Reuters that the discovery of oil and gas in Liverpool Bay was another bonus which could give the region a slice of up to 2,000 jobs from oil companies operating in the area.
Merseyside qualifies for an EU grant of 630 million pounds to boost employment because its GDP is one of Europe's poorest at 73 percent of the European average.
Rigby admits that Ford's job cuts were a blow, coupled with news that Manchester airport beaten Liverpool in getting the go-ahead for a second runway for its airport. This dashed hopes of 20,000 Liverpool airport-related jobs being created in construction, support staff and service industries.
Manchester airport will benefit instead, creating an estimated 50,000 new jobs.
Hardest hit in the region is the small Merseyside community of Speke, where the Halewood factory is based. It has one of the highest unemployment levels in Britain and has failed to enjoy a foreign-led renaissance.
Jobless rates in Speke already run as high as 39 percent in some council estates, compared to more than 11 percent in Liverpool and 6.7 percent nationally.
The Ford job cuts are seen triggering up to 1,200 job losses elsewhere in supplier anmd service industries.
The Speke community is seeing other businesses like banks and supermarkets shut down and move away as employers pull out.
One resident, Nicky McDonagh said after the Ford news: ""The place is bad enough as it is -- it will just lead to more crime. Unemployment's already high -- most children leave school with no job prospects. I just want to get out now."" ($1=.5979 Pound)
",8
"U.S. car giant Ford Motor Co said on Thursday it would cut 1,300 jobs at its Halewood plant near Liverpool, northwest England, or almost one third of the workforce, through a redundancy programme.
Ford's British operations said that the Halewood plant would not build the planned new model of the Escort car, due in 1999.
Production of the new model is likely to transfer to continental European factories in Spain and Germany.
However, Ford held out the possibility of Halewood becoming the European source of a planned new vehicle, which is still only a concept at this stage. It added that Halewood would continue to make the current Escort model through 2000.
""The actions we have announced today at Halewood assembly operations give the plant a realistic future, with an exciting new vehicle in the medium term, subject to approval and performance objectives being achieved,"" said David Gorman, European vehicle operations manager for Ford.
""We have had to take these steps to ensure our manned capacity is in line with our forecasts for sales,"" he said.
Local Liberal Democrat Member of Parliament David Alton told Reuters he had spoken to Ford, which said the jobs would be lost through voluntary redundancy. He said Halewood was in the running to be the European manufacturing site for a new vehicle, possibly in the family saloon range.
""There's some good news in what they say as well -- that they're looking at Halewood as the probable European site for a planned new vehicle,"" Alton said.
The proposed job cuts will reduce Halewood's workforce to just over 3,000, compared with a peak of 14,000 in the 1960s.
Management met trade union representatives on Thursday morning to discuss the cuts.
Workers expressed anger as they entered the factory, blaming ""flexible"" British labour laws and its opt-out from the European Union's Social Chapter, which sets out minimum working conditions in other EU countries.
""I can give you one reason why the job cuts are here. The Social Chapter,"" said production line group leader Phil Gornall.
""In Germany, if Ford closes its plant there, it has to pay its people 18 months pay in compensation. In the U.K., we've got no Social Chapter, it's easier to shut us down,"" he said.
Larry Brook of the MSF union added: ""Britain is the cheapest place to dump labour. We are fighting for the future of Halewood.""
Even if a new family saloon is built at Halewood from the late 1990s, the plant would still have excess capacity, car industry experts said.
Production of the new Escort is now likely to be undertaken in Ford's plants in Valencia, Spain, and Saarlouis, Germany.
Professor Garyl Rhys, a car industry expert at Cardiff University, said Halewood, now a model of industrial relations, was paying for the  ""bad old days"" of the 1960s and 1970s, when the British car industry had a bad strike record.
""Because of the problems at Halewood and a number of other car plants in Britain, there was a reluctance to use them as sources for exports...You couldn't guarantee deliveries because of interruptions to production because of strikes,"" he said.
As a result, Halewood produced mostly for the home market.
The Liverpool area has a higher than average jobless rate and one in three people is unemployed on some of the housing estates near the plant. Union leaders pledged to fight the cuts.
",8
"Tomkins Plc, the UK conglomerate with businesses spanning baking to engineering, is expected to sees a rise in half year pretax profits on Monday amid some market speculation that it could announce a share buyback.
Analysts were mostly predicting six month profits of around 160 million stg from 126.1 million in the previous year. The average forecast for the half year payout was 3.0 pence per share from 2.70 pence last time.  
The shares have recently seen brisk gains following a ""buy"" recommendation from Kleinwort Benson analysts. Tomkins was also listed as one of the nine stocks to buy in 1997 by Credit Lyonnais Laing. Shares are currently at 278 pence, down two pence.
Another reason for Tomkins' recent gains has been some market speculation about a possible share buyback. The group board obtained permission for a buyback of up to 10 percent of its shares in 1995 and currently has around 400 million stg in cash.  
But Ian Rennardson, analyst at Credit Lyonnais, said the group had given no indications since that it may launch a buyback at the interim stage. Other analysts are also sceptical.
Rennardson sees interim profits at 160 million stg and expects a solid trading performance. ""This is a stock within a sector which has seen real underperformance. Tomkins has the best earnings, dividends and cashflow and after the Gates (Corp) deal, the shares are still looking reasonably cheap.""
Another analyst, predicting the same profit levels, said investors would be looking for an update on Gates since its acquisition last summer for $1 bln.  
Gates is an automotive and components company.
Sterling is not expected to deal a blow to the Tomkins results this time round, said one analyst.  ""Sterling will in fact benefit the year ending April 1997 as Tomkins has locked in (foreign exchange cover) at $1.52 to the pound,"" he said.
He anticipates a solid U.S. performance, with a slightly subdued UK market and continued good cash generation.
--London newsroom +44 171 5427717
",8
"Japanese car giant Nissan Motor Co geared up to expand European sales on Tuesday by announcing a new 215 million pound ($357 million) investment in its plant at Sunderland in north east England to build a new model.
The move will create 800 jobs at Nissan UK and is expected to create a further 2,700 jobs in British supplier firms.
The news came just days after U.S. rival Ford Motor Co said it was axing 1,300 jobs at its Halewood plant in Liverpool, north west England because of over-capacity in the world market and to stem painful losses in Europe.
In stark contrast, Nissan will create the extra jobs at the north east England plant by adding a third model to the production line at Nissan Motor (UK) Ltd (NMUK). The investment will be for production equipment such as moulds for the car.
Japan's second-biggest carmaker said that from the year 2000 it will produce an extra 100,000 cars a year in the mid-price Pulsar range, called the Almera, in Britain and elsewhere in Europe.
The decision to build a third model in Europe was the subject of an internal review at Nissan for some time. The review was led by European vice-president and head of UK operations Ian Gibson who worked his way up from the factory floor.
Gibson, chief executive of Nissan UK, told Reuters in an interview that the UK plant had beaten off internal competition to build the model in Japan by proving Sunderland could produce the model to the ""same quality, and with similar efficiency and productivity levels as the plant in Japan.""
""It is a considerable vote of confidence (for Sunderland),"" he said in a BBC television interview .
""It's a successful plant and it has an extremely successful workforce and they have won the business,"" he added.
British Trade and Industry minister Ian Lang welcomed the move, saying, ""This latest decision by Nissan marks a significant development in their presence in Europe and underlines the attractions of the UK as a place to manufacture.""
Explaining the logic behind the decision, which is in sharp contrast to Ford's job cuts, Arthur Maher, analyst at LMC International, said: ""There are two factors which are driving this decision for Nissan. One is economic and the other is political,"" he said.
""First, in the past Nissan has been hit by a high yen (since declined) -- a factor which they took seriously. They probably believed that it would remain a firm currency. The UK was also a cheap place to build cars for Europe, offering good productivity,"" he added.
""Second, politically. For a long time Japan has been held back from restrictive markets like Italy and France which have tight import quotas,"" Maher said.
He concluded that if Nissan wanted to break into these markets after 2000, when all export limits on Japanese car imports into Europe are lifted, it made sense to build locally to make the car more acceptable to European customers.
The British plant is a springboard into that potential market. Nissan has three percent of the European market.
The potential for Nissan to expand its market share is seen as greater than for the more dominant Ford which has seen sluggish sales in the region.
John Lawson, analyst at Salomon Brothers, said he believed that Nissan also had cheaper production costs than Ford in Britain because its salaries are 10 to 15 percent lower.
""Also despite the rise in the value of the pound, there is still a lot to be said for the decision to manufacture in the UK. Japan has much higher labour costs and then there is the shipping and tariff costs,"" said Lawson.
The Nissan Europe technology centre in Britain will be responsible for development of the new car. The decision follows recent Nissan announcements that it will start building diesel engines in Sunderland in 1997, and will launch an estate version of the Primera built in Sunderland in 1998, creating 150 jobs. ($1=.6021 Pound)
",8
"Britain's building sector has finally shaken off one of its nastiest ailments, with strong evidence that the long and painful decline in the domestic housing market is now over and sales are on the up again.
But celebrations failed to break out across the sector.
Housebuilders may be set to reap the rewards of the recovery, but some of the biggest companies in the building industry on Friday continued to suffer from other afflictions.
Building material giants like RMC Plc, Redland Plc and BPB saw their shares slide heavily on Friday due to continued problems in the key German market plus the pound's relentless rise against the mark and dollar which is eating into valuable export revenues.
RMC ended 36p lower at 903.5. Redland closed 5.5p weaker at 330, BPB 13p off 362.5p and Blue Circle 7.5p off at 368.
Optimistic reports of British housing starts at a seven-year high and earlier predictions of 1997 house price inflation of up to 10 percent were overshadowed by concerns about a continued deterioration in German GDP and higher unemployment.
For these big building materials firms, analysts say the impact of Germany -- accounting for up to 40 percent of profits -- far outweighs the small upside from the British house sector.
The second negative is the 10 percent appreciation in the pound against the mark over the last few months. Companies like Redland have already fired a warning signal on sterling's potential impact on profits.
UBS building analyst Simon Brown summed up the gloom: ""Only a tiny proportion of the building material sector's business is in the UK. As a total of construction output, UK housing was 14 percent in 1995.""
Looking at one of the biggest players in the sector, RMC, Brown said: ""Less than 20 percent of RMC's profit comes from the UK and an even smaller part from UK housing. So it is a tiny proportion of overall earnings.""
Downgrades have haunted companies exposed to Germany and the pound. But one player which has escaped the pessimism and is tipped as a ""buy"" in light of the housing recovery is Caradon.
Caradon is seen as the recovery stock, having slashed around 75 million pounds ($126 million) from costs in the last two years and rationalised its portfolio of businesses.
Its profits are seen rising sharply this year and next. It has sizeable exposure to the British housing market, through its double glazing window and shower product range. It can also cash in on demand for building material supplies from Britain.
""It has the highest proportion of output linked to UK housing,"" said UBS' analyst Brown. ""Hepworth and Marley could also be worth a play,"" he said.
Howard Seymour, an analyst at brokers BZW, said in a note that he recommended buying Tarmac and Redland -- but that building material firm BPB was classed a ""sell"".
""We argue that the sector is displaying late cycle characteristics as speculative supply is following demand which gives a robust profile to recovery over 1997.""
He said that expected rises in British interest rates this year would ""take a back seat to profit recovery. Accordingly, investors should view the UK as their first choice for building materials investment over the next 12 months.""
The main beneficiaries of the house market rebound will be housebuilder specialists. ""Those which were best at buying land will be the most serious winners - Berkeley, Persimmon, Barratt and Beazer,"" said Brown. ($1=.5950 Pound)
",8
"Hanson, Britain's most famous conglomerate in the throes of a four-way demerger, begins a new era next year as a building industry company -- inheriting the famous family name on the group's demise.
After starting out in 1950 as a fertliser maker before becoming the multi-industrial giant, Hanson will emerge from the family break-up with a legacy of low debt of around 200 million pounds ($313.4 million), lower asset values due to a recent writedown and a clutch of building material and construction firms.
The estimated 2.4 billion pounds demerger, which starts next month, will see the flotation of Millennium Chemicals and Imperial Tobacco on October 1, with The Energy Group due early next year.
Lord Hanson, group chairman, will remain on the ""New Hanson"" board and also brings his son Robert Hanson as director of corporate development, a move triggering controversy among some big investors. Andrew Dougal takes up the chief executive position.
But analysts, including UBS, warn ""New Hanson"" still faces old dangers like difficult construction markets and the future asset valuation of aggregates which represents two thirds of turnover from the ARC and Cornerstone units.
Its other units are Hanson Brick, Hanson Electrical and Grove Worlwide.
In the most recent nine-month results for Hanson, the building related businesses saw profits fall to 154 million pounds from 156 million. Turnover rose to 1.75 billion from 1.54 billion.
Despite its sales growth, the performance has been hampered by poor market conditions, particularly in Britain which has seen construction spending remain stagnant and margins pressurised.
The British housing market is also still in the doldrums, with the first flicker of recovery only just emerging.
Hanson says U.S. markets have become more vibrant, with U.S.aggregates unit Cornerstone seeing rising profits as the price of the material rose by four percent in the first nine months of the financial year.
But despite recovery in some U.S. sectors, UBS says there are still regional weak spots like California, for example.
Sentiment in the businesses was also dampened earlier this year by a cut in asset values by 2.3 billion pounds to 1.3 billion on the Cornerstone aggregates values.
UBS analysts say the future valuation of these assets will be of key concern.
Analysts have also privately voiced concern about the appointment of Hanson Junior to such a key position in the company, stating that some big investors are perturbed about his level of experience.
""The Lord may with one hand spare Hanson from the high debt levels of others (in the group), but he gives Robert Hanson with the other,"" said one analyst who requested anonymity.
But other sector watchers are more gracious in their assessment, citing the strong market position of units like UK aggregates arm ARC, seen as a first-class player.
""New Hanson's got low debt, good market positions and aims for acquisition-led growth,"" said one.
Another added that this particular company was free from the threat of environmental or legal action payouts - a worry that could afflict the group's other coal and tobacco concerns. ($1=.6382 Pound)
",8
"AMEC Plc, the British building and engineering group, saw first half pretax profits double on Thursday and pledged to reward investors with final dividend growth in the second half after freezing the latest payout.
Pretax profits for the six months to June 30 rocketed to 12.1 million pounds ($18.96 million) from 6.1 million. Sales were 1.32 billion versus 1.13 billion.
AMEC chief executive Peter Mason told Reuters ""We would hope to improve the dividend at the year end,"" after freezing the interim payout at 1.5 pence per share.
Mason explained the reason for the conservative payout:""On balance we felt it was better to have a dividend which was covered rather than try for a small increase. But we will deal with it properly at the year end.""
The chief was confident that profits would be better than last year after announcing in the results statement that turnover should hit the targeted 2.75 billion pounds.
AMEC's shares were up 2 1/2 pence higher at 98 at 1104 GMT.
The AMEC chief also told Reuters that as part of his strategic review, kicked off seven months ago, he aimed to boost the group's international sales through acquisitions and partnerships.
Mason has targeted raising overseas sales to 50 percent of total turnover from the current 30 percent in the long term.
""All options are open,"" he said, adding that the preferred route for expansion is through partnerships and small acquisitions.
""I see no merit in acquisitions in basic building and civil engineering businesses, but I want companies offering value-added technology and design,"" he said. Several deals are already under discussion.
AMEC, which fought off a hostile takeover from Norway's Kvaerner which still holds 26 percent of its shares, had said earlier this year that a number of companies in South East Asia were interested in buying up this stake in bits to cement business links.
This move was seen as a route to expanding sales in the region.
Turning to the interim's divisional results - mechanical and electrical sales rose 20 percent.
Building and civil engineering sales rose 28 percent, despite severe problems in the West German market hit by low infrastructure spending and sluggish conditions.
As a result AMEC is seeking to transfer some of its resources to the brisker East German market.
Process and energy returned to profit in 1996, but Mason predicts stronger figures in 1997 once the rationalisation benefits kick in. Housing sales were up 11 percent.
($1=.6382 Pound)
",8
"Racal Electronics said on Tuesday the joint savings from its link-up with ITT Defence of the U.S. and partner Siemens on the UK Ministry of Defence Bowman defence contract could total 100 million stg.
David Elsbury, Racal chief executive, said the decision to join forces with ITT's rival Crossbow consortium was due to the continued delays in the British government awarding the two billion pounds British Armed Forces communications contract. Elsbury said the group has now been assured of a decision on Bowman by March 1997.  
He said the move by Racal and partner Siemens to link-up with their rival consortium followed news from the UK government of further delays which meant the equipment would not be in soldiers' hands until 2002.
Both sides' bids were in danger of running to 100 million apiece on research and developments costs, said Elsbury. Racal's costs to date are running at between 30 and 50 million.
But the decision to join forces meant  ""cost efficiency savings of 100 million"" in total. He said if the Racal, ITT, Siemens team won, they would form a joint venture and take equity. ""We're happy with the arrangements,"" said Elsbury.  
The contract is crucial to the group's future earnings. The winner of Bowman will get an estimated two billion stg in follow-through export orders on top of the two billion contract value.
Elsbury said the deal could create 6,500 new jobs. But there will be a rationalisation if the Bowman contract is lost.
""To win Bowman would be the prize. To lose Bowman, God forbid, we would still have a sizeable export market, but we would have to downsize the company.""
He did not specify further, but said no decision on job cuts will be made before next year.
--London Newsroom +44 171 542 7717
",8
"British defence and industrial giant General Electric Co Plc saw its half year profits hit by a restructuring charge on Friday to cover an internal shake-up which includes a string of disposals and up to 1,000 job cuts.
Half year pretax profits slumped to 261 million pounds ($423.6 million) from 402 million after the 160 million pounds charge. Underlying profit growth was meagre once again, rising 4.7 percent to 421 million pounds. The interim dividend payout was 3.26 pence versus 3.10 pence per share last year.
In the first set of results delivered since George Simpson took over as head of the group from veteran managing director Lord Weinstock, GEC said the 160 million charge was being levied ""for the restructuring of existing and acquired businesses"" as well as marking down assets in its industrial group before sale.
GEC's shares were slightly lower after the results, trading down four and a half pence at 361 pence in a tumbling market.
""All in all, the GEC results are a bit disappointing,"" one analyst who declined to be named said. ""The headline profits figure was just in line, the dividend increase wasn't very generous and the exceptional was unexpected.""
David Newlands, finance director, said there could be up to 1,000 jobs cut at the newly acquired AG Power Transmission and Distribution and Hazeltine Corp of the U.S.
The related redundancy and closure cost is expected to be 45 million pounds of the total 160 million charge revealed earlier. Another 50 million of that total relates to asset write-downs at two unnamed units earmaked for sale.
""We've had many offers for companies in the industrial group over the years -- all have been well above the book value, except for these two,"" said Newlands.
He said the move was necessary in order to dispose of the two divisions with a string of other divestments. The first sale is expected to take place before Christmas.
""We are trying to accelerate the disposal programme. But is takes two to tango,"" he added.
The rest of the charge announced in Friday's results relates to restructuring within remaining firms.
In a divisional breakdown of the results, chairman Lord Prior said electronic systems and defence reported progress, with margins and profits ahead.
""GEC Alsthom maintained sales and profits in line with expectations. Telecommunications, consumer goods, office equipment and printing, medical equipment, industrial apparatus and distribution and trading all contributed higher profits,"" said the chairman.
But the Gilbarco unit in the U.S. saw a profit fallback. Weak world demand for semiconductors also hit electronic components. Newlands said he did not expect that market to recover until the spring or summer of 1997.
($1=.6161 Pound)
",8
"GKN Plc, the UK auto-components group hit by a U.S. court verdict which awarded $398 million in damages to franchisees on Thursday, could see shares knocked further if the group fails to reverse the judgement through appealing, said analysts.
One analyst said that if the group failed to overturn the judgement or have the damages drastically cut, shares could fall by 6.6 percent from the last closing level of 1045 pence per share. Shares have already fallen three percent, or 35 1/2 pence, to 1009 1/2 so far this session.  
Another analyst saw shares falling 50 pence if the appeal by GKN is lost, but he was less pessimistic in his assessment.
He pointed out that ""Yes, it is a shock for the market, but it is not significant to the operations of the company.
""If they lose there would be a large cash outflow and that could hit the value as a result of higher gearing. But it's a one-off scenario.""
GKN has stated that under the worst case scenario the damages could be raised to $554 million on the basis that some parts of the claim are covered by the North Carolina Unfair Trade Practices Act which allows for trebling of all penalties.
He said that even if the current damages were upheld and not raised, the impact on GKN's cash reservees would be serious.
He pointed out that GKN had 240-250 million pounds of free cash reserves which are unrelated to customer advance payments, ""So if they had to pay the fine that would wipe out their cash balances and if they wanted to make an acquisition they would have to increase debt of make a rights issue,"" he said.
He added that the group was already ""quite stretched, there is already an over-distribution on the dividend from a cash-flow perspective."" The analyst has the company down as a ""sell"".  
--London newsroom +44 171 542 7717
",8
"The United States and Britain ended their latest round of ""open skies"" talks Friday, agreeing on some technical issues but failing to reach a full-blown deal to open up the trans-Atlantic air travel market.
No new date was set for more talks, although industry sources believed the next discussions could be in in weeks rather than months.
Just minutes after the negotiations ended Britain's Department of Trade and Industry announced that it would block the proposed British Airways alliance with AMR Corp.'s American Airlines on trans-Atlantic routes unless certain conditions were met.
Airline industry figures earlier had said the open skies negotiations would remain deadlocked until there was a British verdict on the proposed alliance.
Conditions on allowing the alliance to proceed were outlined by Britain's Office of Fair Trading.
However, even if both parties comply with those conditions, the Department of Trade and Industry said the alliance was still dependant on the clinching of an open skies agreement.
The U.S. Transportation Department said it was disappointed with the lack of progress.
""The U.S. side was disappointed with the lack of progress that was achieved in this round of talks and in light of this result we will consider what steps should be taken next,"" the department said in a statement.
Reporting on the open sky talks, a British Department of Transport official said ""useful progress was made on a number of issues, but not all. No date has been set for further talks.""
The meeting included representatives from the transport departments of the British and U.S. governments, as well as major airlines from both sides of the Atlantic.
It was understood to be friendly, ""with no question of a breakdown in communications this time,"" said one insider.
The issues agreed upon in the meeting were peripheral technical matters pertaining to computer reservation systems and ground baggage handling, which are two components within a wider list under discussion for an open skies deal.
The wider deal hinges on Britain's verdict on the British Airways-American alliance, but a rumoured cabinet split led to British Trade and Industry Minister Ian Lang asking the Office of Fair Trading to seek concessions from British Airways and American.
Those include asking the two carriers to give up 168 landing slots at London's Heathrow airport per week.
The two airlines have yet to respond.
In the past, British Airways had refused to relinquish its slots, stating that other carriers have a bigger share of slots at their home hubs and should find access at Heathrow through trading and normal allocation procedures.
The last open skies talks, in August, broke down amid complaints by U.S. carriers that Heathrow is so crowded that open access would be meaningless unless they were to be granted more slots.
",8
"Shares in British conglomerate BTR rose on Wednesday after it clinched a better-than-expected sale price for its Tilcon unit, though profit fears and strategic concerns remained to dampen sentiment, analysts said.
BTR sold its U.S. based building materials business Tilcon to Ireland's CRH Plc for 212 million pounds ($332.2 million), better than the 180 million anticipated by the market.
BTR's shares edged five and a half pence higher to 261, but analysts still expect a cut in dividend and profits when the group announces its interim results next Thursday.
Andrew Darke, analyst at Williams de Broe, said ""The majority of analysts are expecting a cut in the dividend of one third and falling profits.""
He added that the market welcomed the latest in a stream of disposals, which has raised 700 million pounds in 1996 excluding provisions, saying that this should improve the group's strained cash flow position.
Ian Strachan, BTR chief executive, said on Wednesday that the Tilcon sale proceeds would ""be invested in our key industrial and engineering operations.""
BTR is in the throes of a major strategic review which aims to shake-out 20 percent of existing non-core businesses leaving it to focus on the areas listed by Strachan.
The issue of cash flow, which ABN Amro Hoare Govett says has turned from an 89 million pounds inflow in 1994 to a 253 million outflow last year, remains a key concern.
Analysts also want to know how the group is going to fund its expansion in core businesses like automotive parts and packaging.
The market sees the dividend as an obvious tradeoff in BTR's spending plans. ""It would be big news if they didn't cut the dividend,"" said Darke.
Future strategy on how BTR will expand its chosen core areas in industrial manufacturing and engineering is another unanswered question.
""There is a myriad of unanswered issues,"" said one analyst. ""Strategy, dividend policy, restrcuturing. There is still quite a major information vacuum waiting to be filled,"" he said.
Despite the uncertainy, many of these concerns have been priced in following a heated debate in the summer which led to a shareprice meltdown.
BTR shares hit a low for the year of around 225 pence compared with the annual high of 344 pence before the concerns set in. ($1=.6382 Pound)
",8
"Japanese car giant Nissan Motor Co geared up to expand European sales on Tuesday by announcing a new 215 million pound ($357 million) investment in its British plant at Sunderland in north east England to build a new model.
The move will create 800 jobs at Nissan UK and is expected to create a further 2,700 jobs in British supplier firms.
The news came just days after U.S. rival Ford Motor Co said it was axing 1,300 jobs at its Halewood plant in Liverpool, north west England because of over-capacity in the world market and to stem painful losses in Europe.
In stark contrast, Nissan will create the extra jobs at the north east England plant by adding a third model to the production line at Nissan Motor (UK) Ltd (NMUK). The investment will be for production equipment such as moulds for the car.
Japan's second-biggest carmaker said it will produce models in the Pulsar range, called the Almera in Britain and elsewhere in Europe, at the plant from 2000.
The decision to build a third model in Europe has been the subject of an internal review at Nissan for sime time, headed up by its European vice-president and the head of UK operations Ian Gibson, a man who worked his way up from the production line.
Gibson, chief executive of Nissan UK, told BBC television, ""It is a considerable vote of confidence (for Sunderland).
""It's a successful plant and it has an extremely successful workforce and they have won the business. All the business for the new car will be new business to Europe because the car is built at present in Japan and shipped over here, so all those purchases will be incremental business,"" he said.
Britain's Trade and Industry Secretary Ian Lang welcomed the move, saying, ""This latest decision by Nissan marks a significant development in their presence in Europe and underlines the attractions of the UK as a place to manufacture.
Explaining the logic behind the decision, which is in sharp contrast to Ford's job cuts, Arthur Maher, analyst at LMC International, said, ""There are two factors which are driving this decision for Nissan. One is economic and the other is political.
""First, in the past Nissan has been hit by a high yen (since declined) -- a factor which they took seriously. They probably believed that it would remain a firm currency. The UK was also a cheap place to build cars for Europe, offering good productivity.
""Second, politically, for a long time Japan has been held back from restrictive markets like Italy and France which have tight import quotas.""
Maher concluded that if Nissan wanted to break into these markets after 2000, when all export limits on Japanese car imports into Europe are lifted, it made sense to build locally to make the car more acceptable to European customers.
The UK plant is a springboard into that potential market. Nissan currently has three percent of the European market.
The potential for Nissan to expand its market share is seen as greater than the more dominant Ford which has seen sluggish sales in the region.
John Lawson, analyst at Salomon Brothers, said he believed that Nissan also had cheaper production costs than Ford in the UK because its salaries are 10-15 percent lower.
""Also despite the rise in the value of the pound, there is still a lot to be said for the decision to manufacture in the UK. Japan has much higher labour costs and then there is the shipping and tariff costs,"" said Lawson.
The Nissan Europe technology centre in Britain will be responsible for development of the new car. The decision follows recent Nissan announcements that it will start building diesel engines in Sunderland in 1997, and will launch an estate version of the Primera built in Sunderland in 1998, creating 150 jobs.
($1=.6021 Pound)
",8
"Chinese police have detained veteran dissident Wang Donghai amid accusations by Amnesty International that those who dare to speak up face torture, imprisonment and even death at the hands of the government.
Police in Hangzhou, capital of the eastern province of Zhejiang, told Wang's family that Wang would be sent to a ""study class"", a euphemism for coercive ideological reform, his sister, Wang Yisu, told Reuters on Saturday.
Two public security officers took Wang away on Friday but would not say why Wang was being sent to a study class -- a holdover from the chaotic 1966-76 Cultural Revolution -- or say when he would be released, the sister said.
Police would not let Wang's family meet him or say where he was being held, the sister said.
The sister said she suspected police detained her brother because he was trying to help fellow dissident Chen Longde, who jumped from a third-floor window on August 17 because he could no longer stand being beaten by a prison official.
Chen suffered serious injuries and was taken to hospital after the fall.
""I think it (Wang's detention) had to do with Chen Longde ... My brother was angry, shocked and surprised when he heard about what happened to Chen Longde,"" the sister said in a telephone interview.
""My brother and Chen Longde were very close,"" she said.
Hangzhou police could not be reached for immediate comment.
Wang, 45, and Chen, 39, were ordered last month to serve one year and three years of ""re-education through labour"", respectively, but Wang was released because of poor health.
Re-education through labour is an administrative punishment with a maximum of three years that can be imposed by police without recourse to prosecutors or the courts.
Wang, a veteran of the 1979 Democracy Wall movement, was jailed for two years for organising street protests after armed forces crushed pro-democracy demonstrations by students at Beijing's Tiananmen Square on June 4, 1989, with heavy loss of life.
Western diplomats say Chinese authorities appear to be using administrative punishment more frequently to take dissidents out of circulation without having to go through a more complicated judicial process to impose criminal sentences.
London-based human rights group Amnesty International criticised China's human rights record. ""The Chinese authorities do not tolerate any form of dissent,"" Amnesty said.
""They allow torture to continue, use the death penalty to try to cure social problems, brutally crack down on ethnic groups calling peacefully for more independence and detain hundreds of thousands of people every year without charging them with any crime,"" it added.
""When China's rulers refuse to respect fundamental human rights, they set a precedent for repressive governments worldwide. When they argue that local conditions and economic necessity mean human rights must take second place, their words are echoed by governments through the Asia-Pacific region.""
A commentary by the official Xinhua news agency earlier this year said that a plot by the West to force its human rights standards and values on other countries was doomed to failure.
In April, China quashed a resolution drafted by the United States and the European Union to avert censure at the United Nations Human Rights Commission for the sixth year in a row.
",3
"Most Chinese have been slow to forgive and forget Japanese atrocities in World War Two and fear a possible resurgence of militarism in the land of the rising sun, a survey published in Beijing on Saturday showed.
The survey, conducted by the official China Youth Daily last December, showed that 99.4 percent of 15,000 people interviewed nationwide thought young Chinese ""should remember"" Japan's 1931-45 occupation of China.
More than 97 percent of the respondents were aged below 40, too young to have been victims of Japan's war atrocities. By Beijing's count, 35 million Chinese were killed or wounded by invading Japanese troops.
Asked what first came to their minds when Japan was mentioned, 81.3 percent of respondents said the Rape of Nanjing.
Japanese troops marched into Nanjing, China's pre-communist capital and known then as Nanking, in 1937 and engaged in an orgy of rape and massacre. Up to 250,000 Chinese were believed to have been killed.
More than 97 percent of respondents said they could not tolerate repeated attempts by Japanese officials to whitewash their wartime atrocities, including the Rape of Nanjing.
The China Youth Daily survey showed that 94.9 percent of the respondents were opposed to Japan becoming a United Nations Security Council member.
It also showed that 85.1 percent of respondents believed Japan wanted to become a military superpower and 70.7 percent saw Japan as a new threat to peace in Asia.
China itself ruffled feathers in the region last March when it intimidated rival Taiwan by conducting missile tests and war games close to the island in the run-up to Taiwan's historic presidential elections.
The sheer size of the People's Liberation Army -- the world's biggest at three million -- has caused uneasiness among China's neighbours.
China has been mired in a dispute with Japan over a group of islands in the East China Sea and another dispute with Asian neighbours over the Spratly Islands in the South China Sea.
The survey showed that 53.8 percent of respondents thought that Japanese despised Chinese, while 50.8 percent said Japanese discriminated against Chinese.
Many Chinese themselves harbour deep suspicions and are hostile toward foreigners.
More than 56 percent of the respondents said the Japanese were ""cruel"", 45.2 percent said ""arrogant"" and 45.3 percent described them as ""war freaks"" by nature.
But 52.7 percent of the respondents said they owned Japanese-made electrical appliances.
Many respondents were suspicious of Japanese motives for investing in China. More than half said Japanese investment aimed to control China, while 45.3 percent said Japan dumped outdated equipment in China.
On Friday, the People's Daily, mouthpiece of the ruling Communist Party, accused the United States and Japan of covering up the U.S. military's firing of uranium-tipped bullets near Okinawa during drills in December 1995 and January 1996.
The United States apologised this month.
The People's Daily said Washington's argument that the bullets were mislabelled was unconvincing and questioned why the incident was kept a secret for more than a year.
",3
"The Geneva-based International Federation of Red Cross (IFRC) on Wednesday appealed for food aid for flood-hit North Korea, predicting disaster by the end of the year if relief did not arrive.
""The country is running out of food...they are emptying their warehouses now,"" Ole Gronning of Denmark, IFRC representative in North Korea, said in an interview in Beijing.
""We will have a human disaster at the end of the year if the food (aid) is not coming,"" said Gronning, who had been in North Korea since last November. ""(By) July...there will be no food in the country.""
Devastating floods in 1995 and 1996 left half a million North Koreans homeless out of a total of 23 million, according to relief organisations.
The floods have struck hard at the economy of the hermit communist state, destroying rice fields, roads, factories and livestock and swamping mines.
North Korea was forecast to consume 5.5 million tonnes of grain in 1997, but Pyongyang feared a shortfall of 45 percent, or up to 2.5 million tonnes, Gronning said.
""We already now know that the harvest will not be successful...,"" he said.
On Monday, North Korea admitted that it had only half the grain needed to feed its people.
Food rations across North Korea had dropped to less than a quarter of the level normally considered essential to maintain a healthy population, Gronning said.
There was no indication yet of famine but grain rations had been cut to 100 grams (3.5 ounces) per person a day -- equivalent to 900 calories -- from 450 grams (15.9 ounces).
""Signs of malnutrition are there,"" he said.
The IFRC aimed to raise $10 million to feed 139,000 of the worst hit victims for 11 months through October this year, but so far only $1 million had been raised, Gronning said.
About 5.2 million North Koreans were directly affected by the 1995 floods and a further 3.3 million last year.
Two earlier appeals for funds totalling more than $10 million had largely been met.
Photographs taken by Gronning in North Korea showed what he said was arable land under one metre (yard) of sand.
About two percent of North Korea's farmland had been completely destroyed, covered with sand several metres deep, Gronning said. Lack of machinery made reclamation of sand-covered arable land difficult.
North Korea was ""very exposed"", he said, adding that floods and hailstorms could strike again.
Pyongyang's arch-rival South Korea has been one of the 25 donor countries, pledging 1,000 (corrects from 100,000) tonnes of wheat flour and 15,000 pairs of socks.
""South Korea is coming in very big this year,"" he said.
Seoul suspended food shipments to North Korea after accusing Pyongyang of landing 26 commandos from a submarine last September. All but two of the group died during a manhunt.
The aid resumed after North Korea apologised and South Korea returned the remains of the infiltrators.
In January, the United States gave permission to Minneapolis-based Cargill Inc, the world's largest private grain trading company, to export 500,000 tonnes of wheat or rice to North Korea in what was expected to be a barter agreement.
",3
"China said on Sunday it will tighten inspections of imported animals and plants next year for possible diseases after Chinese quarantine officials banned poultry imports from several U.S. states and a part of Britain.
""The country's animal and quarantine authorities will carry out stricter inspection on a wide range of goods,"" the China Daily Business Weekly newspaper said.
Inspections would cover imports and exports of plants, animals, fruit and agricultural goods, as well as containers, packages and other materials used to transport them, according to new regulations approved this month by the State Council, or cabinet.
Quarantine and customs officials would inspect both hand-carried items as well as goods imported or exported by traders, the newspaper said.
Pets and plants of diplomats who have diplomatic immunity would also have to be inspected, it said.
The authorities could slap fines of up to 50,000 yuan ($6,000) on violators, the newspaper said.
Agricultural officials would be on the lookout for animal and plant diseases at home and abroad, it said.
Last week, China announced a ban on poultry imports from Missouri and Oklahoma, alleging that five cases of Newcastle disease were discovered in the two U.S. states between July and September.
The United States denied the accusation and said it sought talks with China to lift the ban.
A spokeswoman for the U.S. Embassy in Beijing said the disease broke out in pet birds only, and that all the pet birds infected with the disease were destroyed.
The spokeswoman said she had no information on which U.S. states found pet birds with Newcastle disease or when the problems were discovered.
The newspaper said China banned in July poultry imports from an unidentified area of Britain it believed was affected by Newcastle disease.
In October, China announced a ban on imports of poultry from 10 U.S. states because of fears it carried a virus called highly pathogenic avian influenza. But the ban did not go into effect after China and the United States held talks on the issue.
China is the second-biggest market in the world, after Russia, for U.S. poultry products.
Some 330,000 tonnes of U.S. poultry products -- worth $445 million -- were exported to China through Hong Kong last year, according to the U.S. Poultry and Egg Export Council.
Every day, 700 tonnes of U.S. chicken feet are transported across the border from Hong Kong into China, the council said.
Beijing and Washington are also at odds over textile imports, and that dispute has threatened to spill over into the farm sector.
China had threatened to ban some U.S. farm goods -- as well as textiles and alcoholic drinks -- in retaliation for U.S. penalties on textiles purchased from China.
Beijing said it was delaying by one month the implementation of those curbs, which had been scheduled to take effect December 10, because the two sides were planning to hold further talks on the issue.
",3
"Chinese police have arrested the suspected ringleader of last week's riot in the mainly Moslem northwestern region of Xinjiang that left at least 10 people dead and 144 injured, local officials said on Wednesday.
Authorities had issued emergency circulars calling on local officials to deal a blow to separatism in the frontier region and warning of severe punishment for last week's rioters.
Government units had been ordered to form vigilante squads to guard against possible attacks by separatists in the town of Yining near China's border with Kazakhstan, officials said.
""We are resolved to deal a blow to the handful of ethnic separatist elements,"" said Zhang Youlian, deputy director of the foreign affairs office for the Yili Kazakh Autonomous Prefecture, that administers Yining.
Police had arrested Abudu Heilili, 29, of the Uighur ethnic minority, and were interrogating him following the riot last Wednesday and Thursday, said a local Communist Party official.
The suspect was unemployed and a ringleader of a less violent anti-Chinese demonstration in Yining in August 1995, the official told Reuters by telephone.
Heilili had been released after that protest following ""ideological education"" -- political indoctrination, he said.
Police had already rounded up 200 to 300 people after last week's riot, in which at least 10 people were killed and 144 injured. Many suspects had been released after questioning, officials said.
The death toll could rise, with up to seven people listed as missing, the party official said. About 90 people were treated for head wounds, and more than 10 were still in hospital.
Of the injured, 132 were civilians while the remaining 12 were members of the paramilitary People's Armed Police, a spokesman for the Xinjiang regional government said.
About 1,000 people, mostly Uighur farmers or unemployed young men, rioted in Yining last week in one of the largest and most violent demonstrations for independence in the mainly Moslem region of Xinjiang since the 1949 communist takeover.
Turkic-speaking Uighurs are in the majority in Xinjiang, where ethnic Han Chinese make up 38 percent of the population.
""We don't want the Communist Party,"" the demonstrators had chanted, witnesses said.
Uighur demonstrators had attacked Han Chinese with bricks, clubs and knives, and rampaged through the town, smashing and setting fire to about 20 vehicles and looting shops.
The People's Armed Police only succeeded in dispersing the rioters a day later, firing teargas to break up the crowd.
Authorities had sealed off Yining, an after-dark curfew was in force in some districts and armed police still patrolled the streets. The airport would reopen on Friday, officials said.
A Chinese source said the riot erupted after a Uighur criminal suspect resisted arrest by police.
Yusupbek Mukhlisi, leader of the United National Revolutionary Front of East Turkestan based in Kazakhstan, said the riot was sparked by the execution of 30 Uighurs in China last week. Chinese officials dismissed the report.
Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
",3
"China's propaganda machine on Thursday hailed the selection of Hong Kong's first post-colonial chief executive as the beginning of ""true democracy"" in the territory.
""This is a day to be remembered in Hong Kong's democratic development,"" the China Daily said of the choice of shipping tycoon Tung Chee-hwa as chief executive-designate of post-colonial Hong Kong.
""It is...the beginning of Hong Kong's true democracy,"" the official newspaper said in a commentary.
Tung was elected on Wednesday by a 400-member Selection Committee -- its members hand-picked by Beijing -- making him the territory's leader-in-waiting.
He will formally take up the job when Hong Kong reverts to Chinese rule at midnight on June 30, 1997, ending more than 150 years of British rule.
Major Chinese newspapers splashed across their front page news of Tung's election and a picture of the bespectacled tycoon smiling and waving with his wife by his side.
The newspapers carried a commentary by the official Xinhua news agency, which trumpeted Hong Kong-style democracy as ""totally new, that is different from the mainland as well as different from the West"".
""We can see that Hong Kong is establishing a democratic way that is based on law, open, fair, civilised and proceeding in an orderly way and step by step,"" Xinhua said.
China, angered at Western-style democratic reforms introduced by Hong Kong's outgoing Governor Chris Patten, has vowed to dismantle the territory's elected Legislative Council after the handover and install an appointed legislature.
Xinhua took a swipe at Britain, saying: ""In the past 100 years, there has been no democracy in Hong Kong's political life under Britain's rule.""
""All powers, including executive, legislative, judicial and military rights, were granted to the Hong Kong governors, who were appointed by Britain without consulting the local people,"" Xinhua said.
""It is China's resumption of the exercise of sovereignty over Hong Kong...that offers Hong Kong the unprecedented opportunity for its democratic development,"" it said.
Xinhua urged China's rival, Taiwan, to return to the fold.
""Resuming sovereignty over Hong Kong...is the first step of the Chinese nation's great undertaking to realise reunification of the motherland under the leadership of the Communist Party,"" Xinhua said.
It said Wednesday's elections were vital to reunification with Taiwan under the ""one country, two systems"" formula, in which the island, like Hong Kong, would enjoy a great degree of autonomy and be allowed to maintain its capitalist system.
Beijing and Taipei have been political rivals since the end of the Chinese civil war in 1949. Taiwan's Nationalist rulers say they are committed to reunification, but only under Western-style democracy.
The political waters ahead could be choppy for the shipping tycoon.
""People will be watching what happens to Anson Chan,"" a Western diplomat in Beijing said.
Tung has said he would like to keep Chan as chief secretary, but her past defence of Patten's democratic reforms could make things awkward if she decides to stay on.
""She'll have to preside over many policies that she has opposed,"" the diplomat said. ""People want to see how she manages this.""
",3
"China vowed on Tuesday to intensify a crackdown on economic disorder in 1997, citing tax evasion, financial irregularities, smuggling and counterfeiting as some ills that cost the state billions of dollars a year.
""Basically, the situation of economic disorder still has not changed. Some problems are even considerably serious,"" the official People's Daily said in a commentary.
Chinese authorities uncovered tax, auditing and pricing violations valued at 161 billion yuan ($19.4 billion) in the past 11 years, or an average of 14.6 billion yuan a year, the commentary said.
""Increasing the intensity of regulating and revamping economic order has become an important mission which brooks no delay,"" the mouthpiece of the ruling Communist Party said.
""We cannot be soft when dealing a blow to various economic crimes,"" the commentary said.
Tax evasion and smuggling were now rife, springing up along with market-oriented economic reforms introduced by paramount leader Deng Xiaoping in the late 1970s.
State media said taxpayers had evaded personal income tax worth an estimated 12 billion yuan since the tax was introduced in 1980.
Up to 60 percent of state-run or collective firms in China evaded taxes, the media said. It gave no figures.
""Many enterprises have two sets of accounting books and fabricate financial statements, budgets, sales and asset appraisal,"" the commentary said.
Chinese companies owed 35.7 billion yuan in industrial and commercial taxes in the first 11 months of 1996, up 72.9 percent from the year-ago period, Xinhua news agency said.
Beijing collected 563.9 billion yuan in industrial and commercial taxes in the first 11 months, up 1995 percent from the year-ago period.
Smuggling of goods, ranging from drugs to stolen cars, was rampant in China's thriving and porous coastal areas and inland border regions.
Chinese customs seized 5.6 billion yuan worth of smuggled goods in the first six months of 1996, latest figures showed. No comparative figures were available.
Cheng Xiusheng, an economist with the Development Research Centre under the cabinet, said economic disorder was inevitable as China abandoned central planning and embraced market reforms.
The authorities have reined in galloping inflation, allowing them to now turn their attention to restoring economic order, Cheng said.
""It can be said that inflation is under control... The next step is to revamp economic order,"" he told Reuters in a telephone interview.
The People's Daily said financial irregularities, including financial institutions paying exorbitant interest rates and extending huge loans to loss-making state-owned enterprises, have been ""repeatedly banned but do not stop"".
Counterfeiting and piracy were common and almost led to a trade war between China and the United States in February 1995 and June this year. China has declared war on piracy and clamped down on manufacturers of pirated compact discs.
($1 = 8.3 yuan)
",3
"China's propaganda machine had a field day on Thursday, lashing out at U.S. newspapers over accusations of torture and rape of Tibetan nuns and suggestions that the United States should get tough with China.
The overseas edition of the People's Daily, mouthpiece of the ruling Communist Party, scoffed at accusations that Chinese authorities tortured, raped and murdered Tibetan nuns, monks and civilians in the restive Himalayan region.
""This series of articles in the Philadelphia Inquirer is weak to the extent that it is laughable,"" the newspaper said.
The Inquirer published last December a series of articles documenting what it said were stories of rape, torture and murder of Tibetan monks, nuns and ordinary people at the hands of Chinese authorities.
In the articles nearly two dozen cases were documented, including names and dates, from the Himalayan region that has been rocked in recent years by periodic anti-Chinese unrest led by monks and nuns seeking independence and the return of the exiled Dalai Lama.
""This is a critical story that lays bare the efforts by the (Chinese) government to wipe out the culture and religion of the Tibetan people through torture and worse,"" PRNewswire last December quoted Inquirer Editor Mawell E.P. King as saying.
International human rights groups have made similar accusations, quoting Tibetans who fled China.
China denied the accusations.
""One of the main reasons for the Philadelphia Inquirer and some U.S. media to repeatedly fabricate lies about Tibet is their strong bias, arrogance and conceitedness,"" the People's Daily said.
""Using the so-called Tibet problem to incite anti-Chinese sentiment is fashionable among the U.S. media,"" it said.
China's propaganda machine also took on the New York Times, despite a recent rapid warming in ties between Beijing and Washington that had deteriorated in 1995 and up to mid-1996.
""The venom of the New York Times editorial lies in the fact that it...seditiously creates an atmosphere that will poison the relationship between China and the United States at a time when there is a tendency toward improving the bilateral relations,"" the Xinhua news agency said.
""The Times' editorial writer has one special skill: the ability to confuse black and white and to call a deer a house,"" Xinhua said.
The New York Times suggested in a January 30 editorial that U.S. President Bill Clinton should get tough with China.
""The demise of Communism may come someday in China, but it would be a mistake to adopt a passive American policy based on that optimistic prospect, as Mr. Clinton seems to be doing,"" the Times said.
""There is already abundant evidence suggesting that Communism in China is not dying but is instead mutating into a new form that tolerates economic liberties while still suffocating political freedom,"" the Times said.
Xinhua said comparing in the same breath the collapse of the Berlin Wall with socialist China, which is prospering, was an ""incongruous comparison"" just as ""donkeys' lips don't match horses' jaws"".
",3
"China has pledged to open its insurance, stock, retail, wholesale and banking sectors to foreign investment as part of a drive for long-delayed entry to the World Trade Organisation.
""From 1997-2000, China is expected to open its insurance and stock market wider to foreign investment,"" the China Daily said Sunday, quoting Ma Jixian, an official of the State Economic and Trade Commission under the cabinet.
The pledge was contained in a unilateral action plan submitted by China to the Asia-Pacific Economic Cooperation summit in the Philippines last month, the newspaper said.
Before the end of the decade, foreign insurers would have access to markets outside Beijing, Shanghai and Guangzhou, Ma said without elaborating.
China's insurance market was once virtually monopolised by the state-owned People's Insurance Group but the sector has gradually opened up to domestic as well as foreign competition.
Only three foreign insurers are able to write insurance policies in China, including American International Assurance Co. Ltd, a part of the American International Group Inc.
The others are Japan's Tokio Marine and Fire Insurance Co. Ltd and which has a life insurance joint venture with a domestic insurer.
Ma, one of China's representatives at the APEC summit, said foreign stock companies would be allowed to handle A shares, whose availability is still confined to native Chinese. He gave no further details.
Currently, foreign investors are restricted to buying B shares, while Chinese nationals can only buy A shares.
In its action plan, China also pledged to cut its average import tariffs to about 15 percent from the current 23 percent.
The tariffs would be reduced futher in subsequent years, Ma said without going into details.
""A majority of non-tariff measures will have been abolished by 2010 and all those incompatible with World Trade Organisation rules will have been erased by 2020,"" Ma said.
China has pushed to gain entry to the WTO on the favourable terms of a developing nation, but Western countries, particularly the United States, have insisted its economy is too big for such preferential treatment.
According to the action plan, China would allow foreign banks to open more operational outfits in 24 Chinese cities and launch pilot bases where foreign banks can conduct yuan business, the newspaper said.
In the first decade of the next century, foreign banks would be allowed to expand their presence beyond the current 24 pilot cities and more pilot bases would be available for them to conduct yuan business, it said.
China would let overseas retailers establish more joint venture or cooperative retailing chains in areas beyond the 11 pilot cities currently allowed, the newspaper said.
The liberalisation would cover all provincial capitals and major economic cities by the year 2010, the newspaper said, adding that foreign retailers would be free to open outlets in China by 2020.
Foreign investors would be allowed larger stakes in China's power sector and have greater access to China's river, marine and road transportation if Beijing becomes a member of the WTO, it said.
China would further open its tourism sector, allowing joint venture travel agencies in five cities on an experimental basis over the next three years, the newspaper said.
",3
"China's paramount leader Deng Xiaoping is in good health, but may not be able to visit Hong Kong when the British colony reverts to Chinese rule in mid-1997, Beijing Vice-Mayor Zhang Baifa said on Monday.
""To my knowledge, (his health) is very good,"" Zhang told reporters when asked about Deng's health at a reception for diplomats and foreign journalists in Beijing.
Zhang, who is believed to be close to the Deng family, said he had not recently visited the 92-year-old architect of China's sweeping economic reforms, but said Deng was in Beijing.
Asked if Deng would visit Hong Kong for the ceremony when Beijing resumes sovereignty over the British colony at midnight on June 30, 1997, Zhang said: ""He said it himself -- he will go to Hong Kong even it means in a wheelchair.""
But Zhang added: ""It would be difficult for him to go now. It would be disastrous for an old man in his 90s to catch cold. Catching cold would be a serious illness.""
Deng oversaw the negotiations that successfully concluded in an agreement for Britain to hand back the territory it has held for 150 years. He has said repeatedly he hoped to be able to witness the historic transfer of power.
Chinese officials have said privately that Deng would not attend the handover ceremony, where his anointed successor President Jiang Zemin is expected to hold the limelight, but they hoped he would be able to visit Hong Kong afterwards.
The man who launched China's sweeping market-oriented economic reforms in 1978 and guided the nation's policies during the 1980s and into the early 1990s no longer holds public office but remains highly influential.
He has not been seen in public since early 1994 when he toured Shanghai during Chinese Lunar New Year festivities and appeared frail and halting in his movements and had difficulty speaking.
Deng's health is a matter of intense speculation in China and in neighbouring countries because his death is expected to trigger a scramble for power among those eager to succeed him as the de facto emperor of the world's most populous nation.
But analysts say that his death has largely been discounted and rumours of his ill-health that just 18 months ago sent Asian markets into a tailspin now generate little more than a murmur.
Deng is said to be suffering from Parkinson's disease. It is believed that he rarely leaves his closely-guarded home in a courtyard in central Beijing just behind the Forbidden City where China's emperors had ruled for centuries. Beijing has clamped an effective blackout on news about the health of the man who guided China out of the years of radical revolution espoused by Mao, dismantled much of 40 years of Stalinist-style central planning and told Chinese that ""to get rich is glorious"".
Officials routinely decline to answer questions about Deng's health, giving the party line that: ""He is as well as can be expected for a man of his age.""
However, sources close to the family say Deng is losing his ability to walk and is believed to spend most of his time in a wheelchair.
",3
"China on Tuesday introduced rules governing direct shipping links with Taiwan, ignoring a decades-old ban by the island it regards as a renegade province.
The regulations, which take effect from Tuesday, allow only wholly Chinese-owned or Taiwan-owned shipping companies or joint ventures involving Chinese or Taiwanese shipowners to sail between the two sides, Xinhua news agency said.
Hong Kong's Beijing-backed Wen Wei Po newspaper said the southeastern Chinese cities of Xiamen and Fuzhou would be the first ports to be opened to direct shipping links with Taiwan.
""The conditions for (establishing) direct shipping links are ripe,"" the newspaper said.
Taiwan's Nationalist government has banned direct air and shipping links with China since 1949 when Chiang Kai-shek's Nationalist troops lost the Chinese civil war to the communists and fled to the island.
With tensions easing since the late 1980s, civilian aircraft and vessels have skirted the ban by stopping over in a third country or territory such as the British colony of Hong Kong or Portuguese-run Macau.  
Taiwanese businessmen, who have poured more than $20 billion into China, are eager for direct transport links, but Taiwanese authorities have been reluctant to lift the ban.
The Nationalists, who say they are committed to reunification with China, see direct transport links as their last bargaining chip in talks with the communists.
China has threatened to invade if the island seeks independence.
Under the regulations, shipping companies must apply with the Chinese Ministry of Communications for permission to ply routes between the two sides. The rules made no mention of any need to seek approval from Taiwan authorities.
The ministry has 45 days to decide whether to allow a shipping company to sail between the two sides, according to the regulations.
The rules empower the ministry to warn and seize the unlawful income of shipping companies breaking the rules.
China has poured cold water on a proposal by Taipei to turn Taiwan's Kaohsiung into an extraterritorial port, allowing third party ships to ply routes between the two sides.  
The Taipei-based Economic Daily News said on Tuesday Taiwan President Lee Teng-hui had urged the central bank to study how to control capital outflows to China in a further bid to limit the island's economic exposure on its main rival's turf. The central bank denied the report.
Speculation that Taipei might change its China policy has mounted since Lee cautioned last week that the island's economy needed to avoid over-dependence on the mainland.
""The Chinese are not really making much progress on other fronts... They have decided to focus on the three links and apply pressure on the Taiwanese,"" a Western diplomat in Beijing said. The three links refer to trade, transport and mail.
On the diplomatic front, the rivalry has intensified, analysts say, with China trying hard to isolate the island and limit its contacts with other states.
Taiwan state-funded television said Vice-President Lien Chan was visiting the former Soviet republic of Ukraine,  which formally recognises Beijing. The Ukraine has denied the report.
China announced a diplomatic coup on Monday, persuading the West African nation of Niger to switch recognition to Beijing.
",3
"A group of 56 Chinese writers, former officials and academics has petitioned Communist Party chief Jiang Zemin to save cultural relics from the gigantic Three Gorges dam which would flood huge tracts of land.
Ancient tombs and temples were threatened by a dearth of government funds and official under-reporting of those relics that warranted saving, according to the letter, a copy of which was made available to Reuters on Tuesday.
""The hearts of relic protection departments are like burning fire with 10,000 worries and misgivings,"" it said of the lack of funds.
About 130 historical sites, some of them dating to the Stone Age, could be flooded as soon as next year.
The sites include Qing dynasty (1644-1911) temples, an entire street from the Ming Dynasty (1368-1644) and stone carvings from the Han Dynasty (206 BC-AD 220).
Relocation of many relics had been delayed due to lack of funds, the letter said, adding that the damage would worsen unless government funds for relocation were provided.
The letter dated August 8 was signed by prominent female writer Bing Xin, former ambassador to the United States Chai Zemin and former minister of culture Wang Meng.
Others include Su Bingqi, president of the Archaeological Society, and Yu Weichao, curator of the Museum of Chinese History who is in charge of relocating relics.
Archaeologists had designated 829 buried relics near a reservoir under construction as needing protection. The sites covered a total area of more than 20 million square metres (215 million square ft), but the government has agreed to protect one tenth of the area due to a lack of funds, it said.
Some ancient tombs and relics have already disappeared under the onslaught of bulldozers, the letter said.
Construction of the controversial dam was expected to submerge 632 square km (244 square miles) of land in central China's Hubei province and the southwestern province of Sichuan.
It would force the relocation of 840,000 people from up to 200 villages and towns, according to 1991-92 estimates.
Environmentalists have described the project as a potential ecological disaster, leading to the destruction of a scenic mountain region and the extinction of endangered species.
The Three Gorges dam -- the world's biggest water control project --  was expected to ease seasonal flooding by creating a massive reservoir in Hubei to store waters from rains.
The 6,000-km (3,500-mile) Yangtze river -- China's longest -- and its tributaries have triggered floods throughout much of China's history.
The project, expected to cost $30 billion by its completion in 2009, would also help ease China's crippling shortage of electric power.
",3
"China said Sunday its soaring stock markets were overheating on widespread speculation and warned of a crash similar to the great Wall Street collapse of 1929.
""Currently, China's stock markets are overheated, making us associate it with the U.S. stock disaster in 1929,"" the official People's Daily newspaper said in a commentary, issued in advance of its Monday edition by the Xinhua news agency.
China's foreign currency B share market in Shanghai soared by about 80 percent between Nov. 11 and Dec. 10, while the bourse in the southern boomtown of Shenzhen rose by about 100 percent before sharp falls in the final days of last week.
The Shanghai B-share market plunged 12.26 percent on Friday while its Shenzhen counterpart dived 14.75 percent. The Shanghai A-share index lost 5.51 percent and Shenzhen 4.84 percent.
""The stock markets have entered a very abnormal situation fraught with increasing market risk,"" the commentary said.
Anticipating sharp falls in the Shanghai and Shenzhen markets in response to the article in the People's Daily, which is the mouthpiece of the ruling Communist Party, the commentary said: ""The government ... will never step in to help the markets when they slump.""
The commentary described speculation that the government would support the market against falls because of political considerations before the handover of Hong Kong to Beijing in mid-1997 and the Communist Party congress late next year as ""very muddled.""
Bank savings were ""the safest and most reliable method of investment,"" it said in an apparent bid to talk down trading.
Last Friday, the Shanghai and Shenzhen stock exchanges announced that they were imposing a limit of 10 percent on daily movements for stocks with effect from Monday to stop extraordinary price movements.
That move was clearly intended to forestall a possible crash on Monday following the People's Daily policy announcement.
""Recent skyrocketing has been very abnormal and irrational,"" the commentary said. ""We must further check excessive speculation. We must strengthen supervision and regulation.""
The commentary announced a list of measures to try to rein in the bull run, saying that bank loans, for example, must not be used to speculate in stocks.
The government would increase share issues by listing more profitable medium and large state enterprises, it said.
One factor in the bull run over the past month has been a lack of shares, resulting in a large number of buyers chasing a limited supply of shares.
In addition, market irregularities have been rising this year, the commentary said.
It cited manipulation by big players, bank loans entering the market illegally, overdrafts by brokerages and misleading media reports as among reasons for the skyrocketing of the stock markets in recent weeks.
Last week securities authorities suspended the rights of two key unidentified newspapers to release official information about listed companies because of ""mistakes in reporting.""
The Securities Commission Sunday announced a quota of 10 billion yuan ($1.2 billion) worth of share issues for 1996. The amount was 200 percent larger than the 1995 quota, Xinhua said.
The quota, if unused by the end of 1996, could be carried over into next year. Xinhua did not specify whether the quota included foreign currency B shares and domestic A shares.
",3
"A Chinese court has sentenced dissident and former student leader Li Hai to nine years in prison for prying into state secrets in a trial held behind closed doors, a family member said on Tuesday.
""We're very surprised,"" the relative, who asked not to be identified, told Reuters by telephone.
Li had initially been charged with leaking state secrets, but his family and lawyer challenged the charges, arguing that the dissident was not a civil servant and had no access to state secrets.
The court ""lacked evidence to convict (Li) of leaking state secrets. We thought he would get a lighter sentence ... (after) the charge was changed to prying into state secrets,"" Li's relative said.
Instead, Beijing's Chaoyang District Court sentenced Li to nine years in prison for prying into state secrets, the relative said.
""We're not convinced at all,"" he said.
The relative said he believed the appeal process had already started. The appeals trial was also expected to be held behind closed doors because the case involved state secrets.
""Our only hope is in the appeal,"" he said.
It was not clear how Li had pried into state secrets or if any other people have been arrested or charged.
The family has not been allowed to meet Li since he was detained in May 1995.
Li was first arrested in May 1990 for his role in the 1989 student demonstrations for democracy. He was released six months later and expelled from the philosophy department of the prestigious Beijing University, where he was a graduate student.
He was one of 56 signatories to a pro-democracy peace charter issued in May 1995 to coincide with the sixth anniversary of the military crackdown on the student demonstrations.
China jailed dozens of dissidents in 1996 as part of a drive for stability that followed an easing of foreign pressure over its human rights record, diplomats and activists said. Authorities jailed or sent to labour camps 12 better-known dissidents in 1996. Of the 12, former student leader Wang Dan received the harshest sentence -- 11 years -- for conspiring to subvert the government.
Western human rights activists said sending dissidents to labour camps has been increasingly favoured as a way of removing them from society without the complications or publicity of a trial.
At least 10 lesser-known political activists have been incarcerated in the northern region of Inner Mongolia. In the southwestern city of Guiyang, another seven to eight dissidents have been jailed.
At least two dissidents fled to the United States this year -- former student leader Liu Gang and veteran dissident Wang Xizhe.
",3
"Guo Song stood impassive, his arms clamped to his side by two court policemen, as a Beijing judge sentenced him to death for bank robbery after a trial in which he was presumed guilty from the start.
Guo, who killed four bank guards and stole several payrolls, could well be dead by Wednesday, January 1, when sweeping amendments to the Criminal Procedure Law go into effect.
Standing under the insignia of Chinese communist rule -- a red badge embossed with five stars -- the judge delivered the verdict on Guo during proceedings videotaped by a court clerk.
Court hearings in China resemble theatre. Verdicts may be decided beforehand and trials are little more than farce, said one judge-turned-lawyer who asked not to be identified.
""I used to think defence lawyers were laughable,"" he said in an interview. ""The verdict had already been decided. It was purely acting like in a play. Whatever defendants or defence lawyers said does not matter.""
Defendants in China have been presumed guilty before being proved innocent. Suspects can be detained almost indefinitely, and lawyers have access to the bill of indictment only days before a trial.
All this is set to change from January 1, 1997.
""It's a big improvement compared with the past,"" criminal law professor Qu Xinjiu said of the revisions approved by the National People's Congress, or parliament, last March.
However, some Chinese and foreign jurists wonder whether China's fledgling modern legal system will be able to implement these reforms and doubt whether defendants will have real access to a fair trial because of the poor quality of many judges, prosecutors and police.
BIG TEST NEXT YEAR
""Next year will be a big test of whether the quality of judges, prosecutors and police can keep up with judicial reforms,"" lawyer Li Shuguang said in an interview.
""China's judges and prosecutors are not prepared. They will need training... They will have to change their mentality.""
The amendments aim to transform judges from instruments of prosecution to evaluators of evidence, jurists said.
""No one shall be convicted without a verdict pronounced by a people's court according to the law,"" says Article 12 of the revised law that alters the presumption of guilt.
Robin Munro of Human Rights Watch/Asia argued that the amendments do not embrace the presumption of innocence.
""It is not correct... to say that this new law has enshrined the presumption of innocence,"" Munro told Reuters by telephone from Hong Kong.
""It (merely) rejects the presumption of guilt,"" Munro said.
The amendments, however, would allow suspects to consult a lawyer after police interrogation and set a 14-1/2 month limit on the length of police detention before trial.
After January 1, 1997, prosecutors would be required to produce in court evidence they have purportedly collected.
DISSIDENTS UNLIKELY BENEFICIARIES
Critics say the new laws would benefit common criminals rather than dissidents, many of whom were swiftly locked up in 1996 to avoid the complications of the new law.
""Where dissidents are concerned it's the Communist Party leadership that decides what happens to them... The courts are just there to carry out the political decision,"" Munro said.
Dissidents jailed in the last year included Wang Dan, a leader of the 1989 student-led demonstrations for democracy that were crushed by the military. Wang was sentenced to 11 years in prison in November for conspiring to subvert the government.
Critics say the concept of rule by law remains alien to China, where for centuries imperial officials wielded absolute power and their word alone was tantamount to law.
Police have promised to abide by the new law, but officials concede many police and judicial officials lack basic legal expertise and operate virtually unchecked in their own fiefdoms.
Torture is commonly used by police in the countryside to extract confessions from suspects and facilitate the collection of evidence, critics say.
Evidence collected through torture can still be used in court against defendants, critics say. Suspects have no right to remain silent in China.
Critics are concerned about an entirely new section in the Criminal Procedure Law that calls for summary trials where an offence is punishable by a jail term of less than three years.
""It's a big step backwards,"" Munro said. ""All these beautiful new rules... for presenting of evidence, cross examining of witnesses, conducting court debate... these all go out the window.""
Corruption is rife and threatens actual implementation.
""Money can buy a life sentence instead of the court handing down a death sentence,"" the judge-turned-lawyer said.
",3
"Chinese dissident Liu Xiaobo has filed a lawsuit against Beijing authorities for sending him to a labour camp without trial, his wife said on Tuesday.
Liu urged Beijing's Xuanwu District Court to overturn a decision by the Beijing Re-education through Labour Committee to send him to a labour camp for three years.
""I refuse to accept the decision,"" Liu said in his suit, a copy of which was made available to Reuters.
""I am appealing...not out of fear of losing freedom...but to defend my right to freedom of speech as a law-abiding citizen,"" the 41-year-old dissident said.
Police detained Liu, a renowned literary critic and prominent dissident, in September and sent him to a camp in the northeastern city of Dalian to serve three years of re-education through labour.
Re-education through labour is a form of administrative punishment that can be imposed by authorities while avoiding the court system.
Western human rights activists say re-education through labour is increasingly favoured as a way of removing dissidents from circulation without the complications or publicity of a trial.
The dissident's wife, Liu Xia, told Reuters that the court had agreed to hear the suit though no date had been set.
Court officials declined to comment.
Authorities at the labour camp had rejected requests by Liu's family to visit him, his wife said.
""They (authorities) told his father that his performance was not good,"" Liu's wife said in an interview.
She said she held little hope of winning the suit.
The Re-education through Labour Committee accused Liu Xiaobo of ""concocting stories, distorting facts, libelling and sullying the government, stirring up trouble and disturbing social order"".
It said the alleged offences were committed in a petition to the government and a newspaper article written by Liu for a Taiwan newspaper.
In the government petition made last year, Liu and dozens of other intellectuals urged the government to reassess the June 1989 military crackdown on student-led demonstrations for democracy.
""Liu...was warned several times but was unrepentant and continued to engage in lawbreaking and criminal activities,"" said a document issued by the committee.
In the months before his incarceration, Liu orchestrated several daring, open letters to the government.
On September 30, Liu and another dissident, Wang Xizhe, issued a statement calling for the indictment and impeachment of Communist Party boss Jiang Zemin.
The pair demanded Jiang's resignation for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang fled to the United States in October.
Last week, Beijing's Chaoyang District Court rejected the lawsuit of another dissident, Liu Nianchun, against a similar labour camp term.
China dismisses international criticism of its human rights record as interference in its internal affairs.
Chinese authorities have dealt crushing blows to the tiny democracy movement in recent months. Most dissidents have already been forced into exile or are in prison or labour camp.
",3
"Beijing has pledged to open its doors to imports of U.S. textiles under a new deal, but Washington has no illusions it can close its yawning textile trade gap with China, diplomats said Monday.
Chinese and U.S. negotiators signed a new textile agreement in Beijing on Sunday in an 11th-hour deal that ended the threat of a cross-Pacific trade war and ensured U.S. access to China's textile markets.
""It provides us with an opportunity to increase our access to China's markets in high-priority areas,"" one U.S. diplomat said. He declined to elaborate.
""(But) we are under no illusions that we are going to balance textiles as a single sector of our trade,"" said a second diplomat, who requested anonymity.
China exported $6.5 billion worth of textiles to the United States in 1995 but imported only $64 million worth. Diplomats attributed the sluggish U.S. textile exports to Beijing's high tariff rates and non-tariff barriers.
""Textiles are never going to be balanced but it's important that there be a market access element there,"" the second diplomat said.
The agreement gave China a U.S. import quota slightly larger than the previous 1994 textile pact, and China pledged to reduce its tariffs on textile imports.
Both the Chinese and U.S. sides declined to say by how much U.S. textile exports to China would increase and vice versa, or by how much China's tariffs would be cut.
""There are significant gains for U.S. industries,"" a third diplomat said.
""It was, for the first time, a concessionary admission on (the) part of the Chinese that they too had to do something with regard to supplying market access for U.S. products where we were competitive,"" he said.
The overall U.S. trade deficit with China -- the United States' largest after its deficit with Japan -- was seen reaching $38 billion in 1996, up from $34 billion in 1995, according to U.S. figures.
The new textile agreement may be good news for U.S. textile manufacturers and exporters, but it could be bad news for China's lumbering state enterprises.
A flood of U.S. textile imports could intensify competition and further cripple many of China's state enterprises, almost half of which are in the red, analysts said.
""U.S. textile imports will intensify competition in the already saturated domestic textile market,"" a Chinese economist said. ""Life will be even more difficult for a group of money-losing textile enterprises,"" said the economist, who asked not to be identified. ""Some enterprises will be forced to bow out of the textile industry -- declare bankruptcy or merge.""
State-owned textile factories in Shanghai, China's largest industrial city, registered losses of 350 million yuan ($42.2 million) in the first seven months of 1996, the China Business Times said Monday.
The accord ended the threat of a Sino-U.S. trade war, which had loomed after Washington slapped $19 million in penalties on Chinese imports last September, accusing Beijing of shipping textiles through third countries to evade U.S. restrictions on Chinese imports.
China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks. But it delayed the action to allow time for further talks.
Beijing announced after Sunday's deal that it was calling off its retaliatory measures, but Washington's penalties remained in force.
",3
"Residents of a town in China's restive northwestern Xinjiang returned to work on Wednesday from the Lunar New Year holiday with officials vowing to deal a blow to separatism after a riot that left 10 people dead.
""The mayor...warned everyone to heighten their vigilance,"" Zhang Youlian, deputy director of the foreign affairs office of the Yili Kazakh Autonomous Prefecture, said by telephone.
""We are resolved to deal a blow to the handful of ethnic separatist elements,"" Zhang told Reuters.
Police had arrested between 200 and 300 people in the crackdown following the riot, officials said.
About 1,000 people from the Uighur ethnic minority rioted in the town of Yining in Yili prefecture last Wednesday in one of the largest and most violent demonstrations for independence in the mainly Moslem region of Xinjiang for several years.
Paramilitary People's Armed Police only succeeded in dispersing the rioters, who smashed and burned cars and looted shops, a day later, a spokesman for the Xinjiang regional government said by telephone from Urumqi, Xinjiang's capital.
The riot left 10 people dead and 144 wounded, he said. All the victims were Han Chinese, another official said.
The death toll could rise, with up to seven people listed as missing, said one official in Yining.
Of the wounded, 132 were civilians while the remaining 12 were members of the paramilitary armed police.
Local residents returned to work on Wednesday after the five-day Lunar New Year holidays, which ended on Tuesday, but an after-dark curfew remained in parts of the town and armed police still patrolled the streets, Zhang said.
""We resumed work today...Basically, it's normal,"" he said.
Authorities had sealed off the town, but planned to reopen the airport on Friday, Zhang said.
Last week, demonstrators hurling rocks and bricks rampaged through the town, attacking Han Chinese on sight and setting fire to to about 20 vehicles.
Armed police fired teargas to disperse the crowd.
Several leaders of the riot had been arrested, the regional government spokesman said, adding that a manhunt for other rioters was under way.
The leader of an exiled nationalist Uighur group in Kazakhstan said hundreds of Uighurs had been arrested following the riot.
Yusupbek Mukhlisi, leader of the Almaty-based United National Revolutionary Front of East Turkestan, said the riot was sparked by the execution of 30 Uighurs by Chinese authorities last week.
Zhang dismissed the report as a rumour.
Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
The riot was among the most violent for many years in Xinjiang, where Turkic-speaking Uighurs are in the majority and ethnic Han Chinese make up 38 percent of the population.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
Last May, Beijing ordered tighter controls along Xinjiang's lengthy border to block the smuggling of weapons and subversive materials from nearby central Asian states.
",3
"China hit out at Britain on Thursday, saying London's protests against Beijing's proposed amendments to Hong Kong laws after this year's handover of sovereignty were unacceptable, unreasonable and unwise.
""We cannot accept the British protest, it is also totally unreasonable and the so-called protest is unwise,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
""The British side is always forcing its will upon others and this will not work,"" Shen said, adding that Hong Kong was China's internal affair after the handover and no other country had the right to interfere.
Britain lodged a strong protest on Wednesday against Beijing's plans to dilute laws guaranteeing civil liberties in Hong Kong when it regains control of the colony on July 1 after more than 150 years of British rule.
The Foreign Office said junior minister Jeremy Hanley had expressed Britain's ""serious concern"" over the proposals at a meeting with Chinese ambassador Jiang Enzhu.
A spokesman said Hanley told the envoy that Hong Kong's bill of rights and related legislation, which China wants to amend, were fully consistent with the Basic Law -- the post-handover constitution for Hong Kong promulgated by Beijing in 1990.
China has accused Britain of violating the Basic Law by unilaterally introducing laws guaranteeing civil liberties in Hong Kong after the handover.
Shen, the Chinese spokesman, defended China's plan to amend or repeal a list of 25 laws and ordinances, saying China was merely reversing unilateral changes made by Britain.
""It is fair and reasonable,"" Shen said of the proposed amendments.
Beijing is moving to replace Hong Kong's elected Legislative Council with a provisional legislature and block a lenient law that would exclude China-style crackdowns on dissent.
Shen charged that Patten's expansion of the electoral process in Hong Kong in violation of the Sino-British Joint Declaration on the handover was undemocratic.
""I think that violation of the Sino-British Joint Declaration cannot be considered as something democratic,"" Shen said. ""We are upholding the solemnity of the Sino-British Joint Declaration.""
A Chinese envoy to Hong Kong blamed the British protest on Patten, the 28th and last British governor of Hong Kong.
""This was an angry act by Chris Patten who was ashamed that his long-time confrontation with China had been unfruitful,"" Zhang Junsheng, deputy director of Xinhua News Agency, China's de facto diplomatic mission in Hong Kong, told reporters in the colony.
China's opponents say its planned steps fly in the face of vows that allow Hong Kong to keep its freedoms after it becomes a Special Administrative Region of China.
Patten has called Beijing's moves a ""legal nonsense"" while pro-democracy groups said it was a blow to democracy and human rights that would dent overseas confidence in Hong Kong.
Donald Tsang, who is responsible for drafting a budget for wealthy Hong Kong that straddles the transition, said China would need to convince investors the changes were necessary.
""If you can't convince the people of Hong Kong, people may take to the streets, some may keep their frustration in their hearts, some in the civil service may quit. Some may emigrate,"" he told the South China Morning Post newspaper.
The United States expressed strong concern on Tuesday and called on China to reconsider its moves.
",3
"China on Friday angrily denied that its worsening pollution was a threat to the world environment and accused developed countries of concocting the fallacy to monopolise global resources.
""It is rumour and sensationalism,"" the official China Daily said of the ""China environmental threat"" theory. ""It is a cry that the sky is falling when a leaf flutters from a tree.""
China had done more to clean up its environment than developed countries in their initial stages of industrialisation, it said.
Officials announced plans in September to spend up to 320 billion yuan ($38.6 billion) over the next five years to curb pollution and limit damage to the environment.
By last November, the Legal Daily said China had shut down almost 57,000 small polluting factories in a bid to limit environmental damage. Most of the closed enterprises produced paper, fertilisers, electroplates, or extracted sulphur.
It said more than 20,000 environment officials fanned out across China to inspect factories and close down polluting units after the State Council, or cabinet, issued an edict in August to step up environmental protection.
""It is the developed countries that should shoulder the major responsibility of the current condition of world environmental pollution,"" the newspaper said.
""China, at its initial stage of industrialisation, has drawn a lesson from the industrialised countries and has never been willing to sacrifice its environment to develop its economy.""
Even though China's annual per capita income stood at only $400, it was committed to protecting the environment whereas developed countries only began fighting pollution when their per capita incomes hit $3,000, it said.
Factory chimneys across China spew out columns of black smoke, their pipes eject millions of tonnes of untreated waste into rivers and lakes, and a blanket of smog hides the sun above many cities as almost two decades of rapid economic growth have pushed China toward a sink-or-swim market economy.
Some of the world's highest levels of air pollution have been recorded by Chinese cities and acid rain is common.
China, a rising superpower, sees international criticism of issues ranging from its military build-up to human rights abuses as a conspiracy to contain its development.
The China Daily ran a cartoon of a man pointing a finger at a couple who were cleaning their yard and shouting: ""Hey, you dirty the environment!"" while smoke billowed from a chimney in his own filthy backyard.
The newspaper took a swipe at developed countries for polluting the environment, saying they were responsible for emitting 75 percent of the carbon monoxide in the atmosphere.
""The motive for concocting the amazing 'China environmental threat' fallacy is not hard to see through...It is a trick employed by some developed countries to direct people's attention away from reality and to evade their own responsibilities.
""There are those who are unwilling to see China progress and who are trying to contain its development by pointing their fingers at the world's environmental problems,"" it said.
""They hope to maintain the pattern of the past, in which already developed countries continue to enjoy the majority of the world's resources.""
($1 = 8.3 yuan)
",3
"China said on Sunday its soaring stock markets were overheating on widespread speculation and warned of a crash similar to the great Wall Street collapse of 1929.
""Currently, China's stock markets are overheated, making us associate it with the U.S. stock disaster in 1929,"" the official People's Daily newspaper said in a commentary, issued in advance of its Monday edition by the Xinhua news agency.
China's foreign currency B share market in Shanghai soared by about 80 percent between November 11 and December 10 while the bourse in the southern boomtown of Shenzhen rose by about 100 percent before sharp falls in the final days of last week.
The Shanghai B-share market plunged 12.26 percent on Friday while its Shenzhen counterpart dived 14.75 percent. The Shanghai A-share index lost 5.51 percent and Shenzhen 4.84 percent.
""The stock markets have entered a very abnormal situation fraught with increasing market risk,"" said the commentary.
Anticipating sharp falls in the Shanghai and Shenzhen markets in response to the article in the People's Daily, which is the mouthpiece of the ruling Communist Party, the commentary said: ""The government... will never step in to help the markets when they slump.""
The commentary described speculation that the government would support the market against falls because of political considerations before the handover of Hong Kong to Beijing in mid-1997 and the Communist Party congress late next year as ""very muddled"".
Bank savings were ""the safest and most reliable method of investment"", it said in an apparent bid to talk down trading.
Last Friday, the Shanghai and Shenzhen stock exchanges announced that they were imposing a limit of 10 percent on daily movements for stocks with effect from Monday to stop extraordinary price movements.
That move was clearly intended to forestall a possible crash on Monday following the People's Daily policy announcement.
""Recent skyrocketing has been very abnormal and irrational,"" the commentary said. ""We must further check excessive speculation.
""We must strengthen supervision and regulation.""
The commentary announced a list of measures to try to rein in the bull run, saying that bank loans, for example, must not be used to speculate in stocks.
The government would increase share issues by listing more profitable medium and large state enterprises, it said.
One factor in the bull run over the past month has been a lack of shares, resulting in a large number of buyers chasing a limited supply of shares.
In addition, market irregularities have been rising this year, the commentary said.
It cited manipulation by big players, bank loans entering the market illegally, overdrafts by brokerages and misleading media reports as among reasons for the skyrocketing of the stock markets in recent weeks.
Last week, securities authorities suspended the rights of two key unidentified newspapers to release official information about listed companies because of ""mistakes in reporting"".
The Securities Commission announced on Sunday a quota of 10 billion yuan ($1.2 billion) worth of share issues for 1996. The amount was 200 percent larger than the 1995 quota, Xinhua said.
The quota, if unused by the end of 1996, could be carried over into next year. Xinhua did not specify whether the quota included foreign currency B shares and domestic A shares.
",3
"Chinese authorities have sealed off a town in northwestern Xinjiang and paramilitary police were patrolling the streets after at least 10 people were killed in a separatist Moslem riot last week, residents said on Tuesday.
""No one can leave, no one can enter,"" one resident said by telephone from Yining in the Yili Kazakh Autonomous Prefecture near the border with Kazakhstan.
Authorities closed the airport and railway station on Thursday and clamped an after-dark curfew on the mainly Moslem town, local residents said.
""They (outsiders) can't come to our town. We Yining residents can't go to neighbouring counties,"" another resident said. ""It is to guarantee public safety.""
At least 10 people were killed, including one police officer, and some 100 wounded when 1,000 Moslem separatists of the Uighur ethnic minority rampaged through Yining on Wednesday to protest against Beijing rule, Chinese sources and residents have said.
The riot was among the most violent for many years in the restive region of Xinjiang, where Turkic-speaking Uighurs are in the majority and ethnic Han Chinese make up 38 percent of the population.
Shops and restaurants were closed in the town and paramilitary police patrolled the streets. Police arrested several suspects and were hunting other rioters, one Han woman resident said.
""They have arrested several counter-revolutionaries and they are catching more,"" she said.
""The Uighurs are walking the streets and they look happy because the streets are full of them,"" she said in a sign of the depth of ethnic divisions. ""It's just them in the streets. It's all their people. No one else is on the streets.""
However, Han residents said they were not afraid.
""We are not nervous because the armed police and police are here,"" the woman said.
""If something happens we will...unite,"" another Han resident said. ""There are also patriots among the Uighurs.""
Officials tried to play down the riot, describing it as a small incident fuelled by ""foreign hostile forces"". They refused to say how many people were killed or wounded.
Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
Rioters attacked Han on sight, smashed cars and set fire to shops, forcing local authorities to mobilise about 1,000 police and paramilitary People's Armed Police to quell the violence, witnesses said.
Police fired teargas to dispel the crowd.
The demonstrators, shouting anti-Chinese slogans, had marched on a government building, one official said.
The riot erupted after a Uighur criminal suspect resisted arrest by Chinese police, a Chinese source said.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after a series of violent clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
Last May, Beijing ordered tighter controls along Xinjiang's lengthy border to block the smuggling of weapons and subversive materials from nearby central Asian states.
",3
"Beijing's new mayor on Monday vowed the battle against corruption in the Chinese capital would go on but sought to put behind him a graft scandal that led to the downfall of the city's Communist Party boss.
Acting Mayor Jia Qinglin told the Beijing People's Congress, or city council, that a government crackdown on corruption had curbed wining and dining at public expense, the use of luxury cars by low-ranking officials and civil servants living in excessively large housing.
""The struggle against corruption has been crowned with new results,"" the mayor said. ""We must unceasingly score new victories in the struggle against corruption.""
Chinese Communist Party chief and state president Jiang Zemin has identified corruption as a virus that could topple the ruling party and some of China's most serious cases under communist rule have emerged in Beijing.
Officials would be required to declare their incomes and gifts received and the government would speed up supervision of the approval of major infrastructure projects, the appointment of key officials and the appropriation of funds, Jia said.
In his 100-minute speech to the opening session in Beijing's Great Hall of the People, Jia made no mention of Chen Xitong, who was ousted as Beijing's Communist Party secretary in April, 1995.
The mayor wanted to bury the scandal, analysts said.
""Jia Qinglin is an outsider...and doesn't know how deep Beijing's political waters are,"" one analyst said.
Jia was party secretary of the southeastern province of Fujian before being appointed as Beijing mayor last October.
The Beijing People's Congress was expected to formally elect Jia as mayor during its five-day session.
""If he can avoid the controversy, he will run away from it as far as possible,"" said the analyst, who asked not to be identified.
Other Beijing officials, including former mayor Li Qiyan, have previously mentioned Chen in their speeches, urging party cadres to draw a lesson from the scandal. Li has been removed and appointed a vice-minister of labour.
One academic said: ""Jia Qinglin is a newcomer. Issues like these are better left unsaid. It's no good if he talks too tough. It's also no good if it's not tough enough.""
Chen, 66, has been out of the public eye since stepping down as Beijing party boss after his protege, Vice-Mayor Wang Baosen, committed suicide after coming under investigation for corruption in April 1995.
Chen was sacked from the party's powerful Politburo in September 1995, the most senior official to be ensnared in a corruption scandal since the puritan communists swept to power in 1949.
Last December, Beijing Vice-Mayor Zhang Baifa, said Chen could be punished for dereliction of duty but not for any more serious offence.
Chen had accepted many expensive gifts, but more than a year of investigation into the man who presided over China's capital for most of the 1980s had uncovered no evidence of wrongdoing in exchange, Zhang said.
Chen was being held outside Beijing, pending completion of the investigation, he said.
One of Chen's sons, Chen Xiaotong, former general manager of a Sino-Japanese joint venture hotel in Beijing, has been detained. His wife was free, but his mistress was on the run, Zhang said.
",3
"Selling motorcycles used to be a joy ride for the giant, military-founded China Jialing Industrial Co Ltd, but then it ran into real market competition and growth slowed down sharply.
""Up until 1995, we sold as much as we produced,"" said Tian Min, deputy director of financial affairs at the Shanghai-listed firm, in which the Chinese government has a 75 percent stake.
But Jialing, China's biggest motorcycle manufacturer and a former munitions manufacturer that began making civilian products in 1979, saw rival manufacturers mushroom across China in 1994 and 1995 to cash in on its market.
Cutthroat competition slashed prices and profits and swelled stockpiles last year.
""In 1996, we could not sell what we produced,"" Tian said in an interview at Jialing's headquarters in China's wartime capital of Chongqing in southwestern Sichuan province.
Jialing's sales plunged to 3.5 billion yuan ($421.7 million) in 1996 from 4.6 billion yuan in 1995. After-tax profits tumbled to 270 million yuan in 1996 from 460 million yuan in 1995.
""Sales in 1994 and 1995 were good and many seeing this jumped aboard,"" Tian said.
China has about 300 motorcycle plants with total annual production capacity of 20 million units, but only 10 make more than 100,000 a year.
China is the world's largest motorcycle maker, churning out 7.83 million units in 1995, but selling only 6.1 million.
Vice-Premier Zhu Rongji has called for moves to curb blind investment in industries that appear profitable.
Blind investment is being repeated in many sectors, such as colour televisions, washing machines and refrigerators. Production has outstripped demand, leading to overheated competition, price wars and mounting losses among state firms.
Adding to the problems of motorcycle manufacturers, some regional governments, alarmed at traffic congestion and air pollution, have discouraged motorcycle purchases by curbing the issue of licence plates.
TIGHT MONETARY POLICY TO BLAME
Tian also blamed the company's woes on the government's tight monetary policy to rein in galloping inflation.
""The motorcycle market shrank...because people have less money...and less buying power,"" he said.
Tight monetary policy has also resulted in triangular debt, or debt owed among state-owned firms, and cash flow problems.
""Debts owed to each other are very serious...We can't get our money back for motorcycles sold,"" Tian said.
Jialing's collectibles soared to 700 million yuan in 1996.
The company has formed debt collection squads and aims to reduce collectibles to 300 million yuan by end-1997. Collectibles were virtually non-existent in 1994.
STRUGGLING TO REMAIN NUMBER ONE
The climb to the top is hard. Staying on top is even harder.
A price war has forced Jialing to slash prices by an average of 13 percent in 1997, Tian said. The price cut was expected to reduce sales by 400 million yuan a year.
Sales staff would receive commissions linked to performance instead of a fixed salary to try to increase sales, he said.
Jialing will curb waste and cut stockpiles, now 80,000-90,000. It is inviting tenders to force competition among parts suppliers and expects to save 300 million yuan in 1997.
Its motorcycle engines are produced at a joint venture plant with Japan's Honda Motor Co Ltd.
Sales were forecast to hit 4.2 billion yuan in 1997, while profits would be ""no lower"" than in 1996, Tian said.
Jialing would produce 1.35 million motorcycles in 1997 from 1.13 million in 1996. It has capacity for 1.7 million.
Its 1995 output of 1.1085 million motorcycles accounted for 14 percent of the national total of 7.83 million. Jialing's output was forecast to hit two million in the year 2000.
AMBITIONS RISE BEYOND MOTORCYCLES
Jialing has ambitions to do more than produce motorcycles.
It has applied to issue H shares in Hong Kong to raise funds to expand into car production, financing and pharmaceuticals.
The company wants to set up a non-bank financial institution to finance motorcycle sales, Tian said.
To meet the challenges of China's fledgling market economy, Jialing, like many state enterprises, must tackle overstaffing and the burden of cradle-to-grave welfare for its employees.
Jialing plans to lay off about one percent of its 12,500 employees in 1997, with the accumulated figure hitting 3,000 in the year 2000, Tian said.
""We're not like capitalist countries...we can't just abandon them,"" Tian said. ""We have to help them to find new jobs...or it'll bring problems to our social order and stability.""
($1 = 8.3 yuan)
",3
"China's leadership has dissolved the once-powerful personal office of 92-year-old patriarch Deng Xiaoping in what could be a sign his health is increasingly fragile, a Chinese source and diplomats said on Wednesday.
Deng's health has stirred intense speculation this week, rocking stock markets in China, Hong Kong and Taiwan on Tuesday and prompting an attempt by Beijing to calm fears.
Japanese media reported that Deng had been admitted to hospital in critical condition, while a Hong Kong newspaper said he was recuperating at home from a brain haemorrhage but was not near death.
China's official media on Wednesday made no mention of Deng's health.
The Deng office of advisers and secretaries -- or ""Deng ban"" as it is known in Chinese -- was dissolved shortly before the Lunar New Year, which fell on February 7, a Chinese source with close ties to the Communist Party said.
""If true, it is a signal Deng's health had deteriorated... Deng can no longer sustain a very active role in the political sphere,"" said a Western diplomat who had heard about the disbanding of the office.
Chinese sources told Reuters on Monday that Communist Party chief and state President Jiang Zemin and Premier Li Peng cut short out-of-town trips last weekend to return to Beijing to visit the ailing patriarch.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival, when he appeared frail and faltering.
The dissolution of the Deng office also signalled China's succession problem was virtually complete and that Jiang had further consolidated power.
""Jiang Zemin is eager to tell the world that he is now in charge... and he no longer needs to take directives from Deng's office,"" the Chinese source said.
The office used to issue directives to the current leadership, including Jiang, but was considered to have outlived its usefulness, the source said.
It had been headed by Deng's top aide, General Wang Ruilin, a member of the party's powerful Central Military Commission.
""Deng Xiaoping has been retired for many years... Deng's office has no direct function,"" the source said.
Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, retired from his last official position in 1990 and his only post now is honorary chairman of China's Bridge Association, a title that reflects his lifelong passion for the game.
Rumours about Deng's health surface periodically and often have a direct impact on China-related bourses, where Deng's demise is seen by some as a potentially destabilising factor.
Apparently trying to calm China's markets, newspapers splashed a report that economic tsar Zhu Rongji held a seminar on Deng's economic theories and reported Deng had sent his condolences for the funeral of a late defence minister.
The Japanese daily Nihon Keizai Shimbun, quoting diplomatic sources in Beijing with close ties to senior military officials, said Deng was critically ill after a brain haemorrhage.
The Chinese leadership had told senior party and government officials not to leave the country unless obliged to do so for pressing diplomatic reasons, the newspaper said.
Japan's Kyodo news agency said Deng suffered a brain haemorrhage last Friday.
Hong Kong's Ming Pao newspaper said Deng was recuperating at home and ""was not about to die soon"".
On Tuesday, China played down fears that Deng's health was deteriorating, saying there had been ""no big change"". It declined to say if there had been a small change or what could count as a major change.
",3
"China and South Korea negotiated on Friday over the defection of a top North Korean who has taken refuge in Seoul's mission in Beijing while Pyongyang officials said they aimed to persuade the defector to return.
Talks in Singapore between South Korean Foreign Minister Yoo Chong-ha and Chinese counterpart Qian Qichen failed to break a deadlock over the defector, Hwang Jang-yop, 73, the most senior Pyongyang official to flee the North.
In Beijing, however, a South Korean embassy official said negotiations had begun over Hwang, who spent a second night in the embassy compound with an aide as Seoul and Pyongyang both made hectic efforts to claim him.
China has been dragged unwillingly into the row between an old communist comrade and a new business friend.
Diplomats have said China may find itself with little option but to give in to the wishes of the defector, thus angering one of its last remaining socialist allies.
Beijing tried to play for time.
""This incident happened all of a sudden, so we need more time to investigate,"" China's Qian told reporters after a 50-minute meeting with Seoul's Yoo in Singapore.
He urged both Koreas ""to treat this matter with a cool and calm manner, to keep peace and stability"".
Yoo said the two sides would meet again, but did not say where or when. He said Friday's talks were ""good"".
In the sedate, tree-lined diplomatic district of Beijing, dozens of Chinese police cordoned Seoul's consular section off for a second day. Hwang arrived at its door on Wednesday to seek asylum.
""They (North Koreans) are harassing us and we are a little nervous about that,"" said South Korean embassy spokesman Chang Moon Ik, adding that Seoul had asked Beijing to maintain tight security around the compound.
Hwang, who could face summary execution or a lifetime in the gulag if he goes back to the North, was in good health and sleeping well, Chang said. He was spending the day reading.
A North Korean official standing outside the police cordon said Pyongyang had no plans to storm the compound to recover a countryman Pyongyang says was kidnapped.
""We are waiting here for him to come out and then ask him to come back,"" said the official who declined to identify himself.
A group of about 10 North Koreans, badges of the late North Korean leader Kim Il-sung pinned to their lapels, returned to wait in freezing temperatures outside the compound on Friday after police asked them to leave overnight.
""If China allows him to go to South Korea then we will be disappointed,"" said another North Korean. ""It will be regrettable.""
Some commentators have suggested Pyongyang might react violently to the defection of a man ranked 24 in its hierarchy, who is a senior aide to reclusive leader Kim Jong-il and North Korea's top communist party theoretician.
Pyongyang has charged that Hwang must have been kidnapped, and has called on Beijing to sort out the mess.
Seoul has dismissed as ""preposterous"" Pyongyang's charges that Hwang, one of 11 secretaries on the powerful secretariat of North Korea's ruling Workers' Party, was abducted.
It was not clear whether Kim Ha-jung, a special adviser to South Korea's Foreign Minister, was meeting Chinese officials.
Kim failed to hold talks with Chinese officials when he arrived on Thursday as Beijing, apparently angered by Seoul's decision to export its latest row with Pyongyang into China, avoided a meeting, South Korean sources said.
Officials at the North Korean embassy refused to comment or confirm reports from Seoul that Pyongyang had sent a delegation to China to discuss Hwang's defection.
",3
"China has jailed dozens of dissidents this year amid Beijing's obsession with stability coupled with easing foreign pressure on its human rights record, human rights groups and diplomats said on Wednesday.
Authorities have jailed 12 better-known dissidents or sent them to labour camps in the past year, the Hong Kong-based Information Centre of Human Rights and Democratic Movement in China said.
At least 10 lesser-known political activists have been incarcerated in the northern region of Inner Mongolia, Liu Qing, chairman of the New York-based Human Rights in China, said in a telephone interview.
In the southwestern city of Guiyang, another seven to eight dissidents have been jailed, Liu said. He declined to elaborate on the cases pending verification of details.
""A lot more dissidents were jailed this year than in previous years,"" Liu said. ""There are not many prominent dissidents left.""
Liu, who served 10 years in prison for his role in the 1979 Democracy Wall movement and left for the United States in 1992, attributed the tougher policy on dissent to an easing of foreign pressure on China.
""International pressure on China's human rights is easing and disappearing,"" he said.
""This undoubtedly is tantamount to telling the Chinese Communists that the Chinese government can go all out and persecute dissidents,"" Liu said.
The United States delinked human rights from its annual review of renewing Most Favoured Nation trading status for China in 1994. Many business-minded Western governments have been accused of turning a blind eye to human rights abuses in China.
Of the 12 better-known dissidents to be locked up this year, former student leader Wang Dan received the harshest sentence -- 11 years -- for conspiring to subvert the government.
A Beijing court took just 10 minutes last month to reject an appeal by Wang, a leader of student-led demonstrations for democracy that were crushed by the army in June 1989 with heavy loss of life.
Another nine dissidents, including Liu Qing's younger brother Liu Nianchun, were ordered to serve up to three years of re-education through labour.
Labour re-education is an administrative punishment that can be imposed by authorities without recourse to the judiciary.
Western human rights activists say re-education through labour is increasingly favoured as a way of removing dissidents from circulation without the complications or publicity of a trial.
Another dissident serving time at a labour camp, Chen Longde, jumped from a third-floor window in a suicide attempt in August because he could not tolerate alleged beating by prison guards, family members said. Prison officials deny the charge.
Two dissidents fled to the United States this year -- former student leader Liu Gang and veteran dissident Wang Xizhe.
Obsession with stability was another factor in China intensifying its crackdown on dissent, diplomats said.
""The government is obsessed with matters of stability at the moment and all the more so because the 15th party congress is around the corner,"" a Western diplomat said, referring to the crucial five-yearly meeting due late next year.
""In the eyes of the leadership, dissidents represent a potential threat to stability and social order,"" he said. ""The leadership fears that treating them leniently would only encourage others to challenge the authority of the party.""
China dismisses international criticism of its human rights record as interference in its internal affairs.
",3
"China warned Britain on Tuesday against challenging it in the World Court over its decision to disband Hong Kong's elected legislature when it takes back the territory in mid-1997.
""If Britain does this, this will damage Sino-British relations,"" Foreign Ministry spokesman Shen Guofang told a regular news briefing.
""If the British act wilfully, create troubles and do not cooperate with the Chinese side, then Sino-British relations will be damaged,"" Shen said when asked about Britain's threat.
Last week, British Foreign Secretary Malcolm Rifkind denounced China's plans to disband the democratically elected legislature and proposed letting the International Court of Justice in the Hague rule on the dispute.
After more than 150 years of British rule, the capitalist territory of 6.3 million people falls back under the Chinese flag at midnight on June 30, 1997, with promises from Beijing's communist leadership that almost nothing will change.
Upon the handover of Hong Kong, a Beijing-appointed provisional legislature will take over from the elected Legislative Council, reversing democratic reforms introduced by Hong Kong Governor Chris Patten over the past four years.
Patten has lashed out at the creation of the post-colonial legislature, calling its appointment by the 400-member Beijing-backed Selection Committee last week ""a bizarre farce"" and a ""stomach-churning"" process.
He has said the provisional legislature would be a ""rubber stamp"" chamber that would simply echo Beijing.
Spokesman Shen said matters pertaining to Hong Kong would be China's internal affairs after July 1, 1997 and warned Britain against interference.
""This will interfere in China's internal affairs,"" Shen said of Britain's threat. ""Playing the international card is useless.""
""To cooperate with China is of benefit to Britain, otherwise it will not be beneficial,"" he said.
Hong Kong's first post-colonial chief executive, 59-year-old shipping tycoon Tung Chee-hwa, has defended China's controversial decision and lashed at Britain, saying the territory's colonial masters must ""face the reality"".
Tung has said it was irresponsible of Britain to threaten to take Beijing to the World Court over the interim chamber.
The controversial new body is dominated by pro-Beijing figures -- including 33 incumbent lawmakers and many politicians who lost to pro-democracy forces in the 1995 Legislative Council election, the first time all seats were filled by vote, either direct or indirect.
The Democratic Party, the favourite in last year's election with 19 of the 60 council seats, boycotted moves to create the provisional body, branding it anti-democratic.
The Provisional Legislative Council, as it will be known, is to sit from July 1 until a new legislature can be constituted by elections, set for 1998.
",3
"Chinese authorities sealed off a town in northwestern Xinjiang and paramilitary police patrolled the streets after at least 10 people were killed in a separatist riot last week, residents said on Tuesday.
""No one can leave, no one can enter,"" one resident said by telephone from the mainly Moslem town of Yining in the Yili Kazakh Autonomous Prefecture near the border with Kazakhstan.
Authorities closed the airport and railway station on Thursday and clamped an after-dark curfew on the town, residents said.
At least 10 people were killed, including one policeman, and some 100 wounded when 1,000 Moslem separatists of the Uighur ethnic minority rampaged through Yining on Wednesday to protest against Beijing rule, Chinese sources and residents have said.
The riot was among the most violent for many years in the restive region of Xinjiang, where Turkic-speaking Uighurs are in the majority and ethnic Han Chinese make up 38 percent of the population.
Shops and restaurants were closed in Yining and paramilitary police patrolled the streets. Police had arrested many suspects and were hunting other rioters, one Han woman resident said.
Hundreds of Uighurs had been arrested following the riot, said the leader of an exiled nationalist Uighur group in Kazakhstan in an interview in Almaty.
Local officials said the number of arrests was much lower, but refused to give further details.
""They have arrested several counter-revolutionaries and they are catching more,"" the woman resident said.
""The Uighurs are walking the streets and they look happy because the streets are full of them,"" she said in a sign of the depth of ethnic divisions. ""It's just them in the streets. It's all their people. No one else is on the streets.""
However, Han residents said they were not afraid.
""We are not nervous because the armed police and police are here,"" the woman said.
""If something happens we will...unite,"" another Han resident said. ""There are also patriots among the Uighurs.""
Officials tried to play down the riot, describing it as a small incident fuelled by ""foreign hostile forces"". They refused to say how many people were killed or wounded.
Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
In Almaty, Yusupbek Mukhlisi, leader of the United National Revolutionary Front of East Turkestan, said the riot was sparked by the execution of 30 Uighurs by the authorities last week.
However, an official of the bureau in charge of directing the clean-up operation after the riot denied that report.
""This is a pure fabrication,"" he said. ""But I cannot tell you the reason.""
The rioters attacked Han Chinese on sight, smashed cars and set fire to shops, forcing authorities to mobilise 1,000 police and paramilitary People's Armed Police to quell the violence, witnesses said. Police fired teargas to disperse the crowd.
The demonstrators, shouting anti-Chinese slogans, had marched on a government building, one official said.
The riot erupted after a Uighur criminal suspect resisted arrest by Chinese police, a Chinese source said.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
Last May, Beijing ordered tighter controls along Xinjiang's lengthy border to block the smuggling of weapons and subversive materials from nearby central Asian states.
",3
"Beijing has pledged to open its doors ajar to imports of U.S. textiles under a new deal, but Washington has no illusions it can close its yawning textile trade gap with China, diplomats said on Monday.
Chinese and U.S. negotiators signed a new textile agreement in Beijing on Sunday in an 11th-hour deal that ended the threat of a cross-Pacific trade war and ensured U.S. access to China's textile markets.
""It (the deal) provides us with an opportunity to increase our access to China's markets in high-priority areas,"" one diplomat said. He declined to elaborate.
""(But) we are under no illusions that we are going to balance textiles as a single sector of our trade,"" a second diplomat said on condition of anonymity.
China exported $6.5 billion worth of textiles to the United States in 1995 but imported only $64 million. Diplomats attributed the sluggish U.S. textile exports to Beijing's high tariff rates and non-tariff barriers.
""Textiles are never going to be balanced but it's important that there be a market access element there,"" the second diplomat said.
The agreement gave China a U.S. import quota slightly larger than the previous 1994 textile pact, and China pledged to reduce its tariffs on textile imports.
Both the Chinese and U.S. sides declined to say by how much U.S. textile exports to China would increase and vice versa, or by how much China's tariffs would be cut.
""There are significant gains for U.S. industries,"" a third diplomat said.
""It was, for the first time, a concessionary admission on (the) part of the Chinese that they too had to do something with regard to supplying market access for U.S. products where we were competitive,"" he said but did not go into details.
The overall U.S. trade deficit with China -- the United States' largest after its deficit with Japan -- was seen reaching $38 billion in 1996, up from $34 billion in 1995, according to U.S. figures.
The new textile agreement may be good news for U.S. textile manufacturers and exporters, but it could be bad news for China's lumbering state enterprises.
A flood of U.S. textile imports could intensify competition and further cripple many of China's state enterprises, almost half of which are in the red, analysts said.
""U.S. textile imports will intensify competition in the already saturated domestic textile market,"" a Chinese economist said.
""Life will be even more difficult for a group of loss-making textile enterprises,"" said the economist, who asked not to be identified. ""Some enterprises will be forced to bow out of the textile industry -- declare bankruptcy or merge.""
State-owned textile factories in Shanghai, China's largest industrial city, registered losses of 350 million yuan ($42.2 million) in the first seven months of 1996, the China Business Times said on Monday.
The accord ended the threat of a Sino-U.S. trade war, which had loomed after Washington slapped $19 million in penalties on Chinese imports last September, accusing Beijing of shipping textiles through third countries to evade U.S. restrictions on Chinese imports.
China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but delayed the action to allow time for further talks.
Beijing announced after Sunday's deal that it was calling off its retaliatory measures, but Washington's penalties remained in force.
",3
"A Chinese court on Thursday rejected a plea of insanity by a bank robber and sentenced him to death, along with two accomplices, for a string of heists that shocked Beijing.
In a rare move, officials allowed foreign reporters to watch the court proceedings against Guo Song and seven accessories, apparently to trumpet the success of a crackdown on crime launched this year.
The stocky Guo appeared unrepentant, his face set and defiant, as he was led from the courtroom by two policemen after the Beijing Number One Intermediate People's Court convicted him of robbing three bank cash delivery vans this year.
""The court does not believe or accept defendant Guo Song's plea of insanity,"" the presiding judge said in his verdict.
""After psychiatric tests, Guo Song was found to have total control over his mental faculties and was responsible for his actions during the crime,"" said the judge, whose name was not available.
The 32-year-old defendant, dressed in a beige jacket and dark blue trousers, did not speak during the 20-minute hearing. He has two weeks in which to file an appeal to the Higher People's Court.
The presiding judge stood to read the verdict against the eight defendants lined up in front of him and each flanked by two police officers who held their arms at their sides.
Guo, who had previously served a four-year term for rape, was found guilty of three bank robberies in Beijing in February, June and August this year, and of shooting dead four bank guards.
The robberies shocked the Chinese capital, where bank heists had been unheard of since the 1949 communist takeover.
The court sentenced two co-defendants to death for selling firearms to Guo.
A fourth defendant was given a death sentence suspended for two years and a fifth was sentenced to life imprisonment for selling firearms.
Three others, including Zhang Ying, 25, were sentenced to prison terms of up to seven years for harbouring a criminal. Zhang was the lone woman among the defendants.
Police tracked down Guo last September after police detained an accomplice of Guo's in the robberies, Lu Xianzhou, while he was driving a stolen car, state media reported.
Lu confessed to robbing the cash delivery vans and customers of banks and led police to Guo. It was not known if Lu has been sentenced.
Police had recovered six guns, 350 rounds of ammunition and part of the stolen cash -- 170,000 yuan ($20,000), 610,000 Japanese yen ($5,000) and $18,000.
Hundreds of thousands of people have been arrested and several thousand executed since China launched its Strike Hard crackdown against crime last April.
Crime, virtually eliminated after the communists swept to power in 1949, has staged a comeback in the past two decades, springing up along with economic reforms that have loosened central controls while opening up opportunities for abuse of power.
Illegal possession of firearms and gunrunning are widespread in China. The crime rate has soared, and 395 policemen were killed in the line of duty in 1995.
",3
"Beijing's propaganda machine has accused the United States of using Tibet's exiled god-king, the Dalai Lama, as a tool to Westernise and break up China.
""Western countries, led by the United States, have directed the focal point of their 'Westernisation' and 'disintegration' (campaign) at China,"" the Tibet Daily said in an edition seen in Beijing on Tuesday.
""(They) have made the Dalai Lama clique their tool to implement this anti-Chinese strategy,"" the newspaper said, noting that the West had showered awards on the Dalai Lama, including the Nobel Peace Prize in 1989.
China has rarely singled out a country for backing the Dalai Lama, one Chinese analyst said.
Sino-U.S. relations have been strained in recent years by disputes over Tibet as well as Beijing's diplomatic rival Taiwan, human rights abuses and widespread copyright piracy in China.
China blames followers of the Dalai Lama for periodic unrest in the Himalayan region bordering India.
The Dalai Lama says says he wants autonomy and freedom of worship in his deeply Buddhist homeland. He fled China into exile in India in 1959 after an abortive uprising against communist rule.
The December 30 edition of the Tibet Daily slammed Western criticism of China's human rights record in the region, saying critics ""confused black with white"".
""Sovereign rights are much more important than human rights,"" the newspaper said, quoting 92-year-old paramount leader Deng Xiaoping.
""The sovereignty and security of the state should be placed first,"" it said.
The newspaper argued that communist rule protected the rights of the majority of Tibetans by ending slavery and raising living standards.
Tibet has been rocked in recent years by sporadic, sometimes violent, anti-Chinese unrest with monks and nuns often at the forefront of demonstrations for independence.
Chinese authorities have offered a reward of one million yuan ($120,000) for the arrest of those responsible for a bomb set off on Christmas Day outside government offices in Lhasa, the Tibetan capital.
No casualties were reported, but the bomb caused widespread damage, shattering windows 100 metres (yards) away, officials have said.
Chinese officials have said there was little doubt the blast was politically motivated and carried out by followers of the the Dalai Lama.
Last week, Tibet's government-in-exile in Dharamsala, in northern India, denied the Chinese allegation, saying the bombing could have been carried out by China as an excuse to crack down on dissent.
Chinese authorities have tightened security across Tibet in the run-up to New Year celebrations next month and vowed to continue a campaign to indoctrinate monks and nuns to be ""patriotic"" and to pledge allegiance to the Chinese government.
",3
"Chinese Communist Party boss Jiang Zemin has wooed Taiwan's ruling and opposition parties to come up with constructive suggestions on reunification of the two sides, split by civil war almost five decades ago.
""We welcome Taiwan's various political parties...to exchange views with us on relations between the two sides and on constructive suggestions about peaceful reunification,"" Jiang told a government advisory body on New Year's Day.
Chinese newspapers carried the full text of Jiang's speech on Thursday.
Earlier this week, Jiang made a similar overture, but he made no mention of the island's political parties, instead referring to Taiwanese from all walks of life.
Taiwan's ruling Nationalist Party, which fled into exile on the island after losing the Chinese civil war in 1949, says it is committed to reunification but is in no hurry to do so. Taiwan insists on reunification under freedom and democracy and a free market economy.
The island's main opposition Democratic Progressive Party has called for ""self-determination"", or letting Taiwan's residents decide for themselves whether to reunify or declare independence.
China, which regards Taiwan as a rebel province, has threatened to invade if the island declares independence.
""Taiwan is our country's sacred territory,"" Jiang said.
""We hope the Taiwanese authorities...will stop all activities splitting the motherland and take realistic action to improve relations between the two sides,"" he said.
Tensions between Beijing and Taipei began to ease in the late 1980s, but relations plunged after Taiwan's President Lee Teng-hui made a trip to the United States in a bid to break the island out of diplomatic isolation imposed by China.
Ties deteriorated further last March when China conducted war games and missile tests close to Taiwan in the run-up to the island's historic presidential elections. China frowns on Western-style democracy.
Analysts said Jiang was eager for reunification to secure his place in modern Chinese history alongside Mao Zedong, who established the People's Republic, and Deng Xiaoping, who cemented the return of the British colony of Hong Kong to Chinese rule in mid-1997.
Jiang, the anointed successor of Deng, China's 92-year-old paramount leader, is seen by some Western analysts as merely a transitional figure and he has struggled to shake off that image.
Jiang's call on Taiwan to come up with suggestions on ways to reunify could go unanswered again, one Chinese analyst said.
China has been bitter since Taiwan ignored Jiang's 1995 ""eight point"" proposal on reunification, in which he called for leaders of the two sides to exchange visits.
Jiang was seen by some in the military and the Communist Party as weak after his earlier call for reunification fell on deaf ears, analysts said.
His latest overture to Taiwan could backfire and be used by his political opponents to attack him, another analyst said.
",3
"North Korea said on Monday it would fire a top official marooned in South Koreas embassy in China if he sought asylum and Seoul went on alert for possible attack but said it wanted talks on the Cold War crisis.
Pyongyangs Foreign Ministry, commenting on the highest level defection yet from the Stalinist nation, saying that if leading ideologue Hwang Jang-yop had been kidnapped, then North Korea would take ""decisive countermeasures"".
""Our stand is simple and clear. If he was kidnapped, we cannot tolerate it and we will take decisive countermeasures,"" the KCNA news agency, monitored in Tokyo, quoted the Foreign Ministry as saying.
""If he sought asylum, it means that he is a renegade and he is dismissed,"" it said, adding that it had asked Beijing to investigate what it called the disappearance of Hwang, who took refuge in Seouls mission in Beijing six days ago.
North Koreas ambassador was believed to have met officials at Chinas Foreign Ministry on Monday.
Hwangs defection has embarrassed his hermit homeland, delighted Seoul and mired Beijing in a quandary over how to usher him out of China without offending an old communist comrade or a new capitalist friend.
But Hwang turned 74 on Monday with no sign of progress to celebrate in his appeal for asylum in the South, and still stranded in Seouls heavily guarded consulate in Beijing.
U.S. Secretary of State Madeleine Albright voiced U.S. concern over events on the Korean peninsula, saying they underlined the need for dialogue between rival North and South.
South Korea prepared for possible attacks by Pyongyang as the Cold War crisis escalated, but said confrontation over the defector would not scuttle its efforts for detente.
Another prominent defector, Li Il-nam, a nephew of North Korean leader Kim Jong-ils ex-wife, remained in a coma after being shot and critically wounded at the weekend by suspected North Korean agents near Seoul.
Security around South Koreas ports, airports and other public places had been beefed up and 10,000 police and soldiers searched for the two suspected agents who shot Li.
Seoul Foreign Minister Yoo Chong-ha said problems stemming from Hwangs defection were just the start of headaches for Seoul because of a crisis in the North.
""I believe the North Korean regimes crisis will deepen as time passes because theres no likelihood of improvement in its economic hardship and food shortages, and signs of laxity in its social order,"" Yoo told a meeting of South Korean diplomats.
South Koreas security-related ministers on Sunday agreed that a desperate Pyongyang resort to guerrilla attacks after Hwang, a top adviser the Norths Kim Jong-il, sought asylum.
Dour warnings from North Korean officials in Beijing of the consequences of any attempt to move Hwang to the South gave a hint of Pyongyangs willingness to retaliate.
""If they make him go to Seoul, I think there will be war,"" said one North Korean official who declined to be identified.
South Korean diplomats and Chinese police guarding the mission brought in extra blankets and mattresses in a sign they expected a lengthy stand-off over Hwang.
However, dozens of North Korean officials disappeared on Monday afternoon from outside the building where they have kept a round-the-clock vigil since Hwang disappeared inside.
China, an unwilling third party in the feuding between the two hostile ends of the Korean peninsula, has appealed to both sides to act calmly to resolve the affair.
Analysts say the North has suffered huge loss of face over the defection of Hwang, who was ranked high in the hierarchy of his Stalinist homeland and was the architect of its governing ideology of Juche, or strict self-reliance.
",3
"China was caught on Thursday in a no-win situation in a row between its old communist comrade, Pyongyang, and a new commercial ally, Seoul, with a North Korean official holed up in the South Korean embassy in Beijing.
""Whatever way they (the Chinese) play it... it's impossible to keep both Koreas happy,"" one Western diplomat said.
South Korea said Hwang Jang-yop, a senior aide to North Korean leader Kim Jong-il, and an assistant were seeking asylum at Seoul's embassy in Beijing.
North Korea accused the South of kidnapping Hwang, one of 11 secretaries on the powerful secretariat of Pyongyang's ruling Workers' Party, and urged China to sort out the mess -- in North Korea's favour.
Diplomats said they saw little opportunity for Beijing to settle the row in its backyard without disappointing the Stalinist North, one of China's few remaining socialist allies.
""The inevitable outcome is that the guy will end up in Seoul. I can't see any way around it,"" a second diplomat said.
Diplomats said they expected some tough negotiations on the crisis, with Hwang possibly locked inside the South Korean compound for some time.
South Korea has sent Kim Ha-jung, a special adviser to Foreign Minister Yoo Chong-ha, to Beijing for talks on the defector's fate.
If South Korea can convince China that Hwang sought asylum of his own free will and was not kidnapped, China has little choice but to allow the defector to leave for South Korea, the diplomats said.
Already Beijing was giving a hint of its position.
Chinese police blocked the sedate, tree-lined avenues leading to South Korea's consular office in Beijing, where Hwang arrived by taxi on Wednesday to seek asylum.
The cordon was protection for the compound and its high-profile guest against possible North Korean intrusions rather than to prevent the apparent defector from leaving China, diplomats said.
""The Chinese will play it according to the rules,"" the second Western diplomat said. ""They won't stick their nose into the embassy itself. That's something they'll never do.
""It (the cordon) could be as much for the protection of the South Koreans as anything else because the North Koreans could do anything,"" he said. ""You'd want to make sure there are no untoward incidents.""
Hwang, 73, was the highest ranking Pyongyang official to seek asylum in South Korea. He was in charge of the North Korean communist party's foreign policy and a member of its powerful central committee, said Seoul officials, who rank him 24th in the Pyongyang power structure.
But Beijing must placate North Korea, whose friendship China once described as being as close as ""lips and teeth"".
""They'll have to find some face-saving way to resolve the problem,"" the second diplomat said.
""They (Chinese) turned a blind eye in the past to defections through China and that may become a lot more difficult from now on,"" he said.
China has called for calm in the interests of peace and stability in the Korean peninsula while it investigates.
North and South Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
But capitalist South Korea has become an important trading partner and source of investment for China in recent years.
""There's far more in the relationship with South Korea for China than... with North Korea,"" the first diplomat said.
""China's primary interest in North Korea is that the country doesn't collapse with refugees flooding across the border and possible nuclear problems,"" he said.
North Korea was suspected in the early 1990s of pursuing a weapons-grade nuclear programme. Under an agreement signed with Washington in 1994 Pyongyang promised to dismantle the programme in return for safer light-water reactors.
",3
"A court in southwest China sentenced at least five dissidents to prison terms of up to 10 years for subversion, a human rights watchdog group said on Saturday.
At least eight other dissidents were rounded up in Guiyang, capital of Guizhou province, in the same case, the New York-based Human Rights in China said.
An unknown number of the eight were sentenced, the group said. Details were not available.
The Guiyang Intermediate People's Court sentenced the five dissidents in May, 1996, but Human Rights in China said it was not able to confirm their convictions until recently.
""There were many people involved. The place was remote...It took a lot of time to verify the facts,"" Xiao Qiang, executive director of Human Rights in China, told Reuters by telephone.
The convictions could not be indepenently confirmed. Court officials and police could not be reached for comment.
Two of the political activists, Lu Yongxiang and Huang Zhongmin, were arrested in Beijing's Tiananmen Square on June 4, 1995 -- the sixth anniversary of a bloody military crackdown on student-led demonstrations for democracy -- while distributing copies of a daring, open letter to Communist Party leaders, the group said.
Lu, 50, a veteran dissident, and Huang, 35, a businessman, were each sentenced to five years in prison for participating in a counter-revolutionary group, spreading counter-revolutionary propaganda and incitement.
Chen Xi, 42, a lecturer-turned-businessman, received the harshest sentence -- 10 years in prison -- for organising and leading a counter-revolutionary group.
The open letter demanded the ruling Communist Party lift a decades-old ban on the establishment of new political parties and newspapers and draft a new constitution guaranteeing independence of the judiciary, democratic elections and freedom of the press.
In the letter, the dissidents threw their weight behind Zhao Ziyang, who was deposed as Communist Party chief in a power struggle that followed the 1989 crackdown.
Zhao is under virtual house arrest, sources close to him have said. He dropped from public view after May 19, 1989, when he visited students occupying Tiananmen Square and, with tears in his eyes, beseeched their leaders to end the protests. The next day hardliners clamped martial law on the Chinese capital.
On June 3 and 4, 1989 troops backed by tanks and firing automatic weapons stormed into the city, retaking the square and crushing the demonstrations with heavy loss of life.
The open letter also demanded the authorities release fellow dissidents, including former student leader Wang Dan, who was sentenced to 11 years in prison last year for conspiring to subvert the government.
The two other dissidents jailed by the Guiyang court were Liao Shuangyuan, 43, a legal adviser, and Zeng Ning, 28, a legal expert, who received four and two years in prison respectively for organising and joining a counter-revolutionary group.
China jailed dozens of dissidents in 1996 as part of a drive for stability that followed an easing of foreign pressure over its human rights record, diplomats and human rights activists say.
Beijing regularly hits out at criticism of its human rights record, regarding it as interference in its internal affairs and saying its priority is to fulfill the rights of its 1.2 billion people to food and clothing.
",3
"China has pledged to edge open its insurance, stock, retail, wholesale and banking sectors to foreign investment as part of a drive for long-delayed entry to the World Trade Organisation (WTO).
""From 1997-2000, China is expected to open its insurance and stock market wider to foreign investment,"" the China Daily said on Sunday, quoting Ma Jixian, an official of the State Economic and Trade Commission under the cabinet.
The pledge was contained in a unilateral action plan submitted by China to the Asia-Pacific Economic Cooperation (APEC) summit in the Philippines last month, the newspaper said.
Before the end of the decade, foreign insurers would have access to markets outside Beijing, Shanghai and Guangzhou, Ma said without elaborating.
China's insurance market was once virtually monopolised by the state-owned People's Insurance Group but the sector has gradually opened up to domestic as well as foreign competition.
Only three foreign insurers are able to write insurance policies in China, including American International Assurance Co Ltd, a part of the American International Group Inc.
The others are Japan's Tokio Marine and Fire Insurance Co Ltd and which has a life insurance joint venture with a domestic insurer.
Ma, one of China's representatives at the APEC summit, said foreign stock companies would be allowed to handle A shares, whose availability is still confined to native Chinese. He gave no further details.
Currently, foreign investors are restricted to buying B shares, while Chinese nationals can only buy A shares.
In its action plan, China also pledged to cut its average import tariffs to about 15 percent from the current 23 percent.
The tariffs would be reduced futher in subsequent years, Ma said without going into details.
""A majority of non-tariff measures will have been abolished by 2010 and all those incompatible with World Trade Organisation rules will have been erased by 2020,"" Ma said.
China has pushed to gain entry to the WTO on the favourable terms of a developing nation, but Western countries, particularly the United States, have insisted its economy is too big for such preferential treatment.
According to the action plan, China would allow foreign banks to open more operational outfits in 24 Chinese cities and launch pilot bases where foreign banks can conduct yuan business, the newspaper said.
In the first decade of the next century, foreign banks would be allowed to expand their presence beyond the current 24 pilot cities and more pilot bases would be available for them to conduct yuan business, it said.
China would let overseas retailers establish more joint venture or cooperative retailing chains in areas beyond the 11 pilot cities currently allowed, the newspaper said.
The liberalisation would cover all provincial capitals and major economic cities by the year 2010, the newspaper said, adding that foreign retailers would be free to open outlets in China by 2020.
Foreign investors would be allowed larger stakes in China's power sector and have greater access to China's river, marine and road transportation if Beijing becomes a member of the WTO, it said.
China would further open its tourism sector, allowing joint venture travel agencies in five cities on an experimental basis over the next three years, the newspaper said.
",3
"Chinese police have arrested the suspected ringleader of a riot in the mainly Moslem northwestern region of Xinjiang last week that left at least 10 people dead and 144 injured, local officials said on Wednesday.
Abudu Heilili, 29, of the Uighur ethnic minority, was in police custody and under interrogation following the riot last Wednesday and Thursday in Yining near China's border with Kazakhstan, said a local Communist Party committee official.
The suspect was unemployed, and was a ringleader of a less violent anti-Chinese demonstration in Yining in August 1995, the official told Reuters by telephone.
Heilili had been released after that demonstration following ""ideological education"" -- a codeword for political indoctrination, he said.
Police rounded up 200 to 300 people after last week's riot, in which at least 10 people were killed and 144 injured. Many suspects had been released after questioning, officials said.
The death toll could rise, with up to seven people listed as missing, the party official said. About 90 people were treated for head wounds, and more than 10 were still in hospital.
Of the injured, 132 were civilians while the remaining 12 were members of the paramilitary People's Armed Police, a spokesman for the Xinjiang regional government said by telephone from Urumqi, Xinjiang's capital.
Authorities had issued circulars calling on local officials to deal a blow to separatism in the frontier region and warning of severe punishment for last week's rioters.
""We are resolved to deal a blow to the handful of ethnic separatist elements,"" said Zhang Youlian, deputy director of foreign affairs office for the Yili Kazakh Autonomous Prefecture, that administers Yining.
About 1,000 people, mostly Uighur farmers or unemployed young men, rioted in Yining last week in one of the largest and most violent demonstrations for independence in the mainly Moslem region of Xinjiang since the 1949 communist takeover.
Turkic-speaking Uighurs are in the majority in Xinjiang, where ethnic Han Chinese make up 38 percent of the population.
""We don't want the Communist Party,"" the demonstrators had chanted, witnesses said.
Uighur demonstrators had attacked Han Chinese with bricks, clubs and knives, and rampaged through the town, smashing and setting fire to about 20 vehicles and looting shops.
The People's Armed Police only succeeded in dispersing the rioters a day later, firing teargas to break up the crowd.
Authorities had sealed off Yining, an after-dark curfew was in force in some districts and armed police still patrolled the streets. The airport would reopen on Friday, officials said.
A Chinese source said the riot erupted after a Uighur criminal suspect resisted arrest by police.
Yusupbek Mukhlisi, leader of the United National Revolutionary Front of East Turkestan based in Kazakhstan, said the riot was sparked by the execution of 30 Uighurs in China last week. Chinese officials dismissed the report.
Yining is 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
Last May, Beijing ordered tighter controls along Xinjiang's lengthy border to block the smuggling of weapons and subversive materials from nearby central Asian states.
",3
"Chinese police have moved North Korean diplomats away from the area around the South Korean mission in Beijing where a top-level Pyongyang official has taken refuge, witnesses said on Friday.
However, there was no sign of movement in a diplomatic impasse over the fate of Hwang Jang-yop, 73, a pillar of North Korea's Stalinist establishment, and his assistant who have sought asylum in the South.
China, finding itself in a diplomatic quandary involving its old communist comrade and a new commercial friend, has avoided direct comment and chosen instead to appeal for calm.
In Singapore, South Korean Foreign Minister Yoo Chong-ha and Chinese counterpart Qian Qichen met to discuss a South Korean appeal for safe passage from Beijing to Seoul for the defector, a senior aide to North Korean leader Kim Jong-il.
Qian said after the talks that Beijing needed more time.
""This incident happened all of a sudden, so we need more time to investigate,"" he told reporters.
In the sedate, tree-lined diplomatic district of Beijing, dozens of Chinese police cordoned Seoul's consular section off for a second day. Hwang, the most senior official to defect from North Korea, arrived on Wednesday to seek asylum.
""They are harassing us and we are a little nervous about that,"" said South Korean embassy spokesman Chang Moon Ik, adding that Seoul had asked Beijing to maintain tight security around the compound.
Chinese police moved away several North Koreans watching the compound from cars parked in side streets overnight, witnesses said.
""I still don't believe it,"" said one North Korean who drove up to the cordon on Friday. ""Judging from this situation and his position it is not possible for him to defect.
""If China allows him to go to South Korea then we will be disappointed,"" said the North Korean, who declined to identify himself. ""It will be regrettable.""
Pyongyang has charged that Hwang, 73, one of the chief architects of North Korean communism, must have been kidnapped, and has called on Beijing to sort out the mess.
Seoul has dismissed Pyongyang's charges that Hwang, one of 11 secretaries on the powerful secretariat of North Korea's ruling Workers' Party, was kidnapped, saying he arrived at the compound in a taxi on Wednesday.
China's Foreign Ministry said it had nothing to say on Friday on the diplomatic tussle in its backyard.
It was not clear whether Kim Ha-jung, a special adviser to South Korean Foreign Minister Yoo Chong-ha, would meet Chinese officials on Friday.
Kim failed to hold talks with Chinese officials when he arrived from Seoul on Thursday as Beijing, apparently angered by Seoul's decision to export its latest row with Pyongyang into China, avoided a meeting, South Korean sources said.
However, he met the defector inside the compound.
Officials at the North Korean embassy refused to comment or confirm reports from Seoul that Pyongyang had sent a delegation led by an official at the level of vice-minister and including officials from the ruling Workers Party and the Foreign Ministry to discuss Hwang's defection.
South and North Korea were separated at the end of World War Two and fought a war from 1950 to 1953. China fought on North Korea's side in the conflict.
",3
"A top Beijing official said on Monday the city's former Communist Party boss Chen Xitong could be punished for dereliction of duty in a further disgrace for an official who was once among China's most influential men.
However, more than a year of investigation into the man who presided over China's capital for most of the 1980s had uncovered no evidence of more serious wrongdoing, Beijing Vice-Mayor Zhang Baifa told reporters at a reception.
""He (Chen) is living very comfortably,"" the vice-mayor said.
Chen was being held outside Beijing, pending completion of an investigation, Zhang said, but declined to give details. Hong Kong newspapers have reported that Chen was under house arrest in Inner Mongolia.
Chen has not been seen in public since he stepped down as Beijing's Communist Party secretary in April 1995 after his protege, Vice-Mayor Wang Baosen, committed suicide after coming under investigation for corruption.
""Viewing the situation from the case of Wang Baosen, he (Chen) can't escape dereliction of duty,"" Zhang said, referring to what is usually an administrative punishment in China.
Zhang said the former municipal party chief, who served as mayor of Beijing during the 1980s, had accepted many expensive gifts but there was no evidence of wrongdoing in exchange.
Chen was sacked from the party's powerful Politburo in September 1995, becoming the most senior official to be ensnared in a corruption scandal since the puritan communists swept to power in 1949.
Zhang dismissed as ""baseless"" a Hong Kong newspaper report that Chen would be sentenced to between five and seven years in prison.
However, he signalled that the party, not prosecutors, would finally decide whether Chen would be indicted.
""It is up to the party central committee whether he is to be charged,"" Zhang said.
The woman who was Chen's mistress for about six years remained on the run, Zhang said. It was not known if the woman, identified as He Ping, had fled abroad, he said.
One of Chen's sons, Chen Xiaotong, former general manager of a Sino-Japanese joint venture hotel in Beijing, had been detained, Zhang said.
The case of the father was not related to that of the son, who was under investigation for corruption and accepting bribes, the vice-mayor said.
The case of Chen Xiaotong was also not related to that of another princeling, Zhou Beifang, who has received a suspended death sentence for corruption. Princelings are the sons and daughters of China's powerful ruling elite.
Chen Xitong's wife was free and not under house arrest, Zhang said.
Zhang said he and former Beijing Mayor Li Qiyan had been cleared of any wrongdoing because they had reported Chen's irregularities to the party leadership before the scandal surfaced.
Li stepped down as Beijing mayor in October and has been appointed as a vice minister of labour.
",3
"Chinese authorities, shaken by a bombing in Lhasa last month, have tightened security across Tibet in the run-up to the Himalayan region's New Year next month, the Tibet Daily said.
""In our region, there is not a single unit or department that can sleep soundly or relax its vigilance in the struggle against separatism,"" Gyamco, a vice-chairman of Tibet's regional government, was quoted as saying in an edition seen in Beijing on Monday.
Authorities have launched a manhunt across Tibet and offered a reward of one million yuan ($120,000) for the arrest of those responsible for a bomb set off on Christmas Day outside city government offices in Lhasa, the Tibetan capital.
No casualties were reported, but the bomb -- the largest so far by anti-Chinese activists in the restive region -- caused widespread damage, shattering windows 100 metres (yards) away, officials have said.
Gyamco ordered all departments to be staffed round-the-clock in the run-up to the Tibetan New Year on February 8 and called for vigilance to prevent more acts of sabotage, the newspaper said in its December 28 edition.
""Our struggle against the Dalai Lama clique is an intense and complicated class struggle and an unshirkable political responsibility of leaders at all levels,"" Gyamco said.
China blames followers of Tibet's exiled god-king, the Dalai Lama, for anti-Chinese unrest that erupts sporadically in the Himalayan region that borders India.
The Dalai Lama, who won the Nobel Peace Prize in 1989 for his non-violent campaign to win autonomy for his homeland, says he wants autonomy and freedom of worship in the deeply Buddhist region. He fled China into exile in India in 1959 after an abortive uprising against communist rule.
Several much smaller bombs have been been set off in Lhasa in the past two years, including one in 1995 that slightly damaged a plaque donated by Beijing and another last March outside the headquarters of the Tibet regional government.
Lhasa's Communist Party deputy secretary Hou Jianguo vowed to track down the saboteurs responsible for the Christmas Day bombing at all costs, the newspaper said.
""We are determined to solve this case as early as possible and at all costs,"" Hou said.
Authorities would continue a campaign to indoctrinate monks and nuns at lamaseries to be ""patriotic"" and pledge allegiance to the Chinese government, the official said.
Chinese officials have insisted there was little doubt that the Christmas Day blast was politically motivated and carried out by followers of the the Dalai Lama.
Last week, Tibet's government-in-exile in Dharamsala, in northern India, denied the Chinese allegation, saying the bombing could have been carried out by China as an excuse to crack down on dissent.
Tibet has been rocked in recent years by sporadic, sometimes violent, anti-Chinese unrest with monks and nuns often at the forefront of demonstrations for independence.
The exiled government says it opposes violence and remains committed to a negotiated political settlement.
",3
"China rejected on Tuesday an invitation for one of its top policymakers to visit Taiwan, saying the island must first abandon its bid to break out of diplomatic isolation.
""It is impossible,"" a spokesman for the cabinet's Taiwan Affairs Office said when asked if the office's director Wang Zhaoguo would accept the invitation from Taiwanese business leader Kao Ching-yuan.
The spokesman said the time for such a visit was not ripe because Taiwan had yet decided to abandon its ""pragmatic foreign policy"" of trying to boost its international standing.
""Taiwan...should not seek to enter the United Nations,"" the spokesman told Reuters by telephone. Taipei lost its seat in the United Nations when Beijing took its place in 1971.
China regards Taiwan as a rebel province and insists the island is not entitled to official links with other states.
If Wang had accepted and Taiwanese authorities had allowed him to visit, he would have been the most senior Chinese official to set foot on the island since the end of China's civil war in 1949.
Last week, a spokesman for a delegation of Taiwanese business leaders visiting Beijing quoted Wang as saying he would be happy to visit Taiwan if he had an opportunity, but that there was no definite commitment to accept.
The backpedalling by China on Tuesday indicated it was unwilling to make up with Taiwan for now, said a Chinese analyst familiar with Beijing government policy.
Ties between Beijing and Taipei were strained after Taiwan's President Lee Teng-hui made a landmark visit to the United States last year in a bid to lift the island out of diplomatic isolation.
China held war games and missile tests off Taiwan in a show of force in the run-up to the island's first presidential elections in March, which Lee won by a landslide.
Taiwan, an island with a population of 21 million, is eager to make up with its giant neighbour, the world's most populous nation with 1.2 billion people.
Last week, Taiwanese business leader Kao urged China to resume talks with Taiwan, saying the island's investors would lose confidence in China if political friction impeded ties.
But China was in no hurry to mend political fences, preferring instead to continue heaping pressure on Taiwan, said the analyst, who spoke on condition of anonymity.
""China is trying to use Taiwan's industrial and commercial sector to put pressure on the Taiwan authorities,"" he said.
Last month, China stepped up pressure on Taiwan to lift a decades-old ban on direct trade and transport links between the two sides by unilaterally announcing a set of regulations for such links.
Taiwan has banned direct trade, transport and mail links since 1949. Indirect trade and investment has been allowed since the late 1980s, usually through Hong Kong.
Many Taiwanese businessmen, who have poured more than $20 billion into China, are eager for direct trade and transport, but Taiwan has been reluctant to remove the curbs, which it views as its last bargaining chip in talks with the communists.
Last month, China called for political talks with Taiwan to end the state of hostility to pave the way for reunification.
Both China and Taiwan agree to eventually reunify but on very different terms.
",3
"In imperial China, executions were carried out by skinning, quartering, chopping a man in half at the waist or even decapitating an entire clan.
From January 1, 1997, the People's Republic of China adds lethal injection as a means of executing death row convicts. Currently, all executions are by firing squad.
However, more modern means of execution do not necessarily mean waning enthusiasm for capital punishment.
""Crime is worsening...and the Communist Party is obsessed with security,"" a Chinese political scientist who spoke on condition of anonymity said.
""The party believes in using draconian laws against disorder,"" the political scientist said.
With a string of new laws in recent years and thousands of executions a year, the party is clearly not squeamish.
The National People's Congress, or parliament, is debating amendments to the Criminal Law to increase the number of crimes punishable by death, Chinese jurists said. The amendments are due to be passed by a full session of parliament in March.
In the face of soaring crime, China executed at least 1,000 people in just the first two months of its ""Strike Hard"" anti-crime crackdown launched last April, the London-based human rights watchdog Amnesty International said. Thousands more executions may have gone unreported.
Crime, virtually eliminated in the years after the puritan communists swept to power in 1949, has staged a revival in the past two decades in the wake of liberal economic reforms. Capital punishment is one means China chooses to try to deter violence.
RISING EXECUTIONS
Amnesty International recorded 3,612 death sentences and 2,535 executions in China in 1995 compared with 2,496 death sentences and 1,791 executions in 1994. Some 300 people were executed in the United States between the re-introduction of the death penalty in 1977 and January, 1996.
""It's killing the chicken to frighten the monkey,"" one jurist said, quoting a Chinese proverb.
Amnesty International said the figures were believed to fall far short of the actual number of death sentences and executions.
Justice Ministry officials declined requests for an interview. Police declined to comment.
China does not publish statistics about the death penalty, saying these are a state secret.
Despite criticism from groups such as Amnesty International, capital punishment seems to be in China to stay.
""It's impossible for China to abolish the death penalty in the next 20 years,"" Yu Quanyu, vice-president of the China Society for Human Rights Studies, said.
The introduction of lethal injection as a means of execution was contained in amendments to the Criminal Procedure Law that took effect on January 1.
Currently, capital punishment is carried out at execution grounds with a single bullet fired at close range into the heart or back of the head with the convict kneeling, his ankles manacled and hands tied behind his back.
Chinese and foreign jurists were divided over China's motives for introducing lethal injection and allowing executions to be staged inside prisons.
""I strongly suspect...they are making it even more convenient to harvest organs from executed prisoners for transplant purposes,"" Robin Munro of Human Rights Watch/Asia said in a telephone interview from Hong Kong.
Medical facilities can be set up inside prisons to harvest organs, Munro said.
Chinese dissidents living in exile have accused China of timing executions of death row convicts to coincide with the need for transplants of organs, often for sale.
China vehemently denies the charge.
Chinese jurists argued that the introduction of lethal injection and allowing executions behind prison walls were intended to curb waste of police manpower -- not to mention increasing logistical difficulties in finding shooting grounds.
SUPERSTITIOUS VILLAGERS
""It is difficult to find execution grounds,"" another jurist said. ""Superstitious villagers protest against executions on their land.""
Many executions were held at military target ranges and along river banks, requiring huge police manpower to escort death row convicts and to stand guard to keep away curious onlookers.
Chinese laws do not specifically state the site of execution grounds.
Currently, death row convicts cannot be executed inside prisons because it is regarded as inhumane for other inmates to hear the sound of gunfire, jurists said.
The use of lethal injection would be quiet -- and save on manpower, they said.
But Chinese jurists were doubtful whether death row convicts would be given a choice between the bullet and lethal injection.
",3
"China's Communist Party boss Jiang Zemin, in a renewed overture to rival Taiwan, urged the island not to set up new obstacles to ties, major Chinese newspapers said on Friday.
""The Taiwan authorities...must not artificially set up new obstacles,"" Jiang was quoted as saying on Thursday, one day after the election of the first post-colonial chief executive of Hong Kong. He did not elaborate.
Hong Kong is due to revert to China at midnight on June 30, 1997 after 150 years of British rule.
Jiang took the occasion of the naming of Hong Kong's future chief executive to urge Taiwan to return to the fold.
""Completing reunification of the motherland is the will of the people and an historical inevitability,"" Jiang said.
Major newspapers carried the full text of Jiang's speech.
Beijing and Taipei have been rivals since Chiang Kai-shek's Nationalist troops lost the Chinese civil war to the communists and fled into exile on the island in 1949.
The end of the Chiang dynasty in 1988 and the rise of Taiwan's first native-born president, Lee Teng-hui, has brought Western-style democracy -- anathema to Beijing's communists -- to Taiwan.
Beijing suspects Lee is trying to push Taiwan towards independence. Taiwan denies any independence ambitions and says it is still committed to reunification, albeit under democracy and a free market economy.
Jiang renewed a call for ""political talks"" to iron out differences and pave the way for reunification.
He said forces clamouring for Taiwan's independence threatened peaceful reunification.
""The Communist Party of China... will not allow any person, any force to split Taiwan from the motherland,"" Jiang said.
China has threatened to invade if Taiwan declared independence. It held war games and missile tests near the island in March in the run-up to its first direct presidential elections, which Lee won by a landslide.
""Our determination is unwavering,"" Jiang said in a speech to mark the 60th anniversary of the kidnapping of Chiang Kai-shek in the ancient capital of Xian.
Chang Hsueh-liang, dubbed the ""young marshal,"" abducted Chiang Kai-shek 60 years ago to force him to fight invading Japanese troops instead of focusing on his rivalry with the communists.
Beijing regards Taiwan as a rebel province and has sought to push the island into diplomatic isolation, but Taipei has continued to flirt with Beijing's allies.
Fiji President Kamisese Mara arrived in Taiwan on Thursday for a six-day official visit.
Beijing scored a big victory in its quest to isolate Taiwan when South Africa said in November it would switch recognition to Beijing from Taipei by the end of 1997.
Qiao Shi, chairman of China's National People's Congress, or parliament, called for the early normalisation of relations between China and South Africa during a meeting with a visiting delegation of the African National Congress on Thursday, the Xinhua news agency said.
",3
"For Moslems of the Uighur ethnic minority in northwest China, wearing neckties bearing a crescent and a star -- the national emblem of East Turkestan -- could land them in jail. But many young men are proudly defiant.
For Tibetan monks, nuns and civilians, displaying pictures of Tibet's exiled god-king, the Dalai Lama, could mean imprisonment. But almost every Tibetan family in the deeply religious Himalayan region of China has one.
Uighurs, Tibetans and other ethnic minority groups tried to resist Chinese rule for decades, but uprisings were crushed and dissent silenced under the late chairman Mao Zedong's iron-fisted rule.
With Beijing loosening its grip slightly in recent years, more Uighurs and Tibetans have dared to speak their minds, and many clamour for independence in defiance of Beijing's attempts to dilute their culture.
An anti-Chinese riot in the restive northwestern region of Xinjiang -- a region that Moslem separatists call East Turkestan -- this month left nine people dead and 198 wounded, officials said. Police arrested up to 300 people after the riot.
""Minority ethnic groups are like wild horses that are difficult to tame,"" a government official in Beijing said.
""They could gallop away at any time...regardless of how well fed they are,"" said the official, speaking anonymously. ""Like a centrifugal force, their tendency is to move away.
""Ethnic minorities are an old problem, a big problem and a difficult problem to solve,"" the official added.
This month's Moslem riot was one of the largest and most violent demonstrations for independence in the mainly Moslem region of Xinjiang -- which means New Frontier in Chinese -- since the communist takeover in 1949.
Xinjiang, bordering Afghanistan, Pakistan and three mostly Moslem Central Asian states, was shaken last year by bombings and assassination attempts.
Tibet has been rocked periodically by riots led by Buddhist monks and nuns loyal to the Dalai Lama, who fled into exile in India in 1959 after an abortive uprising against the Chinese.
China accuses the Dalai Lama, who won the 1989 Nobel Peace Prize for his non-violent campaign for autonomy for his homeland, of fomenting unrest in Tibet.
Extremities committed during the chaotic 1966-76 Cultural Revolution in Xinjiang and Tibet have contributed to the resolve of ethnic minorities to try to bolt, analysts said.
Han Chinese, who account for more than 90 percent of China's population of 1.2 billion, have been accused of trying to dilute the cultures of Uighurs and Tibetans.
Uighurs were banned from learning their written language in the Cultural Revolution. ""It's like hacking them with a knife. They'll never forget the wound,"" the government official said.
Han Chinese have had more success assimilating other ethnic minorities. The proud Manchus ruled China from 1644 to 1911, but few Manchus can read or write their own language.
A natural divide in looks, lifestyle, language was to blame for much ethnic unrest in more far-flung regions, analysts said.
Uighurs, like their Central Asian cousins, speak Turkic, are Moslems and abstain from pork, a main staple for Han Chinese.
""There's a big difference in the lifestyle, food, language, customs, costume and culture of Han Chinese and Uighurs. These are natural barriers,"" the official said.
China blames ""hostile foreign forces"" for much of the ethnic unrest. Kazakhstan is home to many exiled Uighur separatists.
China also has repeatedly accused Western countries of supporting Tibet's Dalai Lama.
""But why are there no disturbances in Inner Mongolia?"" one analyst asked in reference to China's northern region, populated mainly by ethnic Mongolians. ""That is because Mongolia did not extend its arm into China.""
",3
"Will the death of China's paramount leader Deng Xiaoping plunge the world's most populous country into chaos and division, or will heir apparent Communist Party chief Jiang Zemin take over the reins?
Diplomats and analysts said on Thursday they expected calm before any storm.
Will Deng's anointed successor, who also holds the jobs of state President and head of the armed forces, escape the fate of Chairman Mao Zedong's chosen heir -- a man who survived less than two years when he locked horns with Deng over power?
Will Jiang reverse his mentor's economic reforms and return to Mao Zedong's orthodox communism? Will a power struggle brew behind the scenes among those eager to succeed Deng as China's de facto emperor?
The world will be watching to see which way China's political winds blow -- and how the leadership copes with a plethora of problems from unemployment, a widening gap between rich and poor, corruption and a one-party system.
""I don't think there will be an immediate power struggle,"" one Western diplomat said on Thursday. ""The immediate concern will be to present a face of calm, stability and normality.""
Deng died late on Wednesday of respiratory failure -- a complication from Parkinson's disease and a lung infection. He ws 93 by Chinese reckoning, which adds a year to one's age.
His pragmatic policies transformed a backward Stalinist state into an economic powerhouse.
""There hasn't been such a death in 20 years, of such a prominent figure,"" another diplomat said.
China would be obsessed with stability and security, but the country could ground to a halt for some time while the nation mourns and leaders jockey for position, analysts said.
""There's going to be a lot more emphasis on stability, more focus on internal security so it's going to be... a cautious leadership,"" Hong Kong-based Sinologist Tai Ming Cheung said.
""There may be a certain amount of policy paralysis, which has been there already, but beyond that I don't see any great changes,"" Cheung said. ""There is going to be a lull.""
One Chinese analyst, who asked not to be identified, said stability would be a facade.
""It'll be like a duck swimming -- on the surface it'll be calm but underneath it'll be turbulent,"" said the analyst, quoting a Chinese proverb.
Jiang, 70, appears to have consolidated his power base.
But his political rivals, including Qiao Shi, 72, chairman of the National People's Congress, or parliament, were expected to jostle for power in the run-up to a crucial party congress later this year, analysts said.
""I expect an increase in political jockeying,"" Cheung said.
""I think that Jiang is making all the running and he is in a fairly strong position, so he is the one -- barring any mistakes -- to take full advantage, but then the other people will be pushing just as hard,"" Cheung said.
Jiang's predecessor, Zhao Ziyang, 77, who was sacked in 1989 as general secretary of the party for showing sympathy to students demonstrating for democracy, is waiting in the wings to stage a political comeback.
Zhao has not been seen in public for more than six years and is believed to be living under house arrest in Beijing.
Most analysts say Jiang is in control, but some write him off as a transitional leader.
""He (Jiang) has been consolidating his power considerably over the last year,"" the first diplomat said. ""He is now less dependent on Deng Xiaoping.""
",3
"China is considering restrictions on foreign investment in textiles, garments and sectors where domestic production capacity is already excessive, a senior official of the State Statistical Bureau said on Tuesday.
""The production capacity of some of our traditional industries, such as textiles and garments, is pitifully excessive,"" Li Qiming, director of the bureau's department of industry and transportation statistics, told Reuters.
""We are currently considering...whether to restrict foreign businessmen from entering sectors in which domestic production capacity is already abundant,"" Li said. He did not elaborate.
The losses of state enterprises in these industries exceed the national average, Li said but gave no specific figures.
China has said it would curb textile output and unnecessary expansion in the industry in 1997 to reduce losses in the state sector. It has set a target of phasing out obsolete textile equipment, including 10 million cotton spindles.
""There were 429 state textile enterprises that posted losses of more than five million yuan ($602,000) each in 1995. Their combined losses reached 5.21 billion yuan.""
""Indigenous enterprises are being squeezed...in some traditional industries,"" Li told a news conference.
""We may have to consider protection,"" he said.
The bureau spent one year and mobilised five million pollsters to conduct a survey of industries that showed that foreign investment was concentrated mainly in electronics, telecommunications, textile, garment and food processing, officials said.
China's 10 eastern coastal provinces and provincial-level cities have attracted 87 percent of total foreign investment, while five provinces in northwest China took in less than one percent of foreign investment, Li said.
The survey showed 59,311 wholly foreign-owned and Sino-foreign joint ventures had set up in China by the end of 1995, up 29,343, or 97.9 percent compared with end-1994.
Their combined output value was 1.2 trillion yuan ($144.6 billion) at end-1995, the survey showed. They made profits totalling 79.2 billion and paid 39.8 billion yuan in taxes.
The number of foreign-funded enterprises accounted for 10 percent of the total number of enterprises in China, but the output of foreign firms accounted for 20 percent of the total.
Hong Kong and Taiwan businessmen were the biggest investors, accounting for 32.6 percent of the total. It was inevitable that the government would impose restrictions on foreign investment in industries to protect the state sector, analysts said.
About 38 percent of state enterprises registered losses in 1996 compared with the previous year, Li said.
Losses posted by state firms soared 37.53 percent in 1996, he said.
Pre-tax profits of state enterprises slipped 4.83 percent in 1996 while after-tax profits plunged 42.5 percent.
Excessive stockpiles accounted for 20 percent of funds tied up by finished products.
Debts owed among enterprises worsened, with collectibles of state enterprises increasing by 11.8 percent in 1996.
($1 = 8.3 yuan)
",3
"A Chinese court has agreed to hear a lawsuit by veteran dissident Liu Nianchun accusing the government of illegal incarceration, but finding a defence lawyer has been difficult, Liu's wife said on Thursday.
Although Beijing's Chaoyang District Court has accepted the lawsuit, Liu's family has no money and several lawyers have come under government pressure not to take up the dissident's case, Chu Hailan said in a telephone interview.
In a separate case, Beijing's Dongcheng District Court has agreed to hear Wang Hui's lawsuit accusing police of illegally detaining her for unspecified reasons from May 16 to June 13, Wang told Reuters.
Wang, wife of jailed poet and dissident Zhou Guoqiang, also accused five guards at a detention centre in Changping county near Beijing, where she was held, of beating her up after the guards had been drinking.
She demanded 10,000 yuan ($1,200) in compensation, a public apology from the authorities and punishment of the guards.
No trial dates have been set. The courts declined to comment.
Chinese courts rarely agree to accept lawsuits filed by dissidents or their relatives. But acceptance of the case was only the first hurdle.
""It's very difficult to hire a lawyer. There are all sorts of pressures...and they (lawyers) are worried about their careers,"" Liu's wife said. ""Also, lawyers are expensive. I can't afford them.""
""I'm pessimistic...winning is impossible,"" she said.
International human rights groups have accused China's judiciary of serving as tools to persecute dissidents.
Wang, the poet's wife, was adamant. ""I'm not afraid of being jailed again for suing them,"" she said.
She demanded Chinese authorities allow her husband to visit his 74-year-old mother, who is in hospital with lung cancer.
Wang said she would consider dropping her lawsuit if the authorities allowed her husband, who is suffering from kidney infection, to seek medical treatment at a hospital.
Dissidents Liu, 48, and Zhou, 41, are both serving three year sentences of re-education through labour at a camp in the northeastern province of Heilongjiang, although Zhou has been given an additional year for an unsuccessful escape attempt.
Re-education through labour is an administrative punishment that can be imposed by the authorities without recourse to prosecutors or the courts.
Chinese authorities appear to have begun favouring the administrative punishment as a way to remove dissidents from circulation without the complicated process of a judicial trial.
The New York-based Human Rights in China, which monitors the human rights situation on the mainland, applauded the court's decision to hear Liu's lawsuit, but warned against perfunctory treatment.
""Liu's case must not be given the perfunctory treatment which has always been given to dissidents' lawsuits against the government in the past,"" the group said.
",3
"China has jailed two Mongolians for up to 15 years on charges of separatism and espionage, the London-based human rights group Amnesty International said on Thursday.
Hada, 41, former manager of the Mongolian Academic Bookshop, and Tegexi, 30, who worked in the Inner Mongolian Bureau of Foreign Affairs, were sentenced last December to 15 and 10 years in prison respectively, Amnesty said.
Chinese courts rejected their appeals last month and upheld their original sentences, it said. The pair had been held for a year in solitary confinement without charges or a trial.
""No evidence has been made public to show that Hada and Tegexi were involved in any activity which may be regarded as criminal under international standards,"" Amnesty said.
It called for their immediate and unconditional release.
The Amnesty report could not be independently confirmed. Officials in China could not be reached for comment on the eve of Lunar New Year holidays.
Amnesty said eight others were detained in December for alleged involvement in ""nationalist separatist"" activities, but were subsequently released.
Inner Mongolia, a Chinese province, is populated mainly by ethnic Mongolians but there has been little sign of anti-Chinese unrest since the early years after the 1949 communist takeover and the 1966-76 Cultural Revolution when dissent was crushed.
However, in late 1995, authorities in Inner Mongolia arrested 12 people who had demanded more democracy and an autonomous region, according to human rights groups.
Hada and Tegexi were being detained in poor conditions and their health was suffering, Amnesty said. They were living in a cell in Inner Mongolia's Number One Prison with over 30 other people, the report added.
Hada has a recurrence of tuberculosis and his neck was swollen, the group said. It was not known if he had received any medical treatment in prison.
Beijing-based Western analysts say China has tightened its grip on dissent and separatist sentiment ahead of the British colony of Hong Kong's return to Chinese rule on July 1.
""The harsh sentences passed on Hada and Tegexi are indicative of the severe attitude taken during the past year by the Chinese authorities towards suspected nationalists in...Tibet and Xinjiang,"" Amnesty said.
Inner Mongolia has traditionally been less restive than Tibet and Xinjiang.
Tibet has been rocked in recent years by periodic unrest, which China blames on the Himalayan region's god-king, the Dalai Lama, who fled into exile in India after an abortive uprising against communist rule in 1959.
Xinjiang borders Afghanistan, Pakistan and three mostly Moslem Central Asian states. The region has been shaken in recent months by several clashes and political killings involving separatists who want to end communist rule in Xinjiang.
""This 'crackdown' has also affected those whose peaceful religious activities are deemed to threaten 'national unity' and 'social stability',"" Amnesty said.
",3
"Beijing has pledged to open its doors ajar to imports of U.S. textiles under a new deal, but Washington has no illusions it can close its yawning textile trade gap with China, diplomats said on Monday.
Chinese and U.S. negotiators signed a new textile agreement in Beijing on Sunday in an 11th-hour deal that ended the threat of a cross-Pacific trade war and ensured U.S. access to China's textile markets.
""It (deal) provides us with an opportunity to increase our access to China's markets in high priority areas,"" one diplomat said. He declined to elaborate.
""(But) we are under no illusions that we are going to balance textiles as a single sector of our trade,"" said a second diplomat who spoke on condition of anonymity.
China exported $6.5 billion worth of textiles to the United States in 1995 but imported only $64 million. Diplomats attributed the sluggish U.S. textile exports to Beijing's high tariff rates and non-tariff barriers.
""Textiles are never going to be balanced but it's important that there be a market access element there,"" the second diplomat said.
The agreement granted to China a U.S. import quota slightly larger than the previous 1994 textile pact, and China pledged to reduce its tariffs on textile imports.
Both the Chinese and U.S. sides declined to say by how much U.S. textile exports to China would increase and vice versa, or by how much China's tariffs would be cut.
""There are significant gains for U.S. industries,"" a third diplomat said.
""It was for the first time a concessionary admission on (the) part of the Chinese that they too had to do something with regard to supplying market access for U.S. products where we were competitive,"" he said but did not go into details.
The overall U.S. trade deficit with China -- the largest for Washington after its deficit with Japan -- was seen reaching $38 billion in 1996, up from $34 billion in 1995, according to U.S. figures.
The new textile agreement may be good news for U.S. textile manufacturers and exporters, but it could be bad news for China's lumbering state enterprises.
State-owned textile factories in Shanghai, China's largest industrial city, registered losses of 350 million yuan ($42.2 million) in the first seven months of 1996, the China Business Times said on Monday.
The accord ended the threat of a Sino-U.S. trade war, which had loomed after Washington slapped $19 million in penalties on Chinese imports last September, accusing Beijing of shipping textiles through third countries to evade quota restrictions. China had threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but delayed the action to allow time for further talks.
Beijing announced after Sunday's deal that it was calling off its retaliatory measures, but Washington's penalties remained in force.
",3
"Sprint Corp is keeping its options open on how to extend its local phone services across the U.S. in the post-deregulation telephone environment, but for now its cable TV allies are not participating at all.
Interviews with key Sprint executives this week show the long distance firm will begin by reselling the local circuits of regional Bells but longer term it is keeping an open mind.
""The relationship we have with the cable companies at this point is for wireless only (not local telephone),"" said Sprint chief operating officer Ronald LeMay.
The wireless partnership, Sprint PCS, is shared by Sprint, Tele-Communications Inc, Comcast Corp and Cox Communications Inc. It is building a pure digital network across the U.S for Personal Communications Services.
The extension of local phone service has been the most troublesome part of Sprint's 1994 grand strategy to package wireless and wired phone service with cable TV.
Sprint and its partners have grown away from their original plans to use cable networks to carry telephone services to consumers.
Sprint already has seven million local phone customers, mainly in rural and suburban areas, but is aiming for the center of big cities for its service expansion.
""We're shooting for somewhere between 10 and 20 cities served by end-1997,"" Wayne Peterson, president of Sprint's local communications division told Reuters.
""We are on the verge of several resale agreements (with regional Bells),"" Peterson said, adding that they expect some to be finalised within 30 days.
The 1996 Telecommunications Act which breaks open the regional Bells local calling monopoly sets a process for new competitors to negotiate access to local customers over the Bells' network. Talks have moved very slowly.
No resale deals between Bells and the big three long distance operators have yet passed all approval processes, and to speed the deals, Peterson said Sprint was willing to accept the same terms as MCI Communications Corp and AT&T Corp where they had already struck provisional deals.
However Peterson was looking forward to the day when Sprint would own its own switches -- the modern successors to telephone exchanges -- in all the areas where it provides local services, which would boost the investment returns.
LeMay said the 1994 deal with the cable firms assumed it would be impractical to resell Bell networks nationally.
""Frankly at the same time the Telecom Act began to develop and it became clear that the ability to become a reseller or a rebrander...on a nationwide basis was much more feasible than we assumed when we entered the cable relationship,"" he said.
In addition cash shortages at some cable partners and technical hurdles to upgrading cable networks for telephone services caused some cable companies to hesitate.
There were also disgreements, with some cable companies wanting to keep the benefits of Internet and other broadband services over the cable TV system out of the alliance.
""One of the things we disagreed on was the extent to which we should share the benefits of high speed data,"" LeMay said.
He said no talks with the cable partners were taking place, but added the door was open if any of the companies decided to make a ""real commitment"" to local telephony.
LeMay said Sprint had no interest in buying or taking a stake in Teleport Communications Group Inc, even though it owns networks in precisely the urban areas where Sprint needs local customers.
Teleport is majority owned by Sprint's cable partners and by U S West Media Group's Continental Cablevision.
""Basically it is in our view a commodity function, and we don't have an interest in investing in a commodity function,"" LeMay said, adding that he would be interested only in buying networks like Teleport's if it was cheaper than building or renting them. -- New York Newsroom 212 859 1610
",35
"Regional telephone companies reported strong fourth-quarter results Tuesday, powered by growing demand for Internet phone lines, wireless and other services like caller ID and call waiting.
While the marketplace is growing quickly, the companies' shares continue to be overshadowed by the uncertainties of head-to-head competition with long distance companies, which are hoping to gobble up major chunks of the local phone markets at the end of the year.
NYNEX Corp. said its net income grew 10 percent to $416.5 million, or 95 cents a share, in the fourth quarter from $378.7 million, or 88 cents a share, in the 1995 period.
Consolidated revenue edged up 0.9 percent to $3.33 billion from $3.30 billion. It was reduced by a change in accounting for directory revenues, the assessment of prior-period service rebates and Nynex's decision not to stimulate certain markets while it was in the process of improving services.
Bell Atlantic Corp. said its profits, depressed by one-time items, fell to $346 million, or 79 cents a share, in the fourth quarter, from $392 million, or 89 cents a share, a year earlier. Sales grew to $3.4 billion from $3.2 billion.
Excluding one-time gains and losses, however, Bell Atlantic's operating income grew 7.3 percent to $424 million from $395 million.
""We posted strong gains in our key communications markets in 1996 as we prepare to complete our merger with NYNEX in 1997,"" said Bell Atlantic Chairman Raymond W. Smith.
The two companies agreed to merge in April 1996, hoping to create a company with over $50 billion in market capitalisation. The deal is expected to be completed by the end of March.
""Robust market demand for our communications products and services has produced record revenue growth and record earnings that will strengthen our competitiveness in existing markets and support our entry into significant new markets such as in-region long distance,"" Smith said.
For the year, Bell Atlantic earned $1.88 billion, or $4.28 a share, on revenue of $13.1 billion. In 1995, the company earned $1.86 billion, or $4.24 a share, on sales of $13.4 billion.
""Both Bell Atlantic and Nynex reported better than expected results compared to analysts' consensus,"" said Bill Vogel, analyst at brokers Dillon Reed.
""Bell Atlantic had a very strong and robust quarter. There were quite a few charges in the quarter, fundamental volumes of the business are at or above expectations,"" he said. ""For NYNEX it was the first back-to-back years with double-digit earnings growth.""
SBC Communications Inc., parent of Southwestern Bell Telephone Co., said its net income rose 4.8 percent to $542.9 million, or 90 cents a share, in the fourth quarter from $517.8 million, or 85 cents a share, in the year-ago period.
""Our outstanding financial performance was driven by excellent results by our wireline and wireless businesses, as strong demand and effective marketing led to the addition of a total of 1.5 million customer lines during the year,"" said Edward E. Whitacre Jr., chairman and chief executive.
Pacific Telesis Group, with which SBC is merging, is expected to report earnings later Tuesday.
Southwestern Bell had an outstanding year, with revenues up a record 8.9 percent, compared with 5.8 percent in 1995. The growth was driven by a 9.7 percent increase in local service revenue, up from 7 percent a year ago.
Southwestern Bell added 732,000 access lines during 1996 and 156,000 during the fourth quarter, compared with 611,000 during 1995 and 149,000 in the fourth quarter a year ago, for a total of 15.0 million access lines at the end of the year.
Caller ID, one of SBC's flagship products, expanded its market penetration to nearly 37 percent.
",35
"Two major Wall Street brokerages lowered their earnings estimates for AT&T Corp. Monday amid growing competition in the industry, sparking a heavy sell-off of the stock.
The stock slid $2 to $39.50 on the New York Stock Exchange, where it was the second most-active issue. MCI Communications Corp. lost 75 cents to $33.125 on Nasdaq and Sprint Corp. also lost 75 cents to $39.25 on the NYSE in sympathy.
""It is in AT&T's court,"" said analyst Barry Sine of SBC Warburg. ""The more they spend on marketing their new services for the long term, the lower 1997's results will be.""
The market was spooked by Salomon Brothers analyst Jack Grubman, who cited higher spending and greater competition in the telecommunications market. He cut his estimate of AT&T's 1997 earnings to $3.00 per share from $3.60 and his 1998 estimate to $3.25 per share from $3.80.
Fourth-quarter 1996 earnings per share will be closer to 70 cents than the previously forecast of 78 cents, he added.
Grubman said his new estimates may ""still be too high,"" but he continued to recommend holding AT&T stock.
AT&T reported third-quarter profits of $1.4 billion, or 89 cents a share, on revenues of $13.2 billion.
First Boston Corp. also lowered its AT&T earnings estimates, but agreed with most analysts that Salomon's view was too bearish.
""Salomon's number is for a dire outcome,"" said Frank Governali of First Boston, who expects AT&T to earn $3.25 to $3.45 a share for 1997.
""I would be shocked if AT&T diluted its 1997 earnings down to $3.00 per share,"" said Richard Klugman of PaineWebber.
AT&T said it does not comment on stock activity or analysts' reports.
""We have not yet determined what 1997 will bring, but it is safe to say we do not agree with the more pessimistic comments,"" said a source at AT&T who declined to be identified.
The source acknowledged the company was facing stiff competition from traditional rivals like MCI, as well as small aggressive competitors and soon, the regional Bells.
Governali said AT&T had a choice to make: ""Either to run the business for 1997, in which case they could make $3.60 per share, or to position itself for the long-term, in which case there is no way they can"" earn that amount.
Analysts say the whole industry faces the same dilemma.
The Telecommunications Act of 1996 will release the regional Bells into the long distance market place this year, on top of a horde of tiny rivals that have been nibbling away at the customers of the big three.
Though AT&T, MCI and Sprint can enter the local phone market, they will have to spend hundreds of millions of dollars to advertise their services, push their brand names and build network facilities to key business customers.
Grubman's research note said he believed AT&T was losing hundreds of millions of dollars on its popular Worldnet Internet access service too, because of high costs.
Analysts said MCI and Sprint have already bitten the bullet by warning analysts of increased spending, but AT&T had not done so.
""Sprint and MCI have already done it. MCI's merger with British Telecommunications Plc is a tacit admission of that fact (that you need very deep pockets to succeed),"" Governali said.
SBC Warburg's Sine said MCI told analysts it would spend an extra $200 million to $300 million this year on marketing, but the stock was not hit because it is supported by the value of the planned British Telecom merger, announced in November.
Separately, AT&T said it won a $341 million contract from Delta Air Lines Inc. for worldwide voice and data services.
The seven-year contract extends an existing agreement between the two under which AT&T provides a virtual network for the airline. The new contract will provide Delta with intelligent call-processing to reduce reservation backlogs.
In another announcement, a partner in an African consortium that is bidding to take over Ivory Coast's Ci-Telcom telephone company said AT&T agreed to buy a 35 percent stake in the consortium, Africa Bell.
Ci-Telcom, with an estimated value of between $200 million to $350 million, is the most important company on Ivory Coast's privatisation programme.
AT&T's involvement, if the Africa Bell bid succeeds, would represent a major breakthrough for an American company in a traditionally French domain. Ivory Coast is the most important economy in France's former colonies in West and Central Africa.
",35
"Sprint Corp said core local and long distance operations are performing with unprecedented strength, but its results in 1997 will be diluted by investments required to sustain future strength.
""We have our core operations producing as they have never produced before,"" chief operating officer Ronald LeMay told Reuters in an interview on Wednesday.
""We are investing in the future. That will show in our results in 1997, no question about that.  That will show as dilution in EPS (earnings per share),"" he said.
The company said it already told analysts its expectations that 1997 would see increased spending.  The company reports 1996 results on February 4.
First Call's consensus of analysts's earnings estimates was $2.93 per share in 1996, up from $2.89 reported in 1995 and $2.47 in 1994.
Analysts said they heard the same on spending from MCI Communications Corp, but not from AT&T Corp. However, AT&T has been hit by a wave of lowered analyst estimates, on the assumption it will also spend more. 
In Sprint's case, LeMay said that participation in the U.S. government auctions for D and E bands of radio spectrum would be a major part of the outlay, as the company filled in a few remaining gaps in its national wireless network.
The D and E band bidding process is continuing.  A spokesman said Sprint has so far bid $550 million, and would also incur costs to build networks in those license areas.
The D & E band auctions are the latest for wireless licenses for personal communications services (PCS), which allow clear connections, tiny phones and in-built pagers and voicemail. 
Investments in telephone operations and in the Global One business venture with French and German partners would also affect 1997, he said.  Deutsche Telekom AG and France Telecom share a 20 percent stake in Sprint.
""What we are asking investors to do is look at our core capabilities,"" LeMay said, adding, ""We had the best year since 1989 in long distance last year.""
He said Sprint was not being damaged by small, aggressive resellers in the long distance market.
""We can see their efforts in the marketplace, but we have not suffered the impact nearly that AT&T has had,"" LeMay said.  
The company, which gets two-thirds of its long distance revenues from business customers, has not seen any change in customer turnover, or churn, during 1996.
""Churn comes and goes, but it is not materially different from a year ago,"" LeMay said.
((-- New York newsroom 212-859-1610.))
",35
"Nextwave Telecommunications Inc., an ambitious newcomer among the giants of the wireless world, is to re-file for its delayed initial public offering in the next two weeks, a source close to the company said Monday.
An unknown in the industry until it began bidding in 1996's C-band Personal Communications Services (PCS) auctions, Nextwave has spent a staggering $4.7 billion on wireless licenses for the third largest network in the United States.
The company planned to go public last summer, but after a series of delays finally came to a parting with lead manager Merrill Lynch in the fall. It must now amend a required document it sent to the Securities and Exchange Commission.
Revised documents are not yet finalised, but Smith Barney and Lehman Brothers are set to be co-lead managers of the $200 million equity offering and CIBC Wood Gundy is leading the $300 million debt offering, the source said.
Nextwave, based in San Diego, declined to comment ahead of the re-filing, and the source declined to be identified.
Nextwave's total outlay may top $8 billion, when the $3 billion to $3.5 billion cost to build the network is included.
Some analysts have been spooked by the huge debt Nextwave is taking on and see the wireless market as being dangerously overcrowded already. Nextwave, however, is sanguine.
""The company has pre-sold 35 billion network minutes of use. To put it in perspective, that is equal to the entire U.S. cellular industry's 1994 traffic,"" the source said.
While Nextwave has huge debts, it will not incur the massive advertising, marketing and customer acquisition costs incurred by its clients and their rivals as they duel in the market place for fickle customers.
The company has 21 customers, headed by MCI Communications Corp.
Nextwave is essentially offering off-the-shelf digital wireless service to any reseller that could want it.
These already include long distance and local telephone firms who need wireless to bundle with their wired offerings, other wireless firms which have holes in their own license coverage and electric utilities that see a future in telecom.
",35
"Anne Bingaman, former chief of the Justice Department's antitrust division, has been named president of LCI International Inc.'s local telecommunications division, the company announced Friday.
Bingaman will also hold the title of corporate senior vice president, the McLean, Va.-based company said in a statement.
She will have an operating role, which will include relationships with all local-exchange carriers and state utility commissions, LCI said.
""They are a very impressive hands-on, go for broke group, and it really matches my own temperament,"" Bingaman said in an interview.
The appointment is not only a coup for LCI, which was not the only phone company seeking Bingaman's talents, but is also unusual in giving a former U.S. official a business operating role as opposed to a non-executive or advisory role.
""That was what attracted me to this, a chance to...roll up my sleeves and get down to it,"" Bingaman said.
She did not expect that her inexperience in business would be a disadvantage because of the time she spent learning the complexities of the telephone business.
""Put it this way, I know a lot more about this business than any other business,"" she said.
Bingaman, 53, headed the antitrust division from 1993 to 1996, holding the title of assistant attorney general. In her first year at the department, she opened more than 70 civil investigations.
She challenged more than 60 mergers, most of which prompted the partners to restructure their deals. Among more noteworthy cases, she negotiated an antitrust settlement with Microsoft Corp. announced in 1994 and opposed Microsoft's failed acquisition of personal finance software maker Intuit Inc.
LCI has received permission in 17 states and the District of Columbia to offer local telephone service on a resale basis, and the company has applications pending for approval in at least 11 other states, it said.
LCI is also negotiating with most of the regional Bell companies and major independent telephone companies for interconnection and local service resale, the company said.
Bingaman said as with 60 percent of LCI's employees, her package would include a stake in the company.
",35
"Eastman Kodak Co, fighting to keep its brand name strong in the minds of its customers, sees continued innovation as the key to protecting profit margins in a business that becomes more competitive every year.
""Brand image is fleeting. If you don't innovate...then that (advantage) goes away,"" Daniel Carp, newly-appointed president and chief operating officer, told Reuters on Thursday. ""There is pricing pressure in all products. What happens is that you have to innovate and bring out products at new price points.""  
Carp, who was previously assistant chief operating officer and an executive vice president, said that Kodak brought out 30 new products at this year's key industry show in Germany.
Innovation, risky anyway, is increasingly combined with more flexible manufacturing processes, so that launches took place with minimal inventory, but with a quick follow up to ensure products selling well did not run out, he said.
""The old way was to build inventory then launch,"" he said.
Advanced photo systems (APS) are a case in point where inventory judgement has become a more critical issue.  
Kodak and Fuji Photo Film Co Ltd each announced cameras early this year with special film containing encoded digital information allowing users to specify different print sizes on the same film and allowing mid-roll film changes.
Kodak has eight Advantix models, priced between $100 and $500. Carp said a shortage of supplies earlier in the year had now been corrected, but there may be some changes needed to the product mix across the range.
""There may also be some wrong product mix,"" he said, noting that the whole industry was finding demand higher in the mid-range products than expected.  
Restructuring in such an environment would be a continuous process, with some areas -- which he declined to specify -- in need of imminent reappraisal on product lines, sales channel or manufacturing processes. He did not say if jobs would go.
""There are areas of the company that will probably need to have some downsizing going forward,"" Carp said.
In Kodak's main consumer film business, retailers are also increasingly running lean on supplies, or leave inventory management to vendors like Kodak. This makes the crucial Christmas selling season a nervous time.
""Between Thanksgiving and Christmas is a hold-your-breath time. We've had reasonable sell-in (to inventory). It's way to early to get a read on the sell-through (sales from those stores' inventory),"" he said.
Carp said that Kodak would not rule out acquisitions as one way to fill a gap in product lines, but declined to say where he saw Kodak's deficiencies.
""It would give you more strategy than I would want to,"" he said.
((-- New York Newsroom 212 859 1610))
",35
"Fourth quarter results from Sprint Corp showed extremely strong growth in the core long distance and local phone businesses, but earnings trailed consensus estimates because of dilution from new ventures.
""I was pretty pleased. It continues to show strong core growth offset by increased dilution from new ventures,"" said Simon Flannery, an analyst at J.P. Morgan.
Sprint's volume of business in long distance jumped 20 percent in the fourth quarter from a year ago, and operating margins improved.  
Local calling was less outstanding, analysts said, but included a 5.6 percent increase in lines to customers and a 40 percent increase in revenues for smart phone features like Caller ID and voice dialling.
""The core business was an absolute blow-out,"" said Michael Elling of Prudential Securities.
The stock rose 1/2 to 40-3/4 by midsession.
""Investors continue to focus on the strong core growth and the prospects of the emerging businesses,"" said Flannery.  
Sprint is now gearing up to add thousands of PCS and Internet subscribers in 1997, when its vision of a package of services on one bill should reach fruition.
Sprint produced $0.57 earnings per share in the fourth quarter of 1996, compared with a loss of $0.98 a year ago. Analysts added  back an $0.08 charge for comparison with their projections, reaching $0.65 in the quarter.
That was four cents below their consensus of $0.69 carried on First Call, which already assumed considerable dilution from new ventures like Personal Communications Services (PCS) wireless and Global One.  
""That four cents could be placed at the feet of one product, the Internet roll-out,"" said Elling.
Global One, an international venture jointly owned with Deutsche Telekom AG and France Telecom, cost Sprint $0.05 a share in 1996's fourth quarter up from $0.02 a year ago, but costs should decline from now on, analysts said.
""The true-up at Global One seemed to be worth about two cents per share,"" Flannery said, referring to a fourth quarter catch up to costs incurred earlier.  
Sources close to Global One last week told Reuters that the venture had racked up almost $370 million of losses in 1996 instead of $250 million budgeted. Neither Sprint nor Global One would confirm these figures.
The venture serves multinational firms telecom needs and carries traffic for other telecom firms.
The cost of all the new ventures was around 20 cents to Sprint in the fourth quarter, according to Richard Klugman, an analyst at PaineWebber.  
""You will not see the return on these (investments) until 1999 at the earliest,"" said Klugman. However, like other analysts polled he backed the company's strategy. ((-- New York Newsrom 212 859 1610))
",35
"Citizens Utilities Co said on Thursday that it is aiming to be among the largest eight or 10 U.S. telephone companies by the year 2000, by buying up companies in small but important local telephone markets across the United States.
""We are looking at acquisitions of this type every day,"" Ronald Spears vice president for Citizens' telecom sector told Reuters in an interview.
",35
"Ameritech Corp is confident that it has a three-part strategy to keep its earnings growth intact even when new competitors enter its midwest region in force later this year in search of new customers.
The Chicago-based regional Bell has strengthened its core local calling business, moved to enter new businesses like cable TV and security which add value to the network, and sought out profitable niches abroad.
""The beauty is we started these strategies three years ago and they work,"" said Chief Executive Richard Notebaert.
Over lunch in a Manhattan restaurant, Notebaert told Reuters that the costs of fighting new competitors would be significant, but would not seriously hinder growth.
""Will it affect us? Yes. Will it takes us below double digit earnings growth? I don't think so,"" he said.
While some Bells have sought safety and market strength in mergers, Notebaert said Ameritech had not so far found any business combinations that met the acid test.
""We haven't seen anything that would add value for shareholders,"" he said, declining to give details.
Ameritech has taken an individual path in its core business by pushing software calling features like call-waiting and caller ID -- which are very profitable -- instead of extra lines which may not be so profitable.
""We just stopped stimulating it (demand)"" he said, adding that growth in lines had fallen to 3.5 percent a year from 4.5 percent when new lines were actively marketed.
New lines have a very long payback when cable reinforcement is needed in the street, Notebaert said. The additional revenue may be small, especially if the line is used solely for a facsimile machine or Internet usage.
Ameritech also struck out alone in its foray into the security business, which concentrates on remote monitoring of premises. The company bought SecurityLink in 1994 and National Guardian in 1995 and now has 367,000 users, mostly businesses of which 78 percent are outside its home region.
""We are number two in the U.S. and we need to be number one,"" Notebaert said.
Ameritech, which is licensed to offer long distance services in 42 states, has considered using its security  customer base as a launching pad to sell other telecom services outside its region, Notebaert said.
Ameritech has quietly become a force in cable TV, offering service in 20 of 32 franchises it owns in its local region.
The programming is supplied by Americast, which Ameritech owns with BellSouth Corp, SBC Communications, Walt Disney Co, GTE Corp and Southern New England Telecommunications Corp.
Ameritech is shy about revealing cable TV customer numbers. It would only say they number tens of thousands. Of customers approached, 25 percent have taken the service.
The offering is typical of Ameritech's down to earth approach. Notebaert has shied away from futuristic services when it is not clear what the market will support.
""Everyone who went into interactive and multimedia lost their shirts,"" Notebaert said.
Ameritech powered 30 percent of its earnings growth in the fourth quarter of 1996 came from overseas investments, which includes stakes in companies in New Zealand, Hungary, Belgium, Norway and Germany.
""We could have done much more, but we didn't want to take our eye off the ball at home,"" Notebaert said. ((-- New York Newsrom 212 859 1610))1
",35
"AT&T Corp. on Wednesday said basic U.S. rates for state-to-state calls made from a home would rise by 5.9 percent effective Dec 1., adding an average 60 cents a month to the typical residential bill.
The company said it was raising rates to pay for investments made to broaden its service line, build technical infrastructure and improve customer service.
Small business call rates will rise 4.8 percent for international, toll free and some other services.
The Basking Ridge, N.J.-based company is raising the cost of calls made with a calling card by 5 percent and those made with the assistance of an AT&T operator by 2.6 percent.
It also said it would increase monthly fees on its Reach Out America, SelectSaver and AnyHour Saver calling plans. AT&T said it stopped marketing those plans in 1993 when it introduced its ""True"" family of calling plans.
However, rates on the True savings plans will also rise, an AT&T spokesman confirmed, because they are based on a percentage discount from the basic rate. The new One Rate plan introduced this fall will not be affected as it is flat rate.
AT&T stock rose 62.5 cents to $39 on the New York Stock Exchange.
AT&T last raised rates in February, with a 4.3 percent increase. The previous increase was in December 1994.
""This is a real turkey for consumers,"" said Samuel Simon, founder and now outside counsel to Telecommunmications Research & Action Centre, a consumer group that has monitored long-distance rates since the breakup of AT&T in 1984.
""It is hard to believe market conditions justify yet another rate increase for long-distance customers. Residential rates have been steadily rising for nearly five years, and now AT&T announces a major rate increase the day before Thanksgiving, to take effect four days later.""
Asked earlier why announcement of the latest rate hike was made Wednesday, when most peoples' attention was on Thursday's Thanskgiving holiday, an AT&T spokesman said, ""It is a coincidence.""
Analysts said the increases continue the policy adopted by most big long-distance companies of increasing basic long-distance rates while promoting more generous calling plans to satisfy those customers who are price-sensitive.
""In the last three or four years long-distance prices have actually been going up,"" said industry analyst Jeffrey Kagan, who runs his own consulting firm.
He said that AT&T and others were trying to build up some fat ahead of the battle in 1997, when regional Bells are expected to drive into long-distance markets in force and push rates lower.
In the meantime, he said, it pays for customers to take a hard look once a year at the call rates they are paying, and to choose the calling plan best for them.
""Only a third of long-distance customers are actually on calling plans at all, and it is the rest who are paying the freight,"" Kagan said.
AT&T also launched a cut-rate, international call-back service in Tokyo on Wednesday. In a call-back service, users first call a switching centre in the United States and calls are then connected at cost-effective U.S. rates.
The Tokyo call-back service marks the first time AT&T has started such a service, AT&T Asia/Pacific President John Legere said.
""We are the first major telecommunications carrier in Japan to introduce a low-cost, flat-rate international calling option,"" he said.
AT&T's Japanese unit said it would charge 240 yen ($2) for a three-minute call to Canada or the United States from Tokyo, compared with the 450 yen ($3) Japanese customers now pay.
The service, which will at first be offered only to business customers in Tokyo, could be used for sending data and faxes, Legere said.
",35
"Long distance telephone companies and regional Bells will show consistent growth in core operations in 1996's fourth quarter, but investors remained wary about growing competition.
Phone company stocks as a group fell sharply in 1996 even as the broad market soared, and investors are unlikely to get excited until they can clearly pick winners, analysts say.
""Until current regulatory and competitive uncertainties are resolved investors will remain reluctant,"" said Guy Woodlief, an analyst at Dean Witter Reynolds.  
Whenever their appetite does return they will rediscover an industry growing strongly at an operating level, nourished by growing use of home computers and the Internet, software enhancements for phones, and falling costs of technology.
However, in the case of long distance companies, the investment to enter the local telephone market and expand digital wireless networks are diluting the benefits of robust growth before they reach the bottom earnings line.
Many analysts have already revised down earnings forecasts for AT&T Corp, MCI Communications Corp Sprint Corp, the big three long distance companies.  
The long distance industry is expected to average revenue growth of eight percent. Call growth is faster at 10 percent, reflecting a modest lowering of prices overall.
Price weakness should accelerate as the regional Bells enter long distance in force, though not before 1998.
""My belief is that this (Bell entry) is not happening anytime soon. This is going to take a lot of regulatory work,"" said Richard Klugman of brokers PaineWebber.
The Bells are Ameritech Corp, Bell Atlantic Corp, BellSouth Corp, NYNEX Corp, Pacific Telesis Group, SBC Communications Inc, and U S West Inc. Most report earnings in the next two weeks.  
GTE Corp, because it is not a regional Bell, is already in long distance service. The 750,000 customers it forecast it grabbed in 1996 has added to the competitive pressure that AT&T and others are feeling.
The Bells and GTE together are expected to have boosted lines to customers by 4.8 percent in the fourth quarter from a year earlier, with usage of their networks up by 9.1 percent. Earnings per share are seen up around ten percent.
""The growth story is intact,"" Woodlief said.
So-called vertical services such as caller-ID, voice dialing and call waiting are growing at 15-20 percent a year and now produce $1 billion a year of revenue for a typical Bell.  
Ameritech, which on Monday reported results in line with analysts estimates, has pushed vertical services and soft-pedalled second line sales.
Analysts say that a typical second line has a long payback period, either being used for the Internet, which does not even generate access charges, or for a fax machine.
Vertical services are among the most profitable Bell services but this will mean some price pressure when competition begins to show up in the local calling market.
""Ultimately the prices of these vertical services will go way down,"" Klugman said.  
Analysts say wireless services continue to grow, with perhaps three million net customers added in the quarter across all providers, a bit below the 3.3 million of a year ago. The earnings contribution of wireless is small, but fast growing.
""Wireless is a high cash flow margin business, but heavy on capital so the actual earnings contribution is low so far,"" said Klugman.
Company   (all in dollars) Q4	 yr ago  results date
SBC Communications.........0.91.......0.83..Jan 21
Pacific Telesis............0.58.......0.54..Jan 21
NYNEX Corp.................0.94.......0.88..Jan 21
Bell Atlantic..............0.97.......0.90..Jan 21
AT&T Corp .................0.79.......0.94..Jan 22
BellSouth..................0.63.......0.57..Jan 27
GTE Corp...................0.81.......0.74..Jan 28
MCI Communications Corp... 0.44.......0.41..Jan 28
US West Comms..............0.60.......0.60..Feb 2
Sprint Corp................0.70.......0.79..Feb 2
Worldcom...................0.27.......0.20..Feb 27
Estimates from First Call. Reporting dates from analysts Ameritech..(actual)........1.00.......0.90..Jan 13
",35
"AT&T Corp. said Thursday it set an alliance with Shaklee Corp. that will allow Shaklee's 500,000 sales agents to sell AT&T residential calling plans face-to-face with customers at home.
The alliance is called Shaklee Connections and is expected to reach millions of new customers in 1997 and beyond, AT&T said. No financial details were disclosed.
""Without question, this is a groundbreaking move for AT&T,"" said Joseph Nacchio, executive vice president of AT&T's consumer and small business division.
Shaklee, part of Yamanouchi Pharmaceutical Co. Ltd. of Japan, sells nutritional supplements, personal care products, household cleaners, and water treatment products.
""Shaklee will help us expand our personal presence in communities exponentially and create a whole new network of representatives with roots in neighbourhoods across the country,"" Nacchio said.
Shaklee's independent sales agents will be eligible to become authorised AT&T distributors and will be AT&T customers themselves. They will begin marketing in the first quarter of 1997.
AT&T is taking a page from the books of its smaller competitors by adopting a so-called multi-level marketing campaign.
Analysts have watched with interest as a number of small resellers of consumer long-distance service, notably Excel Communications Inc., have taken a bite out of AT&T's customer base by using independent sales agents to sell to customers at their homes or in other one-on-one settings.
AT&T's market share in the $70 billion long-distance market has sunk to about 55 percent from 90 percent over the last decade, analysts estimated, and small, aggressive resellers like Excel are among those taking away customers.
There are 1,000 resellers of long-distance service in the United States. They do not own networks but buy wholesale capacity on networks owned by companies like AT&T and WorldCom Inc.
",35
"AT&T Corp. is earning more, but having trouble getting paid.
The nation's largest telephone company said Wednesday that operating profits from continuing operations for the last quarter of 1996 rose 14 percent, but said it had to put aside $200 million to cover unpaid bills by customers.
The telecommunications company, which has now completed its split into three major units, said it earned $1.24 billion, or 76 cents a share, in the quarter, compared with $1.09 billion, or 68 cents a share, in 1995's last quarter.
Chief financial officer Richard Miller told Wall Street analysts in a conference call that results for the first quarter of 1997 would be comparable or slightly above those of the fourth quarter.
Revenues in the latest period rose to $13.24 billion from $12.89 billion.
The Basking-Ridge, N.J.-based company's 1995 fourth-quarter operating profits excluded restructuring and other charges totaling $2.036 billion, or $1.27 a share. Including these charges, its net earnings from continuing operations resulted in a loss of $948 million, or 59 cents a share.
Competition has brought the company a new headache.
""It used to be if you don't pay your phone bill you didn't get phone service. Now with multiple suppliers, we can shut off their service, but they can go someplace else to get service,"" Miller told Reuters.
The problem is worst among business users, particularly the hundreds of tiny long-distance resellers, some of whom go bankrupt after ordering millions of network minutes from carriers like AT&T, MCI Communications Corp. and Sprint Corp. in order to compete with them.
AT&T's fourth-quarter operating net per share was three cents below the 79 cents industry analysts had forecast, according to First Call, mainly on the extra $200 million in provisions for bad debts.
As a result, some analysts lowered their 1997 estimates.
""No one was expecting that,"" said Bear Stearns analyst Bette Massick. ""You have to cut your number on that alone.""
For all of 1996, AT&T's income from continuing operations rose to $5.6 billion from $5.2 billion for 1995, excluding the charges. Earnings per share for 1996 were $3.47, a 5.5 percent increase over $3.29 per share in 1995.
Total 1996 revenues were $52.2 billion, a 3 percent increase over 1995's $50.7 billion.
""AT&T had a record year in 1996 in the face of extraordinary challenges and unprecedented changes in our business and in our industry,"" said Chairman Robert E. Allen.
In September 1995, AT&T said it would restructure its businesses, spinning off equipment company Lucent Technologies in September, and it completed with the spinoff of computer company NCR at the end of 1996.
AT&T also sold its majority position in AT&T Capital Corporation to a consortium of investors during the year.
AT&T said its communications services revenue increased $529 million in the latest quarter, up 4.3 percent from the same period last year. Communications services revenues include wireline services and wireless services, as well as communications products and other services.
It said its long-distance calling volumes grew 6 percent over the same period in 1995 and 1.8 percent over the previous quarter.
""The growth in traffic volumes (3.2 percent) was better than the 2.5 percent we were expecting,"" said analyst Richard Klugman of brokers PaineWebber. ""But they are still losing market share to the tune of three percentage points a year,"" he said.
AT&T's wireless services revenue, which includes cellular voice and data, messaging and air-to-ground services, grew 18.4 percent to $937 million in the fourth quarter of 1996. Its cellular service subscribers grew to 5.2 million, a 31.7 percent increase from a year ago.
Revenues from communications products and other services, which include consulting and outsourcing, on-line, and wireless product sales, were $386 million, an increase of nearly 17 percent from the year-ago quarter.
However, credit card revenue plunged 32.3 percent to $374 million, primarily as a result of the securitization program instituted at AT&T Universal Card Services in 1995.
Credit card operating losses fell to $4 million in the fourth quarter from $35 million in the third quarter of 1996. In 1995's fourth quarter, it made an operating profit of $109 million.
AT&T's stock closed 50 cents down at $38.875 on the New York Stock Exchange.
",35
"Like any marriage, the $20 billion merger of MCI Communications Corp and British Telecommunications Plc may be smoothed by the experiences of a two-year courtship that preceded it.
""I may be an incurable romantic, but I think this is going to be a lot easier than people think,"" said one BT insider.
Concert, the name of the planned merged entity, was also the original name for a global communications offspring conceived by the two companies in July 1994 to provide one-stop shopping for multinational corporations.
While the executives atop the planned merged company have a clear vision of where they are going, insiders and industry sources say the acid test will be how the engine rooms of networks, billing, support and customer service are melded.
The initial partnership, now called Concert Communication Services, was a wayward child in its early days. Its progress was slowed by turf wars and bickering about which standard or system to use.
""Some of those turf wars were really destructive,"" said Daniel Briere, a consultant at TeleChoice Inc, who has worked with Concert Communications and its parents.
A computer and software to support pre-paid Concert calling cards in Britain were delayed for many months while BT and MCI managers fought to have their own design used.
Similarly. a videophone product developed by BT for MCI failed on both sides of the Atlantic, at a cost of millions of dollars. BT has built a voicemail system called Callminder, but it cannot be upgraded to serve larger systems.
""This huge hands across-the-water friendship never worked in practice that I saw,"" Briere said.
Still, sources inside both companies believe the tough decisions have already been made, and a unified management can more easily resolve the remaining issues precisely because of the experience they already have in working together in Concert.
""Those debates by and large are behind us,"" said MCI Chief Engineering Officer Fred Briggs. ""A unified management always shortens the decision-making process some,"" he added.
""It may sound weird, but you take out the need for cooperation. You can choose the best and discard the rest,"" TeleChoice's Briere said.
Concert Communications is already producing evidence of such a shift. The venture has $1.5 billion of revenue under contract and networks active in 800 cities in 50 countries. It has a head start over rival alliances Global One and Unisource, backed by Sprint Corp and AT&T Corp, respectively.
To be sure, some analysts see a danger of wrangles being duplicated across the entire company as senior management attempts to fuse two corporations with such different roots.
BT began as a state-owned monopoly, while MCI cut its teeth fighting against a former monopoly, AT&T. BT controls 90 percent of the British market, while MCI has struggled to breach 20 percent of the U.S. long-distance market.
The size of the combined company has raised some concern that MCI's nimbleness and aggression will be lost. The new Concert will rank among the three largest telephone companies in the world, with revenues of $42 billion and 183,000 employees. It will have a pro forma market capitalization of $54 billion.
""Customers will expect a lot more from MCI now that it is on an equal footing with AT&T. It will be harder for MCI to retain that scrappy upstart image,"" said consultant Jeffrey Kagan of Kagan Telecom.
One potential flashpoint is the likely need to use BT billing and support systems to help pry open the U.S. local calling markets, worth $90 billion a year. Though MCI has advanced billing systems, it has never had to cope with an attack of that scale.
A second potential difficulty involves international calling, where BT and MCI plan a replication of calling plans such as MCI's Friends and Family -- used to great effect within the United States -- to cement customer ties on both sides of the Atlantic.
""There are plans in the works for that sort of thing,"" said the BT insider, declining to be identified.
But BT has never had to administer calling plans of the complexity of MCI's Friends and Family, which generates a high level of customer-service queries.
The two companies also plan to use Britain as a conduit to grab international business calling from continental Europe and route it through London to the United States.
Another major issue is what type of technology to use to bring Internet and multimedia applications to U.S. homes. BT is expected to be closely involved as a pioneer in so-called broadband technologies.
""That is going to be a major decision,"" MCI's Briggs said.     -- New York Newsroom 212 859 1610
",35
"Aerospace company Hughes Electronics Corp heads the list of bidders to buy satellite services provider PanAmSat Corp with a strong offer, a source close to the talks said on Friday.
""I think they are just looking at the best offers on the table now,"" the source told Reuters, adding that Hughes' offer was currently about the best on the table.
Both PanAmSat and Hughes declined to comment on what they called speculative reports. Hughes is part of General Motors Corp.  
However, Hughes chief executive Mike Armstrong told Reuters on Wednesday that the company was considering a multi-billion dollar acquisition in aerospace and defense.
""We are always looking at ventures that will make our business grow"" said Hughes spokeswoman Marcy Garber.
Analysts say PanAmSat could be worth $3.5 billion or more, a substantial premium over the $2.75 billion market capitalization of the company. The stock was trading at 27-3/8, up 3/8 late on Friday morning.  
The source, who spoke on condition of not being identified, said that talks are continuing, but no deal is imminent. He would not say how much Hughes was offering.
PanAmSat's majority owners are Grupo Televisa SA of Mexico and the family of founder Rene Anselmo, which each own 40.5 percent of the company's 100 million shares. The rest are publicly traded.
""Rene Anselmo did a great job and took a lot of risks, and now his benefactors are going to reap the rewards,"" said analyst Jimmy Schaeffler of the Carmel Group.  
In April Televisa and the Anselmo family asked investment bankers Morgan Stanley to find a takeover or joint venture partner for the company, or to plan a secondary stock issue.
The source said that Televisa preferred a sale option, though the Anselmo family had no preference.
Other rumored bidders include Lockheed Martin Corp, General Electric Co Loral Space & Communications Ltd, and Deutsche Telekom of Germany according to press reports.
PanAmSat has a unique franchise as the only global competitor to Intelsat, which is owned by numerous governments and was set up under a treaty.
PanAmSat's customers include a vast array of international broadcasters from Time Warner Inc to News Corp, the British Broadcasting Corp and China Central TV.
Schaeffler said its expansion plans put it in a powerful position for new services and covering new areas like Africa and the central Asian republics which so far have no western satellite coverage. -- New York Newsroom 212 859 1712
",35
"Gail McGovern, AT&T Corp.'s new executive vice president for the consumer and small business division, is new to the big challenge facing her: boosting AT&T's share in the consumer long-distance market.
Like her boss, Chief Operating Officer John Walter, McGovern has made a reputation in a different area but will bring a fresh approach, analysts said Monday.
""Gail is very experienced, but her experience is on the business side, and AT&T is facing the bigger challenges on the consumer side,"" said Richard Klugman of brokerage PaineWebber.
McGovern, 44, was named to succeed Joseph Nacchio, who is leaving AT&T to join Qwest Communications Corp., a small telecommunications company in Denver, as chief executive.
She said in an interview Monday that her top priority would be to improve revenue growth and to retain customers.
""I can tell you that focusing on reducing churn will be a top priority in 1997,"" she said in an interview.
As the most senior woman AT&T has ever employed, McGovern will be responsible for more than half the company's revenues.
She expects to apply the same packaging of services to suit consumer customers that she has done in the business market. A single bill for a variety of services will help show the simplicity of offerings, she said.
""Billing is an essential ingredient,"" McGovern said.
AT&T, based in Basking Ridge, N.J., has seen its market share in the $80-billion-a-year long-distance market dwindle from a near-monopoly when a federal judge ordered its divestiture in 1984 to around 55 percent today, according to analysts' estimates.
Apart from MCI Communications Corp. and Sprint Corp., AT&T has recently faced competition from a host of small yet aggressive long-distance companies like LCI International Inc. and Excel Communications Inc..
AT&T has been able to attract consumer customers, at a cost, but has had trouble retaining them.
Analysts who have met her had little doubt McGovern would be up to the task, after winning back major corporate contracts, including IBM Corp., McGraw-Hill Cos. Inc. and Textron Inc..
""She's very bright and very quick,"" said Richard Toole of brokers Merrill Lynch and Co. She has fewer rough edges than Nacchio. Joe was unique, and streetwise, but could be a little brutal,"" he said.
Walter, who was appointed as chief operating officer in October, takes over from Robert Allen as chief executive in May at AT&T's shareholders meeting. McGovern's appointment was his first visible mark on AT&T.
""I see his hands on this promotion, though she was a star to begin with,"" Toole said.
In the interview, McGovern said tying in satellite TV services and other forms of marketing was a great way of reaching new markets.
AT&T has a stake in Hughes Electronic Corp.'s DirecTV direct broadcast satellite venture, and in November set a deal with Shaklee Corp. under which their 500 sales representatives will talk to potential customers about AT&T services.
""We have to explore as many indirect sales channels as possible,"" McGovern said.
",35
"Not content with disturbing your meals with sales calls, AT&T Corp. will soon have salespeople arriving on your doorstep to explain why you should switch long-distance service to them.
However, they will have been invited.
The nation's dominant long-distance company on Thursday announced an alliance with Shaklee Corp. that will have Shaklee's 500,000 sales agents selling AT&T phone service face-to-face across the nation from January 1997.
The Shaklee sales representatives will sell to friends, colleagues and neighbors, never to strangers.
""Without question, this is a groundbreaking move for AT&T,"" said Joseph Nacchio, executive vice president of AT&T's consumer and small business division.
Shaklee, part of Yamanouchi Pharmaceutical Co. Ltd. of Japan, currently sells nutritional supplements, personal care products, household cleaners, and water treatment products.
It is particularly strong among ethnic minorities, non-English speakers and in inner cities. These markets can be tough to crack by other routes, but quite lucrative.
""Shaklee will help us expand our personal presence in communities exponentially and create a whole new network of representatives with roots in neighborhoods across the country,"" Nacchio said.
To start with, Shaklee will sell only AT&T's long-distance calling plans, but AT&T wants to sell new services too once the sales force is trained on their complexities.
""AT&T would like to give Shaklee that opportunity,"" said Shaklee spokeswoman Karin Topping.
The move shows AT&T is neither too big nor too proud to take a leaf out of the marketing books of its competitors.
Small aggressive competitors like Excel Communications Inc. have powered their growth through exactly this kind of ""multi-level"" marketing. The approach is so named because each salesperson recruits others, and continues to benefit from their recruits' sales efforts as they rise up the hierarchy.
MCI Communications Corp. has a similar relationship with direct sales organization Amway Corp.
""Imitation is the sincerest form of flattery. And it certainly validates this sales strategy,"" said Eric Strumingher, industry analyst at brokers Chicago Corp. ""I think this could be very significant for AT&T,"" he said.
For AT&T the alliance is aimed at reaching new customers cheaply, and keeping them.
AT&T's market share in the $70 billion long-distance market has sunk to about 55 percent from 90 percent over the last decade. They have been hit not only by traditional rivals MCI and Sprint Corp., but a host of tiny new competitors.
Recent attempts to regain customers by offering $100 checks have been expensive but without increasing loyalty, so Thursday's initiative marks a new departure.
""We do believe the nature of this sales channel will be much more likely to increase loyalty and retention among customers,"" Jack McMaster, AT&T's vice president for domestic consumer long distance, said in an interview.
Shacklee salespeople sell to their friends and neighbors. Customers are expected to be more reluctant to switch away from a service recommended by a friend.
""It's potentially much more lucrative than selling lipstick or vitamin supplements for the salesperson,"" said David Goodtree, an analyst at consultancy Forrester Research.
Shaklee said an average salesperson earns $14,000 a year part time, with earnings ranging from $1,000 a month at the entry level to six figures for the long-established.
Shaklee said that cars and vacations would typically be incentives for upper echelon sales representatives.
For AT&T a crucial question will be the value of the customers won in terms of their long-distance spending, and the chances of selling new services like satellite television, pagers or mobile phones to them too.
AT&T wants all of Shacklee's half million salespeople to be involved with the program, which means they must be AT&T customers themselves.
""It is our ambition that all of them will participate in this program,"" McMaster said.
This will mean a boost of several hundred thousand good customers who will not be able to switch, even before the sales effort gets underway.
""Thats one of the reasons we are so excited about this,"" McMaster said.
AT&T's stock edged down 12.5 cents to $37.125 on the New York Stock Exchange.
",35
"GTE Corp. Wednesday threw down the gauntlet to AT&T Corp. by offering a nationwide long distance calling plan that is one cent cheaper than the industry giant's own flat-rate plan.
The flat rate plan is called ""GTE's One Easy Rate,"" charging 14 cents a minute day or night. It has no monthly or enrollment fee and is immediately available to consumers in 27 states where GTE already offers either local calling or wireless services as well as long distance.
The Stamford, CT.-based company may later expand the plan to the other 23 states where it offers only long distance services.
Though several companies have cheaper off-peak calling rates, GTE said its rate compares favourably with flat rate plans offered by the big three.
AT&T charges 15 cents per minute for its One Rate, MCI Communications Corp. 14.5 cents for its True Rate, and Sprint Corp. 15 cents for its Sense Day plan.
GTE last month unveiled a flat-rate calling plan for businesses that included domestic and international calling.
GTE's existing long distance rates are 27 cents a minute during peak hours and 14 cents off peak, with a 10 percent discount for customers who spend more than $10 per month and 25 percent off for those who spend $25 or more.
GTE entered the long distance business in March 1996 and signed up 800,000 customers by the end of the year, 50,000 more than it predicted in November.
Analysts say it and other smaller new entrants have hit AT&T hard in its core residential customer base. MCI and Sprint are less reliant on residential customers.
GTE is predominantly a local telephone company, and is often compared with the Baby Bells. But unlike them, it is not restricted by the 1996 Telecommunications Act.
The law forces the Baby Bells to open their local calling regions to competition before offering long distance calling to their local customers.
Analysts say this ruling has been a boon for GTE, giving it a headstart of more than a year over the Bells in the $80 billion long distance market.
GTE said it also plans to focus on markets for ethnic minorities. It may bundle international calling to the country of origin with multilingual customer service and other services needed in that community marketplace.
",35
"Fourth quarter results so far from the regional Bells show a breathless increase in demand across the U.S. for additional lines, wireless phones and services like caller ID. There are no signs of it slowing.
Analysts said results on Tuesday from Bell Atlantic Corp, NYNEX Corp and SBC Communications Inc generally met aggressive market expectations.
""These companies have clearly raised the bar on expectations for demand growth. It should be sustainable for 1997,"" said Richard Klugman of brokers PaineWebber.
However, the share prices of the group continue to reflect investors worries about looming competition in the Bell's core local markets and how well they will do in long distance.
""The big issue is competition and when does that have an impact,"" Klugman said. In the meantime, booming demand continues to show up at the Bells' bottom line.
""Both Bell Atlantic and NYNEX reported better expected than results compared to analysts' consensus,"" said Bill Vogel, an analyst at brokers Dillon Reed.
SBC was a cent below the First Call consensus of $0.91 for the fourth quarter, but SBC chief financial officer Don Kiernan said that this was less when rounding errors were removed. The 1996 consensus of $3.46 was hit dead on.
""Its really much closer (to fourth quarter consensus) than it looks,"" Kiernan told Reuters.
Analysts were sanguine about SBC's performance.
""Generally SBC met aggressive expectations for revenue. Expenses were higher than we expected, but offset by a lower tax rate and a $22 million revenue boost from a regulatory change,"" said Bill Deatherage of brokers Bear Stearns.
Deatherage said the higher expenses seem to have come from Internet and data transport initiatives, investment for long distance services and Americast.
Americast is a venture with Walt Disney Co, GTE Corp, BellSouth Corp, Ameritech Corp, and Southern New England Telecommunications Corp to produce media content for interactive and multimedia networks.
Klugman said that NYNEX was pulled back a little by the relative weakness of the north eastern economy, and had reined in its marketing spending as a result of service penalties.
""I don't think they have had the opportunity to harvest the full benefits of the change in regulatory regime (to price cap from rate of return),"" he said.
However, Vogel noted that NYNEX had made a first.
""For NYNEX it was the first back-to-back years with double-digit earnings growth,"" he said. ((-- New York Newsrom 212 859 1610))
",35
"BellSouth Corp, seeing regional Bells merging around it, feels no pressure to seek a merger itself and sees little value in other deals so far.
""We haven't seen a compelling value proposition in any of the mergers so far,"" chief financial officer Ron Dykes told Reuters.
Dykes said there were few efficiencies in neighboring Bells merging and buying long distance assets was even less attractive.  Competing with Internet service providers was easier and better than paying a premium to buy one.  
As for vertical takeovers, like home security, financial services, software or other firms which are big customers for communications facilities, Dykes was even more blunt.
""It is hard to merge a cat with a dog,"" he said.
By this he meant BellSouth would be much less sure of its footing in a business where it does not have expertise, and management cultures would be very different.
Dykes believes that filling out service provision in BellSouth's huge nine-state region and building franchises for individual businesses is the best way to succeed in the competitive landscape sketched by the 1996 Telecom Act.  
Others have different ideas.
Neighbors Bell Atlantic Corp and NYNEX Corp decided to merge, as did SBC Communications Inc and Pacific Telesis Group, while Ameritech Corp has expanded into home security.
Some analysts believe there are attractive bid targets for regional Bells in the long distance industry, but Dykes said BellSouth doesn't want to own assets of declining value.
""With long distance you are looking at an industry where prices are at their peak.  The same would be true of buying a second tier long distance company,"" he said.  
Dykes believes that long distance rates will fall sharply as companies like BellSouth enter the industry, especially as so much wholesale capacity is for sale.
BellSouth has a deal to use AT&T Corp's network to provide long distance service and expects to be serving customers in at least two states in its region by year-end.
Firms like WorldCom Inc have acquired Internet service providers (ISP's), but Dykes says it is unnecessary.
""In our view it is cheaper to steal the customer than pay for them (by buying an ISP),"" he said.  He said that BellSouth already had tens of thousands of Internet customers.  
""By the end of 1997 we believe we will be the largest Internet service provider in the South,"" he predicted.
BellSouth has worked hard to fill out its wireless coverage, adding new licenses in Federal Personal Communications Services (PCS) auctions earlier this year to its existing PCS and cellular licenses.
It has also bought licenses in other areas in order to swap them for licenses held by other firms in its home region.
On Wednesday it finalised such a deal with a unit of Telephone and Data Systems Inc, trading its interests in 12 licenses in Wisconsin and Illinois for 23 owned by TDS in the South, plus receiving an undisclosed cash sum.
In addition the company has bought licenses for wireless cable which allow it to beam microwave TV signals by line of sight to the homes of viewers. ((-- New York Newsrom 212 859 1610))
",35
"Teleport Communications Group Inc is looking to buy Internet and long distance telephone service companies that add extra value to its networks or help sustain its 50 percent annual revenue growth target.
""We're constantly analyzing the correct time to do that (make acquisitions),"" chief executive Robert Annunziata said in an interview on Wednesday.
Acquisitions would push a higher-value mix of services through its networks, reach new urban residential customers, and perhaps add to its burgeoning long distance networks.  
""Our goal and our strategy are three things.  To grow our existing markets, to grow our new markets, and to grow new products and services,"" Annunziata told Reuters.
Teleport provides local communications to businesses in major cities, competing with regional Bells.  It is launching new networks in eight cities in 1997 for a total of 57.
Teleport is majority-owned by a group of cable TV companies.  Tele-Communications Inc has 31.1 percent, Cox Communications Inc has 24.4, Comcast Corp has 16.0, and U S West Media Group's Continental Cablevision Inc has 11.0 percent.  
Continental Cablevision has to divest its stake by mid-1998, beginning with a one percent stake by June.
The remaining shares have publicly traded since an initial offering last June. The company expects to raise more cash by 1998.
He declined to say whether an acquisition was imminent, but if the company made one, or accelerated its investment plans, it may seek stock or debt financing earlier, he said.  
Annunziata expects Teleport to break even on net earnings in about seven years, but said heavy build-out costs mean the firm is best valued on operating cash flow -- earnings before interest, taxes, depreciation and amortization (EBITDA).
Teleport already has had three EBITDA-positive quarters, and expects to remain that way as growth continues.
""Nobody else competing with the RBOCs (regional Bells) is EBITDA positive...we expect to stay EBITDA positive as we grow our company,"" he said.  
The Staten Island, N.Y.-based firm expects to exceed a 40 percent operating cash flow profit margin in each of its city networks, which generally cost $5-$10 million to build. Total capital costs are expected to continue at $450 million a year.
Annunziata said that he expected the 50 percent annual revenue growth target to remain achievable.
""For the next few years that is our target and our plan. It gets to be a bigger challenge every year as the numbers get bigger,"" he said, noting that acquisitions could contribute to the target.  
Some analysts see the company itself as a takeover target, in the wake of WorldCom Inc's $14 billion acquisition in August of MFS Communications, the other big competitive local exchange carrier.
Investor attention has been drawn to the value of owning local networks, rather than having to resell regional Bell connections, which not only makes for a fast market entry but, in Annunziata's view, eases the sale of extra services too.
""The only way you can capitalize on and control your client base is by owning the facility that connects to the customer,"" he said.
Much would depend on the attitude of the cash-strapped cable TV shareholders, some of which have distanced themselves from the telecommunications market in recent months.
""There is always the issue that they may want to monetize that asset...(but) they have a very good investment here,"" Annunziata said.
Teleport shares have roughly doubled since its IPO. On Wednesday afternoon they stood 1/2 higher at 32-1/4 on Nasdaq.
((-- New York newsroom 212-859-1610.))
",35
"OneLink Communications Inc believes it has found one of the richest veins in the new practise of data mining by wringing every scrap of information out of telephone calls.
Data mining or data warehousing are the terms for building up profiles of customers or potential customers by aggregating millions of pieces of transaction data.
OneLink gathers customer information for healthcare, telephone, real estate and other companies and then compiles maps which lay out demographic information in an easy format.  
The maps can be used and manipulated on a personal computer.
""We view every telephone call and every Internet message as an information transaction,"" Nicholas Bluhm, chief executive of the Minneapolis-based company, said on Friday.
OneLink combines information like the name and number of the caller -- which is gleaned from caller-ID -- with the time spent on line and choices made in call management systems to build up a profile of caller habits and interests.
To get household and financial information it pulls in data stored on databases to build up a complete picture.  
Bluhm said that calls from public phones, mobile phones, and from the workplace left gaps in the data. Trying to fill in those gaps from other sources was often unsuccesful.
The company had its IPO at $3.50 in April 1995 and closed on Friday at $2.25.  The company has four million shares outstanding.
OneLink, which changed its name from MarketLink last week, lost $1.28 million in the first nine months of 1996, more than its revenues of $743,000 in the period. However, the name change coincides with a gradual change to a service-based from a hardware-based company.  
""I believe that by the end of 1997, if not third quarter then fourth quarter, we will be profitable,"" Bluhm said.
He is particularly attracted by markets like healthcare, where resource allocation is important.  OneLink's system can track when calls went unanswered or lines were busy or other indications that customers' needs were not met.
""We are looking at those markets where we can provide enhanced services at enhanced prices,"" he said.
OneLink is also working with regional Bells to help prepare them for the fight with more experienced competitors like the long distance telephone companies, as calling markets are opened to full competition.
""There are so many companies that are throwing away that information you have on your phone bill,"" Bluhm said.
OneLink gets a monthly license fee for its service and a fee per message, per minute of calls monitored and per map printed for its customers.
""We are doing very well and the company is going to be very succesful,"" he said.
-- New York Newsroom 212 859 1610
",35
"AT&T Corp, after recording a $200 million rise in bad debt and uncollectibles in the fourth quarter, sees a need for an industrywide drive to crack down on customers who fail to pay their telephone bills.
""It used to be if you don't pay your phone bill, you didn't get phone service. Now with multiple suppliers, we can shut off their service, but they can go someplace else to get service,"" Chief Financial Officer Richard Miller said Wednesday.  
The extra $200 million was the main reason AT&T fell short of consensus estimates for the fourth quarter, analysts said.
AT&T's operating net was $0.76 against $0.68 in the year-earlier period and adrift of the $0.79 First Call consensus.
""We think there are some behaviors that are beginning to emerge that we need to work on as an industry,"" Miller told Reuters in an interview.
""The majority of the problems we had in 1996 were in the business market, but we are also seeing increased uncollectibles in the consumer area,"" he said.  
There were increases in business fraud, delinquency and bankruptcies during the period, AT&T said.
""We studied this in the fourth quarter and concluded we need to step up our ongoing provisioning. As we take on receivables, we allocate a certain proportion to bad debts or uncollectibles,"" he said.
""Half the $200 million was catch-up for (underprovisioning in) the past and the other represented what we were incurring in the fourth quarter,"" Miller said.  
In 1996, AT&T had $9 billion of account receivables plus $7.1 billion of financial receivables. Of these it put a total $1.3 billion into allowances including uncollectibles.
Miller said the $100 million extra in the fourth quarter should be seen in the context of this overall figure.
Worldnet, AT&T's Internet access service launched in 1996, ended the year with 568,000 subscribers, but added fewer in the fourth quarter than the third quarter.
""Were close to being on our plan on online services...in a brand new industry that is very dynamic that is quite remarkable,"" he said.  
He would make no predictions for when it might break even.
Miller said the company planned to market Worldnet aggressively, and the results of that effort would be seen in the first quarter.
((-- New York newsrom, 212 859-1610))
",35
"Wireless wholesaler Nextwave Telecommunications Inc is to set its delayed initial public offering in the next two weeks, finally bringing to fruition a fund-raising exercise of breathtaking ambition.
Nextwave, an unknown in the industry until it began bidding in 1996's C-band Personal Communications Services (PCS) auctions, has spent a staggering $4.7 billion on wireless licenses for the third largest network in the U.S.
""We expect to file an amended S1 to the SEC in the next couple of weeks,"" said a source close to the company.
The company planned to go public last summer, but after a series of delays finally came to a parting with lead manager Merrill Lynch in the fall. It must now amend the S1 document it sent to the Securities and Exchange Commission.
Revised documents are not yet finalised, but Smith Barney and Lehman Brothers are set to be co-lead managers of the $200 million equity offering and CIBC Wood Gundy is leading the $300 million debt offering, the source said.
Nextwave declined to comment ahead of the re-filing, and the source declined to be identified.
Nextwave's total outlay may top $8 billion, when the $3-3.5 billion cost to build the network is included.
The build-out is covered by $1.4 billion in unconditional vendor financing from companies such as Lucent Technologies Inc and Hughes Networks Systems, and another $2.1 billion in conditional vendor financing.
""The cost of the system is, as you can see, fully funded,"" the source said.
Some analysts have been spooked by the huge debt Nextwave is taking on and see the wireless market as being dangerously overcrowded already. Nextwave, however, is sanguine.
""The company has pre-sold 35 billion network minutes of use. To put it in perspective, that is equal to the entire U.S. cellular industry's 1994 traffic,"" the source said.
While Nextwave has huge debts, it will not incur the massive advertising, marketing and customer acquisition costs incurred by its clients and their rivals as they duel in the market place for fickle customers.
Nextwave sees its success being backed by the 30 percent plus growth in U.S. wireless usage, and the low costs to get its retail customers into that market.
The company has 21 customers, headed by MCI Communications Corp, which in August entered a 10-year agreement to take 10 billion minutes of use on the network.
Nextwave is essentially offering off-the-shelf digital wireless service to any reseller that could want it.
These already include long distance and local telephone firms who need wireless to bundle with their wired offerings, other wireless firms which have holes in their own license coverage and electric utilities who see a future in telecom.
But potential users could embrace any firm with a strong brand and market presences.
These could include retailers like Wal Mart Stores Inc which already sell consumer telecom devices, or companies like Walt Disney Co if it decided to offer a kids phone service under its brand name, the source said.
Nextwave shareholders include Qualcomm Inc -- the inventor of the digital technology CDMA that is used on the network -- Sony Corp , NTT Corp, and Korea Electric Power Corp, plus institutions like ING Capital, Triumph Capital and Kingdon Capital.
The foreign ownership is 22 percent. No shareholder has more than five percent of the company.
Nextwave says doubters should judged it by the quality of its backers.
""Look at the names of the companies allied with us. Why would you put up the money unless you knew it would work? You have more than your reputation on the line,"" the source said.
",35
"Eastman Kodak Co. sees continued innovation as the key to protecting profit margins in a business that becomes more competitive every year, its new president and chief operating officer said Thursday.
""Brand image is fleeting. If you don't innovate ... then that (advantage) goes away,"" said Daniel Carp, who was appointed Thursday to the positions previously held by Kodak Chief Executive Officer George Fisher.
""There is pricing pressure in all products. What happens is that you have to innovate and bring out products at new price points,"" Carp said in an interview.
The Rochester, N.Y.-based photographic giant is counting on new products not only to increase its sales, but also to lift it out of markets where price-cutting is the weapon of choice and into areas where consumers pay a premium for what is new and exciting.
Carp, who was previously assistant chief operating officer and an executive vice president, said Kodak launched 30 new products at this year's Photokina, a key industry show in Cologne, Germany.
Advanced photo systems (APS) and digital cameras are two types of innovation for which Kodak has high hopes.
The APS cameras work with special film containing encoded digital information that allows users to specify different print sizes on the same film and change film rolls half-way through in case light conditions change.
Kodak and long-time rival Fuji Photo Film Co. Ltd put aside their long-running dispute over the Japanese market to work jointly with several Japanese camera makers to set standards and develop the APS cameras.
Innovation, Carp said, is increasingly combined with more flexible manufacturing processes so that launches take place with minimal inventory but with a quick follow-up to ensure that strong-selling products do not run out. ""The old way was to build inventory, then launch,"" he said.
Restructuring in such an environment will be a continuous process, he said, with some areas, which he declined to specify, requiring imminent reappraisal on product lines, sales channels or manufacturing processes.
""There are areas of the company that will probably need to have some downsizing going forward,"" Carp said.
He said Kodak would not rule out acquisitions as one way to fill a gap in product lines, but declined to say where he saw Kodak's deficiencies. ""It would give you more strategy than I would want to,"" he said.
",35
"Rural U.S. wireless firms expect to be able to keep on growing rapidly without facing the blitz from new Personal Communications Services (PCS) rivals that has affected their cellular cousins in big cities.
""We believe strongly that PCS is an urban-based phenomenon,"" John Stanton, chief executive of Western Wireless Corp told an investor conference.
CommNet Cellular Inc, 360 Communications Co, Palmer Wireless Inc and Vanguard Cellular Systems Inc all expect to benefit to some degree.  
""I would think that PCS players will not enter the less densely populated rural markets for some time,"" said Steven Yanis, an analyst at Salomon Bros, which hosted the conference.
Wireless stocks have been depressed all year, missing out on the big Wall Street boom, despite big increases in subscriber numbers, revenues and improving cash flows.
The reason is simply fears of the effects of competition from aggressive PCS companies, who are driven by monstrous debt burdens to grab market share aggressively.  
In most big city markets, there will be five wireless competitors by 1999 instead of two. The fear is that aggressive price cutting or expensive advertising will trip up the carefully balanced discounted cash flow business models which share and bondholders are relying on.
""If you add up the market share projections by the PCS and wireless companies (in most cities) they exceed 100 percent,"" said David Roddy, chief telecommunications economist at Deloitte and Touche Consulting.  
But for rural cellular providers, PCS will be slow to arrive, with little built before 2000, and there will be less of a threat to revenue and subscriber growth.
""Population density is critical to understanding competitive threats,"" said Arnold Pohs, chief executive of CommNet Cellular.
PCS, operating at a higher frequency than cellular, would need more transmitters to cover rural areas and it would be a marginal proposition. However for densely peopled urban areas it offered a perfect solution.  
""PCS is a capacity-based business while cellular is a coverage-based business,"" said Western Wireless's Stanton.
Comnet, whose home territories include North and South Dakota, finds they are not financial badlands. It had almost 60 percent growth in earnings before interest taxes depreciation and amortization in the year to end-June and customer turnover, or ""churn,"" of only 2.2 percent.
There will even be revenue opportunities for rural cellular companies as PCS customers travel through their areas, or ""roam,"" and need a connection.
""We will gain a lot on roaming agreements as dual mode handsets come into play,"" Pohs said.
Dual mode handsets will handle both cellular and PCS frequencies to allow customers to stay in touch nationally even if their provider does not own a network in every area.
",35
"AT&T Corp shares were savaged on Monday as growing worries about marketing and investment costs in the hyper-competitive U.S. telecom market were reflected in earnings estimate cuts by two brokerages.
AT&T shares plunged 2-3/4 or 6.6 percent to 38-3/4 by late-afternoon, after Salomon Bros. and CS First Boston issued their research.  MCI Communications Corp fell 7/8 to 33 and Sprint Corp 1/2 to 39-1/2 in sympathy.  
""It is in AT&T's court,"" said analyst Barry Sine of SBC Warburg.  ""The more they spend on marketing their new services for the long term, the lower 1997's results will be,"" he said.
The market was particularly spooked by a sharp cut in his estimate of AT&T's 1997 earnings per share by Salomon analyst Jack Grubman to $3.00 from $3.60, and to $3.25 from $3.80 for 1998.  Grubman later said his estimates may still be too high.
Most analysts thought this too bearish a view.  Frank Governali of CS First Boston said he only cut his estimate of AT&T's earnings to between $3.25 and $3.45 for 1997.
""Salomon's number is for a dire outcome,"" he said.  
""I would be shocked if AT&T diluted its 1997 earnings down to $3.00 per share,"" said Richard Klugman of PaineWebber.
First Call's analyst consensus for AT&T earnings per share in 1997 is $3.68 and for 1998 $3.98 per share.  For the fourth quarter 1996 it is $0.80 and the 1996 year $3.48.
AT&T declined to comment on the estimate cuts, but a source close to the company said no guidance had come out of the investor relations department to drive them.
""We have not yet determined what 1997 will bring, but it is safe to say we do not agree with the more pessimistic comments,"" the source said, declining identification.  
Governali said that AT&T had a choice to make: ""Either to run the business for 1997, in which case they could make $3.60 per share, or to position itself for the long-term, in which case there is no way they can.""
Analysts say the whole industry faces the same dilemma.
The Telecommunications Act of 1996 will release the regional Bells into the long distance market place this year, on top of a horde of tiny rivals that have been nibbling away at the customers of the big three.  
Though AT&T, MCI and Sprint can enter the local phone market, they will have to stump up hundreds of millions of dollars to to advertise their services, push their brand names and build network facilities to key business customers.
Grubman's research note said that he believed AT&T was losing hundreds of millions on its popular Worldnet Internet access service too, because of high costs.
Analysts say MCI and Sprint have already bitten the bullet by warning analysts of increased spending, but AT&T had not done so.  
""Sprint and MCI have already done it.  MCI's merger with British Telecommunications Plc is a tacit admission of that fact (that you need very deep pockets to succeed),"" Governali said.
SBC Warburg's Sine said MCI told analysts it would spend an extra $200 million to $300 million this year on marketing, but the stock was not hit because it is underwritten by the value of the planned British Telecom merger, announced in November. -- New York Newsroom 212 859 1610
",35
"A number of top executives in the telecommunications industry are abandoning the comforts of giant corporations for the thrills of building a new company and the hope of becoming seriously wealthy in the process.
""I think this is not for everybody,"" said Alex Mandl, who on Monday resigned as chief operating officer of AT&T Corp. to become chairman of Associated Communications, a tiny new company in the crowded arena of wireless services.
""It requires a willingness to step out of the comfort zone of big Corporate America,"" Mandl said in an interview.
New technology and a new era of competition are giving executives with key skills huge opportunities in new ventures, even as thousands of others are losing their jobs.
Small companies with good technology can now beat established giants thanks to opportunities from the auction of new wireless licenses and the convergence of communications, computers and entertainment.
Mandl is not the first. In January 1995 Jim Barksdale left AT&T wireless, where he was chief executive, to become president and chief executive of the then-obscure Netscape Communications Corp..
Across the technology field, start-ups have claimed Silicon Graphics Inc.  President Thomas Jermoluk, Dataquest Inc. Chief Executive Judy Hamilton, Sybase Inc. Chief Operating Officer David Peterschmidt and many others.
George Schmitt was chief executive of PCS PrimeCo, a national wireless venture where he had billions to spend building an advanced communications network for a group of regional Bells. Yet in August last year he took a half-million dollar pay cut to join little-known Omnipoint Corp.
What the recruiters expect is clear -- a winning market strategy, a star to attract a top management team and the use of wide industry contracts to minimize chances of failure.
The companies the executives leave usually recover, but can often take some short-term damage to their stock as investors try to work out the motivation for departure.
AT&T's stock fell $1.375 on Monday to $54.125 on news of Mandl's resignation. It added 12.5 cents Tuesday.
As well as the big names, hundreds of vice presidents and middle-ranking executives have left long-distance firms and regional Bells to work for new companies in the industry.
Many have tough decisions to make, trading in long hours and a comfortable if pedestrian salary progression for a crack at serious wealth -- but with hours only workaholics would enjoy.
""It is the opportunity to shape something risky, but a lot more satisfying,"" said consultant Mark Bruneau of COBA-MID.
Of course not even the big companies are so safe anymore. Greater competition and rapidly evolving technology are erasing the comfort zone for all but a few.
AT&T is cutting tens of thousands of jobs as part of its split into three parts, as are the regional Bells, who will soon be fighting head to head with AT&T in many markets.
In Mandl's case, it was an offer too good to refuse.
A $20 million signing bonus in cash to join Associated removes any personal worries should the new company fail, and dwarfs his AT&T salary of around $1.3 million.
""Most of the other opportunities are stock rich, not cash rich like this,"" said Bette Massick of brokers Bear Stearns.
Should Associated succeed wildly, then Mandl's share options, which convert to an 18 percent stake in the company, should provide still greater comfort.
Nevertheless, it could not have been an easy decision. Mandl, 52, was considered by analysts as heir apparent to AT&T Chairman Robert Allen.
Mandl declined to speculate whether his decision would have been the same if Allen were to retire this year instead of in three or four years.
""He (Allen) was always consistent that I was a good candidate to succeed him, but beyond that you have to earn your stripes,"" Mandl said.
Netscape's Barksdale is pure inspiration for risk takers.
""Barksdale had a terrific job at AT&T. He could have been a candidate for the top job,"" Mandl said.
But now even Robert Allen must dream about being as wealthy as Barksdale.
Netscape, a dominant force in the world of Web browsers for the Internet, was a roaring success after its initial public offering a year ago. Barksdale has sold 2.2 million Netscape shares, but his remaining six million shares are now worth a cool $222 million.
",35
"AT&T Corp. is earning more, but having trouble getting paid.
The nation's largest telephone company said Wednesday that operating profits from continuing operations for the last quarter of 1996 rose 14 percent, but said it had to put aside $200 million to cover unpaid bills by customers.
The telecommunications company, which has now completed its split into three major units, said it earned $1.24 billion, or 76 cents a share, in the quarter, compared with $1.09 billion, or 68 cents a share, in 1995's last quarter.
Chief financial officer Richard Miller told Wall Street analysts in a conference call that results for the first quarter of 1997 would be comparable or slightly above those of the fourth quarter.
Revenues in the latest period rose to $13.24 billion from $12.89 billion.
The Basking-Ridge, N.J.-based company's 1995 fourth-quarter operating profits excluded restructuring and other charges totalling $2.036 billion, or $1.27 a share. Including these charges, its net earnings from continuing operations resulted in a loss of $948 million, or 59 cents a share.
Competition has brought the company a new headache.
""It used to be if you don't pay your phone bill you didn't get phone service. Now with multiple suppliers, we can shut off their service, but they can go someplace else to get service,"" Miller told Reuters.
The problem is worst among business users, particularly the hundreds of tiny long-distance resellers, some of whom go bankrupt after ordering millions of network minutes from carriers like AT&T, MCI Communications Corp. and Sprint Corp. in order to compete with them.
AT&T's fourth-quarter operating net per share was three cents below the 79 cents industry analysts had forecast, according to First Call, mainly on the extra $200 million in provisions for bad debts.
As a result, some analysts lowered their 1997 estimates.
""No one was expecting that,"" said Bear Stearns analyst Bette Massick. ""You have to cut your number on that alone.""
For all of 1996, AT&T's income from continuing operations rose to $5.6 billion from $5.2 billion for 1995, excluding the charges. Earnings per share for 1996 were $3.47, a 5.5 percent increase over $3.29 per share in 1995.
Total 1996 revenues were $52.2 billion, a 3 percent increase over 1995's $50.7 billion.
""AT&T had a record year in 1996 in the face of extraordinary challenges and unprecedented changes in our business and in our industry,"" said Chairman Robert E. Allen.
In September 1995, AT&T said it would restructure its businesses, spinning off equipment company Lucent Technologies in September, and it completed with the spinoff of computer company NCR at the end of 1996.
AT&T also sold its majority position in AT&T Capital Corporation to a consortium of investors during the year.
AT&T said its communications services revenue increased $529 million in the latest quarter, up 4.3 percent from the same period last year. Communications services revenues include wireline services and wireless services, as well as communications products and other services.
It said its long-distance calling volumes grew 6 percent over the same period in 1995 and 1.8 percent over the previous quarter.
""The growth in traffic volumes (3.2 percent) was better than the 2.5 percent we were expecting,"" said analyst Richard Klugman of brokers PaineWebber. ""But they are still losing market share to the tune of three percentage points a year,"" he said.
AT&T's wireless services revenue, which includes cellular voice and data, messaging and air-to-ground services, grew 18.4 percent to $937 million in the fourth quarter of 1996. Its cellular service subscribers grew to 5.2 million, a 31.7 percent increase from a year ago.
Revenues from communications products and other services, which include consulting and outsourcing, on-line, and wireless product sales, were $386 million, an increase of nearly 17 percent from the year-ago quarter.
However, credit card revenue plunged 32.3 percent to $374 million, primarily as a result of the securitization programme instituted at AT&T Universal Card Services in 1995.
Credit card operating losses fell to $4 million in the fourth quarter from $35 million in the third quarter of 1996. In 1995's fourth quarter, it made an operating profit of $109 million.
AT&T's stock closed 50 cents down at $38.875 on the New York Stock Exchange.
",35
"MCI Communications Corp's increased focus on high value customers has produced real results in the last quarter of 1996, positioning the company well for the impending market fight with regional Bells.
""Normally I take strategic position shifts with a pinch of salt, but you can really see it in this quarter's MCI numbers,"" said Richard Klugman of PaineWebber
MCI, which reported results earlier on Tuesday, expanded long distance revenues by 10 percent in the fourth quarter from a year earlier, ahead of volume growth of eight percent.  
This reverses the normal position for long distance companies, which have tended to get less revenue for each average minute used on their system year by year.
""You are seeing a favorable gap (revenue growth minus volume growth),"" Klugman said. ""Part is the price increases around Thanksgiving, but part is the data services,"" he said.
Data services are high value services, and are not billed on a minute basis.
MCI said that it had increased average revenue per customer, cut the proportion of customers leaving for other carriers and built a more effective base for the future.  
""We are far more selective about customers going forward,"" MCI Chief Financial Offier Doug maine told Reuters.
To push this process along MCI is aligning the pay of its sales people with the overall value rather than number of customers. The start of MCI One, a package of services on one bill, has helped that process, he said.
""They did what they said they would do and increased the focus in the long distance business on higher value customers,"" said Barry Sine, an analyst at SBC Warburg.
Analysts are expecting a substantial increase in MCI's spending this year for marketing the expansion into local calling. MCI is sticking with its guidance to analysts to expect flat earnings per share for the year, they said.
MCI is in the process of merging with British Telecommunications Plc. MCI stock was 1/4 firmer at 34-5/8 by midsession. ((-- New York Newsrom 212 859 1610))
",35
"BellSouth Corp on Thursday produced another set of strong earnings, with fourth quarter figures one cent above consensus, and extremely strong access line growth and cellular customer expansion.
Analysts note BellSouth has done this on a lean cost base, aided by a conservative approach to expensive projects like Personal Communications Services (PCS), and futuristic broadband networks.
""They did report a penny better than expectations,"" said Lind Meltzer, an analyst at UBS Securities.
The company boosted earnings per share before one-off items by 12.3 percent to $0.64, from $0.57 a year ago. The First Call consensus was $0.63.
""I think their double digit earnings growth is sustainable,"" said Barry Sine, an analyst at SBC Warburg, though he was less confident that growth would continue at 12-13 percent as had been seen.
Total operating revenues rose six percent to $5.05 billion from $4.76 billion in the fourth quarter and operating expenses rose 5.7 percent, excluding year ago charges.
Preparing for entry into long distance and to defend the local calling market from new rivals is a challenge to costs, but BellSouth is so far doing well.
""Just holding the line on margins is an achievement, and they managed to expand a little,"" said Sine.
BellSouth only bid for PCS licenses to fill in gaps of its regional cellular coverage while some other Bells banded together to build a national network.
Analysts also applaud its 'wait and see' approach to the information superhighway, which has been more broadly adopted by phone companies after technological and marketing setbacks.
""They have been proved right,"" Sine said.
Access line growth over BellSouth's huge and economically buoyant region was 4.7 percent in the fourth quarter from a year earlier. This was below the third quarter's 4.9 percent and the 5.0 of the second quarter.
""We're not sure how much of this decline is secular, and how much is related to the (second quarter strength) from the Atlanta Olympics,"" Sine said.
""Volume growth at BellSouth did look a little weak considering they are normally at the high end of the regional Bells,"" Meltzer said.
SBC Communications Inc and Ameritech Corp each recently reported some moderation in line growth.
In Ameritech's case this is a deliberate cut back in marketing because second lines have a long payback period, particularly when used for linking computers to the Internet which does not generate access revenues, analysts have said.
BellSouth telephone operations cash expenses rose 0.7 percent in the fourth quarter from a year ago.
""They have got some room to go on costs as they came to cost-cutting a little later than some,"" Sine said.
BellSouth its employees per 10,000 access lines had fallen to 28.2 from 32.5 a year ago, a measure of productivity improvements.
The stock closed 1-1/2 lower at 42-3/8 as the broad market fell. ((-- New York Newsrom 212 859 1610))
",35
"MCI Communications Corp on Wednesday said it developed a new network type called Vault which combines conventional voice telephone networks with packet-switched networks like the Internet on a single line.
MCI said the cost is part of the $100 million a year it is spending on upgrading its Internet networks. The company plans to earn $2 billion a year in Internet revenues by the end of the century.
""It can be done over a conventional phone line,"" MCI Chief Engineering Officer Fred Briggs told Reuters.
For example the technology will allow a customer to talk to and receive computer data from an MCI service representative simultaneously on a single, conventional telephone line by turning the voice into data packets.
""We have been working on this for months,"" Briggs said. He declined to say whether MCI had patented the technology.
Customers currently need separate lines to communicate over a telephone network and a packet-switched network.
Packet switching means that traffic is divided into manageable chunks and labelled for its ultimate destination. It will be sent via the most convenient route, while conventional phone calls can only travel the route set in advance.
Packet switching has a network efficiency benefit. It is the difference between diverting cars away from city congestion and not being able to do the same to bypass a breakdown on the subway.
""From a customer's perspective, communications will be simplified.  The issue of which network a communication travels over will be irrelevant,"" said MCI President and Chief Operating Officer Tim Price.
MCI is already using Vault technology to provide enhanced features to its directlineMCI product by allowing customers to update their account profiles via the World Wide Web.
MCI plans to add products suitable for vault in areas like intranet managed services, facsimile, document sharing, video conferencing and communications management. ((-- New York Newsrom 212 859 1610))
",35
"Global One, a telecommunications venture owned by Sprint Corp., Deutsche Telekom AG and France Telecom, lost more money than expected in 1996 and is poised to cut jobs, two sources close to the company said Wednesday.
The venture set up in January last year was expected to lose $250 million for 1996 but has in fact lost almost $370 million, one source close to the venture told Reuters.
""The partners are furious about the losses. Word has come down that they are looking to cut jobs,"" said the source, who asked not to be identified.
Neither Global One nor Kansas City, Mo.-based Sprint, which owns a 33 percent stake in the group, would comment.
It was not immediately possible to contact Deutsche Telekom or France Telecom which share the remaining 67 percent. However, a second source, close to one of the partners later confirmed the accuracy of the story.
Current analyst expectations are of losses of up to $250 million, of which around $85 million would be attributable to Sprint and $51 million of that has already been recorded in the first nine months.
Sprint is planning to report fourth quarter results on Feb. 4 and First Call's analyst consensus of fourth quarter earnings has already slipped in recent days to 69 cents per share from 70 cents, compared to a year ago 79 cents, when Sprint posted a net profit of $278 million, excluding one-time charges.
Analysts say much depends on the proportion of the loss attributable to Sprint, the tax effects, and how the partners account for it, but it will clearly hit earnings per share.
""If this is true, Global One's effect on Sprint will jump up from per share losses of 2-4 cents per quarter in the first nine months to in excess of 10 cents in the fourth quarter,"" said Bill Deatherage of Bear Stearns.
Global One currently has 2,900 employees and has been spending heavily to build a network powerful enough for it to carry traffic for other telecom firms as well as to cater to the global needs of large businesses.
The partners have revealed no financial details about Global One's performance in 1996 except to say it is expected to end the year with more than $800 million of orders.
",35
"GTE Corp on Wednesday said it had 800,000 long distance customers at the end of 1996, six percent above the target of 750,000 it set itself after it entering the $80 billion long distance market last March.
GTE gave the new figures in a press release announcing a new flat rate long distance calling plan. It said by the end of this quarter it may up customer targets for 1997, and pull forward the unit's expected break-even target.
""We are evaluating that on a daily basis,"" Rob McCoy, president of GTE long distance, told Reuters in an interview.  
McCoy did not give the current target for end-1997 customers. The unit is currently expected to break-even by the last quarter of 1998 with a full year profit contribution to the parent company for 1999.
GTE is targeting customers who would spend an average $25 a month on long distance. McCoy said bills were at present above $17 reaching towards $20, adding they would rise further as more users emerged from the first few weeks of promotional service.
""We have had some terrific success in our first 10 months,"" McCoy said.  
GTE is approaching the ferociously competitive market cautiously, picking at customers in niches who may switch to the company and stay. Switching and not staying -- called churn in industry jargon -- has been the bane of the industry.
The new ""GTE's Easy One Rate"" plan is aimed at users who want simplicity, and those who make a lot of daytime long distance calls. Several providers offer cheaper off-peak rates than GTE's $0.14 per minute.
""We don't have a mass market strategy,"" McCoy said. GTE is only initially offering the calling plan in 27 states where it already offers local or wireless services.  
The idea is to build a customer base which uses a bundle of services and -- according to business models and market research -- will be less likely to switch carrier than those who only take one service.
GTE has set up a rate plan customer line, 1-800-GTE-3737, and will monitor which areas among the other 23 states where it offers long distance have high demand. This will help it determine where to expand the rate plan, McCoy said.  
GTE's next market niches to attack will include markets for ethnic minorities. This may bundle international calling to the country of origin with multilingual customer service and other services needed in that community marketplace.
""It will be coupled with marketing best able to reach those marketplaces,"" he said.
McCoy said that GTE's long distance unit would shortly be announcing a business data network resale deal with one of the big three long distance carriers, AT&T Corp, MCI Communications Corp or Sprint Corp.
He declined to say which.
GTE resells the network of WorldCom Inc for its basic long distance, so its increased customer tally will also benefit that carrier as the number of network minutes bought rises.
((-- New York Newsroom 212 859 1610))
",35
"GTE Corp, the one big local telephone company already able to offer long distance across much of the United States is being courted for alliances and mergers, but seems relatively self sufficient.
Analysts who attended a meeting with the company on Friday came away impressed by the list of suitors.
""They said they have been in merger and alliance talks with everyone from AT&T (Corp) to WorldCom (Inc), but they didn't give the impression that talks had gone very far,"" said Barry Sine of brokers SBC Warburg. 
Analysts were even more impressed by how well GTE expects it can do on its own and by the freedom from management distractions that such self-sufficiency offers.
GTE forecast that earnings per share in 1997 and beyond would rise 10 percent a year or more, including a 1997 infusion of a third to half a billion dollars of long distance revenues. Telephone revenues in the U.S., where growth in customer lines has often been the best in the industry, were expected to grow 5-6 percent in 1997.
GTE shares took a cue from the presentation, rising $0.50 on Friday and a further $3/8 to $44-5/8 by midday on Monday.  
""GTE made a very strong case that they don't need to merge with anyone,"" Sine said.
GTE's local calling operations are like a shotgun blast on a map of the United States, peppering 28 states, but on average only accounting for 10 percent of lines in those states.
Regional Bells by contrast blanket regions, which led to them being ruled dominant carriers under the terms of the 1996 Telecommunications Act, while GTE was not.  
So while regional Bells and long distance companies wrangle over the terms of competitive access to local customers, which must be agreed before regional Bells can enter the long distance market, GTE has already been operating long distance services since the spring.
""I think GTE is in a very good strategic position,"" said Richard Klugman of brokers PaineWebber.
By the end of the third quarter GTE had won over 500,000 customers from other carriers. By the end of 1996 it forecasts that it will have 750,000 and by end-1997 1.5 million.  
In a filing with the Securities and Exchange Commission on Friday, GTE said it would increase long distance revenues seven-fold in 1997 from 1996. It gave no exact figure.
GTE's fixed and wireless networks cover areas in which a third of the U.S. population live, but with an extension of 100 miles in each direction, would reach two thirds.
Not only does this give network advantages, with few places far from a call switching center, but it means the GTE brand name is recognised very widely across the country.  
Analysts say brand name recognition is vital for companies that intend to bundle Internet and wireless with local and long distance calling.
GTE has plenty to offer a partner. Its mainly rural and suburban customers are the hardest to reach by other means, putting a premium on its network.
GTE's international operations, including investments in Venzuela, Argentina and the Dominican Republic, and a planned push into Brazil. Latin America is one of the hottest areas for telecom market growth in the world.
GTE had its most serious merger talks with MCI Communications Corp analysts say. MCI was making the moves, but was disappointed that GTE was not prepared to offer more than $30 per share, according to news reports.
Neither company has ever confirmed the talks nor the price. MCI eventually turned its merger attention to British Telecommunications Plc, which already had a 20 percent stake in MCI.
-- New York Newsroom 212 859 1610
",35
"AT&T Corp is hoping to use its new local calling service for businesses to take valuable customers away from regional Bell competitors, appealing to those that want a single bill for a package of services.
Jeff Weitzen, executive vice president for AT&T business markets, said that while the company would initially provide local service by reselling the networks of local phone companies, many customers would soon be found valuable enough to get their own AT&T digital line.  
""In essence what we announced today was only our launching pad,"" Weitzen told Reuters in an interview on Monday.
AT&T announced two services designed to make further inroads in the business calling markets where it already reaps $20 billion of annual revenue.
AT&T Business Local Service, aimed at those who spend less than $2,500 per month, offers local calling on a single bill with any other AT&T service. It is being launched in California on February 3, with other states to follow.  
The second, AT&T Digital Link, offers outbound local calling in 35 states over existing digital lines. AT&T will install its own lines to customers spending more than $2,500 a month, making it easier to offer high-speed data, Internet and other services.
By the end of February, Digital Link, which has been tested with 2,500 customers, will be available in 45 states.
Weitzen hopes to bring customers aboard with the first offer, use a package to calculate what they spend, then pull them across to the more profitable second offering.  
""A large number of customers don't have digital facilities, but when you bundle up the various offerings, they take will cross that ($2,500) line rather quickly,"" he said.
By the end of this year, Business Local Service will be offered across large parts of the country using the circuits of regional Bells under resale agreements, most of which are still under negotiation.
For the moment AT&T only has a resale deal with Pacific Telesis Group for California and is close to finalizing one with Ameritech Corp.  
AT&T's California coverage plans are hindered by the lack of an agreement with GTE Corp, which has several calling regions in California.
Also by the end of this year, a third version of Digital Link software will allow users to cut out regional Bells completely from both inbound and outbound calling, with even 911 emergency calls and local directory-assistance calls being handled via AT&T.
As part of that upgrade, AT&T will need to pass regulatory hurdles in the states concerned.
",35
"Not content with disturbing your meals with sales calls, AT&T Corp. will soon have salespeople arriving on your doorstep to explain why you should switch long-distance service to them.
However, they will have been invited.
The nation's dominant long-distance company on Thursday announced an alliance with Shaklee Corp. that will have Shaklee's 500,000 sales agents selling AT&T phone service face-to-face across the nation from January 1997.
The Shaklee sales representatives will sell to friends, colleagues and neighbours, never to strangers.
""Without question, this is a groundbreaking move for AT&T,"" said Joseph Nacchio, executive vice president of AT&T's consumer and small business division.
Shaklee, part of Yamanouchi Pharmaceutical Co. Ltd. of Japan, currently sells nutritional supplements, personal care products, household cleaners, and water treatment products.
It is particularly strong among ethnic minorities, non-English speakers and in inner cities. These markets can be tough to crack by other routes, but quite lucrative.
""Shaklee will help us expand our personal presence in communities exponentially and create a whole new network of representatives with roots in neighbourhoods across the country,"" Nacchio said.
To start with, Shaklee will sell only AT&T's long-distance calling plans, but AT&T wants to sell new services too once the sales force is trained on their complexities.
""AT&T would like to give Shaklee that opportunity,"" said Shaklee spokeswoman Karin Topping.
The move shows AT&T is neither too big nor too proud to take a leaf out of the marketing books of its competitors.
Small aggressive competitors like Excel Communications Inc. have powered their growth through exactly this kind of ""multi-level"" marketing. The approach is so named because each salesperson recruits others, and continues to benefit from their recruits' sales efforts as they rise up the hierarchy.
MCI Communications Corp. has a similar relationship with direct sales organisation Amway Corp.
""Imitation is the sincerest form of flattery. And it certainly validates this sales strategy,"" said Eric Strumingher, industry analyst at brokers Chicago Corp. ""I think this could be very significant for AT&T,"" he said.
For AT&T the alliance is aimed at reaching new customers cheaply, and keeping them.
AT&T's market share in the $70 billion long-distance market has sunk to about 55 percent from 90 percent over the last decade. They have been hit not only by traditional rivals MCI and Sprint Corp., but a host of tiny new competitors.
Recent attempts to regain customers by offering $100 checks have been expensive but without increasing loyalty, so Thursday's initiative marks a new departure.
""We do believe the nature of this sales channel will be much more likely to increase loyalty and retention among customers,"" Jack McMaster, AT&T's vice president for domestic consumer long distance, said in an interview.
Shacklee salespeople sell to their friends and neighbours. Customers are expected to be more reluctant to switch away from a service recommended by a friend.
""It's potentially much more lucrative than selling lipstick or vitamin supplements for the salesperson,"" said David Goodtree, an analyst at consultancy Forrester Research.
Shaklee said an average salesperson earns $14,000 a year part time, with earnings ranging from $1,000 a month at the entry level to six figures for the long-established.
Shaklee said that cars and vacations would typically be incentives for upper echelon sales representatives.
For AT&T a crucial question will be the value of the customers won in terms of their long-distance spending, and the chances of selling new services like satellite television, pagers or mobile phones to them too.
AT&T wants all of Shacklee's half million salespeople to be involved with the programme, which means they must be AT&T customers themselves.
""It is our ambition that all of them will participate in this programme,"" McMaster said.
This will mean a boost of several hundred thousand good customers who will not be able to switch, even before the sales effort gets underway.
""Thats one of the reasons we are so excited about this,"" McMaster said.
AT&T's stock edged down 12.5 cents to $37.125 on the New York Stock Exchange.
",35
"Citizens Utilities Co. said on Thursday it is aiming to be among the largest eight or 10 U.S. telephone companies by the year 2000 by buying up companies in small but important local telephone markets across the country.
""We are looking at acquisitions of this type every day,"" Ronald Spears, vice president for Citizens' telecom business, told Reuters.
Citizens, currently the 15th-largest U.S. phone company, is looking for new properties on both the western and eastern seaboards, particularly in the South and Southwest, where people are already concentrated or are expected to move.
The Stamford, Conn.-based company is a big stakeholder in wireless telephone firm Centennial Cellular Corp. and owns Electric Lightwave Inc., which provides telecommunications services in five western cities.
To facilitate the growth it needs, Citizens is seeking regulatory changes in the markets where it is the incumbent local phone company, hoping to encourage competitors to come in.
""We want to bring the benefits of a competitive market to customers in the second and third tier markets ..."" he said.
Citizens was to file with New York state regulators Thursday to request price cap regulation for the 250,000 customers it has in upstate New York instead of a cap on its rate of return.
Citizens acquired the business in this area from GTE Corp. in 1993.
If approved, Citizens will also change its New York rate structure, merging local calling areas and making wholesale rates on its network more attractive for new market entrants in a plan it has dubbed ""Customer Wins"".
At the moment it is regulated with a cap on its rate of return, which discourages efficiencies because savings have to be shared with customers.
Price caps instead allow companies to keep their cost savings so long as they meet price targets.
While most regional Bells are being accused of dragging their feet over competition, why would Citizens want to encourage rivals to snare its customers?
The difference, Spears says, is in the type of markets. ""The introduction of competition should stimulate demand in these markets, which is historically what happens,"" he said.
Spears said Citizens would get 85 percent of the revenues as a wholesaler, compared with 100 percent as a retailer -- but the market would be larger and grow more quickly.
Already about 20 companies, mainly cellular telephone providers, are lining up to talk to Citizens about interconnection and resale agreements.
The process is being played out in other parts of the country. Citizens has already moved to price cap regulation in California, Tennessee and West Virginia, and plans to do so in the remaining eight states where it operates as soon as possible.
Citizens Utilities' revenues in the first half of 1996 were up 25 percent at $647 million, with telecommunications the main engine of growth.
This year telecom will account for 65 percent of revenue, and in 1997 near 70 percent, with electricity, natural gas and waste water services taking the rest. Telecom operating margins are a healthy 30-33 percent of revenues.
""We're taking a very aggressive posture for what has been recognised historically as a small independent telephone company,"" Spears said.
",35
"AT&T Corp's core businesses performed better in the last quarter of 1996 after struggling during much of the year, but a new problem of rising bad debts from business customers is causing analysts some concern.
""The growth in traffic volumes (3.2 percent) was better than the 2.5 percent we were expecting,"" said Richard Klugman of brokers PaineWebber. ""But they are still losing market share to the tune of three percentage points a year,"" he said.
An extra $200 million provision for uncollectible revenue dragged earnings below consensus for the fourth quarter.
AT&T's operating net was $0.76 against $0.68 in the year-earlier period and adrift of the $0.79 First Call consensus of analysts. Increased provisions will now cost $100 million each quarter.
""It knocks out close to four cents a share (in earnings) going forward,"" said Klugman.
""No one was expecting that,"" said Bette Massick, an analyst at Bear Stearns. The problem is partly poorer credit profiles at businesses, plus increased bankruptcies and bad debt.
But breaches of contract and bankruptcies among the mushrooming number of long distance service resellers who use AT&T's network is clearly a major problem too, analysts say.
""When a reseller goes out of business the network provider takes the hit,"" said Klugman.
AT&T and other network providers are required by Federal Communication Commission rules to do business with resellers, who then compete with them for customers.
AT&T said it had lowered customer turnover -- or churn -- and had maintained its market share in business services.
""Volumes in long distance was better and revenue growth better than we expected,"" said Massick.
However she said she was lowering her earnings estimate for the company for 1997 to $3.20 from $3.65 per share.
""You have to cut your number for that (the uncollectibles) alone),"" she said.
AT&T seems to have overcome the worst of its problems in the credit card business where operating losses fell to $4 million in the fourth quarter from $35 million in the third quarter of 1994.
""At least it is not losing significant amounts of money any more,"" Klugman said. He added that the business was still very competitive and AT&T, once a pioneer with no-fee cards, had lost its competitive edge.
AT&T shares took the results in their stride, falling 7/8 to 38-1/2 by mid-afternoon, against the backdrop of a sharp fall in the broad market.
Chief Financial Officer Richard Miller said earlier that first quarter results would be comparable or slightly higher than those of the fourth quarter.
The company said it must decide how much to spend on the entry into local telephone markets and how much to spend defending its long distance markets against the regional Bells as deregulation becomes a reality later in the year. ((-- New York Newsrom 212 859 1610))
",35
"Like any marriage, the $20 billion merger of MCI Communications Corp. and British Telecommunications Plc may be smoothed by the experiences of the two-year courtship that preceded it.
""I may be an incurable romantic, but I think this is going to be a lot easier than people think,"" one BT insider said.
Concert, the name of the planned merged company, was the original name for a global communications offspring conceived by the two companies in July 1994 to provide a one-stop shop for multinational corporations.
While the executives atop the new merged company have a clear vision of where they are going, insiders and industry sources say the acid test will be how the engine rooms of networks, billing, support and customer service are melded.
Concert, now called Concert Communication Services, was a wayward child in the early days, and progress was slowed by turf wars and bickering about which standard or system to use.
""Some of those turf wars were really destructive,"" said Daniel Briere, a consultant at TeleChoice Inc., who has worked with Concert Communications and its parents.
A computer and software system to support prepaid Concert calling cards in Britain was delayed many months while BT and MCI managers each fought to have their own design used.
Similarly, a videophone product developed by BT for MCI failed on both sides of the Atlantic at a cost of millions of dollars.
""This huge 'hands across the water' friendship never worked in practice that I saw,"" Briere said.
However, sources inside both companies believe the tough decisions have already been made and that a unified management can more easily fix the remainder precisely because of the experience they already have in working together.
""Those debates by and large are behind us,"" said MCI chief engineering officer Fred Briggs. ""A unified management always shortens the decision-making process some.""
""It may sound weird, but you take out the need for cooperation (in a merger),"" TeleChoice's Briere said. ""You can choose the best and discard the rest.""
Concert Communications is already producing evidence of this. The venture has $1.5 billion of revenue under contract and has networks active in 800 cities in 50 countries.
It has a head start over rival alliances Global One and Unisource, backed by Sprint Corp. and AT&T Corp., respectively.
Some analysts see a danger of wrangles being duplicated across the entire company as senior management attempt to fuse two corporations with such widely different roots.
BT began as a government-owned monopoly while MCI cut its teeth fighting a onetime monopoly, AT&T. BT controls 90 percent of the British market while MCI has struggled for 20 percent of the U.S. long-distance market.
The size of the combined company makes some worry that MCI's nimbleness and aggressiveness will be lost.
The new Concert will be one of the three largest telephone companies in the world, with revenues of $42 billion, 183,000 employees and a pro-forma market capitalisation of $54 billion.
""Customers will expect a lot more from MCI now it is on an equal footing with AT&T. It will be harder for MCI to retain that scrappy, upstart image,"" said consultant Jeffrey Kagan of Kagan Telecom.
Potential flashpoints could be the need to use BT billing and support systems to help pry open the $90 billion a year U.S. local calling markets. Though MCI has advanced billing systems, it has never had to cope with this scale of attack.
A second may be international calling. BT and MCI plan to replicate calling plans like MCI's Friends and Family, which was used to great effect within the United States, to cement customer ties on both sides of the Atlantic.
""There are plans in the works for that sort of thing,"" said the BT insider, who declined to be identified.
But BT has never had to administer calling plans of the complexity that MCI has used, which generate a very high level of customer service queries.
The two companies also plan to use Britain as a conduit for grabbing international business calling from continental Europe and route it through London to the United States.
Another major issue is what type of technology to use to bring Internet and multimedia applications to U.S. homes. BT is expected to be closely involved as a pioneer in so-called broadband technologies.
""That is going to be a major decision,"" MCI's Briggs said.
Even though the top executives work very well together, they do not always have perfect judgment.
Briere said MCI's two biggest previous alliances, a $2 billion media alliance with News Corp. and the $1 billion takeover of Canada's SHL Systemhouse, both in 1995, have not produced the benefits expected.
""Both News Corp. and SHL have failed to meet investment expectations,"" said Briere.
",35
"Like any marriage, the $20 billion merger of MCI Communications Corp and British Telecommunications Plc may be smoothed by the experiences of a two-year courtship that preceded it.
""I may be an incurable romantic, but I think this is going to be a lot easier than people think,"" said one BT insider.
Concert, the name of the planned merged entity, was also the original name for a global communications offspring conceived by the two companies in July 1994 to provide one-stop shopping for multinational corporations.  
While the executives atop the planned merged company have a clear vision of where they are going, insiders and industry sources say the acid test will be how the engine rooms of networks, billing, support and customer service are melded.
The initial partnership, now called Concert Communication Services, was a wayward child in its early days. Its progress was slowed by turf wars and bickering about which standard or system to use.
""Some of those turf wars were really destructive,"" said Daniel Briere, a consultant at TeleChoice Inc, who has worked with Concert Communications and its parents.  
A computer and software to support pre-paid Concert calling cards in Britain were delayed for many months while BT and MCI managers fought to have their own design used.
Similarly. a videophone product developed by BT for MCI failed on both sides of the Atlantic, at a cost of millions of dollars. BT has built a voicemail system called Callminder, but it cannot be upgraded to serve larger systems.
""This huge hands across-the-water friendship never worked in practice that I saw,"" Briere said.  
Still, sources inside both companies believe the tough decisions have already been made, and a unified management can more easily resolve the remaining issues precisely because of the experience they already have in working together in Concert.
""Those debates by and large are behind us,"" said MCI Chief Engineering Officer Fred Briggs. ""A unified management always shortens the decision-making process some,"" he added.
""It may sound weird, but you take out the need for cooperation. You can choose the best and discard the rest,"" TeleChoice's Briere said.  
BT began as a state-owned monopoly, while MCI cut its teeth fighting against a former monopoly, AT&T. BT controls 90 percent of the British market, while MCI has struggled to breach 20 percent of the U.S. long-distance market.
The size of the combined company has raised some concern that MCI's nimbleness and aggression will be lost. The new Concert will rank among the three largest telephone companies in the world, with revenues of $42 billion and 183,000 employees. It will have a pro forma market capitalization of $54 billion.  
""Customers will expect a lot more from MCI now that it is on an equal footing with AT&T. It will be harder for MCI to retain that scrappy upstart image,"" said consultant Jeffrey Kagan of Kagan Telecom.
One potential flashpoint is the likely need to use BT billing and support systems to help pry open the U.S. local calling markets, worth $90 billion a year. Though MCI has advanced billing systems, it has never had to cope with an attack of that scale.  
A second potential difficulty involves international calling, where BT and MCI plan a replication of calling plans such as MCI's Friends and Family -- used to great effect within the United States -- to cement customer ties on both sides of the Atlantic.
""There are plans in the works for that sort of thing,"" said the BT insider, declining to be identified.
But BT has never had to administer calling plans of the complexity of MCI's Friends and Family, which generates a high level of customer-service queries.  
The two companies also plan to use Britain as a conduit to grab international business calling from continental Europe and route it through London to the United States.
Another major issue is what type of technology to use to bring Internet and multimedia applications to U.S. homes. BT is expected to be closely involved as a pioneer in so-called broadband technologies.
""That is going to be a major decision,"" MCI's Briggs said.
-- New York Newsroom 212 859 1610
",35
"LCI International Inc said on Friday it expected to post a 75 to 80 percent increase in operating earnings in 1996 and a 65 percent increase in revenue.
Brian Thompson, chief executive of the long-distance company, said he never told analysts to expect lower growth from the company. He said he was standing by his long-term forecast of 30 to 40 percent annual revenue growth.
""I told them I never changed that (forecast),"" Thompson told Reuters in a telephone interview. He said he expected the company to put in a strong performance in 1997, too.  
LCI's stock plunged in December after conversations with analysts were interpreted as indicating slower revenue growth. Thompson said he was unable initially to correct the impression because the company was in a quiet period.
""I didn't say we were going to drop in the future. As it turns out, the company will do very well this year (just finished),"" he said.
""I think we will end up around 65 percent (in revenues) for the year. Operating earnings are going to be up even more than that -- they are going to be closer to 75 or 80 percent,"" Thompson said.
",35
"AT&T Corp. on Wednesday said basic U.S. rates for state-to-state calls made from a home would rise by 5.9 percent effective Dec 1., adding an average 60 cents a month to the typical residential bill.
The company said it was raising rates to pay for investments made to broaden its service line, build technical infrastructure and improve customer service.
Small business call rates will rise 4.8 percent for international, toll free and some other services.
The Basking Ridge, N.J.-based company is raising the cost of calls made with a calling card by 5 percent and those made with the assistance of an AT&T operator by 2.6 percent.
It also said it would increase monthly fees on its Reach Out America, SelectSaver and AnyHour Saver calling plans. AT&T said it stopped marketing those plans in 1993 when it introduced its ""True"" family of calling plans.
However, rates on the True savings plans will also rise, an AT&T spokesman confirmed, because they are based on a percentage discount from the basic rate. The new One Rate plan introduced this fall will not be affected as it is flat rate.
AT&T stock rose 87.5 cents to $39.25 in afternoon trading on the New York Stock Exchange.
AT&T last raised rates in February, with a 4.3 percent increase. The previous increase was in December 1994.
Asked why announcement of the latest rate hike was made Wednesday, when most peoples' attention was on Thursday's Thanskgiving holiday, an AT&T spokesman said, ""It is a coincidence.""
Analysts said the increases continue the policy adopted by most big long-distance companies of increasing basic long distance rates while promoting more generous calling plans to satisfy those customers who are price sensitive.
""In the last three or four years long-distance prices have actually been going up,"" said industry analyst Jeffrey Kagan, who runs his own consulting firm.
He said that AT&T and others were trying to build up some fat ahead of the battle in 1997, when regional Bells are expected to drive into long distance markets in force and push rates lower.
In the meantime, he said, it pays for customers to take a hard look once a year at the call rates they are paying, and to choose the calling plan best for them.
""Only a third of long distance customers are actually on calling plans at all, and it is the rest who are paying the freight,"" Kagan said.
AT&T also launched a cut-rate, international call-back service in Tokyo on Wednesday. In a call-back service, users first call a switching centre in the United States and calls are then connected at cost-effective U.S. rates.
The Tokyo call-back service marks the first time AT&T has started such a service, AT&T Asia/Pacific President John Legere said.
""We are the first major telecommunications carrier in Japan to introduce a low-cost, flat-rate international calling option,"" he said.
AT&T's Japanese unit said it would charge 240 yen ($2) for a three-minute call to Canada or the United States from Tokyo, compared with the 450 yen ($3) Japanese customers now pay.
The service, which will at first be offered only to business customers in Tokyo, could be used for sending data and faxes, Legere said.
",35
"Global One says its shareholders are pleased the venture was able to establish itself in a tough market in year one and are not judging it by its losses in 1996.
Global One was set up in January 1995 by Sprint Corp, Deutsche Telekom AG and France Telecom to provide global telecom services to multinational firms and carry other telecom firms.  
""They are very pleased they could establish Global One as a strong global carrier in year one,"" said Klaus Czerwinski, vice president of corporate communications at Global One.
Sources close to Global One told Reuters last week the venture had lost almost $370 million in 1996, when only $250 million had been expected.
Czerwinski declined to say how much Global One had lost in total during 1996, saying no figure would be finalised until the venture closes its books, probably in the next two weeks, and even then would not be made public.  
""All I can say is that we did have losses in 1996,"" he told Reuters.
Sprint took $62 million in charges for Global One losses in 1996, $22.1 million of it in the fourth quarter when some earlier spending decisions had to be ""trued-up,"" or reconciled with actual outlays.
The long distance carrier owns a third of the European part of Global One and half the non-European part. The European carriers each own a third of the European operation and a quarter of the non-European operation.  
Sources close to Global One last week said that unexpectedly higher losses had led to threats of job cuts, but Czerwinski was not aware of any being planned.
""The clear truth is that there are no decisions yet,"" he said.
Asked about the shareholders reactions to overall cost levels he said: ""There are things they are more happy with and things they are less happy with....But they do not judge us in year one.""
Sources close to Sprint said on Tuesday the complexities of contributing operations from three different corporations from different accounting and linguistic backgrounds would make it hard to control first year costs.
""There are certain things you can only find out at the end of the year,"" the source said, declining to be identified.
However, these are no expected to be persistent problems the source said.
((-- New York Newsrom 212 859 1610))
",35
"The $25 billion cable TV industry, once considered a major threat to the regional Bells' $95 billion local phone market, is now watering down its ambitions with many projects abandoned or on hold.
Analysts say high-speed Internet services offer a more exciting market than local telephone, while the threat of satellite TV has other cable TV firms defending home turf.
""I think the cable companies are realizing their core business is in urgent need of strengthening,"" said Peter Kreisky, a consultant at Mercer Management Consulting.  
Most cable TV firms are weighed with debt, and have put local phone initiatives on a backburner while regulatory and technological uncertainties resolve themselves.
-- CAUTIOUS CABLE FIRMS LOOK BEFORE THEY LEAP --
""I'ts basically a look before we leap,"" said Joann Dobbs, a spokeswoman for Tele-Communications Inc (TCI), the largest U.S. cable TV company, which has 15 million customers.
TCI, Comcast Corp and Cox Communications Inc were partners with Sprint Corp in a grand alliance begun in 1994 to package local and long distance telephone with wireless and cable TV.  
Now the cable firms' involvement is basically on hold, partly because of technical and regulatory difficulties, but also because Sprint was irritated the cable firms wanted to keep their high speed Internet access plans out of the deal.
-- INTERNET OVER CABLE SEEN MORE EXCITING THAN TELEPHONE --
Internet over cable offers much higher speeds than are generally available over the phone system, removing the big frustration of using the web -- delays in page retrieval.
""Phone over cable is a me-too product, but high-speed data over cable...has a clear competitive advantage,"" said analyst Rick Westerman of UBS Securities.  
Telephone regulatory snags still unsolved a year after legal reform include the cost of resale of regional Bell circuits, how universal service will be funded and the size of access charges Bells levy to connect calls to their customers.
This has has left in doubt how profitable the local phone market will be for new entrants. While long distance firm have to get into the market if they are to offer packaged services it is not essential for for cable TV.
""They were up against very tough competitors in the phone business whose lifeblood was threatened and have a very low cost base,"" said Kreisky.
-- ONE LESS RIVAL FOR REGIONAL BELLS --
A cable TV pullback is good news for the regional Bells because cable firms were the only rivals for their local market, which already had access to a significant number of their residential subscribers.
Time Warner Inc, the second largest cable TV firm with 12.1 million subscribers, this month changed its local phone strategy to concentrate on serving businesses in 18 cities where it already has networks built.
Time Warner only needs to provide switches to make itself a competitive local access provider in these areas.  
Time Warner Cable typically invests $1 billion a year, mostly on cable upgrades, and two years ago had been spending in the order of $100 million a year to prepare for entering the Bells local phone markets using its cable TV network.
""We are going to maximize the return from our existing (telephone) investment, any additional investment will not be material,"" spokesman Michael Luftman said.
However, Time Warner is pushing ahead with its Road Runner high speed Internet access service, which is operational in parts of Ohio on an upgraded system that cost $120 million.
-- SOME CABLE FIRMS STILL AGGRESSIVE ON PHONE PLANS --
Many cable companies retain the long-term ambition of entering the phone market, and some are pushing ahead.
""Cox and U S West Media Group are still going to be aggressive operators in telephone,"" Westerman said.
Cox is supporting its Personal Communications Services (PCS) wireless service in California by switching signals captured by receivers through its cable TV network.
""We are still intending to offer wired telephone service (too),"" said Ellen East, Cox Communications' spokeswoman.
-- THREAT FROM DIRECT BROADCAST SATELLITE --  
The worry for some companies is the success of direct broadcast satellite in picking up customers with offers of hundreds of channels and clear digital signals. The threat is most potent in rural areas, where the cable TV companies will be slow to upgrade, analysts say.
Long distance firms like AT&T Corp which has a small stake in Hughes Electronic Corp's DirecTV, and MCI Communications Corp which is linked to News Corp's ASkyB see satellite as useful.
Market studies suggest that customers are less likely to switch phone provider if they have a satellite TV service as part of the service package.
Cable companies like Time Warner and TCI already have stakes in direct broadcast satellite (DBS) companies which should cushion them from most competitive worries.
Nevertheless, analysts say cable companies are clearly more cautious now than two years ago about what can be accomplished outside their core areas.
""They are saying lets stick to what we know how to do,"" Kreisky said.
((-- New York Newsroom 212 859 1610))
",35
"SBC Communications Inc said on Tuesday that soaring demand for wireless services is beating its expectations and shows no signs of slowing down in 1997.
""I'm amazed by how much momentum we have. Frankly its in advance of our business plans, and its due to both the healthy economy and an overall exploding telecom marketplace,"" SBC Chief Financial Officer Don Kiernan told Reuters.
SBC's U.S. wireless user base jumped by 20.2 percent to 4.4 million during 1996, with 739,000 customers added compared with an internal forecast of 600,000-650,000.
The company was a cent below First Call's analyst consensus with earnings per share of $0.90 for the fourth quarter compared with $0.83 a year earlier, though Kiernan said the miss was less once rounding errors were discounted.
SBC shares, which lost as much as 1/2 immediately after the results, were unchanged at $52-3/4 at 1500 EST/2000 GMT.
Wireless is providing SBC with new outlets for services like caller ID and voice dialling, which gives and extra kick to revenues in a fast growing marketplace, Kiernan said.
During 1996 1.9 million SBC wireless customers took cellular long distance, 42.5 percent of the total, which generated $60 million extra in revenues.
""As wireless customers realise its not that much more expensive to use a cellular phone to make a long distance call we could get a real windfall...,"" Kiernan said.
On top of this services such as Caller ID are a big boost to revenues and profits, first because they cost almost nothing to provide to each marginal user and because they help retain customers who might switch between providers.
""Revenue per customer in wireless is down only 1.5 percent from the prior year,"" Kiernan said. Wireless companies have come to expect bigger falls in average revenue per user as falling prices enable casual users to take a mobile phone.
Traditionally, wireless providers cope by switching to cheaper methods of acquiring new customers through retailers or resellers to offset marginal revenue declines.
But Kiernan said value-added services help support the wireless revenue curve, even as costs decline.
Already SBC reaped over $1 billion in revenues in 1996 from value-added services, mostly on the wired network.
In wired networks a new generation of software-based features would be available in mid-1997 using advanced intelligent networks (AIN), Kiernan said.
AIN means a phone or data network carries plenty of its own computing power and more information about a call than existing networks.
Desktop video conferencing is available already, but others will include call management based on information extracted from caller-ID records. Eventually many of the new features will migrate to the wireless network too.
Kiernan said that SBC had just last week started selling a package of local and long distance calling, plus local and long distance wireless under the Cellular One brand in New York state.
""We will be rolling that out in our other out-of-region markets in Chicago, Washington/Baltimore, Boston during 1997, so that will further buoy up average revenue per customer,"" he said. ((-- New York Newsrom 212 859 1610))
",35
"Cable & Wireless Plc (C&W) and the merging NYNEX Corp and Bell Atlantic Corp have one alliance already, a second is on the way, and by late 1997 they could go as far as a full merger.
""Given the U.K. cable alliance I think there is all the more reason that they will be eventual merger partners,"" said one investment banker, who declined to be identified.
C&W this month said it would merge its U.K. Mercury unit with three cable TV and telephone operators, including NYNEX CableComms Group, of which NYNEX owns 67 percent.  
Sources close to the companies and investment bankers say this is a slow-moving and tentative embrace, with hurdles that could stop it before full merger.
NYNEX's merger into Bell Atlantic will not be completed until the first quarter of 1997, and worries over C&W's assets in Hong Kong will mean waiting to see how the handover to China goes in 1997. No firm decisions are likely before.
However investment bankers say a desire to merge is there, noting the experience of MCI Communications Corp and British Telecommunications Plc (BT) which pulled together an alliance into a full merger.  
""C&W and NYNEX share some common visions and some common friendships,"" said one industry source close to the firms.
""And all the things that frustrate people about loose alliances are true. But C&W is a large and far-flung empire, and there are plenty of (problem) issues,"" he said.
None of the three companies involved would comment.
-- C&W SEES NYNEX BEST BELL PARTNER --
However, C&W Chief Executive Richard Brown was last week quoted by the Financial Times in London as saying that talks with NYNEX had already gone beyond the U.K. cable deal.  
""With traffic flow and multinational accounts, NYNEX makes far more sense as a partner than any other Baby Bell,"" he was quoted as saying. C&W declined to elaborate on the comments.
Investment bankers say C&W is not big enough to crack open the U.S. business market alone, but has long distance circuits that the two Bells could use. Bell Atlantic would be a stronger U.S. brand than C&W, and could funnel far more traffic onto C&W's international network.
C&W is strong in Asia, where NYNEX's 13.5 percent TelecomAsia investment and Bell Atlantic's 24.8 percent stake in Telecom Corp of New Zealand could gain new outlets.  
Bell Atlantic Chief Executive Raymond Smith, eyeing the fat margins on international calling, has left analysts in no doubt of his aim of turning the regional Bell from a powerhouse in the northeast of the U.S. into a global company.
NYNEX Chief Executive Ivan Seidenberg, who takes over as Bell Atlantic CEO a year after the merger is completed in the first quarter of 1997, can help him do that.
-- NYNEX AND C&W SEEN CLOSE TO UNDERSEA CABLE ALLIANCE --
Seidenberg is a close friend of C&W's Brown and bankers say the two are near to a deal on a joint submarine cable firm combining NYNEX's Asian cable FLAG with a transatlantic cable owned by C&W and MFS Communications Co Inc.  
MFS is itself being taken over by WorldCom Inc, the fourth largest U.S. long distance company.
Bankers say the new Bell Atlantic would be most attractive to C&W, but C&W's international reach may attract interest from BellSouth Corp or GTE Corp too.
-- C&W ONLY INTERNATIONAL CANDIDATE LEFT FOR BELLS --
Bankers say C&W is almost the only candidate for any U.S. local phone company hoping to create a company equal in global scale and reach to a merged MCI and BT.
Long distance carriers have moved faster. AT&T Corp has its Unisource alliance with Dutch, Swedish, Spanish and Swiss carriers, while Sprint Corp has its Global One alliance with Deutsche Telekom AG and France Telecom.  
Japan's NTT Corp, so far unallied, is being heavily wooed by BT/MCI according to sources in those firms.
C&W is still available for a good reason. It has a bewilderingly complex structure that makes it both hard to value and expensive to buy. BT discovered this to its cost, abandoning talks on buying C&W in May this year.
C&W's activities include the Mercury phone network and Mercury One 2 One mobile phone operator in Britain, and Mannesmann Mobilfunk and Vebakom in Germany. Many of these are joint ventures, which would complicate a change of ownership.
-- HONGKONG TELECOM IS THE BIG PRIZE, BUT BIGGEST PROBLEM --  
The biggest problem concerns C&W's crown jewel, its 57.5 percent stake in Hong Kong Telecommunications Ltd. Any bidder for C&W must make an offer for the Hong Kong Telecom minority. The total cost of a bid including this could easily top $30 billion, analysts say. Bell Atlantic and NYNEX have a pro forma market capitalization of $47 billion.
""The real wild card is how to value C&W going into 1997 given the Hong Kong Telecom stake,"" an investment banker said.
China's resumes sovereignty in Hong Kong from Britain next June, and worries persist on how Communist Beijing will handle this and other companies in the territory. One rumored deal is that China's ministry of Post and Telecoms would take a stake in Hongkong Telecom ahead of the transition.
There are some options to bypass the complexities.
A loose alliance between C&W and the two Bells would be easy to construct, but would suffer the same disadvantages of lack of focus and turf battles described by BT and MCI when they decided to go for a full merger.
""They could do an operating alliance with options to turn it into an equity alliance at a later stage,"" the banker said.
Another option he saw would be to create an operating company containing the simpler parts of C&W in which the new Bell Atlantic would take a stake.
 -- New York Newsroom 212 859 1610
",35
"At the end of this month, AT&T Corp. will finally untether Lucent Technologies Inc. as a separate company, a year after the telecommunications behemoth first said it would split into three businesses.
For some of AT&T's 3.3 million shareholders -- it has more than any other U.S. corporation -- it may be a confusing time.
Telecom equipment maker Lucent already had an initial public offering of stock in April, but on Sept. 17 AT&T stock will be shorn of the rights to the remaining 82.4 percent of Lucent shares.
AT&T will then made up only of the telecommunications services and computing businesses. The last part of the three way split-up will be around the end of 1996, when shareholders receive stock in computing company NCR.
Existing shareholders on Sept. 30 will receive one new Lucent share for about every three AT&T shares they hold, and if they intend to hold both stocks, they need do nothing.
But the confusion arises because of the necessity to create two new classes of stock -- one for the rump portion of AT&T and one for Lucent -- in the weeks leading up to the  Sept. 30 split.
The New York Stock Exchange said that these classes of temporary ""when issued"" stock -- which are rights to the respective new shares -- will effectively form a market in the new companies before formal trading begins.
""AT&T has done a pretty good job of keeping people informed. But inevitably there will be some confusion,"" said Michael Macleod, a vice president and partner at Shareholders Communications Corp., which specializes in shareholder issues and odd-lot stock programs.
For example, someone selling 100 AT&T shares between Sept. 17 and 30 will in effect be selling rights to 100 new AT&T shares, and rights to just over 30 Lucent shares, although the total proceeds will be the same.
Buyers in that period will be able roughly to reconstruct the old AT&T by buying rights in the same 100 to 30 proportion, or they can buy AT&T or Lucent rights as they see fit. Sellers also can dispose of rights to just one stock and keep the other during that period.
No date has yet been set for the creation of the ""when issued"" stock. AT&T ""when issued"" will be allocated the trading symbol T wd.N, a NYSE spokesman said.
It will not entitle you to any Lucent shares, nor to AT&T's regular 33-cent quarterly dividend, even if it is possible to buy it before the AT&T dividend record date of Sept. 12. On Sept. 30, the AT&T stock symbol will revert to T.N.
The ""when issued"" stock in Lucent (LU wi.N) will carry no rights to Lucent's dividend of 7-1/2 cents a share even if it starts trading before the record date of Sept. 12. At Sept. 30 it will revert to the stock symbol LU.N.
The worst confusion will come for those people who still own stock from the pre-1984 split-up of the Bell system.
""A majority of shareholders -- though representing a small minority of the overall stock held -- still have the original pre-1984 AT&T stock which includes rights to regional Bells,"" said AT&T spokeswoman Eileen Connolly.
If these shareholders want to sell, working out the stock rights and especially the costs for capital gains taxes, could be very complex.
AT&T's 24-hour shareholder information line is 1-800-756-8500.
",35
"Four regional Bell telephone companies reported strong fourth-quarter results Tuesday, riding a wave of demand for extra phone lines, wireless phones and ""smartphone"" services like caller ID.
Two sets of merger partners -- Bell Atlantic Corp. and Nynex Corp. and SBC Communications Inc. and Pacific Telesis Group -- all produced results fairly close to analysts increasingly ambitious expectations.
""These companies have clearly raised the bar on expectations for demand growth. It should be sustainable for 1997,"" said analyst Richard Klugman of brokers PaineWebber.
The Bells have been powered by the mushrooming demand for phone lines to link home computers to the Internet, falling costs of mobile phone service, which has lured more users; and by technology to get more from a phone call -- call waiting, caller ID and call management systems.
Even the companies are surprised by the market's power.
""I'm amazed by how much momentum we have. Frankly, its in advance of our business plans, and its due to both the healthy economy and an overall exploding telecom marketplace,"" SBC Chief Financial Officer Don Kiernan said in an interview.
However, the Bells' stocks continue to be subdued, as investors worry about who will win when regional Bells and long-distance companies follow the lead of telecommunications deregulation and enter each others' markets later this year.
Nynex Corp. said its net income rose 10 percent to $416.5 million, or 95 cents a share, in the fourth quarter from $378.7 million, or 88 cents a share, in the 1995 period.
Revenue edged up 0.9 percent to $3.33 billion from $3.30 billion, the New York-based company said. It was reduced by a change in accounting for directory revenues, the assessment of prior-period service rebates and Nynex's decision not to stimulate certain markets while it was in the process of improving services.
Philadelphia-based Bell Atlantic Corp. said its profits, depressed by one-time items, fell to $346 million, or 79 cents a share, in the fourth quarter, from $392 million, or 89 cents a share, a year earlier. Sales grew to $3.4 billion from $3.2 billion.
Excluding onetime gains and losses, however, Bell Atlantic's operating income rose 7.3 percent to $424 million from $395 million.
""We posted strong gains in our key communications markets in 1996 as we prepare to complete our merger with Nynex in 1997,"" said Bell Atlantic Chairman Raymond Smith.
The two companies agreed to merge in April 1996, hoping to create a company with over $50 billion in market value. The deal is expected to be completed by the end of March.
For the year, Bell Atlantic earned $1.88 billion, or $4.28 a share, on revenue of $13.1 billion. In 1995, it earned $1.86 billion, or $4.24 a share, on sales of $13.4 billion.
""Both Bell Atlantic and Nynex reported better-than-expected results compared to analysts' consensus,"" said Bill Vogel, analyst at brokers Dillon Reed.
""Bell Atlantic had a very strong and robust quarter. There were quite a few charges in the quarter, but fundamental volumes of the business are at or above expectations,"" he said. ""For NYNEX it was the first back-to-back years with double-digit earnings growth.""
SBC Communications Inc., parent of Southwestern Bell Telephone Co., said its net income rose 4.8 percent to $542.9 million, or 90 cents a share, in the fourth quarter from $517.8 million, or 85 cents a share, in the year-ago period.
""Our outstanding financial performance was driven by excellent results by our wire line and wireless businesses, as strong demand and effective marketing led to the addition of a total of 1.5 million customer lines during the year,"" said Edward Whitacre Jr., chairman of the San Antonio, Texas-based company.
Pacific Telesis reported profits of $191 million, or 45 cents a share, before one-time adjustments, down from $233 million, or 54 cents a share, last year. Excluding adjustments, net income rose to $282 million, or 66 cents a share.
The parent of San Francisco-based Pacific Bell said its earnings before adjustments were driven by expanding business in data delivery and new custom calling services, as well as increases in access line and minutes-of-use volume.
Nynex closed unchanged at $50.375, Bell Atlantic fell 25 cents to to $67, SBC fell 25 cents to $52.50, and Pacific Telesis rose 12.5 cents to $37.75, all on the New York Stock Exchange.
",35
"Shares in brewing-to-leisure group Bass Plc are likely to be held back until Britain's Trade and Industry secretary Ian Lang decides whether to allow its proposed merge with brewer Carlsberg-Tetley, said analysts.
Earlier Lang announced the Bass deal would be referred to the Monoplies and Mergers Commission which is due to report before March 24, 1997. The shares fell 6p to 781p on the news.
""The stock is probably dead in the water until March,"" said John Wakley, analyst at Lehman Brothers.  
Dermott Carr, an analyst at Nikko said, ""the market is going to hang onto them for the moment but until we get a decision they will be held back.""
Whatever the MMC decides many analysts expect Lang to defer a decision until after the next general election which will be called by May 22.
""They will probably try to defer the decision until after the election. I don't think they want the negative PR of having a large number of people fired,"" said Wakley.  
If the deal does not go through, analysts calculate the maximum loss to Bass of 60 million, with most sums centred on the 30-40 million range.
""It's a maxiumum loss of 60 million for Bass if they fail and, unlike Allied, you would have to compare it to the perceived upside of doing the deal,"" said Wakley.
Bass said at the time of the deal it would take a one-off charge of 75 million stg for restructuring the combined business, resulting in expected annual cost savings of 90 million stg within three years.  
Under the terms of the complex deal, if Bass cannot combine C-T with its own brewing business within 16 months, it has the option to put its whole shareholding to Carlsberg for 110 million stg and Carlsberg has an option to put 15 percent of C-T to Allied Domecq, which would reimburse Bass 30 million stg.
Bass is also entitled to receive 50 percent of all profits earnied by C-T until the merger is complete, which should give it some 30-35 million stg in a full year. Carlsberg has agreed to contribute its interests and 20 million stg in exchange for a 20 percent share in the combined Bass Breweries and Carlsberg-Tetley business.
C-T was a joint venture between Allied Domecq and Carlsberg formed in 1992 by the merger of their UK brewing and wholesaleing businesses.
-- London Newsroom +44 171 542 6437
",47
"London Clubs International, which runs the London Ritz and Les Ambassadeurs casinos, defended its hostile 181 million pound ($292.1 million) bid for Capital Corporation on Tuesday, describing it as ""generous"" and ""appropriate"".
""I think we have said it is a generous offer. There clearly maybe circumstances in which we would be prepared to reconsider our position but at this stage we clearly think we are coming forward with an appropriate offer,"" said LCI chief executive Alan Goodenough in an interview.
But takeover target Capital Corporation hit back swiftly, saying the offer from London Clubs failed to take account of its potential.
""As we have said already this offer takes no account of our potential now that we have two fully operational high roller clubs,"" said Capital Corp chief executive Alan Hearn in a statement.
""Given our experience of the business, we think we are in the best position to value it and on that basis we think it is a generous offer,"" said Goodenough.
""At this stage what we have got on the table is what we consider to be appropriate given the information that we have,"" he said.
He would not be drawn on how Capital Corp shareholders are responding to the offer. The decision rests with about just six institutions who own more than 50 percent of both companies.
Mercury Asset Management owns about 18 percent of shares in both companies, PDFM has some nine percent of Capital Corp and three percent of London Clubs, Schroders has nine percent in London Clubs and 3.5 percent in Capital.
Jupiter has some six percent in London Clubs and 10 percent in Capital. Morgan Grenfell Fund Managers owns about four percent in London Clubs and 12 percent in Capital.
""We have visited them (institutional shareholders) and presented our case and I would be very disappointed if they did not see the logic of what we are telling them,"" said Goodenough.
London Clubs unveiled its offer document for Capital Corp on Tuesday in which it set out its rationale for the bid, saying Capital has failed to deliver shareholder value.
London Clubs also argues that it has casinos overseas, whereas Capital Corp has only two London ones, which reduces volatility of earnings.
It also said it has an international profile that will lead to further expansion opportunities.
London Clubs International shares closed two pence up at 384-1/2p. Capital Corp shares were flat at 203p.
Under London stock exchange rules a bidder has 60 days in which to acquire its target or the bid lapses. ($ = 0.619 British Pounds)
",47
"British brewer and hotels company Vaux Group Plc has seen beer sales to independent pubs rise six percent compared with last year thanks to a new supply contract with a big pub chain won since the end of its financial year to September 30, chairman Paul Nicholson said.
""Sales to the free on-trade were up 2.4 percent in the year just ended and so far they are up six percent because we've picked up one major contract since the beginning of the year,"" said Nicholson, who declined to give any further details.  
Vaux managed to increase sales of beer it brews by one percent during its financial year in a market down 0.5 percent. It improved market share in the north east of the country. About 40 percent of Vaux beer is sold to its own tied estate of 749 pubs, while 30 percent goes to the free on-trade -- pubs, clubs and restaurants -- and 30 percent into supermarkets.
The company launched Double Maxim and Lampton's, two new ""nitrokegs"" -- popular chilled ales -- during the year, which helped push sales up, but the sales of its leading brand Scorpion lager also increased to 25,000 barrels for the year, Nicholson said.  
Vaux's beer sales to the free pub and club market were also encouraged by higher discounts. On average customers saw their discount levels rise by about 8.0 pounds a barrel.
The company also increased the discount per barrel it allows to its tied estate by 4.50 pounds to 85 pounds.
Renewed consumer confidence is providing a special fillip to the group's 30-strong chain of Swallow hotels where increased leisure spending has had an impact, said Nicholson.
Bookings for the Christmas period were six percent up on last year, he said.
""Our bookings for Christmas over the next two weeks are six percent up and running throgh the next three months they are three percentage points up. It's a healthy increase in demand.""
Revenue per available room rose 14 percent in the year, and has continued to run at that rate since the year end, he said.
Occupancy levels are currently four or five points ahead on where they were last year. In the year ended September 30, 1996 occupancies rose to 71.7 perecnt from 67.8 percent.
Achieved room rates were up from 42.56 pounds to 45.75 pounds in the group's financial year ended September 30, 1996.
Swallow improved trading profits by 4.3 million to 24.1 million stg in the year. Brewing improved profits 26 percent to 4.5 million. Profits from Vaux's managed pubs were up 17 percent at 9.0 million.
Vaux plans to spend 48 million stg on developing its managed estate and building new hotels in the next year, up by 8.0 million stg, said Nicholson.
-- London Newsroom +44 171 542 6437
",47
"Tobacco to insurance group B.A.T Industries Plc on Wednesday posted a five percent rise in 1996 profits and signalled it would look at settling anti-tobacco lawsuits in the United States.
It also said it would take a closer look at its own corporate structure. The company said it was keeping an open mind about whether to demerge its tobacco and insurance arms but added it was interested in buying a British life insurer.
Profits before tax rose to 2.495 billion pounds ($4 billion) but were hit by a 160 million charge for U.S. environmental claims against its Eagle Star insurance unit. Excluding the charge, profit rose by seven percent, putting them at the lower end of stock market forecasts.
Chief executive Martin Broughton told reporters that while the company maintained its stance that it had no liability, it now considered it sensible to look at settling U.S. tobacco claims in the context of agreement with Congress.
""The on-going cost in legal terms, and the impact on the share price is such that we think it sensible and appropriate to evaluate a settlement,"" he said.
He put the legal costs at $100 million in 1996, which he expected to rise at least for the next two years.
A sensible settlement would be one that covered all current and future claims and was approved by Congress and the White House, he said.
So far B.A.T has not been approached by plaintiffs or the U.S. government with any sensible proposals, said Broughton.
""There ought to be a sensible figure which gets it sorted out,"" he said. He called plaintiffs' suggestions of $10 billion and $6 billion, which represents the profits of the entire U.S. tobacco industry, unacceptable.
He said the company remained confident it would ultimately win any cases against it.
B.A.T estimates it has spent 250 million pounds ($402.9 million) in legal costs fighting tobacco-related law suits.
About 500 cases have been filed since 1954, but only 19 have so far reached the courts across the industry.
As well as disappointment over the exceptional insurance charge some analysts had hoped B.A.T would say more about the possible demerger of its tobacco and insurance arms.
B.A.T shares, up 32 percent since November on promising perceptions about its legal battles in the U.S., tumbled 20 pence to close at 530 pence on Wednesday.
Chairman Lord Cairns told reporters the company kept an open mind on its corporate structure.
""We are not wedded to the structure that we have at the moment. It is a question over which we keep an open mind.""
B.A.T's tobacco business turned in a seven percent overall improvement in local currency to 1.634 billion pounds with group volumes four percent ahead and world market share increasing to 12.8 percent from 12.4 percent.
Trading profit from financial services grew by an underlying eight percent to 1.2 billion with strong performances from two insurers -- Farmers in the U.S. and Allied Dunbar in Britain. ($ = 0.619 British Pounds)
",47
"Britain's United Biscuits (Holdings) Plc expects its margins in Europe to remain firm and to move up over the next two to three years, said managing director Eric Nicoli.
""We expect margins to move to 10 percent in all our businesses over a two or three year period,"" said Nicoli in an interview. UB margins are currently at around 10 percent in Britain and four percent in mainland Europe.
(Corrects to make clear company isn't expecting European margins alone to move by 10 percent over the next two to three years.)
Earlier the company reported a more than doubling in pretax, pre-exceptional annual profits to 109.1 million stg. UB shares were 7-1/2p higher at 246p in early trade.  
UB has now entered a phase of consolidation, after a hectic disposal programme, which means the emphasis is on organic growth, said Nicoli.
Over the last two years the company has sold its American snack operation Keebler, pulled out of Portugal and exited from Spanish snacks. It has also sold one of its Italian snack businesses, withdrawn from Turkey and Brazil and sold Ross Vegetables Products business in Britain.  
""The emphasis on organic growth as we are now in a consolidation phase,"" said Nicoli.
When asked about the outlook for the company he said, ""Our markets continue to be very competitive but we expect another year of good progress.""
In Britain, there is a trend among shoppers to switch into higher value lines against a background of improved consumer confidence, said Nicoli.
In mainland Europe, he said the company's businesses will improve but it did not expect any help from the markets.
-- London newsroom +44 171 542 6437
",47
"British pub-to-hotel group Greenalls Plc on Thursday reported a 48 percent rise in profits before exceptional items to 148.7 million pounds ($246.4 million), driven by its acquisition of brewer Boddington in November 1995.
""The year saw a good trading performance, both from the Greenalls businesses and the former Boddington estate,"" said chairman and chief executive Andrew Thomas. ""Trading in the current year has begun satisfactorily,"" he added.
Exceptional items charged in the year ended September 27, 1996, totalled 31.2 million, including 23.9 million for paying redundancy to former Boddington staff and re-organisation costs.
Underlying profit before exceptional items and tax and excluding Boddington increased by 10.7 percent to 111.3 million.
Boddington generated operating profit of 47.1 million in the 11 months after it was acquired and Greenalls said it saved 18 million in costs from integrating Boddington into the group.
Overall group profits before tax and exceptional items were at the top end of share analysts' forecasts, which ranged from 145 to 150 million pounds.
However, Greenalls shares fell 7p to 597p after the company ruled out the sale of its De Vere Hotels.
""I suspect one of the reasons why the stock has come off is that they ruled out selling off their De Vere brand at this stage. But we still remain positive on the stock because we see growth across all the businesses in a consumer led 1997,"" said James Wheatcroft an analyst at Panmure Gordon in London.
In an interview Greenalls managing director Peter Daresbury said the company's outlook for the Christmas period was good.
""Christmas bookings are looking very good and there seems to be a strong level of consumer confidence, although the snow and the fog has not been wonderful for the business,"" he said.
Christmas is a critical period for hotel, pub and restaurant groups in Britain and mainland Europe with as much as 20 percent of their annual turnover generated in December alone.
The company plans to spend 170 million on developing its business in 1997/98 with about 40 million going on rolling out its Greenalls pub concepts.
Profits from Greenalls Inns rose 50.2 percent to 78.9 million when Boddington is included. Greenalls Inns operates 920 outlets nationally, of which 514 are managed food houses.
Greenalls branded pub restaurants and lodges -- which include 88 so-called Millers Kitchens and 41 Henry's Tables -- improved profits by 41.8 percent to 24.8 million. De Vere Hotels lifted operating profit by 14.5 percent to 25.2 million as revenue per available room and occupancy levels rose.
($1=.6034 Pound)
",47
"Tobacco to insurance group B.A.T Industries Plc reported a five percent rise in 1996 profits to 2.495 billion pounds ($4 billion) on Wednesday, hit by an exceptional charge of 160 million pounds for U.S. environmental claims against its Eagle Star insurance unit.
Excluding the charge, profit rose by seven percent.
Chairman Lord Cairns said in a statement B.A.T dismissed any liability for damages currently being claimed by smokers in a string of tobacco related lawsuits in the U.S.
The company also said it kept an open mind on its corporate structure, but gave no news of any concrete plans.
As well as disappointment over the exceptional insuarnce charge some analysts had hoped B.A.T would say more about the possible demerger of its tobacco and insurance arms.
B.A.T shares, up 32 percent since November as its legal battles in the U.S. looked more promising, tumbled 20 pence to 530 pence in early trade.
""We continue to believe that B.A.T Industries itself has no potential liability in any U.S. tobacco litigation,"" Cairns said, adding that the tobacco industry was confident of winning the cases and does not intend to offer a settlement.
However, Cairns said the company would be prepared to ""evaluate proposals from third parties to provide relief from all current and future suits, provided that they were in shareholders' interests"".
Cairns said, ""Our twin goals are to improve the long term growth prospects of our business and to increase shareholder value. We continue to evaluate business oppurtunities and issues of corporate structure that will enable us to meet them.""
B.A.T director of public affairs Michael Prideaux told Reuters the company was keeping an open mind. ""We were surprised by media reports that we had ruled out a demerger,"" said Prideaux. ""We are not convinced that simply doing the splits helps either business much, what we are saying however is we have an open mind.""
The company has looked at several options for improving shareholder return over the last year, including merging its financial services arm, comprising mainly general and life insurance companies, with another insurer.
Prideaux dismissed the idea of floating off the company's U.S. cigarette arm Brown & Williamson as a way of ringfencing the rest of B.A.T from any potential payments to smokers in the United States.
""Tobacco is strategically managed as world wide business so simply floating off B&W would be a classic way of destroying shareholder value because B&W plays an integral part in developing U.S. international brands around the world,"" said Prideaux.
""If it became independent you would probably end up with separate sales networks.""
B.A.T's tobacco business turned in a 7 percent overall improvement in local currency to 1.634 billion pounds with group volumes four percent ahead and world market share increasing to 12.8 percent from 12.4 percent.
Trading profit from financial services grew by an underlying eight percent to 1.2 billion with strong performances from two insurers Farmers in the U.S. and Allied Dunbar in Britain.
The company recommended an eight percent increase in the base dividend to 26.0p, with a further 3.5 pence to be paid as a foreign income dividend.
($ = 0.619 British Pounds)
",47
"David Jones, chief executive of British fashion retailer Next Plc, on Monday rejected as nonsense press reports that he had been approached by headhunters to take over the top job at Sears.
Some shareholders at stores group Sears are disgruntled with the dismal performance of the group and are calling for a radical shake-up including a demerger of its very profitable Selfridges department store and the sale of the struggling British Shoe Corporation.
Sears was back in the spotlight last week when it issued a profit warning and reported disappointing Christmas sales, leading to suggestions that chief executive Liam Strong's job was on the line.
The Sunday Telegraph newspaper reported that Jones was offered the job of chief executive of Sears but had decided to turn it down.
But Jones told Reuters in an interview on his carphone, ""I'm very happy in my current job. I am not intending to leave Next. As far as I am concerned no one is headhunting me for any job.""
Although Sears sold its mail order business Freemans earlier this month to Littlewoods  LWD.CN for 395 million pounds ($656 million) and pledged to return about 410 million in cash to shareholders in six months' time, some investors are calling for deeper changes.
Sears shares, which traded at 90p on Monday, have underperformed the stockmarket by over 40 percent since Strong took the helm five years ago.
Jones is accredited with rescuing Next from the brink of collapse in the early 1990s -- in the midst of Britain's deepest recession since the second world war -- by combining a sell-off programme of non-core assets, such as mail order business Grattan, and a sharper focus on the main brand.
He sold shops and merged others, improving the Next profile on the high street and reducing shoppers' confusion about the range and type of products on sale.
On December 6, 1990, Next shares reached a low of 7p compared with 573p today. Next now has a return on equity of 32.49 percent, against 12.5 percent at Burton Group, 11.79 percent at Laura Ashley, and 9.54 percent at Sears.
Sears also rejected press reports that headhunters had been appointed by the company charged with finding Strong's replacement.
""We have not employed any headhunters. The chairman and the board are strongly supportive of Liam Strong,"" said a spokeswoman at Sears. ""We are not seeking a replacement for Liam.""
Sears last week reported like-for-like sales at its troubled British Shoe Corporation unit, owner of Dolcis, Shoe Express and Shoe City, fell 2.8 percent in the six months to January 6. ""We are just about at the end of our tether,"" said one small shareholder, who declined to be named. ""It just seems like nothing goes right for them.""
A spokeswoman for Philips and Drew Fund Management, Sears' single largest shareholder with over 12 percent of the stock, declined to comment on their view but confirmed it had met Sears management last week for a regular update. ($ = 0.602 British Pounds)
",47
"One hundred years after Cadbury launched Britain's first milk chocolate, the average Briton now eats 13 kilos of confectionery each a year, exceeded only by Denmark and Ireland in the sweet tooth stakes, though the Swiss eat more chocolate.
British confectionery sales grew by five percent last year to a record 4.9 billion pounds ($8.28 billion), according to a review by Cadbury and its sweet-making arm Trebor Bassett published on Tuesday.
Cadbury marketing director Alan Palmer told a news conference, ""The market will break the magical five billion barrier for the first time next year.""
The Swiss consume the hightest amounts of chocolate averaging 10 kilos per person a year compared to eight kilos in Britain.
Volume sales in Britain rose by two percent to 833,000 tonnes last year, a growth of more than 12 percent over the last decade, said the Confectionery Market Review.
""The long-term growth trend in snacking and the decline in formal meals is just one reason why the market for confectionery will grow,"" Palmer told Reuters. ""And the growth in the gift market for confectionery where there are bigger gift boxes of chocolate is another reason,"" he said.
""The question is how fast it will grow rather than any risk it will not grow.""
Bruce Burnett, Trebor Bassett marketing director, told reporters the key to the market's expansion has been the major investment in media advertising, the advent of commercial television and new brand innovation.
Cadbury's 10 million pound sponsorship last year of the nation's top-rated soap opera Coronation Street became the largest TV sponsorship deal in Britain. The company also sponsored the British Olympic team at the 1996 Atlanta games.
Palmer said the confectionery industry spent 100 million pounds last year on TV advertising alone, of which about one-third came from Cadbury-Schweppes.
In 1996 the industry spent 128 million pounds on media advertising -- 39 million on sweets and 89 million on chocolate -- more than the National Lottery and soft drinks combined.
Children's average pocket money grew by 17 percent in 1996 to 2.40 pounds a week -- the highest annual increase since the early 1980's -- and a colder, more typical summer helped make sales more buoyant.
Milk chocolate now accounts for almost 90 percent of chocolate eaten in Britain, where there are about 500 different confectionery brands on sale.
Chocolate continues to make up most of the confectionery market with 70 percent of sales at 3.4 billion pounds while sweets accounted for 30 percent at 1.5 billion, said the review.
Within the chocolate market, 1.465 billion worth of snack bars were sold last year, with Kit-Kat owned by Nestle Rowntree the top seller. A total 550 million pounds worth of moulded bars were sold, and Cadbury's Dairy Milk remained top seller.
The Cadbury brothers launched Britain's first milk chocolate in 1897 in three penny and six penny packs. It was the forerunner of Cadbury's Dairy Milk which went on sale in 1905.
In 1904 George Cadbury Junior perfected a process for getting pure liquid milk into the product which made it less dry and coarse than using powdered milk.
Cadbury chocolate contains typically half as much cocoa solid as mainland European chocolate.
Chocolate became more affordable in the intra-war years in Britain, falling from two shillings per half pound at the end of World War One to eight pence at the start of World War Two.
Cadbury holds a 20 percent share of total confectionery sales in Britain and Trebor Bassett 10 percent. Nestle Rowntree has a 20 percent market share and Mars 18 percent.
($1=.5921 Pound)
",47
"Business at hotel to betting group Ladbroke Group Plc is going well, with some flickers of hope that conditions are picking up at its 38 hotels in mainland Europe, chief executive Peter George said in an interview.
""The same trend has continued in the last two months. The businesses are doing well. It does seem to be getting gradually better this year in mainland Europe,"" he said.
Earlier Ladbroke reported a 34 percent rise in calendar 1996 pretax, pre-exceptional profits to 163 million stg but trading profit from its European hotels fell slightly.
",47
"Food and drink group Grand Metropolitan Plc said on Thursday it was hanging a ""for sale"" sign on its national food businesess in Europe in an effort to focus on its major international brands -- Pillsbury, Green Giant, Haagen-Dazs and Old El Paso.
""We have people indicating strong interest and indicating prices that are acceptable to us,"" said Paul Walsh, chief executive of GrandMet's Pillsbury Company in an interview.
He said he expected the sell-off to be complete by January 1997.
In the shop window in Britain are Shippams, meat pie maker Peter's Savoury Products, Memory Lane Cakes and Fleur de Lys.
Also on the block are Germany's Hofmann-Menu and Goldstein, cake and pastry maker Brossard in France and Italy, waffle maker Suzy and biscuit firm Desobry in Belgium and cake maker Driehoek in the Netherlands.
Analysts expect them to fetch about 140 million pounds ($220 million).
Their combined sales last year were 370 million pounds with operating profit of 10 million and operating capital used of 129 million pounds at September 30, 1995.
Before the announcement, GrandMet's European foods business showed sales of $1.2 billion, which are forecast to fall to about $450 million once they are sold.
The European foods business posted a trading profit of 23 million pounds in the year to September 1995, up from 12 million in 1994, after a hefty restructuring and plant closure programme undertaken in 1993.
The company does not disclose earnings for each individual subsidiary but Brossard in France is easily the largest and similar in sales terms to Germany's Erasco Group, which Campbell Soup agreed earlier to buy from GrandMet for about $210 million.
""My plan in foods is to focus on our leading brands,"" said Walsh, adding that the sell-off of so-called tertiary brands would allow GrandMet to concentrate on its main brands.
The businesses were also providing an inadequate return on capital, he said. ""You can expect GrandMet to be very eager to improve total return to shareholders. Several of us have held this view for a long while.
""I think it's compatible with GrandMet's mission to improve shareholder returns. We intend to fix that.""
GrandMet shares were steady at 469 pence.
($1=.6373 Pound)
",47
"Anglo-Dutch food to detergent company Unilever Plc/NV is unlikely to bid for French food group Danone as it would clash with its strategy and come up against big regulatory hurdles, said analysts.
""I think it would be unlikely,"" Paribas analyst John Campbell said on Thursday.
Unilever earlier would not comment on the rumours.
Since Unilever announced the sale of its speciality chemicals division earlier this month, expected to fetch some 5 billion stg, Unilever's name has been linked with a host of potential takeover targets including Cadbury-Schweppes and Reckitt and Coleman, sending their shares higher, but few of them fit the Unilever strategy, said analysts.
Cadbury-Schweppes, is too big in Britain and Unilever is reluctant to enter the soft drinks market especially in view of stiff competition from Coca-Cola and PepsiCo, said analysts.
C-S would also bring with it relatively high debt levels -- net debt stood at 1.617 billion stg on June 15, 1996 and gearing at 121 percent, before the sale of its 51 percent stake in Coca Cola and Schweppes Beverages Ltd.
""I just don't think Danone is a runner. It's just idle chatter. Unilever just does not want to go down the beer route or the packaging route and it does not want to hold a raft of businesses in France, Italy and Spain,"" said one analyst who asked not to be named.
A more likely target for Unilever is CPC International, said analysts, the company has a large, fast moving, international consumer foods and baking business and some 60 percent of its sales outside the United States. CPC brands include Hellmann's Mayonnaise and Knor soups, Pot Noodles and Skippy peanut butter.
Unilever chairman Niall Fitzgerald said at the time of the company's full year results earlier this month he hopes to conclude a sale in the next three to six months. He also said the sale was designed to ""de-clutter"" the group's portfolio and concentrate on key brands which include Persil detergent, Solero and Magnum ice-cream and Flora margarine as well as free up funds for expansion in emerging markets like South America and Asia Pacific.
The European foods business remains depressed against a weak economic background, poor consumer demand and tough competition.
""I don't think Danone has got enough eastern promise about it,"" said Michael Landymore analyst at Henderson Crosthwaite. ""It would put Unilever squarely back in Europe which it has said it trying to get out of in favour of developing markets,"" said Campbell.
Unilever would also have to break up Danone to get its hands on the right business lines -- grocery, biscuits and water, said analysts.
""Unilever would have to break the company up because it would not want to keep the glass containers division or the beer division,"" said Campbell. ""It's also a flagship food company in France and it would be investigated under anti-trust legislation by the EC (European Commission),"" he added.
The EU has to clear a merger or acquisition involving a world-wide turnover of at least five billion ECU and a European turnover threshold of 250 million ECUs.
Acquiring Danone would also stretch Unilever's resources, said analysts, who estimate the company has a warchest of about 10 billion stg after the sale of its speciality chemicals division. Danone, capitalised at about $10.8 billion, would probably fetch a price of about $15 billion, said analysts.
-- London newsroom + 44 171 542 6437
",47
"Britain's B.A.T Industries Plc spelled out a more conciliatory approach to a string of U.S. tobacco-related lawsuits on Wednesday, saying it was now time to explore settling the claims.
""The on-going cost in legal terms, and the impact on the share price is such that we think it sensible and appropriate to evaluate a settlement,"" B.A.T chief executive Martin Broughton said.
He put the legal costs at $100 million in 1996, which he expected to rise at least over the next two years.
A sensible settlement would be one that covered all current and future claims and was approved by Congress and the White House, he said.
There have been press reports that a congressionally sanctioned settlement might be in the works under which tobacco companies would settle claims with U.S. states which have filed suits, in response for immunity.
A commentary published in the Journal of the American Medical Association on Tuesday, however, argued that the states were better off seeking compensation from the companies rather than letting Congress broker a deal.
B.A.T has spent an estimated 250 million pounds ($402.9 million) in legal costs fighting tobacco-related law suits.
Since the first case was filed in 1954, about 500 cases have been filed although only 19 have reached trial across the industry. There was a big increase in cases filed in 1996, although there are only isolated cases outside the U.S.
""I can't see the legal costs coming down, the trend is for it to continue upwards,"" Broughton said.
Last week, a federal judge in the United States dismissed a lawsuit filed by the City and County of San Francisco and 10 other California counties against the tobacco industry.
The tobacco industry hailed the ruling as a victory in its fight against lawsuits seeking to force cigarette companies to repay states and municipalities for health care costs of smokers. It is believed to be the first ruling to totally dismiss a lawsuit of this type.
Although anti-smoking lawyers said the ruling was a drawback, they remained optimistic about the more than 20 other cases pending around the country.
So far the company has not been approached by plaintiffs or the U.S. government with any sensible proposals, said Broughton.
""There ought to be a sensible figure which gets it sorted out,"" said Broughton.
Sums of $10 billion and $6 billion -- which represent the profits of the entire U.S. tobacco industry -- have been suggested by plaintiffs as the cost of settlement for the industry.
These sorts of figures are clearly unacceptable, said Broughton, especially in view of the fact that the company is confident it will win the pending cases.
Of the 19 cases to reach the courts the tobacco industry has won all except one which is currently under appeal.
In the last few weeks a federal judge in San Francisco dismissed a lawsuit filed by the City and County of San Franciso and 10 other California counties against the tobacco industry.
San Francisco and other counties are among a growing number of municipalities and states that have sued the tobacco industry to recoup Medicaid costs.
The attorneys general from 22 states have filed such suits. The first of the trials, which stems from a case bought by Mississipi is scheduled for June.
On February 18 a West Virginia county circuit judge dismissed all of the state's claims for fraud, negligence, unjust enrichment and conspircay against 17 tobacco companies, saying the attorney general lacked authority to pursue the claim.
A case against R.J. Reynolds, a subsidiary of RJR Nabisco Holdings Corp, is due to be heard in April.
A judgement on whether the U.S. Food and Drug Administration has the right to regulate cigarette sales and marketing is expected in the next six weeks.
If the FDA wins its rules would ban free samples and billboard ads near schools and playgrounds, limit vending machine sales, ban sponsorship of sports events and the use of cigarette brands on hats, t-shirts and other products.
The rules would also restrict advertising in some publications and require retailers to see photo identifications for cigarette buyers under the age of 27.
--London Newsroom +44 171 542 6437 ($ = 0.620 British Pounds)
",47
"The sale of 47 Bass-owned Holiday Inn hotels in North America to the Bristol Hotel Co forms part of Bass's plan to build a global franchise business, Bass finance director Richard North told Reuters in an interview.
""We have always seen franchising as our primary business. Owning and managing hotels is simply a means of supporting that operation. We have reached the point in the U.S. where that is no longer necessary and where we are at the appropriate time in the cycle to sell these assets,"" he said.
""The value we have obtained is very attractive,"" he added.  
Earlier Bass announced the sale of 47 Holiday Inn full service hotels and 14 Holiday Inn management contracts in the mid-market sector in the U.S. in a deal worth $659 million.
""If you take the current market price, add $75 million and look at the profits of these hotels and work in the franchise fees and the 39 percent effective tax rate that works out at a PE (price/earnings ratio) of 18.6 times,"" North said.
As part of the deal Bristol will spend $150 million on refurbishing the properties over the next three years. The 61 hotels transferred generated profits of $69 million in the year to September 30 after payment of franchise fees.  
""We believe we are way up on the cycle in the U.S. In fact, our assessment is that there is a little bit left to go but of course, you can only really tell with hindsight,"" said North.
Holiday Inn franchisees in the U.S. get about 33 percent of their occupancy through the Holiday Inn reservation system compared with 13 percent on average in Europe.
""We want to get Europe up to the same sort of level as the U.S.,"" said North. Under the Holiday Inn franchise scheme, hoteliers pay a fee to join relative to room numbers and then five percent of gross room revenues per annum and 0.5 percent of gross room revenues for the IT reservation system and a further one percent for marketing. Bristol agreed also to convert a further 10 of its 39 existing hotels to the Holiday Inn brand. These conversions, together with the 61 hotels transferred under the deal, will result in 84 out of 100 BRistol properties being named Holiday Inn or Crowne Plaza.
Bass owns 60 Holiday Inn's in Europe, the Middle East and Africa and 39 in the Asia-Pacific region. Bass has no plans to sell its Crowne Plaza hotels in North America.
As part of the sale to Bristol, Bass will also take a 36.1 percent stake in Bristol, which it plans to retain.
""We are very impressed with the management team and their entrepreneurial flair and we are very pleased to retain an interest in the company,"" said North.
Bristol also has a proven ability in developing older full service hotels, he added.
-- London Newsroom +44 171 542 6437
",47
"Brewer to leisure group Whitbread Plc can expect to raise about 100 million stg from the sale of its underperforming retail sites in 1997/98, said chief executive Peter Jarvis in an interview on Friday.
""We now have such a wide range of retail brands and a fast and sizeable programme of new openings, that we are able to dispose of older premises that simply cannot be upgraded,"" said Jarvis.
Recession in the early 1990's has made consumers more discerning so that they now pick their favoured restaurants and pubs more carefully, he said.
The company's 1,700 strong Whitbread Inns, which forms about 40 percent of group profits, added 80 sites this financial year and sold 50, with the modern sites generally much bigger and often designed to include a Travel Inn.
Some of the company's Beefeater restaurant-pubs are too old in design to be upgraded and other outlets are unlikely to prove economic over the medium term where for instance the local economy has turned down.
""We are constantly trying to improve the average within the portfolio,"" said Jarvis.
The advent of a more flexible property market -- in terms of lease back sale arrangements and fewer freeholds -- and much improved property prices will also enable Jarvis' sucessor David Thomas to accelerate the disposal and upgrade programme.
""He (Thomas) will be able to churn sites faster than I have been able to.""
""He is likely to dispose of more in the next five years than myself.""
Thomas will take over as chief executive in the summer when Jarvis steps down.
- Tim Farrand, London Newsroom +44 171 542 6437
",47
"Drinks group Guinness Plc assured investors on Friday that its joint ventures with French luxury goods company LVMH were secure despite a decision by LVMH to sell a third of its shares in Guinness.
""Our commercial arrangements with LVMH are unaffected by this announcement,"" said Guinness finance director Phil Yea.
Guinness and LVMH's champagne and cognac arm Moet Hennessey operate some 15 joint ventures worldwide, including a New York company which distributes their top brands like Dewar's scotch and Moet champagne in the United States.
LVMH Moet Hennessey Louis Vuitton sold 135 million of its Guinness shares or about 7.0 percent of its holding in the company, at 414p per share, to raise about 559 million pounds ($934.9 million).
Analysts said the sale was driven by a number of factors, including rumours circulating in London that LVMH needs the funds to buy the rest of American duty free chain DFS, and by the strength of sterling against the French franc.
LVMH currently owns 58.75 percent of DFS.
""I don't think LVMH liked the trading statement from Guinness on Wednesday, it showed that the market for spirits is just not going to get any better. I think they have just had enough of the rotten share price performance of Guinness over the years,"" said one analyst who declined to be named.
LVMH said it would keep its remaining 14 percent stake in Guinness and seek to further develop the longstanding business ties between the two companies.
Guinness said the sale meant they each now owned a similar amount of each other's shares and the company snapped up 2.3 percent of its shares released by the LVMH sale.
""In 1994, Guinness reduced the amount of capital invested to secure its long term involvement in Moet Hennessey and today's part disposal by LVMH has a similar effect from their perspective,"" said Yea.
The LVMH sale gives it a stake of 268 million Guinness shares worth 1.14 billion pounds, while Guinness' stake in Moet Hennessey was valued at 1.026 billion in its last annual report.
The original cross-shareholding of 12 percent was taken up in 1988 but had crept up to 24 percent by 1994 when the relationship was reformed.
Guinness agreed to sell its 24 percent stake in exchange for a 34 percent holding in Moet Hennessey plus cash, while LVMH agreed to bring its Guinness stake down to 20 percent.
At the time, both companies also agreed that if LVMH ever reduced its stake in Guinness to below 15 percent it could not raise it again without a special shareholders' resolution.
Bernard Arnault, chairman of LVMH, has a seat on the main Guinness board and Guinness chairman Tony Greener has a seat on the LVMH board. Guinness also has two seats on the six-strong Moet Hennessy board.
Insiders say the relationship between Arnault and Guinness has been stormy and uncertain in recent years.
Analysts have had to second guess his next move against the background of a poor performance from Guinness shares relative to the sector and the stock market over the last five years.
""It takes away the fear that LVMH would sell the lot and it means that Guinness has got an excellent deal in terms of buying at a price which won't recur,"" said Ron Littleboy, analyst at Nomura.
Guinness's shares initially fell 22p to 414p in early trade before rebounding to 430, after Guinness announced it had repurchased some of its own shares.
The company currently has shareholder approval to buy back up to 10 percent of its own shares and many analysts expect it to buy back more after its full year results on March 20.
($1=.5979 Pound)
",47
"Anglo-Dutch consumer products group Unilever NV /Plc reported a 15 percent rise in annual profits on Tuesday and put its speciality chemicals units up for sale in a move tipped to raise up to five billion pounds.
Pre-tax profit rose to 2.66 billion pounds ($4.4 billion) last year on a six percent rise in turnover to 33.52 billion.
Unilever shares surged on the results, which were better than analysts had forecast, and on the planned speciality chemicals sale.
Chairman Niall FitzGerald said the sale of the speciality chemicals businesses would enable the group to concentrate on achieving growth in its consumer goods operations, particularly in developing and emerging markets.
Analysts said the sale, which could free Unilever up for a major acquisition in its main food, detergents and personal products businesses, was well timed.
FitzGerald said, meanwhile, that the overall economic situation in 1997, as in 1996, was likely to be generally favourable for the group, which is the world's largest producer of both margarine and ice cream, with activities from food to toiletries and household goods brands such as soap powder Omo.
But he saw little reason to believe that conditions in Europe, particularly in France and Germany, would improve.
Analysts' forecasts for pre-tax profit had centred on 2.53 billion pounds and Unilever Plc shares surged 86-1/2 pence to 1,479-1/2 in London as some looked to raise 1997 forecasts.
In Amsterdam its shares rose 19.0 guilders, six percent, to 332.40.
""We will now seek actively buyers for the totality or the individual (chemicals) businesses and we will then assess those over the next month or two,"" FitzGerald told Reuters. ""We would hope to conclude a sale in the course of the next three to six months.""
FitzGerald declined to say how much the businesses, with 15,800 staff in more than 35 countries, might be worth.
Analysts estimate the sale sould fetch 4.5 to 5.0 billion pounds and FitzGerald told a news conference in the short term it would wipe out the company's net borrowings of 1.7 billion pounds.
The funds would also be used for acquisitions in growth areas, FitzGerald told reporters, such as Asia Pacific and South America and in priority categories like detergents, tea, ice cream, yellow fats, personal care products and fragrances.
""We have a carefully defined list of what we may do with (the proceeds), which I am not prepared to discuss,"" he said. ""In China I would like to have a business 10 times the size.""
The four units -- National Starch and Chemical Company, Quest International, Unichema International and Crosfield -- have a combined turnover of 3.0 billion pounds, nine percent of Unilever's total sales, and showed operating profit of 415 million in 1996, with margins of 14.1 percent.
""These are extremely large and important parts of our businesses but for some time we have been reviewing whether they should be a continuing part of the portfolio -- not because they are poorly performing themselves, they are excellent performers -- but whether we can give them the concentration and the focus that they require,"" FitzGerald said.
""...if you look at the way this industry is developing we have to take a decision either to significantly improve our presence in these markets, perhaps double it, or to exit and in exiting to concentrate on the other 90 percent of our business which is our mainstream consumer goods business.""
Commenting on the overall results, Unilever said its performance in Europe was held back by poor weather hitting ice cream sales and by the impact of the mad cow disease crisis.
But good progress in North American market conditions provided the basis for better results there and the momentum of growth continued strongly in the fast-growing emerging markets.
Unilever Plc is paying a final dividend of 21.76 pence, making 32.05 for the year, a rise of nine percent. The Dutch arm raised the final dividend to 4.75 guilders from 4.71, making a total of 6.98 against 6.19 in 1995. ($1=.6120 Pound)
",47
"Scottish-based Stakis Plc on Wednesday reported a surge in visitors to its casinos and a sharp rise in its hotel room rates, with chief executive David Michel in confident mood about future trends.
""In real terms we are just back to where room rates were in the late 1980s. Room rates have just about reached their pre-recession levels in the provinces,"" Michels told Reuters.
The company's hotels, excluding the Metropole in London acquired in November for 327 million stg ($543 million) from Lonrho, showed an occupancy level of 71.8 percent in the first 13 weeks of 1997, a touch down from 72 percent last time.
But its average room rate rose to 50.10 stg over the same period, up from 45.58 in 1996.
""In the first quarter we did 10 percent, but I still think the average will be 7.5 percent or more over the year,"" said Michels. ""Our forecast is to finish this year at 76 percent occupancy,"" he added.
Although January was a typically dull month for hotel occupancy, future bookings are at similar levels to last year, giving every confidence Stakis can achieve its target, he said.
The group's hotel occupancy was also pulled back slightly in the period by the temporary closure of the Stakis Tyneside where work is underway on a 3.5 million stg refurbishment.
During the six weeks Metropole traded under the Stakis flag, it showed 64.7 percent occupancy at an average price per room of 64.77 stg for its 2,266 rooms.
In a trading statement, Stakis said attendance at its 23 casinos rose to 603,000 in the quarter up from 525,000, but the spend per head fell to 110 stg from 129 .
Turnover at the casinos rose 20 percent to 14.2 million stg driven by the 17 percent increase in attendances.
The fall in spend per head mainly reflected the sale of the Barracuda casino in April last year to Ladbroke, said Michel. The spend per head at the Barracuda averaged 450 stg.
But Michel was encouraged by the increased casino attendance. ""More people realise that they are a reasonable night out, you don't have to spend 100 stg,"" he said.
""We have spent a year trying to make them do so, we've made a number of conversions, one big new build, and promotions to our base membership of 900,000, and we have introduced new training tables.""
The improvements coincided with an increase in newspaper and television interest in casinos.
Stakis shares were up 1-1/2p at 103p in early trade. ($1=.6021 Pound)
",47
"British drinks group Guinness Plc on Wednesday became the latest in a long line of companies to fall victim to the pound's inexorable rise on foreign exchange markets.
The company said it would take a 60 million pound ($100 million) hit to its trading profits in 1997 as a result of the pound's continued strength against overseas currencies.
Guinness shares fell 5p to 430p before edging back to 432-1/2 as analysts talked in disappointed terms about the size of its currency hit, outlined in a trading statement.
""The actual underlying trading is exactly as expected, in other words small improvements, but the currency hit is more than most people were anticipating,"" said Merrill Lynch analyst John Beaumont.
According to an Edinburgh Financial survey of 25 brokers on Reuters historical database taken on January 10, the consensus forecast for Guinness' pretax profits in the year ended December 31, 1997 was 1.017 billion pounds ($1.7 billion).
But most analysts now do not expect the company to breach the one billion mark. For 1996, the same brokers forecast on average pretax profits of 958.5 million.
Shares in food and drink giant Grand Metropolitan slid 8p to 426-1/2p. At a rate of $1.60 to the pound, GrandMet says it stands to lose about 16 million in profit every year.
The pound's advance began in August last year. From an index low of 84.0 measured against a basket of major currencies, its trade-weighted index shot up to 96.1 by the year-end, a rise of more than 14 percent.
On Wednesday, sterling was trading at 2.66 marks and $1.67. The pound started the new year at $1.712, its highest level since it fell out of the European Exchange Rate Mechanism in late 1992.
But Guinness' currency loss will be partly offset by a lower interest payments on its debt which analysts calculate should produce a saving of 10 to 15 million pounds.
In its trading update Guinness said its interest coupon would be more than one percentage point lower in 1997.
However, the company made positive remarks about its trading performance in 1996.
Chairman Tony Greener said ""I am pleased that after substantially increased investment, our 1996 results will represent steady growth in profit performance for the year...""
Sales of spirits were one percent higher than in 1995 with notable growth in single malts and de luxe Scotch whiskies and prices will be up 1.5 percent overall in 1996. Total Scotch sales have recovered well in the second half, said the company.
Most country markets have traded in line with the group's forecasts, with trading in Latin America improving in the second half as Venezuela and Mexico recovered annual profits.
""Business continues to be strong in Asia, with further progress in many markets, notably in Thailand, South East Asia and Korea,"" said the group.
But it said ""unfavourable economic conditions continue to constrain sales in Europe."" In Britain shelf prices of leading brands were kept at ""target levels"" over the Christmas period.
Guinness stout has increased volumes sold by five percent and draught Guinness by eight percent in 1996.
But the company said the beer market in Spain has remained difficult, declining four percent, and drinkers switched from high margin on premise beer to lower margin take home.
But Cruzcampo profits for 1996 are expected to be broadly in line with 1995 due to improved productivity. ($1=.5976 Pound)
",47
"British food manufacturer Dalgety Plc posted an 8.5 percent fall in profits on Monday to 43 million pounds ($70.5 million) in the six months to December 31, 1996 as sales of its beef and animal feeds slid.
The company was hit by evidence showing that the brain wasting disease Bovine Spongiform Encepthalopathy (BSE) in cattle, known as mad-cow disease, could spread to humans who ate infected meat.
The European Union imposed a worldwide ban on British beef exports last March and insisted on the slaughter of thousands of British cattle, a cull which has been delayed.
But Dalgety chief executive Richard Clothier said things should improve. ""During the second half the continued improvements in Petfoods, new capacity and new products in Food Ingredients and the declining effects of BSE in Dalgety Agriculture are expected to result in a much improved performance,"" said Clothier.
Analysts had forecast pre-tax profits of 41-45.5 million pounds. Dalgety maintained its dividend at 8.5p in anticipation of a better second half performance.
""The figures are pretty much as flagged in terms of what it tells us about the shape, size and direction of the company,"" said UBS analyst Charles Mills.
Dalgety shares were up 2p at 341p in early trade, helped by positive remarks from Clothier.
The export ban on British beef affected Dalgety's manufacturing organisation and temporarily resulted in higher costs of outsourcing and distribution.
In Petfoods, Dalgety improved trading profit by eight percent to 17.9 million pounds in the first half, helped by cat food, with sales of the Felix brand up 16 percent across Europe.
Operating profit from the company's agri-business fell 23 percent to 15 million pounds as a direct result of the effects of BSE on British cattle feed.
""Sales volumes of cattle feed for the six months period fell by 30 percent, as the delay in the culling programme resulted in excess milk production which reduced the demand for feed and created intense price competition in the market,"" said Clothier.
Operating profit from food ingredients was steady at 15.3 million pounds as fears over BSE reduced the sales of meat seasonings in the first quarter. But demand for alternatives had now offset the decline in beef-based foods, Clothier said.
In food distribution, Dalgety's profits fell seven percent to 5.6 million due in part to the strength of sterling against the dollar. Growth in the American fast food market slowed, affecting hamburger chain McDonald's sales, said Clothier.
""The outlook remains tough in the U.S. but McDonald's are responding with vigour and developments in new markets such as Brazil and Mexico provide good opportunities for future growth,"" he added.
The group's net debt increased to 305 million pounds from 281 million, giving a gearing ratio of 76 percent. ($1=.6097 Pound)
",47
"British brewing to leisure group Bass Plc said on Monday it had sold 47 Holiday Inn full service hotels and 14 Holiday Inn management contracts in the mid-market sector in North America to the Bristol Hotel Company.
In return Bass will take a 36.1 percent stake in Bristol, which it plans to retain, plus loan repayments totalling $300 million and $91 million in cash, to be used in the business.
This results in a total value of $640 million for the deal, although based on the closing price of Bristol stock on Friday it is valued at $659 million.
Bass' decision to sell the hotels fits with its declared strategy of expanding its Holiday Inn franchise system and exiting from owning and managing hotels in areas where it has established a presence in franchising.
""We have always seen franchising as our primary business. Owning and managing hotels is simply a means of supporting that operation,"" said Bass finance director Richard North.
""We have reached the point in the U.S. where that is no longer necessary and where we are at the appropriate time in the cycle to sell these assets,"" said North in an interview.
The 61 hotels transferred, which have a book value of $638 million, generated profits of $69 million in the financial year to September 30 after payment of franchise fees. Bristol will spend $150 million on refurbishing the properties over the next three years.
Bass, which confirmed last week it was in talks with Bristol, said the deal would have no significant effect on its earnings.
In a separate statement issued in New York Bristol said the acquisition should improve earnings slightly in 1997, excluding the cost of integrating the 61 hotels and transaction fees.
Holiday Inn franchisees in the United States get about 33 percent of their occupancy through the Holiday Inn reservation system compared with 13 percent on average in Europe.
""We believe we are way up on the cycle in the U.S. In fact our assessment is that there is a little bit left to go, but of course you can only really tell with hindsight,"" said North, referring to property prices in the United States.
Bass shares were off 15p at 800p after the stock went ex-dividend from the start of trading on Monday.
""It allows them to get out at a reasonable price and invest the cash in areas of expansion like the Far East,"" said Dermott Carr, an analyst at Nikko Europe.
Bristol also agreed to convert a further 10 of its 39 existing hotels to the Holiday Inn brand. These conversions, together with the 61 hotels transferred under the deal, will result in 84 out of 100 Bristol properties being named Holiday Inn or Crowne Plaza.
Bass owns 60 Holiday Inns in Europe, the Middle East and Africa and 39 in the Asia-Pacific region. It has no plans to sell its Crowne Plaza hotels in North America.
Under the Holiday Inn franchise scheme, hoteliers pay a fee to join, relative to room numbers, plus five percent of gross room revenues per annum. They also pay a 0.5 percent fee for access to the computer booking system and a one percent annual fee for marketing, both linked to room revenue.
",47
"Britain's biggest cider maker H P Bulmer on Wednesday played down the runaway success of so-called ""alcopops"" -- fruit flavoured alcoholic drinks -- on its business, saying their impact had not been significant.
""It's important to get it into perspective. The total alcopops market is only about 60 percent of sales volume of our Strongbow,"" said chief executive John Rudgard.
""Yes it's big. Its grown from nowhere very quickly. There is no doubt that people who drink alcopops have taken sales from a wide variety of other drinks but the biggest substition is from lager.""
There is some substitution from ciders, but within that category the biggest impact is on fashion type ciders which Bulmer does not have in its brand portfolio, said Rudgard.
""We have strong brands which provides us some insulation against competition. We have not found the same difficulties as Matthew Clarke.""
In September Clarke shook the stock market with a profit warning, citing tough competition from alcopops and a flood of cheap cider products. The warning wiped more than 290 million stg off the company's stock market value.
Rudgard said Bulmer's brands, which include Strongbow, White Lightning, Stonehouse and Scrumpy Jack, have proved more resilient while the cider market is still growing despite the introduction of alcopops.
According to the latest National Association of Cider Makers figures the cider market grew by 4.1 percent to 115 million gallons in the 12 months to September 1996. Bulmer sales were up 7.5 percent in the same period, excluding Inch's Cider Company which it acquired for 23 million stg in May.
Inch's made a trading profit of 1.5 million stg. Group trading profit before exceptional items was up 13.7 percent at 19.5 million stg.
Bulmer increased its share of the UK cider market by 3 percent to 53 percent.
Operating margins in the UK fell to 12.6 percent from 12.7 percent due to the marketing investments in its export markets, particularly on Strongbow.
Rudgard said margins will continue to remain lower as investment programme overseas is stepped up.
-- London Newsroom +44 171 542 6437
",47
"David Wellings, chief executive of confectionery and soft drinks company Cadbury-Schweppes, said the group was trading in line with plans, and still aims to be one of the top three in confectionery by the end of the decade.
""I think the word we used is robust, that means the business is performing to plan. The base business is performing well and our acquisitions are also growing to plan, especially Dr Pepper,"" Wellings said.  
""I think that is the pattern ahead, a base business growing well and a thrust into emerging markets at a pace which management believes is reasonable,"" he added.
Cadbury-Schweppes posted a three percent increase in trading profit to 105 million stg from its confectionery business in the half year to June 15. Trading profits from its drinks business rose to 198 million from 165 million.
""We have a very clear objective in our confectionery stream and that is to be one of the top three by the year 2000. That means we need to sell one million tonnes of chocolate a year by the year 2000,"" Wellings said.  
The profits increase was driven by the first full six-month contribution from Dr Pepper/7Up -- the third largest soft drinks group in the U.S. -- acquired in January 1995 for $1.71 billion.
""The acquisitions we made in 1995 are continuing to perform to expectations and that includes our Canadian acquisitions as well as Dr Pepper.
Cadbury acquired Allan Candy for an undisclosed amount and Neilson Group for 108 million last year, making it the market leader in Canadian confectionery.  
The company is the third largest soft drinks group in the world but trails in fourth spot behind Nestle, Mars and Suchard in confectionery. ""Obviously there are areas of the world where we can expand more quickly than others like Eastern Europe,"" he said.
Cadbury's factories in Russia and China came on stream in the first half and Poland reached breakeven point in its second year of confectionery production.
In the half year to June 15 Cadbury-Schweppes posted a 12 percent rise in pretax profits to 231 million on sales of 2.29 billion up from 2.03 billion.  
""In North America both confectionery and soft drinks will continue to grow and that is about lifestyle and the breakdown of formal eating occassions and increased opportunities to snack,"" Wellings said.
""So we will continue to see single digit growth even in the mature markets like the U.S. and the UK, but across Europe growth is going to be steady. The French for instance still tend to eat two large meals a day and resist the trend towards snacking,"" Wellings said.  
7Up volumes were nearly two percent ahead of last year after a relaunch of its design and advertising but still behind Coca-Cola-owned Sprite, as competitors stepped up their discounting and promotions.
When it was first acquired 7Up was level pegging with Sprite and Cadbury is trying hard to turn the brand around. The Dr Pepper brand, however, is outpacing growth in the U.S. market. The company agreed to sell its 51-percent stake in Coca-Cola & Schweppes Beverages for 622.5 million which will greatly reduce debt and provide more scope for acquisitions, although Wellings declined to be drawn on what they might be.
-- London Newsroom +44 171 542 6437
",47
"British leisure and brewery group Whitbread Plc said on Thursday it had appointed David Thomas as its chief executive designate to take over from Peter Jarvis who is to step down next summer.
Thomas's appointment was viewed by the investment community as a natural progression from the Jarvis era, which saw Whitbread aggressively transform itself from a brewer to a diversified leisure company in less than six years.
Since 1985, Whitbread has changed its business mix. Beer now only accounts for 14 percent of profits, with the rest coming from its managed estates, restaurant and leisure arm.
Analysts expect Thomas to press ahead with Whitbread's expansion into the leisure and restaurant business while retaining its interest in brewing.
""It's just going to be basically more of the same, he's going to continue to take them down the retail, leisure route,"" said Charles Winston, an analyst at BZW.
A slide in Whitbread shares, down 12.5p at 763p, was attributed more to profit-taking than any disappointment at the new executive appointment.
""It's more of a tribute to Jarvis than a thumbs down for Thomas. They have also had a very good run up of late,"" said one analyst who declined to be named.
""We knew he was going to leave before retirement age although these announcements are always a bit of a surprise when they come,"" said John Beaumont, an analyst at Merrill Lynch.
But he added: ""The appointment of David Thomas seems like a natural progression for the company.""
Thomas, who was appointed to the main board in 1991 and took over the restaurant and leisure division in 1992, is credited with accelerating the development of Whitbread's existing brands -- Travel Inn, restaurants TGI Friday's and Beefeater.
He was also the architect of Whitbread's drive into the pub food market through Brewers Fayre.
Jarvis, aged 55, has hinted to reporters at recent news conferences that he would prefer to leave the company before reaching retirement age in order to pursue outside interests. He is currently a non-executive director of Burton, Rank and Barclays Plc.
",47
"British oil and exploration company LASMO Plc on Thursday reported profits nearly doubled in 1996 was confident about the prospects for oil prices and group oil production in 1997.
LASMO reported after-tax profits of 67 million pounds ($109 million), up from 34 million pounds. It declared a dividend of 2.0p, up from 1.25p.
The figures were in line with broker forecasts of 64 to 75 million pounds, and the shares were up 4-1/2p at 243-1/2p just before the last hour of trading in London.
""We think (oil) prices are going to weaken in the short term, but we don't think they are going to fall through the floor, the floor being around $15 or $16 a barrel,"" chief executive Joe Darby said in an interview.
""We are planning on $19 average for the year on Brent.""
The company benefited from the unexpected strength of oil prices in 1996 and tighter control over costs. Average oil prices rose to $18.72 from $17.09 in 1995.
LASMO reported operating costs of 2.87 pounds on average per barrel produced, down from 3.17 pounds in 1995 but still above its main rival Enterprise Oil.
Darby said LASMO expected to reduce costs further in 1997, although ""we are getting to the point where progress will be slower."" Just three years ago its costs were at four pounds, well above the industry average.
Darby said LASMO expected to reduce operating costs further in 1997 although ""we are getting to the point where progress will be slower.""
LASMO reported 1996 costs running at 2.87 pounds on average per barrel, down from 3.17 pounds in 1995, but still above its main rival Enterprise Oil. Just three years ago it was operating at four pounds a barrel, well above the industry average.
Peak production from Indonesia and initial contributions from its new British oil fields led to the highest ever level of production for the company in 1996.
The company is currently producing about 185,000 barrels of oil equivalent a day (boepd), but is confident of achieving its
",47
"British sweetener and animal feed producer Tate & Lyle Plc issued a profits warning on Thursday as the strength of sterling on foreign exchange markets stripped 7.1 million pounds from its profits in the first quarter.
""Results for the half year to March 1997 are expected to be below those for the corresponding period but above those achieved in the second half of the 1996 financial year,"" said the company in an annual statement to shareholders.
The company made pretax profits of 168.2 million pounds ($272.4 million) in the six months to March 30, 1996 and full year profits of 276.3 million, down 11.2 percent on the year.
Tate & Lyle said if current exchange rates prevailed for the rest of its financial year, results for the full-year would be ""marginally"" lower than the 1996 year.
But Tate shares staged a recovery from their recent lows, gaining 10 pence to 435, after remarks about the performance of its North American unit Staley were less negative than had been feared.
The company said the currency impact resulted from the translation of foreign currencies and the EU Common Agricultural Policy currency mechanism.
The revaluation of the green pound hit results at Tate & Lyle Sugars in the first quarter where profits were cut by 1.6 million pounds.
""Excluding this currency impact, profit before tax for the quarter was, as expected, below the corresponding period last year which had benefited from good margins in maize sweeteners in the U.S.,"" said the company.
The company said results for the year in dollars at Staley would be in line with its forecasts because of reduced costs and a shift in production towards non-high fructose corn syrup products.
Tate said high fructrose corn syrup prices remained highly competitive but ""management initiatives have reduced costs and directed production towards non-HFCS products.""
The company added that favourable trends in America's sugar markets and reduced operating costs had resulted in higher dollar profits in the group's American sugar companies compared with last year's first quarter.
It said the improvement would more than offset the expected downturn at Staley.
""The statement wasn't as bearish as some had feared,"" said one senior trader.
David Lang, analyst at Henderson Crossthwaite, said there were signs that Tate's prospects were improving, pointing to the company's statement that first-half profits would be above levels in the second half of last year.
""I think the market should take comfort from that. There is a major turnaround coming,"" Lang said.
""If you take a long-term view you would be a buyer. The recovery is starting lower than we thought and next year could be tough, but the long-term outlook is improving.""
The company said profits from its sweetener and starches operations in Africa improved in the first quarter.
But lower production cut profit contributions from Australia and adverse conditions in Russia and Thailand hit results from sugar trading operations.
($1=.6175 Pound)
",47
"British betting and Hilton hotel company Ladbroke Group Plc on Thursday posted a 34 percent increase in 1996 pretax profits to 163 million pounds ($263 million) before exceptional items and forecast further good progress during 1997.
Chief executive Peter George also made positive remarks about trading since its 1996 year ended on December 31.
""The same trend has continued in the last two months. The businesses are doing well. It does seem to be getting gradually better this year in mainland Europe,"" George said in an interview. Trading profits from its European hotels fell slightly in 1996.
""In Germany we have seen a few patchy signs of improvement. A few of our properties have actually done better in the first couple of months this year than last year but I would not say that augurs for a recovery this year.""
""I think it will take up to another 12 months for Germany to come back.""
Revenue per available room (RevPar) in hotels in mainland Europe fell to 50.8 pounds in 1996 from 52.1 pounds. In London it rose to 70.4 pounds from 60.4 and to 37.9 pounds from 33.2 pounds elsewhere in Britain.
""Japan is still tough I must say, Tokyo and particularly for us Osaka where new properties have been opened,"" George said.
Overall hotel occupancy levels rose slightly to 69.6 percent from 69 percent and group RevPar moved from 48 pounds to 49.3 pounds.
Ladbroke shares put on 10p to reach 235p in morning trade as the company's headline profit figure pipped the consensus forecast from brokers of 160 million pounds.
""The results were a little better than our expectations at both the pretax and the earnings per share level,"" said Nigel Reed, industry analyst at Paribas Capital Markets. Earnings per share before exceptional items were up 40 percent to 10.44 pence during the period.
Hilton International, which operates Hilton hotels outside the United States, increased trading profits by an underlying 20 percent to 160.2 million, and the betting and gaming division grew profits by 46 percent to 84.9 million.
Ladbroke and Hilton Hotels Corp agreed to reunite the Hilton hotels brand worldwide for the first time in 32 years in January. Previously HHC had the rights to the Hilton name in the United States and Ladbroke owned them elsewhere.
""Betting was much better than we thought and hotels were slightly under what we thought they could do,"" Reed said.
Ladbroke's retail betting business in Britain showed a marked recovery despite the 8.0 million pound cost associated with jockey Frankie Dettori's unique feat of winning all seven races at an Ascot race meeting last September.
On the casino side, the only disappointment was London's Maxims club, where George said there had been a reduction in high stake gambling and the company had made provisions for outstanding debt.
But a weaker performance from Ladbroke's casino division was more than offset by earnings in retail betting where trading profit rose to 59.8 million in 1996 from 34.1 million.
George said the company, which has decided to close down its property division, was still trying to dispose of two properties in the United States and one in Israel which should make a total gain of about 70 million pounds.
Net debt fell by 315.6 million to 707.7 million, reducing the interest charge by 25.8 million to 70.3 million. At its peak three years ago the company was crippled by debt of 1.6 billion pounds during a deep recession in the property market.
Exceptional items amounted to 103.8 million pounds included 52.3 million arising from the group's exit from commercial property and 15.4 million for the adjustment to the price of DIY retailer Texas Homecare sold to J. Sainsbury two years ago.
($ = 0.620 British Pounds)
",47
"British oil exploration company LASMO Plc expects oil prices to weaken in the short term but Brent crude should average $19 for the year, chief executive Joe Darby said in an interview.
""We think prices are going to weaken in the short term, but we don't think they are going to fall through the floor, the floor being around $15 or $16 a barrel,"" said Darby
""We are planning on $19 average for the year on Brent."" LASMO realised an average $18.72 per barrel in 1996, up from $17.09 in 1995.
",47
"United Biscuits (Holdings) Plc more than doubled its profits in 1996 to 109 million pounds ($174 million) before tax and exceptional items, reflecting a simpler and slimmed-down portfolio of products.
United, which owns brands such as McVities biscuits and KP nuts but has exited from its U.S. Keebler subsidiary, said total exceptional charges, mainly from the loss on disposal of businesses, amounted to 84.7 million pounds in 1996 compared with 150.3 million in 1995.
Sales rose by three percent to 1.887 billion and trading profits grew four percent to 129.2 million.
Underlying profits growth was in line with stock brokers forecasts, but a presentation by management to analysts was greeted positively, sending the group's shares up 11 pence to 248-1/2p by 1415 gmt.
""It's all quite encouraging. The way they are analysing and managing the business is very much more in line with what the market demands,"" said Richard Workman, an analyst at ABN-AMRO Hoare Govett.
The company said its recovery was strongly led by its British operations, while in mainland Europe, it started to realise the potential of businesses acquired earlier in the 1990's.
UB's British business increased profits before exceptional items by 12 percent to 113.7 million pounds as renewed consumer confidence encouraged shoppers to step up brands.
In an interview UB's managing director Eric Nicoli said UB Has now entered a phase of consolidation after a hectic disposal programme.
""The emphasis is on organic growth as we are now in a consolidation phase,"" said Nicoli.
Over the last two years UB has sold its American snack operation Keebler, pulled out of Portugal and exited from Spanish snacks. It has also sold one of its Italian snack businesses, withdrawn from Turkey and Brazil and sold Ross Vegetables Products business in Britain.
UB expects its margins in Europe to remain firm and to move up over the next two to three years, said Nicoli.
""We expect margins to move to 10 percent in all our businesses over a two or three year period,"" he said.
(Corrects to make clear that company isn't expecting European markets alone to move by 10 percent.)
UB margins are currently at around 10 percent in Britain and four percent in mainland Europe.
In 1997 the company plans to build on the turnaround ""all our markets continue to be very competitive but we expect another year of good progress,"" said Nicoli.
The total dividend payout was increased by 10 pence per share from 9.8p.
The company's leading biscuit brands include McVities in Britain, Verkade in Holland and Oxford in Denmark. Biscuit sales growth came from the launch of Go Ahead! a range of low fat products. UB also owns snacks KP Nuts, Skips and Hula Hoops.
",47
"Confectionery and soft drinks group Cadbury-Schweppes on Wednesday reported healthy first-half results and said it was positive about its expected full-year performance.
Chief executive David Wellings said the group was trading in line with plans and still aimed to be one of the top three world confectionery firms by the end of the decade.
""I think the word we used is robust. That means the business is performing to plan. The base business is performing well and our acquisitions are also growing to plan, especially Dr Pepper,"" he said in an interview.
For the half year to June 15, the company reported a 12 percent rise in pretax profits to 231 million pounds ($362 million) on sales up 13.3 percent to 2.293 billion pounds.
""The outlook for the year as a whole is positive with further growth expected for both business streams,"" chairman Dominic Cadbury said in a statement.
Analysts' forecasts for pretax profits ranged from 218 million to 232 million pounds, after restructuring costs. The shares rose 11-1/2 pence to 523 on the news.
""The results were at the upper end of the market range and will be well received,"" said Paribas analyst John Campbell.
The group's confectionery business posted a three percent profits rise to 105 million in the half year while its drinks business chipped in 198 million, up from 165 million.
""I think that is the pattern ahead, a base business growing well and a thrust into emerging markets at a pace which management believes is reasonable,"" he added.
Cadbury's factories in Russia and China came on stream in the first half and Poland reached breakeven point in its second year of confectionery production.
""We have a very clear objective in our confectionery stream and that is to be one of the top three by the year 2000. That means we need to sell one million tonnes of chocolate a year by the year 2000,"" Wellings said.
The company is the third largest soft drinks group in the world but trails in fourth spot behind Nestle, Mars and Suchard in confectionery.
The profits increase was driven by the first full six-month contribution from Dr Pepper/7Up -- the third largest soft drinks group in the United States -- acquired in January 1995 for $1.71 billion.
""The acquisitions we made in 1995 are continuing to perform to expectations and that includes our Canadian acquisitions as well as Dr Pepper,"" he said.
Cadbury acquired Allan Candy for an undisclosed amount and Neilson Group for 108 million last year, making it the market leader in Canadian confectionery.
""In North America both confectionery and soft drinks will continue to grow and that is about lifestyle and the breakdown of formal eating occasions and increased opportunities to snack,"" Wellings said.
""So we will continue to see single-digit growth even in the mature markets like the U.S. and the U.K., but across Europe growth is going to be steady. The French, for instance, still tend to eat two large meals a day and resist the trend towards snacking.""
Sales volumes of its 7Up soft drink were nearly two percent ahead of last year after a relaunch of its design and advertising but still behind Coca-Cola-owned Sprite as rivals stepped up their promotions.
When it was first acquired, 7Up had level pegging with Sprite and Cadbury is trying hard to turn the brand around. The Dr Pepper brand, however, is outpacing growth in the U.S. market.
The company agreed to sell its 51-percent stake in Coca-Cola & Schweppes Beverages for 622.5 million, which will greatly reduce debt and provide more scope for acquisitions, although Wellings declined to be drawn on what they might be.
The group set aside 35 million pounds for restructuring of its Schweppes France operation -- reflecting the decision to set up in partnership with San Benedetto, the Italian producer of mineral water and soft drinks -- to build a new plant and close down two existing older ones. ($1=.6382 Pound)
",47
"British household products group Reckitt and Colman Plc reported an 11 percent rise in 1996 pretax profits to 316.5 million pounds ($505.5 million) on Thursday, saying the underlying performance of the group remained solid.
In an interview, chief executive Vernon Sankey said the group expected to see similar growth rates in sales and earnings in 1997.
But the company's shares slipped 3p to 782p as the figures came in right in the middle of brokers' forecast range.
Household products, comprising 80 percent of group turnover, posted a nine percent increase in trading profit to 283.9 million. Earnings from the pharmaceutical division grew 12.2 percent to 67.2 million.
The company benefitted from 27 million of savings from its integration of L&F Products in North America, which it acquired for one billion pounds in 1994. Lysol, America's best selling disinfectant, increased its market share across the range.
The lavatory care category grew by 18.1 percent in Africa and the Middle East, and most of the countries in Latin America showed double digit growth with Harpic. Floor care products in Latin America achieved record sales, driving the group's regional market share up to 49.5 percent.
But economic conditions in Europe continued to be tough and sales overall were flat although margins improved, said the company.
""Mainland Europe has been relatively flat for most of 1996 and I think it's too early to say Europe is turning around. There are some reasonable signs. France and germany are still very tough,"" said Sankey.
The strategy is working, he said, which remains to focus on number one and number two brands with global potential, use the group's wide geographic base and expand in developing markets.
About one third of Reckitt's business comes from North America, one third in Europe, a third from the the rest of the world. Some 26 percent of business comes from developing markets of Africa, Asia and Latin America.
If sterling remains at its current high levels on foreign exchange markets it would hit Reckitt by some 20 million on translation next year, Sankey said.
Reckitt shares have risen by 14 percent in recent weeks amid market rumours that the company may fall victim to a takeover bid by Anglo-Dutch giant Unilever.
But many analysts now think the bid premium makes the company too expensive as a takeover target.
Sankey dismissed speculation that Unilever Plc would bid for Reckitt as just rumour, saying the company has not been approached by Unilever.
""It's a rumour and we have had rumours for years. We get rumours everyday, now quite frankly that is it,"" said Sankey.
The company declared a total dividend payout of 21.97 pence per share up from 20.15 pence. Including the foreign income dividend it was increased to 23.37p.
($ = 0.626 British Pounds)
",47
"Brewer to hotels group Vaux Plc reported a nine percent rise in its pretax profits on Wednesday to 34.8 million pounds ($57.74 million) and chairman Sir Paul Nicholson said its new financial year has started well.
""The new year has started well with beer sales well up,"" said Nicholson in an interview. ""I think at the moment consumers are feeling good and that very strongly benefits our hotels where we have seen a strong increase in the leisure market.""
Vaux's 30 mid-market Swallow hotels were its star performer in profit terms in 1996 -- Swallow trading profits rose 4.3 million to 24.1 million stg.
""Our bookings for Christmas over the next two weeks are six percent up and running through the next three months they are three percentage points up. It's a healthy increase in demand,"" said Nicholson.
Sales of beer were helped by the launch of two ales -- Double Maxim and Lambton's. Vaux, which operates an ale and lager brewery in Sunderland and a smaller draught ale brewery in Sheffield, saw its beer sales rise one percent in the year to September 30, 1996 whereas sales in the market overall were down 0.5 percent.
The brewing and wholesaling side of the business improved profits 25 percent to 4.52 million, despite Vaux offering higher discounts. Vaux's independent pub and club customers received an average further discount of eight pounds per barrel in the year.
The company also increased the discount per barrel it allowed to its tied estate of pubs by 4.50 pounds to 85 pounds.
Vaux's managed pubs improved profits 17 percent to 9.0 million and on a like-for-like basis liquor sales were ahead by 6.3 percent and food sales by 13.1 percent with profits up 10.1 percent. Vaux owns 868 pubs of which 163 are managed and plans to convert 25 more from tenanted to managed pubs.
Vaux is in talks to sell its 38-strong care homes business, which it no longer believes fits with its core business activity, said Nicholson, but he declined to say who the interested party was or how much they were worth.
The company's shares were off 3-1/2p at 253p in early trade.
($1=.6027 Pound)
",47
"Tobacco to insurance group B.A.T Industries Plc reported a five percent rise in 1996 profits to 2.495 billion pounds ($4 billion) on Wednesday, hit by an exceptional charge of 160 million pounds for U.S. environmental claims against its Eagle Star insurance unit.
Excluding the charge, profit rose by seven percent.
Chairman Lord Cairns said in a statement B.A.T dismissed any liability for damages currently being claimed by smokers in a string of tobacco related lawsuits in the U.S.
The company also said it kept an open mind on its corporate structure, but gave no news of any concrete plans.
As well as disappointment over the exceptional insuarnce charge some analysts had hoped B.A.T would say more about the possible demerger of its tobacco and insurance arms.
B.A.T shares, up 32 percent since November as its legal battles in the U.S. looked more promising, tumbled 20 pence to 530 pence in early trade.
""We continue to believe that B.A.T Industries itself has no potential liability in any U.S. tobacco litigation,"" Cairns said, adding that the tobacco industry was confident of winning the cases and does not intend to offer a settlement.
However, Cairns said the company would be prepared to ""evaluate proposals from third parties to provide relief from all current and future suits, provided that they were in shareholders' interests"".
Cairns said, ""Our twin goals are to improve the long term growth prospects of our business and to increase shareholder value. We continue to evaluate business oppurtunities and issues of corporate structure that will enable us to meet them.""
B.A.T director of public affairs Michael Prideaux told Reuters the company was keeping an open mind. ""We were surprised by media reports that we had ruled out a demerger,"" said Prideaux. ""We are not convinced that simply doing the splits helps either business much, what we are saying however is we have an open mind.""
The company has looked at several options for improving shareholder return over the last year, including merging its financial services arm, comprising mainly general and life insurance companies, with another insurer.
Prideaux dismissed the idea of floating off the company's U.S. cigarette arm Brown & Williamson as a way of ringfencing the rest of B.A.T from any potential payments to smokers in the United States.
""Tobacco is strategically managed as world wide business so simply floating off B&W would be a classic way of destroying shareholder value because B&W plays an integral part in developing U.S. international brands around the world,"" said Prideaux.
""If it became independent you would probably end up with separate sales networks.""
B.A.T's tobacco business turned in a 7 percent overall improvement in local currency to 1.634 billion pounds with group volumes four percent ahead and world market share increasing to 12.8 percent from 12.4 percent.
Trading profit from financial services grew by an underlying eight percent to 1.2 billion with strong performances from two insurers Farmers in the U.S. and Allied Dunbar in Britain.
The company recommended an eight percent increase in the base dividend to 26.0p, with a further 3.5 pence to be paid as a foreign income dividend. ($ = 0.619 British Pounds)
",47
"Soft drinks and confectionery group Cadbury-Schweppes Plc, expected to report a solid eight percent rise in first half profits on Wednesday, faces questions about the performance of its 7UP soft drink in the U.S.
""One of the main questions will be the success or otherwise of the relaunch of the 7UP brand,"" said Mark Duffy, food manufacturing analyst at SBC Warburg. Competitor Sprite, owned by Coca-Cola, has seen an agressive marketing push and is ranked the fastest growing brand in the U.S. after Cadbury's Dr Pepper.  
Analysts forecasts for pretax profits range from 218 to 232 million stg, after restructuring costs, up from 206 million last time. A dividend of 5.1 pence is expected, up from 4.9p.
A restructuring cost of some 35 million is anticipated, with the bulk of it or about 25 million, stemming from the closure of its smaller production plant in France.
Most of the profit improvement is expected to come from Dr Pepper in the U.S., which will contribute earnings for the full six months period for the first time.  
It bought Dr Pepper/7UP -- the third largest soft drinks group in America -- in January 1995 for $1.71 billion, shifting the company's biggest profit centre to the U.S. from Britain.
Cadbury's U.S. drinks business should turn in about 112 million stg in trading profit against 59 million in the first half of 1995, due entirely to the contribution of Dr Pepper.
All other areas of the group's business are likely to show only small changes compared with last year.
""The significant things are Dr Pepper, restructuring in Europe and a touch of weakness in UK beverages,"" said John Campbell, food and drink analyst at Paribas.  
""UK beverages is partly a weather issue and partly due to the fact that although gross margins are reasonaly steady, the market generally is just a bit more competitive.""
Campbell estimates UK beverages will contribute 47 million stg in operating profit down from 50 million last time.
Broadly, analysts expect a pretty flat performance from the group's confectionery business, with a consensus forecast of 110 million stg for operating profits. On average, analysts calculate beverages will chip in trading profits of 150 million.  
After the sale of its 51 percent stake in the Coca-Cola & Schweppes Beverages (CCSB) operations to Coca-Cola Enterprises in June for 620 million stg, many analysts want to see a clear statement of strategy from the company.
""The market needs more clarity on strategy following the sale of CCSB,"" said Duffy. ""We think it was a positive growth business and the sale came as a result of pressure from Cola owned bottlers globally. It was not pro-active at all.""
There are some latent worries about the company's future growth strategy.  
""All they see at the moment is a stronger business financially, with the fundamentals ahead reasonably positive -- but where will they find additional growth?"" said Campbell.
It lies in only fourth place globally in confectionery, behind Nestle, Mars and Suchard, and could embark on buying confectionery firms in emerging markets.
It might use its big Australian confectionery business as a launch pad into the growing Far East sugar confectionery market.
But so far, say analysts, the company has not said when shareholders can expect a return on investments in emerging markets: one of the largest so far, a 75 million Russian plant.  
Cadbury announced an investment of 20 million stg in building a new plant at Wrocoaw in Poland in 1993 and a joint venture in China at a cost of 20 million. Net debt at 1.34 billion at the end of 1995 should fall to about 510 million by the end of 1996 as a result of the CCSB sale and providing there are no further acquisitions. Gearing should fall from 45 percent to 15 percent over the same period giving plenty of scope for acquisitions.
There are also rumblings in the investment community about the logic of a tie up with PepsiCo globally, which would offer big cost-savings in production and a good mix of brands.
-- London Newsroom +44 171 542 6437
",47
"British household products group Reckitt and Colman Plc is expected to report a 15 percent increase in its full year profits on Thursday, as the benefits of its acquisition of L&F Products feeds through.
Analysts forecasts for 1996 pretax profits range from 314 to 320 million stg, up from 285 million last time. Estimates of the total dividend range from 21.8 to 22.6 pence.
The group, known for brands ranging from Mr Sheen polish and Brasso, to Dettol disinfectant, acquired L&F Products, maker of America's best-selling disinfectant Lysol, for one billion pounds in 1994.
""The real driver will come from the benefits of intergrating L&F, which will bring substantial cost-savings,"" said one analyst who declined to be named.
At the half year stage, the company reported sales up 5.3 percent, although turnover in the United States grew more strongly at 7.0 percent. In Europe underlying sales were flat due to sluggish economic activity and stiffer competition.
""It's primarily from the U.S., where we expect growth. We have had encouraging signs from management in the last couple of months on that one,"" said an analyst.
At the half year stage, pretax profits grew to 165 million stg from 149.6 million. Turnover from continuing operations grew by just four percent during the period to 1.16 billion stg.
The company continues to face competition in Britain and mainland Europe from larger retail chains selling cheaper own-brand products.
Reckitt has targetted South America and Asia, where it believes consumers are more influenced by brand names. Last year sales in eastern Asia rose by 25 percent, while in Brazil turnover jumped 20 percent.
The company generates about 32 percent of revenue from Europe, a similar amount from North America and 18 percent from emerging markets.
Reckitt shares have risen sharply in recent weeks amid market rumout that it may fall victim to a takeover bid by Unilever.
But the investment community has now largely dismissed this, arguing that it does not fit the fast moving consumer goods sector that Unilever Plc has identified as one of its favourites, nor does it have enough of a presence in emerging markets.
The shares have risen more than a pound since the rumours emerged, to the current 805p level and many analysts think this sort of bid premium now makes it too expensive as a takeover candidate.
""Our view is that on balance Unilever probably have higher targets on their list as in some ways Reckitt replicates Unilever in terms of its geographic exposure and I think Unielver wants to expand more rapidly in emerging markets,"" said Carl Short, analyst at SocGen.
R&C's stated aim is to become the world leader in household products and dominate over the counter pharmaceuticals.
The company's whose name used to be synonomous with Britain's favourite mustard Coleman's now generates only about five percent of its trading profit from food operations.
-- Tim Farrand, London Newsroom +44 171 542 7717
",47
"Anglo-Dutch consumer giant Unilever NV/Plc should report a 10 percent improvement in underlying profits for the full year on Tuesday but the increase will be marred by sterling's surge on foreign exchange markets.
Analysts also expected Unilever to unveil a hefty charge for reorganising some of its newly acquired businesses like personal products company Helene Curtis and industrial cleaner Diversey.
On average, 24 brokers polled forecast 1996 pretax profits of 2.525 billion stg up from 2.319 billion for the year to December 31, 1995.  
The company is expected to take a currency hit of about 50 million stg in the fourth quarter rising to as much as 210 million in 1997.
A restructuring charge of 80 million stg on average for the fourth quarter should bring the total to about 220 million net for the year.
Most of the curency movement took place in the fourth quarter and Unilever operates a currency policy of applying constant exchange rates until the fourth quarter, at the end of which it calculates and applies the average rate for the year.  
Sterling has apprectiated by 11.1 percent since October 1, 1996 against the ECU and about 45 percent of Unilever's business is in hard European currency terms.
The real impact of currency movements will come through in the dividend payout, which is set as a percantage of earnings in sterling and Dutch guilder.
Analysts forecast the total dividend in sterling will rise 4.8 percent to 30.8p but by some 8.0 percent in guilders to 8.73 guilders. In early January, many brokers recommended switching out of Unilever Plc to its NV shares to pick-up the benefit, a factor which has dragged down the company's London share price.  
Unilever Plc shares were 7-1/2p lower at 1357p on Friday, but in four out of the last five years the p/e ratio has fallen to 13.5 or 14 times in the early part of the year before climbing steeply ahead of the first half figures.
Brokers' estimated profits for 1997 are dependent on key assumptions about currency rates and the breakdown of income streams by currency -- many are working on the basis of $1.70 average for the year against the pound and 2.65 mark -- but six houses have downgraded their 1997 forecasts over the last month.  
""Our reading of the clues so far is to expect a higher gross restructuring than perhaps others,"" said Michael Bourke, analyst at Panmure Gordon, who is estimating a charge of 110 million in the fourth quarter to give 250 million net for the year.
""The fourth quarter tends to be where they dump the bulk of their charges and their recent acquisitions have needed considerable reorganisation,"" he said.
Analysts expect to see profits driven by continued sales growth in the emerging markets of South America and a pick up in North America. However, earnings from Europe and especially Germany are likely to remain depressed.  
""North America and Latam are likely to be big the engines for growth whereas Europe remains a difficult market, but we should see the benefits of rationalisation start to come through there,"" said Nikko analyst Dermott Carr.
Brokers are keen to get a tighter grip on chairman Niall FitzGerald's strategy. Since taking over as chairman in September, FitzGerald has talked about re-shaping the group to give it a sharper focus.  
""I think the market is expecting a bit too much of one man. I don't think FitzGerald will be as radical as many think but it would be interesting to get a clearer view of what he defines as a non-core business,"" said Carr.
Generally analysts think Unilever will remain a fairly broad church under FitzGerald rather than a pure, branded food company and unlike the single brand focus of a Coca-Cola or Procter & Gamble. -- London Newsroom +44 171 542 7717
",47
"Sir Ian Prosser, chairman of British brewer to leisure group Bass Plc, warned shareholders on Thursday that the business was running slightly behind its forecasts, sending its shares tumbling.
""In the first 16 weeks of the year, the business has continued to make progress, although slightly behind our expectations,"" Prosser told shareholders at the annual meeting.
The company's 2,200-strong hotel chain Holiday Inn has moved forward in the first 13 weeks of the year, but as expected, the rate of growth in dollar profits is below last year, he said.
Bass shares fell 21-1/2p to 831p on the trading statement.
""The tone of the statement was negative and clearly intended to lower market expectations but it's difficult to put a finger on exactly where the disappointments lie, with the exception of leisure,"" said Mark Puleikis, analyst at Merrill Lynch.
In an interview with Reuters shortly after the meeting Prosser declined to add to the trading statement.
Brokers currently estimate Bass will report pretax profits of between 798 million and 670 million pounds ($1.10 billion) in 1997.
In America franchise revenue per available room (REVpar) from Holiday Inns has grown by 7.0 percent (11 percent in company-managed hotels) in the first 13 weeks of the year, Prosser told the meeting.
""In Europe trading is good with growth in RevPar of 7.5 percent, but with the Chinese market softening, revpar has fallen by 4.0 percent in Asia,"" he said.
In Bass Taverns, managed house turnover grew by 9.0 percent and food revenues increased by 21 percent, while machine revenues rose 9.0 percent during the period.
Operating costs in the pubs have risen in line with turnover, he added.
Prosser said profits at Bass's other leisure retailing businesses were ""a little ahead"" of last year, with all businesses except Gala trading well.
Gala admissions per club were some 4.0 percent lower, and spend per head was off 1.0 percent versus last year.
Bass Brewers profits continued to grow, with total beer volumes up by 2.5 percent, but margins were slightly down on last year due to intense competition, Prosser said.
He also said the soft drinks market has been flat since the start of the year, but added that the company's Robinsons brand continued to make progress.
",47
"Britain's largest brewer Scottish and Newcastle is prepared to stick with its Center Parcs holiday resorts through both good times and bad, chief executive Brian Stewart said.
""We do see leisure as offering very significant growth oppurtunities, we have to take the rough with the smooth and we have a period which is difficult but we will overcome that,"" he told Reuters late on Tuesday.
Profits from Center Parcs resorts were down 11 percent at 39 million pounds at the half-year stage due to weak economic conditions in mainland Europe and the cost of improving its facilities in the Netherlands.
The relatively poor performance of S&N's leisure division has caused many analysts to question the wisdom of S&N's move into leisure.
""We certainly hope the consumer gains a little bit of confidence in Europe but we are very positive about initiatives we are taking now to get Center Parcs back on track.""
Bookings in UK Center Parcs were ""very strong and well ahead of last year,"" said Stewart.
He said the planned opening of Rank -owned village holiday resort Oasis was no more serious a competitive a threat than any other leisure deveopment.
He said the company planned to concentrate on existing Center Parcs and no new Center Parcs would be built in the next year.
""We are very positive about our future prospects from our leisure division, where we see significant growth oppurtunities,"" said Stewart, adding that he expected to see some improvement in mainland Europe from Center Parcs in 1998.
""Whether the consumer recovers in terms of confidence, especially in Germany, I think is debatable because there will be political and economic uncertainty there this calendar year.""
He said S&N was unconcerned that it had lost some market share to Bass BASS.l in the beer market.
""I'm not worried about the competition, I'm worried that our brands continue to perform as well as they have done over the past twelve months.""
""Our brands are performing better and people are more conscious about brands, consumer service and marketing support, so I see the recipe pretty much as we have experienced over the last 12 months.""
Stewart said S&N expected to continue to supply beer to most of Inntrepeneur's 3,000 tied pubs, despite the fact its exclusive beer supply contract with the company expires in March 1998.
Pub company Inntrepreneur is jointly owned by Grand Metropolitan and Australian brewer Foster's.
""We do anticipate we will hold the majority of the brands based on our brand performance through those outlets. You have got to remember that publicans have traded with these brands for many years and they will not wish to upset their customers, particularly when the brands are performing as well as they are.""
- London Newroom +44 171 542 6437
",47
"Cider maker Matthew Clark has put a line under the extent of its losses inflicted mainly by the phenomenal growth of ""alcopops"" and now has a strategy that will turn the company round, said its business development director.
""The numbers we have put into the market today and the issues we have identified, that is all the issues and that is the financial costs of those issues in this whole year,"" said Peter Huntley in an interview. Clark estimated its losses at 22 million for the year from a combination of lower sales and tougher competition over pricing and supply contracts.
",47
"Brewer to leisure group Whitbread Plc has turned in a ""sound"" business performance in the last three months, said chief executive Peter Jarvis in an interview on Friday.
""The performance of core businesses in the last quarter of the year, December, January and Febuary, has been sound,"" said Jarvis.
The company reports its full year results ending February 28, 1997 on May 7.
""Whitbread Inns in that period have seen like-for-like sales growth in food and drink of between four and five percent. And overall their sales have been well into double digits.""
In mid January the company reported an eight percent increase in its sales in the five week period from December 1, 1996 compared with the previous year.
""Our beer company, particularly in takehome had a very strong christmas performance relative to the market. Our market share in takehome beer is the highest it has ever been,"" he added.
The group's ""beer volume for the year that is about to finish is well up on the market which is going to be one or two percent down.""
He said the refurbished pubs within the Whitbread Inn division -- like Brewers Fayre and Hogshead -- are performing very well.
""The returns that we are getting for the investment in new openings in the last six months are better than we have had historically.""
The group is converting its refurbished sites into profit quicker because they are opening them more quickly, he said.
Whitbread will open another 50 Pelican restaurants -- either Cafe Rouge or Cafe Dome -- by the end of the 1997 financial year, with plans to expand the chain to 300-400.
""And I think it will be relatively more successful as it moves out of London. Where we have opened in the provinces the performances are extremely good.""
Outside London there is less competition and customers view Cafe Rouge as a ""much more serious restaurant,"" whereas in London people tend to have one drink and move on and the average spend per head is therefore lower.
""Across the group we have a pipeline of new sites to open in the next 12 months which is the strongest pipeline we have ever had for the company -- we have 47 for Pelican, 45 Travel Inns, 80 managed pubs and 40 Costa Coffees.""
""It's a pipeline of at least 200 new outlets to be opened in the next year or so.""
The trend for eating out in Britain is growing fast and there is futher to go over the next decade, said Jarvis.
""The thing about the marketplace in Britain is that the percentage of money that people spend on eating out as a percentage of food is only about one-fifth as against half in the United States."" -- Tim Farrand, London Newsroom +44 171 542 6437.
",47
"Growth in fast-food, snacking and eating out in Britain is driving profits at food retailer Watson & Philip, owners of the 526-strong chain of Alldays convenience stores, chief executive Colin Glass said on Wednesday.
And the trend shows no sign of abating, he said.
""What is happening is there has been a major demographic shift with an increasing number of single occupancy household or households where both people work. Customers are spending more on prepared food rather than food they cook at home,"" Glass said in an interview.
The company's shares soared 44p to 389p on Wednesday, making it the stockmarket's biggest climber. Earlier Alldays reported sales in comparable stores up by 2.2 percent in the year to October 27, 1996.
Group pre-tax, pre-exceptional profits were 20.1 million pounds ($33.31 million) in the year, up 11 percent.
The convenience food store chain also had an operating margin of 5.4 percent in the year, up from 4.9 percent.
""The product at Alldays will be consumed or start to be consumed within two minutes of the customer being in the store,"" said Glass. As a result the company has adopted two strategies aimed at achieving profits growth.
First to change the product mix to bring in more videos, fast food and drinks -- grocery and household goods now make up less than a quarter of Alldays's range -- and secondly to open more stores, said Glass.
The company plans to open about 150 more Alldays stores in 1997 mainly in the midlands and northern England and by the millenium Glass said the Alldays network of stores would be increased to 1,000.
Watson & Philip also plan to put Dunkin' Donuts into 60 of its stores over the next month, said Glass. The company will franchise Dunkin' Donuts from its owner Allied Domecq. The company is also currently testing the Domino Pizza brand with its customers in six stores.
Glass said the company had a medium term target of seven percent margins at its 286 company-owned stores, adding that margins at its 240 franchised outlets were likely to remain at current levels.
W&P has a franchise agreement with Total Oil Ltd which will lead to over 50 Total-owned petrol stations incorporating Alldays stores, at Total's cost, over the next year.
Analysts had downgraded their profit forecasts for the company's full-year results after it issued a profits warning in October, sending its shares down almost 40p on the day.
At the time market forecasts ranged from 18.5 million to 21.8 million pounds.
($1=.6035 Pound)
",47
"British cider maker Matthew Clark outlined a recovery plan on Tuesday aimed at tackling the phenomenal rise in popularity of ""alcopops"" and a cut throat industry-wide price war.
""We have drawn a line under the issues we face,"" said business development director Peter Huntley in an interview.
The company estimates it will lose 22 miillion pounds ($36.80 million) over the year from a combination of lower sales and tougher competition over pricing and supply contracts to national and regional brewers.
Sales of Diamond White and K cider were off some 30 percent due to the emergence of ""alcopops"", costing Matthew Clark about 11 million pounds in annual profits.
""The decline in Diamond White and K is still in progress, but it is a quiet period of the year and our marketing plan will hit the market in April and we expect it to arrest the decline very quickly,"" he said.
Alcopops -- cola and fruit flavoured alcoholic drinks -- have grown to annualised sales of 80 million litres a year in 18 months and hit sales of Diamond White, the dominant premium packaged cider brand, six times more than premium lagers.
Price competition produced deep promotional discounts in supermarkets and will cost Matthew Clark about four million pounds in lost profits at the full year, said Huntley.
""The level of discounting and below the line price support, and promotional support this summer has been at levels which have just not been seen in the cider industry for the last five years,"" he said.
""For example on a two-litre Old English and Blackthorn, the discounting we had to do this summer to match the market was to take 30 percent off the price, so it was down from 2.99 pounds and 3.19 pounds to 1.99 pounds.""
But Huntley said Clark ""expects to pull back on the level of promotional discount"" that went on during the summer.
Matthew Clark now has a 38 percent market share, down some three to four percentage points over the last year, putting it well behind its larger rival Bulmer HP Holdings Plc which has some 52 percent of the market.
The company unveiled a plan to spend more on advertising in an effort to rebuild its cider brands, including a new campaign for Diamond White aimed at bringing back 18 to 24-year-old drinkers and the relaunch of Blackthorn in the spring.
It also pledged to increase prices from this month and do away with deep promotional discounts in supermarkets.
Matthew Clark shares rose 30p to 330p by early afternoon with analysts saying they liked the frank way the company had presented its recovery strategy.
The company's shares plunged 60 percent after a profits warning in September, wiping more than 290 million pounds off its market value.
""They gave an open, frank and honest assessment of what there problems were and what they are going to do to sort them out,"" said Merrill Lynch analyst John Beaumont.
""A lot depends on how Bulmer will react, of course. Will they both stop cutting each other's throats and stop chasing each other's accounts?"" he said. ($1=.5979 Pound)
",47
"British food manufacturer Hillsdown Holdings plc on Thursday reported a 10.5 percent increase in its 1996 pretax profits to 150.5 million pounds ($242.7 million) and said the business climate in 1997 looked good.
""The year has only just begun for Hillsdown but the business climate in 1997 looks favourable,"" Chairman Sir John Nott said.
The scare over mad cow disease -- bovine spongiform encephalopathy (BSE) -- continued to dent Hillsdown's meat business but it helped lift its poultry and fish sales.
Trading profit on canning, preserves, biscuits and drinks rose to 63.6 million pounds in 1996 from 40.5 million, although earnings from chilled foods were flat at 21.2 million.
Profits from the company's meat and produce division fell to 9.1 million from 12.4 million in 1995 but the poultry, furniture and housebuilding division boosted profits from 36.2 million to 46.8 million.
Earnings from Britain rose by some 35 million to 146.5 million but in mainland Europe trading profits were flat at about 30 million, reflecting the poor state of the German economy.
""The red meat market has continued to be lifeless and our international meat traders, Towers, have effectively had to tread water with the emphasis on tight stock control,"" said chief executive George Greener in a statement.
Fairview New Homes, which had a strong second half and has doubled its land bank over the last two years, is set for strong profits performance as confidence in the housing recovery grows, he said.
Greener scotched some hopes in financial markets that the group would dispose of its non-food interests.
He said the structure and culture of Hillsdown as a diversified manufacturing company is a major strength and should be enhanced.
""I do not believe it is simply a question of divesting of highly profitable non-food businesses,"" said Greener.
Hillsdown shares were two pence higher at 193-1/2 pence in the morning session, as the company's headline profits topped brokers' consensus forecast of 149 million pounds. ($ = 0.620 British Pounds)
",47
"Pub-to-hotels group Greenalls Plc is seeing a strong level of Christmas bookings and consumer confidence is picking up, managing director Peter Daresbury said in an interview.
""Christmas bookings are looking very good and there seems to be a strong level of consumer confidence, although the snow and the fog has not been wonderful for the business,"" he said.
Christmas is a critical period for hotel, pub and restaurant companies operating in Britain and mainland Europe with as much as 20 percent of their annual turnover generated in December.  
Greenalls, owners of the 21-strong De Vere Hotels chain, 2,360 pubs and 470 off-licenses, earlier reported a 47.9 percent rise in pre-tax, pre-exceptional profits to 148.7 million in the year ended September 27. Greenalls has seen improved hotel occupancy and conference business as the corporate sector turned more buoyant and people took more leisure breaks in the year, said Daresbury.
De Vere Hotels revenue per available room rose 10.8 percent and occupancy levels were up at 74.4 percent from 72.6 percent.
The company's chain of 46 Premier Lodge's increased occupancy levels from 72 percent to 73 percent with revenue per available room up 9.1 percent during the year.
""We think that we are seeing a sort of steady pick up in consumer confidence and we consider that to be sustainable for 12 to 18 months,"" said Daresbury.
Greenalls is also investing to attract the non-traditional pub goer who wants to eat out and is prepared to trade up by buying wine or premium lagers for instance rather than cheaper ales, he said.
This strategy should give the company more exposure at the top end of its pub estate to improvements in consumer spending, said Daresbury.
The company plans to extend its pub concepts into 292 of its managed estate over the next year and aims to build 10 to 15 new large city-centre pubs.
It announced plans to spend 170 million on developing its business in 1997/98 with about 40 million going on rolling out its Greenalls pub concepts.
Greenalls Inns now operates 920 outlets nationally, of which 514 are managed food houses. Drinks and food sales per outlet in its enlarged managed pub estate, rose 7.8 percent and 11.9 percent respectively.
Greenalls Inns pub estate was greatly expanded by the acquisition of Boddington in November for 527 million stg.
Operating margins at Greenalls Inns managed estate were up 1.1 percentage points at 25.7 percent, which reflected changes in the mix of drinks on offer with more wine, premium lager and soft drinks on sale.
The company's branded pub restaurants and lodges saw food and drink sales per outlet up by 14.6 percent and 13.8 percent respectively.
Greenalls' Premier House operates 175 outlets in Britain, including 88 Millers Kitchens, 41 Henry's Tables, 13 Henry's Cafe Bars and seven Quinceys.
Analysts expect Greenalls to turn in pre-tax profits of about 168-170 million stg in 1997/98.
-- London Newsroom +44 171 542 6437
",47
"Peter Jarvis, who announced he would be stepping down as chief executive of leisure and brewing group Whitbread Plc in the summer, paid tribute to his successor David Thomas as an inspired retailer.
""He is a retailer. He has been in retail all his life. I am not a retailer. I devised the retail strategy. I was a marketer, I was in ads until I was fourty. But David knows the retail business like the back of his hand.""
Whitbread is now embarking on a period of organic growth driven by its retail brands which Thomas is best suited to orchestrate, said Jarvis.
",47
"Anglo-Dutch consumer giant Unilever NV/Plc should report a 10 percent improvement in underlying profits for the full year on Tuesday but the increase will be marred by sterling's surge on foreign exchange markets. 
Analysts also expected Unilever to unveil a hefty charge for reorganising some of its newly acquired businesses like personal products company Helene Curtis and industrial cleaner Diversey.
On average, 24 brokers polled forecast 1996 pretax profits of 2.525 billion stg up from 2.319 billion for the year to December 31, 1995.
The company is expected to take a currency hit of about 50 million stg in the fourth quarter rising to as much as 210 million in 1997.
A restructuring charge of 80 million stg on average for the fourth quarter should bring the total to about 220 million net for the year.
Most of the curency movement took place in the fourth quarter and Unilever operates a currency policy of applying constant exchange rates until the fourth quarter, at the end of which it calculates and applies the average rate for the year.
Sterling has apprectiated by 11.1 percent since October 1, 1996 against the ECU and about 45 percent of Unilever's business is in hard European currency terms.
The real impact of currency movements will come through in the dividend payout, which is set as a percentage of earnings in sterling and Dutch guilder.
Analysts forecast the total dividend in sterling will rise 4.8 percent to 30.8p but by some 8.0 percent in guilders to 8.73 guilders.
In early January, many brokers recommended switching out of Unilever Plc to its NV shares to pick-up the benefit, a factor which has dragged down the company's London share price.
Unilever Plc shares were 7-1/2p lower at 1357p on Friday, but in four out of the last five years the p/e ratio has fallen to 13.5 or 14 times in the early part of the year before climbing steeply ahead of the first half figures.
Brokers' estimated profits for 1997 are dependent on key assumptions about currency rates and the breakdown of income streams by currency -- many are working on the basis of $1.70 average for the year against the pound and 2.65 mark -- but six houses have downgraded their 1997 forecasts over the last month.
""Our reading of the clues so far is to expect a higher gross restructuring than perhaps others,"" said Michael Bourke, analyst at Panmure Gordon, who is estimating a charge of 110 million in the fourth quarter to give 250 million net for the year.
""The fourth quarter tends to be where they dump the bulk of their charges and their recent acquisitions have needed considerable reorganisation,"" he said.
Analysts expect to see profits driven by continued sales growth in the emerging markets of South America and a pick up in North America.
However, earnings from Europe and especially Germany are likely to remain depressed.
""North America and Latam are likely to be big the engines for growth whereas Europe remains a difficult market, but we should see the benefits of rationalisation start to come through there,"" said Nikko analyst Dermott Carr.
Brokers are keen to get a tighter grip on chairman Niall FitzGerald's strategy.
Since taking over as chairman in September, FitzGerald has talked about re-shaping the group to give it a sharper focus.
""I think the market is expecting a bit too much of one man. I don't think FitzGerald will be as radical as many think but it would be interesting to get a clearer view of what he defines as a non-core business,"" said Carr.
Generally analysts think Unilever will remain a fairly broad church under FitzGerald rather than a pure, branded food company and unlike the single brand focus of a Coca-Cola or Procter & Gamble .
-- London Newsroom +44 171 542 7717
",47
"Food service company Compass Group still has plenty of growth potential to come from the global trend towards contracting out catering, said chief executive Francis Mackay in an interview.
""There is a natural and gradual process of out-sourcing catering, which will continue at least until the year 2000. If you take Europe and the U.S. together, the market is worth about 100 billion pounds, of which only 30 billion is outsourced."" ""That leaves two-thirds of the market still available, and we are in a very strong position to take advantage of that.""
",47
"Anglo-Dutch consumer products group Unilever NV/Plc Tuesday reported a 15 percent rise in pre-tax profits for 1996 and said it was putting its speciality chemicals businesses up for sale.
Pre-tax profit rose to 2.66 billion pounds ($4.4 billion) on a 6 percent rise in revenues to 33.52 billion ($54.7 billion). 2.
Unilever's stock surged on the results, which were better than the 53 billion pounds ($4.13 billion) analysts had forecast, and the planned sale of the speciality chemicals businesses.
Chairman Niall FitzGerald said the overall economic situation in 1997 was likely to be generally favourable, as in 1996, but he warned about market conditions in Europe, particularly France and Germany.
He said the planned sale of Unilever's speciality chemicals businesses would enable the company to concentrate on achieving growth in its consumer goods operations, particularly in developing and emerging markets.
""We will now seek actively buyers for the totality or the individual businesses and we will then assess those over the next month or two,"" he told Reuters in an interview. ""We would hope to conclude a sale in the course of the next three to six months.""
FitzGerald declined to say how much the businesses might be worth. The four units -- National Starch and Chemical Company, Quest International, Unichema International and Crosfield -- have combined revenue of 3.0 billion pounds ($4.9 billion), 9 percent of Unilever's total sales, and showed operating profit of 415 million pounds ($678 million) in 1996, with profit margins of 14.1 percent.
""These are extremely large and important parts of our businesses, but for some time we have been reviewing whether they should be a continuing part of the portfolio -- not because they are poorly performing themselves, they are excellent performers -- but whether we can give them the concentration and the focus that they require,"" FitzGerald said.
""They are essentially industrial businesses selling not to consumers but to intermediate customers. They are very fine businesses,"" he said. ""But if you look at the way this industry is developing, we have to take a decision either to significantly improve our presence in these markets, perhaps double it, or to exit and in exiting to concentrate on the other 90 percent of our business, which is our mainstream consumer goods business.""
The four companies together make up one of the world's largest speciality chemicals groups, employing 15,800 people in more than 35 countries.
Unilever is the world's largest producer of both margarine and ice cream, and its activities span food, personal products, such as Pond's cold cream, and household goods brands, including laundry detergents and Lux soap.
In Europe, Unilever's overall results in 1996 were held back by the impact of poor weather on ice cream sales and the impact of the bovine spongiform encephalopathy beef crisis.
""We see little reason, however, to believe that conditions in Europe, particularly in France and Germany, will improve,"" FitzGerald said.
Good progress in North American market conditions provided the basis for better results, and the momentum of growth continued strongly in the fast-growing emerging markets.
",47
"Anglo-Dutch consumer products group Unilever NV/Plc reported a 15 percent rise in annual profits on Tuesday and put its speciality chemicals units up for sale in a move tipped to raise up to 5 billion British pounds ($8.17 billion).
Pre-tax profit rose to 2.66 billion pounds ($4.4 billion) on a 6 percent rise in revenues to 33.52 billion ($54.7 billion). 2.
Unilever shares surged on the results, which were better than analysts had forecast, and on the planned speciality chemicals sale.
Unilever Plc shares surged 86-1/2 pence to 1,479-1/2 ($24.17) in London as some looked to raise 1997 forecasts.
Chairman Niall FitzGerald said the sale of the speciality chemicals businesses would enable the group to concentrate on achieving growth in its consumer goods operations, particularly in developing and emerging markets.
Analysts said the sale, which could free Unilever up for a major acquisition in its main food, detergents and personal products businesses, was well timed.
FitzGerald said, meanwhile, that the overall economic situation in 1997, as in 1996, was likely to be generally favourable for the group, which is the world's largest producer of both margarine and ice cream, with activities from food to toiletries.
But he saw little reason to believe that conditions in Europe, particularly in France and Germany, would improve.
""We will now seek actively buyers for the totality or the individual (chemicals) businesses and we will then assess those over the next month or two,"" FitzGerald told Reuters. ""We would hope to conclude a sale in the course of the next three to six months.""
FitzGerald declined to say how much the businesses, with 15,800 staff in more than 35 countries, might be worth.
Analysts estimate the sale should fetch 4.5 billion to 5 billion pounds ($7.35 billion to 8.17 billion), and FitzGerald told a news conference in the short term it would wipe out the company's net borrowings of 1.7 billion pounds ($2.78 billion).
The funds would also be used for acquisitions in growth areas, FitzGerald told reporters, such as Asia Pacific and South America and in priority categories like detergents, tea, ice cream, yellow fats, personal care products and fragrances.
""We have a carefully defined list of what we may do with (the proceeds), which I am not prepared to discuss,"" he said. ""In China I would like to have a business 10 times the size.""
The four units -- National Starch and Chemical Company, Quest International, Unichema International and Crosfield -- have combined turnover of 3 billion pounds ($4.9 billion), 9 percent of Unilever's total sales, and showed operating profit of 415 million ($678 million) in 1996, with margins of 14.1 percent.
""These are extremely large and important parts of our businesses but for some time we have been reviewing whether they should be a continuing part of the portfolio -- not because they are poorly performing themselves, they are excellent performers -- but whether we can give them the concentration and the focus that they require,"" FitzGerald said.
""...if you look at the way this industry is developing we have to take a decision either to significantly improve our presence in these markets, perhaps double it, or to exit and in exiting to concentrate on the other 90 percent of our business which is our mainstream consumer goods business.""
Commenting on the overall results, Unilever said its performance in Europe was held back by poor weather hitting ice cream sales and by the impact of the mad cow disease crisis.
But good progress in North American market conditions provided the basis for better results there and the momentum of growth continued strongly in the fast-growing emerging markets.
",47
"The growth in fast-food, snacking and eating out in Britain is driving profits at food retailer Watson & Philip, owners of the 526-strong chain of Alldays convenience stores, said chief executive Colin Glass.
And the trend shows no sign of abating, he said.
""What is happening is there has been a major demographic shift with an increasing number of single occupancy household or households where both people work customers are spending more on prepared food rather than food they cook at home,"" said Glass in an interview. The company's shares were 44p higher at 384p.  
""The product at Alldays will be consumed or start to be consumed within two minutes of the customer being in the store,"" said Glass. As a result the company has adopted two strategies aimed at achieving profits growth.
First to change the product mix to bring in more videos, fast food and drinks -- grocery and household goods now make up less than a quarter of Alldays' range -- and secondly to open more stores, said Glass.
The company plans to open about 150 more Alldays stores in 1997 mainly in the midlands and north England and to put Dunkin Donuts into 60 of its stores over the next month, he said.  
Watson & Philip will franchise Dunkin' Donuts from its owner Allied Domecq. The company is also currently testing the Domino Pizza brand with its customers in six stores.
Alldays reported an operating margin of 5.4 percent for the year to October 27, 1996, up from 4.9 percent. Glass said the company had a medium term target of 7.0 percent margins at its 286 company owned stores, adding that margins at its 240 franchised outlets were likely to remain at current levels.
W&P has a franchise agreement with Total Oil Ltd which will lead to over 50 Total owned petrol stations incorporating Alldays stores, at Total's cost, over the next year.
Watson & Philip posted group pre-tax, pre-execptional profits of 20.1 million stg in the year, up 11 percent.
The company's shares soared 44p to 389p, making it the stockmarket's biggest climber so far today.
Analysts had downgraded their profit forecasts for the company's full-year results after it issued a profits warning in October, sending its shares down almost 40p on the day.
At the time market forecasts ranged from 18.5 million to 21.8 million stg.
-- London Newsroom +44 171 542 6437
",47
"Nynex Corp. has until Monday to respond to charges it acted in bad faith by not signing an agreement with MCI Communications Corp. that would have allowed the nation's No. 2 long-distance carrier to enter Nynex's local market in New York state.
MCI filed a motion against Nynex on Monday asking the state Public Service Commission (PSC) to impose sanctions on Nynex for failing to sign the so-called interconnection agreement, which would enable MCI to provide local phone access in the state.
On Wednesday, state Attorney General Dennis Vacco filed papers with the commission seeking to bar Nynex from offering long-distance service because it discriminates against local-service rivals.
Vacco has been an outspoken critic of the proposed Bell Atlantic Corp. takeover of Nynex, and its New York Telephone operating unit, on anticompetitive grounds.
Nynex operates 11.1 million local service lines while competitors have less than 100,000 local service lines, according to state regulators' estimates.
Nynex spokesman Mark Marchand said the New York-based company strongly disagreed with Vacco's assessment of their draft application for long-distance service in New York.
""Fifty phone companies are licensed with the PSC to provide all forms of local phone service,"" Marchand said. ""What they do is up to them. The market is open. There is no other state in the country which has a more competitive market.""
Nynex has signed full interconnection deals with competitive access providers, including MFS Communications, a unit of WorldCom Inc.; Teleport Communications Group Inc. and WinStar Communications Inc.
The deals would allow the companies to route traffic over their own network switching equipment.
In addition, Nynex has reached resale pacts with Frontier Corp., among others, to allow companies to offer local access over Nynex's network.
Most of the new entrants into the New York local service market are focused on profitable niches in the business services market, rather than residential service.
The dispute is part of a broad change across the United States due to the 1996 Telecommunications Act, under which local and long-distance providers are seeking to meet regulatory requirements that would allow them to compete on each other's historic turf.
Washington-based MCI, which has waged an agressive campaign to enter local service markets, so far has reached five interconnection deals -- two in California, where Pacific Telesis and GTE Corp. operate, and with the respective Baby Bells in Georgia, Minnesota and Iowa.
",9
"3Com Corp Chairman Eric Benhamou said he plans to use the company's proposed merger with U.S. Robotics Corp to expand the reach of 3Com's office-oriented equipment into small business and home markets.
In a telephone interview Wednesday evening after the announcement of the $7.3-billion-merger (on a fully-diluted basis), Benhamou said a key force behind the deal was the prospect of enlarging the market for its corporate network equipment into retail sales channels.
As the leading supplier of modems, U.S. Robotics' strong presence in retail outlets can be used to propel sales of 3Com's core network adapter card business, he said.
3Com is by far the world's dominant supplier of adapters, or network interface cards (NICs), used to link personal computers to networks.
""Our OfficeConnect product line is perfect for the retail market,"" Benhamou said, referring to products it introduced in 1996 that repackage its other corporate office equipment -- hubs, switches and routers -- for small business and home users.
OfficeConnect products link the computers, printers, modems and telephones found in home offices in a low-cost network.  
Benhamou also sees opportunities to sell U.S. Robotics modem products for desktop and laptop computers to corporate offices using 3Com's 500-strong enterprise sales force.
""We will just leverage Robotics strength in retail outlets,"" he said in reference to his plan to shoe horn 3Com equipment into consumer markets that -- until the recent demand explosion for Internet links -- was largely confined to office networks.
""(The new demand for network connections) even reaches into your shirt pocket with products like Pilot,"" he said. Pilot, a product 3Com will acquire in the merger, is a shirt-pocket sized personal information organizer that offers ties to the Internet.
Further growth will come from Robotics efforts to develop higher speed modems like the 56 kilobit ones it introduced on Monday and future cable modem and digital subscriber line modems that transit up to six megabits per second.
He said the merger would also give 3Com access to a growing base of telco carrier customers who use Robotics hubs equipment to provide Internet dial-up services, saving 3Com from having to invest on its own to enter the Wide Area Network (WAN) market.  
Robotics focuses heavily on WANs, providing equipment for both ends of an Internet connection: modems for consumers and hub connections for service providers. Fifty percent of its revenue come from modems, a third from hub equipment and about 20 percent from sales of Pilot and miscellaneous products.
""As far as technology is concerned, we are very focused on LANs,"" Benhamou said, contrasting his company's traditional focus on local area networks (LAN) found in corporate offices.
Of 3Com's $2.3 billion in fiscal 1996 revenues, 40 percent came from network adapter cards and 60 percent from sales of hubs, switches and routers systems, largely to corporations.
""We only have about one to two percent overlap in terms of product revenues,"" Benhamou said of the two companies.
-- New York newsdesk, 212-859-1736
",9
"Lucent Technologies Inc. said Thursday it earned $66 million the first three months of 1997, reversing a big loss as it ended its first year as an independent company.
Lucent, the former high-technology manufacturing unit of AT&T Corp., reported net income of $66 million, or 10 cents a share, for the three months ended March 31, reversing a loss of $103 million, or 16 cents a share, in the 1996 quarter.
The company, which designs and builds public and private communications systems and networks and telecommunications equipment, said revenues for its fiscal second quarter grew by 12.5 percent to $5.15 billion from $4.58 billion.
Lucent said it benefited from strengthened relationships with the regional Bell companies that followed its spin-off from AT&T a year ago.
Previously, local phone companies had been reluctant to do business with the AT&T equipment unit, seeing AT&T as a potential rival in the coming era of open competition for local and long-distance services.
Of Lucent's four main businesses, only consumer products suffered a decline in revenues for the quarter, which was expected, the company said.
""We're delighted to report double-digit revenue growth and a dramatic quarter-over-quarter rise in profits as we complete our first year as a public company,"" Chairman Henry Schacht said in a statement.
""Our strong U.S. and international sales to network operators, businesses and microelectronics customers position us well to take maximum advantage of the exploding communications technology market.""
The company, based in Murray Hill, N.J., said its gross profit margin for the quarter rose to 42.1 percent of revenues from 39.9 percent, due primarily to higher sales volume and productivity improvements.
Lucent said its revenues from systems for network operators increased 23.3 percent to $2.93 billion. Revenues for microelectronic products increased 18.3 percent to $615 million and revenues for business communications systems increased 14.1 percent to $1.308 billion.
Revenues from consumer products decreased 41 percent to $174 million as a result of continuing reengineering of the business to increase profitability, Lucent said.
The company said the decrease was expected following the closing of its phone centre stores, the streamlining of its product line and expected reductions in phone rentals.
Lucent said continuing demand for second telephone lines in businesses and residences for uses such as Internet access, data traffic and fax services contributed to solid gains in sales of wireless systems, switching systems and related software.
Chief Financial Officer Don Peterson said the company expects its lagging consumer products unit -- the smallest of four product divsions -- to show substantial profit gains in 1997 and a return to revenue growth by the December quarter.
""We expect a substantial improvement in profitablity this year (for the unit) mainly through cost-cutting, and positive revenue growth"" due to new products, he said.
Lucent's stock closed at $54.125, down 50 cents a share, on the New York Stock Exchange.
",9
"America Online Inc. said on Tuesday it plans to launch a national Internet service in Japan in mid-April, and vowed to make Japan its biggest international market within a couple of years.
""Japan is a huge market opportunity for AOL, and we are pursuing it aggressively,"" AOL Chairman Steve Case said in a statement. ""Over the next few years, we plan to make Japan our largest international market.""
AOL Japan Inc. is a three-way joint venture by America Online, Mitsui & Co. Ltd., a diversified Japanese trading company; and publisher Nihon Keizai Shimbun Inc., or Nikkei. America Online owns a 50 percent stake, Mitsui 40 percent and Nikkei 10 percent.
Taking aim at established rivals in Japan, officials with Dulles, Va.-based America Online, the world's No. 1 online service, said the new service would offer a range of graphically oriented, multimedia features not available on the largely text-based services of other Japanese online services.
Leading online and Internet service providers include Nifty-serve, a 2 million-member Japanese licensee of Columbus, Ohio-based CompuServe Corp. ; PCVAN, a unit of Fujitsu Ltd. and ASCIINet, a unit of ASCII Corp..
AOL Japan promised to make its service uniquely Japanese, with content, customer service, billing and management all rendered in the Japanese language.
AOL Japan will be offered at a monthly fee of 980 Japanese yen, or about $8, for three hours' use, and 480 yen, or $4, for each additional hour, about half the hourly price of Nifty-serve, Japan's dominant online service.
New AOL Japan members will get a 10-hour free trial in the first month, the company said.
AOL International President Jack Davies said the service will offer a fixed price for access to all information services, in contrast to Nifty-Serve requirements for access to some databases.
Another newcomer to Japan's market for online and Internet access is Redmond, Wash.-based Microsoft Corp.'s Microsoft Network (MSN), which is allied with national phone company Nippon Telegraph and Telephone Corp..
MSN Network claims more than 200,000 members in Japan.
Industry analyst Peter Krasilovsky said AOL Japan and MSN were positioned to rapidly acquire market share from incumbent online service providers like Nifty-Serve, whose services have an antiquated look compared to AOL.
""It looks like AOL will be a major player, battling it out with the Microsoft Network,"" said Krasilovsky of Arlen Communications, a consulting group based in Bethesda, Md.
Japan's total online audience is estimated at around 5.7 million computer users, America Online said, citing recent statistics from market research firm International Data Corp.
AOL Japan will have access to news from Nihon Keizai Shimbun, Japan's leading financial newspaper and other well-known Japanese publications.
The service will supply sports, news and entertainment to Japanese subscribers and give them direct access to other America Online services around the world, plus member-to-member chat groups, electronic mail and Internet access.
Additional partnerships will be announced with major Japanese publishers before the service is launched April 15, America Online officials said.
Initially, about two-thirds of Japan's population will be able to dial the service via local numbers, officials said. The company plans to make more comprehensive access available shortly. Like its North American and European cousins, AOL Japan will target home computer users, not businesses.
America Online is the world's largest online service with 8 million subscribers. CompuServe is second at 5.3 million members, including the 2 million Nifty-Serve members.
America Online also said Tuesday its international subscriber count had surpassed the 600,000 mark and was on track to reach 1 million members by September.
America Online has nearly 500,000 members in Europe, and AOL Canada has more than 100,000 members, the company said.
""Our goal is to have 1 million members outside of the U.S. by September 1997. We think we are well on track to acheive that with the growth in Japan and other countries,"" Davies said in a phone interview.
",9
"Computer Associates International Inc shares gave up six percent of their value Wednesday and analysts said the fall reflected concern over an unexpected secular decline in mainframe revenues.
While the company had issued cautionary comments in late December that revenues were unlikely to meet expecations due to sales problems in its European operations, analysts said they were caught off guard by the mainframe sales slippage.
By midday Wednesday, the stock had fallen three points to 43.  It was the second most active issue on the NYSE.  
In addition, analysts said CA's decline may be tied to broader weakness in the mainframe business, citing disappointing growth in International Business Machines Corp's own hardware business during the December quarter.
IBM is the world's dominant supplier of mainframe software, while Computer Associates is a leading independent supplier of software used to run mainframe machines.
""People got spooked about the mainframe business,"" said Alex. Brown analyst Chris Mortenson, who noted the company told analysts in a conference call Tuesday night mainframe revenues had fallen eight percent in the December quarter.  
Cowen & Co analyst Drew Brosseau said mainframe sales were a primary reason why he had lowered his revenue estimates for the fiscal fourth quarter ending in March and for its fiscal 1998 year.  He also tied the stock decline back to IBM.
""Anything that affects IBM mainframes positively or negatively is going to have an impact on CA,"" he said, noting how IBM's mainframe growth is considered a key indicator of the health of the mainframe business overall.
The analyst said he trimmmed his March fourth quarter revenue estimate by $40 million to $1.6 billion and reduced fiscal 1998 revenues by $150 million to $4.55 billion.  
But despite mounting mainframe revenue concerns, most analysts left earnings estimates and stock ratings untouched.
""Most of that near-term transitional challenge is in the stock so we are still recommending it,"" Brosseau said. ""But I expect the performance to come mostly in the second half of the (calendar) year."" He stood by his $55 12-month target.
Mortensen added that, ""I find today that most investors are asking, 'What's going to make the stock go up in the next 30 days?' If you don't have a good answer, they sell it.""
The stock has fallen back in recent weeks from the historic high of just under 68 it acheived in early December.  
Although the company said in October that it was planning to focus its business increasingly on client/server instead of mainframe software, and warned in December of a transitional revenue shortfall, analysts said they were suprised to see an absolute decline in mainframe sales during the latest quarter.
In a published note, Furman Selz analyst Sanjiv Hingorani said mainframe revenues fell eight percent to $640 million, mostly in Europe.  He said CA had suggested the shortfall in the region amounted to $200 million in unrealized revenues.
Especially troubling to analysts was a sequential decline in mainframe MIPS among existing customers CA had described.  
MIPS, or Millions of Instructions Per Second, is a measure of the capacity of the mainframe systems shipped to customers.
In its own commments to analysts Tuesday evening, IBM said MIPS grew 35 percent in the fourth quarter compared with 80 percent in fourth quarter 1995.  MIPS are the primary indicator of mainframe growth IBM discloses to analysts.
Mortenson said Computer Associates executives said they had never encountered such a decline in mainframe capacity. Under grilling by analysts, they said they believed it to be an anomaly which would disappear in the current quarter.
The company, which has historically derived more than 70 percent of its revenues from mainframe sales, said mainframe software accounted for 61 percent of revenues in the December quarter, while client/server software amounted to 39 percent.
Computer Associates reported operating earnings of $0.75 per share for its fiscal third quarter ended in December versus $0.60 per share in the December 1995 quarter. The latest quarter excluded a $598 million acquisition charge.
((-- New York newsdesk, 212-859-1736))
",9
"(Corrects by deleting the fourth paragraph, so that the story will reflect that at no point did Giering blame AT&T for tax issues that NCR faces as an independent company.)
NCR Corp eked out a small profit in the fourth quarter of 1996 and saw healthy gains in year-over-year profit margins but hopes of matching computer industry growth rates remain a long way off, executives said.
In a conference call with analysts and a phone interview after the call, NCR Chief Financial Officer John Giering said profits are weighed down by a whopping 75 percent tax rate.
Giering said NCR was unlikely to bring its tax levels down to resemble industry norms of 35 to 40 percent before 1999. 
He said his goal was to bring the company's U.S. operations to breakeven in 1997 in terms of profitablity. NCR is already profitable in its overseas operations, which accounted for half of its $7 billion in 1996 revenues.
Besides slashing the company's tax rate, the NCR executive said the company's primary goal was to see a 9 to 12 percent growth rate from core operations over the next several years.
Giering said he expected NCR to reach gross profit margins in the mid-30 percent range within three years.  
In 1996 results released earlier Tuesday, gross margins for the year rose to 28.1 percent from 1995's 21.8 percent.
Giering said profits remain small but tax liabilities are very large, hence the high effective rate. AT&T absorbed much of the potential benefit from operating loss carry-forwards when NCR was still a subsidiary, he said.
On balance, AT&T relieved NCR of more than $3 billion in net losses since 1993, leaving NCR's balance sheet remarkably clean prior to its spin-off as a separate company this month.
NCR said it ended 1996 with $1.2 billion in cash and debt of only $76 billion.  
""Right now (the tax rate) is in the 75 percent range,"" Giering told Reuters, ""I look at this as a 1997 phenonmon.""
He estimated that the tax rate would come down to roughly 50 percent in 1998 on the way to the 35 to 40 percent level expected in 1999. ""Clearly we need to have more income in the U.S. to turn that number around,"" Giering said.
The company may be aided in its goal of balancing the contribution of its U.S. and international operations by trends in top-line revenue growth.  
Giering told analysts that the 1996 revenues for core businesses, excluding mass-market PCs and the entry level server businesses it is exiting, grew 9 percent in the Americas, but declined one percent in Europe and 3 percent in the Asia/Pacific region.
NCR does not break out its revenues in dollar terms.
The CFO said his primary goals was to ensure that ""international operations are really paying their full share in terms of all the costs incurred on their on behalf.""  
He said one of the anomalies NCR is working hard to reconcile is that many of its corporate functions are domiciled in the United States, which made sense as a unit of AT&T but now hurts NCR as a standalone entity at tax-time.
Deep concern about NCR's financial prospects commbined with the company's insecure position in a computer industry that refuses to stand still has lead Wall Street analysts to be deeply leery of the stock since its public debut.
Of the two analysts following the stock, one of them, Smith Barney's Shao Wang maintains a neutral rating. In an an unusual move on a neutral rated stock, Wang set a target price of $28 on the stock, well below its current price of $38-3/4.
Nonetheless, on the strength of its ongoing turnaround, its limited fourth quarter profits and rising profit margins, NCR stock gained 3-1/8 on Tuesday.
-- E. Auchard, New York newsdesk, 212-859-1736
",9
"Computer, give me $20 bucks.
Such a demand enters the realm of possibility with the introduction Monday of a device that turns a personal computer into an automated-teller machine capable of dispensing card-based electronic cash, marking a new step in PC-based home banking.
Fischer International Systems Corp said its $60 device can be inserted into the floppy disk drive of any PC, enabling it to read ""smart cards,"" a new type of plastic credit-card that can perform electronic cash transactions and store bank account balances.  
Already gaining popularity in Europe to pay for store purchases and streetside telephone calls, the ""smart card"" is beginning to take hold in the United States as a replacement for cash used in ordinary purchases like grocery shopping.
By enabling PCs to securely dispense money, the device may provide a major stimulus to home banking by empowering consumers to perform financial transactions that now require a visit to a bank branch or an automated teller machine.
""What's been missing is a low-cost, easy-to-use 'bridge' between smart cards and personal computers,"" Fischer President and Chief Executive Michael Battaglia said.  
Smarty, as the product is known, is a slim piece of hardware that inserts into a personal computer's 3.5 inch floppy disk reader, allowing the machine to link via the Internet to banks or retail outlets.
The product is unique because Fischer holds key patents for smart card readers inserted into 3.5 inch floppy drives -- making Smarty the most readily adaptable card reader for the 200 million personal computers now in use, company officials said.  
The device, which can be inserted into home or office personal computers or into a laptop computer when traveling, will enable consumers to make wider use of banking cards for purchases, replacing the need to carry loose bills and coins.
As such, the product could be a boon to PC-based home banking, permitting full-scale transactions instead of the more limited functions now available, like electronic balancing of checkbooks, financial investment tracking or tax return filing.  
Fischer officials said they are working with several major U.S. and European financial services firms to spur use of the devices in a variety of business and consumer applications, including home banking over the Internet.
In addition, Art Burton, Fischer's vice president of sales and marketing said the company is in talks with top providers of home banking software like Intuit Inc. and Microsoft Corp. to link Smarty to their software.
""We have had some discussions at various stages with the primary providers of home banking software,"" Burton said. ""We are also working with individual banks.""  
Burton said the PC-based Smarty product will be offered later this year to consumers participating in a trial of smart card technology on the Upper West Side of New York City by a group led by MasterCard, Citibank and Chase Manhattan Bank.
In addition, Fischer said it has received initial Smarty orders from the Bank of America and Wells Fargo Bank, for pilot testing by bank employees.
Orders for demonstration models have also come from the U.S.-based credit card consortium Visa, U.K.-based Mondex International and Sweden's Telia Group.  
Smart cards contain an embedded microchip capable of storing more than four million bytes of computer data, or dozens of pages of information -- far more than existing magnetic-strip credit cards that hold just 40 characters or so.
The new financial data format can act as a one-stop shopping card storing electronic cash, a collection of credit cards, and other personal information including several forms of identification to prevent fraud.  
While slow to catch on in the United States, smart cards have grown popular in Europe and Asia, where millions are now used by banks and credit card concerns as a means of storing digital cash, by phone companies as long-distance calling cards, or in healthcare to carry details of an individual's medical history.
Fischer, with annual revenues of about $20 million, is solely owned by Addison Fischer, its chairman and a former professor at the Massachusetts Institute of Technology.  
Addison Fischer is considered one of the world's leading experts on computer security. He was one of the founders and principal owners of RSA Data Security Inc, developers of a popular computer security encryption technique.
Fischer and his two partners recently sold RSA to publicly-held Security Dynamics Technologies Inc. in return for $200 million in Security Dynamics stock.  
Fischer faces many larger competitors in the smart card reader market, including France's Gemplus, U.S.-based Schlumberger Ltd and VeriFone Inc ;, Germany' Siemens AG and Philips Electronics NV of the Netherlands.
But these rival machines take the form of bulky computer attachments or standalone-terminals priced between $80 and $300.
By contrast, Fischer's floppy-insert method will be priced at $60 initially, with prices expected to fall below $40 as volumes increase in the coming year, making it an affordable option for consumers, Burton said.
Asked if the company may be considering an initial public stock offering, Burton said that, ""It is firmly in our plans, but we are talking long-term -- within the next year -- not short-range.""
He said Fischer plans to make another major product announcement in the spring of a related computer security technology before it decides whether to move ahead with any possible sale of the company's shares to the public.
",9
"New York State utility regulators are set to approve the Bell Atlantic Corp/NYNEX Corp merger, subject to several conditions, to be set forth prior to a final vote set for Thursday.
Regulators will consider demanding the combined company permanently locate its headquarters in New York, reduce rates, issue $300 million in rebates and improve customer service.
These conditions were among those considered at a hearing Wednesday of the N.Y. Public Service Commission in Albany, the state capitol, which will be taken up at tommorrow's meeting.
The merger would create the nation's largest local phone operator and still faces hurdles in Washington, as well as New York, the only state now withholding its approval.
In Washington, the combination reportedly has met with increased scrutiny in recent weeks from anti-trust officials at the Department of Justice and the Federal Trade Commission. Federal officials have issued new subpeonas requesting details on rivals' plans to offer local phone service in New York.
The deal still faces an ongoing anti-trust review by New York State Attorney General Dennis Vacco, who argues the merger strengthens NYNEX's existing monopoly and represents a bad deal for N.Y. residential and small business customers.
""We are watching closely the review being conducted by the PSC,"" said Joe Mahoney, a spokeman in the office of the Attorney General, the state's top anti-trust regulator.
Vacco may issue a statement on the subject if the PSC makes its decision Thursday, the spokesman said.
Regulators seek to balance the economic benefits and efficencies created by the merger with any negatives that may arise by strengthening NYNEX's grip on local service and the potential that has to slow the entry of new competitors.
A report by the staff of the N.Y. Public Service Commission discussed at Wednesday's hearing before the three-member panel argued that NYNEX and its merger partner should be required to immediately refund roughly $300 million.
The figure represents one third of the $908 million the report estimated would be the economic benefit of the deal.
The companies dispute this figure, arguing the potential benefit is likely to reach only $600 million by the third year of the deal, according to Bell Atlantic Chairman Ray Smith.
Consumer advocates, who oppose the merger, have countered that the companies should rebate $1.25 billion immediately to consumers, a figure that includes an estimated cost of the loss of competition resulting from the merger. That represents 15 percent of the gains the combined Bell Atlantic could expect to enjoy in the coming five years, they maintain.
However, two of the three commissioners called for any decision about a customer rebate be postponed until a more complete picture of the impact of the deal emerges.
Commission members asked whether the impact should be based on current estimates or whether the determination should wait to see what happens to pricing after the entry of new competitive forces and any savings achieved by the merger.
They also called for other tangible economic benefits to the state, such as strong assurances that the company's primary headquarters will be located in New York.
Commissioner Thomas Duleavy called for the New York corporate headquarters of the company ""not to be one of form, but one of substance.""
Commissioners also said they want to see more tangible benefits for wholesale and retail NYNEX customers.
They also may decide to increase an existing plan designed to spur NYNEX to improve its long-criticized customer support operations. One proposal would demand that NYNEX increase hiring of customer support personnel and rapidly bring service quality up to the standards of Bell Atlantic.
Also Thursday, the commission approved a two-zone pricing plan that would allow NYNEX competitors to selectively choose which services they purchase from the local phone company as they offer local phone services of their own.
A press advisory issued after Wednesday's meeting said the NYPSC had ""reserved a final decision on the NYNEX - Bell Atlantic merger until a special Commission session scheduled for Thursday.""
The meeting is set to for 1000 EST/1500 GMT in Albany.
Bell Atlantic closed Wednesday down 1-7/8 to 63-3/8. NYNEX fell 1-3/4 at 47-3/8. The declines reflected a broad decline among Baby Bell stocks and the stock market in general.
-- New York newsdesk, 212-859-1736
",9
"Shareholders of MCI Communications Corp are expected to vote overwhelmingly in favor of the proposed merger with British Telecommunications Plc at MCI's annual shareholder meeting Wednesday.
The shareholder vote is one of the first major milestones on the road to winning approval for the $23 billion cross-border merger, which will create a combined company known as Concert Plc with $40.6 billion in revenues.  
The merger awaits regulatory approvals in Washington, London and Brussels, the headquarters of the European Commission. Company officials are confident the merger -- announced in November 1996 -- is on track to close in the fall of 1997.
The annual meeting, to be held in out-of-the-way Wilkes Barre, Pa., two hours north of Philadelphia, is expected to be a quiet affair, with only three items on the agenda: the shareholder vote, and election of directors and auditors.
Wilkes Barre was chosen because it was the hometown of William McGowan, the legendary founder and former chairman of MCI, who died in June 1992.  
In his speech to shareholders Wednesday, Bert Roberts, MCI's current chairman and chief executive, is expected to focus on the projected benefits of its merger, which would create one of the world's first global communications carriers.
One industry analyst briefed by the company said he expected Roberts to reveal some of the early products and services that may result from its ties to British Telecom.
Among the possible offerings would be seamless services connecting the United States and Britain, including wireless phone transmission, faxing, electronic mail, voice mail and the Internet, the analyst said.  
Industry analysts believe the MCI official will also respond to AT&T Corp's initiative to offer local phone service using a fixed wireless system attached to the side of a customer's premises as a means of bypassing local networks controlled by regional Bell companies.
Through interconnection pacts and the new wireless technology, AT&T has said by 1998 it plans to offer local service to the vast majority of the U.S. population.  
MCI made an early move into local phone markets with its MCI Metro unit but has appeared less aggressive than its rivals since the passage of the U.S. Telecommunications Act of 1996 in evolving a strategy to expand its local phone presence.
A key benefit of the merger with cash-rich British Telecom is the financing muscle that MCI can tap as it seeks to slice substantial market share away from the incumbent regional Bell companies in various local service markets.  
MCI provides local service in 20 U.S. metropolitan markets through a mix of company-owned facilities and resale agreements to use other companies' networks. It has said it plans to be in 31 local service markets by the end of 1997.
By contrast, long-distance rivals AT&T and Sprint Corp have each said they are gearing up to compete in the 50 top U.S. metropolitan markets by year-end.
There are three nominees, all British, to the MCI board. They include Sir Peter Bonfield, British Telecom's chief executive and a current MCI board member; Sir Colin Marshall, chairman of the Confederation of British Industry and chairman of British Airways ; and J. Keith Oates, deputy chairman of British retail group Marks and Spencer Plc.
Sources close to the company said they expected a favorable vote at the meeting, due in part to the substantial 20 percent stake that British Telecom already owns of MCI and the lack of opposition to the merger among other shareholders.
The MCI vote will be followed April 15 by an extraordinary general meeting of British Telecom shareholders to be held at Wembley Stadium in London.
",9
"U S West Communications Group. reported better-than-expected first-quarter earnings Friday, citing successful marketing programmes and tighter cost controls.
The Englewood, Colo.-based telephone operator earned $328 million, or 68 cents per share, in the first quarer, up from $289 million, or 61 cents, a year earlier.
The earnings were several cents ahead of Wall Street expectations, which, according to First Call Inc., put earnings at 65 cents a share.
""U S West Communications Group has started off 1997 with double-digit momentum on the heels of 1996's accelerating results,"" said Richard McCormick, chairman of U S West Inc., the holding group for the phone company.
U S West Communications serves more than 25 million customers in 14 Western and Midwestern states.
U S West officials cautioned analysts against raising their earnings projections for the year, saying investments in new wireless networks and growing competition were likely to dampen earnings growth.
The current consensus estimate for the 1997 year has U S West Communications earning $2.54 per share vs. $2.44 per share in 1996, according to First Call.
""Absent a significant regulatory shift, we remain comfortable with the consensus estimate for the 1997 year,"" Chief Financial Officer Allan Spies told Wall Street analysts.
Spies stood by a prediction U S West made at a February analysts' meeting, projecting overall earnings growth of 4 percent to 6 percent in 1997. First-quarter 1997 earnings per share grew 11.5 percent.
Revenues rose 5 percent to $2.59 billion from $2.46 billion.
The company said local service revenues grew 7.5 percent to $1.23 billion in the quarter, with almost half the growth driven by sales of value-added features beyond basic access.
It said Caller ID subscribers rose by an unprecendented 900,000 in the first quarter due to an aggressive promotional campaign. The product is now used by 26 percent of its residential customers.
Goldman Sachs analyst Richard Klugman said the company also benefited from labour cost cuts. U S West Communications trimmed 4,000 employees in the last four quarters. It now has a work force of just over 47,000.
U S West Communications, among other Baby Bell stocks, rose amid speculation of other combinations after U.S. regulators approved the merger of Bell Atlantic Corp. and Nynex Corp.
It closed up $1.875 at $33.25 on the New York Stock Exchange.
",9
"New York state utility regulators Thursday approved the $23 billion Nynex Corp. and Bell Atlantic Corp. merger, subject to conditions the regional telephone giants must agree to by the end of March.
Consumer groups opposed to the merger that have demanded rate rebates for New York customers blasted the state Public Service Commission's decision as a sellout.
New York became the last state in Nynex's six-state service region to approve the merger, which still faces hurdles in Washington and New York.
The merger of the Baby Bells would create the nation's largest local phone company serving customers in 12 Northeastern states and Washington.
""The bedrock requirements of our approval are improved service quality and ensuring that ratepayers see tangible benefits,"" New York State Public Service Commission Chairman John O'Mara said.
He said in an interview that, while there would be no immediate rate reduction, ""We have attached conditions that we believe will bring rate reduction.""
The merger is being held up by federal regulators who are reviewing its competitive implications.
Bell Atlantic spokesman Eric Rabe said the companies now expected the deal to close after April 22, the previous target date. ""Obviously, things are moving slower than we had hoped,"" Rabe said.
He said the Justice Department had still not indicated when it would act on the deal. He said the Federal Communications Commission said it would take 30 days after the Justice Department finishes its review before it took action.
The companies welcomed the commission's decision but said in a joint statement they were still assessing the conditions.
In addition, state Attorney General Dennis Vacco expressed concern the decision did not go far enough to protect ratepayers and said he was reviewing the deal.
After several months of hearings, the three-member panel voted for the merger and the conditions in a 15-minute meeting in Albany, the state capital.
The commission said the combined company must not move major operations that were located in New York state before the merger and that its headquarters be in New York, which New York-based Nynex and Philadelphia-based Bell Atlantic have agreed to.
The regulators focused on improving customer service in New York, where consumer groups have berated Nynex for offering what they call the worst service in the nation.
The approval calls on Nynex to accelerate spending to improve customer service, including hiring up to 1,000 new support staff by the end of 1997 in New York state.
A Nynex spokesman said the company has been hiring service personnel over the past year and would hire more in 1997. Last year, it hired 3,600 employees in service-related areas, three-fourths of them in New York state. Overall, Nynex has just over 68,000 employees.
Consumer groups were swift to criticise the commission's decision.
""We are outraged that this commission approved a merger that is completely anticompetitive,"" said Robert Ceisler of the New York Citizens Utility Board ratepayers' group. ""The commission has sanctioned a more powerful and richer monopoly.""
Consumer advocates had demanded the commission at least force Nynex to give consumers immediate rebates to compensate for the reduced competition and greater efficiencies expected from the merger.
Other conditions cited were having Bell Atlantic pledge to observe existing agreements between regulators and Nynex, that Nynex employee pension funds be protected, and that Bell Atlantic grant regulators access to its records.
Nynex stock closed down 37.5 cents at $47 while Bell Atlantic fell 75 cents to $63.625, both in consolidated trading on the New York Stock Exchange.
",9
"Sony Corp. will unveil Monday an Internet-based staging area for consumers to sample, play and even purchase the entertainment giant's vast store of popular television, film, music and video games.
""The Station at Sony.com,"" as Sony's site is to be known, represents a major push by the consumer electronics and entertainment giant to make its presence felt on the Web.
The Station moves Sony beyond the typical company-promotion site to offer many features of a full-scale online network comparable to that of America Online Inc.
Sony officials said they believed the Station could make Sony the top entertainment brand on the Web -- ""the place people turn to play,"" to quote a Sony official -- just as Disney has come to symbolise children's programming and ESPN means sports.
""For the first time, Sony has brought together the best of all it has to offer, "" Mitchell Cannold, president of Sony Online, the U.S.-based Internet marketing unit of Sony, said of the centralized entertainment site.
""Our goal is to make The Station the primary online entertainment destination for fun and games -- a place that Web users of every age will be able to be entertained in, have fun and make their own,"" Cannold said.
The Sony Station harnesses the latest Web technology to allow users to sample and buy music and film clips, or communicate with other Station visitors in an array of topical discussion areas, called ""chat rooms,"" on the site.
One feature is a special ""back-stage pass"" that appears on computer screens of those who sign up to join the Sony site.
Called the ""StationPass,"" this token functions as a kind of electronic mail connection that travels with users to outside Web sites, keeping them in touch with other StationPass holders.
The StationPass uses new Java programming technology that will allow the computer user to remain in touch with other StationPass holders by pager or other digital communications device.
Sony said it has laid down strict formating guidelines for graphics, text and other content on the Station, so computer users with PCs purchased in recent years using a standard modem should suffer few delays when visiting the site.
Games and contests of all sorts are available, from Sony Wonder interactive entertainment for children, to online versions of the TV game shows Jeopardy and Wheel of Fortune, to Battleground, a new type of multiplayer game where a thousand combatants can navigate tanks through a futuristic warzone.
Station visitors can shop for Sony merchandise and collectible items, along with Columbia TriStar home videos and Sony Wonder kids products like CDs, boosk and tape packages.
Gary Arlen, president of Arlen Communications and a veteran industry analyst, predicted that popular entertainment fans will find the Sony Station engrossing.
If people go to the Web to be entertained -- to play a game like Jeopardy, to see a soap opera like ""Days of Our Lives,"" or to sample the new single by Mariah Carey, they will go to Sony Station and they will go there regularly,"" he said.
Promising to provide a boost to the site is an exclusive joint marketing partnership Sony has agreed to with Visa U.S.A., the credit card consortium.
In return for making Visa the preferred method of payment for goods purchased at the site, Visa has agreed to feature the Sony brand name in a major TV and publishing campaign Visa plans to launch later this year to promote Internet commerce.
A Visa marketing executive confirmed outlines of the deal.
The agreement makes Sony the exclusive ""entertainment"" brand to be featured in the ads, although other brands may also appear, Sony officials said.
They said Visa's outside marketing commitment represents ""many millions of dollars"" in free advertising for the site.
More immediately, Sony said it planned a broad promotional campaign in publications such as Wired magazine and other advertising venues to promote the lauch of the Station.
Sony also boasts of having the largest amount of brand name advertising ever assembled for a new site, with marquis names like Sears, Roebuck and Co., General Motors Corp., American Airlines, Kellogg Co., Colgate Palmolive and Microsoft Corp.
Sony said it expected the six companies to contribute roughly $1 million for it to display ads during 1997, a figure that excludes any unpaid reciprocal promotions.
Ads targeted to fit computer users' personal interests pop-up as they click to navigate through the Web pages of the Station. The target audience is young people, the same 18-to-34-year-old demographic group that is already active on the Web.
While a complete range of Sony brand products will be available, the Station also has been opened up to allow selected corporate partners also to showcase their products. Half the products on the site are from Sony, officials said.
",9
"3Com Corp and U.S. Robotics Corp's merger promises to create a second powerhouse in the data networking industry capable of competing head-to-head in the Internet access business with Cisco Systems Inc.
The merger, valued at $6.6 billion in stock, represents the largest such deal ever in the computer network industry.
But analysts were divided on whether the merger by two of the top six network equipment suppliers will be strong enough to offer end-to-end network connections on the scale of Cisco.  
""No more Cisco and the Seven Dwarfs,"" Bear Stearns analyst Eric Blachno said, invoking an analogy frequently heard in the industry to describe Cisco's dominant market leadership.
""It appears the Cisco has acquired a large competitor,"" he said in reaction to the latest industry consolidation move.
However, veteran industry analyst Frank Dzubeck questioned the viability of combining the two companies in light of precedents set by previous mega-mergers in the industry.  
""This could be another Bay-Wellfleet-Synoptics deal,"" he said, referring to the 1994 merger that formed Bay Networks Inc, a union seen as running aground over conflicts in integrating product lines, company cultures and managements.
Similarly, Dzubeck, president of Communications Networks Architects Inc, an industry consulting firm, said 3Com and U.S. Robotics represented ""two cultures, two different product streams, two managements.""
""A lot depends on how they meet the organizational challenges,"" the analyst said of the complexities inherent in combining companies centered about 2,000 miles apart.  
3Com is headquartered in Santa Clara, Calif., the heart of Silicon Valley, while U.S. Robotics is located in Skokie, Ill.
3Com is known as the leading maker of network adapter cards used to connect personal computers to office networks. Roughly 40 percent of its $2.3 billion in fiscal 1996 revenues were derived from adapter card sales, analysts say.
By contrast, Robotics is the top maker of computer modems for consumers and other products providing Internet access.
The $1.9 billion company also sells switchboard-like data communications hubs, which Internet Service Providers (ISPs) use to handle scores of simultaneous incoming consumer calls.  
""The whole concept of those two companies getting together is a very strong one,"" said Paul Deninger, chief executive of Broadview Associates, a high-technology investment banking firm, when asked Tuesday to speculate on rumors of the merger.
""Robotics is a remote access company,"" Deninger said. ""3Com has no remote access strategy. This provides them one.""
While Deninger is an active dealmaker in the networking industry -- completing 24 smaller technology acquisition deals in the last 18 months -- the latest merger was managed by Morgan Stanley and Goldman Sachs, according to the companies.  
In a conference call, executives of the two companies said 3Com's strength as a corporate equipment supplier and U.S. Robotics' strong retail presence would allow the company to compete in both local-area and wide-area networks.
But several industry analaysts said rather than allowing 3Com to compete head-to-head in every market segment of the networking industry, the merger was best seen as allowing it to create a defensible niche in important segments.  
3Com Chairman and Chief Executive Eric Benhamou acknowledged as much in saying his company's strengths lie at what he called ""the edge of the network"" -- selling products to connect office workers and consumers to computer networks.
""We are much stronger at the edge of the network,"" Benhamou said, allowing that archrival Cisco dominates the core of office networks and long-distance ""backbone"" networks.
Cisco's strength in the larger network equipment used to build these portions of computer networks was bolstered by a major acquisition of its own last April, when it paid about $4 billion to acquire Stratacom Inc.  
The combination of 3Com and Robotics comes no where near Cisco in several vital respects. Their combined revenues are running at roughly $5 billion a year, officials said, compared with Cisco's current annual run rate of more than $6 billion.
But Cisco's daunting advantages become more apparent when the underlying growth rates of the companies are compared.
While the 3Com and Robotics businesses are estimated to be growing at 40 percent per year -- a healthy rate by most any industry measure -- Cisco continues to outrun all major competitors by its explosive 80 percent per year pace.
""That's an amazing growth rate,"" Deninger said of Cisco's market momentum. ""Especially since no one else in the industry is growing faster than 40 percent,"" he said.
Across a variety of measures Cisco remains the dominant player in the industry, followed by a 3Com/Robotics combination, Bay Networks Inc and Cabletron Systems Inc.
((New York newsdesk, 212-859-1736))
",9
"The proposed $6.6 billion acquisition of modem maker U.S. Robotics Corp. by computer network equipment manufacturer 3Com Corp. triggered a drop Thursday in the stocks of 3Com, U.S. Robotics and other major network companies.
Santa Clara, Calif.-based 3Com's stock fell $4 to $35 and was the most heavily traded issue on Nasdaq, with more than 40 million shares changing hands. U.S. Robotics dropped $1.875 to $59.125, also on Nasdaq, and was the second-most active share.
Analysts said the proposed stock swap unveiled Wednesday undervalued Skokie, Ill.-based U.S. Robotics, the world's leading maker of computer modems for the consumer market.
""I think U.S. Robotics shareholders are being robbed,"" said Donaldson Lufkin analyst Eric Buck, who harshly criticised the terms of the deal.
Several analysts said the offer -- involving stock and options valued at $7.3 billion in all -- put a low-ball value on U.S. Robotics of 20 times annual earnings vs. its historic multiple of 25.
""If anything, this deal is more of a take-under than a takeover,"" Salomon analyst Peter Swartz said of the 3Com deal. ""Both stocks are down 50 percent from their highs."" Swartz noted that many network stocks are trading at historic lows.
The merger, if approved by shareholders and government regulators, would create a combined company with $5 billion in annual revenues and 12,000 employees -- second only to leader Cisco Systems Inc. with more than $6 billion in annual revenues. The merger also comes as the Internet and other computer networks continue to grow in importance.
Analysts said the deal put pressure on other network equipment players to use their shares to fund major acquisitions of their own.
""We believe the competitive landscape of the networking sector is undergoing a fundamental restructuring,"" J.P. Morgan analyst Bill Rabin said in published comments. ""Other networking vendors will have to combine or be bought.""
Along with 3Com and U.S. Robotics, network company stocks were among the most actively traded on Nasdaq Thursday.
Cisco Systems fell $3.06 to $55.06, Ascend Communications Inc. dropped $5.375 to $57, and Cascade Communications Corp. slipped $2.50 to $30.125.
Still, Rabin reiterated ""buy"" ratings on four stocks in the sector, while maintaining his ""market perform"" rating on 3Com. Swartz also kept his ""buy"" rating and recommended investors buy 3Com shares while the price is low.
The main beneficiaries of the 3Com-Robotics deal appeared to be Bay Networks Inc. and Shiva Corp. -- two stocks that have sat in the doghouse for some time -- based on their potential as acquisition targets, analysts said.
Shiva rose 62.5 cents to $15.875 on Nasdaq, recovering from its historic low, while Bay added 12.5 cents to $19.375 on the New York Stock Exchange.
""The merger forces other players in the industry to ante up to play in this bigger game,"" said Steve Harmon, an independent financial analyst who publishes the Internet Stock Report.
""It forces equipment makers to look for end-to-end solutions supplying network products to both businesses and consumers,"" he said, referring to how the 3Com-Robotics merger would allow the combined company to compete in both markets.
The pressure to do deals adds to the burdens already weighing on the computer network industry, analysts said.
Earnings shortfalls or close calls, fears of slowing industry growth and cautionary comments from 3Com, Cascade and Shiva have triggered fears about the whole sector, Rabin said.
In addition, technology changes in the industry and the growing threat of competition from outsiders like chip makers Intel Corp. and Rockwell International Corp. have dimmed the outlook for the industry as a whole.
Some analysts cited fears that Intel may decide to integrate network adapter cards or modem chips directly into the computer chassis it builds, rendering stand-alone products from many network suppliers a commodity -- if not obsolete.
",9
"Shares of 3Com Corp and U.S. Robotics Corp slid on Monday as prospects dimmed for a new suitor emerging to rescue Robotics shareholders unhappy with the proposed merger of the two firms, traders said.
The agreement binding 3Com and Robotics to the $7.3-billion merger, announced last Wednesday, requires either party to pay up to $160 million if the deal falls through, according to a Securities and Exchange Commission 8-K filing over the weekend.
3Com closed on Monday at 32-13/16, down 19/64 on the day. U.S. Robotics shares, which have traded in tandem with the ups and downs of 3Com stock, closed at 55-3/8, down 7/16.
Terms of the merger call for 3Com to exchange 1.75 shares of its stock for each Robotics share. The exchange ratio is fixed with no collar, according to officials of the two companies.
The value of the 3Com offer to Robotics shareholders -- which stood at $68 when the deal was announced -- has fallen in line with the six-point decline in 3Com shares. At Monday's close, the offer was worth $57-27/64 in Robotics shares.
Analysts said shareholder disatisfaction with the proposal extends into mid-level management at Robotics. Options given employees in recent years are worthless at current price levels.  
One investment banker not involved in the deal said he made inquiries after the announcement seeking alternative bidders. ""What we found is that there was not a high level of interest among competitors to enter a rival bid to 3Com,"" he said.
In the near-term, 3Com's rivals appear content to let the deal stand, seeing the distraction of managing the integration of 3Com, a leading corporate network supplier, with Robotics, the top consumer modem maker, as a competitive advantage.
Competitors ""preferred to see 3Com and Robotics go through this period of pain instead of doing anything to break the deal up,"" the banker said. ""They feel this deal is going to slow 3Com in the near-term.""
But analysts said the deal was vulnerable because it involved a stock swap only, leaving it open to someone willing to pay cash or a stronger stock price. A shareholder vote is not expected for several months, giving rivals time to mull options.
""It's very possible that if the 3Com price continues to fall, USRX continues to fall too,"" Senan said. ""If I were a USRX shareholder, I would be willing to consider other bids.""
A U.S. Robotics spokeswoman, asked if the company had been approached by other potential bidders, said: ""As a matter of policy, we don't comment on rumors or speculation.""  
One possible new suitor mentioned on Monday was network industry leader Cisco Systems Inc.
Volpe, Welty and Co analyst Amar Senan said Cisco ""could certainly afford to buy U.S. Robotics with minimal dilution. It's speculation, but it is also possible. It all depends on how much of a threat Cisco sees in this merger.""
Cisco fell 1-3/8 to 54-1/4 on Monday, topping the Nasdaq most active list with 12.5 million shares traded. Cisco officials were not immediately available for comment.
-- New York newsdesk, 212-859-1736
",9
"America Online Inc. said Tuesday it planned to place advertising on company-sponsored discussion areas, or ""chat groups,"" as part of the world's largest online service's bid to expand its revenue base beyond mainly subscriber fees.
The Dulles, Va.-based company said placing ads in the company-sponsored chat rooms would generate 360 million ad ""impressions"" every month, a program one analyst estimated could generate $15 million to $25 million in new revenues in 1997. Impressions, or how many times an ad is viewed, are the advertising industry's standard way of measuring the impact of individual ad promotions.
America Online stock rose $3.75 to $43.75 a share on the New York Stock Exchange in afternoon trading. That rise followed a gain of $2.50 on Monday.
""AOL has the largest online chat community in the universe,"" Bob Pittman, the president of America Online Networks, the company's main operating unit, said in a statement.
""Over 70 percent of our members chat and we log 1 million hours of chat every day, a figure that has more than doubled over the last six months,"" he said.
Lehman Brothers analyst Brian Oakes estimated ""chat rooms"" account for about 23 percent of online usage time among America Online subscribers.
Oakes said America Online places ads on less than 4 percent of the screens its subscribers view, marking it as a significant revenue growth opportunity for the company.
If ads ran on all interactive services on America Online, including chat, electronic mail, special interest bulletin boards and its ""instant messages"" subscriber messaging system, America Online could book as much as $500 million in advertising revenues, he said.
America Online's chat area, known as ""People Connection,"" creates up to 14,000 virtual chat rooms with up to 23 people in one area.
Advertisements would rotate every 60 seconds, utilizing America Online's new software ad delivery technology, the company said.
The ads will run in company-sponsored chat rooms like Town Square (current events), Life, Romance, Special Interest, Places, Arts & Entertainment, and News, Sports & Finance. Advertising will not be targeted at private chat rooms created by members themselves, the company said.
As an example, Oakes said sponsored chat rooms could include a Michael Jordan chat session with his fans, sponsored by Nike, or a health care discussion, sponsored by Johnson & Johnson.
Daytime TV talk show host Rosie O'Donnell's recent appearance set a record on America Online with more than 16,000 simultaneous participants signing on during the program, he said.
Adding advertising to chat rooms represents America Online's latest bid to boost revenues from sources other than subscriber fees.
Last week, America Online announced a deal with Tel-Save Holdings Inc., a long distance phone service provider, in which America Online received a $100 million payment from Tel-Save to market its long-distance services to America Online members.
The online service has said it expected an increasing portion of its revenues to come from ads instead of just subcriber fees as it grows beyond its roots as an online access company to become a diversified media company.
""This is yet another asset that we have that will allow America Online to capture an ever larger percentage of online and Internet advertising spending,"" Pittman said of the plan to mix advertising with online chat sessions.
America Online is the world's largest Internet online service with about 8 million members.
",9
"AT&T Corp. said Thursday it withdrew its application with the U.S. government for a license to launch a new generation of communications satellites.
AT&T's decision to cancel its application to the Federal Communications Commission follows the disposal of several of its existing satellite businesses in recent months, completing its exit from the satellite operations business.
In a statement, the New York-based company said investment in the new Ka-band satellite technology was a drain on capital resources that did not fit with a renewed focus on its core long-distance business and key growth areas like wireless, online and local services.
Ka-band refers to radio frequencies that handle two-way voice and data communications. The Ka-band satellites would hover in place in a geostationary orbit instead of circling the Earth.
The new class of satellites would have allowed AT&T to offer a range of next-generation communications services such as video, data transmission and high-speed Internet services.
""We are focusing on our core business and some growth areas, and satellites is not core to that,"" AT&T spokesman Gary Morgenstern said, adding that the company was not withdrawing from the satellite business completely.
AT&T continues to offer satellite-based services through its minority investment in the Direct TV direct broadcast satellite venture of Hughes Electronics Corp.
AT&T's Ka-band project was formally known to the industry as the AT&T VoiceSpan Satellite System.
The company said about 50 employees are engaged in the VoiceSpan project and that it would attempt to reassign them.
In April, General Electric Co.'s GE Spacenet unit agreed to buy AT&T's Very Small Aperture Terminal satellite operations for an undisclosed amount.
In March, AT&T sold its Skynet Satellite Services unit to Loral Space & Commmunications Ltd. for $478 milion. AT&T also collected roughly $130 million on an insurance claim for one of its satellites which it lost in space in January.
The sale of the existing satellite operations means AT&T no longer directly owns any communications satellites.
In addition, AT&T recently agreed to dispose of its undersea communications cable unit -- another operation it had considered low on its list of priorities -- to Tyco International Ltd. in a deal worth about $850 million.
A dozen companies, including Hughes, Loral Space, and the international satellite consortium Intelsat have announced plans to compete in the Ka-band satellite market.
Satellites offering such high-speed communications services are not expected to be launched until the year 2000.
",9
"Faced with market share battles on several fronts, Novell Inc provided the outlines of a five-year game-plan that would reduce dependence on its mainstay network operating system business and diversify its revenue base into faster-growing software businesses.
In a speech to an investor conference here, Joseph Marengi, recently named president and chief operating officer, also said his company is contemplating the judicious use of its $1 billion in cash to make selective technology acquisitions.  
In response to a question, the executive downplayed persistent rumors that it is an acquisition target by saying that Novell's strategy remains focused on building its business as a ""standalone"" company.
""This is a company with a market cap of $4 billion, $1 billion in cash and $1.5 billion in revenues,"" he said. ""Everything we are doing is to position ourselves to be standalone.
He declined to comment on financial results of Novell's quarter ended in January, noting that it was in a quiet period ahead of the report due out next week.  
""Business is okay,"" he noted in passing.
Marengi said that as part of its plan to diversify its revenue base over the next five years, the company expected its core NetWare operating systems business to decline to 40 percent of total revenues from its current 60 percent position.
He said that by 2002, the company expected 25 percent of revenues from what he called ""platform-independent"" or non-NetWare server products and 25 percent from network applications software such as its group communications, systems management and Internet-related software products.  
Novell's strategy is to move beyond its historic dominance of the client/server-based local area network market and into the emerging future in which personal computers connect to the wider Internet without regard to whether the connection is local or on the other side of the globe, he said.
""We are trying to get people to think about client/network computing as opposed to client/server,"" Marengi said in response to a reporter's question.
By later this year, he said Novell expected to displace Microsoft Corp's Exchange product as the number two electronic messaging product in the world.  
He allowed that International Business Machines Corp's cc:Mail product would continue as the best-selling messaging product in the coming year.
In the near-term, Marengi said he believes Novell will successfully defend its position as the market leader among network operating systems, fending off a growing challenge from Microsoft's Windows NT.
While acknowledging that Windows NT was gaining ground as the core operating system used to manage corporate networks, he said this was mostly concentrated at the low-end of the market among smaller and newer businesses.  
He said Novell NetWare continues to dominate in larger corporate departmental networks, and estimated that only 2 percent of current NetWare customers had switched to alternative network operating systems such as Windows NT. NT's success had come among new users, he said, and noted that the company is re-doubling its efforts to target such emerging markets.
""We want to grow through acquisitions,"" Marengi said of the company's plan to once again consider acquisitions to fill technology gaps in its product line. ""We will make sure that any company we do acquire will fit (our overall) strategy,"" he said. ""Nothing on the scale of WordPerfect,"" he said.  
Novell sold WordPerfect Corp to Canada's Corel Corp at a substantial loss last year.
Marengi said he expected the company to double its installed base of server software units to 8 million units in 2000 from 4 million units currently, as part of a plan to put its server software count at over 10 million units five years out.
Server software are products used to manage the operations of centralized computers that manage traffic on local area networks that typically tie together numerous personal computers.
NetWare is used to connect local area networks that include 60 million desktop computers worldwide.  
He said Novell expects international revenues to contribute 60 percent of revenues five years out, up from 49 percent currently. As an example, he said Novell intends to capitalize on its leading position as ""The networking company in China.""
The executive said the company's operating profit margins have been hovering in the 20 to 23 percent range recently, and that those percentages will ""be up a little bit"" by the end of calendar 1997, "" but ""not significantly.""
He said the company's search for a new chief executive was on track and that he expected an appointment to be announced within 30 to 60 days.
He said Novell did not plan to use any of its $1 billion cash hoard to buy back stock.
",9
"Shares of network stocks fell on Thursday amid fears that 3Com Corp's merger with U.S. Robotics Corp would heap new burdens on an industry already struggling with a raft of near-term issues.
Analysts said the $7.3 billion merger plan boosted pressure on other network players to use their discounted shares as currency to fund major acquisitions of their own.
Some said 3Com's $7.3 billion offer for U.S. Robotics stock and options put a low-ball valuation on the modem maker of 20 times 1997 earnings, versus a historic 25 times multiple.  
""If anything this deal is more of a take-under than a takeover,"" Salomon analyst Peter Swartz said of the 3Com deal.
""This deal says the days of the 35 to 40 percent premiums paid in previous networking acquisitions are over,"" Swartz said, noting many stocks were now trading at historic lows.
""Both stocks are down 50 percent from their highs,"" he pointed out.
By midafternoon, U.S. Robotics shares were up 1/4 at 61-1/4, well below the 68-1/4 contemplated by the terms of 3Com's merger offer. 3Com stock was off 3-1/2 points at 35-1/2.  
Donaldson Lufkin analyst Eric Buck harshly criticized the terms of the deal. ""I think U.S. Robotics shareholders are being robbed,"" he said.
In the wake of the deal, industry leader Cisco Systems Inc was down 2-1/8 to 56, Ascend Communications Inc lost 4-3/8 points to 58 and Cascade Communications Corp was down 2-1/8 to 30-1/2.
""We believe the competitive landscape of the networking sector is undergoing a fundamental restructuring,"" J.P. Morgan's Bill Rabin said in published comments. ""Other networking vendors will have to combine or be bought.""  
Still, Rabin reiterated buy ratings on four stocks in the sector, while maintaining his market perform rating on 3Com. Swartz also kept his buy rating on 3Com shares, and recommended investors take advantage of price weakness.
The main beneficiaries of the 3Com-Robotics deal appeared to be Bay Networks Inc and Shiva Corp -- two stocks that have sat in the doghouse for some time -- based on their potential as acqusition targets, analysts said.
Shiva rose 9/16 to 15-13/16, recovering from its historic low, while Bay added 1/8 to 19-3/8.  
In comments to his sales force, Merrill analyst Joe Bellace said Shiva, among other remote access suppliers, may be a more likely acquisition target over the next two years in light of the 3Com-Robotics deal, market sources said.
""The merger forces other players in the industry to ante up to play in this bigger game,"" said Steve Harmon, an independent analyst who publishes the Internet Stock Report.
""It forces equipment makers to look for end-to-end solutions supplying network products to both businesses and consumers,"" he said of how the 3Com-Robotics merger would allow the combined company to compete in both markets.  
Strong break-up penalties the 3Com-Robotics deal would levy if either party backs out, makes it unlikely another suitor will arise with a sweeter offer, analysts said.
Earnings shortfalls, or close calls, fears of slowing industry growth, and cautionary comments from 3Com, Cascade and Shiva have excited fears about the whole sector, Rabin said.
In addition, technology changes in the industry and the growing threat of competition from outsiders such as chip makers Intel Corp and Rockwell International Corp have weighed down the prospects for the industry as a whole.
Some analysts cited fears that Intel may decide to integrate network adapter cards or modem chips directly into the computer chassis its builds, rendering stand-alone products from many network suppliers a commodity, if not obsolete.
((--E. Auchard, Wall Street Bureau, 212-859-1736))
",9
"Computer, give me $20.
Such a demand enters the realm of possibility with the introduction Monday of a device that turns a personal computer into an automated-teller machine capable of dispensing card-based electronic cash, marking a new step in PC-based home banking.
Fischer International Systems Corp. said its $60 device can be inserted into the floppy disk drive of any PC, enabling it to read ""smart cards,"" a new type of plastic credit-card that can perform electronic cash transactions and store bank account balances.
Already gaining popularity in Europe to pay for store purchases and streetside telephone calls, the ""smart card"" is beginning to take hold in the United States as a replacement for cash used in ordinary purchases like grocery shopping.
By enabling PCs to securely dispense money, the device may provide a major stimulus to home banking by empowering consumers to perform financial transactions that now require a visit to a bank branch or an automated teller machine.
""What's been missing is a low-cost, easy-to-use 'bridge' between smart cards and personal computers,"" Fischer President Michael Battaglia said.
Smarty, as the product is known, is a slim piece of hardware that inserts into a personal computer's 3.5-inch floppy disk reader, allowing the machine to link via the Internet to banks or retail outlets.
Fischer holds key patents for smart card readers inserted into 3.5 inch floppy drives -- making Smarty the most readily adaptable card reader for the 200 million personal computers now in use, company officials said.
The device, which can be inserted into home or office personal computers or into a laptop computer when travelling, will enable consumers to make wider use of banking cards for purchases, replacing the need to carry loose bills and coins.
The product could be a boon to PC-based home banking, permitting full-scale transactions instead of the more limited functions now available, like electronic balancing of checkbooks, financial investment tracking or tax return filing.
Fischer officials said they were working with several major U.S. and European financial services firms to spur use of the devices in a variety of business and consumer applications, including home banking over the Internet.
In addition, Art Burton, Fischer's vice president of sales and marketing said the company was in talks with top providers of home banking software like Intuit Inc. and Microsoft Corp. to link Smarty to their software.
""We have had some discussions at various stages with the primary providers of home banking software,"" Burton said. ""We are also working with individual banks.""
Burton said the PC-based Smarty product will be offered later this year to consumers participating in a trial of smart card technology in New York City borough by a group led by MasterCard, Cititbank and Chase Manhattan Bank.
In addition, Fischer said it has received initial Smarty orders from the Bank of America and Wells Fargo Bank, for pilot testing by bank employees.
Orders for demonstration models have also come from the U.S.-based credit card consortium Visa, U.K.-based Mondex International and Sweden's Telia Group.
Smart cards contain an embedded microchip capable of storing more than 4 million bytes of computer data, or dozens of pages of information -- far more than existing magnetic-strip credit cards that hold just 40 characters or so.
The new financial data format can act as a one-stop shopping card storing electronic cash, a collection of credit cards, and other personal information including several forms of identification to prevent fraud.
While slow to catch on in the United States, smart cards have grown popular in Europe and Asia.
Fischer, with annual revenues of about $20 million, is solely owned by Addison Fischer, its chairman and a former professor at the Massachusetts Institute of Technology.
Addison Fischer is considered one of the world's leading experts on computer security. He was one of the founders and principal owners of RSA Data Security Inc., developers of a popular computer security encryption technique.
Fischer faces many larger competitors in the smart card reader market, including France's Gemplus, U.S.-based Schlumberger Ltd. and VeriFone Inc., Germany' Siemens AG and Philips Electronics NV of the Netherlands. But these rival machines take the form of bulky computer attachments or standalone-terminals priced between $80 and $300.
",9
"International Business Machines Corp., aiming to halt a slide in its stock price, Tuesday set a 2-for-1 split that helped fuel a Wall Street rally in one of the most popular stocks on Main Street.
The world's biggest computer maker said its board approved the split, which will double the number of shares traded while halving the stock's price, subject to shareholders approving a rise in the amount of authorised shares, a formality.
Industry analysts said that while the move gave the stock a cosmetic boost, the gains may be fleeting unless IBM proves it can revive the growth of its core computer business.
""The company's management must show how they can deliver sustained growth again before people will say 'IBM is healed,'"" Nomura Securities analyst Daniel Ries said.
Still, analysts and traders said IBM's timing was impeccable, coming after Salomon Brothers upgraded the stock and following the past week's drop of $25.
""People were looking for an entry point -- they found it,"" one trader said.
The stock, which had tumbled since IBM's fourth quarter earnings report disappointed Wall Street last week, bounced back and rose $5 to $150.75 in active New York Stock Exchange trading.
The stock, widely held by individual and institutional investors worldwide, is one of 30 issues in the Dow Jones industrial average and often sets the tone for the broader market on Wall Street.
Besides the initial boost that typically accompanies stock splits, the move may provide some psychological benefits, analysts said, such as reducing the focus on the price of $175, IBM's record high set in 1987, which the stock again approached recently until last week's sell-off.
Now, IBM must provide concrete evidence of its plans for sustained earnings growth before the stock can move higher.
""The significant move upward in the second half of 1996 was based on the people becoming convinced that IBM could sustain growth of 8 to 10 percent,"" Nomura's Ries said.
IBM shares jumped more than $60 in the second half of 1996, reaching $170 in December.
""Not a big deal,"" Soundview Financial analyst Gary Helmig said of the split, noting the main effect will be to double the daily share volume of IBM, which has averaged about 5 million shares a day.
""There's no real reason for them to do this, but it does tend to make the stock go up,"" he said.
Analysts also said the split will make IBM more affordable to smaller investors, but was less significant for investors who manage pension funds or other large portfolios.
In its earnings report last week, IBM said profits rose 18 percent to $2 billion, or $3.93 a share, in the fourth quarter, but several analysts cut their ratings after the report, citing sluggish mainframe sales, weakness in Europe and other factors.
Salomon Brothers analyst John Jones upgraded his rating Tuesday to strong buy from buy but did not comment further.
The company said the board proposed raising the number of authorised common shares to 1.875 billion from 750 million. It said the record date for the split was May 9 and that the split shares will be distributed on May 27.
It also declared a regular quarterly dividend of 35 cents a share on the presplit shares and set its annual shareholders meeting for April 29 in Dallas.
",9
"The proposed $6.6 billion acquisition of modem maker U.S. Robotics Corp. by computer network equipment manufacturer 3Com Corp. triggered a drop Thursday in the stocks of those and other major network companies.
Santa Clara, Calif.-based 3Com's stock fell $4 to $35 and was the most heavily traded issue on Nasdaq, with more than 40 million shares changing hands. U.S. Robotics dropped $1.875 to $59.125, also on Nasdaq, and was the second-most active share.
Analysts said the proposed stock swap unveiled Wednesday undervalued Skokie, Ill.-based U.S. Robotics, the world's leading maker of computer modems for the consumer market.
""I think U.S. Robotics shareholders are being robbed,"" said Donaldson Lufkin analyst Eric Buck, who harshly criticised the terms of the deal.
Several analysts said the offer -- involving stock and options valued at $7.3 billion in all -- put a low-ball value on U.S. Robotics of 20 times annual earnings vs. its historic multiple of 25.
""If anything, this deal is more of a take-under than a takeover,"" Salomon analyst Peter Swartz said of the 3Com deal. ""Both stocks are down 50 percent from their highs."" Swartz noted that many network stocks are trading at historic lows.
U.S. Robotics Chairman Casey Cowell said the sale price was ""absolutely"" not too low, noting that networking company valuations have been very volatile recently and that both U.S. Robotics and 3Com stock prices have fallen.
3Com especially has been under pressure after announcing its fiscal third quarter revenues would be weaker and that it cut prices on its core product, its adapter cards.
The merger, if approved by shareholders and government regulators, would create a combined company with $5 billion in annual revenues and 12,000 employees -- second only to leader Cisco Systems Inc. with more than $6 billion in annual revenues. The merger also comes as the Internet and other computer networks continue to grow in importance.
Analysts said the deal put pressure on other network equipment players to use their stock to fund major acquisitions of their own.
""We believe the competitive landscape of the networking sector is undergoing a fundamental restructuring,"" J.P. Morgan analyst Bill Rabin said in published comments. ""Other networking vendors will have to combine or be bought.""
Along with 3Com and U.S. Robotics, network company stocks were among the most actively traded on Nasdaq Thursday.
Cisco Systems fell $3.06 to $55.06, Ascend Communications Inc. dropped $5.375 to $57, and Cascade Communications Corp. slipped $2.50 to $30.125.
The main beneficiaries of the 3Com-Robotics deal appeared to be Bay Networks Inc. and Shiva Corp. -- two stocks that have sat in the doghouse for some time -- based on their potential as acquisition targets, analysts said.
Shiva rose 62.5 cents to $15.875 on Nasdaq, recovering from its historic low, while Bay added 12.5 cents to $19.375 on the New York Stock Exchange.
""The merger forces other players in the industry to ante up to play in this bigger game,"" said Steve Harmon, an independent financial analyst who publishes the Internet Stock Report.
""It forces equipment makers to look for end-to-end solutions supplying network products to both businesses and consumers,"" he said, referring to how the 3Com-Robotics merger would allow the combined company to compete in both markets.
The pressure to do deals adds to the burdens already weighing on the computer network industry, analysts said.
Earnings shortfalls or close calls, fears of slowing industry growth and cautionary comments from 3Com, Cascade and Shiva have triggered fears about the whole sector, Rabin said.
In addition, technology changes in the industry and the growing threat of competition from outsiders like chip makers Intel Corp. and Rockwell International Corp. have dimmed the outlook for the industry as a whole.
Some analysts cited fears that Intel may decide to integrate network adapter cards or modem chips directly into the computer chassis it builds, rendering stand-alone products from many network suppliers a commodity -- if not obsolete.
",9
"Shareholders of MCI Communications Corp. are expected to vote overwhelmingly in favour of the proposed merger with British Telecommunications Plc at MCI's annual shareholder meeting Wednesday.
The shareholder vote is one of the first major milestones on the road to winning approval for the $23 billion trans-Atlantic merger, which would create a combined company known as Concert Plc with $40.6 billion in revenues.
The merger awaits regulatory approvals in Washington, London and Brussels, the headquarters of the European Union. Company officials are confident the merger -- announced in November -- is on track to close in the fall of 1997.
The annual meeting, to be held in Wilkes Barre, Pa., two hours north of Philadelphia, is expected to be a quiet affair, with only three items on the agenda -- the shareholder vote, and election of directors and auditors.
Wilkes Barre was chosen because it was the hometown of William McGowan, the legendary founder and former chairman of MCI, who died in June 1992. Washington-based MCI is the nation's second largest long distance company.
In his speech to shareholders Wednesday, Bert Roberts, MCI's current chairman and chief executive, is expected to focus on the projected benefits of its merger, which creates one of the world's first global communications carriers.
One industry analyst briefed by the company said he expected Roberts to reveal some of the early products and services that may result from its ties to British Telecom.
Among the possible offerings would be seamless services connecting the United States and Britain, including wireless phone transmission, faxing, electronic mail, voice mail and the Internet, the analyst said.
Industry analysts believe the MCI official will also respond to AT&T Corp.'s initiative to offer local phone service using a fixed wireless system attached to the side of a customer's premises as a means of bypassing local networks controlled by regional Bell companies.
Through interconnection pacts and the new wireless technology, AT&T has said by 1998 it plans to offer local service to the vast majority of the U.S. population.
MCI made an early move into local phone markets with its MCI Metro unit, but has appeared less aggresive than its peers since the passage of the U.S. Telecommunications Act of 1996 in evolving a strategy to expand its local phone presence.
A key benefit of the merger with cash-rich British Telecom is the financing muscle that MCI can tap as MCI seeks to slice substantial market share away from the incumbent regional Bell telephone companies in various local service markets.
MCI provides local service in 20 U.S. metropolitan markets through a mix of company-owned facilities and resale agreements to use other companies' networks. It has said it plans to be in 31 local service markets by the end of 1997.
",9
"Xylan Corp was pummelled to a new low Tuesday after its fourth quarter earnings came in a penny shy of expectations and the company warned a rebound may not come until fall, a quarter longer than previously hoped.
Renewed fears of a December sales slowdown at 3Com Corp further stoked a sell-off in network shares Tuesday.
Xylan fell 7-5/8 Tuesday morning to 20-7/8, a 27 percent drop, echoing the sharp declines seen in recent weeks in other once high-flying names in the computer network sector like Cascade Communications Corp and Shiva Corp.  
In published comments, Deutsche Morgan Grenfell analyst Noel Lindsay said he cut his fiscal 1997 year earnings estimate to $0.70 per share from $0.76 per share following a conference call with Xylan executives Monday night.
In the call, officials guided analysts to expect modest growth in 1997's first half, but for growth to accelerate again beginning in the September quarter, Lindsay said.
The selling spree extended to the industry's normally untouchable leader, Cisco Systems Inc, which tumbled 2-3/4 to 65-1/2 ahead of its fiscal second quarter report due after the close of trading Tuesday.  
3Com fell 3-3/4 to 58-1/4 Tuesday, its second consecutive sharp decline, and part of a 10-point retreat since company executives warned analysts last week that a sales slowdown had hit the company in December, despite a recovery in January.
Lindsay also cut his earnings and revenue estimates on 3Com for the fiscal third quarter ending later this month and for the 1997 fiscal year, citing the 3Com officials' remarks.
Traders said Cisco was tugged down in sympathy with 3Com. While the current consensus for Cisco is $0.50 per share, and whispered expectations hovered at $0.52, they said investors are jittery that slowing growth may be an industry-wide issue.  
Despite continued strength in its financial results, Ascend Communications Inc, another network equipment stock prized by money managers for its rocket-like growth, was dragged down by association with its sector, traders said.
Ascend shares fell 3-1/8 to 65-1/4 Tuesday and joined 3Com, Cisco and Xylan among the Nasdaq's ten most active stocks.
Lindsay said Xylan's shortfall resulted from a build-up in the company's sales force ahead of new product introductions in upcoming quarters. For the fourth quarer, Xylan reported $0.11 per share versus the consensus forecast of $0.12.
Nonetheless, the analyst said his reduced forecast for the first half of 1997 was partially offset by a ""bright"" second half outlook. While the stock has proved highly volatile, he said he was maintaining his accumulate buy on Xylan.
Adding force to Xylan's volatility is the growing short position in the company shares in recent months.
As of January 15, the short position represented 4.9 million shares, or 12 percent of the total shares outstanding, a 30 percent increase since December, according to a Nasdaq spokesman.
-- Wall Street bureau, 212-859-1736
",9
"AT&T Corp. said Monday its first-quarter profits fell 17 percent, trimmed by competition in long-distance services and investments in new businesses, and warned second quarter results might be weak as well.
Meanwhile, BellSouth Corp., a consistent top performer among regional telephone companies, said its operating earnings rose 11 percent due to a rise in the number of customer lines and strong growth in its wireless operations.
AT&T said it earned $1.13 billion, or 69 cents a share, on revenues of $13.05 billion, down from net income of $1.36 billion, or 85 cents a share, on revenues of $12.85 billion in the first quarter of 1996.
AT&T's earnings per share for the first quarter were in line with Wall Street's expectations based on previous guidance the company had provided financial analysts.
""Results are where we expected them to be as we implement our strategy,"" Chairman Robert Allen said in a statement.
In a conference call Monday, AT&T also warned that its second quarter results were likely to be weaker than the first quarter but that its expectations for the full year remained on track.
Several Wall Street analysts said they planned to reduce their earnings estimates for the remainder of the year.
""There was not a great deal to cheer in the results,"" Goldman Sachs analyst Richard Klugman said.
AT&T's first quarter revenue increase was driven by growth in local telephone service and other initiatives, business long-distance services and wireless services. That was partially offset by declines in financial services and consumer long-distance revenues, the company said.
AT&T said long-distance calling volume in the most recent quarter increased by 6.7 percent over the same period of 1996, but revenue from those services rose only 0.6 percent to $11.51 billion.
Volume from consumer long-distance was flat and revenue fell 1 percent to $6.06 billion, the company said. Revenue from business long-distance rose 2.4 percent on a double-digit increase in volume.
AT&T said expansion in online, local and international operations reduced its quarterly per share income by 25 cents. A year earlier, those expenses reduced earnings by 10 cents a share, AT&T said.
Atlanta-based BellSouth said it earned $693 million, or 70 cents a share, on revenues of $4.8 billion in the three months ended March 31, slightly ahead of Wall Street expectations.
A year earlier the company earned $626 million, or 63 cents a share, before a one-time gain of $344 million, or 35 cents a share, on the sale of paging operations.
Revenues were $4.5 billion in the 1996 quarter.
""BellSouth's 17th consecutive quarter of improved operating results was driven by our innovative marketing,"" said Chief Executive Officer Duane Ackerman, adding that, ""Sales increased across the board.""
The company said the number of customer lines increased by 379,000 -- the biggest gain for any quarter in its history, breaking the old mark of 359,000 set in the first quarter of 1996. BellSouth now has a total of 22.5 milllion access lines.
BellSouth said the company's U.S. cellular operations ended the first quarter with 3.8 million customers, reflecting an annual growth rate of 24 percent. In international cellular markets, customers rose 76 percent since the first quarter of 1996, reaching 1.5 million.
""These are just blistering numbers,"" Montgomery Securities analyst Bill Vogel said of BellSouth's growth in customer access lines and the value-added services like Caller ID and Call Waiting the company offers in addition to basic access.
""They not only have the access lines growing, but the services on those lines growing sharply,"" he said.
Vogel, who maintains a ""buy"" rating on the stock, said he expected BellSouth earnings to accelerate beyond the 11 percent rise seen in the first quarter as the company benefits from rising growth in new services.
BellSouth stock was down $1.125 at $39.875 and AT&T stock was off 75 cents at $32.875, both in afternoon trading on the New York Stock Exchange.
",9
"Software firm Computer Associates International Inc. stock dropped more than 6 percent Wednesday, and analysts said the slump reflected concern over an unexpected decline in mainframe computer revenues.
Although the Islandia, N.Y.-based company issued cautionary comments in late December that revenues were unlikely to meet expectations due to sales problems in its European operations, analysts said they were caught off guard by the slippage in mainframe software sales reported late Tuesday.
Computer Associates stock fell $2.50 to $43.50 on the New York Stock Exchange, where it was one of the most active issues.
Analysts said the decline may also be linked to broader weakness in the mainframe business, citing disappointing growth in International Business Machines Corp.'s hardware business during the December quarter.
IBM is the world's dominant supplier of mainframe software, while Computer Associates is a leading independent supplier of software used to run mainframe machines.
""People got spooked about the mainframe business,"" said Alex. Brown brokerage analyst Chris Mortenson, who noted the company told analysts in a conference call Tuesday night that mainframe revenues fell 8 percent in the December quarter.
Despite mounting mainframe revenue concerns, most analysts left earnings estimates and stock ratings untouched.
The stock has fallen back in recent weeks from the historic high of just under $68 it acheived in early December.
Computer Associates reported operating earnings of $284.7 million, or 75 cents a share, for its fiscal third quarter vs. $227.2 million, or 60 cents a share in the year-ago quarter. The latest quarter excluded a $598 million acquisition charge.
The company, which has historically derived more than 70 percent of its revenues from mainframe sales, said mainframe software accounted for 61 percent of revenues in the December quarter, while PC network software amounted to 39 percent.
",9
"Computer network company 3Com Corp. will acquire modem giant U.S. Robotics in a deal valued at $6.6 billion, the companies said Wednesday, in a deal that would create a counterweight to industry powerhouse Cisco Systems Inc.
The merger -- the largest ever in the computer network industry -- will create a company with more than $5 billion in annual revenues and more than 12,000 employees in 130 countries, U.S. Robotics and 3Com said.
Under terms of the deal announced after markets closed, each share of U.S. Robotics will be swapped for 1.75 shares of 3Com. The deal is valued at $6.6 billion based on the $39.125 Tuesday closing price of 3Com stock, the companies said.
3Com closed Wednesday down 12.5 cents at $39 and U.S. Robotics was down 50 cents at $61, both on Nasdaq.
The companies said the merger would create a company that would provide end-to-end equipment for computer networks.
U.S. Robotics, based in Skokie, Ill., is the world's largest maker of consumer modems, which enable personal computer users to connect to the Internet and online services and to send and receive faxes from their PCs. Santa Clara, Calif.-based 3Com is one of the biggest computer networking companies.
Industry analysts were divided over whether the merger of two of the top six network equipment suppliers would be enough to offer one-stop shopping for network equipment on the scale of No. 1 company Cisco Systems Inc.
""No more 'Cisco and the Seven Dwarfs',"" Bear, Stearns analyst Eric Blachno said, invoking a nickname frequently heard in the industry to describe Cisco's dominant position. ""It appears the Cisco has acquired a large competitor.""
Veteran industy analyst Frank Dzubeck, however, questioned the viability of combining the two companies in light of precedents set by previous mega-mergers in the industry.
""This could be another Bay-Wellfleet-Synoptics deal,"" he said, referring to the 1994 merger that formed Bay Networks Inc. That merger ran into problems over conflicts in combining product lines, company cultures and management teams, analysts have said.
The U.S. Robotics-3Com deal calls for 3Com Chairman Eric Benhamou to remain chairman and chief executive officer of the combined company. U.S. Robotics Chairman and Chief Executive Casey Cowell will join 3Com's board as vice chairman.
""The combination of 3Com and U.S. Robotics dramatically alters the networking landscape with the industry's broadest set of innovative, feature-rich network access solutions,"" said Benhamou. ""Together, with an installed base of over 100 million network connections, we can offer network users the fastest access to their local and wide area networks.
Cowell said, ""By providing faster, more intelligent, and easier-to-use products for connecting the broadest array of users to local and wide area networks, we can accelerate the deployment of networking worldwide.""
Cowell founded the company in 1976 with four college friends, working day and night in a windowless workroom above a military surplus store in Chicago.
U.S. Robotics, known for its Sportster and Courier modems and for being the first to market with 56-kilobit-per-second modem technology, became the darling of Wall Street in its relatively short stint, taking advantage of the Internet craze of the 1990s.
""They've become the bride, one of the most prized catches of networking,"" said Amar Senan, an analyst for investment bankers Volpe, Welty & Co.
""They've come from a humble analogue company to one of the most formidable networking companies,"" Senan said. ""They started with 300 (bits per second) modems"" and just this week shipped their first 56 kilobit ""x2"" modems.
The company's first modems were sold under the names of Apple Computer Inc. and Commodore Computers. In 1987, the company began to focus on selling its own brand of products and posted revenues of $21 million. For fiscal 1996 which ended on Sept. 30, U.S. Robotics reported revenues of $1.98 billion.
U.S. Robotics went public in October of 1991 at $13 a share. After stock splits, a $1,000 investment made in 1991 is worth about $30,000, Cowell said.
",9
"Seeking to show its readiness to compete in high-speed networking, Bay Networks Inc on Tuesday unveiled a set of products and strategies aimed at shoring up its reputation as a technology leader and helping it recover from the stumbles of recent years.
David House, Bay's recently hired chairman and chief executive, outlined the company's new ""Adaptive Networking"" strategy for making the plumbing of Internet-based networks easier to upgrade to the higher-speed networks now emerging.  
""Everybody's goal is networks that are invisible to the user,"" House said during a Las Vegas press conference at Networld+Interop, the semiannual trade show of the Internet equipment industry.
""We want networks that behave like electricity and water,"" House said, comparing computer networks to other well-developed infrastructures.
""Adaptive Networks are the products and technologies that will transition us to the Internet-optimized networks of tomorrow,"" he said.  
His appearance came exactly six months after House joined Bay Networks from Intel Corp, where he served as a respected senior executive for more than two decades.
Highlighting the company's new product announcements was a new single, application-specific networking chip capable of carrying up to 1.5 million packets of Internet data a second --- allowing networks to carry billions of bits of data per second.
The company said the new Route Switch Processor (RSP) integrates the manageability of routers with the speed of switches -- two traditionally separate product categories.  
House said the RSP chip, now running in Bay laboratories, would be offered in new routing switch products due out in 1998.
The RSP chip is designed to solve the growing demand for high-speed Internet transmission, while reducing technical bottlenecks that cause congestion on overloaded data networks.
House said RSP would serve as the core technology in its main product lines, including local networks used in corporate offices and in products serving telephone and Internet carriers.  
He said the chip would allow Bay to cut switch product prices tenfold over time, driving the cost of advanced switching down to $500 per connection from $5,000 currently.
Sounding like the old chip revolution evangelist he is, House described what he said were the semiconductor-driven dynamics of the networking business, which is seeing benefits from both exponential jumps in the power of computer chip technology and commodity-style price cuts.
",9
"Xerox Corp. on Thursday reported higher fourth-quarter profits from continuing operations, as a 26 percent rise in sales of digital products offset flat sales of its mainstay black and white copiers.
Xerox shares also got a boost when the nation's largest maker of document processing systems said it had agreed to sell part of its Talegen insurance holdings in a deal worth $450 million including assumption of debt.
In addition, the company also said its board had voted to raise the dividend 10 percent.
Xerox reported earnings of $426 million for the latest quarter, up 12 percent compared to earnings from continuing operations of $379 million in the 1995 quarter.
The 1995 figure excludes a $1.6 billion charge related to the planned sale of Talegen and a one-time gain on taxes related to operations in Brazil.
Sales rose to $5.08 billion from $4.76 billion.
The earnings beat forecasts by a few cents a share, according to figures from First Call, a service that tracks analysts' estimates, and Xerox stock closed up $1.375 at $59.50 on the New York Stock Exchange.
The fourth quarter report marked a significant turnaround from a stunning third quarter earnings disappointment that had sent Xerox shares tumbling as low as $46 a share in October.
""A lot to like,"" Smith Barney analyst Peter Enderlin said, pointing in particular to sales growth in key businesses, progress on exiting the insurance business, and the dividend increase. ""It was a good solid quarter,"" he said.
Stamford, Conn.-based Xerox said in September that a deal to sell all of Talegen for $2.7 billion to investors led by Kohlberg Kravis Roberts & Co., the New York buyout firm, had fallen apart, leaving it to sell the insurance unit piecemeal.
Xerox announced Thursday that it agreed to sell Talegen's Coregis unit, a professional liability insurer, for $375 million in cash and the assumption of $75 million in debt to General Electric Co.'s GE Capital unit.
Xerox said that its digital product revenues, which now account for a third of overall corporate revenues, rose 26 percent in the quarter, boosted by strong sales of color copiers and printers and copy publishing systems.
Black-and-white copiers, the products that remain synonymous with the company's name, accounted for 53 percent of total revenues.
Strong increases in copier equipment sales in the United States and Brazil were partly offset by a decline in Europe, due largely to sluggish national economies, the company said.
Xerox Chairman Paul Allaire said he was encouraged by the planned sale of Coregis and by the strong interest of prospective buyers in the rest of Talegen Holdings Inc.
He said he expected Xerox will have sold most of Talegen's operations by year-end and hinted the divestiture may allow it to boost its program to buy back shares of Xerox stock, a move that increases the value of remaining shares outstanding.
Industry analysts had said Coregis was the most attractive piece of Talegen, which also provides workers' compensation, industrial indemnity and other types of specialized insurance products.
Chicago-based Coregis, which has 470 employees, writes commercial property and casualty insurance for public entities and licensed and certified professionals.
Xerox said in a separate deal it agreed to sell Apprise Corp., a New Jersey-based firm that sells computing services to insurers, to Andersen Consulting. Terms were not disclosed.
Xerox also said the board voted to raise the quarterly dividend to 32 cents a share from 29 cents, an increase of 10 percent, payable April 1 to shareholders of record on March 7.
For the full year, Xerox earnings from continuing operations rose 3 percent $1.21 billion from $1.17 billion, in 1995. Including the charge for Talegen, Xerox lost $472 million in 1995.
Sales grew 5 percent to $17.38 billion from $16.59 billion.
",9
"WavePhore Inc., an Arizona company specializing in wireless data transmission, unveiled plans Monday for a service that would use existing television signals to broadcast programming to personal computers.
The proposed system, called WaveTop, will allow computer users to bypass bottlenecks in the Internet by enabling them to receive programs broadcast by WavePhore, the company said.
The Phoenix-based company said it expected to begin selling its WaveTop service in September.
The WaveTop service will broadcast entertainment and information programming nationwide over TV signals, sidestepping the clogged phone lines and overstrained computer networks that slow Internet connections, the company said.
""We think we can complement the Internet beautifully,"" said Sandy Goldman, vice president of WavePhore's consumer unit.
Analysts consider the system one of a promising new breed of products designed to take advantage of the convergence of personal computers and television technology.
The category includes products like WebTV, which differs from WavePhore in that it relies on a phone line and special TV set-top box to provide Internet connections to TV sets.
WaveTop will initially broadcast stereo music, news, educational childrens programs and new software to home PCs, without interrupting tasks being performed by the computer, the company said.
Once it begins U.S. operations in September, WaveTop will be the first wireless data broadcast medium to deliver audio, video, software and real-time data to home personal computers, Goldman said in an interview Friday.
""This gets past the bottleneck of the phone line being busy,"" said Gary Arlen, a veteran online industry analyst who heads Arlen Communications in Bethesda, Md.
The system will be free to consumers who own a broadcast-ready personal computer equipped with a TV tuner, a device that several top computer manufacturers plan to include in new machines this year. TV tuners add about $99 to $150 to the cost of a PC, but prices are falling.
WaveTop would be advertiser-supported but also may offer a pay-per-use option.
Arlen said the system was well suited for transmitting information that did not require instant feedback. ""For a lot of Web surfing, all you need is a way of quickly accessing things that are floating through the wires anyway,"" he said.
The WaveTop system operates by embedding data into a portion of existing TV signals. WavePhore has announced a pact to use the Public Broadcasting Service's 250 local stations to broadcast via an unused portion of their signals.
The high-speed service will be able to reach more than 99 percent of U.S. television households simultaneously and could eventually be extended to cover Canada over the Canadian Broadcasting Corp.'s TV network.
""It's a network infrastructure that's already in place,"" said Joel Krasner of brokerage firm Southcoast Capital, the one Wall Street analyst who formally follows the company.
""You don't have to have people using cable modems or fiber optic cables,"" said Krasner, referring  to other, more costly methods of speeding Internet delivery using phone and cable television technologies.
While WavePhore officials said the company planned to launch an aggressive promotional campaign aimed at the Christmas 1997 selling season, Krasner expected WaveTop to take root only among so-called early adopters this year.
""It's a 1998 event,"" Krasner said of chances WaveTop could become a hit consumer electronics product.
Goldman said the WaveTop network planned to offer one radio station in 1997 and three by 1998, playing a choice of rock, classical and jazz music.
KidsTop, aimed at children, will deliver educational programming developed by PBS and others, Goldman said.
For news, Goldman said the company hoped to negotiate deals with media companies like Dow Jones & Co. Inc. or Reuters Holdings Plc to offer a slimmed-down version of what WavePhore already offers on its professional investor network.
He said WavePhore has few information partnerships to announce, but was in talks with content providers for each of the seven services WaveTop will offer. Goldman said the company expected to sign these deals ahead of the service's September launch.
The company noted that a recent study by technology research firm Yankee Group estimated that by the year 2000, nearly 20 million U.S. households will have PCs capable of receiving data embedded in a TV signal.
WavePhore's strategy has been embraced by computer industry leaders Microsoft Corp., Intel Corp. and Compaq Computer Corp., which are developing enabling technology of their own to support the integration of home computer and TV technologies.
WavePhore stock rose 12.5 cents to $9 in afternoon trading on Nasdaq.
",9
"Cisco Systems Inc fell more than two points in active trading Wednesday and analysts said the decline in the stock reflected cautious comments by Cisco officials about the traditionally weak April quarter.
The share weakness came despite continued strong growth in revenues and earnings for Cisco's second quarter ended in January.  Quarterly earnings were $0.51, which was a penny above published expectations, versus the year ago's $0.32.
Analysts said Cisco management was generally upbeat on company prospects in a conference call Tuesday evening.  
In published comments, Gruntal analyst David Takata said that, ""The one-to-one book-to-bill ratio going into the seasonally weak Q3 may temporarily spook some investors.""
Takata was referring to Cisco's rate of bookings to orders as it began its third quarter ending in April.  Cisco's 73 percent revenue growth year-to-year was well above that of rivals but down from an historic 80 percent-growth plus rate, he noted.
Takata retained his outperform rating on the stock.  Most analysts appeared to retain their favorable recommendations on the stock and left earnings estimates more or less unchanged.  
Merrill Lynch analyst Joe Bellace reacted to Cisco's results by fine-tuning earnings estimates to the higher end of his previous range for both the 1997 and 1998 fiscal years.
In comments to his brokerage's sales force, the Merrill analyst said he expected Cisco to report earnings for fiscal 1997 in a range of $2.05 to $2.10 per share, narrowing his view from a broader $2.00 to $2.10 range.
Bellace's fiscal 1998 range closed to $2.70 to $2.80 per share from the previous range of $2.60 to $2.80, a spokesman for Merrill confirmed.  He retained his short- and long-term accumulate ratings on the stock.  
Bear Stearns analyst Eric Blachno said the quarterly report was ""a very solid one"" and the conference call that followed ""very upbeat.""
He noted a slight rise in the time it took to collect accounts receivable during the January quarter but dismissed the issue by saying he believed the problem had been resolved.
""We think the company's performance should alleviate concerns in the investment community that the networking marketplace is slowing,"" Blachno told Reuters.  ""We actually think the marketplace is strengthening.""
Consequently, Blachno reiterated Cisco's buy rating, which he described as equivalent to a ""strong buy"" at other firms. He maintained his earnings estimates for the 1997 fiscal year ending in July at $2.10 per share and for 1998 at $2.80.
In published remarks, the Bear Stearns analyst said Cisco appears to be gaining market share versus competitors, but  the overall market continues to grow at a healthy 30 to 50 percent clip.
Reflecting confidence in the sector's health, he reiterated his recommendations on other names in the sector, including 3Com Corp and U.S. Robotics Corp as buy and Cabletron Systems Inc as attractive.
((-- New York newsdesk, 212-859-1736))
",9
"WavePhore Inc on Monday unveiled a service that broadcasts data to home personal computers via television signals, allowing users to bypass bottlenecks in the Internet.
The company said its WaveTop service will broadcast entertainment and information programming nationwide through TV signals, side-stepping the clogged phone lines and overstrained computer networks that slow Internet connections.
""We think we can complement the Internet beautifully,"" said Sandy Goldman, WavePhore's consumer unit vice president.  
Initially, the WaveTop system will carry stereo broadcasts of a music radio station, real-time news, educational programs for children, and new and updated software to home PCs -- all without interrupting ongoing activities on the computer, the Phoenix-based company said.
Once it begins U.S. operations in September, WaveTop will represent the first wireless data broadcast medium delivering audio, video, software and real-time data to home PCs, Goldman told Reuters in a recent interview.  
""This gets past the bottleneck of the phone line being busy,"" said Gary Arlen, a veteran online industry analyst who heads Arlen Communications in Bethesda, Md.
The system will be free to consumers who own a broadcast-ready personal computer equipped with a TV tuner, a device that several top computer makers plan to integrate into their machines this year. TV tuners now add $99 to $150 to the cost of a PC, but prices are falling.
WaveTop is to be advertiser-supported. It may also provide consumers with optional higher value, pay-per-use services.  
Arlen said the system is well suited for transmitting information that does not require instant feedback. ""For a lot of Web surfing, all you need is a way of quickly accessing things that are floating through the wires anyway,"" he said.
WavePhore's system operates by embedding data into a portion of existing TV signals. The company has a pact with the Public Broadcasting Service's 250 local stations to broadcast via an unused portion of their signals.  
This high-speed, point-to-multi-point service will have the capacity to reach more than 99 percent of U.S. television households simultaneously and is capable of being extended to Canada over the Canadian Broadcasting Corp's TV network.
""It's a network infrastructure that's already in place,"" said Joel Krasner of brokerage firm Southcoast Capital, the one Wall Street analyst who formally WavePhore.
""You don't have to have people using cable modems or fiber optic cables,"" Krasner said. He was referring to other, more costly delivery methods capable of speeding Internet delivery using phone and cable TV technologies.  
Goldman said the WaveTop network plans to offer one radio station in 1997 and three by 1998, playing a choice of rock, classical music and jazz.
KidsTop, aimed at children, will deliver educational programming developed by the Public Broadcasting Service and others, Goldman said.
For news, the company said it plans to negotiate deals with media companies such as Dow Jones & Co and Reuters Holdings Plc, offering a slimmed-down version of what it already offers on its professional investor network, he said.  
Both Dow and Reuters declined comment.
WavePhore already carries Dow and Reuters news on its professional investor network.
Goldman said WavePhore has few information content partnerships to announce at this stage but is in talks with content providers for each of the seven services WaveTop will offer.
Goldman said the company expects to sign these deals ahead of the formal launch of the service in September.
WavePhore said a recent study by the technology research firm Yankee Group estimated that by the year 2000, nearly 20 million U.S. households will have PCs capable of receiving data embedded in a TV signal.
WavePhore's strategy has been embraced by computer industry leaders Microsoft Corp, Intel Corp and Compaq Computer Corp. All three are developing enabling technology to support the integration of home computer and TV technologies.
Krasner believes WavePhore may strike a deal with Pointcast Inc, a Web-based information broadcaster. The two companies already work together to provide information to corporate subscribers, he said.
((-- New York Newsdesk, 212-859-1736))
",9
"Cisco Systems Inc. is set to announce the acquisition of Telesend Inc., a developer of low-cost, high-speed Internet access technology, sources familiar with the deal said Tuesday.
Cisco agreed to acquire Telesend, a privately-held Cupertino, Calif.-based firm, in exchange for an unspecified amount of stock in Cisco, the sources said.
Additional financial terms were not available.
Telesend is the developer of a new telecommunications technology known as ISDN DSL, or IDSL for short. The full name is Integrated Services Digital Network Digital Subscriber Line.
A Cisco spokesman had no comment on the acquisition other than to say, ""Most of our acquisitions are of small, privately-held firms.""
The spokesman, Adam Stein, said Cisco has made 14 mainly technology-oriented acquisitions in the last three-and-a-half years.
Officials of Telesend were not available to comment, but an automated voicemail system answering calls at Telesend's offices in Cupertino transferred callers directly to a Cisco switchboard operator. Cisco is headquartered in nearby San Jose.
Telesend's IDSL is a local-loop modem technology that allows phone companies to offer Internet access connections from central office switches to local customers at speeds of up to 128,000 bits per second, or about four times the speed of standard phone lines.
Kieran Taylor, an analyst at market research firm TeleChoice Inc., said buying Telesend is a strategic move by Cisco to counter IDSL products announced a month and a half ago by rival equipment maker Ascend Communications Inc.
",9
"Networking stocks weathered stiff selling pressure Monday as money managers appeared to be lightening up on the sector following Friday's wild sell-off in the shares of Cascade Communications Corp.
Cascade remained the most active issue Monday, giving up another three points to 38 by late afternoon on volume of more than 11 million shares.
Analysts said other issues tarred by Cascade's mishap appeared to include 3Com Corp, off 3-5/8 to 65-1/8, and Ascend Communications Inc, down 3-1/2 to 74-1/2.  
""The whole networking sector is in the toilet today,"" said one networking analyst. Even Cisco Systems Inc, which clung to positive territory during most of Monday lost ground shortly before the close to end the day down 1/4 at 68-3/8.
The American Stock Exchange Networking Index slid 8.39 points Monday to 314.53, a decline of 2.60 percent, continuing a fall back from the 345 level it hit Thursday.
The 3Com decline comes ahead of a series of events the company plans to hold in New York Tuesday, including a joint product annoucement with Cascade and International Business Machines Corp and a briefing for financial analysts.  
Industry analysts expect 3Com, Cascade and IBM to announce a new level of compability between products designed to reduce Internet traffic congestion, in a bid to reduce demand for router equipment supplied by Cisco, their mutual adversary.
Comments from Cascade executives about slowing growth in its core business have sent the stock hurtling back from its previously high price-to-earnings multiple. The stock lost 23-1/8 points to end Friday at 41.
""It's a little bit of residual effect from Cascade getting whacked Friday,"" said Joe Noel. ""Fund managers are getting a little nervous that the sky is falling down.""  
Noel said the recent fallback in the networking sector reflects a pattern of periodic stampede behavior into and out of the the sector. Cascade's problems has inspired fears that the sector's growth overall may be slowing, he said.
""But fund managers always come back to the networking sector, because this is where growth is,"" Noel said. ""They may look elsewhere for a little while, but there are few other stocks where they can find 100 percent plus annual growth.""
Ascend, increasingly a direct competitor to Cascade, appeared to be dragged down by a more general guilt by association.
Like Cascade, Ascend has seen rocketing sales of its Internet infrastrucure equipment and enjoyed a sky-high valuation to go with that growth.
-- Wall Street bureau, 212-859-1736
",9
"America Online Inc. said Tuesday it planned to place advertising on company-sponsored discussion areas, or ""chat groups,"" as part of the world's largest online service's bid to expand its revenue base beyond mainly subscriber fees.
The Dulles, Va.-based company said placing ads in the company-sponsored chat rooms would generate 360 million ad ""impressions"" every month, a programme one analyst estimated could generate $15 million to $25 million in new revenues in 1997. Impressions, or how many times an ad is viewed, are the advertising industry's standard way of measuring the impact of individual ad promotions.
America Online stock rose $3.75 to $43.75 a share on the New York Stock Exchange in afternoon trading. That rise followed a gain of $2.50 on Monday.
""AOL has the largest online chat community in the universe,"" Bob Pittman, the president of America Online Networks, the company's main operating unit, said in a statement.
""Over 70 percent of our members chat and we log 1 million hours of chat every day, a figure that has more than doubled over the last six months,"" he said.
Lehman Brothers analyst Brian Oakes estimated ""chat rooms"" account for about 23 percent of online usage time among America Online subscribers.
Oakes said America Online places ads on less than 4 percent of the screens its subscribers view, marking it as a significant revenue growth opportunity for the company.
If ads ran on all interactive services on America Online, including chat, electronic mail, special interest bulletin boards and its ""instant messages"" subscriber messaging system, America Online could book as much as $500 million in advertising revenues, he said.
America Online's chat area, known as ""People Connection,"" creates up to 14,000 virtual chat rooms with up to 23 people in one area.
Advertisements would rotate every 60 seconds, utilizing America Online's new software ad delivery technology, the company said.
The ads will run in company-sponsored chat rooms like Town Square (current events), Life, Romance, Special Interest, Places, Arts & Entertainment, and News, Sports & Finance. Advertising will not be targeted at private chat rooms created by members themselves, the company said.
As an example, Oakes said sponsored chat rooms could include a Michael Jordan chat session with his fans, sponsored by Nike, or a health care discussion, sponsored by Johnson & Johnson.
Daytime TV talk show host Rosie O'Donnell's recent appearance set a record on America Online with more than 16,000 simultaneous participants signing on during the programme, he said.
Adding advertising to chat rooms represents America Online's latest bid to boost revenues from sources other than subscriber fees.
Last week, America Online announced a deal with Tel-Save Holdings Inc., a long distance phone service provider, in which America Online received a $100 million payment from Tel-Save to market its long-distance services to America Online members.
The online service has said it expected an increasing portion of its revenues to come from ads instead of just subcriber fees as it grows beyond its roots as an online access company to become a diversified media company.
""This is yet another asset that we have that will allow America Online to capture an ever larger percentage of online and Internet advertising spending,"" Pittman said of the plan to mix advertising with online chat sessions.
America Online is the world's largest Internet online service with about 8 million members.
",9
"NCR Corp. unveiled Friday the prototype for a do-it-yourself retail checkout system designed to speed supermarket checkout times and substantially reduce the frustration of shoppers waiting in line to pay for goods.
The company said the automated check-out system will allow shoppers to scan, bag and pay for groceries in express lanes, without cashier assistance, making shopping transactions as easy as banking at an automated teller machine.
Following in-store consumer testing this year, NCR said it plans to introduce the self-checkout system in 1998.
NCR estimated there are more than 175,000 food store checkout lanes in the United States, with about 30 percent of those lanes operated as cashier-assisted express lanes.
""We are trying to serve the frequent shopper who has just a few items to buy on the way home from work,"" said Joanne Walter, NCR's vice president of future retailing systems.
The initial system is targeted at food store express lanes. Future versions will target consumer checkout in other retail environments.
Walter said initial versions would be aimed ""express service"" customers who have 15 items or less to buy.
Walter said the company's market research shows that 65 percent of all retail purchases involve 20 items or less.
She said the system is an extension of her company's expertise as a world-leader in retail automation. NCR was origanally known as National Cash Register.
The Dayton, Ohio-based company, the former computer equipment arm of AT&T Corp., is now the No. 1 supplier of self-service automated teller machines used in banking and the bar-code scanners used at retail checkout counters.
""This is a product that will replace the retail checkout line. We are using all of our existing (retail automation) research and development to combine it into one product,"" Walter said.
The automated checkout system is known as SCOT, for Self Checkout Terminal. The name is also a playful reference to the national origin of the product prototype. The engineering team that developled the system is based in Dundee, Scotland.
Building on existing ATM banking machines, shoppers will be able to purchase groceries and even make cash withdrawals, without cashier intervention.
Shoppers using the system touch selected points on an automated teller menu. A screen leads them through the checkout process, prompting them to scan items and complete the checkout by inserting a debit or credit card, or cash.
The company said the system was designed to cut reduce labor costs and allow checkout staff to be deployed in other areas of the store.
""Shoppers are looking for ways to avoid checkout lines, and grocers are focusing on enhancing customer service while reducing front-end labor costs,"" Walter said.
",9
"Cascade Communications Corp shares were crushed in a wave of selling Friday after company comments in a conference call stoked fears about future earnings.
Several analysts slashed ratings on Cascade, citing concern that growth rates for its core frame-relay switching business may be slowing to industry levels of 30-50 percent from its prior 100 percent plus.
The formerly high-flying data networking stock was off 19-3/4 to 44-3/8. All gains seen since April had evaporated.
",9
"International Business Machines Corp gave its stock a cosmetic boost with a two-for-one split Tuesday, but the luster it gave the stock may prove fleeting unless IBM can revive core business growth.
""The company's management must show how they can deliver sustained growth again before people will say 'IBM is healed,'"" Nomura Securities analyst Daniel Ries said.
Nonetheless, IBM surged to 153, up 7-5/8 points, reversing a 25-point slide the stock has endured in the past week since signs of slower growth emerged in its fourth quarter results.  
Analysts and traders said the timing of the split coincided with an analyst upgrade by Salomon Brothers and took advantage of what many investors considered the stock's oversold condition after the recent sell-off.
""IBM did the right thing: they split the stock right on top of Solly's upgrade,"" said one trader, referring to Salomon analyst John Jones' move to upgrade IBM stock to strong buy.
""People were looking for an entry point -- they found it,"" he said.  
IBM's more than seven point gain contributed over 22 points to the Dow's 84 point rise Tuesday afternoon, due to the stock's heavy weighting in calculating the 30-stock index.
While the stock split was largely seen as numerical window-dressing -- doubling the number of shares traded while halving the price into the $70s of each post-split share -- the split has subtle psychological implications for investors.
Besides the initial boost that typically accompanies share splits, the move may reduce investors' focus on the psychologically important level of 175.  
That's IBM's historic high share price, reached in 1987, and a level the computer maker's shares had flirted near, but never quite reached, prior to last week's selloff.
The higher share activity should help dramatize daily movements in the stock and lift total volumes to the lofty levels seen by Intel Corp and Microsoft Corp, which can often top 10 million shares traded.
One tangible benefit of the split may be to heighten retail investor interest in the stock.  By cutting the investment necessary to buy a ""round lot"" of 100 shares, the stock may appear more affordable to smaller investors.  
But securities analysts said the stock split move does nothing to stoke the main engine for further stock price gains -- core business growth.
""The significant move upward in the second half of 1996 was based on the people becoming convinced that IBM could sustain growth of eight to 10 percent,"" Nomura's Ries said.
IBM shares gained more than 60 points in the second half of 1996, reaching as high as 170 in December.
But disappointing growth in fourth quarter hardware sales and continued economic sluggishness in European markets led Wall Street to slash ratings.
The company had told analysts that hardware sales grew only two percent during the final quarter of 1996.
""Not a big deal,"" said Soundview Financial analyst Gary Helmig of the share split, noting that the principal effect should be to double the daily share volume of IBM, which previously has averaged about four five million shares a day.
""There's no real reason for them to do this, but it does tend to make the stock go up,"" he said.
-- Wall Street bureau, 212-859-1736
",9
"VLSI Technology Inc expects flat to lower revenues for the 1997 first quarter compared to the 1996 fourth quarter's net revenues of $183.6 million, a spokesman for the company said.
Allen Marcow, VLSI's vice president of corporate communications, confirmed that company executives had warned analysts in a conference call about the outlook on revenues.
""We did not see a lot of Q1 growth in revenues,"" Marcow told Reuters, referring to comments made to analysts.  
Marcow also said VLSI expects to see continued improvements from expense controls. He said gross profit margins would improve in 1997 due to a changing product mix.
Analysts said the Friday afternoon conference call heightened concern about VLSI's fourth quarter results. Even before the call, worry about the data had caused the stock to fall sharply throughout the day.
VLSI shares were down 6-3/8 to 16-7/8 at 1453 EST/1953 GMT. The stock was the most active Nasdaq issue, with nearly 15 millions shares changing hands.  
The sell-off began slowly this morning, then picked up steam ahead of the conference call, which began at 1300 EST/1800 GMT.
The sharp decline in VLSI's stock followed the release of the company's results for the 1996 fourth quarter. The release came after the stock market close Thursday.
The company reported a loss of $1.38 a share after a pre-announced charge for closing a factory. On an operating basis, earnings of $0.17 a share were in line with the First Call consensus.  
But market sources said the report fell short of Wall Street's informal, ""whispered"" expectations for the fourth quarter, traditionally a strong one for the company.  
Merrill Lynch analyst Tom Kurlak, who listened in on the conference call, said he expected analysts' consensus estimate on VLSI earnings for fiscal 1997 to fall in the coming days to around $1.20 per share.
Kurlak said two main negatives drove the stock down Friday: projected flatness in first quarter revenues, and a delayed reaction to the Wednesday resignation of VLSI Chief Financial Officer Gregrory Hinckley.
Hinckley left to join Mentor Graphics Corp as finance chief and chief operating officer. He was replaced at VSLI by Bala Iyer, the company's former controller.  
Kurlak also said product orders for the company had declined in the fourth quarter. ""We are not setting up for momentum in the first half,"" he said, referring to the company's sales momentum heading into 1997.
On a more upbeat note, Kurlak said he expected the company to see gross margins rise slightly in the first quarter to around 42.2 percent from 41.5 percent in the fourth quarter.
As a result, the analyst said he still forecasts that earnings will grow sequentially in the first quarter to $0.20 a share, compared to operating earnings of $0.17 reported for the forth quarter.
",9
"Cascade Communications Corp said its core frame-relay business continued to grow in 1996 at the hyper-growth rates seen in recent years, but that some of the evidence of this was concealed in its other businesses.
In a phone interview, chief executive Daniel Smith said some frame-relay business is now concealed in sales of Asynchronous Transfer Mode (ATM) products, a newer line of high-speed data transmission products Cascade sells.
Smith also said he sees Cascade gaining frame-relay market share in 1997, but at perhaps a slower pace than to date.  
""We grew market share significantly in 1996 and we expect to continue that in 1997, but maybe at a slower rate than in 1996,"" he told Reuters. He declined to quantify these growth goals saying it was company policy not to make such forecasts.
He said Cascade had ""relatively flat"" sequential frame relay sales in the fourth quarter, compared with its September quarter, but attributed this to delays in telecom customer orders, not lost business.  
Cascade stock fell sharply Friday following the release of its fourth quarter earnings late Thursday, which were slightly better-than-expected. By late afternoon Friday, Cascade stock had fallen 23-1/8 to 41 on volume of nearly 39 million shares.
Fourth quarter net income was $0.24 per share, a penny ahead of consensus, versus $0.10 in the 1995 fourth quarter.
",9
"The stock of VLSI Technology Inc. took a nose-dive Friday, losing over 25 percent of its value, after projecting that revenues in the 1997 first quarter would be equal to or below the fourth quarter of 1996.
VLSI stock fell $5.875 to close at $17.325 on Nasdaq Friday. More than 19 million shares changed hands, topping the Nasdaq actives list.
The San Jose, Calif.-based high technology company late Thursday reported a loss for the fourth quarter of 1996 of $63.6 million, or $1.38 a share, on revenues of $183.6 million, including a pre-announced charge for closing a factory.
After speaking with analysts, VLSI's vice president of corporate communications Allen Marcow said, ""We did not see a lot of first quarter growth in revenues"" compared with revenues the 1996 fourth quarter.
In the 1996 first quarter, the quarter that will be used for comparison when 1997 figures are released, VLSI earned $3.2 million, or 7 cents a share, on revenues of $167.7 million.
VLSI appears to be facing competition or other problems in three of its four business groups, said C.B. Lee, an analyst at Hancock Institutional Equity Services.
Problem areas are computing, hurt by the recent sales slowdown at a key customer Apple Computer Inc.; digital entertainment where it faces stiff competition from SGS-Thomson, and the Compass software unit.
The key exception is VLSI's wireless communications chip business, which remains strong, Lee said.
Merrill Lynch analyst Tom Kurlak said the stock decline was also a delayed reaction to the Wednesday resignation of VLSI Chief Financial Officer Gregrory Hinckley.
Hinckley left to join Mentor Graphics Corp. as finance chief and chief operating officer. He was replaced at VSLI by Bala Iyer, the company's former controller.
The San Jose, Calif.-based company is a maker of high-end Application Specific Integrated Circuits (ASICs) used in communications, digital entertainment and, to a declining extent, in personal computers.
For several years, the company has been undergoing a transition out of the computer chipset business and into more profitable areas such as communications and TV set-top boxes.
",9
"Bell Atlantic Corp. said Thursday its earnings rose sharply in the first quarter, boosted by growth in its telephone and cellular businesses.
The Philadelphia-based telecommunications company reported first-quarter net income of $515.6 million, an increase of 11.0 percent over the $464.7 million it earned in first quarter of 1996. Earnings per share rose to $1.17 from $1.06, slightly more than the First Call consensus estimate of $1.16.
Operating revenues grew to $3.4 billion from $3.2 billion.
""This was a good solid set of numbers,"" J.P. Morgan analyst Simon Flannery said of the strong showing in new and second-line growth, wireless business and productivity.
""In spite of investments for new initiatives, they were still able to deliver double-digit earnings growth in the latest quarter,"" he said.
Bell Atlantic Chairman and Chief Executive Raymond Smith said, ""Demand for our services, including data connectivity, wireless and value-added services, continues to drive excellent bottom line performance.""
Anticipating a landmark year for the company, Smith said, ""We are heading toward the closing of our merger with Nynex with great momentum. With solid fundamentals, we are poised for a terrific year in 1997.""
The Wall Street Journal reported Thursday that Bell Atlantic and Nynex Corp. are stepping preparations for a legal counter-attack if the Justice Department blocks their proposed $23 billion merger, which was announced in April 1996.
Smith said the company has been able to absorb significant start-up costs for new ventures, such as the PrimeCo personal communications services partnership and international wireless activities.
The chief factors in the latest results were continued cost-control measures and the strong performance of Bell Atlantic's core business units, driven by revenue growth of 7.6 percent, including Bell Atlantic's proportionate share of domestic cellular revenues.
The year-ago results excluded a non-cash $142.1 million charge the comnpany took to cover a change in the method for booking revenues from its directory publishing business in 1996. After the restatement, first-quarter 1996 net income was $606.8 million, but investors focused on the company's actual operating results.
Bell Atlantic's stock gained $1 to $60.25 in late morning trading on the New York Stock Exchange.
The latest earnings report consolidates the results of the Mexican Grupo Iusacell SA de CV investment for the first time following Bell Atlantic's assumption of operational control of the business in February. Specific figures were not broken out in the company's statement.
",9
"Computer network company 3Com Corp. will acquire modem giant U.S. Robotics in a deal valued at $6.6 billion, the companies said Wednesday, in a deal that would create a counterweight to industry powerhouse Cisco Systems Inc.
The merger -- the largest ever in the computer network industry -- will create a company with more than $5 billion in annual revenues and more than 12,000 employees in 130 countries, U.S. Robotics and 3Com said.
Under terms of the deal announced after markets closed, each share of U.S. Robotics will be swapped for 1.75 shares of 3Com. The deal is valued at $6.6 billion based on the $39.125 Tuesday closing price of 3Com stock, the companies said.
3Com closed Wednesday down 12.5 cents at $39 and U.S. Robotics was down 50 cents at $61, both on Nasdaq.
The companies said the merger would create a company that would provide end-to-end equipment for computer networks.
U.S. Robotics, based in Skokie, Ill., is the world's largest maker of consumer modems, which enable personal computer users to connect to the Internet and online services and to send and receive faxes from their PCs. Santa Clara, Calif.-based 3Com is one of the biggest computer networking companies.
Industry analysts were divided over whether the merger of two of the top six network equipment suppliers would be enough to offer one-stop shopping for network equipment on the scale of No. 1 company Cisco Systems Inc.
""No more 'Cisco and the Seven Dwarfs',"" Bear, Stearns analyst Eric Blachno said, invoking a nickname frequently heard in the industry to describe Cisco's dominant position. ""It appears the Cisco has acquired a large competitor.""
Veteran industy analyst Frank Dzubeck, however, questioned the viability of combining the two companies in light of precedents set by previous mega-mergers in the industry.
""This could be another Bay-Wellfleet-Synoptics deal,"" he said, referring to the 1994 merger that formed Bay Networks Inc. That merger ran into problems over conflicts in combining product lines, company cultures and management teams, analysts have said.
The U.S. Robotics-3Com deal calls for 3Com Chairman Eric Benhamou to remain chairman and chief executive officer of the combined company. U.S. Robotics Chairman and Chief Executive Casey Cowell will join 3Com's board as vice chairman.
""The combination of 3Com and U.S. Robotics dramatically alters the networking landscape with the industry's broadest set of innovative, feature-rich network access solutions,"" said Benhamou. ""Together, with an installed base of over 100 million network connections, we can offer network users the fastest access to their local and wide area networks.
Cowell said, ""By providing faster, more intelligent, and easier-to-use products for connecting the broadest array of users to local and wide area networks, we can accelerate the deployment of networking worldwide.""
The merger, which is subject to approval by government regulators and shareholders, is expected to close this summer and is expected to result in a one-time charge against earnings in that quarter.
The deal is also expected to be slightly dilutive to the combined companies' earnings, but that will be offset by expected cost savings from the merger, 3Com Chief Financial Officer Chris Paisley said in a conference call with analysts and reporters.
The deal could revitalise interest in networking stocks, which have met with stiff selling pressure in the wake of earnings and sales warnings from several companies in recent weeks, Prime Charter Ltd. Chief Investment Strategist Scott Bleier said.
""This should heat up the networking sector,"" Bleier said. ""This is a mega-merger and you can probably expect other big companies like Cisco and Ascend (Communications Corp.) are going to be on the prowl.""
According to Instinet, several networking shares traded higher in after-hours activity. Cascade Communications Corp. rose to $33 from a regular session closing price of $32.625, and Cisco Systems Inc. traded at $58.50, up from a close of $58.125.
",9
"AT&T Corp. said Monday its first-quarter profits fell 17 percent, trimmed by competition in long-distance services and investments in new businesses, and warned second quarter results might be weak as well.
Meanwhile, BellSouth Corp., a strong performer among regional telephone companies, said its operating earnings rose 11 percent due to a rise in the number of customer lines and strong growth in its wireless operations.
AT&T said it earned $1.13 billion, or 69 cents a share, on revenues of $13.05 billion, down from net income of $1.36 billion, or 85 cents a share, on revenues of $12.85 billion in the first quarter of 1996.
AT&T's earnings per share for the first quarter were in line with Wall Street's expectations based on previous guidance the company had provided financial analysts.
""Results are where we expected them to be as we implement our strategy,"" Chairman Robert Allen said in a statement.
In a conference call Monday, AT&T also warned that its second quarter results were likely to be weaker than the first quarter but that its expectations for the full year remained on track.
Most Wall Street analysts said they planned to reduce their earnings estimates for the remainder of the year.
""There was not a great deal to cheer in the results,"" Goldman Sachs analyst Richard Klugman said.
AT&T's first quarter revenue increase was driven by growth in local telephone service and other initiatives, business long-distance services and wireless services. That was partially offset by declines in financial services and consumer long-distance revenues, the company said.
AT&T said long-distance calling volume in the most recent quarter increased by 6.7 percent over the same period of 1996, but revenue from those services rose only 0.6 percent to $11.51 billion.
Volume from consumer long-distance was flat and revenue fell 1 percent to $6.06 billion, the company said. Revenue from business long-distance rose 2.4 percent on a double-digit increase in volume.
""AT&T's results portend a tougher environment for other long distance companies of all sizes,"" said Merrill Lynch analyst Daniel Reingold, adding that prices in the industry were falling more steeply than he expected.
What is bad news for AT&T and its rivals, however, is good news for consumers who are already seeing the benefit of sharply lower international calling rates, analysts said.
Atlanta-based BellSouth said it earned $693 million, or 70 cents a share, on revenues of $4.8 billion in the three months ended March 31, slightly ahead of Wall Street expectations.
A year earlier the company earned $626 million, or 63 cents a share, before a one-time gain of $344 million, or 35 cents a share, on the sale of paging operations.
Revenues were $4.5 billion in the 1996 quarter.
""BellSouth's 17th consecutive quarter of improved operating results was driven by our innovative marketing,"" said Chief Executive Officer Duane Ackerman, adding that, ""Sales increased across the board.""
The company said the number of customer lines increased by 379,000 -- the biggest gain for any quarter in its history, breaking the old mark of 359,000 set in the first quarter of 1996. BellSouth now has a total of 22.5 milllion access lines.
BellSouth said the company's U.S. cellular operations ended the first quarter with 3.8 million customers, reflecting an annual growth rate of 24 percent. In international cellular markets, customers rose 76 percent since the first quarter of 1996, reaching 1.5 million.
""These are just blistering numbers,"" Montgomery Securities analyst Bill Vogel said of BellSouth's growth in customer access lines and the value-added services like Caller ID and Call Waiting the company offers in addition to basic access.
""They not only have the access lines growing, but the services on those lines growing sharply,"" he said.
Vogel, who maintains a ""buy"" rating on the stock, said he expected BellSouth earnings to accelerate beyond the 11 percent rise seen in the first quarter as the company benefits from rising growth in new services.
BellSouth stock closed down 50 cents at $40.50 and AT&T closed off 62.5 cents at $33, on the New York Stock Exchange.
",9
"Computer Associates International Inc said on Tuesday at its North American revenues grew 33 percent in its December quarter, cushioning the blow of a pre-announced decline in European sales.
In a phone interview, Sanjay Kumar, CA's president and chief operating officer, said European revenues declined about 20 percent year-on-year.
Total revenues for the fiscal third quarter ended December 31 were $1.05 billion against $1.00 billion in the December quarter of 1995.
Also, the executive said CA had become a ""big buyer"" of its own stock since the company's warning in late December of a revenue shortfall sent the stock price tumbling.
CA stock had been trading around record high levels of $67 and now is in the mid $40's.
Kumar said the revenue problem arose from the software maker's on-going transition to a client-server focus from its traditional mainframe base.
He said the mainframe-oriented European sales force was finding the switch to highly competitive open systems software a challenge.  
Kumar said he told Wall Street analysts in a conference call Tuesday evening that it could take a quarter and perhaps two quarters to put its European sales back on track.
""We clearly need the current quarter to work through these issues,"" he said, referring to the fiscal fourth quarter ending in March.
""My thinking at this point is that (I would like to have) the room if needed into the first quarter,"" he said.
""I told analysts that I am not doing anything short term just to grab some revenue,"" he added.  
The CA executive said Italy and Spain continue to do well but France and Germany suffered the brunt of the sales downturn.
Asia/Pacific revenue growth was ""very strong"" with China growing 100 percent year over year.
Kumar said client/server revenues now account for 39 percent of CA's total with mainframe revenues making up the rest. Client/server revenues grew 43 percent year on year, he noted. ""I would clearly like to see us cross the 50-50 line in 1997, but it may take until 1998,"" he said, referring to the split between mainframe and client/server revenues.
In its third quarter earnings results, CA reported operating earnings of $0.75 a share, 25 percent above the December 1995 quarter's $0.60.
That excluded a pre-announced charge of $598 million for the acquisition of Cheyenne Software.
",9
"MCI Communications Corp. Thursday reported flat quarterly earnings despite a healthy rise in revenues, and the company warned that growth might slow as it embraces higher profit margin businesses.
The telecommunications company earned $295 million, or 42 cents a share, in the first quarter, unchanged from a year ago and in line with analysts' consensus estimates. Revenues grew 8.7 percent to $4.9 billion from $4.1 billion.
""MCI continues to demonstrate strong overall revenue growth and profits,"" said Gerald Taylor, chief executive. ""As we move towards our merger with BT, MCI is focused on implementing long term strategies that position us for growth.""
In October, MCI and British Telecom announced a merger valued at $23 billion that would create the world's second-largest telecommunications group. The deal is expected to close in the fall, subject to regulatory approval.
Long-distance revenues rose 8.2 percent to $4.4 billion from $4.1 billion, twice the pace of MCI's key long distance rivals, it said. Operating income was $653 million, a rise of $39 million, or 6.4 percent from last year's first quarter.
Traffic grew 4 percent from the 1996 first quarter.
MCI said, however, that it expected revenue and traffic growth rates to slow in coming quarters as the industry's growth in home phone markets moderates and as MCI invests more money in higher profit margin businesses.
Washington-based MCI said it was shifting away from selling access to its network at wholesale prices to other telephone companies, and tightening credit collection among the companies to which it sells network access.
In an interview, Chief Financial Officer Doug Maine said MCI's strategy of replacing discount-seeking residential callers with customers willing to pay for value-added services should insulate it from the industry-wide slowdown.
MCI's strategy echoes concerns by rival AT&T Corp., which described in its own first-quarter report Monday competitive pressures and a variety of costly ways to keep customers.
Until remaining barriers to entering the local services market drop, Maine said MCI will avoid chasing low-end consumers with AT&T's practice of writing them checks.
Bear Stearns analyst Bette Massick said MCI appeared to be making progress in reducing the number of customers who switch to whichever provider offers the cheapest calling plan.
In both the business and mass markets, MCI said it is benefiting from efforts to offer integrated voice and data services on one bill under its networkMCI One and MCI One brands.
MCI's Business Markets posted double-digit revenue growth, led by especially strong growth in value-added services such as data, Internet, conferencing and pre-paid calling cards.
Business services account for about two-thirds of the company's overall revenues.
MCI's Information Technology revenues grew 27 percent to $433 million, with U.S. revenue doubling year-over-year. MCI said revenue from its Internet services has grown nearly 200 percent over first quarter 1996.
Local services revenue grew to $65 million or 63 percent year-over-year and jumped 33 percent from fourth quarter 1996, it said. MCI's stock fell $1.375 to $37.375 on Nasdaq.
",9
"New York state utility regulators Thursday approved the $23 billion Nynex Corp. and Bell Atlantic Corp. merger, subject to conditions the regional telephone giants must agree to by the end of March.
Consumer groups opposed to the merger that have demanded rate rebates for New York customers blasted the state Public Service Commission's decision as a sellout.
New York became the last state in Nynex's six-state service region to approve the merger, which still faces hurdles in Washington and New York.
The merger of the Baby Bells would create the nation's largest local phone company serving customers in 12 Northeastern states and Washington.
""The bedrock requirements of our approval are improved service quality and ensuring that ratepayers see tangible benefits,"" New York State Public Service Commission Chairman John O'Mara said.
He said in an interview that, while there would be no immediate rate reduction, ""We have attached conditions that we believe will bring rate reduction.""
The merger is being held up by federal regulators who are reviewing its competitive implications.
Bell Atlantic spokesman Eric Rabe said the companies now expected the deal to close after April 22, the previous target date. ""Obviously, things are moving slower than we had hoped,"" Rabe said.
He said the Justice Department had still not indicated when it would act on the deal. He said the Federal Communications Commission said it would take 30 days after the Justice Department finishes its review before it took action.
The companies welcomed the commission's decision but said in a joint statement they were still assessing the conditions.
In addition, state Attorney General Dennis Vacco expressed concern the decision did not go far enough to protect ratepayers and said he was reviewing the deal.
After several months of hearings, the three-member panel voted for the merger and the conditions in a 15-minute meeting in Albany, the state capital.
The commission said the combined company must not move major operations that were located in New York state before the merger and that its headquarters be in New York, which New York-based Nynex and Philadelphia-based Bell Atlantic have agreed to.
The regulators focused on improving customer service in New York, where consumer groups have berated Nynex for offering what they call the worst service in the nation.
The approval calls on Nynex to accelerate spending to improve customer service, including hiring up to 1,000 new support staff by the end of 1997 in New York state.
A Nynex spokesman said the company has been hiring service personnel over the past year and would hire more in 1997. Last year, it hired 3,600 employees in service-related areas, three-fourths of them in New York state. Overall, Nynex has just over 68,000 employees.
Consumer groups were swift to criticize the commission's decision.
""We are outraged that this commission approved a merger that is completely anticompetitive,"" said Robert Ceisler of the New York Citizens Utility Board ratepayers' group. ""The commission has sanctioned a more powerful and richer monopoly.""
Consumer advocates had demanded the commission at least force Nynex to give consumers immediate rebates to compensate for the reduced competition and greater efficiencies expected from the merger.
Other conditions cited were having Bell Atlantic pledge to observe existing agreements between regulators and Nynex, that Nynex employee pension funds be protected, and that Bell Atlantic grant regulators access to its records.
Nynex stock closed down 37.5 cents at $47 while Bell Atlantic fell 75 cents to $63.625, both in consolidated trading on the New York Stock Exchange.
",9
"On top of its domestic troubles, AT&T Corp must now contend with new threats to its international strategy after Friday's defection of Spain's Telefonica into the rival British Telecom-MCI camp.
""They certainly have a lot of balls up in the air,"" Bear Stearns telecommunications analyst Bill Deatherage said, referring to the multiple battles facing AT&T, the largest U.S. telephone company.  
The international rebuff comes just ahead of AT&T's first-quarter earnings report, slated for release Monday.
Wall Street expectations are set low after the company's warning to financial analysts in early March that heavy investments in competitive initiatives would cause earnings in 1997 to fall substantially short of profit last year.
Analysts on average expect AT&T to post first-quarter earnings of $0.69 per share, down from $0.90 in the 1996 first quarter.  
Analysts agree AT&T's primary focus must remain on shoring up its domestic results, most of all in its core long-distance business, which is contending with market share losses to large long-distance rivals as well as smaller niche players. At the same time, it must gear up for the emerging competition in local phone and wireless communications services, they said.
Nonetheless, global alliances are forming fast, and AT&T is widely perceived to have been put on the defensive after recent moves by Concert, the British Telecommunications Plc and MCI Communications Corp alliance.  
On Friday, Telefonica de Espana SA said it struck an alliance with MCI and British Telecom, a move that is expected to open up the vast Latin American market for Concert.
Later, AT&T said Telefonica's new relationship was ""incompatible"" with the Spanish company's membership in the Unisource telecom alliance backed by AT&T.
The U.S.-based company said it expected to spend $8 billion to $9 billion this year -- mainly on new high-speed data networks and to expand wireless services -- which would dilute earnings by $0.75 to $1.00 per share.
",9
"A group of 28 computer and communications equipment makers -- missing a major modem manufacturer -- Wednesday announced a coalition to develop a common standard for a new generation of faster modems running at speeds up to 56 kilobits per second.
Missing from the coalition was U.S. Robotics Corp., the industry's leading maker of consumer modems and the company credited with pioneering development of 56-kilobit modems, which began shipping its products earlier this week.
U.S. Robotics and 3Com Corp. later announced that 3Com would buy U.S. Robotics in a deal valued at $6.6 billion.
Faster modems will dramatically cut the time it takes to access a Web page or download software to a personal computer. The 56-kilobit-per-second speed would effectively double the speed of current 28.8-kilobit-per-second modems.
The standards group is backed by other makers of modems and related products like Rockwell International Corp., Lucent Technologies Inc. and Motorola Inc.
Backers of the industry standards effort, to be known as the Open 56 Forum, include leading data and telecommunications equipment makers, semiconductor suppliers and personal computer manufacturers.
Twenty-eight companies in all signed up initially. In a conference call, supporters of the initiative said the forum would welcome the participation of any company willing to create interoperable 56-kilobit modems, including U.S. Robotics.
""We have approached U.S. Robotics directly ... to join,"" said David Mays, an official at Ascend Communications Inc., a driving force behind the effort to create a common standard.
But before industry unification can be achieved, the standards-setting group may have to do a better job of encouraging key industry players to participate.
A spokeswoman for U.S. Robotics said the company was first invited to join the Open 56K Forum less than one hour before the group's announcement was released Wednesday afternoon.
Asked if U.S. Robotics would consider joining the Open 56K Forum, spokeswoman Sarah Powers responded, ""Definitely. We are actively seeking interoperability"" in the industry.
She said Robotics was actively considering participating in the forum's first meeting, slated to be held March 27.
While Robotics is the first to ship actual products, several vendors have said they plan to ship products in March.
For example, Motorola introduced two 56-kilobit modems Wednesday, the Modemsurfr 56K and the Voicesurfr 56K. A spokeswoman said the modems will be available by mid-March.
Until an industrywide standard is created, modems from each supplier will remain incompatible when communicating with modems offered by other suppliers.
There is wide agreement within the industry that failure to agree on a common standard will create confusion among consumers, delaying acceptance of the higher-speed technology.
",9
"Lucent Technologies Inc expects its lagging consumer products unit -- the smallest of four product divsions -- to show substantial profit gains in 1997 and a return to revenue growth by the December quarter.
""We expect a substantial improvement in profitablity this year (for the unit) mainly through cost-cutting,"" Chief Financial Officer Don Peterson Peterson ""and positive revenue growth"" in the December quarter, due to new products.  Earlier Thursday, Lucent had said consumer product revenues fell 41 percent in the second quarter ended in March.  
Consumer products comprised a small fraction of total March quarter revenues of $5.15 billion.  It was the only Lucent unit not to see double-digit growth in the quarter.
The division's revenues fell to $174 million in the March quarter due to the impact on sales resulting from the closing in 1996 of hundreds of phone center stores, the streamlining of the product line and reduced revenue from phone rentals.
Revenues from Lucent's carrier network systems division jumped 23.3 percent to $2.93 billion, while the business communications unit rose 14.1 percent to $1.3 billion and semiconductor revenues gained 18.3 percent to $615 million.  
In addition, Peterson told Reuters the company's closely watched backlog of customer equipment orders remained ""in the $4 billion range, or about the same level it was in the fiscal first quarter ended in December 1996.""
""The backlog was about the same level that we talked about in the prior quarter's conference call,"" Peterson said.
He said the backlog was replenished by about $600 million in new wireless equipment orders in Taiwan, Brazil, Indonesia, the Philippines and Mexico balancing out the revenue recognized from prior equipment contracts during the quarter.  
The Lucent executive said he expected the company to maintain its gross profit margin as a percentage of revenues at around 42 to 43 percent for the fiscal 1997 year ending in September.
For the March quarter, Lucent reported an overall gross margin of 42.1 percent, down from the 45.9 percent reported in the seasonally strong volume December 1996 quarter but up from the 39.9 percent margin in the year-ago March quarter.
""I don't see margin expansion as a major opportunity, but I do think we can hold onto it if we run the business right,"" he said of plans to hold margins at 43 percent in fiscal 1997.  
Peterson said international revenues increased 26 percent over the year-ago quarter to $1.26 billion from $1.0 billion.
Because most large equipment contracts are transacted in U.S. dollars, he said the impact of currency translation on Lucent results was immaterial during the latest quarter and was expected to have minimal impact for the rest of the year.
Speaking of plans to pump up consumer product revenues, he said the company plans to introduce a slew of new products including wireless, cordless and corded phones and answering machines to replace older models.  
After a round of profit-taking in the morning that sent Lucent shares down 5/8 of a point, the stock recovered in mid-afternoon trading to 54-7/8, up 1/4 of a point on the day.
((-- New York newsdesk, 212-859-1736))
",9
"Lloyd's of London received a much needed vote of confidence on Tuesday with news that British insurance giant Commercial Union was taking a role in the Lloyd's insurance market.
CU acquired a majority stake in managing agent Marlborough Underwriting Agency Limited, responsible for running syndicates which form the basis of Lloyd's. The move represents the first active participation by a major composite insurer in Lloyd's.
But it may also signal another nail in the coffin for Names - individuals with unlimited liability who have traditionally backed the insurance market.
The news comes just one day after a qualified set of first accounts left question-marks hanging over the long-term prospects of Equitas, the company set up last year to run-off Lloyd's near-disastrous pre-1993 liabilities.
The shape of Lloyd's has been changing rapidly since more than eight billion pounds ($13 billion) of losses between 1988 and 1992 threatened to sink the market and ushered in corporate capital with limited liability to Lloyd's three years ago.
Corporate capital now accounts for around 44 percent of the market's 10.3 billion pound capacity while the number of Names has shrunk to below 10,000 for the first time since the mid-70s.
In 1989, Names numbered over 34,000.
Since their introduction, corporate investors have been strengthening ties with agents, which manage the underwriting syndicates of both limited and unlimited Names at Lloyd's.
The developments have raised questions over Names' long-term future in Lloyd's and some forecast the share of corporate capacity to rise to two-thirds or more by the turn of the century.
There are fears that this increase could damage the entrepreneurial spirit and scope of insurance cover offered which supporters say have given it the market its pre-eminent position and ability to meet policyholders' claims.
The attraction for managing agents is the security of capital offered by corporate investors.
""A managing agent doesn't want to have capacity dropping off his syndicates. He wants long term syndicate participation,"" said one industry analyst.
Names only back their syndicates for one year at a time, at which point they can decide whether to renew or not.
Much simpler, say some, would be to abandon Names and annual renewal for permanent capital provided by corporate capital.
Sir David Berriman, chairman of the Association of Lloyd's Members (ALM) which represents around over 8,000 Names said today's move represented another shift in the ownership and control of Lloyd's and arguably further eroded the rights of Lloyd's traditional Names.
Angerstein investment Trust, one of the largest corporate investors in Lloyd's has repeatedly stated its intention to look for opportunities to expand its interest in managing agents.
Already this year it has completed the purchase of managing agencies Mumford and Coffey, quickly followed by the acquisition of members' agency Stace Barr Wellington.
U.S. companies have also been at the forefront of such moves with firms such as Ace Ltd, Capital Re and Chartwell Re all purchasing managing agents outright.
Others have gone for minority shareholdings
Angus Sladen, managing director of Marlborough said the company had been impressed by CU's conviction that the revitalised Lloyd's had a bright future.
He said that CU's financial strength and experience of the London and international market would enable it to ""seize the opportunities available to Lloyd's"" in the wake of its 'Reconstruction and Renewal' plan implemented last year.
CU is paying the Blenheim Partnership an initial 2.9 million pounds in cash for the Marlborough stake with a further payment of up to 2.9 million, half of which is dependent on capacity levels.
It said it intended to develop the business from its current capacity of around 80 million pounds, building up its own capacity on Marlborough syndicates, at the same time as encouraging the presence of existing individual Names and other capacity providers. ($ = 0.614 British Pounds)
",44
"Lloyd's of London is to publish recommendations that the insurance market be externally regulated for the first time in its 300-year history in proposals to be published on Friday.
According to sources at Lloyd's, a working party set up in 1996 to consider market regulation will recommend that it come under the auspices of Britain's top financial watchdog, the Securities and Investments Board (SIB).
As well as recommending external oversight, specific proposals will be put forward on how regulation is organised, the sources said.
Any plans will have to be approved by the new Labour government, but if adopted they would put an end to Lloyd's current system of self-regulation.
The changes would require amendments to the Insurance Companies Acts and the Financial Services Act (1986).
David Gittings, Lloyd's director of regulation, said in January that he would be ""surprised"" if the review did not recommend some sort of external overview.
The now-ruling Labour party said in the run-up to this month's general election it favoured making regulation accountable to the Department of Trade & Industry (DTI) and SIB rather to the Council of Lloyd's, as at present.
The new government is expected to carry out a thorough review of all financial services regulation in coming months. That is likely to include Lloyd's.
While the DTI currently regulates Lloyd's solvency requirements, it is not subject to external regulation on protection of members' interests or the operation of a transparent market.
A rescue package last year saved Lloyd's from collapse after the huge losses it incurred between 1988 and 1992.
The review of the market's regulation was set in motion last October.
The panel included representatives from other regulatory organisations as well as from Lloyd's. The DTI had a 'watching brief' on the panel and the SIB was represented in addition to members from the regulated financial services community.
",44
"Lloyd's of London on Friday moved to reassure its traditional backers, known as Names, that there was no hidden agenda to force them out of the 300 year-old insurance market.
""Trust us,"" outgoing Chairman Sir David Rowland answered in response to a question from one worried Name. ""It'll be all right.""
Speaking at his last annual meeting as chairman, Rowland also promised there would be no move to do away with the practice in which syndicates are reformed each year despite criticisms from some managing agents that it is out-of date and expensive.
But he threw his support behind recent changes in the market which have seen members move away from unlimited to limited liability.
On retirement, said Rowland, he would become a limited liability member of Lloyd's.
""Unlimited personal liability has been shown to mean exactly what it says, and I no longer believe that the substantial advantages of that method of trading should blind us to the reality of its possible consequences for the individual,"" he said.
New trading structures with continuous capital, allowing the commitment of resources for the long-term development of underwriting businesses, may prove the better route, said Rowland.
Unless it embraces change, Lloyd's will see a steady decline in its fortunes, he warned.
The annual reforming of syndicates and the reinsurance of outstanding claims when the syndicate year closed -- known as reinsurance to close -- had appeared to work admirably until the 8 billion pounds ($13 billion) in losses between 1988 and 1992 that at one point threatened to destroy Lloyd's.
Rowland argued it would never again be possible to reinsure to close an annual account without remembering the vulnerabilty of the system.
Critics have increasingly questioned the viability of the annual system of raising capital for Lloyd's, which they say is both costly and prevents long-term planning.
Only a few days ago, the outspoken former chairman of Lloyd's, Robert Hiscox, described it as an ""anachronistic absurdity"" and attacked the complexity of the current capital structure where Names and corporate capital co-exist.
There is increasing tension at Lloyd's between Names, whose assets largely back the market on an unlimited basis and limited liability corporate capital, first introduced in 1994.
These tensions will be resolved by market forces, promised Rowland.
",44
"Nearly eight million members of Britain's largest mortgage lender, the Halifax Building Society, are in-line to pocket hundreds of pounds more than originally expected when it floats on the London stock market on June 2.
If betting at London financial bookmakers is near the mark, the basic handout of 200 shares will be worth around 1,400 pounds ($2,270), way ahead of predictions when the flotation was first announced.
The average payout would be 2,170 pounds, nearly 900 pounds more than the Halifax's initial forecasts in January.
Bookmakers, City Index and IG Index, are quoting the Halifax closing price on its first day of trading at 695-705 pence.
That would value the group which converts to a bank on flotation at over 17-1/2 billion pounds and rank it among Britain's largest dozen companies.
In January, the Halifax estimated the shares would be priced at between 390 and 450 pence and in April put a 415 pence 'floor' value on the shares sold on flotation through its free dealing service.
""We opened the Halifax at 660 to 670 pence yesterday. It was very difficult to find people to sell it at that price and it looks as though it's going to be dragged a bit higher,"" said IG Index's Peter Hetherington.
Around two-thirds of Halifax members will receive the basic 200 shares windfall. Members will receive additional shares based on the level of savings.
The maximum allocation for those who can claim for a mortgage account and savings account will now be worth just under 10,000 pounds.
Forecasts of the size of handout have risen steadily since the original announcement of the flotation.
A downward revision in the number of qualifying members gave an initial boost to the figure and the performance of financial stocks since has helped drag the price higher.
The success of the Alliance and Leicester flotation in April has added to expectations of strong demand for Halifax shares. Alliance shares rose sharply on the first days of trading as institutional investors scrambled for stock.
That experience and the subsequent strength of the shares is likely to tempt many Halifax members to hold onto their handouts, at least initially.
""On fundamentals it's unlikely it's worth seven pounds but built into that price is a big chunk of scarcity premium,"" said one banking analyst.
""The concern is that there isn't going to be a lot of supply around and whatever there is will come out largely in one auction. That's where institutions are going to get their stock ... and they'll only get one shot at it."" ($ = 0.615 British Pounds)
",44
"Britain's United Assurance Group, created by the merger of Refuge and United Friendly last October, said on Thursday 2,200 jobs would be lost as a result of integration, some 400 more than had been originally expected.
The company, Britain's fourth largest home services insurer -- selling through agents who visit customers homes, said last August that it expected around a quarter of the group's 7,100 employees would lose their jobs.
United is planning to close over half its offices in an effort to cut costs by around 37 million pounds ($60 million) a year.
Group chief executive George Mack said that the opportunities to make cost savings and achieve economies of scale were essential in enabling it to compete in its chosen businesses.
The rationalisation and integration will involve an eventual reduction in the group's regional and branch offices to 116 from 279.
United has set aside 76.3 million pounds for the expected integration costs.
The new structure would enable greater emphasis to be placed on clients' needs, the company said.
Mack declined to rule out further job losses but told Reuters that any reductions were unlikely to be material in the near term.
""We are looking to make sure we're lean and efficient in our back offices and strong and expanding on our sales force front... if anything we're looking to expand our sales force,"" he said.
The group has yet to get a response from the Department of Trade and Industry to its proposals that the costs for the restructuring be borne by shareholders. Under its plans shareholders would receive a greater return for taking on the additional risk.
The news of the lay-offs cames as the merged group announced pre-tax profits of 549.3 million pounds for 1996, which included 430 million pounds from the transfer of 'orphan assets' -- surplus insurance funds -- to shareholders.
United shares rose on the figures, adding 11-1/2 pence to 485-1/2.
Excluding net exceptional items of 371.3 million pounds, profits from continuing operations were up 18 percent at 193.5 million pounds.
The dividend for the year was raised 35 percent to 18 pence per share.
Run-off costs from the closure of the group's motor business to new business in 1996 had been higher than expected with the pre-tax loss of 15.5 million pounds reflecting the effect of an adverse increase in the number of claims and value of settlements.
Efforts would now be concentrated on the household busines which United said offered ""great potential"" to the enlarged group.
""We've had a less good year this year than last. Market conditions have been less favourable but we believe we have a strong product range and sound account and with the client base of the combined group we expect to be vigorous in expanding our portfolio,"" said Mack.
Provisions chargeable for the 11,000 cases of possible mis-selling of pensions by the group, remained broadly unchanged at 71 million pounds.
""We will have a clear idea of the level at which we're settling at the end of 1997 but we believe we're appropriately provided for at the moment. Until we have specific settlememnt experience there is some uncertainty in the size of that provision,"" Mack said.
",44
"The Treasury may well take over regulation of insurance companies from the Department of Trade and Industry (DTI) under the Labour government's plans for sweeping reform of Britain's financial services, industry observers said on Thursday.
Spokesmen for both the DTI and Treasury said that no decision had yet been made on the changes, but that this could form part of the new government's shake-up of financial regulation.
Such a move would bring insurance into line with the rest of the financial services sector.
""If the Treasury is responsible for all other aspects of regulation of insurance it would be only sensible,"" said one industry executive.
The steady erosion of the boundaries between insurance and banking industries has also increased the pressure to bring the supervisory regimes closer together.
Many banks are beginning to offer insurance products while insurers are increasingly providing services such as savings facilities, personal loans and mortgages.
At present the DTI regulates insurance companies,  ensuring they are financially sound and meet solvency requirements. Regulation of products is separate.
General insurance is regulated by an industry code of practice and life products by the Financial Services Act, which is to be replaced by fresh legislation arising out of framework reforms announced by Chancellor Gordon Brown on Tuesday.
While British insurers may have given a cautious welcome to the announcement of the regulatory shake-up, they have, as yet, little information on how far the government will go. But many in the industry admit the logic of doing away with the current multi-tiered system.
The creation of a single statutory body, a Securities and Invesments Board (SIB) with enhanced powers and extended remit, could reduce costs, improve transparency and clarify uncertainties which have developed under the present set-up where insurers may be regulated by several different watchdogs.
It could also give a much needed boost to public confidence, after a series of scandals typified by the pension mis-selling of the late 1980s and early 1990s which have undermined public perceptions of the sector.
Britain's financial services market operates on the principle of ""buyer beware"", with regulators focusing on the solvency of practitioners.
The market is left to regulate product suitability, with consumers having to shop around for a good deal. As the pensions mis-selling scandal showed, this was a less than perfect system from the customer's point of view.
Both the SIB and the Personal Investments Authority (PIA), the self regulatory organisation currently responsible for the industry, have come in for severe criticism of their handling of the scandal.
Hundreds of thousands of people were wrongly advised to take out personal pensions rather than stay in company or other occupational schemes and many have yet to receive compensation.
Underlining the problems that have beset the sector in recent years a leaked draft report from the SIB on Wednesday accused Britain's largest life insurer, Prudential Corp of mis-selling financial products and wrongly advising clients to put money into one of its most popular products, The Prudential Savings Account.
While insurers acknowledge the benefits of dealing with a single regulator, there are fears that the government may introduce tighter controls on products and selling.
Only last week, Britain's National Consumer Council called for urgent and wholesale reform of insurance law to ""drag it into the 21st century and redress the balance for consumers"".
A Treasury spokesman said it was too early to say whether detailed legislation on the selling of products would be included in the reform.
With the private sector likely to play a larger part in the provision of pensions in the future, tighter regulation would seem to fit in with the government's long term plans, said industry observers.
",44
"The Lloyd's insurance market's ""annual venture"" - where syndicates are formed anew every year - has been criticised as costly and damaging to competitiveness in a report by accountants KPMG published on Friday.
The report will form part of the submission by the Lloyd's Corporate Capital Association (LCCA) to the Lloyd's Syndicate Structure working party which is weighing the pros and cons of different capital structures for syndicates.
But it will also be seen as another attack on the position of unlimited liability Names, the traditional backers of the 300 year-old insurance market, who fear they are being eased out of the market in favour of corporate investors.
Only last month, Lloyd's put forward proposals to raise the amount of capital Names must pledge to back their underwriting activities.
That move is likely to reduce further the number of Names at Lloyd's, already at 20-year lows.
Corporate capital, first introduced in 1994, now accounts for 44 percent of the market's total capacity.
KPMG puts the direct costs of the annual venture at 117 million pounds ($190 million) in an average year, more than 10 percent of the underwriting profits of the insurance market in the 1994 year of account.
In addition, it argues that the indirect costs involved clearly inhibit Lloyd's syndicates in critical areas such as long-term planning, capital investment and reinsurance purchasing.
This, it says, will increasingly restrict Lloyd's competitiveness internationally in areas such as the provision of multi-year insurance products and compliance with overseas regulatory standards.
KPMG suggests that 58 million pounds could be saved by the abolition of members' agents who represent Names' interests. The Corporation of Lloyd's annual costs could be reduced by around 41 million pounds, it says.
Antony Haynes, chairman of the LCCA which represents corporate investors, said the KPMG report ""speaks for itself.""
""Both traditional names and corporate capital providers are seeing a substantial part of their underwriting returns being eroded by a market practice of the annual venture...,"" Haynes said.
But Robert Miller, spokesman for the Association of Lloyd's Members (ALM) which represents around 8,000 Names, rejected the report's conclusions.
""We are doubtful about the apportionment of the costs. Secondly what it has completely failed to take into account is that the Names significantly pay for the costs of the annual venture,"" said Miller.
Names were willing to pay for the annual venture, he argued, because it allowed them to receive an income stream unrelated to other investments such as shares and to diversify their portfolios.
The Lloyd's syndicate structure working party is due to publish its conclusions soon.
It is one of a number set up to examine the key strategic issues facing Lloyd's which will report by the end of May.
The findings will be pulled together to develop the blueprint for the market's new business plan, expected to be published in June or July.
Supporters of the present system argue that a shift to corporate capital will damage the flexibility and entrepreneurial spirit of the Lloyd's market.
ALM has commissioned its own independent study on the way capital is provided to Lloyd's syndicates which will provide the basis of its submission to the working party. ($ = 0.615 British Pounds)
",44
"A vehicle to reinsure so-called 'orphan syndicates' could free thousands of Lloyd's of London Names currently trapped in the insurance market according to plans published on Tuesday.
John Rew, co-founder of publisher and market analyst Chatset, has invited Names - the traditional backers of Lloyd's - to fund a feasibility study on whether a Name-owned company could be floated to re-insure orphan syndicates.
Rew, is seeking to raise 600,000 pounds ($972,000), one third of which will be devoted to the study. If successful, a prospectus will be issued to set up the syndicate.
There are around 13,000 Names trapped on more than 50 syndicates for 1993 which are still open because of the uncertainty surrounding eventual liabilities.
Normally the 1993 year would have closed at the end of 1995. Until they do, none of the Names can formally leave Lloyd's.
In order to close a syndicate, Lloyd's requires that the reinsurance be backed by another syndicate. About five Lloyd's syndicates specialise in this market.
Following huge losses run-up by Lloyd's between 1988 and 1992, members of closed syndicates transferred outstanding liabilities to a specially created reinsurance company, Equitas, under a rescue package implemented last year.
But Equitas did not take on orphan syndicates.
Once orphan syndicates have been reinsured, the names' deposit can be released.
In the case of ceased or resigned Names, who may comprise as many as half the 13,000, Lloyd's requires 100 percent of the 'stamp capacity' to be backed by deposit, which Rew estimates could mean up to 450 million pounds trapped within Lloyd's.
($ = 0.616 British Pounds)
",44
"Britain's Co-operative Wholesale Society (CWS) breathed a sigh of relief on Thursday as the ambitious takeover bid led by 31-year-old Andrew Regan crumbled in a flurry of legal writs.
But the company's satisfaction at seeing off Regan may be tempered by the realisation that its battle for independence may have only just begun.
While the chances of Regan ever succeeding in his bold attempt to buy the group and sell off its disparate parts were probably always slim, the move has alerted many in the industry to the underlying and, some say, under-utilised CWS assets.
The view among banking observers was that CWS remains in play whatever the outcome of the Regan episode.
""It's not the end of saga. It may be the end of Regan's offer but that's not the same thing. Regan's done a lot of other people's work for them,"" commented one banking source.
In favour of its hopes of staying independent, CWS boasts a convoluted ownership and voting structure which complicates any hostile takeover attempt.
But Regan, who had planned to mount a bid approach through a unit of his Lanica Trust Plc, has identified both a wealth of underperforming assets and possible purchasers in the event of any break-up, and put in place the financing to back it.
It was not the deal that ultimately foundered, but doubts about Regan himself that allowed CWS to claim victory in what may prove to be only round one of its fight for independence.
Last week, the group turned in a 10 million pound ($16.2 million) fall in profits for the year before tax and distribution to its members of 68.2 million pounds on flat sales of around three billion pounds.
A 21 percent rise in trading profits in its banking arm was more than offset by falls in its trading operations.
Regan planned a 1.2 billion pound offer for CWS through a company specially set up for the purpose - Galileo Group - intending to sell off CWS businesses which include supermarkets, banking, insurance as well as opticians, chemists and funeral parlours.
Allied Irish Banks confirmed it was among those interested in Co-op businesses, and supermarket chain J.Sainsbury was also reported to be among those lining up to purchase the assets.
The plans foundered amid allegations of financial irregularities regarding an earlier deal Regan had been involved in concerning a food supply agreement with the CWS and Hobson Plc, which was run by Regan at that time.
CWS has launched criminal proceedings against Regan, partner David Lyons and suspended CWS employee Allan Green relating to confidential documents allegedly stolen by Green.
It is also suing Regan's banking advisor Hambros and law firm Travers Smith Braithwaite.
According to banking sources, Regan's decision to ditch his bid may have been precipitated by the threat that his financial backers were about to pull out.
Japanese bank Nomura which was financing it was understood to be very unhappy about the allegations surrounding Regan and had written to Hambros on Wednesday demanding a full explanation of them by nine o'clock Thursday morning.
But Nomura had not been satisfied by the response it had received according to the industry sources and was reviewing its position when Regan announced he was dropping his bid.
A spokesman for Nomura declined to comment. ($ = 0.615 British Pounds)
",44
"British composite insurer Commercial Union Plc on Tuesday announced a major restructuring of its domestic general insurance operations to improve profitability and customer service.
The shake-up is aimed at producing some 100 million pounds ($163.5 million) of savings annually by 1999, largely through the reduction of administration and claims supply chain costs.
But the company was quick to emphasise that no jobs were under threat.
""Provided we meet our overall strategic objectives there won't be any compulsory redundancies. There is no hidden agenda here to lose jobs,"" said Andy Homer, manager of Commercial Union's UK general insurance division.
Dubbed 'Market Orientation', the changes will see head office functions reorganised into customer-focused trading units built around specific market segments and distribution channels, the company said.
There will be nine new trading units, each focused on one market sector. They will handle product development, underwriting, marketing and delivery.
Underwriters, marketers, finance and information technology staff will all work in teams, with the task of focusing on customer needs and Commercial Union believes it is the first British insurer to take this cross-functional approach.
""Market Orientation will create an innovative, team-based commercial culture and ensure that we establish ourselves as the pre-eminent force in the UK insurance market,"" said Cees Schrauwers, managing director of Commercial Union non-life insurance.
The company hopes to save 40 million pounds through more effective management of the claims supply chain, which accounts for five percent of the 800 million pound annual claims bill.
It already has a sole supplier agreement for windshields with Autoglass.
The benefits will be shared by customers as well as shareholders, Schrauwers said.
Around 40 million pounds of savings are targeted from administration costs through greater use of new technology.
Four of the group's 22 branches -- Liverpool, Manchester Bristol and Southampton -- have already piloted the changes.
Another 20 million pounds are to come from new modelling software to improve pricing and margins.
Many of the costs involved in the programme have already been incurred as normal business expenses, Homer said.
""In 1998 and 1999 we believe we can complete the programme. There's no hidden charge coming up later in the year,"" he said.
($ = 0.611 British Pounds)
",44
"British composite insurer Commercial Union Plc posted a strong rise in first quarter profits on Wednesday, helped by a sharp fall in U.S. weather claims.
Chief executive John Carter described the company's prospects as ""excellent"" but the shares trimmed 10-1/2 pence to 739 pence after the figures, which were in the middle of analysts' forecast range.
Pre-tax operating profits rose to 102 million pounds ($166.4 million), up from 83 million pounds last year.
Excluding the negative impact of sterling, profits were up 46 percent. On the same basis profits and new business sales at the group's worldwide life business rose 25 percent.
Net assets per ordinary share were up 23 pence over the quarter to 568 pence.
Echoing comments made by General Accident which reported on Tuesday, Commercial Union said the rating environment remained competitive in UK general insurance though there was evidence of firming in certain classes of business.
A fall in weather losses helped U.S. results and France and Australia also saw increases in profits.
Weather claims in the U.S. fell 23 million pounds over the period to 6 million pounds as a result of the milder winter.
Finance director Peter Foster dismissed recent concerns about exposure to possible U.S. tobacco-related insurance claims.
""Commercial Union has very limited exposure to tobacco. We believe our policies have clear exclusion clauses and our exposure is not significant,"" Foster told Reuters.
In the UK, weather costs were broadly flat.
But the incidence of subsidence, a result of the dry start to the year, rose over the quarter. Claims were up 11 percent while the cost increased to 11 million pounds from seven million pounds in the first quarter last year.
General insurance profits rose to 67 million pounds, up three million pounds over 1996 but continuing competition in the UK reduced general insurance profits there.
""The UK rating environment remains competitive though there is evidence of rates trying to move upwards - particularly in motor classes,"" Foster said.
""Other rates are relatively stable on the personal lines side. On commercial lines the market remains competitive but the rate of reduction being seen has actually declined.""
In the U.S. general insurance also remained competitive with overall average rate increases broadly in line with inflation.
France was seeing rises in certain classes but areas such as motor cover were becoming more difficult, said Foster.
Asked about disappointing first quarter new sales in France where new single premium business fell 16 percent, Foster said he was confident about the quality of the business and the prospects for the future.
French first quarter 1996 figures had been very strong and a rise in interest rates and reorganisation of the sales force had not helped comparisons, he said.
With the acquisition of 73 percent of SEV, a French life assurer in April, life operations now account for around 50 percent of total group premium income.
This is likely to continue to rise in the future, said Foster.
""Life business tends to grow at a faster rate than general and we expect that to continue in the future. A lot of the growth will be organic. We can achieve a pretty high level of organic growth but if a suitable opportunity arose we would certainly consider it,"" he said.
Life profits over the quarter increased to 62 million pounds from 58 million pounds last year, with strong performances from the UK, the Netherlands and France.
The company had an open mind about a life acquisition, said Foster, but it was not actively seeking them.
($ = 0.613 British Pounds)
",44
"Equitas, created to run off Lloyd's of London's huge pre-1993 losses, on Monday received -- as expected -- only a qualified opinion on its first set of accounts.
The development underlined the difficulties Equitas faces in unwinding 10.4 billion pounds ($17 billion) of liabilities which had threatened to destroy the Lloyd's market.
Equitas chairman David Newbigging described its initial five months of operation as a case of ""so far, so good"" as the company released first details of its financial position since it was given the green light last September.
But auditors Coopers & Lybrand cited 'significant uncertainties' about the accuracy of provisions relating to claims outstanding, reinsurers' share of those and reinsurance recoveries.
Claims experience was likely to differ from estimated liability, potentially to a 'material degree', it said, warning that if adjustments were necessary they could wipe out shareholders funds of 588 million pounds.
That threat was well flagged in the Lloyd's settlement offer document last year, however, and the company expressed little surprise at the position taken by the auditors.
""Obviously no company likes to see an audit qualification... There are fundamental uncertainties associated with the type of liability we've got and I think we'll have some mention of it in audit qualifications -- probably forever,"" said Equitas finance director Jane Barker.
However, she said the group would be looking to remove another problem highlighted by Coopers, that of data quality, as quickly as possible.
While it would continue to be a feature of Equitas' first trading period through March 1997, the objective is to remove or substantially reduce it by March 1998.
Equitas was formed to allow a line to be drawn under Lloyd's near-disastrous pre-1993 losses.
Its creation was a central plank in Lloyd's 'Reconstruction and Renewal' (R&R) plan, freeing Names from their exposure to the eight billion pounds of losses accumulated between 1988 and 1992.
The payment of claims and expenses by syndicates last year had reduced Equitas' reinsurance premium to 11.2 billion pounds by the time it began operating in September, down from a figure set at 14.7 billion pounds based on year-end 1995 figures.
The company said that by September the group had assets totalling 16 billion pounds and net claims reserves of 10.5 billion pounds.
But the surplus between the Equitas premium and the value of discounted liabilities had been reduced from the projected surplus of 880 million pounds as at year-end 1995 to 588 million pounds in September.
Newbigging said Equitas had two clearly defined objectives -- to secure true finality for reinsured Names -- individuals with unlimited liability who traditionally supported Lloyd's -- and to create a sufficient surplus to enable some return of the premium to them but that neither of these targets would be easy.
However, there had been no major surprises so far, he said, and the position of the group today was ""much as we anticipated at the time we became operational"".
The company expects total group liabilities to halve over the next three or four years but asbestos, pollution and health claims, all long-tail and notoriously difficult to assess, make up some 40 percent of Equitas' discounted liabilities and are expected to take up to 40 years to run-off.
While any surplus over eventual liabilities, can be returned to Names, that was unlikely to occur within the next three, four or five years according to Newbigging. ($ = 0.611 British Pounds)
",44
"Lloyd's of London confirmed on Friday it is to abandon 300 years of self-regulation and recommend supervision be handed over to an external authority.
The insurance market's ruling body, the Council of Lloyd's, has endorsed the findings of a working party set up in October 1996 to review the existing regulatory system.
The proposals include bringing Lloyd's more into line with other regulated markets and narrowing the gap in treatment between it and insurance companies.
The Council would retain day-to-day responsibility for regulation but be subject to external oversight by the Securities and Investments Board (SIB) and the Department of Trade and Industry (DTI).
Lloyd's is to ask the government to amend both the Insurance Companies Acts and the Financial Services Act to bring in the additional external accountability.
It has yet to discuss the proposals with the Labour government which is expected to carry out a thorough review of all financial services regulation in coming months. That review is likely to include Lloyd's.
The government has previously indicated that it favours centralising financial regulation into one body rather than the current division of responsibility between Self-Regulatory Organisations supervised by the SIB.
Today's proposals would effectively make the Council something akin to an SRO and so could be overtaken by events if the government goes ahead with the shake-up of regulation.
The changes themselves, if approved, could take up to two years to implement.
In the meantime the report suggests Lloyd's mirror best practice elsewhere in the financial sector with the assistance of a representative from the SIB.
A spokesman said the SIB would give careful consideration to the proposals but that the legislation needed to implement them was a matter for the government.
The report says powers enabling the Secretary of State for Trade and Industry to assume direct responsibility for supervising Lloyd's members if they fail solvency tests should be widened to bring them more into line with those relating to insurance companies.
This would include allowing the DTI to sequester the assets and freeze the bank accounts of Lloyd's members if they were to default.
External regulators would set out the regulatory principles, approve the market's rules and review and monitor the Council's performance.
Lloyd's said such a move would reinforce confidence that the interests of policyholders and members are sufficiently safeguarded and that the Council is objectively discharging its responsibility to ensure a properly regulated and solvent market.
Sir Alan Hardcastle, chairman of Lloyd's regulatory Board who headed up the review, said it was in the collective interest that the market was ""solvent, fair, stable and clean"".
Other recommendations backed by the Council include cutting the size of the present Regulatory Board from 18 to 12 with one third drawn from the market, one third from external members of the Council and one third independent members.
Regulatory complexity is also to be addressed together with a review of Lloyd's rule book of bylaws and regulations.
A greater proportion of regulatory costs would in future be recovered from firms rather than wholly from members' subscriptions as at present.
The 14-member working group was set up last year in the wake of the 'Reconstruction and Renewal' (R&R) rescue package which saved the market from collapse threatened by huge losses run up between 1988 and 1992.
The panel included representatives from within Lloyd's and the wider financial services industry.
",44
"The numbers of Names at Lloyd's of London, already at 20-year lows, could fall even further after the insurance market said it would raise the amount of capital they must pledge to back their underwriting activities.
The move, which was announced earlier on Thursday as part of a package of measures to strengthen Lloyd's financial credibility, will fuel fears among the insurance market's traditional backers that Names are being eased out in favour of corporate investors.
But Andrew Duguid, secretary of the Lloyd's council, rejected any suggestion of a hidden agenda and said that the purpose of the proposals was to bolster the market's financial security.
""I don't think it will have a dramatic or abrupt impact on the number of Names. I wouldn't expect many to leave but some may reduce the amount they underwrite,"" said Duguid.
But he admitted that the balance between the two was likely to shift amid a continued growth in corporate members, who were first introduced in 1993.
There will now also be fewer differences in the way Names and corporate investors are treated.
The number of Names has dwindled since the huge losses which threatened to bankrupt the three hundred year old insurance market between 1988 and 1992.
In contrast, the amount of capital provided by corporate investors has surged to around 44 percent of total capacity.
From a peak of over 34,000 in 1989, there are now fewer than 10,000 Names, the lowest figure since the mid-70s.
Under the scheme, which will come in next year, Names will be required to put up at least 32.5 percent of their underwriting capacity as deposits at Lloyd's. This will rise to 37.5 percent the following year.
At present Names must put up between 20 and 30 percent, compared with 50 percent for corporate investors. But Names will no longer be able to use their homes to guarantee funds deposited at Lloyd's.
Lloyds also plans to introduce a new requirement for Names to show evidence of assets of at least 40 percent of premiums underwritten next year and 50 percent by 1999.
This will be made up of the funds held at Lloyd's and proof of other personal wealth.
Different categories of Names will also disappear and members will annually have to reconfirm the wealth backing their underwriting.
The minimum total of assets required is also to increase to 350,000 pounds ($568,000) by 1999, from its present level of 250,000 pounds.
The proposals, designed to strengthen the so-called ""chain of security"" at Lloyd's, are recognition that since its reconstruction plans implemented last year, Lloyd's is now subject to far greater scrutiny by policyholders and brokers worldwide.
The  first link in that chain is the premiums trust fund, made up of policyholders premiums, and Lloyd's is to replace its existing investment criteria with a single, more flexible regime.
The aim is to allow managing agents greater  opportunity to achieve better returns while keeping the assets safe.
Actuarial opinions on the adequacy of the reserves held will be compulsory from the 1997 year-end for all syndicates.
In addition, a consistent accounting treatment will be imposed to highlight potential reinsurance bad debts -- a central problem in the near-disastrous losses suffered between 1988 and 1992. ($ = 0.615 British Pounds)
",44
"British insurers are jostling for position in preparation for the opening of the potentially lucrative Indian market to foreign companies for the first time in over two decades.
On Monday Prudential Corp became the latest company to team up with an Indian partner, announcing plans to explore opportunities in life insurance with Industrial Credit and Investment Corp of India.
The Indian government is expected to outline rules governing participation in the health insurance and pensions industries soon, following February's budget announcement that private and foreign investors would be allowed into the sectors through joint ventures with its two state-run monopolies.
The General Insurance Corp (GIC) and the Life Insurance Corp (LIC) have controlled the industry since life insurance was nationalised in 1956 and general insurance in 1972.
The budget has been a hostage to a political crisis and change of prime minister in recent weeks, but new Indian leader Inder Kumar Gujral has indicated he is keen to push the February budget through parliament quickly.
Participation is initially to be limited to firms with majority Indian ownership but attracted by the possibility of wider reform, British firms have been working hard to forge links with Indian companies.
Many have been visiting India since the early 1990s, well in advance of the report of the government's Malhotra committee which proposed reform.
For many, such as the Pru whose Indian operations were its largest overseas before nationalisation, it will be a return to a market with which historical ties are strong.
Others looking for a foothold in India include Commercial Union which has formed a joint venture for general insurance with the Hindustan Times, part of the KK Birla Group.
Eagle Star, part of B.A.T, has established links with the Indian Tobacco Co, mutually-owned Standard Life with Housing Development Finance Corp, General Accident with the Bombay-based Wadia group, Guardian Royal Exchange with the Peerless Group and Legal & General with SK Modi Group. Royal & Sun have a joint venture with DCM Shriram Consolidated.
Industry analysts expect it to take between six and eight months to pass the necessary legislation and award licenses for the health insurance sector.
Successful applicants are expected to begin operating sometime in 1998.
But how long it takes to liberalise other areas of insurance is open to question.
""I suspect the coalition government is going to hamstring decision-making. I don't see the general insurance market opening up for two or three years. As far as getting licences is concerned we're hostages to the political situation which is volatile,"" said one British insurance executive.
Government plans, an extension of free-market reforms begun in 1991, have run into opposition from Indian labour unions and parties across the political spectrum.
But fears of a repatriation of funds by foreign companies are unfounded according to a spokesman for one insurance company.
""Insurers try to match liabilities with the funds they have in a country,"" he said, adding that worries firms would compete for profitable sectors and ignore loss-makers were also misguided.
""The example of the health sector is ample proof that we're willing to enter what is generally believed to be a loss-making sector, turn it around and make it profitable.""
Health insurance cover in India is limited compared to the rest of the world and penetration low.
Per capita spending on insurance premiums of around $5 is among the lowest anywhere and compares with $30 in Thailand and $407 in Taiwan according to Eagle Star figures.
But its potential is enormous. The middle class is estimated at between 250 and 300 million people and the finance ministry estimates the insurance industry is growing at around 11 percent annually. ($ = 0.612 British Pounds)
",44
"Lloyd's of London on Thursday dismissed concerns about its exposure to possible U.S. tobacco-related insurance claims.
A spokesman for the insurance market said that the possibility of large tobacco liability claims against the industry was not regarded as a significant issue for Lloyd's.
There had been no substantial volume of tobacco manufacturers' coverage underwritten directly with the Lloyd's market, he said, and any claims applying to years prior to 1993 would be covered by the Equitas reinsurance vehicle.
Equitas was set up under last year's Lloyd's rescue plans to run-off the market's billions of pounds of pre-1993 losses.
Tobacco was one of the potential health hazards scrutinised in the course of the ""exhaustive"" reserving work for Equitas, and no significant exposures were identified, said Lloyd's.
""Health-related claims against tobacco companies have been covered by robustly worded policy exclusions for many years,"" added the spokesman.
The question of whether such clauses are sufficient to exclude cover for tobacco-related claims are at the centre of a piece of research recently produced by Schroders insurance analyst Paul Hodges.
Hodges suggests that loosely worded general liability policies may open the way for tobacco-related claims against insurers should the tide turn in legal cases currently being fought out in U.S. courts.
The tobacco industry is facing thousands of individual claims from sufferers of smoking-related diseases and on Wednesday Ohio became the twenty-fifth U.S. state to say it would be seeking to recover public money spent on treating illnesses caused by smoking.
Last month, the Louisiana attorney-general named more than one hundred insurers as co-defendants in its action against tobacco companies.
But the tobbaco industry has never had damages upheld at the end of the appeal process, in more than 500 cases filed since 1954.
For their part, tobacco manufacturers are keeping silent on the extent of any insurance cover they may have.
Asked about it at B.A.T Industries' first quarter results on Wednesday, chief executive Martin Broughton was tight lipped, saying only that the issue was complex and ""certain to require litigation"" to clarify it.
No tobacco company has tried to claim against its insurer in the U.S. because, argues Hodges, of the costs involved, fear of losing control of its defence, and scrutiny of possibly embarrassing internal documents under U.S. discovery laws.
But the bottom line according to one insurance market observer is that no-one knows whether insurers will be dragged into the courts or whether the exclusion clauses will stand up. -- London Newsroom +44 171 542 7717
",44
"British regulators on Tuesday moved to speed up compensation payments to people who were vitims of pension misselling by banks and insurance companies in the late 1980s and early 1990s.
The Personal Investment Authority (PIA) which regulates the pension industry announced it had set firms new targets for completing the review of outstanding cases.
In an effort to reduce delays, regulators also laid out criteria for the use of legally binding ""guarantees"" to reassure victims they would not lose out.
Individual timetables have been set for the 24 companies with the greatest number of cases while all other regulated firms will be required to have completed 90 percent of priority cases by the end of December 1997 and the remainder by December 1998.
The 24 companies, which are responsible for three quarters of cases, include household names such as Prudential Corp, Legal & General, Norwich Union, Allied Dunbar and Royal Sun Alliance.
They have been given individual deadlines for settling priority cases ranging from July to the end of the year.
Those have been set by agreement between the regulator and the firms.
The remainder of all cases must be completed before the end of 1998 and the PIA warned that failure to meet the timetables would lead to disciplinary action.
The guarantee system outlined today is intended to enable firms to settle cases more quickly.
Under it, someone missold a personal pension would be guaranteed that if it were not possible for them to rejoin their old company scheme, the insurer would provide benefits mirroring those they would have received had they remained in their occupational schemes.
As many as 1-1/2 million people may have been wrongly advised by the financial services industry to take out personal pensions instead of staying in occupational schemes.
A review was launched in 1994 but figures released today show that so far only 50,300 assessments have been completed out of the 570,000 cases for review.
Around 102 million pounds ($165.4 million) has been paid out in 12,650 cases where redress has been accepted, just over 8,000 pounds apiece.
Sir Andrew Large, chairman of Britain's top regulatory body the Securities and Investments Board (SIB), said it was time for the excuses to stop.
""Firms can be under no illusion that results are expected from them, and expected soon,"" said Large.
""Last November I said that the front line regulators would agree targets with their firms. I welcome the fact that these targets have now been set.""
The move to crack down on perceived foot-dragging by firms guilty of the misselling comes just 24 hours before the 20 worst offenders have been summoned to a meeting at the Treasury to discuss the slow progress made in settling outstanding cases.
Treasury economic secretary Helen Liddell is reported to want to hammer out the quickest solution possible.
The SIB originally promised to resolve the issue by the end of last year but difficulties in gathering and processing information have proved particularly time consuming.
The Association of British Insurers (ABI) welcomed today's move and said at most senior levels in the industry there was an absolute determination to complete the review as quickly as possible.
The review is estimated to be costing the industry some 250 million pounds in administration alone.
The cost of redress has already been reserved by pension providers, the ABI said, but the industry recognised that the current uncertainty needed to be resolved quickly so individuals knew exactly where they stood. ($ = 0.616 British Pounds)
",44
"British insurer Norwich Union looks set to make a sparkling debut when its shares start trading on the stock market on Monday.
On flotation the company, which has more than seven million customers, is likely to be valued at around six billion pounds making it Britain's third-largest quoted insurer behind Prudential Corp and Royal & Sun Alliance.
As with recent demutualising building societies Halifax and Alliance & Leceister, Norwich Union's members have seen the value of their stakes in the company steadily climb since proposals to float the group were first announced.
Nearly three million Norwich policyholders will share 1.3 billion free shares under the flotation plans. The company aims to raise another 1.75 billion pounds ($2.9 billion) of capital in a public and members' offer of new shares.
Members have rushed to grab the opportunity to buy further shares at a 25 pence discount, queuing to beat the registration deadline earlier this week.
Norwich Union said on Thursday it still expects the public offer to be priced at between 240 pence and 290 pence per share, 215 pence to 265 pence for members, suggesting large profits for those lucky enough to get extra shares.
Bookmakers City Index are taking bets on a first day closing price of between 343 pence and 353 pence, a profit for members of at least 78 pence per share.
Many are expected to cash in their profits immediately especially those who have borrowed to fund the purchase of extra shares.
The minimum 300 free shares that 1.8 million with-profits members will receive is likely to be worth more than 1,000 pounds. The average handout will be far higher with additional shares based on the value and duration of their policies.
The 1.1 million non-profit policyholders are to receive a flat rate 150 shares.
Members may be disappointed by the number of discounted shares they actually receive with a scaling down of applications a near certainty.
In fact, such has been members' appetite for extra shares that Norwich Union on Thursday announced it was clawing back 400 million pounds worth of shares from the public offering, primarily financial institutions, to satisfy demand.
That took the members' share to around half of the total offering of 2.4 billion pounds.
For Norwich Union, the flotation will bring to an end more than 200 years as a mutual where ownership is held jointly by members.
Demutualisation will allow it to separate the group's life operations and thus policyholders' returns from the risks associated with its more volatile and cyclical general insurance business.
It will also strengthen Norwich Union's financial position and allow the core life business greater investment freedom.
Institutional demand is a big factor in the expected sharp
rise in the share price.
Both Halifax and Alliance & Leceister saw their shares squeezed higher by financial institutions keen to buy and maintain the weighting of the financial sector in their portfolios.
Like Halifax, Norwich is almost certain to enter the FTSE 100 index of Britain's largest companies later this year.
Many analysts estimate fair value of the shares at anything from 280 pence to 340 pence.
Norwich Union has also been touted as a possible takeover target, with Australian insurer AMP reportedly heading the list of possible predators.
The probable price tag of the group now looks set to price it out reach of many who might have been interested.
News of the final public and members' offer price and provisional basis of allocation is expected to be made on June 15. Dealings will begin on June 16. ($ = 0.613 British Pounds)
",44
"Insurance broker C.E. Heath announced late on Friday that senior management were in advanced talks about a possible buyout of the company for just under 100 million pounds ($163.7 million).
That would value the shares at 143 pence each, a premium of 63 percent over the day's opening price, Heath said shortly after the close of the stock market.
Management involved in the possible offer include group chief executive John Mackenzie Green, according to a source close to the talks.
Meanwhile, non-executive directors are considering the approach.
Over three million shares changed hands in the course of the day ahead of the late afternoon announcement. It was the unusually high stock activity which forced the company to release the news early, the source said.
The success of a bid hinges on fund management group PDFM, which owns 22 percent of Heath, Hambros, which holds 13 percent, Fidelity, with a 13 percent stake and Equitable Life with just under five percent.
In the past Heath was an underwriter, broker and computer services business.
The strategy over the last five years has been to sell underwriting businesses and demerge computer services leaving a pure, medium sized broker in the hope of making the company more attractive to investors.
Over the last year, however, the whole sector has been depressed with market conditions difficult as intense competition squeezed margins.
""Management launched a major reorganisation but the argument is that its very difficult to carry out a restructuring in the full glare of the market place,"" said the source.
Analysts said that a bid from another broker was a possibility but the difficulty was getting the right people to stay with the company.
""The main problem is that the company is the people...There would be other brokers who would be interested if they could get the right people to stay on board,"" said one.
""It's a tricky question -- do shareholders say you can't buy the company but allow them to continue to manage it?"" ($ = 0.610 British Pounds)
",44
"The strength of the British pound hit results at Sedgwick Group Plc on Tuesday as the international insurance broker reported a fall in profits in the first three months of the year.
Over the quarter, pre-tax profits slipped by 1.8 million pounds ($2.9 million) to 43.5 million pounds, with the strong pound knocking 3.4 million pounds off the figures.
The company also announced it was seeking a listing for its shares on the New York Stock Exchange with trading expected to begin in June.
Chairman Sax Riley said that with 40 percent of the group's business emanating from North America, the listing represented a logical step.
Sedgwick's results followed a similar performance by British rival Willis Corroon last week which blamed the pound's strength for a five percent fall in first quarter profits.
Excluding the impact of the currency Sedgwick pre-tax profits were up four percent on last year.
The results were described as ""encouraging"" by Riley given the adverse effect of exchange rates and an increasingly weak insurance rating environment.
Shares in Sedgwick firmed slightly on the results which broadly matched analyst expectations.
By early afternoon, the shares were trading at 130-1/2 pence, an increase of two pence on the day.
""There were no real surprises. Sterling was factored in and there were no shocks there at all,"" commented one analyst.
Merger talk continued to be in the background, he added, but there was no indication that there was any substance to continued speculation about a possible tie-up with British rival Willis.
A series of mergers among rival firms has left both Sedgwick and willis trailing far behind industry giants Aon Corp and Marsh & McLennan of the U.S.
That has prompted speculation the two British companies may pursue a similar strategy in the drive for cost savings.
""The brokers are doing all the right things except making money. Noble Lowndes is doing well - that is one part of the business geared to grow. It is nice to see they're pushing hard at fee-based services. The rest of the business still looks pretty dull,"" said the analyst.
There is an acceptance that rates would not recover in the short-term and that Sedgwick was not budgeting on assumptions of a hardening in rates, he said.
Sedgwick's operational strategy has been focused on lessening the group's dependence on the underwriting cycle by increasing fee-earning consultancy business.
It has also concentrated on broadening its business base and keeping a tight control on costs
The company was looking to extend worldwide consultancy and outsourcing activities, said Riley, and would continue to look for new initiatives aimed at additional profit improvement and cost containment.
""We are confident that this strategy will enable us to make the most of our global network and brand, and to increase shareholder value,"" he added.
The planned joint venture with Nikols, Italy's largest broker and the combination of the two companies' businesses in southern Europe and Latin America created opportunities for significant profit, he said.
The plans are part of Sedgwick's strategy of strengthening its global operations and it was exploring further opportunities to develop its presence in continental Europe, it said. ($ = 0.616 British Pounds)
",44
"Britain's top financial regulator the Securities and Investments Board (SIB) on Thursday launched a 400,000 pound ($654,000) advertising campaign designed to heighten the public's awareness of the review into pensions mis-selling.
Under the banner, ""Have You Lost Out On Your Pension?"", the campaign seeks to underline the importance of the public playing its part in the review.
The advertisements will be carried in the national press between Thursday and Sunday this week.
The move has been timed to coincide with the mailing of questionnaires by firms to people who have potentially been mis-sold pensions.
""It is vital that investors respond to the questionnaire, even if they are unable to provide all the information asked for. Otherwise, their case cannot be resolved speedily,"" the SIB said in a statement.
Just two weeks ago regulators moved to speed up compensation payments to victims of pension misselling by banks and insurance companies in the late 1980s and early 1990s.
Companies involved have been given an ultimatum to  settle outstanding cases in an effort to speed up the process and complete it by the end of next year.
As many as 1-1/2 million people may have been wrongly advised to take out personal pensions instead of staying in occupational schemes.
A review was launched in 1994 but recent figures show that so far only around 50,000 assessments have been completed out of the 570,000 cases currently for review.
A total 102 million pounds has been paid out in 12,650 cases where redress has been accepted, around 8,000 pounds each. ($ = 0.611 British Pounds) Thursday, 29 May 1997 14:02:56 ENDS  nFLLUIT1AF
",44
"Royal Bank of Scotland's telephone-based insurance subsidiary Direct Line on Wednesday said it had seen signs that the bottom of the motor insurance cycle had passed and that it expected results this year to improve on 1996.
But the company, Britain's largest motor insurer, struck a note of caution, warning that it could not be taken for granted that ""irrationality"" would not return to the motor insurance market.
The comments came as Direct Line reported a small rise in pre-tax profits for the six months to the end of March to eight million pounds ($13.1 million) from five million pounds in 1996.
""We see signs in the market place that prices are beginning to recover and we expect our results this year to be better than last year,"" said Royal Bank's chief executive George Mathewson.
""Some of the people writing about doomsday scenarios seem to slightly off the mark,"" he said.
Last year saw an 86 million pound slide in Direct Line profits to 26.5 million pounds as a result of the intense competition in the motor insurance market where rates have been falling since 1993.
Continued price competition in motor and rising personal injury claims costs again dominated the results with lower average motor premium rates and volumes reducing profits by 15 million pounds.
However, the company said that expense and accident repair claims costs remained firmly under control and it had held operating cost per in-force policy steady at 45 pounds.
With a cost structure roughly half that of rivals there were limited cost savings that could be made, Mathewson said.
Claims, however, offered some potential and one opportunity in that area was development of Direct Line's own repair centres.
The company has four sites now operational and has purchased a further three.
""These are really very different to any concept that we have seen before in the industry. We expect to reduce repair claims and offer a substantially improved service to the customer,"" said Mathewson.
Claims costs were 12 million pounds lower than the same period last year which was hit by exceptionally severe winter weather.
Direct Line chief executive Ian Chippendale described the performance as a ""good result in exceptional market conditions"".
""Our business is in excellent shape with a prudent balance achieved between market share, costs and profitability. The company is exceptionally well placed to move forward as rationality returns to the motor market place,"" said Chippendale.
Direct Line said it had allowed its motor market share to fall to 2.1 million from 2.2 million while pricing remained ""irrational"".
Total gross premium income for the period rose four million pounds to 308 million pounds while total assets rose 16 percent to 1.27 billion pounds.
The company continued to expand its home insurance account, increasing policies to 819,000 by March.
Direct Line Financial Services had also seen good progress across its whole product range with the mortgage book now standing at 870 million pounds and savings book 370 million pounds. ($ = 0.611 British Pounds)
",44
"British tobacco-to-insurance group B.A.T Industries on Wednesday said it was confident a string of tobacco-related lawsuits in the United States would have no material impact on its bottom line.
But chairman Lord Cairns said the company must brace itself for ""occasional reversals along the way, especially at the lower court level"".
B.A.T's American subsidiary Brown & Williamson is facing a string of lawsuits, including 24 cases brought by individual states to recover funds spent on treating patients with tobacco-related illnesses.
Speaking after the group released flat first quarter pre-tax profits, B.A.T chief executive Martin Broughton declined to comment on recent press reports that the industry may be in negotiations over a possible $300 billion settlement of the lawsuits.
Broughton also would not comment on suggestions that the tobacco industry may be able to rely on insurance cover to offset the claims.
The issue of insurance, he said, was complex both factually and legally, with many different policies containing many different exclusion clauses.
Schroders insurance analyst Paul Hodges in a recent research note argued that loosely worded general liability insurance policies could open the way for claims by the tobacco industry against their insurance companies.
On Wednesday, B.A.T reported a one million pound ($1.6 million) rise in group pre-tax profits to 591 million pounds in the first three months of the year.
But the company repeated a warning made at last week's annual shareholders meeting that if the strength of the British currency persisted it may hold back the group's full-year results.
B.A.T shares eased slightly after the broadly in-line figures, shedding 1-1/2 pence to 522-1/2 pence by early afternoon.
Total trading profit from B.A.T's financial services business rose three percent to 266 million, with the general business slightly ahead at 142 million pounds and the life companies showing a six percent rise to 124 million pounds.
In North America, insurer Farmers made an encouraging start to the year with all round business growth fuelling a six percent rise in profits to 163 million pounds. But market conditions remained difficult for B.A.T's British business where profits fell two million pounds to 77 million pounds.
While the company expects further rises in premiums in the coming year, it anticipates increases to be limited.
Asked about the recent consolidation in the industry Broughton said the company remained ""alert to acquisition opportunities"" but did not feel the need to do anything urgently.
Re-emphasising comments made last year, he said, the group lacked a strong brand in the independent financial advisory segment of the market and that was likely to be the focus of the group's acqusition appetite.
Total tobacco profit of 363 million pounds would have risen by eight percent but for a 22 million pound provision for the future closure of a cigarette factory in the German capital Berlin, which reduced the increase to two percent.
Total group cigarette volumes rose slightly to 167 billion pounds, with good gains in Asia Pacific, Middle East and Africa and Europe more than compensating for reduced sales in North America.
Tobacco profit from the America-Pacific region was lower at 140 million pounds in the first quarter. Reduced sales in a very competitive U.S. domestic market and the loss of contribution from the sale of brands disposed of at the end of 1996 as required by U.S. competition authorities, more than offset the benefit of last year's price increase.
B.A.T's American subsidiary Brown & Williamson saw lower shipments and its market share fell to 16.3 percent from 17.5 percent, mainly due to the sale of the brands. ($ = 0.614 British Pounds)
",44
"British mutual insurer Norwich Union said on Thursday strong demand had led it to increase the members' offer in next week's flotation to 1.2 billion pounds ($2 billion).
That means some 400 million pounds worth of shares will be clawed back from the public offering, primarily financial institutions, to satisfy members' appetite for extra shares which saw many queuing to beat the June 10 deadline.
Some 800 million pounds worth of shares had originally been set aside to meet members' applications but this proved insufficient as members' rushed to top up their holdings at a 25 pence per share discount to the public offer price.
For Norwich, the flotation will bring to an end more than 200 years as a mutual with policyholders owning the company.
Demutualisation will allow it to separate the group's life operations and thus policyholders' returns from the risks associated with its more volatile and cyclical general insurance business.
It will also strengthen Norwich's financial position and allow the core life business greater investment freedom.
The flotation is likely to value Norwich, which has more than seven million customers, at around 5.5 billion pounds and create Britain's third-largest quoted insurer behind Prudential Corp and Royal & Sun Alliance.
Nearly three million Norwich policyholders will share 1.3 billion free shares in addition to the extra discounted shares.
Norwich still expects the offer price to range between 240 pence and 290 pence per share suggesting large profits for those lucky enough to get extra shares.
Bookmakers City Index are taking bets on a first day closing price of between 335 pence and 345 pence, an immediate profit of at least 70 pence per share.
It would put the value of the minimum 300 free shares with profits members will receive at over 1,000 pounds.
Many will receive far more depending on the value and duration of their policies.
Non-profit policyholders are to receive a flat rate 150 shares.
Institutional demand is a big factor in the likely sharp gains over the offer price.
The two building societies who floated recently -- Halifax and Alliance & Leceister -- saw their share price squeezed higher by financial institutions keen to buy the shares and maintain the weighting of the financial sector in their portfolios.
Like Halifax, Norwich is almost certain to enter the FTSE 100 index of Britain's largest companies.
The public offer, which is made up of the institutional offer, retail offer and employees offer, will be between 1.1 and 1.2 billion pounds following the clawback of the extra shares for members.
News of the final public and members' offer price and provisional basis of allocation is expected to be made on June 15. Dealings in Norwich shares will begin on June 16. ($ = 0.612 British Pounds)
",44
"Norwich Union, the British insurer which starts trading on the stock market this week, said on Sunday that its public offer of shares had been priced at the top end of pre-float forecasts following huge demand for stock.
As widely expected successful applicants will pay 290 pence per share in the public offer while members will pay 265 pence, reflecting their 25 pence discount.
The offer raised around 2.4 billion pounds ($3.9 billion) for Norwich Union and values it at over 5.6 billion pounds.
That makes it Britain's third largest quoted insurer behind Prudential Corp and Royal & Sun Alliance.
But many applicants will be disappointed with the number of shares they actually receive after a sharp scaling back of allocations because of the heavy demand.
Members applied for nearly four times as many shares as were available while the institutional offer was covered a mammoth 10 times.
Norwich Union chief executive Allan Bridgewater declared himself ""delighted"" at the response from both members and institutional investors.
It was, he said, an endorsement of the strength of the Norwich Union brand and the prospects for the business going forward.
Members applying for up to 1,500 pounds worth of shares will get their full allotment but for instance an application of 10,000 pounds will get just 22 percent of shares asked for.
Less than half of the 766,000 members applying for shares will receive their full allocation.
In fact, such was members' appetite that Norwich Union had to claw back 400 million pounds worth of shares from the public offering, primarily financial institutions, to satisfy it.
On the start of trading on the stock market on Monday members will hold just over three-quarters of Norwich Union's share capital.
Those lucky enough to get shares may be tempted to cash-in immediately especially those borrowing to fund the purchases.
But Bridewater said the company had seen no evidence that this would be the case.
Many analysts estimate fair value of the shares at anything from 280 pence to 340 pence. Bookmakers City Index predict the shares to race as high as 353 pence by the end of the first day.
Under the floatation plans which brings to an end 200 years as a mutual nearly three million Norwich Union policyholders will share 1.3 billion free shares under the flotation plans in addition to any extra shares in the members offer.
The minimum 300 free shares 1.8 million with-profits members will receive is likely to be worth more than 1,000 pounds. The average handout will be far higher with additional shares based on the value and duration of their policies.
The 1.1 million non-profit policyholders are to receive a flat rate 150 shares. Bridewater said the company had considered raising the offer price above its pre-float predictions of between 240 pence and 290 pence but had felt on balance that a 290 pence price reflected a ""fair price"" looking forward.
As with recent demutualising building societies Halifax and Alliance & Leceister institutional demand will be a big factor in the expected sharp rise in the share price.
Both saw their shares squeezed higher by financial institutions keen to buy and maintain the weighting of the financial sector in their portfolios.
Like Halifax, Norwich Union is certain to enter the FTSE 100 index of Britain's largest companies later this year.
Norwich Union has also been touted as a possible takeover target, with Australian insurer AMP reportedly heading the list of possible predators.
The probable price tag of the group now looks set to price it out reach of many who might have been interested and Bridewater confirmed that there had been discussions of a takeover with anyone. ($ = 0.611 British Pounds)
",44
"The prospect of a shake-up at Sedgwick Group looked possible on Wednesday after news that a U.S. fund manager known for his aggressive attitude to underperforming companies had taken a sizeable stake in the insurance broker.
Chicago-based David Herro, instrumental two years ago in ousting Maurice Saatchi as chairman of the advertising group Saatchi & Saatchi, since renamed Cordiant, now owns over three percent of Sedgwick through his mutual fund, Oakmark International.
A spokeswoman for Sedgwick said it had held several meetings with Herro as part of its normal programme of contacts with institutional investors, but declined further comment.
Herro led a shareholders revolt against Saatchi in a battle over boardroom pay in 1994.
Saatchi left the firm he founded with his brother, but took some of the group's leading clients with him.
Shares in Sedgwick, which has made no secret of its  desire to take part in the quickening consolidation in the insurance broking sector, rose three pence to 127.5 pence.
The shares have rebounded from a year's low of 113 pence only last week, a gain of nearly 13 percent.
Herro's shareholding may signal renewed pressure on the company to do something following the poor performance of the shares in recent years.
They have fallen nearly 40 percent since the beginning of 1992, compared with a 71 percent advance in Britain's leading shares over the same period.
A demand for action could come in three weeks time at the group's annual meeting on April 24.
There are fears that Sedgwick may have missed the boat after a stream of mergers and takeovers among rival firms.
Just last month Marsh & Mclennan announced a $1.8 billion merger with Johnson & Higgins to form the world's largest broker.
The $1.2 billion merger of Aon and Alexander & Alexander in the U.S. last December, followed swiftly on the heels of Aon's purchase of Bain Hogg from Inchcape. JIB Group and Lloyd Thompson merged at the end of last year to form Jardine Lloyd Thompson.
This has left Britains's two largest brokers, Sedgwick and Willis Corroon somewhat stranded and has raised the prospect of the two being pushed into each others arms as the only solution to their current difficulties.
Willis has always brushed off suggestions it may be interested in teaming up with its British rival.
But Sedgwick chairman Sax Riley, until recently group chief executive, has repeatedly refused to rule out a merger.
After the results in February which saw a five percent rise in pre-tax profits to 95.5 million pounds ($155.2 million) Riley said the group continued to look at opportunities in the sector and predicted a second round of consolidation was about to begin in the industry.
The attraction of mergers are the huge cost savings firms can strip out. Marsh & Mclennan predicted annual cost savings of at least $150 million following its March deal.
However, mergers also raise potentially big  difficulties in marrying often very different corporate cultures and the risks of damage to staff morale or loss of key personnel have to be weighed carefully.
But insurance broking is suffering from overcapacity and stagnant or declining commissions. Insurance premiums, the basis for commissions, have slumped in the past decade.
There has also been a trend of companies taking on more risk themselves and paying fees for risk management advice rather than commission for broking. ($ = 0.615 British Pounds)
",44
"The Lloyd's of London insurance syndicate Friday posted profits of more than 1 billion pounds ($1.6 billion) for the second year running -- but warned that profits would fall for at least the next two years.
The insurance market, which last year only just succeeded in pushing through a rescue package after the billions of pounds of losses run up between 198nd 1992, also said its future focus would be on customers.
""For too long, Lloyd's has been obsessed with its capital base. We need to get back to basics,"" said Chief Executive Ron Sandler.
That meant providing customers with the best service and developing international trading opportunities, he said.
Lloyd's results are reported three years in arrears, and for 1994 profits once again topped the billion-pound mark at 1.01 billion pounds ($1.6 billion).
That fell just short of 1993's record level of 1.08 billion pounds ($1.8 billion) and was in line with forecasts.
Corporate members, who were introduced to the market in 1994 following the near-disastrous losses which threatened to sink Lloyd's, will share in the profits for the first time.
Corporate capital now provides some 44 percent of the market's capacity, a figure that is forecast to increase further in the future.
Sandler described the 1994 results as ""extremely satisfactory"" but said there was no sign of an end to the downward trend in premium rates.
That decline, a product of competition in insurance markets worldwide, is expected to have a significant impact on profits in the next few years.
An aggregate of individual syndicate forecasts suggests profits will fall to around 900 million pounds in 1995 ($1.5 billion) and 600 million ($980 million) in 1996.
The 1995 figure is ahead of projections made this time last year despite the adverse movement in currencies, but the slide in rates is expected to take its toll in subsequent years.
Lloyd's chairman, Sir David Rowland, admitted 1997 results would be under pressure from the decline and said he hoped brokers would ""sit on their hands when offered business at crazy rates.""
The 1994 figures were a result of generally good market conditions and the exercise of much-sharpened skills in pricing and the setting of terms by Lloyd's underwriters, he said.
They were also helped because of fewer catastrophes, he added, though currency effects reduced profits by around 100 million pounds ($164 million).
Lloyd's returned to profit 12 months ago following five years of record losses totalling more than 8 billion pounds ($13 billion).
Those losses were reinsured into a separate company, Equitas, a central plank in Lloyd's ""reconstruction and renewal"" plan which ensured the 300-year old insurance market's survival.
The reinsurance of 1992 and prior liabilities have transformed Lloyd's position, Sandler said, and clients could be confident that Lloyd's security ranked alongside the best in the world.
",44
"The latest rise in Britain's lending rates is unlikely to put the brakes on the recovery in house prices, market experts said on Tuesday.
While the impact of today's 1/4 point rate rise is widely expected to be limited, the Royal Institution of Chartered Surveyors warned that further rises in rates could risk widening the country's north-south divide in the housing market.
The warning came after some of Britain's largest home loan providers raised mortgage rates in response to the newly elected Labour Government's decision to increase base rates from six to 6-1/4 percent.
Britain's biggest mortgage provider, the Halifax Building Society and Abbey National Plc acted quickly to raise their lending rates after news of the government's move. The Halifax raised its rate to 7.6 from 7.25 percent, while Abbey raised its rates by 31 basis points.
The two, who together have more than four million borrowers, are likely to be followed by other mortgage providers.
Despite worries about future rises, today's increase is unlikely to halt a recovery in Britain's housing market, which has seen prices rise throughout the country and boom in London and the South East region, after falling sharply during the early 1990s.
According to figures from NatWest Group, house prices fell on average by 1.5 percent annually between 1990 and 1995.
""Today's interest rate rise will do little to harm the housing market recovery, but any further rises, if coupled with the abolition of mortgage interest tax relief (MIRAS), would leave thousands of homeowners worse off and widen the north/south divide,"" said the Royal Institution of Chartered Surveyors.
MIRAS has been widely tipped as a possible casualty in the Labour government's plans to implement its spending plans while keeping its income tax pledges.
It is a proportionately bigger benefit for homeowners in the north of Britain, where the average mortgage of 40,000 pounds ($64,700) is less than half that in the south east.
Today's interest rate rise is not expected to be the last and the Institution of Chartered Surveyors estimate that a one percentage point rise in rates, together with the loss of MIRAS, could increase the cost of the average mortgage by around 60 pounds a month by the end of the year.
Others, however, were less gloomy about the future prospects for house prices.
A spokesman for the National Association of Estate Agents said they were disappointed by the rise in rates but said they did not expect it to have a major impact on buyer confidence.
NatWest Group are forecasting a strong rise in the market in 1997, peaking at over 10 percent nationally and at more than 15 to 20 percent in London and the South East.
Despite predicting year-end interest rates of seven percent, Natwest estimate house prices will rise by eight percent in 1997 and average 4.5 percent annually between 1997 and 2001.
Strong growth in personal incomes reflecting rising employment, higher earnings and lower taxes, together with maturing TESSA saving plans and windfalls estimated at over 20 billion pounds from building society and insurance company mergers and stock market flotations, are behind NatWest's positive outlook.
It also does not expect mortgage rates to rise much above current low levels, ""ensuring that houses remain very affordable by historical norms"".
That view was echoed by Halifax chief executive Mike Blackburn.
""Mortgage rates are still at a relatively low level and it is clear that the housing market is continuing to recover. We do not believe this increase will halt the recovery,"" said Blackburn.
After the latest change, interest rates are still around half the peak experienced in 1990. ($ = 0.618 British Pounds)
",44
"Lloyd's of London on Friday moved to reassure its traditional backers, Names, that there was no hidden agenda to force them out of the 300 year-old insurance market.
""Trust us,"" outgoing chairman Sir David Rowland answered in response to a question from one worried Name. ""It'll be all right.""
Speaking at his last annual meeting as chairman, Rowland also promised there would be no move to do away with the venture where syndicates are reformed each year, despite criticisms from some managing agents that it is out-of date and expensive.
But he threw his support behind recent changes in the market which have seen members move away from unlimited to limited liability.
On retirement, said Rowland, he would become a limited liability member of Lloyd's.
""Unlimited personal liability has been shown to mean exactly what it says, and I no longer believe that the substantial advantages of that method of trading should blind us to the reality of its possible consequences for the individual,"" he said.
New trading structures with continuous capital, allowing the commitment of resources for the long term development of underwriting businesses, may prove the better route, said Rowland.
Unless it embraced change Lloyd's would see a steady decline in its fortunes, he warned.
The annual venture and the reinsurance of outstanding claims when the syndicate year closed - known as reinsurance to close - had appeared to work admirably until the eight billion pounds ($13 billion) of losses between 1988 and 1992 that at one point threatened to destroy Lloyd's.
Rowland argued it would never again be possible to reinsure to close an annual account without remembering the vulnerabilty of the system.
Critics have increasingly questioned the viability of the annual system of raising capital for Lloyd's, which they say is both costly and prevents long term planning.
Only a few days ago, the outspoken former chairman of Lloyd's, Robert Hiscox, described it as an ""anachronistic absurdity"" and attacked the complexity of the current capital structure where Names and corporate capital co-exist.
There is increasing tension at Lloyd's between Names, whose assets largely back the market on an unlimited basis and limited liability corporate capital, first introduced in 1994.
These tensions would be resolved by market forces promised Rowland.
""The Council affirms members' rights to continue to trade on an annual venture basis if they and their agents wish,"" said Rowland.
""But the Council does not believe that it should prescribe one structure over another. The pattern that results will reflect the choices made by agents, members and new capital providers,"" he said.
Members would also be free to choose whether to continue to trade on an unlimited basis, he said.
The Council, however, expects the trend toward corporate membership to continue.
A survey by the Association of Lloyd's Members, a group which represents Names' interests, showed more than half will be considering conversion to limited status over the next few years, according to Rowland.
Both Rowland and chief executive Ron Sandler in their speeches repeatedly stressed the importance of looking forward to the 500 or so Lloyd's members who turned up to the meeting in London's Barbican Centre. ($ = 0.615 British Pounds)
",44
"Around three million members of British insurer Norwich Union will be able to buy shares at a 10 percent discount in a planned offering ahead of the company's flotation on June 16.
Norwich is to raise 1.75 billion pounds ($2.9 billion) of fresh capital in the offering and up to a further 670 million pounds to fund cash payments to its half million overseas members.
The company has also increased its estimate of the price of the new shares.
They are now expected to be sold at between 240 pence and 290 pence. The group's brokers Kleinwort Benson had previously given a guide price of between 220 pence and 265 pence.
Members of the insurance group, Britain's third largest with seven million customers worldwide, are to be offered extra shares at a fixed discount of 25 pence.
A member is someone who holds a Norwich life insurance, pension or annuity policy. Holders of non-life policies such as house contents or car insurance do not qualify.
Members will also receive around 1.3 billion free shares worth around 3.4 billion pounds under flotation plans already announced.
Under the new forecasts, the value of the 300 shares minimum allocation to with-profits policyholders will increase by at least 60 pounds and could be worth as much as 870 pounds.
Members will receive additional shares based on the value and length of time they have held their policies.
The company said it expected to be valued at between 4.9 and 5.6 billion pounds on flotation which would put it in the FTSE 100 index of Britain's largest quoted companies.
Norwich chairman George Paul said the company was keen to encourage members to continue to participate in the future of the group.
""I hope that they will take advantage of this opportunity to buy further shares at a 25p discount,"" said Paul.
Alan Bridgewater, Norwich's chief executive, said they were expecting widespread interest in the offer.
Norwich members wishing to take part in the public offering will have to apply for a minimum of 400 pounds worth of shares. There will be an upper ceiling on applications by members of 100,000 pounds.
At least 800 million pounds worth of shares have been reserved to meet applications from members. This may be increased by clawing back 400 million pounds worth of shares from the public offering in the event of strong demand.
The final members' offer price will be announced on June 15 and will be used to determine how many shares succesful applicants receive.
Mini-prospectus and application forms are to be sent to members today. The deadline for receipt of applications is June 10.
Around 1.5 billion pounds of the money raised will go into the policyholders' life fund while the excess, less the 120 million pound cost of flotation, will be used for corporate purposes. ($ = 0.604 British Pounds)
",44
"British insurance broker and risk management consultant Willis Corroon Group Plc on Wednesday blamed sterling's strength and continued competition for a five percent fall in profits over the first three months of the year.
Pre-tax profits first quarter fell to 45.7 million pounds ($74.7 million) in the first quarter from 48.1 million pounds last year.
But after adjusting for the adverse impact of foreign exchange movements of 4.4 million pounds, underlying profits were up four percent.
Brokerage and fee revenue from continuing operations fell by seven percent to 184.2 million pounds.
Willis executive chairman John Reeve said the results were in line with expectations at the start of the year and reflected ""intensifying competition"" between underwriters which had led to further falls in premium rates.
Shares in the company dipped slightly after the figures which analysts said broadly met forecasts, losing four pence to 144 pence by late morning.
""There's the effect of falling premium rates, the effect of the currency and an element of shifting profits from the first quarter to later in the year,"" said one analyst.
""They are looking to enhance shareholder value over time but it's not going to happen overnight. There isn't any great underlying revenue growth. Costs are likely to be held down and brokerage to remain flat so it's not very exciting basically.""
The strengthening of sterling against the dollar and other currencies had a disproportionate effect on the results due to the weighting of foreign currency revenues in the company's global speciality businesses in the early part of the year.
As previously forecast, changes in the pattern of the business were likely to reduce the proportion of annual profit arising in the first quarter, Reeve said.
""Against this background, our underlying performance is satisfactory, with encouraging growth in a number of key business segments,"" he said.
Industry consolidation had led to significant shifts in the competitive environment and the resulting large combinations created both challenges and opportunities, said Reeve.
A series of mergers among rivals has left Willis and British rival Sedgwick Group trailing far behind industry giants Aon Corp and Marsh & McLennan Cos Inc of the U.S.
Chicago-based Aon has bought out three of its rivals in the past six months and said only last week that it was still interested in doing more deals.
Marsh & McLennan's $1.8 billion acquisition of privately-owned Johnson & Higgins in March has further increased the pressure on the two British brokers and raised the prospect of the two being pushed into each others arms as the only solution to their current difficulties.
However, Willis has always brushed off suggestions it may be interested in teaming up with its British rival.
Reeve said the company intended to continue to pursue its change programme, designed to alter fundamentally the way it does business and ""seize new development opportunities within the altered market-place.""
($ = 0.611 British Pounds)
",44
"The Association of British Insurers (ABI) on Thursday cautioned the new Labour government against reducing tax credits on dividends or lowering incentives to pension provision in its first budget.
It also called on Labour to use the budget, expected in June, to encourage long-term savings and warned it against changes in the tax system which would undermine consumer confidence.
Reducing the level of tax credits on dividends would hit Personal Equity Plans (PEPs) and charities as well as pension business, said the ABI.
It would also lead to an increased imbalance between the tax treatment of interest and dividends, it said.
Advance corporation tax (ACT) is payable by British tax resident companies on dividends but can be offset against their mainstream corporation tax liability.
Currently, institutions such as pension funds pay no tax and are able to generate extra income by claiming back the ACT paid by companies which distribute dividends net of basic tax.
Because the Labour party has ruled out changes to income tax, it is widely believed to be considering reducing the credit for corporation tax paid to non-taxpaying recipients of dividends, including pension funds, to help meet spending plans.
The Association's director general Mark Boleat said its budget representations aimed to help the government's commitment to encourage savings and develop the partnership between public and private provision.
""Adequate pension provision and savings are essential for everyone and it is vital that the tax system should be targeted at encouraging this and without undue complexity,"" said Boleat.
According to the ABI, more people could be encouraged to start or increase levels of pension savings through simplifying the pension contribution rules and introducing greater flexibility for pension schemes to cover long-term care and other forms of provision.
It also advised the introduction of savings accounts with tax treatment along PEP lines and extending the qualifying status for life insurance policies.
Restricting tax relief on pension contributions to the basic rate of income tax would make pension savings less attractive and could lead to a transfer of funds into more tax favoured arrangements such as PEPs, it said.
Similarly, removing tax relief on private medical insurance for the over 60s would substantially reduce take-up of insurance by older individuials and increase pressure on National Health spending.
The ABI also urged the government not to raise the  current rate of insurance premium tax, saying it would represent a threat to prudent protection.
It said if individuals bore risks themselves rather than insure they could be unable to meet the resultant financial liabilities and called for the eventual abolition of it.
Most non-life premiums are taxed at a rate of four percent with some classes of business such as travel insurance anbd extended warranties facing rates of 17-1/2 percent
""It is a regressive tax in its effect and hits hardest those in tne poorer sectors of the community who can least afford an unexpected loss,"" said Boleat.
-- Simon Cowell, London Newsroom +44 171 542 7717
",44
"Lloyd's of London announced on Tuesday it is to give Names more time to meet planned increases in the capital they must put up to support their underwriting activities.
Lloyd's has also dropped proposals to prevent Names - the traditional backers of the insurance market - using their own homes as collateral for underwriting.
The planned capital increases are part of a package of measures designed to strengthen the financial security that underpins Lloyd's and to provide a level playing field between Names and corporate members.
The longer transition period for the changes announced today may go some way to meeting the concerns of Names' representatives who had called for more time to be given to meet the new capital requirements.
Names fear they are gradually being forced out of the market in favour of corporate capital first introduced in 1994, a charge repeatedly denied by the Lloyd's hierachy.
Names are to be given three years before they have to meet the new requirements of showing evidence of assets amounting to 50 percent of the premiums they underwrite.
In a Lloyd's working party report last month a two-year transition period was proposed but, after consultations, that has been extended from 1999 to the year 2000.
A phased increase in Names' minimum level of means to 350,000 pounds ($571,000) from the current level of 250,000 pounds has also been increased from two to five years and will come into force in 2002.
This 350,000 pounds will be made up of funds held at Lloyd's and evidence of ""other personal wealth"" (OPW).
Proposals to double the OPW requirements for 2000 and beyond have been dropped in favour of a slightly higher level of funds which must be held at Lloyd's.
At present Names must put up between 20 and 30 percent of the total business they back compared with 50 percent for corporate members.
By 2000, Names will have to hold 40 percent of premium capacity at Lloyd's with OPW making up a further 10 percent, bringing them into line with corporate members.
The use of ""principal private residences"" (PPRs) - Names' own homes - as collateral for members' underwriting are to be allowed to continue but only for those in existence at the end of 1994.
No new PPR backed guarantees may be introduced in the future nor existing one increased.
Risk assessment is to be extended to all members from  1998 onward and may require higher capital levels for members with greater risk exposure.
This is expected to affect less than 10 percent of individual members.
The Association of Lloyd's Members (ALM), which represents Names' interests, broadly welcomed today's proposals, saying it was essential that all Names should demonstrate their ability to meet any losses they incurred.
Lloyd's proposals coincided with the publication of an independent report commissioned by the Market Interests Group - an alliance of the ALM, member agents and Lloyd's brokers.
It acknowledged that reform in particular of the annual venture and management of Names' based capital was important, but said that creating an environment that encouraged their disappearance would be a significant mistake.
Earlier on Friday a leading figure in Lloyd's called for the capital structure of the market to be simplified.
Robert Hiscox, chairman of insurance group Hiscox Plc described the annual venture - where syndicates are reformed anew every year - as an ""anachronistic absurdity"" and said the current mixture of unlimited and limited members was too expensive to maintain. ($ = 0.611 British Pounds)
",44
"Lloyd's of London on Friday posted profits of over one billion pounds ($1.6 billion) for the second year running -- but warned that profits would fall for at least the next two years.
The insurance market, which last year only just succeeded in pushing through a rescue package after the billions of pounds of losses run up between 1988 and 1992, also said its future focus would be on customers.
""For too long, Lloyd's has been obsessed with its capital base. We need to get back to basics,"" said Chief executive Ron Sandler.
That meant providing customers with the best service and developing international trading opportunities, he said.
Lloyd's results are reported three years in arrears and for 1994, profits once again topped the billion pound mark at 1.01 billion pounds.
That fell just short of 1993's record level of 1.08 billion pounds and was in line with forecasts.
Corporate members, who were introduced to the market in 1994 following the near-disastrous losses which threatened to sink Lloyd's, will share in today's profits for the first time.
Corporate capital now provides some 44 percent of the market's capacity, a figure that is forecast to increase further in the future.
Sandler described the 1994 results as ""extremely satisfactory"" but said that there was no sign of an end to the downward trend in premium rates.
That decline, a product of competition in insurance markets worldwide, is expected to have a significant impact on profits in the next few years.
An aggregate of individual syndicate forecasts suggests profits will fall to around 900 million pounds in 1995 and 600 million in 1996.
The 1995 figure is ahead of projections made this time last year despite the adverse movement in currencies but the slide in rates is expected to take its toll in subsequent years.
Lloyd's chairman Sir David Rowland admitted 1997 results would be under pressure from the decline and said he hoped brokers would ""sit on their hands when offered business at crazy rates"".
The 1994 figures were a result of generally good market conditions and the exercise of much sharpened skills in pricing and the setting of terms by Lloyd's underwriters, he said.
They were also helped because of fewer catastrophes, he added, though currency effects reduced profits by around 100 million pounds.
Lloyd's returned to profit 12 months ago following five years of record losses totalling more than eight billion pounds.
Those losses were reinsured into a separate company, Equitas, a central plank in Lloyd's ""reconstruction and renewal"" plan which ensured the 300-year old insurance market's survival.
The reinsurance of 1992 and prior liabilities had transformed Lloyd's position, Sandler said, and clients could be confident that Lloyd's security ranked alongside the best in the world.
Final proposals for further strengthening the market's financial security which will include increasing the amount of capital that Names -- the traditional backers of the market -- have to put up to back their underwriting, are expected to be published next week.
Lloyd's is continuing its efforts to recover around 600 million pounds of debts owed by Names who have refused to meet their losses.
Rowland said it was impossible to give an estimate of how much Lloyd's thought it could collect, but said it would be a substantial sum of money.
Litigation in the U.S. and Britain was unlikely to prove problematic and the amount recovered would depend ultimately on the assets of the Names involved, he added. ($ = 0.610 British Pounds)
",44
"Britain on Friday launched a new watchdog for the country's 200,000 occupational pension schemes.
Called the Occupational Pensions Regulatory Authority (OPRA), the body was set up in the wake of the pension scandal surrounding publishing mogul the late Robert Maxwell.
The independent watchdog, which will be based in Brighton on the English south coast and starts operations on Monday, was established under the Pensions Act 1995 drawn up in the wake of the Maxwell pensions scandal of 1991.
The new act comes into force on April 6 and the reforms are designed to reinforce the most important parts of existing British pensions law.
OPRA chief executive Caroline Johnston said it would be naive to say that one could guarantee that there could not be a recurrence of the Maxwell situation when more than 400 million pounds ($655 million) went missing, but she expressed confidence that it would be ""much less likely"" in the future.
OPRA will ensure that occupational schemes, which control some 500 billion pounds of assets, abide by the new rules and are adequately funded to cover members' pensions.
Its remit is to see that the interests of Britain's 12 million members of company pension schemes are protected and that occupational pension schemes comply with the law.
It will have powers to investigate suspected breaches of the law and take legal, disciplinary or regulatory action against employers or trustees where breaches are found.
Under the Pensions Act legislation, it will have the power to investigate trustees, search company offices and seize documents.
Actuaries and auditors will be under a new statutory duty to report clients if they find rules being breached.
In the event of any wrongdoing, OPRA will be able to fine trustees, remove them from their posts, disqualify them and, if necessary, replace them with their own nominees.
It can also wind up schemes and apply for injunctions to prevent the misuse of pension scheme assets.
OPRA chairman John Hayes promised the body would take a pragmatic approach and did not necessarily expect schemes to be in a position to comply with every aspect of the new Pensions Act from day one.
""We will deal with cases on merit...and be sensitive but tough,"" Hayes said.
And while it plans to make use of publicity to encourage compliance, OPRA says it will not be heavy handed with small-mistakes that do not involve dishonesty or a deliberate ignoring of the rules.
The new regime will rely heavily on tip-offs and has set up a hotline to enable employees and pensioners to pass on information -- anonymously if they wish.
($ = 0.609 British Pounds)
",44
"Members of the Norwich Union are to receive 3.1 billion pounds ($5.1 billion) worth of free shares after they overwhelmingly approved plans on Friday to float the insurance group on the London Stock Exchange in June.
The company, Britain's third largest life insurer, said that nearly 99 percent of members who voted had backed management's proposals to drop mutual status and become a public company.
The results of a postal vote announced at a sparsely attended extraordinary general meeting showed 21,000 votes against the plans dwarfed by over 1.85 million members in favour.
Less than 200 Norwich Union members turned up to the meeting held at the London Arena in the capital's Dockland, but a number who did voiced their opposition to the flotation which will see members net an average 800 pounds worth of shares.
Another one million ""non-profit"" policyholders of the group will receive a fixed handout of shares worth beween 330 and 400 pounds.
Norwich Union chief executive Allan Bridgewater welcomed the result. ""We are delighted to have received a resounding endorsement from our members for the flotation proposal and thank them for voting in such numbers,"" he said.
There were few doubts about the outcome of the vote which follows a series of similar moves by British building societies in the past year.
The Halifax, Alliance and Leicester, and the Woolwich have all received unequivocal backing for plans to convert to banks which have also involved distributing hundreds of pounds worth of shares to members.
Norwich Union also plans to raise 1.75 billion pounds of fresh capital through an offer of new shares in May and Bridegewater said he hoped a considerable part of this would come from existing members increasing their shareholdings.
They will be able to purchase the shares at a discount, the size of which has yet to be announced.
The demutualisation and flotation of the company, the first by a mutually-owned British insurer, will value Norwich Union at around five billion pounds and rank it among Britain's 50 largest companies.
Norwich Union's 10,000 employees will share in the giveawy, receiving 150 shares each.
The two million with-profit members will receive a minimum of 300 shares with additional shares based on the value and duration of their policy holdings as at October 1, 1996.
But the giving up of mutual status, entailing the transfer of ownership from policyholders to shareholders is an emotive issue.
Supporters of mutuality argue that it gives members undiluted exposure to the profits of the business without the need to pay dividends to shareholders.
The attraction of demutualisation is the access to capital it gives. It was the need for capital, with the greater investment flexibility it brings, which drove Scoottish Amicable to put itself up for auction in February.
But there are questionmarks over how long Norwich Union will be able to hold onto its independence.
Australian mutual AMP which lost out in its fight for Scottish Amicable to Britain's Prudential last month, has made no secret of its desire to expand in Britain.
Interest may also come from Europe with a number of continetal insurers including Dutch insurer Aegon and Germany's Allianz looking for a foothold in Britain.
Norwich Union argues its plans will offer more scope for developing the business in the future and allow the separation of the group's life operations from the risks associated with its more volatile and cyclical general insurance business.
A court hearing formally to approve the proposals will take place on April 23.
",44
"Lloyd's of London on Wednesday said that preliminary underwriting profits had topped the one billion pound mark for the second year running despite a slight drop from the previous year's level.
The insurance market made profits of 1.005 billion pounds ($1.7 billion) before tax and after members' personal expenses for the 1994 underwriting year. That was down from 1993's profits of 1.084 billion pounds but were in line with forecasts made by the market at the time of last year's figures.
Lloyd's reports results three years in arrears. The presence of corporate members in the 1994 numbers for the first time prompted a slightly earlier release of the figures than usual.
Corporate funds have been increasingly replacing Names -- individuals whose asets have traditionally supported the market -- since 1994 and account for around 44 percent of the capital underpinning business written this year.
Lloyd's returned to profit last year after five years of record losses totalling more than eight billion pounds which had threatened the very survival of the world's oldest insurance market.
Failure of the market was avoided with the successful completion of Lloyd's reconstruction plan last year.
The fall in profitability from one year to the next is a reflection of the cyclical nature of the insurance industry.
Years of high returns are often followed by more competitive pricing until an upturn in claims reverses the trend.
The preliminary 1994 result is based on an initial review of syndicate returns representing 94 per cent of the market's 1994 capacity of 10.898 billion pounds, and projections for the remaining syndicates.
Final figures for the 1994 year will be published in Lloyd's Global Results in early June when projected results for the 1995 and 1996 years of account will also be published.
Lloyd's Global Results 1995 projected a profit for the 1994 underwriting year of 1.008 billion pounds, using a sterling exchange rate of $1.55. The preliminary result of 1.005 billion is based on the exchange rate at 31 December 1996 of $1.71. ($ = 0.606 British Pounds)
",44
"Lloyd's of London Names -- the traditional backers of Lloyd's insurance market -- will have to dig deep in their pockets in future if as expected a working party set up to assess the market's funding recommends an increase in the minimum amounts Names provide to support their underwriting, insurance sources said.
Lloyd's, still smarting from massive claims suffered by the market between 1988 and 1992, is expected to announce fundamental changes to its capital structure in the next week, the sources said on Wednesday.
According to the sources, the report filed by the working party should be published within the next few days.
At present Names must put up between 20 and 30 percent of their underwriting capacity as deposits, compared with 50 percent for corporate investors.
Under the working party's plans Names may be required to provide at least 32.5 percent next year, and 37.5 percent in the following year, according to a report in Britain's Financial Times newspaper.
One source at Lloyds described the figures as looking ""familiar in terms of earlier discusssions here"".
The new system would require all investors to show evidence of assets totalling 50 percent of premiums.
The eight billion pound ($13 billion) losses between 1988 and 1992, which have prompted the latest changes and at one point threatened to sink Lloyd's, ushered in the introduction of corporate capital for the first time and a decline in the number of Names to below 10,000 for the first time since the mid-70s.
In 1989, the figure was over 34,000.
Corporate funds now account for around 44 percent of this year's 10.3 billion pound capacity and since their introduction have been strengthening ties with managing agents which run insurance syndicates.
Only last week Commercial Union became the first major composite insurer to enter Lloyd's with the purchase of Marlborough Underwriting Agency.
The developments raise questions about Names' long term future at Lloyd's and some observers expect the share of corporate capacity to rise to two-thirds or more by the turn of the century.
($ = 0.614 British Pounds)
",44
"Lanica Trust Limited, the investment vehicle run by 31 year old Andrew Regan confirmed on Monday it had lost over 600,000 pounds ($981,000) in its failed attempt to win control of the Co-operative Wholesale Society (CWS).
And the company said its shares, suspended in February after news of its interest in the Co-op leaked to the press, would not be relisted until legal proceedings pending against Regan and business partner David Lyons had been resolved.
Lanica shares were suspended on February 10 at 19-1/2 pounds after soaring from just 137 pence at the end of October.
A spokeswoman for the London Stock Exchange said that there were a number of ""unresolved issues"" surrounding the company.
Lanica's ambitious plans to bid 1.2 billion pounds for the Co-op crumbled in April amid a flurry of legal writs following allegations of the theft of confidential Co-op documents and financial irregularities in an earlier Regan deal.
The circumstances surrounding the planned Co-op takeover won it an unprecedented ""unreserved"" public apology and substantial cash settlement from Regan's merchant bank Hambros.
A preliminary hearing of the private prosecution for theft and handling stolen property brought by the Co-op against Regan was last week adjourned until June 18.
The Serious Fraud Office is currently investigating a transaction between the Co-op and Hobson Group, then headed by Regan, back in January 1995.
Lanica said that it had made a loss of 381,045 pounds last year, compared with a 578,456 profit a year earlier.
The loss included the write-off of Lanica' entire 600,000 pound investment in Galileo Group, the company specially set up to make the Co-op bid.
Regan intended to break-up the Co-op, selling off constituent parts of the group whose interests range from supermarkets, banking and insurance to opticians, chemists and funeral parlours.
Following the failure of the bid, Galileo was put into liquidation. The liquidators, Ernst & Young, have not ruled out legal action against Regan, Lanica or its advisers Hambros.
In a statement accompanying the results, Regan again expressed his disappointment that Galileo had been unable to put its proposals to Co-op members.
""We believed very strongly that these were in the best interests of Lanica Trust's shareholders, but equally importantly, to the owners of CWS. However, it was not to be,"" said Regan.
Lanica would continue to examine investment opportunities which over time would ""provide our shareholders with substantial potential for capital growth"", he added. ($ = 0.611 British Pounds)
",44
"Britain's largest life insurance group Prudential Corp said on Wednesday it is to increase its exposure to the top end of the personal financial services market by taking a near 30 percent stake in St James's Place Capital.
The move coincides with news that St James' is seeking to buy the 49 percent of life insurer J. Rothschild Assurance (JRA) it does not already own and comes hot on the heels of the Pru's purchase of mutual insurer Scottish Amicable two weeks ago.
It is the attraction of JRA, set up by St James's co-founder Sir Mark Weinberg in 1992, and its upmarket clientele which lies behind the Pru's interest in St James's.
JRA targets high net-worth individuals, managing some 1.7 billion pounds ($2.8 billion) for its near 200,000 policyholders.
In 1996, the company announced a 41 percent growth in new business, among the highest in the industry.
Despite assurances from the Pru that it would respect JRA's wishes to stay independent, any future takeover of it or St.James would represent a neat hat-trick for Weinberg.
In the 1960s he founded insurance firm Abbey Life, which he later sold to Lloyds Bank. He then set up Allied Dunbar, eventually selling that to B.A.T Industries.
However, the Pru has agreed not to increase its holding in St James's for at least a year, unless the company attracts a bid from a third party.
That undertaking was described as ""fundamental"" to the deal by Mike Wilson chief executive of JRA.
The Pru will pay around 39.6 million pounds for 30.5 million St James's shares, to add to the 10.4 million shares it already owns.
Scottish Amicable holds approximately 20 percent of JRA which after conversion into St James shares will give the Pru control of 118.8 million shares or 29.9 percent.
""Something had to happen to sort out the interest the Pru acquired through ScotAm. This looks an elegant intermediate step but may not be the final solution,"" said one industry analyst.
The move gave the Pru strategic options, he said and a purchase of JRA further down the line would not conflict with its existing Prudential or Scottish Amicable brands.
""The value would be in keeping it separate. It's a fairly unique organisation and the Pru's chief executive Peter Davis has said in the past that there's nothing wrong with operating separate brands.""
St James said it believed the plans would enable JRA to achieve more rapid growth through improved incentives for the sales force and a simplification of the management structure.
Plans to float JRA on the stock market, possibly as early as this summer, have been shelved.
Wilson said today's proposals would result in the same benefits for shareholders but at an earlier stage than would otherwise have been possible.
JRA contributed 11 million pounds towards St James' after tax profits from continuing operations of 25.1 million pounds in the nine months to December 31, 1996, up from 5.5 million pounds for the whole of the previous year.
St James said it believed JRA, with its high quality, focused distribution and strong brand name was well placed to take advantage of current developments in the industry.
Lord Rothschild who co-founded St James's with Weinberg, sold half his family's stake for 13.8 million pounds last October following his decision to step down as joint chairman after the group's reconstruction in the summer.
St James's also owns Life Assurance Holding Corp which specialises in the acquisition and management of closed life assurance policies and Global Asset Management, a specialist fund management company. ($ = 0.615 British Pounds)
",44
"British composite insurer Royal & Sun Alliance Group Plc on Tuesday gave the green light to a planned share buyback as the company reported a sharp increase in profits for the first quarter of 1997.
But in the absence of any major positive surprises, shares gave only a muted reaction to the news, slipping back 7-1/2 pence to 482 pence pence by late morning.
Pre-tax operating profits for the first three months of the year rose 24 percent to 195 million pounds ($320.6 million), helped by a fall in weather related costs in the United States.
Royal Sun said it remained on target to achieve at least the 175 million pounds of cost savings identified at the time of last year's merger and with the results now out of the way the buyback of five percent of the shares approved at the annual meeting would go ahead.
""We're now in a position that brokers can start to move into the market to do the buyback. How long it will take is just a matter of timing and it's something we're discussing closely with our brokers,"" chief executive Richard Gamble told Reuters.
While a 34 million pound fall in weather-related costs boosted U.S. general business profits to 51 million pounds, a near two thirds rise in UK subsidence took the shine off the British results.
The 10 million pound rise in subsidence more than accounted for the five million pound drop in British profits to 50 million pounds.
""Subsidence is a worry. The good news is the recent rain but it has been one of driest winters on record following on from other dry periods,"" said Gamble.
""We do anticipate subsidence is going to be with us for some time to come but that is being built into the cost of household insurance.""
Analysts said views on the stock largely depended on assessments of the pace of progress in integrating operations.
Repeating a ""hold"" recommendation on the stock, Tim Young at brokerage SocGen warned it may drag out longer than some expect.
""It is a huge task integrating the two groups and that makes us cautious for the short term,"" Young said. ""I find it difficult to see how it can operate as a truly integrated unit before 1999.""
At Lehman Brothers, analyst Rob Procter said good news on the integration progress should emerge through the next 12 months.
""They are likely to beat their cost savings targets and the share buyback could be the first of many,"" Procter said.
Following last year's six billion pound merger of Royal Insurance with Sun Alliance Insurance, Gamble said the reduction in staff numbers would accelerate in 1997.
By the end of March some 1,500 people had left the company and together with properties vacated, annualised savings are so far running at 44 million pounds.
The merger had not affected the group's ability to pick up new business nor retention levels which, said Gamble, were holding up to expected levels.
Echoing remarks made by competitors last week, the company said the rating environment had become more realistic with a succesful four percent increase in motor market rates implemented last autumn.
Royal Sun is to continue to keep an eye on opportunities for small acquisitions such as the recent 46 million pound purchase of Prudential's Italian life assurance and pensions business, but is not actively pursuing larger acquisitions.
""We're not aggressively in the market. Money is not burning a hole in our pocket - that's the indication given by the share
",44
"Insurance market Lloyd's of London will have to wait to find out the implications for it of Tuesday's announcement of a shake-up in Britain's financial services regulatory system.
No decision has yet been reached about where Lloyd's will fit into the new regulatory regime which will see the existing system of self-regulatory organisations (SROs) swept away and replaced by a Securities and Investments Board (SIB) with tougher new powers and an extended remit.
Only last week the insurance market announced it favoured giving up 300 years of self regulation for supervision by an external authority, specifically the SIB.
A Treasury spokesman described the Labour government as ""sympathetic"" to the proposals but said that no decision had yet been taken.
""There are a number of areas - Lloyds, building societies, insurance more generally - which are still under discussion as to how they are going to be handled under these new arrangements. We'll have to wait to see how those discussions proceed,"" said the spokesman.
Lloyd's has yet to talk to the government about its proposals which would bring it more into line with other regulated markets and narrow the gap in treatment between it and insurance companies.
Under the plans the Council would retain day-to-day responsibility for regulation but be subject to external oversight by the SIB and Department of Trade and Industry.
The changes would need legislation to be brought forward to amend both the Insurance Companies Acts and the Financial Services Act.
The government is likely to want all parties involved to take part in discussions and a Lloyd's spokesman said it would be ""happy to do so"".
",44
"Britain's Scottish Amicable on Thursday defended the multi-million pound fees paid to banking advisers as part of its 2.87 billion pound ($4.7 billion) takeover by life insurer Prudential Corp.
The comments came as ScotAm, based in the Scottish city of Stirling, published details of the proposed transfer of business to the Pru and benefits to policyholders as part of the acquistion plans.
A policyholder circular outlining the proposals will be mailed to members over the next week. The plans have to be approved by voting members at a special general meeting to be held on June 27.
Gavin Stewart, general manger of the Scottish-based mutual insurer, admitted the cost of the deal, estimated at 34 million pounds, was a lot of money but said it was important to get things right.
It was always expensive to demutualise, he said, and had to be seen in the context of similar moves by building socities.
Norwich Union recently put the costs of its  plans to drop mutual status and its five billion pound flotation next month at 120 million pounds.
The amounts paid by ScotAm covered not only advisory fees for bankers SBC Warburg but all the logistical costs of posting circulars to more than a million policyholders and holding special meetings, said Stewart.
Around 1.1 million members stand to receive cash payments averaging 550 pounds and a total package of 1,450 pounds once additional bonuses to policies are taken into account.
All qualifying with-profits members will receive a fixed cash payment of 250 pounds with a further variable amount based on the size and duration of the policy.
Assuming ScotAm gets the necessary approval of three-quarters of members' who vote and the go-ahead from the Court of Session in Edinburgh, it hopes to pay cash and bonuses shortly after the completion of the deal on September 30.
""We're convinced this is an excellent deal for policyholders. 600 million pounds is being paid out in cash and one billion pounds as added value in bonuses on to policies - about half now and half added to policies when they pay out,"" said Stewart.
""We think policyholders when they see the deal will recognise the value and will be pleased to vote for it.""
In all, the cash and bonus payments amount to 1.6 billion pounds. In addition, the Pru is to inject 1.3 billion pounds of financial support to enable increased investment freedom for the ScotAm with profits fund, enhancing the potential for better returns.
ScotAm policies are to be transferred to the Pru and held in a dedicated fund, serviced from ScotAm's headquarters.
The Pru beat off rival offers from Abbey National and Australian Mutual Provident (AMP) to win control of ScotAm and reinforce its position as Britain's number one fund manager.
The poilcyholders circular will lay out details of the rejected Abbey and AMP bids.
ScotAm chairman Sandy Stewart said the bidding process had produced a high value for the business and a full distribution of the assets in the with-profits fund to with-profits policyholders.
""The members of ScotAm now have the opportunity to vote for a package which will provide additional financial security and the prospect of improved future investment returns leading to enhanced payouts,"" said chairman Stewart. ($ = 0.611 British Pounds)
",44
"Royal Bank of Scotland's telephone-based insurance subsidiary Direct Line said on Wednesday that it believed the motor insurance cycle had bottomed and forecast profits for the year would top last year's levels.
But the company, Britain's largest motor insurer, also struck a cautionary note, warning that competition remained tough and it could not be taken for granted that ""irrationality"" would not return to the motor insurance market.
The comments came as Direct Line reported a small rise in pre-tax profits to eight million pounds ($13.1 million) for the six months to the end of March from five million pounds twelve months ago.
""We see signs in the market place that prices are beginning to recover and expect our results this year to be somewhat higher than last year,"" said Royal Bank's chief executive George Mathewson.
""Some of the people writing about doomsday scenarios seem to slightly off the mark,"" he added.
The rise in profits expected for the current year would result partly from the firming in motor rates and partly from an improvement in claims experience, he said.
However, the full effects of the recovery in the motor market are not expected to be fully reflected until next year.
Last year saw an 86 million pound slide in Direct Line profits to 26.5 million pounds following intense competition in the motor market where rates have been falling since 1993.
Continued price competition and rising personal injury claims costs again dominated results with lower average motor premium rates and volumes reducing profits by some 15 million pounds.
The performance was much in line with expectations, said analysts, and was unlikely to prompt any significant changes in forecasts.
""They're not saying rates are rising materially, just that they're edging ahead,"" commented one.
The company said that expense and accident repair claims costs remained firmly under control over the period and that it had held operating costs for each in-force policy steady at 45 pounds.
With a cost structure roughly half that of rivals there were limited savings in that area to be made, Mathewson said.
Claims, however, offer some potential with the development of Direct Line's own repair centres, he added.
The company has four sites now operational and plans to open a further four.
""These are really very different to any concept that we have seen before in the industry. We expect to reduce repair claims and offer a substantially improved service to the customer,"" said Mathewson.
Direct Line chief executive Ian Chippendale described the first half performance as a ""good result in exceptional market conditions"".
""Our business is in excellent shape with a prudent balance achieved between market share, costs and profitability. The company is exceptionally well placed to move forward as rationality returns to the motor market place,"" said Chippendale.
Direct Line said it had allowed its motor market share to fall to 2.1 million from 2.2 million while pricing remained ""irrational"" but renewal rates were a healthy 82 percent.
Total gross premium income for the period rose four million pounds to 308 million pounds while total assets rose 16 percent to 1.27 billion pounds.
Claims costs were 12 million pounds lower than the same period last year which was hit by exceptionally severe winter weather.
The company continued to expand its home insurance account, increasing policies to 819,000 by March.
Direct Line Financial Services had also seen good progress with the mortgage book now standing at 870 million pounds and savings book 370 million pounds. ($ = 0.611 British Pounds)
",44
"British insurance group Norwich Union said on Tuesday it will float on the London Stock Exchange on June 16.
The company, Britain's third largest life insurer, expects to allocate around 1.3 billion free shares to 2.9 million qualifying members as part of its plan to drop its mutual status and become a public limited company.
Norwich also hopes to raise 1.75 billion pounds ($2.8 billion) of fresh capital through an offer of new shares. Existing members will be able to buy the shares at a discount, the size of which will be announced on May 21.
Last month Norwich members voted overwhelmingly in favour of its conversion proposals, the first by a mutually owned British insurer.
The flotation will value it at around five billion pounds, ranking it among the country's 50 largest companies.
Norwich members wishing to participate in the public offering will have to apply for a minimum of 400 pounds worth of shares. There will be an upper ceiling on applications by members of 100,000 pounds.
Non-members, who will not receive any discounts, will have to apply for at least 1,000 pounds worth of shares and those registering with the Norwich will be sent a mini-prospectus from May 21.
Around 1.5 billion pounds of the money raised will go into the existing with-profits fund to enable the company to keep up benefits to policyholders.
The balance, less the 120 million pound cost of the flotation, will be used for corporate purposes.
Around 1.8 million ""with profit"" members will net an average of 800 pounds worth of free shares under the plans. They will receive a minimum of 300 shares with additional shares based on the value and duration of their policies as at October 1, 1996.
Another one million ""non-profit"" policyholders will receive a fixed allocation of 150 shares worth between 330 and 400 pounds.
Norwich sent British and Irish members a booklet today, providing information on how to buy shares at a discount.
Application forms and a mini-prospectus will be sent to members along with details of the size of the discount on May 21.
A June 10 deadline has been set for the return of the forms and payment ahead of the start of trading in the shares on June 16.
Norwich said it was setting up a single company personal equity plan (PEP) for which there will be no initial charge. For plans opened within 42 days of flotation, the first year's management fee will be waived. ($ = 0.618 British Pounds)
",44
"British composite insurer Commercial Union Plc on Wednesday reported a strong rise in first quarter profits, helped by a sharp fall in U.S. weather claims.
Pre-tax operating profits rose to 102 million pounds ($166.4 million), up from 83 million last year.
The results were in line with expectations but the shares lost ground after a recent good run.
Forecasts were likely to be left largely unchanged, analysts said, and by mid-afternoon Commercial Union shares had slipped 13-1/2 pence to 736p.
The strength of the pound held back headline figures and, excluding the impact of sterling, profits advanced 46 percent. On the same basis profits and new business sales in the group's life business rose 25 percent.
General insurance profits increased to 67 million pounds, up three million pounds over 1996 despite a reduction in profits in Britain due to increased competition.
The company is set to unveil details of its strategy for the UK general insurance business next month.
A fall in weather losses helped U.S. results while France and Australia also saw profit increases.
Weather claims in the U.S. fell 23 million pounds over the period to six million pounds after the milder winter.
In Britain, weather costs were broadly flat.
But a dry start to the year and increased turnover in the housing market combined to push up subsidence costs.
Claims notifications were up 11 percent while costs increased to 11 million pounds from seven million pounds.
Echoing comments made by General Accident which reported on Tuesday, Commercial Union said British general insurance rates remained competitive though there was evidence of firming in certain classes of business, particularly motor.
U.S. general insurance was also competitive and average rate increases there had broadly matched inflation.
France was seeing rises in certain classes but areas such as motor cover were becoming more difficult, the company said.
Life profits over the quarter increased to 62 million pounds from 58 million pounds last year, with strong performances from the UK, the Netherlands and France.
Excluding the impact of exchange rates, new life, pensions and investment sales rose by 25 percent.
With the acquisition of 73 percent of French life assurer Societe d'Epargne Viagere (SEV) in April, life operations now account for around 50 percent of total group premium income.
The growth of the life business, part of a long-standing strategy, is set to continue for the foreseeable future.
The company hopes to take advantage of future changes in welfare provision in Britain and continental Europe.
Demographic changes putting pressure on spending on state pensions, sickness and accident benefits is expected to provide a growing number of opportunities for private providers in years to come.
Growth is likely to be organic but the company remains open-minded about acquisitions.
""If a suitable opportunity arose we would certainly consider it... but we're not actively seeking acquisitions,"" said finance director Peter Foster.
Sales at the company's French life operations were expected to remain dull for the rest of this year and possibly early into 1998 as the reorganisation of the sales force continued.
First quarter new sales figure in France, where new single premium business fell 16 percent, disappointed many.
The reorganisation, a rise in interest rates and strong 1996 first quarter comparisons were among the factors blamed for the shortfall.
Commercial union continues to eye further opportunities in eastern Europe after the success of its Polish operations and will start writing business in the Czech Republic later this year. ($ = 0.613 British Pounds)
",44
"The long-term prospects for Lloyd's reinsurance vehicle Equitas, an integral part of the recovery plans of the world's oldest insurance market, remain uncertain after a qualified set of first accounts.
A four-page report from auditors Coopers & Lybrand spoke of ""significant uncertainties"" about the level of claims against Equitas, set up to run-off Lloyd's huge pre-1993 losses, warning that the company could well be pushed into insolvency.
It says much about the unusual nature of the company that management took a relatively sanguine view of the audit.
Since its creation last year, the board have been careful to stress the doubts that underlie the success or failure of the project.
It is just too early to say what the eventual liabilities of the company are and whether it is adequately funded to cover them, analysts say.
The accounts showed that in the eight months leading up to the start of operations on September 4, the surplus of assets to liabilities was reduced by 122 million pounds ($198.4 million) because of further provisions for syndicate assets transferred to Equitas.
But management has also kept its cards close to its chest, leaving industry observers none the wiser about the prospects for the group.
Around 40 percent of Equitas' 10.4 billion pounds of discounted liabilities are for asbestos, pollution and health claims.
All are notoriously difficult to assess and many years are likely to pass before the full exposure becomes clear.
The auditors have also been denied access to some information on claims which are the subject of actual or potential litigation because of the risk of breaches of legal privilege.
""It's very early days... and putting myself in the position of an auditor, I would certainly be very cautious about giving an unqualified opinion,"" said one industry analyst.
""On a more positive note they haven't come out with a complete condemnation and that has got to be reasonable news.""
Compounding the difficulties, question marks hang over much of the data on which the assumption of liabilities have been calculated, a point not lost on Coopers.
Equitas has had, by necessity, to rely on unaudited work from Lloyd's own reserving project, involving in Coopers words ""the use of many assumptions which have a significant effect on the quantification of the provisions for claims"".
The company has committed itself to resolving this issue as quickly as possible and hopes to solve it by March 1998. Whether that turns up some unexpected surprises may go a long way to indicating the long term success of Equitas.
If it does come unstuck its first option is to trigger the ""proportionate cover"" clause which allows it to pay claims at a reduced rate.
Were it to fail completely, Names could yet find themselves asked to dip their hands back into their pockets.
In the words of Sir David Berriman, chairman of the Association of Lloyd's Members which represents over 8,000 Lloyd's Names, they ""need as much reassurance as they can get and heavily qualified accounts do nothing to help"".
($ = 0.614 British Pounds)
",44
"A sharp fall in weather-related losses lifted British insurer General Accident Plc to a record first quarter on Tuesday.
But a disappointing shortfall in the Scottish-based group's net asset value (NAV) saw the shares slip despite the strong operating performance.
Operating profits for the first three months of the year more than doubled to 114 million pounds ($184.8 million) from 55 million pounds last year.
""They are terrific operating figures but the NAV was a long way short of what the market was expecting,"" said Credit Lyonnais insurance analyst David Hudson.
The disappointing NAV reflected the company's policy of switching out of equities and into bonds. That reduced NAV growth because of the absence of unrealised gains but increased operating profits because the higher yield comes through in investment income.
The company's NAV of 723 pence per share was some 30 pence below market expectations, said Hudson, and the shares slipped five pence to 958 pence by late morning.
""It's a question of trying to weigh up the fact that profit expectations will be raised but NAV expectations have been disappointed,"" said Hudson.
The strong operating performance, if repeated across the industry as a whole would raise the prospect of a prolonged downturn in the insurance cycle, with rates remaining under pressure.
General Accident described trading as ""competitive"" over the quarter and while it had implemented premium increases in personal and commercial motor classes, elsewhere rates were static.
The focus going forward was on maintaining the improvement in its underwriting performance, chief executive Bob Scott told Reuters.
""We've seen growth in original currencies of about four percent in the quarter and we've got to keep that pushing ahead,"" said Scott.
Worldwide underwriting results improved by 50 million pounds over the period while weather costs fell by 30 million pounds - four million pounds in the UK and 20 million pounds in the U.S.
The company maintained underwriting profitability in the UK while underlying trends in the U.S. and Canada improved.
In Britain, the first of a series of rating increases in personal motor planned for 1997 of 3.2 percent was implemented on April 1. Further rises are being considered.
Commercial rates were increased by eight percent.
""All the evidence is that private motor rates are moving up. The Automobile Association (AA) survey indicates they're definitely moving after a three or four year period when they've been in decline. Commercial motor is following a similar pattern,"" Scott said.
""There are some signs on content that rate increases may be being thought about but generally the weather has been good and the homeowners account hasn't suffered unduly.""
But General Accident had seen a 50 percent increase in subsidence claims to two million pounds, although it was too early to say whether it was going to be as bad as it was in 1991, he said.
After absorbing the integration costs of Provident Mutual in 1996, life profits were up 45 percent to 32 million pounds.
Sales of life and pension products were up 9.5 percent overall with the profitability of new business continuing to grow.
New UK single premium business grew by 18 percent to 253 million pounds.
""We're concentrating on writing profitable new business in life. Margins are under pressure in every area of the insurance business, life insurance as well, but we've got a good franchise ...we can grow strongly organically we believe,"" said Scott.
Investment earnings in the quarter fell to 133 from 135 million pounds. ($ = 0.616 British Pounds)
",44
"Lloyd's of London announced Tuesday it will give backers more time to meet planned increases in the capital they must put up to support their underwriting activities.
Lloyd's has also dropped proposals to prevent Names -- as the traditional backers of the insurance market are called -- from using their own homes as collateral for underwriting.
The planned capital increases are part of a package of measures designed to strengthen the financial security that underpins Lloyd's and to provide a level playing field between Names and corporate members.
The longer transition period for the changes announced Tuesday may go some way to meeting the concerns of Names' representatives, who had called for more time to be given to meet the new capital requirements.
Names fear they are gradually being forced out of the market in favour of corporate capital first introduced in 1994, a charge repeatedly denied by the Lloyd's hierachy.
Names are to be given three years before they have to meet the new requirements of showing evidence of assets amounting to 50 percent of the premiums they underwrite.
In a Lloyd's working party report last month, a two-year transition period was proposed but, after consultations, that has been extended from 1999 to the year 2000.
A phased increase in Names' minimum level of means to 350,000 pounds ($571,000) from the current level of 250,000 pounds ($409,000) has also been increased from two to five years and will take effect in 2002.
This 350,000 pounds ($571,000) will be made up of funds held at Lloyd's and evidence of ""other personal wealth"" (OPW).
Proposals to double the OPW requirements for 2000 and beyond have been dropped in favour of a slightly higher level of funds which must be held at Lloyd's.
At present, Names must put up between 20 percent and 30 percent of the total business they back, compared with 50 percent for corporate members.
By 2000, Names will have to hold 40 percent of premium capacity at Lloyd's with OPW making up a further 10 percent, bringing them into line with corporate members.
The use of ""principal private residences"" (PPRs) -- Names' own homes -- as collateral for members' underwriting will be allowed to continue but only for those in existence at the end of 1994.
The Association of Lloyd's Members (ALM), which represents Names' interests, broadly welcomed Tuesday's proposals, saying it was essential that all Names should demonstrate their ability to meet any losses they incurred.
",44
"Lloyd's of London, beset by huge losses until 1993, is focused on its future and the needs of its clients after one of the most dramatic periods in its 300-year history, chairman Sir David Rowland said.
In the insurance market's 1996 report and accounts published on Wednesday, Rowland said that Lloyd's had to continue to offer first-rate security to keep the confidence of its policyholders.
It also had to ""strive to make its internal arrangements as transparent and equitable as possible"".
""The forces that shape the future must be the needs of our clients and our determination to preserve the unique marketplace, with its powerful attractions to clients and brokers alike, that is both our inheritance and the source of our future prosperity,"" said Rowland.
The successful implementation of last year's reconstruction package and the settling of the ""great majority of the litigation that beset us"" had removed huge uncertainties, said Rowland.
Huge losses run up between 1988 and 1993 threatened the future of the insurance market before the 'Reconstruction & Renewal' (R&R) plan was put in place last year.
Since the completion of R&R, the priority has shifted to debt collection and so far more than 1,300 writs have been issued against ""Names"" -- investors whose capital underpins the market.
Lloyd's members who did not accept the R&R settlement or did so without paying in full, still owe Lloyd's over 600 million pounds ($970 million).
Whilst a significant amount of this is uncollectable Lloyd's was ""absolutely determined to recover as much debt as we can, in the shortest possible time"", said Ron Sandler the market's chief executive.
The post-reconstruction solvency return showed a margin of total assets over total liabilities of 4.7 billion pounds, exceeding the statutory margin of solvency by more than five times.
The Corporation of Lloyd's contributed 486.4 million pounds to the settlement. The Corporation's balance sheet shows a deficiency of 239 million pounds, reflecting a 292 liability connected with the settlement, offset by 53 million pounds of net assets.
The creation of five new business units at the beginning of this year was designed to make the Corporation of Lloyd's more transparent and accountable to those whom it served and to promote more commercial pricing mechanisms and management disciplines, said Sandler.
Progress in the implementation of the reorganisation had been encouraging and business plans for each were to be published shortly. ($ = 0.618 British Pounds)
",44
"Shanghai's port will be expanded to improve container handling and the approach channels will be deepened to accommodate large container ships, the port director said on Friday.
The port's container throughput rose 29 percent to 1.97 million units last year and should rise by a further 21 percent to 2.3 million units this year, director Du Deming said.
""The aim is to reach three million units by the end of the century but we could surpass that, we are doing the preparatory work to meet this challenge,"" Du said in an interview.
Shanghai port, China's largest, has been hampered for more than a century by shallow approach channels and silt build-up from the Yangtze River. Despite continual dredging the approches are only seven metres deep.
""We need to deepen the approaches by five metres, through a combination of engineering and dredging, to bring the depth of the approaches to 12.5 metres,"" Du said.
""The plan is to achieve this within the next 10 years. It will be a big project with several phases,"" he added.
Du declined to estimate the amount of investment required to achieve the plan, saying it was under study.
""Water depth is one of our biggest problems. We need to deepen the approaches as soon as possible to allow in the third-, fourth- and even fifth-generation container ships which can hold 5,000 containers and more,"" Du said.
Fifth-generation container vessels have visited Shanghai, but never fully loaded.
Du said investment in new facilities and reconstruction in Shanghai port would drop somewhat this year below last year's 1.1 billion yuan ($132 million), but that investment would resume growing in 1998. He declined to give details.
He said the port was trying to improve efficiency and had brought average ship turn-around times down to two days last year, a 10 percent improvement over 1995.
""We are inevitably competing for business with other ports in the region, and ship owners and cargo owners can make their own choice,"" he said. ""We need to improve facilities, equipment and particularly information systems.""
But Du said he did not see Shanghai port as competing with Hong Kong, which last year handled 13 million standard containers, more than six times the throughput of Shanghai.
""There is not much conflict. China is such a big country that both ports can continue to be prosperous. Hong Kong basically handles the south of the country, and Shanghai the Yangtze basin,"" he said.
Development of the deep-water port of Ningbo port 200 km (125 miles) south of Shanghai has often been tipped as the answer to the port congestion and silting that dog Shanghai, but Du was cautious on the issue.
""We're looking into it,"" he said. ""Shanghai and Ningbo should both be developed, there is not enough capacity in either to meet the demand.""
",11
"China's stock markets, greeting the Year of the Ox on Monday after a two-week lunar new year break, are expected to perform well through the year but with trading more subdued than last year, analysts said on Sunday.
The analysts said the two main positives for the China share markets this year were the country's strong economy and Beijing's apparent desire to have the financial markets on an upswing to mark Hong Kong's return to Chinese control on July 1.
But the ""Ox Year"" enthusiasm of stock investors was tempered by the determination of the Chinese securities authorities to push speculative funds out of the markets and make them less casino-like, they said.
""The major factor for the stock markets in the Year of the Ox will be the improved national economy,"" said an executive with a major Chinese brokerage.
""But we don't expect to see any dramatic surges like last year. The central government is stressing market stability,"" he said.
""The Hong Kong takeover will have a great psychological impact on the markets,"" a stock analyst said. ""I see most of (China's) share indices hitting record highs around the time of Hong Kong's return.""
Some brokers said they believed there would be a correction in April and early May in response to the generally poor 1996 results expected from listed companies.
But they said the markets were expected to perform strongly from June through to August during the period of the Hong Kong handover, and the rises could be sustained through the rest of the year assuming China's economy remained strong.
On the last trading day of the Year of the Rat on January 31, Shanghai's A share index closed at 1006.362 points against an historical high of 1640.710, while the B share index was 66.894 points against an all-time high of 105.780.
Shenzhen's A share index ended at 372.54 points against a record of 502.77 and the B index was 157.06 against 201.87.
The official China Daily Business Weekly said on Sunday that the stock markets in Shanghai and Shenzhen could see an over-supply of share issues this year due to a big increase in listings combined with falling investor activity in equities.
The securities authorities set a new share issue quota at the end of last year of 10 billion yuan, double the previous quota.
""Demand for stocks was expected to wither after the market cooled down from excessive speculation,"" the newspaper quoted an expert as saying.
The authorities moved to rein in the share markets in mid-December after months of feverish trading which pushed prices up dramatically.
Many investors last year responded to two interest rate cuts by removing funds from their bank accounts to invest in the stock markets. But the China Daily said the impact of the rate cuts was fading.
The stock markets were also expected to suffer from the crackdown on the use of illegal funds to buy shares, particularly the use of credit, the newspaper said.
""Although there are no precise figures for illegal funds in the stock market, including overdrafts, corporation loans and banking deposits, the illegal money contributed significantly to the overheated market last year,"" it said.
",11
"The yuan is expected to remain stable during the first half of this year, taking a break from its sharp rise over recent months, traders said on Wednesday.
The yuan will move in a tight range between 8.2800 and 8.3500 to the dollar with Beijing determined to cap its rise despite steady upward pressure, they said.
The yuan closed at a 20-month high of 8.2935 to the dollar on Wednesday on the Shanghai-based national foreign exchange interbank market, largely on the back of China's record high foreign exchange reserves of $105 billion at the end of 1996.
""We expect little movement in the yuan against the dollar in the first six months of this year,"" said a foreign exchange trader with a major Chinese bank.
""The economy is good with foreign exchange reserves hitting record highs, but this is being balanced by the higher cost of exports,"" he added. ""The central bank will not allow the yuan to fluctuate sharply under these conditions.""
The yuan has risen slowly but inexorably over the past year from around 8.3174 at the beginning of 1996 -- a rise of just 0.29 percent, making it one of the most stable currencies in the world against the dollar.
The rise reflects the overall improvement of the Chinese economy, but has added a slight extra burden to exporters.
With the currency's continued strength, the central People's Bank of China has been intervening on almost a daily basis in the market to check the yuan's upward trend, traders said.
One Shanghai foreign trade official said the average export cost of foreign exchange stood at 8.38 yuan for each dollar of exported goods in 1996, making exporters lose money when they turned trade surplus dollars into local currency.
The central bank has also bought much local currency on the interbank market in the past few months, partly to prevent over-supply of the yuan from fanning inflation, analysts said.
Overall, the central bank is buying in both dollars and yuan to dampen the market, they added.
China's retail price inflation fell to a year-on-year 6.1 percent in 1995 from 14.8 percent year-on-year in 1995.
But fixed-asset investment surged again in the second half of last year after Beijing cut bank interest rates in May and August, threatening to rekindle inflation, traders said.
""Despite the fall in inflation last year, the central bank is expected to continue to take a cautious approach,"" said a second foreign exchange trader. ""Its intervention on the market to prevent sharp rises and falls of the yuan will continue.
""The central government has made it clear it will continue its tight credit policy to prevent a revival of inflation,"" he added.
",11
"Citibank NA on Monday started the move by foreign banks across the river to Shanghai's Pudong development zone, hoping to gain an early start in the local Chinese currency business.
But a senior Citibank executive at the formal opening of the Citibank branch office in Pudong said he saw only modest profit opportunities in the early stages of local currency operations.
John Beeman, Citibank's Country Corporate Officer for China told a news conference marking the branch opening that he expected the Chinese central bank to issue detailed regulations covering foreign banks doing Chinese yuan business in March.
""There will then be a thorough inspection of our branch premises and procedures. Assuming we pass the inspection, we hope to be able to offer (local currency) products and services in April,"" he said.
Citibank is one of eight foreign banks which have so far been given approval to do Chinese yuan business. Up to now, all foreign banks in China have been restricted to foreign currency transactions only.  
One of the main conditions attached to the right to do local business is that the chosen foreign banks must move their main operations to the Pudong district, which the Shanghai city government wants to develop into a financial centre.
Transport links to Pudong are currently undeveloped and the office vacancy rate in the main business area is estimated by real estate analysts at more than 70 percent.
Beeman said he did not expect much volume in local currency loans and deposits in the initial stages of Citibank's operations.
""On the scale (of the local currency business), our expectation at least for this year is that it will probably be relatively modest,"" Beeman said.
""On profitability, it depends how you do the accounting. But I would expect it to be profitable in terms of operating income almost from the beginning,"" he added.
Preliminary regulations issued by the People's Bank of China, the central bank, require the volume of Chinese yuan business be no more than 35 percent of the volume of a bank's foreign exchange business.  
They are also restricted to taking deposits and making loans to foreign-invested enterprises registered in Shanghai, and to Chinese firms that have obtained special approval.
Citibank is the only U.S.-based bank among the eight foreign banks so far granted permission to do Chinese yuan business.
Foreign bankers estimate that probably seven or eight other foreign banks with branches in Shanghai meet the financial and operational pre-conditions for applying to do local business.
But the requirement to move to Pudong presents significant problems for some banks in terms of dealing with their current office space, one European banker said.
""They have made it very clear that it is Pudong or nothing,"" the banker said. ""There is no flexibility at all. They have to move, which for some may not be easy.""
But Citibank's Beeman said he saw the Chinese banking authorities gradually relaxing restrictions and expanding the scope for foreign banks to do local currency business once they were satisfied with the way things were working.
""In China, it starts with a small group on an experimental basis until the authorities are satisfied things are running smoothly, then they expand it quite rapidly,"" Beeman said.
",11
"China's decision to dramatically expand the number of companies listed on its B shares markets will help to finally make them a serious prospect for foreign investors, brokers said on Wednesday.
The securities authorities on Tuesday unveiled a list of 33 companies given approval to offer foreign currency B shares and list them on the two domestic stock markets in Shanghai and Shenzhen.
Last month, the authorities also named 38 companies for listing on overseas stock markets, most of which are expected to be listed as H shares in Hong Kong.
""They won't be able to list them all by the end of 1997, the volume is just too big,"" said Hoong Yik Luen of ING-Barings in Shanghai.
""But by mid-1998 if all goes well, the market capitalisation for B and H shares will be doubled or even tripled. Then the China market will become a serious market for international institutional investors,"" he said.
John Crossman, chief representative of brokers Jardine Fleming in Shanghai, said that while the quality of the companies proposed for listing was not yet clear, the plan to speed up listings was at least a step in the right direction.
""The only way for this market to go forward is for there to be a bunch of new listings, to get the B share markets up to 200-330 listings, and get capitalisation up to $20-30 billion, somewhere where people will pay attention to it,"" he said.
There are now 86 companies listed on the B share markets in Shanghai and Shenzhen, with total market capitalisation of about US$3 billion.
The new list, approved by the Securities Commission of the State Council (cabinet), includes refrigerator maker Qingdao Hai'er, Benxi Steel, Shenyang Petrochemical and Dalian Refrigerator.
The companies selected are mostly large state-run industrial enterprises from sectors including electric power, transport, electronics, telecommunications, petrochemicals, textiles, light industry and pharmaceuticals.
A local analyst with another foreign brokerage said the list of companies included no surprises and quite a few weak players.
""Bringing more companies to market is positive news but the companies have got to be good quality,"" he said. ""I'm personally not so satisfied with the candidates.""
The B shares, denominated in U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen, are reserved for foreign investors, but a large proportion are held and traded by local Chinese investors operating through a variety of loopholes.
A spokesman for the Securities Commission was quoted as reaffirming the ban on local investors from holding B shares.
""I think people are saying it because it's the rules and the rules are to be respected,"" said a foreign brokerage analyst. ""But I don't think there will be vigorous enforcement.""
",11
"China's growing army of young urban professionals, mobilised by the reforms of deceased leader Deng Xiaoping, are fighting for wealth and success in a world undreamed of by their communist forebears.
Their weapons are the cellphone, the well-cut suit and the right accessories. Their goal is a better life -- or at least a better apartment.
""Making more money and seeking personal success is everyone's target, and no one feels any reluctance about admitting it,"" said a twenty-something university graduate working for a foreign insurance company in Shanghai.
They would have done in the days before Deng, who broke China out of its isolated and poverty-stricken Maoist mould.
But where capitalist-style self-interest would once have earned anything from harsh criticism to labour camp, the rat race now has China's official endorsement.
Chinese yuppies -- university educated, better informed and more independent-minded than their parents -- are most visible in Shanghai, the heart of China's economic boom.
Suits and beepers are required accessories, although BMW cars are still some way off. In sparkling glass towers that rival those of Hong Kong and Singapore, China's new breed of urban professionals is plotting the future.
Many work for foreign companies, earning a monthly income of at least 2,500 yuan ($301), more than 10 times the average income of Chinese people.
""My salary is much higher than my parents but I still want to earn more money to become rich,"" said a computer engineer working with a foreign company.
In the days when the socialist planned economy ruled supreme in China, the only way for an ambitious young person to attain independent status and wealth was to go abroad. Things are changing.
""When I was in university, I thought going abroad was the only way to have a good career, but now I'd rather stay in China,"" said a young manager with a foreign bank in Shanghai.
""I want to be an expert in the banking industry, and my current job will allow me reach that target,"" he said.
The importance of this group of increasingly sophisticated and worldly professionals to China's future can hardly be over-estimated, analysts said.
""They are a very important group of people, the spearhead of development. It is they who are taking China into the new millennium,"" a European banker said.
He said young Chinese people were much less willing to take China's traditionally passive approach to dealing with authority.
""People are less compliant than several years ago. They have more to stand up for and more personal interests to defend,"" he said.
A decade ago, student graduates in China were assigned jobs by their university, and had little or no say in what positions they would move into. If they didn't like the work, they had to put up with it.
""In those days, if a person resigned from a job, it was hard to find another one,"" said a another mid-twenties yuppie working as a salesman with a British company.
""People thought that you would only quit a job if you had made some serious mistake. But now changing jobs is normal. It's got to the point where it is strange if you stick to one job for a long time, say over five years,"" he said.
Compared with the young people of a decade ago, members of China's current generation have immeasurably more freedom to plan their futures, and most put personal careers as their top priority.
""I found the job I have myself after graduating from university,"" said a secretary working with a Hong Kong-based company in Shanghai. ""If I am not satisfied with it, I can quit and try to find another one.""
",11
"China's domestic A share markets will rise strongly in 1997 due to the improving national economy but the pyrotechnics of 1996 will not be repeated with Beijing insisting on steady development, analysts said on Tuesday.
The official crackdown two weeks ago on rampant share speculation has made the markets much more wary, but there is still plenty of money in China looking to get into the country's two stock markets in Shanghai and Shenzhen, they said.
Bank deposits are continuing to surge at about 30 percent a year and the government has purposefully closed off many other investment channels in the past few months, they said.
The government has also pledged to flood the share markets with new scrip to prevent the sort of volatile surges experienced in 1996.
""Company results for 1996 are expected to improve a great deal (over 1995) largely due to the recovering national economy and the two interest rates cuts over the past year,"" said a stock analyst with China Finance Trust and Investment Co.
""This will be a trigger for the A share indices to top the highest levels reached in 1996, sometime around the time listed firms post their annual reports in April 1997,"" he said.
Shanghai's A share index hit a 1996 high of 1,313.917 points on December 12 and its Shenzhen counterpart a record of 502.77 points on the same day.
Analysts said they believed share prices would not move as dramatically in 1997 as they did in 1996 with Beijing having made it clear it requires the markets to progress steadily.
The central government said in April 1996 that it wanted to develop China's fledgling stock markets to make them a major means for Chinese companies to raise money, thereby relieving the debt burden on state-run banks.
The statement sent Shanghai's A share index up more than 100 percent and Shenzhen's A share index up more than 300 percent in the months that followed.
But in mid-December, Beijing launched a crackdown on the stock markets due to alarm over growing volatility and speculative trading, and share prices have since plunged around 30 percent.
""The crackdown has sent strong warnings to retail investors, preventing them from blindly rushing to the stock markets for quick profits,"" said an A share trader. ""This will prevent the markets from being so volatile again in 1996.""
""After the powerful correction triggered by the crackdown, prices of most shares are now closer to their real value,"" said a second trader. ""We believe the indices have about touched bottom which has laid the foundation for rises next year.""
Analysts said liquidity for the markets would be ample in 1997, with China's individual bank deposits estimated to be 3.8 trillion yuan ($457.8 billion) at the end of 1996, against a total A share market capitalisation of around 1.2 trillion yuan.
""There are few investment channels,"" said a broker. ""As long as the markets are developing healthily, investors are likely to make the stock markets their choice.""
Beijing recently announced a quota for new A share issues in 1997 and beyond of 10 billion shares, almost double the 5.5 billion share quota announced a year ago.
The big increase was aimed squarely at stabilising the markets, analysts said.
($1=8.3 yuan)
",11
"Trading on China's capital markets will be dominated this week by technical factors with the death of Deng Xiaoping last Wednesday already well discounted as a factor, analysts said on Sunday.
They said the unexpected calm and maturity of trading on the stock, state debt and currency markets on Thursday and Friday ensured smooth entry into trading on Monday.
Investors are watching for signs of shifts in the policies or leadership of the country, but there was a growing sense among analysts that in the short term at least, there is little chance of any political problems emerging to shake the markets.
""The markets will trade...without impact from Deng's death,"" said a stock analyst with a major Chinese brokerage. ""I would say it will be at least a month before any new leadership appointments or changes are made in Beijing.""
""During this period, trading volumes are expected to be low with investors reluctant to build heavy positons due to overall market uncertainties,"" he added.
A state debt trader said: ""The markets had expected Deng's death to be this year's biggest negative impact, but it turned out that the impact was unexpectedly short-lived.""
""We now believe the markets will be more affected by changes in financial policies, such as re-adjustment of bank reserve ratios, than by post-Deng politics,"" she added.
Both the Shanghai and Shenzhen stock markets rose on Thursday and Friday despite Deng's death, with investors seeing no signs of immediate political instability and expecting a continuation of Deng's reformist policies, analysts said.
Volumes on the state debt markets dropped a little, but trading was otherwise unaffected by Deng's death, traders said.
Spot contracts gained some ground late last week on rumours that the People's Bank of China, the central bank, would soon cut bank interest rates and bank reserve ratios.
Interest rates on China's local currency and foreign exchange interbank markets also saw little impact, traders said.
Some brokers said the stock market may be entering a phrase of consolidation in the near term.
""Technical charts indicate there will be a big correction around the middle"" of this week, a stockbroker said. ""This will be the key factor.""
""The company reporting season is getting into full swing,"" said another broker. ""The stock markets will have difficulty rising solidly in the near term with so many listed firms expected to post poor results for 1996.""
The Finance Minstry announced last Tuesday it would issue a total of 123 billion yuan ($14.82 billion) in treasury notes from March 1 to October 20, the largest batch of state debt issued since China resumed such sales in the early 1980s.
Traders said the coupons for the latest batch had been set low due to falling inflation and this would become the major factor for the state debt spot market this week.
""The existing contracts have much higher yields against the new issue and they will rise..., brushing aside the Deng factor,"" one trader said.
A trader on the Chinese yuan interbank market said a possible cut in bank reserve ratio would be the single most important factor to affect the market in the next month or so.
""We believe there will be no more Deng impact over this period,"" he said.
($1 = 8.3 yuan)
",11
"China's central bank wants to boost open market operations in 1997, partly to soak up state bank funds banned from the state debt repurchase and spot public secondary market, bankers and analysts said on Friday.
But the People's Bank of China seems to have not yet made up its mind on how to do it, the key problem being the central bank's shortage of the short-term treasury bills used in the open market operations.
Under new rules, state banks are banned from the repo and public T-bill spot markets and are allowed to buy T-bills only on the primary market. They can sell them only to the central bank, which at the moment is not buying, bankers said.
They said the lack of liquidity would make it difficult for the market to absorb the state bank funds gradually being withdrawn from the secondary markets.
""By promising more activity in the open market operations, the central bank wants to offset part of the impact of the ban,"" said a state debt analyst with a Chinese brokerage. ""But the central bank will have some difficulty keeping its promise.""
The central bank kicked off open market operations on a trial basis in April last year, trading short-term T-bills of one year and less with 14 state banks to give an indication of the bank's policies and to help to control money supply.
But accumulated turnover so far has only marginally topped four billion yuan ($482 million), too small to give any clear clues to the state of China's money markets, analysts said.
""We expect turnover of the open market operations to be significantly increased this year,"" a central banker said on Friday but declined to give any details.
Last week, deputy governor Chen Yaoxian was quoted by the official media as saying Beijing intended to make the open market operations one of the major means of controlling China's money supply this year. He did not give any details either.
""The central bank is surely feeling the urgent need to expand the open operations now that it has banned state banks from trading on the state debt repurchase and spot secondary markets,"" said one banker with the Bank of China.
""All major state banks have stopped trading on the markets,"" she added. ""But we have a lot of state debt in hand and the central bank must know we need to quickly find an outlet to prevent losses. We can't leave large sums just sitting there.""
The central bank at a meeting last week told state banks to withdraw from the markets, offsetting existing positions gradually. The aim is to stop bank funds from leaking into the volatile stock markets, traders said.
""One key problem is that the central bank has not bought any state debt on the primary market,"" said the state debt analyst with a Chinese brokerage. ""It has little state debt on hand to trade significant amounts of T-bills with the state banks.""
""Trading in the open market operations so far has been unilateral with the central bank only buying state debt,"" said a banker with a major state bank. ""Real open operations require the central bank to have a supply of state debt first.""
Another difficulty is how to ensure the state banks make as much from the operations as they have off the state debt secondary markets, analysts said.
""We have made good returns on the state debt secondary markets,"" said the banker from the Bank of China. ""We cannot expect the same returns in the open market operations, which will hurt our enthusiasm in trading with the central bank.""
Currently, the open market operations involve the central bank buying a total of 40 to 50 million yuan in state debt once a week from the 14 designated banks, bankers said.
That is a minuscule amount compared to the billions of yuan worth of state debt the state banks are used to trading each week on the state debt secondary markets in a week, they said.
($1 = 8.3 yuan)
",11
"China is planning major reforms of its government debt markets in 1997 to make them more responsive to market forces and their rates more flexible, officials and analysts said on Tuesday.
Reforms this year will focus on creating a more market-driven secondary market after a series of measures taken last year to improve the primary market, including the introduction of a public tender for setting coupons, they said.
In a speech on this year's plans for state debt markets, a senior official said reforms in 1997 will aim to improve coordination between the primary and secondary markets, the Shanghai Securities News said on Tuesday.
""We will actively strengthen the role of underwriters as market makers on the secondary market to promote the coordinated development of the primary and secondary markets,"" Deputy Finance Minister Liu Jibin was quoted as saying. Market makers -- major brokerages or securities houses -- would be required to invest consistently in the state debt market and help to stabilise prices when they fluctuate sharply, industry analysts said.
""A market maker system and off-floor trading will be introduced in 1997,"" the newspaper on Monday quoted Gao Jian, director of the ministry's state debt department, as saying.
China began state debt issues in the early 1980s with purchases made compulsory for many people such as government employees and staff of state-run enterprises.
By the early 1990s, purchases of government debt were voluntary, but state-run banks were still forced to underwrite whatever amount they were allocated by the authorities.
Real market forces did not come into play until 1995 when Beijing for the first time used a public tender system to set the coupon rate on a debt issue.
The system was used for all issues in 1996 -- an indication the primary market has been largely freed from administrative control, traders said.
""With the changes to the primary market now in place, reforms this year are expected to give more priority to the secondary market,"" said Lu Weiming, a state debt trader with China Guotai Securities.
""They are looking at reforms to the secondary market now largely because of the increasingly active trading there after three successive years of record debt issues,"" said a second trader.
China issued a record 195.2 billion ($23.52 billion) yuan worth of state debt last year and industry sources expect this year's issues to hit another record of 250 billion yuan.
In other reforms, the People's Bank of China at a meeting in Beijing last week ordered commercial banks to withdraw from trading on the state debt repurchase and spot secondary markets, traders said.
The banks, which have accounted for more than 80 percent of the money supply on the repurchase market alone, have been ordered not to build any new positions and to gradually offset their existing positions.
""The state debt market will gradually move to being dominated by securities brokerages as a result of the withdrawal of the commercial banks,"" said a trader with J & A Securities.
Other significant changes will include more issues of treasury notes and bonds which pay interest on an annual basis instead of on maturity, officials have said.
The introduction of state debt paying annual interest will allow Beijing to one day open trading on the annual interest rate to pave the way for a possible start of financial derivatives, industry analysts said.
China issued two experimental batches of state debt paying annual interest in 1996.
($1 = 8.3 yuan)
",11
"China's ban on state banks trading on the state debt secondary market is making state debt issues more difficult but Beijing is expected to take measures to offset the impact, analysts said on Friday.
The ban has made liquidity flow out of the markets, depressing prices and weakening investor confidence, making the response to this year's first issue much cooler than issues last year, they said.
But Beijing has already signalled that it wants to encourage individuals to stay in the state debt market.
The authorities announced this week that individuals would be allowed to open special state debt trading accounts for the first time. The service fee levied on trades by individuals was also cut to 0.2 percent from 0.3 percent.
Beijing has been chosen as the test site for the personal accounts, but individuals in others parts of China will be allowed to open such accounts if the experiment succeeds.
Analysts said they also expect Beijing to soon allow the establishment of state debt investment funds.
""Individual investors have responded more coolly to this year's first issue than to the last few issues,"" said one state debt analyst with a major Chinese brokerage.
""The ban is the major reason,"" he said. ""It has depressed state debt prices on the secondary markets. With sentiment hurt, investors have become more reluctant to buy.""
""State banks used to be major money suppliers on China's state debt market,"" said one trader. ""Their withdrawal is depressing the market and making state debt issues more difficult.""
The first batch of 1997 state debt, the 20 billion yuan ($2.41 billion) two-year discount treasury note, is being issued from January 22 to February 17.
But with China's financial markets basically all closed from this weekend until February 17 for the Chinese lunar new year holiday, the issue was basically completed by Friday afternoon. Some sales will also be made on the last day of issue.
For the first time, the top five underwriters of the treasury note issue are all securities houses rather than state banks because the banks no longer need to build positions for secondary market trading, traders said.
The People's Bank of China, the central bank, recently ordered commercial banks to withdraw from trading on the state debt repurchase and spot secondary markets. They are only allowed to offset existing positions and must not build new ones.
China issued a record of 195.2 billion yuan in state debt last year and is expected to issue another record of 250 billion yuan this year, industry sources said.
""Despite the lukewarm response from retail investors, institutions have still shown great interest in the latest issue,"" said a broker with a major underwriter.
""They widely expect the central government to take market-boosting measures,"" he said.
",11
"China's stock markets saw heavy turnover on Monday but little change to the key indices as the impact of Deng Xiaoping's death faded and profit-taking set in, analysts said.
Investors expect little chance of any political problems emerging to shake the markets, at least for the next few weeks, they said.
""It seems to be all very stable,"" said stock analyst Alex Conroy with ING-Barings in Shanghai. ""I expect range trading for a while. There's no particular reason to be trading in a frenzy.""
Shanghai's domestic A share index edged down 0.77 percent to 1,055.078 points on heavy volume of 1.02 billion shares while the B share index was little changed at 65.707 points, inching up just 0.21 percent against the close on Friday last week.
In Shenzhen, the A index rose 0.95 percent to 362.69 points and the B index lost 0.15 percent to 150.73 points.
""The markets were under profit-taking pressure after the past two trading days of rises,"" said a Shanghai-based A share dealer with China Guotai Securities.
""Institutional speculative buying of heavily-weighted stocks pushed the (Shanghai B share) index up, but most investors took a wait-and-see attitude as Deng's death has been factored in and there is nothing else happening,"" said one broker.
Traders said the markets had expected Deng's death to be this year's biggest negative factor. But the relative calm in the market on Thursday and Friday following Deng's death on Wednesday has helped improve sentiment.
""Shenzhen's A share index extended gains into Monday with fewer worries about stability in China after Deng Xiaoping's death,"" said a Shenzhen-based broker.
Some stock analysts said the markets, in the near-term, would likely move in line with company results and technical factors.
""The most important factors in the short term will be company results with the annual report season now getting into full swing,"" said one analyst.
""The (Shanghai's B share) market has entered a correction peroid, and the performance of individual stocks will depend on their annual results,"" said a broker.
But others are more cautious.
""I expect most investors to stay on the sidelines in the next few days, waiting for market-moving incentives,"" a Shenzhen-based analyst with a major Chinese brokerage said.
""I would suggest investors have more cash in hand as market sentiment does not appear quite stable,"" a broker said.
The Shanghai Securities News on Monday predicted the stock markets will rise steadily in 1997 on the back of an improved national economy.
The newspaper forecast in a commentary that Shanghai's composite index would soon rise to more than 1,100 points. The index closed at 1,009.564 points on Monday.
""The improved macro-economy and financial conditions dictate that stock indices will have an upward trend in 1997,"" the newspaper said.
($1 = 8.3 yuan)
",11
"Share markets in and around China have again shown how sensitive they are to the health of paramount leader Deng Xiaoping, but analysts said on Wednesday the issue was now emotional, with little economic significance.
Most stock markets in the China region gained ground on Wednesday after sharp losses on Tuesday sparked by a new bout of rumours that Deng's health was failing.
Beijing said there had been no major change in his condition.
""Old Deng's health is still the top political concern on the Chinese stock markets,"" said an executive with a major Chinese brokerage.
""The markets will continue to fluctuate sharply in the lead-up to his inevitable death,"" he said.
""Few investors (in the Chinese stock markets) expect his death will cause long-term social instability,"" he added. ""What they worry about is a short-term power struggle which will leave the stock markets in the cold.""
But foreign brokers in Shanghai said they saw the Deng factor as temporary, and weakening further as time went by.
""At this point, he is just an icon,"" said one foreign brokerage analyst. ""The impact gets weaker every time these rumours come out. It's just an emotional issue. People are looking for an excuse to take profits.""
Analysts in Taiwan agreed that the longer Deng lingered, the less the effect his death would have on the markets.
""It (the effect of his death) would depend on how Taiwan's markets themselves are doing at that time,"" said Allen Huang of National Securities. ""If it's as bullish as it is right now, the actual death probably wouldn't be that big a deal.""
""I don't believe his death will have a major impact because it has been written into people's equations for quite some time,"" said Richard Graham, representative of ING Barings.
""I would be surprised if it had much impact on the markets,"" he said.
Graham said foreign businesses were generally of the view that there were no signs of major political instability in China and that the current political leadership in Beijing led by President Jiang Zemin had a solid and stable hold on power.
In Shenzhen, a brokerage analyst said one result of the past couple of days could be a reduction in institutional activity on the stock markets until the situation became clearer.
""Investors are going to adopt a cautious stance towards trading amid worries over Deng's health,"" said an analyst with a major Chinese brokerage. ""Institutional investors will be reserved about buying until Deng passes away.""
Concerns about Deng's health continued to dampen sentiment in Hong Kong on Wednesday, where the Hang Seng index ended up just 3.38 points or 0.03 percent at 13,106.32.
""Until there is a clear confirmation about the political situation in China, I think the cautious sentiment will stay put,"" said Edward Chan, head of research at Amsteel Securities.
""Until investors have a better view on the political arena in China, I think the movement will be volatile,"" he added.
Analysts said the Hong Kong market could suffer a temporary slide if Deng died, but the reaction would be a symbolic, knee-jerk move and a further correction could become a buying opportunity.
",11
"China is building a network of major toll highways to supplement its overloaded railway system, and plans to float stock for many of the roads to fund the expansion, companies and analysts said on Monday.
But some brokers questioned the decision to use equity to finance the highway construction programme, saying it would make more sense to raise money by issuing debt.
Chinese officials estimate the country will need around $65 billion for highway construction in the next five years but funding shortfalls are expected to be as large 15 to 25 percent of the total.
China's first international-standard highways only started appeared at the beginning of this decade, but by the end of 1996, the country had 3,258 km of express highway.
There are plans to add a further 900 km in 1997, almost all of it toll road.
Two of the China highways have already listed shares on stock exchanges with more still to come.
The successful Hong Kong listing last November of Anhui Expressway, which runs a 134-km toll highway between Hefei and Nanjing, has encouraged officials to list more highways as a means of raising cash.
Meanwhile, Guangdong Express Highway Development Co, which runs a toll road and a toll bridge in Guangdong province, listed B shares on the Shenzhen stock exchange last August to raise funds for another toll highway.
Four other China highway companies have received approval from the central securities authorities for overseas listings.
Hangyong Express Highway Development Co last year opened a toll highway linking the cities of Hangzhou and Ningbo to the south of Shanghai and hopes to list its shares in Hong Kong.
A Hangyong official, contacted by telephone, said the growing highway network was crucial to China's future.
""Express highways have the advantage of being able to handle greater flows of traffic with a lower rate of accidents than traditional roads,"" the official said. ""They are more convenient and faster than trains, and less expensive for freight.""
Foreign brokers in Shanghai said it would almost certainly be cheaper for China to fund its highway expansion through the issue of bonds and sovereign debt rather than equity issues.
""But the local communities want to get these toll roads built and they can't get debt quota,"" said Brewer Stone, Shanghai representative of Prudential Securities.
He said toll roads posed a risk for investors in spite of the rosy outlook for growth of the Chinese economy.
""I think historically toll roads have often been a dicey proposition because it's extremely difficult to accurately forecast traffic flows,"" he said. ""Drivers can prove to be extremely ingenious in find alternative routes.""
But an official with the Guangdong Express Highway Development Co said all construction had to fit in with the master national plan prepared in Beijing to prevent competing projects by different highway developers.
",11
"China looks likely to slow the pace of reform in its financial markets, the late Deng Xiaoping's most startling experiment, as his successors make stability their top priority this year, analysts said on Sunday.
China's leaders already have enough on their plates -- the return of Hong Kong from July 1, the ruling Communist Party's 15th Congress later in the year and task of consolidating their power in the aftermath of Deng's death last Wednesday.
Bold and ambitious new reforms in the financial sector are unlikely to occur before these more pressing items are out of the way, but pressure to move ahead will build during the year, the analysts said.
""I think for the coming months up to the Party Congress, the intention will be to keep things tight,"" said one European banker. ""But once the congress is out of the way, they will want to speed it up again.""
An analyst working with a Shanghai brokerage said the authorities could be expected to be cautious on issuing new regulations and initiating new changes in the foreseeable future, but added: ""The main policy will not change.""
""The development of the stock market will not change despite the news (of Deng's death),"" said one trader. ""But to maintain the stability of the market, the government will not announce any big changes in the immediate future.""
The chance of a roll-back in the overall trend towards bigger, more sophisticated and regulated financial markets seems even more unlikely.
China's stock, futures and capital markets sprang out of Deng's comment in the early 1990s that capitalist-style markets might be worth trying.
""If, after one or two years of experimentation, they prove feasible, we can expand them. Otherwise, we can put a stop to them and be done with it,"" Deng said.
But as Deng probably guessed when he said it, once the markets' juggernaut got under way, it was probably impossible to do much more than guide it.
""The markets are still experimental to some extent, but closing them down is less and less of an option as time passes,"" the banker said.
The Beijing leadership is faced with a host of pressing issues related to the financial markets.
The markets are still waiting for the release of the long-delayed Securities Law, Futures Law and Investment Fund Law, all basic building blocks of the financial industry.
Foreign bankers and insurers are impatient about the snail's pace at which China's financial sector is being opened up.
The futures markets are so constrained by policy that they are scarcely able to fulfil their function -- the hedging of risk, traders say.
Stock brokers complain about the bureaucratic way in which companies are chosen for listing, resulting in too many poor quality firms being listed too slowly.
And the huge problem of heavily indebted state-owned enterprises is still there waiting to be resolved.
""The need is there, there is an enormous need to address the issues,"" the banker said. ""But the political situation has not been stable enough for people to attack the knotty decisions.""
""Stability is the top requirement for now. Any sign of weakness could trigger something unexpected,"" he added.
",11
"Foreign airline executives on Tuesday called for Shanghai's new airport to handle a mixture of international and domestic flights and for early consultations with foreign airlines before its 1999 scheduled opening.
Construction work on the new airport in Pudong, which will eventually be the biggest in China, begins this month in the Pudong zone to the east of Shanghai city. It will supplement the existing airport at Hongqiao to the west.
But airline representatives said there was no indication which airport they will be required to operate from after 1999 or what arrangements will be made for them.
Many said they understood the Pudong airport, 30 km (18 miles) from the city centre, would handle international flights and Hongqiao domestic ones.
""But I think that, from an airline perspective, it would not be wise to limit either airport to solely international or domestic traffic,"" said one airline executive who asked not to be named.
""I know they have plans for new infrastructure but I'm not going to hold my breath for some sort of rapid transit route from Pudong to Hongqiao,"" he said.
Traffic in Shanghai is very congested, although city officials say the problem will be eased by a network of elevated highways being constructed around and through the city.
Lu Jianhua, an official with the Pudong airport planning office, said the current plan was to have both international and domestic flights operating from both airports, but that final arrangements had not been settled.
""The specifics of flight assignments to the two airports still need to be decided,"" Lu said.
The first phase of Pudong airport will include a 4,000-metre runway and a 150,000 square metre main building, costing a total of 12 billion yuan ($1.46 billion).
The airport at that point will be able to accommodate 20 million passengers and 750,000 tonnes of air cargo, more than double the present capacity of Hongqiao.
The whole Pudong airport project, to be completed in 15-20 years, calls for four runways and an annual capacity of 70 million passengers and five million tonnes of air cargo.
Lu said a new unified administration would be created to manage both Hongqiao and Pudong airports. They are currently two separate entities and foreign airline executives said they sensed a competitiveness between the two.
Asked which airport he would prefer to operate from, one airline representative said: ""We're not going to be given a choice, we will go where they tell us to go.
""But I don't know anything about Pudong. I haven't seen any drawings. We haven't been asked to participate in the design, although we have offered,"" he added.
Design of the airport terminal has been won by a French consortium, Aeroports de Paris, but the representative said the foreign airlines wanted to have input into the design as early as possible.
""We are concerned because Hongqiao airport is massively inadequate today, despite the fact that it's as good as any large airport in China. We are concerned that, without some input from us, we may end the same way in Pudong,"" he said.
",11
"The ""Great Leap East"" in Shanghai real estate has begun with the property market in the Pudong zone beginning to look up thanks to official pressure on foreign banks to move over there, property analysts said.
But the overall outlook for Shanghai's office property market remains grim from the developer's point of view -- vacancy rates are around 30 percent and likely to rise to 60 percent by the end of 1997 due to a forest of new buildings, the analysts said.
Pudong's Lujiazui district has been designated by the Chinese authorities as the future ""Wall Street of Asia"".
But the office space glut and transport difficulties have kept people away, until now.
""The great leap east is in progress,"" said Sam Crispin, senior manager with real estate firm First Pacific Davies in Shanghai.
""There's been a rapid shift in interest with the banks moving over there. The service sector will then follow,"" he said.
Leading the leap to Pudong are the foreign banks which have been bluntly told by the Shanghai city government that they will not be able to do local currency business unless they put their headquarters in Pudong.
Eight foreign banks have been given approval to do local yuan business in the past month, and they are busy setting up their Pudong operations, while other foreign banks with full branches in Shanghai are lobbying hard to gain the same privilege.
Crispin said Lujiazui's office vacancy rate was probably around 75 percent at present, and would probably remain at that figure for the rest of the year.
""I don't see any significant decline by the end of this year because there's significant amounts of stock coming onto the market,"" he said.
James Hawkey, research manager for Jones Lang Wootton in Shanghai, said that while vacancy rates in Pudong were high, the take-up rate was accelerating.
""The vacancy rate (in Pudong) is currently 69.7 percent, but that's to be expected for a newly-developed area,"" he said.
""There's a lot of new supply in 1997, but vacancy rates will probably start to move down,"" he said.
With supply far in excess of demand for the foreseeable future, the analysts said they saw Shanghai real estate prices overall sliding further.
The foreign banks are paying $20-24 per square metre per month for prime Pudong office space, compared to rates double that or more on the other side of the river in central Shanghai, analysts said.
""Rates (in central Shanghai) are likely to slide over the next couple of years. They may come down to about $30, but what the market is seeing now is that companies that want quality space are willing to pay for it,"" said First Pacific Davies's Crispin.
Another real estate broker said he saw the price floor for quality office space in Shanghai at somewhere close to $10-15 per square metre per month.
""The bottom of the pit is the limit, there's too many buildings,"" the broker said. ""But there's still a shortage of really good properties.""
",11
"The jailing of one of the founding fathers of modern China's stock markets, announced this month, has sent a chill through the markets, with a clear message that no one is exempt, analysts said on Monday.
But they said the impact on prices from the sentencing of Guan Jiansheng, former head of top securities house Shanghai International Securities Co (SIS), would be minimal because of the careful timing of the announcement.
Official media announced on February 3, just ahead of the two-week Chinese lunar new year market holiday, that Guan had been sentenced to 17 years in prison for embezzlement and accepting bribes.
A Shanghai court convicted Guan of accepting 294,000 yuan ($35,000) in bribes and misappropriating 2.4 million yuan in public funds between 1992 and 1994, media reports said.
""Guan was one of the founders of China's modern stock markets and the heavy jail sentence has sent a chilly message to other major players on the stock markets,"" said an executive with a major Chinese brokerage.
""This is a warning to all brokerage officials intending to profit from illegal securities trading by taking advantage of their posts,"" said an analyst with China Guotai Securities in Shenzhen.
HG Asia's Shanghai respresentative Bruce Richardson said the Guan sentence was aimed at pulling the markets into line despite the relatively lax supervision.
""They're sending a message. There's a certain amount of bitterness among people who don't make a lot of money in China, and the heavy penalty shows these people that the government cares,"" he said.
A second Shanghai brokerage executive said Guan's sentencing fitted with the tougher attitude towards the stock markets being taken by the securities authorities in recent months.
""Beijing's crackdown on the stock markets recently makes it very clear that it is determined to bring them into line,"" he said. ""Beijing has made it clear that it will excuse no one. Guan has been selected to serve as an example to warn others.""
Guan, 49, was removed from his post as SIS president after the brokerage was implicated in a huge state debt futures trading scandal that rocked the Shanghai Stock Exchange in February 1995.
SIS took a bond futures contract position far exceeding the legal maximum and then tried to force down the market through massive dumping, which resulted in it suffering huge losses from selling short in a rising market.
The scandal prompted Beijing to ban state debt futures trading in May 1995 and SIS was later merged with the former Shanghai Shenyin Securities Co to form China's largest brokerage, Shenyin & Wanguo Securities.
""Despite the severity of the sentence, the price impact on the markets will be minimal,"" said one Chinese stock trader. ""The markets had long expected Guan to be jailed.""
During the early 1990s, Guan helped make SIS China's top brokerage house and helped to work out the framework for China's modern securities markets, established in 1990.
Since late last year, the China Securities Regulatory Commission, the top securities watchdog, has taken tough and public action against around 30 branches of major Chinese banks and securities houses for illegal credit bidding on new issues.
It also fined Zhangjiajie Tourism Development Co Ltd for trading its own shares in the first such case in China's modern stock markets. ($1 = 8.3 yuan)
",11
"China's foreign currency B share markets are expected to recover in 1997 thanks to the improving national economic outlook, but the fundamentals of most B share firms remain poor, analysts said on Monday.
The B share markets in both Shanghai and Shenzhen have rollercoastered in the past few weeks in often feverish speculative trading, and are about 50 percent up on their low points of a couple of months ago.
Additional solid gains are expected in 1997 once 1996 results are released by the end of April which, if conditions are right, could push the indices to records, analysts said.
But the basic problems with the B share markets -- poor quality companies and low liquidity -- are unlikely to be resolved in 1997, they added.
""The markets are likely to recover next year,"" said a Shanghai stock analyst with a Chinese brokerage. ""I would expect Shanghai's B share index to breach the 105-point historical high. The key factor will be the improved national economy.""
Most of the 1996 results, to be posted in April, are unlikely to be much of an improvement over the dismal 1995 results, analysts said. Shanghai B share firms as a whole posted net negative profit growth of 16.3 percent in 1995.
""Any rally in the B shares before the 1996 results come out will not be sustainable,"" said Edmond Huang, an analyst with ING-Barings in Shanghai. ""The recent gains have been driven by liquidity, not by fundamentals.""
""But the macro-economic environment is positive and most of these companies have bottomed out, so 1997 should be good for them,"" Huang added.
Brokers in Shenzhen also said they expected to see the B share market performing strongly in 1997.
""Listed firms will see their operations greatly pick up in 1997 due to the two cuts in interest rates this year,"" a broker at Shenzhen J&A Securities said.
Year-on-year retail price inflation is expected to be about 6.0 percent in 1996, down from 14.8 percent in 1995 and well below a government target of 10 percent, figures issued by the State Statistical Bureau on Monday said.
The slowdown of inflation rises prompted Beijing to cut bank interest rates in May and August this year, relieving the burden of listed firms. Analysts expect the People's Bank of China to cut interest rates again in the first half of next year.
""Company performance has been improving since the second half of this year,"" said an analyst. ""This will be a major factor to support the markets next year.""
All China's B share firms were formerly state enterprises and many suffer from poor management and heavy debt loads which have made it difficult for them to cope with the tight credit policies in force since 1993.
""The long-term development of the B share markets lies in listing more high-quality companies,"" said one trader. ""But this problem is unlikely to be solved in one year.""
""With more such companies listed in Shenzhen, the market's liquidity will improve and investor confidence strengthen,"" a broker in Shenzhen said.
Combined capitalisation of the Shanghai and Shenzhen B share markets is only about 35 billion yuan ($4.2 billion), with 42 B share companies listed in Shanghai and 43 in Shenzhen.
""The markets are too small with investors having little choice of which firms they would like to invest in, and institutions are able to easily manipulate the markets,"" said a trader. ($=8.3 yuan)
",11
"China is setting up a national state debt trading market to link up all state debt trading floors around the nation to check widespread irregularities, industry analysts said on Monday.
The computerised market, the China State Debt Clearing System, would gradually take over the trading of all state debt in the country with the current markets, including the Shanghai stock exchange, taking a minor role, they said.
""Nearly all China's state debt trading is now regional,"" said a trader with China Guotai Securities. ""An institution trading in Shanghai cannot have its positions cleared in Shenzhen, which is inconvenient.
""With the new market being opened, a trader can bid and ask on any market around the country through the computer network,"" he said.
Major players on China's state debt markets currently include state banks, securities houses, state enterprises and wealthy individuals looking for quick returns or for short-term cash for speculative investment elsewhere.
The bulk of China's state debt is traded through the Shanghai and Shenzhen securities exchanges, but there are dozens of other centres through which state debt can be traded.
""The primary purpose of the market is to check rampant irregularities,"" said one state debt investment analyst. ""The most important aim is to eradicate credit trading.""
China's securities rules ban the trading of state debt on credit but in practice many trading centres have accepted 20 percent margin requirements for state debt repurchase trading, traders said.
The state debt margin trading has led to huge losses for some state banks and other financial institutions, due to unrecoverable debts, traders say. The official media reported in mid-1996 that the Wuhan Securities Exchange Centre, the Tianjin Securities Exchange Centre and the STAQ system, which trades China's institutional shares, had accumulated debts on the repo market of up to 50 billion yuan ($6.02 billion).
Traders said some banks and brokerages had already started to put their state debt under the auspices of the new market but that formal trading on the system, based in Beijing, was not expected to start until the second half of this year.
""Once the national market begins full operations, financial institutions will be required to have all their state debt entrusted to it,"" said one trader. ""This will effectively end credit trading.""
Another reason for setting up the centrally-controlled computerised market was to enforce a recent ban on state banks trading on the state debt repurchase and spot secondary markets, analysts said.
The central bank at a recent meeting told state banks to phase out trading on the markets, not to build new positions and to offset existing positison only gradually, to ensure that bank money would not flow into the volatile stock markets.
""All we big four state commercial banks have to get out of the markets,"" said one banker with the Bank of China. ""The new market will enable the central government to enforce the ban.""
The big four are the Construction Bank, the Agricultural Bank, the Bank of China and the Industrial and Commercial Bank of China.
Industry sources said the People's Bank of China, the central bank, was preparing to play a major role on the new market to trade short-term treasury bills of one year and below with the state banks in its open market operations.
($1=8.3 yuan)
",11
"China named on Thursday four more foreign banks approved to handle local currency business, and bankers said they saw the accelerated timetable reflecting a desire to boost property prices in Shanghai's Pudong zone.
The China Daily said the four new banks were U.K.-based Standard Chartered Bank, Japan's Sanwa Bank and Daiichi Kangyo Bank and the Shanghai-Paris International Bank, a joint venture between France's Banque National de Paris and the Industrial and Commerical Bank of China.
The newspaper said the banks, and four others named earlier, would be able to take deposits and make loans in yuan, the Chinese currency, only after they had moved operations to the Pudong district of Shanghai.
""I see the whole thing as being real-estate driven,"" said a foreign banker. ""To make Pudong a success, they need to get the foreigners over there, so there's no reason limiting the numbers.""
The Chinese authorities want to make the Pudong development zone in eastern Shanghai the country's premier financial district, and have told foreign banks they will only be allowed to do local currency business from offices there.
""Before the banks were approved no one would touch Pudong, but now people are charging over there to try and sign something up,"" said a real estate broker.
Foreign bankers had originally assumed the authorities would wait until the first four banks had begun operations before approving any more.
The first four are Citicorp's Citibank unit, HSBC Corp's Hongkong and Shanghai Banking Corp unit, the Industrial Bank of Japan and the Bank of Tokyo-Mitsubishi Ltd
Chinese banking sources said a number of other banks would also be approved for yuan business during 1997.
Foreign bankers said the faster they were allowed into the yuan business the better, regardless of the limitations placed upon them.
Approved banks can only accept Chinese yuan deposits from foreign-funded firms or from foreign individuals, or deposits from Chinese enterprises derived from the banks' loans to them.
The banks can supply yuan loans only to foreign-funded firms or Chinese enterprises who have previously obtained foreign currency loans from the banks.
""We won't be able to increase our customer base, but it's at least a start, another step forward,"" said a foreign banker.
""It's a very significant step,"" said a senior banker with one of the chosen banks. ""If a bank can't do business in the local currency then it's only half a bank.""
""We welcome this good news,"" said Lance Browne, Standard Chartered's chief executive for China. ""It's a positive development for our business in China.""
Another banker said specific regulations for the business had not yet been issued by the central bank, and training sessions for foreign bank staff were in progress nearly every weekend.
One banker said he did not expect yuan loans and deposits to begin for another three or four months, to allow all the various issues to be sorted out.
",11
"After an initial kneejerk fall in stock prices, China financial markets handled the death of paramount leader Deng Xiaoping calmly on Thursday, but analysts warned that trading could be volatile for some time to come.
Some foreign brokers predicted strong buying by foreign investors over the coming days with the removal finally of the shadow of the ""Deng factor"".
Nearly all Shanghai's shares opened in the morning at the 10 percent limit-down level with their Shenzhen counterparts also falling sharply on initial jitters over Deng's death.
But the markets quickly rebounded and by the end of trading, Shanghai's domestic A share index was up 0.28 percent at 1007.731 points and the foreign currency B share index edging down 0.7 percent to 64.675 points.
Shenzhen's B share index ended up 1.26 percent to 143.53 points while the A share index lost 2.11 percent to 350.59 points.
Alex Conroy, stock analyst with ING-Barings in Shanghai, said the sequence of a fall followed by a rebound in the aftermath of Deng's death had long been expected, but the speed of the reaction was surprising.
""It's happening a bit faster than I expected,"" she said.
Brokers said prices were supported by widespread bargain hunting and heavy support-buying by domestic institutions.
But they said investors would be watching Beijing for a clear indication that the final transition of political power to the next generation of leaders, led by Communist Party chief Jiang Zemin, was as smooth as most market analysts expect.
On China's largest state debt market in Shanghai, most treasury bill spot contracts ended up after an initial sharp loss with most investors expecting no big changes in policy despite Deng's death, traders said.
The foreign exchange market was unaffected by Deng's death with the central bank firmly in control of price movements, traders said. The Chinese yuan closed up at 8.2939 on Thursday from Wednesday's 8.2945 against the U.S. dollar.
China's commodity futures markets were also untouched with technical factors dominating, traders said.
""Despite the first day's calmness, we expect some volatile trading on thin volumes on the financial markets in the next few weeks,"" said a Chinese banker.
""The most important market stabiliser will be signs from the central government that the power transition is progressing smoothly,"" he added.
Deng died late on Wednesday from respiratory failure. He was 92.
",11
"Foreign banks in Shanghai do not expect to start local Chinese yuan business for several months due to regulatory uncertainties and the requirement that they move operations to Pudong first, bankers said on Thursday.
Four banks have been given approval to do local currency business, and the Business News reported on Thursday that other banks, starting with Hong Kong and European banks, will be added to the list during the year.
For now, the four banks chosen to lead the experiment -- the Hongkong & Shanghai Banking Corp, Citibank, Tokyo-Mitsubishi Bank and the Industrial Bank of Japan -- are still largely in the dark, bankers said.
""It will take more time to organise,"" said a senior manager with one of the four banks. ""The regulations issued so far are very general. We need much more specific rules, and I'm not sure they have even started to write them yet.""
The manager said he expected local currency business to begin by the middle of the year.
The manager of a European bank waiting in the wings to enter local currency business said he thought the first trading would not come until at least March.
""In terms of the technical points it is now clear that the announcement (on the foreign banks doing local currency business) was premature,"" he said.
He said the People's Bank of China, the central bank, had made it clear that banks would not be allowed to start up until their main operations are physically located in the Pudong development zone across the river from central Shanghai.
The requirement that the banks not only have an office registered in Pudong but also locate their main operations there, only made clear recently, has led to a sudden scramble for office space in Pudong, a real estate broker said.
""People have been charging over there, looking for places, while three months ago no one would touch it,"" the broker with a foreign real estate firm said.
A senior manager with another of the four chosen banks said the requirement to move to Pudong was a major headache in getting local currency business going.
""Just working out the wiring in the Pudong office is taking a lot of time, this can't be done in one day,"" he said.
Another key issue is the need to train up staff to handle the local business, the European bank manager said.
Major foreign banks in Shanghai, currently restricted to doing business in foreign currency, have staff on training courses organised by the central bank to help them learn the procedures for local currency business, he said.
But one of the bank managers said that beyond the technical issues, the major problem facing the foreign banks was one of how to get hold of enough Chinese yuan to lend out.
The banks have been told they can basically only lend and borrow to foreign-invested enterprises registered in Shanghai, which generally speaking do not have large surpluses of Chinese yuan on hand, bankers say.
""Funding is going to be the major problem,"" said the bank manager.
",11
"China's stock markets began returning to normal on Friday with all markets up in steady morning trade as the negative impact of the death of Deng Xiaoping faded from view, analysts said.
Both retail investors and institutions began building positions reflecting the sentiment that Deng's death would actually benefit the markets in the longer term by permanently removing a major negative factor, they said.
By midday on Friday, Shanghai's foreign currency B share index was up 0.666 points or 1.03 percent to 65.341 points and the domestic A share index was up 31.437 points or 3.12 percent to 1039.168.
In Shenzhen, the B share index rose 3.97 points or 2.76 percent to 147.50 points and the A index was up 2.45 points or 0.7 percent at 353.05 points.
""Trading has returned to normal,"" said one Shanghai trader. ""Investors don't believe there will be any major policy change after Deng's death.""
""Some investors believe Deng's death will benefit the markets by removing a major negative factor for good,"" the trader added.
""People feel today that there is a stable political transition and the government is gaining credibility,"" a Shenzhen analyst with China Guotai Securities said. ""Medium and long-term investors are beginning to pour in funds.""
Shanghai brokers said securities houses in the city convened meetings on Thursday and agreed on the necessity to keep the markets moving normally but decided not to intervene to support the markets.
But some analysts said they suspected the markets were in one way or another receiving support from institutions under instructions to ensure no major market movements in the aftermath of Deng's death.
""I still think there may be some government support in this,"" said an analyst with a foreign brokerage in Shanghai. ""The official intention is to ensure that normalcy is maintained.""
Analysts said the relatively short mourning period before Deng's funeral on Tuesday indicated China wanted to dispel the gloom as quickly as possible, helping to creating favorable investment conditions.
""The stock markets in China are more closely related to political conditions,"" said another Shanghai trader. ""The impression that China's is on the right track of a smooth transition has helped the markets to recover swiftly.""
Other brokers have warned that there was still potential for markets volatility in the short term.
""I will have to wait until the end of the mourning period to see clearly where the market is heading,"" the Shenzhen-based analyst said.
",11
"The Chinese yuan will remain stable despite the death this week of paramount leader Deng Xiaoping, dealers said on Friday.
They said the currency would likely stay steady not so much because of the growing sense China will remain politically stable but because of the central bank's complete dominance of the market.
The current trend in the Chinese currency is as it has been for the past year and more -- slow but steady strengthening against the U.S. dollar on the back of China's growing trade surplus and heavy flow of foreign investment dollars, they said.
The yuan closed little changed at 8.2940 on Friday from Thursday's level of 8.2939 against the U.S. dollar on the Shanghai Foreign Exchange System.
""There will be little change in the central government or in economic policy as Deng has not really been in power for a long time,"" said one dealer.
""People had been prepared for the news for a long time, so there was no strong response visible on the market,"" he added.
Another dealer said that any sense of political uncertainty could give rise to greater selling of the yuan by foreign companies.
""But even in the case of some political instability, the possibility of which is pretty small, the Chinese yuan will still be stable given the full control of the central bank,"" he said.
Trading volumes on the Shanghai Foreign Exchange System, through which the yuan's rate against the U.S. and Hong Kong dollars and the Japanese yen is reflected, are very small, amounting to only $200 million to $300 million each day on average.
""Given the foreign exchange reserves, the central bank has ample ability to control the market trend, said one trader.
The latest figures released by the People's Bank of China, the central bank, show the country's foreign exchange reserves stood at $105 billion at the end of 1996.
Dealers said the yuan's gradual rise was likely to be contained within a range between 8.2800 to 8.3100 to the dollar over the next few months.
Zhou Xiaochuan, vice-governor of the People's Bank, said last month the central bank would step up intervention on the foreign exchange market to prevent the yuan from rising sharply.
""There is an oversupply of U.S. dollars on the market due to the trade surplus and continued in-pouring of foreign investment, but investor concerns over central bank intervention will curb its rise,"" said one dealer.
According to official figures, China posted a trade surplus of $12.24 billion in 1996 and it is expected to grow to $17.4 billion in 1997. Official forecasts put direct foreign investment in China in 1997 at $49.5 billion, up 15 percent from last year.
China's exports in January 1997 rose 27.5 percent to $11.69 billion while imports fell 1.29 percent to $9.98 billion, creating a trade surplus of US$1.71 billion against a deficit of $938 million in January 1996, customs figures showed.
Dealers said the average export cost of foreign exchange stood at around 8.38 yuan for each dollar of exported goods in 1996, making exporters lose money when they turn trade surplus dollars into local currency at the current exchange rate.
""If the exchange rate rises further, exporters will lose more, which is a key factor for curbing the yuan's rise,"" said one dealer.
",11
"Key companies on China's foreign currency B share markets were expected to report slightly better results for 1996 after a dismal 1995, with more progress seen for 1997, analysts said on Monday.
The B share companies were generally lagging far behind the booming growth of China's economy, and gains in 1996 would be followed by a stronger performance in 1997 based on two interest rate cuts last year and sharply lower inflation, they said.
""We do expect things to get better, but it's not here yet,"" said Bruce Richardson, chief analyst for HG Asia in Shanghai. ""Market sentiment is quite strong, people see some hope.""
Shanghai property developer Lujiazui Finance and Trade Zone Development Co Ltd, a key market barometer, expected 1996 post-tax profits of 590 million yuan, slightly up from the 585 million yuan in 1995, a company official said on Monday.
Other major companies including Shanghai Diesel Engine Co Ltd and Shanghai Tyre and Rubber also expected improved results in 1996 compared with 1995, officials said but declined to give details.
""The B share companies are expected to perform slightly better than in the past two years thanks to an improvement in the national economy,"" said Jiang Dengfu, a senior B share analyst with Shenyin & Wanguo Securities.
""But improvements in the companies' results are lagging behind the better national economy. A full recovery is expected to start this year,"" he said.
Shanghai's B share firms posted a net year-on-year fall in profit of 13.8 percent in 1994 compared with 1993, and 16.3 percent in 1995 over 1994.
Analysts attributed the dismal results, when the Chinese economy as a whole was growing at more than 10 percent per year, largely to poor company management and Beijing's tight credit policy in force since mid-1993.
However, bank interest rate cuts in May and August last year were seen as having relieved much of the pressure.
""The firms began improving this year thanks to the bank interest rate cuts,"" said a second analyst. ""Key companies such as Lujiazui also won big loans from the government.""
Brokers in southern Shenzhen said they didn't expect a remarkable improvement in the 1996 results of locally-listed B share companies.
""But listed firms, especially those with heavy liabilities, may see their operations this year significantly helped by the lower rates because they will lead to lower finance-related costs,"" said one Shenzhen share analyst.
The exceptions would largely be firms that ignored the rules and traded heavily and successfully in their own shares, Shenzhen brokers said.
""Some public companies reaped huge profits from trading their own shares last year and part of the profits will be calculated into their 1996 profits,"" a broker with Shenzhen J & A Securities Co Ltd said.
Not all analysts were optimistic of a turnaround in 1996 results.
""The results are going to be lousy on balance,"" said stock analyst Alex Conroy with ING-Barings in Shanghai. ""Very few if any of the companies will be able to pull off good results.""
",11
"A meeting of China's bankers in Beijing next week is expected to work out plans to tighten controls on the country's immature financial markets to curb widespread irregularities, bankers said on Friday.
They said officials were likely to put forward comprehensive proposals against inside trading and institutional manipulation of the markets.
It is also expected to consider whether further cuts to bank interest rates should be made this year, following two cuts in 1996, the bankers said.
""The meeting will look at this year's plan for reforming the bank sector and the financial markets,"" said one Shanghai-based banker who will participate in the meeting. ""Standardisation will be one of the key topics.""
""One of the focuses will be strengthening supervision of the financial markets,"" said an executive with a major Chinese brokerage. ""As an annual meeting, it will also tackle issues such as whether bank interest rate cuts are needed this year.""
Another issue expected to be addressed is the theoretical ban on domestic investors trading foreign currency B shares, re-affirmed again by the securities authorities this week.
Brokers said they expected specific measures to be worked out, including possibly a demand for brokerages to check all accounts to uncover those held by domestic investors, who are estimated to account for about half of all B share trading at present.
At the end of last year, the authorities launched a crackdown on the illegal use of credit to bid for shares in initial public offerings.
This year, the emphasis is expected to be on irregularities in the secondary share markets, particularly inside trading, analysts said.
Widespread irregularities also exist in China's state debt repurchase trading and experimental local currency interbank market including unauthorised direct transactions among financial institutions to avoid supervision, traders said.
China's modern financial markets were established only in the early 1990s to help push the country in the direction of a market-driven economy, but many quickly turned into casinos, causing huge losses for the state.
Analysts said the lack of comprehensive regulations governing the markets was a key problem along with the prevailing get-rich-quick mentality, but Beijing now seems more determined than ever to clean things up.
""With the response of the markets so far not satisfactory, the central government has indicated it will look for further measures to regulate the markets,"" one stock analyst said.
""But in the short term, new measures are unlikely to have a great impact because they are expected to do something,"" he added. ""But in the long run, they could prove effective by helping to standardise the markets.""
The meeting is also likely to re-affirm a policy of tight control over the development of commodities futures markets with Beijing still looking for an effective means of controlling over-speculation and institutional manipulation of futures contracts, traders said.
",11
"China's securities authorities are trying once again to ban domestic investors from the foreign currency B share market, but brokers said on Friday that the drive had little chance of success.
Chinese brokerages in Shanghai and Shenzhen this week started re-registering investor accounts to weed out domestic investors who are trading B shares, theoritically reserved for foreigners only.
But stock analysts said the painstaking process of driving locals from the B shares seems to have resulted in a compromise with the securities authorities, in fact trying to find an indirect way to legalise those already in the markets.
""The impact on the market will be minimal,"" said a Shanghai broker. ""Many investors are trying one way or another to find a trustee, and we believe most of them will be able to do so.""
Brokers said domestic investors with B share accounts had to find a foreigner, or someone with right of residence outside China, to write a certificate to say that he or she entrusts the local person to trade B shares.
""It seems that in Shanghai it is just a matter of walking in with your cousin's passport, but in Shenzhen I understand they are seriously trying to cut back on accounts opened with just an identity card,"" said Bruce Richardson of HG Asia in Shanghai.
Those who manage to obtain the trading certificate will be able to retain their accounts and can continue to legally trade B shares in their own name. Those that fail will be banned from buying new shares from April 1, brokers said.
""This is nothing more than a compromise,"" said a broker with a Chinese brokerage in Shanghai. ""The overwhelming majority of domestic investors will be able to find a trustee.""
The B shares were created in 1992 to attract foreign investment funds into China, but as a result of a market slump that began in 1994, many foreign investors have pulled out.
Their place has been taken by domestic investors, attracted by the large gap in price between B share prices and the much higher prices on the domestic A share market.
Brokers estimate that domestic investors have accounted for at least half of B-share trading in recent months, and concerns that the authorities really mean business about pushing the domestic investors out has been a major negative factor.
In mid-1996, a rush to B share trading by domestic investors pushed Shenzhen's B share index up more than 100 percent and the Shanghai index up 50 percent in just a few weeks.
""The China Securities Regulatory Commission has the tools if they want to really shut down every local B share investor, but I don't think they'll do it, it would be too costly,"" said HG Asia's Richardson.
""If you took local funds out of the market, or froze them, the market would go back to where it used to be, which I don't think anyone wants,"" he said.
He said that the CSRC was about the only player that wanted the locals out of the market -- the stock exchanges, brokerages and foreign investors all basically welcomed them because of the extra liquidity they bring to what is still a very small market.
",11
"China's central bank is ordering state banks to gradually pull out of the state debt markets to help stop the flow of speculative ""hot money"" into the volatile stock markets, industry sources said on Thursday.
The People's Bank of China wants the banks to use their surplus funds to help out the many debt-ridden state enterprises rather than parking it in the state debt repurchase market where they can be used for short-term share plays, the sources said.
""Central bank officials met representatives of the state banks and major securities houses in Beijing early this week and told them the banks will be gradually banned from the state debt secondary market,"" a Shanghai state debt trader said.
""The banks were told that they must not build new positions but can phase out their existing positions,"" he added. ""A deadline for clearing all positions has not been set.""
A state debt analyst with a major Chinese securities house said the bulk of money supply on China's T-bill secondary market currently came from the Chinese state banks, which liked to lend short-term money to securities institutions for high returns.
""By clearly stating that commercial banks will be driven away from the state debt markets, Beijing is aiming to cut off money supply to the stock markets,"" one executive with a major Chinese brokerage said.
""The central government seems determined to check the trend of state money flowing into stocks,"" he said. ""It doesn't want to see the stock markets sky-rocketing and becoming casinos.""
Instead, Beijing wants the money to be used to offset the effects of the tight credit policy in force in 1993, restricting the flow of loans to the poorly-managed state enterprises and making them perform even worse, one analyst said.
State debt traders said they expected turnover on the T-bill repurchase and spot markets to decline sharply over the next few weeks as a result of the decision.
Daily turnover for repurchase papers on China's largest state debt market in Shanghai could drop to around two billion yuan ($240 million) from an average of around 10 billion yuan in the past few months, they said.
Industry sources said Beijing was establishing a national state debt clearing market, where the banks can trade state debt with the People's Bank of China in its open market operations as a key outlet for the banks to clear their existing positions.
The central bank kicked off open market operations in April 1996, trading short-term state debt with 14 major commercial banks as a means of indicating Beijing's monetary policy and indirectly controlling money supply.
But trading has so far been very light as the central bank regards the operations only as an experiment, the sources said.
Only about four billion yuan in state debt was traded in the open market operations in 1996, one source said.
",11
"China announced on Tuesday a preferential tax rate of 15 percent for foreign banks doing local yuan business but limited them to dealing with foreign-funded firms registered in Shanghai.
Foreign bankers expressed surprise at the rate, which is the same as that at which their foreign currency business is taxed, and much lower than the 33 percent rate for Chinese banks doing the same business with the same clients.
But bankers with local Chinese commercial banks said they were not worried about the decision, saying the scope of the local currency business that foreign banks would be allowed to conduct would be highly restrictive for years to come.
The official Xinhua news agency said in a report that the four foreign banks chosen by the People's Bank of China to do local currency deposit and loan business would be taxed at the same rate as their current foreign currency business.
""Their (foreign banks) income tax rate will remain the same, 15 percent as before,"" the agency said. ""Their clients can only be foreign-funded enterprises registered in the city, and they should open RMB (renminbi or yuan) accounts in the central bank's Shanghai branch,"" it added.
The four foreign banks are the Hongkong & Shanghai Banking Corp, Citibank, Tokyo-Mitsubishi Bank and the Industrial Bank of Japan.
""It sounds too good to be true,"" said a banker with one of the four foreign banks chosen to begin yuan business. ""It's especially strange because many foreign bankers have at least implied that they would be willing to accept a higher tax rate. It's very surprising.""
A second foreign banker said the major restriction on the foreign banks would be local currency funding, especially given the ban on the banks taking on individual retail deposits in yuan.
""The key issue seems to be funding,"" he said. ""If the funding sources are limited you have no local currency to expand your business.""
All foreign banks in China are currently restricted to doing business in foreign currency and have been eager to gain a share of the huge local market for yuan deposits and loans.
""The announced tax is not going to greatly impact on our business in the short term,"" said an official with a major Chinese bank. ""Foreign banks are now restricted in the companies and location of their local currency business and further development is expected to be very slow.""
But another local banker said the opening of yuan business to foreign banks would inevitably put pressure on Chinese banks.
""In the past, competition has been only among ourselves and no matter whether our services are good or bad, we survive at the expense of depositors,"" the banker said. ""In the long run, we have to improve ourselves.""
Xinhua said that about 10 foreign banks had applied to the central People's Bank of China for the right to start yuan business.
According to rules issued by the central bank, foreign banks can only accept yuan deposits from foreign-funded firms or from foreign individuals or deposits from Chinese enterprises derived from the banks' loans to them.
The banks can supply yuan loans only to foreign-funded firms or Chinese enterprises who have previously obtained foreign currency loans from the banks, the rules said.
",11
"China's financial markets are increasingly working on the assumption that the central bank will cut interest rates in the first quarter of this year as inflationary pressures dwindle, analysts said on Friday.
They said another interest rate cut, following two in 1996, would particularly help debt-ridden state-run enterprises claw their way towards profitability and would boost both the stock and treasury bond markets.
""Inflation in 1996 was much lower than the target,"" said a Shanghai-based banker with a major Chinese commercial bank. ""This might prompt a cut in bank interest rates shortly, possibly within the first three months of this year.""
""One of the key factors is the worsening performance of state-run enterprises,"" said a second banker. ""A rate cut will not solve all their problems but will relieve their debt burden to some extent and help them in terms of cash supply.""
Officials with the interest rate department of the central People's Bank of China have declined to comment.
Most of China's state enterprises are heavily in debt and are a major burden on both the country's financial system and the government budget. A rate cut would make credit cheaper for them and reduce their debt servicing payments.
The annual rate for one-year fixed bank deposits is now at 7.47 percent, down from 9.15 percent last May.
Year-on-year retail price inflation for 1996 is expected to come in at about 6.0 percent, down dramatically from 14.8 percent in 1995 and well below the original government target of 10 percent, the latest official figures show.
""There is still potential for a further bank interest rate cut in the short term, especially given the positive market response to the two cuts last year,"" said Lu Weiming, a state debt trader with China Guotai Securities.
""A new cut will also help boost the stock and treasury bill markets,"" he added.
Speculation of another interest rate cut have supported prices on the spot treasury bill market in recent days. Analysts cite the rate cut rumours as one reason for the speedy recovery of China's stock markets following sharp falls in mid-December.
Personal bank deposits have continued to surge, increasing year-on-year by about 30 percent in 1996 against 1995 to hit around 3.8 trillion yuan ($457.8 billion) by the end of 1996, the analysts said.
A key barrier to another rate cut, however, is the central bank's reluctance to relax credit with local fixed-asset investment continuing to grow swiftly despite strenuous efforts by the central authorities to keep spending under control.
Official figures show that local governments around China have approved more than 700 new fixed-asset investment projects since July 1996.
The State Planning Commission has estimated that fixed-asset investment would hit 2.3 trillion yuan in 1996, about three times the level of 1992.
""The markets widely expect another rate cut in the short term but the range might be limited,"" said one investment analyst with China's J and A Securities.
""The next cut might be aimed more at having a psychological impact on state-run enterprises and investors rather than a real impact on the economy."" ($1 = 8.3 yuan)
",11
"China has begun to issue a stream of new stock trading regulations to bring some order to its share markets, despite top-level wrangling over the long-awaited Securities Law, industry analysts said on Monday.
They said it appeared as if the authorities had decided to first issue the non-controversial sections of the Securities Law rather than wait for agreement on the entire piece of legislation.
China's two stock markets are growing fast and the need for detailed regulations covering the issue and trading of shares is becoming more urgent all the time, the analysts said.
""These new rules are expected to form part of the future Securities Law, but they can't get the law out any time soon,"" said an executive with a Chinese securities house.
""So they have been prompted to do this by the need to more effectively regulate the markets.""
Since late last year, around a dozen new sets of regulations have been issued by the central securities authorities, including rules announced on Monday which set up a system of annual checks into the operations of listed companies.
Other rules have covered initial public offerings, company information releases, foreign currency B share trading, exchange and brokerage risk control, daily stock price movement limits as well as business by trust and investment companies.
""With securities trading becoming ever more active, the central government wants to prevent irregularities from spreading,"" said a second executive. ""They can piece together the separate rules later, making the formulation of the Securities Law easier.""
China began to draft the securities law in 1992 but disputes over who should have the final say on the markets, in addition to some questions over trading procedures, has delayed the law time and again, industry sources said.
Responsibility for managing the stock markets is currently split between several powerful parts of the central government, including the People's Bank of China, the State Planning Commission and the State Administration of Foreign Exchange.
None of these bodies wishes to withdraw from the profitable industry, the analysts said.
The regulations governing the markets are also scattered, and include many issued directly by the Shanghai and Shenzhen exchanges.
""The rules as they currently exist are far from comprehensive, which means that many transactions put you in a legal no-man's land,"" said one trader. ""With all the loopholes, irregularities are widespread.""
The irregularities include the widespread use of credit for trading on both the primary and secondary markets and listed firms buy and selling their own shares illegally.
""The issue of so many new rules within a short period of time is part of the national campaign to clean up the stock markets,"" said a second trader.
",11
"The ""Great Leap East"" in Shanghai real estate has begun, with the property market in the Pudong zone beginning to look up, thanks to official pressure on foreign banks to move over there, property analysts said.
But the overall outlook for Shanghai's office property market remains grim from the developer's point of view -- vacancy rates are around 30 percent and likely to rise to 60 percent by the end of 1997 due to a forest of new buildings, the analysts said.
Pudong's Lujiazui district has been designated by the Chinese authorities as the future ""Wall Street of Asia"".
But the office space glut and transport difficulties have kept people away, until now.
""The great leap east is in progress,"" said Sam Crispin, senior manager with real estate firm First Pacific Davies in Shanghai.
""There's been a rapid shift in interest with the banks moving over there. The service sector will then follow,"" he said.
Leading the leap to Pudong are the foreign banks which have been bluntly told by the Shanghai city government that they will not be able to do local currency business unless they put their headquarters in Pudong.
Eight foreign banks have been given approval to do local yuan business in the past month, and they are busy setting up their Pudong operations, while other foreign banks with full branches in Shanghai are lobbying hard to gain the same privilege.
Crispin said Lujiazui's office vacancy rate was probably around 75 percent at present, and would probably remain at that figure for the rest of the year.
""I don't see any significant decline by the end of this year because there's significant amounts of stock coming onto the market,"" he said.
James Hawkey, research manager for Jones Lang Wootton in Shanghai, said that while vacancy rates in Pudong were high, the take-up rate was accelerating.
""The vacancy rate (in Pudong) is currently 69.7 percent, but that's to be expected for a newly-developed area,"" he said.
""There's a lot of new supply in 1997, but vacancy rates will probably start to move down,"" he said.
With supply far in excess of demand for the foreseeable future, the analysts said they saw Shanghai real estate prices overall sliding further.
The foreign banks are paying $20-24 per square metre per month for prime Pudong office space, compared to rates double that or more on the other side of the river in central Shanghai, analysts said.
""Rates (in central Shanghai) are likely to slide over the next couple of years. They may come down to about $30, but what the market is seeing now is that companies that want quality space are willing to pay for it,"" said First Pacific Davies's Crispin.
Another real estate broker said he saw the price floor for quality office space in Shanghai at somewhere close to $10-15 per square metre per month.
""The bottom of the pit is the limit, there's too many buildings,"" the broker said. ""But there's still a shortage of really good properties.""
A Chinese real estate broker said grade A real estate in Pudong was already renting for around $15 per square metre per month.
""The overall occupancy rate is about 30-40 percent, although some of the better buildings are over 50 percent. But it will be three to five years before Pudong property is really fully absorbed,"" the broker said.
",11
"China's first and only non-state bank, the China Minsheng Banking Corp, is planning major growth in 1997 but will always be a niche player beside the country's huge state banks, a senior official said on Thursday.
Minsheng was founded in Beijing a year ago, opened Shanghai and Guangzhou branches last month, and plans to open branches in at least six other Chinese cities over the next 12 months, Shanghai branch manager Lu Jiashan said.
""The plan is to set up branches in Shenzhen, Dalian, Hangzhou, Wuhan, Chengdu and either Qingdao or Jinan. If it's completed, the scale of the bank by the end of 1997 will be quite significant,"" Lu said in an interview.
But he said the bank's ambitious growth plans posed no threat to the state banks that dominate the country's banking sector.
""We will grow fast, but we are in a weak position compared to the state banks, we're no threat to them at all,"" he said. ""The private banks will always be small players.""
The Minsheng Bank is an anomaly in China's tightly controlled banking system.
The bank doesn't seem to quite rate the title ""private"", but it has 59 shareholders, mostly private Chinese firms including the Hope Group, a feed grain producer based in Sichuan province, and the Xiamen Fuxun Group based in Fujian province.
Lu said that the bank had complete freedom to make loans, in terms of both recipients and amounts, a huge difference from the state banks who have strict loan quotas they must stick to, and instructions on how much they must lend state enterprises.
""All our loans are based purely on commercial considerations, there are no quotas, no administrative interference in the loan process at all. There are also no policy loan responsibilities,"" he said.
Lu said the central bank viewed the Minsheng Bank as an experiment.
""Whether there will be more non-state banks or not is not for me to answer, but one thing we can be sure of is that there will be a lot more banks in China in the future, and many of them will be share-based companies,"" he said.
The bank announced a small profit of 11 million yuan for its first year of operations and already has more than seven billion yuan in assets, Lu said.
""We have been open in Shanghai for only 18 days, but we already have assets of one billion yuan, which is much better than my expectations. We have 150 to 160 enterprises that have opened accounts with us,"" he said.
He said the bank's target was to triple the assets of the Shanghai branch to three billion yuan by the end of 1997 and open several branch offices around the city.
The bank's main focus, he said, would eventually be loans to private companies, although at this point only 10 percent of its customers are private firms with state enterprises and listed companies making up the lion's share.
""In the past, it has not been so easy for private firms to get banking support,"" Lu said. ""Now there is a bank specialising in this sector, helping them with their businesses, which I am sure will give a boost to the economy as a whole.""
He said the branch had so far made 12 loans of which three were to private companies.
""There are risks involved, and we need to make the right choice of companies that will promote the market economy as a whole, so we don't invest blindly,"" he said.
",11
"Trading on China's local currency interbank market has surged in the last few days following a directive to state banks to withdraw from the state debt secondary markets, traders said on Tuesday.
The increased trading volume fits in neatly with Beijing's intention to make the interbank market a major conduit for the nation's short-term funds and a barometer of money supply, they said.
The market's turnover surged 69.71 percent to 20.938 billion yuan ($2.523 billion) last week from the previous week.
Turnover was now averaging more than four billion yuan a day compared with an average daily turnover last year of around 2.5 billion yuan.
Lending by state banks on the market had risen noticeably, the Financial News said.
""Major banks have shifted to the interbank market for lending out their short-term surplus money,"" said one interbank market trader.
""They used to lend the money on the repurchase secondary market because rates there are higher than those on the interbank market, but they have been told to withdraw from the market,"" the trader said.
The People's Bank of China, the central bank, earlier this month ordered state banks to pull out of state debt secondary markets to prevent their funds being used for speculation on the stock market.
The government wants to force the banks to park their short-term funds in the interbank market, which was launched in January last year to give financial institutions an avenue for trading short-term money among themselves.
But the interbank market, still viewed as experimental by the authorities, has so far proved to be too small to provide a clear picture of China's money supply movements, analysts say.
""The trend towards the interbank market becoming more active will continue for the rest of this year,"" said a second trader.
""The central government has made it clear that it will be one of the main focuses of financial reform in 1997.""
Greater liquidity on the interbank market would allow the authorities to look at expanding its membership, currently restricted to 19 state banks and 35 short-term financing centres, money brokerages run by the central bank, analysts said.
""The recent surge in volumes is healthy for the interbank market,"" said a banker with the Shanghai-based Communications Bank.
""It will gradually allow the central bank to consider adding more members to help the market grow and become a real barometer of China's short-term money movements.""
Beijing intended to make the expansion of the interbank market a key task in 1997, central bank deputy governor Chen Yaoxian said recently.
""We will greatly expand the interbank market this year,"" Chen was quoted by state media as saying. ""We will make it gradually become the key marketplace for commercial (state) banks to clear their positions.""
",11
"A two-year campaign by China's financial overlords to force state banks out of the stock markets has succeeded, reducing bank risk and widespread irregularities, analysts said on Wednesday.
The campaign, launched in early 1995 to force banks to close or hive off their stock trading subsidiaries and investment firms, had been effective in stopping the use of state assets for gambling on the stock markets, bankers said.
""The process of separating banks from the stock and trust and investment businesses has largely been completed,"" said a banker with the Bank of China, reached by telephone in Beijing.
""This has greatly reduced the risks caused by banks trading on the volatile stock markets.""
In early 1995, Chinese state-run banks owned more than 1,000 securities offices with combined assets of more than 40 billion yuan ($4.8 billion), most of them set up during the stock fever that followed the launch of China's stock markets in 1990.
By the end of 1996, most of the offices had either been sold to securities houses, closed or made independent, bankers said.
Bank shares in securities brokerages had largely been sold to the brokerages and major industrial and commercial firms, they said.
Chinese bankers said they generally welcomed the move, in particular given the losses their securities subsidiaries suffered in the long market slump from early 1994 to mid-1996.
In mid-1995, China promulgated the ""Commercial Bank Law"", which bans banks from trading in stocks or doing trust and investment business, giving the central bank a legal basis for the clean-up campaign.
""The separation has effectively driven bank money away from the highly risky stock trading,"" said a banker with the Shanghai-based Communications Bank. ""It has also eradicated some sources of irregularities on the stock markets.""
One problem was the temptation for banks to make funds in their control available to securities subsidiaries for stock trading on credit.
Branches of all major Chinese banks and securities houses were also fined or publicly criticised in late 1996 by financial authorities for illegally feeding credit into initial public offerings on China's domestic A share markets.
""Many bank securities branches have been acquired by major securities brokerages and continue their business under different company names,"" said one executive with a major Chinese securities house. ""This has given the large securities companies an easy way to expand.""
The official Xinhua news agency reported last week that by the end of 1996, China's four largest state-owned banks had largely pulled out of the trust and investment business.
Of a total of 186 trust and investment firms formerly owned by the banks -- the Industrial and Commercial Bank, the Agricultural Bank, the Bank of China, and the Construction Bank of China -- 148 now operated separately while the remainder were in the process of becoming independent, the agency said.
",11
"Reform of China's non-equity capital markets is expected to push ahead over the next year with little or no impact seen from the death of paramount leader Deng Xiaoping, industry analysts said on Friday.
Trading on the state debt and local currency interbank markets has been hardly affected by Deng's death and the analysts said they believed Beijing would not postpone their development, particularly efforts to greatly expand the interbank market.
""Trading has been normal although volume has dropped a little in the past few days,"" said one Shanghai-based interbank trader. ""We can see no major policy changes likely to affect the markets in the medium term.""
""The markets see signs that there will be a smooth transition of leadership,"" said a state debt trader. ""This belief has helped prices of state debt spot contracts to stand firm in the past two days despite Deng's death.""
But a senior China analyst for a brokerage in Hong Kong said she saw the death of Deng possibly leading to a slowdown in the pace of reforms of the capital markets.
""This is a big year for them -- they have the return of Hong Kong, the 15th Communist Party Congress and now absorbing the death of Deng to deal with,"" she said.
""That's a fairly heavy programme already. So this is not the year when you are going to institute major banking reform, for instance,"" the analyst said. ""Stability is the buzzword at the moment.""
On China's largest state debt market in Shanghai, most treasury bill spot contracts closed up for successive days on Thursday and Friday after brief losses in early trading on Thursday on Deng's death.
Daily turnover on the Shanghai-based China national local currency interbank market has been light, with institutions reluctant to build heavy positions on Deng's death.
But interest rates on the market have not changed much, indicating a confidence in medium-term prospects, traders said.
""Despite Deng's death, most investors are confident that the government will have no problem at all to redeem the state debt on maturity,"" said a second state debt trader.
""They also expect future state debt issues to have lower interest rates because of China's falling inflation on the back of the improved economy,"" he said. ""These factors have pushed up the existing state debt spot contracts in the past two days.""
Retail price inflation fell to a year-on-year 6.1 percent in 1996 from a year-on-year 14.8 percent in 1995.
Traders said the state debt repurchase markets in China had also performed well in the past few days despite Deng's death with normal trading on the nation's domestic A share markets backing up rates and volumes on the repo market.
On Tuesday, a day ahead of Deng's death, the Finance Ministry announced it would issue a total of 123 billion yuan ($14.8 billion) treasury notes from March 1 to October 20, the largest single batch of state debt issue ever announced since China resumed such issues in the early 1980s.
""The timing of the announcement has indicated that the state debt market will continue as planned,"" said a securities analyst. ""It has also signalled that other financial reforms promised will be implemented.""
These include a plan to drastically expand the nation's local currency interbank market, possibly by admitting major securities houses as market members, analysts said.
The market now has only 19 state banks and 35 short-term financial centres, money brokerages run by the People's Bank of China, the central bank, as its members.
Turnover on the market is currently only around three billion yuan per day, far below the level at which the market can attain the official goal of being a barometer of national short-term money movements, traders said.
($1 = 8.3 yuan)
",11
"China is planning major reforms of its government debt markets in 1997 to make them more responsive to market forces and their rates more flexible, officials and analysts said on Tuesday.
Reforms this year will focus on creating a more market-driven secondary market after a series of measures taken last year to improve the primary market, including the introduction of a public tender for setting coupons, they said.
In a speech on this year's plans for state debt markets, a senior official said reforms in 1997 will aim to improve coordination between the primary and secondary markets, the Shanghai Securities News said on Tuesday.
""We will actively strengthen the role of underwriters as market makers on the secondary market to promote the coordinated development of the primary and secondary markets,"" Deputy Finance Minister Liu Jibin was quoted as saying.
Market makers -- major brokerages or securities houses -- would be required to invest consistently in the state debt market and help to stabilise prices when they fluctuate sharply, industry analysts said.
""A market maker system and off-floor trading will be introduced in 1997,"" the newspaper on Monday quoted Gao Jian, director of the ministry's state debt department, as saying.
China began state debt issues in the early 1980s with purchases made compulsory for many people such as government employees and staff of state-run enterprises.
By the early 1990s, purchases of government debt were voluntary, but state-run banks were still forced to underwrite whatever amount they were allocated by the authorities.
Real market forces did not come into play until 1995 when Beijing for the first time used a public tender system to set the coupon rate on a debt issue.
The system was used for all issues in 1996 -- an indication the primary market has been largely freed from administrative control, traders said.
""With the changes to the primary market now in place, reforms this year are expected to give more priority to the secondary market,"" said Lu Weiming, a state debt trader with China Guotai Securities.
""They are looking at reforms to the secondary market now largely because of the increasingly active trading there after three successive years of record debt issues,"" said a second trader.
China issued a record 195.2 billion ($23.52 billion) yuan worth of state debt last year and industry sources expect this year's issues to hit another record of 250 billion yuan.
In other reforms, the People's Bank of China at a meeting in Beijing last week ordered commercial banks to withdraw from trading on the state debt repurchase and spot secondary markets, traders said.
The banks, which have accounted for more than 80 percent of the money supply on the repurchase market alone, have been ordered not to build any new positions and to gradually offset their existing positions.
""The state debt market will gradually move to being dominated by securities brokerages as a result of the withdrawal of the commercial banks,"" said a trader with J & A Securities.
Other significant changes will include more issues of treasury notes and bonds which pay interest on an annual basis instead of on maturity, officials have said.
The introduction of state debt paying annual interest will allow Beijing to one day open trading on the annual interest rate to pave the way for a possible start of financial derivatives, industry analysts said.
China issued two experimental batches of state debt paying annual interest in 1996.
($1 = 8.3 yuan)
",11
"A Chinese court sentenced a U.S. businessman on Monday to 10 years in jail for smuggling garbage, fined him 500,000 yuan ($60,000) and ordered him to be deported, the official Xinhua news agency said.
William Ping Chen had confessed to charges of smuggling banned goods, including 238 tonnes of garbage and a small amount of waste medical items, between July and December 1995, Xinhua said.
The Shanghai Number One People's Intermediate Court sentenced Chen to 10 years in jail and ordered his expulsion from China after finding him guilty of smuggling ""foreign garbage"" for profit, the news agency said.
Chen still has the right of appeal, but is likely to be deported swiftly if he waives that right.
""We place the highest priority on looking after U.S. citizens in this sort of situation,"" a U.S. consulate official said, adding that officials had requested permission to visit Chen in jail.
Chen, 56, who was arrested in June last year, was sentenced following an open hearing on December 2 at which he was defended by two lawyers, Xinhua said. The hearing was attended by an official from the U.S. consulate in Shanghai, it said.
Chen had insisted on going ahead with imports of banned waste items despite warnings from officials of the Shanghai municipal environmental protection bureau and the Chinese partners in his Shanghai United Paper Works Co Ltd, it said.
Chen had evaded customs supervision to illegally import the garbage from the United States and ""had caused serious damage to the environment of China"", the court verdict said.
The court also ordered Chen to pay the 500,000 yuan fine, Xinhua said.
Chen's arrest came during a furore in China over several illegal shipments of U.S. rubbish -- old clothes, rubber gloves, disposable syringes and medical nappies found mostly in shipments listed as waste paper for recycling -- and which escalated into an issue of national pride.
Chinese officials whipped up a nationalistic campaign over the garbage, with Shanghai customs describing itself as the ""front line, a steel Great Wall guarding the motherland"".
Last year, China turned back more than 200 ships from its ports carrying foreign waste or dangerous materials and issued new regulations to curb imports of foreign garbage.
The rubbish issue touched a nerve in China and also served as a timely tool for Beijing to wave in the face of U.S. attacks on its copyright violations and human rights record.
Chen's sentencing was the first in China of a U.S. citizen since human rights activist Harry Wu was detained in June 1995, convicted of spying and sentenced to 15 years in jail.
Wu was deported to the United States within hours of his sentencing after he decided not to appeal.
Four U.S. citizens are currently serving sentences in jails in China, but officials have declined to give details of the length of their terms or their offences.
",11
"The city of Wenzhou, a capitalist pioneer in socialist China, has decided the best way to mourn paramount leader Deng Xiaoping is to make more money, residents said on Monday.
""Without Deng, there would be no today's China and, especially, no today's Wenzhou,"" said advertising company manager Wu Hao.
Deng, who died on Wednesday aged 92, helped to steer China on its current economic course, wrenching it from purist Marxist policies that had brought the nation to the brink of starvation and industrial collapse.
Once a poor and backward city, Wenzhou has boomed since Deng's reform were launched in 1979, seizing new opportunities more aggressively than almost any other place in the country.
While top-level attention focused on four ""special economic zones"" such as Hong Kong's neighbour Shenzhen, which was created as a closely-monitored official experiment with capitalism, Wenzhou just went ahead and started making money.
Private firms in the city of seven million people on China's eastern coast, 350 km (217 miles) south of Shanghai, now account for 75 percent of Wenzhou's annual industrial output, compared to a national average of 10 percent.
""There is no way we could make as much money as we do, do so much business, if it had not been for Deng Xiaoping and the policy changes he pushed through,"" Zhou Ping, the owner of a small shoe factory, said in a telephone interview.
Another businessman in his twenties, asked about Deng's death, said getting rich was his top priority.
""It (Deng's death) has nothing to do with my business,"" he said. ""What I should do is first make more money, then find a wife and finally have a son.""
""Despite any possible changes in Beijing, there will be less control of the private sector at least in the short term, and there will be more opportunities for making money,"" he added.
Wenzhou's brand of freewheeling capitalism was born of poverty and desperation.
The city sits on the coast facing Taiwan, home of the Nationalist government which in 1949 fled to the island, now regarded by Beijing as a renegade province, after losing the civil war.
Fearing a continuation of the war, the new communist government neglected coastal regions, including Wenzhou which for many years received less than half the level of state investment other cities did.
When Deng's reforms were launched, Wenzhou embraced them with fervour -- so much so that the city was criticised for following a capitalist road instead of a socialist one.
But Deng's 1992 visit to the south of China in which he called for fast development of the market economy silenced the critics and allowed Wenzhou to charge ahead, said a Wenzhou businessman who was formerly an official with a state-run firm.
""It gave us the courage to do business whole-heartedly without having to worry about the political consequences,"" he said.
Local officials say that with the policies on private enterprise and the market economy increasingly stable on a national scale, Wenzhou is set for a ""second surge of development"".
""This new surge is making Wenzhou's private firms even bigger and more competitive,"" said the former official.
",11
"One of Shanghai's top businessmen said on Wednesday that he had no doubts or concerns about policy changes following the death of Chinese leader Deng Xiaoping last week.
""All we want is stable government,"" said Zhang Xuexiong whose chocolate-making company is a major supplier of confectionary to the Shanghai market and one of the city's largest private companies. ""The rest we can handle with our own hands.""
Zhang is the owner of the Shanghai Haolaixi Food Co Ltd, which he started in 1989 with 90,000 yuan ($10,840) in capital.
It turned a 10,000 yuan profit in the first year and he hasn't looked back since.
Last year, the company had a profit of over one million yuan, which Zhang said he expects to rise to over three million in 1997.
""(Party chief) Jiang Zemin said quite clearly in his eulogy to Deng that multiple forms of production would continue to be allowed. There will definitely be no change in policy,"" he said.
Zhang was effusive in his praise of Deng and his contribution to making him a millionaire.
""If the policy had not opened up, we simply wouldn't exist,"" he said. ""Deng Xiaoping saw that it was essential to let people become prosperous before they would continue to support the rule of the Communist Party.""
The company has 380 workers, but in a classic capitalist entrepreneurial move, Zhang plans to fire more than half of them later this year when he installs automatic packaging machinery imported from the United States.
Zhang, aged 45, was one of many young people shipped out of Shanghai to work in the countryside during the 1966-76 Cultural Revolution. He returned to his native city in 1984, and started a series of small restaurants and shops.
""But private enterprise was very tough in the 1980s, especially in Shanghai. It was only after Comrade Deng's speech in 1992 opening up economic development that things got moving,"" he said.
",11
"Foreign companies are finally beginning to realise the dream of the China market that has long tantalized traders -- selling goods to the world's largest slice of mankind and making money from it.
Many foreign companies remain stuck in China ventures that are money-losing and frustrating, but the number turning a profit or at least gaining solid market share is increasing, along with the market, according to analysts and businessmen.
In the 16 or so years since China opened its doors to the global economy, the country has become the second-biggest recipient of foreign investment funds in the world, after the United States.
Foreign brands such as Coca-Cola, Kentucky Fried Chicken and Lux soap have become household names throughout China, and the shelves of convenience stores from Harbin to Hainan are stuffed with foreign-brand soaps, chocolates and cigarettes.
""Overall, more and more companies are coming, which is not necessarily to say they're making money yet,"" said a Western diplomat in Shanghai. ""But there's now a general view that there's not only great potential but also an increasingly good track record for companies that have persisted.""
""You can now see that if you stick it out, you can make money and you can get good market share. Coca-Cola is now a household name throughout China,"" he added.
Coca-Cola Co. came back to China after a 30-year absence in 1979, and the company booked its first accounting profit for its China operations 11 years later, said John Farrell, head of China operations.
""You cannot afford not to be in China. It's just the reality of opening a country of this size and the size of the economy and population,"" Farrell said.
""But it takes a lot of patience and you need to be very diligent to build your business. It's not easy by any means.""
The Atlanta-based company has 18 bottling plants across China, and with sales volume doubling every three years this is just the beginning.
Coca-Cola declines to say just how profitable the China market is. Like most other companies, it does not issue figures on its China operations.
""You have to march along with the constraints that you're given,"" Farrell said.
""The main thing for us was living up to the commitments we'd made on building plants, transferring technology and training people. The more we did that, the longer we did that, the more people would believe and trust us and allow us to expand a little bit more.""
Among the sectors that have done well so far are communications equipment firms, such as Motorola Inc. of Schaumberg, Ill., and Sweden's LM Ericsson AB, and low-priced consumer product makers.
""Generally speaking, the easiest place to make a profit tends to be in the consumer industry, usually fairly small-scale operations,"" said Anne Stevenson-Yang, director of China operations for the U.S.-China Business Council.
""That is, assuming the deal is done right,"" she added.
There are big variations on market access and ease of business for foreign companies depending on the sector they are trying to storm.
The restraints are few in areas such as consumer products, while in sectors such as banking, distribution and insurance, foreign firms are kept on a very tight leash.
Overall, companies involved in high-cost, long-term projects seem to bear a proportionately bigger risk, analysts said.
""Big, heavy industry projects are a problem,"" said one foreign broker in Shanghai.
""Generally, foreign businesses in trouble have a bad business plan, or they're doing things which China is not famous for -- like trying to build airplanes or something.""
The automobile industry has seen its share of troubles for foreign companies which have ventured in.
Chrysler Corp. had a famously difficult relationship when it set up a joint venture in Beijing in the early 1980s, and France's PSA Peugeot Citroen is looking at closing one of its two China plants.
""We're having some difficulties -- all Western carmarkers are having difficulties in China,"" said a Peugeot official in early December.
General Motors Corp., which has been close to completing negotiations for a $1 billion automobile factory in Shanghai for months, is well behind schedule on its plans and could have trouble ever making a profit in China, according to some analysts.
""It's going to be very difficult for them to make money. But they're coming in because they feel they have no choice,"" said the Western diplomat. ""It they don't do the deal, Ford will.""
Hong Kong and Taiwan businessman have generally done much better in their investments than non-Chinese, said a representative for a Hong Kong trading company in Shanghai.
""But more people make money than they would admit,"" he added. ""People find ways to shift profits to Hong Kong or from one company to another to make things look like break-even.""
Making money is not a top priority for many companies in the China market, at least in the initial stages. Many are happy to break even or lose money for many years in order to gain market share.
The Canadian insurance company Manulife Financial, for instance, which set up a joint venture last month, said it doesn't expect to see a profit for at least seven years.
",11
"China's securities authorities on Saturday publicly punished a listed company for trading its own shares, opening a new phase in a crackdown on securities industry irregularities.
The Shanghai Securities News said the Shenzhen-listed A share firm Zhangjiajie Tourism Development Co Ltd had been fined two million yuan ($241,000) and ordered to hand over all its profits from the illegal share trade.
Shanghai brokers said it was apparently the first time that a listed company had been publicly punished for trading its own shares, something many Chinese companies are known to do.
The company was accused of buying more than two million of its own shares from September to November last year, then selling part of the shares just before announcing a bonus issue on November 22, making a profit of 11.805 million yuan.
The authorities also ruled that the Hunan Securities Trading Centre had violated the rules by allowing Zhangjiajie to illegally trade its own shares, and fined the centre 750,000 yuan, the newspaper said.
The national watchdog body, the China Securities Regulatory Commission (CSRC), decided to confiscate Zhangjiajie's profits from the illegal trades and ordered the firm to sell the shares it still held within two months, the newspaper said.
The CSRC also ordered the company to convene quickly a shareholders' meeting to discuss the dismissal of general manager Yang Zhezhong and deputy general manager Li Jianzhang, who are responsible for the illegal trading, it said.
China's securities authorities late last year launched a crackdown on banks and securities houses for illegal transactions involved with share issues.
""The public punishment of a listed company signals that the crackdown has now spread to the secondary (public trading) market,"" said one broker.
""Market rumours say that the central government is conducting a large-scale investigation into irregularities on the secondary market,"" a second broker said. ""We are expecting the exposure of more irregular transactions.""
China's Company Law and securities trading rules ban listed firms from trading their own shares.
""The company's action of buying its own shares and then selling them just prior to a bonus issue was an instance of insider trading,"" the Shanghai Securities News quoted a CSRC circular as saying.
($1 = 8.3 yuan)
",11
"China's entry to the World Trade Organisation (WTO) is likely to be one of the top issues for U.S. Secretary of State Madeleine Albright in Beijing as the two nations draw closer on trade issues, analysts said on Monday.
Albright, on the last stop of a nine-nation tour, will meet President Jiang Zemin, Premier Li Peng and other officials during her brief stay, cut short because of funeral arrangements for the late leader Deng Xiaoping, who died last Wednesday.
Discussions on China's admission to the global trade body, long delayed by disagreements over the terms, have gained momentum in recent weeks with U.S. officials saying China has indicated a willingness to drop more of its trade barriers.
""It's going to be one of the main items on the agenda, they're right in the middle of it,"" said a Western analyst in Shanghai.
""What people want is for the Chinese to sign on to the international standards of trade. It would be a very positive factor in relations (between China and the United States) if it was resolved,"" the analyst said.
Zhou Dunren, professor at Fudan University's American Centre, said WTO entry was the biggest problem facing China and the United States in the sphere of economic relations.
""But it looks very possible that China will gain entry to the WTO this year, even though it may be a conditional entry rather than full membership,"" he said.
""The U.S. attitude on China's entry was previously very tough, setting very high conditions. But now there appears to be basic support from the U.S. to China's entry, with the conditions being softened somewhat,"" Zhou added.
""There's no doubt that the middle ground is appearing and that that's attractive to everyone,"" said John Crossman, Shanghai representative for financial firm Jardine Fleming.
""I think we can look forward to a time when trade disputes aren't what drives the China-U.S. relationship. Now the contact is all negative,"" he said.
China has been seeking to join the world body on the easier terms offered to developing countries.
But the United States and other Western countries say the Chinese economy is too big, and that giving it preferential treatment would distort the global trading system.
U.S. officials declined to comment on the current state of discussions on China's WTO entry.
Professor Peng Fuyong of Shanghai's Finance University said China's eagerness to gain WTO membership had also diminished somewhat in recent months.
""One reason for the slowdown may be concerns that there are certain elements of the domestic economic structure which are not ready for WTO entry,"" he said.
""For instance, the state-run import-export firms and some industries are not at this point efficient enough to face the competition that would result from WTO entry,"" Peng added.
Zhou said bilateral trade overall was set to continue to grow strongly in the years ahead.
""When the Shanghai Communique was signed 25 years ago (setting the framework for normalising Sino-U.S. relations), trade between the two amounted to probably just a few million dollars a year. It hit $50 billion in 1996, and it looks like this trend will continue,"" he said.
According to U.S. figures, China's trade surplus with the United States swelled to about $38.9 billion in 1996, up from about $34 billion in 1995. Beijing's figures show a net trade deficit with Washington.
The main reason for the widely varying figures is that China does not count goods shipped through the British colony of Hong Kong in its U.S. trade data.
""The return of Hong Kong to China in 1997 provides an opportunity for the two sides to find a solution to this problem,"" said Zhou.
",11
"China's stock markets began returning to normal on Friday with all indices closing up in steady trade after the negative impact of the death of Deng Xiaoping faded from view, analysts said.
Retail investors and institutions began building positions reflecting the sentiment that Deng's death would actually benefit the markets in the longer term by removing a major negative factor, they said.
At the close on Friday, Shanghai's foreign currency B share index rose 0.894 points, or 1.38 percent, to 65.569 points while the domestic A share index closed at a year high of 1,063.276, rising 55.545 points, or 5.51 percent.
In Shenzhen, the B share index rose 7.43 points, or 5.18 percent, to 150.96 and the A share index zigzagged up 8.68 points, or 2.48 percent, to 359.28.
""Trading has returned to normal,"" said one Shanghai trader. ""Investors don't believe there will be any major policy change after Deng's death.""
""Some investors believe Deng's death will benefit the markets by removing a major negative factor for good,"" he said.
""The bad news has been digested,"" a Shenzhen-based analyst with Central-South Securities said. ""The Shanghai stock market performed well because investors can see a smooth leadership transition taking place.""
""People feel today that there is a stable political transition and the government is gaining credibility,"" another Shenzhen analyst said. ""Medium and long-term investors are beginning to pour in funds.""
Shanghai brokers said securities houses in the city convened meetings on Thursday which agreed on the necessity to keep the markets moving normally, but decided not to intervene to support the markets.
But some analysts said they suspected the markets were in one way or another receiving support from institutions under instructions to ensure no major market movements in the aftermath of Deng's death.
""I still think there may be some government support in this,"" said an analyst with a foreign brokerage in Shanghai. ""The official intention is to ensure that normalcy is maintained.""
Analysts said the relatively short mourning period before Deng's funeral on Tuesday indicated China wanted to dispel the gloom as quickly as possible, helping to creating favourable investment conditions.
""The stock markets in China are very sensitive to political conditions,"" said another Shanghai trader. ""The impression that China is on the right track towards a smooth transition has helped the markets to recover swiftly.""
Other brokers have warned that there was still potential for market volatility in the short term.
""I will have to wait until the end of the mourning period to see clearly where the market is heading,"" the Shenzhen-based analyst said.
",11
"Foreign business people said on Friday they expected Deng Xiaoping's death to have almost no affect at all on either economic policies or the immense problems they face in making money in China.
Analysts said foreign money had now become an indispensible part of the government's efforts to keep unemployment down and the economy growing, and there was no prospect of any fundamental shift.
Lance Browne, Standard Chartered Bank's China manager, said he expected no change in policy toward foreign banks, nor in the speed and extent to which they can expand their business in China.
""It could hardly be any slower, and speeding it up, that's unlikely too,"" he said.
""Business people at this point see virtually no impact on their operations, either with regard to policy or the problems they face,"" said a Western diplomat in Shanghai.
Foreign businesses have been placed under ever-greater profit pressure in the past year as various preferential policies applied previously have been cut back or abolished to give domestic companies greater room to manoeuvre.
""There could be a further tightening of policy on the privileges applied, but that was going on before and has nothing to do with the death of Deng,"" the diplomat said.
Deng, China's paramount leader, died late on Wednesday aged 92.
An American businessman in the automobile sector in Shanghai said he saw no impact from Deng's death, but reported an increasing sense of concern among foreign business about the problems of getting approvals and making a profit in China.
""People are investing heavily, but there is a great sense of disappointment and unhappiness,"" he said.
""This has nothing to do with Deng, but it will be important to see how the leadership absorbs this,"" he said.
Hoong Yik Luen, investment analyst with ING-Barings in Shanghai, said foreign funds had become a key part of government efforts to keep the economy growing and unemployment down.
""They wouldn't be able to change the policy on foreign investment, they couldn't afford it,"" he said. ""Unemployment would probably be 20 percent now instead of 15 percent if it wasn't for foreign investment.""
An investment analyst based in Hong Kong said major foreign corporations were committed to investing in China almost regardless of what happens.
""The fact that there has been almost no impact on investment flows from the roll-back on the preferential policies shows how much momentum investment has, and there's no reason for the Chinese to shift their policy on taking in money,"" the analyst said.
""I see no change at all in the short term,"" said Standard Chartered's Lance Browne.
""There hasn't been a sense that the reforms are controversial inside the leadership for years. Had it been controversial, it would be different,"" he said.
But Chinese officials appear to be concerned about the topic.
One foreign businessman said he had been visited by officials asking for his view on the possible impact of Deng's death on foreign investment in the country.
""They are asking the same questions you are asking -- what effect Deng's death will have on investment decisions,"" the businessman, who declined to be named, said.
""I told them the feeling was that there would be no effect,"" he added.
""But of course it could be the calm before the storm. We'll have to see how strong the leadership looks in six months. There are always people in the wings who would like to replace them,"" he said.
",11
"China's stock markets rose calmly on Tuesday reflecting signs of political stability seen since paramount leader Deng Xiaoping died last week, analysts said.
Stocks rose in Hong Kong and fell in Taiwan, but for reasons that had little or nothing to do with politics in giant neighbour China, they said.
""Signs are clear during (China's) six-day official mourning period (from last Thursday to Tuesday) that political conditions are stable,"" said an executive with a major Chinese brokerage in Shanghai.
""The markets expect no sensational political news to shake them, at least for a few weeks,"" he added.
President Jiang Zemin on Tuesday offered unstinted praise for Deng during a funeral oration, saying the future lay with economic reforms pioneered by the strongman who died last Wednesday, aged 92.
Modern China's stock markets, established in 1990 under Deng's direction, only officially emerged from an ""experimental"" phase last year, with many investors still worried that Beijing could decide to close them down, brokers say.
""With Deng's death, investors are nervous about the continuity of policy,"" said the stock analyst. ""Normal trading today serves to stabilise sentiment.""
Shanghai's domestic A share index closed up 8.752 points, or 0.83 percent, at 1,063.83 while the foreign currency B share index ended up 0.589 points, or 0.9 percent, at 66.296.
In sothern Shenzhen, the A share index rose 6.02 points, or 1.66 percent, to 368.7 points while the B index edged up 0.14 points, or 0.09 percent, to 150.87.
""A sense of stability dominated the markets today partly due to the normal trading (hours),"" said a senior B share dealer. ""This helped the indices move up.""
Trading on China's two stock markets continued through the funeral ceremony for Deng in the morning, although volumes dropped significantly as traders and investors alike watched the live television broadcast.
""The central government wanted to tell millions of investors on the stock markets that they were determined to let the markets continue as before even though their creator is gone,"" said a stock analyst. ""All markets closed up today, which shows they succeeded.""
Traders said share prices were likely to rise steadily for at least the next few weeks on strong national economic prospects.
""Technical factors will prevail in the coming weeks,"" said a broker. ""Investors will buy blue-chip firms expected to post strong 1996 results. They have confidence in the national economy this year after its good performance last year.""
In Hong Kong, share prices rallied on Tuesday, with the Hang Seng Index closing up 144.57 points, or 1.08 percent, at 13,520.26 mainly due to gains in HSBC Holdings.
Brokers said China-related shares continued to attract keen interest and investors had been encouraged by Jiang's vows to push ahead with market-oriented reforms.
""This morning Beijing reiterated the open-door policy will still be maintained,"" said Edwin Cheung, dealing director at Taiwan Securities.
In Taipei, analysts said Deng's funeral had no impact on stock trading, with the weighted index falling 21.25 points, or 0.27 percent, to 7,887.36.
""Nobody talked about it,"" said Allen Huang, fund manager for National Securities.
",11
"China's stock exchanges remain the most open and most market-driven financial markets in the country despite recent official pressure to rein them in, analysts said on Tuesday.
The foreign exchange, interbank and treasury bill repurchase markets are kept under incredibly tight control by the Beijing authorities, with even tiny movements achieved only with official approval.
""Unlike the stock markets, the funds moving on the money markets are directly linked to China's currency stability and money supply,"" said one interbank market trader.
""The central bank is afraid that any chaos on the markets could result in financial turmoil at either a national or local level,"" he added.
China's futures markets, once home to frenzied, casino-like trading, have been ruthlessly brought to heel over the past year with the authorities forcing speculative funds out to the stock markets, analysts said.
""Stocks are the most open of all China's financial markets,"" said a stock analyst with a major Chinese brokerage. ""There was the crackdown in late 1996, but in fact the central government rarely intervenes in the markets.""
China's stock markets in Shanghai and Shenzhen plunged in mid-December after the official People's Daily published an article warning of over-heating. Prices are now about 30 percent below their mid-December levels.
Current rules allow for a maximum 10 percent rise or fall in a share price over one trading day, but information flow, while still behind the standards of advanced stock exchanges abroad, is relatively free, analysts said.
On the nation's interbank foreign exchange trading market, by contrast, the People's Bank of China intervenes heavily on a daily basis to keep movements in the Chinese yuan against other currencies within very strict guidelines.
The central bank has its own trading room on the market, which has access to all transaction details, while dealers from other players on the market can only see trades done by their own bank.
Daily volumes are not posted on the market and rate movements of the Chinese yuan against other currencies are strictly limited, traders said.
""We feel very much that we are in an infair position with the central bank knowing everything and us knowing so little,"" said a Chinese foreign exchange trader.
""The tendency therefore is for us not to bother to think or analyse the markets too much. Most of the trading is done in the dark with us just guessing at the central bank's intentions,"" he added.
Traders said the same situation existed on the Chinese yuan interbank market, launched just one year ago, and on the nation's state debt repurchase markets.
They said another factor was that the bulk of funds moving on the money markets were state assets.
""The central bank will not stand by and let them get lost in uncontrolled trading,"" said one trader.
",11
"Shanghai's economy, which grew a phenomenal 13 percent last year, is likely to see only slightly slower growth in 1997, but unemployment in China's largest city is rising, the city's statistics bureau announced on Wednesday.
Shanghai's gross domestic product growth rate is likely to stabilise and fall gradually in the next few years, the statistics bureau's director Sun Zuyao told a news conference.
""The GDP growth rate for Shanghai in 1997 is likely to differ from that of 1996 by around one percentage point, and from current conditions, it would appear more likely to be down rather than up,"" Sun said.
""Shanghai's economy has been growing at more than 14 percent a year since 1992. That's fast enough,"" he added. ""Of course, if everyone does good work, then we could see an increase.""
Previously published figures give Shanghai's GDP for 1996 at 287 billion yuan, a rise of 13 percent on 1995.
Sun said one of the biggest problems facing the city was how to deal with the large number of loss-making state-owned enterprises and the staff who are forced out of their jobs with only a subsistance allowance.
He said the number of Shanghai's unemployed workers, including the so-called ""xiagang"" staff (staff withdrawn from their posts) from state enterprises, rose 20 percent during 1996.
Sun said the number of people in the city registered as unemployed with no connection to any work unit was 150,000 at the end of 1996, about the same as at the end of 1995.
But he said the number of ""xiagang"" workers had risen to 270,000 by the end of 1996, up from 200,000 at the end of 1995.
Analysts say China's communist government forces the heavily indebted state enterprises to keep most of their workers on their books, fearing the social consequences of sudden and massive unemployment.
But Sun said there had been an improvement in the overall situation with the state enterprises in Shanghai, which are the target of continuing gradual pressure to improve their operations or else merge or close.
About 27.8 percent of state enterprises in Shanghai lost money last year, down from 33 percent in 1995, with losses last year amounting to 5.7 billion yuan, or about 27 percent of the total profits of Shanghai's industrial enterprises.
""Due to the ongoing reforms of the state enterprise sector, I think there will be a relatively good improvement in the situation with regard to loss-making state enterprises this year,"" he said.
The statistics issued by the bureau on Wednesday highlighted the changes taking place within Shanghai's economy, particularly in the textile sector that was once the powerhouse of the city's industry.
Output of cloth in 1996 fell by 43.4 percent to 341 million metres and yarn output fell 25.1 percent to 191,000 tonnes.
($1 = 8.3 yuan)
",11
"China's financial markets breathed a sigh of relief on Thursday as the death of paramount leader Deng Xiaoping removed a major element of uncertainty that had overshadowed them for years, analysts said.
The single most sensitive and volatile factor for the markets in and around China in recent years had been the health of Deng.
Suddenly, it's not there any more.
""The official announcement has finally removed the main disturbing factor in the markets for the past few years,"" said a Hong Kong stock analyst based in Shanghai.
""It's the start of a new era. The new focal point of concern will hopefully be more economic fundamentals,"" the analyst said.
Local Chinese brokers agreed that Deng's death late on Wednesday removed a key negative factor from the markets.
""His health has long loomed large on the markets,"" said one stock analyst in Shanghai.
Bruce Richardson, Shanghai representative of HG Asia, said traders were relieved the wait was over.
""For years, people have been saying that when he goes there will be a deep drop which will present a buying opportunity. I'm a little surprised that the markets have digested the event so quickly,"" Richardson said.
""It shows that people are taking a forward-looking attitude. sentiment is very positive all around,"" he added.
Stock markets in China, Hong Kong and Taiwan moved higher on Thursday after gyrating wildly at the opening after the news.
Hong Kong stocks had jumped 1.96 percent or 256.96 points, by midday after an initial loss of 92 points. The weighted index in Taiwan rebounded from an earlier fall to close 21.19 points, or 0.28 percent, higher at 7,678.04.
The Shanghai foreign currency B index was up 0.29 percent or 0.188 points at 65.318 while Shenzhen was up 0.63 percent or 0.89 points at 142.64.
Some analysts have predicted a power struggle in the wake of Deng's demise while others viewed the current leadership structure headed by Communist Party chief Jiang Zemin as being basically stable.
China markets would now be looking for signs to indicate which group of pundits was correct, analysts said.
""The main concern is political instability,"" said a broker in Shenzhen. ""People will be watching to see what measures the government takes over the next few days.""
",11
"The Czech National Bank (CNB) on Tuesday put the largest fully-private bank, Agrobanka a.s., under forced administration due to liquidity problems arising from the failure of another bank, Kreditni Banka a.s..
The central bank, in its 12th intervention into a commercial bank in the post-Communist period, said it would guarantee all of Agrobanka's obligations during a ""temporary"" forced administration period of an unspecified duration.
Analysts said the move was another badly-needed step in reforming the banking sector and should speed up overall market reforms.
CNB Governor Josef Tosovsky on Tuesday said that the central bank instructed the ""big banks"" to prepare up to six billion crowns ($159 million) to help liqidity at Agrobanka, which has four billion crowns in basic capital.
Tosovsky did not elaborate on what form the liquidity help might take or from which source.
The ""Big Four"" banks are Ceska Sporitelna, Komercni Banka, Investicni a Postovni Banka and Ceskoslovensko Obchodni Banka a.s. (CSOB) -- all in which the state holds a significant stake. All but CSOB, have privately-held shares.
Tosovsky, who called Agrobanka's situation a problem with ""liquidity not solvency"" said the central bank would jump in with its own funds if necessary to help the central bank's ""precautionary measures"".
In a statement issued after an overnight meeting of the Czech cabinet, the CNB said that problems of Agrobanka, the country's fifth largest overall, had arisen as a consequence of the failure of the medium-sized Kreditni Banka a.s.
It also said the move stemmed from the investigation of people in the Kreditni case -- in which five people connected to Kreditni have been indicted on fraud charges -- who are also connected to Agrobanka.
""The investigation of the fall of Kreditni Banka...and its politicisation, and charges against people connected to Agrobanka, negatively influences the liquidity position of this bank (Agrobanka),"" the CNB said in its statement.
Over 70 percent of banking activity in the country is done within the four largest banks.
In order to support Agrobanka, the CNB said it would guarantee all deposits at the bank, and that it would ensure, in cooperation with other commercial banks, sufficient ""financial sources"" for Agrobanka, should it need them.
Czech Prime Minister Vaclav Klaus said the central bank's move was a preventative step aimed at keeping the banking sector sound. ""There isn't even the slightest reason for any sort of banking panic,"" Klaus told journalists on Tuesday.
($1=26.51 Czech Crown)
",18
"Czech National Bank (CNB) Governor Josef Tosovsky said on Thursday he could see no sense in the crown's recent sharp rise amid a wave of Eurobond issues in the currency.
Tosovsky also told a news conference on 1997 monetary policy that a marked reduction in money supply growth had created good conditions for lowering inflation and interest rates.
But the central bank would remain cautious, and lowering the M2 growth rate would still be the main goal, he added.
The crown has surged since the New Year despite a steadily worsening trade balance, with an unprecedented 24 billion crowns ($862 million) in new Eurobonds issued in the currency.
""I don't see any rational reason for the strengthening of the crown in the past few days,"" Tosovsky said.
But he indicated that the central bank was still comfortable with the crown's rise even though it has climbed to nearly five percent above parity with its mark/dollar basket, which the CNB uses for fixing the currency daily.
Almost a year ago the CNB widened the band in which the crown is fixed to 7.5 percent either side of the midpoint of basket from 0.5 percent either side.
""We widened the band so the crown could move freely within it...,"" said Tosovsky. ""A strong crown is the long-term policy of the central bank.""
The crown slipped on Thursday morning due to Tosovsky's comments, dropping to 4.32 percent above the midpoint from around +4.50 percent before he spoke.
But it recovered to 27.770 crowns to the dollar and 16.925 to the mark, or 4.67 percent above parity, after the German bank Suedwest LB ignored Tosovsky's comments and issued another one billion crowns in Eurobonds.
""Obviously there was a large issue of Eurobonds in recent days but we do not see any macro-economic reasons for such an issue,"" Tosovsky said. Asked if there was a herd mentality in issuing these bonds, he said: ""Yes.""
Analysts said issuers of one to two-year crown Eurobonds were taking advantage of relatively wide interest rate differentials with major currencies and an inverted yield curve.
Tosovsky also said the CNB aimed to lower the M2 growth rate even further within its target range of eight to 12 percent.
M2 growth slowed in November to 9.7 percent year-on-year from 9.8 percent in October, and 22.1 percent in November 1995.
The slow down began after the CNB raised its discount rate one percentage point to 10.5 percent in June and raised minimum reserve requirements for banks to 11.5 percent from 8.5 percent.
Tosovsky said the inflation target of 7.9 percent for 1997 depended on growth of government regulated prices -- heating costs and housing rents -- not exceeding 15.2 percent.
The CNB's target implied core inflation of about five percent, and a rise in food prices of about seven percent.
But the cabinet is debating fiercely how much to deregulate the politically sensitive cost of energy and housing.
Tosovsky said that a slowing in real wage growth would also be a condition for meeting the targets.
The other major concern, he said, was the continually worsening trade deficit, and thus the current account deficit, which some analysts have said may surpass eight percent of gross domestic product this year.
Tosovsky said it was important to keep demand for imports under control, and implied that interest rates could not be quickly lowered as a result.
""We are trying to hold back aggregate demand. These restrictions should be also reflected in imports,"" he said.
-- Prague Newsroom, 42-2-2423-0003 ($1=27.84 Czech Crown)
",18
"The Czech National Bank (CNB) said on Thursday that non-performing loans written off in the first 11 months of 1996 by commercial banks totalled 20 billion crowns, up from about two billion in the same period of 1995.
But CNB spokesman Martin Svehla said the main reason for the rise was a change in taxation rules allowing banks to pull more into reserves so that the credits could be written off.
""It has been allowed by the taxation rules thanks to the reserves created by these banks,"" Svehla told Reuters.
Most large banks have released their profit and loss figures for 1996, but have yet to detail reserves and provisions.
Svehla said the total amount of credit classified as risky in Czech commercial banks was about 220 billion crowns.
That was split between non-performing credit lingering from the Communist era, which has been consolidated in the state-run Konsolidacni Banka, and credit granted after the 1989 revolution, much of it connected with privatisations.
""We tightened up rules on how to assess risk and potential risk from credit. These rules have been effective since 1995, and they have gained more and more confidence,"" Svehla said.
""On one hand the figure (of classified credit) became bigger, but reserves and provisions were created, in what I would say is a sufficient amount. Speaking about the whole banking sector, all these potential losses are covered by all created reserves.""
He said that six of 13 small private banks which have been offered participation in a state-supported debt relief programme were certain to enter the scheme.
Pragobanka, Banka Hana, and Moravia Banka have been accepted in the potential 13.7 billion crown debt buy-back programme, Svehla said, declining to name the others.
Banking sources have said that Forestbank, Zemska Banka, and Universal Banka had applied to join the programme and were nearing approval.
""This is good news for the banks and their clients. It means they will be better accepted on the (interbank) market,"" Svehla said.
Under the plan, participating banks must follow strict conditions and allow the central bank to make management changes where needed.
The state-run Konsolidacni Banka would buy the banks' doubtful assets at face value.
The banks will be required to buy back the assets after around five to seven years, again priced at their nominal value, minus credits recovered by Konsolidacni from the debtors in the meantime.
Banks seeking to participate will be held to strict requirements which include sticking to a three-year stabilisation plan and an agreement to attain an eight percent capital adequacy ratio. -- Prague Newsroom, 420-2-2423-0003
",18
"A long-awaited early 1997 measure of Czech M2 money supply showed no signs of surfacing on Monday, causing traders and analysts who use the numbers for investment strategy to vent their frustrations.
""It's incredibly frustrating, because the Czech National Bank keeps referring to M2 as one of its most important statistics and it's consistently released very late,"" said Matt Starr, a fixed-income analyst at Creditanstalt in Prague.
While central banks of most major economies and many post-communist neighbours have already released key money supply figures for well into 1997, the Czech National Bank (CNB) has yet to publish any for the year.
The CNB said on Monday it still had no definite release date for January's M2 data, although the figures may come soon.
""Definitely not today. Maybe tomorrow or after tomorrow,"" Pavel Palivec, a CNB spokesman, told Reuters.
""No legal norms"" require a release of M2 data, he said, adding that slow reporting of commercial banks was partly to blame for the tardier-than-usual release.
Tension has grown ahead of the government's economic stimulus package on Wednesday, where some analysts believe that a rapid decline in M2 may enable the cabinet to succeed in pushing the central bank into lowering key interest rates.
""They (the CNB) may be waiting for political reasons, but it's putting a lot of people off,"" said one trader at the Prague office of a foreign bank.
Analysts are hoping to see end-February figures, although January data is more likely.
They say it is difficult to forecast privately and that much of the data included in the M2 calculation has long been at the central bank's disposal.
The CNB has never had a set release date for its key M2 figure, but in 1996 the lag time was usually around one-and-a- half to two-and-a-half months after the period being measured.
The last M2 release was on March 13, when the CNB said M2 at end-December was 7.8 percent higher than the same 1995 month. That was a slowing from November which showed a rise of 9.7 percent year-on-year.
November's results were released on January 23.
Analysts are watching M2 closely since growth in the money supply slowed from a double-digit rate last year ahead of central bank tightening measures in June.
The government has said a drop in March's 12-month inflation rate to 6.8 percent from nine percent for much of 1996 came at the cost of a slowdown in economic growth.
The criticism has kept many watching for a possible lowering of interest rates, monetary conditions permitting.
Creditanstalt's Starr said he expects the figures -- after an inflow of more than 30 billion crowns in crown Eurobonds in January -- might give the central bank less room to manoeuvre, helping its argument to keep rates higher.
""I actually think the M2 figure for January is going to be bad with all those Eurobonds they haven't been able to sterilise (pull out of circulation),"" Starr said.
Compared with other central banks, the CNB-published figures lag well behind:
* Germany's Bundesbank has a roughly three-day window around the 20th of each month to release its key M3 data for the preceding month.
* The U.S. Federal Reserve measures M2 weekly and releases the results within three to five days, adding up roughly $4 trillion circulating and saved in the U.S. economy.
* The neighbouring Polish central bank releases its broad money data for each month within 10 days after the end of the period measured. End-March data was released on April 9.
-- Prague Newsroom, 420-2-2423-0003
",18
"Pop star Michael Jackson launched his first concert tour in three years on Saturday with a high-tech spectacle in Prague aimed at restoring the gleem to a career tarnished by allegations of child molestation.
Jackson exploded through the floor of his futuristic stage in something best described as a missile on a monorail, and emerged decked out in gold-plated astronaut's armour to open the concert with one of his latest hits, ""Scream"".
On a stage melding a classical Greek temple with the furnishings of a space station, Jackson matched the high tech wizardry with his still-formidable dancing skills, singing many of the hits throughout his 20-year career.
The three-month ""HIStory World Tour"" actually will take hundreds of tonnes of equipment to stops in Europe, Africa, Asia, but with no dates scheduled for the Americas.
Many of the estimated 120,000 spectators on Prague's sprawling Letna Plain -- where Communist leaders once reviewed military parades -- stood awestruck as massive ""Jumbotron"" video screens dominated Jackson's virtual-reality show.
""It's more of a video game than a concert,"" said one Prague student as she stood dwarfed in the crowd mid-way from where the real Jackson looked like a blip on a radar screen.
Fans hailing from Malta to Moscow made the trip to Prague, but the biggest of the 40,000-strong foreign contingent came from neighbouring Germany where Jackson had cancelled planned stops because of high taxes charged to visiting entertainers.
Some 130,000 were expected for the two-hour concert in Prague, but ticket touts outside the gates were offering $30 tickets for less than $10.
Czech President Vaclav Havel -- dubbed ""Rock'n Roll President"" as a fan of the Rolling Stones, Velvet Undergound and Frank Zappa, who have all played Prauge -- showed up for the gig although he said Jackson's music ""isn't close"" to him.
The first part of the tour has a heavy Eastern European flavour with stops planned for Hungary, Romania, Poland, and Russia, matching a theme running through his latest album ""HIStory"" which includes the song ""Stranger in Moscow"".
The first tour of the self-proclaimed ""King of Pop"" since 1993's ""Dangerous"" tour is to back Jackson's ""HIStory"" album which has lagged well behind his 1982 album ""Thriller"", the all-time top seller with 44 million copies sold worldwide.
But the tour marks his biggest effort yet to get Jackson's career back on track after a long-running scandal over child-sex abuse allegations.
The charges first came to light in August 1993, when a 13-year-old boy accused Jackson of molesting him.
Jackson denied wrongdoing but reached a multimillion-dollar settlement with the boy, and prosecutors dropped their investigation in 1994 after the child refused to testify.
The concert marks the climax of five of the most bizarre days in the history of the ancient Czech capital, as the star's game of hide-and-seek kept a horde of fans and media guessing outside his hotel, and clogged streets in the city's centre.
Reports that Jackson was furious with a local tabloid's rehash of the child molestation story led local media to speculate that he might cancel Saturday's concert as he remained holed-up in his hotel suite for much of the week.
On Friday, Jackson sparked a near riot when he ventured out to visit St. Vitus Cathedral in Prague Castle, and fans climbed over pews in the holy Bohemian shrine to get close.
Meanwhile, concert organisers erected a giant water-filled statue of Jackson on the same hill over Prague where a massive monument to Soviet-leader Josef Stalin once stood.
President Havel, the playwright whose dissident writings helped inspire Czechoslovakia's bloodless 1989 revolution over Communism, penned a 1984 essay ""Thriller"" using ""Jackson-mania"" as his metaphor to mourn the soulless modern world.
",18
"Czech politicians are struggling to overcome scepticism about the merits of NATO membership, with opinion polls consistently showing Czechs the coolest of the central European frontrunners towards joining the bloc.
While surveys show a majority of Hungarians and Poles in favour of joining the alliance, they say less than 40 percent of Czech citizens back NATO membership.
""Many consider NATO to be just military manoeuvres around Europe, and maybe it is our fault that we haven't been able to explain the importance in the solidarity of values,"" Czech Senate Chairman Petr Pithart told Reuters in an interview.
But Pithart, elected to chair the new upper house of parliament in December, also believes there is a lingering lack of respect for the army which would make a referendum on NATO membership, sought by the political opposition, irrelevant.
""The relationship to NATO, the less strong will here compared with Poland or Hungary or wherever, is evidently for me more a result of the scepticism against the army of the Czech republic than against NATO,"" Pithart said on Thursday.
The Czechs, along with Poland and Hungary, are widely expected to be invited to join NATO (North Atlantic Treaty Organisation) at a summit of member states in July.
NATO membership has been the top foreign policy aspiration of the Czech government, along with joining the European Union.
Disdain for the Czech army built up after World War Two and during 40 years of communism, when many Czechs saw the military as subservient to Moscow.
Opinion polls also show that many people are simply tired of being tied to a military bloc.
Pithart, who was the Czech Republic's first post-Communist prime minister and is now affiliated to the centre-right Christian Democrats, is joined in his opposition to a referendum on NATO by the conservative current Prime Minister Vaclav Klaus.
But the chairman of the lower house, Social Democrat leader Milos Zeman, has joined ultra-right and Communist members of parliament in calling for a referendum, although he says he and his opposition party are in favour of joining NATO.
""Certainly to be against holding a referendum is dangerous because it indicates you feel a majority of people are against (NATO membership),"" said Pithart, a political scientist and leading dissident under Communism.
""But to use (a referendum), which we've never used in the political tradition of this country, is absurd.""
Pithart said Czech politicians must start rebuilding the prestige of the military by pointing out the army's solid performance with NATO in the IFOR and SFOR missions in Bosnia.
""Because in our modern history one of the major casualties is that the army has somewhat lost prestige and...respect,"" Pithart said.
Echoing a favourite theme of his friend, President Vaclav Havel, Pithart said it was necessary to also stress the non-military underpinnings of NATO representing a family of democratic nations in Europe.
",18
"The Czech National Bank (CNB) on Tuesday put the largest fully-private bank, Agrobanka a.s., under forced administration due to liquidity problems arising from the failure of another bank, Kreditni Banka a.s..
The central bank, in its 12th intervention into a commercial bank in the post-Communist period, said it would guarantee all of Agrobanka's deposits during a ""temporary"" forced administration period of an unspecified duration.
In a statement issued after an overnight meeting of the Czech cabinet, the CNB said that problems of Agrobanka, the country's fifth largest overall, had arisen as a consequence of the failure of Kreditni Banka a.s..
It also said the move stemmed from the investigation of people in the Kreditni case -- in which five people connected to Kreditni have been indicted on fraud charges -- who are also connected to Agrobanka.
""The investigation of the fall of Kreditni Banka...and its politicization, and charges against people connected to Agrobanka, negatively influences the liquidity position of this bank (Agrobanka),"" the CNB said in its statement.
While over 70 percent of banking activity in the country is down within the four largest banks -- each with the state as a major shareholder -- Agrobanka has grown to be the largest fully-private bank with four billion crowns ($151 million) in basic capital.
In order to support Agrobanka, the CNB said it would guarantee all deposits at the bank, and that it would ensure, in cooperation with other commercial banks, sufficient ""financial sources"" for Agrobanka, should it need them.
Czech Prime Minister Vaclav Klaus said the central bank's move was a preventative step aimed at keeping the banking sector sound. ""There isn't even the slightest reason for any sort of banking panic,"" Klaus told journalists on Tuesday.
He said the move by the central bank is a way to stop problems in the banking sector escalating.
The fall in August of Kreditni, based in the western city of Plzen, caused a political furore and led local media to question the effectiveness of bank supervision.
Kreditni and Agrobanka were linked to each other through the secretive Czech investment group Motoinvest which used both banks to finance its securities operations.
An official from Motoinvest was indicted last weeekend for a debt swap scheme which police said led, in-part, to the failure of Kreditni Banka.
But Motoinvest has denied any responsibility for the failure of Kreditni which caused losses of about 12 billion crowns.
-- Prague Newsroom, 42-2-2423-0003 ($1=26.51 Czech Crown)
",18
"Czech politicians and pundits spent Monday panning the self-proclaimed ""King of Pop"" Michael Jackson for the first concert of his world tour on Saturday and his behavior in Prague in the week leading up.
Columnists in almost every Czech daily blasted Jackson for his high-tech two-hour show, which some in the crowd of over 120,000 said was more video game than concert.
""The... spiceless performance with Jackson's appallingly bad vocals -- which were not even saved by his famous dance routines -- were complemented by an even worse sound system,"" said Stanislav Pechacek in the right-wing daily Denni Telegraf.
Prague, known more as a former bastion for classical music than a pop mecca, has hosted a handful of huge festival-style concerts -- including two visits by the Rolling Stones -- since the revolution over Communism in 1989.
But the city had never seen anything like the hype and hysteria surrounding Jackson's visit, which included erecting a giant statue of the star on the same rock pedastal where a monument to Soviet-leader Josef Stalin once stood.
Jackson opened by exploding through the floor of a futuristic stage and emerged in gold-plated astronaut's armour.
The next two-hours were choreographed with the aid of three huge ""Jumbotron"" screens flanking a stage blending a classical Greek temple with a space station.
But columnists -- in a country embracing the kitschiest of American culture since the revolution -- took issue with Jackson's singing and the Cult of Personality around him, which clogged the streets in the city centre for five days.
""Jackson is the most bizarre product of American pop culture,"" Jan Lacina said in Lidove Noviny, describing the performance as surprisingly sober.
""A big nothing took place,"" said Vladimir Vlasak in the largest Czech daily Mlada Fronta Dnes, while complaining of Jackson's ""megalomania"".
""The music sounded as artificial as the singer himself,"" said Svobodne Slovo's Jaroslav Riedel.
The three-month ""HIStory World Tour"" will take the multi-media spectacle to stops in Europe, Africa, Asia, but with no dates scheduled for the Americas.
The harshest criticism -- in the minds of protocol-minded Czechs -- came from the Christian Democratic party, who peppered Jackson for not removing his trademark black fedora when meeting President Vaclav Havel at Prague Castle.
The local agency CTK quoted Jan Kasal, who serves as deputy chairman of parliament for the centre right party, as saying Jackson had no manners and that he could not imagine any other visitors behaving in such a way.
Jackson's next concert is scheduled for Tuesday night in Budapest.
",18
"President Vaclav Havel on Tuesday paid a personal tribute to the grand old man of Czech literature, Bohumil Hrabal, calling him one of the great contemporary writers of prose, and a friend for life.
The author of ""Closely Observed Trains"" and over 50 folksy works, fell to his death from the fifth floor of a Prague hospital on Monday where he was being treated for arthritis.
Doctors said he fell while apparently trying to trying to feed pigeons. He was 82.
""He wrote ruggedly beautiful texts,"" the former playwright Havel said in a statement released by the president's office.
Havel recalled writing a student essay on Hrabal, and joining him at the favourite literary hangout, Cafe Slavia. ""A beautiful friendship connected us throughout life,"" Havel said.
On Tuesday, the normal afternoon murmur filled the U Zlateho Tygra (at the Golden Tiger) bar, where Hrabal was a fixture, and where U.S. President Bill Clinton joined the venerable author for a beer during a 1994 state visit.
Many of Hrabal's old friends quietly toasted him in the room where a black sash over a picture was the only indication that a Golden Tiger regular would never return.
""He used to sit here, but now he sits everywhere,"" said one regular under a collection of Hrabal memorabilia.
Hrabal's subtle political works were suppressed under the Czechoslovak communist authorities but were widely circulated in samizdat photocopies in dissident circles.
""I consider Bohumil Hrabal as one of the greatest prose writers of contemporary time,"" Havel said.
The Jiri Menzel film ""Larks on a Thread"" was a biting commentary based on Hrabal's personal stories of a worker's tedious 1950s life after the Communist takeover.
A Hrabal revival began soon after the 1989 revolution when ""Larks"", banned by the Communists, was reintroduced, and many of the author's works were finally published legally.
Menzel also made Hrabal's quirky ""Closely Observed Trains"", about life at a provincial railway station during World War Two, into an Oscar winner in 1966.
Another film, based on Hrabal's ""I Served the King of England"", is set to be released later this year.
Havel, the dissident turned president, said he was happy to have been able to award Hrabal the state honour for artists, the Medal for Merit, in 1996.
",18
"Czech Foreign Minister Josef Zieleniec said on Monday his country viewed as frivolous and ""absolutely unacceptable"" Russian threats of economic reprisals for Prague's entry into NATO.
""We consider it frivolous to connect the expansion of the North Atlantic alliance with bilateral (Czech-Russian) relations and threaten economic sanctions in this context,"" the Czech news agency CTK quoted Zieleniec as saying.
On Sunday, Moscow's ambassador to Prague Nikolai Ryabov warned the Czech Republic that key bilateral agreements with Russia might be jeopardised if it joined NATO.
Ryabov told Russia's NTV commercial television that the former Warsaw Pact member's entry into the western defence alliance could mean a damaging loss of arms markets for Moscow.
""It would be a real blow for the Russian economy,"" he said.
The ambassador went on to hint that Moscow could reconsider economic deals with Prague if it went ahead.
""Agreements fundamental to the Czech Republic, such as gas deliveries and nuclear energy, create a basis for future problems that our countries would face (if Prague joined NATO),"" said Ryabov, former head of Russia's central electoral commission.
Zieleniec told CTK that Ryabov's statement made it clear why the Czechs wanted to join western organisations.
""This type of demand is one of the reasons why it is important, at the earliest, to become a member of the key western political, economic, and security organisations,"" it quoted Zieleniec as saying.
He said he thought the ambassador's interview on Russian television was mostly for media consumption.
The Czechs, Poland and Hungary are expected to be named among the first former-Soviet Bloc countries to be invited to join NATO at a July summit of the alliance in Madrid.
Russian officials have intensified their rhetoric against NATO expansion plans, which they say threaten Russia's security, in the run-up to a summit in Helsinki this week between President Boris Yeltsin and U.S. Bill Clinton.
Moscow hopes to use the issue as a lever with which to win concessions from the U.S.-led alliance on arms control agreements and other security and economic issues.
After the collapse of former communist trade arrangements in the early part of the decade, total Czech trade turnover with Russia grew 9.8 percent in 1996 to $2.8 billion.
But 1996 trade was heavily weighted in Russia's favour with Czech exports to Russia at $694 million and while imports from Russia were $2.1 billion.
Czechs are still dependent on Russia for natural gas and most of its crude oil, but Prague is in the final stages of negotiations of a long-term contract for some of its gas supplies to come from Norway.
Last year, the Czechs opened the Ingolstadt spur in the Transalpine crude pipeline from the Adriatic Sea, providing direct access to crude from the Middle East.
The Czech power company CEZ a.s. is also dependent on Russian nuclear fuel for its lone atomic power station at Dukovany, but the company is expected to take U.S.-supplied nuclear fuel when it opens a new plant at Temelin by the end of the century.
The Czech army is also considering several offers to modernise its mostly Soviet-era equipment with Western-made, NATO compatible goods.
",18
"Prime Minister Vaclav Klaus said on Tuesday that the Czech National Bank may have gone too far in its attempts to slow inflation quickly and the result may have been a slowing in economic growth.
Speaking at Prague's Zofin Forum of business leaders Klaus said there was no way to slow inflation quickly, and that central bank steps last year to rein in consumer prices were more than the government wanted.
""At this moment I see in the Czech economy the existence of an array of short-term irremovable inflation factors which we cannot simply get rid of, and I also do not see any easy way to a faster slowing of inflation,"" said Klaus, a monetarist professor of economics.
Klaus took issue with restrictive monetary measures of the Czech National Bank last year which helped cut inflation to 7.3 percent year-on-year in February from levels above nine percent in the previous year.
He said that the government differed with the central bank on whether monetary tightening measures to slow inflation would slow the economy.
""I believe that in our context and in our structural parameters disinflation bought at the high price of a marked loss in the pace of economic growth was more than we would have wished,"" he added.
Still, Klaus told his audience that February's inflation rate was ""satisfactory"".
He said that 1996 full-year gross domestic product growth ended one percent lower than the government originally expected. He did not give a specific result. The government's original forecast was growth of 4.8 percent.
Full-year official GDP results are expected later this month.
Klaus said factors in this slowing of growth were weak demand for exports because of weak growth and protected markets in western Europe. Another reason was the ""unfavourable structure of our domestic demand -- consumer as well as investment.""
Klaus however stressed the ""restrictive measures of the central bank"" and its role on demand as a factor and said the CNB ""used"" the chaos after inconclusive June elections to raise interest rates and tighten minimum reserve requirements.
He said the main problem facing the country's economy was a widening trade deficit, but he ruled out a devaluation of the crown to help the situation.
""I am only reminding you that the cure for our trade deficit cannot be any devaluation of the crown and fortunately the government, the central bank and the majority of analysts agree with this,"" Klaus said.
The Czech trade deficit, spurred by imports of raw materials and machinery needed for industrial restructuring, widened to a record 160.3 billion crowns for the whole of 1996, up from 95.7 billion the previous year.
The deficit is forecast to grow even further in 1997, to around 210-220 billion crowns.
-- Prague Newsroom, 420-2-2423-0003
",18
"Volkswagen AG's Czech unit Skoda Automobilova a.s. said on Thursday that it should nearly double its worldwide production capacity, making half a million cars yearly by the end of the century.
At a news conference detailing last year's results -- which showed a swing to a small profit after a 1995 loss -- Chief Financial Officer Volkhard Kohler said the former communist car maker had laid the foundation for strong global expansion.
""The half million (cars produced yearly) volume is no Utopia for us, we are sure we can achieve that,"" he said.
""We have to globalise,"" said Kohler, who is to be re-assigned soon after helping lead Skoda's transformation.
Skoda posted 1996 net profit of 163 million crowns after a loss of 1.62 billion crowns in 1995, when it ploughed much of its cash flow into building a new mid-sized platform for its Octavia line which premiered last autumn.
""In the next and future years we don't count on any losses, only profits,"" said Kohler, declining a more specific forecast.
Skoda's total turnover comprised roughly 3.4 percent of Volkswagen Group's worldwide take in 1996. VW built up a 70 percent stake in the Czech company in 1995 since joining in on its privatisation earlier in the decade.
Officials said potential domestic production capacity would be filled when it reaches an expected 340,000 cars this year.
Expansion is to come from opening new production elsewhere, such as its assembly line in Poznan, Poland -- which has a capacity for 15,000 to 20,000 cars.
Total sales rose 34 percent last year to 58.9 billion crowns, while unit sales were up 24 percent to 279,363 cars, almost entirely comprised of Skoda's compact Felicia line.
Production is forecast to increase 30 percent this year, as the Octavia range comes fully on stream.
The century-old Skoda, based north of Prague, posted robust sales growth of 47 percent in developed countries of western Europe, which accounted for nearly a third of total turnover.
Meanwhile, sales to central and eastern Europe, excluding Skoda's home market, rose 78 percent, and domestic turnover was up 24 percent and comprised 45 percent of sales.
Sales and marketing director Detlef Wittig said that the company hoped to hold on to its 50 percent domestic market share while continuing to focus on Poland and Russia for growth and making gains in new western European markets.
""In highly developed Western markets we have broken through with the Felicia range,"" Wittig said, stressing that Skoda's marketing had concentrated on the new quality of the brand which was once the butt of many western jokes.
Unit sales in two of its largest western European export markets Germany and Britain showed growth of just two percent, but sales to France, Italy, and Denmark showed double-digit growth, and sales to nearby Austria doubled to 9,457 units.
Meanwhile it had a lower turnover in Asia and South America of 10 percent as it directed exports toward stronger demand in Europe. The company has yet to attack North America.
Despite average double-digit wage increases and Czech average annual inflation last year of 8.8 percent, personnel costs grew only 6.8 percent, as the workforce grew 6.9 percent to 17,992 employees.
Skoda exports account for roughly five percent of total Czech exports. Kohler said that further increases in productivity and efficiency would counter the strong Czech crown and increase Skoda's share to seven or eight percent.
""We can say that the ground floor (at Skoda) has already been finished, but it now depends on our colleagues to make a nice skyscraper,"" the outgoing Kohler said.
-- Prague Newsroom, 420-2-2423-0003
",18
"Czech Industry and Trade Minister Vladimir Dlouhy said if the rapid expansion in the country's current account deficit does not subside by the end of next year, a devaluation of the crown might be needed.
Speaking on Czech Television late on Wednesday, Dlouhy repeated government policy that a devaluation is currently not necessary to boost exports and stem the current account defict forecast at 5 to 6 percent of gross domestic product this year.
In a panel discussion, Dlouhy was asked whether he could see the need for a devaluation of the crown in the future, if the deficit kept growing.
""If (growth in the deficit) doesn't stop, then I think at the turn of 1997-98 it will be the time when you will correctly push me into more emphatic measures of the types that I would not like to take, like a devaluation,"" he said.
Some independent economists have suggested that a nominal devaluation in the currency might be needed if the record trade deficit does not subside.
But the government and other economists have said that net capital inflow, plus tourism and services revenue should comfortably pay for a merchandise trade deficit which grew to 85.3 billion crowns in the first seven months of 1996.
That compares with a 49.5 billion crown trade deficit for the same period last year.
""I would like to see a stabilisation of the increase of the deficit during the first half of next year,"" Dlouhy said.
""If it ranges around five percent of GDP, this economy, with its revenue from tourism and services, is capable of financing it.""
Prime Minister Vaclav Klaus and central bank governor Josef Tosovsky have both recently ruled out a devaluation. Tosovsky said a strong crown would force companies to be more efficient.
The comments sent the crown to its all-time high last Friday against the mark/dollar basket to which it is pegged each day, but profit taking has eased the currency a bit in recent days.
Dlouhy added that he is strongly against protectionist measures, but would seek to use other tools to help the trade balance.
""I will never agree with (an) import surcharge or higher protectionism, but I will agree with using the relevant legislative tools like the anti-dumping law, stricter (quality) controls, and more money for pro-export policy,"" Dlouhy said.
-- Prague Newsroom, 42-2-2423-0003
",18
"Prime Minister Vaclav Klaus said on Tuesday that the Czech National Bank may have gone too far in its attempts to slow inflation quickly and the result may have been a slowing in economic growth.
Speaking at Prague's Zofin Forum of business leaders Klaus said there was no way quickly to slow inflation, and that central bank steps last year to rein in consumer prices were more than the government wanted.
""At this moment I see in the Czech economy the existence of an array of short-term irremovable inflation factors which we cannot simply get rid of, and I also do not see any easy way to a faster slowing of inflation,"" said Klaus, a monetarist professor of economics.
Klaus took issue with restrictive monetary measures of the Czech National Bank last year which helped cut inflation to 7.3 percent year-on-year in February from levels above nine percent in the previous year.
He said that the government differed with the central bank on whether montening measures to slow inflation would slow the economy.
""I believe that in our context and in our structural parameters disinflation bought at the high price of a marked loss in the pace of economic growth was more than we would have wished,"" he added.
Still, Klaus told audience that February's inflation rate was ""satisfactory"".
He said that 1996 full-year gross domestic product growth ended one percent lower than the government originally expected. He did not give a specific result. The government's original forecast was growth of 4.8 percent.
Full-year official GDP results are expected later this month.
Klaus said factors in this slowing of growth were weak demand for exports because of weak growth and protected markets in western Europe. Another reason was the ""unfavourable structure of our domestic demand -- consumer as well as investment.""
Klaus however stressed the ""restrictive measures of the central bank"" and its role on demand as a factor and said the CNB ""used"" the chaos after inconclusive June elections to raise interest rates and tighten minimum reserve requirements.
He said the main problem facing the country's economy was a widening trade deficit, but he ruled out a devaluation of the crown to help the situation.
""I am only reminding you that the cure for our trade deficit cannot be any devaluation of the crown and fortunately the government, the central bank and the majority of analysts agree with this,"" Klaus said.
The Czech trade deficit, spurred by imports of raw materials and machinery needed for industrial restructuring, widened to a record 160.3 billion crowns for the whole of 1996, up from 95.7 billion the previous year.
The deficit is forecast to grow even further in 1997, to around 210-220 billion crowns.
-- Prague Newsroom, 420-2-2423-0003
",18
"Ducking into a crumbling production office on a rainy Prague street, they don't look like two of the hottest European properties in the film world.
You couldn't tell it by their workplace -- a stuffy dark cave in the basement of an early 20th century block of flats -- hardly enough room for the two of them amid stacks of film cans and mounds of remnants that didn't make the cut.
Still, life keeps getting brighter for the father and son team who have become the de facto storytellers of bittersweet Czech post-communist nostalgia.
Director Jan Sverak is 31 and wears ""John Lennon"" glasses, while his grey-bearded father Zdenek is screenwriter and star. Can we call Dad the ""Czech Sean Connery"" as so many do?
""Call (Connery) the American Zdenek Sverak,"" Jan says, explaining that Czechs never knew who James Bond was back in the days of the Cold War.
Together the two have won their second Oscar nomination for best foreign language feature in five years with ""Kolya"".
The story of an ageing bachelor's re-awakening when he takes an abandoned Russian boy under his wing on the eve of Prague's bloodless 1989 ""Velvet Revolution"" -- it is favoured to win an Academy Award this month, after picking up Hollywood's Golden Globe in January.
Critics say the politically-charged comedy/drama, which draws heavily on the decades of animosity -- and jokes -- Czechs had for occupying Russian forces, may be one of the region's best offerings since the Czech new wave of the 1960s.
FIRST OSCAR NOMINATION IN 1992
The Sverak team made their first splash in 1992, when the post-war boys'-life drama-comedy ""Elementary School"" earned a first Oscar nomination but lost.
""When we had our first Oscar nomination we thought it would be the first and last time in our lives,"" says Jan.
Jan says he met an American scriptwriter in Hollywood four years ago who had been nominated 15 times but had never won an Oscar.
""He is my example,"" Zdenek jumps in to say.
While ""Kolya"" is set at the end of the communist era, it is again a mix of personal and political turmoil, seen often through a boy's eyes.
The two Sveraks have a close father-son relationship, frequently boyishly embracing in a country where ""macho"" usually means never hugging or shedding a tear.
""We are more friends than a father and son. We are very close characters. He has the same sense of humour as me, and we cry in the same part of the films,"" Zdenek says,
His son butts in to warn, ""They think we cry every time we watch the film.""
Awkward moments can sometimes occur when the son directs the father in love scenes.
In one shot, Zdenek revels in a post-amorous glow with the actress Libuse Safrankova, a woman Jan remembers most for her popular roles as a princess in many Czech fairytales.
""The script says they just finished making love and I have to explain to them that they have to breathe a bit, that they just can't lay there like they are resting... and they have to touch each other... this is bizarre,"" Jan says.
""Yes, bizarre,"" echoes his father.
After landing a deal with Miramax to distribute ""Kolya"" the Sveraks are working on an original English-language feature. The project is still a secret, while Zdenek finishes the script.
After a film, television, and stage career which has made him one of the most popular personalities in the country since the early 1970s, Zdenek says he has no regrets that he did not defect to pursue his career like so many Czechs including Oscar-winning director Milos Forman.
Jan, who came of age as a director after the revolution, says he will stay in Prague, despite offers to go abroad.
""This is the big advantage that we did not receive the Oscar for 'Elementary School' because I was so young and so hungry for American films... Now, I am not hungry any more, so we will make the European films,"" he says.
""There is no political reason to leave the country now and there are possibilities to make films in Europe, so why leave the country?""
But can the Sveraks' magic translate into English-language success? ""Kolya"" has been selling out art houses in New York and on the west coast, but does everyone get it?
""I think that you can get 100 percent of the meaning of 'Kolya', not 100 percent of the jokes,"" Jan says.
""I think the audience can catch the whole message, and not all the jokes unfortunately... But the political background and our geographic situation, that's part of this message...,"" Zdenek replies.
",18
"Standard & Poor's (S&P) on Tuesday gave investment grade ratings to three of the four largest Czech banks, but said the high marks were partly due to an implied safety net for the banks provided by the state.
In its first quality debt ratings for commercial banks in former communist Europe, S&P gave long-term ratings of BBB-minus to Komercni Banka a.s., Ceska Sporitelna a.s. , and  Ceskoslovenska Obchodni Banka a.s..
It also issued all three banks short-term ratings of A3 for counterparty risk in trade with other banks.
The ratings fell short of the Czech Republic's sovereign rating of A, but were similar to the marks issued to the Slovak, Polish, and Greek central banks, and one grade above Hungarian sovereign debt.
But in explaining the ratings, S&P said the three banks' size and position in the market made it ""highly likely that the Czech government would provide support"" if needed.
Thus, the ratings were higher than they would have been if based solely on each bank's financial situation.
S&P did not give a rating for the third largest Czech bank, IPB a.s., which is waiting for a roughly one-third stake to be privatised in a tender later this spring.
S&P said Komercni had 25 percent of Czech deposits, 26 percent of the credit market and conducted 10 percent of total trading on the Prague Stock Exchange last year.
""Given the bank's size, its importance to the country's financial system, and position in the market, S&P believes state support would be forthcoming if required in the future, although no formal guarantee exists,"" it said of Komercni, the country's largest commercial bank.
It said that Komercni's classified loans totalled 35.4 percent at the end of September and its outlook was stable.
Komercni's deputy general director Borivoj Prazak told reporters after the announcement that the bank was ""very glad"" to receive the ratings. ""We held our ground,"" despite slower than expected Czech macroeconomic growth, he said.
As with the other two banks, the Czech government has a major stake in Komcerni, 48.7 percent.
The government has said it plans to privatise all state-held banks, so getting the ratings based on the tacit state safety net adds more intrigue to the debate over the speed and extent of Czech banking privatisation.
S&P noted that Sporitelna, the former Communist savings bank where virtually all deposits were kept, was still ""the most important player in Czech retail banking"" but said it ""remains vulnerable to further problems within the sector"".
""(Sporitelna's) asset quality problems remain a concern with customer loans classified as non-standard amounting to 43.6 billion crowns ($1.58 billion), representing 31.8 percent of gross customer loans at year-end 1995,"" S&P said.
It said that CSOB's ratings reflected the bank's strong position in foreign trade financing and its joint ownership by the Czech and Slovak governments.
The S&P report said CSOB's non-standard loan level had dropped to 41 percent of gross customer loans by the end of 1995 from 51 percent at the end of the previous year.
($1=27.52 Czech Crown)
",18
"The Czech government on Wednesday backed Transport Minister Martin Riman's hard line against striking railway workers who have shut the country's entire rail network over potential job cuts.
Government spokesman Ivo Strejcek told reporters after a cabinet meeting that ""the government expressed its support"" for Riman who has refused union demands for a long-term railway plan that guarantees jobs while sacking the current management.
The spokesman declined any further comment.
The rail strike, which began at midnight on Tuesday and was originally planned for 48 hours, is the Czech Republic's first major nationwide post-Communist industrial action, but it looks increasingly likely to be prolonged.
The strike has had little major impact on daily life, but many businesses fear the shutdown in freight service will start to bite into earnings if the strike lasts longer.
Cities have added buses to relieve commmuter pressure, but international trains have been stranded at borders with Germany, Poland, Austria, and Slovakia.
Two rounds of talks between Riman and union officials on Tuesday failed to break the impasse, and the minister acknowledged the strike may go on longer. Fresh talks on Wednesday have yet to lead to a solution.
The OSZ has said it will make its decision on prolonging the strike by 6 p.m. on Wednesday (1700 GMT).
The Association of Unions of Rail Workers (OSZ) wants the government to implement a long-term plan to revive the decrepit railway system saying that waste and inefficiency in the system should be cleaned up before jobs are threatened.
Leaders of the OSZ reported that 75 to 80 percent of the more than 100,000 railway workers had joined the strike, but management of the railway company said over 60 percent showed up for work and signed a petition against the strike.
The Czech news agency CTK reported that an attempt to use workers who ignored the strike resulted in the operation of a just five trains on Wednesday, but the system was mostly idle.
The state railway company, Ceske Drahy, lost six billion crowns ($216.4 million) in 1996, and expects to lose seven billion crowns this year, but the government has been unable to put together a viable plan for reversing the losses.
The Czech daily Mlada Fronta on Wednesday reported that the last unpublished government plan, which infuriated the unions and led to the strike, called for layoffs of up to 40 percent of Ceske Drahy's more than 100,000 workers.
The plan also called for the sale of 20 percent of the rail system, and a decommissioning of another 20 percent, it said.
An effort to reconstruct Ceske Drahy ended in 1994 when the conservative government backed off privatisation plans to halt a threatened strike just hours before it was to begin.
This time, Prime Minister Vaclav Klaus has given ominous warnings that the unions ""may go too far"" with the strike.
Most major Czech firms have said a short-term strike will have little effect on their operations, though the coal mining company Mostecka Uhelna Spolecnost a.s. said it was losing between 15-20 million crowns a day due to the action.
e($ = 27.73 Czech Crowns)
",18
"The Czech cabinet will adopt a carrot-and-stick package mixing investment incentives with budget and import cuts in an attempt to spur economic growth, a Reuters poll of analysts showed on Tuesday.
With the cabinet due to announce a stimulus package on Wednesday, share market reforms and savings promotion steps to reduce demand were most frequently mentioned as likely to be included by the nine analysts surveyed.
The government has said it aims to reduce growing budget and trade deficits, while spurring growth, dampening demand for imports and adding confidence to beleaguered capital markets.
None of the analysts expected a direct manipulation of the exchange rate to help exports, although several suggested allowing the crown to ease below its corridor of plus/minus 7.5 percent from the mid-point of a mark/dollar basket.
Josef Poeschl at the Vienna Institute for Comparative Economic Studies said lower interest rates were needed, but Merrill Lynch's Andrew Kenningham expected lower rates would be put off until more data on slowing growth was available.
There was a consensus among the analysts that the cabinet should take steps to beef up market regulation, with most saying a U.S.-style Securities and Exchange Commission (SEC) would help revive lagging foreign investment.
The analysts agreed sharp budget cuts were on the cards, as economic growth, and thus tax revenue, has come up short.
Expectations ranged from 20 billion crowns ($654 million) in cuts seen as ""very likely"" by Boris Gomez and Susanne Hallergard at ING Barings to 40-50 billion forecast by Kenningham.
""At least 25 billion crowns of cuts are needed to give good chance of a balanced budget,"" said Kennigham. ""Anything short of a balanced budget lacks credibility.""
There was a broad consensus that state sector wages would be capped at 10 percent nominal growth -- Kenningham said that should save about 30 billion crowns this year -- and several expected pressure on the private sector to follow suit.
Kamil Janacek, chief economist at Komercni Banka, said the government should seek a budget surplus of two to three percent of gross domestic product (GDP), but more likely would move toward just a balance.
Janacek, who works at the largest state-controlled bank, said the government must finish privatising big banks and industrial corporations.
He said he expected the issuing of longer-term government bonds to increase the propensity to save in the household sector and for changes in the legal and institutional framework to enable better functioning of the legal infrastructure.
Several said they expected longer-term state bonds to be issued to attract individual Czech retail investors to park their money for awhile, reducing demand.
The group was mixed on the need to impose surcharges or quotas to reduce demand for imports, which have thrown the current account deficit to more than 8.5 percent of GDP.
Gomez and Hallergard said they expected seasonal import duties on selected foodstuffs and more stringent non-tariff trade barriers on imports, particularly from the European Union, in the package.
Poeschl said he expected some non-tariff barriers would be introduced on selected items, adding they should be for a defined period of time with plans for a gradual removal.
Other key comments included:
* Martin Kupka at Prague's Patria Finance said he expected ""considerable"" budget cuts, anti-import administrative measures and a rise in consumption taxes to dampen demand.
* Matt Starr, bond trader at Creditanstalt Prague, said he expected a cap on wages, budget cuts, a move to separate investment funds from banks -- an often-cited problem in the capital markets -- and more support for the Export Guarantee and Insurance agency (EGAP) and state export bank.
($ = 30.58 Czech Crowns)
",18
"The Czech central bank should not prop up the crown even if it fell to the low end of its fluctuation band, a leading Czech economist said on Thursday.
Without central bank intervention the market could force the crown as low as 20 percent below parity with its mark/dollar basket, Jan Svejnar, director of the Economics Institute at the Czech Academy of Sciences, said in an interview.
This would give natural support to troubled Czech exports, he added.
Svejnar said he was not advising an official devaluation of the currency, but calling for the central bank to allow a market-driven depreciation in line with the existing macroeconomic situation.
""I'm not saying that the central bank should go and devalue (but)...should be ready to let the currency depreciate,"" said Svejnar, who is also a professor at the University of Michigan.
The central bank and Czech government have repeatedly ruled out a devaluation to boost exports, and the Czech National Bank agreed in its meeting on Thursday not to change its current policies.
The central bank fixes the crown daily against a mark/dollar basket but allows it to fluctuate on the market within a corridor of plus or minus 7.5 percent of its basket parity.
The CNB widened the band in February 1996 from plus/minus 0.5 percent and since then has virtually matched the market rate each day. The crown was fixed at the equivalent of 1.39 percent on Thursday.
With the country's current account deficit exceeding eight percent of gross domestic product, the crown fell last week to a nine-month low after hitting record levels of 5.51 percent above basket parity in early February.
Investors have moved into crown paper to take advantage of real interest rate differentials with major currencies.
""What I am more worried about is... sooner or later (the trade balance) will become untenable,"" said Svejnar, adding that foreign capital would then flee the country.
He said that with the central bank foreign exchange reserves covering just about five months of average imports, central bank intervention to prop up the crown would be futile.
Czechs ""should take a lesson"" from the 1992 crash of the British pound when the Bank of England made a fruitless attempt to defend its currency against speculators, who ultimately forced the pound from the European exchange rate mechanism, he said.
""Essentially, (the Bank of England) lost a significant part of its reserves and had to devalue the pound or let the pound devalue anyway,"" Svejnar said.
",18
"Czechs, with a relatively large number of Oscar-winning films and filmmakers for a small nation, on Tuesday praised Jan and Zdenek Sverak for bringing home a coveted Academy Award for their film ""Kolya"".
The story of an ageing bachelor's re-awakening when he takes an abandoned Russian boy under his wing on the eve of Prague's bloodless 1989 Velvet Revolution won the Oscar for Best Foreign Language Film in the ceremony held late on Monday.
President Vaclav Havel, a former dissident playwright under communism who acted in a few films himself, sent a victory telegram to the family Sverak in Los Angeles.
""I am pleased with the great success of your film. I am happy that after many years a Czech film has again received the Oscar,"" Havel's press office quoted the telegram as saying.
Local newscasts headlined the Kolya win for the director Jan, 31, and his scriptwriter father Zdenek, who played the greybeard bachelor in Kolya.
""The Oscar Goes to Prague"" heralded the capital city's daily Vecernik Praha.
It was the first Czech foreign language film Oscar since Jiri Menzel's ""Closely Observed Trains"" won in 1968 amid the period known worldwide as the ""Czech New Wave"".
Slovak Elmar Klos won the best foreign film Oscar in 1966 for ""The Shop on Main Street"" when Czechoslovakia was still ruled as one state.
This country of 10 million people also lays claim to director Milos Forman, a Prague native who made the Oscar-winning ""Amadeus"" (1985) and ""One Flew Over the Cuckoo's Nest"" (1976) after emigrating to the United States.
Forman failed to pick up best director honours on Monday after his nomination for ""The People Versus Larry Flint"", after winning a Golden Globe and the Berlin's Golden Bear for the film.
The Sverak team made their first international splash in 1992, when the post-war drama-comedy ""Elementary School"" earned a first Oscar nomination but lost.
Zdenek is currently working on the team's first original English-language script.
Critics say Kolya, a politically-charged comedy/drama which draws heavily on the decades of animosity -- and jokes -- Czechs had for occupying Russian forces, may be one of the region's best offerings since the Czech New Wave.
""The film is about how the understanding between nations is much more important than the power,"" Sverak told reporters backstage after winning the Oscar.
Earlier this month Kolya won the Czech version of the Oscar, the Czech Lev (Lion), for best picture, but Zdenek Sverak was edged out for the best Czech actor award by Bolek Polivka, a popular cabaret comedian.
Kolya was favoured to take home the Oscar after winning Hollywood's Golden Globe for best foreign language film in January.
",18
"The Czech National Bank (CNB) said on Wednesday that it was not satisfied with the continued firming of the Czech crown, and cautioned that it has the option of intervening on the market when necessary.
""Intervention (on the market) is our normal instrument, and we can use it whenever we are not satisfied (with the crown's exchange rate),"" CNB spokesman Martin Svehla told Reuters.
The crown was still well above its mark/dollar basket on Wednesday, as the CNB matched the market, fixing it at 27.947/dollar 16.664/mark, or 5.42 percent over parity with the basket, and just below Tuesday's record fixing at +5.51.
""The other question is whether we are satisfied? You heard (CNB) governor (Josef Tosovsky) saying there is 'no reason' for the crown to be like this,"" Svehla added.
""It signals that the central bank is not fully satisfied with this development."" He declined to elaborate, and said these were just ""general"" comments.
The crown's surge has been fuelled by more than 30 billion crowns in recent issues of mostly medium-term Eurobonds.
Tosovsky said at the peak of the wave in late January that there was ""no rational"" macroeconomic reason for the crown's rise, and the Eurobond wave.
The firming currency is compounding a troublesome trade deficit which grew to a record 160 billion crowns in 1996.
Some crown dealers have said the central bank that had been putting out feelers in the market recently, but others said that it did not appear that intervention was imminent.
""I don't expect any direct intervention soon,"" said Citibank dealer Emil Stava. ""I don't think their main goal is to help exporters by a depreciation of the currency.""
He said the CNB was still mainly concerned with controlling the money supply and inflation.
The market has not bought the CNB's comments, as dealers keep buying crowns.
Crown Eurobonds keep coming -- another billion crowns was issued on Wednesday -- taking advantage of interest rate spreads against major currencies and an inverted yield curve.
The CNB has not intervened since last February when it propped up the crown after widening the fixing corridor to plus/minus 7.5 percent against the basket from 0.5 percent.
Svehla repeated that the CNB had no immediate plans to lower its key interest rates, despite a rapid decline in the money supply in recent months.
The CNB's repo rate remains solidly at 12.4 percent, while its discount rate has been at 10.5 percent since it was raised a full percentage point last June.
Meanwhile inflation in January slowed to 7.4 percent, year-on-year, from 8.6 percent in December.
-- Prague Newsroom, 42-2-2423-0003
",18
"Czech Deputy Finance Minister Vladimir Rudlovcak, under heavy criticism for his management of capital markets, resigned on Thursday, his ministry said.
It said Finance Minister Ivan Kocarnik had accepted Rudlovcak's resignation and named Jiri Spicka, director of the ministry's section on finance and banking, as his replacement.
Rudlovcak and the ministry have been criticised by investors and in the media for their performance in regulating funds and equities markets, which are frequently accused of being opaque and rife with insider trading.
In leaving, Rudlovcak was quoted by the ministry in a statement as saying that ""in the situation when there is a long-term strong media campaign against the Finance Ministry and himself especially... his continuation in the function of deputy minister would not be profitable"".
It said that the situation had been problematic ""especially for the activity of the (capital market) oversight, in which (Rudlovcak's) authority is continually eroded through the systematic attacks.""
Criticism of Rudlovcak intensified in recent weeks after several cases where Czech investment fund managers and major shareholders were found to have been stripping assets of the funds under the noses of regulators.
One case involved the investment fund Trend, in which a group of shareholders was arrested and charged with transferring major holdings out of the fund, including a major stake in the Prague department store Kotva a.s.
The arrests too place long after shares had been transferred and a group of minority shareholders is still fighting to get them back.
On Thursday, a representative of the Czech Value Fund, one of Trend's large minority shareholders which has put much of the blame for ignorance of the fund's stripped assets on the Finance Ministry, welcomed Rudlovcak's resignation.
""It's a positive sign of course. It shows that what we are working on here is having some effect,"" said John Moffitt of the Czech Value Fund, who leads a group of investors pushing for tighter regulation of the capital markets.
Another case involved the fund CS Fond in which managers were found to have drained more than a billion crowns ($34 million) of assets into personal accounts.
The ministry statement cited the CS Fond case specifically, saying that Rudlovcak and his staff did what it could within the framework of the law but it was up to other criminal justice bodies to resolve the case which had ""an unambiguous criminal character"".
Much of the frustration on Prague's share markets, which have consistently underperformed other post-communist markets in the region, has been aimed at the Finance Ministry.
Prague Stock Exchange Chairman Tomas Jezek, one of the most outspoken critics of Rudlovcak, is pushing for legislation to give power to a new independent watchdog fashioned on the lines of the U.S. Securities and Exchange Commission.
Jezek was not immediately available for comment after the ministry's announcement.
Jan Sykora, a broker at the Prague investment house Wood & Co, commented : ""I think it's good news, because clearly there are a lot of things not going well in the capital markets and Rudlovcak was responsible for that (the capital markets).""
-- Prague Newsroom, 420-2-2423-0003 ($ = 29.67 Czech Crowns)
",18
"Czech railway workers on Wednesday voted to extend a national railway strike, scheduled to end at midnight, for another 24 hours after the government supported a tough approach against the strikers.
Jaromir Dusek, chairman of the Association of Unions of Czech Railway Workers (OSZ), was quoted by the CTK news agency as saying that OSZ's strike committee had agreed to continue the action for at least another day.
Dusek was quoted by the private television channel Prima after the decision to extend the strike that the OSZ would keep extending the strike until it gets an acceptable compromise.
The OSZ had originally scheduled the action as a 48-hour strike, but said it would consider extending it for 24 hours at a time if its demands were not met.
The government on Wednesday backed Transport Minister Martin Riman's hard line against the OSZ, which has shut the country's entire rail network over potential job cuts.
Government spokesman Ivo Strejcek told reporters after a cabinet meeting that ""the government expressed its support"" for Riman, who has refused union demands for a long-term railway plan that guarantees jobs while sacking the current management.
The spokesman declined any further comment.
CTK quoted Riman later on Wednesday as saying a Prague court had ruled that the strike was illegal, but the OSZ then said that a different court had ruled that the strike was lawful.
The strike, the first major nationwide post-Communist industrial action, has had little major impact on daily life, but businesses fear the shutdown in freight service will start to bite into earnings if the strike lasts longer.
Cities have added buses to relieve commmuter pressure, but international trains have been stranded at borders with Germany, Poland, Austria, and Slovakia.
Two rounds of talks between Riman and union officials on Tuesday failed to break the impasse, and the minister acknowledged the strike may go on longer. Fresh talks on Wednesday have apparently not yet led to a solution.
The OSZ wants the government to implement a long-term plan to revive the decrepit railway system, saying that waste and inefficiency should be cleaned up before jobs are threatened.
The state railway company, Ceske Drahy, lost six billion crowns ($216.4 million) in 1996, and expects to lose seven billion crowns this year, but the government has been unable to put together a viable plan for reversing the losses.
Leaders of the OSZ reported that 75 to 80 percent of the more than 100,000 railway workers had joined the strike, but management of the railway company said over 60 percent showed up for work and signed a petition against the strike.
An attempt to use workers who ignored the strike resulted in the operation of a just five trains on Wednesday, but the system was mostly idle.
An effort to reconstruct Ceske Drahy ended in 1994 when the conservative government backed off privatisation plans to halt a threatened strike just hours before it was to begin.
This time, Prime Minister Vaclav Klaus has given ominous warnings that the unions ""may go too far"" with the strike.
Most major Czech firms have said a short-term strike will have little effect on their operations, though the coal mining company Mostecka Uhelna Spolecnost a.s. said it was losing between 15-20 million crowns a day due to the action.
($ = 27.73 Czech Crowns)
",18
"The Czech government, central Europe's perennial budget hawk, says it will consider a plan next week to cut all ministries' spending in order to balance the 1996 budget by year's end.
The Finance Ministry is proposing cuts of roughly more than one percent from the 1996 budgets of every ministry, because of a projected 6.6 billion crown ($248 million) revenue shortfall and a 2.7 billion over-expenditure from the originally approved balanced budget.
""The total we need to cut is roughly 9.3 billion crowns,"" Deputy Finance Minister Miroslav Havel told Reuters.
Prime Minister Vaclav Klaus's government has been widely praised by financial analysts for passing four consecutive balanced budgets, earning him the reputation as post-Communist Europe's tightest fiscal manager.
Earlier, Klaus told a news conference after a cabinet meeting that the finance ministry plan would be on the agenda of next week's government session.
Deputy minister Havel said the cuts, would not affect pensions or civil service wages, but would be broad, not deep.
""(The cuts) will touch every ministry and in the same level -- the same percentage of reduction of several non-investment outlays. Certainly we're not cutting pensions or wages,"" said Havel, who directs budget planning for the ministry.
""But we are reducing such expenditures on materials and other things,"" he added.
Analysts said the Czech capital markets would welcome the move as it would keep billions of crown out of the bloated money supply which has already been fueling inflationary domestic demand.
""I would consider this to be a very positive move,"" said Jan Vlachy, vice-chariman at Prague's Patria Finance. ""This is basically the only way I could have imagined the government could have had an (immediate) impact on inflation.""
Domestic bond prices have been depressed of late after central bank moves to tighten the money supply in late June signalled inflation worries were strong.
Annual inflation has remained stubbornly around nine percent this year, above the eight percent the government projected by the year's end.
The budget cuts, if passed, would reduce the entire 1996 state budget to 291 billion crowns from the plan passed by parliament last December.
Havel said the revenue gap was mostly due to Russia's failure to pay about five billion crowns on loans owed to the Czech Republic.
The largest component of the over-expenditure was subsidies for heating because of the longer than expected cold weather and other social aid payments, he said.
""You know (the ministers) don't like cutting their budgets. But we're doing it because of the total macroeconomic situation,"" Havel said. ($1=26.63 Czech Crown)
",18
"The Czech cabinet appeared headed for a shakeup on Tuesday as Prime Minister Vaclav Klaus's senior Civic Democratic Party (ODS) agreed to discuss changes with its two partners in the centre-right ruling coalition.
The leadership of ODS, after suffering weeks of harsh criticism and falling approval ratings amid Klaus's insistence that immediate personnel changes were not necessary, agreed to discuss a shuffling of the cabinet.
""(The leadership) expressed its agreement with the opening of debate on the reconstruction of the government also with our coalition partners,"" Klaus said in an interview on Czech Radio.
The Czech news agency CTK quoted ODS deputy chairman Miroslav Macek as saying that the cabinet changes should be completed by the end of June.
Later a government spokesman, Ivo Strejcek, told Reuters that leaders of the coalition parties might meet Tuesday afternoon or evening, but he said he could not say what would be discussed.
Klaus's government has come under fire in recent weeks for a slowdown in the country's economic performance and for highly publicised cases of financial crime, and problems in the health care sector and schools.
The macroeconomic problems -- mainly a current account deficit topping nine percent of gross domestic product and recent contractions in industrial output -- have prompted a sell-off of the country's currency, the crown.
Political instability has also added to the downward pressure on the currency. The central bank intervened on several occasions last week to stem the fall of the crown.
Opinion polls have shown that support for Klaus's centre-right ODS is at a record low while support for the opposition Social Democrats has grown well above that of the three parties in the ruling coalition.
Just 35 percent of respondents in a poll released on Monday said they trusted the government, down from 38 percent in April. A year ago 47 percent trusted the government.
Klaus last month announced a package of measures aimed at giving fresh impetus to economic growth, curbing trade and current account deficits and clamping down on economic crime. It included cuts in public spending and limits on wage growth.
""The ODS's declining popularity  probably also means that the public has not embraced the package of measures that the government recently announced in an effort to 'correct' negative economic developments,"" independent political analyst Jiri Pehe said.
""As the package was not accompanied by radical personal changes in the government is now backfiring--and, once again, affecting adversely mainly the ODS,"" he added.
Deputy Prime Minister and Finance Minister Ivan Kocarnik was chiefly blamed for the country's problems in the poll on Monday, with 28 percent saying he should resign.
He was followed in the unpopularity stakes by Industry and Trade Minister Vladimir Dlouhy, with 22 percent saying he should quit. Eighteen percent said Klaus should go.
",18
"Standard & Poor's (S&P) on Tuesday gave investment grade ratings to three of the four largest Czech banks, but said the high marks were partly due to an implied safety net for the banks provided by the state.
In its first quality debt ratings for commercial banks in former communist Europe, S&P gave long-term ratings of BBB-minus to Komercni Banka a.s. , Ceska Sporitelna a.s. , and Ceskoslovenska Obchodni Banka a.s..
It also issued all three banks short-term ratings of A3 for counterparty risk in trade with other banks.
The ratings fell short of the Czech Republic's sovereign rating of A, but were similar to the marks issued to the Slovak, Polish, and Greek central banks, and one grade above Hungarian sovereign debt.
But in explaining the ratings, S&P said the three banks' size and position in the market made it ""highly likely that the Czech government would provide support"" if needed.
Thus, the ratings were higher than they would have been if based solely on each bank's financial situation.
S&P did not give a rating for the third largest Czech bank, IPB a.s. , which is waiting for a roughly one-third stake to be privatised in a tender later this spring.
S&P said Komercni had 25 percent of Czech deposits, 26 percent of the credit market and conducted 10 percent of total trading on the Prague Stock Exchange last year.
""Given the bank's size, its importance to the country's financial system, and position in the market, S&P believes state support would be forthcoming if required in the future, although no formal guarantee exists,"" it said of Komercni, the country's largest commercial bank.
It said that Komercni's classified loans totalled 35.4 percent at the end of September and its outlook was stable.
Komercni's deputy general director Borivoj Prazak told reporters after the announcement that the bank was ""very glad"" to receive the ratings. ""We held our ground,"" despite slower than expected Czech macroeconomic growth, he said.
As with the other two banks, the Czech government has a major stake in Komcerni, 48.7 percent.
The government has said it plans to privatise all state-held banks, so getting the ratings based on the tacit state safety net adds more intrigue to the debate over the speed and extent of Czech banking privatisation.
S&P noted that Sporitelna, the former Communist savings bank where virtually all deposits were kept, was still ""the most important player in Czech retail banking"" but said it ""remains vulnerable to further problems within the sector"".
""(Sporitelna's) asset quality problems remain a concern with customer loans classified as non-standard amounting to 43.6 billion crowns, representing 31.8 percent of gross customer loans at year-end 1995,"" S&P said.
It said that CSOB's ratings reflected the bank's strong position in foreign trade financing and its joint ownership by the Czech and Slovak governments.
The S&P report said CSOB's non-standard loan level had dropped to 41 percent of gross customer loans by the end of 1995 from 51 percent at the end of the previous year.
-- Prague Newsroom, 42-2-2423-0003
",18
"The head of Credit Suisse First Boston in Europe, David Mulford, said on Thursday that while economies were gaining speed throughout Eastern Europe, CSFB would concentrate its activity where it was already based.
""I don't think we will see any major shift"" of CSFB's business in Eastern Europe, Mulford, who was appointed CSFB Europe chairman last month, told journalists.
He said that beyond CSFB's established investment banking business in Poland, Hungary, Russia and the Czech Republic, few new beachheads were planned.
""The only change...is that we have opened an operation recently in Kiev, because we think Ukraine is a very promising market, but I don't anticipate any further office operations elsewhere,"" he said while visiting CSFB's Prague office.
Mulford, a former U.S. assistant treasury secretary in the Bush administration, took over a restructured CSFB last month saying ""Europe, Russia and the emerging economies of central Europe are key to our long-term success in world finance.""
A recent CSFB research report showed that overall gross domestic product in the former East Bloc was picking up, and the entire region would show average positive growth by the end of the century, after massive post-Communist recessions.
But CSFB said there would be a convergence of average growth rates below five percent in the region by 2000 as robust Czech, Polish, and Hungarian economies slowed and countries further east pick up strength.
Mulford said each country had to balance the quest for lower inflation with a need to maintain economic growth.
""It's important to have reasonable positive growth. If you have a seven or eight percent growth level and it goes down to a five percent growth level, I don't think people should talk about that as a recession or a major setback,"" he said.
""But I do think that growth down around the one or two percent levels for extended periods...are not particularly helpful, although I would also say that inflation is a major enemy of long-term stability.""
He said that while it was still necessary to price growth out of the system, each government had its own level of political tolerance for inflation.
""People have to have a sense of progress, but if you have high inflation you don't necessarily have a feeling of progress...You've got to strike the right balance.""
In Prague, Prime Minister Vaclav Klaus recently criticised the Czech National Bank for going to far in efforts to slow inflation below eight percent annually last year, saying that an excessively tight monetary policy had slowed growth.
Analysts said Czech 1996 real GDP -- once forecast at well above five percent growth -- would fall well short of four percent growth in data due to be released on Friday.
""I think when you mention the slowing of growth here, which has been more noticable than Poland for example -- although you've seen the same thing a couple of years ago in Hungary -- I mean that's normal,"" Mulford said.
""It's not easy keeping everything going at the same pace, and some of the adjustments are quite difficult and quite painful and take time, and are politically hard to accomplish.
He said despite a ballooning Czech current account deficit, which topped eight percent of GDP in 1996, and rising wage-labour costs, the slowing in Czech growth should not last.
""I think this is temporary. Problems are being addressed. The government recognises that there are issues which have to be dealt with, and I think we will see that happen,"" he said.
""In other words, I don't think we're heading toward a period of negative development.""
-- Prague Newsroom, 420-2-2423-0003
",18
"Pop singer Michael Jackson flew into Prague on Tuesday to launch his first tour in two years as promoters erected a huge statue of the star on a hill over the city where a monument to Soviet chief Josef Stalin once stood.
Jackson's three-month ""HIStory"" tour through Europe, Africa and Asia kicks off on Saturday with a concert on Prague's Letna Plain where 130,000 are expected, but he arrived four days early to do some sightseeing in and around the Czech capital.
After his jet sat for half an hour on the tarmac of Prague airport's VIP terminal, the flamboyant but reclusive Jackson emerged in a gold lame and red outfit under a white parasol blocking the bright sun.
Several hundred fans handpicked by promoters greeted the star, and he hugged several who presented gifts on the tarmac before Jackson's motorcade left.
After waving at others lining the 15 km (10 mile) route into the city from a gleaming Rolls Royce, Jackson and his police-escorted phalynx of luxury cars carrying his entourage drove through a screaming hotel welcoming party.
Thousands of fans massed at the hotel on the river Vltava (Moldau), climbing over each other for a glimpse of the star on his first tour since he was cleared of child molestation charges by a U.S. court because of lack of evidence.
Pavel Klika, in his late-teens from the southern Czech city of Tabor, played a human ""K"" in a seven-member group spelling out J-A-C-K-S-O-N for his arrival.
""I had to come here to see him to really believe he was in the Czech Republic, even though I have a ticket to see him on Saturday -- I just couldn't wait,"" Klika said.
The singer's penthouse suite faces the hill where a 10-metre (33 foot) water-filled statue of Jackson takes up the rock pedastal where Communists built a massive monument to Stalin.
That statue was blown up after his death in 1953.
Despite complaints about the Jackson statue in some quarters, Prague City Hall finally approved its placement until the concert is completed on Saturday.
Two huge torches on either side of Jackson's statue were lit recalling the days when Stalin's Cult of Personality kept two Olympic-style flames burning.
The Prague stop, Jackson's first visit to the Czech capital in a long series of rock concerts since the fall of Communism here in 1989, has so far avoided the controversy at other planned dates on his tour.
In South Korea, civic and religious groups reacted bitterly to a decision to let Jackson play two concerts in Seoul in October, saying it was unbelievable that the government agreed to make Jackson the teenagers' idol.
A planned stop in Casablanca was cancelled by Moroccan authorities, without explanation. A concert organiser said the government did not want 100,000 youths all in the same place.
",18
"Czech President Vaclav Havel on Wednesday told the nation that he had a near-death experience after radical surgery which removed a cancerous tumour in his lungs over four weeks ago.
Speaking publicly for the first time since the December 2 operation, Havel, looking thinner and grasping for breath but speaking clearly, reflected on his illness and the loss of his wife Olga to cancer last January.
""In the year we have just dismissed, I have faced death twice. First, when it came for my closest being, and second when it swirled around my hospital bed,"" he said in the videotaped nationally televised New Year's greeting.
Havel, in a reflective mood even more profound than usual for the former playwright, said both events caused great suffering and made him feel that the world was unjust.
""But on the other hand, both of these experiences, to my own surprise, I have perceived as great challenges for a new and far deeper consideration of the world in which we live.""
Havel said that he pondered ""about myself, about the mysterious order of human existence, and about the volume of signs or hidden messages which are speaking to us from within this order, which we are mostly ignoring.""
Havel, the chain-smoking leader of Prague's bloodless 1989 revolution over communism, entered a clinic on November 25 with what his office called a case of pneumonia.
A week later Doctors performed exploratory surgery and found a small malignant tumour in the right lobe of his lungs.
Surgeons decided immediately to remove half of the lobe, and said later that it appeared that the cancer was caught in an early stage and had not spread to other tissue.
But Havel, aged 60, developed pneumonia in the left lobe soon after the surgery and fought off a high fever, the seriousness of which is only now coming to light.
For weeks he was on a respirator connected through his throat but was released from hospital on the day after Christmas after the pneumonia and fever subsided.
Doctors have said that Havel's condition has been steadily improving and his prospects for a full recovery are good.
The less than eight-minute address, which he taped in a business suit sitting at a desk in his private west Prague villa, replaced his traditional New Year's speech which is normally much longer.
Havel concentrated his prepared remarks on creating a deeper understanding of common goals in Czech society.
He recalled that 1996 brough many ""important, beautiful, and painful"" things to the Czech public.
He said the year was tainted by the failure of several banks, political spats, and various corruption which had emerged from the country's massive post-Communist privatisation programme and economic reforms.
""I implore you... to try to understand all of these ugly things as warning signs calling us all to a newer and deeper consideration of the sense of our common affairs,"" he said.
The greatly popular Havel also thanked all who have supported him through his illness, and said he hoped that Czechs still could rely on him.
The Czech agency CTK reported on Wednesday that Havel's staff at Prague Castle had agreed to stop smoking in the office in a show of solidarity with the president who was advised by doctors to give up his several-packs-a-day habit.
He made no mention however of his smoking in the speech.
Havel is expected in February to finalise a long-awaited declaration of reconciliation with Germany, which has been a focus of his presidency, aiming to put an end to anxiety of the neighbouring countries over World War Two and its aftermath.
",18
"Czech railway unions said on Monday they would begin a nationwide strike at midnight demanding a complete overhaul of the decrepit rail system, and adding to growing unrest among public sector workers.
The planned 48-hour strike, seeking a long-term plan to revive the failing state railways, is expected to completely shut passenger and freight traffic on domestic and international lines throughout the Czech Republic.
""We certainly will strike from midnight,"" the executive secretary of the Association of Unions of Rail Workers (OSZ), Zdenek Jilek, told Reuters.
In a statement, the OSZ said that if it did not get sufficient guarantees to repair what it says are massive problems in the quality and development of the state railways Ceske Drahy, it would prolong the strike.
""It will be repeated every 24 hours,"" the OSZ said.
Prime Minister Vaclav Klaus was quoted by the CTK news agency as saying on Monday that a new development plan for the railways had already been negotiated with union leaders, and the unions were simply impatient for a result.
""If they could not hold on until when we meet again, and they call a strike, then they are taking a great risk in front of 10 million people of this country,"" he was quoted as saying.
The action comes on top of an alternating ""chain"" strike started last week by teachers and school workers who are forcing the closure each day of selected primary and secondary schools throughout the country.
The school strikes, for pay increases and more state expenditure on teaching resources, are alternating each day among various districts.
There have also been persistent threats of industrial action by doctors and health-care workers, especially at large state clinics and hospitals which have fallen into insolvency.
The centre-right coalition government has resisted giving into public sector demands which might threaten its fiscally-hawkish reputation.
The country posted its first state budget deficit in 1996, at just over a billion crowns, after three straight years with a budget surplus.
The rail union leaders said that their action carries no demands for pay increases, but is rather to clean up what it says are ""massive problems"" in the leadership of Ceske Drahy and the transport policy of the Czech government.
They said that the condition of the rail system was ""critical"" and problems were deepening, and that the government had not fulfilled its own decisions to improve and consolidate the railways.
The OSZ represents all Czech rail workers, which total more than 100,000 employess, excluding train drivers who have yet to say whether they will support the action.
It is not expected that the railways would function even if the drivers do not strike.
Losses of Ceske Drahy, one of the few companies not yet privatised by the post-Communist government, have been mounting.
CTK quoted Ceske Drahy officials as saying the company expected losses of about seven billion crowns in 1997 after a six billion crown loss last year, and four billion in 1995.
In June 1995, the rail unions were hours away from a strike over the planned privatisation of Ceske Drahy, when the government agreed not to execute its plan at the time to restructure the loss-making railways.
-- Prague Newsroom, 42-2-2423-0003
",18
"Seven years after the ""Velvet Revolution"" over communism, journalists still do not have to check their political views at the gate to Prague Castle, but they now better hide their Rolling Stones t-shirts under more serious attire.
On Monday, the spokesmen for the Czech president, prime minister, and both houses of parliament issued a joint statement asking media to respect ""the normal protocolled parts of life of the historical areas of our institutions.""
In other words: ""Please...devote attention... to the society dress of your reporters.""
If enforced, it marks the end of an era for one of the most ecclectically-clad European press corps, although it came without a formal dress code. Many journalists said the statement left much to subjective interpretation.
""Society dress? Whose society? This IS the dress of our society,"" said one normally casual Czech reporter.
Liberated by the bloodless 1989 coup led by the sweatered dissident playwright Vaclav Havel and other crumpled intellectuals, much of Prague's free press has carried on the no-holds-barred approach to many high-brow functions.
Government and presidential news conferences are often festooned with jeans, rock concert t-shirts and pullovers, but an increasing number of business suits have recently snuck in.
When Havel made the unlikely ascent from prisoner to president in 1989, an emergency tailor was dispatched to complete his first suit so he could take the oath of office.
But as the years roll on, Havel, who once rode a child's scooter through Prague Castle's Baroque halls, has developed a taste for finer suits and the trappings of protocol.
""These rules are respected by all workers and guests; there's nothing preventing journalists also from coming to actions organised by our offices in society dress,"" Monday's statement said.
But the times are not changing so quickly.
Despite having a dapper prime minister, Vaclav Klaus, who routinely wins opinion polls as best dressed in Bohemia, many of Prague's most well-respected democrats do not associate a free market and a free society with a rigid dress code.
At a reception on the 20th anniversary of the Charter 77 human rights declaration earlier this month, dissidents, reporters, and ministers mixed in Prague Castle's gilded Spanish Hall, the most formal of the country's salons.
Amid the mirrors, porcelain, and stucco of the magnificent room, guests rocked the night away in everything from waistcoats to the best picks of garage sale bins.
And while actors dressed in former communist police uniforms symbolically kept an eye on the event, the real interior minister's rat tail hairdo belied his new establishment suit.
",18
"The Czech National Bank (CNB) said on Wednesday that it was not satisfied with the continued firming of the Czech crown, and cautioned that it has the option of intervening on the market when necessary.
""Intervention (on the market) is our normal instrument, and we can use it whenever we are not satisified (with the crown's exchange rate),"" CNB spokesman Martin Svehla told Reuters.
The crown was still well above its mark/dollar basket on Wednesday, as the CNB matched the market, fixing it at 27.947/dollar 16.664/mark, or 5.42 percent over parity with the basket, and just below Tuesday's record fixing at +5.51.
""The other question is whether we are satisfied? You heard (CNB) governor (Josef Tosovsky) saying there is 'no reason' for the crown to be like this,"" Svehla added.
""It signals that the central bank is not fully satisfied with this development."" He declined to elaborate, and said these were just ""general"" comments.
The crown's surge has been fuelled by more than 30 billion crowns in recent issues of mostly medium-term Eurobonds.
Tosovsky said at the peak of the wave in late January that there was ""no rational"" macroeconomic reason for the crown's rise, and the Eurobond wave.
The firming currency is compounding a troublesome trade deficit which grew to a record 160 billion crowns in 1996.
Some crown dealers have said the central bank that had been putting out feelers in the market recently, but others said that it did not appear that intervention was imminent.
""I don't expect any direct intervention soon,"" said Citibank dealer Emil Stava. ""I don't think their main goal is to help exporters by a depreciation of the currency.""
He said the CNB was still mainly concerned with controlling the money supply and inflation.
The market has not bought the CNB's comments, as dealers keep buying crowns.
Crown Eurobonds keep coming -- another billion crowns was issued on Wednesday -- taking advantage of interest rate spreads against major currencies and an inverted yield curve.
The CNB has not intervened since last February when it propped up the crown after widening the fixing corridor to plus/minus 7.5 percent against the basket from 0.5 percent.
Svehla repeated that the CNB had no immediate plans to lower its key interest rates, despite a rapid decline in the money supply in recent months.
The CNB's repo rate remains solidly at 12.4 percent, while its discount rate has been at 10.5 percent since it was raised a full percentage point last June.
Meanwhle inflation in January slowed to 7.4 percent, year-on-year, from 8.6 percent in December.
-- Prague Newsroom, 42-2-2423-0003
",18
"Pop singer Michael Jackson came to Prague on Tuesday to launch his first tour in two years as promoters erected a huge statue of the star on a hill over the city where a monument to Soviet boss Josef Stalin once stood.
Jackson's three-month ""HIStory"" tour through Europe, Africa and Asia kicks off on Saturday with a concert on Prague's Letna Plain where 130,000 are expected, but he arrived four days early to do some sightseeing in and around the Czech capital.
After his jet sat for half an hour on the tarmac of Prague airport's VIP terminal, the flamboyant but reclusive Jackson emerged in a gold lame and red outfit under a white parasol blocking the bright sun.
Several hundred fans handpicked by promoters greeted the star, and he hugged several fans who presented gifts on the tarmac before Jackson's motorcade left.
After waving at others lining the 15 km (10 mile) route into the city from a gleaming Rolls Royce, Jackson and his police-escorted phalynx of luxury cars carrying his entourage drove through a screaming hotel welcoming party.
Thousands of fans amassed at the hotel on the river Vltava (Moldau), climbing over each other for a glimpse of the star on his first tour since he was cleared of child molestation charges by a U.S. court because of lack of evidence.
Pavel Klika, in his late teens from the southern Czech city of Tabor, played a human ""K"" in a seven-member group spelling out J-A-C-K-S-O-N for his arrival.
""I had to come here to see him to really beleive he was in the Czech Republic, even though I have a ticket to see him on Saturday -- I just couldn't wait,"" Klika said.
The singer's penthouse suite Prague faces the hill where a 10-metre (33 foot) water-filled statue of Jackson takes up the rock pedastal where Communists built a massive monument to Stalin which they later blew up up after his death in 1953.
Despite complaints about the Jackson statue in some quarters, Prague City Hall finally approved its placement until the concert is completed on Saturday.
Two huge torches on either side of Jackson's statue were lit recalling the days when Stalin's Cult of Personality kept two Olympic-style flames burning.
The Prague stop, Jackson's first visit to the Czech capital in a long series of rock concerts since the fall of Communism here in 1989, has so far avoided the controversy at other planned dates on his tour.
In South Korea, civic and religious groups reacted bitterly to a decision to let Jackson play two concerts in Seoul in October, saying it was unbelievable that the government agreed to to make an ""amoral singer"" the teenagers' idol.
A planned stop in Casablanca was cancelled by Moroccan authorities, without explanation. A concert organiser said the government did not want 100,000 youths all in the same place.
",18
"When the former Czechoslovak diplomat Josef Korbel died in 1977, he may have carried the secret tragedies of his Jewish heritage to the grave, but his passion for democracy lives on through his powerful daughter.
As Madeleine Korbel Albright tours the globe and shards of her tumultuous family history surprise the world, it is her father's life and legacy which may quietly foreshadow things to come from the new U.S. Secretary of State.
Revelations this month that three grandparents died in concentration camps surprised Albright -- born in Prague in 1937 as Marie Jana Koerbelova. She fled with her family after the 1948 Communist coup, and was raised as a Catholic.
But while much of the recent focus has been on her family's Holocaust tragedies, it was her father's democratic heritage which again put the family at risk after World War Two, and apparently had the most influence on his daughter.
At her swearing-in last month, Albright first thanked her mother and father ""who taught me to love freedom"", then praised Vaclav Havel, the Czech dissident-turned-president, ""who helped me to understand the responsibilities of freedom"".
""A great deal of what I did I did because I wanted to be like my father,"" Albright recently told Time magazine.
As U.S. ambassador to the United Nations, Albright crusaded against anti-democrats, often condemning the behaviour of Cuban president Fidel Castro, Iraq's Saddam Hussein, and Serbian aggression in Bosnia.
HOW POWERFUL WILL HER FATHER'S INFLUENCE BE
Now the world wonders whether she will moderate her often sharp tongue as she tackles U.S. diplomatic problems from Havana to Beijing, or if she will lambast the leaders and political systems her father loathed.
""Cuba is an embarrassment to the Western Hemisphere and I think we need to keep making clear that there needs to be a change there,"" she said soon after becoming secretary of state.
Josef Korbel had a direct impact on the fragile -- and eventually crushed -- inter-war experiment of Czechoslovak democracy. Friends and former colleagues said leaving his cherished homeland behind in tatters crushed him.
""Joe was, you might say, a Czech nationalist, but more importantly he was a Czech democrat and he deeply abhorred the collapse of his country,"" Professor Arthur Gilbert, who taught with Korbel at the University of Denver, told Reuters.
""His anti-communism, and his distate for the Soviet Union came from a man who really had seen both systems.""
Korbel was most influenced by the father of Czechoslovak democracy, President Tomas Garrigue Masaryk, a humanist philosopher whom Korbel called ""the most profound writer and thinker of the late 19th and early 20th centuries"".
In ""Twentieth Century Czechoslovakia"" published in 1977, Korbel cites Masaryk as taking the progressive step in 1918 of backing women in the national assembly, and saying that ""women should devote themselves to public activity just as men.""
Korbel frequently cited Masaryk in his work after becoming a professor and eventually dean of the Graduate School of International Studies at the University of Denver, when he settled with his family in Colorado in 1949.
Born to a Jewish wood merchant in a northeastern Czech village in 1909, Korbel studied at the Sorbonne in Paris and then earned his law doctorate in Prague in 1933. He joined the Czechoslovak foreign service assigned as a press attache at the embassy in Belgrade.
With the Nazi onslaught imminent Korbel took his family to London as the Germans occupied the Czech lands in 1939.
Korbel's friendship with Masaryk's son Jan began during the war, when Korbel was information officer for the government in exile in London, and Jan Masaryk was foreign minister. Amid the Blitz, Madeleine learned to speak English and live under siege.
After returning from London, and serving as ambassador to Belgrade, Korbel was stunned by the 1948 Communist takeover. He wrote that the last democratic president Edvard Benes told him in vain, days before the coup that ""I shall defend our democracy till my last breath.""
Jan Masaryk died soon after the coup when he fell, jumped or pushed from a high foreign ministry window. His death is still controversial in Prague, but Korbel wrote in 1977 that Masaryk simply ""was murdered by Soviet agents"".
Masaryk's death devastated him, and his return for the funeral was the last time Korbel would see his home.
Before the Communists could get to him, Korbel spirited his family out of Czechoslovakia, taking asylum in the United States, and eventually a teaching post in Denver.
""Sooner or later he would have been imprisoned,"" said Antonin Sum, a former colleague of Korbel's who served in the last democratic pre-Communist foreign ministry and was imprisoned for 13 years.
""The question at that time was (Korbel) a democrat or not. He was very dangerous to the Communists."" Nearly 200 of the democrats arrested were executed by the Communists.
KORBEL AN ARDENT COLD WARRIOR
Korbel quickly became a fixture at the university, leading its first doctoral programme in international relations. He is remembered by his colleagues for his visceral defence of U.S. foreign policy, even in the dark days of the Vietnam War.
""He was an ardent Cold Warrior,"" said Professor Gilbert whom Korbel hired in 1961. ""The three things he cared about was what was happening in the Soviet Union, what was going on at school, and fly fishing.""
Albright's often-quoted concept of ""assertive multilateralism"" in foreign policy appears to have its roots in Korbel's strong defence of U.S. involvement abroad.
But Gilbert said Korbel ""was very late in the game to understand the problems about Vietnam -- well into the 60s before he started to have doubts about American involvement.""
Gilbert said Korbel's house in Denver became a meeting place for informal academic policy discussions, a practice Albright carried on as a professor in Washington.
Albright married newspaper heir Joseph Albright, raised three daughters while earning her doctorate, and divorced.
But the Albright name is still seen alongside Korbel, not just as a maiden name kept as her middle name, but because father and daughter would quote each other in research.
In 1977, the father predicted Prague's ""Velvet Revolution"" in the final words of his last book:
""The spark is still there. One cannot doubt that it will flicker one day again into flame, and freedom will return to this land that is so essentially humane...The nation will take up again its active role in mankind's never-ending struggle for freedom and social justice.""
As a professor at Georgetown, Albright advised Havel after Prague's 1989 revolution which ended four decades of Communism.
",18
"Czech President Vaclav Havel said on Wednesday he felt more deeply about the world after facing the possibility of death when he underwent major surgery to remove a cancerous lung tumour a month ago.
""In the year we have just dismissed, I have faced death twice. First when it came for my closest being and second when it swirled around my hospital bed,"" he said in a New Year address on national television.
Speaking publicly for the first time since the December 2 operation, Havel reflected on his illness and the loss of his wife Olga to cancer last January.
The former playwright, looking thinner, said both events had caused great suffering and made him feel the world was unjust.
""But on the other hand both of these experiences, to my own surprise, I have perceived as great challenges for a new and far deeper consideration of the world in which we live,"" said Havel.
He said he had thought ""about myself, about the mysterious order of human existence, and about the volume of signs or hidden messages which are speaking to us from within this order, which we are mostly ignoring.""
Havel, the chain-smoking leader of Prague's bloodless 1989 overthrow of Communist rule, entered a clinic on November 25 with what his office called a case of pneumonia.
A week later doctors performed exploratory surgery and found a small malignant tumour in his lungs.
Surgeons decided to operate immediately and said later it appeared the cancer had been caught at an early stage and had not spread.
But Havel, 60, developed pneumonia in his lungs soon afterwards and fought off a high fever, the seriousness of which is only now coming to light.
For a while he was on a respirator connected through his throat but was released from hospital the day after Christmas.
Doctors have said Havel's condition has been steadily improving and that his prospects for a full recovery were good.
The just under eight-minute address, which he made in a business suit sitting at a desk in his private west Prague villa, replaced his traditional and normally much longer New Year's speech.
Havel called for a deeper understanding of common goals in Czech society.
He said 1996 had brought many ""important, beautiful, and painful"" things to the Czech public.
The year was tainted by the failure of several banks, political spats and corruption cases which had emerged from the country's massive post-Communist privatisation programme and economic reforms.
""I implore you...to try to understand all of these ugly things as warning signs calling us all to a newer and deeper consideration of the sense of our common affairs,"" he said.
Havel thanked all who had supported him through his illness and said he hoped Czechs could still rely on him.
The Czech news agency CTK reported on Wednesday that Havel's staff at Prague Castle had agreed to stop smoking in the office in a show of solidarity with the president, who has been advised by doctors to give up his several packs a day habit.
",18
"Pop star Michael Jackson launched his first concert tour in three years on Saturday with a high-tech spectacle in Prague aimed at restoring a career tarnished by allegations of child molestation.
Jackson exploded through the floor of his futuristic stage and emerged in gold-plated astronaut's armour to open the concert with one of his latest hits, ""Scream"".
On a stage blending a classical Greek temple with a space station, Jackson matched the high tech wizardry with his formidable dancing skills, singing many of the hits of his 20-year career.
The three-month ""HIStory World Tour"" will take hundreds of tonnes of equipment to stops in Europe, Africa, Asia, but with no dates scheduled for the Americas.
Many of the estimated 120,000 spectators on Prague's sprawling Letna Plain -- where Communist leaders once reviewed military parades -- stood awestruck as massive ""Jumbotron"" video screens dominated Jackson's virtual-reality show.
""It's more of a video game than a concert,"" said one Prague student as she stood in the crowd mid-way from where the real Jackson looked like a blip on a radar screen.
Fans from Malta to Moscow made the trip to Prague, but the biggest of the 40,000-strong foreign contingent came from neighbouring Germany where Jackson had cancelled planned stops because of high taxes charged to visiting entertainers.
Some 130,000 people were expected for the two-hour concert in Prague, but ticket touts outside the gates were offering $30 tickets for less than $10.
Czech President Vaclav Havel -- dubbed ""Rock'n Roll President"" as a fan of the Rolling Stones, Velvet Undergound and Frank Zappa, who have all played in Prague -- showed up although he said Jackson's music ""isn't close"" to him.
The first part of the tour has a heavy Eastern European flavour with stops planned for Hungary, Romania, Poland, and Russia, matching a theme running through the ""HIStory"" album which includes the song ""Stranger in Moscow"".
The first tour of the self-proclaimed ""King of Pop"" since 1993's ""Dangerous"" tour is to back ""HIStory,"" which has lagged well behind his 1982 album ""Thriller"", the all-time top seller with 44 million copies sold worldwide.
But the tour marks the biggest effort yet to get Jackson's career back on track after a long-running scandal over child-sex abuse allegations.
The charges first came to light in August 1993, when a 13-year-old boy accused Jackson of molesting him.
Jackson denied wrongdoing but reached a multimillion-dollar settlement with the boy, and prosecutors dropped their investigation in 1994 after the child refused to testify.
The concert marks the climax of five of the most bizarre days in the history of the ancient Czech capital, as the star's game of hide-and-seek kept a horde of fans and media guessing outside his hotel, and clogged streets in the city's centre.
Reports that Jackson was furious with a local tabloid's rehash of the child molestation story led local media to speculate that he might cancel Saturday's concert as he remained holed-up in his hotel suite for much of the week.
On Friday, Jackson sparked a near-riot when he ventured out to visit St Vitus Cathedral in Prague Castle, and fans climbed over pews in the holy Bohemian shrine to get close.
Meanwhile, concert organisers erected a giant water-filled statue of Jackson on the same hill over Prague where a massive monument to Soviet-leader Josef Stalin once stood.  REUTER
",18
"The outgoing vice-chairman of Czech Skoda Auto a.s., a unit of Volkswagen AG , rejected as ""nonsense"" on Wednesday a German magazine report connecting him to a VW bribery affair under investigation.
Volkhard Koehler was unexpectedly replaced on Skoda's board last week, and a subsequent story in the weekly Der Spiegel said it was because he had prevented an investigation into a bribery affair linked to VW employees and was involved in dubious real estate transactions.
A Skoda spokesman, Milan Smutny, said in a statement on Wednesday that Koehler had spoken to economic corruption investigators in the German city of Braunschweig who confirmed that he was not the subject of any investigation.
""The state prosecution office confirmed that (Koehler) is not the target of any investigation,"" Smutny said. He quoted Koehler as saying Der Spiegel's claims were ""absolutely nonsense"".
VW chairman Ferdinand Piech said last week that corruption allegations, which centred on a plant expansion contract for Skoda awarded to Swiss-Swedish engineering group ABB , involved ""a nearly double-digit sum in the millions of marks"".
He said a probe into allegations that VW employees have demanded and received bribes in return for contracts, had so far turned up only one employee who has since been suspended.
The employee was not named.
Piech said the figures involved are well below German media reports that have said the contract was worth some 400 million marks and included bribes of about 20 million marks.
VW said its purchasing division in the summer of 1994 approved a 74 million mark contract for a Skoda paint factory and a second contract worth 38 million marks to expand the facility.
Smutny said that all decisions on purchases over 100,000 marks at Skoda had to be approved by officials at Volkswagen headquarters in Germany.
German prosecutors in Braunschweig have said they were investigating two suspects as part of their probe at VW, brought about by the carmaker in a formal legal request.
Smutny said Koehler was expecting another assignment from VW headquarters in Wolfsburg after his stint with Skoda ends on April 15. He said that the non-renewal of his contract conformed to standard Volkswagen practice.
The functions of Skoda board members named last week will be announced in a news conference on April 3, Smutny said.
",18
"Czech railway unions said on Monday they would begin a nationwide strike at midnight demanding a complete overhaul of the decrepit rail system, and adding to growing unrest among public sector workers.
The planned 48-hour strike, seeking a long-term plan to revive the failing state railways, is expected to completely shut passenger and freight traffic on domestic and international lines throughout the Czech Republic.
""We certainly will strike from midnight,"" the executive secretary of the Association of Unions of Rail Workers (OSZ), Zdenek Jilek, told Reuters.
In a statement, the OSZ said that if it did not get sufficient guarantees to repair what it says are massive problems in the quality and development of the state railways Ceske Drahy, it would prolong the strike.
""It will be repeated every 24 hours,"" the OSZ said.
Prime Minister Vaclav Klaus was quoted by the CTK news agency as saying on Monday that a new development plan for the railways had already been negotiated with union leaders, and the unions were simply impatient for a result.
""If they could not hold on until when we meet again, and they call a strike, then they are taking a great risk in front of 10 million people of this country,"" he was quoted as saying.
The action comes on top of an alternating ""chain"" strike started last week by teachers and school workers who are forcing the closure each day of selected primary and secondary schools throughout the country.
The school strikes, for pay increases and more state expenditure on teaching resources, are alternating each day among various districts.
There have also been persistent threats of industrial action by doctors and health-care workers, especially at large state clinics and hospitals which have fallen into insolvency.
The centre-right coalition government has resisted giving into public sector demands which might threaten its fiscally-hawkish reputation.
The country posted its first state budget deficit in 1996, at just over one billion crowns ($36 million), after three straight years with a budget surplus.
The rail union leaders said that their action carries no demands for pay increases, but is rather to clean up what it says are ""massive problems"" in the leadership of Ceske Drahy and the transport policy of the Czech government.
They said that the condition of the rail system was ""critical"" and problems were deepening, and that the government had not fulfilled its own decisions to improve and consolidate the railways.
The OSZ represents all Czech rail workers, which total more than 100,000 employees, excluding train drivers who have yet to say whether they will support the action.
It is not expected that the railways would function even if the drivers do not strike.
Losses of Ceske Drahy, one of the few companies not yet privatised by the post-Communist government, have been mounting.
CTK quoted Ceske Drahy officials as saying the company expected losses of about seven billion crowns in 1997 after a six billion crown loss last year, and four billion in 1995.
In June 1995, the rail unions were hours away from a strike over the planned privatisation of Ceske Drahy, when the government agreed not to execute its plan at the time to restructure the loss-making railways.
($ = 27.78 Czech Crowns)
",18
"Congressional approval to expand NATO to former communist Europe is not assured as top aspirants must still prove they can pay their way, a key supporter of expansion in the U.S. Senate said on Wednesday.
""I think many of my Czech friends and my Polish friends think this is a foregone conclusion in the United States Senate,"" Joseph Biden, ranking Democrat on the Senate foreign relations committee, told reporters.
""It is not... a 'done deal'.""
Biden, on a tour of regional capitals, said he must fight a ""growing neo-isolationism in the United States"".
But to do that, he said he must prove top candidates for expansion -- which he listed as Poland, Hungary, the Czech Republic, and Slovenia -- were ready to fulfill all criteria for joining the North Atlantic Treaty Organisation.
""When I stand... as the spokesperson for my party on these issues and I say 'Expand NATO', they're going to say 'Okay, are they (applicants) ready to pay'? And to be very blunt with you I don't think those questions -- that question -- has been addressed in Poland or here in the Czech Republic,"" Biden said.
NATO is expected to invite a number of countries to join the alliance at a July summit of member states in Madrid, but Biden said that achieving the two-thirds vote required in the Senate to approve the change in the NATO charter may be tough.
Czech diplomats last autumn said then-U.S. Secretary of State Warren Christopher and then-United Nations ambassador Madeleine Albright both expressed concern about what they regarded as the low level of Czech defence spending.
The worries were expressed in meetings with Czech Prime Minister Vaclav Klaus and Foreign Minister Josef Zieleniec.
Klaus denied that Christopher had said this when they met in September, but later the Foreign Ministry confirmed that the subject had been raised by the Americans.
All NATO aspirants are struggling to find financing to modernise their forces to be compatible with NATO at the same time their economies are undergoing massive reforms.
Still, NATO membership remains a top foreign policy priority of former communist countries in central Europe.
Biden said he was ""confident"" the questions on committments to meet NATO requirements -- expected to costs billions of dollars -- would eventually be answered by aspirants.
""If they are not, I think we lose the day, if they are, I think my position prevails.""
The Clinton administration last month said the cost for expanding NATO eastward was expected to be between $27 billion and $35 billion up to the year 2009, with the U.S. expected to bear costs of between $1.5 billion and $2 billion.
Biden said he would have preferred a slower approach to NATO expansion, but since the Clinton administration had made the committment to expand quickly, there was no turning back.
""What happens in Europe is significantly impacted upon by whether or not we are here with both feet planted on the ground as a player in Europe. To the extent we are not, our security diminishes long term,"" he said.
He said the opposition to expansion in Congress was ""real"" and it was growing.
Democratic Representative David Obey of Wisconsin earlier this month called NATO's quick eastward expansion an ""historically arrogant decision which we will come to regret.""
""I believe (turning back from NATO expansion) would raise serious doubts about America's long-term commitment in Europe,"" Biden said. ""I think that arrogance would be if we did not do all in our power to pull (NATO aspirants) closer to the west.""
",18
"Czech Foreign Minister Josef Zieleniec on Monday said his country viewed as frivolous and ""absolutely unacceptable"" Russian hints of economic reprisals for Prague's entry into NATO.
""We consider it frivolous to connect the expansion of the North Atlantic alliance with bilateral (Czech-Russian) relations and threaten economic sanctions in this context,"" the Czech news agency CTK quoted Zieleniec as saying.
Moscow's ambassador to Prague, Nikolai Ryabov, warned the Czech Republic on Sunday that key bilateral agreements with Russia might be jeopardised if it joined NATO.
Ryabov told Russia's NTV commercial television that the former Warsaw Pact member's entry into the Western defence alliance could mean a damaging loss of arms markets for Moscow.
The ambassador went on to hint that Moscow could reconsider economic deals with Prague if it went ahead.
""Agreements fundamental to the Czech Republic, such as gas deliveries and nuclear energy, create a basis for future problems that our countries would face,"" he said.
Zieleniec told CTK that Ryabov's statement made it clear why the Czechs wanted to join Western organisations.
""This type of demand is one of the reasons why it is important...at the earliest, to become a member of the key Western political, economic, and security organisations,"" Zieleniec said.
He said he thought the ambassador's interview on Russian television was mostly for media consumption.
The Czechs, Poland and Hungary are expected to be named among the first former-Soviet Bloc countries to be invited to join NATO at a July summit of the alliance in Madrid.
After the collapse of former communist trade arrangements in the early part of the decade, total Czech trade turnover with Russia grew 9.8 percent in 1996 to $2.8 billion.
But it was heavily weighted in Russia's favour with Czech exports to Russia at $694 million while imports from Russia were $2.1 billion.
Czechs are still dependent on Russia for natural gas and most of their crude oil, but Prague is in the final stages of negotiations of a long-term contract for some of its gas supplies to come from Norway.
Last year, the Czechs opened the Ingolstadt spur in the Transalpine crude pipeline from the Adriatic Sea, providing direct access to crude from the Middle East.
The Czech power company CEZ a.s. is also dependent on Russian nuclear fuel for its lone atomic power station at Dukovany. But the company is expected to take U.S.-supplied nuclear fuel when it opens a new plant at Temelin by the end of the century.
The Czech army is also considering several offers to modernise its mostly Soviet-era equipment with Western-made, NATO-compatible goods.
",18
"Tremours rumbled through Czech markets on Monday, as crown, debt, and equity traders were anxious about the contents of a government pro-growth package due out mid-week.
The extent of budget cuts and measures affecting interest and exchange rates in the still-secret package -- aimed at stemming growing budget and trade deficits and reviving economic growth -- kept everybody in the markets guessing.
The Czech crown fell to a 10-month low, losing 1.5 percent of its value trading late on Monday at 30.283/dollar 17.568/mark or about 0.75 percent below parity with the peg, from 29.290 and 17.439, or +0.80 on Friday.
""I think we'll see much nervousness on the markets (until the cabinet's announcement) -- forex, equity, and fixed income,"" said Vladimir Kreidl at Prague's Patria Finance.
In thin activity on the Prague Stock Exchange, the blue-chip PX50 index dropped about 0.5 percent to 548.5.
""Probably now, the nervousness around the government measures is a little bit distracting,"" said Lubomir Vystavel of ING Barings. The heaviest decliner among top shares was Komercni Banka, which fell 65 crowns, 2.8 percent, to 2,247.
Prime Minister Vaclav Klaus and other senior ministers have suggested a series of budget cuts along with a loosening in monetary policy, but specific details have not been revealed.
The central bank responded last Thursday by easing minimum reserve requirements, but kept key interest rates unchanged.
The Czech National Bank fixed the crown on Monday at 30.045 and 17.439 or +0.04 percent above parity, as rates fluctuated wildly ahead of the daily fixing at 11.30 am (0930 gmt).
The sharp fall in the crown did not give a reason for the CNB to intervene to prop up its value, the CTK news agency quoted CNB spokesman Martin Svehla as saying late on Monday. Central bank officials were not available for further comment.
Traders are debating whether the central bank, as a complicit part of the plan to be announced on Wednesday, would let the crown depreciate to help a worsening trade situation.
The crown, which hit its high in February against the central bank's mark/dollar peg, has been especially sensitive as government pressure for an easing of monetary policy grows.
""Traders see the authorities as not opposing a weaker Czech crown, and the authorities are seeing the revaluation (side of the central bank's fixing) band, as overvalued,"" said Petr Korous, a trader at Ceskoslovenska Obchodni Banka.
Korous said comments by Prime Minister Klaus over the weekend, hinting he was not happy with the crown's higher exchange rate levels, added more uncertainty.
The government and the central bank have repeatedly ruled out a direct administrative devaluation of the crown in order to boost exports, although the country's current account deficit now is over eight percent of gross domestic product.
""I haven't seen the market this agitated since last September. When you see volatility like that, and it's across the board not just a few major players, that can be a bit of a problem,"" said one London-based analyst.
",18
"The Czech industrial sector is ""really in weak shape"" with generally low profits and poor corporate leadership, the European Bank for Reconstruction and Development Czech team leader said on Wednesday.
Speaking to an international banking forum Jiri Huebner of the London-based EBRD said return on equity among large Czech firms averaged just 3.5 percent last year, while the early months of 1997 have shown a sharp slowdown in output.
""Consequently a typical Czech company's profitability is so low that there are insufficient profits to pay dividends -- over 90 percent did not pay or declare any dividends,"" he said.
""Is the Czech industrial sector really in weak shape? I think it is.""
Huebner said a key problem was debt loads of company owners -- mostly large domestic funds and holding firms -- carried over from leveraged buyouts used after the coupon-based privatisation scheme, and the ownership structure which has emerged.
He quoted the EBRD's own study of fifty of the largest Czech companies which showed that the average level of debt leverage was about 43 percent of the total balance sheet -- and about 58 percent at engineering companies.
This situation, coupled with uncertainty about poorly regulated capital markets, have combined to keep foreign equity investment at bay, he said.
""As a consequence, most industrial companies face internal cash constraints for financing new investments and for modernisation which are often needed to achieve a leap in productivity,"" Huebner said.
""Since coupon privatisation by its nature involved only a change of ownership, Czech companies had little resources to restructure.""
Huebner said Czech managers must take strong initiatives to restructure firms since shareholders are proving ineffective.
He called on managers to formulate their own long-term plans for investment since ""many owners do not behave like long-term strategic investors"" but instead massively practice transfer pricing and short-term speculation.
""In the absence of their own plans, most controlling shareholders will probably not block the managements' intiatives,"" Huebner said.
""All the enterprising and competent Czech managements should take advantage of this and fill in the prevailing vacuum of corporate governance.""
Among the points Huebner prescribed to revitalise Czech industry, which posted a real contraction in output of 3.9 percent in January, the government should:
* Adopt a tax system which allows wider writeoffs, rewarding rational decision making by mangement, and lowering punitive tax burdens.
* More strictly enforce rules against transfer pricing between holdings, giving greater protection to minority shareholders, and increasing tax collection.
* Encourage more equity expansions by firms by liberalising rights issues procedures and allowing management more freedom to initiate equity issues.
* Split banks' investment activities so that corporate decisions do not conflict with lending interests.
Also:
* Banks should be more discriminating in financing leveraged buyouts.
* Management must take a robust intiative to restructure.
-- Prague Newsroom, 420-2-2423-0003
",18
"The Czechs, a small nation with an impressive history of Oscar success, on Tuesday showered praise on Jan and Zdenek Sverak for bringing home a coveted Academy Award for their film ""Kolya"".
The story of an ageing bachelor's reawakening when he takes an abandoned Russian boy under his wing on the eve of Prague's bloodless 1989 Velvet Revolution won the Oscar for Best Foreign Language Film in the ceremony late on Monday.
President Vaclav Havel, a former dissident playwright under communism who acted in films himself, sent a victory telegram to the Sveraks in Los Angeles.
""I am pleased with the great success of your film. I am happy that after many years a Czech film has again received the Oscar,"" Havel's press office quoted the telegram as saying.
Czech media also applauded for the win for the director Jan, 31, and his scriptwriter father Zdenek, who played the bachelor in Kolya.
""The Oscar Goes to Prague"" shouted the capital's daily Vecernik Praha.
It was the first Czech foreign language film Oscar since Jiri Menzel's won in 1968 with ""Closely Observed Trains"" one of a spate of admired movies known worldwide as the ""Czech New Wave"".
Elmar Klos from Slovakia -- now independent, but then part of Czechoslovakia -- won the best foreign film Oscar in 1966 for ""The Shop On Main Street"".
The Czech Republic, with a population of 10 million, also lays claim to director Milos Forman, a Prague native who made the Oscar-winning ""Amadeus"" in 1985 and ""One Flew Over The Cuckoo's Nest"" in 1976 after emigrating to the United States.
Forman failed to pick up best director honours on Monday after his nomination for ""The People Versus Larry Flint"", after winning a Golden Globe and the Berlin's Golden Bear for the film.
The Sverak team made their first international splash in 1992, when the post-war drama-comedy ""Elementary School"" earned a first Oscar nomination but lost. Zdenek is currently working on the team's first original English-language script.
Critics say Kolya, a politically-charged comedy-drama which draws heavily on the decades of animosity -- and jokes -- Czechs had for occupying Russian forces, may be one of the region's best offerings since the Czech New Wave.
""The film is about how the understanding between nations is much more important than the power,"" Sverak told reporters backstage after winning the Oscar.
Earlier this month Kolya won the Czech version of the Oscar, the Czech Lev (Lion), for best picture, but Zdenek Sverak was edged out for the best Czech actor award by Bolek Polivka, a popular cabaret comedian.
Kolya was favoured to take home the Oscar after winning Hollywood's Golden Globe for best foreign language film in January.
",18
"The right-wing Czech coalition government ended nine uneasy months of ruling with a parliamentary minority on Tuesday when a former opposition deputy crossed the aisle to bring it a key seat.
Tomas Teplik, recently expelled from the opposition Social Democratic Party (CSSD), joined Prime Minister Vaclav Klaus's Civic Democratic Party (ODS), an official in the ODS's parliament office told Reuters.
The switch gives the ruling coalition 100 seats in the 200-seat lower house of parliament, after having a minority since general elections last June.
""I can confirm that the (ODS parliamentary) caucus voted to accept Teplik,"" said Vlasta Kloncarova of the ODS.
Financial analysts welcomed the news which they said would increase confidence in the Czech economy. ""I would call it a higher level of comfort,"" said Jan Pudil, director of the Prague-based investment house WoodCommerz.
""This is going to take away the political questions... and keep investors focusing on the fundamentals in the macro-economy, which is the way it should be,"" he added.
Klaus's coalition, which has held power longer than any conservative government in post-Communist Europe, lost its large majority in parliament last June after a surprisingly strong second place showing by the centre-left Social Democrats.
Though divided on some issues, the coalition has remained united in all key votes.
Another former CSSD member, budget committee chairman Josef Wagner, declared himself an independent last weekend after the Social Democrats expelled him for voting with the ruling coalition last December on the 1997 budget.
The CSSD expelled Teplik -- who also voted with the government on the budget -- along with Wagner late last year, but unlike Wagner, Teplik did not try to rejoin the CSSD.
Wagner's membership was officially terminated by the CSSD's national congress earlier this month, and he has said he will remain ""an independent Social Democrat.""
He has said he will not necessarily vote with the government to give the coalition an absolute majority.
Marie Noveska, who was elected as a CSSD deputy last June but resigned from the party after it was revealed that she had falsely used a ""Doctor of Law"" title, has remained in parliament as an independent.
",18
"President Emil Constantinescu said on Tuesday that military modernisation costs were Romania's only obstacle to full NATO membership, but the country should still be named in the first wave of new members.
Speaking during a visit to Radio Free Europe headquarters in Prague, Constantinescu said that Romania had already met all of NATO's criteria for membership except one -- upgrading its military equipment to western standards.
""That is why we speak of Romania's nomination in the first wave followed by the effective integration when all the conditions would be fulfilled,"" he said.
""We still have to fulfil one of them... the capacity to support the costs of the modernisation of military equipment.""
Romania -- with the backing of France, Spain and Italy -- has intensified diplomatic efforts aiming to be among the first group of ex-communist states expected to receive an invitation to join the North Atlantic Treaty Organisation at a July summit in Madrid.
Poland, Hungary, and the Czech Republic are widely expected to be named, but Constantinescu said Romania saw ""no alternative"" to its NATO integration, and should be part of the first group.
Romania is trying to link its bid to join NATO to that of Hungary. The two countries have signed an agreement to form a joint military battalion and new Romanian Prime Minister Victor Ciorbea is to make his first official trip abroad to Budapest this week. Constantinescu said Romania, after a slow start in post-Communist reforms, now met NATO's membership criteria on democracy and human rights.
""There is no argument against Romania's integration into NATO. Anything regarding democratic steps, stability, minority relations, relations with neighbouring countries and regional stability, Romania has fulfilled,"" Constantinescu said.
But the president said that ""radical"" economic reforms were still necessary, and his country could not rely on large NATO members to pay the bill for modernising Romania's army.
""It's clear that the United States... are not willing to support the costs of modernisation of military equipment for any large group of countries, because that would be impossible for the American taxpayer,"" he said.
The U.S. government estimated last month that the total cost to bring in former Warsaw Pact members would be between $27 billion and $35 billion up to the year 2009.
Of this, the United States is expected to bear costs of between $1.5 billion and $2 billion, the Clinton administration said in a report to Congress.
The frontrunners are all struggling to find the finances for modernising their military to the alliance's standards in the midst of massive economic reforms.
Constantinescu, at the end of a two day visit to Prague, did not say how Romania might eventually meet the cost of military modernisation.
But the Bucharest government launched a programme last year to seek credits for up to $400 million to pay for military modernisation.
Romanian military planners have said the government expects to spend about three percent of gross domestic product in total military spending this year, or roughly $900 million.
",18
"A Czech appeals court rejected on Tuesday a move by a group of minority shareholders to invalidate a $1.32 billion 1995 tender which gave a 27 percent stake in fixed-line monopoly SPT Telecom a.s. to a Dutch-Swiss consortium, SPT said.
The decision, which overturns a lower court ruling, means the Telsource consortium, combining PTT Netherlands and Swiss Telecom, will remain SPT's largest shareholder after the Czech government, which still holds a majority stake.
The lawsuit concerned the validity of a decision at an SPT general meeting held in February 1995, setting up the tender which at the time was the largest privatisation in post-Communist Europe.
The action was brought by a group of Czech investors who contended former Economics Minister Karel Dyba did not have authority to represent the state in voting at a general meeting which approved the plan for SPT to take on a strategic partner.
A second suit over another general meeting in August 1995 is still under review, but the decision on Tuesday is a setback for the group which has been agressively challenging the tender.
The Dutch-Swiss consortium bid $1.32 billion in cash, and another $131 million in services, to win the tender over four other international telecom groups, promising to double the country's network to more than four million lines by the end of the century.
SPT said after the decision that the ruling on Tuesday would help its creditibility with investors, after large finance programmes were held up because of the lawsuits. ""The decision only confirms the integrity of the current view of our company and thus all resolutions of the SPT general meeting are valid,"" SPT's chairman Lubos Rezabek said in a statement.
A second lawsuit, brought by the same group led by Czech businessman Martin Mosinger, concerns the conduct of a general meeting in August 1995 where the transaction won final approval.
""I believe that the second suit... will soon be concluded to our benefit and it will put an end to questions regarding the SPT privatisation,"" Rezabek said.
SPT last April mandated U.S.-based banks Chase Manhattan and Citibank to arrange a $500 million, five-year syndicated loan to part finance the firm's long-term development programme.
The syndicated loan was delayed pending decisions on the lawsuits.
SPT shares closed 13 crowns lower on the Prague Stock Exchange on Tuesday at 4,040 ahead of the news.
-- Prague Newsroom, 42-2-2423-0003
",18
"Burmese democracy leader Aung San Suu Kyi received on Friday an honorary doctorate in absentia from Prague's Charles University in a show of Czech solidarity with Burma's democrats.
The Nobel laureate's husband, British professor Michael Aris, accepted the honour for Suu Kyi who has been largely confined to her house and told by military rulers that if she left Burma she would not be permitted to return.
The six-centuries-old Czech university awarded the Doctor of Law degree on the 20th anniversary of Prague's Charter 77 human rights declaration, for Suu Kyi's ""active participation in the fight for democracy, freedom and human rights"".
In a speech read by Aris, Suu Kyi said that the fight of her National League for Democracy (NLD) was ""a struggle that knows little respite.""
She said that Prague's 1989 bloodless ""gentle revolution"" over communism, which was in large part inspired by the Charter, formed a special bond with Burma's democracy campaigners and ""provided hope and practical lessons"".
""An idea whose time has come cannot be crushed,"" she said.
Suu Kyi's NLD won a landslide victory in a 1990 election, but has never taken power because the military government rejected the results of the poll.
In commemorating Burma's 49th anniversary of independence from Britain last week, Suu Kyi vowed to step up her efforts to bring democracy to Burma despite restrictions on her and her supporters.
In December, troops and riot police used water cannon and batons to force thousands of student demonstrators off the streets in the biggest anti-government demonstrations seen since national protests in 1988.
Czech President Vaclav Havel, a former dissident against communism who helped forge the Charter and led the 1989 democratic revolution, promised ""support and solidarity"" to Burma's democrats, in a statement read at the ceremony.
In the speech read by Aris, Suu Kyi said that like the Czech democrats, who were ignored by the top communist rulers until the revolution, Burma's democracy campaign was mired in ""a one-sided dialogue with police and security forces"".
Aris said that Suu Kyi's speech was delivered to him from Burma with great difficulty.
",18
"The Czech cabinet will adopt a carrot-and-stick package mixing investment incentives with budget and import cuts in an attempt to spur economic growth, a Reuters poll of analysts showed on Tuesday.
With the cabinet due to announce its ""package"" of stimulus measures on Wednesday, share market repairs and savings promotion steps to reduce demand were most frequently mentioned by the nine analysts as likely to be included.
The government said it aims to reduce growing budget and trade deficits, while spurring growth, dampening demand for imports and adding confidence to beleaguered capital markets.
None of the analysts expected a direct manipulation of the exchange rate to help exports, although several suggested allowing the crown to ease below its corridor of plus/minus 7.5 percent from the mid-point of a mark/dollar basket.
Josef Poeschl at the Vienna Institute for Comparative Economic Studies, said lower interest rates were needed, but Merrill Lynch's Andrew Kenningham expects lower rates would be put off until more data on slowing growth is available.
There was a consensus among the analysts that the cabinet should take steps to beef up market regulation with most saying a U.S.-style Securities and Exchange Commission would help bring back lagging foreign invesmtent.
The analysts agreed sharp budget cuts were on the cards, as economic growth, and thus tax revenue, has come up short.
Expectations ranged from 20 billion crowns in cuts seen as ""very likely"" by Boris Gomez and Susanne Hallergard at ING Barings, to 40-50 billion forecast by Kenningham.
""At least 25 billion crowns of cuts are needed to give good chance of a balanced budget,"" said Kennigham. ""Anything short of a balanced budget lacks credibility.""
There was a broad consensus that state sector wages would be capped at 10 percent nominal growth -- Kenningham said that should save about 30 billion crowns this year -- and several expect pressure on the private sector to follow suit.
Kamil Janacek, chief economist at Komercni Banka, said the government should seek a budget surplus of two to three percent of GDP, but more likely would move toward just a balance.
Janacek, who works at the largest state-controlled bank, said the government must finish privatising big banks and industrial corporations.
He said he expects the issuing of longer-term government bonds ""to increase the propensity to save in the household sector"" and for ""changes in legal and institutional framework enabling better functioning of the legal infrastructure"".
Several said they expected longer-term state bonds to be issued aimed at attracting individual Czech retail investors to park their money for awhile, reducing demand.
The group was mixed on the need to impose surcharges or quotas to reduce demand for imports which have thrown the current account deficit to more than 8.5 percent of GDP.
Gomez and Hallergard said they expected ""seasonal"" import duties ""on selected foodstuffs and more stringent non-tariff trade barriers on imports, particulary from EU"" in the package.
Poeschl said he expected some non-tariff barriers will be introduced on selected items and should be for a defined period of time, including plans for a gradual removal.
Other key comments included:
* Martin Kupka at Prague's Patria Finance said he expected ""considerable"" budget cuts, anti-import administrative measures and a rise in consumption taxes to dampen demand.
* Matt Starr, bond trader at Creditanstalt Prague, said he expected a cap on wages, budget cuts, a move to separate invesment funds from banks -- an often-repeated problem in the capital markets -- and more support for the Export Guarantee and Insurance agency (EGAP) and state export bank.
-- Prague Newsroom, 420-2-2423-0003
",18
"The Anglo-Swedish consortium which makes the Gripen supersonic fighter aircraft said on Thursday that it could provide the Czech Republic with new planes for 40 percent less than any offered by its American competitors.
British Aerospace Plc and Sweden's Saab said their package offered to the Czechs, who are looking to upgrade a fleet of ageing Soviet-made aircraft, includes guaranteed financing, low-cost leasing, and possible equity participation in Czech aircraft makers.
Alan Garwood, British Aerospace's director for North America and Europe told a news conference the package would allow the Czechs to buy new Gripens for much less than any new or used aircraft offered by American makers.
""We believe the life-cycle cost of the Gripen is incredibly competitive, and the Americans cannot compete,"" he said, adding that there would be hidden costs inherent in the upkeep of used U.S. aircraft.
Officials declined to specify the cost-per-piece the Gripen joint venture would actually offer to the Czechs.
In cooperation with McDonnell Douglas Corp, the U.S. Navy last month offered the Czechs seven used surplus F/A-18 ""Hornet"" fighters in a no-cost, five-year agreement as a sweetener for a long-term deal.
The offer also includes supplying, at cost, replacement parts, pilot and ground personnel, training and equipment.
U.S. Lockheed Martin Corp has said it would have its own lower-cost offer to the Czechs for its flagship F-16.
New advanced fighters are typically $20 million and higher, depending on communications, avionics and weapons systems.
Czech defence officials have said they have the will but not the wallet to buy brand new Western-made advanced fighters, but are keeping their options open as a battle over the long-term military budget goes on.
They have said they would need about 24 fighters to replace their ageing Soviet made MiG-21s to be more compatible with NATO, but they have said new western planes are too pricey.
But Garwood said that the Gripen's basic lower price, a low-cost lease, and a guaranteed financial package backed by the Swedish and British government's with low interest rates, would ensure tremendous savings for the Czechs.
""Every day (the Czechs) delay, the American aircraft are getting older,"" Garwood said.
The Gripen consortium has been considering participating in a tender for a 34-percent stake in the debt-ridden Czech light jet maker Aero Vodochody a.s.. Officials said a decision would be made in the next 7-10 days on whether to enter the bidding.
Garwood said that although the Czech government did not explicitly create a direct link between equity participation in Aero and the selection of new fighter aircraft, Garwood said the government has made it clear that there would be a ""strategic"" link with Aero's new owners.
Gripen officials said that development of Aero's L-159 trainer aircraft would fit well with the consortium's strategy, but did not rule out remaining in the race to supply the aircraft if they decided not too seek the Aero stake.
Garwood said that the consortium was also in talks over offset agreements which would create production of some of the components domestically for Gripens provided to the Czech army.
-- Prague Newsroom, 42-2-2423-0003
",18
"Czech President Vaclav Havel called on the new Senate on Wednesday to give final approval to a post-World War Two reconciliation pact with Germany to ensure good relations with its large and influential neighbour.
In his first speech to the upper house, which was elected last November, Havel asked Senators to rise above the lower house's often ugly debate on the pact, in which Communist and ultra-right Republican opposition deputies filibustered before the measure was approved by a large majority last month.
""The debate on (the declaration) in the Chamber of Deputies did not give us much glory,"" Havel told the Senate.
The declaration, in which Bonn expresses its regret for the 1938-45 occupation of the Czech lands and Prague its sorrow for excessive brutality in the expulsion of ethnic Germans after the war, was signed by both governments in January.
It was quickly approved by a large marjority in the German parliament but faced virulent attacks by Czech Communist and Republican deputies who said the measure was a sellout to Bonn.
The agreement seeks to tie up political loose ends from World War Two and its aftermath, and is Germany's last reconciliation agreement with a neighbouring country which the Nazis occupied.
Havel told the Senate, in which the centre-right coalition government has a strong majority, to consider the historical significance not just of the declaration itself, but of building strong relations with the Czechs' powerful neighbour.
""I am guaranteeing you, that historians and politicians will devote time to the question of what we did for good relations with our large and influential neighbour, and through that for good relations in the whole of Europe,"" Havel said.
The speech, which mostly focused on the constitutional role of the Senate, was Havel's first live public appearence since he had half of his right lung removed along with a small malignant tumour in December.
A former chain-smoking dissident playwright, Havel was to return to his full presidential duties this week, but has been hampered by the flu.
Havel, 60, led a three-year fight to have the Czech constitution fulfiled by forming a Senate, which he considers as a necessary guarantor of Czech democracy.
",18
"Software maker Cognos Inc sees another strong year in fiscal 1998 and a share buyback or acquisition with its $100 million in cash, Chief Executive Ron Zambonini told Reuters.
""We've had a very strong year,"" Zambonini said of fiscal 1997 ended February 28. He added in an interview on Monday that 1998 would also be ""a big year.""
Ottawa-based Cognos makes software to analyze business database information via sophisticated spreadsheets.
""We have six new products and versions coming out in the first quarter,"" Zambonini said.
Zambonini said that Cognos, whose revenues grew 34 percent to US$51.3 million in the 1997 third quarter ended November 30, was considering how to use its cash hoard of more than US$100 million, he said.
Cognos' net earnings for the first nine months of fiscal 1997 rose to US$23.5 million or US$0.51 a share from year earlier US$10.1 million or US$0.23 a share.
""We think when it's accretive, it makes sense to use our cash,"" Zambonini said.
""We're actively looking right now for other products,"" he said. In early February, Cognos said it acquired London-based Right Information Systems Ltd, a business modeling and forecasting software developer, for $8 million in cash and stock.
He added that Cognos planned to expand operations in Europe, especially in Germany, Italy and Scandinavia.
A buyback of up to five percent of shares was another option, since the stock had taken a beating on Nasdaq and the Toronto Stock Exchange since late last year, Zambonini said.
Investors sold off after an analyst downgraded Cognos to a hold from a buy, saying the stock reached his target price in early December.
Cognos shares were up 0.20 to 32.75 in Toronto on Tuesday, down from a 52-week high of 53.50. Cognos was unchanged at 24-1/8 on Nasdaq, versus a 52-week high of about 39.
((lydia.zajc@reuters.com Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks extended their winning streak to end higher on Thursday, powered by surging banks as fears of a Canadian interest rate hike eased.
The Toronto Stock Exchange's key 300 Composite Index rose 33.27 points to 6009.90. Trading was heavy at 95.3 million shares worth C$1.7 billion ($1.2 billion).
In the past three sessions, Canada's largest market jumped by more than 2.5 percent.
Banks led 12 of Toronto's 14 sub-indices to higher ground, rising almost 1.8 percent as investors put aside worries that Canada would raise interest rates to match U.S. hikes.
Investment advisor Ira Katzin with RBC Dominion Securities said: ""Financial services benefited from the expectations that interest rates would stay stable or ease off a bit.""
But market watchers were eying Friday's U.S. employment data, Katzin said.
The numbers could provide more indication of whether U.S. inflation was on the rise, which could prompt rate hikes by U.S. and Canadian central banks.
The U.S. government will report April's non-farm payrolls and unemployment rate.
Toronto's stronger sub-sectors included media, pipelines and real estate, while conglomerates and forestry products fell.
Advancing issues outnumbered decliners 500 to 447 and 301 were flat.
In active issues, gold prospector Bre-X Minerals Ltd. lost 0.44 to 3.04 in heavy dealings. Investors continued to consider the worth of its controversial Busang project in Indonesia.
Royal Bank of Canada, the nation's largest bank, rose 1.35 to 57.20 and third-ranked Bank of Montreal also rose 1.35 to 52.05.
",26
"Toronto's stock market soared to the eighth record close of 1997, rallying on the back of high-flying golds and lots of takeover news in Canada's oil patch.
The Toronto Stock Exchange's 300 Composite Index lept 60.40 points to end at 6225.78. It also set a new intra-day record of 6225.83 points.
""The market finally has made a major break to all-time high levels,"" said Montreal-based portfolio consultant Ron Meisels.
Turnover was heavy at 122 million shares worth C$2 billion ($1.48 billion).
New York matched Toronto's gains, jumping 60.81 points to end at 7022.44. The Dow Jones Industrial Average passed the key 7000 level on optimism about the U.S. economy, low inflation and stable interest rates.
Canada's largest equities market made a strong move upward after surging bullion prices in London boosted heavyweight gold stocks.
Investors also focused on the continuing merger activity in the Western-based oil and gas sector.
All of Toronto's 14 sub-indices spiralled upward except for real estate. Golds, oils, transportation and consumer products led gaining groups.
Advancing issues raced ahead of decliners 607 to 410 while 269 traded unchanged.
Hot stocks included Morrison Petroleums Ltd., which rose 0.40 to 9.90 before being halted in late trading. It had been the target of a C$652 million ($482 million) hostile takeover by Canadian 88 Energy Corp. but on Thursday announced a merger with Northstar Energy Corp.
Northstar rose 0.35 to 14.15 before the halt while Canadian 88 shares slipped 0.15 to 4.95.
A marriage between Newport Petroleum Corp. and Cimarron Petroleum Ltd. was also announced early on Thursday. Newport shares lost 0.65 to 9.15 while Cimarron soared 3.20 to 23.50.
Talisman Energy Inc. rose 1.10 to 46.25 after unveiling a C$1.7 billion ($1.3 billion) takeover bid for Wascana Energy Inc. late Wednesday night. Wascana shares gained 2.05 to hit 19.00 on nine million shares, which was above the offering price of C$18.50 a share.
",26
"Investors cheered Hudson's Bay Co's naming on Monday of a former Wal-Mart Stores Inc official as chief executive, saying he would bring Wal-Mart's retailing savvy to Canada's biggest department store chain.
William Fields replaces retiring Chief Executive George Kosich on June 1. Hudson's Bay shares closed up 0.90 to 27.40 today on the Toronto Stock Exchange after the news.
Fields was most recently chief executive of Blockbuster Entertainment Group, a unit of Viacom Inc. He resigned by mutual agreement on April 22 after Viacom said that its movie rental unit's first quarter would fall short of year earlier performance by 15 to 20 percent.
He was chief executive from 1995 to 1996 of the stores unit of Wal-Mart, the largest U.S. retailer, capping a 25-year career at Wal-Mart in which he began as a store manager.
Hudson's Bay hired another former Wal-Mart executive, Millard Barron, last autumn to head its discount department chain Zellers. The 327-year-old retailer also runs a more upscale chain, the Bay.
""Having two of them, who understand the Wal-Mart way of doing things...will certainly give Hudson's Bay an advantage in adopting the new merchandising and marketing techniques,"" said analyst Leonard Kubas, president of Leonard Kubas Consultants.
""You've brought in two senior execs from, I guess, the most successful non-food retailer in the U.S,"" said an analyst, who requested anonymity, adding that ""clearly it is a positive development for the company.""
Wal-Mart, which came to Canada in 1994, has ousted Zellers as Canada's top discount store chain and brought everyday low pricing to Canadian consumers.
Fields told Reuters in a telephone interview that he was considering ways of battling his former employer.
""I do have some ideas, but I think the first thing I need to do is understand more about the Canadian consumer and the Canadian market place and maybe at least have a week before I come up with a strategy.""
Fields added that he would likely bring some of Wal-Mart's culture to Hudson's Bay.
""The principles that Sam Walton established are pretty ingrained in me, so I think it would be hard to separate the two,"" he said.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks finished one percent higher on Tuesday, following a rally in New York as investors speculated the U.S. central bank may not raise interest rates after surprisingly weak U.S. economic data.
The Toronto Stock Exchange's key 300 Composite Index rose 67.98 points to close at 5903.56. On Wall Street, the Dow Jones Industrial Average jumped 179 points to finish at 6962.
""Economic stats came through this morning that suggest the economy is slowing down,"" said Ira Katzin, an investment advisor with Toronto-based brokerage RBC Dominion Securities.
The U.S. employment cost index rose 0.6 percent in the first quarter, compared with economists' expectations of a 0.9 percent increase.
Also, April's index of U.S. consumer confidence dipped to 116.8 in April from 118.5 in March.
The numbers suggested the U.S. Federal Reserve may not have to increase short-term interest rates at a May meeting, Katzin added.
Toronto's 14 sub-indices strengthened across the board except for pipelines. Rallying groups were led by media, consumer products, interest rate sensitive banks and retail issues.
Turnover was brisk at 102 million shares worth C$1.8 billion (US$1.3 billion).
Advancing stocks overwhelmed declining issues 580 to 397, while 227 stocks were unchanged.
Amid hot stocks, Royal Bank of Canada jumped 1.50 to 55.15. Bank of Montreal rose 1.15 to 50.25.
Gold prospector Bre-X Minerals Ltd. edged up 0.15 to close at 3.80. Busang partner Freeport-McMoRan Copper and Gold Inc., said at its annual meeting on Tuesday that it hoped an independent audit expected later this week would resolve conflicting estimates of gold reserves at the project.
",26
"Toronto stocks ended mixed in brisk dealings on Friday, amid nervousness over a possible U.S. interest rate hike and quarterly triple-witching.
The Toronto Stock Exchange's key 300 Composite Index rose 19.50 points to close at 6074.78 on turnover of 101.5 million shares worth C$1.9 billion ($1.38 billion).
But the overall market was mixed with declining issues outnumbering advances 491 to 447, while 331 stocks were unchanged.
Volatility earlier in the session was due partly to the quarterly expiry of options, futures and options on futures called triple-witching, traders said.
Investors are also nervously awaiting a possible rise in U.S. interest rates following the U.S. Federal Open Market Committee meeting on Tuesday.
""We have the anticipation of (U.S. Federal Reserve Chairman Alan) Greenspan doing what he said he was going to do,"" said Montreal-based strategist Bill Ram.
The TSE, Canada's largest stock market, lost 87 points this week from last Friday's close.
Of Toronto's 14 sub-indices, 10 moved higher led by banks, oils, forestry products and conglomerates. The weak side included gold and base metals.
Among hot stocks, gold prospector Bre-X Minerals Ltd. sank 2.25 to close at 15.20 on over nine million shares, the TSE's heaviest trader.
The selloff was sparked by an Indonesian newspaper report which cast doubts on the size of the Busang gold deposit which Bre-X discovered in Indonesia.
Bre-X partner Freeport-McMoRan Copper & Gold Inc. declined to comment on the Busang deposit until it has completed its due diligence process.
Sofware maker Cognos Inc. jumped 4.10 to close at 33.10 after UBS Securities upgraded it to a strong buy from a hold. The brokerage also raised its earnings estimates for the company.
Investors continued to scoop up shares of Canadian Occidental Petroleum Ltd. in the wake of its C$2 billion ($1.45 billion) friendly takeover bid for Wascana Energy Inc. Canadian Occidental rose 0.95 to finish at 26.90, while Wascana traded steady at 20.65.
",26
"Toronto stocks closed weaker in heavy trading on Thursday after a last minute sell-off that was led by New York.
The Toronto Stock Exchange's 300 Composite Index lost 43.79 points to settle at 6205.07, while the Dow Jones Industrial Average plunged 92.75 points to reach 6927.38.
Canada's largest equities market also posted its heaviest trading session and highest value ever, with 169.4 million shares traded worth C$2.97 billion ($2.18 billion).
Despite the drop, the 300 index did not cross the key support mark of 6175 points, said portfolio consultant Ron Meisels. ""We're still actually very much above the break-out level,"" he said.
Toronto's losses were checked by a soaring gold group, which rocketed 3.23 percent on surging bullion price on COMEX. April gold closed $5.00 higher an ounce at $352.70.
All of Toronto's 14 sub-indices lost ground except for golds and retail. Consumer products led losses, followed by banks, oils and utilities.
Declining stocks edged out advancing ones 518 to 515 while 268 traded flat.
In individual issues, prospector Bre-X Minerals Ltd. continued to be active, rising 1.20 to 22.70 on 6.7 million shares.
Shareholders were cheered by Bre-X's statement on Wednesday that its huge Busang discovery contains 200 million ounces of gold.
Minorca Resources Inc., which holds a small stake in Bre-X's profits, rose 1.05 to 6.45 in heavy dealings.
United Grain Growers Ltd. shares rose 1.75 to 14.25 in light trading after news that two grain handling rivals, Alberta Wheat Pool and Manitoba Pool Elevators, said they will make a C$13.75 a share offer for all UGG shares.
Champion Road Machinery Ltd. jumped 4.25 to 14.75 in moderate trading after the construction unit of Sweden's AB Volvo launched a C$15 a share takeover bid.
Hudson's Bay Co., Canada's largest department store chain, saw shares rise 1.90 to a yearly high of 27.40. Hudson's Bay shares played catch-up with recent gains in Toronto's merchandising sub-indice.
",26
"Toronto stocks closed one percent higher on Tuesday, but trailed a stronger rally in New York as fears of a U.S. interest rate hike eased on weak U.S. inflation numbers.
The Toronto Stock Exchange's key 300 Composite Index soared 64.22 points, or 1.1 percent, to close at 5743.55. On Monday, the index was down more than 10 percent since setting its lifetime high of 6348 points on March 11.
The Dow Jones Industrial Average surged 135.26 points to close at 6587.16.
Toronto's gains were restrained by its heavyweight gold group, which dropped two percent on weak gold prices.
""We're just following the U.S. side. The U.S. side is very strong on consumer price index numbers,"" said Montreal-based analyst Bill Ram.
The U.S. Labor Department said on Tuesday the consumer price index rose 0.1 percent in March. Economists surveyed by Reuters had forecast a gain of 0.2 percent.
The weaker numbers inspired investors to put aside fears of another U.S. rate move -- at least for a while, Ram said.
Turnover was moderate with volume of 77.1 million shares worth C$1.35 billion ($966 million).
Of Toronto's 14 sub-indices, 11 rose led by banks, conglomerates and utilities. On the weak side, gold fell two percent followed by moderate losses in consumer products and real estate.
Advancing stocks outpaced declining issues 513 to 416 with 299 unchanged.
Among hot stocks, Bre-X Minerals Ltd. dropped 0.22 to 2.23 on 5.3 million shares, topping the most-active list.
Bank of Nova Scotia jumped 1.45 to 50.15, while the Toronto Dominion Bank rose 1.40 to 37.00.
Conglomerate BCE Inc., Canada's largest publicly traded company, added 2.10 to finish at 63.70 on 1.2 million shares.
Biotechnology firm BioChem Pharma Inc. lost 5.60 to 26.40 as the market appeared to react coolly to clinical trial results released last week on its Hepatitis B drug, lamivudine.
",26
"Toronto stocks sank to their lowest level in four months on Friday after unexpectedly high U.S. producer price data heightened fears of further U.S. interest rate hikes.
The Toronto Stock Exchange's 300 Composite Index plunged 106.47 points, or 1.84 percent, to end at 5683.64.
Nearly 88 million shares changed hands worth C$1.23 billion ($879 million).
""People are finally doing a bit of panicking here,"" said Montreal-based portfolio consultant Ron Meisels.
The key index closed at its lowest point since December 6 when it dipped to 5672.21 points.
U.S. producer prices slipped 0.1 percent in March, but the core rate, which excludes food and energy prices, jumped 0.4 percent. Economists polled by Reuters had forecast an average increase of 0.1 percent in the core rate.
The data sparked fears that the U.S. Federal Reserve will raise short-term interest rates at a meeting in May, analysts said. Bank of Canada officials suggested on Thursday that the central bank was in no hurry to match the Fed's last rate hike in March.
All of Toronto's 14 sub-indices lost ground, led by golds, banks, media, consumer products and oils.
The key financial services group sank nearly 2.8 percent amid worries that higher interest rates would hurt profits.
--- HOT STOCKS ---
* Bank of Nova Scotia fell 1.75 to finish at 48.40, while Royal Bank of Canada lost 1.60 to close at 51.00.
* Bre-X Minerals Ltd. fell 0.17 to 2.50 on 7.5 million shares. The Ontario Securities Commission and TSE announced a task force on Friday to study tougher rules for Canada's mining sector in the wake of the Busang gold controversy.
* Repap Enterprises Inc. fell 0.54 to 0.55 on massive turnover of 15.3 million shares. The selling was sparked by investor concern over the company's financial liquidity after its failed merger with Avenor Inc.
",26
"Toronto stocks ended mixed in active trading on Tuesday as a rally in heavyweight bank stocks was offset by profit-taking in other groups.
The Toronto Stock Exchange's key 300 Composite Index rose 5.26 points to close at 6247.78 on volume of 105.75 million shares worth C$1.67 billion ($1.23 billion).
But the overall market was mixed with declining issues outpacing advances 525 to 463, with 307 stocks unchanged.
""All the activity was centered in the bank sector ... fueled by some solid earnings,"" said Ira Katzin, investment advisor at RBC Dominion Securities.
The financial services group, which accounts for 17.55 percent of the 300 index, jumped almost 2.1 percent after two big Canadian banks reported strong first-quarter earnings.
The banks led five of the TSE's 14 sub-indices higher, which also included forest products and media. But these gains were offset by profit-taking in conglomerates, energy, consumer products and base metals.
Looking ahead, analysts said investors are awaiting U.S. Federal Reserve chairman Alan Greenspan's Humphrey-Hawkins testimony on Wednesday.
Among bank stocks, Bank of Montreal and Bank of Nova Scotia soared after they reported sharply higher first quarter profits.
Bank of Montreal gained 1.10 to 49.50 on 899,000 shares, while Bank of Nova Scotia jumped 1.25 to 52.90 on 1.1 million shares.
Canadian Imperial Bank of Commerce posted the biggest gain, climbing 1.60 to 67 on 908,000 shares.
Sherritt International topped the most-active list, ending up 1.00 at 59.00 on 7.9 million shares, after earlier reaching a 52-week high of 60.
Sherritt improved after chief executive Ian Delaney defended the company's controversial investments in Cuba in a speech to Toronto's business community on Monday.
",26
"iStar internet inc's new chief executive Craig Wallace said on Wednesday that the Internet service provider would post a reduced third-quarter loss on Friday, following a heavy second-quarter loss.
""Earnings will be in better shape than Q2 and will even be better in Q4,"" Wallace told Reuters in an interview.
iStar's net losses widened to C$10.5 million or C$0.50 a share in the second quarter ended November 30 from a first-quarter loss of C$8.1 million or C$0.43 a share. It did not give previous year comparisons because aquisitions changed the firm's make-up.
Wallace, who took the helm in January after joining the company last June, declined to elaborate. Before moving to iStar he was director of marketing at Microsoft Canada Inc.
Analysts and investors have been less optimistic. One analyst, who declined to be identified, noted that iStar has not posted a profitable quarter since going public in November 1995 and said the performance could not get much worse.
iStar's shares have tumbled as low as 2.06 on the Toronto Stock Exchange after soaring to 22 at their opening in late 1995. On Wednesday they slipped 0.15 to 2.55.
Last year iStar was busy snapping up Internet providers across Canada, but the company has now shifted its focus to providing Intranet software solutions for corporations.
The Ottawa-based firm, which has about 65,000 personal and corporate subscribers across Canada, is now concentrating on growing revenue and containing costs, Wallace said.
Soon after Wallace took over from founder Rainer Paduch, who became chief technology officer, iStar chopped about 20 percent of its staff, or 45 employees.
The lay-offs cut C$500,000 from iStar's monthly expenses and came on top of 100 layoffs last year.
Wallace said revenue will rise but costs will fluctuate instead of increasing as iStar's infrastructure is already in place. ""We have significant improvement in our gross margin percent in Q3 and it will only get better in Q4,"" he said, again declining to elaborate.
He forecast that iStar will reach profitability in fiscal 1998.
However, the analyst disagreed, citing a lack of credibility on the street. ""It doesn't really matter what their margins are,"" he said. ""If they do manage to get their act together, it'll be too late.""
Wallace said iStar is not actively seeking new acquisitions, but he would be willing to have discussions with any firm. He dismissed past rumors that iStar might merge with rival HookUp Communication Corp.
Wallace also brushed aside suggestions that iStar could be swallowed by larger companies, saying that he believed iStar would emerge on top from a consolidation in the industry.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"The Toronto Stock Exchange's move to decimal trading from fractions this year has not boosted trading volume as hoped, a study has shown.
The conclusion was contained in a July discussion paper by doctoral student Jeff Bacidore at Indiana University's Graduate School of Business and recently obtained by Reuters.
The TSE is Canada's largest stock exchange and is third-ranked in North America. All of Canada's five equities markets except for Winnipeg adopted trading increments of five cents rather than one-eighth of a dollar on April 15.  
TSE officials said they made the move in hopes of attracting business away from U.S. exchanges. Many overseas exchanges also use decimal trading increments.
But Bacidore found trading did not increase in the nine week period after the change compared to the previous nine weeks.  ""Statistically speaking, the volume is about the same,"" he told Reuters in a phone interview.
However, Susan Crocker, the exchange's senior vice-president of equities and derivative markets, said the study was too short. ""What occurs to generate volume on any given day? Like a million things,"" she said.  
Because the time periods were so short, ""I don't even know how you can draw that conclusion,"" Crocker said.
Bacidore said the time frame avoided seasonal fluctuations.
ScotiaMcLeod senior vice-president Fred Ketchen, a proponent of decimalization and former TSE chairman, agreed with Crocker. ""It is too early to make that assessment.""
""The move to nickel spreads has prompted an increase in the number of market orders coming into the market as opposed to limit orders,"" Ketchen said. ""That isn't going to show in the electronic book as far as the liquidity is concerned.""  
Bacidore said his data set was too limited to be broken down into the different types of orders.
His study also found that decimalization cut earnings for traders, who made higher profits from the previous wider spreads between prices.
""It's just like any good: if you lower the price, you're going to lose money on each share but volume picks up enough, if you sell more of the product, you could actually compensate for that per unit loss,"" Bacidore said. ""In this case the per unit cost of trading fell, but the volume didn't pick up.  
Ketchen added that ""If you have a one-eighth of a dollar spread, and you can bring that down to a nickel, you've got to be helping somebody.""
Crocker agreed. ""Spreads have narrowed and investors have certainly benefitted.""
Bacidore, who said he was interested in decimalization because U.S. markets are considering abandoning their systems to join an international movement, said his next step is to see if Toronto is attracting volume away from U.S. exchanges.
The exchange is also studying the effect of decimalization but is unlikely to publish its results, Crocker said.
-- Reuters Toronto Bureau (416) 941-8100 or lydia.zajc@reuters.com
",26
"Toronto's key stock index closed higher on Tuesday with a boost from soaring banking issues, but the broader market was pulled lower by weakness in the heavily weighted gold group.
The Toronto Stock Exchange's 300 Composite Index rose 45.65 points to end at 6126.92. However declining issues edged out advances 515 to 479, while another 300 traded flat.
""The banking sector did well,"" said MMS International analyst Katherine Beattie. Canada's six biggest banks soared to record heights after influential U.S. investment firm Goldman Sachs hiked ratings on five out of the six.
The financial services sector rose more than 1.7 percent.
However, ""we've still got a problem in the gold sector,"" Beattie said. Golds continued to tumble on dropping bullion prices.
Trading was brisk today at 102.9 million valued at C$1.76 billion ($1.3 billion).
Ten of Toronto's 14 sub-indices surged, led by consumer products, banks, conglomerates and oils. The weaker sectors were golds, transportation, forestry products and media.
The hottest stocks were the banks. The Royal Bank of Canada jumped 1.60 to close at 54.85, below its new high of 55.30.
Goldman Sachs put Canada's largest bank on its recommended list, along with Canadian Imperial Bank of Commerce, the nation's second biggest. CIBC shares rose 1.25 to end at 66.70, also below a new record of 67.50.
Despite being left out of the upgrades, the Bank of Montreal, the third largest, rose 1.10 to 50.15.
Base and precious metals miner Princeton Mining lost two cents to reach 0.42 on nearly three million shares, topping Toronto's most actives.
It announced a private placement of special warrants at C$0.35 per share, convertible to one common share each, to raise C$5.4 million ($4 million).
",26
"The Vancouver Stock Exchange will become the first Canadian exchange to conduct trading at night, in order to tap budding interest from Asian investors.
The new after hours trading will begin on this Sunday, spokeswoman Joyce Courtney said on Friday.
The trading programme, called Vista, is intended to attract Asian market players just starting to trade when Vancouverites are winding down their work day, Courtney said.
The two-hour session will run from 6:30 to 8:30 Pacific time (1:30 a.m. to 3:30 a.m., GMT). It is officialy considered the beginning of the next day's regular trading session, despite the time gap, Courtney said.
Vancouver will start by offering 40 stocks ranging from Australian resource firms to Asian industrials, she said.
""Our purpose here is to attract additional business from Asia so we're looking, quite frankly, to get ... investment from Asia into these companies,"" Courtney said. ""It's an extension of a number of Asian-Pacific initiatives we've had under way,"" which included marketing trips.
Some Canadian brokerages will get involved. ""We don't have every single VSE member committed to the programme but we do have a kind of a critical mass to start the trading,"" Courtney said. Trading partners include Toronto-Dominion's discount service Green Line and Levesque Beaubien Geoffrion.
Overseas brokerages will also be able to participate. International brokerages can gain associate status through VSE members and trade using special Reuters and Bloomberg terminals, Courtney said.
As of yet none are confirmed but several have applied, she added.
Canadian brokerages seem to be approaching this development cautiously. Diane Ratte, Midland Walwyn Capital Inc's senior vice-president and director of equity trading, said the brokerage would not staff the new session. ""At the present time, no. We're going to sit back and see what happens.""
""I didn't get the impression that too many of the firms were going to be actively involved. I got the impression that most of the firms are going to take that attitude -- sit back and wait,"" Ratte said.
Courtney said the VSE is hoping for a low-key start but expects trading to build up. ""We're looking for a gradual evolution of this trading session.""
",26
"Toronto stocks closed flat in light trading on Monday with its upward bias kept in check by battered Barrick Gold Corp. and the fact U.S. markets were closed for a holiday.
The Toronto Stock Exchange's key 300 Composite Index added 3.36 points to end at 6217.60. Turnover was thin at 84.8 million shares worth C$1.13 billion ($836 million).
Investor interest in mergers buoyed Toronto despite tumbles by closely watched Barrick and Bre-X Minerals Ltd., analysts said.
Both fell after Calgary, Alberta-based prospector Bre-X announced a deal with Freeport-McMoran Copper and Gold Inc., based in Louisiana, to develop a huge gold discovery in Busang, Indonesia.
Freeport will own 15 percent of Busang, Bre-X will keep 45 percent and Indonesian interests will take 40 percent.
Barrick shares sank sharply after the Toronto-based gold miner was shut out of the Busang development.
""Barrick dragged down the gold index,"" said Maison Placements Canada president John Ing.
""New York was off today, so there wasn't any action,"" he added. U.S. financial markets were closed on Monday for President's Day holiday.
Market players will keep an eye on Canada's 1997/98 federal budget due at 1630 EST/2130 GMT on Tuesday, but no major surprises are expected, traders said.
Of Toronto's 14 sub-indices, 12 groups rose led by conglomerates, media, forestry products and retail.
The only two weak sectors were gold and financial services.
Advancing issues outpaced declines 545 to 422 with 297 stocks unchanged.
In individual issues, Bre-X fell 0.95 to close at 23.00 on 5.1 million shares, while Barrick sank 1.90 to 34.05 on 1.9 million shares.
Merger mania helped keep Toronto firmer, including oilpatch takeovers.
Energy firm Morrison Petroleums Ltd. rose 0.15 to 10.40, topping Toronto's most active issues. Morrison and Northstar Energy Corp. unveiled a C$700 million ($518 million) merger last week. Northstar shares rose 0.15 to 14.90.
",26
"Toronto stocks rolled to another record close on Wednesday, buoyed by firmer gold and base metal prices.
The Toronto Stock Exchange's key 300 Composite Index rose 10.64 points to close at 6248.86, the 10th record close of 1997. It also set a new intra-day high of 6260.73 points.
Trading was heavy with volume of 128.5 million shares worth C$1.97 billion ($1.44 billion).
""A lot of that comes from the golds,"" said Dunnery Best, Midland Walwyn's director of private client investment. ""All the golds across the border are looking stronger,"" he said.
Toronto's heavyweight gold group added over one percent while the base metal sector rose nearly two percent.
They led gains in nine of 14 sub-indices. The weak side was led by oils, transportation and banks.
""The base metals did a good job,"" Best added, noting that mining stocks improved as base metal prices strengthened on declining supply.
Advancing issues outnumbered declines 561 to 448 with 282 stocks unchanged.
Canadian stocks virtually ignored Canada's 1997/98 federal budget released on Tuesday, which introduced no major initiatives that would affect publicly-traded companies.
Among hot gold stocks, Bre-X Minerals Ltd. recouped some its losses since announcing an agreement on the division of the Busang gold discovery in Indonesia.
Bre-X rose 0.70 to close at 21.50 on 7.7 million shares after chief executive David Walsh said he would not rule out a deal with a potential suitor for the right price.
In base metals, Rio Algom Ltd. jumped 1.50 to close at 53.50 after earlier hitting a 52-week high of 54.
Nickel producer Inco Ltd. finished up 0.85 at 48.20 after reaching a 52-week peak of 48.90.
National Bank of Canada edged 0.05 higher to 16 after kicking off the first quarter earnings parade of Canada's six major banks.
National Bank reported a 12 percent increase in net income for the quarter ended January 31 and raised its dividend.
",26
"Sears Canada Inc, Canada's third largest department store chain, said on Monday that retail revenues could grow by 8.6 percent or more in 1997, after an unexpectedly small first-quarter loss.
""We're hoping to do as well or better than that,"" Chief Executive Paul Walters told reporters after the annual meeting. Sears, which is 55 percent-owned by Sears, Roebuck and Co, earlier reported a first-quarter loss of C$0.03 a share versus a loss of C$0.23 in the same period of 1996.
Wood Gundy retail analyst David Brodie, who had forecast a deeper loss of C$0.10 a share for Sears Canada in the traditionally weak sales quarter, called the results ""fantastic.""
Sears Canada said first-quarter retail revenues rose by 8.6 percent from a year ago, but it did not break out actual retail revenues. Consolidated revenues jumped to C$875.1 million from C$821.7 million.
Walters credited stronger consumer spending and increased advertising. ""Now is the time to step on the gas pedal and grow,"" he said.
Sears Canada also plans to spend C$300 million over three years to upgrade its 110 outlets, starting in Toronto.
Brodie said he would up his original 1997 profit estimate of C$0.70 by 10 cents or so. ""They're in a very good position to step on the accelerator,"" he said.
""I don't attribute it (the growth) to the demise of Eaton's,"" Brodie added.
Venerable Canadian retailer T Eaton Co Ltd declared it might close up to 31 of its 85 outlets after entering bankrupcty protection on February 27.
Walters also said Sears Canada had been eying the purchase of a handful of Eaton's outlets. ""We've identified stores that are of interest to us,"" he said, adding that Sears Canada had only considered only a few locations since it already had competing stores in the same areas.
Despite rumors that Canadian retailers may band together and snap up Eaton's outlets, Brodie said it was more likely that a U.S. company would acquire parts of the 127-year-old, family-owned Eaton's chain.
But no matter how many Eaton's stores will be shuttered, Sears Canada will pick up about 20 percent of their sales, or its portion of Canadian market share, Walters noted.
Sears Canada shares rose 0.25 to 14 in Toronto on Monday.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto's key stock index rocketed almost 100 points higher on Friday as earnings euphoria soared and fears of a U.S. interest rate hike waned.
The Toronto Stock Exchange's key 300 Composite Index climbed 97.01 points to 6106.91 and extended its winning streak to a fourth day.
Trading in Canada's largest equities market totaled 109 million shares worth C$2.2 billion ($1.6 billion).
""All of a sudden people are coming back to rational expectations,"" said Calgary, Alberta-based portfolio manager Josef Schachter. ""Earnings have been fantastic.""
Stock market gains in Toronto and New York were also powered by news of a long-awaited agreement between the White House and congressional Republican leaders to balance the U.S. budget, Schachter said.
A balanced U.S. budget means the government will offer fewer bonds, boosting demand and prices for fixed income instruments and reducing yields.
There were also growing expectations that the U.S. Federal Reserve would not hike interest rates at its May 20 meeting since this week's U.S. economic data pointed to minimal inflation growth.
This week, Toronto's key index jumped by almost five percent as strong corporate earnings rolled in.
Of Toronto's 14 sub-indices, 12 rose on Friday, including media, utilities, consumer products and banks. Real estate and gold groups slipped.
Advancing issues led decliners 616 to 358, while 254 were unchanged.
In individual issues, telecommunications conglomerate BCE Inc. jumped 4.20 to 69.95. Cable and telephone companies were active after the federal Canadian Radio-television and Telecommunications Commission on Thursday threw the country's local telephone market open to competition.
The government telecommunications watchdog also came out in favor of convergence between the phone and cable television broadcast industries.
Bank of Montreal, Canada's third largest, jumped 1.70 to 53.75, leading interest-sensitive banks.
",26
"Toronto stocks ended weaker in brisk turnover on Tuesday, pulled down by weakness on Wall Street and a tumbling financial sector.
The Toronto Stock Exchange's key 300 Composite Index lost 25.26 points to 6129.28. Trading was active as 106.6 million shares worth C$1.8 billion ($1.3 billion) changed hands.
The Dow Jones Industrial Average fell 58.92 points to 6896.56 and Canada's banking group dropped almost one percent.
Montreal-based portfolio consultant Ron Meisels said Toronto's market had traded in a narrow range recently as investors debated a possible hike in U.S. interest rates.
Once rates go up, bond yields increase and bond prices drop, attracting investors who then sell interest-sensitive issues such as banks. The bearish players believe rates will rise, while others think Canada's key index will sustain only a temporary setback before resuming its upward march.
""I feel there has been a constant fight recently between the bulls and the bears,"" Meisels said. He forecast Toronto would soon reverse its downward trend as investors hunted for bargains.
Of Toronto's 14 sub-indices, nine fell, led by consumer products, base metals, banks and transports. Gaining groups included conglomerates, oils and golds.
Declining stocks outnumbered advances 561 to 397, while 299 traded unchanged.
Among individual stocks, Wascana Energy Inc. topped Toronto actives after Tuesday's news that Canadian Occidental Petroleum Ltd. said it planned a C$20.50 ($14.97) a share all-cash bid for Wascana. Wascana jumped 1.10 to 20.45 on 15.8 million shares and Canadian Occidental rose 1.70 to 25.15.
Wascana was seeking a white knight after a hostile bid from Talisman Energy Inc. Talisman shares traded flat at 43.60.
Royal Bank of Canada, the nation's largest, slipped 1.05 to 57.10 in light dealings.
",26
"Toronto stocks closed weaker in active trading on Friday as U.S. Federal Reserve Chairman Alan Greenspan's cautionary comments about equities continued to weigh on investors' minds.
The Toronto Stock Exchange's 300 Composite Index lost 29.62 points to finish at 6157.40 points.
Trading volume totalled 101.36 million shares worth C$1.54 billion ($1.12 billion).
""The reverberations of Mr. Greenspan are going on,"" said portfolio consultant Ron Meisels of Montreal-based P & C Holdings. ""Some people are still worried about the fact that he may raise interest rates,"" he said.
Greenspan warned on Wednesday stock prices may be too high and said he could not rule out a hike in short-term interest rates as a pre-emptive strike against inflationary pressures.
Of Toronto's 14 sub-indices, the seven weak groups included energy, conglomerates, consumer products and utilities.
The six gaining sectors included media, transportation and real estate. Forestry products was unchanged.
Declining issues outnumbered advances 537 to 474. Another 290 stocks were unchanged.
--- HOT STOCKS ---
* Gold prospector Queenstake Resources Ltd. jumped after news that an adjacent property in Mexico owned by Francisco Gold Corp. yielded what Francisco described as ""excellent"" assay results.
Queenstake soared 1.06 to close at 3.56 on 3.8 million shares, topping Toronto's most-active list. Francisco jumped 12.50 to close at 31 on the Vancouver Stock Exchange.
* Renaissance Energy Ltd. fell 3.40 to 38.75 after key aspects of the company's 1996 financial results released late Thursday disappointed investors.
",26
"Canada's largest stock market in Toronto posted its biggest intra-day drop in almost a decade on Thursday as shares in former market darling Bre-X Minerals Ltd. were hammered by investors.
The Toronto Stock Exchange's key 300 Composite Index plummeted 191.21 points to 5931.63, the biggest loss since October 20, 1987, the day after so-called Black Monday when it lost 220.90 points.
Gold prospector Bre-X resumed trading late on Thursday, plunging C$13 to C$2.50 on eight million shares after the company said on Wednesday's its Busang gold find, once touted as the world's largest, may not be as rich as projected.
""It's pretty obvious that Bre-X blew a hole in the market,"" said John Ing president of Maison Placements Canada of Toronto. ""It's...the shock and the ripple effect of the Bre-X disaster.""
Investors unloaded their Bre-X shares after trading resumed Thursday afternoon, wiping C$3.12 billion ($2.26 million) from the company's market value. The stock was halted on Wednesday.
On Nasdaq, Bre-X shares plummeted $9-13/32 to $1-31/32 on trading of nearly 6.9 million shares.
Investors seemed unconvinced after Bre-X chief executive David Walsh declared he was confident of the company's reserve estimates for its discovery deep in Indonesia's jungle.
Bre-X's partner Freeport McMoRan Copper & Gold Inc. said on Wednesday its preliminary studies showed the site turned up ""insignificant amounts of gold."" Bre-X has estimated the Busang deposit contains 71 million ounces of gold.
During the selloff, the Toronto Stock Exchange's computer systems were halted twice, forcing the market to close half an hour early due to ""technical difficulties,"" an official said.
Worries about other junior mining firms swept the market, sparking a massive retreat in the heavyweight gold sector.
The gold group sank 906.93 points, or 8.66 percent, to close at 9559.92 -- its biggest one-day drop since September 7, 1993 when the sector lost nearly 10 percent of its value.
The carnage also extended to New York's stock market, which lost 140.11 points on the Dow Jones Industrial Average to close two percent lower at 6740.59.
Wall Street, already unsettled by fears that rising interest rates would end its bull run, was further hurt by news that Toronto was suffering its own difficulties with Bre-X, analysts said.
All of Toronto's 14 sub-indexes finished lower, led by golds, banks and base metals.
Trading was heavy with 104.2 million shares changing hands worth C$1.38 billion ($1.0 billion). Declining issues outnumbered advances 787 to 214 with 270 stocks were unchanged.
",26
"Canada's venerable Eaton's department store chain, under bankruptcy protection, said on Wednesday it placed 31 of 85 stores under review as U.S. vulture brokerages swooped down on its C$150 million (US$110 million) supplier debt.
Toronto-based T. Eaton Co. Ltd., Canada's fifth largest chain with annual sales of C$1.67 billion (US$1.22 billion), said it would renegotiate leases for the stores under review, as part of restructuring plan it filed on February 27.
Eaton's is expected to eventually close some of the stores under review as it tries to grapple with its mounting losses in Canada's competitive retail market.
The 127-year-old retailer owned by one of Canada's richest families, the Eatons, owes C$150 million (US$110 million) to suppliers and another C$160 million (US$118 million) to two of the nation's largest banks, Bank of Nova Scotia and Toronto-Dominion Bank.
Eaton's has seen up to C$40 million ($29 million) of its C$150 million ($110 million) supplier debt snapped up by U.S. vulture brokerages, the firm said on Wednesday. The brokerages are trading the debt at a discount on behalf of their clients.
The U.S. brokerages are using names on their lists of suppliers garnerned from previous bankruptcy protection filings, such as Canadian clothing retailer Dylex Ltd.. Suppliers, eager to recoup some of their claims as soon as possible, sold their debt at a range of 50 to 81 percent of the dollar, they said.
Bear Stearns' Director of Bankruptcy and Research, David Goldburg, guessed that up to C$40 million ($29 million) has been bought.
BDS Securities Senior Managing Director Scott Donahue said his firm has bought between C$13 million ($9.5 million) to C$15 million ($11 million) which in turn has been sold to clients who trade it.
Donahue said that the market has likely topped out at offers of C$0.81 on the dollar, since the Eaton family may demand its suppliers to shave something off their demands to be paid in full.
""You have to assume that if the Eaton family risked their equity stake in this venerable old chain by filing under CCAA (Companies' Creditors Arrangement Act), they're going to try to get the unsecured claimants to take some kind of haircut,"" Donahue said.
Donahue also said the Eaton family, which consists of four brothers and their offspring, will have to work very hard to cut corporate expenses which is typically easier for outsiders.
""For 85 stores, it's dramatically higher than you would expect it to be, which is not so unusual in family owned and operated companies,"" he said. ""A lot of Eatons in the trough.""
Eaton's might stretch out its time frame to reorganize and pay creditors, which would cut into the traders' profits. ""At these levels you're not allowing yourself much margin for error,"" Bright said.
But the U.S. vultures are not interested in pushing Eaton's into bankruptcy, Donahue said. ""They would prefer to be passive investors"" and eventually reap value, he said.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks closed flat in thin dealings on Tuesday after the U.S. Federal Open Market Committee announced a widely expected quarter-point interest rate hike.
The Toronto Stock Exchange's key 300 Composite Index dipped 0.49 points to end at 6143.76. Trading was light -- 87.8 million shares traded hands worth C$1.5 billion ($1.1 billion).
Market players had sold off Canadian stocks in recent weeks, reckoning on a 25-basis-point increase in U.S. short-term interest rates. ""I think that it was fully discounted,"" remarked Montreal-based portfolio consultant Ron Meisels.
""It (the rate hike) is not major news at this stage anymore,"" Meisels said. ""Everybody saw it coming and now it's here.""
Of Toronto's 14 sub-indices, 11 posted gains led by conglomerates, real estate and pipelines. The only three weak sectors were base metals, golds and consumer products.
Declining issues narrowly outnumbered advances 477 to 462 while 310 stocks traded flat.
In individual issues, Canadian Imperial Bank of Commerce lost 0.35 to close at 33.45 on 3.4 million shares, topping Toronto's most active issues.
Canada's second largest bank said on Tuesday each CIBC dividend capital receipt and secondary warrant will split on a two-for-one basis.
Gold prospector Bre-X Minerals Ltd. slipped 0.20 to 15.50 on nearly 2.5 million shares. Calgary-based Bre-X is awaiting the signing of contracts of work for two sections of the Busang gold discovery from the Indonesian government.
Alcan Aluminium Ltd. dropped 1.20 to 48.80 on more than one million shares.
Shares in forestry firm Merfin International Inc. jumped 0.55 to 6.50 after executives expressed disappointment with a C$6.00-a-share bid from Memphis, Tenn.-based Buckeye Cellulose Corp.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto's stock market ended mixed in moderate turnover on Friday as investors took a breather after this week's strong performance.
The Toronto Stock Exchange's key 300 Composite Index dipped 2.35 points to reach 5826.27. Turnover was 78 million shares worth C$1.1 billion (.
The market added nearly 150 points from its opening level of 5676.39 on Monday and rose 30 points on Thursday.
""We had a couple of good sessions here in Canada, so it's not as aggressive as it was yesterday,"" said Dunnery Best, Midland Walwyn's director of private client investing.
Of Toronto's 14 sub-indices, eight rose and six lost ground.
Base metals, transportation and forestry products led gaining groups, while weak groups included consumer products, golds and media.
Advancing issues outnumbered decliners 504 to 422, while 279 traded flat.
Among the hot stocks, Rio Algom Ltd's shares jumped 3.30 to 35.80 on more than 3.4 million shares as vague takeover rumors swirled around the copper producer.
Gold prospector Bre-X Minerals Ltd. rose 0.19 to 2.49 in active dealings as investors continued to consider the viability of its Busang gold discovery in Indonesia.
BioChem Pharma Inc. jumped 2.85 to 25.75 after Thursday's earnings report. The biotechnology firm's first- quarter profit soared to C$0.12 a share from year earlier C$0.01.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"The Toronto stock market ended mixed in heavy dealings on Friday but the key index managed to remain above the key 6,200 points level despite some profit-taking by investors.
The Toronto Stock Exchange's 300 Composite Index slipped 11.84 points to close at 6214.24. Turnover was active at 126.4 million shares worth C$1.84 billion ($1.36 billion).
MMS International analyst Katherine Beattie said Canada's largest equities market lost points after investors decide to sell some stocks and rake in profits following recent highs.
The key index gained 105 points during the week after opening at 6109.15 on Monday.
Beattie added the market may correct soon after reaching a life-time high of 6225.83 points yesterday. ""I'm wary of this market. I think we've hit the top,"" she said.
Eight of Toronto's 14 sub-indices dipped, led by consumer products, conglomerates, real estate and banks. The stronger side included media, forestry products and golds.
Advancing issues outnumbered declines 576 to 409 while 262 traded flat.
Merger news in Canada kept market players hopping. Abitibi-Price Inc., the world's largest newsprint maker, and Stone-Consolidated Corp. said on Friday that they agreed to merge in a stock swap deal. Abitibi-Price shareholders would get one share in the new company while Stone-Consolidated holders would get 1.0062 shares.
Abitibi-Price shares rose 0.05 to 22.30 while Stone-Consolidated jumped 1.35 to 22.25.
The merged company, which would have a market capitalization of C$4.1 billion ($3.1 billion), would also be the world's largest newsprint maker by a margin of almost two-to-one.
Prospector Bre-X Minerals Ltd. lost 0.70 to 23.95 after news that Freeport-McMoRan Copper and Gold Inc. might cut an unfair deal to develop its huge Busang gold deposit in Indonesia.
Bre-X's chief executive David Walsh said there was no memorandum and Bre-X will respond to the Indonesia government's request to form a deal with its Indonesian partners by the February 17 deadline.
Bre-X and Barrick Gold Corp. said late last year that they were working on a partnership to do the same. Barrick shares lost 0.70 to hit 35.95.
",26
"Toronto's stock market ended weaker in thin dealings on Monday, negatively influenced by New York's sell-off.
The Toronto Stock Exchange's key 300 Composite Index fell 28.62 points to 5797.65.
The session was quiet, with 64.8 million shares trading hands worth C$1.02 billion (US$730 million).
""They got a little nervous in New York and the investors ran for the sidelines,"" said ScotiaMcLeod's senior vice-president Fred Ketchen. ""That certainly spilled over into the Canadian market as well.""
Wall Street fell as investors reconsidered previous worries of U.S. interest rate hikes.
Since the Dow Jones Industrial Average gained about five percent last week and Toronto rose nearly 2.5 percent, investors decided to take Wall Street farther down, Ketchen said.
Eleven of Toronto's 14 sub-indexes dropped, led by consumer products, pipelines, conglomerates and retail. The firmer sectors were gold, transportation and forestry products.
In individual issues, copper miner Rio Algom Ltd. slipped 1.80 to close at 34.00 in vigorous trading, surrendering its gains from Friday's rally. The stock soared 3.30 on Friday amid vague takeover rumors.
Biotechnology firm BioChem Pharma Inc. fell 3.35 to 22.40 in light volume.
Canadian high technology issues lost ground in conjunction with their U.S. counterparts. Hummingbird Communications Ltd. lost 2.60 to 31.40 while Cognos Inc. fell 2.05 to 32.30.
Bombardier Inc. shares were up 0.10 to 27.10 in active dealings after ASA Holdings Inc. said it will buy 30 Canadair jets, with options for an additional 60 aircraft.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Frozen yogurt firm Yogen Fruz World-Wide Inc is proposing to partly satisfy its appetite for expansion by teaming up with  Subway Restaurants and PepsiCo Inc's KFC unit, analysts said on Tuesday.
By offering its products in the fast food chains, part of a recent trend called co-branding, the Toronto-based firm could expand beyond 2,920-odd outlets. It is already the world's biggest frozen yogurt franchisor, ahead of TCBY Enterprises Inc of Little Rock, Arkansas.
""It's definitely a very strong growth story,"" said First Marathon Securities analyst Perry Caicco, who has a 52-week share price target of C$6.00.
Shares on the Toronto Stock Exchange jumped 0.35 to 4.84 in brisk trading of more than 850,000 shares in late dealings. The rise was sparked by news that brokerage Gordon Capital will issue an analyst's report on the company on Wednesday.
First Marathon helped underwrite a private placement of five million special Yogen Fruz warrants at C$4 each announced in late January.
""The test they have going with the biggest potential to really kind of blow the doors off the numbers is with Subway,"" Caicco said.
The privately held submarine sandwich chain is the world's second largest restaurant franchisor after McDonald's Corp.
The company began testing with Subway in 20 U.S. locations a few weeks ago, Caicco said.
Yogen Fruz President Michael Serruya cautioned: ""It's is still very much in the initial stages.""
Yogen Fruz is also experimenting with KFC in some outlets in Panama. ""That happens to be farther advanced (than Subway),"" Caicco added.
KFC, which has had mixed results developing its own desserts for the past few years, has been watching the tests closely and has been pleased with early results, Caicco said.
Serruya said the company was exploring other arrangements: ""There are various other deals we're working on.""
Another expansion possibility is selling new flavors in U.S. grocery stores through the Destination Products International group, an offshoot of Cott Corp run by Canadian marketing guru Dave Nichol. Destination is 85 percent owned by Cott, a maker of private label products, and 15 percent by President and Chief Executive Officer Nichol.
""I think they're experimenting with a high quality hard-packed frozen yogurt product,"" Caicco said.
An analyst who declined to be identified said: ""Yogen Fruz has developed four or five flavors which they will package and sell.""
Caicco said Yogen Fruz is aiming toward a limited store test somewhere in the United States.
""We're talking with them (Destination Products),"" Serruya said.
In other developments, Serruya said, Yogen Fruz is planning to acquire one to three companies before its year-end of August 31.
Caicco said Yogen Fruz is eyeing a few complementary U.S. franchises, armed with the C$20 million raised in the private warrrant placement.
""They're actively, right now, looking at five or six deals in the U.S.,"" Caicco said. The other analyst said the prime target was in the north eastern United States.
Caicco added: ""They may also, in fact, purchase or acquire a franchise that is not specifically complementary to what they do, but might be something that they could move out into their very strong sort of international franchise network.
Yogen Fruz, which is running out of manufacturing capacity, is considering buying a Pennsylvania plant in the next one or two months, Caicco added.
Serruya would only say that it would be on the U.S. East Coast.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Gendis Inc will post ""extensive"" losses in fiscal 1998 after its Greenberg Stores Ltd unit was forced into bankruptcy with almost 1,500 layoffs, President Allan MacKenzie said on Tuesday.
Asked in an interview what impact Gendis would feel for the year ending in late January 1998, MacKenzie told Reuters: ""Extensive. Multi-millions."" He declined to elaborate.
MacKenzie said that the losses from the bankruptcy would be reported separately from ongoing operating results.
Winnipeg-based Gendis said on Tuesday that Greenberg, one of its two wholly owned retail arms, declared bankruptcy and sold 89 of its 169 stores to the other unit SAAN Stores Ltd, resulting in the closing of 80 stores and about 1,500 layoffs.
MacKenzie added that Gendis would take the largest loss among Greenberg's creditors after acting as its chief banker.
Greenberg's Montreal headquarters would be shuttered and 60 of its 322 staff members offered jobs at SAAN's head office in Winnipeg, MacKenzie said.
Deacon Capital analyst Bill Chisholm said Gendis would need to write off Greenberg's assets before recouping some of the losses. ""It'll be a big charge for the current year, probably around C$65 million,"" Chisholm said.
In its fiscal 1997 third quarter ended October 26, Gendis earned C$1.7 million or C$0.10 a share versus year earlier C$847,000 or C$$0.05 a share.
Greenberg stores, scattered across Quebec and Canada's Atlantic provinces, lost ground after Wal-Mart Stores Inc came to Canada in 1994.
""We, I don't think there's any doubt, got caught in what I would call the crossfire,"" MacKenzie said.
Chisholm added SAAN was a largely profitable operation and would ""hopefully"" remain in the black.
Gendis shares slipped 0.30 to 10.70 in light turnover on the Toronto Stock Exchange today.
((Reuters Toronto Bureau 416-941-8100))
",26
"Corel Corp is poised to scoop up more market share from huge U.S. rival Microsoft Corp with up to five deals to put its office software on new computers, Chief Executive Michael Cowpland said.
Cowpland told Reuters in an interview on Monday that the deals, which could mean yearly sales of about two million software units, would be announced in the next two to three months.
He said ""that will give us about seven million units a year"" when added to last summer's agreement with Packard Bell NEC Inc. Packard Bell NEC is a unit of NEC Corp.
Ottawa-based Corel took on Microsoft, which is about 30 times its size with yearly revenues of almost $9 billion, when it acquired office suite software company WordPerfect from Novell Inc in January 1996. Corel posted 1996 revenues of $334 million for the year ended November 30.
Cowpland added that Corel was gaining market share and now had up to 20 to 25 percent of total office suite sales.
Another salvo was the launch of more specialized software suites, with one aimed at the legal profession, to join products for engineers and doctors, Cowpland said.
He said Corel would unveil the legal software this month, priced at twice the $200 regular office suite. It began shipping the medical product two weeks ago.
Corel Chief Financial Officer Chuck Norris said the company's results for the first quarter ended in late February would be in the range of analysts' estimates. Forecasts ranged from nil to a loss of $0.11 a share on revenues of $85 million to $102 million.
Corel's fourth-quarter earnings rose to $6.5 million or $0.09 a share from a year earlier loss of $956,000 or $0.02 a share. For full-year 1996, Corel lost $2,750,000 or $0.04 a share.
((lydia.zajc@reuters.com Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks closed softer in moderate trading on Wednesday, dragged lower by fears of Canadian interest rate hikes a day after the U.S. Federal Reserve increased short-term interest rates.
The Toronto Stock Exchange's key 300 Composite Index slipped 20.92 points to 6122.84. Trading was moderate at 93.6 million shares worth C$1.3 billion ($949 million).
""We react usually what happens to the U.S. maybe one day after,"" said Montreal-based portfolio consultant Ron Meisels. U.S. markets dipped yesterday after a widely expected quarter-point rise in the U.S. Fed Funds rate.
""People are worried that there will be a similar raising of rates in Canada,"" Meisels said.
Of Toronto's 14 sub-indexes, 10 tumbled, led by the interest-sensitive banks and pipelines along with transportation and consumer products.
The strong groups were real estate, golds, utilities and industrial products.
Declining issues beat out advances almost two to one -- 639 to 348 -- while 269 traded flat.
In other news, Toronto market watchers were rocked by news that Bre-X Minerals Ltd., with one of the hottest gold stories of recent years, may have ""insignificant amounts of gold"" in the Busang discovery in Indonesia.
Trading in Calgary, Alberta-based Bre-X was halted all day on Wednesday.
Bre-X's partner, Freeport-McMoRan Copper & Gold Inc., based in New Orleans, said tests so far showed ""insignificant"" gold in what has been called the biggest gold find this century.
Bre-X Chief Executive David Walsh said in a statement that ""there appears to be a strong possibility that the potential gold resources...have been overstated because of invalid samples and assaying of those samples.""
A Toronto Stock Exchange official said the exchange did not know when Bre-X, part of Toronto's key 300 and 100 Indexes, would resume trading. It closed at 15.50 on Tuesday.
In individual issues, business applications software Cognos Inc. jumped 3.75 to 37.25, boosted by strength in U.S. high-technology issues, analysts said.
""It was a very strong day today for techs,"" said analyst James Moore at brokerage Alex Brown & Sons. ""Cognos is one of the quality names in the group.""
""The stock has been oversold in the last couple of months by momentum investors,"" Moore added.
Tee-Comm Electronics Inc. lost more than 35 percent of its value, falling 1.75 to 3.20 in heavy trading. The company said it continued to proceed with plans to raise money to grow its subscriber base for its digital satellite service.
",26
"Canadian grocery chain Loblaw Cos Ltd is set to see earnings per share soar by 50 percent by 2000 as sales grow, President Richard Currie said on Friday.
""Earnings per share will jump about 50 percent over the next three years,"" Currie told the annual meeting. First- quarter profit rose to C$0.15 a share for the period ended March 22 from year earlier C$0.12.
Currie also told shareholders that 1997 earnings per share would rise to C$0.85 to C$0.89, the range of predictions by analysts. ""My expectations are (that) the analysts are about correct,"" he said.
Last year, Loblaw, which is 70 percent-owned by bakery group George Weston Ltd, earned C$0.72 a share or C$173.7 million on sales of C$9.85 billion.
Currie forecast 1997 sales would expand by 10 percent. ""Sales have been very solid, up seven percent last year, and with this year being a 53-week year, it might hit to 10 percent,"" Currie added. ""That would represent a stellar year.""
Loblaw ended its previous fiscal year in December 28 but because it reports in 12-week increments, it must add a few days this year.
""The earnings have a potential to increase more if we can get our costs down to where they could be,"" Currie said. In 1996, Loblaw streamlined warehousing and distribution systems.
Loblaw, which owns retail and wholesale stores including Loblaws, Valu-Mart, Extra Foods and Lucky Dollar Foods, has seen sales grow steadily over the past few years as it expanded in Atlantic Canada and other regions.
The grocer plans to unveil its first Quebec stores, outside of its outlets in the Ottawa/Hull region, in late 1997 or early 1998.
Loblaw has also benefited from the strike of unionized workers at 73 Safeway Inc stores in Alberta, which began on March 26, Currie added. Loblaw sales have jumped 30 percent in the province.
Safeway is based in Pleasanton, California.
Currie said Loblaw would have C$450 million in capital expenditures in 1997, up from about C$350 million in 1996. He said Loblaw planned to open or renovate 64 outlets.
Loblaw shares edged up 0.05 to 17.30 on the Toronto Stock Exchange today, below its 52-week high of 17.60 and well above its year low of 10.40.
George Weston shares rose 0.50 to 78 in Toronto.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto's key stock index ended higher in brisk trading on Thursday, extending Wednesday's rally despite being weighed down by losses on Wall Street.
The TSE 300 Composite Index rose 29.80 points to close at 5828.62, outperforming the Dow Jones Industrial Average which slumped 21.27 points to finish at 6658.60.
Toronto added to Wednesday's 55-point rally while investors took profits in New York after the Dow's 92-point gains, said MMS International analyst Katherine Beattie.
""That shows that the markets are very fragile,"" Beattie said. ""They (investors) want to take advantage of any strength to sell,"" she said.
Toronto was also buoyed by its heavyweight gold group which jumped nearly 2.2 percent, aided by firmer COMEX gold prices. The key June contract rose $1.00 to $344.30.
Ten of Toronto's 14 sub-indices posted gains, led by golds, transportation, forestry products and consumer products.
The weak side included conglomerates, base metals and utilities.
Trading was heavy at 100 million shares worth C$1.54 billion ($1.1 billion).
Advancing stocks outnumbered declines 556 to 395, with 276 issues flat.
Among hot stocks, Bre-X Minerals Ltd. rose 0.13 to 2.30 on 5.0 million shares as investors continued to consider the viability of its Busang gold discovery in Indonesia.
Kenting Energy Services Inc. rose 0.25 to 9.05 after Precision Drilling Corp. amended its takeover offer
Bakery and foodstuffs maker George Weston Ltd. jumped 4.50 to close at 74.50, the TSE's top gainer.
",26
"Venerable Canadian retailer T. Eaton Co. Ltd. filed on Thursday for court protection from its creditors and said it would close some of its department stores as it tried to restructure its operations.
""We will have to vacate a number of stores over time. But it is too early to predict the future of specific stores or any other measures that may be taken,"" Eaton's President George Eaton said.
The 127-year-old Toronto-based firm, which has estimated annual sales of C$1.25 billion ($912 million), said it arranged financing of C$555 million ($405 million) from an unspecified major financial institution.
The chain, which is owned by the Eatons, one of Canada's richest families, said it filed for a court order to continue the operations of its retailing division, while negotiating a restructuring plan.
Canadian department stores have lost market share in recent years due to a weak economy and the invasion of U.S. discounter Wal-Mart Stores Inc. in 1994.
Eaton's has about 90 outlets across Canada.
""About half of the stores will go...I think it'll be around about 40,"" predicted analyst John Winter of John Winter Associates Ltd in Toronto.
""As in most bankruptcy reorganizations, they're just going to close a large number of stores they shouldn't have opened in the first place and that will stanch the red ink.""
Eaton's parent, Eaton Group of Companies, sold some of its real estate holdings in recent years, including properties worth about C$300 million ($219 million) a year ago.
The company has long been reluctant to discuss its operations, but rumors emerged recently about a possible takeover by a U.S. chain, one analyst said.
J.C. Penney Co. Inc. and Dayton Hudson Corp. topped the list of rumored suitors, while some Canadian discount retailers were seen possibly acquiring some of Eaton's unwanted locations.
Analyst Winter voiced doubt that anyone would want to purchase Eaton's weaker stores, saying: ""They're such dogs that once they (the buyers) looked at the numbers they would retch.""
Some Eaton's customers were shocked by the news.
""It's unbelievable,"" said one Eaton's patron at the court where the application for creditor protection was filed.
",26
"The Canadian unit of Wal-Mart Stores Inc bowed to Canadian pressure on Thursday and said it would resume sales of Cuban-made pajamas after consulting with legal advisers and government officials.
On March 4, Canadian Trade Minister Art Eggleton said the government was investigating whether Wal-Mart Canada Inc broke any laws by removing the pajamas from its 136 stores on February 27.
Wal-Mart Canada is wholly owned by the world's largest retailer, based in Bentonville, Arkansas.
By refusing to sell the ""Puritan"" brand of men's cotton pajamas, Wal-Mart Canada could have violated Canada's Foreign Extraterritorial Measures Act.
The act penalizes companies in Canada for adhering to foreign legislation such as the U.S. Helms-Burton law that punishes firms for doing business with Communist-ruled Cuba.
Nichole Bourget, spokeswoman for Eggleton, applauded the move. ""I think they made the right decision after realizing that ... what was important was that Canadian companies abide by Canadian laws, and I think that Wal-Mart decided to respect that principle,"" Bourget said.
The maximum penalty for contravening the Foreign Extraterritorial Measures Act is C$1.5 million (US$1.1 million), Bourget said.
Canada and Europe have protested bitterly against the Helms-Burton legislation, which allows Americans to file lawsuits in U.S. courts against foreigners deemed to have benefited from property confiscated by the Cuban government since the Communist revolution in 1959.
Wal-Mart Canada, which said it pulled the pajamas because of a customer's complaint at a Winnipeg, Manitoba store, said its reversal ""reflects our commitment to meet the expectations of the Canadian marketplace.""
Last weekend a group of 30 Winnipeg citizens gathered outside a store to protest the move to ban the pajamas by singing ""O Canada"", waving the Canadian flag and handing out leaflets.
Each Wal-Mart store had carried about 100 pairs of the C$12.96 (US$9.53) pajamas, one of 80,000 items sold by the Canadian chain.
((Reuters Toronto Bureau (416) 941-8100))
",26
"Canada's Philip Environmental Inc. said on Thursday it planned to acquire Houston-based Allwaste Inc. and Serv-Tech Inc. in two deals worth $612 million that would create North America's biggest recycling firm.
""We are naturally very, very excited about this opportunity,"" Philip Chief Executive Allen Fracassi told a media conference call. ""It makes great economic sense and the synergies are just spectacular.""
Hamilton, Ontario-based Philip said that the deals when completed in June would create North America's largest metals recycling and industrial services company, with annual revenues topping $1.6 billion, 8,000 employees and 215 operating locations in North America, Europe and South America.
Philip, which has recently made a spate of acquisitions to expand beyond the metals recycling business, said it would swap 0.611 of a Philip share for each Allwaste share for total consideration of $540 million.
The deal included the assumption of about $133 million in debt from Allwaste, which provides industrial services.
In a separate transaction, Philip agreed to exchange 0.403 of a Philip share for each Serv-Tech share in a deal valued at $72 million, including the assumption of $21 million of debt.
Industrial and environmental services firm Serv-Tech generated more than $140 million in revenues in 1996 and Philip said that its earnings would be boosted by the Serv-Tech deal.
Fracassi told reporters that Philip was not done with acquisitions.
""Our acquisition program will continue. We are in an very very quickly consolidating, fairly new industrial sector, so we'll continue to seek and react to opportunities,"" he said.
Analyst Peter von Ond at Canadian brokerage Midland Walwyn called the deals a good fit.
Von Ond said he revised his 1998 earnings estimate for Philip to C$1.70 ($1.25) a share from C$1.60 ($1.17) after the news.
His 1997 forecast was unchanged at C$1.40 ($1.03) a share since the deals do not close until late June and more Philips shares will be issued, offsetting earnings growth.
Philip earned C71 cents (52 cents) a share in 1996.
Shares of Philip were down C50 cents to C$22 on the Toronto Stock Exchange on Thursday and by 25 cents to $16.125 in New York.
AllWaste rose $2.50 to $9.25 on the New York Stock Exchange, while Serv-Tech rose 81.25 cents to $5.875 on Nasdaq.
",26
"Toronto stocks closed weaker on Wednesday, hit by the wave of selling after U.S. Federal Reserve Chairman Alan Greenspan questioned whether equity prices could sustain their strong two-year growth spurt.
""It's bearish for stocks,"" said MMS International analyst Katherine Beattie.
The Toronto Stock Exchange's 300 Composite Index recouped some of its early losses, but still closed down 46.35 points at 6201.43.
Greenspan also expressed concern about the risks of inflation and warned the Fed may need to hike interest rates.
The Dow Jones Industrial Average sank about 120 points during the session, but finished the day off 55.03 points at 6983.18.
Greenspan sparked a similar sell off in December after he remarked on the ""irrational exuberance"" of the stock market, but North American markets later recovered.
""We're going to continue to get this kind of sell off and bargain hunting,"" Beattie said.
Wednesday's trading was brisk at 104.9 million shares worth C$1.88 billion ($1.37 billion).
All of Toronto's 14 sub-indices tumbled, led by golds, transportation, consumer products and base metals.
Declining issues outnumbered advances 595 to 408 while another 287 stocks traded flat.
	  --- HOT STOCKS ---
* Bank stocks lost ground after strong gains on Tuesday. Bank of Nova Scotia fell 0.30 to close at 52.60 on nearly 2.3 million shares, while Bank of Montreal lost 0.45 to finish at 49.05 on 1.4 million shares.
* Canadian Natural Resources Ltd. jumped 1.05 to 34 in heavy trading after brokerage Goldman Sachs started coverage and added the energy firm to its recommended list.
* Funeral chain Loewen Group Inc. dropped 2.15 to 44.65 on more than a million shares.
",26
"The Toronto stock market edged higher to reach the year's ninth record close in heavy trading on Tuesday, aided by the continued flow of money into tax-sheltered pension funds.
The Toronto Stock Exchange's key Composite Index rose 20.62 points to end at 6238.22, which was also a new intraday high.
Turnover was unusually heavy with 138.47 million shares traded worth C$2.52 billion, the TSE's second highest value ever.
""We're in the RRSP (Registered Retirement Savings Plan) season in Canada,"" said Ira Katzin, investment advisor at RBC Dominion Securities. Canadians are scrambling to sock away savings in tax-sheltered pension plans before the March 1 deadline.
After market close, Canada's Finance Minister Paul Martin presented his 1997/98 budget after market close with few new surprises for equities, said Fred Ketchen, ScotiaMcLeod's senior vice-president.
Martin announced an extension for the special tax on banks -- a surcharge of 12 percent of capital tax -- until October 31, 1998.
Of Toronto's 14 sub-indices, only four slipped: real estate, pipelines, base metals and oils. The gaining groups were led by golds, media, retail and banks.
Advances outnumbered declines 539 to 469 while another 275 traded unchanged.
In individual issues, Bre-X Minerals Ltd. lost 2.20 to 20.80 on almost 10 million shares while Barrick Gold Corp. shares rose 1.45 to 35.50 on 1.5 million shares.
Uncertainty still surrounds gold prospector Bre-X even though it recently cut a deal with U.S.-based Freeport McMoRan Copper and Gold Inc. to develop the huge Busang gold discovery in Indonesia. Barrick was shut out of a potential partnership.
Under the deal, Bre-X's stake will drop to 45 percent from 90 percent. Freeport will own 15 percent and Indonesian interests will grab 40 percent.
Abitibi-Price Inc. rose 0.45 to 23.55 after being upgraded to market outperform from market perform by brokerage Goldman Sachs.
The forestry products firm agreed to merge with Stone-Consolidated Corp. last week, creating the world's largest newsprint maker on an almost two-to-one basis. Stone shares rose 0.25 to 23.60 in light trading.
",26
"Toronto stocks finished one percent higher for a second consecutive session on Wednesday, fueled by investor enthusiasm following strong corporate earnings.
The Toronto Stock Exchange's key 300 Index jumped 73.07 points, or 1.2 percent, to close at 5976.63 after adding 68 points on Tuesday.
""It's being continually spurred on by what we're seeing come out of the cash register. Earnings really are doing very, very well on balance,"" said ScotiaMcLeod senior vice-president Fred Ketchen.
Trading was brisk at 95.3 million shares worth C$1.5 billion (US$1.07 billion).
""New York vastly outperformed us yesterday, so this is turnabout fair play,"" Ketchen said. The Dow Jones Industrial Average rallied 179 points to hit 6962 on Tuesday.
Earnings euphoria swept aside earlier inflation fears after the U.S. government released unexpectedly strong gross domestic product figures. GDP rose 5.6 percent on an annualized basis in the first quarter, compared to economists' forecasts of 4.1 percent.
Ketchen said that investors are awaiting Friday's U.S. employment numbers for more direction on inflation and whether the U.S. Federal Reserve will have to hike short-term interest rates.
All of Toronto's 14 sub-indices gained ground, led by conlomerates, consumer products, transportation and base metals.
Gaining issues beat decliners 593 to 366, while 301 traded flat.
In individual issues, Shell Canada Ltd. soared 3.90 to 57.40. The energy company said first quarter earnings rose to C$1.35 from a year-earlier C$0.87 and that it plans to buy back 14 percent of its Class A common shares.    Conglomerate Brascan
Ltd. jumped 3.15 to 33.90 in heavy trading after news that it was set to merge with financial management firm Edper Group Ltd.
Calgary-based Bre-X Minerals Ltd. topped Toronto's most active stocks, dropping 0.32 to 3.48. The gold prospector said on Wednesday that its partner, Freeport-McMoRan Copper and Gold Inc., extended its due diligence review of the controversial Busang gold project in Indonesia to June 30.
",26
"Toronto's key stock index soared to close more than one percent higher on Monday but the broader market ended mixed as gold issues slipped on weaker bullion prices.
The Toronto Stock Exchange's key 300 Composite Index jumped 69.47 points, or 1.1 percent, to 6144.25.
Trading was moderately heavy  at 89.8 million shares worth C$1.72 billion ($1.25 billion).
Despite broad gains, declining issues still outnumbered advances 488 to 465 while 286 stocks were unchanged.
""Quite a blue chip rally,"" remarked portfolio manager Josef Schachter, head of Schachter Asset Management.
Schachter said investors concluded Canada's largest equities market had fallen enough in recent weeks to account for a 25-basis-point hike in U.S. short-term interest rates.
The U.S. Federal Reserve is widely expected to raise rates at its Federal Open Market Committee meeting on Tuesday.
Investors are saying ""okay, we can get a quarter point, we can live on that,"" Schachter said.
Of Toronto's 14 sub-indices, 12 posted gains led by financial services, pipelines, consumer products and media.
The only two weak sectors were gold and real estate.
Bullion prices ended weaker on Monday with Comex April gold down US$2.60 at US$350.40 an ounce.
Hot stocks included Bre-X Minerals Ltd. which led heavy traders and closed up 0.50 at 15.70 on volume of six million shares.
The Calgary-based gold prospector on Monday defended the accuracy of assay results and resource calculations for the Busang gold find in Indonesia.
Doubts about the size of the discovery pushed Bre-X shares to a 52-week low of 14.25 on Friday.
In other Bre-X news, U.S. brokerage Lehman Brothers cut its rating on the stock to neutral from outperform.
Another active issue was forestry firm Avenor Inc., adding 1.45 to close at 24 on 567,000 shares.
Avenor said on Monday that it will refuse a merger proposal from Domtar Inc. and will instead focus on a merger with Repap Enterprises Inc.
But the Avenor/Repap deal was put in doubt on Monday after Canada's largest pension fund, Caisse de depot et placement, gave the deal a thumbs down. The Caisse holds a 10 percent stake in Avenor.
Repap fell 0.23 to close at 2.19 on 945,000 shares, while Domtar lost 0.15 to close at 11.45 on 136,000 shares.
",26
"Toronto's key stock index ended softer in light trading on Monday, depressed by weak gold shares and fears of a Canadian interest rate hike.
The Toronto Stock Exchange's 300 Composite Index eased 4.31 points to close at 5679.33, down more than 10 percent since its life-time high of 6348.02 on March 11.
Turnover was thin with 63.6 million shares changing hands worth C$965.6 million ($689.7 million).
The TSE was restrained on Monday by a weak Canadian dollar which prompted concerns that the Bank of Canada may have to raise Canadian rates to prop up the currency, said Dunnery Best, Midland Walwyn's director of private client investing.
Canada's dollar closed at C$1.3994 (US$0.7145) on Monday after the central bank intervened to support the sagging unit.
In New York, the Dow Jones Industrial Average recouped some of Friday's 148-point loss, rising 60.21 points to close at 6451.90 on Monday.
Fears of rising U.S. interest rates, which dragged North American markets lower last week, appear to have subsided, Best said.
""Has it run its course? I would say largely,"" he said.
Other stock analysts suggested the threat of higher U.S. rates is not over and they predicted the correction would resume.
Of Toronto's 14 sub-indices, nine weak groups were led by gold, consumer products and real estate. Gainers included media, oils and base metals.
Declining stocks outnumbered advances 581 to 351 with 290 unchanged.
Hot stocks included Ballard Power Systems Inc. which jumped 3.25 to 39.50 after German industrial group Daimler-Benz AG said it bought a 25 percent stake in Ballard.
The two companies plan to jointly develop fuel cells for electric vehicles.
Among gold stocks, Bre-X Minerals Ltd. slipped 0.05 to 2.45 on 5.6 million shares, the heaviest trader on the TSE.
Golden Rule Resources Ltd. fell 0.65 to 5.15 in heavy dealings.
",26
"- Chip designer Mosaid Technologies Inc will see earnings bounce back in fiscal 1998 as the chip market re-ignites, Chief Executive George Cwynar said on Wednesday.
Cwynar told Reuters in an interview that he saw profit and revenue growth accelerating to the 20 percent range in fiscal 1998 from about two percent in fiscal 1997 ending April 30.
""This calendar year we're in, is going to be a slow recovery year,"" he said.
Mosaid last week reported that earnings per share for the third quarter ended January 31 fell to C$0.06 from year earlier C$0.32 due to the collapse in memory chip prices in the past year and delayed orders for chip testing systems.     Cwynar
said he expected the memory chip market to come back in 1998 as personal computer users snapped up the backlog of cheap chips and increased demand for Mosaid's bigger, faster designs.
Analysts predicted that Mosaid, based in Carp, a town about 35 km (21.75 miles) west of Ottawa, would recover from its recent slump, aided by ACCELERIX, a single component that would combine the functions of memory and logic.
Mosaid spokeswoman Sue Rutherford said that up to five analysts planned to start coverage of Mosaid, which posted revenues of C$37 million in fiscal 1996.
One analyst who declined to be identified said: ""All the ingredients are there for a big comeback.""
Mosaid increased its work in memory/logic design after acquiring a large stake in ACCELERIX Inc in October 1996. Cywnar said the ACCELERIX design could increase speed and cut space demands, making it ideal for portable products that are rapidly capturing buyers' interest.
""We expect to have the design finished this spring sometime,"" said Cwynar, adding that Mosaid anticipated ""a production-ready design by the end of this calendar year.""
Mosaid shares were down 0.35 to 14.25 in late trading on the Toronto Stock Exchange on Wednesday.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks ended weaker on Thursday, extending Wednesday's sharp losses despite a strong rally in heavyweight gold issues.
The Toronto Stock Exchange's 300 Composite Index lost 13.97 points to finish at 6187.46. The key index fell 46 points on Wednesday.
""It would have been a lot worse if not for the gain in gold,"" said International MMS analyst Katherine Beattie.
Toronto's gold and precious metals group soared 2.85 percent after bullion prices rose in both London and New York metal markets.
Trading was brisk with 114.9 million shares changing hands worth C$2.04 billion ($1.5 billion).
North American markets on Thursday continued to digest the negative comments on stock prices made by U.S. Federal Reserve Chairman Alan Greenspan on Wednesday.
Greenspan cautioned that the stock markets might be overvalued and the risk of rising inflation could prompt a tightening in short-term interest rates.
""I think people are taking Greenspan's comments seriously,"" Beattie said.
Of Toronto's 14 sub-indices, 11 groups lost ground led by media, utilities, conglomerates and transportation. The three strong sectors were golds, base metals and real estate.
Declining issues outnumbered advances 520 to 472. Another 289 traded flat.
Telecommunications conglomerate BCE Inc. fell 2.30 to 66.90 on 4.3 million shares, topping Toronto's most active list.
BCE, Canada's largest publicly-traded company, was beaten up by investors after unit Bell Canada said its 1997 profits will fall short of preliminary targets set in March 1995.
Bell Canada said late Wednesday that net income will reach C$850 million ($620 million), down from a previous forecast of C$950 million ($695 million). Moody's Investors Service said on Thursday it may downgrade the ratings of Bell Canada and its parent.
Among rallying gold stocks, Barrick Gold Corp. rose 1.65 to close at 38.35 on 1.7 million shares.
Placer Dome Inc. gained 0.80 to 29.65 on 2.5 million shares, while Bre-X Minerals Ltd. added 0.15 to 19.85 on 2.9 million shares.
",26
"Toronto's key stock index ended flat after a quiet session on Monday, kept in check by weakness in resource and bank stocks despite a rally on Wall Street.
The Toronto Stock Exchange's 300 Composite Index edged up 0.30 points to close at 5835.61. Turnover was moderate at 76.14 million shares worth C$1.05 billion (US$750 million).
""New York doesn't have quite the resources weight to pull them south like Toronto does,"" said Dunnery Best, Midland Walwyn's director of private client investing.
""New York is still being driven ahead by technologies and the wave of good earnings,"" he said.
Canada's largest stock market was also hurt by concern over a weakening currency, Best said.
The dollar ended softer on Monday at C$1.4000 (US$0.7140) from Friday's close of C$1.3970 (US$0.7158) on fears that the Bank of Canada may have to raise short-term interest rates to defend the currency during the Canadian election campaign.
Foreign investors were worried that political rhetoric over Quebec's separatist movement may heat up over the next few weeks, Best said.
Bank stocks, which have attracted foreign investors in recent months, lost ground on Monday.
Of Toronto's 14 sub-indices, six fell led by financial services, transportation, oils, and pipelines. Gaining groups included conglomerates, real estate and media.
Declining stocks outpaced advancing issues 491 to 446. Another 283 stocks traded flat.
Among hot stocks, gold prospector Bre-X Minerals Ltd. was the most active issue, adding 0.40 to 3.65 on nearly 10 million shares.
Investors are debating the future of Bre-X's Busang gold deposit in Indonesia ahead of this week's audit report by Strathcona Mineral Services Ltd.
Toronto-Dominion Bank, Canada's fifth largest bank, lost 0.25 to 38.60 in active dealings.
Cambridge Shopping Centres Ltd. jumped 0.80 to 10.50 after launching a friendly C$375 million (US$267.9 million) takeover offer for Markborough Properties Inc. in a bid to increase its ownership of Canadian malls.
Markborough shares sliped 0.07 to 0.47.
Hudson's Bay Co., Canada's largest department store retailer, jumped 0.90 to 27.40 after Monday's news that it appointed former Wal-Mart Stores Inc. executive William Fields to replace retiring chief executive officer and president George Kosich.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Telecommunications firm Mitel Corp sees growth in the computer telephony integration business lagging expectations, Chief Executive John Millard told Reuters on Friday.
""It's certainly come more slowly than we anticipated and we see projections of the volume of business in this area being pushed back, but I can tell you that there's tremendous interest in the networks,"" Millard said in a phone interview.
Ottawa-based Mitel has stumbled in recent months because its computer telephony integration (CTI) unit, which makes lines and equipment to combine telephone and data into one network, did not achieve forecast results.
Mitel warned investors in late February that it expected fourth-quarter earnings to fall to C$0.10 a share in the period ending March 31 from year earlier C$0.14 a share.
It also took a C$13 million restructuring charge due to increased operating costs and additional price cuts by rivals.
""Before we see what you might call explosive growth in this area, it might be another year,"" Millard  said of CTI.
He said Mitel planned to release a slew of CTI and PBX products later this year, which would boost fiscal 1998 earnings per share from the estimated C$0.44 in fiscal 1997.
Mitel also makes public branch exchange (PBX) telephone switches and semiconductors.
Shares in Mitel closed up 0.20 to 7.45 in Toronto on Friday and were unchanged at 5-3/8 in New York.
((lydia.zajc@reuters.com, Reuters Toronto Bureau (416) 941-8109))
",26
"Toronto stocks ended mixed in light dealings on Monday with weak gold and forestry stocks offsetting strong bank issues and a rally in New York.
The Toronto Stock Exchange's 300 Composite Index rose 15.57 points to close at 6242.42,  short of its life-time high of 6260.73 reached on February 19.
Declining issues inched ahead of advances 506 to 497, while 277 stocks were unchanged.
Toronto's volume was thin at 95.4 million shares worth C$1.5 billion ($1.1 billion).
New York's Dow Jones Industrial Average jumped 76.58 points to close at 7008.20, aided by strength in high-technology stocks.
Toronto's 10 gaining sectors were led by the financial services which rose 48 points.
""It was a blue-chip rally in Canada,"" said Calgary-based portfolio manager Josef Schachter.
The nation's five biggest banks are scheduled to begin reporting first-quarter earnings this week with Bank of Nova Scotia and Bank of Montreal on Tuesday.
Bank of Nova Scotia rose 0.65 to close at 51.65, while Bank of Montreal gained 0.50 to finish at 48.40.
Other strong sub-indices included consumer products, pipelines and conglomerates. The four weak groups were gold and precious metals, forestry products, retail and transportation.
Bre-X Minerals Ltd. continued its recent slide, dropping 1.40 to close at 19.80 on almost 3.7 million shares. Analysts attributed part of the decline to Placer Dome Inc.'s comment on Friday that it was no longer interested in bidding for Bre-X after its deal with U.S.-based Freeport-McMoRan Copper and Gold Inc. to develop the rich Busang gold deposit.
Forest products heavyweight MacMillan Bloedel Ltd. topped heavy traders, closing down 0.25 at 19.05 on 7.2 million shares. The stock fell after brokerage Gordon Capital Corp. crossed a seven-million share block earlier in the session.
Telecommunications firm Mitel Corp. dropped 1.40 to 8.45 after announcing that its fourth quarter performance would disappoint analysts.
The company said it expected to take a  C$13 million ($9.6 million) re-tax restructuring charge in the fourth quarter to cut operating expenses at its business communications systems unit.
",26
"A Wal-Mart store in Canada is set to become the first-ever unionized outlet for the world's largest retailer.
The Ontario Labour Relations Board decided late on Tuesday to certify the retail/wholesale division of the United Steelworkers of America at the store in Windsor, Ontario, across the U.S.-Canada border from Detroit.
The ruling came despite a May 10, 1996 vote by Windsor store employees rejecting a union drive by 151-43.
But the tribunal, which administers labour laws in Canada's most populous province, ruled that Wal-Mart executives used unfair labour practices by refusing to tell employees if they would shut the store if it became unionized.
Van Horne said the board rejected a second vote at the store because it felt workers would still be reluctant to vote freely because of a perceived threat to their jobs or benefits.
Bentonville, Ark.-based Wal-Mart Stores Inc., which has 136 stores in Canada and more than 3,000 worldwide, has defeated every drive to unionize its stores since its founding in 1962.
Wal-Mart came to Canada in 1994 and is now the country's biggest discount retail chain.
United Steelworkers representative Pat Van Horne said the board's decision could pave the way for more unionized Wal-Marts in Canada. ""Obviously this is a good precedent for us,"" Van Horne said.
But Wal-Mart Canada spokesman Ed Gould disagreed, saying: ""Many people will take a look at the process by which the expressed will of individuals can be denied and think twice"" about unions.
Van Horne said the next step was to negotiate a contract with Wal-Mart.
""The proving ground for the union will be our ability to get a collective agreement that satisfies the employees,"" Van Horne said.
Wal-Mart's Gould said the company might appeal the ruling.
""We're going to review the reasons and then we're going to consider the next steps and that could include obviously an appeal,"" Gould said.
Gould ruled out abandoning the Windsor outlet. ""We are not in business to close stores.""
Windsor employees earn about C$8.30 ($6.14) an hour plus profit-sharing and performance-based bonuses, Gould said.
",26
"Canadian department store retailers, rocked by the invasion of U.S. giant Wal-Mart, now face the specter of another U.S. buyout after Thursday's bankruptcy protection filing by the venerable Eaton's chain.
Although some analysts bet that Eaton's would shed up to half of its 90-odd stores, others speculated that a U.S. retailer might acquire all or part of the 127-year-old chain owned by one of Canada's richest families, the Eatons.
Toronto-based T. Eaton Co. Ltd., Canada's fifth largest department store chain with annual sales of C$1.67 billion ($1.22 billion), received court permission on Thursday to continue the operations of its retailing unit while negotiating a restructuring plan.
Eaton's arranged financing of C$555 million ($405 million) from General Electric Capital Canada Inc..
Canadian department stores have bled market share in recent years due to a weak economy and the 1994 arrival of Bentonville, Ark.-based discounter Wal-Mart Stores Inc.
Wal-Mart has quickly seized the lead in Canadian retailing market share, with 43 percent. Amid this onslaught, several Canadian retailers have declared bankruptcy.
One analyst, who declined to be identified, said publicly owned Canadian retailers such as Hudson's Bay Co. and Sears Canada Inc. would be especially hard hit if a second major U.S. retailer emerged in Canada.
""If a U.S. guy doesn't come in, it'll be positive for Hudson's and Sears,"" he said. If not, ""that's the worst of all worlds...it makes it much tougher."" Sears Canada is 61 percent-owned by Chicago-based Sears, Roebuck and Co..
Another analyst estimated a revamped Eaton's would be worth about C$275 million ($201 million).
The list of rumored suitors includes J.C. Penney Co. Inc., Dayton Hudson Corp., Dillard Department Stores Inc., Federated Department Stores Inc. and Nordstrom Inc..
Duncan Muir, spokesman for Plano, Texas-based J.C. Penney, declined to comment specifically on Eaton's, saying: ""We from time to time look at Canada, like other countries,"" he said.
Minneapolis-based Dayton Hudson spokeswoman Susan Eich said, ""We really don't have any plans to expand internationally. We think we have more than enough opportunities in the U.S.""
Seattle-based Nordstrom spokeswoman Amy Jones said, ""We currently have nothing on our schedule for Canada.""
Some Canadian discount retailers were also seen possibly acquiring some of Eaton's unwanted locations, analysts said.
Eaton's President George Eaton, whose great-grandfather Timothy opened Eaton's first store in Toronto in 1869, did not disclose how many stores would be closed or how many of its 15,000 employees would be let go.
Analysts have estimated 25 to 40 stores in some of Canada's smaller towns would be shuttered.
In court documents, Eaton's said it lost an estimated C$151 million ($110 million) in fiscal 1997 ended Jan. 25 on revenues of C$1.67 billion ($1.22 billion).
",26
"Toronto's key stock index set new highs on Wednesday, powered by glittering gold stocks as gold futures soared on precious metal markets.
The Toronto Stock Exchange's 300 Composite Index jumped 38.46 points to close at 6165.38, its seventh record close of 1997. The index also set an intraday high of 6172.13.
Trading was heavy with 119.6 million shares changing hands worth C$1.9 billion ($1.4 billion).
The gold sector, which makes up 10.5 percent of the key index, gained nearly 2.4 percent by the end of the session.
April gold prices on COMEX turned around from their losing position to close $3.50 higher at $345.40.
But Canada's largest equities market was kept in check by unexpected losses in the heavyweight banking sector. Investors decided to jump on the golds bandwagon and sell bank issues, take profits after the sector hit new heights this week.
""A little bit of the helium has escaped from that sector today,"" said ScotiaMcLeod's senior vice-president Fred Ketchen. ""Everything else's showing strength, mirroring New York.""
All of Toronto's 14 sub-indices rose except for banks and real estate. Golds led the surge, followed by retail, utilities and consumer products.
Advancing stocks raced ahead of declines 545 to 437, while another 284 traded unchanged.
Gold stocks were active, including Bre-X Minerals Ltd. and Barrick Gold Corp., the world's second largest gold miner.
Bre-X President David Walsh said he was ""positive"" the prospector would reach an agreement with its Indonesian partners by the February 17 deadline, set by the Indonesian government. This will allow Bre-X and Barrick to develop a huge gold discovery in Busang.
Bre-X stock rose 0.45 to 22.70 while Barrick added 1.05 to reach 36.25, both in heavy trading.
Retailer Sears Canada Inc. topped Toronto's most actives, rising 0.40 to 11.95 on 2.6 million shares.
Automobile parts maker Magna International Inc. lost 1.45 to 71.35 on more than two million shares after an agressive U.S. seller shed a very large amount of stock.
",26
"Canada's Philip Environmental Inc. said on Thursday it planned to acquire Houston-based Allwaste Inc. and Serv-Tech Inc. in two deals worth $612 million, creating North America's biggest recycling firm.
""We are naturally very, very excited about this opportunity,"" Philip Chief Executive Allen Fracassi told a media conference call. ""It makes great economic sense and the synergies are just spectacular.""
Hamilton, Ontario-based Philip said that when completed in June, the deals would create North America's largest metals recycling and industrial services company, with annual revenues topping $1.6 billion, 8,000 employees and 215 operating locations in North America, Europe and South America.
Philip, which has recently made a spate of acquisitions to expand beyond the metals recycling business, said it would swap 0.611 of a Philip share for each Allwaste share for total consideration of $540 million.
The deal included the assumption of about $133 million in debt from Allwaste, which provides industrial services.
In a separate transaction, Philip agreed to exchange 0.403 of a Philip share for each Serv-Tech share in a deal valued at $72 million, including the assumption of $21 million of debt.
Industrial and environmental services firm Serv-Tech generated more than $140 million in revenues in 1996 and Philip said its earnings would be boosted by the Serv-Tech deal.
Fracassi told reporters that Philip might make more acquisitions.
""Our acquisition programme will continue. We are in a very very quickly consolidating, fairly new industrial sector, so we'll continue to seek and react to opportunities,"" he said.
Analyst Peter von Ond at Canadian brokerage Midland Walwyn called the deals a good fit.
Von Ond said he revised his 1998 earnings estimate for Philip to C$1.70 ($1.25) a share from C$1.60 ($1.17). His 1997 forecast was unchanged at C$1.40 ($1.03) a share since the deals do not close until late June and more Philips shares will be issued, offsetting earnings growth.
Philip earned C71 cents (52 cents) a share in 1996.
Shares of Philip were down C50 cents to C$22 on the Toronto Stock Exchange on Thursday and by 25 cents to $16.125 in New York.
AllWaste rose $2.50 to $9.25 on the New York Stock Exchange, while Serv-Tech rose 81.25 cents to $5.875 on Nasdaq.
",26
"Toronto stocks gained nearly one percent on Wednesday, powered by a rally in the conglomerate and banking groups as investors cheered strong first quarter earnings.
The Toronto Stock Exchange's key 300 Composite Index climbed 55.27 points to close at 5789.82.
Trading was moderate with turnover of 78.9 million shares worth C$1.27 billion ($909 million).
""I think this surprised a few people,"" said ScotiaMcLeod senior vice-president Fred Ketchen. ""The overriding influence in the market is moving away from inflationary problems to satisfaction with earnings,"" he said.
Toronto and New York have corrected about 10 percent since mid-March amid fears of further U.S. interest rate hikes.
But investors have put those concerns aside as companies report stronger-than-expected earnings, Ketchen said.
Canadian steel maker Stelco Inc on Wednesday posted first quarter earnings of C$0.27 ($0.19) a share compared to C$0.13 ($0.09) a share in the same period a year ago.
Of Toronto's 14 sub-indices, 11 gained ground led by consumer products, banks and conglomerates. The three weak sectors were media, real estate and golds.
""The expectation is that the banks are going to have another year of record earnings,"" Ketchen said.
Advancing issues edged out declines 482 to 468 while another 285 stocks traded flat.
In individual stocks, Bre-X Minerals Ltd. continued to attract attention, slipping 0.06 to 2.17 on 3.9 million shares. Bre-X was the most-active stock of the session.
Royal Bank of Canada, the country's largest bank, jumped 1.20 to 53.05 on 2.8 million shares.
Gold producer Placer Dome Inc. fell 0.35 to 23.05 on 1.6 million shares ahead of an announcement by Crystallex International Corp.
Crystallex was expected to make an announcement regarding its effort to claim a part of Placer Dome's Las Cristinas gold property in Venezuela, analysts said.
Crystallex gained 0.81 to 4.01 before the stock was halted pending news on Wednesday.
",26
"Partners of the Andersen Worldwide professional services business opened a key meeting on Monday to air major differences on how the $11 billion global venture should develop.
The Andersen group covers the Arthur Andersen accounting and audit practice and Andersen Consulting, which specialises in strategic advisory work.
The 2,700 partners are meeting in Paris hoping to resolve problems stemming from the rapid growth of Andersen Consulting and tensions between the two Andersen businesses.
The group posted revenues of $9.5 billion in 1996 and is tracking toward $11 billion by August 1997, an Andersen executive told Reuters recently.
But the rise of the consulting side since it set up as a separate unit in 1989 has fuelled demands for a reorganisation which reflects its wealth and importance within the group.
At stake is how the partnership votes are distributed and fee income is shared out across the Andersen group.
Revenues at the consulting arm have grown between 20-25 percent a year, while the traditional accountancy practice has shown annual growth of 11-13 percent.
The 1996 revenues were split $4.9 billion for consulting and $4.6 billion for accountancy. That was the first time consulting revenues outstripped the accounting side, the executive said. The earnings differential is widening, with consulting expected to bring in $6 billion and accountants $5 billion in 1997.
But there are around 1,650 audit and 1,100 consulting partners, so not only do fewer consulting partners make more money than their accounting colleagues, they have a smaller share of the partners' votes.
Also, under a complex system of worldwide allocation of revenues, the consultants end up effectively transferring wealth to the accountants.
The Paris meeting will air the issues, such as keeping more of the consulting income on that side of the group, the executive said.
""We are not in a crisis,"" the Andersen executive said. ""Revenues and earnings continue to grow year on year."" But there is room for a change in governance, he added.
Among the various options which have been studied are a separation of the two businesses but that radical move was not considered likely. ""I don't think that's most likely,"" he said.
A more gradualist approach might be to streamline the decision-making process. Any proposals which require ""constitutional change"" would require a two-thirds majority of partners in Arthur Andersen and Andersen Consulting.
Andersen Consulting owes its success to demand from blue-chip firms for management advice, computer-related services and the trend in contracting out administrative jobs traditionally done in-house. Its international corporate identity reflects the global nature of its clients' businesses.
Consulting's rivals includes computer specialists International Business Machines , EDS as well as high-powered management consultants such as McKinsey.
The Arthur Andersen accountancy, set up in Chicago in 1913, is one of the so-called Big Six practices. It draws on a customer base of mid-sized firms, and member firms have a strong national identity in the 79 countries in which it has offices.
The Paris meeting, part of an 18-month cycle of partners' gatherings, will be the last with Lawrence Weinbach as managing partner and chief executive, as he is stepping down in August.
",38
"Anglo-French Channel Tunnel operator Eurotunnel said Monday it cut its first-half losses and hoped an agreement could be reached soon on a vital bank debt restructuring.
Losses after interest totalled 3.04 billion francs ($597 million), an improvement of 618 million francs ($121 million) from the same period in 1995. Since March, Eurotunnel had broken even at the operating level before financial charges and after operating expenses and capital expenditure.
French co-chairman Patrick Ponsolle said this proved it was economically viable but needed to lighten the debt burden.
But the British and French co-chairmen differed over the timing of a deal to refinance 72 billion francs ($14 billion) of debt and unpaid interest owed to its 225-member bank syndicate.
Eurotunnel has been in bank talks since it froze payments on its junior-ranked loans a year ago, after it undershot cash targets in 1995. A mandate for two mediators named by a Paris court to help negotiations expires at the end of September.
Ponsolle told reporters he hoped for an agreement by the end of September, while his British counterpart, Alistair Morton, told Reuters in London he was allowing eight weeks to reach an accord with bankers.
""Our aim is still to reach an agreement on September 30,"" Ponsolle told reporters. He said there was a ""near-consensus"" on the instruments and the structure for the debt-restructuring. But the key question of sharing out the rewards remained.
""What is still being discussed is the division of pain and the hope of gains between shareholders and lenders,"" he said.
Morton said: ""I reckon there's about eight hours of serious negotiation left to do, so I've allowed eight weeks for it. The banks have got plenty of time to get their act together and come to the table,"" he said.
Morton, who has said he would resign when the debt talks were completed, said he will step down at the end of October.
Eurotunnel's talks have been deadlocked over how much the banks should get out of the company's cash flow to repay debts and the amount that should go to shareholders who have seen their shares plummet.
Ponsolle said Eurotunnel had always been sold as a long-term investment -- it was floated in 1987 and the first dividend was planned for 2004 -- and it would be unfair if the banks were get the rewards just as it started making money.
Eurotunnel decided to reward shareholders' patience with discounts on the company's Le Shuttle trains and the Eurostar high-speed rail system, he said.
Eurotunnel was headed for a 50 percent sales increase this year, on its 1995 turnover of 2.3 billion francs ($452 million), despite an expected slowing in sales in the second half of 1996, Ponsolle said.
The company has provisioned 3.7 billion francs ($727 million) for interest due on its bank debt but unpaid since it froze payments on Sept. 14, 1995.
",38
"France said on Friday it would not allow Britain's General Electric Co Plc (GEC) to bid for the state's stake in defence electronics group Thomson-CSF for national security reasons.
But GEC indicated that it had not given up, saying it was talking to two French companies which will be allowed to bid -- electronics-to-publishing group Lagardere Groupe and Alcatel Alsthom, an electronics and engineering company.
The Finance Ministry said it had received offers for the 58 percent stake from Lagardere and Alcatel Alsthom, which is bidding with defence company Dassault Industrie.
""The government has declared as admissable the proposals by Lagardere Groupe and the one by Alcatel Alsthom and Dassault Industrie,"" the Ministry said in a statement.
""However, because the sale to a foreign company of more than 50 percent of the share capital of Thomson-CSF goes against the interests of national security, the proposal by GEC has not been admitted,"" it added.
GEC said it regretted the rejection but said it was in talks with both Lagardere and Alcatel.
London analysts say it was never likely GEC would be allowed to win the tender over French companies. But they say it might yet gain a stake by teaming up with a French partner.
In London, GEC said in a statement that the French government had encouraged it to open talks with Lagardere and Alsthom. It gave no further details.
GEC said it had bid for Thomson because it believed it could be brought together with GEC-Marconi to create a world leader in defence electronics and enable Europe to compete better with U.S. companies.
""The fragmented structure of the European defence electronics industry will not sustain a strong competitive position in world markets in the next century,"" it said.
""This can be achieved only through an integrated electronics defence capability efficient in its operations and effective in the deployment of its resources,"" GEC said.
In Paris, the ministry said the government had encouraged the accepted candidates to set out their plans for French and European industrial partnerships when they submitted final offers for Thomson-CSF.
Firm offers are due by May 7 and the government hopes to make a decision by the end of June.
One defence consultant in Paris said that GEC's bid had been a bold move to ""flush out"" France's strategy in its defence restructuring.
GEC and other British firms wanted to know whether e France was ready for a transnational restructuring, which would build European groups strong enough to compete with U.S. giants such as Lockheed Martin and merger partners Boeing and McDonnell Douglas.
That integrated model could include the Airbus Industrie civil aircraft consortium, which groups France's Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace AG (Dasa) and Casa of Spain.
The alternative was more modest collaboration with joint ventures. ""It's about control,"" said the consultant, who requested anonymity. GEC's move had been a test of whether the French were willing to give up their 51 percent majority in defence companies.
The answer came back loud and clear on Friday: no.
An investment banker close to the Thomson-CSF sale said GEC was in a strong position as it had ties to both Lagardere and Alcatel. It could, for example, negotiate a big slice of Thomson-CSF after the company was sold to one of the French companies.
Last year, Lagardere and its South Korean ally Daewoo Electronics won the bidding for Thomson-CSF's then parent, Thomson SA , beating Alcatel.
Thomson SA controls consumer electronics group Thomson Multimedia (TMM).
But the government suspended the deal in December after the independent Privatisation Commission objected to the terms of TMM's sale to Daewoo.
",38
"The French government said on Tuesday it was ready to relaunch the privatisation of defence electronics firm Thomson-CSF and appointed key executives to oversee the sale.
""The government has just taken the decisions necessary for the privatisation of Thomson-CSF to enter the operational phase,"" the industry and finance ministries said in a joint statement.
An attempt to sell the whole Thomson electronics group last year floundered when the independent Privatisation Commission rejected the sale of parent company Thomson SA to the missiles-to-publishing conglomerate Lagardere Groupe for a symbolic one franc.
The government said on Tuesday it would make Marcel Roulet, formerly chairman of both Thomson SA and Thomson-CSF, responsible for the sale of the defence subsidiary on a full-time basis. He will now only be chairman of Thomson-CSF.
It also appointed Thierry Breton, formerly a deputy chairman of French computer maker Cie des Machines Bull, as chairman of Thomson SA and its wholly-owned consumer electronics unit, Thomson Multimedia (TMM).
Breton will be responsible for privatising TMM and will shortly make proposals on the sale, the statement said.
""First of all, it is the signal that the two things are really separate, with two different men who will exclusively work on Thomson-CSF and the handling of the privatisation of TMM,"" an industry ministry official said.
""The second signal is that, effectively, we are relaunching the TMM privatisation with a new head who will soon make proposals to the government on the procedure,"" he added.
The government will inject 11 billion francs ($1.9 billion) of fresh capital into TMM by the summer, following approval from the European Commission.
TMM, which makes television sets and video cassette recorders, will be sold gradually through an opening up of its capital, the statement said.
A source close the deal said the TMM sale would follow the lines of the past Bull privatisation -- a trade sale accompanied by a list of conditions, rather than a stock market flotation.
TMM would need sound finances to float on the bourse but is losing money and requires industrial partners who would take a medium-term view rather than stock market investors, who look to the short term, the source said.
An industry source said the boards of Thomson SA and Thomson-CSF met on Tuesday morning to discuss the terms and conditions of Thomson-CSF's privatisation.
A key objection by the Privatisation Commission to the government's first sale attempt was the planned sale by Lagardere of loss-making TMM to the South Korean Daewoo Electronics group, again for one symbolic franc.
Lagardere wanted to retain Thomson-CSF and merge its Matra Defense Espace unit with Thomson to create an integrated defence company with radar, satellite and missile interests.
The government has now decided to sell Thomson-CSF, 58 percent owned by Thomson SA, separately from TMM.
Detailed terms and conditions are expected to be announced shortly, opening the way for companies to make fresh bids for Thomson-CSF. Both Lagardere and Alcatel Alsthom have said they are interested.
TMM last week posted a 1996 net attributable loss of 3.1 billion francs, which included hefty provisions for factory closures and the expected loss of up to 10,000 jobs.
But it expects to break even at the operating level next year and be profitable from 1999 when U.S. patent revenues come on stream.
Thomson-CSF announced last week it returned to profit in 1996 after three years of losses, showing a net attributable profit of 745 million francs.
",38
"European aircraft consortium Airbus Industrie Friday attacked as ""anti-competitive"" a deal under which Delta Air Lines Inc. will buy new aircraft exclusively from Boeing Co. for the next quarter century.
Delta said Thursday it had named Boeing as its sole aircraft supplier for the next 25 years, as it announced a $6.7 billion order for 106 Boeing aircraft. Options would bring the total to 644 aircraft.
The Delta deal, potentially worth more than $15 billion, follows a similar ""exclusive"" deal between Boeing and AMR Corp's American Airlines.
""We are not afraid of competition, we can sell our planes on their own merits,"" said an Airbus spokeswoman. She said Boeing was trying to buy out the competition with exclusive deals which lock an airline into a long-term commitment.
""It's destroying competition"" in the long term, she said.
Such deals could be bad for airlines and passengers if Boeing, which is already in a dominant position globally, forced out Airbus and gave the U.S. manufacturer room to raise prices, she said.
""If Airbus is forced out of the market, prices would go up, which is not in the interests of the public.""
Asked if Airbus was planning an anti-trust action on the Delta deal, she said: ""If we were asked by any of the official instances (authorities), we will of course be ready to talk to them.""
Boeing, which has around 60 percent of the world civil aircraft market, is merging with McDonnell Douglas, which has about 10 percent. The merged group would have annual sales of $48 billion.
That merger plan is being investigated by the European Commission.
Delta's deal with Boeing will allow it to streamline its fleet, reduce maintenance and training costs and retire older planes to reduce operating costs.
American Airlines said in November it would buy planes solely from Boeing to 2018. It ordered 103 jets and took options on more than 500 in a deal that could be worth well over $30 billion.
Airbus, which had 1996 sales of $8.8 billion, is a consortium of four European companies that are in talks to convert it from a partnership into a limited liability company by 1999.
The four partners are French state-owned Ste Nationale Industrielle Aerospatiale , British Aerospace Plc , Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain.
",38
"Air France announced on Monday the start of a transatlantic alliance with two major U.S. carriers, Delta Air Lines and Continental, as part of a strategy to form global links vital to the French state-owned carrier's future.
Delta and Continental  unveiled registration facilities at Air France's central hub at Paris Charles de Gaulle airport, marking the official transfer of flights and operations from Paris Orly airport.
The alliances were announced last October.
Under the move, Air France's global hub at Charles de Gaulle is now linked to five major U.S. hubs -- New York's JFK airport, Atlanta and Cincinnati belonging to Delta and New York-Newark and Houston belonging to Continental.
""Through our partnership with Air France, we see a very good opportunity to flow traffic over the Delta hubs in the U.S. to Paris and beyond (the) Air France CDG hub,"" Bob Coggins, Delta's executive vice president for marketing told reporters.
Besides the move from Orly to the more modern and spacious facilities at Charles de Gaulle, the alliances allow the U.S. and French firms to share Frequent Flyer programmes and share revenues on feeder and transatlantic flights.
The main benefit will come when Air France links its schedules with Delta and Continental through a formal code-sharing programme, Barry Simon, Continental's senior vice president international said.
Code-sharing allows one airline to issue a through ticket using a connecting flight on its partner's network. Such deals can significantly increase traffic at low cost.
But Air France cannot sign up a code-sharing pact until the French and U.S. governments agree a bilateral air treaty. The U.S. authorities seek substantial liberalisation, including the right to fly from a domestic city to France and onward to a destination in a third country.
""We took into account what we could do, and we did it,"" Air France deputy managing director Christian Kozar said. ""Thanks to Air France, Charles de Gaulle will be - and already is - the world's entry point for Europe. If the Americans choose Charles de Gaulle, it is for the long term.""
Air France Aviation, a staff newspaper, said the airline hopes to agree as many Delta and Continental code-shares as possible by the end of 1997.
Continental's Simon said he was not aware of the details of the intergovernmental talks but said, ""I see no reason why it can't be done.""
The U.S. partnerships and Air France's new summer schedule are expected to increase Air France's traffic this year by 20 percent, equally split between the two factors, Kozar said. That will follow a 20 percent increase in the first year of hub operations in 1996, he added.
The alliances should add $100 million to Air France's annual revenues, Yves Abbas, Air France hub coordinator said.
Delta is particularly looking to develop business using Air France's network in the Middle East and Africa, said Coggins. Eventually, it hopes to increase the frequency of flights to Paris, he said.
More than three million passengers travel between the United States and France every year.
Both U.S. airlines said they were confident Air France could overcome its labour problems encountered in its merger with Air France Europe, adding that U.S. companies faced disputes when the U.S. system was deregulated in the 1980s.
",38
"Holding company Cie de Suez and utilities group Lyonnaise des Eaux are expected on Friday to announce a merger deal, effectively ending the independence of the company set up in the 19th century to build the Suez Canal.
The boards of the two companies will meet on Friday to approve terms of the link-up, which has already received the backing of the Lyonnaise board.
Lyonnaise chairman Jerome Monod said last Thursday that merger with Suez was an excellent plan but the terms had not yet been fixed.
The deal would mark the end of autonomy for Suez, which fell victim in the 1990s to a deeply distressed property market -- ironic since it was founded in 1858 by Ferdinand de Lesseps to build and operate the property asset which symbolised the glory of French Empire and engineering, the Suez Canal.
Discontented Suez shareholders forced out the previous chairman, Gerard Worms, after the group reported a four billion franc ($690 million at current rates) loss in 1995 and installed Gerard Mestrallet to turn round the sprawling conglomerate.
Mestrallet quickly sold crown jewels such as investment bank Banque Indosuez and fund manager Gartmore and the ailing real estate portfolio was disposed of, leaving Suez with more than five billion francs in cash.
But he held on to a 63-percent stake in Belgian holding company Societe Generale de Belgique, which groups some choice industrial and financial assets.
SGB welcomed Suez as a white knight in the late 1980s when it was being stalked by Italian businessman Carlo de Benedetti, who saw it as ripe for takeover.
Now it looks as if SGB could be the saviour for Suez. Stock market analysts say that if there is any industrial logic in the merger, it lies in Mestrallet's focus on the utilities sector and abandoning financial services.
SGB has a 37 percent stake in Tractebel, which specialises in electricity, gas, water and environmental services.
It has operations in cable television, property, infrastructure and industrial installations -- areas which overlap with Lyonnaise.
Lyonnaise, under veteran chairman Monod, has set its sights on international expansion in utilities but lacks the financial muscle to fund that growth.
So a link-up would inject fresh capital from Suez's cash hoard -- even after an estimated 3.4 billion franc payment to sweeten Suez shareholders on the merger.
Monod said last week that a merged Suez/Lyonnaise would be a multi-service company on a global scale and capable of boosting profits and cashflow. ($ = 5.797 French Francs)
",38
"Talk of a merger between the Airbus European passenger plane venture and U.S. aerospace giant Lockheed Martin was premature but the two groups do have interests which would benefit from a link up, Airbus's French partner said on Saturday.
""It's premature,"" Aerospatiale vice president for corporate communications Patrice Kreis said when asked about a report in the London Times newspaper which said Airbus Industrie and Lockheed Martin were in merger talks.
""Airbus's interests and Lockheed's interests are to merge (eventually),"" he said, in the face of a pending merger by Boeing and McDonnell Douglas. The merged Boeing-McDonnell group ""want not only to dominate the market but to take it over completely,"" he said.
But it was too early to talk about linking up Airbus with Lockheed as European aerospace and defence companies needed to consolidate among themselves, before tackling a transatlantic merger, he said. ""There's a lot of work to do,"" he added.
Among the key steps to be taken are current moves to changing Airbus's partnership into a limited liability company. But that should occur in the context of a rationalisation of European civil and military aviation, space and weapons systems, he said.
""Airbus on its own will not survive. Everything is linked -- civilian aircraft, military aircraft, space and weapons systems,"" he said. The creation in the United States of titans such as Lockheed Martin and Boeing-McDonnell Douglas, which embrace all these sectors, is forcing Europe to do the same.
The European consolidation would be through changes in capital at the parent-company level rather than cooperation on specific projects favoured in the past.
Important steps are being taken in France in the restructuring, with a merger of state-owned Aerospatiale and combat-plane maker Dassault Aviation, and the privatisation of defence electronics firm Thomson-CSF, both due to be realised this year.
Aerospatiale's chairman Yves Michot has said he was talking to Lockheed to collaborate with Airbus on specific projects.
Lockheed could become a partner in the crucial Airbus project to build a 555-seater plane, the A3XX, to rival Boeing's monopoly of the large capacity segment with its 747 jumbo.
Aerospatiale had no comment on the timing of any Lockheed decision to join the A3XX project, which has already signed up Italy's Alenia, part of the Finmecanicca group, and Saab of Sweden as potential risk-sharing partners.
Lockheed Martin and Aerospatiale both have interests in civil and military aircraft -- Lockheed makes fuselages for Boeing passenger planes, makes large military transports, and is also a prime contractor for the U.S. new-generation F22 fighter.
Aerospatiale makes Airbus cockpit systems and assembles the planes at its plant in Toulouse, southwestern France. It is also a key partner in the planned European Future Large Aircraft (FLA) military transport.
British Aerospace Plc, Daimler-Benz Aerospace AG and Casa of Spain are the other Airbus partners working on changing it to an integrated company by 1999.
",38
"French missiles-to-publishing conglomerate Lagardere confirmed on Thursday it will make an offer in the privatisation of defence electronics firm Thomson-CSF when the deadline falls due.
A Lagardere spokesman said the company would make its intentions known on Friday, but he gave no details.
The French government set March 28 as the deadline for intentions to bid for its 58 percent stake in Thomson-CSF, with firm and final offers due by May 7 and a decision by June 30.
Engineering giant Alcatel Alsthom has said it is making a joint bid with privately-owned Dassault Industries, which would bring in radar maker Dassault Electronique and in the wake of a successful bid, would cooperate with state-owned Aerospatiale.
Thomson-CSF makes missiles, radars, aircraft avionics, training simulators and telecomunications systems. It made 1996 net attributable profit of 745 million francs ($131.4 million) on sales of 36.27 billion francs.
Analysts view the Thomson-CSF sale as a key step in rationalising the fragmented French industry, which is needed to prepare a consolidation in Europe. The task is made all the more urgent as U.S. firms merge rapidly to form defence and civilian groupings which dwarf their foreign rivals.
France currently has three missile firms - Lagardere's Matra, Aerospatiale and Thomson-CSF, three satellite poles - Alcatel, Aerospatiale and Matra, two military communications players - Thomson-CSF and Alcatel, and two radar makers - Thomson-CSF and Dassault Electronique.
Thus the government, in its sale terms and conditions, called for the biggest possible industrial grouping around Thomson-CSF, to cut out duplication in scarce research and development funds and boost the economies of scale.
The terms did not set any nationality restrictions for bidding, which sparked speculation British electronics giant GEC Plc could throw its hat in the ring or line up behind Alcatel, to gain an entry into Thomson-CSF.
Alcatel chairman Serge Tchuruk has said he hoped to agree defence deals with GEC and Daimler-Benz Aerospace AG (Dasa) of Germany if he won the prize.
Meanwhile, British Aerospace Plc has said it is ""standing by to provide assistance"" to a bid from Lagardere, with which it has the Matra BAe Dynamics missiles joint venture.
For the Dassault family, joining Alcatel for the Thomson-CSF bid means a chance to keeping control of its Rafale combat jet, a 25-year, multi-billion franc acquisition for the French air force and navy. Potential export sales add further allure.
A banker close to the deal said since electronics make up maybe a third of the value of a modern jet, a win by Lagardere of Thomson-CSF could give it a majority of value in the Rafale once its Matra missile systems are added. That would give it a potential claim to be the prime contractor, ousting Dassault, and boosting its margins. ($ = 5.668 French Francs)
",38
"The French government said on Tuesday it was ready to relaunch the privatisation of defence electronics firm Thomson-CSF and appointed key executives to oversee the sale.
""The government has just taken the decisions necessary for the privatisation of Thomson-CSF to enter the operational phase,"" the industry and finance ministries said in a joint statement.
An attempt to sell the whole Thomson electronics group last year floundered when the independent Privatisation Commission rejected the sale of parent company Thomson SA to the missiles-to-publishing conglomerate Lagardere Groupe for a symbolic one franc.
The government said on Tuesday it would make Marcel Roulet, formerly chairman of both Thomson SA and Thomson-CSF, responsible for the sale of the defence subsidiary on a full-time basis. He will now only be chairman of Thomson-CSF.
It also appointed Thierry Breton, formerly a deputy chairman of French computer maker Cie des Machines Bull, as chairman of state-owned Thomson SA and its wholly-owned consumer electronics unit, Thomson Multimedia (TMM).
Breton will be responsible for privatising TMM and will shortly make proposals on the sale, the statement said.
The government will inject 11 billion francs ($1.9 billion) of fresh capital into TMM by the summer, following approval from the European Commission.
TMM, which makes television sets and video cassette recorders, will be sold gradually through an opening up of its capital, the statement said.
A key objection by the Privatisation Commission to the government's first privatisation attempt was a planned sale by Lagardere of loss-making TMM to the South Korean Daewoo Electronics group for one franc.
Lagardere wanted to retain Thomson-CSF and merge its Matra Defense Espace unit with Thomson to create an integrated defence company with radar, satellite and missile interests.
The government has now decided to sell Thomson-CSF, 58 percent owned by Thomson SA, separately from TMM.
Detailed terms and conditions are expected to be announced shortly, opening the way for companies to make fresh bids for Thomson-CSF. Both Lagardere and Alcatel Alsthom have said they are interested.
TMM last week posted a 1996 net attributable loss of 3.1 billion francs, which included hefty provisions for factory closures and the expected loss of up to 10,000 jobs.
But it expects to break even at the operating level next year and be profitable from 1999 when U.S. patent revenues come on stream.
Thomson-CSF announced last week it returned to profit in 1996 after three years of losses, showing a net attributable profit of 745 million francs. ($ = 5.747 French Francs)
",38
"Eurotunnel, operator of the Channel Tunnel, admitted on Thursday it took too long to get people off a blazing train last November but insisted that the fire was not its fault.
""Our service was safe in that we got everybody out of that train without serious injury in an extremely serious fire,"" Eurotunnel co-chairman Robert Malpas said.
""It took too long. They were in that club car too long,"" Malpas told a news conference at the French end of the tunnel.
Thirty-four people were slightly injured in the November 18 blaze, in which a train carrying a truck in flames tried to drive out of the tunnel quickly but broke down before it could.
The injuries occurred when smoke from the burning truck filled the tunnel and seeped into the club car where the truck drivers and other passengers were travelling.
Eurotunnel officials were criticised for delays in evacuating the passengers into a central service tunnel which runs between the two rail tunnels.
At Thursday's news conference, Eurotunnel officials unveiled a package of new safety measures and procedures which reversed a key element of its previous safety policy.
Under the new procedures, in the event of an emergency, passengers will be taken immediately off the train and into the nearest of 600 emergency cross-tunnel passages leading to the service tunnel.
""The most important policy change is that it (a train) will no longer drive through. The instruction will be to stop and get people out straightaway, whereas before it was to drive through -- and if it had to stop, to uncouple the club car,"" Malpas said.
French judicial authorities are still investigating the exact cause of the fire, which broke out on a truck-carrying shuttle train and severely hit Eurotunnel's passenger and freight services between Britain and France.
No lives were lost in the blaze.
Procedural changes would include more systematic checks on trucks at the time of loading, better surveillance of departing shuttles and more direct contact with the railway control centre, Eurotunnel said.
It also planned to install additional fire suppression systems in the rail tunnels by 1999.
Eurotunnel said it expected to re-open heavy goods vehicles (HGV) shuttle services before the middle of June and complete repairs on the south tunnel by mid-May.
""The changes we have announced today will make the system even safer and give us the confidence to re-open our HGV shuttle services,"" co-chairmen Malpas and Patrick Ponsolle said in a statement.
Eurotunnel said traffic carried in March by the Le Shuttle tourist service dipped to 153,796 vehicles, including coaches, from some 158,494 a year earlier, though there were only two departures an hour compared to the normal four departures an hour before the fire.
""These figures are close to those for March 1996, so are very satisfactory, particularly taking into account the fact that our capacity has been reduced by half due to the repair works currently being carried out in the tunnel,"" it said.
While Le Shuttle results fell, traffic on the high-speed Eurostar passenger train service shot up to 500,899 passengers in March from 389,069 in the year-ago period.
The amount of rail freight transported also rose, increasing to 230,753 tonnes from 207,417 in March 1996.
",38
"Air France, wracked by labour strife on Easter weekend at its domestic unit and facing increased competition in regional markets, held on Friday to its aim of breaking even in 1997 and being privatised quickly.
The company will officially lose its national monopoly from April 1, when domestic air travel in the European Union is opened up to competition from European carriers.
Jean-Claude Baumgarten, special adviser to Air France chairman Christian Blanc, speaking in a telephone interview from Osaka, Japan, said ""Yes"" when asked if the group was on track for break-even and a share sale in late 1997 or early 1998.
The group is maintaining its estimate of a 200-million franc loss for 1996/97 at the Air France international airline while losses at the Air France Europe domestic wing should be less than a forecast 800 million, he said.
Those results should allow the group to be sold later this year or early in 1998, he said. But first, Blanc must push through a merger between Air France and Air France Europe.
The merger move sparked a surprise strike on Friday by Air France Europe ground staff, who are protesting against their pay and conditions being brought in line with those of Air France employees when the merger goes ahead in September.
Similar pay concerns lie behind a two-day strike starting on Easter Monday, called by Air France Europe flight crew.
Junior Transport Minister Anne-Marie Idrac sounded a cautious note in an interview in Friday's edition of the French newspaper Le Monde.
""The privatisation of Air France is written in the 1993 law...But the merger between Air France and Air France Europe has to be completed before launching the privatisation,"" she said.
""The market has to be ready to absorb Air France shares ...the company's accounts need to inspire confidence. The question is whether six months will be enough. It is in the light of this recovery that we will set the final calendar,"" she said.
Baumgarten said Air France Europe, formerly Air Inter, should be close to break-even in 1997/98 and that last year's launch of low-price ""Le Shuttle"" services between Paris and Toulouse, Marseilles and Nice was paying off.
The Shuttle is a key part of Air France's hold on the domestic market, which together with European traffic, contributes 42 percent to group sales. It is this market which is under attack from European carriers such as British Airways Plc (BA) through its French TAT European Airlines unit.
France is the biggest domestic market in Europe, he said.
Last year saw a savage price war, with ticket discounts of 20 percent, which bled privately held Air Liberte into bankrupcty and acquisition by BA and merger with TAT. French airline AOM was also engaged in the domestic competition.
The Shuttle ""is at least breaking even,"" Baumgarten said. It has helped Air France Europe regain market share lost to high-speed TGV intercity trains and rival airlines, and has stabilised yields - as measured in revenue per passenger per kilometre transported - at minus one percent compared to minus 20 percent. The load factor - the number of passengers carried - was also climbing.
Baumgarten said the three-city service showed France was ready for a shuttle product, which could be rolled out to other French cities and feed the Paris Charles de Gaulle airport.
""The name of the game is extending the network,"" he said. But because the big carriers such as Air France, BA, KLM and Lufthansa have invested heavily in building up their hubs, they will draw on small regional airlines to add the domestic spokes to feed the hub.
Leasing, chartering, code-sharing and franchises with low-cost companies equipped with small planes are the tools to building up that network, he said. Air France currently has relationships with Britair and Eurowings for European coverage.
With more feeder routes, Air France can boost long-haul traffic through the Paris hub, also benefiting its U.S. partners Delta and Continental and Japanese ally Japan Airlines (JAL), he said.
",38
"France's second rebuff in a week to British group General Electric Co Plc (GEC) -- this time over nuclear merger talks -- underscores its concerns over controlling strategic industries, analysts say.
State-controlled nuclear engineering firm Framatome said on Monday its main shareholders had told it that a mooted merger between Framatome and Anglo-French joint venture GEC Alsthom was unlikely.
GEC, an engineering and electronics company, had wanted 50 percent of the new group but that this was contrary to the French government's wishes, it said.
Framatome's statement follows Friday's refusal by the French government to allow GEC to bid in the privatisation of defence electronics firm Thomson-CSF -- again because the state was not prepared to sell a half share to a foreign firm.
""It's about control,"" said one restructuring specialist who declined to be identified.
Concerns over industrial leadership are a common thread in the French government's thinking, while British managers are seeking to improve shareholder returns, analysts said.
Majority ownership of at least 51 percent is the least the French government seems willing to contemplate in strategic sectors, analysts said. But even where ownership is split 50-50 -- as in the GEC Alsthom engineering group -- the French still effectively held control, the restructuring expert said.
""Strategically the U.K. companies, on behalf of their shareholders, are saying 'We can't justfify any more 49s or 50/50s that don't have some element of operational control, because we don't think shareholder returns are actually maximised in that way,"" he said.
GEC Alsthom is jointly owned by GEC and Alcatel Alsthom. It makes power generating plants and France's high-speed TGV trains, and had been in talks to merge with Framatome. Alcatel owns 44 percent of Framatome directly.
France, whose first attempt to privatise the Thomson parent company collapsed last year when a South Korean company's involvement failed to get past the privatisation watchdog, raised the issue of foreign ownership again on Friday when it rejected a bid by GEC.
French Finance Minister Jean Arthuis insisted on Saturday that Paris was open to foreign firms taking part in French bids for the state's 58 percent in Thomson-CSF. ""The government is ready to examine offers which include partnerships,"" he said.
He indicated that a foreign partnership would help France's ambition to create a big European defence company strong enough to rival the U.S. titans.
But analysts say France, while wanting a European defence restructuring, is determined to stay in the pilot's seat.
The government says Alcatel and missiles-to-publishing firm Lagardere are eligible to bid for Thomson-CSF and is encouraging GEC to talk to them as they prepare final offers.
An investment banker close to the Thomson-CSF sale said the British business approach was essentially pragmatic and driven by bottom-line considerations.
It was not inconceivable, given weak margins and the strength of GEC Alsthom's competitors, that GEC could one day sell its share in the joint venture to Alcatel, the banker said.
GEC Alsthom competes with the likes of U.S. General Electric Co, the Swiss-Swedish Asea Brown Boveri joint venture and Siemens AG of Germany.
",38
"Troubled Eurotunnel SA/Plc releases first-half results on Monday but analysts contacted by Reuters said any attempt to forecast the figures was futile, given the uncertainties overhanging its debt restructuring.
""Everything depends on resolving the financial situation. If they announce a good figure...that might help, but it's really a face-off between the company and the bankers,"" Olivier Machou, analyst at brokerage Leven said.
It was hard to forecast results due to ""dumping"" in Eurotunnel's bitter price war with the ferries, he added.
One analyst said, ""It's not a stock that you can take a view based on half-year figures, especially as the first half comes before the summer season.""
A London-based broker said, ""It's not worth forecasting, everything hangs on the debt talks, which will take forever. It will happen when it happens.""
However, one analyst at a large French brokerage said he had a rough forecast of a 2.5 billion franc net loss and an operating loss of around 100 million.
Eurotunnel needs to agree a refinancing of its bank debt by the end of September, having asked in July for two court-appointed mediators to stay on to negotiate a deal with its some 220-strong bank syndicate.
The Channel Tunnel operator posted first-half sales of 1.79 billion francs, up from 806 million a year ago.
It made a net loss for full-year 1995 of 7.196 billion francs on turnover of 2.266 billion.
The headline figures will likely be flattered by the fact that Eurotunnel did not have all its services running a year ago, said Jeff Summers, head of research at debt specialist Klesch and Co in London.
Stripping out the minimum usage fee that the railway operators pay, he expected a 25-30 percent improvement in the underlying results from a year ago.
In sterling terms, Summers has pencilled in a 22 million pretax, pre-interest loss versus 121 million a year ago. With benign currency movements, it may break even.
Operating cashflow should at least double to 56 million stg before interest and capital expenditure, compared to 29 million.
""Everything is going in its favour,"" Summers said. He cited the British government's recent decision to allow cooperation between ferry companies to pool their capacity and the European Commission's decision not to extend the duty-free sales regime beyond 1999.
Pooling by rivals such as P&O and Stena would lead to ""a reduction in direct competition"" for Eurotunnel, while the loss of duty-free sales, representing 250 million stg of soft subsidies for the ferries, would push ferry firms to raise ticket prices.
Eurotunnel could then raise its prices and boost turnover.
The cross-Channel market has also grown much faster even than Eurotunnel forecast, with traffic up 20 percent last year and estimated growth of 13-15 percent this year, Summers said.
Moreover, Richard Branson, head of the London & Continental Railways (LCR) group which runs the Eurostar high-speed train concession, has forecast it will hit six million passengers in the financial year 1996/97 and 10 million in 18 months.
If that happens, Eurotunnel could receive revenues above the minimum usage fee as higher service levels trigger extra payments.
-- Paris newsroom +33 1 4221 5452
",38
"Holding company Cie de Suez  and utility Lyonnaise des Eaux must tell shareholders how they will benefit from the groups' planned merger, otherwise the deal will look like a defensive move, analysts said on Friday.
The boards of Suez and Lyonnaise are expected to approve later on Friday terms of the merger which will create a group with annual sales of about 200 billion francs ($35 billion) and a market capitalisation of 75 billion.
But size is not necessarily a bonus if the new group cannot bring operating companies together and if Suez is not allowed to sell Belgian financial assets to shed its conglomerate status and focus on utilities.
""If there is no link-up between Lyonnaise and Suez, the merger makes little sense. It looks like a defensive move,"" a share analyst said.
Lyonnaise chairman Jerome Monod told Europe 1 radio on Friday that the new group would have four core businesses -- energy, water distribution, waste management and communications.
""What do shareholders stand to gain?"" a second analyst asked. ""There is still uncertainty,"" he added.
In the short term, Suez shareholders can look forward to  a big cash payout as part of the merger terms, with a dividend estimated at around 24 francs per share, or a total of some 3.8 billion francs.
They are also getting a chance to cut the discount on Suez shares compared with underlying assets -- if the new group buries Suez's holding company image by selling financial assets to concentrate on utilities, as promised.
Suez investors will also gain by getting shares in Lyonnaise, which for all its past weakness, is one of France's biggest companies and harbours big expansion ambitions.
But Suez holders still need to be convinced on big issues related to the merger.
The merger is being structured as a Lyonnaise takeover of Suez, apparently to take advantage of Suez's tax loss carry-forward, which would shelter future profits of the new group. ""This needs to be clarified,"" said an analyst.
For Lyonnaise shareholders, the deal looks more risky.
They do not know if Suez chairman Gerard Mestrallet has made guarantees of management freedom to the Belgian government for the Societe Generale de Belgique holding company, which groups choice industrial and financial assets.
Any commitments may inhibit SGB's disposal of Belgian financial assets, which include stakes in banking giant Generale de Banque and insurer Fortis.
French investment in Belgium has become a sensitive issue since Renault SA's decision to close its Vilvoorde plant near Brussels at heavy cost to jobs.
The Belgian authorities insist on keeping the Tractebel utilities company, 50.3 percent owned by SGB, independent and headquartered in Belgium. This may limit the scope for integrating Tractebel into Lyonnaise's global ambitions.
Howver, Tractebel could benefit from asset transfers from Lyonnaise, such as the Elyo energy subsidiary.
The disposal of Suez's French financial units such as consumer credit house Sofinco, property broker Banque Monod and insurer Henin Vie, pose less of a problem.
Credit Agricole, which last year bought Banque Indosuez, has an option to buy 20 percent of Sofinco next year.
Lyonnaise shareholders stand to gain an injection of fresh capital which the company needs to finance its global aspirations. But if the Suez disposals do not go according to plan, they will be left with a conglomerate on their hands, with the accompanying discount on the shares. ($ = 5.789 French Francs)
",38
"France's Lyonnaise des Eaux and holding company Cie de Suez agreed on Friday to merge, creating a new global utilities heavyweight, and announced a series of financial goals.
As part of the deal creating a group with annual sales of more than 200 billion francs ($34.5 billion) and market capitalisation of 75 billion francs, Suez said it would pay its shareholders a dividend sweetener worth three times last year's payout.
The companies said in a joint statement they expected 1997 net profits of at least 3.50 billion francs and aimed to double earnings per share in five years after 1997.
""Beyond this year, the goal is to double net earnings per share in five years,"" they said. Shareholders of the new group will benefit from an immediate positive effect on net earnings of eight percent on the 1997 results.
The statement came after the Suez and Lyonnaise supervisory boards met to approve merger terms for the group that will be known as Suez Lyonnaise des Eaux.
Suez said shareholders would be asked to approve the merger terms at a meeting on June 11 and authorise a dividend of 24.60 francs a share -- representing a total payout of 3.8 billion francs. It paid a dividend of 8.20 francs for 1995.
Under the agreement, Suez shareholders will get 20 Lyonnaise shares for 41 Suez shares. Trading in the two companies' shares was suspended on the Paris bourse on Friday.
The merger agreement ends the independence of Suez, set up in the 19th century to build the Suez Canal, a glory of French engineering.
Lyonnaise chairman Jerome Monod told Europe 1 radio earlier on Friday that the larger group would absorb Suez, whose activities involve financial services and utilities, through a friendly ""merger-takeover.""
Lyonnaise's ""mission is to conquer the world,"" said Monod.
The group will focus on four core businesses -- energy, water distribution, waste management and communications -- and would give shareholders ""a very big world actor that will be a leader in its activities and enjoy high visibility,"" Monod said.
It would have the resources to invest around 17 billion francs from its first year of operation, he said. He has promised that the merged group will boost profits and cashflow.
Lyonnaise, whose activities span water distribution, construction and communications, has been pushing the deal as an operation that will give it extra muscle to expand abroad.
Lyonnaise is twice the size of Suez in terms of shareholder funds and one third bigger in share capitalisation.
Suez, once one of France's grandest corporate institutions that grew through acquisitions, fell victim in the early 1990s to a property slump.
Disgruntled Suez shareholders forced out the previous chairman Gerard Worms after the group made a four billion franc loss in 1995 and installed Gerard Mestrallet to turn round the overly diversified colossus.
Mestrallet swiftly sold crown jewels such as investment bank Banque Indosuez and fund manager Gartmore. He also disposed of the ailing real estate portfolio, leaving Suez with more than five billion francs in cash.
But he held on to a 63-percent stake in Belgian holding company, Societe Generale de Belgique, which groups some choice industrial and financial assets. ($ = 5.789 French Francs)
",38
"Sophie L'Helias, ex-Wall Street lawyer, shareholder lobbyist and columnist, has added author to her CV with the publication this month of a book on French corporate governance.
""The Return of the Shareholder"", published by Gualino, is essentially a guide for anyone involved in corporate life or owns shares, and maps out French corporate governance and the British and U.S. models.
L'Helias, 33, has shaken up the sometimes cosy boardrooms of French firms with campaigns to boost shareholder value and hold boards accountable to small investors, notably through a proxy shareholder solicitation of Channel Tunnel operator Eurotunnel SA /Plc.
L'Helias, whose rapid-fire English and scathing American humour belie her French origins, has drawn on her international legal training and advocacy experience to analyse French corporate practice, which she concludes is in need of reform.
""The French model will inevitably undergo significant change in coming years as the current procedures which govern the workings and control of companies and the balance of power between the directors on the one hand and investors on the other, have shown themselves to be inappropriate,"" she writes in the opening chapter.
CONSTRUCTIVE CRITICISM OR SLANGING MATCH?
A glaring gap in the French landscape is a lack of an obligation for companies to issue a compliance statement, which serves as a benchmark to judge firms on their code of conduct.
That forces an adversarial role on shareholders who have to ask firms what their view of best practice is.
The corporate governance issue is not a fad but goes to the heart of the complex relationship between company managers and investors, and relates to the performance and expectations of each side, she argues.
""Constructive dialogue"" is how L'Helias terms the future relations between directors and shareholders, rather than the ""dialogue of the deaf"" which characterises many of the thumbnail sketches she scatters throughout the book, such as Alcatel Alsthom, International Business Machines and British Gas Plc Plc.
The book comes at a time of great change as the French system of ""managed capitalism"" evolves to a new system of what could be called ""shareholder capitalism"".
The old regime reserved a special role for the government and saw firms run with an eye to serving the national interest and those of family owner-managers and employees, L'Helias says.
But with the rollback of the state through privatisations, the increasing presence of British and American investors, and the long-awaited arrival of private pension funds, French boards are having to adapt to new performance standards.
Company boards are being pushed to explain strategies, focus on objectives and increase shareholder returns, she adds.
HAVE LAW DEGREES, WILL LOBBY
L'Helias organised a ground-breaking proxy vote solicitation for a key Eurotunnel shareholders meeting in June 1996. With the backing of one of the Eurotunnel shareholders association and Investir magazine, she secured proxies for a blocking minority of 33 percent of the votes.
The aim was to ensure the small shareholders' voice was heard as the company negotiated with its bankers on a restructuring of its 70 billion franc ($12.2 billion) junior bank debt.
L'Helias also acted in 1995 for a New York-based fund, Elliott Associates, which was pushing for the board of a French investment fund, Cie d'Investissement de Paris (CIP), to narrow the discount on its shares relative to net asset value.
The following year, the investment bank SBC Warburg consulted L'Helias as it prepared an offer to buy out CIP from majority owner Banque Nationale de Paris (BNP).
BNP, which had launched a buy out for CIP, rejected the SBC Warburg offer, and completed it own buy-out.
L'Helias was educated at universities in Saarbruck, Germany, Paris' Sorbonne, Pennsylvania in the United States, and gained an MBA at the Insead European business school at Fontainebleau in France.
She was a lawyer in a Wall Street law firm in the 1980s buy-out boom and worked briefly in the London office of Merrill Lynch and opened her Franklin Global Investor Services (FGIS) consultancy in 1994.
""I am not a shareholder activist,"" she said. She plays an advocacy role, typically retained by a big shareholder who wants her to persuade companies to improve returns. The aim is not to humiliate managements but to use reason and argument. ""Most of the time, the work is quiet and but sometimes it goes public -- like in Eurotunnel,"" she said.
L'Helias also writes a column on corporate governance in the separate French and Swiss Agefi financial newspapers. ($ = 5.718 French Francs)
",38
"France said on Friday it would not allow Britain's General Electric Co Plc (GEC) to bid for the state's stake in defence electronics group Thomson-CSF for national security reasons.
But GEC indicated that it had not given up, saying it was talking to two French companies which will be allowed to bid -- electronics-to-publishing group Lagardere Groupe and Alcatel Alsthom, an electronics and engineering company.
The Finance Ministry said it had received offers for the 58 percent stake from Lagardere and Alcatel Alsthom, which is bidding with defence company Dassault Industrie.
""The government has declared as admissable the proposals by Lagardere Groupe and the one by Alcatel Alsthom and Dassault Industrie,"" the Ministry said in a statement.
""However, because the sale to a foreign company of more than 50 percent of the share capital of Thomson-CSF goes against the interests of national security, the proposal by GEC has not been admitted,"" it added.
GEC said it regretted the rejection but said it was in talks with both Lagardere and Alcatel.
London analysts say it was never likely GEC would be allowed to win the tender over French companies. But they say it might yet gain a stake by teaming up with a French partner.
In London, GEC said in a statement that the French government had encouraged it to open talks with Lagardere and Alsthom. It gave no further details.
GEC said it had bid for Thomson because it believed it could be brought together with GEC-Marconi to create a world leader in defence electronics and enable Europe to compete better with U.S. companies.
""The fragmented structure of the European defence electronics industry will not sustain a strong competitive position in world markets in the next century,"" it said.
""This can be achieved only through an integrated electronics defence capability efficient in its operations and effective in the deployment of its resources,"" GEC said.
In Paris, the ministry said the government had encouraged the accepted candidates to set out their plans for French and European industrial partnerships when they submitted final offers for Thomson-CSF.
Firm offers are due by May 7 and the government hopes to make a decision by the end of June.
One defence consultant in Paris said that GEC's bid had been a bold move to ""flush out"" France's strategy in its defence restructuring.
GEC and other British firms wanted to know whether e France was ready for a transnational restructuring, which would build European groups strong enough to compete with U.S. giants such as Lockheed Martin and merger partners Boeing and McDonnell Douglas.
That integrated model could include the Airbus Industrie civil aircraft consortium, which groups France's Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace AG (Dasa) and Casa of Spain.
The alternative was more modest collaboration with joint ventures. ""It's about control,"" said the consultant, who requested anonymity. GEC's move had been a test of whether the French were willing to give up their 51 percent majority in defence companies.
The answer came back loud and clear on Friday: no.
An investment banker close to the Thomson-CSF sale said GEC was in a strong position as it had ties to both Lagardere and Alcatel. It could, for example, negotiate a big slice of Thomson-CSF after the company was sold to one of the French companies.
Last year, Lagardere and its South Korean ally Daewoo Electronics won the bidding for Thomson-CSF's then parent, Thomson SA, beating Alcatel.
Thomson SA controls consumer electronics group Thomson Multimedia (TMM).
But the government suspended the deal in December after the independent Privatisation Commission objected to the terms of TMM's sale to Daewoo.
",38
"Even before Cie de Suez  head Gerard Mestrallet has confirmed he is considering a merger with utilities group Lyonnaise des Eaux, the market is already betting that he will run the new group.
Brokers, fed by newspaper reports and market rumours, are convinced financial conglomerate Suez and Lyonnaise will merge to create a utilities group with an estimated market capitalisation of 79 billion francs ($13.9 billion) that will give new life to both companies.
A decision on who would head a merged group could play a key role in determining which company gains the upper hand in running the combined entity.
Two elements argue for the merger. Suez, after selling key assets to make good property losses, has a big cash hoard and 50 billion francs in capital -- but little industrial identity.
And at Lyonnaise, chairman Jerome Monod, 66, is preparing his retirement. A merger would not only financially strengthen the company but give fresh leadership.
Odds are heavily in favour of Mestrallet who took over Suez two years ago after a boardroom battle ousted then chairman Gerard Worms. Mestrallet was brought in from Suez's Belgian unit Societe Generale de Belgique (SGB).
""He's the favourite,"" said an analyst, who declined to be named. ""He has done an impressive job.""
""Mestrallet has shown his worth,"" an investment banker said.
He sold key assets including investment bank Banque Indosuez and is credited for bringing Suez back to profit.
The company made a 1995 net attributable loss of 3.96 billion francs, due to provisions for property losses, but analysts expect it to report a 1996 net profit of about 1.15 billion francs.
Mestrallet has narrowed Suez's focus to utilities, held through its Tractebel subsidiary owned by SGB. But the company has been left with an ""identity problem"".
Suez had become a ""piggy bank,"" stuffed with cash and equity capital, while Lyonnaise needs funds to finance its expansion.
Mestrallet, 47, son of a shopkeeper, graduated from the elite Ecole Polytechnique and the Ecole Nationale d'Administration (ENA) and worked as chief of staff to Jacques Delors at the French Finance Ministry before his boss became president of the European Commission.
His rival for power is Guy de Panafieu, the number two to Monod at Lyonnaise.
De Panafieu, 53, is also a graduate of ENA, the fast-track school for senior posts in government and industry. He managed the integration of the troubled Dumez construction firm since its 1990 acquisition by Lyonnaise.
But de Panafieu, although seen as having handled Dumez well, is too closely identified with Monod, the analyst said.
""I do not really see it. He is in Monod's shadow and it is not in the spirit of the times to continue the same line.""
In buying Dumez, Lyonnaise inherited foreign contracts which cost hundreds of millions in provisions as disputes grew. Lyonnaise, already struggling with property losses, had to sell assets to fund provisions for those contract disputes.
""The company has lost time and has sold everything. It does not have a lot of asset support"", said the analyst.
One outside contender is Christine Morin-Postel, who heads Suez's Credisuez unit, and who negotiated the sale of four billion francs of property loans to the Whitehall Street ""vulture fund"" led by broker Goldman Sachs.
The sale, among the biggest in French real estate disposals, is seen as the key to bringing Suez back into profit.
Morin-Postel, 50, also knows Lyonnaise well, having held the international development post and a directorship in the GTM Entrepose construction subsidiary. Last July, British leisure group Rank Organisation Plc made Morin-Postel a non-executive director. ($ = 5.689 French Francs)
",38
"Boeing Co. may expand into aerospace services and is on the lookout for foreign partners, Chairman and Chief Executive Phil Condit said Friday.
Seattle-based Boeing already has big ambitions and is awaiting regulatory approval from U.S. and European authorities for a merger with McDonnell Douglas Corp., which would create a firm with annual sales of $48 billion and 200,000 employees.
""I do have goals to increase Boeing's presence on a global basis ... so that we are more active in a lot of countries,"" Condit told reporters. ""One of the areas that is very interesting is the broader ... service area.""
Boeing's core activities would remain civil aircraft, defence and space, and any new business will build on its knowledge of its aerospace customers, he said.
Condit cited as an example its airline training joint venture with FlightSafety International, announced on March 10.
""That joint venture will have operations in a number of countries ... It also gives us a presence and a place to understand (customers') needs more directly,"" he said. ""I think it is possible to continue those kind of things, looking at other service opportunities.""
Condit said he met European Competition Commissioner Karel van Miert in Brussels earlier this week and reiterated that he expects approval of the MDD merger.
""I don't see any restrictions at this point,"" he said. ""The overlap of the businesses is very little, so we're not faced with significant plant closures, we don't have products that overlap."" he added, ""There will be a lot of discussion, a lot of data, but in the end it will be approved.""
Boeing expects the McDonnell merger to generate around $1 billion of savings, mainly by cutting head office staff, Condit said. The biggest task will be to get 200,000 people working togther efficiently, he added.
Condit played down anticompetitive fears expressed by European rival Airbus Industrie, especially in helicopters, saying they were in different markets. Boeing makes twin-rotor, heavy lift helicopters, while McDonnell Douglas makes light, commercial products, he said. With four U.S. helicopter makers, industry obervers have said there was room for consolidation, he added.
Condit denied it was in Boeing's interest to force its U.S. suppliers to stay away from partnering Airbus on its A3XX large plane project, as alleged by Airbus partner Daimler-Benz Aerospace .
Boeing wants its subcontractors to ""have a broader business base, to spread overhead costs and deliver more economical products,"" he said. It also wants to expand collaboration with foreign companies, such as British Aerospace Plc.
Condit said there are no conflicts for BAe, which is an Airbus partner, in working with Boeing.
",38
"Shares in French resorts company Club Mediterranee jumped almost 20 percent on Monday as investors welcomed the appointment of the head of Euro Disney to the ailing holidays group.
Club Med announced last Friday it was replacing its chairman Serge Trigano with Philippe Bourguignon, head of the Disneyland Paris theme park, and surprised the market with a net loss for the 1995-96 year of 743 million francs ($131.3 million).
""Bourguignon knows the business well. He has credibility...he is probably one of the best guys to choose,"" analyst Thibaut Simonnet at broker Ferri said.
Bouguignon is credited with the turnround in the last two years of Disneyland Paris, which suffered initial heavy losses after opening in 1992 to hostile French media reports and an indifferent public.
Club Med traded up 20 percent to 427 francs, on volume of 956,611 shares at 1152 GMT, while the market was up 0.43 percent.
Bourguignon, who takes up the new post in March, has 14 years' experience at hotels group Accor and gained valuable experience from Euro Disney, Simonnet said. Bouguignon's job at the theme park was probably made easier by the fact that Walt Disney Co held 39 percent of Euro Disney.
Simonnet forecast a pretax pre-exceptional profit for Club Med in 1996-97 of 200 million francs and held his ""buy"" recommendation on the company. That forecast still represented a weak operating margin of 2.5 percent on annual turnover of eight billion francs.
Another French brokerage, Oddo, upgraded the stock to ""overweight"" from ""underweight"" and pointed out that Bourguignon had managed to triple gross operating profit at Euro Disney in three years and boosted sales by a fifth.
Oddo upgraded its forecast earnings per share for 1996-97 to 11.1 francs from a previous estimated 12.3 francs, and 22.7 francs for 1997/98 from 18.5.
Bourguignon steps in at an opportune time as Club Med has set aside 820 million francs in restructuring provisions to pay for the closure of seven holiday villages and 100 head office job losses.
The provisions will make it easier for Club Med to return to profit in 1997, analysts said.
It is simplifying its marketing by dropping the mid-range ""Trident"" product and offering only the Club Med at the upper end of the market and Club Aquarius at the lower segment.
It stands to make some money from the planned sale of a minority stake in an Italian business but will not get anything from disposing of its loss-making cruise liners.
The company still enjoys a strong brand and has a strong financial structure, with an acceptable debt/equity ratio of 60 percent. The expiry of a cross-shareholding pact means the company is open to outsider investors.
What remains to be seen is how the employees will react to the arrival of Bourguignon as a professional manager, in the place of Trigano, whose family founded the company and ran it as a family business even though it no longer owned Club Med. (1$ = 5.659 French Francs)
",38
"A bid by conglomerate Lagardere for military electronics firm Thomson-CSF highlights the cutthroat competition in the secretive world of naval combat systems, a senior defence source said on Monday.
Publishing-to-missiles group Lagardere and engineering company Alcatel Alsthom filed rival offers last Wednesday in the Thomson-CSF privatisation, seen as a big step in the consolidation of the European defence industry.
Lagardere said it had secured 300 million pounds ($500 million) in financing from defence giant British Aerospace Plc and would put BAe's and Thomson-CSF's naval businesses into Matra BAe Dynamics, a joint venture held by Lagardere and BAe.
France and Britain, countries which have strong maritime traditions, have waged a commercial war in naval systems, sometimes in alliance, but more often squared off as rivals.
""I believe we have a real lead in the field of naval combat systems that the British do not have,"" said the defence official. ""It's a crown jewel. I would be amazed if we gave this away.""
Thomson-CSF and rivals such as BAe and General Electric Co Plc design and integrate the complex electronic and computer systems controlling weapons and radar for ships and submarines. The submarine sector, based on sonar technology, is considered a ""sovereignty issue"" for France, the official said.
The Alcatel camp is hoping the French government will not let Thomson's naval assets slip into foreign control by accepting Lagardere's bid and undermining the sovereignty issue.
The Thomson-CSF sale offers a rare opportunity for BAe to grab a market share built up by the French firm since 1990 when it bought Signaal of the Netherlands.
Thomson-CSF said naval systems contributed about six billion francs of 1996 turnover of Thomson-CSF's total 36 billion franc sales. Defence electronics as a whole, including aerospace and land-based systems, made up 65 percent of the group's sales.
Thomson-CSF has allied with state-owned DCN naval shipyard for combat systems for ships but the DCN jealously guards its submarine technology, heavily restricting Thomson-CSF's access to its sonar systems, the defence official said.
Sonar technology is inextricably tied to submarine architecture, the source said, adding ""The field of sonar is an area of sovereignty for the French navy.""
Two major deals in naval systems highlight their strategic importance, a source following the Thomson-CSF sell-off commented.
BAe is acquiring a 49-percent stake in German defence firm STN Atlas, as part of a consortium with arms company Rheinmetall AG and utilities firm Badenwerk.
The Anglo-German consortium won against stiff competition from U.S. defence giant Lockheed Martin, Daimler-Benz Aerospace and Thomson-CSF, the source said.
BAe's BAeSema joint venture with the Sema computer systems house, is expected to play a key role in the BAe bid, despite a statement last Wednesday by BAeSema to the contrary, a senior industry source said.
A second major move in the area was creation of Thomson Marconi Sonar, a joint venture between GEC and Thomson-CSF -- which some French newspapers viewed as costing then Thomson-CSF chairman Alain Gomez his job as the government thought it brought the British too close to its strategic technology.
GEC is a huge player in the submarine field and secured a two billion pound contract in March to build three nuclear -powered Trafalgar class submarines for the British navy.
Thomson-CSF's share of key programmes include France's La Fayette ""stealth"" frigate, the Horizon warship being built by Britain, Italy and France, and through Signaal, is working on a frigate being built by Germany and the Netherlands.
($ = 0.615 British Pounds)
",38
"Labour unions at beleaguered French carmaker Renault SA said on Monday that they were calling for a one-hour strike at all Renault plants in France, Belgium and Spain.
This was in reaction to an announcement last week that of Renault's Vilvoorde plant near Brussels would close and reports that job will go in France, they said in a statement.
Earlier a Renault spokeswoman said chairman Louis Schweitzer had agreed to meet staff this week at the Belgian plant, where 3,100 jobs will go, but the time and place were not set.
Last Thursday's surprise announcement by the privatised car firm that it would close Vilvoorde stirred a political storm at home and abroad, and a denunciation from Belgian Prime Minister Jean-Luc Dehaene.
The Renault spokeswoman had no comment on newspaper reports that it was preparing to announce some 3,000 job cuts in France this year. But an industry source said somewhat fewer than 3,000 posts would go in 1997.
An official with the CGT union said Schweitzer was also expected to make a rare appearance at a staff works meeting in France on Thursday.
""Schweitzer has let it be known that he'll explain the situation the company finds itself in on Thursday at an extraordinary staff works council meeting,"" the official with the Communist-led CGT, Renault's biggest union, told Reuters.
Renault's troubles were highlighted by statistics showing new car sales in France slid 24.6 percent last month after tumbling 33.6 percent in January.
The two-month drop reflected the market's weakness since a French state rebate programme, which had underpinned demand, ended in September.
Faced with declining demand and gross overcapacity, Renault is being forced to cut production but must do so without French government support.
With French unemployment at 12.7 percent and a general election due next year, the centre-right government of Prime Minister Alain Juppe has refused to back a plan to cut 40,000 jobs in the car industry over six years.
French radio and newspapers gave blanket coverage to the labour dispute, with Le Figaro newspaper quoting the economy minister for Belgium's Flemish region as saying the closure was ""an act of economic terrorism"".
Thousands of workers from Renault Belgium, supported by steelworkers, marched through Brussels to protest against the shutdown which is expected to save 825 million French francs ($144 million) a year. Belgian workers called for a Renault boycott.
But on the French stock market, brokers said the company had to reduce output and restructure. Renault stock was down 4.02 percent at 141 francs at 1243 GMT, but that was due to profit-taking as the shares have risen 20 percent since last Wednesday.
""The big problem in the auto sector is overcapacity, a problem which no-one has dared to touch for 20 years for obvious labour reasons,"" said a broker. ""The fact that Renault is tackling it is a good sign.""
Renault shed 1,641 jobs last year and 1,735 in 1995.
Newspapers said charges for the job-cutting plans, on top of an operating loss at the group estimated at two billion francs or more, would result in a full year loss of more than five billion francs for the group in 1996.
The car firm was privatised in stages in 1994 and 1996.
Renault has four assembly plants in France, two in Spain, one in Portugal and one in Slovenia.
($ = 5.718 French Francs)
",38
"French defence electronics company Thomson-CSF, soon to be sold by the state, Wednesday posted 1996 results that showed a return to profit after three years of heavy losses.
Thomson-CSF reported net profit of 745 million francs ($129 million) compared with a net loss of 791 million ($137 million) for 1995. Sales were up 2.2 percent at 36.27 billion ($6.3 billion).
The government, after a bungled first attempt, is trying to privatise Thomson-CSF as part of a defence industry restructuring that could have an impact on the entire European sector.
French engineering and telecommunications giant Alcatel Alsthom has teamed up with aircraft maker Dassault Aviation and state-owned Aerospatiale to bid for Thomson-CSF. Lagardere, involved in businesses ranging from missiles to publishing, is also bidding, supported by British Aerospace Plc.
Thomson-CSF said its operating profit rose 5.6 percent to 2.07 billion francs ($358 million) despite a reduction in military budgets and tougher markets. The improvement was due to better competitiveness following restructuring efforts pursued over a number of years.
The net result was dented by an exceptional charge of 824 million francs ($143 million), compared with 753 million ($130 million) in the prior year, to cover restructuring costs tied to the shrinking of markets and cost-cutting measures, it said.
Consolidated pretax profit was 1.30 billion francs ($225 million), versus a loss of 437 million ($76 million), which included a 101 million franc ($17.5 million) hit from its the sale of its holding in the troubled state-owned bank Credit Lyonnais.
Thomson-CSF's previous three years' losses were essentially due to falls in the value of Credit Lyonnais' shares, which were taken on Thomson-CSF's accounts to reflect its equity stake.
Europe, excluding France, contributed more than 10 billion francs ($1.7 billion) in sales for the first time, compared with less than four billion ($692 million) in 1995.
""The European market accounts for 28 percent of the consolidated turnover, against only 10 percent at the end of the 1980s,"" it said, adding this was due to its policy of external growth through acquisitions.
Its holding in profitable semiconductor maker SGS-Thomson contributed 588 million francs ($102 million), up from 477 million ($83 million) in 1995.
Net debt fell to 900 million ($156 million) from 2.3 billion ($398 million).
",38
"The French government set out on Wednesday the procedure for privatising defence electronics company Thomson-CSF, including minimum financial terms and conditions.
The terms and conditions mark the government's second attempt to sell Thomson-CSF through a private sale after a first effort failed last year when the state tried to sell it as part of the Thomson SA electronics group.
The successful bidder or group would become the majority owner by acquiring more than 50 percent of Thomson-CSF's capital and voting rights, the finance ministry said in a statement.
The government said on Tuesday it hoped to pick the winning bidder by June 30.
Firms bidding must have at least five billion francs ($868 million) in equity capital and the same amount in turnover in non-consumer and defence electronics, it said on Wednesday.
The government reaffirmed it would hold a ""golden share"" which gives it an effective veto over any changes in ownership to protect the state's strategic defence interests.
The statement said that in the case of a group bid, the lead company must plan to hold more than a third of Thomson-CSF's capital and voting rights.
Bidders must declare themselves by 1100 GMT on March 28. The finance ministry would tell the candidates whether they were eligible within five working days, the ministry said.
Offers must be delivered by 1100 GMT on May 7 and bidders must make an irrevocable offer to buy Thomson-CSF within four months of that date. In a group bid, the partners must set out planned individual holdings and the contractual relations that exist between the companies, the statement said.
Thomson-CSF's capital consists of 119.5 million shares, of which 41.7 percent is in public hands. The rest is owned by Thomson SA and Sofivision, with the state holding one share. Thomson SA is state-controlled.
Some 6.65 million Thomson-CSF shares will be reserved for employees and former staff.
The Thomson-CSF privatisation is part of the state's aim to restructure the defence industry around a few ""national champions"" as a step towards wider European consolidation.
Engineering group Alcatel Alsthom and missiles-to-publishing conglomerate Lagardere Groupe have said they are interested in bidding. Thomson-CSF makes radars, tactical missiles, radios and integrated complex systems as a defence prime contractor.
The independent Privatisation Commission thwarted the government's first attempt to sell Thomson SA last year. Then it objected to the planned sale of the group to Lagardere, which in turn wanted to sell the loss-making Thomson Multimedia unit to Daewoo Electronics of South Korea for a symbolic one franc. ($ = 5.760 French Francs)
",38
"French carmakers Renault SA and PSA Peugeot Citroen on Wednesday reported slight gains in first-quarter sales, despite sharp falls in their core domestic market.
Renault reported consolidated revenues of 47.2 billion francs ($8.2 billion), up three percent from a year ago or 1.8 percent on a like-for-like basis.
The PSA group posted turnover of 43.51 billion francs, up 0.9 percent or 0.6 percent on a like-for-like basis.
Both firms said exports offset sharp drops in domestic sales following the end to a French government rebate scheme to encourage car purchases. Renault's sales in the home market dropped 26.5 percent in the period, while PSA's fell 30 percent.
""In the first quarter, the upturn in the automobile market in western Europe, excluding France, was slightly higher than expected. In addition, there was a favourable trend in exchange rates,"" Renault said in a statement.
Renault's automobile division revenues were up 4.7 percent, or 2.7 percent on a like-for-like basis. This sector accounts for 80 percent of total group revenues.
Commercial vehicles, which includes Mack Trucks in the United States, saw a 2.7 percent revenue decline to 7.36 billion francs. Stripping out changes in company structure and currency movements, the fall was 0.9 percent, which was mainly due to a drop in European sales.
Renault's finance division contributed two billion francs, representing 4.2 percent of group revenues, down from 4.7 percent, with the fall due to lower interest rates in France and Germany.
The French government holds a 46 percent stake in Renault, which is currently embroiled in a controversial closure of its Vilvoorde car plant in Belgium.
The PSA group recorded total worldwide sales of 498,200 vehicles, up 0.7 percent from the 1996 period. The automobile division showed a 0.9 percent rise, or 0.6 percent on a like-for-like basis.
Sales of its Peugeot and Citroen cars in western Europe fell 9.8 percent to 381,000 in the first quarter, due to a fall in the French market following the end of the rebate system, PSA said in a statement.
PSA saw sales in the European market, outside France, rise 4.6 percent to 270,100 units, with particularly good performances in Britain, Italy, the Netherlands and Spain.
A launch of the Citroen Berlingo and Peugeot Partner products helped boost sales of light utility vehicles in the European market by 30 percent to 67,500 units. ($ = 5.742 French Francs)
",38
"Even before Cie de Suez head Gerard Mestrallet has confirmed he is considering a merger with utilities group Lyonnaise des Eaux, the market is already betting that will run the new group.
Brokers, fed by newspaper reports and market rumours, are convinced financial conglomerate Suez and Lyonnaise will merge to create a utilities group with an estimated market capitalisation of 79 billion francs ($13.9 billion) that will give new life to both companies.
A decision on who would head a merged group could play a key role in determining which company gains the upper hand in running the combined entity.
Two elements argue for the merger. Suez, after selling key assets to make good property losses, has a big cash hoard and 50 billion francs in capital -- but little industrial identity.
And at Lyonnaise, chairman Jerome Monod, 66, is preparing his retirement. A merger would not only financially strengthen the company but give fresh leadership.
Odds are heavily in favour of Mestrallet who took over Suez two years ago after a boardroom battle ousted then chairman Gerard Worms. Mestrallet was brought in from Suez's Belgian unit Societe Generale de Belgique (SGB).
""He's the favourite,"" said an analyst, who declined to be named. ""He has done an impressive job.""
""Mestrallet has shown his worth,"" an investment banker said.
He sold key assets including investment bank Banque Indosuez and is credited for bringing Suez back to profit.
The company made a 1995 net attributable loss of 3.96 billion francs, due to provisions for property losses, but analysts expect it to report a 1996 net profit of about 1.15 billion francs.
Mestrallet has narrowed Suez's focus to utilities, held through its Tractebel subsidiary owned by SGB. But the company has been left with an ""identity problem"".
Suez had become a ""piggy bank,"" stuffed with cash and equity capital, while Lyonnaise needs funds to finance its expansion.
Mestrallet, 47, son of a shopkeeper, graduated from the elite Ecole Polytechnique and the Ecole Nationale d'Administration (ENA) and worked as chief of staff to Jacques Delors at the French Finance Ministry before his boss became president of the European Commission.
His rival for power is Guy de Panafieu, the number two to Monod at Lyonnaise.
De Panafieu, 53, is also a graduate of ENA, the fast-track school for senior posts in government and industry. He managed the integration of the troubled Dumez construction firm since its 1990 acquisition by Lyonnaise.
But de Panafieu, although seen as having handled Dumez well, is too closely identified with Monod, the analyst said.
""I do not really see it. He is in Monod's shadow and it is not in the spirit of the times to continue the same line.""
In buying Dumez, Lyonnaise inherited foreign contracts which cost hundreds of millions in provisions as disputes grew. Lyonnaise, already struggling with property losses, had to sell assets to fund provisions for those contract disputes.
""The company has lost time and has sold everything. It does not have a lot of asset support"", said the analyst.
One outside contender is Christine Morin-Postel, who heads Suez's Credisuez unit, and who negotiated the sale of four billion francs of property loans to the Whitehall Street ""vulture fund"" led by broker Goldman Sachs.
The sale, among the biggest in French real estate disposals, is seen as the key to bringing Suez back into profit.
Morin-Postel, 50, also knows Lyonnaise well, having held the international development post and a directorship in the GTM Entrepose construction subsidiary. Last July, British leisure group Rank Organisation Plc made Morin-Postel a non-executive director. ($ = 5.689 French Francs)
",38
"France said on Friday it would not allow Britain's General Electric Co Plc (GEC) to bid for the state's stake in defence electronics group Thomson-CSF for national security reasons.
GEC said it regretted the rejection but indicated it had not given up, saying it was talking to two French groups which are allowed to bid -- missiles-to-publishing group Lagardere Groupe and Alcatel Alsthom, an electronics and engineering company.
The Finance Ministry said it had received offers for the 58 percent stake from Lagardere and Alcatel, which is bidding with defence company Dassault Industrie.
""The government has declared as admissable the proposals by Lagardere Groupe and the one by Alcatel Alsthom and Dassault Industrie,"" the Ministry said in a statement.
""However, because the sale to a foreign company of more than 50 percent of the share capital of Thomson-CSF goes against the interests of national security, the proposal by GEC has not been admitted,"" it added.
Industry Minister Franck Borotra told French television that GEC could still play a role in the Thonson-CSF privatisation if it found common ground with either of the French bidders.
""GEC, which believes it can play an important role in this restructuring, has to approach the two candidates which have been admitted to see what kind of agreement, what kind of negotiations can take place about the place they can have in the restructuring of the European defence industry around Thomson-CSF,"" Borotra told LCI television in an interview.
London analysts say it was never likely GEC would be allowed to win the tender over French companies. But they say it might yet gain a stake by teaming up with a French partner.
GEC said it had bid for Thomson because it believed it could be brought together with GEC-Marconi to create a world leader in defence electronics and enable Europe to compete better with U.S. companies.
""The fragmented structure of the European defence electronics industry will not sustain a strong competitive position in world markets in the next century,"" it said.
""This can be achieved only through an integrated electronics defence capability efficient in its operations and effective in the deployment of its resources,"" GEC said.
In Paris, the ministry said the government had encouraged the accepted candidates to set out their plans for French and European industrial partnerships when they submitted final offers for Thomson-CSF.
Firm offers are due by May 7 and the government hopes to make a decision by the end of June.
Last year, Lagardere and its South Korean ally Daewoo Electronics won the bidding for Thomson-CSF's then parent, Thomson SA, beating Alcatel.
Thomson SA held the state stake in Thomson-CSF and all of consumer electronics group Thomson Multimedia (TMM).
But the government suspended the deal in December after the independent Privatisation Commission objected to the terms of TMM's sale to Daewoo.
",38
"French defence electronics firm Thomson-CSF , soon to be sold by the state, posted 1996 results on Wednesday showing a return to profit after three years of heavy losses.
Thomson-CSF reported a net attributable profit of 745 million francs ($129 million) compared with a net loss of 791 million for 1995. Sales were up 2.2 percent at 36.27 billion.
The return to the black was mainly due to the sale of Thomson-CSF's 19 percent stake in the troubled state-owned bank Credit Lyonnais.
""Thomson-CSF has been able to return to a profitable footing, as the bank no longer weighs on the accounts of the company, which is now completely centred on defence electronics,"" chairman Marcel Roulet told an analysts' meeting.
The state, after a bungled first attempt, is trying to privatise Thomson-CSF as part of a defence industry restructuring which may have an impact on the entire European sector.
Roulet said he expected the terms and conditions drawn up by the government on the privatisation would be published soon. ""It is a question of a few days or a week."" The Privatisation Commission has to vet the terms to allow the sale to go ahead.
French engineering and telecommunications giant Alcatel Alsthom has teamed up with fighter-aircraft maker Dassault Aviation and state-owned Aerospatiale to bid for Thomson-CSF.
Missiles-to-publishing group Lagardere is also bidding, supported by British Aerospace Plc (BAe) .
Thomson-CSF said in a statement that operating profit rose 5.6 percent to 2.07 billion francs despite a reduction in military budgets and tougher markets. The improvement was due to better competitiveness following restructuring efforts pursued over a number of years.
The net result was dented by an exceptional charge of 824 million francs, compared with 753 million in the prior year, to cover restructuring costs tied to the shrinking of markets and cost-cutting measures, it said.
Pre-tax pre-exceptional profit rose 12 percent to 2.04 billion francs, reflecting the productivity gains and lower financial charges. Financial costs fell to 27 million francs from 135 million, due to lower interest rates and favourable currency movements.
Consolidated pretax profit was 1.30 billion francs, versus a loss of 437 million, which included a 101 million franc hit from its the sale of its holding in Credit Lyonnais.
The previous three years' losses at Thomson-CSF were essentially due to falls in the value of Credit Lyonnais shares, which were taken on Thomson-CSF's accounts to reflect its equity stake.
",38
"European aircraft consortium Airbus Industrie on Friday attacked as ""anti-competitive"" a deal under which the U.S. airline Delta will buy new aircraft exclusively from its archrival Boeing for the next quarter century.
Delta Air Lines Inc said on Thursday it had named Boeing Co as its sole aircraft supplier for the next 25 years, as it announced a $6.7 billion order for 106 Boeing aircraft. Options would bring the total to 644 aircraft.
The Delta deal, potentially worth more than $15 billion, follows a similar ""exclusive"" deal between Boeing and AMR Corp's American Airlines.
""We are not afraid of competition, we can sell our planes on their own merits,"" said an Airbus spokeswoman. She said Boeing was trying to buy out the competition with exclusive deals which lock an airline into a long-term commitment.
""It's destroying competition"" in the long term, she said.
Such deals could be bad for airlines and passengers if Boeing, which is already in a dominant position globally, forced out Airbus and gave the U.S. manufacturer room to raise prices, she said.
""If Airbus is forced out of the market, prices would go up, which is not in the interests of the public.""
Asked if Airbus was planning an anti-trust action on the Delta deal, she said: ""If we were asked by any of the official instances (authorities), we will of course be ready to talk to them.""
Boeing, which has around 60 percent of the world civil aircraft market, is merging with McDonnell Douglas which has around 10 percent. The merged group would have annual sales of $48 billion.
That merger plan is being investigated by the European Commission
Delta's deal with Boeing will allow it to streamline its fleet, reduce maintenance and training costs and retire older planes to lower operating costs.
American Airlines said last November it would buy planes solely from Boeing to 2018. It ordered 103 jets and took options on more than 500 in a deal that could be worth well over $30 billion.
Airbus, which ad 1996 sales of $8.8 billion, is a consortium of four European companies that are in talks to convert it from a partnership into a limited liability company by 1999.
The four partners are French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain.
",38
"The French government said Tuesday it was ready to relaunch the privatisation of defence electronics firm Thomson-CSF and appointed key executives to oversee the sale.
""The government has just taken the decisions necessary for the privatisation of Thomson-CSF to enter the operational phase,"" the industry and finance ministries said in a statement.
An attempt to sell the whole Thomson electronics group last year floundered when the independent Privatisation Commission rejected the sale of parent company Thomson SA to conglomerate Lagardere Groupe for a symbolic one franc.
The government said Tuesday it would make Marcel Roulet, formerly chairman of both Thomson SA and Thomson-CSF, responsible for the sale of the defence subsidiary on a full-time basis. He will now be chairman only of Thomson-CSF.
It also appointed Thierry Breton, formerly a deputy chairman of French computer maker Cie des Machines Bull, as chairman of state-owned Thomson SA and its wholly owned consumer electronics unit, Thomson Multimedia.
Breton will be responsible for privatising Thomson Multimedia and will shortly make proposals on the sale, the statement said. TMM, which makes television sets and video cassette recorders, will be sold gradually, the statement said.
The government will inject 11 billion francs ($1.9 billion) of fresh capital into TMM by the summer, following approval from the European Commission.
A key objection by the Privatisation Commission to the government's first privatisation attempt was a planned sale by Lagardere of money-losing TMM to the South Korean Daewoo Electronics group for one franc.
Lagardere wanted to retain Thomson-CSF and merge its Matra Defence Espace unit with Thomson to create an integrated defence company with radar, satellite and missile interests.
The government has now decided to sell Thomson-CSF, 58 percent owned by Thomson SA, separately from TMM.
Detailed terms and conditions are expected to be announced shortly, opening the way for companies to make fresh bids for Thomson-CSF. Both Lagardere and Alcatel Alsthom have said they are interested.
Thomson-CSF announced last week that it returned to profit in 1996 after three years of losses, showing a net profit of 745 million francs ($130 million).
",38
"U.S. aero-engine maker Pratt & Whitney marked on Wednesday a revamp of global operations with the opening of a regional office in Paris to anchor a new market strategy aimed at getting closer to civil and military clients.
The office at the La Defense business district on the Paris outskirts will spearhead P&W's efforts to sell the ""total thrust management"" concept to airlines and air forces in Europe, the Middle East and Africa, Robert Wolfe, president of large commercial engines told reporters.
P&W, a unit of the United Technologies Corp industrial group, aims to ""integrate closely with its customers"" through the regional offices which serve the Americas, Europe, the Middle East and Africa and the Asia-Pacific region, he said.
P&W makes engines for passenger planes with thrust ranging from 17,000 to 98,000 pounds, as well as combat jets such as the F15 and F16 fighters and the futuristic F22 stealth warplane.
Wolfe said P&W has a 53 percent share of all engines sold on the Airbus Industrie A330 wide-body plane and 41 percent of the Boeing 777 giant twinjet.
The Hartford, Connecticut-based firm wants to expand market share by handling ""all aspects of the propulsion system with the airline, to become the thrust manager"" for the life of the engines, instead of just selling or leasing power plants.
That package deal would include setting up a special purpose company to buy engines and lease them to the airline. It would take charge of overhaul, repairs and maintenance -- leaving airlines to concentrate on flying passengers, Wolfe said.
The engine overhaul business is forecast to generate $1.0 billion to $1.5 billion by the end of next year, contributing about 30 percent of P&W's total revenues, he said.
It is discussing the thrust management concept with airlines British Airways Plc, Swissair and Singapore Airlines, and wants to be the first to sign contracts in this area, Wolfe said.
It has already signed contracts with Delta for engine inventory management and Airbus for all engine maintenance on aircraft owned or leased by the European consortium.
Major U.S. airlines including Delta and United Airlines are also interested. ""We think we have broken the ground for the first step toward full-thrust management,"" he said.
P&W is looking at acquisitions and joint ventures among smaller firms specialising in overhaul to help boost operations. ""I dare say you could see some of those occurring in the coming months,"" he said.
P&W currently has around 15 percent of the total sales in the overhaul business in both commercial and military engines but expects to increase that ""easily"" to 30 percent, he said, giving no timetable.
The U.S. military is considering privatising maintenance of its park of F100 engines for the F15 and F16 aircraft, he said. And supply contracts for the F22's F119 engine stipulate the maintenance will come from P&W.
Airlines stood to gain savings of 20-25 percent over the life of the engines, including the acquisition cost, while P&W would be able to predict confidently the costs and margins of its products over the total life cycle.
Wolfe declined to give the margins on current business.
Industry executives have said competition for engine sales forces the leaders, P&W, General Electric and Rolls-Royce Plc to sell their products on razor-thin margins, if any at all, and recoup their money on sales of spares over the 25-or-so year life of the plant.
P&W expects 14,000 commercial jets to be sold in the next 20 years, with the world aviation market growing five percent a year. Europe will grow annually 3.9 percent, and in terms of revenue per passenger mile, ranks as the third largest regional market with 25 percent of the world total.
",38
"Labour unions at beleaguered French carmaker Renault SA said on Monday that they were calling for a one-hour strike at all Renault plants in France, Belgium and Spain.
This was in reaction to an announcement last week that of Renault's Vilvoorde plant near Brussels would close and reports that job will go in France, they said in a statement.
Earlier a Renault spokeswoman said chairman Louis Schweitzer had agreed to meet staff this week at the Belgian plant, where 3,100 jobs will go, but the time and place were not set.
Last Thursday's surprise announcement by the privatised car firm that it would close Vilvoorde stirred a political storm at home and abroad, and a denunciation from Belgian Prime Minister Jean-Luc Dehaene.
The Renault spokeswoman had no comment on newspaper reports that it was preparing to announce some 3,000 job cuts in France this year. But an industry source said somewhat fewer than 3,000 posts would go in 1997.
An official with the CGT union said Schweitzer was also expected to make a rare appearance at a staff works meeting in France on Thursday.
""Schweitzer has let it be known that he'll explain the situation the company finds itself in on Thursday at an extraordinary staff works council meeting,"" the official with the Communist-led CGT, Renault's biggest union, told Reuters.
Renault's troubles were highlighted by statistics showing new car sales in France slid 24.6 percent last month after tumbling 33.6 percent in January.
The two-month drop reflected the market's weakness since a French state rebate programme, which had underpinned demand, ended in September.
Faced with declining demand and gross overcapacity, Renault is being forced to cut production but must do so without French government support.
With French unemployment at 12.7 percent and a general election due next year, the centre-right government of Prime Minister Alain Juppe has refused to back a plan to cut 40,000 jobs in the car industry over six years.
French radio and newspapers gave blanket coverage to the labour dispute, with Le Figaro newspaper quoting the economy minister for Belgium's Flemish region as saying the closure was ""an act of economic terrorism"".
Thousands of workers from Renault Belgium, supported by steelworkers, marched through Brussels to protest against the shutdown which is expected to save 825 million French francs ($144 million) a year. Belgian workers called for a Renault boycott.
But on the French stock market, brokers said the company had to reduce output and restructure. Renault stock was down 4.02 percent at 141 francs at 1243 GMT, but that was due to profit-taking as the shares have risen 20 percent since last Wednesday.
""The big problem in the auto sector is overcapacity, a problem which no-one has dared to touch for 20 years for obvious labour reasons,"" said a broker. ""The fact that Renault is tackling it is a good sign.""
Renault shed 1,641 jobs last year and 1,735 in 1995.
Newspapers said charges for the job-cutting plans, on top of an operating loss at the group estimated at two billion francs or more, would result in a full year loss of more than five billion francs for the group in 1996.
The car firm was privatised in stages in 1994 and 1996.
Renault has four assembly plants in France, two in Spain, one in Portugal and one in Slovenia. ($ = 5.718 French Francs)
",38
"The battle for Thomson-CSF heated up on Wednesday as the French government announced terms for its privatisation and rival companies made clear they would fight for control of the profitable defence electronics firm.
The sale, part of the state's restructuring of France's defence industry around a few ""national champions"" as a step towards wider European consolidation, has dragged on for months and provoked bitter public opposition, but the government and bidders forged ahead on Wednesday.
As expected, books-to-missiles conglomerate Lagardere made clear its intention to bid and engineering group Alcatel Alsthom said it planned a joint offer with combat plane maker Dassault Industries.
Both bidders said their offers would allow for far-reaching co-operation with state-owned aircraft and defence company Aerospatiale, a necessity since Aerospatiale and Thomson already co-operate on many projects.
""Like all the candidates, we are ready to take into account the business electronics and defence activities of Aerospatiale in our industrial plan, with the sole concern, for us, of strengthening Thomson-CSF,"" Lagardere said.
Alcatel and Dassault said they were pleased by the government's statement Aerospatiale was directly concerned by a defence sector restructuring resulting from Thomson-CSF's sale.
""This confirms the industrial logic elaborated by Alcatel and Dassault, whose plan develops the possibility of major cooperation between Aerospatiale and a privatised Thomson-CSF,"" the joint Alcatel-Dassault statement said.
On Tuesday, the government excluded Aerospatiale from the bidding because it is state-owned. It has previously said it planned to merge Dassault and Aerospatiale later this year.
The government's announcement of terms and conditions marks its second attempt to sell Thomson-CSF through a private sale after a first effort failed last year when the state tried to privatise it as part of the Thomson SA electronics group.
France's Privatisation Commission thwarted the government's first attempt to sell Thomson SA last year to Lagardere, which planned to hold onto Thomson-CSF and sell loss-making Thomson Multimedia unit to Daewoo Electronics of South Korea for a symbolic franc.
On Tuesday the government said the successful bidder would become the majority owner by acquiring more than 50 percent of Thomson-CSF's capital and voting rights.
In the case of a group bid, the lead company must plan to hold more than a third of Thomson-CSF's capital and voting rights, the Finance Ministry statement said.
The government hopes to pick the winning bid by June 30.
Firms bidding must have at least five billion francs ($868 million) in equity capital and the same amount in 1995 turnover in non-consumer and defence electronics, it said on Wednesday.
The government repeated it would hold a ""golden share"" which gives it an effective veto over changes in ownership to protect the state's strategic defence interests.
Bidders must declare themselves by 1100 GMT on March 28. The Finance Ministry would tell the candidates whether they were eligible within five working days, the ministry said.
Offers must be delivered by 1100 GMT on May 7 and bidders must make an irrevocable offer to buy Thomson-CSF within four months of that date. In a group bid, the partners must set out planned individual holdings and the contractual relations that exist between the companies, the statement said.
Thomson-CSF's capital consists of 119.5 million shares, of which 41.7 percent is in public hands. The rest is owned by Thomson SA and Sofivision, with the state holding one share. Thomson SA is state-controlled.
Some 6.65 million Thomson-CSF shares will be reserved for employees and former staff.
",38
"Holding company Cie de Suez and utilities group Lyonnaise des Eaux are expected Friday to announce a merger, effectively ending the independence of the company set up in the 19th century to build the Suez Canal.
The boards of the two companies will meet Friday to approve terms of the link-up, which has already received the backing of the Lyonnaise board.
Lyonnaise Chairman Jerome Monod said last Thursday that a combination with Suez was an excellent option, but the terms had not been fixed.
The deal would mark the end of autonomy for Suez, which fell victim in the 1990s to a deeply distressed property market -- ironic since it was founded in 1858 by Ferdinand de Lesseps to build and operate the property asset that symbolised the glory of French Empire and engineering, the Suez Canal.
Discontented Suez shareholders forced out the previous chairman, Gerard Worms, after the group reported a four billion franc ($690 million at current rates) loss in 1995 and installed Gerard Mestrallet to turn round the sprawling conglomerate.
Mestrallet quickly sold crown jewels such as investment bank Banque Indosuez and fund manager Gartmore, as well as the ailing real estate portfolio, leaving Suez with more than five billion francs ($863 million) in cash.
He held on to a 63-percent stake in Belgian holding company Societe Generale de Belgique, which groups some choice industrial and financial assets.
SGB welcomed Suez as a white knight in the late 1980s, when it was being stalked by Italian businessman Carlo de Benedetti, who saw it as ripe for takeover.
Now it looks as if SGB could be the saviour for Suez. Stock market analysts say that if there is any industrial logic in the merger, it lies in Mestrallet's focus on the utilities sector and abandoning financial services.
SGB has a 37 percent stake in Tractebel, which specialises in electricity, gas, water and environmental services. It has operations in cable television, property, infrastructure and industrial installations -- areas that overlap with Lyonnaise.
Lyonnaise, under veteran chairman Monod, has set its sights on international expansion in utilities but lacks the financial muscle to fund that growth. A link-up would inject fresh capital from Suez's cash hoard -- even after an estimated 3.4 billion franc ($587 million) payment to sweeten Suez shareholders on the merger.
Monod said last week that a merged Suez/Lyonnaise would be a multi-service company on a global scale and capable of boosting profits and cashflow.
",38
"Anglo-French Channel Tunnel operator Eurotunnel said on Monday it cut first-half losses and hoped an agreement could be reached soon on a vital bank debt restructuring.
Losses after interest totalled 3.04 billion francs ($597 million), an improvement of 618 million on the same period in 1995. Since March, Eurotunnel had broken even at the operating level before financial charges and after operating expenses and capital expenditure.
French co-chairman Patrick Ponsolle said this proved it was economically viable but needed to lighten the debt burden.
But the British and French co-chairmen differed over the timing of the deal which would refinance 72 billion francs of debt and unpaid interest owed to its 225-strong bank syndicate.
Eurotunnel has been in bank talks since it froze payments on its junior-ranked loans a year ago, after it undershot cash targets in 1995. A mandate for two mediators named by a Paris court to help negotiations expires at the end of September.
Ponsolle told reporters here he still hoped for an agreement by the end of September, while his British counterpart, Alistair Morton, told Reuters in London he was allowing eight weeks to reach an accord with bankers.
""Our aim is still to reach an agreement on September 30,"" Ponsolle told reporters. He said there was a ""near-consensus"" on the instruments and the structure for the debt-restructuring. But the key question of sharing out the rewards remained.
""What is still being discussed is the division of pain and the hope of gains between shareholders and lenders,"" he said. The talks were ""difficult and complex,"" he added.
Morton said: ""I reckon there's about eight hours of serious negotiation left to do, so I've allowed eight weeks for it. The banks have got plenty of time to get their act together and come to the table,"" he said in a telephone interview.
Morton, who has said he would resign when the debt talks were over, announced he will step down around end October.
Eurotunnel's talks have been deadlocked over how much banks should get out of cashflow to repay debts and the amount that should go to shareholders who have seen their shares plummet.
Ponsolle said Eurotunnel had always been sold as a long-term investment -- it was floated in 1987 and the first dividend was planned for 2004 -- and it would be unfair if the banks were get the rewards just as it started making money.
Eurotunnel had decided to reward shareholders' patience with discounts on the company's Le Shuttle trains and the Eurostar high-speed rail system, he said.
Stockholders could get 30 percent discounts for three return journeys a year on Le Shuttle and reduced fares on Eurostar.
Eurotunnel was on track for a 50 percent sales increase this year, on its 1995 turnover of 2,266 million francs, despite an expected slowing in sales in the second half of 1996, he said.
The company has provisioned 3,710 million francs for interest due on its bank debt but unpaid since it froze payments on September 14, 1995. Its cash position had doubled to 440 million francs from a year ago.
It announced August traffic on the Le Shuttle doubled to 304,032 vehicles compared to 145,861 a year ago. Eurostar carried 566,247 people in August, compared to 279,449.
Ponsolle said a decision on its claim against the TransManche Link building consortium could be made early in 1997. The earliest date a shareholders meeting could be convened to vote on a debt accord would also be in the new year.
Morton will be succeeded by Robert Malpas, chairman of Cookson, a British specialist materials manufacturer.
",38
"Shares in French resorts company Club Mediterranee jumped almost 20 percent on Monday as investors welcomed the appointment of the head of Euro Disney to lead the ailing group.
Club Med announced on Friday that it was replacing chairman Serge Trigano with Philippe Bourguignon, head of the Disneyland Paris theme park, and surprised the market with a net loss for the 1995-96 year of 743 million francs ($131.3 million).
""Bourguignon knows the business well. He has credibility...he is probably one of the best guys to choose,"" analyst Thibaut Simonnet at broker Ferri said.
Bourguignon is credited with turning round the fortunes of Disneyland Paris in the last two years after it suffered heavy initial losses since opening in 1992 due to hostile French media reports and an indifferent public.
Club Med shares closed up 21 percent at 431, on volume of 1.3 million shares, while the stock market as a whole was up 0.2 percent.
Bourguignon, who takes up the new post in March, has 14 years' experience at hotels group Accor and gained valuable experience from Euro Disney, Simonnet said.
Simonnet forecast a pretax pre-exceptional profit for Club Med in 1996-97 of 200 million francs and held his ""buy"" recommendation on the company.
That forecast still represented a thin operating margin of 2.5 percent on annual turnover of eight billion francs.
Another French brokerage, Oddo, upgraded the stock to ""overweight"" from ""underweight"" and noted Bourguignon had managed to triple gross operating profit at Euro Disney in three years and boost sales by a fifth.
Oddo upgraded its forecast earnings per share for 1996-97 to 11.1 francs from a previous estimate of 12.3 francs and to 22.7 francs for 1997/98 from 18.5.
Bourguignon steps in at an opportune time as Club Med has set aside 820 million francs in restructuring provisions to pay for the closure of seven holiday villages and 100 head office job losses.
The provisions will make it easier for Club Med to return to profit in 1997, analysts said.
It is simplifying marketing by dropping its mid-range ""Trident"" product and offering only Club Med at the upper end of the market and Club Aquarius at the lower end.
It stands to make some money from the planned sale of a minority stake in an Italian business but will not get anything from disposing of its loss-making cruise liners.
The company still enjoys a strong brand and has a strong financial structure, with an acceptable debt/equity ratio of 60 percent, analysts say.
The expiry of a cross-shareholding pact means the company is open to outside investors.
It remains to be seen how employees react to the arrival of Bourguignon as a professional manager in the place of Trigano, whose family founded the company and ran it as a family business even though it no longer owned Club Med. ($ = 5.659 French Francs)
",38
"France's restructuring of its defence sector and the key role of state-owned Aerospatiale in that process are complicating the change in the European Airbus consortium into a limited liability company, analysts said.
The four national firms in Airbus Industrie are studying the best way to convert the partnership into a faster, more efficient company, better to compete with U.S. rival Boeing Co, which is merging with McDonnell Douglas.
Aerospatiale is not only the French partner in the Airbus passenger plane venture but is also involved in the two deals at the heart of France's defence industry consolidation -- the merger of Aerospatiale and combat plane maker Dassault Aviation and the privatisation of electronics firm Thomson-CSF .
""It is consistent with French strategic thinking that you must first get your house in order, then negotiate from a position of strength,"" said an industry executive.
""Aerospatiale cannot do this today in the Airbus system. It has to have weight behind it. It will have that weight when the Dassault merger is complete,"" he added. DASSAULT MERGER WILL BOOST AEROSPATIALE
The Dassault merger, due to be agreed this year, will add 13 billion francs of annual turnover to Aerospatiale, creating a group with combined sales of 64 billion and giving Aerospatiale greater clout at the Airbus negotiating table.
A banker close to the Airbus talks said Aerospatiale is seen as the weakest among the senior Airbus partners -- British Aerospace (BAe) and Daimler-Benz Aerospace (Dasa). Casa of Spain makes up the fourth Airbus partner.
But Aerospatiale will get an injection of aggressive, private-sector management with the Dassault merger.
Aerospatiale executives complain bitterly that the foreign media does not give them due credit for their industrial restructuring. Their efforts turned the company round to post a 1996 net attributable profit of 812 million francs, after years of losses, and racked up sales of 51 billion francs.
Their exasperation is palpable when they say their public sector tag is seen as a weakness when compared to the private sector BAe and Dasa.
But analysts point out that Aerospatiale was slower in attacking its cost structure and still needs to improve.
BAe underwent drastic pruning in the early 1990s, going from an empire with property, cars and military interests to a group focused on defence and aerospace. It posted 1996 pretax profits of 425 million pounds, on sales of 7.44 billion pounds.
Dasa, although loss-making, has the industrial and financial strength of parent Daimler-Benz AG which has set a management target of a 12 percent return on capital. Dasa posted 1996 turnover of 13 billion marks, making it smaller than BAe and Aerospatiale, but it has huge ambitions for Airbus.
A business consultant said Aerospatiale has excellent programmes, but, using benchmarking techniques, its military projects are 30 percent more costly than those of BAe and Dasa. THOMSON-CSF SALE ENHANCES PROSPECTS
Apart from the Dassault merger, Aerospatiale also holds a key hand in the Thomson-CSF sell-off.
The government has said bidders Alcatel Alsthom and Lagardere will have to take into account Aerospatiale's interests when putting together their offers for Thomson-CSF.
Even though Aerospatiale, as a state-controlled company, cannot take part direcly in the privatisation, it will be affected by the outcome and chairman Yves Michot will give his views to the government on the rival bids.
French newspapers have reported that Michot will have to observe strict neutrality in the contest. But it is clear Alcatel's plans would significantly strengthen Aerospatiale, giving it still greater weight against BAe and Dasa.
If Alcatel won Thomson-CSF, it would create a missiles joint venture between Thomson-CSF and Aerospatiale, and a satellite venture between Alcatel Espace, Aerospatiale and Thomson-CSF.
Lagardere has said it wants a dialogue with Aerospatiale to prepare its bid. Relations between the two firms have been strained as they compete in missiles and satellites.
""The perimeter of Aerospatiale is not yet defined,"" said the industry executive.
The government plans to decide on the Thomson-CSF bids by June 30. AEROSPATIALE NEEDS AIRBUS, WILL MAKE IT WORK
Aerospatiale only stands to gain from the defence moves and is in no hurry to bow to pressures from BAe and Dasa to rush into an Airbus agreement which does not suit its own interests.
Airbus is vitally important for Aerospatiale. Its 38 percent stake in Airbus contributed the biggest slice of 1996 operating profit, 1.175 billion francs, and around 70 percent of sales.
Analysts believe of the big Airbus three, Aerospatiale needs Airbus the most, and BAe and Dasa could, in extremis, walk away if relations broke down irreparably.
BAe has a 20 percent Airbus stake and has bigger military interests, while Dasa's parent Daimler-Benz gets most of its money from the auto business, through Mercedes trucks and cars.
Aerospatiale has, paradoxically, maximalist and minimalist aims for the new Airbus company.
For the near term, Michot takes a cautious approach in the status change, arguing that the present system has proven its worth, winning Airbus a third of the world market, coming out of nowhere in 25 years. A much bigger manufacturing concern would overstretch the management.
In the long term however, Michot would like Airbus to have a military wing, to balance out economic cycles with government contracts. U.S. giant Lockheed Martin has both civil and defence sides, and Boeing will acquire McDonnell's significant military interests in the pending merger.
The Airbus partners said in January they agreed in principle on the change to a single integrated company, in which the new Airbus would own its factories and design offices. Work is going on this year on valuing the assets to be vested in the new firm.
That valuation is complicated as some of the factories mix civil and military programmes, and some plants are efficient while others are uncompetitive. In BAe's case this is made easy as it has a plant for making Airbus wings, and Dasa has a special production line near Hamburg for the Airbus 320 family.
One way of viewing the Airbus negotiations is through the prism of conflicting cultural visions.
""This country (France) has a vision of long-term industrial strategy. It wants to be a world power and be a dominant player in the aircraft industry,"" said the industry executive. Without that vision, Airbus arguably would never have got funds to launch its first plane in the early 1970s.
Set against that long-term strategic view, is the British insistence on short-term returns for shareholders, summed up as ""Let the City decide"".
But Aerospatiale would not have signed the agreement on the Airbus change if it had not meant it, the executive said.
",38
"French engineering group Alcatel Alsthom and missiles-to-publishing conglomerate Lagardere said on Wednesday they had submitted firm and final offers for Thomson-CSF.
British Aerospace Plc said in London it was putting 300 million pound stg in Lagardere's offer while GEC Plc said it had signed memoranda of understanding with both bidders.
The state is selling its 58 percent stake in defence electronics firm Thomson-CSF and had set a midday deadline for the bidders to make their industrial and financial proposals.
The French government, mindful of a threat from U.S. defence mega-mergers and the need to build a national champion before embarking on European consolidation, set sale terms seeking the biggest possible industrial participation around Thomson-CSF.
The government is not expected to take any decision until after the two-round parliamentary election of May 25 and June 1.
Alcatel and family-owned Dassault Industries said they had submitted a joint bid for Thomson-CSF and hoped aerospace group Aerospatiale would join them afterwards if they won.
Alcatel and Dassault, which holds a majority stake in warplane maker Dassault Aviation, said they were committed to increasing Thomson-CSF's size ""by close to 50 percent to create a world leader in defence electronics as well as in the associated civil sectors"".
Dassault is offering to put its Dassault Electronique subsidiary into a joint venture with Thomson-CSF, which would bring significant assets in guidance systems, aircraft and missile electronics to Thomson-CSF.
If Aerospatiale does join up with Thomson-CSF through the Alcatel-Dassault bid, that holds out the possibility of further industrial integration as Aerospatiale is merging with Dassault Aviation, another move vital to the French consolidation.
Alcatel and Dassault said they could finance the acquisition from their own resources without compromising the future or using the resources of Thomson-CSF.
If the joint bid succeeded, it would form a 25-billion franc annual pool for research and development, with major benefits in civil and miltary syngeries, the two companies said.
Lagardere said it had the finances needed to fund the acquisition and an eventual offer to buy out minority shareholders in Thomson-CSF. It would issue a special five billion franc bond convertible into Thomson-CSF shares to help fund the deal, along with its own cash and credit lines.
The bond would be a one-year, eurofranc issue  underwritten by Credit Lyonnais and Dresdner Kleinwort Benson. It would be repaid in cash and Thomson-CSF shares depending on terms of a planned merger between Thomson-CSF and Matra High Technologies and the public offer to minorities.
Lagardere had been the government's favoured bidder for the whole Thomson SA group last year but the independent Privatisation Commission rejected its offer, which included selling the loss-making Thomson Multimedia unit for one franc to Daewoo Electronics of South Korea.
Lagardere's Matra space and missiles businesses have British alliances with British Aerospace Plc and GEC Plc.
The Thomson-CSF sale is being closely watched as France is the last of the four major European arms producers to shake up its industry, a step needed to open the way for new cross-border alliances with partners in Britain, Germany and Italy.
In London, Britain's GEC said it had signed a memorandum of understanding with both candidates bidding for Thomson-CSF. It said it would enter talks to combine some of the business of its GEC-Marconi division with those of Thomson-CSF.
Germany's Daimler-Benz Aerospace (Dasa) has also said it has held talks with the French bidders aimed at possible cooperation.
Thomson-CSF makes military radios, radars, sonars, aircraft, naval and missile electronics, and training simulators. It made a 1996 net attributable profit of 745 million francs on sales of 36.3 billion francs.
",38
"French defence electronics firm Thomson-CSF, soon to be sold by the state, posted 1996 results on Wednesday showing a return to profit after three years of heavy losses.
Thomson-CSF reported a net attributable profit of 745 million francs ($129 million) compared with a net loss of 791 million for 1995. Sales were up 2.2 percent at 36.27 billion.
The return to the black was mainly due to the sale of Thomson-CSF's 19 percent stake in the troubled state-owned bank Credit Lyonnais.
""Thomson-CSF has been able to return to a profitable footing, as the bank no longer weighs on the accounts of the company, which is now completely centred on defence electronics,"" chairman Marcel Roulet told an analysts' meeting.
The state, after a bungled first attempt, is trying to privatise Thomson-CSF as part of a defence industry restructuring which may have an impact on the entire European sector.
Roulet said he expected the terms and conditions drawn up by the government on the privatisation would be published soon. ""It is a question of a few days or a week."" The Privatisation Commission has to vet the terms to allow the sale to go ahead.
French engineering and telecommunications giant Alcatel Alsthom has teamed up with fighter-aircraft maker Dassault Aviation and state-owned Aerospatiale to bid for Thomson-CSF.
Missiles-to-publishing group Lagardere is also bidding, supported by British Aerospace Plc (BAe).
Thomson-CSF said in a statement that operating profit rose 5.6 percent to 2.07 billion francs despite a reduction in military budgets and tougher markets. The improvement was due to better competitiveness following restructuring efforts pursued over a number of years.
The net result was dented by an exceptional charge of 824 million francs, compared with 753 million in the prior year, to cover restructuring costs tied to the shrinking of markets and cost-cutting measures, it said.
Pre-tax pre-exceptional profit rose 12 percent to 2.04 billion francs, reflecting the productivity gains and lower financial charges. Financial costs fell to 27 million francs from 135 million, due to lower interest rates and favourable currency movements.
Consolidated pretax profit was 1.30 billion francs, versus a loss of 437 million, which included a 101 million franc hit from its the sale of its holding in Credit Lyonnais.
The previous three years' losses at Thomson-CSF were essentially due to falls in the value of Credit Lyonnais shares, which were taken on Thomson-CSF's accounts to reflect its equity stake.
Europe, excluding France, contributed more than 10 billion francs in sales for the first time, compared with less than four billion in 1995. ""The European market accounts for 28 percent of the consolidated turnover, against only 10 percent at the end of the 1980s,"" it said, adding this was due to its policy of external growth through acquisitions.
Its holding in profitable semiconductor maker SGS-Thomson contributed 588 million francs, up from 477 million in 1995. Net debt fell to 900 million from 2.3 billion.
With an order book worth more than 67 billion francs at the end of 1996, the firm should see an increase in turnover over last year on a like-for-like basis, it said.
Thomson-CSF stock closed up 1.55 percent at 196 francs, while the market was up 0.55 percent.
",38
"Rival bidders Alcatel Alsthom and Lagardere Group are expected to put in final offers on Wednesday to meet the government's timetable in the privatisation of defence electronics firm Thomson-CSF.
A source close to telecommunications giant Alcatel said on Monday the final offer would confirm the terms of its joint bid with privately-held Dassault Industries.
Alcatel has held talks with Daimler-Benz Aerospace (Dasa) over cooperation if it won Thomson-CSF but these were ""not binding on the French government,"" the source said. Dasa has said it is talking to Alcatel and Lagardere.
But the larger issue is what deals the British heavyweight defence firm General Electric Company Plc (GEC) has discussed with the two French contenders, the source said.
Dasa, while ambitious for a bigger role in European defence, is smaller than GEC, which is Britain's largest defence electronics group and a major rival to Alcatel in world markets.
Alcatel has to be more careful in negotiating with GEC, the source said.
Although the French government ruled out GEC as a candidate in the Thomson-CSF sale, saying it went against national security interests to sell more than 50 percent of the firm to a foreign company, it encouraged Lagardere and Alcatel to talk to GEC in preparing their bids.
Analysts believe GEC knew it would not be allowed to make its own bid but used the opportunity to serve notice that it wants a share of the business plan with whoever wins.
The government's sale terms and conditions are centred on creating a strong group around Thomson-CSF with the widest possible industrial participation and with a European dimension.
""The prospects for restructuring the defence industry in a European context will be taken into account by the government. The two candidates know that,"" Industry Minister Franck Borotra told reporters on Monday.
""Alcatel won't do it at any cost,"" the source close to Alcatel said. While the Thomson-CSF deal is important to developing Alcatel's business, chairman Serge Tchuruk does not want it so badly as to make ""dangerous concessions"".
A source close to Lagardere said neither Lagardere nor Alcatel would bid for Thomson-CSF at any price.
Lagardere has close ties with both GEC and British Aerospace Plc (BAe). It has a satellite joint venture with GEC through Matra Marconi Space and a missile venture with BAe in Matra-BAe Dynamics.
Alcatel is partners with GEC in GEC Alsthom, the power engineering joint venture.
The government has said it would hold to the timetable on the Thomson-CSF sale despite a pending parliamentary election which pushed back the partial privatisation of France Telecom by a month. The state expects to choose the buyer of Thomson-CSF by June 30.
Socialist leader Lionel Jospin, campaigning against the RPR/UDF centre-right coalition, said on April 22 he opposed further privatisations, saying ""if Thomson is to be sold for one franc, honestly that is not what we want to do.""
The government was forced into privatising Thomson-CSF separately from the Thomson SA electronics group when the independent Privatisation Commission threw out last year the government's preferred bid by Lagardere.
Lagardere wanted to buy the whole group for one franc and re-sell the loss-making consumer goods arm Thomson Multimedia for a symbolic one franc to South Korea's Daewoo Electronics.
",38
"The restructuring of France's defence sector and the key role of state-owned Aerospatiale in the process are complicating moves by the European Airbus consortium to become a limited liability company, analysts say.
The four national firms in Airbus Industrie are studying the best way to convert the partnership into a faster, more efficient company able to compete with U.S. rival Boeing Co, which is merging with McDonnell Douglas Corp.
Aerospatiale, the French partner in the Airbus passenger plane venture, is also involved in two deals at the heart of France's defence industry consolidation -- the merger of Aerospatiale and combat plane-maker Dassault Aviation and the privatisation of electronics firm Thomson-CSF.
""It is consistent with French strategic thinking that you must first get your house in order, then negotiate from a position of strength,"" said an industry executive.
""Aerospatiale cannot do this today in the Airbus system. It has to have weight behind it. It will have that weight when the Dassault merger is complete,"" he added.
DASSAULT MERGER WILL BOOST AEROSPATIALE
The Dassault merger, due to be agreed this year, will add 13 billion francs ($2.2 billion) of annual turnover to Aerospatiale, creating a group with combined sales of 64 billion and giving Aerospatiale greater clout at the Airbus negotiating table.
A banker close to the Airbus talks said Aerospatiale is seen as the weakest of the senior Airbus partners -- British Aerospace (BAe) and Daimler-Benz Aerospace (Dasa). Casa of Spain makes up the fourth Airbus partner.
But Aerospatiale will get an injection of aggressive, private-sector management with the Dassault merger.
Aerospatiale executives complain bitterly that the foreign media does not give them due credit for their industrial restructuring which turned the company round to post a 1996 net attributable profit of 812 million francs, after years of losses, and recorded sales of 51 billion francs.
Their exasperation is palpable when they say their public sector tag is seen as a weakness when compared to the private sector BAe and Dasa.
But analysts point out that Aerospatiale was slower in attacking its cost structure and still needs to improve.
BAe underwent drastic pruning in the early 1990s, going from an empire with property, cars and military interests to a group focused on defence and aerospace. It posted 1996 pretax profits of 425 million pounds ($690.3 million), on sales of 7.44 billion pounds.
Dasa, although loss-making, has the industrial and financial strength of parent Daimler-Benz AG which has set a management target of a 12 percent return on capital. Dasa posted 1996 turnover of 13 billion marks ($7.6 billion), making it smaller than BAe and Aerospatiale, but it has huge ambitions for Airbus.
A business consultant said Aerospatiale had excellent programmes, but its military projects were 30 percent more costly than those of BAe and Dasa.
THOMSON-CSF SALE ENHANCES PROSPECTS
Apart from the Dassault merger, Aerospatiale also holds a key hand in the Thomson-CSF sell-off.
The government has said bidders Alcatel Alsthom and Lagardere will have to take into account Aerospatiale's interests when putting together their offers for Thomson-CSF.
Even though Aerospatiale, as a state-controlled company, cannot take part directly in the privatisation, it will be affected by the outcome and chairman Yves Michot will give his views to the government on the rival bids.
French newspapers have reported that Michot will have to observe strict neutrality in the contest. But it is clear Alcatel's plans would significantly strengthen Aerospatiale, giving it more weight against BAe and Dasa.
If Alcatel won Thomson-CSF, it would create a missiles joint venture between Thomson-CSF and Aerospatiale, and a satellite venture between Alcatel Espace, Aerospatiale and Thomson-CSF.
Lagardere has said it wants a dialogue with Aerospatiale to prepare its bid. Relations between the two firms have been strained as they compete in missiles and satellites.
""The perimeter of Aerospatiale is not yet defined,"" said the industry executive.
The government plans to decide on the Thomson-CSF bids by June 30.
AEROSPATIALE NEEDS AIRBUS, WILL MAKE IT WORK
Aerospatiale stands to gain from the defence moves and is in no hurry to bow to pressures from BAe and Dasa to rush into an Airbus agreement which does not suit its own interests.
However, Airbus is vitally important for Aerospatiale. Its 38 percent stake in Airbus contributed the biggest slice of 1996 operating profit, 1.175 billion francs, and around 70 percent of sales.
Analysts believe that of the Airbus big three, Aerospatiale needs Airbus the most, and that BAe and Dasa could walk away if relations broke down irreparably.
BAe has a 20 percent Airbus stake and has bigger military interests, while Dasa's parent Daimler-Benz gets most of its money from the auto business, through Mercedes trucks and cars.
Aerospatiale has, paradoxically, maximalist and minimalist aims for the new Airbus company.
For the short term, Michot argues that the present arrangement with Airbus has proved its worth, winning a third of the world market. A much bigger manufacturing concern could overstretch the management, it reasons.
In the long term however, Michot would like Airbus to have a military wing, to balance out economic cycles with government contracts.
The Airbus partners said in January they agreed in principle on the change to a single integrated company, in which the new Airbus would own its factories and design offices. Work is going on this year on valuing the assets to be vested in the new firm.
That valuation is complicated as some of the factories mix civil and military programmes, and some plants are efficient while others are uncompetitive.
One way of viewing the Airbus negotiations is through the prism of conflicting cultural visions.
""This country (France) has a vision of long-term industrial strategy. It wants to be a world power and be a dominant player in the aircraft industry,"" said the industry executive. Without that vision, Airbus arguably would never have got funds to launch its first plane in the early 1970s.
Set against that long-term strategic view, is the British insistence on short-term returns for shareholders, summed up as ""Let the City decide"". ($ = 5.790 French Francs) ($ = 0.615 British Pounds) ($ = 1.716 German Marks)
",38
"The board of utilities group Lyonnaise des Eaux, involved in merger talks with holding company Cie de Suez, was due to meet on Wednesday afternoon to approve the 1996 accounts, a company spokeswoman said.
Suez and Lyonnaise are negotiating a merger which could put assets of the cash-rich holding company at the disposal of the utilities company with global ambitions.
Lyonnaise will publish its results on Thursday morning, which analysts expect to show net attributable profit of between 1.0 and 1.5 billion francs, after a 1995 profit of 906 million.
But more importantly, the market is hungry for details of the merger, specifically the financial terms and the industrial strategy, analysts said.
The boards have to address scepticism over whether there really is an industrial sense to the merger, or whether the deal is no more than a glorified capital increase for Lyonnaise through Suez, which owns a 16.8 percent stake in Lyonnaise.
Some of the potential industrial integration may have been curtailed with undertakings that Suez's indirectly-held services subsidiary Tractebel will be kept independent in Belgium.
And if this is to be a pure financial injection, a payment of a Suez special dividend to shareholders before any merger may erode that benefit.
""This is a major transaction. The objectives have to be clear,"" said an analyst. ""There has to be a clear strategy, there must be an industrial logic behind this link-up,"" he added.
So far the market has fed on rumours and speculation on a share swap of two Suez shares for every one Lyonnaise. Some analysts believe the merger makes sense in general terms, but want to know what the combined group would look like in detail.
""Does one plus one make one-and-a-half or two?"" asked the analyst. ""Vague talk of synergies is not enough.""
Another analyst wanted to know how the operating units will be brought together, what subsidiaries will be sold and how the proceeds will be used to develop the group.
Lyonnaise has activities in water distribution, waste treatment, energy production, construction and communications.
Suez has sold its Banque Indosuez investment bank and property assets to focus on providing services to local authorities, mainly held in its Tractebel unit.
The two groups have performed weakly throughout the nineties and have lacked a strategy, said the second analyst. The new combined company must show it has a direction and can provide a return to shareholders.
Investors in Suez stock have effectively lost a third of their money if they bought shares in 1987 when the company was privatised at 317 francs per share, he said.
Lyonnaise, saddled by a 1990 purchase of the Dumez construction group and property losses, has shown a poor return on equity of five or six percent, a rate bettered by an investment in bonds, he added.
Suez stock was up 0.35 percent at 286.90 francs at 1100 GMT, while Lyonnaise was down 1.26 percent at 547 francs.
Some of the questions being asked are, what will Suez do with units unrelated to services, like its Sofinco consumer credit house? Will Lyonnaise keep its loss-making construction firm GTM-Entrepose ?.
How fast will Suez pursue its disposal plan for financial assets and how will the cash be invested?
Suez said on Tuesday it would pay an unspecified special dividend in June to reflect capital gains on the sale investment bank Banque Indosuez.
A big Suez shareholder, the Saint-Gobain glass-making company, called on Tuesday for a 10 percent payment on Suez's financial assets estimated at a total 34 billion francs. Total Suez assets are estimated at 50 billion, including Tractebel.
Suez said on Tuesday that its board was unanimously in favour of a merger with Lyonnaise. Both the Lyonnaise and Suez boards will have special meetings on April 11 to dicuss the terms of the merger.
",38
"Rival bidders in the privatisation of French defence electronics firm Thomson-CSF will need to woo planes-to-missiles group Aerospatiale to stand a chance of winning the deal, analysts said.
France is selling Thomson-CSF as part of a defence industry restructuring which will affect state-owned Aerospatiale's business and the government has said it will ask Aerospatiale's chairman for his opinion about the offers.
The government on Tuesday said it had ruled out Aerospatiale from bidding for Thomson-CSF either on its own or as part of a group because it is a public sector company already.
A defence ministry official said on Thursday that if Aerospatiale, as a state-owned firm, had entered the bidding it would have meant ""the state upsetting the equitable handling of the privatisation procedure"".
The government, through Aerospatiale, would have been throwing its weight behind one of the bidders, he said.
Engineering group Alcatel Alsthom had enlisted Aerospatiale, and family-owned Dassault Industries, in its pitch for Thomson-CSF, to rival that of books-to-missiles group Lagardere.
Because Aerospatiale has close ties with Thomson-CSF on a number of programmes, it would be directly affected by the sale and the government said it would consult Aerospatiale chairman Yves Michaud on offers for Thomson-CSF.
Lagardere responded to the news by asking for a formal process to gain access to financial and industrial information on Aerospatiale to allow it to mount its bid for Thomson-CSF.
But an analyst at a large French brokerage said relations between Lagardere and Aerospatiale were bad and the chances of Alcatel winning Thomson-CSF had improved.
""The chances of Lagardere (getting Thomson-CSF) are less today,"" he said.
Aerospatiale and Lagardere compete directly in the same markets and products, notably in missiles and satellites.
Lagardere has long considered it and not Aerospatiale should be the French centre for a European consolidation in missiles and satellites.
Lagardere has tried to persuade Daimler-Benz Aerospace (DASA) to merge its missiles and satellites with its own joint ventures with British companies, instead linking up with Aerospatiale.
Aerospatiale said it was ""pleased that the government, in its role of shareholder, will consult Aerospatiale's chairman on the parts of the offers for Thomson-CSF which will affect Aerospatiale.""
Alcatel Alstom declined comment.
Newspaper La Tribune reported earlier this month that Alcatel, Dassault Industries and Aerospatiale had agreed a plan to carve up Thomson-CSF's capital between them if Alcatel won the bidding.
In that plan, Dassault would sell its holding in aircraft avionics firm Dassault Electronique to Thomson-CSF, and Thomson-CSF would sell its estimated four billion francs worth of missiles activities to Aerospatiale, boosting its presence in tactical missiles to better rival Lagardere's Matra/BAe Dynamics joint venture with British Aerospace Plc.
",38
"The French government set out on Wednesday the procedure for privatising defence electronics company Thomson-CSF, including minimum financial terms and conditions.
The terms and conditions mark the government's second attempt to sell Thomson-CSF through a private sale after a first effort failed last year when the state tried to sell it as part of the Thomson SA electronics group.
The successful bidder or group would become the majority owner by acquiring more than 50 percent of Thomson-CSF's capital and voting rights, the finance ministry said in a statement.
The government said on Tuesday it hoped to pick the winning bidder by June 30.
Firms bidding must have at least five billion francs ($868 million) in equity capital and the same amount in 1995 turnover in non-consumer and defence electronics, it said on Wednesday.
The government repeated it would hold a ""golden share"" which gives it an effective veto over changes in ownership to protect the state's strategic defence interests.
The statement said that in the case of a group bid, the lead company must plan to hold more than a third of Thomson-CSF's capital and voting rights.
Bidders must declare themselves by 1100 GMT on March 28. The finance ministry would tell the candidates whether they were eligible within five working days, the ministry said.
Offers must be delivered by 1100 GMT on May 7 and bidders must make an irrevocable offer to buy Thomson-CSF within four months of that date. In a group bid, the partners must set out planned individual holdings and the contractual relations that exist between the companies, the statement said.
Missiles-to-publishing conglomerate Lagardere indicated in a statement that it was likely to make a bid. But it said it would need information on French state-owned defence and aviation group Aerospatiale.
Thomson-CSF has a number of joint projects with Aerospatiale, which the government ruled out as a sole or joint bidder on Tuesday due to its state ownership.
Engineering group Alcatel Alsthom had allied itself with Aerospatiale and combat plane maker Dassault Aviation to bid for Thomson-CSF.
""Like all the candidates, we are ready to take into account the business electronics and defence activities of Aerospatiale in our industrial plan, with the sole concern, for us, of strengthening Thomson-CSF,"" Lagardere said.
This was consistent with Lagardere's approach to the Thomson-CSF sale and the spirit of dialogue that it wanted to develop between itself and Aerospatiale, it said.
Lagardere wanted to know how it would gain access to industrial and financial information on Aerospatiale which would be indispensable for a serious bidder, it added.
The Privatisation Commission thwarted the government's first attempt to sell Thomson SA last year to Lagardere, which in turn wanted to sell the loss-making Thomson Multimedia unit to Daewoo Electronics of South Korea for a symbolic one franc.
Thomson-CSF's capital consists of 119.5 million shares, of which 41.7 percent is in public hands. The rest is owned by Thomson SA and Sofivision, with the state holding one share. Thomson SA is state-controlled.
Some 6.65 million Thomson-CSF shares will be reserved for employees and former staff.
The privatisation is part of the state's aim to restructure the defence industry around a few ""national champions"" as a step towards wider European consolidation.
Lagardere said the exclusion of Aerospatiale showed a concern for equitable treatment and reduced Alcatel's industrial plans for Thomson to the ""correct proportions"".
Thomson-CSF makes radars, tactical missiles, radios and integrated complex systems as a defence contractor.
",38
"French defence electronics firm Thomson-CSF, soon to be sold by the state, posted 1996 results on Wednesday showing a return to profit after three years of heavy losses.
Thomson-CSF reported net attributable profit of 745 million francs ($129 million) compared with a net loss of 791 million for 1995. Sales were up 2.2 percent at 36.27 billion.
The government, after a bungled first attempt, is trying to privatise Thomson-CSF as part of a defence industry restructuring which could have an impact on the entire European sector.
French engineering and telecommunications giant Alcatel Alsthom has teamed up with fighter-aircraft maker Dassault Aviation and state-owned Aerospatiale to bid for Thomson-CSF.
Missiles-to-publishing group Lagardere is also bidding, supported by British Aerospace Plc (BAe).
Thomson-CSF said in a statement that operating profit rose 5.6 percent to 2.07 billion francs despite a reduction in military budgets and tougher markets. The improvement was due to better competitiveness following restructuring efforts pursued over a number of years.
The net result was dented by an exceptional charge of 824 million francs, compared with 753 million in the prior year, to cover restructuring costs tied to the shrinking of markets and cost-cutting measures, it said.
Pre-tax pre-exceptional profit rose 12 percent to 2.04 billion francs, reflecting the productivity gains and lower financial charges. Financial costs fell to 27 million francs from 135 million, due to lower interest rates and favourable currency movements.
Consolidated pretax profit was 1.30 billion francs, versus a loss of 437 million, which included a 101 million franc hit from its the sale of its holding in the troubled state-owned bank Credit Lyonnais.
Thomson-CSF's previous three years' losses were essentially due to falls in the value of Credit Lyonnais' shares, which were taken on Thomson-CSF's accounts to reflect its equity stake.
Europe, excluding France, contributed more than 10 billion francs in sales for the first time, compared with less than four billion in 1995.
""The European market accounts for 28 percent of the consolidated turnover, against only 10 percent at the end of the 1980s,"" it said, adding this was due to its policy of external growth through acquisitions.
Its holding in profitable semiconductor maker SGS-Thomson contributed 588 million francs, up from 477 million in 1995.
Net debt fell to 900 million from 2.3 billion.
With an order book worth more than 67 billion francs at the end of 1996, the firm should see an increase in turnover over last year on a like-for-like basis, it said.
The stock market responded to the figures by marking the shares higher, welcoming the operating profit which was in line with forecasts even though the net result was below the one billion franc or so some expected.
As the lower-than-expected net attributable profit included restructuring charges, the market viewed this positively, one broker said.
Thomson-CSF stock was up 0.78 percent at 194.5 francs at 1250 GMT, while the market was down 0.19 percent.
($ = 5.778 French Francs)
",38
"Labour unions at beleaguered French carmaker Renault SA called on Monday for a one-hour strike at all its factories in France, Belgium and Spain amid reports that the company will announce big job cuts.
Renault said chairman Louis Schweitzer would this week meet representatives of a Belgian assembly plant, closure of which has already been announced, but declined comment on reports that 3,000 jobs will also go in France this year.
The Belgian government and the northern Flanders region also said they would sue Renault over procedural issues after European Commissioner Karel Van Miert said the group had not followed European directive on consulting unions.
Eight unions from Belgium, France and Spain called the one-hour strike and said they planned to take legal steps to thwart the decision to close the Belgain Vilvoorde plant.
""(We call) for a one-hour strike at all Renault sites in Belgium, Spain and France on March 7 during the day of action in the entire Belgian car industry against the Vilvoorde closure,"" the unions' statement said.
A Renault spokeswoman said Schweitzer had agreed to meet staff this week at the Belgian plant, where 3,100 jobs will go, but the time and place had not been set.
On Thursday he will attend a works council meeting in Paris to face angry French workers who fear job cuts in on top of the Belgian closure.
The Renault spokeswoman had no comment on newspaper reports that it was preparing to announce a plan to cut about 3,000 jobs in France this year. But an industry source said somewhat fewer than 3,000 posts would go in 1997.
Renault's troubles were highlighted by statistics showing new car sales in France slid 24.6 percent last month after tumbling 33.6 percent in January.
The two-month drop reflected the market's weakness since a French state rebate programme, which had underpinned demand, ended in September.
Faced with declining demand and gross overcapacity, Renault is being forced to cut production but must do so without French government support.
With French unemployment at 12.7 percent and a general election due next year, the centre-right government of Prime Minister Alain Juppe has refused to back a plan to cut 40,000 jobs in the car industry over six years.
French radio and newspapers gave blanket coverage to the labour dispute, with Le Figaro newspaper quoting the economy minister for Belgium's Flemish region as saying the closure was ""an act of economic terrorism"".
Thousands of workers from Renault Belgium, supported by steelworkers, marched through Brussels to protest against the shutdown which is expected to save 825 million French francs ($144 million) a year. Belgian workers called for a Renault boycott.
But on the French stock market, brokers said the company had to reduce output and restructure. Renault stock was down 4.02 percent at 141 francs at 1243 GMT, but that was due to profit-taking as the shares have risen 20 percent since last Wednesday.
""The big problem in the auto sector is overcapacity, a problem which no-one has dared to touch for 20 years for obvious labour reasons,"" said a broker. ""The fact that Renault is tackling it is a good sign.""
Renault shed 1,641 jobs last year and 1,735 in 1995.
Newspapers said charges for the job-cutting plans, on top of an operating loss at the group estimated at two billion francs or more, would result in a full year loss of more than five billion francs for the group in 1996.
The car firm was privatised in stages in 1994 and 1996.
Renault has four assembly plants in France, two in Spain, one in Portugal and one in Slovenia. ($ = 5.718 French Francs)
",38
"French pharmaceuticals and beauty products firm Sanofi on Tuesday posted a 1996 net profit rise of 11 percent, helped by a return to profit in the beauty sector in the second half of the year.
The company announced net earnings for the full year 1996 of 1.74 billion francs ($308 million), compared to 1.58 billion a year ago, on sales of 23.65 billion, which were up three percent.
Earnings per share rose eight percent to 16.80.  Analysts had been expecting an average earnings per share figure of 17.3 francs, according to Edinburg Financial Publishing, and 17.1 francs according to Jacques Chahine Finance in Paris.
The year was ""satisfactory"", finance director Jean-Claude Leroy told a news conference.
It was marked by the continued high level of research efforts. That is right in line with our policy for the short term which is progressing nicely and preparation for the long term through research,"" he added.
Healthcare sales rose five percent but turnover in the beauty segment fell by the same percentage, he said.
The overall profit rise was helped by ""major success in the clinical development of new products in the healthcare sector,"" the group said.
There had been very weak economic growth in Europe, with the exception of Britain, and that had resulted in increased competition, Sanofi said in a statement with its results.
In the beauty segment, selective distribution of luxury goods was hit by that sluggish consumption and sales for the sector fell five percent to 3.8 billion francs on a like-for-like basis from 1995. There were no new beauty product launches last year.
But the sector, after a 74 million loss in the first half, posted operating profit for the second half close to that of the year-ago period. In the full year operating profit was 236 million francs, against 331 million in 1995.
Yves Rocher posted growth in both sales and net earnings while Nina Ricci reported declines in sales and earnings due to difficulties in the industry, Sanofi said.
Leroy said sales of Yves Saint Laurent fell two percent to 2.8 billion francs, while Roger & Gallet's turnover was under 300 million francs. Sales from Oscar de la Renta were above the 300 million level while Van Cleef & Arpels was close to that.
In healthcare, pharmaceutical sales continued to grow in all geographic areas, except in the United States where there was competition from generic products. Diagnostics saw sales up four percent, hindered by difficult market conditions.
Healthcare operating profit rose 5.5 percent to 3.7 billion francs after taking in account higher research and development spending. Research accounted for 16 percent of group turnover.
The year was marked by relative stability of the French franc in comparison with other major world currencies, with the exception of the Japanese yen.
Net debt to equity ratio at the end of 1996 was 11 percent versus 13 percent a year ago. Cashflow rose 12 percent to 3.1 billion francs.
The group, 38-percent held by oil major Elf Aquitaine, had previously forecast a 10 percent rise in 1996 net profit. It gave no forecast for 1997 profit and the 1996 dividend would be set at the board meeting due on March 20.
($ = 5.646 French Francs)
",38
"Holding company Cie de Suez  and utilities group Lyonnaise des Eaux SA are expected to announce a merger deal on Friday, effectively ending the independence of the company created in the 19th century to build the Suez Canal.
The boards of the two companies will meet on Friday to approve terms of the link-up, which has already received the backing of the Lyonnaise board.
Lyonnaise chairman Jerome Monod said last Thursday that the merger with Suez was an excellent plan but the terms had not yet been fixed.
However, a source close to the merger talks told Reuters on Thursday that the share parity to be used would be 41 Suez shares for every 20 Lyonnaise shares.
Suez stock was down 0.04 percent at 282.90 francs ($48.79) on volume of 171,495 shares, while Lyonnaise was down 0.37 percent at 540. The market was off 0.63 percent.
Suez would also pay out either 3.6 or 3.8 billion francs for the 1996 dividend, the source added.
The deal would mark the end of autonomy for Suez, which fell victim in the 1990s to a troubled property market.
It was founded in 1858 by Ferdinand de Lesseps to build and operate the property asset which symbolised the glory of the French Empire and engineering, the Suez Canal.
Discontented Suez shareholders forced out the previous chairman, Gerard Worms, after the group reported a four billion franc ($690 million at current rates) loss in 1995 and installed Gerard Mestrallet to turn round the sprawling conglomerate.
Mestrallet quickly sold crown jewels such as investment bank Banque Indosuez and fund manager Gartmore. The ailing real estate portfolio was also disposed of, leaving Suez with more than five billion francs in cash.
But he held on to a 63 percent stake in Belgian holding company Societe Generale de Belgique (SGB) which groups some choice industrial and financial assets.
SGB welcomed Suez as a white knight in the late 1980s when it was being stalked by Italian businessman Carlo de Benedetti, who saw it as ripe for takeover.
Now it looks as if SGB could be the saviour for Suez. Stock market analysts say that if there is any industrial logic in the merger, it lies in Mestrallet's focus on the utilities sector and abandoning financial services.
SGB has a 37 percent stake in Tractebel, which specialises in electricity, gas, water and environmental services. It has operations in cable television, property, infrastructure and industrial installations -- areas which overlap with Lyonnaise.
Lyonnaise, under veteran chairman Monod, has set its sights on international expansion in utilities but lacks the financial muscle to fund that growth.
A link-up would inject fresh capital from Suez's cash hoard -- even after the special dividend to sweeten Suez shareholders on the merger.
Monod said last week that a merged Suez/Lyonnaise would be a multi-service company on a global scale and capable of boosting profits and cashflow.
Monod said earlier this week, he expected Mestrallet to head the executive board of the merged company while Monod himself would head the supervisory board and handle strategy. ($ = 5.797 French Francs)
",38
"A debt deal to refinance Channel Tunnel operator Eurotunnel SA /Plc may help management and bank lenders but leaves little value for the long-suffering shareholders, debt specialists said on Thursday.
Eurotunnel said on Thursday it would send prospectuses to shareholders next month giving details of a restructuring of its 70 billion francs ($12 billion) of bank debt and hoped to get approvals at a meeting in Paris by July 10.
It earlier announced a 1996 net loss of 6.1 billion francs, one billion francs less than a year ago.
One debt specialist said Eurotunnel technically has no shareholder value as its debts wiped out its ""enterprise value.""
Eurotunnel currently has issued shareholders capital of some 10 billion pounds, which it plans to halve to take into account its past losses. But the debt stock will remain intact, except for one billion pounds which will be swapped for shares.
A second debt expert said the complex debt deal takes none of the debt away but pushed out payments further into the future, giving time for management to stabilise the company.
""The restructuring works in that it solves the banks' problems by turning current debt into future potential paid debt,"" he said. ""It solves the company's problem as it allows management to continue without defaulting,"" he added.
But the problem for shareholders is the deal ""mops up all the free cashflow for the short, medium and long-term,"" he said. There is no debt write-off and the loans will be simply restructured, using instruments which extend maturities, allow extra borrowing and rolling up interest payments. However, interest margins will be lowered.
""The restructuring may leave shareholders with 50 percent of the company but 50 percent of nothing is still nothing,"" he said. ""Based on common-sense projections, it is hard to see how the equity holders are going to get anything,"" he said.
The debt/equity swap will leave equity holders with 55 percent of Eurotunnel's capital.
But first Eurotunnel must get approvals from both its 225-strong bank loan syndicate and shareholders.
Christian Cambier, chairman of the Eurotunnel shareholders association, said he has four conditions for approving the deal and would be seeking shareholder proxies to get a 34 percent blocking vote at the July meeting.
The conditions are: he wants the banks to approve the restructuring deal before the shareholders give their approval, both tunnel bores to be operating by May 15, freight service on the Shuttle to be resumed before June 15 and an extension of the tunnel concession by the French and British governments.
""I am confident we will refuse approval if the conditions are not met,"" he said. Cambier's association held proxies for 32 percent of the shareholder votes at last year's annual shareholders' meeting.
Eurotunnel is running a reduced service following a major fire on November 18 which forced the shut-down of part of the ""south"" tunnel bore and halted the freight Shuttle operation.
Another group representing Eurotunnel small shareholders, Adacte, said in a statement it maintained its opposition to the restructuring which it said gives too much to the banks and exclusively hit the shareholders by diluting the capital.
Adacte wants to postpone the shareholders meeting until the company can show a full year of continuous commercial service.
Eurotunnel has not published its cashflow forecasts to show these will cover debt service and capital expenditure needs. Although shareholders get no rights to the cashflow, they are being asked to approve a deal which dilutes their holdings.
""Last year's shareholders meeting was a rehearsal,"" said Sophie L'Helias, a laywer who helped organise the proxy solicitation for the 1996 shareholders meeting. ""This year it is the real thing. Shareholders will have to decide what is in their best interests,"" she added.
The second of the debt specialists said a rejection of the debt accord would lead to bankruptcy, which was not attractive but could leave it to a commercial court to decide whether some of the debt should be written off. ($ = 5.790 French Francs)
",38
"The king is dead, long live the king.
Chinese President Jiang Zemin has for seven years been designated to step into the shoes of paramount leader Deng Xiaoping, and since Deng's death last week he has done so with almost foolhardy alacrity, analysts said on Sunday.
Western diplomats say they have been picking up signals for several months that Jiang has been trying to carve out his own place in history, distancing himself from his mentor, Deng, who died last Wednesday in Beijing aged 92.
But Chinese political analysts warn that Jiang is playing for major stakes against players who are not short of chips and who may have no qualms about cheating.
""Jiang Zemin is not a strongman. He's no Mao Zedong and he's no Deng Xiaoping,"" said one Chinese political analyst. ""He can't do whatever he likes.""
On the second day of official mourning after Deng's death, Jiang appeared to have taken a bold first step in the shadowy political minuet danced by those who rule China from the highest echelons of the Communist Party.
Jiang vowed even greater successes than those achieved by Deng in pushing ahead with the diminutive patriarch's capitalist-style reforms.
""Jiang Zemin committed a political blunder,"" said one well-connected political analyst. ""He said it too early. He could have waited.
""He's giving his political rivals something with which to attack him,"" he said.
""Deng Xiaoping had qualities that differed from Mao Zedong. But what does Jiang Zemin have?"" he asked.
That question may be on the lips not only of political analysts but of Jiang's rivals to rule China.
Since imperial China, the transfer of the ""mandate of heaven"" to a new emperor -- or party chief -- has rarely been smooth. The latest power shift so far has been seamless, but upheavals cannot be ruled out, analysts said.
In recent days, Jiang has come under veiled attack from leftist hardliners who are nostalgic for Mao's authoritarian rule and who see Deng's death as an opportunity to push their conservative policies.
Jiang, 70, must now confront his own mortality and fend off other aspirants to power, among them Qiao Shi, the former security tsar who now heads parliament, economic supremo Zhu Rongji and Premier Li Peng.
Jiang appears strong, after amassing the top jobs in the party, the government and the three-million-strong armed forces. But analysts say his opponents are well-placed to expose his weaknesses.
""For Jiang Zemin right now, he is much in the running,"" said one Western diplomat. ""He has especially in the last year made a very decisive break from being under Deng's shadow.
""He had been always very cautious to keep within Deng's policy line,"" he said. ""But in the past year, he has significantly defined himself as someone who is very separate from Deng.""
He may have been over-ambitious in taking all of China's top three positions.
The only other communist official to hold those three posts was Mao's chosen successor, Hua Guofeng, a colourless rural bureaucrat who was deposed within two years by Deng.
As one of the 459 members of Deng's Funeral Committee, Hua is expected to make a rare appearance at the memorial rites on Tuesday, a poignant reminder to Jiang -- who is expected to deliver the eulogy -- of what happens to those who lose out in a power struggle in China.
",14
"China's President Jiang Zemin has emerged to rule China after seven years in waiting as heir apparent to Deng Xiaoping and, at 70, among his most pressing tasks will be to identify his own successor.
Diplomats said finding an heir could be crucial for Jiang if he is to ward off attacks from ambitious younger men or from power-hungry elders who want to run the show from behind a bamboo curtain -- the means chosen by China's Empress Dowager 100 years ago.
""Jiang Zemin, who while Deng Xiaoping was alive was the young successor, has become at the moment of Deng's death the incumbent leader who is immediately faced with a succession crisis,"" said Australian Sinologist Geremie Barme.
China's leadership has carefully displayed a united front since Deng died on Wednesday aged 92.
China-watchers say this may be a facade.
""It'll be like a duck swimming -- on the surface it'll be calm but underneath it'll be turbulent,"" said one Chinese analyst, quoting a Chinese proverb.
In imperial China, the transfer of the ""mandate of heaven"" to a new emperor was rarely smooth. While the latest power shift so far has been seamless, analysts said later upheavals could not be ruled out.
Jiang must now confront his own mortality and fend off other aspirants to power, among them Qiao Shi, the former security tsar who now heads parliament, economic supremo Zhu Rongji and Premier Li Peng.
He will also face assault on his authority from the last two surviving veterans of Deng's generation, former president Yang Shangkun, 89, and former head of parliament Peng Zhen, 95, whose communist credentials are second only to those of Deng.
In a system where Deng held supreme power until he drew his last breath -- even though he retired from his last post in 1990 and never held a top job -- political pedigree and traditional respect for age rank high.
Political acumen will be crucial.
In the seven years since he was launched into China's top job, Jiang has toiled to make his position unassailable, battling to boost support while picking his way through the political minefield at the top of the party.
Analysts say he certainly now ranks as first among equals in a society that finds itself without an all-powerful strongman for the first time this century, but he may have tried too hard.
""Unlike Deng Xiaoping, Jiang has shown himself to be an unwise political strategist for he has, in an unprecedented move in post-imperial Chinese history, claimed and maintained control of all three major arms of power,"" Barme said.
""It is strategically suicidal,"" he said. ""It is not wise to be front man in everything.""
Analysts said the time may have come for Jiang, well above the official retirement age of 65, to act quickly.
""If he was a wise leader, he would quickly manoeuvre himself into a position where he could appoint a successor who could carry out his legacy -- just as Deng appointed a successor,"" Barme said.
""So Jiang is faced with the urgent task of devolving power to younger leaders, but may not have the wisdom to carry out such a strategic reformulation of his position"".
Diplomats agreed that Jiang's amassing of top jobs could hurt rather than help his survival after Deng.
His most immediate challenge comes from Premier Li Peng, who completes his second and final term next March, but whose future post must be decided, albeit in secret, at the crucial 15th Party Congress in October.
Li wants another job. He wants to be president -- or better still head of the party -- and he can argue that Jiang should give up at least one of his jobs, Chinese political analysts say.
But Jiang cannot afford to give up his job as head of the party, and doesn't want to stop being president. Therein lies the future power struggle.
""Jiang Zemin enjoys the trappings of power,"" said one Western diplomat. ""He likes the pomp and ceremony, the fanfare and red-carpet treatment. He likes to bask in the limelight.
""That is a reason why the Li Peng question is so problematic,"" he said.
""If Jiang were willing to give up the presidency then the retirement of Li Peng from the premiership would not create so many problems.""
",14
"When China wanted to hide the death of an emperor on the road 2,000 years ago it filled his carriage with fish to disguise the smell.
Now it uses enigmatic language to throw a smokescreen around the state of its leaders' health.
Paramount leader Deng Xiaoping, who remains China's most powerful leader even though he formally retired from his last official post in 1990, is 92 and frail, and has not been seen in public for more than three years.
China's Communist Party leaders have shrouded Deng and his health in a veil of secrecy, issuing only terse statements saying he is as well as can be expected for a man of his advanced years, or that there has been ""no big change"".
""This is Chinese culture,"" said one Western diplomat. ""The emperor can't be seen to be dying until he actually dies.""
The power struggle on the death of a Chinese emperor -- or communist strongman -- has traditionally been bloody, and analysts say the departure of Deng is unlikely to be an exception.
When China's first emperor, Qin Shi Huangdi, died while travelling in the south in 210 BC, his prime minister filled the emperor's carriage with fish for two weeks to hide the smell of the rotting corpse, fearing a power struggle before he could reach the capital.
China's communist leaders will probably not conceal the death of Deng for as long as two weeks -- the death of Mao Zedong in 1976 was announced within 12 hours of his passing.
But they are doing their utmost to prevent hard information on any deterioration in Deng's health from reaching the 1.2 billion Chinese whose fate could hang in the balance.
The instinct for self-preservation and a Chinese abhorrence of any talk of death may be two motivations behind the secrecy of Deng's anointed successor, Communist Party chief and state president Jiang Zemin, and his colleagues.
""There is always a nexus between the health of the nation and its leader,"" said a Western sinologist who declined to be identified. ""In a culture so concerned with life and longevity... death is the ultimate horror.""
One Chinese analyst agreed.
""In China's current system, the fate of the nation depends on the fate of the leader,"" he said.
""They are not only afraid that news that Deng is close to death could spark a really fierce power struggle, but they also worry about public instability,"" he said.
Deng is not the only powerful communist veteran of Mao's generation who still lives, and any elder who outlives Deng could step into his shoes as kingmaker and force a power struggle around Jiang.
Most diplomats say Jiang has already consolidated his position as Deng's successor in the party, government and military and say major blood-letting is unlikely after Deng's death. Jiang has even disbanded Deng's personal office.
""I don't think it's going to come as a shock to anybody when he finally does pass away,"" another Western diplomat said.
""It's not going to really mean a big shake-up in the leadership here or tanks rolling down the street,"" she said.
Still Beijing prefers to keep Deng's situation a secret. China's communist rulers inherit a system of based on veneration for age.
""It is highly disrespectful to the leader to discuss his health in public,"" said the Western sinologist.
",14
"The deteriorating health of China's paramount leader Deng Xiaoping has forced Communist Party chief Jiang Zemin and other leaders to cut short provincial trips to return to Beijing, sources said on Monday.
Party chief and state president Jiang returned at the weekend from a visit to the communist revolutionary base of Ganzhou in central Jiangxi province, said one Chinese source close to the party.
Premier Li Peng also flew back to Beijing at the weekend, cutting short a tour of the booming, southern province of Guangdong, said the source, who asked not to be identified.
""Jiang Zemin and Li Peng cut short their trips and rushed back to Beijing because Deng Xiaoping's health was deteriorating,"" the source said.
""They went to see Deng...over the weekend,"" the source said. ""His health is not looking good.""
Ninety-two-year-old Deng, whose policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded compound behind the Forbidden City of China's emperors in central Beijing.
Diplomats have said one barometer of Deng's health in China's highly-secretive system is the travel of top leaders and close family members, with few willing to be out of town or abroad if Deng were close to death.
Chinese sources have reported increasing rumours in Beijing in the past few days that Deng's health may be failing.
Chinese officials say there is little change and he is all right for a man of his age.
""I think, for someone of that advanced age, the state of his health should be described as all right,"" said a Chinese Foreign Ministry spokesman last week at a meeting of European and Asian foreign ministers in Singapore.
Hong Kong's Apple Daily newspaper reported at the weekend that the architect of China's sweeping economic reforms had been rushed to hospital on Thursday after a massive stroke that followed an earlier, mild stroke.
Rumours about Deng's health surface periodically and Hong Kong stocks tumbled last Friday on one rumour.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival when he visited Shanghai and appeared frail and faltering. He is now believed to be in fragile health and with fading lucidity.
China's elderly leaders exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up power networks.
State-run Chinese media have rarely carried reports on Deng since he vanished from public view, partly because of his failing health and his own desire to retire to play a behind-the-scenes role.
Deng retired from his last official position in 1990 and his only post is honorary chairman of China's Bridge Association, a title that reflects his passion for the card game.
Deng was in the public eye at the start of the new year when state television ran a 12-part documentary on his life, but without details of his present circumstances and without interviews with his wife or children.
Western diplomats say the longer Deng lingers the less impact his death will have on the delicate balance of power at the top of China's ruling Communist Party.
",14
"China's most powerful man has boldly asserted he will outperform his mentor Deng Xiaoping, the late leader who dumped Communist economic orthodoxy to wrench the world's most populous nation into the modern era.
Jiang Zemin, Deng's anointed successor with top posts in the Communist Party, the government and the military, waited just two days after Deng died on Wednesday before implying that the reformist had left much undone.
""We would run China's undertakings still better, and make greater contributions to the cause of peace, development and progress of the mankind,"" Jiang told visiting Kazakhstan President Nursultan Nazarbayev on Friday.
To ordinary Chinese Jiang's words, his first statement since the end of the 18-year long Deng era of market reforms under Communist control, were an unmistakeable rebuke.
""Of course that's a criticism,"" said a Chinese worker without hesitation.
Jiang spoke even before the last rites were observed for Deng, whose no-frills memorial rites are scheduled for next Tuesday in Beijing's enormous Great Hall of the People.
To some analysts, Jiang's remarks showed self-assurance, but also smacked of disrespect and arrogance that he may regret in the event of backstage power plays that are the traditional aftermath to the death of a strongman in China.
Chinese leaders have projected an image of seamless transition, mindful of the political tumult that enveloped China following the death of Mao Zedong in 1976.
But the seeds of a power struggle became visible even as Deng lay on his deathbed.
The February issue of a magazine called Zhongliu, or Mainstay, controlled by ultra-leftists, obliquely criticised Deng's successor in what a political analyst described as ""the first cannon fired by leftists at Jiang Zemin"".
In China's arcane political world, power struggles are fought behind the scenes and traditionally emerge into the public eye only when they erupt in the state media.
The language used by the magazine was reminiscent of the chaotic 1966-76 Cultural Revolution that Mao used to purge his opponents, analysts said.
""The magazine is trying to stir up debate reminiscent of the Cultural Revolution... to oust Jiang Zemin,"" one said.
In a deliberately understated response to Deng's death, Chinese authorities made little effort to organise memorial activities.
In central Beijing's Tiananmen Square, site of the 1989 student-led protests smashed by the military acting at Deng's behest, at least two people have been detained while trying to show final respects to the late leader.
State television has run endless paeans to Deng and showed formal mourning activities organised by Chinese officials in Hong Kong, Washington and other foreign cities.
In China itself, the citizenry have been left to do things themselves.
In Deng's home village of Paifang in southwestern Sichuan province, tens of thousands of mourners have thronged to the courtyard of his birth since the community's favourite son died. Deng himself left Paifang at 16 and never returned.
In the Sichuan capital Chengdu, people began spilling into People's Square on Thursday and by nightfall the crowd swelled past 10,000, many carrying candles, witnesses said.
""For us here it's tumultuous,"" a worker at a hotel on the square said.
In the southern boomtown of Shenzhen, a special economic zone near Hong Kong that was Deng's brainchild, hundreds of people filed past a giant Deng billboard which had been turned into a makeshift shrine.
The billboard stands in a square beside one of Deng's most stunning innovations, the Shenzhen Stock Exchange, which Deng said proved that markets were acceptable not only in capitalist societies but also under socialism.
Deng's reforms unsheathed the double-edged sword of rising incomes and galloping inflation but many Chinese said on Saturday they were much better off than in the pre-Deng era.
""Mao made the Chinese stand up but Deng made us rich,"" said Yang Baisong, a 41-year-old taxi driver in Beijing.
",14
"China's four oldest Special Economic Zones grew almost twice as fast as the rest of China last year, although foreign investment slowed in a sign their economies remained structurally weak, officials said on Monday.
Officials of the State Council's Special Economic Zones (SEZ) Office attributed the slowdown in foreign investment in the coastal boomtowns partly to a government push to attract funds to underdeveloped western and central regions.
The zones had shifted their policy towards attracting larger and more high-technology investment and were trying to move away from their previous focus on smaller, more labour intensive projects, one official said in a telephone interview.
The economies of China's zones in Shenzhen, which borders Hong Kong, in Zhuhai and Shantou in southern Guangdong province and in Xiamen in eastern Fujian province posted average gross domestic product (GDP) growth of 15.16 percent in 1996, the China Business Times said.
That compared with 9.7 percent nationwide.
Their total GDP was 177.5 billion yuan ($21.3 billion), it said. The GDP of Shenzhen alone was 95 billion yuan, accounting for more than half the total, while growth in the boomtown across the border from Hong Kong was 16.4 percent.
Fastest growing of the four was Xiamen, which posted a sizzling 19.25 percent, while the slowest was Zhuhai with growth of 8.9 percent.
The special economic zones, a brainchild of paramount leader Deng Xiaoping and set up in the early 1980s to open China's doors to the West, had suffered because the technological level of their industry was not high, the official of the SEZ office said.
""Of the projects they are able to attract, high-technology ones account for a low proportion,"" he said. ""Most are still labour-intensive processing projects.""
The average industrial output growth of the four was 17.49 percent in 1996, with total output value of 218.9 billion yuan. Shenzhen's industrial output was valued at 120.9 billion, with Xiamen in second place followed by Zhuhai and Shantou.
Fastest growth of 30.27 percent was registered by Xiamen, a target for investment from Taiwan. Shantou was in last place, growing by 9.4 percent.
In foreign trade, the total trade of the four zones was $55.739 billion, showing a 12.06 percent increase from 1995.
Shenzhen accounted for more than half of the total, but showed the slowest growth rate of just 0.7 percent. Zhuhai recorded the smallest amount of trade at $4.949 billion but the fastest growth of 30.17 percent.
However, foreign investment showed negative growth in the four zones -- both new contracts signed and investment amount.
The SEZ official attributed the slowdown to a better understanding of China among foreign investors, which meant that while the contracts were fewer in number, they were more likely to result in actual inflows of investment.
""More contracts that are signed actually go ahead,"" he said.
Contracts signed totalled 2,129 in 1996, or 21.93 percent negative growth, while their value was $5.948 billion, or 21.59 percent negative growth.
Shenzhen showed the sharpest drop, with the number of new contracts falling 38.8 percent and value slashed 51.5 percent.
However, actual foreign investment rose in all four zones with Shenzhen showing the biggest growth of 56.6 percent and Xiamen the smallest at 2.16 percent.
($1.0=8.3 yuan)
-- Beijing newsroom (8610) 65321921
",14
"When Deng Xiaoping took power in 1979 an urban Chinese needed a year's salary to buy a black and white television.
When he died 18 years later, the average city dweller could afford a refrigerator, a washing machine and a colour television -- some could even buy their own home.
Deng took over a China wracked by the 1966-76 decade of the radical Cultural Revolution and an economy stultified by three decades of Stalinist central planning.
""Let some people get rich first,"" Deng said in an axiom that underlined his rapid-fire approach to the economic reform that marked his rule.
The goal of Deng's economic reforms, which he first tried and failed to implement in 1960s, reflected his more pragmatic policies after Mao's sweeping idealism.
Both men wanted to keep the Communist Party in power but Deng believed that economic prosperity and money in the pockets of every Chinese would be a safer guarantee.
""Without a vision of his own to impose on society, Deng has been willing to adopt policies of non-intervention,"" wrote Barry Naughton in ""Deng Xiaoping: The Portrait of a Chinese Statesman"".
He dared to sweep away rigid planning in favour of free market forces, allowed private business into the command economy and decided to open China's door to the rest of the world.
In so doing, he saw the average per capita income of urban Chinese soar by 1,500 percent to about 5,600 ($674) in 1995 from 316 yuan ($38) a year in 1978. Earnings of rural residents leapt by more than 2,500 percent to 3,600 yuan ($433) a year in 1996 compared with just 116 yuan ($13) in 1978.
On the world stage, its foreign trade has ballooned from an asterisk when Mao died in 1976 to 11th in the world and an engine of Asian growth in 1997.
Deng's first attempt at reform from 1976 to 1978 was also the first in a series of boom-bust cycles, a recurrent fact of economic reform for years. The economy overheated and had to be reined in as Deng rushed to allow Chinese to get rich.
But the tone was set. Deng and his day-to-day policy-makers wanted to revive the economy and they chose to do so by getting rid of over-bureacratisation and allowing greater autonomy.
They started by introducing the responsibility system for farmers, under which China's 800 million peasants were allowed to sell on the free market any produce they grew over and above the quota for which they were ""responsible"" to the state.
Agricultural output skyrocketed, farmers' incomes soared and rural enterprise was born.
That success prompted Deng to introduce the ""factory manager responsibility system"" that freed managers from the control of the Communist Party secretary ubiquitous in every state unit.
""Whoever is given responsibility should be given authority as well,"" Deng said in 1978.
He battled orthodox Marxist ideologues to legalise private enterprise.
He set up experimental Special Economic Zones on the coast where foreign investment and capitalist practices were allowed to flourish -- and then to seep into the rest of China.
He lifted decades of controls on prices of many items, a move that brought bursts of fierce inflation but also allowed the marketplace to take command and meant that goods filled shop shelves that had been left empty by decades of state planning.
The ultimate goal was to force enterprises to take responsibility for their own profits and losses and sink or swim amid market competition.
Many factories -- some state-owned, many collective and private -- responded to that challenge.
However, many government enterprises have been unable to compete, forcing the state to maintain subsidies to lumbering loss-making national industries for fear mass unemployment could trigger civil unrest to destabilise Deng's fragile new system.
About 70 percent of China's 100,000 state-owned enterprises operate in the red and state banks are burdened with enormous bad debts -- up to 30 percent of their portfolios -- because they must extend policy loans on orders from the government.
Deng's economic policymakers have tinkered with the spectre of bankruptcy but have repeatedly pulled back from the brink of a solution that raises shades of capitalism.
The existence of a quasi-private economy alongside the huge and still-dominant public sector has fostered dislocations such as profiteering, corruption and inflation.
Introduction of macro-economic controls has been slow amid reluctance to let go entirely of state levers.
Deng preferred to set in motion the big picture and to use his unparalleled political clout to push through economic policies rather than to get involved with the policy basics.
When he did, he called on occasion for bolder and faster growth -- preferring what he called ""short-term pain"" to ensure long-term gain but resulting in sometimes harmful policies that had to be followed by periods of moderation.
""Deng was a politician, a manager and a generalist whose most successful role was as the political godfather of economic reform,"" Naughton wrote.
",14
"China's paramount leader Deng Xiaoping died late on Wednesday of complications from Parkinson's disease and a lung infection, the Communist Party announced.
The official announcement listed Deng's age as 93. He was born on August 22, 1904, but China adds a year to a person's age after the lunar new year, which fell earlier this month.
Announcement of Deng's death came in a letter to the Communist Party, the People's Liberation Army and the people of various ethnic groups throughout China and issued by the official Xinhua news agency.
Deng, the man whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, died at 21.08 (1308 GMT) in Beijing, Xinhua said.
The party and government ""proclaim with profound grief to the whole party, the whole army and the people of all ethnic groups throughout the country that our beloved Comrade Deng Xiaoping... passed away"", Xinhua said.
Deng was in the advanced stages of Parkinson's disease with complications of lung infections and died of respiratory failure after he did not respond to emergency treatment, Xinhua said.
Chinese sources close to the party said doctors performed an emergency tracheotomy on Deng before he died.
The streets were quiet and calm after China's announcement came in the middle of the night, but additional police were seen around the Zhongnanhai government compound in central Beijing and some major intersections.
Two armed police carrying assault rifles stood guard at the end of the lane in central Beijing where Deng had lived and questioned reporters who tried to stop in the area.
Visitors in small groups were going in and out of the compound where Deng lived, on a leafy alley behind the Forbidden City that once housed China's emperors.
Analysts said they expected a relatively stable transition of power since Deng's anointed successor Jiang Zemin has already amassed the positions of Communist Party chief, state President and head of the armed forces.
The official Xinhua news agency began to issue a lengthy obiturary filled with praise for the man who ruled China from 1978 until he retired from his last official post in 1990, but whose influence remained supreme until his death.
""Comrade Deng Xiaoping was an outstanding leader enjoying high prestige acknowledged by the Party, the army and the people of all ethnic groups throughout China,"" Xinhua said.
It called him ""a great Marxist, a great proletarian revolutionary, statesman, military strategist and diplomat, and a long-tested communist fighter, the chief architect of China's socialist reforms, opening up and modernisation drive, and the founder of the theory of building socialism with Chinese characteristics"".
The long stream of titles that did not omit any of the adjectives that China's Communist Party associates with a senior leader in a eulogy, was an official mark that the party planned to ensure Deng was buried with full party honours, analysts said.
Deng had not been seen in public since the 1994 Chinese Lunar New Year festival, when he appeared frail and faltering in a visit to Shanghai.
Chinese sources told Reuters earlier this week that Communist Party chief and state President Jiang Zemin and Premier Li Peng both cut short out-of-town trips last weekend to return to Beijing to visit the ailing patriarch.
",14
"China eulogised Deng Xiaoping on Friday, hailing the diminutive patriarch as a giant whose stature could never be matched and pledging the army's loyalty to his political heirs.
As flags around the capital flew at half-mast on the second day of official mourning for Deng, who died on Wednesday at 92, the judiciary sounded a cautious note, issuing a nationwide call for stability.
Security was discreet and the atmosphere calm in the capital. People hurried to work as usual on a bright and crisp Friday morning.
But hundreds of grieving people gathered in Deng's birthplace Paifang, a tiny village in southwestern Sichuan, some kneeling on the ground and weeping.
Police armed with assault rifles moved in to ensure order, local officials said. No incidents were reported.
""Comrade Deng Xiaoping... became a great son of the people, a giant who will never be matched,"" the People's Daily said in a commentary. ""The people of the motherland love and esteem him.""
State radio and television poured out glowing tributes for a second day to the 150 cm (5 ft) communist revolutionary who transformed China from an isolated economic pygmy into a burgeoning behemoth.
Communist cells in the military vowed to ensure the world's biggest armed forces remained loyal to his heir, Jiang Zemin, who holds the jobs of Communist Party chief, state President and head of the three-million-strong armed forces.
""The party committees of the military say they will continue to lead the armed forces to rally more closely around the Central Committee and the Military Commission with Jiang Zemin at the core,"" Xinhua news agency said.
Analysts said Jiang was determined to ensure a smooth transition, especially in the first days after Deng's death when opponents will be poised to seize on any policy error.
The Supreme People's Court, China's top judicial body, ordered all courts to ensure strict law enforcement and to safeguard social stability, Xinhua said.
The chief economist for the State Statistical Bureau issued a special announcement that Deng's passing would not harm the economy, which is shooting up by 10 percent a year.
Political transitions in communist China in the past have been fraught with difficulty and the deaths of senior leaders have triggered mass protests more than once.
Political analysts said Deng's passing was unlikely to be marked by unrest.
Many predict a power struggle sooner or later, but fought behind the scenes, well away from public scrutiny.
After nearly eight years wielding effective power under Deng's wing, Jiang has built up a powerbase and is seen as the man most likely to lead China's 1.2 billion people into the 21st century.
Most people followed their daily routines despite the loss of the gravelly-voiced socialist reformer who set the world's most populous nation on the road from revolutionary communism to a capitalist-style market economy.
Popular reaction has been subdued, ranging from shock and sadness to indifference.
""I have no feelings. Deng was nothing to me,"" said a 62-year-old snack vendor. ""The old go out, the new come in.""
A few wept. ""I felt very bad when I heard the news,"" said a farmer from Shanxi. ""He was a great man.""
State media was effusive. The people had vowed to turn their grief into strength to carry on the reforms Deng launched in 1978.
Authorities have decreed six days of mourning until the funeral on Tuesday when 10,000 people will gather in the Great Hall of the People.
In a letter to the leadership, Deng's widow and family appealed for a simple farewell for the lifelong Marxist.
When he retired in 1989, Deng himself said: ""I hope you will see to it that both my retirement and my funeral are simple.""
Deng wanted his corneas to be donated to an eye bank and his body dissected for medical research. His ashes were to be scattered at sea, said his widow, two sons and three daughters in their letter.
It was a vivid contrast to the treatment accorded Deng's formidable predecessor, Mao Zedong, when he died 21 years ago. After a national outpouring of grief, he was embalmed. His remains are displayed in a mausoleum in Tiananmen Square.
""As a complete materialist, Comrade Xiaoping always has a philosophical view of life and death,"" said the Deng family letter, written four days before he died.
China had long been prepared for the departure of its paramount leader. Deng was last seen in Shanghai in 1994, a daughter supporting his fragile frame, his chain-smoker's voice reduced to a hoarse whisper.
",14
"China urged the United States Wednesday to grant it permanent Most Favoured Nation trading status, despite doubts in the U.S. Congress that Beijing will keep its promises regarding Hong Kong.
""Granting China permanent MFN status is good for the healthy development of Sino-U.S. relations,"" said an official with the Ministry of Foreign Trade and Economic Cooperation.
""We will never change our position and attitude to the United States.""
Chinese hopes of winning over Washington from its annual review on renewal of MFN appeared to fade this week as visiting Congressman Jim Kolbe said China was unlikely to win permanent MFN status this year.
""I do not believe this year we will grant permanent MFN status to China,"" the Arizona Republican said Tuesday.
U.S. concerns over whether China will keep its promise to leave Hong Kong untouched after the British colony reverts to Chinese rule this year would slow Beijing's hopes, he said.
""We want to monitor Hong Kong for a year before we make any change,"" Kolbe told reporters in Beijing.
President Bill Clinton would have to certify the move in June. China recovers sovereignty over Hong Kong at midnight on June 30.
MFN grants China the same tariff treatment accorded other U.S. trading partners.
""The U.S. annual review of MFN status is totally wrong,"" said an official at MOFTEC's research institute. ""It is a product of the Cold War,"" said the official, who declined to be identified. ""Times have changed, but the United States still sticks to this view. It is unreasonable.""
China hailed Clinton's decision in 1995 to delink the annual renewal from China's human rights record. Beijing has since been pushing hard for the United States to end the whole annual review process that precedes renewal of MFN status to China and to grant permanent rights.
""China's attitude is clear, that these benefits should be granted mutually,"" the research institute official said. ""This is not some kind of special favoured treatment that they gave us. This is part of normal trade relations so it is not necessary to review it every year,"" he said.
Some U.S. senators have urged Washington to grant China permanent MFN status on grounds the annual review was a disadvantage to the United States and caused uncertainty to business.
Beijing and Washington have been trying to mend ties that were badly strained by a series of disputes over the last two years ranging from Taiwan, which China considers a renegade province, to trade and human rights.
Last November, Jiang and Clinton agreed on an exchange of presidential visits in 1997 and 1998, which would be the first since President George Bush came to China in early 1989.
",14
"The fragile health of China's 92-year-old paramount leader Deng Xiaoping on Wednesday stirred intense speculation among Japanese and Hong Kong newspapers after the country's leaders cut short out-of-town trips.
Deng was critically ill after suffering a brain haemorrhage, the Japanese daily Nihon Keizai Shimbun said, quoting sources in the Chinese capital.
""According to diplomatic sources in Beijing, the health of China's paramount leader Deng Xiaoping, who has implemented policies of reform..., worsened and he was in a critical condition on February 18,"" the newspaper said.
Chinese sources said on Monday that Communist Party chief Jiang Zemin and Premier Li Peng had both cut short out-of-town trips last weekend to return to Beijing to visit Deng.
The newspaper said sources close to senior officials in the People's Liberation Army said that Deng had ""recently suffered a brain haemorrhage"".
The Chinese leadership had told senior party and government officials not to leave the country unless obliged to do so for pressing diplomatic reasons, it said.
Hong Kong's Ming Pao newspaper said Deng was recuperating at home with a team of doctors attending to him.
Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded central Beijing compound close to the Forbidden City, home for centuries to China's emperors.
On Tuesday, China had played down fears that Deng's health was deteriorating.
""There has been no big change in comrade Deng Xiaoping's health,"" Foreign Ministry spokesman Tang Guoqiang told a news briefing.
He declined to say if there had been a small change or what could count as a major change in the health of the ailing patriarch.
Rumours about Deng's health surface periodically and often have a direct impact on China-related bourses, where Deng's demise is seen by some as a potentially destabilising factor.
Worries over Deng's health helped to push shares on Shanghai and Shenzhen stock exchanges sharply lower by their close on Tuesday and also rocked share prices in Taiwan and Hong Kong.
The markets recovered slightly on Wednesday, but traders remained cautious about Deng's health.
In an apparent bid to calm the markets, major Chinese newspapers prominently featured economic tsar Zhu Rongji attending a seminar on the economic theories of Deng, architect of China's sweeping economic reforms.
The Chinese Securities newspaper, read by most traders in the market, announced the seminar in a front-page box to draw attention to the fact that Deng was still alive.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival, when he appeared frail and faltering. He is thought to be in fragile health and with fading lucidity.
Taiwan's United Daily News on Tuesday quoted the island's top official on mainland affairs, Chang King-yuh, as saying Deng's condition was serious. Officials said they were closely monitoring his health.
",14
"China's President Jiang Zemin and Premier Li Peng have paid a formal Chinese new year call on reclusive paramount leader Deng Xiaoping, state media said on Wednesday.
However, the first report issued in China's state-controlled media on Deng since a similar visit by Jiang last year avoided any comment on the health of the 92-year-old man whose sweeping reforms transformed a backward Stalinist state into an economic powerhouse.
""President Jiang Zemin and Premier Li Peng along with other top leaders have paid a visit to Deng Xiaoping, to wish him a happy Spring Festival, good health and long life,"" the People's Daily said in a front-page report.
Deng, has not been seen in public since the 1994 Chinese lunar new year festival when he visited Shanghai and appeared frail and faltering, and he is now believed to be in fragile health and with fading lucidity.
He lives in a closely-guarded compound with his family down an alley behind the former imperial palace of China's emperors in the heart of Beijing.
Jiang and his Politburo colleagues also visited China's other ageing veteran leaders who ruled China with Deng for most of the 1980s and early 1990s and whose influence remains strong, the People's Daily said.
They included Deng's close ally Peng Zhen, 96, former president Yang Shangkun, 89, former parliament chief Wan Li, 80, retired politburo member Song Ping, 79, and former vice-premier Bo Yibo, 88, the People's Daily said.
""The veteran leaders asked Jiang and his colleagues to send their seasonal greetings to the Chinese people,"" the brief report said, apparently avoiding any direct message from Deng who is sometimes rumoured to be no longer capable of speech.
China's elderly leaders continue to exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up power networks.
Speculation has abounded about Deng's health, ranging from rumours of his sudden admission to hospital a few weeks ago to reports that he remains at home with little change in his health but with failing mental capacities.
However, a family member said last week that Deng remained at home and in good health, and denied that he was in hospital.
She said he was able to read ""with the help of others"", a hint that while he may no longer be able to read, he is able to understand when others read to him.
The official Chinese media has rarely carried reports on Deng since he disappeared from public view, partly because of failing health and his own desire to retire to play a behind-the-scenes role.
Deng retired from his last official position in 1990 and his only post is honorary chairman of China's Bridge Association, a title that reflects his lifelong passion for the game.
Deng was in the public eye at the start of the new year when state television ran a 12-part breathless documentary on his life, but without any details of his present circumstances and without interviews with his wife or children.
",14
"China plans ""education"" sessions among its restive Moslem Uighur minority after an anti-Chinese riot in the northwestern Xinjiang region left nine people dead and nearly 200 wounded, officials said on Thursday.
Officials would launch an education campaign throughout the region to teach Xinjiang's Uighurs about the importance of patriotism and to persuade them not to take part in such unrest in future.
""We are preparing a circular to distribute throughout Xinjiang on this incident,"" Zhang Yuliang, director of the propaganda department of the Xinjiang regional Communist Party committee, told Reuters by telephone from the regional capital, Urumqi.
""We will carry out a session of education for the masses to teach them about ethnic unity,"" he said.
Authorities have issued emergency circulars calling on local officials to deal a blow to separatism in the frontier region.
Police in Yining near China's border with Kazakhstan were interrogating the suspected ringleaders of the two-day riot against Chinese rule that rocked the town last week, officials said by telephone.
One Yining government official said authorities had revised the toll from the riot, saying nine people had been killed, including four policemen. Officials previously said 10 people died.
At least 198 people had been wounded, including about 50 who were seriously injured, the official said.
Police had arrested 200 to 300 people after the riot last week in which about 1,000 people, mostly Uighur farmers or unemployed youths, rampaged through Yining, smashing and burning cars, looting shops and demanding China pull out of Xinjiang, officials said.
A Chinese source has said the riot erupted after a Uighur criminal suspect resisted arrest by police.
The riot was one of the largest, most violent demonstrations for independence in the mainly Moslem region of Xinjiang -- which means New Frontier in Chinese -- since the 1949 communist takeover.
However, many of those detained had since been released,
""The vast majority of those arrested were members of the public who had been hoodwinked into taking part and they have been released,"" Zhang said.
""But as for the leading criminals, they will be dealt with according to the law,"" he said. ""We will do our best to ensure swift and severe punishment of criminals.""
Police were interrogating suspected ringleader Abudu Heilili, 29, of the Uighur ethnic minority, he said.
""For people like this, who have taken part in many such incidents, we are investigating to see whether more sinister forces are working behind them,"" he said.
Officials have accused unidentified ""hostile foreign forces"" of fomenting the unrest in Yining, 50 km (30 miles) from the border with Kazakhstan, where many exiled Uighur separatists live.
Turkic-speaking Uighurs are in the majority in Xinjiang, where ethnic Han Chinese make up 38 percent of the population.
Xinjiang authorities last year stepped up a crackdown on separatists and underground religious activity after clashes, bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
",14
"China's Deng Xiaoping launched the greatest economic boom on earth and justified his reforms to doubting Marxist ideologues with one deceptively simple phrase.
The maxim that Deng used as an ideological figleaf to cover his near-heretical treatment of Marxist economics was ""socialism with Chinese characteristics"".
The phrase that would justify private enterprise, ownership of property and lifting of price controls in a state run by the Communist Party saw the light of day in Deng's opening speech to the 12th party congress on September 1, 1982.
""We must integrate the universal truth of Marxism with the concrete realities of China, blaze a path of our own and build a socialism with Chinese characteristics -- that is the basic conclusion we have reached after summing up long historical experience,"" Deng told the elders of the central committee.
The congress was crucial for Deng's nascent economic reforms, already running into resistance from his orthodox Marxist colleagues who feared -- rightly as it turned out -- that his employment of market forces would erode three decades of Stalinist command economics.
""Deng's greatest contribution of all was that simple phrase 'Chinese characteristics',"" said one Western diplomat.
""It ensured that you could do anything you thought was appropriate. It should be engraved on his tomb.""
That single phrase enabled Deng to dump the revolutionary fervour nurtured by the late chairman Mao Zedong in favour of doing pretty much what he wanted.
""This was a huge leap forward compared with the Mao era,"" said a Chinese political scientist. ""This sentence guided China on to the path of modernisation. It marked the shift from Mao's path to Deng's path and enabled Deng to do an enormous number of things.""
It ended the sole system of public ownership. Collective and private enterprises were born. It also ended cradle-to-grave care and control by the party.
Chinese could be sacked, they could resign. They were free to find their own jobs. They could move house. They had to pay for their own education and medical care.
The command economy gave way to market forces.
What Deng created was no longer socialism, neither was it capitalism.
It was somewhere in between. It was socialism with Chinese characteristics.
",14
"China has issued a call to crack down on independence activities in the restive region of Tibet by exposing the exiled Dalai Lama as a ""fake"" religious leader and pushing ahead with a clean-up of monasteries.
""The splittist activities of the Dalai Lama clique are not only a major reason in damaging social stability but also are the biggest impediment to the development and reform of our region,"" the Tibet Daily quoted a senior regional party official as telling a meeting on legal work in the Himalayan region.
Regional deputy Communist Party secretary Gui Jinlong told the meeting that officials should step up their work to eliminate the influence of the Dalai Lama in the Buddhist region, the newspaper reported in an edition available in Beijing on Monday.
Officials had gained many victories in their crackdown on crime and unrest in Tibet last year, but police needed to strike harder at those in the region who wanted independence, he said.
Guo stressed three main tasks for 1997 to ensure stability in the region, which has been rocked by several anti-Chinese riots in recent years.
The first was to deepen criticism of the Dalai Lama, he said, referring to the region's exiled god-king who has won the Nobel Peace Prize for his peaceful campaign for more autonomy for his homeland but who is vilified by Beijing.
""(We must) thoroughly expose his pretence of being a 'religious leader' so that all the masses and monks and nuns in the region are clear that the Dalai (Lama) is a political subversive and a religious sham,"" Guo was quoted as saying.
""(They) should be clear that the Dalai is a traitor to the motherland, the scum of the people, the chief criminal of religion, and then they will voluntarily oppose splittism and uphold stability,"" Guo said.
China blames pro-independence unrest in Tibet on the Dalai Lama, who is revered by most Tibetans as their spiritual and temporal leader and who fled into exile in India in 1959 after an abortive uprising aginst communist rule.
Guo called on legal officials in Tibet to beef up their struggle against infiltration, in a hint that anti-Chinese feelings among Tibetans had spread among officials appointed by Beijing.
Thirdly, he called for an intensification of instruction about patriotism in Tibet's monasteries and temples.
He urged legal workers in the region to take part in rectification work and clean-ups of monasteries to raise vigilance in the region against the ""splittists"" -- Beijing's codeword for people it says are trying to divide Tibet from China.
Anti-Chinese unrest has erupted sporadically in Tibet since communist troops marched into the region in 1950, with monks and nuns at the forefront of the pro-independence movement.
",14
"China's new central depository has ambitious goals to clean up the chaotic state debt market and implement risk controls to prevent losses from a chain of debts, and analysts said it may have the clout to do just that.
Formally registered last month, the China Government Securities Depository Trust and Clearing Co was created by the central bank, the People's Bank of China, and the Ministry of Finance and six other shareholders with capital of 180 million yuan ($21.6 million).
""Our primary goal is to solve the problem of risk on the state debt market,"" said Wang Ping, executive vice-president of the clearing house. ""We want to bring risk down to its lowest possible level.""
Other goals include providing a centralised clearing system and uniting nationwide back office operations, Wang told Reuters in an interview.
Another major aim was to prevent borrowers wanting funds amid a national credit squeeze turning to loopholes on China's fledgling repo markets, resulting in huge levels of debt estimated at 50-60 billion yuan ($6.0-7.0 million).
The central bank planned to issue debt to clear up the outstanding chain of debt that had resulted from institutions engaging in the banned practice of turning to the repo market while holding bills worth as little as three percent of the value of funds raised, Wang said.
The clearing centre has been quietly carving out a niche for its operations aimed at regulating the chaotic and disparate system since it won a battle with Shanghai's Foreign Exchange Trading System to handle China's repo market.
Wang said the Beijing-based securities depository hoped to have united all bond and repo back office operations within 1997, and had ambitious goals for its future.
""We want to promote the merging of financial policy and monetary policy,"" Wang said.
""With the support of the People's Bank and the Ministry of Finance, we are moving toward international market practices and hope to set up a foundation for the opening to foreigners of China's debt market,"" he said.
However, he said that this target remained several years in the future and would depend on China's ability to make its yuan currency convertible on the capital account. Officials have said they would like full convertibility by the year 2000.
The securities depository also appeared poised to become the main channel through which the central bank would conduct its open market operations.
In 1996, the first year the central bank conducted open market operations, turnover was more than 4.0 billion yuan, Wang said. ""The amount this year will be significantly larger.
""The People's Bank will put into effect a double-track system of direct and indirect control,"" he said. ""On one hand it will control the scale of loans while on the other it will greatly expand open market operations and discounting.""
The central bank aimed to end direct controls by 1998, he said. It would also issue short-term debt of one-year and below maturity to trade with state banks this year, he said.
Officials declined to reveal the planned size of central bank open market operations, but some sources said turnover could soar as high as 200 billion this year.
Wang acknowledged that the new securities depository had run into some opposition, citing unidentified interest groups in some regions as well as market players who did not fully understand the need for a regulated system.
The bulk of China's state debt is traded through the Shanghai and Shenzhen securities exchanges, as well as through dozens of smaller centres scattered across China.
""So we need administrative measures to help us to do our work,"" he said.
",14
"China warned the Vatican on Tuesday not to meddle in its religious affairs, specifying that missionary work and appointments of bishops were the prerogative of Beijing.
""China acts in line with its own national circumstances in administering its religious affairs,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
Chinese authorities keep a tight grip on religious activities amid nervousness in the ruling Communist Party that unauthorised religious gatherings could lead to local instabilty that would threaten its rule.
Asked to comment on a meeting scheduled for Tuesday between the Pope and Taiwan Vice-President Lien Chan, Foreign Ministry spokesman Shen told the Holy See not to interfere.
Beijing is bound to be further angered by the meeting, and wants the Vatican to sever ties with Taiwan, which China has regarded as a rebel province since their civil war ended in 1949.
Lien will be the highest-ranking Taiwanese official to visit the Vatican.
China also appeared irked by a statement by Pope John Paul on Monday that the Vatican would closely watch how Catholics in Hong Kong were treated after the British colony is handed over to Beijing in July.
""We would hope to have no interference in our religious affairs, and when we talk about interference, the scope is very wide, not only including missionary work but also in appointments of bishops,"" Shen said.
""These should all be independently determined by China and there should be no interference by the Vatican,"" he said.
In his annual ""state of the world"" address to diplomats accredited to the Vatican, the 76-year-old Pope said on Monday the Holy See would be monitoring events in Hong Kong after the July 1 handover from Britain to Beijing.
The Pope was ""trusting that respect for differences, for the fundamental rights of the human person and for the rule of law will accompany this new journey forward"".
Last year the Pope appointed Shanghai-born Monsignor Joseph Zen, 64, as coadjudicator bishop of Hong Kong, which means he will eventually succceed Cardinal Joseph Wu as Catholic leader.
By appointing a bishop with right of succession before the handover, the Pope sought to guarantee continuity for the church in Hong Kong and effectively bypassed consultations with Beijing that would probably become necessary after July 1.
Beijing does not allow Catholics to recognise the Pope's authority.
Chinese Catholics who want to worship openly must belong to the state-controlled Chinese Catholic Patriotic Association. Those loyal to the Pope worship secretly.
China's Catholic and Protestant churches, both tightly controlled by the state, claim several million believers but many more are believed to worship at underground churches.
",14
"China hinted to Guatemala on Thursday that it should sever ties with Beijing's arch-rival Taiwan if it hoped to persuade Beijing to lift its U.N. veto on sending peacekeepers to the Central American nation.
""The attitude and position of the Chinese government is very flexible on this matter,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
Asked about ongoing talks at the United Nations between China and Guatemala after Beijing exercised its veto in the Security Council last week to kill a U.N. plan to monitor disarmament and a ceasefire in Guatemala, Shen said Beijing's door was open.
Shen lashed out at Guatemala's decision to invite Taiwan Foreign Minister John Chang to last month's peace signing ceremony in Guatemala City as a violation of the spirit and principles of the United Nations, but held out an olive branch.
""We still think the door to discussions between China and Guatemala is open,"" he said. ""We would like to hold talks with the Guatemala government at any time.""
Shen stopped short of saying Beijing wanted Guatemala to break off diplomatic relations with Taiwan.
""The United Nations admits only one China, so if a country keeps so-called diplomatic relations with Taiwan then it violates the spirit and principles of the U.N.,"" he said.
""Therefore the Guatemala government should make arrangements to respect the principles of the U.N.,"" he said.
U.N. diplomats said China had requested the meeting with Guatemala in New York to try to repair the effects of its controversial veto that barred U.N. observers from monitoring a Guatemalan peace pact. The meeting was likely to continue on Thursday, diplomats said.
The fact that China and Guatemala were talking despite a lack of diplomatic ties fuelled worries on Taiwan that Beijing might succeed in tempting Guatemala to follow South Africa's recent example and sever ties with Taipei in favour of Beijing.
Shen was rather more direct.
""We hope the Guatemala government will take concrete actions to get rid of the obstruction and guarantee they will never support Taiwan either inside or outside the U.N.,"" he said.
China is angry with Guatemala not only for recognising Taiwan but for joining a number of other small Latin American countries since 1993 to sponsor a General Assembly resolution aimed at securing U.N. membership for the Asian economic powerhouse.
Shen urged Guatemala not to support what he called Taiwanese activities aimed at gaining independence for the island that Beijing has regarded as a renegade province since the end of the Chinese civil war in 1949.
It was the first time China had exercised its U.N. Security Council veto in nearly 24 years, and underlined its determination to try to force Taiwan into diplomatic isolation.
Taipei on Thursday denounced Beijing for using its Security Council seat to squeeze Latin American states.
""We should altogether condemn communist China's acts of using its influence in the U.N. Security Council to interfere in the internal affairs of Central and South American countries,"" said Foreign Ministry deputy spokesman Chen Yung-tso.
Taiwan has given generous economic aid to several small, impoverished nations around the world in its bid to break out of a diplomatic isolation imposed by China. Taiwan was expelled from the United Nations in 1971 and replaced by Beijing as the rightful representative of China.
China has never spelled out publicly what Guatemala was expected to do. But diplomats said it sought a pledge to refrain from sponsoring further pro-Taiwan U.N. resolutions and to stop receiving high-ranking Taiwanese visitors.
",14
"Chinese President Jiang Zemin has refused a request from his predecessor, disgraced Communist Party chief Zhao Ziyang, to attend the funeral of paramount leader Deng Xiaoping, a Chinese source said on Sunday.
Jiang gave Zhao no reason for barring him from attending the memorial rites for the man who personally appointed both men to China's top job, the source told Reuters.
Deng, who handpicked Zhao as his successor in 1987 only to sack him two years later for sympathising with student demonstrators gathered in Beijing's Tiananmen Square, died in the capital on Wednesday aged 92. His memorial rites will be held in the Great Hall of the People on Tuesday.
Zhao was in the scenic city of Hangzhou in eastern China where he had gone to spend the Chinese lunar New Year earlier this month, said the source who is close to Zhao.
Zhao had sent a request to Jiang and other top leaders the day after Deng died, asking for permission to return to the capital after learning of Deng's demise, the source said. Zhao lives under virtual house arrest in Beijing and can move around China only with the approval of the top leadership.
Jiang rejected Zhao's request even though Deng's family and some party veterans had agreed to allow him to attend the funeral, the source said. Deng's family could not be reached for comment.
""Not only will the leadership not let him attend the funeral, they also will not let him return to Beijing,"" said the source who asked not to be identified.
Zhao renewed his request on February 21, but the leadership had yet to respond, the source said.
Surveillance of Zhao was expected to tighten in the run-up to a crucial party congress later this year as Jiang, who has held the post of party chief since Zhao was sacked, tries to consolidate his power, the source said.
Zhao has not been seen in public since May 19, 1989 when he visited students occupying Tiananmen Square and, with tears in his eyes, beseeched their leaders to call off their pro-democracy demonstrations. The next day hardliners clamped martial law on the capital.
On June 3 and 4, troops firing automatic weapons and backed by tanks stormed the city centre, retaking the square and crushing the demonstrations with heavy loss of life.
Zhao was accused by his enemies of backing the ""counter-revolutionary turmoil"" and trying to split the party.
Diplomats say China's current leadership remains nervous of the influence of Zhao, whose relatively liberal political and economic policies made him popular while in office.
Party mandarins fear Zhao could be a wild card if he were to re-emerge from his virtual house arrest in a post-Deng power struggle, diplomats said.
Zhao has refused to acknowledge making mistakes, giving him some clout among Chinese who disagree with the verdict of hardliners that the 1989 protests were seditious, diplomats said.
The source said 77-year-old Zhao was in good health. He spends much of his time reading books and indulges his passion for golf about once a week.
",14
"Xi Yang was a Hong Kong reporter looking for a scoop.
China jailed him for stealing state secrets as a warning and then freed him when it needed a chip to smoothe choppy waters as its plans for governing Hong Kong ran into a storm.
After two of the more difficult weeks so far in China's march toward its July 1 resumption of sovereignty over the British colony of Hong Kong, Beijing abruptly freed Xi Yang on Saturday from a 12-year sentence for spying and stealing state secrets.
""There really isn't much room for any other interpretation,"" said one Western diplomat in Beijing.
""They needed to make a gesture to Hong Kong to show they cared about human rights and releasing Xi Yang was probably one of the easiest ways to do that -- and at very little cost.""
Beijing prison authorities notified Xi Yang at 8.00 a.m. (0000 GMT) on Saturday morning that he was being released on parole, and 12 hours later he arrived in Hong Kong -- a free man for the first time since his arrest in October 1993.
Xi was paroled because he ""showed signs of repentance"", the official Xinhua news agency said, but gave no more details.
China viewed his article in the Hong Kong Ming Bao newspaper on Beijing's interest rate policy and its gold reserves as a theft of state secrets and central bank clerk Tian Ye was jailed for 15 years for leaking the information.
Diplomats said the harsh sentence against Xi Yang had served its purpose both as a warning to the free and feisty media in Hong Kong as to limits on their coverage after Beijing resumes sovereignty and to stop reporters from uncovering news not published in the state-run Chinese media.
""By locking him up they made their point about press freedoms,"" said one Asian diplomat.
""Whether they jailed him for two years or 50 years, it doesn't matter because they have succeeded in reinforcing the notion to Hong Kong journalists that they can't export their press freedoms into China,"" he said.
""They have made their point that 'don't think you can have it your way',"" he said.
The timing of Xi's parole was no coincidence, diplomats diplomats said.
""It's been a tough couple of weeks for them over Hong Kong, and here was a gesture of reconciliation they could make at very little cost,"" the Western diplomat said.
China and Hong Kong's outgoing colonial masters have become embroiled in a row over Beijing's plans to dilute civil liberties by rolling back the Bill of Rights and laws on freedom of association in Hong Kong after the handover.
China's decision aroused protest in Hong Kong and sparked expressions of concern from the United States.
Xi Yang's release Yang offered an opportunity to Beijing to demonstrate to Hong Kong it can be flexible on human rights, diplomats said.
Beijing has found from past experience that releasing a dissident at strategic moments can smoothe the path of international diplomacy.
China freed veteran democracy activist Wei Jingsheng in 1993 when it was vying to win the 2000 Olympic Games and paroled dissident Chen Ziming a year later in a successful bid to persuade Washington not to revoke its Most Favoured Nation trading status on grounds of human rights violations.
",14
"China lashed out on Friday at U.S.-based Human Rights Watch, saying some political prisoners the group defended were convicted rapists and swindlers, and accused it of adopting a Cold War mentality.
The chapter on China in the World Report 1997 released by the human rights monitoring group last month ""contains malicious and slanderous attacks against China's human rights situation and is frivolous and unjust"", the official Xinhua news agency said.
Beijing regularly retaliates against criticism of its human rights record, regarding it as interference in its internal affairs and saying its priority is to fulfil the right of its 1.2 billion people to food and clothing.
""The report terms those criminals who have been convicted of crimes such as hooliganism, swindling, bribery and embezzlement and endangering the state security as 'dissidents' and 'political prisoners',"" Xinhua said, quoting an official of the China Society for the Study of Human Rights.
""This cannot but make the readers suspicious of its true intentions,"" he said.
In the past year, China has effectively silenced its tiny community of dissidents, jailing several for lengthy terms for crimes ranging from hooliganism to plotting to subvert the state and sentencing others to up to three years of re-education through labour.
""They are feeling under pressure as a result of groups such as ours on human rights,"" Robin Munro, who runs the Hong Kong office of Human Rights Watch/Asia, said by telephone.
""Rather than respond to the criticisms it is much easier to try to discredit and undermine the charges,"" he said. ""It is hard to take this kind of vituperative diatribe seriously.""
The report contained the first official confirmation that Guo Haifeng, a leader of 1989 student demonstrations for more democracy, had been sentenced -- receiving a five-year jail term last November for the catch-all crime of hooliganism.
""He later raped six women, married or unmarried, in defiance of laws, by tempting them with the ways of talking about love affairs or buying houses, which constituted hooliganism,"" Xinhua said.
Chinese courts frequently sentence people to jail for hooliganism in cases where sex outside marriage, rather than rape, may have occurred. Sex outside marriage is an offence in China, while rape is punishable by death.
Guo had confessed to his crimes, Xinhua said, dismissing the Human Rights Watch report that Guo had been jailed for helping another dissident flee the country.
Xinhua attacked Human Rights Watch for describing Xiao Biguang as a political prisoner when he had been ordered in 1994 to serve three years of re-education through labour for swindling.
""They know perfectly well that he was sentenced for his activities in the underground church in China and in labour relations,"" Munro said of Xiao.
The Chinese human rights researcher accused Human Rights Watch of maintaining a Cold War mentality, of political bias against a socialist China and said it had become ""the most aggressive vanguard of the anti-China force"".
""If Human Rights Watch persists in acting as the instigator and troublemaker in creating conflicts over the issue of human rights, it will certainly become a hindrance and stumbling block in the development of the world human rights cause,"" he said.
",14
"Deng Xiaoping's most daring attempt at reform of China was also among his most dismal failures -- politics.
It was an omission that will haunt his successors.
His anointed heir, Communist Party chief and state President Jiang Zemin, will also almost certainly inherit a power struggle in a country where political structures have yet to fully enshrine the handover of power.
Deng, who died late on Wednesday aged 92, had raised the prospect of democracy, ensuring tens of millions of peasants have the right to elect local representatives.
But he failed to build a structure that would solve the centuries-old problem of how an emperor could hand down power after he passed from the scene.
Deng regarded political reform, complemented by economic invigoration, as crucial to the survival of Communist Party rule.
""In essence the purpose of political restructuring is to overcome bureaucratism, develop socialist democracy and stimulate the initiative of the people and of the grass-roots units,"" Deng told a Japanese visitor in September 1986.
The main aims he emphasised after he gained power in late 1978 were separation of party and government roles, rejuvenation of the leadership and re-establishment of party democracy.
""For Deng, democracy is a way of making the communist party state more efficient,"" wrote David Goodman in ""Deng Xiaoping.""
He never envisaged a system of universal suffrage and was therefore forced to crush those who went too far by demanding Western-style democracy and finally to settle for superficial reform that would not allow any threat to party supremacy.
His combination of rapid economic reform alongside gradual political change saved China's Communist Party from the fate of its Soviet cousin -- where rapid political reform toppled a regime that did not press ahead on the economic front.
He ended up creating a system in which the party held sway as a virtual parasite to a parallel government, economic and social structure and where corruption and abuse of power flourished in the loopholes.
Deng separated functions of party and government to stop the party interfering to replace government, to prevent over-concentration of authority in party and in individual hands and to end absence of responsibility in the bureaucracy.
The party should guide, not govern, in Deng's view.
By the time of his death, the government was responsible for administration, it was the executor of decisions on policy that were the prerogative of the party.
Deng pulled no punches in injecting new blood into a party leadership riddled with ageing veterans after the upheaval of the 1966-76 radical Cultural Revolution.
He battled stiff opposition to shunt elders into a temporary holding pen -- the Central Advisory Commission, which he was finally able to retire in 1993.
To try to ensure an orderly succession, he set an example by stepping down from a string of public offices, abandoning all his positions by the end of 1989.
But he was forced to appoint and then sack two heirs apparent.
His third choice, Jiang Zemin -- also chosen by Deng personally to head the party -- survived until Deng's death, but with no orderly succession pattern yet in place to prevent the usually brutal and often bloody succession struggles that have followed the deaths of Chinese emperors for centuries.
Encouragement of party-led democracy -- emphasis on the need to stimulate individual and group initiative -- was the third plank in his political reform programme.
""In the final analysis, all our other reforms depend on the success of political reforms, because it is human beings who will -- or will not -- carry them out,"" Deng said in 1986.
""Without political reform, economic reform cannot succeed because the first obstacle to overcome is people's resistance.""
Deng drew the line when the enthusiasm of the people for political reform became too extreme with open calls for democracy, and he sent the army to kill unarmed students who urged greater openness in the spring of 1989.
He did allow limited democracy, with villages all over China empowered to elect district leaders from a pool of more than one candidate but free speech and publication of ideas and assembly were going too far.
Those limits may influence a final judgment on his standing in Chinese history.
""In the annals of history there is only a small chapter devoted to those who advanced economic progress,"" wrote Lucian W. Pye in ""Deng Xiaoping: Portrait of a Chinese Statesman"".
""The big chapters are reserved for those leaders who brought political freedom and security to their people.""
",14
"China tightened its grip on the media on Sunday with directives on how to write news, ordering journalists not to advocate sex, violence and superstition and to fill their reports with patriotism and socialism.
The latest guidelines from China's propaganda mandarins come amid an ongoing crackdown on ideas that step out of line with party precepts, and which has been billed as a campaign to promote spiritual civilisation, or civic responsibility.
Quoting Communist Party chief Jiang Zemin's Stalinist description of reporters as ""engineers of the human soul"", the All China Journalists' Association issued a communique to reporters to submit to the ""supervision of the party and the people"".
The association set up a hotline for the public to report journalists who break the new rules, in a move reminiscent of the witchhunts of the ultra-leftist 1966-76 Cultural Revolution and other political campaigns espoused by Chairman Mao Zedong.
To ensure China's reporters were familiar with what they should and should not do, the China News Workers' Association issued a detailed six-part directive via the official Xinhua news agency.
Top of the list was ""wholeheartedly to serve the people"".
To achieve this goal, the directive urged reporters to fulfil their supervisory role by ""bravely criticising and exposing erroneous words and actions and corrupt phenomena that harm the people's interests"".
Party chief and state president Jiang has personally mounted a drive to stamp out corruption, a plague he has warned could topple the party, and has used propaganda to back his cause.
However, the new directive also specifies events from which reporters should steer clear and the tone in which they should cover topics that are acceptable.
Urging reporters to uphold a ""correct"" tone in public opinion, it tells them to promote patriotism, collectivism and socialism.
""News reports must not advocate sex, murder, violence, ignorance and superstition and other bad taste content that harm the spiritual health of the people,"" it said.
This was essential for political stability as well as the happiness of the masses, it said.
The directive also called on reporters to respect the constitution and the law, telling them not to publish reports that determine the nature of a case or a crime before the courts have delivered their verdict.
China has long used the state-controlled press to publicise crimes or criminals it wants to hold up as examples with little regard to whether sentence has been passed.
Neither will reporters be allowed to use the media to spread propaganda that differs from party decisions, the directive said, in a rare signal that some more independent-minded newspapers may be straying from the party line.
Reporters must also strictly protect the secrets of the party and the state, uphold the truth in news and not use the media for their own personal ends, it said. It gave no hint as to how reporters should reconcile the possibly differing demands of the truth and the party.
Last week, China's propaganda tsars ordered journalists to stop violating socialist ethics by asking for money, gifts, credit cards or houses in return for positive reporting, and banned warned them against insider trading.
Reporters ""must voluntarily oppose worship of money, hedonism and individualism"", the directive said.
China's communist rulers keep a tight grip on the media, which they view as a propaganda tool that must serve party interests. Propaganda officials have called on journalists to back party policies and give priority to ""positive"" reporting.
",14
"China appealed for calm while South Korea called for a military alert amid fears a diplomatic deadlock over a senior Pyongyang defector marooned in Beijing could push the hermit North to take extreme action.
However, signs emerged that North Korea and its leader Kim Jong-il might be ready to give up the fight to recover scholarly ideologue Hwang Jang-yop -- possibly as a result of mediation by Beijing to end the Cold War crisis in its backyard.
South Korean officials said talks continued with Beijing over the fate of Hwang, ranked 24th in Pyongyang's hierarchy, who spent his seventh day behind the white walls of Seoul's consulate office in Beijing.
Hwang, 74, could be the first in a stream of high-level defectors to betray their Stalinist homeland, beset by two years of floods, food shortages and talk of power struggles, South Korean media reported.
South Korean Prime Minister Lee Soo-sung called for ""extraordinary alertness"" and military readiness against North Korea, saying Hwang's defection had sent shock waves through the divided Korean peninsula.
A Seoul newspaper said it had documents revealing plans by other North Korean officials to flee.
""The defection of secretary Hwang Jang-yop, who belongs to the core force of the North Korean leadership, vividly displays the shaking of the ideological foundation that has supported the North Korean system amid economic disasters,"" Lee said.
Seoul would spare no diplomatic efforts to allow Hwang to be granted political asylum, he said.
Lee told parliament that Pyongyang had increasingly deployed offensive forces near the border with the South, despite an economic crisis and chronic food shortages.
A military spokesman said Lee was referring to the North's defence build-up in recent years and no additional troops had been deployed at the tense border in the past week.
But China took no chances and sent three armoured personnel carriers to reinforce approaches to Seoul's mission, apparently not reassured by signs Pyongyang could be coming to terms with the loss of one of its greatest ideological thinkers.
A sign of the jangling nerves in South Korea's diplomatic community in Beijing came when grocery workers collecting money for delivery of beer and rice cakes were mistaken for Pyongyang agents trying to trick their way into the home of Seoul's consul-general.
A report by South Korea's Yonhap news agency that three men -- apparently North Koreans -- had harassed the diplomat's wife was a false alarm, a Seoul embassy spokesman said.
The woman had called the embassy in fright when the men knocked on her door, but when South Korean officials contacted the store manager it turned out that he had given his employees the wrong address.
The softer tone set when Pyongyang's Foreign Ministry said it would dismiss Hwang if he defected was echoed by supreme leader Kim, who said those who lacked the grit to defend Pyongyang's fiery brand of communism should go their own way.
""As the revolutionary song goes: Cowards, Leave If You Want To! We will defend the red flag to the bitter end,"" a political essay broadcast by state radio quoted Kim as saying.
Pyongyang officials had previously been steadfast in their accusation that Seoul abducted the architect of North Korea's governing ideology of Juche, or strict self-reliance. South Korea has dismissed the charge as preposterous.
North Korea's ambassador met Chinese Foreign Ministry officials in talks that apparently resulted in Pyongyang's change in tune and withdrawal of diplomats from a vigil outside the mission where Hwang is holed up, Western diplomats said.
Beijing, an unwilling third party in the feuding between the two hostile sides in the last Cold War standoff, repeated its plea to both to act with restraint to resolve the affair.
The United States has urged Pyongyang to avoid all provocative actions and has said it was closely monitoring developments after an assassination attempt against a former North Korean defector near Seoul on Saturday night.
The tussle over Hwang's defection was the latest flare-up in tense relations between the two Koreas, arch-enemies since the 1950-53 Korean civil war ended only in a truce.
",14
"China's parliament chairman has said Beijing has no plans to expand its direct elections for local congress deputies beyond the county level and insisted his National People's Congress was not merely a rubber stamp.
In a lengthy interview published in the People's Daily on Friday, Qiao Shi also stressed the importance of developing a real legal system in China -- a cause he has espoused -- although he acknowledged that China still had a long way to go.
Qiao stressed that China had passed several laws and regulations in recent years to beef up its parliament and find ways to ensure the laws it passed were actually enforced.
Critics have described China's parliament as little more than a rubber stamp for decisions made by the leaders of the ruling Communist Party, although under Qiao's chairmanship a few members have dared to show their opposition to some measures.
However, Qiao used the interview to take an apparent swipe at a drive by President and Communist Party chief Jiang Zemin -- anointed heir to paramount leader Deng Xiaoping -- to bolster his image through a personal publicity campaign.
""No decisions should be made by an individual or by a small number of people,"" Qiao said when discussing the powers of the National People's Congress as well as local congresses.
""The collective performing of duties is an important principle followed by the people's congresses at all levels,"" said Qiao, one of the seven members of the standing committee of the Politburo, China's most powerful decision-making body.
China's communist leaders insist publicly that decisions are taken collectively and that state matters are handled by parliament and the State Council, or cabinet.
However, diplomats say the party -- and its individual leaders -- are the final arbiters of power, with the parliament allowed to exist as little more than window-dressing to try to persuade China's people that they too have a say in the decision-making process.
In terms of the structure and formation of China's central and regional parliaments, Qiao said the use of direct elections had been expanded since 1979, shortly after Deng Xiaoping consolidated power, to the county level from the lowest township level.
""Since 1995, elections of deputies to the people's congresses at township level have been held,"" he said.
""We have discovered that the people are very enthusiastic about these elections, and that more than 90 percent of the voters took part in the elections,"" he said.
However, Qiao dashed any expectations that the system of direct elections of deputies for congresses would be expanded soon above the county level.
""China has a vast territory and a large population and its economic and cultural development level is not high,"" Qiao said.
""Therefore, it conforms with our country's special conditions to elect deputies to the people's congresses directly only at the county and township levels for the present,"" he said.
Figures compiled by parliament show that in the last elections for township and county congresses, a total of 3.64 million delegates were chosen, many of them in contests where the number of candidates exceeded the number of seats.
Qiao acknowledged the limits to parliament's power, saying that many regional officials, who in China can run their district as virtual fiefdoms, ignore the law.
""There have even been cases in which law enforcement officials violate laws and some people override laws with their own opinions and power,"" Qiao said. ""We are now taking measures to tackle those problems."" He did not specify those measures.
",14
"China appealed for calm while South Korea called for a military alert amid fears a diplomatic deadlock over a senior Pyongyang defector marooned in Beijing could push the hermit North to take extreme action.
However, signs emerged that North Korea and its leader Kim Jong-il might be ready to give up the fight to recover scholarly ideologue Hwang Jang-yop -- possibly as a result of mediation by Beijing to end the Cold War crisis in its backyard.
South Korean officials said talks continued with Beijing over the fate of Hwang, ranked 24th in Pyongyang's hierarchy, who spent his seventh day behind the white walls of Seoul's consulate office in Beijing.
Hwang could be the first in a stream of high-level defectors to betray their Stalinist homeland, beset by two years of floods, food shortages and talk of power struggles, South Korean media reported in Seoul.
South Korean Prime Minister Lee Soo-sung called for ""extraordinary alertness"" and military readiness against North Korea, saying Hwang's defection had sent shock waves through the divided Korean peninsula.
A Seoul newspaper said it had documents revealing plans by other North Korean officials to flee.
""The defection of secretary Hwang Jang-yop, who belongs to the core force of the North Korean leadership, vividly displays the shaking of the ideological foundation that has supported the North Korean system amid economic disasters,"" Lee said.
Seoul would spare no diplomatic efforts to allow Hwang to be granted political asylum, he said.
Lee told parliament that Pyongyang had increasingly deployed offensive forces near the border with the South, despite an economic crisis and chronic food shortages.
A military spokesman said Lee was referring to the North's defence build-up in recent years and no additional troops had been deployed at the tense border in the past week.
But China took no chances and sent three armoured personnel carriers to reinforce approaches to Seoul's mission, apparently not reassured by signs Pyongyang could be coming to terms with the loss of one of its greatest ideological thinkers.
The softer tone set when Pyongyang's Foreign Ministry said it would dismiss Hwang if he defected was echoed by supreme leader Kim, who said those who lacked the grit to defend Pyongyang's fiery brand of communism should go their own way.
""As the revolutionary song goes: Cowards, Leave If You Want To! We will defend the red flag to the bitter end,"" a political essay broadcast by state radio quoted Kim as saying.
Pyongyang officials had previously been steadfast in their accusation that Seoul abducted the architect of North Korea's governing ideology of Juche, or strict self-reliance. South Korea has dismissed the charge as preposterous.
North Korea's ambassador met Chinese Foreign Ministry officials in talks that apparently resulted in Pyongyang's change in tune and withdrawal of diplomats from a vigil outside the mission where Hwang is marooned, Western diplomats said.
Beijing, an unwilling third party in the feuding between the two hostile sides in the last Cold War standoff, repeated its plea to both to act with restraint to resolve the affair.
The United States has urged Pyongyang to avoid all provocative actions and has said it was closely monitoring developments after an assassination attempt against a former North Korean defector near Seoul on Saturday night.
The tussle over Hwang's defection was the latest flare-up in tense relations between the two Koreas, arch-enemies since the 1950-53 Korean civil war ended only in a truce.
",14
"China urged the United States on Wednesday to grant it permanent Most Favoured Nation (MFN) trading status, despite U.S. congressional doubts over whether Beijing will keep its promises on recovering Hong Kong.
""Granting China permanent MFN status is good for the healthy development of Sino-U.S. relations,"" an official with the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) said.
""We will never change our position and attitude to the United States.""
Chinese hopes of winning over Washington from its annual review on renewal of MFN appeared to fade this week as visiting U.S. Congressman Jim Kolbe said China was unlikely to win permanent MFN status this year.
""I do not believe this year we will grant permanent MFN status to China,"" the Arizona Republican said on Tuesday.
U.S. concerns over whether China will keep its promise to leave Hong Kong untouched after the British colony reverts to Chinese rule this year would slow Beijing's hopes, he said.
""We want to monitor Hong Kong for a year before we make any change,"" Kolbe told reporters in Beijing.
President Bill Clinton would have to certify the move in June. China recovers sovereignty at midnight on June 30.
MFN grants China the same tariff treatment accorded other U.S. trading partners.
""The U.S. annual review of MFN status is totally wrong,"" said an official at MOFTEC's research institute.
""It is a product of the Cold War,"" said the official who declined to be identified. ""Times have changed, but the United States still sticks to this view. It is unreasonable.""
China hailed Clinton's decision in 1995 to delink the annual renewal of MFN from China's human rights record.
Beijing has since been pushing hard for the United States to end the whole annual review process that precedes renewal of MFN status to China and to grant permanent rights.
""China's attitude is clear, that these benefits should be granted mutually,"" the research institute official said.
""This is not some kind of special favoured treatment that they gave us. This is part of normal trade relations so it is not necessary to review it every year,"" he said.
""Our position is determined, you must give us this every year and do not need to review it,"" he said, adding that U.S. business groups were also opposed to the review system.
Some U.S. senators have urged Washington to grant China permanent MFN status on grounds the annual review was a disadvantage to the United States and caused uncertainty to business.
The doubts over Hong Kong were unlikely to interrupt a smiling campaign by Chinese leaders after President Jiang Zemin granted a rare meeting meeting to Kolbe and other members of the U.S. House of Representatives to try to boost ties with the American Congress.
Beijing and Washington have been trying to mend ties that were badly strained by a series of disputes over the last two years ranging from Taiwan, which China considers a renegade province, to trade and human rights.
Last November, Jiang and Clinton agreed on an exchange of presidential visits in 1997 and 1998, which would be the first since President George Bush came to China in early 1989.
",14
"It began with a whimper, culminated in an economic explosion and was one of the most far-reaching events of the 20th century.
Deng Xiaoping's 1992 move to kick-start an economy faltering after the 1989 Tiananmen massacre strengthened his conservative opponents was a high point of his career and launched an economic boom that has reverberated around the world.
In January 1992, Deng, then 87, toured the boomtown of Shenzhen that borders Hong Kong in what has gone down in history as his ""nan xun"" or Southern Tour.
For more than two months not a newspaper in China's Communist Party controlled media machine published even a word of Deng's unprecedented visit, underlining the extent to which China's paramount leader -- by then retired from all formal posts -- had lost control of the powerful propaganda apparatus.
Hardline leftists who opposed Deng's bid to place his stamp of approval on the flourishing Shenzhen Special Economic Zone that was his brainchild blocked for weeks any news of his tour.
But in late March of that year, Deng and his loyalists succeeded in pushing aside the propaganda tsars and his ""Southern Tour"" burst upon the Chinese public through primetime state television and splashed across whole pages of state-run newspapers.
It marked the start of a new era in the reform process that Deng had launched in 1979.
That southern tour unsheathed a double-edged sword of rising incomes and galloping inflation but many Chinese said on Saturday they were much better off than in the pre-Deng era.
""Mao made the Chinese stand up but Deng made us rich,"" said Yang Baisong, a 41-year-old taxi driver in Beijing.
""I can make 8-9,000 yuan ($960-$1,080) a month,"" Yang said. ""That's pretty good and this car is my own.""
China's economy is the fastest growing on earth, sizzling at 9.7 percent last year after three years of double-digit growth.
Deng, always impatient with economic reform, had acted out of deep frustration with the slow pace of economic change after hardliners regained the offensive in the wake of the bloody crackdown on student-led pro-democracy dissent in Beijing's Tiananmen Square on June 4, 1989.
Opposition to reform had come from top level bureaucrats, Marxist purists and Deng's own gerontocratic peers whose power and privilege stemmed from four decades of central planning.
The media barrage of March 1992 marked a strategic turning point in Deng's campaign to outflank conservative opponents in the capital.
At the same time, it exposed his own weakness in that he had to head south to areas where reform had found their strongest hold to push his agenda because he was unable to win a hearing in the bastion of conservativism in Beijing.
The Southern Tour marked an unprecedented interference in the political process and revealed China's worst-kept secret -- that he was the man really running the country.
It was Deng's first public appearance in more than a year -- he had deliberately faded from the scene to boost the stature and credibility of his chosen heir, Communist Party chief Jiang Zemin who was appointed after the Tiananmen Square crackdown.
In scarcely-veiled criticisms in Shenzhen, Deng revealed the extent of his disappointment with his anointed successor and with Premier Li Peng -- both too weak or too conservative to press the radical economic change that Deng believed was the only way to ensure the party retained power.
""We should be even bolder than before in conducting reform and opening to the outside and have the courage to experiment,"" he said in Shenzhen.
""We must not act like women with bound feet,"" he said.
",14
"China on Thursday began six days of mourning for paramount leader Deng Xiaoping after an 18-year rule that transformed China from backward Stalinist state to economic powerhouse. He was 92.
A letter from the ruling Communist Party, the State Council, and the Central Military Commission to China's 1.2 billion people expressed profound grief at the death of ""a great Marxist, a great proletarian revolutionary, statesman, military strategist and diplomat"".
China's Foreign Ministry announced six days of mourning, indicating Deng's funeral could take place on February 25.
The gravel-voiced veteran of military battlefields and backroom political struggles died at 9.08 p.m. (1308 GMT) on Wednesday in Beijing, the official Xinhua news agency said.
Deng, whose pragmatic market reforms propelled China onto the world stage as an emerging economic superpower, was in the advanced stages of Parkinson's disease. He died of respiratory failure after he did not respond to emergency treatment.
Chinese sources close to the party said doctors performed an emergency tracheotomy to try to save Deng, reportedly in the crimson-walled Zhongnanhai government compound just off Tiananmen Square.
The party and government ""proclaim with profound grief to the whole party, the whole army and the people of all ethnic groups throughout the country that our beloved Comrade Deng Xiaoping... passed away"", Xinhua said.
His career spanned much of the 20th century, from the last emperor to the birth of China as a nuclear power. He swept to power in 1978 after being purged three times and retired only in 1990.
He led China from Mao Zedong's ultra-leftist fervour to a nation at its most stable and prosperous for nearly 200 years, and his influence reigned supreme until his death.
He died without achieving one of his dreams -- to be present in Hong Kong when the colony, wrested from China at gunpoint by the British as spoils of victory in the opium wars, returns to Beijing's sovereignty at midnight on June 30 this year.
No foreign dignitaries would be invited to the funeral, Chjina said.
Flags were flying at half-mast in Tiananmen Square and at the Great Hall of the People, as well at Chinese embassies around the world ""to express the incomparable esteem and profound grief of the whole Party, the whole army and the people"".
Condolences poured in for Deng, who had not been seen in public since the Chinese lunar new year festival in 1994 when he appeared frail and faltering on a visit to Shanghai.
U.S. President Bill Clinton said he was saddened to learn of Deng's death, calling him an ""extraordinary figure on the world stage over the past two decades"".
Japanese Prime Minister Ryutaro Hashimoto said he was saddened and pledged to ""continue to work with China's leaders for the long-term stability of our bilateral relationship"".
Canadian Prime Minister Jean Chretien voiced regret but said his feelings were mixed due to Deng's record on human rights.
Deng died almost within sight of Tiananmen Square, where troops and tanks of the People's Liberation Army, acting on Deng's orders, crushed student-led demonstrations for more democracy with heavy loss of life in 1989.
Diplomats said immediate factional struggle was unlikely in the China's internecine political world, because Deng's anointed heir, party chief Jiang Zemin had a firm grip on power.
Factory manager and technocrat Jiang has already amassed the positions of party chief, state President and head of the armed forces. But Jiang is 70, and will soon have to confront his own succession dilemma.
An official obituary on Deng from Xinhua urged China's 1.2 billion people to rally behind his heir.
Chinese responded with shock and sadness to news of Deng's demise, but without the great outpouring of grief that greeted Mao's death in 1976.
""Then we cried like we lost our father and mother,"" said one driver parked near Deng's central Beijing residence. ""Now everyone is indifferent.""
Streets were quiet and calm on Thursday, although extra police patrolled outside Zhongnanhai and military cars with flashing lights drove along main city streets.
Police stood guard around the compound in central Beijing where Deng lived, turning away mourners bringing wreaths.
Stock markets in China, Hong Kong and Taiwan were highly volatile on Thursday, contrary to forecasts by market pundits who expected a moderate response to Deng's death.
Reaction in U.S. markets had been muted and many other Asian markets also showed little if any response to the news, focusing instead on domestic considerations.
The People's Daily newspaper splashed a black-and-white portrait of a smiling Deng over much of its front page and all newspapers ran a black masthead.
""Comrade Deng Xiaoping was an outstanding leader enjoying high prestige acknowledged by the Party, the army and the people of all ethnic groups throughout China,"" Xinhua's lengthy obituary said.
It called Deng ""a long-tested communist fighter, the chief architect of China's socialist reforms, opening up and modernisation drive, and the founder of the theory of building socialism with Chinese characteristics"".
",14
"China was silent on Tuesday on the fragile health of paramount leader Deng Xiaoping after Communist Party chief Jiang Zemin and other leaders cut short out-of-town trips to visit the ailing patriarch.
The State Council, or cabinet, declined on Tuesday to make immediate comment on the rumours that the health of Deng, 92, had deteriorated recently or that he had suffered a stroke.
In Taipei, Taiwan's top policymaker on mainland affairs described Deng's condition as serious and said the government would closely watch developments.
Party chief Jiang, who is also state president and head of the army, returned at the weekend, cutting short an unpublicised visit to the communist revolutionary base of Ganzhou in central Jiangxi province, said one Chinese source close to the party.
Premier Li Peng also flew back to Beijing at the weekend, abruptly curtailing a tour of the booming southern province of Guangdong because of Deng's deteriorating health, said the source, who asked not to be identified.
The two leaders had returned to Beijing where they visited Deng, the source said.
Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded compound behind the Forbidden City of China's emperors in central Beijing.
Diplomats have said one barometer of Deng's health in China's highly-secretive system is the travel of top leaders and close family members, with few willing to be out of town or abroad if Deng were close to death.
Vice-Premier Li Lanqing was abroad on a visit to Israel and Iran, and Defence Minister Chi Haotian was in the Philippines, where officials said he would not change his travel plans.
Chinese sources have reported increasing rumours in Beijing in the past few days that Deng's health may be failing.
However, a Chinese Foreign Ministry spokesman said last week Deng was all right for a man of his age.
Hong Kong's Apple Daily newspaper reported at the weekend that the architect of China's sweeping economic reforms had been rushed to hospital on Thursday after a massive stroke that followed an earlier, mild stroke.
Doctors said that if Deng's stroke had been a haemorrhage he could have died within hours, while if it was a thrombosis, or formation of a blood clot, he could last days or weeks.
Rumours about Deng's health surface periodically and one such rumour caused Hong Kong stocks to tumble last Friday.
The worries over Deng's health deflated Taiwan's main stock index by 1.161 percent to 7563.76 on Tuesday morning while Hong Kong's major index slipped 0.80 percent to 13039.03.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival when he appeared frail and faltering on a visit to Shanghai. He is now believed to be in fragile health and with fading lucidity.
China's elderly leaders exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up a power base.
Deng retired from his last official position in 1990 and his only post is honorary chairman of China's Bridge Association, a title that reflects his passion for the card game.
Deng was in the public eye at the start of the new year when state television ran a 12-part documentary on his life, but without details of his present circumstances or interviews with his wife or children.
Western diplomats say the longer Deng lingers the less impact his death will have on the delicate balance of power at the top of China's ruling Communist Party.
",14
"China has set up a special bureau to fight corruption, and the new organisation is empowered to tackle extreme cases involving the most senior officials, the official Xinhua news agency said on Tuesday.
The Special Case Investigation Section (SCIS) had been set up to to investigate more serious or extreme cases of corruption this year, Xinhua said, in a hint that Beijing may be ready to take on more high-ranking officials over graft.
The SCIS would target ""extremely severe legal cases and disciplinary offenses by officials at or above the department level in central government offices and those at or above the vice-governor level in local areas"", it quoted an official with the Supreme People's Procuratorate as saying.
The SCIS is part of the Law and Discipline Department of the Procuratorate.
""This has been a major step by the Procuratorate to make a breakthrough in solving cases of neglect of duty by state employees, or violations of citizens' rights, abuse of power, and other major crimes,"" the official said.
The SCIS was now organising a 50-member team and would start its work as soon as possible, he said.
China's procurators have said they face an uphill task to tackle corruption that has sprung up nationwide and at all levels of the Communist Party and government since paramount leader Deng Xiaoping launched his market reforms in 1978.
Harsh penalties, including the death penalty in extremely large or high-level cases, have failed to deter greedy officials.
Communist Party chief Jiang Zemin has warned repeatedly that graft is a virus that could eventually topple the party if it is allowed to spread unchecked.
It was not clear whether the new task force would be empowered to take on the case of disgraced former Beijing municipal party boss, Chen Xitong, who has been under investigation since April, 1995 for suspected corruption.
In 1995, Chen became the first member of the ruling Politburo to be sacked for corruption since the 1949 communist takeover. He has yet to be charged.
A former colleague, Beijing vice-mayor Zhang Baifa said last month that Chen could face disciplinary action for alleged dereliction of duty but was unlikely to face charges of graft.
Chen's case had been one of the most difficult, China's top corruption official said last year, describing the problems of fighting graft in the face of powerful interference.
Chen and his associates had prepared well for investigation, changing bank accounts, altering contracts and making sure their testimony was consistent, Luo Ji, director of the Supreme People's Procuratorate's General Anti-Corruption and Bribery Administration said.
Official graft was almost unknown in China under the authoritiarian rule of the late Chairman Mao Zedong, but has boomed as Deng's reforms have opened up loopholes in the system and unprecedented opportunities for officials to profit from their positions.
Chen's departure from power came only after Beijing vice-mayor Wang Baosen committed suicide after coming under investigation in a $37 million corruption scam.
",14
"Beijing's parliament began the process on Wednesday of upgrading the southwestern city of Chongqing to become China's fourth municipality along with such cities as Beijing and Shanghai.
Approval by the National People's Congress for the proposal will give Chongqing, a port on the Yangtze river in southwestern Sichuan province, the power to make its own decisions and handle its own finances without recourse to provincial authorities.
Chinese sources said the decision had met opposition from provincial authorities in Sichuan, reluctant to lose control of the largest city and biggest industrial base in China's most populous province of more than 103 million inhabitants.
With ratification of the proposal by China's rubber-stamp parliament virtually assured, Chongqing's area will expand to include two outlying cities and a prefecture, enlarging its population from 14 million to 30 million, the Xinhua news agency said.
The decision will pave the way to accelerate relocation of about one million people who must move to make way for the huge lake that will be created after the Three Gorges dam blocks the Yangtze river, downstream from Chongqing, it said.
A municipality has the same status as a province in China and falls under the direct authority of the central government. The other three municipalities are Beijing, Shanghai and the northern port city of Tianjin.
Supporting the motion from the State Council, or cabinet, to upgrade Chongqing, Premier Li Peng told parliament the move would give the city control of the Three Gorges scheme, thus boosting management of the world's largest water control project.
It would also help Chongqing to fuel economic development in western China, which has lagged far behind the boom in eastern coastal areas fuelled by paramount leader Deng Xiaoping's market reforms, Li said.
""The upgrading of Chongqing will help promote the economic and social development of the southwest area and the upper reaches of the Yangtze River,"" Li said.
It would also ease pressure on the Sichuan provincial government in managing the huge population of the city.
More than two-thirds of the estimated one million people who must be moved out of the way of the Three Gorges hydro power project would be resettled in Chongqing and its satellite cities of Wanxian, and Fuling, Minister of Civil Affairs Doje Cering told parliament.
""Chongqing municipality could handle the general administration of the relocation work,"" he told a parliament standing committee session that opened on Wednesday.
In recent interviews, officials in Chongqing said the move would raise the political profile of the mega-city.
As a municipality, Chongqing envisaged an economic boom that would narrow the gap between impoverished inland provinces in the west and their wealthy coastal cousins in the east, officials said.
For years after the communists swept to power in 1949, Chongqing -- wartime capital of rival Nationalists from 1938 to 1945 -- took a back seat to Chengdu, capital of the southwestern province of Sichuan.
Its elevation to municipality at the full session of parliament next month would end its backward role, officials said.
",14
"China extended its campaign to eradicate ideas out of line with Communist Party ideology on Thursday with an order to publishers to issue more good books, no bad books and fewer mediocre books.
The directive issued at a meeting called by the China Press and Publications Administration urged a strengthening of professional ethics in China's publishing industry.
China's propaganda mandarins have been locked for several months in an authoritarian campaign to stamp out ideas that differ from party precepts, and which has been billed as a drive to promote spiritual civilisation, or civic responsibility.
""We should insist on the strategy of publishing the best books,"" said a directive issued by the administration.
""We must publish more good books, not publish bad books and minimise publication of mediocre books,"" said the directive issued in the People's Daily, mouthpiece of the Communist Party.
The new directive banned publishing houses from selling off publication codes, without which no book or magazine can be published in China, and from accepting money or other favours from authors in return for printing their works.
""We want to publish healthy, useful books that can spread knowledge,"" an administration official said in a telephone interview.
""For example, good books are books about science, books that you can learn from,"" an official of one publishing company, said, adding that writings of authors such as former Minister of Culture Wang Meng and urban novelist Wang Shuo were ""good"" books.
""Bad books are books that violate policy on religion, are subversive or pornographic or depict violence,"" the administration official said.
In recent years, pornographic and violent novels have flooded book stands, commanding an enormous market among Chinese starved of entertainment during Mao Zedong's ultra-leftist 1966-76 Cultural Revolution.
Private entrepreneurs eager to make money on the flourishing book market have sparked a flourishing sale in publication codes. Every book published in China must have a numbered code.
An official of the China Publishers' Association said bad books included those that advocated ethnic separatism -- a problem in restive Tibet and the Moslem Xinjiang region -- and books about China's leaders and which revealed state secrets.
""The publishing of too many bad books will affect our national image,"" the association official said.
Officials refused to reveal the titles of ""bad"" books named on a list of some 100 publications distributed at this week's meeting.
However, one publisher said ""bad"" books included the highly popular pornographic novel ""Dream of the Rose"" that was published by a private entrepreneur and ""Weird Sex Customs"", a book banned last year after its fantastic description of Islamic life angered China's Moslem minority.
Mediocre, or vulgar books, included martial arts novels and love stories, popular among's China's tens of millions of peasant farmers and migrant rural labourers, the association official said.
China this week tightened its grip on the media, with directives on how to write news, ordering journalists not to advocate sex, violence and superstition and to fill their reports with patriotism and socialism.
",14
"China's President Jiang Zemin issued a pledge on Saturday to outdo late paramount leader Deng Xiaoping in pursuing the capitalist-style reforms that his patron vowed would carry China through the next 100 years.
Jiang, who with Deng's death at 92 on Wednesday became undisputedly the most powerful man in China, waited a scant two days before hinting that ""the chief architect"" of reforms that have transformed the face of China in just 18 years had only started a job that he (Jiang) meant to finish.
""We would run China's undertakings still better, and make greater contributions to the cause of peace, development and progress of the mankind,"" Jiang told visiting Kazakhstan President Nursultan Nazarbayev.
To ordinary Chinese, Jiang's first public words following the death of the man credited with creating China's extraordinarily successful combination of communism and capitalism were an unmistakeable rebuke.
""Of course that's a criticism,"" said a Chinese worker without hesitation.
However, Jiang was also swift to nail his colours to Deng's reforms and opening to the outside world that transformed an isolated Stalinist state into a fledgling economic superpower.
Jiang, who is also China's Communist Party chief and the head of the military, was hand-picked by Deng to be his successor and holds most of the cards needed to replace him.
But for some analysts, his swift attempt to assume Deng's personal mantle smacked of arrogance that could prove dangerous if a power struggle were to erupt.
China's secretive leadership has projected an image of seamless transition following Deng's death, mindful of the political tumult that enveloped the country following the death of Mao Zedong in 1976 before Deng emerged.
But there were hints of discord even as the 92-year-old Deng lay dying.
The February issue of a magazine called Zhongliu, or Mainstay, controlled by ultra-leftists, obliquely criticised Deng's successor in what one political analyst described as ""the first cannon fired by leftists at Jiang Zemin"".
In China's arcane political world, power struggles are fought behind the scenes and traditionally emerge into the public eye only when they erupt in the state media.
The language used by the magazine was reminiscent of the chaotic 1966-76 Cultural Revolution that Mao used to purge his opponents, analysts said.
""The magazine is trying to stir up debate reminiscent of the Cultural Revolution... to oust Jiang Zemin,"" one said.
Clearly fearing a repeat of the student-led demonstrations that marked the last funeral of a party luminary in 1989, police threw a security net around Tiananmen Square in the heart of Beijing and plainclothes officers patrolled university campuses.
Deng's memorial rites are scheduled for Tuesday in the cavernous Great Hall of the People on the edge of the square.
On Saturday, a People's Liberation Army honour guard rehearsed the cremation that is expected on Monday at a special cemetery for party heroes, shouldering a glass coffin with a live soldier inside -- apparently simulating China's late paramount leader.
State television has run endless paeans to Deng and showed formal mourning activities organised by Chinese officials in Hong Kong, Washington and other foreign cities.
At home, however, China has kept official reaction to Deng's death deliberately low-key, making little attempt to organise memorial activities that might spin out of control.
In central Beijing's Tiananmen Square, site of the 1989 student-led protests smashed by the military at Deng's behest, at least two people have been detained while trying to pay final respects to the late leader.
Tens of thousands of mourners thronged to the courtyard of his birth in his home village of Paifang in southwestern Sichuan province. In the Sichuan capital of Chengdu more than 10,000 people gathered in People's Square on Thursday to mark the passing of their province's favourite son.
In the southern boomtown of Shenzhen, a special economic zone near Hong Kong where Deng first experimented with grafting capitalist-style markets on to a socialist economy, hundreds of people filed past a giant Deng billboard which had been turned into a makeshift shrine.
In Shanghai, which quickly reverted to its nimble trading ways under Deng's guidance, the city's familier profit mantra was joined by a new chant drifting skyward from the Jade Buddha Temple.
""The monks are praying for world peace and Deng Xiaoping,"" an attendant said. ""So that Deng will go to heaven.""
",14
"U.S. and Chinese negotiators were locked in last-ditch talks into the night on Saturday to try to hammer out a new textile accord and a deal on market access as a new deadline loomed for a cross-Pacific trade war.
However, U.S. officials hinted that an agreement could be virtually in the bag with negotiators expected to work virtually through the night to put the finishing touches to a final text.
Chief U.S. textile negotiator Rita Hayes said earlier she was confident of accord on renewing a 1994 textile accord and resolving a dispute over U.S. penalties on Chinese exports on the fifth day of talks with officials at China's Ministry of Foreign Trade and Economic Cooperation.
""We felt like we had made tremendous progress and we are looking to complete negotiations today,"" she told Reuters before leaving for the ministry. ""You're always positive you can reach an agreement but you have to balance it out.""
The United States had extended by a day the deadline of midnight January 31 in Washington (0500 GMT) for agreement on a new textile accord.
""I felt like it was important to extend it, the deadline, for one day... so we could get a fresh start this morning,"" Hayes said of the talks that went virtually without a break for 48 hours on Thursday and Friday.
""We did not complete the agreement... so we felt like we'd have one extra day to complete it,"" she said before resuming negotiations that dragged late into Saturday without agreement as a new deadline loomed.
U.S. officials had said they hoped for a deal by the end of Saturday.
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise. Officials declined to say whether the threatened multi-billion penalties on China would be imposed if the deadline extension expired without accord.
Chinese officials refused to comment, saying only talks were continuing.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Hayes said the U.S. side was still focusing on two major demands -- its market access package and a level playing field for the textile industry.
""The two main things that we have been consistently concerned about are the market access that China has to the United States... and also making sure that it is balanced, that we have a market access package from China,"" she said.
Disagreement over market access in China appeared to be a major stumbling block, industry representatives said earlier.
However, they said hopes for a deal were high, with Hayes and her team believed to be putting the finishing touches to the text of an agreement.
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the previous deadline of January 31, Hayes has said.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries.
",14
"At least 30 people were killed and dozens more injured in a fire that destroyed a hotel in central China early on Wednesday, with many hurt when they leapt from windows to escape the flames, officials said.
Officials said two people suspected of starting the deadly blaze had been arrested and the manager of the Yanshan Hotel in Changsha, capital of central Hunan province, was on the run.
The fire broke out at about 2.00 a.m. (1800 GMT) in a restaurant on the second floor of the Yanshan Hotel and the flames spread swiftly up to the seventh floor, officials said.
More than 100 people, including the dead, had been taken to hospital by 8.00 a.m., and 30 people were confirmed dead, the official Xinhua news agency said.
A local hospital official said the number of casualties could be much higher.
""We have reports that as many as 200 people may have been killed or injured,"" an official of the Hunan Number One Hospital said by telephone.
Many guests jumped from windows of the hotel as flames blocked exits on all six of the burning floors, Xinhua said.
About 10 fire engines and 1,000 firemen and rescue workers were sent to rescue hotel guests and to fight the blaze, which took about five hours to extinguish, officials said.
The Hunan Number One hospital had admitted 22 victims, of whom 13 were dead on arrival, most from smoke inhalation, the hospital official said.
""At least eight people were burnt to death at the scene,"" a local broadcast official said by telephone. ""Many more died later in hospital.""
Many of the injured were in serious condition.
""In the burns ward we have people who were burnt and we have people with internal injuries from jumping out of upper stories,"" said a nurse at the Hunan Number Two hospital.
""There are also people with broken bones who jumped out of windows. There are rather a lot of patients with broken bones,"" she said.
A Changsha government official said police had arrested two people believed to have started the blaze, but it was unclear whether the fire was arson. Police were searching for the hotel manager, who had fled, she said.
Officials said the seven-storey hotel was completely gutted by the fire, the deadliest reported in China since a blaze in December 1994 in a cinema in the northwestern Xinjiang region killed 323 people, most of them children.
""I cycle past the hotel every day to go to work,"" said one official. ""It has been completely burnt.""
The number of fire disasters in China in 1996 declined by 3.5 percent compared with the previous year to 36,856, Xinhua quoted an official of the Ministry of Public Security as saying on Wednesday. There were a large number of casualties, the official said, but gave no details.
China implemented safety measures in hotels, restaurants and cinemas in 1995, sharply cutting the number of major fires after a string of fire disasters in 1994 killed 2,600 people and injured 4,000, making it China's deadliest year on record.
",14
"South Korea went on alert on Monday for possible attack by the rival North, but said it wanted talks to defuse rising tensions as a high-level Pyongyang defector spent a sixth day stranded in Seoul's embassy in Beijing.
The defection of the most senior official ever to betray his Stalinist homeland was just one of a maze of problems troubling Pyongyang -- beset by an imploding economy, food shortages caused by two years of floods and talk of a power struggle.
Senior North Korean official Hwang Jang-yop turned 74 on Monday with no sign of progress to celebrate in his appeal for political asylum in the South and he remained marooned in Seoul's heavily-guarded consulate office in Beijing.
South Korea braced for possible attacks by Pyongyang as the Cold War crisis escalated, but said confrontation over the defector holed up in Seoul's embassy in Beijing would not scuttle its efforts for detente.
Another prominent defector, Li Il-nam, a nephew of North Korean leader Kim Jong-il's ex-wife, remained in a coma after being critically wounded at the weekend by suspected North Korean agents near Seoul.
Security around South Korea's ports, airports and other public places has been beefed up and 10,000 police and soldiers searched for the two suspected North Korean agents who shot Li.
Seoul Foreign Minister Yoo Chong-ha said problems stemming from Hwang's defection were just the start of headaches for Seoul because of a crisis in the North.
""I believe the North Korean regime's crisis will deepen as time passes because there's no likelihood of improvement in its economic hardship and food shortages, and signs of laxity in its social order,"" Yoo told a meeting of South Korean diplomats.
South Korea's security-related ministers on Sunday agreed that a desperate North Korea could resort to guerrilla attacks after Hwang, a top adviser to North Korean leader Kim Jong-il, sought asylum last Wednesday.
Dour warnings from North Korean officials in Beijing of the consequences of any attempt to move Hwang to the South gave a hint of Pyongyang's willingness to retaliate.
""If they make him go to Seoul, I think there will be war,"" said one North Korean official who declined to be identified.
""We want him back,"" he said, in an echo of earlier threats to use force if Hwang was compelled to go to Seoul.
South Korean diplomats and Chinese police guarding the mission brought in extra blankets and mattresses in a sign they expected a lengthy stand-off over Hwang.
However, dozens of North Korean officials disappeared on Monday afternoon from outside the building where they have kept a round-the-clock vigil since Hwang turned up in a taxi with an aide last Wednesday.
North Korea's ambassador was believed to have met officials at China's Foreign Ministry on Monday, but it was not known if they discussed Hwang's defection.
China, an unwilling third party in the feuding between the two hostile ends of the Korean peninsula, has appealed to both sides to act calmly to resolve the affair.
Western diplomats said China had said privately it wanted little to do with the imported crisis in its backyard, saying Hwang was now effectively in South Korea. It is unwilling to favour an old communist comrade or a new capitalist friend.
The United States has urged Pyongyang to avoid provocative actions and has said it is closely monitoring developments between the two Koreas, arch-enemies since the 1950-53 Korean civil war ended only in a truce.
Analysts say the North has suffered huge loss of face over the defection of Hwang, who was ranked high in the hierarchy of his Stalinist homeland and was the architect of its governing ideology of Juche, or strict self-reliance.
",14
"China hit back on Saturday over a U.S. report that it had silenced all dissent by the end of 1996, voicing firm opposition to such charges and accusing Washington of interfering in its internal affairs.
""The Chinese government protects and promotes the human rights and basic freedoms of all its peoples according to the constitution and relevant laws, and its achievements are clear for all to see,"" Foreign Ministry spokesman Tang Guoqiang said.
The Foreign Ministry statement was China's first response to the annual U.S. human rights report released on Thursday that accused China of effectively silencing all public dissent against the Communist Party and government by the end of last year.
""The U.S. government turns a blind eye to the facts and distorts and condemns China's human rights situation, seriously violating the basic principles of international relations,"" Tang said.
""China voices its firm opposition to this,"" he said.
""The U.S. side should stop its wrong methods of using the pretext of human rights to interfere in China's internal affairs,"" Tang said.
In the annual human rights report on 193 countries, the United States accused China of detaining, jailing or driving into exile all known dissidents.
This year's hard-hitting report was released during a dramatic improvement in Sino-U.S. ties that have long been rocked by disputes over issues ranging from rights to trade to Taiwan.
Tang defended China's human rights record, stressing that the government's human rights priority was the feeding and clothing of its 1.2 billion people.
""At present, China politics is stable, its economy is developing, its society is advancing, its ethnic peoples are united, its people are living and working in peace,"" Tang said.
""The facts prove that placing the people's rights to live and to develop in first place... fits with the basic interests of the whole people,"" he said.
Analysts said Beijing's response was unusually mild, in a sign China is eager to keep up the positive momentum in cross-Pacific ties.
However, the father of leading dissident Wang Dan said on Friday that China's 1996 jailing of his son, a former leader of the 1989 student-led demonstrations for more democracy, was clear evidence of the kind of abuse the U.S. report condemns.
All nations had the right and responsibility to concern themselves with human rights in other countries, said Wang Xianzeng, whose 27-year-old son was last year sentenced to 11 years in prison for plotting to overthrow the government.
The recent Sino-U.S. rapprochement has survived Wang Dan's last October jailing after a four-hour trial that was denounced by human rights activists as a politically orchestrated sham.
New Secretary of State Madeleine Albright, who is to visit China next month, has said she will pursue a policy of inclusion rather than isolation towards China and, while keen to foster human rights, does not want to hold the overall relationship hostage to one issue.
",14
"A hardline Chinese magazine has issued a blistering attack on China's most prominent living author and former culture minister in the first open salvo of a power struggle before a crucial Communist Party meeting.
""Really what kind of person is Wang Meng?"" begins the bitter tirade in the January issue of the magazine Zhongliu, or Mainstay, available on Thursday.
""What kind of role has Wang Meng been playing in China's cultural, ideological battlelines and political life as a whole?"" said the article written under the pen-name Gong Yizhou, which means ""all in one boat"".
The article in the Communist Party magazine levels the virtually subversive charge that Wang Meng failed to support the rule of the Communist Party and has fallen short in battling bourgeois liberalism, a communist codeword for Western ideas.
""As a high-ranking official of the Communist party, have his words and actions met the basic requirements of a party member?"" it said.
""He has never written even the most basic self-criticism of this series of major mistakes on these important questions,"" the article charged.
""We are measuring a party member against basic party standards and this is definitely not too high a demand. Should we tolerate party members with different views to...look down on and make fun of (the party)?"" it said.
""He played an especially abominable role in mistakenly supporting the 1989 turmoil,"" it said, referring to the pro-democracy student demonstrations centred in Beijing's Tiananmen Square that were crushed by the army on June 4, 1989 with heavy loss of life.
Wang, 62, appointed minister of culture in 1986, was removed from the job in August 1989 in a purge of liberal officials and those close to disgraced Communist Party chief Zhao Ziyang.
""This is one of the fiercest attacks we have seen against anyone actually mentioned by name for several years in China,"" said one China analyst.
""This is not just an attack against Wang Meng, but against his people and against his successful re-emergence in the last couple of years,"" he said. Wang was re-elected as vice-chairman of the Chinese Writers' Association last December.
A Chinese analyst described the vitriolic article as reminiscent of the language of the ultra-leftist 1966-76 Cultural Revolution, when Wang was purged and sent into internal exile in the westernmost region of Xinjiang.
""An attack like this marks the first public step in the power struggle that is bound to lead up to the party congress,"" the China analyst said, referring to the crucial meeting due later this year that will see a major reshuffle of the most powerful players on China's political stage.
Such party meetings in China are almost always preceded by a bitter struggle for power and position and characterised by oblique attacks on leading players through those perceived to be their supporters.
Wang Meng only laughed when asked to comment on the article. ""I have heard of this, but I have not seen it,"" he said when reached by telephone.
Wang is best-known for his 1957 novel ""The Young Man from the Organisation Department"" that depicts the red tape and rigid thinking of communist officials.
He is also renowned for his award-winning short story ""Hard Porridge"" that involves a family, headed by an ageing patriarch, that has difficulty changing its ways. Wang vehemently denied charges that the story, written in early 1989, was an attack on paramount leader Deng Xiaoping.
",14
"The number of bankruptcies in China soared by more than 160 percent in 1996 to exceed the total of the previous seven years but experts on Tuesday warned that many more insolvent firms waited in the wings.
""This is a startling figure,"" bankruptcy expert Cao Siyuan said in a telephone interview.
A total of 6,232 firms declared bankruptcy in China last year, an increase of 161.3 percent compared with 1995 when 2,385 companies went under, said Cao, architect of China's existing bankruptcy law and who now runs his own consultancy business.
The 1996 figure compared with the total of 5,395 firms that went bankrupt from 1989 to 1995, said Cao.
He attributed the sharp rise in the number of bankruptcies to the progress of China's market-oriented reforms launched in 1978 by paramount leader Deng Xiaoping to replace Stalinist-style central planning with a sink-or-swim system.
""Many of the firms that went bankrupt last year were already effectively bankrupt but had delayed their final procedures or announcement,"" Cao said. ""It was a situation where they had no choice but to declare bankruptcy.""
He estimated the number of bankruptcies this year could soar as China pushed ahead with reforms to force its thousands of loss-making state enterprises to turn a profit or go under.
""Bankruptcies could exceed 10,000 this year if the government doesn't interfere,"" Cao said.
Bankruptcy has long been controversial in China even after the bankruptcy law was passed in 1988 and the law has generally been used only to liquidate smaller enterprises because of fears of mass unemployment and unrest.
Bankruptcies would increase dramatically if all firms that actually were no longer viable were allowed to go under, Cao said.
The current rate of bankruptcies was about 0.06 percent of China's estimated 10 million companies, including private and collective firms as well as the 100,000 strong state sector.
""I think a level of 1.0 percent would be more reasonable,"" Cao said, dismissing fears among some sectors of the government that the level of bankruptcies was too high.
Beijing's communist rulers have been trying to promote the use of mergers rather than bankruptcies to liquidate firms that have no hope of getting out of the red.
Mergers far exceeded bankruptcies, but no specific numbers were available, Cao said.
Only a tiny number of China's bankruptcies were a result of a decision by banks to foreclose, Cao said, adding that this phenomenon needed attention.
Of the 2,385 bankruptcies in 1995, only 47, or two percent, were a result of applications from the banks, while in 1996 the number was just 72, or just 1.2 percent of the total, Cao said.
One reason for the reluctance of banks to foreclose was because many branches had extended loans to enterprises without following the correct procedures, he said, adding that managers were afraid of possible repercussions if the level of bad debt became public knowledge.
Officials have said state commercial banks would write off 30 billion yuan ($3.6 billion) in bad debts of state enterprises in 1997, up from 20 billion yuan in 1996.
Many of the bankruptcies last year were in China's fast-developing coastal provinces where reforms had made greater progress, Cao said.
Far fewer were reported in booming southern Guangdong province were firms were more reluctant to admit defeat or in the capital, Beijing, where officials feared bankruptcies would result in layoffs and possible social unrest, he said.
",14
"China's President Jiang Zemin, speaking publicly for the first time since the death of Deng Xiaoping, vowed on Friday to push forward the reforms that his mentor launched 18 years ago.
""The Communist Party of China, the Chinese army and people of various ethnic groups are determined to turn grief into strength,"" Jiang told Kazakhstan President Nursultan Nazarbayev, who is on holiday in China.
Speaking for the first time in public since Deng died, aged 92, on Wednesday, Deng's designated heir pledged to ""hold high the great banner of Deng's theory to build socialism with Chinese characteristics"".
China would unite to pursue Deng's reforms and opening up ""unswervingly and confidently"", the Xinhua news agency quoted Jiang as saying.
Jiang repeated almost word for word the official obituary of the pragmatic reformer whose belief that China's people should be allowed to get rich ended a decade of chaotic rule by Mao Zedong, who believed his people should be ""red"" -- communist.
However, it was Jiang's first personal and public commitment that he planned to press on with Deng's capitalist-style reforms that have transformed China from a backward Stalinist state to an economic powerhouse.
""We would run China's undertakings still better, and make greater contributions to the cause of peace, development and progress of the mankind,"" Jiang was quoted as saying.
The death of Deng was ""an immeasurable loss"" to the Party, army and people of China, Jiang said.
Jiang, who also holds the posts of Communist Party chief and head of the armed forces, emerged on Deng's death to rule China after seven years in waiting as his heir apparent.
Diplomats say Jiang may soon find himself embroiled in a power struggle with other pretenders to power in the highest echelons of the ruling party.
China's leadership has carefully displayed a united front.
China-watchers say this may be a facade.
""It'll be like a duck swimming -- on the surface it'll be calm but underneath it'll be turbulent,"" said one Chinese analyst, quoting a Chinese proverb.
In imperial China, the transfer of the ""mandate of heaven"" to a new emperor was rarely smooth. Deng only came to power in late 1978 after a two-year battle with Mao's appointed successor, Hua Guofeng.
The latest power shift has so far been seamless, but analysts said later upheavals could not be ruled out.
Jiang's first test will be at the crucial 15th Party Congress, which is expected to be held in October and is to elect a new central committee, politburo and party chief. The post of party chief, or general secretary, is the most powerful in China.
At least one contest will be over a crusade by Premier Li Peng, 68, to try to retain his slot on the politburo standing committee -- the most powerful decision-making body in China.
Li must step down as premier in 1998, after completing the maximum two terms, and is keen to make a play for the top party post so that he can remain in the hierarchy after he retires from the government job, analysts say.
",14
"North Korea hailed strongman Kim Jong-il as a god on his 55th birthday on Sunday, but a shooting in South Korea and a diplomatic stand-off in Beijing cast the ""Dear Leader"" in a less than divine light.
The Cold War climate on the Korean peninsula chilled further after a prominent North Korean defector was shot and seriously wounded near Seoul and South Korea accused Pyongyang of the attempted assassination.
Birthday celebrations for the Dear Leader, as Kim is known in his Stalinist homeland, had been intended to smooth his formal accession to supreme power after the death of his father, the Great Leader Kim Il-sung, three years ago.
Instead, Kim has been embarrassed by the surprise defection of a top adviser, talk of a power struggle and a worsening food crisis.
The party appeared subdued, scaled down due to severe food shortages caused by two years of flooding to little more than fireworks and a gymnastics display by 10,000 children. Scheduled live coverage was abruptly cancelled without explanation.
Pyongyang diplomats voiced cult-like adoration for the Dear Leader as they kept vigil outside the South Korean mission in Beijing where ideologue Hwang Jang-yop, the most senior North Korean ever to defect, sought asylum five days ago.
In Seoul there were signs the North may have infiltrated the South to seek retribution.
South Korean cabinet ministers accused Pyongyang of sending two gunmen to try to kill Li Il-nam, nephew of Kim Jong-ils ex-wife, outside his home near Seoul on Saturday, and ordered tighter security for defectors and government leaders.
The assassination attempt appeared to be a warning to Seoul and to potential asylum-seekers, Seoul officials said.
Chinese security was tight around the South Korean mission in Beijing where Hwang has taken refuge. Armed Chinese police set up a fortress-like defence wall, laying anti-tyre spikes across approaches and bringing in a huge water cannon truck.
""If the South uses force to move him to South Korea we will respond with force,"" said one Pyongyang diplomat keeping watch.
""We are determined to prevent them from taking him to the South,"" said the official, who declined to give his name.
He repeated Pyongyangs charge that Hwang was kidnapped, but said the North did not want to see violence. Seoul has dismissed the accusation.
Hwang, 73, was expected to remain stranded in the mission for some time, with Beijing unlikely to give in to his request for asylum in Seoul until after Kims birthday celebrations to avoid further embarrassing its old communist comrade.
The Pyongyang diplomat said he was certain Hwang would never forget such an important day in the North Korean calendar.
""The Dear Leader is a pillar in our minds,"" the diplomat said. ""Hwang, deep in his mind, will be thinking of this day and we believe he will celebrate it as well.""
But in letters reportedly written by Hwang and released by Seoul, the man who ranked 24th in Pyongyangs hierarchy has charged that his homeland was a dictatorship racked by famine, and said he would rather die than go back.
Hwang has become the focus of a Cold War tussle between the two Koreas, arch-enemies since their 1950-53 war ended only in a truce -- and a severe embarrassment to China.
Beijing played for time as it agonised over a diplomatic quandary -- how to usher Hwang out of Beijing without offending its old socialist ally or its new capitalist friend.
It has urged calm on the Korean peninsula, where two of the worlds largest armies face each other, while it investigates.
But while Seoul placed police on full alert, in Pyongyang thousands of child gymnasts celebrated Kims birthday.
""The Great General Kim Jong-il is trusted absolutely, eternally and fully as if he were god,"" North Koreas official newspaper Rodong Sinmun said.
""The Korean people regard him as their god because he defends the destiny of the motherland, nation and people,"" it added.
",14
"If every person in Russia and Germany turned on their televisions, that would equal the number of Chinese who have watched a primetime documentary on the life of China's paramount leader Deng Xiaoping.
""There is a rather high viewership,"" said one official of China Central Television (CCTV) when asked how many of China's 1.2 billion people were watching the 12-part documentary launched with much fanfare on New Year's Day.
He estimated the ratings at 28 percent of the estimated 800 million Chinese who have access to a television -- or 224 million people sitting in front of their screens every evening at 8.00 p.m. (1200 GMT) for the past 12 days.
That compares with about 40 million who watch the nightly evening news -- a stultifying menu of Communist Party leaders meeting visiting heads of state or issuing political pronouncements and images of factory output successes.
It outstrips ratings of recent popular soap operas, although it cannot match the number who watch the spectacle of song and dance that transfixes China on Lunar New Year's Eve.
Deng Xiaoping has faced scant competition from other channels for the eyes of China's television audience.
Usual primetime viewing offers a choice between game shows, soap operas imbued with socialist propaganda or saccharine love stories imported from Singapore or Hong Kong.
The decision to run the series, after four years of shooting and post-production, followed a surprise, last-minute edict from China's propaganda tsars, CCTV officials said.
Officials were unable to explain why it was necessary to wait until early December to schedule broadcast of a documentary that had been in the works for so long.
Political analysts said the paean was aimed at stressing the importance of Deng in the year when Hong Kong will return to Beijing sovereignty under an accord he brokered, but when poor health will prevent him from attending the ceremony.
Speculation abounds of Deng's fragility, ranging from rumours of his sudden admission to hospital in recent days to reports that he remains at home with little change in his health but no longer mentally alert.
Deng has not been seen in public for nearly three years -- a result of his own desire to retire from the front of stage to a behind-the-scenes role, as well as his failing health, analysts say. In his last appearance he looked weak and faltering.
CCTV's advertising department had long ago sold all space for advertisements to accompany a soap opera due to be shown in early January at the usual rates of about 70,000 yuan ($8,400) per 15 seconds when the sudden reprogramming order arrived.
It was regarded as inappropriate to interrupt with advertising each 45-minute episode on the man whose pragmatic market policies turned a backward Stalinist state into an economic powerhouse.
As a result, viewers have been regaled with a breathless commentary on the achievements of China's architect of reform sandwiched between 15 minutes of advertisements ranging from sanitary napkins, instant noodles and soap to pumpkin seeds, insurance, toothpaste and shampoo.
CCTV's advertising department said it had not received any complaints from customers expecting to sell their karaoke machines or chocolate during a soap opera and instead found their products linked to a tribute to China's political boss.
",14
"Talks between China and the United States on a new textile accord neared a deadline on Friday for a trans-Pacific trade war, but industry experts said they expected an agreement within hours.
Chief U.S. textile negotiator Rita Hayes held talks through Thursday night and into Friday evening with Chinese officials to try to iron out problems in renewal of a 1994 textile accord and to resolve a dispute over U.S. penalties on Chinese exports.
U.S. officials said they were hoping for an agreement before the Friday deadline expires at midnight on January 31 Eastern Standard Time, but differences over market access in China appeared to be delaying progress.
Hopes for a deal were high, with Hayes and her team believed to be putting the finishing touches to the text of an agreement, said U.S. industry representatives on the sidelines of the talks.
""We fully expect they will reach an agreement,"" said one U.S. industry representative.
""I expect the reason for the talks not wrapping up is market access,"" said National Retail Federation vice-president Robert P. Hall. ""This is an issue that is not traditionally part of apparel bilaterals.""
Hayes had been upbeat about progress in the talks on Thursday, citing significant headway on the issue of market access and saying she hoped for a deal by the end of the day. However, that failed to materialise.
Washington could make significant cuts to China's textile quotas if agreement could not be reached before the January 31 deadline, Hayes said earlier. The United States would not give China another extension of the deadline, she said.
The Sino-U.S. textile pact had been scheduled to expire on December 31 but was extended by one month to give both sides time to hammer out a compromise.
Washington and Beijing were also seeking to ease tensions in a dispute over Chinese exports of textiles via third countries. The United States has threatened multi-million dollar penalties and raised the spectre of a cross-Pacific trade war over the issue.
Washington slapped $19 million worth of penalties on imports of Chinese textiles last September, saying Beijing was shipping textiles through third countries to evade quota restrictions.
China has threatened to retaliate by temporarily banning imports of some U.S. textiles, farm goods and alcoholic drinks but has delayed such action to allow time for further talks.
Textiles are just one of a range of issues dogging a Sino-U.S. relationship that has long been strained by disputes over topics ranging from trade to human rights to Taiwan.
A U.S. delegation left Beijing on Friday after talks on human rights with Chinese officials and following a year in which all remaining members of the nation's tiny pro-democracy movement have been either imprisoned or driven into exile.
U.S. trade official Lee Sands wrapped up two days of talks in Beijing on Friday to discuss China's delayed accession to the World Trade Organisation (WTO), long a source of cross-Pacific friction.
Beijing, which wants to join the global trade club on the favourable terms accorded to developing countries, has accused Washington of blocking its entry.
",14
"China's crown rests uneasily on the head of Deng Xiaoping's anointed successor, Jiang Zemin.
Deng's death after an 18-year rule opens the door to a power struggle in the communist political elite, throwing into relief Deng's major failure -- his inability to set in place a firm succession structure.
Many diplomats and political analysts said they expected Jiang to tighten his grip on the top job after seven years building a powerbase under the wing of his patron.
But the absence of a proper structure and the removal of his mentor leaves him exposed in one of the most precarious positions in the world.
""With Deng's death the political ring of confidence that so protected Jiang Zemin has been torn asunder and he must now face an uncertain political future and political ills by himself,"" said Australian sinologist Geremie Barme.
Deng was the last leader of China's communist era who could back his claim with an impeccable revolutionary pedigree -- a founder of socialist rule, a victorious veteran of the Long March and battles that swept the Communist Party to power and a colleague of Chairman Mao Zedong.
Jiang's resume is not so impressive.
But, aware of his weakness, he has devoted much of his time to building up his powerbase -- particularly in the military -- after his two predecessors were purged following student demonstrations.
He has amassed the positions of party boss, state president and head of the armed forces.
""Jiang Zemin is a student of Chinese history and Chinese politics and he is very clear that the military hold the key to political power. As the Mao Zedong dictum said, 'political power comes from the barrel of the gun',"" said Hong Kong-based analyst Tai Ming Cheung.
But, he said, the military's support is not unqualified and Jiang will have to ""provide additional finances and allow the military an important say"".
Barme said Jiang's capture of China's three top jobs was unprecedented in the 20th century -- but also dangerous because he was now the only real target for a takeover bid.
Diplomats and analysts said that while Jiang appeared comfortable in the immediate aftermath to Deng's death, he could not afford to be complacent.
""There is a lot of horse trading that has already been taking place, and with Deng's passing it complicates matters a little, perhaps not significantly,"" said Cheung.
But Jiang was now facing the real test of his career, and of Deng's succession plans, diplomats said.
""It has been Jiang Zemin's good fortune that Deng Xiaoping lasted this long,"" said one Western diplomat.
",14
"China bank deposits grew last year, albeit more slowly than in 1995 due to two interest rate cuts, and would remain the top choice for private investors due to a lack of other opportunities, state media said on Sunday.
However, investment funds, which have so far failed to attract investors and exist on only a tiny scale, could become a target for private funds in 1997, the China Daily Business Weekly said on Sunday.
Investment in housing and insurance could become alternatives this year after small investors burnt their fingers in the stock markets and in corporate bonds and failed to buy state debt due to enormous competition, it said.
Stamps, coins, antiques and art -- targets of the destructive fervour of Red Guards in the radical 1966-76 Cultural Revolution -- would continue to play an important role in the portfolios of families with money to save, it said.
New bank deposits in China in January to November totalled 820.19 billion yuan ($98.82 billion), up 12 percent year-on-year, but with growth sharply down from the skyrocketing 37.7 percent increase for all of 1995, the newspaper said.
Total private savings in China's banks amounted to 3,791.73 billion yuan at the end of November, it said.
A sharp cut in retail inflation, to about 6.0 percent from 14.48 percent in 1995, persuaded many individuals to put their money in the banks, it quoted central bank economist Zhao Haikuan as saying. China uses retail inflation as its benchmark, mainly because consumer inflation remains higher -- at about 8.0 percent -- showing little incentive to save in banks.
The interest rate on one-year deposits stood at 7.47 percent, lower than the 10.98 percent offered in 1995 but well above inflation, Zhao said.
Although China's two stock markets in Shanghai and southern Shenzhen had now attracted 21 million investors -- and drew more than 10,000 new punters a day between October to early December -- the limited size of the exchanges and their volatility were deterrents, the Business Weekly quoted analysts as saying.
In addition, a state debt issue of 195.2 billion yuan last year fell far short of absorbing the more than 800 billion yuan in new deposits, Zhao said. China is expected to float up to 250 billion state debt in 1997, nearly one-third more than in 1996.
He ruled out a substantial drop in personal bank deposits as a result of the lower interest rates and saw little likelihood of a flood of consumer spending.
Bank savings would remain the first choice for individuals in 1997, ahead of stocks and bonds, Zhao said.
Officials were eager to lure deposits into China's state-owned banks, saddled with huge bad debts from state-owned enterprises and still required to help out state firms identified as strategic by the central government.
Investment funds were seen absorbing surplus cash this year as more stocks and corporate bonds are floated in 1997, the Business Weekly said, quoting a report by leading brokerage China Securities Co Ltd.
By 1996, China had set up 75 funds and of these 25 were listed in Shanghai or Shenzhen. The listed funds accounted for just 5.0 percent of all equities, with their market value estimated at about 11 million yuan, or 2.5 percent of total trading volume, the Business Weekly said.
Only three funds have capital of more than 200 million yuan, while 70 percent are smaller than 100 million yuan. Few have invested in equities, preferring to put their money into property. Stocks and bonds account for less than 10 percent of their total investment, it said.
",14
"The deteriorating health of China's paramount leader Deng Xiaoping has forced Communist Party chief Jiang Zemin and other leaders to cut short out-of-town trips to return to Beijing, sources said on Monday.
Jiang, who is also state president and head of the army, returned at the weekend, cutting short an unpublicised visit to the communist revolutionary base of Ganzhou in central Jiangxi province, said one Chinese source close to the party.
Premier Li Peng also flew back to Beijing at the weekend, abruptly curtailing a tour of the booming, southern province of Guangdong, said the source, who asked not to be identified.
""Jiang Zemin and Li Peng cut short their trips and rushed back to Beijing because Deng Xiaopings health was deteriorating,"" the source said.
""They went to see Deng...over the weekend,"" the source said. ""His health is not looking good.""
The 92-year-old Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, lives in a tightly-guarded compound behind the Forbidden City of Chinas emperors in central Beijing.
Diplomats have said one barometer of Dengs health in Chinas highly-secretive system is the travel of top leaders and close family members, with few willing to be out of town or abroad if Deng were close to death.
Vice-Premier Li Lanqing was on a visit to Israel and Iran and Defence Minister Chi Haotian is in the Philippines.
Chinese sources have reported increasing rumours in Beijing in the past few days that Dengs health may be failing.
The State Council, or cabinet, declined on Monday to comment on the rumours.
A Chinese Foreign Ministry spokesman said last week Deng was all right for a man of his age.
Hong Kongs Apple Daily newspaper reported at the weekend that the architect of Chinas sweeping economic reforms had been rushed to hospital on Thursday after a massive stroke that followed an earlier, mild stroke.
Rumours about Dengs health surface periodically and Hong Kong stocks tumbled last Friday on one rumour.
Deng has not been seen in public since the 1994 Chinese Lunar New Year festival when he visited Shanghai and appeared frail and faltering. He is now believed to be in fragile health and with fading lucidity.
Chinas elderly leaders exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up a power base.
State-run Chinese media have rarely carried reports on Deng since he vanished from public view, partly because of his failing health and his own desire to retire to play a behind-the-scenes role.
Deng retired from his last official position in 1990 and his only post is honorary chairman of Chinas Bridge Association, a title that reflects his passion for the card game.
Deng was in the public eye at the start of the new year when state television ran a 12-part documentary on his life, but without details of his present circumstances and without interviews with his wife or children.
Western diplomats say the longer Deng lingers the less impact his death will have on the delicate balance of power at the top of Chinas ruling Communist Party.
",14
"South Korea on Tuesday urged ""extraordinary alertness"" against the rival North, warning that the defection of a senior North Korean official now marooned in Seoul's Beijing embassy showed the hermit state was unstable.
As China reinforced security at the South Korean mission, there was little sign of progress in the diplomatic deadlock with the two rival Koreas on what to do with Hwang Jang-yop, the most senior North Korean to betray his Stalinist homeland.
It was Hwang's seventh day in Seoul's consulate office.
Appeals for calm from China, an unwilling third party in the latest Cold War crisis, appeared to yield fruit with North Korea showing signs of backing off from its hard line over its highest ever defector.
But South Korean Prime Minister Lee Soo-sung called for ""extraordinary alertness"" against the North.
""The defection of secretary Hwang Jang-yop, who belongs to the core force of the North Korean leadership, vividly displays the shaking of the ideological foundation that has supported the North Korean system amid economic disasters,"" he said.
Hwang, one of 11 powerful secretaries of the ruling Workers' Party along with North Korean leader Kim Jong-il, sought refuge at Seoul's mission in the Chinese capital last Wednesday.
Lee told parliament the communist North had increasingly deployed offensive forces near the border with the South, despite an economic crisis and chronic food shortage at home.
While repeating its appeals for calm, China was prepared for disturbances.
Police guarding the mission where Hwang is stranded went on higher alert, and three armoured personnel carriers filled with helmeted paramilitary police rumbled into the sedate diplomatic quarter to back up squads of police armed with assault rifles.
""We hope all parties can deal with this matter calmly... and calmly face and appropriately handle this incident to maintain peace and stability in the Korean peninsula,"" a Chinese Foreign Ministry spokesman said.
Seoul and Beijing were working to find a solution to the three-way diplomatic crisis that has thrown relations among China and the two Koreas into turmoil, Seoul officials said.
""Negotiations with the Chinese government are still going on,"" said South Korean embassy spokesman Chang Moon Ik, but declined to give details.
He dismissed reports that three-way talks between Beijing, its old communist ally Pyongyang and its new capitalist friend Seoul were under way to break the deadlock over Hwang's fate.
The North has hinted it may accept Hwang's defection, saying it would dismiss him if he sought asylum.
""It is certain North Korea is changing its attitude,"" said Kim Kyung-woong, a senior official of Seoul's state South-North Dialogue Office.
North Korea's Foreign Ministry said late on Monday it would fire Hwang if he sought asylum in Seoul but warned of ""decisive countermeasures"" if it were proved he had been kidnapped.
North Korea had earlier maintained Seoul kidnapped Hwang, architect of the Stalinist nation's governing ideology of Juche, or strict self-reliance. Seoul called the charge preposterous.
The tussle over Hwang's defection was the latest flare-up in tense relations between the two Koreas, arch-enemies since the 1950-53 Korean civil war ended only in a truce.
The United States has urged Pyongyang to avoid all provocative actions and has said it was closely monitoring developments after an assassination attempt against a former North Korean defector near Seoul on Saturday night.
South Korea accused Pyongyang agents of shooting 32-year-old Li Il-nam in an attack that left him critically ill with a bullet still lodged in his skull. Doctors in Seoul said he was on life support and unlikely to regain consciousness.
",14
"Rumours say the health of China's paramount leader Deng Xiaoping is failing. Officials say there is little change and he is all right for a man of 92.
Western diplomats say the longer Deng lingers the less impact his death will have on the delicate balance of power at the top of China's ruling Communist Party.
One barometer of Deng's health in China's highly secretive system is the travel of top leaders and close family members, with few willing to be abroad if Deng was close to death, diplomats said.
China's elderly leaders exert great influence after their retirement in a society where age is revered and in a communist system in which officials spend years building up power networks.
Hong Kong's Apple Daily newspaper reported at the weekend that the 92-year-old architect of China's sweeping economic reforms had been rushed to hospital on Thursday after a massive stroke that followed an earlier, mild stroke.
The ailing leader was in the Number 301 military hospital in western Beijing under observation, the mass-circulation newspaper said, quoting sources in Beijing.
He had been taken to hospital before the Chinese lunar new year, which fell on February 7, after an earlier mild stroke and later released, it said.
Deng was well enough to meet visitors during the new year festivities, although he had a cold, the newspaper said.
Similar rumours sent Hong Kong stocks tumbling on Friday.
There was little sign in Beijing of any major change in the fragile health of the man whose policies transformed a backward Stalinist state into an economic powerhouse.
""I think, for someone of that advanced age, the state of his health should be described as all right,"" said a Chinese Foreign Ministry spokesman at a meeting of European and Asian foreign ministers in Singapore.
The state of Deng's health was evident from the fact that Foreign Minister Qian Qichen attended the high-profile meeting in Singapore, Guo said.
""Otherwise, Minister Qian wouldn't be here,"" Guo said.
In another indication that Deng's health may not be in crisis, Vice-Premier Li Lanqing, a member of the powerful party politburo, left Beijing on Saturday to visit Israel and Iran.
That trip would certainly have been cancelled if Deng was near death because no senior leader wants to be abroad when the patriarch goes to meet Marx, one Western diplomat said.
Rumours about Deng's health surface periodically.
However, a family member said last month that Deng remained at home and in good health.
She said he was able to read ""with the help of others"", a hint that while he may no longer be able to read, he is able to understand when others read to him.
Deng has not been seen in public since the 1994 Chinese lunar new year festival when he visited Shanghai and appeared frail and faltering. He is now believed to be in fragile health and with fading lucidity.
State-run Chinese media rarely carry reports on Deng since he vanished from public view, partly because of failing health and his own desire to retire to play a behind-the-scenes role.
Deng retired from his last official position in 1990 and his only post is honorary chairman of China's Bridge Association, a title that reflects his lifelong passion for the card game.
Deng was in the public eye at the start of the new year when state television ran a 12-part documentary on his life, but without any details of his present circumstances and without interviews with his wife or children.
",14
"The seven-year-old reincarnation of Tibet's second holiest Living Buddha, selected by China, spends his days memorising Buddhist sutras, playing football or learning to use his computer, state media said on Sunday.
But the Beijing Review magazine, in a cover story report on the life of Gyaincain Norbu, reincarnation of the 10th Panchen Lama, gave no hint as to the mystery over whether the boy lives in his Himalayan homeland or under the watchful eye of China's leaders in Beijing.
The boy, who was selected under Chinese auspices, is regarded by many Tibetans as a pretender to the spiritual mantle of the 10th Panchen Lama, who died in 1989, spending most of his time in Beijing.
Chinese sources have said he lives in the capital under state protection against possible assassination attempts by radical Tibetans.
Tibet's spiritual leader, the exiled Dalai Lama, has named another boy as the reincarnation of the 10th Panchen Lama. His choice has disappeared but China says he is well.
The 11th Panchen Lama made his debut as a religious leader on the first anniversary of his recognition on November 22 when he led Tibetan lamas in reciting scriptures in a ceremony at the Yonghe Lamasery in Beijing and then gave a lecture, the Beijing Review said.
His teachers, a monk from Tibet's Ganden monastery and an elerly lama from the Tashilunpo monastery that is the Panchen Lama's seat, have set up a rigorous schedule of discipline and study for the child, it said.
When he is in Tibet, he rises at 6.30 a.m. -- earlier in the summer -- and after brushing his teeth does exercises and plays in the monastery courtyards, Beijing Review said.
At 7.00 a.m., it is time for half an hour of chanting sutras followed by a typical Tibetan breakfast of yak butter, tsampa -- roast barley flour -- and milk cakes. Local farmers send him gifts of fresh yak butter and his parents send him milk cakes.
Study of the Buddhist sutras resumes at 8.15 a.m., then lunch of barley flour, noodles, meat and rice, it said.
Since leaving his mother's cooking at the family's rural home, the little living Buddha has had to adjust to eating vegetables, regarded as animal feed among Tibetan herders who live mainly on meat, it said. He was eating now more vegetables.
He takes a nap until 3.00 p.m. when he begins another 2-1/2 hours of study.
""At this age, he has an excellent memory,"" his teacher Living Buddha Migmar Shidar told Beijing Review. ""So we keep him on a tight schedule and he's progressing faster than we expected.""
The highlight of his day comes at 5.30 p.m. when the 11th Panchen Lama is freed from the classroom and rushes out to play football, cycle along the courtyard paths or play hide-and-seek with other boys, it said.
After dinner at 7.00 p.m. come more studies, with Tibetan four nights a week, one night of Chinese and one of mathematics. He also plays with a computer he was given recently.
At weekends he is allowed to watch television, and cartoons are his favourite.
""The 11th Panchen Lama is, after all, living in the 1990s,"" the Beijing Review said. ""He feels the pulse of the time.""
Bedtime is at 9.30 p.m., when he goes to sleep after a glass of sour milk. Sundays are a holiday.
",14
"Kmart Corp., in another bid to spruce up its discount stores, said Wednesday it will spend $750 million over the next three years to convert nearly all of the outlets to a new concept called ""Big Kmart.""
The new Big Kmarts are designed to help shoppers save time and money and bring them back more often by reorganizing merchandise and displaying it in wider, easier-to-access aisles.
""This new store signals real change, a new beginning, a new Kmart, bigger and better in every respect,"" Chairman Floyd Hall said at an unveiling of the Big Kmart concept at the Chicago Brickyard Mall.
The Big Kmart concept is expected to add significantly to sales at existing stores.
""We would look for a 20 percent gain in any given store in sales per square foot,"" Hall said in an interview.
The Big Kmart prototypes, under development for 18 months, have previously been called Kmart's ""high frequency"" concept. So far 297 stores have been converted. Another 333 are slated for conversion in 1997. Most of the remainder of Kmart's more than 2,000 traditional stores will be converted by 1999.
Big Kmart stores, not to be confused with another concept, the Super Kmart Centre, are the same size as the 60,000 to 80,000 square feet traditional stores.
The Big Kmart concept groups merchandise into three areas: home fashions, including towels, bedding, dinnerware and appliances, located near the front of the store; childrens' apparel and toys, near ladies and mens apparel; and consumables, including health and beauty care products, near the centre of the store.
Big Kmart stores will also feature a new Pantry department filled with more food and household products, paper products and pet supplies.
""We don't really look for a customer to choose us over a grocery store,"" Hall said. ""We're offering it up as a convenience to our customers.""
The Big Kmart stores will not duplicate the full grocery sections offered in the firm's 97 Super Kmart Centres.
Kmart, the nation's third largest retailer, has launched previous programmes to draw shoppers into its discount stores, which have been criticised as dirty and disorganized.
In 1990, former Kmart chairman Joseph Antonini launched a massive store renovation programme that also updated the company's logo. However, the changes failed to bring Kmart up to the standards set by archrivals Wal-Mart Stores Inc., and Dayton Hudson Corp.'s Target.
Hall said the company plans to open seven traditional stores and three Super Kmart Centres in 1997 and concentrate its efforts on opening 35 new Big Kmart stores and 15 to 18 Super Kmart Centres in 1998.
",5
"Mercury Finance Co's new chief executive officer said on Monday he hoped to receive a short-term credit facility from the troubled consumer finance company's lenders to gain time to stabilize the firm.
""I'm guardedly optimistic,"" William Brandt Jr. said of the possibility of receiving a short-term facility after a day of meetings with Mercury's institutional lenders.
Mercury said last week it had defaulted on $17 million of commercial debt, and analysts said the company had about $100 million of debt coming due on Thursday.
But Brandt, who was named chief executive of the company on Monday, said he hoped he could avoid filing for bankruptcy reorganization while stabilizing the company.
""I am not prepared to file any imminent bankruptcy,"" Brandt, who has a background as a corporate turnaround and bankruptcy specialist, said in an interview late on Monday. ""I would like to keep the company intact and operating as it is.""
However, Brandt said he also was familiar with the rules and advantages of bankruptcy filing if it became necessary.  
About four weeks of breathing space would give Brandt time to determine if Mercury could re-enter the commercial debt market at rates it considered reasonable, he said.
""I'm not about to go into that market right now,"" he said.
Last week, Mercury had its debt ratings lowered to default status by some major rating services after defaulting on the commercial debt.
The default came after Mercury said it needed to lower its past four years' net income by a total of about $90 million due to accounting irregularities.
If it could not re-enter the commercial debt market in the next few weeks, Brandt said Mercury would consider securitizing its consumer loans -- bundling them -- to sell in the open market.
Mercury said last year it would consider securitizing its loans, but Brandt said the company's systems were not centralized enough to do that immediately.
""The good news is, there is some background spade work"" that had been done by the company to set up securitization, he said.
Access to the debt market gives Mercury the capital it needs to lend to its sub-prime credit customers.  
Brandt replaced John Brincat, who resigned as president and chief executive but will remain as an employee of the company. Brandt said his pay package with Mercury would include salary and other compensation based on the company's performance, but he would not say what the salary was.
Brandt said his life's goal was not to remain chief executive of Mercury, but that a stint of 18 months at the head of a company he was trying to turn around was not considered long in his business.
When asked how long he would stay at Mercury, Brandt answered: ""Until I run out of aspirin.""
",5
"First Bank System Inc. said Thursday it will acquire U.S. Bancorp  in a stock deal worth more than $8.5 billion that will make it the 14th-largest bank in the United States and give it a firm toehold in the Pacific Northwest.
The deal between Minneapolis-based First Bank and U.S. Bancorp, a regional bank based in Portland, Ore., will also result in the loss of about 4,000 jobs, the banks said.
Under a definitive agreement, U.S. Bancorp shareholders will receive in a tax-free exchange 0.755 share of First Bank common stock for each U.S. Bancorp share they own.
Based on First Bank's trading price of $75.375 Thursday, which was down $2.875, the purchase price equals $56.91 a share for holders of U.S. Bancorp, whose shares jumped $6.75 to $55.
""This is very rich pricing,"" said James Schutz at ABN AMRO Chicago Corp., noting the deal values U.S. Bancorp at about 19.2 times its 1996 earnings.
However, First Bank Chief Executive John Grundhofer's reputation for aggressive cost-cutting, the complementary fit of U.S. Bancorp with First Bank's mostly Midwestern markets and the rich price of bank stocks in general made the deal palatable to many analysts.
""You could live a couple of lifetimes without finding another fit this good,"" Grundhofer said in a statement announcing the deal.
""It's a natural fit for them,"" said Frank Barkocy, analyst at Josephthal, Lyon & Ross. ""It's a natural extension of their marketplace.""
First Bank said it expected pretax cost savings of about $340 million from the merger, with combined operating expenses being reduced by 14 percent.
First Bank said it would take pretax charges of $625 million for costs related to the merger, which was expected to close by the end of June.
While it was too soon to say specifically which jobs would be cut in the merger, the majority of jobs affected will be in the Portland area, bank officials said. Both banks have instituted hiring freezes to help minimize the number of people losing jobs, the banks said.
First Bank said the deal was expected to add to its earnings per share starting in the second quarter of next year. By 1999, First Bank sees about an 8 percent addition to earnings per share.
First Bank said it would be able to increase revenues from the deal by offering its payment systems services to U.S. Bancorp's extensive corporate base.
Home equity lending and investment management services are also businesses First Bank plans to offer U.S. Bancorp's customers, while U.S. Bancorp's leasing expertise would be offered to First Bank customers, the banks said.
""Where the deal makes more sense is the compatibility of the business lines,"" said Stephen Biggar, analyst at S&P Equity Group.
Grundhofer will be president and chief executive of the new company, which will take the U.S. Bancorp name but remain based in Minneapolis.
U.S. Bancorp Chairman Gerry Cameron will serve as chairman of the merged bank until his retirement in 1998.
Since 1991, First Bank has made 23 acquisitions, including the $717 million acquisition of Nebraska-based FirsTier Financial Inc. in 1996.
Cameron said he was first approached by Grundhofer about a deal in early November.
""I frankly told him he should go talk to someone else that was interested,"" Cameron told reporters during a conference call. But he said he felt a responsibility to shareholders to hear Grundhofer out and the two discussed the deal around Thanskgiving.
After subsequent meetings and a review that ended last weekend, both sides were even more convinced the deal made sense, he said.
",5
"Caterpillar Inc remains concerned that continued strength of the dollar could pressure its pricing, though the impact was not that great in the first quarter.
""So far...  the impact's been very minimal and a large part of that is the fact that we've restructured our business so we know how to manage an overvalued dollar,"" Douglas Oberhelman, chief financial officer of the Peoria, Illinois-based heavy equipment maker, said in an interview.  
That restructuring includes more overseas production, he said.
But the continued strength in the dollar, which is at a multi-year high against the yen, could lead to pricing competition from Japanese competitors later this year, Oberhelman said.
""No question that if the dollar continues to be overvalued and continues to be strong, we'll see some price erosion later in the year,"" Oberhelman said.  
""So far, it's not been the predatory pricing that we've seen in the past from our competitors,"" he said.
Earlier Tuesday, Caterpillar said it expected 1997 profits to rise from 1996 on ""moderately higher"" sales.
That forecast anticipates additional tightening by the Federal Reserve this year.
""We're expecting another 50-75 basis points probably this year before we finish,"" Oberhelman said. ""That's in our plan. anything over and above that, we'd be concerned about.""
Caterpillar reported net income of $394 million, or $2.08 a share for the first quarter, up from $296 million, or $1.53 a share a year ago. Earnings were well above the $1.69 a share First Call mean analyst estimate.
Caterpillar shares were up 2-1/4 at 81-5/8 Tuesday.
((Chicago newsdesk, 312-408-8787))
",5
"Caterpillar Inc. reported a first-quarter profit of $394 million Tuesday, the best quarter in the company's history and up 33 percent from a year ago.
Caterpillar also said it now expects 1997 profits will be higher than the $1.4 billion it posted in 1996, based on expectations for ""moderately higher"" sales.
The outlook is a switch from January, when Caterpillar forecast profits near 1996 levels.
The Peoria, Ill.-based heavy equipment maker reported earnings of $394 million, or $2.08 a share, well above the Wall Street consensus of $1.69 a share. Sales and revenues were $4.26 billion.
A year earlier, Caterpillar earned $296 million, or $1.53 a share, on revenues of $3.84 billion.
Caterpillar shares rose $2.375 to $81.75 on the New York Stock Exchange in afternoon trading.
""This is just a very, very solid operating quarter,"" said J. Blair Brumley, an analyst who follows Caterpillar at Dain Bbosworth Inc.
Gross profit margins helped drive earnings in the quarter, rising to 26.8 percent of machinery and engine sales from 24.5 percent a year ago.
The rise in profit margins was primarily due to higher prices, higher physical sales volume, a favourable change in geographic sales mix, lower sales discounts and the net effect of the stronger dollar.
But the favourable effect of the stronger dollar on costs incurred in Japanese yen and European currencies was substantially offset by the negative impact on prices.
If the dollar remains too strong vs. the yen, the company could be forced to cut prices because of competition from Japanese companies, Caterpillar said.
""So far...  the (negative) impact's been very minimal and a large part of that is the fact that we've restructured our business so we know how to manage an overvalued dollar,"" Caterpillar Chief Financial Officer Douglas Oberhelman said in an interview. ""No question that if the dollar continues to be overvalued and continues to be strong, we'll see some price erosion later in the year.""
Sales in the United States were $2.17 billion, up 15 percent from a year ago. Sales outside the United States were $1.90 billion, up 6 percent from a year ago.
Sales volume in the quarter was up 9 percent, while prices improved 2 percent, Caterpillar said.
Caterpillar did hedge its forecast for the year, saying greater-than-expected interest rate increases by the Federal Reserve and lingering weakness in European demand could hurt results. Last month the Fed raised short term interest rates by one-quarter percentage point in a bid to ward off inflationary pressures.
""We're expecting another 50-75 basis points (one-half to three-quarter percentage point in rate increases) probably this year before they finish,"" Oberhelman said of the Fed. ""That's in our plan. Anything over and above that, we'd be concerned about.""
Caterpillar noted that the economic and industry outlook improved from January because the United States and Canada are now expected to have better economic growth and higher machine industry demand than originally anticipated.
The company said it expected U.S. gross domestic product to rise 3 percent in 1997, up from the 2 percent it expected earlier.
",5
"Strong business fundamentals and a presumed change in the shareholder profile of Wallace Computer Services Inc should protect it from a bid by investor Guy Wyser-Pratte to remove the company's poison pill takeover defense, analysts said.
""I think they've done a terrific job of creating shareholder value and I think it will come out at some time,"" said Judith Scott, analyst at Robert W. Baird.  
Meanwhile, many arbitrageurs likely sold their Wallace stock after Moore Corp Ltd said in early August it was abandoning its 13-month takeover campaign, analysts said.
""Since August 6, you've had a substantial change in the profile of the Wallace shareholder base,"" said Martin McDevitt Jr., analyst at Cleary Gull Reiland and McDevitt.  ""Most of the selling since the early part of August is on behalf of arbitrageurs.""
McDevitt conceded that he could not say for sure how much of the selling in the stock has been from arbitrageurs.  
But he argued that the shareholder base is probably more composed of shareholders looking for a longer-term return. His 12-15 month price target for Wallace is $36-$40 a share, with other analysts in the $35-$36 range.
The stock was unchanged at 27-1/4 Thursday.
After Moore withdrew its bid, Wyser-Pratte, who controls a 2.3 percent stake in Wallace, filed proxy materials with the Securities and Exchange Commission, seeking to have three directors elected to Wallace's board.  He is also seeking the repeal a bylaw requiring an 80 percent vote to approve certain mergers.  
In an interview, Wyser-Pratte argued that while Wallace shareholders could have received $60 a share from Moore a year ago, the stock, on a pro forma basis adjusting for a stock split, is trading just above $54.
But analysts counter that the company posted higher than expected earnings of $1.60 a share in the fiscal year ended July 31 and that the stock price should improve after uncertainty over the Wyser-Pratte proposals subsides.
""We think over the next three to five years, the company can grow 15 percent a year on the bottom line,"" McDevitt said.  
But while forecasting better results and a higher stock price for the company, not all analysts are convinced Wyser-Pratte will be unsuccessful in having the poison pill defense removed.
Kenneth Bohringer, analyst at Prudential Securities Research, noted that 59.8 percent of Wallace's shares were tendered to Moore's bid last year.
""I would assume that going forward, they can expect challenges to the poison pill,"" he said. ""But I think that they have been vindicated by the performance they put together over the last year.""
--Reuters Chicago newsdesk, 312-408-8787
",5
"First Bank System Inc. said Thursday it will acquire U.S. Bancorp in an $8.5 billion stock deal that will make it the 14th-largest bank in the United States and give it a firm toehold in the Pacific Northwest.
The deal between Minneapolis-based First Bank and U.S. Bancorp, a regional bank based in Portland, Ore., will also result in the loss of about 4,000 jobs, the banks said.
Under a definitive agreement, U.S. Bancorp shareholders will receive, in a tax-free exchange, 0.755 share of First Bank common stock for each U.S. Bancorp share they own.
Based on First Bank's trading price of $74.875 Thursday, which was down $3.375, the purchase price equals $56.53 a share for holders of U.S. Bancorp, whose shares jumped $6.50 to $54.75.
""This is very rich pricing,"" analyst James Schutz at ABN AMRO Chicago Corp. said, noting that the deal values U.S. Bancorp at about 19.2 times its 1996 earnings.
However, First Bank Chief Executive John Grundhofer's reputation for aggressive cost cutting, the complementary fit of U.S. Bancorp with First Bank's mostly Midwestern markets and the rich price of bank stocks in general made the deal palatable to many analysts.
""You could live a couple of lifetimes without finding another fit this good,"" Grundhofer said in a statement announcing the deal.
""It's a natural fit for them,"" said Frank Barkocy, analyst at Josephthal, Lyon & Ross. ""It's a natural extension of their marketplace.""
First Bank said it expected pretax cost savings of about $340 million from the merger, with combined operating expenses being reduced by 14 percent.
First Bank said it would take pretax charges of $625 million for costs related to the merger, which was expected to close by the end of June.
It also said the deal was expected to add to its earnings per share starting in the second quarter of next year. By 1999, First Bank sees about an 8 percent addition to earnings per share.
First Bank said it would be able to increase revenues from the deal by offering its payment systems services to U.S. Bancorp's extensive corporate base.
Home equity lending and investment management services are also businesses First Bank plans to offer U.S. Bancorp's customers, while U.S. Bancorp's leasing expertise would be offered to First Bank customers, the banks said.
""Where the deal makes more sense is the compatibility of the business lines,"" said Stephen Biggar, analyst at S&P Equity Group.
Grundhofer will be president and chief executive of the new company, which will take the U.S. Bancorp name but remain based in Minneapolis.
U.S. Bancorp Chairman Gerry Cameron will serve as chairman of the merged bank until his retirement in 1998.
Since 1991, First Bank has made 23 acquisitions, including the $717 million acquisition of Nebraska-based FirsTier Financial Inc. in 1996.
",5
"TCF Financial Corp., a bank holding company, moved to enter the business equipment leasing field Friday, signing a letter of intent to acquire Winthrop Resources Corp. for about $326 million.
Under the agreement, TCF will offer one share of its stock for every 1.2877 shares of Winthrop in a tax-free pooling of interests.
Minneapolis-based TCF also said it has suspended its share repurchase programme as a result of the pending acquisition.
Winthrop, with leased assets of $327 million, specialises in leasing high technology and business equipment to companies throughout the United States, the company said.
""This is a well-managed, dynamic firm that will increase our asset origination capacity and complement our existing lines of business,"" TCF Chief Executive William Cooper said in a news release.
Winthrop, also based in Minneapolis, will become a subsidiary of TCF Bank Minnesota, the companies said.
The deal values Winthrop at $36.50 a share, based on a TCF stock price of $47, TCF said.
TCF shares fell 50 cents to $46.625 on the New York Stock Exchange at mid-afternoon. Winthrop rose 37.5 cents to $34.375 on Nasdaq.
The deal is expected to close by the third quarter, subject to negotiation of a definitive agreement, a due diligence review, and approval by both companies' boards of directors, shareholders and regulators.
TCF, with assets of $7.1 billion, has banking operations in Minnesota, Illinois, Wisconsin, Michigan and Ohio.
The proposed acquisition appears to fit Cooper's focus on ""power assets and power liabilites,"" said Joseph Duwan, analyst at Keefe, Bruyette & Woods.
""The (interest rate) spreads are relatively wide, the yields are attractive, as opposed to straight commercial lending,"" Duwan said of the leasing business.
",5
"Mercury Finance Co.  said Thursday it was suspending payment of a previously announced dividend while it tries to secure short-term financing as it falls deeper and deeper into debt.
The troubled consumer finance company said it had been unable to refinance a total of $61 million in commerical paper -- or short-term debt -- that had matured through Wednesday. Another $127 million comes due between Thursday and Feb. 14, Lake Forest, Ill.-based Mercury said.
The company has been in violation of certain loan covenants since last week, when it was unable to pay $17 million in commercial debt.
Mercury has been in turmoil since it announced last week that accounting irregularities had caused it to overstate its earnings by about $90 million.
It said accounting misstatements appeared to stem from unauthorised entries by former controller James Doyle. But Doyle's lawyer has accused the company of a ""charade"" and said Doyle is cooperating with federal authorities.
FBI agents served a search warrant seeking financial records Monday.
Mercury said Thursday that it suspended a dividend payment of 7.5 cents a share that was payable March 3.
The company also said it was continuing to try to obtain short-term financing from its lenders in talks that have been taking place all week. It added that funds from the short-term financing will be used exclusively for operating purposes and will not be available for paying principal or interest on company debt.
One analyst said the apparent lack of a report so far by new auditors on the extent of the accounting discrepancies might be hindering the talks with lenders.
""Certainly, (the talks are) complicated in one instance by the default on the commercial paper to date and what seems to be the lack of resolution on the extent and nature of the accounting regularities,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co.
Earlier this week William Brandt Jr., a turnaround and bankruptcy specialist who replaced John Brincat as chief executive officer on Monday, told Reuters the company needed about four weeks of financing to gain time to stabilise the firm.
Mercury, which makes used-car loans to individuals of often relatively low creditworthiness, also said Thursday that operations were continuing at all of the company's 280 locations nationwide.
Market sources said there had been rumours of bids for Mercury's commercial paper at 50 percent to 80 percent of face value. One attorney familiar with bankruptcy matters said bidders might be trying to have more influence if Mercury is forced to file for bankruptcy.
""It is not uncommon for investment groups to be buying paper at a discount to improve their situation in a restructuring,"" said Ted Koenig, attorney at Holleb & Coff in Chicago.
Mercury was only one of several auto lenders to report deepening troubles Thursday.
Dallas-based Jayhawk Acceptance Corp.  said Thursday afternoon it would file a voluntary petition for reorganization under Chapter 11 bankruptcy protection, after saying its revolving credit lender plans to deliver it a default notice.
Jayhawk said last week it took a $15.5 million charge to fourth-quarter earnings to increase its allowance for credit losses after reevaluating the likelihood of recovering advances made to some dealers.
Evanston, Ill.-based First Enterprise Financial Group Inc. said it did not report 1996 earnings as expected Thursday and that it was reviewing its portfolio in light of recent developments in the industry.
An analyst at ABN AMRO Chicago Corp. lowered the company's stock to hold from buy.
""We believe the Mercury situation is causing audit firms to take a much harder position with automobile finance companies,"" Chicago Corp. said in a research report.
First Enterprise's stock plunged $3.375 to $8.875 on Nasdaq.
The fallout from Mercury's financial troubles is also striking a foundation established by Mercury founder Daniel Terra, who died in June. The foundation, which funds the Terra Museum of American Art in Chicago and an American museum in Giverny, France, holds 8 million shares as part of its $350 million endowment.
Those shares were worth more than $116 million a week ago, but were worth about $21 million Thursday.
Mercury's stock fell 25 cents to $2.25 on the New York Stock Exchange, where it was one of the most heavily traded issues.
",5
"Shuffle Master Inc Chief Executive Joseph Lahti said Monday he is not seeking to put the gaming equipment supplier up for sale, but also said it was his responsibility to consider ways that provide value to shareholders.
""Are we in play? No,"" Lahti said in an interview. But he added that if someone were to inquire about the availability of the company, ""what's the price is my next question.""
Shuffle Master earlier said it would not pursue unsolicited discussions with Anchor Gaming.  
Those discussions, initiated by Anchor Chairman Stanley Fulton, related to a potential business combination with Anchor, Shuffle Master said in a news release.
Shuffle Master also said it believes it will be served with a lawsuit by Anchor alleging that Shuffle Master's Let It Ride game infringes on certain of Anchor's patents.
Lahti said in a news release that Shuffle Master viewed any potential lawsuit as an attempt by Las Vegas-based Anchor to pressure Eden Prairie, Minnesota-based Shuffle Master into a business combination.  
In the interview, Lahti said Shuffle Master noted Anchor's game when it filed for its patent, yet was awarded a patent anyway.
Anchor did not return telephone calls seeking comment.
But one analyst was skeptical of whether Anchor would seek to acquire Shuffle Master, which is trading at about 24 times its annualized third quarter earnings of $0.13 a share.
""I find Anchor being interested highly unlikely,"" said Stuart Linde, analyst at Gerard Klauer Mattison & Co, who rates Shuffle Master a sell. ""I think Anchor's more intent on making an acquisition in the casino sector."" He said an acquisition of Shuffle Master at current prices would be dilutive for Anchor.
Shuffle Master shares fell 1/8 to 11-5/8 Monday, while Anchor's stock price fell 5/8 to 52-3/4, both on Nasdaq.
Another analyst said Shuffle Master could be part of consolidation in the gaming equipment business.
""Consolidation on the supply side really hasn't occurred yet,"" said Robert Evans, analyst at John G. Kinnard & Co. ""It wouldn't be surprising if it did.""
--Reuters Chicago newsdesk, 312-408-8787
",5
"Mercury Finance Co.'s agreement to buy a consumer finance business fell apart Thursday after the auto-loan company said phony bookkeeping entries had inflated its earnings and it had fired its chief accountant.
At the same time, the officer blamed for the overstated earnings may be cooperating with federal authorities.
BankBoston Corp. said it terminated its agreement to sell its Fidelity Acceptance Corp. unit to Mercury for 32.7 million shares of Mercury stock. When the deal was announced on Jan. 10, the stock was worth about $458 million.
Mercury Finance stock has not traded since it closed at $14.875 on the New York Stock Exchange on Tuesday. The NYSE would not indicate where the stock might open but traders said it was changing hands at $4.25 overseas. That would make the 32.7 million shares worth about $139 million.
""BankBoston today informed Mercury Finance Co. that recent events regarding Mercury Finance constituted a breach of the provisions of BankBoston's agreement for the exchange of shares of Fidelity Acceptance Corp. for shares of Mercury Finance,"" BankBoston said in a statement.
Analysts said BankBoston, a Boston-based banking company, would have little trouble finding another buyer for Fidelity, its auto financing arm.
""At the time they were structuring this deal there were four or five other firms that expressed interest or made bids on Fidelity,"" said Nancy Bush at Brown Brothers Harriman.
""I don't think they're going to get the kind of sweetheart deal they got with Mercury,"" she added.
A Mercury Finance spokesman declined to comment on the deal.
But the spokesman said the company was interested in talking to James Doyle, the controller who Mercury Finance said had disappeared but who is reportedly cooperating with federal authorities.
A Dow Jones news wire report quoted Doyle's attorney as saying Doyle had accused Mercury Finance of a charade and that the controller had not disappeared but was cooperating with the authorities.
The attorney was not available and his assistant would not confirm the accuracy of the Dow Jones report.
A spokesman for the U.S. attorney's office in Chicago declined to comment.
Mercury Finance said on Wednesday its 1996 earnings would be restated to $56.7 million from $120.7 million and that earnings for the three prior years would also be adjusted downward, though not as sharply.
The problems appeared to stem from unauthorized entries in financial records by its chief accounting officer, Doyle, who the company said had been fired.
Mercury Finance also said it was in violation of certain provisions if its loan agreements and that a special committee of directors has been formed to investigate the problems.
Mercury Finance said Thursday that the NYSE was seeking more information. Mercury spokesman Joseph Kopec said the exchange wanted ""additional assurance that the numbers in the release Wednesday were reliable.""
Kopec said he did not know if the Lake Forest, Ill.-based finance company would issue additional information.
Mercury Finance also got hit by at least three lawsuits charging it violated securities laws.
Filed in federal court in Chicago on Wednesday and Thursday, the lawsuits alleged the company and some senior officers misrepresented or omitted crucial information about Mercury Finance's earnings for the last three years, lawyers who filed the suits said in statements.
Also, Standard & Poor's Corp. cut its debt rating on the company's commercial paper and said it may cut the rating further.
",5
"Case Corp said Tuesday it plans to spend $950 million in the next four years as part of an ongoing program to revamp its product line by the turn of the century.
""We have the goal to replace all the major (agricultural) products by the end of the century,"" Jean-Pierre Rosso, chief executive of the Racine, Wisconsin-based farming and construction equipment maker said in an interview. Many construction products will also be revamped.  
One major portion of that product overhaul, a new tractor series, will enter production this spring, Rosso said.
The MX Series tractors, which run from 85 to 115 horsepower, are in the midsize area of the tractor market, which represent about 30 percent of tractor sales worldwide for Case, Rosso said.
Orders in the United States and Europe have already exceeded company plans, Rosso said, although he would not disclose what those plans were.
""We have significant orders on both sides of the ocean already,"" he said.  
The tractor, which was recently unveiled, will be produced in Racine and the United Kingdom.
The switch from the German production site of Case's mid-sized tractors is expected to lower costs both from a labor and logistics stand point, Case said. The Racine and UK plants are also more efficient than the German plant. The new design utilizes more common components for models in different parts of the world, also bringing down costs, Case said.
Typically, the U.S. market has larger farms and looks for more horsepower, with wider implements. European farmers are looking for more advanced features on lower horsepower tractors, Rosso said.  
""The new design is much better matched to the needs and requirements of the customer base that it is targeted to,"" said J. Blair Brumley, analyst at Dain Bosworth Inc. The pricing of the tractor will also be equivalent to products offered by competitor Deere & Co, Brumley said.
The switch to the MX series tractors is expected to depress earnings in the first quarter, before boosting earnings later in the year, Case and analysts have said.
At the same time, Case is also introducing a premium tractor called the QuadTrak, which has also been well received.  
""There's more demand than we can supply this year,"" Rosso said of the QuadTrak, which is designed with four tracks to have better terrain handling and less soil compaction.
In the early phases of the QuadTrak introduction, Case will lease about half of those tractors in order to get more customer feedback, Rosso said.
Also this year, Case plans to introduce a new skid steer loader, a piece of construction equipment that can utilize many different attachments -- sort of the construction equivalent of a Swiss Army knife. The loader will be at the higher-margin heavy lift end of the product line, Rosso said.
""It gets us in a part of the market which we are not present,"" Rosso said.
Adding a new product to its skid steer line could help Case to face new competition in the market, Brumley said.
""They're number two in market share and that skid steer market is going to get real crowded,"" with offerings from other manufacturers, Brumley said.
((Chicago newsdesk, 312-408-8787))
",5
"Sears, Roebuck and Co will spend more than $500 million to revamp and expand its off-the-mall tire and battery stores under the new National Tire and Battery name, the retailer said Wednesday.
The change is part of a plan under which Sears will spend more than $1 billion through the year 2002 on its entire auto group to add stores and convert some existing stores.  
Hoffman Estates, Ill.-based Sears, which sold 25 million tires and 8.5 million batteries through its Sears Tire Group in 1996, will combine most of its 275 Tire America and National Tire Warehouse Stores under the National Tire and Battery name, Sears said.
The company also plans to add about 100 National Tire stores over the next five years, hoping to add about $120 million in annual revenue for the tire group when the expansion is completed. Sears' tire group had $2.3 billion in revenues in 1996.  
The stores, unveiled Wednesday in Chicago, will have a high-tech, open feel, with customers able to watch the work being done on their cars. Pricing will be competitive in individual markets, Sears said.
""We will be at market pricing in every market we're in,"" Paul Baffico, president of Sears Automotive Group, said in an interview. ""We do not necessarily want to be the market price leader, but we will be competitive with anybody who is in the market.""  
The off-the-mall stores are geared toward a younger, higher income customer with higher performance car needs than the 800 mall-based Sears Auto Centers, Baffico said. Because of the existence of the mall stores, the retailer chose not to include the Sears name in National Tire and Battery.
""From a location strategy standpoint, a different name allows us to be closer to a Sears store without cannibalizing the market,"" Baffico said.
Areas targeted for new tire stores this year are Detroit, Minneapolis/St. Paul, Rochester, N.Y. and Buffalo, N.Y.  
Sears will also add a small number of Sears Auto Center stores in malls where they have recently acquired other retailers, Baffico said.
Separately, Sears plans to spend more than $650 million to add 780 Parts America auto parts stores by the year 2002 and to transform 240 Western Auto stores to Parts America, Baffico said.  
""We should be by 2002 the clear number two in parts,"" Baffico said. That category is currently led by Memphis, Tenn.-based AutoZone Inc, with Pep Boys -- Manny, Moe & Jack of Philadelphia second, based on revenues. Sears' parts group had $1.4 billion in revenue in 1996.
Since the parts stores do not compete with Sears' mall format, the company will decide by the end of the summer whether to include the Sears name in the name of the stores, Baffico said.
One analyst agreed that Sears' expansion plans for the automotive group were aggressive, but noted that the company was being even more aggressive in other formats.
""Those are relatively aggressive, but remember they're coming from a place where they've been a little stagnant for a while,"" Stephen Latz, analyst at A.G. Edwards, said of the auto group expansion plans.
((Chicago newsdesk, 312-408-8787))
",5
"USG Corp, maker of building products such as wallboard, is looking to double its earnings by the early 2000s from its 1995 base.
""By the early 2000s, we would like to double the bottomline of our company,"" USG chief executive William Foote said in an interview.
He said that goal was based on its 1995 earnings. The company reported earnings before interest, taxes, depreciation and amortization of $417 million in 1995.
EBITDA rose to $437 million in 1996 for the company.
USG plans to achieve this by growing revenues with production expansion and through cost cutting initiatives, Foote said.
The company is also seeking to have its debt rating raised to investment grade -- triple-B or better -- by the end of 1998, Foote said. The rating is currently double-B-plus.
The company currently spends about $150 million a year on capital improvements and $150 million a year to pay down debt. Once investment grade rating is reached, more of the company's cash will be spent on expanding capacity and improving costs, Foote said.
On Thursday, USG said its United States Gypsum Co unit will spend at least $85 million to build a facility to manufacture gypsum wood fiber panels, a building product the company plans to position between its less expensive wallboard product and more expensive cement board.
In November, the company announced plans to build a new, lower-cost wallboard manufacturing facility in Bridgeport, Ala. for $110 million. The company also last year said it would spend $35 million to modernize a Cloquet, Minn. plant.
Foote would not rule out announcing another new facility plan by the end of 1997.
""There are no plans that are imminent but I can't say that that might not happen,"" Foote said.
He also conceded that the new gypsum wood fiber product could cannabalize sales of the company's other products, but noted that this would free USG up to sell to more customers in the wallboard market.
""It would allow us to increase our (wallboard) market share,"" Foote said. ""We are able to sell all the Sheetrock (wallboard) we make right now.""
USG shares closed up 1/2 at 32-3/4 Thursday.
((Chicago newsdesk, 312-408-8787))
",5
"FBI agents Monday searched the headquarters of troubled Mercury Finance Co., which announced a change in its leadership days after announcing bookkeeping problems that caused it to overstate its earnings by millions of dollars.
The used-auto loan company named turnaround and bankruptcy specialist William Brandt Jr. president and chief executive officer. Brandt replaces John Brincat, who resigned those positions but will remain as an employee and a member of the board of directors, Mercury said.
The FBI agents, armed with a search warrant, arrived late Monday morning at Mercury's headquarters in the Chicago suburb of Lake Forest, Ill., seeking financial records, a company spokeswoman said.
Mercury said in a statement that it was cooperating fully with the investigators in supplying documents requested under the search warrant.
""We are grateful the FBI is conducting the search in a way that is not disruptive to business,"" the spokeswoman said.
The company announced Wednesday that it had found problems in its bookkeeping that caused it to overstate earnings by $90 million over four years. The company said the misstatements appeared to stem from unauthorised entries in financial records by its former controller, James Doyle, whom the company said it dismissed.
But Doyle's lawyer reportedly accused Mercury of a ""charade"" regarding the faulty books and said his client was cooperating with federal authorities.
Brandt, president and chief executive officer of Chicago-based Development Specialists Inc., takes over as Mercury continues to negotiate with lenders after defaulting on $17 million in commercial debt Friday. Analysts said Mercury has as much as $100 million in debt due this week.
In a statement, Brandt said, ""My experience with turnarounds is that the first stage is critical and requires enormous focus, coordination and immediate information-gathering to identify the most effective way to return a company like Mercury Finance to financial stability.""
One person familiar with Brandt's reputation said the appointment could help forestall a bankruptcy filing by Mercury.
""I think with the announcement of this guy as head, he will buy them some time ... to do some negotiating with creditors,"" said James Schrager, senior lecturer in business policy at the University of Chicago.
Schrager described Brandt's reputation as ""Mr. Clean. Knows the rules for bankruptcy, which are the relevant rules here.""
A Mercury spokeswoman stressed that while Brandt is a bankruptcy expert, he also has experience with corporate turnarounds that did not involve bankruptcy.
But, while conceding that the hiring of an outsider might buy Mercury a little more time with its lenders, one attorney with experience in bankruptcy cases said it was disappointing that Mercury did not say it secured bank financing this weekend.
""Unless they get the bank support, there's no way they're going to be able to restructure"" the short-term debt coming due, said Ted Koenig, a partner with Holleb & Coff in Chicago.
Mercury, whose stock lost about 86 percent of its value last week after it announced it was forced to restate its 1996 earnings due to the accounting irregularities, also was meeting its lenders in Chicago on Monday to discuss financing arrangements to meet its liquidity needs.
The stock continued slipping Monday, dipping 25 cents to $1.75 on the New York Stock Exchange.
Brandt was trustee for the bankruptcy liquidation of Southeast Banking Corp., a Miami-based bank taken over by the FDIC in 1991 and the bankruptcy of Standard Brands of America Inc, a Florida-based electronics and appliance retailer.
",5
"Caterpillar Inc. reported a first quarter profit of $394 million Tuesday, the best quarter in the company's history and up 33 percent from a year ago.
Caterpillar also said it now expects 1997 profits will be higher than the $1.4 billion it posted in 1996, based on expectations for ""moderately higher"" sales.
The outlook is a switch from January, when Caterpillar forecast profits near 1996 levels.
The Peoria, Ill.-based heavy equipment maker reported earnings of $394 million, or $2.08 a share, well above the Wall Street consensus of $1.69 a share. Sales and revenues were $4.26 billion.
A year earlier, Caterpillar earned $296 million, or $1.53 a share, on revenues of $3.84 billion.
""This is just a very, very solid operating quarter,"" J. Blair Brumley, an analyst who follows Caterpillar at Dain Bbosworth Inc., said.
Gross profit margins helped drive earnings in the quarter, rising to 26.8 percent of machinery and engine sales from 24.5 percent a year ago.
The rise in profit margins was primarily due to higher prices, higher physical sales volume, a favourable change in geographic sales mix, lower sales discounts and the net effect of the stronger dollar.
But the favourable effect of the stronger dollar on costs incurred in Japanese yen and European currencies was substantially offset by the negative impact on prices.
Sales inside the United States were $2.17 billion, up 15 percent from a year ago. Sales outside the United States were $1.90 billion, up 6 percent from a year ago.
Sales volume in the quarter was up 9 percent, while prices improved 2 percent, Caterpillar said.
While results were far better than expected for the quarter, analysts expressed some concern about how much the stronger dollar aided results.
Caterpillar also hedged its forecast for the year, saying greater-than-expected interest rate increases by the Federal Reserve and lingering weakness in European demand could hurt results.
Also, if the dollar remains too strong vs. the yen, the company could be forced to cut prices because of competition from Japanese companies, Caterpillar said.
Caterpillar noted that the economic and industry outlook improved from January because the United States and Canada are now expected to have better economic growth and higher machine industry demand than originally anticipated.
The company said it expected U.S. gross domestic product to rise 3 percent in 1997, up from the 2 percent it expected earlier. Caterpillar shares rose $2.25 to $81.625 Tuesday.
",5
"The stock of Giddings & Lewis Inc. jumped Monday amid speculation that Harnischfeger Industries Inc. would boost its hostile $631 million takeover offer for the supplier of machine tools or that another suitor would make a bid.
Analysts were sceptical that Fond du Lac, Wisconsin-based machine tool and industrial automation products maker Giddings would see a much higher bid than the $19-a-share tender offer Harnischfeger announced Friday.
""I don't think there's much more in that Harnischfeger bid than what's in there, and I don't think there's anyone else out there"" that would make a higher bid, Thomas Burns Jr., analyst at NatWest Securities, said.
The stock of Giddings, which also makes industrial automation equipment, soared $6.73 to $20.36 in active trading of more than 10.1 million shares on the Nasdaq market.
""People are expecting a higher bid,"" one trader said.
Harnischfeger's unsolicited bid of $19 a share for Giddings has a total value of $747 million including assumption of Giddings debt.
Giddings has asked its stockholders not to act on the offer until its board reviews the proposal. Giddings also said it retained Credit Suisse First Boston to explore all strategic alternatives.
Many analysts think that Harnischfeger's bid will prove to be successful.
While saying the Harnischfeger bid was not a done deal, ""We expect (Harnischfeger) to pursue its target with vigour and would be surprised if another offer significantly higher than the one now on the table would surface,"" J. Blair Brumley, analyst at Dain Bosowrth Inc., said.
Harnischfeger said it is looking at using Giddings & Lewis to expand in the fragmented industrial products aftermarket service business, which Harnischfeger estimates as an $80 billion market.
But some analysts said buying Giddings & Lewis, a company that took a $64.1 million charge last year to try to fix its integrated automation systems business, adds a lot of uncertainty for Harnischfeger shareholders.
""...We believe that investors will be looking at a fundamentally different company with much more risk involved than they had previously,"" Brumley wrote in a research note, in which he also lowered the rating of Harnischfeger to a hold from a buy.
But some analysts said Harnischfeger has picked a perfect time to go after Giddings & Lewis. Giddings & Lewis has already taken steps to fix its underperforming operations, but the stock, in their opinion, still is ailing, they said.
""They got all the dirty work behind them,"" said Darren Bagwell, analyst at Robert W. Baird & Co Inc. ""They've wiped the slate clean, and yet the stock price still reflects that wait and see attitude.""
In fact, Bagwell also said Giddings & Lewis could probably squeeze a higher bid out of somebody and said he felt the company was worth more than $19 a share.
Harnischfeger Industries stock fell $3.125 to $42.25 on the New York Stock Exchange.
",5
"American Business Information Inc founder and chief executive officer Vin Gupta Thursday backed the First Call consensus forecast of $0.23 a share in third quarter earnings from continuing operations and $0.91 a share for the full year.
""I'm comfortable with that,"" Vin Gupta, founder and chief executive officer of the Omaha, Nebraska-based provider information on businesses said in response to both estimates.
The estimates compare with $0.20 a share for the third quarter of 1995 and $0.80 a share for all of 1995.  
American Business sells data to customers who use the information for sales leads.  While the information is publicly available, Gupta says it is not easy for individual businesses to find.
While the company's stock fell to 10-1/2 from just under 15 after second quarter earnings were released, Gupta said in an interview that he bought about 200,000 shares in the company on July 16.  The company also bought back about 200,000 shares under a stock repurchase plan approved in June.  
Gupta said he and his family own 56 percent of the stock and he manages the company for long-term value, eschewing dividends and higher margins to reinvest in technology, expand its sales force, develop products and make acqusitions. Those who sell at the first hiccup in earnings should stay away from the stock, he said.
""We don't take unnnecessary gambles,"" he said.  ""We don't bet the house.  So people who get nervous, I guess they don't belong in our stock.""  
Gupta started the business in 1972 with a $100 investment, and expects sales of about $100 million in 1996, compared with $86.8 million in 1995.
""We have the most comprehensive, the most accurate database in the country now,"" he said.  Aside from phone directories and other sources, American Business makes about 14 million telephone calls to businesses each year to verify and gather more information.  
Aside from selling directly to subscribers, the company also sells CD-ROM formats of its data and is now offering business profiles on the Internet at $3 a profile.  In the first three weeks that service, Lookup USA, was avaialble, about 100-120 profiles were sold each day, he said.
In the next three years, Gupta sees $10-$20 million in revenues added from products on the Internet.  ""The Internet, the way its growing, I think could be a lot bigger,"" he said.
Among future developments for the company, Gupta noted that its address database will be bundled with a Microsoft Corp mapping product soon to be released.
He also said the company expects to be more active in the acquisition market.
""I would say that there's a good possibility that something could happen in the next two or three months,"" he said of acquisitions.
--Reuters Chicago newsdesk, 312-408-8787
",5
"Motorola Inc. filed a federal lawsuit Thursday against U.S. Robotics, alleging infringement of a number of Motorola's patents for high-speed modem technology.
The patents at issue cover technologies essential to the international standard for current modem technology and may also apply to parts of the new, higher speed, 56-kilobit modem technology, Motorola said.
The lawsuit comes just as U.S. Robotics is preparing to ship modems that allow users to download information from the Internet at a rate of 56 kilobits per second over ordinary, analogue telephone lines. U.S. Robotics said it plans to ship those modems in the next few days.
Bill Heimbach, manager of corporate development for Schaumburg, Ill.-based Motorola's Information Systems Group, said Motorola would not seek to delay those modems reaching the market.
He said the lawsuit, filed in U.S. District Court in Boston, came after two years of unsuccessful negotiations with Skokie, Ill.-based U.S. Robotics over licensing Motorola's technology.
""We did it in an attempt to force a very early closure to the issues we have,"" Heimbach said, adding that the timing of the lawsuit was not influenced by U.S. Robotics' plans to ship the modem.
The technology is part of standard international technology for modems.
Heimbach said International Telecommunications Union rules say the technology must be made available to others on a fair, reasonable, non-discriminatory basis, which allows Motorola to require license fees for its part of the standard technology.
Earlier Thursday, Motorola said it settled similar litigation with Rockwell International Corp. Motorola also said it formed an alliance with Rockwell Semiconductor Systems to develop a 56-kilobit modem using Rockwell's technology.
Motorola said it expects to introduce the modems in early March.
A spokeswoman for U.S. Robotics said the company had yet to see the lawsuit and could not comment.
Heimbach said Motorola hopes to settle quickly with U.S. Robotics, and one industry analyst said he also expected the case would be settled.
""All this is just a diversion, because U.S. Robotics says it will have its (modems) in as many retailers' stores as they can by the weekend,"" said John Grangaard, at GS2 Securities.
U.S. Robotics shares closed up $2 at $60.875 on Nasdaq, Motorola slipped 75 cents to $63, and Rockwell was down 50 cents at $67.75, both on the New York Stock Exchange. ROK.N MOT.N USRX.O
",5
"Midwest regional banks should continue their trend of low double-digit earnings growth in the 1997 first quarter, with expense control, steady loan growth and share buybacks pacing results.
""We ought to see more of what we've been seeing -- slow loan growth, good expense control and share buybacks"" boosting earnings per share, Michael Ancell, banking industry analyst at Edward D. Jones, said.  
That earnings trend, which has been evident for Midwest banks for several quarters, is also expected to continue much of the year, even if the Federal Reserve raises rates again.
""A quarter point, or (50 basis point) or whatever higher federal funds rate doesn't make too much difference as far as what the year will look like,"" Thomas Maier, analyst at EVEREN Securities, said.
With adjustable rate loans and more banks deriving revenues from fees and other areas, fluctuations in interest rates have less impact on bank earnings than in the past, analysts said.  
Rising rates could pressure thrift earnings later this year, analysts warn.
""Inherently, it's much more difficult to match the rate sensitivity of both sides of their balance sheets,"" Ben Crabtree, analyst at Dain Bosworth, said. ""They don't have much in the way of adjustable rate loans.""
While earnings growth looks strong for the rest of the year for Midwest banks, analysts are eying consumer loans, including credit card loans, for signs of higher delinquencies and charge offs.  
First Chicago NBD Corp last month warned of a difficult credit environment for its card business for the rest of the year.
Credit concerns could also slow consumer loan growth, analysts noted.
""We're expecting consumer loan growth to have slowed for a number of these companies, with bankers becoming a little more gun-shy,"" Ancell said.
The following are first quarter mean estimates, according to First Call, compared with 1996 first quarter actual earnings:  
					 Q1 97	   Q1 96
					 ----	    -----
Banc One Corp			$0.84	   $0.77
Commerce Bancshares Inc	  $0.79	   $0.70
Firstar Corp			 $0.50	   $0.46
First Bank System Inc	    $1.26	   $1.14
First Chicago			$1.15	   $1.03
KeyCorp				$0.97	   $0.88
Mercantile Bancorp Inc	   $1.01	   $0.70
National City Corp		 $0.86	   $0.79
Northern Trust Corp		$0.60	   $0.52
Norwest Corp			 $0.83	   $0.74
TCF Financial Corp		 $0.81	   $0.73
		((Chicago newsdesk, 312-408-8787))
",5
"TCF Financial Corp. and Standard Financial Inc. said Monday they signed a definitive agreement for TCF to acquire Standard Financial for $424 million in stock and cash.
The deal was announced two days after Milwaukee-based bank holding company Marshall & Ilsley Corp. said it would acquire cross-town thrift Security Capital Corp. for about $945 million in cash and stock, or about $92 a share.
Both deals help the buyer increase market share in the consolidating Midwest banking arena. Marshall & Ilsley said it will increase its market share to 19.2 percent in Wisconsin, with Milwaukee-based Firstar Corp., the number two bank in the state, at 12.1 percent of deposits.
At the same time, the acquisition of $2.4 billion asset Standard Financial and its 14 full-service offices would strengthen TCF's franchise in Chicago, allowing it to do more cost affective advertising than it could before the deal, William Cooper, chairman of $7.1 billion asset TCF said.
""We believe this merger will produce long-term revenue enhancements and meaningful cost savings,"" Cooper said in a news release.
TCF expects to save about $4 million annually once the two banks' operations are combined in Illinois and to generate more than $4 million in revenues from the deal by offering more products to Standard Financial customers, changing the mix of Standard Financial's loan portfolio to add higher yielding loans and through fees at its automatic teller machines.
""Standard certainly has the customer profile TCF looks for, but I thought the price that they paid was fairly rich based on Standard's earnings,"" Stephen Skiba, analyst at ABN AMRO Chicago Corp, said.
The combined company would have $10 billion in assets and 276 financial services offices and more than 900 automatic teller machines in five Midwest states.
TCF, a savings bank holding company based in Minneapolis, will offer about $25 for each Standard share. Standard stockholders may choose to receive cash or TCF shares or a combination of the two. Between 40 percent and 60 percent of the purchase would be paid in TCF stock, and the rest in cash.
The exchange ratio for shares would depend on the average price of TCF stock during the 30 trading days before the deal closes.
Analysts also thought Marshall & Ilsley paid a full price for Security Capital, a $3.66 billion asset thrift with 42 bank branches and 10 lending offices throughout Wisconsin.
The $92 a share acquisition price includes about 12.3 million Marshall & Ilsley common shares and $376 million in cash and is a premium over the $84.75 closing price for Security Capital Friday.
""It's pretty pricey,"" said Thomas Maier, analyst at EVEREN Securities. ""You can argue that given what it does for them in terms of share in the state of Wisconsin, it's worth it.""
Wisconsin is seen as one target area for Midwest regional banks to make acqusitions to enhance market share.
""I think it's a defensive move on M&I's part, that if they didn't grow within the Wisconsin market, it was more likely they would be a takeover target,"" Skiba said.
Skiba also said the acquisition of Standard Financial by TCF could make other Chicago-area thrifts, including MAF Bancorp Inc. and St. Paul Bancorp Inc., even more likely acquisition targets.
""I think there's becoming a scarcity value on the large independent thrift franchises that are left,"" Skiba said.
TCF shares fell $0.625 to $44 Monday, Standard Financial rose $2.375 to $23.50, Marshall & Ilsley fell $0.56 to $36.75, and Security Capital rose $0.75 to $85.50.
",5
"First Bank System Inc. said Thursday it will acquire U.S. Bancorp in a stock deal worth more than $8.5 billion that will make it the 14th-largest bank in the United States and give it a firm toehold in the Pacific Northwest.
The deal between Minneapolis-based First Bank and U.S. Bancorp, a regional bank based in Portland, Ore., will also result in the loss of about 4,000 jobs, the banks said.
Under a definitive agreement, U.S. Bancorp shareholders will receive in a tax-free exchange 0.755 share of First Bank common stock for each U.S. Bancorp share they own.
Based on First Bank's trading price of $75.375 Thursday, which was down $2.875, the purchase price equals $56.91 a share for holders of U.S. Bancorp, whose shares jumped $6.75 to $55.
""This is very rich pricing,"" said James Schutz at ABN AMRO Chicago Corp., noting the deal values U.S. Bancorp at about 19.2 times its 1996 earnings.
However, First Bank Chief Executive John Grundhofer's reputation for aggressive cost-cutting, the complementary fit of U.S. Bancorp with First Bank's mostly Midwestern markets and the rich price of bank stocks in general made the deal palatable to many analysts.
""You could live a couple of lifetimes without finding another fit this good,"" Grundhofer said in a statement announcing the deal.
""It's a natural fit for them,"" said Frank Barkocy, analyst at Josephthal, Lyon & Ross. ""It's a natural extension of their marketplace.""
First Bank said it expected pretax cost savings of about $340 million from the merger, with combined operating expenses being reduced by 14 percent.
First Bank said it would take pretax charges of $625 million for costs related to the merger, which was expected to close by the end of June.
While it was too soon to say specifically which jobs would be cut in the merger, the majority of jobs affected will be in the Portland area, bank officials said. Both banks have instituted hiring freezes to help minimise the number of people losing jobs, the banks said.
First Bank said the deal was expected to add to its earnings per share starting in the second quarter of next year. By 1999, First Bank sees about an 8 percent addition to earnings per share.
First Bank said it would be able to increase revenues from the deal by offering its payment systems services to U.S. Bancorp's extensive corporate base.
Home equity lending and investment management services are also businesses First Bank plans to offer U.S. Bancorp's customers, while U.S. Bancorp's leasing expertise would be offered to First Bank customers, the banks said.
""Where the deal makes more sense is the compatibility of the business lines,"" said Stephen Biggar, analyst at S&P Equity Group.
Grundhofer will be president and chief executive of the new company, which will take the U.S. Bancorp name but remain based in Minneapolis.
U.S. Bancorp Chairman Gerry Cameron will serve as chairman of the merged bank until his retirement in 1998.
Since 1991, First Bank has made 23 acquisitions, including the $717 million acquisition of Nebraska-based FirsTier Financial Inc. in 1996.
Cameron said he was first approached by Grundhofer about a deal in early November.
""I frankly told him he should go talk to someone else that was interested,"" Cameron told reporters during a conference call. But he said he felt a responsibility to shareholders to hear Grundhofer out and the two discussed the deal around Thanskgiving.
After subsequent meetings and a review that ended last weekend, both sides were even more convinced the deal made sense, he said.
",5
"Beleaguered auto lender Mercury Finance Co. said it was in last-minute negotiations Monday to extend $50 million in short-term financing it received a month ago from Bank of America.
The financing, used to meet daily operating expenses and interest payments, was granted in February in order for Mercury to establish firmer financial footing as it tried to regroup from troubles that included overstated earnings, an FBI investigation and a slew of shareholder lawsuits.
Under terms of the financing, the loan comes due Monday unless Mercury secures waivers from lenders.
A spokesman said Mercury has been discussing the extension with lenders in recent days and that an announcement on whether it was extended was expected before the market opens Tuesday.
One analyst said Mercury indicated Monday it expected to receive the extension.
""Mercury was optimistic that all the ducks were in a row and that they would be able to negotiate an extension,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co. That rating agency lowered Mercury's senior debt to a default rating of double-D from triple-C Monday, after Mercury failed to pay $15 million in debt Friday.
Though Mercury has defaulted on millions of dollars in short-term debt in the past several weeks, the $15 million due Friday was the first in medium-term notes to come due since Mercury's financial woes began, Kmiotek said.
On Jan. 29, Mercury said it would have to lower its earnings over the last four years by about $90 million.
The cut in earnings was due to accounting discrepancies Mercury blamed on its controller, James Doyle. But a day later, Doyle's lawyer accused Mercury of a charade and said Doyle was cooperating with federal authorites.
Since then, Mercury has defaulted on millions of dollars in debt, been served with a search warrant by FBI agents seeking financial records, hired William Brandt Jr., a turnaround and bankruptcy specialist as chief executive officer, and has been named a defendant in more than half a dozen lawsuits surrounding the misstated earnings.
The company also lost more than $2 billion in market capitalization when the stock plunged following its cut earnings.
",5
"U.S. retailers are expected to post sales gains in the single digits for March, bolstered by low-end discount stores sales while department store performance was nearly flat compared with a year ago.
""It appears there's a slowdown in the department store end of the business, but the discounters are still doing well,"" Michael Niemira, analyst at Bank of Tokyo-Mitsubishi Ltd. said.
Overall, he expects comparable-store sales, or sales at stores open at least a year, to be up about 5 percent or slightly less.
An early Easter could depress sales at stores that were closed on the holiday, which fell in the March selling period instead of April this year. Winter storms in much of the northern part of the nation may have also held sales back.
""You need to look at March and April overall to get comparable sales,"" William Armstrong, an analyst at Fahnestock & Co. Inc. said of quirks in the reporting calendar, where some retailers include Easter in March and others in April this year.
Armstrong is expecting overall retail sales for March to increase by 2 percent to 4 percent.
Most retailers will report March sales early Thursday. But Plano, Tex.-based J.C. Penney Co. Inc. Tuesday reported a 3.7 percent decline in comparable-store sales at its JCPenney stores in March. The early report was due to a debt offering the company is making this week.
The loss of one day's sales because of Easter hurt sales, J.C. Penney said.
Penney's decline is expected to be mirrored by other department stores, analysts said.
""Most (department store) chains saw flat or even slightly lower comparable sales during the March period, as they compared with healthy year-ago increases,"" analysts at Montgomery Securities wrote in a research report. They added that the early Easter and snowstorms in the Northeast added to pressure on sales.
At the same time, discount stores are expected to post 4 percent to 6 percent sales gains, with low-end discounters reporting low double-digit gains, Montgomery said.
""We continue to believe the low-end strata is benefitting from the fruits of a fully-employed economy and the direct pay-hike from the 1996 minimum wage increase,"" Montgomery's analysts wrote.
Among the major chains, analysts see Wal-Mart Stores Inc., the nation's largest retailer, reporting same-store sales gains of about 7 percent. Sears, Roebuck and Co. was expected to report gains of 2 percent to 3 percent, with Kmart Corp. up 10 percent to 12 percent.
Kmart's results are expected to be driven by seasonal items, such as horticulture, home goods and bicycles. But it will give back some of those gains in April because of the calendar shift, analysts at Deutsche Morgan Grenfell said in a research note. Kmart stores were open on Easter, analysts added.
Dayton Hudson Corp. is expected to post a 1 percent to 2 percent gain, with a 3 percent to 4 percent increase at its Target discount stores offsetting flat department store sales. Federated Department Stores Inc. is expected to post flat sales, with some planned promotions moved into April, analysts said.
",5
"Warm weather spurred sales of spring merchandise and boosted retail sales in February, the nation's store chains said Thursday, but flooding in the Midwest could hurt results in March.
Industry officials and analysts said most winter clothing was cleared out of stores in January and early February, so retailers were properly stocked for spring.
Salomon Bros. said its index of same-store sales rose 4.7 percent in February, compared to a 5.2 percent rise a year ago and a 7.3 percent January rise. Same-store sales measure results at stores open at least a year.
""It looks like early trends on spring fashion are good,"" said Harry Ikenson, analyst at Rodman & Renshaw Inc. ""Inventories seem to be in good shape and it's a good start to spring.""
""After January's sales performance, our level of clearance merchandise coming into February was substantially below last year,"" said William Kellogg, chairman of Kohl's Corp., a Wisconsin-based retailer with 150 stores in the Midwest and the East.
""We are particularly encouraged by the early selling of spring merchandise.""
Though comparisons were difficult after retailers posted a strong February in 1996, a week of temperatures in the 50s and 60s in much of the country this year was a plus.
""It drives people in to buy spring merchandise,"" analyst Peter Schaeffer at Dillon Read & Co. said.
Several chains posted stronger-than-expected results.
Wal-Mart Stores Inc., the nation's larget retailer, said same-store sales rose 6.7 percent, above analysts' forecasts, while J.C. Penney Co. Inc. posted a strong 11.4 percent gain.
Kmart Corp., the third-biggest retailer, said sales rose 3.9 percent at comparable stores, while Sears, Roebuck and Co., the No. 2 retailer, posted a 1.6 percent gain.
Among department stores, Dayton Hudson Corp. said sales rose 4.2 percent, Federated Department Stores Inc. reported a 2.2 percent gain and Dillard Department Stores Inc. had a 1 percent rise.
Carson Pirie Scott & Co. reported on Monday that February sales rose a solid 8.2 percent.
""I was particularly pleased with the strong initial sell-through on new spring receipts during the month,"" Carson Chief Executive Stanton Bluestone said in a statement.
Sales at clothing chain The Gap Inc. were flat.
Sales of computers and other electronic gear continued to lag, though results were not as weak as had been expected.
Electronics superstores Best Buy Co. Inc. and Circuit City Stores said sales fell 3 percent and 4 percent, respectively. Analysts had expected sales declines of up to 10 percent.
Sales of electronic gear, which have been dismal for several months, were unlikely to improve until later this year or early 1998 when new high-tech products are due to be available, analysts said.
They also said retail stocks were unlikely to be as strong as they were in 1996.
""I don't think that we're seeing any sort of a rally here in retail like we saw last year,"" Dillon Read's Schaeffer said. ""I don't think it's a sector play, it's an individual stock play.""
Gap shares fell $1.25 to $32.50, Dillard fell 25 cents to $30.25, Sears lost 75 cents to $54.875, and Federated was unchanged at $35.875.
Best Buy rose $1.375 to $10, Circuit City added $2 to $33.75, Wal-Mart rose 12.5 cents to $26.75 and J.C. Penney gained 37.5 cents to $49.50.
",5
"Harnischfeger Industries Inc chief executive officer Jeffery Glade thinks acquiring Fond Du Lac, Wisconsin-based Giddings & Lewis Inc is his company's best option as it tries to become dominant in the fragment machine tool and material handling business.
But whether or not Harnischfeger's $747 million unsolicited tender offer for Giddings is successful, the company is still looking for other acquisitions.  
""This is not our last acquisition in this industrial product service group,"" Glade said in an interview late Friday.
Grade said the industry, which he estimated as more than an $80 billion business, ""is poorly served. It is fragmented. No one is a lion's share owner of it.""
He sees acquiring Giddings, a supplier of industrial automation products and machine tools, as a way of improving Milwaukee-based Harnischfeger's aftermarket service to the machine tool and material handling business.  
""We'll be within 24 hours of any major plant in the United States,"" Glade said. ""That's what happens if you put their business with ours.""
Glade said Harnischfeger announced the $19 a share tender offer for Giddings, which closed Friday at $13.625, after discussing an acqusition with the company since last Monday.
He said Giddings' board of directors Friday issued what Harnischfeger considered a rejection to the offer, asking for a two year ""stand still"" agreement while it tried to convince Harnischfeger it was worth more. Under the agreement, Harnischfeger would not be able to try to acquire Giddings.  
""My own view is they decided they wanted a public auction,"" Glade said.
Giddings would not comment on any discussions it had with Harnischfeger.
In a statement Friday, Giddings urged shareholders not to respond to Harnischfeger's offer until its board of directors reviews the offer and other alternatives.
""The true value of (Giddings) shares is not reflected in the marketplace,"" Marvin Isles, Giddings chief executive, said in a news release.  
But Glade said the offer for Giddings was fair.
""It's a darn good offer, 40 percent over the market for a machine tool business most analysts are pretty cautious about,"" Glade said.
According to First Call, the consensus recommendation of 12 analysts who follow Giddings rates the company closer to hold than buy.
Harnischfeger will have to take on a ""significant"" amount of new debt to finance its bid for Giddings, but has the financing in place, Glade said. He expects the debt to be paid down in two to four years and thinks the acquisition would be accretive to earnings as soon as it closed.
That accretion would come from growing the business, not shutting plants and laying off people, he said.
""What we intend to do is grow this little baby,"" Glade said. ""We think we can sell more and become a better service provider when we combine our strategy.""
""We have other alternatives to (Giddings), but I would tell you (Giddings) is the best opportunity at this moment,"" he said. He would not say at what price Giddings is not the best alternative for Harnischfeger.
((-- Chicago newsdesk, 312 408-8787))
",5
"Shares of Sears, Roebuck and Co, the nation's second largest retailer, fell about six percent Thursday after the company said it will voluntarily refund some payments from credit card holders who filed for bankruptcy.
Sears said the repayments might have a material effect on 1997 earnings. But analysts said the company could not quantify its earnings exposure during a conference call.
Sears stock was down 3-1/8 to 47-3/4.  
The dispute is over a process called reaffirmations, where Sears approaches holders of Sears credit cards who have filed for bankruptcy and attempts to have them make payment to Sears rather than having the debt and their Sears credit wiped out in bankruptcy court.
The reaffirmation agreements must be filed with a bankruptcy court. Sears said Thursday some of the agreements were not filed properly.
While Sears could not say how much it might have to refund to debtors, the company did say it had $400 million in reaffirmations from 1992 through February 1997, analysts said.  
Analysts noted that some of the reaffirmations were properly filed. But Sears may also be subject to other court sanctions.
The retailer told analysts it would offer each debtor affected a $100 gift certificate.
A Sears spokeswoman was not immediately available to confirm analysts' comments.
""It (the earnings impact) could end up being $0.50 to $1.00 a share and that's a lot,"" said Peter Schaeffer, analyst at Dillon, Read.  
Analysts also said that Sears defined ""material"" as anything over five percent of annual net income. Based on analysts estimates for 1997 earnings, that could mean a minimum cost of about $70 million to 1997 earnings, analysts said.
But analysts also said it was too early to say how much impact the credit card problem would have.
""They (Sears officials) don't know,"" said Karen Sack, analyst at S & P Equity Group. ""They can't quantify it until they do a full investigation.""
The company also said same store sales rose one percent in March, slightly below expectations.
But the credit card problem was what was hurting the stock, analysts said.
""Granted, sales were somewhat disappointing,"" said Joseph Ronning, analyst at Brown Brothers Harriman. ""But this came out of the blue.""
((Chicago newsdesk, 312-408-8787))
",5
"Sears, Roebuck & Co. will spend more than $500 million to revamp and expand its stand-alone tire and battery stores under the new National Tire and Battery name, the retailer said Wednesday.
The change is part of a plan under which Sears will spend more than $1 billion through the year 2002 on its entire auto group, adding stores and converting some existing stores.
Hoffman Estates, Ill.-based Sears, which sold 25 million tires and 8.5 million batteries through its Sears Tire Group in 1996, will combine most of its 275 Tire America and National Tire Warehouse Stores under the National Tire and Battery name, Sears said.
The company also plans to add about 100 National Tire stores a year over the next five years, and hopes to add about $120 million in annual tire group revenue when the expansion is completed. Sears tire group had $2.3 billion in revenues in 1996.
The stores, unveiled Wednesday in Chicago, will have a high-tech, open feel, with customers able to watch the work being done on their cars. Pricing will be competitive in individual markets, Sears said.
""We will be at market pricing in every market we're in,"" Paul Baffico, president of Sears Automotive Group, said in an interview. ""We do not necessarily want to be the market price leader, but we will be competitive with anybody who is in the market.""
The stores, which will be located away from shopping malls, are geared toward a younger, higher-income customer with higher performance car needs than the 800 mall-based Sears Auto Centres, Baffico said. Because of the existence of the mall stores, the retailer chose not to include the Sears name in National Tire and Battery.
""From a location strategy standpoint, a different name allows us to be closer to a Sears store without cannabilizing the market,"" Baffico said.
Areas targeted for new tire stores this year are Detroit, Minneapolis/St. Paul, Rochester, N.Y. and Buffalo, N.Y.
Sears will also add a small number of Sears Auto Centre stores in malls, Baffico said.
Separately, Sears plans to spend more than $650 million to add 780 Parts America auto parts stores by the year 2002 and to transform 240 Western Auto stores to Parts America, he said.
""We should be by 2002 the clear No. 2 in parts,"" Baffico said. That category is currently led by Memphis, Tenn.-based AutoZone Inc., followed by Pep Boys -- Manny, Moe & Jack of Philadelphia, based on revenues. Sears' parts group had $1.4 billion in revenue in 1996.
Since the parts stores do not compete with Sears' mall stores, the company will decide by the end of the summer whether to include the Sears name in the name of the stores, Baffico said.
One analyst said that Sears' expansion plans for the automotive group were aggressive, but noted that the company was being even more aggressive in other formats.
""Those are relatively aggressive, but remember they're coming from a place where they've been a little stagnant for a while,"" Stephen Latz, of A.G. Edwards, said of the auto group expansion plans.
",5
"TCF Financial Corp., a bank holding company, moved to enter the business equipment leasing field Friday, signing a letter of intent to acquire Winthrop Resources Corp. for about $326 million.
Under the agreement, TCF said it will offer one share of its stock for every 1.2877 shares of Winthrop in a tax-free pooling of interests, resulting in a total of about 6.9 million new TCF shares.
Winthrop, with leased assets of $327 million, specializes in leasing high technology and business equipment to companies throughout the United States, the company said.
""This is a well-managed, dynamic firm that will increase our asset origination capacity and complement our existing lines of business,"" TCF Chief Executive Officer William Cooper said in a news release.
Wintrhop, also based in Minneapolis, will become a subsidiary of TCF Bank Minnesota, the companies said. Winthrop's funding costs are expected to drop as a result, allowing it to grow its business.
""We've always known that somewhere down the line, we'd have to get that borrowing cost down,"" said Winthrop President David Morgan, who has agreed to continue running Winthrop after the deal is completed.
The deal values Winthrop at $36.50 a share, based on a TCF stock price of $47, TCF said.
TCF shares fell 62.5 cents to $46.50 on the New York Stock Exchange. Winthrop rose 37.5 cents to $34.375 on Nasdaq.
The deal is likely to reduce earnings per share slightly in the first full year after the acquisition, and boost earnings after that, told analysts on a conference call.
Minneapolis-based TCF also said it has suspended its share repurchase program due to the accounting treatment it chose to use for the deal.
The deal is expected to close by the third quarter, subject to negotiation of a definitive agreement, a due diligence review, and approval by both companies' boards of directors, shareholders and regulators.
TCF, with assets of $7.1 billion, has banking operations in Minnesota, Illinois, Wisconsin, Michigan and Ohio.
The proposed acquisition appears to fit Cooper's focus on ""power assets and power liabilites,"" said Joseph Duwan, analyst at Keefe, Bruyette & Woods.
""The (interest rate) spreads are relatively wide, the yields are attractive, as opposed to straight commercial lending,"" Duwan said of the leasing business.
",5
"Modem maker U.S. Robotics Corp's stock soared Wednesday on talk that it may be close to unveiling a faster analog modem.
Skokie, Illinois- based U.S. Robotics told an Oppenheimer & Co investors conference Tuesday that it is looking at developing new technologies including higher speed modems.
The company has previously said that it did not believe 33.6 kilobits per second was the fastest speed for modems.
While the company did not say whether it had developed a faster modem, an Oppenheimer analyst said the presentation on the subject was more elaborate than discussions on the topic in the past.
""This is the first time they've ever discussed this with some slides and everything,"" Oppenheimer analyst Steven Levy said.  ""To the extent there is one, it's probably not too far away.""
Meanwhile, Rockwell International Corp's semiconductor systems unit said late Tuesday it expects to demonstrate 56 kilobit transmission capabilities at a trade show in November.
That added to sentiment that such a modem, which would speed Internet communication over standard telephone lines, was more than just theory, analysts said.
Analysts said U.S. Robotics has about an 80 percent share of the modem market for online services and a 38 percent share for desktop modems that connect users with those services.
If U.S. Robotics can quickly market a faster modem, it could help the company hold or improve that share, as there is no standardization at the 56 kilobit level, analysts said. In other words, Rockwell and U.S. Robotics' modems don't ""talk"" to each other.
""Clearly we have an issue of standardization process that will take time and during that time, there's an opportunity for the company to be the only supplier,"" said Rakesh Sood, analyst at Hambrecht & Quist.
U.S. Robotics would not comment about whether it was close to releasing a faster modem. The stock was up 4-3/8 to 56-7/8 on Nasdaq Wednesday. Rockwell International stock rose 1/4 to 54-1/8 in NYSE trading.
Sood noted that modems are a far bigger part of U.S. Robotics' business than Rockwell International's.
--Reuters Chicago newsdesk, 312-408-8787
",5
"Mercury Finance Co.'s woes deepened Friday when the company said it would be unable to pay $17 million in commercial debt due the same day and its stock lost 86 percent of its value.
The auto lender's stock tumbled $12.75 to close at $2.125 on the New York Stock Exchange on volume of more than 42 million shares after it opened for trading for the first time since Tuesday. It fell as low as $1.625.
Based on the more than 172 million shares outstanding as of early November, that would mean a loss of more than $2.2 billion in market capitalisaiton for the company.
On Wednesday, the company said it found problems in its bookkeeping that caused it to overstate earnings by $90 million over four years.
The consumer finance and auto loan company said Friday that as a result of downgrades from several debt rating services, it would not be able to issue new short-term debt, known as commercial paper, to repay maturing debt and could not make the payments due Friday.
Standard & Poor's Corp. and Fitch Investors Service downgraded the company's commercial paper to a default rating.
Lake Forest, Ill.-based Mercury said it was in discussions with lenders to satisfy its working capital needs, but could not predict the outcome of the discussions.
Analysts said the company has another $100 million in commercial debt due next Thursday and that the company could be forced to file for bankruptcy protection from creditors if those discussions were unsuccessful.
""They're very close to some reorganization, bankruptcy filing, probably a voluntary reorganization,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co.
A finance company like Mercury makes money on the difference, or spread, between what it pays to borrow and the higher rates it charges customers. A finance company without a source of funds is like a retailer without a source of merchandise, analysts noted.
""If you can't fund, you're out of business,"" one analyst who follows the company said, requesting anonymity.
A company spokesman did not return repeated phone calls seaking comment on Mercury's financing.
The company said in a statement that it had retained Salomon Brothers Inc. to advise it on current and future capital needs and related issues.
Mercury said on Wednesday it had to restate its earnings downward by about $90 million for the past four years because of accounting irregularities. It said the problems appeared to stem from unauthorised entries in financial records by its controller, James Doyle.
But Doyle's lawyer reportedly accused Mercury of a charade and said Doyle was cooperating with federal authorities.
A special committee of Mercury's board, formed to investigate the accounting problems, has instructed its lawyers to contact Doyle's attorney for information on the investigation, Mercury said Friday.
Doyle's lawyer was out of town Friday and did not return phone calls.
The company said it also directed its lawyers and accounting firm to complete a thorough investigation of the company's auditing and accounting practices and report to the board.
Another class-action lawsuit accusing the company of violating securities laws by issuing misleading and false financial statements was filed in federal court in Chicago, bringing to at least four the number of such suits filed.
",5
"Cobra Electronics Corp said Monday it expects to report increases in revenue and profits in 1997, after the company reported a profitable year in 1996, its first year in the black since 1989.
""We are expecting double-digit revenue growth and a significant increase in profit,"" chief executive officer Jerry Kalov said in an interview.
The company reported revenue of $90.3 million in 1996 and net income of $601,000 in 1996, compared to revenue of $90.4 million and a loss of $1.1 million a year ago.  
After completing a cost-cutting program in 1996, Cobra is looking to its new radar and laser detection products and a comeback in the citizens band radio market to help fuel revenue growth.
The company is currently introducing a system called Safety Alert, which expands on its radar dectector technology to allow drivers to receive a signal alerting them to emergency vehicles, oncoming trains and construction and other equipment that might cause an accident.
The company plans to sell the detector, which mounts on a windshield for about $69.95, Kalov said.  
The signal comes from a transmitter that sells for about $300 and is mounted in the light panel of emergency vehicles, he said. The company hopes municipalities will be interested in purchasing the transmitters to help avoid costly accidents to their vehicles.
""It's going to take some time, because municipalities don't have a lot of money,"" Kalov said about selling transmitters.
The company is also introducing a product for about $149 that combines Safety Alert, a radar detector and a system to warn drivers when police are using laser to trap speeders in an area.  
In fact, the growing use of laser by police should spur sales in the company's detection equipment, Kalov said.
""As more and more laser guns are showing up, we believe it's going to create a spurt"" in laser detector sales, he said.
Cobra currently has about 15 percent of the detection market, but it expects its market share to grow to 20 to 25 percent by the end of the year, he said.
The company also has about a 35 to 40 percent market share in CB radios, its largest business. It sees that share rising to 50 percent with introduction of technology that reduces background noise and with new distribution channels.  
Kalov said use of CBs, which peaked in the 1970s, is rebounding as people become used to the mobile communications of cellular phones for emergencies but don't want to pay cellular phone charges.
CB radios also serve a ""chat-room"" function, allowing drivers to get recommendations for restaurants and information on road conditions, Kalov said.
The company also maintains a niche profile in the cordless telephone market with less than three percent of the market. Kalov said that the company's goal is to have three to five percent of that market.
((Chicago newsdesk, 312-408-8787))
",5
"The nation's retailers are expected to post modest sales gains for February, with warm weather during the month having a mixed impact on results, analysts said Tuesday.
Analysts said retailers are expected to post a rise of about 4 percent in sales from stores open at least a year, or same-store sales, for February.
""While warm weather, particularly in the Northeast, did boost sales of apparel at many retailers, it depressed sales in some hardline areas,"" analysts at Merrill Lynch said in a research note.
Most retailers are scheduled to report their February sales results Thursday morning, though Carson Pirie Scott & Co. reported Monday that its same-store sales rose 8.2 percent for the month.
""Carsons had a strong reading, which might be a tell-tale sign for some of the smaller retailers,"" said Michael Niemira, analyst at Bank of Tokyo-Mitsubishi.
One retailer that has exceeded the industry average in recent months, Sears, Roebuck and Co., is expected to fall back to the pack, with gains of about 2 percent to 4 percent in sales at stores open at least a year.
""Its sales were depressed by its automotive business, which was hurt by the warm weather and hard lines, which continued their weak performance,"" Merrill Lynch's analysts said in the report.
Many retailers will have tough comparisons with their 1996 sales from February through the middle of spring, analysts said.
But one retailer that is expected to exceed the average is J.C. Penney Co., which some analysts see posting same-store sales gains of about 9 percent.
""The (sales) numbers, I think are going to be led by Penneys in particular, which seems to have a strong reading for February,"" Niemira said. ""Apparel is certainly helping them.""
The nation's largest retailer, Wal-Mart Stores Inc., is seen posting gains of 4-6 percent, analysts said.
Electronics superstores should continue to trail the rest of the retail sector, analysts said.
Dean Ramos, with Dain Bosworth Inc., estimated that both Best Buy Co. Inc. and Circuit City Stores Inc. would report a 7 percent to 10 percent decline in same-sales for February.
""New consumer electronics products such as Digital Video Disk are not yet a factor,"" Ramos said in a report previewing last month's retail sales.
",5
"Hyatt Hotels Corp. said Monday it will spend $1 billion over the next three years to acquire 20 to 30 hotels, rapidly accelerating its expansion programme.
Target properties will be upscale three- to five-star hotels and resorts in the United States, Canada and the Caribbean over a three-year period, said Hyatt, which is owned by Chicago's Pritzker family.
The company already has made two deals which it says are typical of the expansion plan. Last Friday, a Hyatt affiliate purchased the Grand Hyatt San Francisco, which Hyatt has managed since 1973, for $125 million plus the assumption of $5 million in debt, the company said.
On Friday, Chicago-based Hyatt will take over management of the Hotel Nikko Atlanta after acquiring the hotel in partnership with Blackstone Real Estate Partners for $90 million. The hotel will be renamed the Grand Hyatt Atlanta.
Hyatt, which operates 176 Hyatt hotels and resorts around the world, purchased 12 hotels in the past three years.
The more aggressive acquisition stance was seen by some as a response to acqusition plans by Hyatt's competitors.
""Hyatt is probably doing this to be defensive,"" said Burland East, analyst at Everen Securities in Chicago, noting that the move comes as other hoteliers, including Host Marriott Corp. and Hilton Hotels Corp., are looking to expand.
Hyatt's plan was made easier by a recent reorganization of some Pritzker family holdings. The family recently formed Hyatt Equities L.L.C., a real estate acquisition company that consolidates a number of the family's hotel real estate interests into one company, Hyatt said.
Hyatt Equities was created to capitalise on the equity value of the Pritzkers' hotel portfolio, allowing the company to borrow against a collection of assets instead of individual assets at more favourable interest rates.
""Hyatt Equities provides an additional vehicle through which we will grow our family's interest in Hyatt hotel real estate, enabling Hyatt to acquire hotels already managed by Hyatt as well as hotels currently managed by other hotel companies,"" Nicholas Pritzker, president of Hyatt Development and Hyatt Equities, said in a news release.
Hyatt Equities debt will be rated by Standard and Poor's and Moody's, and Hyatt's investment bankers anticipate strong investment-grade ratings Hyatt said.
Hyatt said that, as a private company, Hyatt Equities is able to use a broader set of transaction structures than is typically available to public companies, real estate investment trusts or acquisition funds.
Among real estate investment trusts that could wind up competing with Hyatt for upscale properties are Dallas-based Patriot American Hospitality Inc. and Phoenix-based Starwood Lodging Trust, East said.
""At the margins, 30 hotels is meaningful,"" East said of the impact of Hyatt's plan on the hotel landscape. ""Is it earth-shattering? No.""
",5
"The U.S. bank megamergers of 1995 have been digested and banking honchos are already bellying up to the table for more deals, with the nearly $9 billion acquisition of U.S. Bancorp by First Bank System Inc announced Thursday the latest example.
""I think 1997 will wind up, and it's already started out very much, like 1995,"" said Steven Schroll, banking analyst at Piper Jaffray.  
Before the First Bank announcement, $12.85 billion in bank and thrift acquisitions had been announced in 1997, according to SNL Securities LP, a financial information company. In 1995 there were $74.4 billion in deals, a figure that fell to $46.27 billion in 1996.
""What's happening is all those megamergers in 1995 are completed,"" Schroll said.
At the same time, the acquisition menu for banks is broader, with regulatory barriers to mergers between banks, insurance companies and securities firms likely to be lowered.  
Congressional action to remove barriers between banks and thrifts last year could also put more thrifts in play, analysts said.
Frank Barkocy, an analyst at Josephthal Lyon & Ross, said in a research note that today's deal could be a catalyst ""for stepped-up merger and acquisition activity in coming months, likely at significant premiums, as institutions scramble to obtain meaningful market share positioning in additional geographic sectors.""  
Among the larger potential targets mentioned are First Chicago NBD Corp, which was formed by one of the larger mergers of 1995, and Bank of Boston Corp, which bought BayBanks Inc in a $2.0 billion deal that year.
""There's no deal too big"" to be done, Schroll said.
While not predicting a takeover of either firm, Tucker Anderson, chief investment strategist at Cumberland Associates, told a panel in New York Thursday that both BankBoston and First Chicago ""could be beneficiaries of consolidation."" Neither is too big to be acquired, he said.  
James Schutz, bank industry analyst at ABN AMRO Chicago Corp, said First Chicago could give a buyer a large foothold in major Midwest markets at a reasonable price because of its relatively low price-to-earnings multiple.
""For bang for the buck, First Chicago is probably the most lucrative,"" Schutz said.
A First Chicago spokesman said the bank does not comment on merger speculation.
Meanwhile, Schroll predicted that regional banks with between $10 billion and $40 billion in assets could largely disappear through consolidation in the next two or three years.  
Firstar Corp in Milwaukee, with assets of about $20 billion and a presence in four states, could be a target, Schroll said.
""To me, it's the closest lookalike to U.S. Bancorp"" of the banks Piper Jaffray monitors, Schroll said. Firstar was also mentioned as a target by Salomon Brothers in a note on the First Bank/U.S. Bancorp deal, as was KeyCorp, market sources said.
Spokesmen for Firstar and KeyCorp said their banks do not comment on merger speculation.
James Schmidt, executive vice president of the John Hancock Funds, noted during a panel discussion on bank trends Thursday that the number of U.S. banking companies has shrunk from around 14,000 in the mid-1980s to about 9,500 today. He predicted a further winnowing to 4,000 banks by the year 2010.
((Chicago newsdesk, 312-408-8787))
",5
"Mercury Finance Co. said Monday it has secured $50 million in short-term financing from Bank of America, giving the troubled lender breathing room to work on longer-term financing.
At the same time, some of Mercury's competitors in the market for automotive financing to borrowers with less-than-pristine credit records, said they are interested in purchasing some or all of its assets, once its books are back in order.
""A lot of people have been interested, but Mercury has been sending them all to Salomon Brothers (the company's adviser),"" said Mercury spokesman Joseph Kopec.
Mercury said Monday that financing from Bank of America, secured by the Lake Forest, Ill.-based company's assets, would be used to meet day-to-day operating expenses and to cover interest payments coming due in the next few weeks. Mercury said it continues to serve customers at all its locations.
""These funds will enable Mercury to operate while a long-term financing facility is being put together,"" Mercury Chief Executive Officer William Brandt Jr. said in a statement.
Last week, Mercury said it was unable to refinance $61 in short-term debt that had matured through Feb. 5 and that another $127 million would come due between then and Feb. 14.
Mercury's woes began Jan. 29 when it said it had to restate its earnings over the last four years downward by about $90 million.
The cut in reported profits was due to accounting discrepencies Mercury blamed on its controller, James Doyle. But a day later, Doyle's lawyer accused Mercury of a charade and said Doyle was cooperating with federal authorites.
Since then, Mercury has defaulted on millions of dollars in debt, been served with a search warrant by FBI agents seeking financial records, and hired Brandt, a turnaround and bankruptcy specialist, as chief executive officer. It also has been named a defendant in more than half a dozen lawsuits regarding the misstated earnings.
The company lost more than $2 billion in market capitalisation when its stock plunged following news of its reduced earnings.
But all that has not scared off rivals looking to buy Mercury's assets, if Mercury can clean up its books.
""If they should decide to sell assets, yes, we'd be interested,"" said George Evans, chief executive officer of Dallas-based Search Capital Group Inc. In an interview, he added that Search might be interested in taking over Mercury and running it on a long-term basis.
""We have had no direct contact with Mercury,"" Evans said. ""We've had some indirect contact with the lenders.""
He would not elaborate on that contact.
""If you make the assumption that the $90 million hit was all of it, Mercury is still, other than debt liquidty, a viable company,"" Evans said.
Thomas Barlow, chief executive officer of Reliance Acceptance Corp., the auto lending unit that is expected to be spun off this week by Cole Taylor Financial Group Inc., said his company might be interested in acquiring Mercury, once Mercury solved its liquidity woes.
""Once Mercury has gotten its books in order, we'd be interested if they were interested,"" Barlow said. ""Certainly, if they're interested, there are synergies in the two companies.""
Mercury shares were up 37.5 cents at $2.25 in late trading on the New York Stock Exchange.
",5
"With Mercury Finance Co in talks to secure long-term financing and no fresh disclosures about the consumer finance company emerging, investors have started to come back to the stock.
""I think the stock is moving up because of time here,"" Michael Durante, senior specialty finance analyst at Prudential Securities, said on Wednesday. ""With each passing day, the company looks to be more and more stable.""  
No word has surfaced about any fresh adverse findings since Mercury appointed Arthur Andersen LLP as its auditor on February 18, Durante said, though the audit of 1996 results was still incomplete.
""I think indications are so far that nothing new has been found over and above what Peat Marwick found, which is good news,"" Durante said, referring to KPMG Peat Marwick, the company's former auditor.
A Mercury spokesman said the auditors declined to say exactly when they would finish their work.  
Meanwhile, Mercury this week has tried to secure long-term financing from lenders. The spokesman could not say how successful those talks have been.
On January 29, Mercury said accounting discrepancies were discovered, causing it to restate its results to show earnings over four years were $90 million less than previously reported.
Since then, Mercury has defaulted on millions of dollars of debt. It was served with a search warrant by FBI agents seeking financial records and hired a new chief executive officer. The company was also named as a defendant in more than half a dozen lawsuits related to the misstated earnings.  
The company lost more than $2 billion in market capitalization when its share price plunged after the disclosure of the erroneous financial information.
But in recent days, the stock has moved higher in active trading. After falling to as low as 1-1/2 on January 31 from 14-7/8 before the disclosures, Mercury was up 1/4 at 3-5/8 in early afternoon trading on Wedesday. More than 12 million shares changed hands.
Durante said the company had a liquidation value of $3-$4 a share, barring any new disclosures, while its value as a going concern was in the high single digits.
But other analysts were not as sanguine about Mercury's value. Katrina Blecher, an analyst at Gruntal & Co, recommended investors sell at the stock's current level.
""On a fundamental basis, which is difficult at best to garner given the state of unaudited and/or unavailable specifics, we feel the company is fully valued,"" Blecher wrote in a research report Wednesday.
((Chicago newsdesk, 312-408-8787))
",5
"Hyatt Hotels Corp. said Monday it will spend $1 billion over the next three years to acquire 20 to 30 hotels.
Target properties will be upscale hotels and resorts in the United States, Canada and the Caribbean over a three-year period, said Hyatt, which is owned by Chicago's Pritzker family.
The company already has made two deals which it says are typical of the expansion plan. Last Friday, a Hyatt affiliate purchased the Grand Hyatt San Francisco, which Hyatt has managed since 1973.
On Friday, Chicago-based Hyatt will take over management of the Hotel Nikko Atlanta after acquiring the hotel in partnership with Blackstone Real Estate Partners. The hotel will be renamed the Grand Hyatt Atlanta.
Hyatt's plan was made easier by a recent reorganization of some Pritzker family holdings. The family recently formed Hyatt Equities L.L.C., a real estate acquisition company that consolidates a number of the family's hotel real estate interests into one company, Hyatt said.
Hyatt Equities was created to capitalise on the equity value of the Pritzkers' hotel portfolio, allowing the company to borrow against a collection of assets instead of individual assets at more favourable interest rates.
""Hyatt Equities provides an additional vehicle through which we will grow our family's interest in Hyatt hotel real estate, enabling Hyatt to acquire hotels already managed by Hyatt as well as hotels currently managed by other hotel companies,"" Nicholas Pritzker, president of Hyatt Development and Hyatt Equities, said in a news release.
Hyatt Equities debt will be rated by Standard and Poor's and Moody's, and Hyatt's investment bankers anticipate strong investment-grade ratings, said Hyatt, which operates 176 Hyatt hotels and resorts around the world.
Hyatt said that, as a private company, Hyatt Equities is able to use a broader set of transaction structures than is typically available to public companies, real estate investment trusts or acquisition funds.
""Hyatt is probably doing this to be defensive,"" said Burland East, analyst at Everen Securities in Chicago, noting that the move comes as other hoteliers, including Host Marriott Corp. and Hilton Hotels Corp., are looking to expand.
Among real estate investment trusts that could wind up competing with Hyatt for upscale properties are Dallas-based Patriot American Hospitality Inc. and Phoenix-based Starwood Lodging Trust, East said.
""At the margins, 30 hotels is meaningful,"" East said of the impact of Hyatt's plan on the hotel landscape. ""Is it earth-shattering? No.""
",5
"Talks between Caterpillar Inc. and the United Auto Workers will resume with the help of a federal mediator, the parties said Friday, almost a year and a half after striking workers returned to the work at the heavy machinery maker.
No date has been set for the talks called by the Federal Mediation and Conciliation Service. The talks would be the first formal negotiations since November 1995, when a tentative agreement, subsequently rejected, was submitted to UAW members.
The 17-month strike ended in December 1995 without a new contract. Peoria, Illinois-based Caterpillar's workers have been without a contract since 1991.
Neither Caterpillar nor the union would say if any specific event occurred to spur new talks.
""As a result of conversations between FMCS, UAW and Caterpillar, I have called a meeting of the parties for a discussion of the issues between them,"" John Calhoun Wells, FMCS director, said in a statement.
A union official said jobs and job security have been main issues throughout negotiations, while almost 400 unfair labour practice complaints by the UAW and seniority problems have also become issues.
""I've always felt that there's going to come a time when it would make a good business decision for the company"" to reach a labour agreement, Jim Clingan, executive vice president of UAW local 974 in Peoria, said. But he added that he did not know if that time has been reached.
Caterpillar has reported record profits in the wake of the strike and analysts have said the continuing labour woes have had little, if any, impact on the company's bottom line.
""(Caterpillar is) not going to budge enough for it to make a difference,"" said J. Blair Brumley, analyst at Dain Bosworth Inc. ""Even if they get a contract, it's not going to look very different than what those guys are working under now.""
Caterpillar reported profit of $1.4 billion on revenues of $16.52 billion in 1996.
In a statement, Cateprillar vice president Wayne Zimmerman called the resumption of meetings ""a positive development.""
""It's long past time to resolve the uncertainty this dispute has created for our employees,"" Zimmerman said.
UAW president Stephen Yokich also welcomed Wells' announcement.
""It is clearly in the best interests of all stakeholders, including communities and families, that the long-standing labour dispute be resolved equitably,"" Yockich said in a statement.
Caterpillar shares rose $2.625 to $93.375 in line with other capital equipment makers.
Brumley noted that when the news of the announcement was made, Caterpillar shares traded lower briefly.
",5
"Mercury Finance Co. said Thursday it was suspending payment of a previously announced dividend while it tries to secure short-term financing as it falls deeper and deeper into debt.
The troubled consumer finance company said it had been unable to refinance a total of $61 million in commerical paper -- or short-term debt -- that had matured through Wednesday. Another $127 million comes due between Thursday and Feb. 14, Lake Forest, Ill.-based Mercury said in a news release.
The company has been in violation of certain loan covenants since last week, when it was unable to pay $17 million in commercial debt.
Mercury has been in turmoil since it announced last week that accounting irregularities had caused it to overstate its earnings by about $90 million.
It said accounting misstatements appeared to stem from unauthorised entries by former controller James Doyle. But Doyle's lawyer has accused the comapny of a ""charade"" and said Doyle is cooperating with federal authorities.
FBI agents served a search warrant seeking financial records Monday.
Mercury said Thursday that it suspended a dividend payment of 7.5 cents a share that was payable March 3.
The company also said it was continuing to try to obtain short-term financing from its lenders in talks that have been taking place all week.
It added that funds from the short-term financing will be used exclusively for operating purposes and will not be available for paying principal or interest on company debt.
One analyst said the apparent lack of a report so far by new auditors on the extent of the accounting discrepancies might be hindering the talks with lenders.
""Certainly, (the talks are) complicated in one instance by the default on the commercial paper to date and what seems to be the lack of resolution on the extent and nature of the accounting regularities,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co.
Earlier this week William Brandt Jr., a turnaround and bankruptcy specialist who replaced John Brincat as chief executive officer Monday, told Reuters the company needed about four weeks of financing to gain time to stabilise the firm.
Mercury, which makes used-car loans to individuals of often relatively low creditworthiness, also said Thursday that operations were continuing at all of the company's 280 locations nationwide.
Market sources said there had been rumours of bids for Mercury's commercial paper at 50 percent to 80 percent of face value.
One attorney familiar with bankruptcy matters said bidders might be trying to have more influence if Mercury is forced to file for bankruptcy.
""It is not uncommon for investment groups to be buying paper at a discount to improve their situation in a restructuring,"" said Ted Koenig, attorney at Holleb & Coff in Chicago.
Meanwhile, another auto lender, Evanston, Ill.-based First Enterprise Financial Group Inc. said it did not report 1996 earnings as expected Thursday and that it was reviewing its portfolio in light of recent developments in the industry.
An analyst at ABN AMRO Chicago Corp. lowered that stock to hold from buy.
""We believe the Mercury situation is causing audit firms to take a much harder position with automobile finance companies,"" Chicago Corp. said in a research report.
First Enterprise stock plunged $4 to $8.25 on Nasdaq.
The fallout from Mercury's financial troubles is also striking a foundation established by Mercury founder Daniel Terra, who died in June.
The foundation, which funds the Terra Museum of American Art in Chicago and an American musuem in Giverny, France, holds 8 million shares as part of its $350 million endowment.
Those shares were worth more than $116 million a week ago, but were worth about $21 million Thursday.
Mercury stock was unchanged at $2.625 in afternoon trading on the New York Stock Exchange, where it was one of the most heavily traded issues.
",5
"Retailers are expected to post sales gains in the single digits for March, bolstered by low-end discount stores sales while department store performance was nearly flat compared with a year ago.
""It appears there's a slowdown in the department store end of the business, but the discounters are still doing well,"" Michael Niemira, analyst at Bank of Tokyo-Mitsubishi Ltd. said.
Overall, he expects comparable-store sales, or sales at stores open at least a year, to be up about 5 percent or slightly less.
An early Easter could depress sales at stores that were closed on the holiday, which fell in the March selling period instead of April this year. Winter storms in much of the northern part of the nation may have also held sales back.
""You need to look at March and April overall to get comparable sales,"" William Armstrong, an analyst at Fahnestock & Co. Inc. said of quirks in the reporting calendar, where some retailers include Easter in March and others in April this year.
Armstrong is expecting overall retail sales for March to increase by 2 percent to 4 percent.
Most retailers will report March sales early Thursday. But Plano, Tex.-based J.C. Penney Co. Inc. Tuesday reported a 3.7 percent decline in comparable-store sales at its JCPenney stores in March. The early report was due to a debt offering the company is making this week.
The loss of one day's sales because of Easter hurt sales, J.C. Penney said.
Penney's decline is expected to be mirrored by other department stores, analysts said.
""Most (department store) chains saw flat or even slightly lower comparable sales during the March period, as they compared with healthy year-ago increases,"" analysts at Montgomery Securities wrote in a research report. They added that the early Easter and snowstorms in the Northeast added to pressure on sales.
At the same time, discount stores are expected to post 4 percent to 6 percent sales gains, with low-end discounters reporting low double-digit gains, Montgomery said.
""We continue to believe the low-end strata is benefitting from the fruits of a fully-employed economy and the direct pay-hike from the 1996 minimum wage increase,"" Montgomery's analysts wrote.
Among the major chains, analysts see Wal-Mart Stores Inc., the nation's largest retailer, reporting same-store sales gains of about 7 percent. Sears, Roebuck and Co. was expected to report gains of 2 percent to 3 percent, with Kmart Corp. up 10 percent to 12 percent.
Kmart's results are expected to be driven by seasonal items, such as horticulture, home goods and bicycles. But it will give back some of those gains in April because of the calendar shift, analysts at Deutsche Morgan Grenfell said in a research note. Kmart stores were open on Easter, analysts added.
Dayton Hudson Corp. is expected to post a 1 percent to 2 percent gain, with a 3 percent to 4 percent increase at its Target discount stores offsetting flat department store sales. Federated Department Stores Inc. is expected to post flat sales, with some planned promotions moved into April, analysts said.
",5
"Harnischfeger Industries Inc's $19 a share tender offer for industrial tool and systems maker Giddings & Lewis Inc could be about the best offer Giddings can get, industry analysts said Monday.
""I don't think there's much more in that Harnischfeger bid than what's in there, and I don't think there's anyone else out there"" that would make a higher bid, Thomas Burns Jr., analyst at NatWest Securities, said.  
Shares of Fond du Lac, Wisconsin-based Giddings & Lewis jumped 6-3/4 to 20-3/8 Monday. That was seen as an indication that some buyers expect a higher bid, a view many analysts take issue with.
""My feeling is at $19 a share, that's full value, I think, for Giddings & Lewis,"" said William Cooke, analyst at McDonald & Co. ""I think that Harnischfeger is assuming they can double the earnings of Giddings & Lewis in the not too distant future. I think they're being optimistic.""  
Harnischfeger said it is looking at using Giddings & Lewis to expand in the fragmented industrial products aftermarket service business, which Harnischfeger estimates as an $80 billion market.
But some analysts said buying Giddings & Lewis, a company that took a $64.1 million charge last year to try to fix its integrated automation systems business, adds a lot of uncertainty for Harnischfeger shareholders.  
""...we believe that investors will be looking at a fundamentally different company with much more risk involved than they had previously,"" J. Blair Brumley, analyst at Dain Bosworth, wrote in a research note, in which he also lowered the rating of Harnischfeger to a hold from a buy.
While saying the Harnischfeger bid was not a done deal, ""we expect (Harnischfeger) to pursue its target with vigor and would be suprised if another offer significantly higher than the one now on the table would surface,"" Brumley said.  
Some analysts said Harnischfeger has picked a perfect time to go after Giddings & Lewis. Giddings has already taken steps to fix its underperforming operations, but the stock, in their opinion, still is ailing, they said.
""They got all the dirty work behind them,"" said Darren Bagwell, analyst at Robert W. Baird & Co Inc. ""They've wiped the slate clean, and yet the stock price still reflects that wait and see attitude.""
In fact, Bagwell also said Giddings & Lewis could probably squeeze a higher bid out of somebody and said he felt the company was worth more than $19 a share.
Some analysts also noted that Harnischfeger's bid was likely based only on publicly available information and that a bidder who had a good look at Giddings & Lewis books might find information to convince them to make a higher offer.
Harnischfeger shares were down 3-5/8 at 41-3/4 Monday.
((Chicago newsdesk, 312-408-8787))
",5
"Mosinee Paper Corp on Wednesday it expected capital expenses to double in 1997 as the paper products company expands capacity during the year.
""We expect to spend about $40 million,"" Daniel Olvey, chief executive of the Mosinee, Wisconsin-based manufacturer, said in an interview.
In recent years, the company has spent about half that. The increase would come with Mosinee adding a large number of paper-converting lines at its Bay West commericial towel and tissue unit, Olvey said.  
The increased spending is possible because the company paid down $31 million in debt in 1996, freeing up capital this year, Chief Financial Officer Gary Peterson said.
About 55 percent of Mosinee's $314.5 million in revenues came from specialty paper in 1996 and the rest from the towel and tissue business. Olvey said he expected towel and tissue to account for more than 50 percent of its revenues in the next couple of years.
The company is adding about 30 percent capacity to its Bay West towel paper converting plant and thinks the market can absorb the extra output.  
""We think over a period of two or three years it will be able to absorb that, "" he said.
Currently, operating margins in the towel and tissue business are in the high 20 percent range, while the specialty paper margins are in the low to mid 20 percent range, he said.
The company produces about 99,000 tons of towel and tissue each year from 140,000 tons of waste paper. Waste paper prices have been moderate in recent weeks, not much changed from the fourth quarter of 1996, Olvey said.
The company is seeing some softness in towel and tissue prices. Such seasonal fluctuations are expected, he said.  
""In terms of selling prices, we're seeing stable to slightly up prices on the specialty paper side, and on the towel and tissue side, we're seeing stable to moderately down prices there,"" Olvey said. He expects towel and tissue prices should rebound in the next two months.
Raw material costs for the company have been favorable this year, he added.
""The raw materials area is still very soft,"" he said. ""The pulp we're purchasing, there's a lot of deals out there.""  
Mosinee focuses on niche businesses, with long-term contracts and above-average margins, to help lessen the effects of cyclicality in the paper business.
Olvey said the company was the largest U.S. producer of paper for masking tape, and provides the paper used for the test strip on one brand of battery Olvey would not name.
The company also makes decorative laminate for countertops and is one of the manufacturers of paper boxes for McDonald's Corp sandwiches.
Aside from adding capacity through capital improvement, Mosinee continues to look at potential acquisitions.
""We are very interested in making good acquisitions that we are comfortable with for the long haul,"" Olvey said. ""We want equipment that is not only competitive in the marketplace now, but is competitive 15 to 20 years from now.""
Acquisitions should also fit a niche with which the company is familiar.
""We are interested in expanding our specialty papers business, because we are at capacity there,"" he said.
((Chicago newsdesk, 312-408-8787))
",5
"The nation's retailers are expected to post modest sales gains for February, with warm weather during the month having a mixed impact on results, analysts said Tuesday.
Analysts said retailers are expected to post a rise of about 4 percent in sales from stores open at least a year, or same-store sales, for February.
""While warm weather, particularly in the Northeast, did boost sales of apparel at many retailers, it depressed sales in some hardline areas,"" analysts at Merrill Lynch said in a research note.
Most retailers are scheduled to report their February sales results Thursday morning, though Carson Pirie Scott & Co. reported Monday that its same-store sales rose 8.2 percent for the month.
""Carsons had a strong reading, which might be a tell-tale sign for some of the smaller retailers,"" said Michael Niemira, analyst at Bank of Tokyo-Mitsubishi.
One retailer that has exceeded the industry average in recent months, Sears, Roebuck and Co. , is expected to fall back to the pack, with gains of about 2 percent to 4 percent in sales at stores open at least a year.
""Its sales were depressed by its automotive business, which was hurt by the warm weather and hard lines, which continued their weak performance,"" Merrill Lynch's analysts said in the report.
Many retailers will have tough comparisons with their 1996 sales from February through the middle of spring due to warm weather a year ago, analysts said.
But one retailer that is expected to exceed the average is J.C. Penney Co. , which some analysts see posting same-store sales gains of about 9 percent.
""The (sales) numbers, I think are going to be led by Penneys in particular, which seems to have a strong reading for February,"" Niemira said. ""Apparel is certainly helping them.""
The nation's largest retailer, Wal-Mart Stores Inc., is seen posting gains of 4-6 percent, analysts said.
Electronics superstores should continue to trail the rest of the retail sector, analysts said.
Dean Ramos, with Dain Bosworth Inc., estimated that both Best Buy Co. Inc. and Circuit City Stores Inc. would report a 7 percent to 10 percent decline in same-sales for February.
""New consumer electronics products such as Digital Video Disk are not yet a factor,"" Ramos said in a report previewing last month's retail sales.
",5
"Harnischfeger Industries Inc. said Friday it offered to buy Giddings & Lewis Inc., a Fond du Lac, Wisconsin-based maker of industrial automation products and machine tools, for about $747 million, including assumption of debt.
It said the $19-per-share offer has a value of about $747 million, based on the approximately 33.2 million shares of Giddings & Lewis stock now outstanding and including the assumption of Giddings & Lewis debt.
The price represents a premium of about 40 percent over Friday's closing price on Giddings & Lewis's stock of $13.625 per share.
Harnischfeger Chief Executive officer Jeffery Glade said the company would have to take on ""significant"" debt to finance the deal, but added that financing was in place.
""It's fully financed, no contingencies,"" Glade said in an interview. He added that he expected the deal would add to Harnischfeger earnings immediately upon closing and that with growth, the debt would be paid down quickly.
He added that Milwaukee-based Harnischfeger would use Giddings & Lewis to help improve its aftermarket service to the machine tool and material handling business.
""We'll be within 24 hours of any major plant in the United States,"" Glade said. ""That's what happens if you put our business with ours.""
Harnischfeger is not looking to cut plants or lay off employees if it succeeds in its offer, Glade said.
""What we intend to do is grow this little baby,"" Glade said. ""We think we can sell more and become a better service provider.""
The transaction would create an enterprise with combined 1996 revenues of $3.6 billion with operations in mining equipment, pulp and papermaking machinery, and industrial products and services.
Harnischfeger said it made its offer in a letter dated April 25 from Glade to Giddings & Lewis President and Chief Executive Officer Marvin Isles.
Harnischfeger had been talking to Giddings & Lewis about an acquisition since Monday, then made the offer Friday after receiving what it considered a rejection from Giddings & Lewis' board, Glade said.
Giddings & Lewis would not comment on its discussions with Harnischfeger.
In a news release late Friday, the company urged shareholders not to act on the Harnischfeger offer until its board of directors reviewed the offer and the company's alternatives.
Harnischfeger is an international holding company with businesses involved in the manufacture and distribution of equipment for underground mining, surface mining, pulp and papermaking and material handling.
Glade said Harnischfeger had alternatives to Giddings & Lewis, but that Giddings & Lewis was the best choice. He would not say at what price Giddings & Lewis remains the best alternative. Harnischfeger shares closed at closed down $1 at $45.375 Friday.
",5
"Banyan Strategic Realty Trust, which releases its full 1996 results early next week, will report funds from operations (FFO) of $0.03 a share for the 1996 fourth quarter, down from $0.07 a share a year ago.
Leonard Levine, chief executive of the real estate investment trust also said Friday that funds from operations for the year ended December 31 would be $0.34 a share, up from $0.32 a share a year ago.
But the company expects funds from operations, the standard measure of a REITs performance, to jump in 1997.  
""In 1997, we expect our targeted numbers for FFO, both as a result of acquisitions made in late '96 and continuing acquisitions in early '97...will be somewhere between $0.50 and $0.55,"" Levine said in an interview.
The company's target for 1998 FFO is $0.65 to $0.70 a share, not including additional acquisitions, which it expects to make.
By June 30 of this year, Banyan expects to own 19 properties in the Midwest and Southeast, including industrial buildings, suburban office buildings, apartment complexes and a retail center.  
""Real estate is cyclical and the best way to protect against that cycle is to spread your risk,"" Levine said in explaining Banyan's strategy, which is counter to most REITs, which focus on one property sector.
The company focuses on markets without much competition from larger REITs.  
""Our principal investment strategy is to focus on smaller real estate markets and smaller properties where we believe there continues to be extraordinary opportunities available to us to purchase stable and appreciating real estate and where the economies are both very strong and there continues to be an absence of credit and capital,"" Levine said.
Banyan buys properties with an eye toward both improving its revenue stream and selling at a profit down the road.
The company hopes to speed its portfolio growth in coming years and Levine expects Banyan to make some sort of equity offering in the next year to raise market capital.
""I think sometime within the next 12 months we'll be exploring ways in which the company can grow from that perspective,"" Levine said of a potential equity offering.
Among the benefits from an equity offering would be to improve Banyan's liquidity, he added.
Shares of the company closed Wednesday at four and have not traded since.
((Chicago newsdesk, 312-408-8787))
",5
"Reliance Acceptance Corp said Friday it borrowed from its bank credit lines because the less expensive short-term commercial debt market has been essentially closed to sub-prime lenders most of this week.
""This week, with what's hit with the other companies, nobody's buying commercial paper,"" said Howard Silverman, chairman of Reliance, the auto lending unit of Wheeling, Ill.-based Cole Taylor Financial Group Inc.  
Sub-prime lenders, who loan money to consumers with riskier credit, had trouble securing commercial debt due to problems with Mercury Finance Co and another firm.
Last week, Mercury said it overstated its earnings by about $90 million over the last four years, due to accounting discrepancies. The company is currently in default and negotiating with its lenders to try to obtain short-term financing to stabilize the company.
On Thursday, Dallas-based Jayhawk Acceptance Corp, another sub-prime lender, said it might have to file for reorganization under protection of the U.S. Bankruptcy code.  
Sub-prime lenders use commercial debt, with maturities of 270 days or less, to fund purchases of loans from auto dealers. They make money on the spread, or difference, between what they pay for funds and the higher rates of the loans.
Reliance's bank debt can cost about 200 basis points more than commercial debt, lowering the amount they make on the spread, the company said
But Reliance also stressed that its bank credit exceeds its commercial debt lines, and that the company has full access to its bank financing.
""Our bank group is terrific,"" said Jim Kaplan, general counsel for Reliance. ""They have called us and told us they are strongly behind us.""
Analysts said they had also heard that the commercial debt market has been closed to sub-prime lenders this week.
""Mercury has been making a lot of people gun-shy,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co.
((Chicago newsdesk 312 408 8787))
",5
"First Bank System Inc is seen paying a premium price to expand its geographic footprint to the Pacific Northwest with its planned $9 billion acquisition of Portland, Oregon-based U.S. Bancorp.
""This is very rich pricing,"" analyst James Schutz at ABN AMRO Chicago Corp said, noting that the deal -- which would make First Bank the 14th largest bank in the United States based on assets -- values U.S. Bancorp at about $59.08 a share, or 19.2 times 1996 earnings.  
U.S. Bancorp shares were up 6-3/16 at 54-7/16 Thursday.
But at the same time, First Bank chief executive John Grundhofer's reputation for aggressive cost cutting, the complementary fit of U.S. Bancorp with Minneapolis-based First Bank's mostly Midwestern markets, and the rich price of bank stocks in general, make the deal palatable to analysts.
""It's a natural fit for them,"" said Frank Barkocy, analyst at Josephthal, Lyon & Ross. ""It's a natural extension of their marketplace.""  
First Bank said it would be able to grow revenues from the deal by offering its payment systems services to U.S. Bancorp's extensive corporate base. Home equity lending and investment management services are also businesses First Bank plans to offer U.S. Bancorp's customers, while U.S. Bancorp's leasing expertise would be offered to First Bank customers, the banks said.
""Where the deal makes more sense is the compatibility of the business lines,"" said Stephen Biggar, analyst at S&P Equity Group.  
First Bank expects to cut the combined banks' operating expenses by about 14 percent, with a pre-tax cost savings of about $340 million.
""We believe that (First Bank's) ability to cut costs could make this deal work,"" Salomon Brothers said in a note on the deal, according to market sources.
While First Bank stock was down 3-1/2 at 74-3/4 Thursday, analysts still saw the deal as a positive for the acquisition minded bank.
""They've got the acqusition history behind them,"" Biggar said. ""They've got a management that can make deals work.""  
The deal could also spark more bank consolidation, especially in the Midwest, with buyers swooping in while First Bank is busy consolidating its purchase, analysts said.
""We expect this announcement could trigger other activity,"" Salomon Brothers said, according to market sources.
Among potential targets frequently mentioned are Milwaukee-based Firstar Corp and Cleveland-based KeyCorp. Schutz even argues that Chicago-based First Chicago NBD Corp could be an attractive target at a reasonable price.
""For bang for the buck, First Chicago is probably the most lucrative"" in terms of Midwest markets, he said.
((Chicago newsdesk, 312-408-8787))
",5
"Mercury Finance Co.'s woes deepened Friday when the company said it would be unable to pay $17 million in commercial debt due the same day, and its stock lost nearly 90 percent of its value.
The stock lost $13 to $1.875 on the New York Stock Exchange on volume of more than 27 million shares after it opened for trading Friday afternoon for the first time since Tuesday. It fell as low as $1.625.
Based on the more than 172 million shares outstanding as of early November, that would mean a loss of more than $2.2 billion in market capitalisaiton for the company.
On Wednesday, the company said it found problems in its bookkeeping that caused it to overstate earnings by $90 million over four years.
The consumer finance company said Friday that as a result of downgrades from several debt rating services, it would not be able to issue new short-term debt, known as commercial paper, to repay maturing debt and could not make the payments due Friday.
Standard & Poor's Corp. and Fitch Investors Service downgraded the company's commercial paper to a default rating.
Lake Forest, Ill.-based Mercury said it was in discussions with its lenders to satisfy its working capital needs, but could not predict the outcome of the discussions.
The company also said it had retained the services of Salomon Brothers Inc. to advise on its current and future capital needs, as well as all related issues.
Mercury said Wednesday it had to restate its earnings for the past four years by a total of about $90 million lower because of accounting irregularities.
Mercury said the problems appeared to stem from unauthorised entries in financial records by its controller, James Doyle.
But Doyle's lawyer reportedly accused Mercury of a charade and said Doyle was cooperating with federal authorities.
A special committee of Mercury's board, formed to investigate the accounting problems, has instructed its lawyers to contact Doyle's attorney, to attempt to reach Doyle and to obtain information on the investigation, Mercury said Friday.
Doyle's lawyer was out of town Friday and did not return repeated phone calls.
The company said it also directed its lawyers and accounting firm to expeditiously complete a thorough investigation of the auditing, accounting practices and procedures of the company and report to the board.
Another class-action lawsuit accusing the company of violating securities laws by issuing misleading and false financial statements was filed in U.S. District Court in Chicago. At least four such suits have been filed.
",5
"Huntington Bancshares Inc. said Monday it agreed to acquire First Michigan Bank Corp., a Michigan banking company, in a deal valued at $898 million.
The deal comes just months after Holland, Mich.-based First Michigan said it had been targeted by a different company. A First Michigan spokeswoman would not say who made the previous offer, or how it compared to the Huntington deal.
First Michigan shares fell 87.5 cents to $29.875 on Nasdaq at mid-afternoon, after having jumped to as high as $30.75 in recent weeks on takeover speculation.
Under the definitive agreement, Columbus, Ohio-based Huntington Bancshares will offer 1.05 shares of its stock for each First Michigan share in a fixed exchange that is expected to be a tax-free pooling of interests.
The deal originally was valued at $31.50 per share or $908 million, based on Friday's closing stock price for Huntington. Huntington stock, however, fell 50 cents to $29.50 on Nasdaq on Monday, lowering the value of the deal.
""It's an expensive price here,"" said Joseph Duwan, analyst at Keefe Bruyette & Woods Inc. He noted that the deal valued First Michigan at 3.1 times book value and about 19 times 1996 earnings.
But First Michigan is also seen as a well-run franchise, in a western Michigan market that is attractive for its diverse economic base. Huntington is not currently in the western Michigan market, analysts noted.
""It's very pricey, but the point is I don't think anybody could have gotten First of Michigan without doing at least an at-market deal,"" said James Schutz, analyst at Chicago Corp.
All of First Michigan's 90 banking offices in the state will be merged into Huntington's lead subsidiary, Huntington National Bank. First Michigan has assets of $3.6 billion.
The combined company would have assets in excess of $25 billion, stockholders' equity of about $1.9 billion and a market capitalisation of about $5.2 billion.
""This merger significantly expands our Michigan market share and enables us to realise important synergies in our consumer, commercial and fee-based businesses,"" said Frank Wobst, chairman and chief executive of Huntington.
""Upon completion of this transaction, Huntington will have approximately $6 billion in assets in Michigan making it our second-largest market after Ohio.""
The acquisition is expected to boost Columbus, Ohio-based Huntington's earnings slightly in 1998 and increase profits by 4 percent in 1999, he said.
A pre-tax merger-related charge of about $35 million will be recognised in the quarter the merger is completed.
The merger is expected to result in annual cost savings of at least $19 million, or 15 percent of Michigan's expense base in 1998, by eliminating redundancy and excess capacity.
The deal is expected to close late in the third quarter, subject to regulatory and shareholder approvals.
Huntington has warrants to buy up to 19.9 percent of First Michigan's outstanding shares at an exercise price of $29.275 per share if the deal does not close under certain circumstances.
Huntington Bancshares, with assets in excess of $21 billion, operates 355 offices in Ohio, Florida, Indiana, Kentucky, Michigan and West Virginia. It also has 81 mortgage, trust, investment banking, and automobile finance offices in those states as well as in Georgia, Maryland, New Jersey, North Carolina, South Carolina, Pennsylvania and Virginia.
",5
"Boeing Co. stock surged Tuesday after the company decided to scrap plans to build a costly stretch version of its 747 jumbo jet.
Boeing shares jumped $5.625 to a record $112.125 on the New York Stock Exchange, accounting for much of the rise in the Dow Jones industrial average. Boeing is one of 30 stocks in the index of blue-chip companies.
Industry analysts estimated the move by the world's largest aircraft manufacturer, announced late on Monday, could reduce Boeing's research and development costs by more than $2 billion over the next five years and boost annual earnings by as much as $1 a share.
NatWest Securities analyst Nick Heymann said the decision not to proceed with the risky project removed a cloud of uncertainty over Boeing as it ramps up production to meet rising demand and prepares to complete its planned $14 billion purchase of McDonnell Douglas Corp.
""It's fantastic news,"" he said.
While officials at Boeing rival Airbus Industrie said the European consortium would go ahead with plans for an all-new superjumbo jetliner called the A-3XX, Heymann said he thought that project was dead.
""Airbus never really had the resources to go ahead with their aircraft,"" Heymann said.
He said it was even less likely the European consortium could raise the funds now that Boeing has talked with the same customers and determined market conditions did not justify the investment needed for a new big jet.
Boeing said it would cost more than $7 billion just to develop a new wing and make other changes needed to produce two new versions of the 747 that would add range and capacity.
Airbus has said it can develop and all-new jet for $8 billion, but analysts peg the total costs at closer to a whopping $15 billion.
Citing increasing ""route fragmentation,"" especially across the Pacific Ocean, Boeing said it plans to focus its development efforts on new versions of the medium-sized 767 and 777 twin-engine models.
Boeing already has begun offering an increased-capacity version of the 767 that could be launched with an initial order in the next few months.
Boeing also is considering new versions of the 777 that would add both capacity and range.
Heymann said Boeing also plans minor changes in the 747 including new digital cockpit electronics and computer software. The revamped plane would be the same size with the same range as the current 747-400, Boeing's latest version of the four-engine plane.
Alfred Goldman, a stock market analyst at brokers A.G. Edwards and Sons, said the rise in Boeing stock accounted for nearly half of the Dow's rise of about 34 points, to 6,878, at midday.
",31
"Nike Inc., the world's largest maker of athletic footwear, reported a 24 percent jump in first-quarter profits Monday, reflecting strong demand for its shoes and apparel around the world.
The Beaverton, Ore.-based company also announced a two-for-one stock split, its second in two years.
For the three months ended Aug. 31, Nike earned $226.1 million, or $1.53 a share, up from $182.1 million or $1.25 a share a year ago. Revenues jumped 34 percent to $2.28 billion from $1.70 billion last year.
The earnings were slightly better than the $1.51 a share industry analysts had expected on average.
But the company's stock jumped sharply on news that Nike had taken orders for $3.5 billion in footwear and apparel through January, a 66 percent increase over the year-earlier period, analysts said.
""The futures were up beyond anybody's expectations,"" said Shelly Hale Young of Hambrecht & Quist, who said few expected Nike to top the 55 percent increase in advance orders reported three months ago.
As a result, she and other analysts raised their Nike earnings estimates for the rest of the year, and Nike stock rose $2.375 to a record close of $121.625 on the New York Stock Exchange.
""Management is very pleased with these results,"" Nike Chairman Phil Knight said in a conference call with analysts and reporters.
In a statement, he said Nike's ""brand strength, which many thought was nearing its peak last year, continues to grow unabated in fiscal 1997.""
Indeed U.S. sales of Nike footwear surged 27 percent to over $1 billion in the quarter, while the overall market is growing at only about an 8 percent rate.
Young of Hambrecht & Quist said she expected Nike to raise its share of the U.S. footwear market to 43 percent by the end of the fiscal year from 37 percent, with most of the increase coming at the expense of rival Reebok International Ltd.
The increase is coming even as Nike imposes a 7 percent rise in the price of its shoes, which can top $100 a pair.
Young said Nike's aggressive marketing and focus on footwear technology have given it the edge.
""They have the better shoes and they have the brand that consumers want to buy, and therefore they can increase prices,"" she said.
Overseas, where Nike is not as well established in all markets, Nike sales rose 35 percent from last year's first quarter to $781 million, a figure that was hurt by fluctuations in the U.S. dollar.
The company also continued its strong performance in ahtletic apparel, where sales surged to $584 million, a 75 percent increase.
At the company's annual shareholders meeting in Beaverton, Ore., Knight and others strongly defended the company against rising criticism of its overseas manufacturing practices.
Shareholders overwhelmingly defeated a proposal for independent monitoring of the factories introduced by the United Methodist Church.
Knight blamed media reports for distorting Nike's record and said the company generally pays twice the minimum wage in countries where it operates.
He said the company recently had discovered ""horrible conditions"" among Pakistani workers -- including children -- sewing soccer balls at home under contract for Nike and had worked to establish centralized sewing centers that would eliminate the abuses.
Nike outside directors Jill Conway and John Thompson said they had traveled recently to Indonesia and Vietnam and were generally satisfied by factory conditions.
",31
"Paccar Inc., maker of Kenworth, Peterbilt and Foden heavy-duty trucks, reported fourth-quarter profits well above expectations Tuesday as it benefited from its acquisition of Dutch-based DAF Trucks N.V.
Paccar earnings slid to $62.5 million, or $1.61 per share, in the quarter ended Dec. 31 from $65.1 million, or $1.67 per share, a year earlier. Sales edged up to $1.2 billion from $1.1 billion.
But the earnings were well above average Wall Street expectations of $1.23 a share, according to First Call, and Paccar stock rose $2.25 to $69.75 in afternoon Nasdaq trading.
""It was quite a nice quarter for them,"" said analyst Paul Latta of brokerage Ragen MacKenzie in Seattle. He credited the better-than-expected results to the acquisition of DAF, completed in November for $543.8 million.
""Everybody knew it would be accretive (help earnings) and was wondering how accretive it would be,"" he said. ""It looks like it's falling into the category of very accretive.""
The Bellevue, Wash.-based company did not break out European business, but Latta and others said Paccar's truck-making operations performed substantially better than expected in the quarter.
""Last year was a strong year for heavy-duty truck manufacturing -- much better, in fact, than many in the industry anticipated,"" said Paccar Chairman Mark Pigott. ""Paccar increased its market share (of the largest trucks) as more trucking companies specified our products.""
For the year, Paccar net income fell to $201 million, or $5.17 per share, from $252.8 million, or $6.50 per share, in 1995. Sales dropped to $4.3 billion from $4.6 billion.
Pigott said analysts expected 1997 to be a reasonable year for truck manufacturers despite softer markets in both North America and Europe.
Analysts agreed, noting that markets had held up better than expected despite concerns about overcapacity in the U.S. truck fleet.
""I think the one thing that has been surprising to everyone in the industry is that truck demand has not slowed as much as had been forecast,"" said John Rogers of Jensen Securities.
He noted that U.S. truck sales volume was down about 15 percent last year, compared with estimates of up to a 25 percent decline.
Richard Walles of DRI/McGraw Hill in London estimated total U.S. truck sales would decline less than 10 percent this year while European sales would remain flat.
Truck fleet operators are at the tail end of a replacement cycle, but sales remain at historically high levels, ""so we can't complain too much,"" he said.
Paccar said operating profits surged 28 percent last year in its financial services sector due to a growing portfolio and significantly lower credit loss provisions in Mexico.
",31
"Boeing Co. may take over maintenance operations for some of its airline customers as part of a drive by the jet manufacturer to develop new business opportunities, a company spokeswoman said Friday.
Boeing Enterprises, a new division of the company's commercial airplane group, is looking at maintenance as ""one of many"" new business opportunities, spokeswoman Barbara Murphy said.
""There are things that make it very logical for us to pursue this new business opportunity,"" she said. ""We have an advantage. We know our airplanes better than anyone.""
The Wall Street Journal reported Friday that Boeing was pushing to take over the heavy-maintenance operations of several major carriers, possibly including British Airways Plc.
Murphy declined to comment on any specific deals, and a spokeswoman for British Airways also declined comment.
Industry analysts said a move by Boeing into maintenance would make sense as a way to diversify the company's business beyond highly cyclical airplane manufacturing and weapons systems.
""If you can get into that business without stepping on your customer's toes I think it's a great idea,"" said Bill Whitlow of Pacific Crest Securities.
He and other analysts said the move was a reflection of Chief Executive Officer Phil Condit's efforts to diversify Boeing while the manufacturer is enjoying a record wave of new orders.
""This is a reflection of Phil Condit and his more aggressive nature than his predecessor and a reflection of the internal thinking that's going on as to where best could they deploy the huge amount of cash they're going to have on hand,"" said Paul Nisbet of JSA Research.
Boeing had $4.4 billion in cash at the end of last year, and Nisbet estimated that with the company's expected acquisition of McDonnell Douglas Corp. this year it will generate at least $1.5 billion in excess cash annually over the next several years.
Last month Boeing Enterprises announced a $200 million joint venture with FlightSafety International to offer pilot and ground crew training. FlightSafety is a unit of Berkshire Hathaway Inc.
The Boeing unit, formed in January, also has been exploring ways to profitably use the company's massive database of world airline inventories to help carriers maintain service records.
Boeing was off $1.75 at $100.375 on the New York Stock Exchange amid a drop of 148 points, or more than 2 percent, in the Dow Jones industrial average.
",31
"Microsoft Corp. said its third-quarter profit jumped 85 percent to $1.04 billion, well beyond analysts' expectations, on strength in its core Windows business and the new Office 97 upgrade.
The software giant's net income of 79 cents a share compared with earnings of $562 million, or 44 cents a share, in last year's fiscal third quarter. Revenues rose to a record $3.21 billion, a 45 percent increase over the $2.21 billion racked up in the year-ago quarter.
Analysts on average had forecast earnings of 64 cents a share and revenues of about $2.9 billion.
While Microsoft Chief Financial Officer Mike Brown reiterated that he expects growth to slow over the next year, analysts said they were impressed by the software giant's continuing ability to rack up huge gains.
""I was floored,"" said analyst Scott McAdams of Ragen MacKenzie, who predicted the stock would rise sharply Friday as analysts jack up their earnings estimates. ""This was a 16-cylinder engine, and all cylinders were working.""
Microsoft released the results after financial markets closed. In Nasdaq trading Thursday Microsoft fell 12.5 cents to $98.125, but the stock rose as high as $102.75 in after-hours trading, dealers said.
Microsoft credited strong revenues from the Office 97 bundle, released in January, which helped drive application and content revenues to $1.53 billion, up 24 percent from the year-earlier period.
But revenues from Microsoft's platform products, including the various Windows operating systems, rose 73 percent to $1.68 billion.
Sales of software preloaded on new computers to the so-called OEM (original equipment manufacturer) channel, rose 51 percent, faster than the PC growth rate, reflecting a continued shift to the higher-priced Windows 95 operating system from the older Windows 3.x.
In an interview, Brown said he expected growth to slow over the next five quarters based on difficult comparisons with year-earlier quarters and a lack of planned major new upgrades.
Brown said he was ""very excited"" about the long-term future but said the earnings bar had been raised to an ""all-time Olympic record.""
""We haven't had very many quarters in which EPS (earnings per share) went up 80 percent,"" he said. ""That's not a quarter-in, quarter-out type of thing. This is just an incredible quarter.""
In fact, he said results from the current fourth quarter would be roughly equivalent to the period that just ended, and he predicted a modest sequential decline in revenues and earnings in the seasonally slow September quarter. But after that sequential growth should resume, Brown said.
Because Microsoft exceeded third-quarter expectations by 15 cents per share, analysts likely will have to raise fiscal 1997 estimates to about $2.65 per share from the previous $2.35, McAdams said. Fiscal 1998 estimates also are likely to be raised, he said.
McAdams also pointed out that the company's ""unearned"" revenues of $1.29 billion included an additional 13 cents per share that was taken in but not recognized as earnings in the quarter. Microsoft defers some revenues to account for costs over the life cycle of products such as Windows and Office.
While Microsoft routinely beats earnings estimates, analysts said they had not even heard a ""whisper"" of the blowout number, and Microsoft's stock has traded in a relatively narrow range over the past two months.
""It's just an extraordinarily well-managed company to deliver that kind of earnings upside on this size of a revenue base,"" said analyst David Readerman of Montgomery Securities.
",31
"Computer giants Microsoft Corp , Intel and Compaq Computer Corp have proposed standards for a new generation of televisions that would be compatible with an emerging class of personal computers for the home.
In a telephone briefing with reporters, Microsoft Senior Vice President Craig Mundie said on Monday the proposed television protocol -- unveiled at a broadcasters' conference in Las Vegas -- would be recommended also as a standard for multimedia Pcs.
Mundie said the companies, dubbed the ""Big Three"" of the personal computer industry, are proposing adoption of three out of 18 advanced technical standards set forth by a television industry coalition.
Mundie and executives from Intel and Compaq said their proposal would allow a ""significant improvement"" in picture quality as well as transmission of related information and data to personal computers, television and hybrid devices.
""This model of television in particular is going to provide the viewer with a completely different experience,"" said Robert Stearns, senior vice president of Compaq.
He suggested that advanced television, also known as high-definition television, would allow viewers greater opportunity to interact with programming by choosing camera angles, chatting with characters, responding to advertising and even affecting the outcome of shows.
He said that beyond the issues of ""plumbing"" or technical standards, the broadcast industry could develop new revenue streams from advanced television.
He and the other executives said equipping personal computers to decode and display the new forms of television signals would add very little to the cost of the devices, perhaps less than $150.
At the same time, the emergence of advanced television is creating a new class of big-screen personal computers which combine features of the computer and television.
The consumer electronics industry is gearing up for production of advanced television sets with sophisticated computer circuitry.
Last week, the U.S. Federal Communications Commission, culminating a 10-year effort, called for a rollout of the technology that will have digital television on the air in the nation's 10 biggest markets within 18 months.
But rather than set specific technical standards for advanced television, the agency essentially is allowing the industry and marketplace to decide, Mundie said.
Placing a major bet on the coming convergence of computers and television, Microsoft over the weekend agreed in a $425 million deal to buy WebTV Networks Inc., which provides a way for consumers to access the Internet on their TV screens.
Raising the ante further, Mundie said Microsft planned to include technology needed for its preferred television standards in forthcoming versions of its Windows 95 and Windows NT operating systems.
That would mean competing television standards would be incompatible with Windows-based computers.
",31
"Microsoft Corp Chief Financial Officer Mike Brown reiterated Thursday that he expects results in the current fourth quarter to be similar to the just-ended third quarter, which he called ""sizzling.""
But in an interview, Brown also said he expects Microsoft's growth to slow over the next five quarters based on difficult comparisons and a lack of planned major new upgrades.  
While the current fourth quarter is expected to show results similar to the $1.04 billion in net income and $3.21 billion in revenues posted for the period that ended March 31, Brown said the first quarter of fiscal 1998 could show a sequential downturn.
Brown said he expected results to rise sequentially after that.  
Brown also said that while the company's high-end Windows NT Workstation operating system is being pre-loaded on some new personal computers, the mix shift was not yet material to Microsoft's so-called OEM (original equipment manufacturer) revenues.
""It's just going to be more of a (fiscal) '99 phenomenon, not a '98 phenomenon,"" he said.
Brown said he expected a spike in revenues from the Office 97 upgrade would begin to tail off in the current quarter, although deferred revenues from product shipped earlier would prevent a sequential downturn.  
The next upgrade of Office will not be out until fiscal 1999, Brown said.
""So fiscal '98 is in the product cycle valley from a comparison standpoint, and that makes the comparison tough, even if business fundamentals are very good,"" Brown said.
And he said he expected the revenue surge from the higher-priced Windows 95 operating system to begin to tail off soon now that the product has been out 20 months.
Brown said he was ""very excited"" about the long-term future but said the earnings bar had been raised to an ""all-time Olympic record.""
""We haven't had very many quarters in which EPS went up 80 percent,"" he said. ""That's not a quarter-in, quarter-out type of thing. This is just an incredible quarter.""
((-- Reuters Seattle bureau 206-386-4848))
",31
"A new osteoporosis drug reduces the risk of broken hips by 51 percent among women who already have suffered fractures caused by the debilitating bone disease, researchers said on Tuesday.
In research presented at a medical meeting, Dennis Black of the University of California at San Francisco said results were so promising that the first part of the study was ended early so all the participants could get the drug.
Black said 2,027 women aged 55 to 80 who previously had suffered spinal fractures due to the disease were enrolled in the study, with half of them getting the drug alendronate and half getting a placebo.
Women taking the drug were 51 percent less likely to suffer hip fractures over a three-year period and 55 percent less likely to suffer painful new spinal fractures.
Researchers ended the first phase of the study in October because they felt it would be unethical to continue giving patients the placebo, Black told the American Society for Bone and Mineral Research.
The second part of the research, studying the effect of the drug on 4,400 post-menopausal women with osteoporosis who had not suffered previous spinal fractures, will be completed early next year, Black said.
Alendronate, sold under the trade name Fosamax by Merck and Co., was approved by the U.S. Food and Drug Administration in October 1995 based on a smaller study that showed it increased bone mass density.
As of July 30 the company had generated $100 million in sales from the drug, a company spokeswoman said.
Merck has its eye on the even more lucrative market for prevention of osteoporosis, which affects an estimated 25 million Americans, the vast majority of them post-menopausal women who suffer bone loss when their bodies stop producing estrogen.
Currently only estrogen-based drugs are approved for prevention of osteoporosis, but Merck filed an application with the FDA in April seeking similar approval for Fosamax, a non-hormonal drug.
Researchers at the meeting were to present evidence on Wednesday that Fosamax stops bone loss and restores bone mass at the spine and hip.
Black noted that hip fractures are among the most debilitating symptoms of osteoporosis, leading to permanent disability in 50 percent of the cases and costing the U.S. economy $5.4 billion annually.
He said the research showed that ""even women with advanced osteoporosis can benefit from treatment.""
Another researcher at the conference presented a study showing that a class of drugs known as cytokine inhibitors prevents bone loss in laboratory rats, indicating a possible new treatment for osteoporosis.
",31
"Nike Inc. said Thursday that earnings jumped 77 percent in the latest quarter as worldwide sales of its athletic footwear and clothing surged.
The Beaverton, Ore.-based company said net income rose to $237.1 million or 80 cents a share, in its fiscal third quarter ended on Feb. 28, from $133.9 million, or 45 cents a share, a year earlier. Revenue rose 53 percent to $2.42 billion from $1.58 billion.
The earnings exceeded expectations of Wall Street analysts who had estimated Nike would earn 72 cents a share on average, according to First Call, which tracks profit forecasts.
Nike said worldwide orders for footwear and apparel to be delivered from March through July rose 34 percent from the year-earlier period to $4.3 billion.
""All of us out here at Nike are delighted with the quarter,"" Chairman Phil Knight said in a conference call with analysts and reporters.
In a statement, Knight said said revenues for the latest quarter rose more than 50 percent in each of the company's four geographic regions -- the United States, Europe, Asia-Pacific and the Americas.
""This is remarkably balanced growth for a company with trailing 12-month revenues approaching $9 billion,"" Knight said.
Nike said it U.S. sales of footwear and athletic apparel rose 51 percent to $1.34 billion, while international sales jumped 67 percent to $983 million. International sales would have been up 78 percent if currency changes were ignored.
""Obviously these are great numbers,"" said analyst John Rogers of Jensen Securities in Portland, Ore. ""The surprising thing was not only the overall sales growth and margin growth but particularly the international component.""
Nike officials said in the conference call the company's international sales were on track to surpass U.S. sales somewhere around the year 2000.
Rogers said the future orders figure, marking the 10th straight quarter of increases over 30 percent, was in line with estmimates.
""I think it's more than likely that order rates will slow from here as comparisons get tougher,"" he said.
",31
"Boeing Co. plans to enter the airline maintenance business within the next several months as part of a drive by the jet manufacturer to develop new business opportunities, a top executive said Friday.
""It's one of the things we're looking at, and I'm quite sure we're going to do it,"" said Larry Clarkson, president of Boeing Enterprises, a new division of the company's commercial airplane group.
Clarkson said in an interview the company is negotiating with several potential partners, which he declined to identify, and might begin by forming a joint venture to provide maintenance for airlines that want to use outside contractors for the business.
The Wall Street Journal reported Friday that Boeing was pushing to take over the heavy-maintenance operations of several major carriers, possibly including British Airways Plc, but Clarkson said any such transaction would be a long way off.
""When it comes to, say, taking over the total maintenance of a major airline, it's going to take us a while,"" Clarkson said. ""It's a very complicated thing to do.""
A spokeswoman for British Airways declined comment.
Industry analysts said a move by Boeing into maintenance would make sense as a way to diversify the company's business beyond highly cyclical airplane manufacturing and weapons systems.
""If you can get into that business without stepping on your customer's toes I think it's a great idea,"" said Bill Whitlow of Pacific Crest Securities.
He and other analysts said the move was a reflection of Chief Executive Officer Phil Condit's efforts to diversify Boeing while the manufacturer is enjoying a record wave of new orders.
""This is a reflection of Phil Condit and his more aggressive nature than his predecessor and a reflection of the internal thinking that's going on as to where best could they deploy the huge amount of cash they're going to have on hand,"" said Paul Nisbet of JSA Research.
Boeing had $4.4 billion in cash at the end of last year, and Nisbet estimated that with the company's expected acquisition of McDonnell Douglas Corp. this year it will generate at least $1.5 billion in excess cash annually over the next several years.
Last month Boeing Enterprises announced a $200 million joint venture with FlightSafety International to offer pilot and ground crew training. FlightSafety is a unit of Berkshire Hathaway Inc.
The Boeing unit, formed in January, also has been exploring ways to profitably use the company's massive database of world airline inventories to help carriers maintain service records.
Boeing fell $1.75 to $100.375 on the New York Stock Exchange amid a drop of 148 points, or more than 2 percent, in the Dow Jones industrial average.
",31
"An Electronic Arts executive on Wednesday said the company was focusing on personal computers and CD-ROM devices as game platforms despite the success of new cartridge-based machines from Nintendo Co Ltd.
Bing Gordon, executive vice president of marketing for the entertainment software company, said he had been surprised by the success in North America of the Nintendo 64, which was launched last year afer several delays. It became one of the big electronics hits of the holiday season.  
Still, he said Electronic Arts probably would focus on other platforms because of Nintendo's decision to stick with more expensive cartridges rather than switch to CD-ROMs as its rivals Sony Corp and Sega Enterprises Ltd had done.
""We're pretty strongly in the camp that low manufacturing cost in media is important to the overall growth of interactive entertainment,"" Gordon said. ""I doubt we'll ever ship as many products for the Nintendo 64 in any year as we do on the PC or the Sony Playstation.""  
He said Electronic Arts planned to launch its first game for the Nintendo 64, a version of its FIFA soccer product, in March or April to coincide with the European launch of the video game device.
Electronic Arts announced Wednesday it had opened a game development studio in the Seattle area, which Gordon said was destined to become ""one of the top five worldwide centers of interactive entertainment creativity,"" along with Japan, Britain, northern California and possibly Los Angeles.  
He noted that two of the company's four ""long-term competitors"" -- Microsoft Corp and Nintendo -- are located within a few miles of the new Electronic Arts studio, which employs 55 developers. About 40 of them came with last year's acquisition of Manley & Associates Inc in nearby Issaquah, Washington.
Anthony Garcia, a former Microsoft executive who is general manager of the new facility, said he hoped to add about 15 employees during the next year.
Electronic Arts develops software for platforms owned by all its competitors, including Sony and Sega.  
The company also is working to develop online products, including Ultima Online, which will go into a wide-scale beta test in April or May.
Gordon said he hoped the game would be on store shelves in June. He described Ultima Online as a ""persistent world"" that could be experienced by up to 20,000 Internet players in a single day and 2,000 simultaneously.
He said the company would wait until after a market test before deciding whether it would seek to charge for connect time in addition to the software. And he said there were still many issues to be resolved before multiuser Internet games could take off.
""This is not a boat that's about to leave the dock,"" he said.
""The most valuable thing we've done in Internet so far is to start replacing print advertising in our communication mix with Web marketing,"" Gordon said.
He said the company is making money over the Internet by selling its software directly to users.
	  ((-- Reuters Seattle bureau 206-386-4848))
",31
"Japan will likely become the largest international supplier of structural parts for the planned next-generation Boeing 747 jumbo jet, Boeing Co. said on Thursday.
Boeing officials said the Seattle-based company was holding talks with three major Japanese aerospace manufacturers -- Fuji Heavy Industries Ltd., Kawasaki Heavy Industries Ltd. and Mitsubishi Heavy Industries Ltd. -- aimed at significantly expanding Japanese manufacturers' role in producing two ""stretch"" versions of the 747.
""The discussions will go on until later in the year, but it is likely the Japanese industry will end up being the largest international supplier of parts for the 747-500x and -600x,"" Boeing spokeswoman Susan Davis said.
While the three manufacturers provide structural parts for most Boeing models, they were not among top 10 suppliers for the current-generation 747 jet, another Boeing official said.
The 747-500x would hold 462 passengers in a typical three-class configuration and have a range of 10,000 miles, compared with 416 passengers and 8,400 miles for the 747-400. The 600x would hold 548 passengers and have an 8,900-mile range.
The three Japanese companies were already significant Boeing partners, building about 20 percent of the structural parts for the new 777 as well as wing components and other parts for the current 747 jumbo.
The Japanese manufacturers would likely produce 747 wing flight-control surfaces and landing-gear doors as well as fairings that join the wings to the body.
Outside suppliers now provide these components for the current 747 model with the exception of the fairings, which are made at Boeing's plant in Winnipeg, Manitoba, the site of a recent five-week strike.
Last week Boeing Chief Executive Phil Condit told a group gathered to mark a century of trade between Seattle and Japan that Japan Airlines Co. Ltd. was the company's biggest 747 customer, having taken delivery of 96 jets since 1970.
""We strongly believe that strengthening of ties between our two countries remains crucial for the future,"" he said.
Boeing hopes to land more orders from Japanese airlines by increasing ties with Japanese manufacturers, although Davis said there was ""no guarantee.""
""They provide high-quality parts at competitive prices,"" she said. ""If it does happen to increase sales, it increases the work here in the U.S. too.""
",31
"Boeing Co. said Monday first-quarter profit more than doubled and sales rose 70 percent as it ramped up airplane production, but the results disappointed Wall Street and the company's stock tumbled.
Boeing said it earned $313 million, or 87 cents a share, in the quarter, excluding an accounting credit, compared with $119 million, or 35 cents a share, a year earlier. Revenue soared to $7.32 billion from $4.29 billion.
But Boeing's net income was 13 percent below the Wall Street consensus of $1 a share, according to First Call, and its stock fell $6.625 to close at $95.375 on the New York Stock Exchange, where it was the most active issue.
""The stock is down because earnings came in quite a bit below the consensus. That's it in a nutshell,"" said Peter Jacobs, an analyst at Ragen MacKenzie in Seattle.
Analysts said Boeing's earnings were hurt by higher-than-expected expenses for new airplane models and other projects including a commercial space venture.
The company also said it was incurring significant overtime costs as it increases production to meet rising demand and warned that profit margins would be under pressure for the rest of the year.
""It's sort of a wake-up call to some analysts who I think have been a little too optimistic about their margins,"" said analyst Bob Toomey of Piper Jaffray.
Boeing said profit margins would be lower for the rest of the year because of a shift toward deliveries of the new 777 and next-generation 737 models. New models carry lower profit margins until the company has written down the costs of production equipment.
At the annual shareholders meeting, Chairman Phil Condit said the two new models would account for half of Boeing's production next year, but he said the industry's fundamentals remained strong.
""I'm very optimistic about the upturn in our commercial airplane business as well as our prospects in defence and space,"" Condit said. ""We're excited about the future of this company.""
Boeing delivered 68 commercial aircraft in the quarter, up from 40 in the year-earlier period when production was still hampered by the effects of a 10-week strike.
For this year, Boeing reiterated that it expects to deliver 340 jets and generate revenue of $33 billion, compared with 218 jets and revenues of $22.7 billion last year.
That includes former defence and space operations of Rockwell International Corp., absorbed in December, but not the planned acquisition of McDonnell Douglas Corp., which Boeing executives say will be completed in August, adding about $15 billion of annual revenue.
Analysts expect Boeing production to continue rising in 1998 to about 450 jets as the world's biggest commercial planemaker works to meet surging industry demand.
""You expect that if you're ramping up rates there would be some costs incurred, and that's clearly what's happening,"" said Wolfgang Demisch of BT Securities.
But he said he was encouraged that Boeing still expects to meet its production target for the year.
""There always is a significant risk of running into some sort of shortfall, and all of a sudden you wind up with airplanes that ... are most of the way done and missing some critical parts,"" he said.
That happened to Boeing in the late 1960s, when the company nearly went bankrupt, he said.
This time around there is no such danger, as the company said it had $5.5 billion in cash at the end of the quarter, up slightly from three months early. Boeing's backlog rose to $89.2 billion from $87.7 billion three months earlier, chiefly because of new defence contracts.
Boeing also recorded a $64 million accounting credit related to an employee-benefit trust fund.
Boeing shares were also pressured by other factors, including a report in the London Times that Boeing rivals Lockheed Martin Corp. and Airbus Industrie were discussing a possible merger.
An Airbus spokeswoman denied the report Monday but said the European consortium was in discussions with many aerospace companies, particularly about joining its proposed A3XX jumbo jet project.
At the shareholders meeting, Condit reiterated that he was optimistic Boeing would complete its planned merger with McDonnell Douglas despite concerns raised by European Union authorities. A special meeting of Boeing shareholders to approve the merger has been set for July 25.
",31
"Microsoft Corp. plunges into its latest online venture Thursday as it enters the hotly competitive market to supply local news and information over the Internet.
Microsoft's Sidewalk will be launched in the software giant's hometown of Seattle and add 10 to 15 cities by the end of the year, including New York, Washington, San Francisco and Sydney, Australia, executives said.
While Microsoft enters a field crowded with Internet startups, local niche players and established media powers, the software heavyweight, with its $10 billion cash hoard, brings nearly unmatched ability to sustain short-term losses, and few doubt its staying power.
""I think they will be a major presence,"" said Larry Gerbrandt, an analyst with Paul Kagan Associates. ""They have the size to jump-start businesses. The question is whether a national infrastructure can be more efficient than a whole bunch of local entrepreneurs.""
The field is crowded with both types of players, all aiming to get a slice of the highly fragmented $72 billion market in local advertising.
Microsoft's strategy is to focus on listings for entertainment and leisure activities led by restaurants, movies and music.
""The core thing we identified in our research was the fact that consumers are working more and more and have less free time,"" said Gayle Troberman, consumer marketing manager for Sidewalk. ""So the choices they make become increasingly important.""
The Seattle Sidewalk site offers users the ability to personalize content based on preferences and activate ""agents"" that will remind them about specific performers and events.
Articles written by an editorial staff of about 14 full-time journalists will highlight major events and trends, but the core of the site is a series of searchable databases of rated movies, restaurants, outdoor activities and events.
Microsoft is aiming to capture part of the revenue that traditionally goes to local newspapers, and at least in Seattle the dominant newspaper has acted quickly to protect its turf.
""If we don't respond, somebody will eat our lunch,"" said Michael Fancher, executive editor of The Seattle Times.
The newspaper speeded its planned Internet site to beat Seattle Sidewalk and on Wednesday announced an alliance with Digital City, the local news component of America Online Inc.
Fancher cited the newspaper's long-term commitment to providing regional news ""regardless of the financial model.""
""I don't think that this is a natural fit for Microsoft, and I think once they've stimulated the competition they'll move on,"" Fancher said.
Others are not so sure.
Charles Conn, chief executive officer of two-year-old CitySearch, which already operates in 12 U.S. cities, said Microsoft is one of its few rivals to build a journalistic presence in each city rather than simply provide a ""hodgepodge of hypertext links.""
""I'm glad to have another serious player in the business,"" Conn said. ""I think we're going to see sites like CitySearch and Sidewalk really break through the clutter.""
In contrast to Sidewalk's narrow entertainment focus, CitySearch provides a broad platform for community news and information, generally in partnership with a local news organisation.
CitySearch's financial model is also much different, based largely on creating and operating Internet sites for thousands of small and medium-sized businesses, which pay $49 to $99 a month.
Sidewalk's revenue at first will come exclusively from advertising, and Troberman said executives have been ""excited"" by their success in attracting local advertisers in Seattle and New York.
Local advertising will be sold in each city by agents from CUC International Inc. Sidewalk also has attracted support from national advertisers, including Barnes & Noble, Citibank, Visa U.S.A. and United Airlines.
",31
"Software giant Microsoft Corp.'s stock dropped more than 4 percent Monday amid indications that a successor to the Windows 95 operating system will be delayed until 1998.
The stock fell $3.875 to $90.125 and was the most active issue on Nasdaq after widespread reports that the Windows 95 update, code-named Memphis, probably would not be released this year as previously anticipated.
Industry analysts said the likely delay of the operating system update would have little financial impact on Microsoft but could reflect a diminishing corporate appetite for frequent software upgrades.
""For large organisations, every year and a half to two years is too fast for new versions,"" said David Rothschild of brokerage Piper Jaffray. ""Every three or four years is more like it.""
Analysts said the delay likely stemmed from the difficulty of integrating into the operating system the upcoming version 4.0 of Redmond, Wash.-based Microsoft's Internet Explorer browser.
Jonathan Roberts, director of Windows product management for Microsoft, declined to project a release date for Memphis but said computer manufacturers had been told they would not get software code in time for holiday season retail shipments.
He added that it would be ""desirable"" to synchronize the retail release of the software to coincide roughly with shipments of new computers.
Roberts said developers still expected to issue the first major beta test version to customers by June 30 but said computer manufacturers that sell in major retail outlets generally need final code by July to ship for the holiday season.
The Windows 95 update, sometimes referred to as Windows 97 or Windows 9x, will include several performance-related features, most of which are ready. But developers are still working on the new Internet browser, which adds ""push"" technology and comes hard on the heels of version 3.0 of the browser, a major update released in August.
In ""push"" technology, computer users can have customised information sent to them over the Internet rather than having to go out on the Net and search for it.
Widely publicised security flaws discovered recently in Internet Explorer 3.0 might be part of the reason Microsoft has decided to go slow with the operating system update, some analysts said.
""It's fair to say Internet Explorer got a fair amount of heat for the security problem,"" said Larry Dietz of Zona Research, an analyst at Zona Research.
But he also said Microsoft could be ""throttling back a little"" because of resistance to frequent upgrades from corporate users.
""Large end-users are in no hurry to spend the dollars,"" Dietz said. ""Most end-users know there is a tremendous amount of down time that exists any time you putter with people's computers.""
Microsoft's Roberts acknowledged that many corporate users are still making the transition to Windows 95.
Piper Jaffray's Rothschild said the Memphis delay would be unlikely to affect Microsoft's earnings or revenues significantly, particularly because the company defers much of the income it gets from operating systems.
But he and other analysts noted the company's stock is still relatively high priced compared with its expected growth.
""It's an expensive stock, and whenever you get a whiff of bad news, it's going to behave like this,"" said Mike Wallace of UBS Securities. ""I dont think it's a big deal.""
Microsoft, which has slipped about 13 percent from its peak of $103.50 in early February, was one of many high-technology stocks that slumped Monday.
While the shipping date has slipped, Microsoft needs to update the operating system soon if only because its very name advertises the fact that Windows 95 is nearly 2 years old, analysts said.
In addition, Microsoft's financial model requires it to maintain a regular stream of upgrade revenues, said Michael Gartenberg, research director of the Gartner Group consulting and research firm.
He predicted the Memphis system would get a less historically specific name -- perhaps Windows 2000 -- and said Microsoft probably would increase the price for the new operating system relative to that for Windows 95.
Roberts declined to comment on the naming or pricing of the product.
",31
"Starbucks Corp. executives Thursday lashed out at critics of the company's coffee buying practices, saying the retailer has been targeted unfairly because of its high visibility.
At the company's annual shareholders meeting, Chairman Howard Schultz heatedly defended the coffee chain's commitment to improve the lot of the Third World farmers who grow most of the beans it roasts and sells.
Schultz threatened to stop buying Guatemalan coffee entirely if activists continues to pummel Starbucks with what he called ""propaganda"" about its role in conditions endured by agricultural labourers there.
""We are doing everything possible to be a great corporate citizen, but we are only one company,"" Schultz said. ""We can't change the entire physical, political and agricultural system of an entire country overnight.""
Schultz clearly was stung by a coalition of labour, human rights and religious activists who launched a campaign on the eve of the annual meeting to complain Starbucks was not doing enough to change a system that pays workers far less than a reasonable living wage.
""We're the only company that has given back to Guatemala, and we are the ones being hounded,"" said Schultz.
Schultz pointed out that Starbucks had donated $300,000 to the aid group CARE last year to help workers in Guatemala and three other coffee-growing nations and had established a partnership with Appropriate Technology International to help small-scale producers in Central America.
He said the non-profit groups were the best way for the company to effect change because Starbucks does not itself have any coffee farms and typically buys its beans from exporters rather than producers.
Bruce Herbert, director of the Northwest Coalition for Responsible Investment, said he and other activists recognised Starbucks' positive contributions but wanted the company to live up to the code of conduct it approved two years ago as a framework for helping coffee workers.
""No one has ever put a timeline on it, but two years have passed and they haven't taken the first steps,"" he said.
At a news conference after the meeting, Schultz said the company was expanding its charitable efforts by establishing the Starbucks Foundation, which will support aid projects in the cities where the coffee chain operates.
The Foundation will get all royalties and a $500,000 advance from a book by Schultz on the Starbucks way of doing business to be published in September.
Schultz also said market coffee prices that have doubled over the past several months were a source of ""great concern,"" but he said he was confident that company would work through the volatiliy and meet Wall Street earnings estimates for the current fiscal year.
He said the company would make an announcement on its strategy regarding the price issue within the next several days, but he declined to say whether Starbucks would raise retail prices.
Dave Olsen, senior vice president for coffee, said market supply and demand were not far out of balance but a decision by large buyers to go short on the commodity had created a huge ""bow wave"" of buying, compounded by speculative volatility.
",31
"Walt Disney Co.'s agreement to buy into billionaire Paul Allen's Starwave Corp. will mean little change for the online company's 300 employees, Chief Executive Officer Mike Slade said Thursday.
In an interview, Slade said Starwave would continue producing its nine Internet sites including the hugely popular ESPNet SportZone as well as a new ABC News site that will go online this month.
He said the long-expected announcement by Disney represented a natural evolution for Starwave, which has become one of the Internet's early success stories by focusing on sports and entertainment and teaming with well-known ""brand names.""
""What's really important is the big traditional media company and the Internet company get their strategic and economic interests completely aligned, and they are,"" Slade said. ""These relationships are always complicated, but everyone's working for the exact same goal.""
Disney and Starwave did not provide financial details, but Slade said the deal reduces Allen, co-founder of Microsoft Corp., to a minority shareholder with a single representative on Starwave's new board, which will be controlled by Disney.
Analysts said Disney paid about $100 million for a one-third stake, with a series of options to buy the rest over the next five years. Starwave employees also own shares.
Starwave was founded by Allen and Slade in 1993, before the Internet emerged as a commercial publishing platform. The company explored interactive television before developing content for proprietary online services and CD-ROMs.
""Then the Web came along,"" said Slade, who credited the company's chief technology officer Patrick Naughton and Progressive Networks founder Rob Glaser with persuading him to adopt an Internet business plan.
Starwave launched its sports product in late 1994 and signed the deal with ESPN -- now mostly owned by Disney -- the following spring.
The ESPNet site is considered one of the Web's most popular and one of the few mainstream areas that charge for access.
While basic sports results and information are free of charge, Slade said about 100,000 people pay to play in fantasy leagues or gain access to premium information at $4.95 a month.
Starwave also operates Mr. Showbiz, a well-regarded entertainment site, as well as a site for parents and children and official sites for professional football, basketball and auto racing.
Slade said Starwave's experience producing ESPNet would help in creating innovative features for the ABC News site.
Despite competition with virtually every major news organization including CNN, USA Today and NBC's joint venture with Microsoft, Slade was optimistic Disney could make money in news.
""One of the things about Disney that makes them the ideal partner is they never do things in a lackadaisical way,"" Slade said. ""They marshal all the corporate resources and really make it happen.""
",31
"Microsoft Corp., Intel Corp., and Compaq Computer Corp.  Monday proposed standards for a new generation of televisions that would be compatible with an emerging class of personal computers for the home.
In a telephone briefing with reporters, Microsoft Senior Vice President Craig Mundie said the proposed television protocol -- unveiled at a broadcasters' conference in Las Vegas -- also would be recommended as a standard for multimedia PCs to be detailed at a major industry meeting in San Francisco this week.
Mundie said the companies, dubbed the ""Big Three"" of the personal computer industry, are proposing adoption of three out of 18 advanced technical standards set forth by a television industry coalition.
Mundie and executives from Intel and Compaq said their proposal would allow a ""significant improvement"" in picture quality as well as transmission of related information and data to personal computers, television and hybrid devices.
""This model of television in particular is going to provide the viewer with a completely different experience,"" said Robert Stearns, senior vice president of Compaq.
He suggested that advanced television, also known as high-definition television, would allow viewers greater opportunity to interact with programming by choosing camera angles, chatting with characters, responding to advertising and even affecting the outcome of shows.
He said that beyond the issues of ""plumbing"" or technical standards, the broadcast industry could develop new revenue streams from advanced television.
He and the other executives said equipping personal computers to decode and display the new forms of television signals would add very little to the cost of the devices, perhaps less than $150.
At the same time, the emergence of advanced television is creating a new class of big-screen personal computers which combine features of the computer and television.
The consumer electronics industry is gearing up for production of advanced television sets with sophisticated computer circuitry.
Last week, the Federal Communications Commission, culminating a 10-year effort, called for a rollout of the technology that will have digital television on the air in the nation's 10 biggest markets within 18 months.
But rather than set specific technical standards for advanced television, the agency essentially is allowing the industry and marketplace to decide, Mundie said.
Placing a major bet on the coming convergence of computers and television, Redmond, Wash.-based Microsoft over the weekend agreed in a $425 million deal to buy WebTV Networks Inc., which provides a way for consumers to access the Internet on their TV screens.
Raising the ante further, Mundie said Microsft planned to include technology needed for its preferred television standards in forthcoming versions of its Windows 95 and Windows NT operating systems.
That would mean competing television standards would be incompatible with Windows-based computers.
",31
"Microsoft Corp.'s fiscal third-quarter profit jumped 85 percent to $1.04 billion, well beyond analysts' expectations, on strength in its core business, including sales of its Office 97 upgrade, the world's largest software company reported Thursday.
Microsoft Chief Financial Officer Mike Brown reiterated that he expects results in the current fourth quarter to be similar to the quarter ended March 31, which he termed ""sizzling.""
But in an interview Brown also said he expects Microsoft's growth to slow over the next five quarters based on difficult comparisons with year-earlier quarters and a lack of planned major new upgrades.
Net income, equal to 79 cents a share, rose from earnings of $562 million a year ago, or 44 cents a share, in the third quarter. The number easily topped Wall Street's consensus analyst forecast of 64 cents a share, according to First Call.
Revenues totalled $3.21 billion, a 45 percent increase over the $2.21 billion racked up in the same quarter a year ago. Analysts on average had predicted revenues of about $2.9 billion.
Microsoft released its latest results after financial markets closed. In after-hours trading, the Redmond, Wash.-based company's stock jumped $4.625 to $102.75 from its Nasdaq closing price, dealers said.
""Worldwide acceptance of Microsoft Office 97 ignited these outstanding results,"" Brown said in a statement.
Office 97, the latest upgrade of the company's best-selling software package, was launched in January. It combines ""productivity applications"" such as word processing and spreadsheets that accounted for an estimated $2 billion of the company's $8.7 billion in the prior fiscal year.
Brown said Microsoft also realised ""solid gains"" from sales of operating systems.
Microsoft makes the bulk of its money from ""platforms,"" including the operating systems preloaded onto new personal computers, which generate about one-third of the company's revenues.
""However,"" Brown cautioned, ""incredible results like these are seldom duplicated, and we are mindful of the very tough comparisons we will have in fiscal 1998.""
Brown said in the interview that the first quarter of fiscal 1998 could show a downturn from the fourth fiscal quarter of 1997. He said he expected results to rise sequentially after that.
Brown said he expected a spike in revenues from the Office 97 upgrade would begin to tail off in the current quarter, although deferred revenues from product shipped earlier would prevent a sequential downturn.
The next upgrade of Office will not be out until fiscal 1999, Brown said.
""So, fiscal '98 is in the product cycle valley from a comparison standpoint, and that makes the comparison tough, even if business fundamentals are very good,"" he said.
Brown said he expected the revenue surge from the Windows 95 operating system to begin to tail off soon now that the product has been out 20 months.
Brown said he was ""very excited"" about the long-term future but said the earnings bar had been raised to an ""all-time Olympic record.""
""We haven't had very many quarters in which EPS (earnings pr share) went up 80 percent,"" he said. ""That's not a quarter-in, quarter-out type of thing. This is just an incredible quarter.""
",31
"A huge cheer erupted in the newsroom of the Seattle Times shortly after 12 noon Monday when Washington state's largest newspaper learned it had won its sixth Pulitzer prize.
A few minutes later another cheer went up when the newspaper won its seventh.
""It was wild pandemonium,"" said business editor Rob Weisman.
For any but the nation's largest newspapers it is virtually unheard of to win more than one Pulitzer in a year, but the Seattle Times this year won in two prestigious categories  -- investigative reporting and beat reporting.
""We had two very competitive candidates, but the odds against winning two in a single year are so astronomical there's simply no way you can get your hopes up for something like that,"" said executive editor Mike Fancher.
With a daily circulation of 235,000, the Seattle Times barely ranks among the nation's 50 biggest newspapers.
The Pulitzer judges cited the Times for its series exploring corruption in a federally subsidised housing programme for native Americans and for beat reporter Byron Acohido's investigation of rudder control problems on the Boeing 737, the world's most widely used airplane.
Shortly after the series was published the Federal Aviation Administration called for inspection of all U.S.-based models for any possible jamming of rudder parts, and Boeing announced it was working on a modification.
Throughout his investigation, Acohido encountered what Fancher called a ""very hostile reaction"" from Boeing, the region's dominant employer.
At one point the company issued a statement saying it refused to cooperate with Acohido because ""we have lost all confidence that he is capable of objective reporting when it comes to Boeing.""
""In terms of access to Boeing they've treated me consistently, which means minimum access,"" Acohido said. ""There are other ways of getting information.""
The Pulitzer was the second for Times reporter Eric Nalder, who was part of the investigative team that also included Deborah Nelson and Alex Tizon.
Their report on inequities in subsidised Indian housing led to congressional hearings and proposals to change the law governing the programme.
""In both stories the immediate aftermath was that things changed, and that's what good journalism is about,"" Fancher said.
Nalder also was part of the team that won the newspaper's last Pulitzer in 1990 for its coverage of the Exxon Valdez oil spill in Alaska.
",31
"Unionized workers said Thursday they have filed a class-action lawsuit against Albertson's Inc., charging the rapidly growing grocery store chain pressures them to work overtime without pay.
The United Food and Commercial Workers Union, which represents 31,000 of the company's 85,000 employees, said seven of its members filed the lawsuit in King County Superior Court in Seattle, seeking back wages that could total millions of dollars.
A union official said employees were preparing a similar action in California, where the Boise, Idaho-based chain has about 165 of its nearly 800 stores.
Joe Peterson, a special assistant to UFCW international President Douglas Dority, was not certain how many employees were covered by the Washington state suit but said back pay sought easily would run into the ""millions.""
He said the union, which also filed a complaint with the National Labor Relations Board, has sworn statements from more than 1,500 Albertson's employees contending they have been forced to miss breaks and pressured to work off the clock.
""The company has created conditions in its stores that foster off-the-clock work,"" Peterson said. ""We think the off-the-clock practices have helped them in their expansion plans and have given them a competitive edge over retailers who have obeyed the law.""
A spokesman for Alberston's denied the charges, noting that the retailer had filed a federal lawsuit in Boise this week seeking to force the union to go through a contractual grievance process.
""We are always very concerned any time an allegation is made that any of our employees may have worked off the clock for any reason,"" said Michael Read, the company's director of public and governmental affairs.
""It's a top priority for us to be sure that every employee is treated fairly and is paid in full for every minute worked,"" he said.
He contended the lawsuit was part of a union campaign aimed at damaging the company's reputation and boosting efforts to organize non-union stores.
Read said 40 percent to 50 percent of the company's workers are unionized, with the UFCW by far the biggest union.
With about $13 billion in annual sales, Albertson's is one of the nation's biggest grocery chains and has an ambitious plan to open more than 350 new stores in the next five years.
",31
"Boeing Co. stock surged Tuesday after the company decided to mothball plans to build a costly stretch version of its 747 jumbo jet.
Boeing shares jumped $7.375 to a record $113.875 on the New York Stock Exchange, accounting for much of the rise in the Dow Jones industrial average. Boeing is one of 30 stocks in the index of blue-chip companies.
Industry analysts estimated the move by the world's largest aircraft manufacturer, announced late on Monday, could reduce Boeing's expenses by more than $2 billion over the next five years and boost annual earnings by as much as $1 a share.
NatWest Securities analyst Nick Heymann said the decision not to proceed with the risky project removed a cloud of uncertainty over Boeing as it boosts production to meet rising demand and prepares to complete its planned $14 billion purchase of McDonnell Douglas Corp.
""It's fantastic news,"" he said.
While officials at Boeing rival Airbus Industrie said the European consortium would go ahead with plans for an all-new superjumbo jetliner called the A-3XX, Heymann said he thought that project was dead.
""Airbus never really had the resources to go ahead with their aircraft,"" Heymann said.
He said it was even less likely the consortium could raise the funds now that Boeing had talked with the same potential customers and determined market conditions did not justify the investment needed for a new big jet.
Boeing said it would cost more than $7 billion just to develop a new wing and make other changes needed to produce two new versions of the 747 that would add range and capacity.
Analysts noted that the estimated cost of developing the so-called 747-500X and 747-600X had ballooned over the past two years from about $3 billion as prospective customers such as British Airways Plc and Singapore Airlines Ltd. demanded more features.
In the end, only Thai Airways International Ltd. and Malaysian Airline System committed to ordering the proposed new four-engine jetliner.
Boeing executives said the projected demand for fewer than 500 very large jets over the next 20 years was not enough to generate a sufficient shareholder return.
""Sufficient market demand has not yet developed to justify committing the significant investment required to develop larger versions of the 747,"" Ron Woodard, president of the Boeing commercial airplane group, said in a statement.
While most of the 1,000 Boeing employees working on the 747-X project will be shifted to other planned derivatives, Woodard said Boeing would continue studying the possibility of a jet bigger than the current 747-400.
Airbus, which projects a far bigger market for jets that can seat more than 500 passengers, has said it can develop an all-new jet for $8 billion, but analysts pegged the total cost at closer to a whopping $15 billion.
Analysts said Airbus could develop an attractive airliner to alleviate congestion at the world's biggest airports and on heavily travelled routes, but they were sceptical about the consortium's ability to keep costs down.
""At the end of the day it's going to come down to the cost of building the airplane,"" said Byron Callan of Merrill Lynch. ""This only increases the pressure on Airbus to restructure and restructure quickly.""
He said Airbus now might be more willing to take the risk needed to launch a new large jet to break Boeing's monopoly on the lucrative top end of the market.
Citing increasing ""route fragmentation,"" especially across the Pacific Ocean, Boeing said it plans to focus development efforts on new versions of the medium-sized 767 and 777 twin-engine models.
Boeing already has begun offering an increased-capacity version of the 767 that could be launched in coming months. Boeing also is considering new versions of the 777 that would add both capacity and range.
",31
"Boeing Co. said Monday first-quarter profit more than doubled and sales rose 70 percent as it ramped up airplane production, but the results disappointed Wall Street and the company's stock tumbled.
Boeing said it earned $313 million, or 87 cents a share, in the quarter, excluding an accounting credit, compared with $119 million, or 35 cents a share, a year earlier. Revenue soared to $7.32 billion from $4.29 billion.
But the net income was 13 percent below the Wall Street consensus of $1 a share, according to First Call, and Boeing stock lost $5.50 to $96.50 in afternoon trading on the New York Stock Exchange.
""The stock is down because earnings came in quite a bit below the consensus. That's it in a nutshell,"" said Peter Jacobs, an analyst at Ragen MacKenzie in Seattle.
Analysts said Boeing's earnings were hurt by higher-than-expected research and development expenses for new airplane models and other projects including a commercial space venture.
The company also said it was incurring significant overtime costs as it increases production to meet rising demand and warned that profit margins would be under pressure for the rest of the year.
""It's sort of a wake-up call to some analysts who I think have been a little too optimistic about their margins,"" said Bob Toomey at Piper Jaffray.
Boeing said profit margins would be lower for the rest of the year because of growing deliveries of the new 777 and next-generation 737 models. New models carry lower profit margins until the company has written down the costs of production equipment.
""The fundamentals remain as strong as ever -- they remain excellent,"" Toomey said. ""They'll work through this problem.""
Boeing delivered 68 commercial aircraft in the quarter, up from 40 in the year-earlier period when production was still hampered by the effects of a 10-week strike.
For this year, Boeing reiterated that it expects to deliver 340 jets and generate revenue of $33 billion, compared with 218 jets and revenues of $22.7 billion last year.
That does not include the planned acquisition of McDonnell Douglas Corp., which Boeing executives say will be completed in August and which will add about $15 billion of annual revenue.
Analysts expect Boeing production to continue rising in 1998 to about 450 jets as the world's biggest commercial planemaker works to meet surging industry demand.
""You expect that if you're ramping up rates there would be some costs incurred, and that's clearly what's happening,"" said Wolfgang Demisch of BT Securities.
But he said he was encouraged that Boeing still expects to meet its production target for the year.
""There always is a significant risk of running into some sort of shortfall, and all of a sudden you wind up with airplanes that ... are most of the way done and missing some critical parts,"" he said.
That happened to Boeing in the late 1960s, when the company nearly went bankrupt, he said.
This time around there is no such danger, as the company said it had $5.5 billion in cash at the end of the quarter, up slightly from three months early. Boeing's backlog rose to $89.2 billion from $87.7 billion three months earlier, chiefly because of new defence contracts.
Boeing also recorded a $64 million accounting credit related to an employee-benefit trust fund.
Boeing shares were also pressured by other factors.
The London Times reported on Saturday that Boeing competitors Lockheed Martin Corp. and Airbus Industrie were discussing a possible merger.
In addition, the European Union and U.S. officials have begun talks on European complaints about U.S. subsidies to aircraft makers, and Boeing fears the outcome will be linked to an EU decision on its planned takeover of McDonnell Douglas, traders said.
""The earnings are not quite up to par, and the other stories are not helping,"" one trader said.
",31
"Microsoft Corp. stock surged 10 percent to a record close Friday, a day after the software giant reported an 85 percent increase in quarterly earnings, smashing Wall Street estimates.
Microsoft jumped $9.50 to $107.625 on Nasdaq and was by far the most active issue with nearly 29 million shares changing hands.
While Microsoft keeps expectations low and then routinely surpasses them, analysts were stunned by the results reported late Thursday from the latest quarter, which included earnings that were 23 percent higher than estimates.
""I think it's the best quarter I've ever seen,"" said Scott McAdams, who has watched the company for years as an analayst at Ragen MacKenzie in Seattle. ""I was floored.""
As they always do, Microsoft executives warned they could not sustain the current pace, and analysts agreed growth will slow over the next five quarters, particularly when the company faces comparisons with the period that just ended.
But coupled with better-than-expected earnings from its hardware ally Intel Corp., Microsoft's results reflect fundamental strength in the personal computer industry, analysts said.
""The combination of very strong returns from Microsoft and very strong returns from Intel certainly indicates we're still in an upswing, and I dont believe we've hit the maximum level,"" said Rob Enderle, senior analyst with Giga Information Group.
He and other analysts said the strong sales were being driven by a shift to 32-bit operating systems and applications led by Microsoft's Windows 95 operating system and its Office 97 desktop programmes.
While Windows 95 has been on the market for 20 months, ""the original uptake was not that dramatic,"" particularly among corporate users, said Drew Brosseau of Cowen & Co.
He said only 20 percent of large organisations had moved to a 32-bit desktop from the older 16-bit DOS and Windows operating systems by the end of 1996.
But last year's release of Microsoft's Windows NT version 4.0 cleared a ""logjam"" and triggered the current sales surge by allowing corporate managers to make an informed choice between Microsoft's two main operating systems, Brosseau said.
""It's pretty clear that momentum is going to continue through the end of the year,"" Brosseau said.
Meanwhile, Microsoft has another ace up its sleeve in its line of server software for corporate networks, led by the Windows NT Server operating system and the BackOffice group of applications.
Analyst Rick Sherlund of Goldman Sachs estimated sales of Microsoft's business systems would rise to $1.5 billion this year from $750 million last year.
Sherlund was among many analysts who raised Microsoft earnings estimates for the current quarter and fiscal 1998, which begins July 1.
First Call, which tracks earnings estimates, said 17 analysts raised estimates to an average of $3.10 a share for fiscal 1998, compared with a previous consensus of $2.72. For the current fiscal year, which ends June 30, the analysts raised estimates to an average $2.62, up from a previous consensus of $2.34.
For its fiscal third quarter ending March 31, Microsoft reported earnings of $1.04 billion or 79 cents a share, compared with $562 million or 44 cents a share a year earlier. Analysts on average expected earnings of 64 cents a share.
Revenue for the quarter rose to $3.21 billion from $2.21 billion, smashing estimates the company would bring in $2.9 billion in revenues.
",31
"Microsoft Corp. said Thursday its third-quarter profit jumped 85 percent to $1.04 billion, well beyond analysts' expectations, on strength in its core Windows business and the new Office 97 upgrade.
The software giant's net income of 79 cents a share compared with earnings of $562 million, or 44 cents a share, in last year's fiscal third quarter. Revenues rose to a record $3.21 billion, a 45 percent increase over the $2.21 billion racked up in the year-ago quarter.
Analysts on average had forecast earnings of 64 cents a share and revenues of about $2.9 billion.
While Microsoft Chief Financial Officer Mike Brown reiterated that he expects growth to slow over the next year, analysts said they were impressed by the software giant's continuing ability to rack up huge gains.
""I was floored,"" said analyst Scott McAdams of Ragen MacKenzie, who predicted the stock would rise sharply Friday as analysts jack up their earnings estimates. ""This was a 16-cylinder engine, and all cylinders were working.""
Microsoft released the results after financial markets closed. In Nasdaq trading Thursday Microsoft fell 12.5 cents to $98.125, but the stock rose as high as $102.75 in after-hours trading, dealers said.
Microsoft credited strong revenues from the Office 97 bundle, released in January, which helped drive application and content revenues to $1.53 billion, up 24 percent from the year-earlier period.
But revenues from Microsoft's platform products, including the various Windows operating systems, rose 73 percent to $1.68 billion.
Sales of software preloaded on new computers to the so-called OEM (original equipment manufacturer) channel, rose 51 percent, faster than the PC growth rate, reflecting a continued shift to the higher-priced Windows 95 operating system from the older Windows 3.x.
In an interview, Brown said he expected growth to slow over the next five quarters based on difficult comparisons with year-earlier quarters and a lack of planned major new upgrades.
Brown said he was ""very excited"" about the long-term future but said the earnings bar had been raised to an ""all-time Olympic record.""
""We haven't had very many quarters in which EPS (earnings per share) went up 80 percent,"" he said. ""That's not a quarter-in, quarter-out type of thing. This is just an incredible quarter.""
In fact, he said results from the current fourth quarter would be roughly equivalent to the period that just ended, and he predicted a modest sequential decline in revenues and earnings in the seasonally slow September quarter. But after that sequential growth should resume, Brown said.
Because Microsoft exceeded third-quarter expectations by 15 cents per share, analysts likely will have to raise fiscal 1997 estimates to about $2.65 per share from the previous $2.35, McAdams said. Fiscal 1998 estimates also are likely to be raised, he said.
McAdams also pointed out that the company's ""unearned"" revenues of $1.29 billion included an additional 13 cents per share that was taken in but not recognised as earnings in the quarter. Microsoft defers some revenues to account for costs over the life cycle of products such as Windows and Office.
While Microsoft routinely beats earnings estimates, analysts said they had not even heard a ""whisper"" of the blowout number, and Microsoft's stock has traded in a relatively narrow range over the past two months.
""It's just an extraordinarily well-managed company to deliver that kind of earnings upside on this size of a revenue base,"" said analyst David Readerman of Montgomery Securities.
",31
"Advanced Technology Laboratories Inc's chairman and chief executive expects 1997 revenues to rise six to seven percent from the $329.7 million generated last year.
Dennis Fill also said in an interview on Thursday that he was ""comfortable"" with analyst estimates that the ultrasound equipment maker would earn $1.75 to $1.90 a share this year. In 1996, it earned $1.46, excluding non-recurring items.
Gross profit margin should rise to about 51 percent of revenues from 48.9 percent in 1996, he said.
""That gives customers great flexibility, lower costs and brings a great improvement in capability to the midrange market,"" Fill said from Orlando, where he was attending a medical conference.
The new HDI 1000 also includes a WebLink component that allows users to send images directly over the Internet without the need to pass through a computer workstation.
Fill said the new system, for general ultrasound applications excluding cardiovascular, would sell for $50,000 to $100,000 depending on features, compared with $135,000 to $250,000 for the company's high-end HDI 3000.
",31
"Boeing Co. said Tuesday it formed an entrepreneurial organisation that will seek out joint ventures and possibly acquisitions related to its core business of commercial airplanes.
Boeing senior vice president of planning and international development Lawrence Clarkson will serve as president of the new organisation, Boeing Enterprises, which will be part of Boeing's commercial airplane group.
In an interview, Clarkson said the unit was aggressively seeking out ""very significant"" projects and could grow rapidly in the next year.
Clarkson declined to be specific about ongoing negotiations but indicated they probably would not involve new airplane models.
Instead, he said Boeing would seek out opportunities in ""businesses that are very related to what Boeing does, but which up to now we've let other people do.""
For example, Boeing executives in the past have discussed taking advantage of the company's massive database of world airline inventories to help carriers maintain service records, a business Clarkson said would fall within the new unit.
Boeing Enterprises also will be responsible for the company's joint venture with General Electric Co. to market the 737 as a business jet.
Clarkson said formation of the unit had been discussed for some time and was unrelated to Boeing's planned acquisition of McDonnell Douglas Corp.
""The idea is to have a basically independent operation so we don't get tied down with the existing bureaucracy,"" he said.
He said some of the prospective joint ventures could have ""significant"" international components, particularly focusing on the Asia-Pacific region.
Boeing is continuing to study the possibility of working with Asian manufacturers to build a new small jet that would seat about 100 passengers, but Clarkson said he did not expect any decisions in the near future.
Clarkson said he expected any acquisitions would be profitable immediately.
""The basic objective here is to increase shareholder value and grow the company, so obviously we want it to be as profitable as possible,"" he said.
A decision on Clarkson's replacement in planning and international development will be made in the near future, the company spokeswoman said.
Clarkson, 58, came to Boeing in 1987 from engine maker Pratt & Whitney, a unit of United Technologies Corp.
After serving as a senior vice president in the commercial airplane group, Clarkson was promoted to his position in Boeing headquarters, which The New York Times descibed as ""the closest thing it has to a corporate secretary of state.""
""I think I'll still have to use some of those skills, but it's kind of nice to get into more of a line operation and something new,"" Clarkson said.
Clarkson will retain his title as one of only six Boeing senior vice presidents.
",31
"Microsoft Corp is expected to show a sharp 40 percent jump in quarterly earnings Thursday on strength of the software giant's core business including the latest upgrade to its best-selling Office suite.
On average analysts expect the Redmond, Wash.-based company to post earnings of $0.64 a share for its fiscal third quarter, compared with $0.44 a year ago after adjusting for a split, according to First Call.  
Several analysts predicted revenues in the range of $2.9 billion, up about 32 percent from last year's $2.2 billion and up from $2.68 billion in the December quarter.
""I think on balance it will be a very good quarter,"" said David Readerman, analyst at Montgomery Securities. ""I don't see any motivating factor why they should blow the number out.""
In January, Microsoft launched Office 97, the latest version of its ""productivity"" applications such as word processing and spreadsheets that accounted for an estimated $2 billion of the company's $8.7 billion in fiscal 1996 revenues.  
Microsoft makes the bulk of its money from ""platforms"" including the operating systems preloaded onto new personal computers, which generate about third of the company's revenues.
But analysts said the fastest-growing driver of revenue continues to be the high-end Windows NT operating system and related products for back-end computer servers.
Rick Sherlund of Goldman Sachs estimated that Microsoft's BackOffice business, including NT, would be up 100 percent over the year-earlier quarter and represent about 20 percent of total revenues.  
Analysts expect results from the current fourth quarter to be similar to the third, but Microsoft has warned that growth is likely to slow in the fiscal year that begins July 1.
""I do expect them to reiterate that fiscal '98 will represent a period of slower growth for the company,"" Sherlund said.
While Microsoft is still benefiting from a mix shift to its more lucrative Windows 95 and Windows NT systems, analysts said it was not clear how planned updates to the products next year would affect revenues.
""They're being very cryptic on pricing,"" said analyst Scott McAdams of Ragen MacKenzie. He said Microsoft had delayed release of the products in part because corporate customers were becoming confused by the proliferation of Windows flavors.
Nevertheless, McAdams estimated Microsoft's revenues in fiscal 1998 would rise 27 percent to $13.7 billion.
""The markets they're playing in could double the size of the company,"" he said.
((-- Reuters Seattle bureau 206-386-4848))
",31
"Forestry giant Weyerhaeuser Co. Wednesday reported sharply lower fourth-quarter earnings, capping a year of mixed results dragged down by pulp and paper prices.
Several other timber industry companies also reported comparatively weak fourth-quarter results blamed on poor market conditions.
For the fourth quarter Weyerhaeuser posted earnings of $98 million or 50 cents a share, compared with $251 million or $1.25 a share a year earlier. Revenues in the quarter fell to $2.8 billion from $3.1 billion.
The earnings figure was above the Wall Street consensus of 48 cents a share mainly because of strong operating earnings in the company's real estate business, analysts said.
But Weyerhaeuser closed off $1 at $49.25 on the New York Stock Exchange.
For the year Weyerhaeuser, based in Federal Way, Wash., reported net income of $463 million or $2.34 a share, down from $983 million or $4.83 a share before a special charge in 1995.  Revenues for the year fell to $11.1 billion from $11.8 billion.
""1996 was a year of mixed results,""  said John Creighton, Weyerhaeuser president and chief executive officer, who cited lower pulp and paper prices but ""solid demand"" for wood products in the United States and Japan.
Pulp and paper operating earnings for the year fell to $307 million from a record $1.18 billion in 1995. Earnings from timberlands and wood products were virtually flat at $805 million, compared with $808 million.
Portland, Ore.-based Louisiana-Pacific Corp. reported a net loss for the fourth quarter of $14.7 million, or 14 cents a share, on sales of $567 million, compared with net income of $26.8 million or 25 cents a share on sales of $670.3 million a year earlier.
For the year the company reported a net loss of $201 million, or $1.87 a share, blamed mainly on a pre-tax charge of $350 million for the closing of its pulp mill in Ketchikan, Alaska.
In 1995 the company had a loss of $51.7 million or 48 cents a share including a pretax charge of $366.6 million mainly to account for the settlement of class-action lawsuits over the company's siding.
Louisiana-Pacific chairman and chief executive officer Mark Suwyn said the company had resolved key legal and organisational issues in 1996 but still faced an oversupply in the market for its key product of oriented strand board, used in building.
Louisiana-Pacific stock closed up 25 cents at $21.
Clayton, Mo.-based Jefferson Smurfit Corp. posted net income of $14 million, or 13 cents a share, for the fourth quarter, down from $64 million, or 57 cents a share, a year earlier. Sales for the quarter were $816 million, compared with $973 million.
For the full year the company earned $112 million, or $1.01 a share, compared with $243 million, or $2.19 a share. Sales fell to $3.4 billion from $4.1 billion in 1995.
Company president and chief executive officer Richard Graham said inventories in containerboard and newsprint have declined steadily over the past several months, promising some relief to the weak pricing environment.
""Given continued economic expansion, we could see a recovery in the company's principal markets during the second half of 1997,"" he said.
Jefferson Smurfit fell 43.75 cents to close at $15.06 on Nasdaq.
",31
"For years Microsoft Corp. Chairman Bill Gates and other executives have watched with mixed feelings as longtime rival Apple Computer Inc. has slowly self-destructed.
While the two companies have had frequent clashes over the years, including a landmark copyright lawsuit that went to the Supreme Court, Microsoft also has become the largest independent producer of software for the Macintosh platform.
But as Apple goes through yet another reorganization aimed at stanching losses and regaining lost market share, Microsoft has long since turned its attention to other, more pressing rivalries.
""I am very interested in continuing to work with Apple as we have done through history,"" Gates said in Frankfurt, Germany, where he appeared for a product launch. ""But I am confused by the Apple operating system strategy ... and have decided not to worry about the future (in this respect).""
Indeed, Microsoft has little need to worry about Apple, which just a few years ago provided the only credible threat to the hegemony of Microsoft's Windows operating system, the software that runs a personal computer.
Now, various versions of Windows are installed on about 80 percent of new desktop copmputers, compared with about 5 percent for the ailing Apple Macintosh operating system.
More importantly, the competitive landscape has been shifting rapidly due to the rise of the Internet and the Java programming language, which is independent of any operating system.
""The Mac operating system vs. the Windows operating system is almost a sideshow nowadays,"" said Dwight Davis, editor of Windows Watcher, an industry newsletter. ""In centre stage is Java, which has huge momentum and a lot of companies supporting it.""
Both Microsoft and Apple have been trying to ""pigeonhole"" Java as simply one of many development languages with little success, Davis said.
""Now that Java's on everybody's lips, there's really a critical mass of vendors out there, many of them driven by an anti-Microsoft agenda, and they're going to use Java as their rallying cry to erode Microsoft's dominance in the industry,"" Davis said.
As for Microsoft's Macintosh software, at an estimated $250 million a year it would be a huge business for almost any computer software company -- but now represents just 2.5 percent of the Redmond, Wash.-based company's annual revenues.
Nevertheless, last month Microsoft signalled its commitment to the Macintosh platform by forming a product unit with 100 employees dedicated to designing a new version of its Office software bundle for Apple computers, expected out sometime in the fall.
Shortly afterward, Gates visited Apple's Cupertino, Calif., headquarters to meet with Chairman Gilbert Amelio and Apple co-founder Steven Jobs and discuss closer cooperation, according to published reports.
Gates confirmed meeting with Jobs but said he was not devoting a lot of time to Apple.
""People like Apple and would like them to succeed,"" Gates said. ""But that doesn't mean they will succeed.""
Dave Meltzer, Microsoft group product manager for Macintosh applications, estimated that 8 million Macintosh users have at least one Microsoft product, creating steady demand for upgrades.
""We continue to sell more units than ever,"" Meltzer said.
""To the extent they they're experiencing difficulties, that's a sad thing for us,"" he said. ""We're certainly confident they will take the right steps to put the company on an even footing.""
",31
"Boeing Co.'s engineers union said Wednesday it has filed a charge of unfair labour practices over the aerospace giant's decision to merge its training unit into a new venture with FlightSafety International.
The Seattle Professional Engineering Employees Assocation, which represents more than 23,000 mostly white-collar workers at Boeing, said it filed a complaint asking the National Labour Relations Board to prevent Boeing from completing its deal until the legal issues are resolved.
Charles Bofferding, executive director of SPEEA, said the union had begun negotiations with Boeing after being surprised by the March 10 announcement of the deal with FlightSafety, which affects more than 600 Boeing employees, including about 240 union members.
Under the deal, Boeing and FlightSafety, a unit of Warren Buffett's Berkshire Hathaway Inc., each would contribute $100 million in assets to create an international training company for commercial jet pilots and ground crews.
Bofferding said Boeing already has agreed to guarantee that employees will be offered other jobs at Boeing if they do not get similar positions in the new venture, known as FlightSafety Boeing Training International.
But he was not optimistic Boeing would agree to union demands that engineers who switch to the new venture will be allowed to keep their Boeing wages and benefits as well as union membership.
""Those two issues frankly we don't think we're going to clear up in negotiations,"" Bofferding said. ""It's very clear the company wants to give these people FlightSafety International benefits and strip away these people's union representation.""
A Boeing official said in a statement the company was ""disappointed"" the union felt a need to file the charge with the NLRB.
""We recognise our obligation to engage in these discussions with the union and welcome the opportunity to do so,"" said the official, Sants Contreras.  ""We have worked very hard over the last three years to build a strong, cooperative relationship with SPEEA, and we hoped to have more time to meet with the union on their concerns before they took this type of action.""
The two sides will meet again Friday to continue their negotiations.
",31
"Microsoft Corp. Tuesday fired the latest salvo in its battle with rival Netscape Communications Corp. as it unveiled the latest version of its Internet Explorer browser.
Version 4.0 of the Microsoft browser was posted on the Internet (http://www.microsoft.com/ie), but the company cautioned that the ""platform preview release"" was only for developers and technical evaluators.
Meanwhile Netscape this week released a third ""platform preview"" version of its competing Communicator suite of Internet products, which includes its popular Navigator browser.
Microsoft's browser will be finalized by sometime in ""midsummer,"" a company executive said, while the Netscape package will be available commercially this quarter.
""Having a browser beta that is such an early beta out in the public hands is something that would never have happened two years ago,"" said Annette Hamilton of ZDNet AnchorDesk, referring to the Microsoft preview release.
""The reason it is happening is there is so much intense competition,""she said. ""They don't want to lose momentum.""
Until last year Navigator dominated the emerging Internet market with an overwhelming market share of about 90 percent, but with the release of version 3.0 of Internet Explorer, Microsoft has come back to capture up to one third of the market.
Microsoft gives away its browser for free, and many customers pay only small licensing fees for current Navigator versions. But the market battle is crucial in Microsoft's effort to maintain its dominance of the personal computer industry by controlling the operating system.
In fact the new version of Internet Explorer can be integrated into the Windows 95 desktop and so users can ""browse"" for information either on the individual computer or out on the Internet.
The browser ultimately will be integrated into an update of the Windows 95 operating system, expected sometime next year.
Microsoft also said the new browser can be programmed to automatically check for updates to frequent Web sites and to allow for ""Webcasting"" by content providers that will be able to offer subscriptions.
""We've combined push capabilities, (computer) desktop integration and the latest in browsing and communication technologies to deliver the best of the PC and the best of the Web,"" said Brad Chase, vice president of Microsoft's applications and Internet client group.
The initial version of Internet Explorer 4.0 will be available only for Microsoft's Windows 95 platofrm, although the company also is working on versions for Windows 3.1, Macintosh and Unix, officials said.
Meanwhile Netscape's Communicator, which will cost $59 for individual licenses, will work on all platforms, said Daniel Klaussen, a group product manager for the company.
""Not much is given away in the world,"" he said, referring to Microsoft's browser. ""For its business model to work Microsoft really needs users to upgrade to their latest operating system, and of course that is not free.""
Internet Explorer 4.0 also includes Outlook Express, which gives users advanced e-mail and other capabilities; Microsoft NetMeeting, software that allows video conferencing; and Microsoft NetShow, software that enables Web publishers to offer live ""Webcasts"" as well as video and multimedia on demand by computer users.
Microsoft stock rose $2.375 to $98.25 in Nasdaq trading Tuesday, while Netscape dipped 37.5 cents to $27.625.
",31
"Advanced Technology Laboratories Inc Chairman and Chief Executive Officer Dennis Fill said Wednesday he was comfortable with estimates the company will earn between $1.30 and $1.40 a share this year.
Fill also said in an interview that earnings of $1.85 a share for 1997, the consensus estimate of industry analysts according to I/B/E/S, are ""within our reach.""
The manufacturer of medical ultrasound equipment, also known as ATL, earned $0.74 a share last year.  
Fill spoke to Reuters after a presentation at a brokerage conference in New York, where he said the company was on track to achieve its goal of a 15 percent return on shareholders' equity by the end of 1998.
Fill said that after several turbulent years the medical-device industry is stabilizing, although he did not see any significant growth in the U.S. ultrasound market before 1998.  While the U.S. ultrasound market is flat and the European market is growing at a slow three to five percent a year, ATL sales are growing by about six to seven percent annually, he said.  
""So we are continuing to take market share,"" Fill said.
In April, ATL's ultrasound imaging product became the first medical device ever to win premarket approval from the U.S. Food and Drug Administration for use in diagnosing breast cancer, Fill said.
He said he expected the agency to act in the next several weeks on its supplemental request for approval of the next-generation HDI 3000 machine.
In addition to breast cancer, Fill said the company's equipment increasingly is being used as a lower-cost alternative to magnetic resonance imaging for muscular-skelatal problems and for heart patients.
And he said the company sees promising opportunities in Asia and Latin America, where industry growth rates are in the ""low double digits.""
He said a venture with Japan's Hitachi Medical Corp aimed at penetrating the Japanese market probably will begin producing significant results beginning next year.
					-- Seattle bureau 206-386-4848
",31
"As Delta Air Lines Inc. nears a decision on an aircraft order worth at least $2.5 billion, Boeing Co. reportedly is trying to persuade the carrier to lock it in as the long-term supplier for all its jet needs.
The deal being considered, similar to an agreement reached with executives of American Airlines last year, could have broad ramifications for an aviation industry that is becoming increasingly consolidated, industry analysts said.
The Wall Street Journal reported Tuesday that Boeing was negotiating with Delta on a sole-source agreement that could involve up to 100 jets worth about $6 billion.
Delta spokesman Bill Berry declined to comment on the reported Boeing proposal, although he acknowledged the airline was considering a purchase that would go well beyond its stated goal of two dozen wide-bodied jets needed to help retire 49 ageing Lockheed L-1011 airliners from Delta's domestic routes.
Berry said Delta was in final discussions with both Boeing and its European rival Airbus Industrie.
""We are now in very sensitive final discussions with the manufacturers,"" he said. ""We would hope to have a decision in a matter of weeks. But I can't tell you if it's two weeks or six weeks or eight weeks.""
Boeing Chairman Phil Condit, in Brussels for a meeting with European regulators, said a sale to Delta was far from certain.
""We are in a very strong competition at Delta,"" Condit told a meeting organised by the European Aviation Club. ""We have not reached any agreement at this point.""
Boeing stock rose $2 to $108.125 in New York Stock Exchange trading, and Delta gained $1.125 to $85.75.
Delta's current fleet of 531 jets is two-thirds Boeing, including some older narrow-body planes that need to be replaced or modified to meet upcoming noise requirements.
A Boeing spokeswoman said the manufacturer was offering Delta its wide-body, twin-jet 777, although the airline also is considering the slightly smaller 767-400ERX, which is not yet in production, a fact Airbus is emphasising.
""If they would want something right away they take one of current airplanes Boeing has or the (Airbus) A330, so that's where the battle is,"" said Paul Nisbet of JSA Research.
Nick Heymann, an analyst at Natwest Securities, said the potential Delta deal could have ""huge ramifications for the future of how airlines get their equipment.""
""Boeing's strategy here is to be able to have such a complete product line that all their derivatives will be able to meet all their customers' needs even as their customers' markets fragment,"" he said.
The ""one-stop shopping"" concept is spreading across the aviation industry as manufacturers seek to increase their share of the lucrative market in services, Heymann said.
Just this week Boeing said it would eliminate its money-losing training organisation and instead offer training for commercial jet pilots and mechanics in a joint venture with Flight Safety International.
General Electric Co. expanded its aircraft engine servicing business by agreeing to acquire Greenwich Air Services Inc. and UNC Inc. for a total of $875 million plus the assumption of debt.
A deal with Delta would be similar to the agreement struck with American, a unit of AMR Corp., last year worth at least $6.5 billion over the next five years and up to $25 billion or more over 20 years.
But Wolfgang Demisch, analyst at BT Securities, pointed out that while the American deal has been described as a firm long-term commitment for the airline to buy all its jets from the Seattle-based manufacturer, it does not legally bind the carrier to accept prices that are not competitive.
""I view it as more of a statement of intent than anything else,"" he said. Given recent strong airline traffic, rising profits and expectations of growth, he said Delta would be tempted to accept Boeing's offer, which presumably guarantees competitive prices.
Analyst Bill Whitlow of Pacific Crest Securities disagreed, saying Delta management has been historically conservative, particularly compared with American's, and would be less likely to go with a single source.
""If you do that you lose the ability to pit each manufacturer off each other every time an order comes up,"" he said.
",31
"After arriving late to the Internet party, computer software giant Microsoft Corp has crafted a strategy that poses a serious threat to rival Netscape Communications Corp.
The latest version of Microsoft's Internet Explorer software for browsing the vast computer network, launched last week, eliminates the formerly commanding technological lead Netscape's market-leading Navigator, industry analysts said.  
Because Microsoft is giving away its browser, the Redmond, Wash.-based company likely will boost its market share from less than 10 percent to as much as 40 percent by mid-1997, according to one estimate.
The market battle is expected to escalate next year when Microsoft launches a new version of its browser that can be used instead of the Windows interface, allowing users to search for information on their own computer or the Internet with a single stroke.  
""Netscape doesn't own the operating system, so it will be very difficult for them to counter that,"" said Michael Wallace of UBS Secrurities.
Microsoft also has integrated Internet server software for no additional cost into its high-end Windows NT operating system, taking aim at another key Netscape market.
""It's clearly a strategy to cut off any revenue stream that Netscape might have because Netscape does pose a real threat to Microsoft,"" said Phil Lemmons, editor in chief of PC World magazine.  
While the Internet browser market itself is not expected to generate significant revenue, it is a crucial battleground because the browser is seen as the next-generation ""front end"" for the operating system.
""Whoever dominates the browser market will determine the direction of the Internet,"" Wallace said.
He and others are betting that Microsoft will continue to make inroads as its Chairman Bill Gates tenaciously defends the company's dominance of the personal computer desktop.  
""I don't think Netscape is going to do very well in the long run with Bill Gates waking up every morning thinking, 'How can I get Netscape today?'"" said Adam Schoenfeld or research firm Jupiter Communications.
""As other companies have painfully learned, when Gates is out to get you he's serious,"" Schoenfeld said.
Netscape can count on support from software developers and corporate executives eager for an alternative to Microsoft's Windows platform.  
And Netscape has a chance to beat its much-larger rival in areas not dominated by Microsoft products, such as television set-top boxes, video game devices and stripped-down ""network computers"" being backed by Oracle Corp and other Microsoft rivals.
But analysts say Netscape faces a tough battle with broad ramifications for the software industry.
""It's very hard to bet against them given the amount of resources that they can and are throwing at it,"" Lemmons said. ""Microsoft is a formidable foe, and there's nothing so deep and mysterious about Netscape's technology that it can't be cloned.""  
Lemmons said that despite Microsoft's near-monopoly in key areas of desktop computing software, the strategy of giving away Internet software appears to be legal, and the company has withstood years of antitrust scrutiny.
Software developers and industry executives will be watching closely as the battle between Microsoft and Netscape continues to heat up over the coming year, Schoenfeld said.
""The question for any innovative software company is what can you do that Microsoft can't also do,"" he said.
""The damning thing is Microsoft doesn't even have to do it as well -- they just have to do it and leverage their desktop control,"" Schoenfeld said. ""That looms over the entire industry.""
					-- Seattle bureau 206-386-4848
",31
"Continuing its sweeping effort to acquire key Internet technology, Microsoft Corp. said Monday it had purchased Interse Corp., a privately held developer of Web site analysis software.
Terms of the deal for the 30-person Sunnvale, Calif.-based company were not disclosed.
A Microsoft executive said Interse's market focus tool would be added quickly to the software giant's BackOffice line of server products, but details of how the software will be repackaged had not been worked out.
Interse market focus, which ranges in price from $695 to $6,995 depending on features, allows Web site operators to track visitor behaviour.
""Understanding usage patterns on your Web site is the best way to see what your customers are interested in so you can deliver the most targeted content,"" Microsoft Chairman and Chief Executive Officer Bill Gates said in a statement. ""Interse is the team that had this vision and is delivering on it.""
""It's really a comprehensive usage analysis and reporting solution,"" said Terry Myerson, president and chief executive officer of Interse, who along with some other of the company's employees will be joining Redmond, Wash.-based Microsoft.
He said in an interview that he would continue to work on the technology with the aim of being able to dynamically create customised Web pages based on a user's known preferences.
""That is the holy grail of what this medium wants to be,"" said Steve Harmon, senior investment analyst with MecklerMedia Corp. ""What it's all about really is what I call the 'me-net.'""
While Microsoft probably could have developed its own solution, the compressed product cycles of ""Internet time"" have spurred the company to buy dozens of small startups over the past year to ensure it does not fall behind competitors.
""Every day that goes by when you don't have a solution, you're that much more open to a competitor gaining a strong market hold,"" Harmon said.
With its buoyant stock and $9 billion in cash, Microsoft can afford to be generous.
""All of our employees were taken care of terrifically,"" Interse's Myerson said. ""It was a very positive experience.""
",31
"Edmark Corp, a U.S. maker of educational computer software for children, said on Monday that chairman and chief executive Sally Narodick had resigned for stress-related health reasons.
The company said Donna Stanger, vice-president for product development, would temporarily assume the duties of chief executive while the board of directors searched for a permanent successor.
Frances Conley, a director of the company and principal of Roanoke Capital Ltd, will serve as chairman of the board.
""As you can well imagine, it's an extremely difficult thing for me to acknowledge that I'm not a rock and I'm not invincible, and I'm having a tough time with that,"" Narodick told a news conference.
She said she first began experiencing symptoms including fatigue in June and took a two-week holiday. After returning to work, she again suffered symptoms including fatigue, insomnia and weight loss.
Late last month her doctors recommended that she take steps to lower her stress level.  
""I don't have energy... It's pretty clear that I need to take quite a bit of time off to rest and heal myself, and in this kind of environment the company needs somebody who's going to be fully in charge."" Narodick said.
Her resignation comes at a time when the market for educational software is increasingly crowded, forcing Edmark and its rivals to drive down prices and compete fiercely for precious shelf space.
Edmark officials declined to comment on persistent speculation within the industry that the company might become a takeover candidate but said the change in top management would not alter their options.
Stanger said the company could continue to be a ""very strong niche player"" or could elect to merge ""if the need for scale becomes important enough"".
Conley said Edmark would survive the current turmoil within the company and the industry, noting the company's talent pool of more than 200 employees and strong balance sheet including more than $25 million in cash as of June 30.
Narodick, who said she had ""great confidence"" in Stanger, will remain on Edmark's board.
",31
"Amazon.com Inc., an online bookseller, is one of the best-known retailers on the Internet but faces a harsh investment climate and tough competition as it plunges into the stock market, industry analysts said Tuesday.
The rapidly growing Seattle-based company filed documents on Monday to sell about 10 percent of the company in an offering projected to raise up to $33 million.
That gives the company a market value of about $300 million despite a reported net loss of $5.8 million last year on sales of only $15.7 million.
While Amazon.com long has been considered a likely candidate for a public offering, some analysts were surprised by the timing, noting that technology stocks in general and Internet startups in particular have been hammered in recent months.
Some analysts speculated that Amazon.com decided to jump in now because of rising competition from bookselling giants Borders Group Inc. and Barnes & Noble Inc., among others.
""I certainly think it's possible it came sooner rather than later because of the entry of those other players into that market,"" said Scott Smith, director of the digital commerce group at Jupiter Communications.
The competition already has sparked a price war, forcing Amazon.com to offer its 500 top titles at a 40 percent discount to list price, slashing its slim profit margins.
Smith and other analysts give Amazon.com high marks for identifying and exploiting a niche that seems particularly appropriate for online commerce.
""They can definitely make money at this,"" said Bill Bass, an analyst with Forrester Research. ""The interesting thing will be to see how much of the market they'll be able to capture.""
Amazon.com advertises itself as ""Earth's Largest Bookstore"" with an ""inventory"" of virtually all 1.5 million English-language books in print plus about 1 million out-of-print books, compared with about 200,000 titles at a typical superstore.
In fact Amazon.com keeps no more than a few thousand books on hand at its Seattle warehouse at any time, relying on its relationships with major distributors and publishers to order titles as needed and keep overhead low.
Jeff Bezos, the 33-year-old founder and chief executive of Amazon.com, said the secret to the company's success was its ability to develop strong relationships with customers.
""We are incredibly customer-obsessed,"" Bezos said Tuesday at PC Forum, a high-level industry conference in Tucson, Ariz.
""The Web is really primitive at this point,"" he said. ""You have to make every customer an evangelist.""
The company's filing with the Securities and Exchange Commission said repeat customers account for more than 40 percent of its business.
""I think it's absolutely possible to make money on the Web,"" Bezos said, while declining to comment specifically on the company's financial results. ""You can sell products at lower prices and have higher margins with much lower overhead.""
But Manesh Shah, publisher of IPO Maven, said the market has not been kind to Internet stocks since last summer, when momentum began shifting to large-capitalization issues.
""The market has been very negative on small-cap IPOs,"" he said. ""I think they are hoping sometime between now and the end of the summer they get a window to get in.""
Well-known Internet startups such as CNET Inc. and Yahoo Inc. have swung wildly, while Wired Ventures was forced to withdraw its planned offering due to a lack of interest.
Yahoo, which has never matched its peak of $43 a share attained on its first day of trading last year, currently trades around $28. CNET has fallen from as high as $35.75 this year to $24.50 Tuesday.
Even mighty Microsoft Corp. has seen its stock price slip 12 percent in recent weeks.
""Overall the sentiment is quite negative,"" Shah said.
",31
"Forestry giant Weyerhaeuser Co. Wednesday reported sharply lower fourth-quarter earnings, capping a year of mixed results dragged down by pulp and paper prices.
Several other timber industry companies also reported comparatively weak fourth-quarter results blamed on poor market conditions.
For the fourth quarter Weyerhaeuser posted earnings of $98 million or 50 cents a share, compared with $251 million or $1.25 a share a year earlier. Revenues in the quarter fell to $2.8 billion from $3.1 billion.
The earnings figure was above the Wall Street consensus of 48 cents a share mainly because of strong operating earnings in the company's real estate business, analysts said.
But Weyerhaeuser closed off $1 at $49.25 on the New York Stock Exchange.
For the year Weyerhaeuser, based in Federal Way, Wash., reported net income of $463 million or $2.34 a share, down from $983 million or $4.83 a share before a special charge in 1995. Revenues for the year fell to $11.1 billion from $11.8 billion.
""1996 was a year of mixed results,""  said John Creighton, Weyerhaeuser president and chief executive officer, who cited lower pulp and paper prices but ""solid demand"" for wood products in the United States and Japan.
Pulp and paper operating earnings for the year fell to $307 million from a record $1.18 billion in 1995. Earnings from timberlands and wood products were virtually flat at $805 million, compared with $808 million.
Portland, Ore.-based Louisiana-Pacific Corp. reported a net loss for the fourth quarter of $14.7 million, or 14 cents a share, on sales of $567 million, compared with net income of $26.8 million or 25 cents a share on sales of $670.3 million a year earlier.
For the year the company reported a net loss of $201 million, or $1.87 a share, blamed mainly on a pre-tax charge of $350 million for the closing of its pulp mill in Ketchikan, Alaska.
In 1995 the company had a loss of $51.7 million or 48 cents a share including a pretax charge of $366.6 million mainly to account for the settlement of class-action lawsuits over the company's siding.
Louisiana-Pacific chairman and chief executive officer Mark Suwyn said the company had resolved key legal and organizational issues in 1996 but still faced an oversupply in the market for its key product of oriented strand board, used in building.
Louisiana-Pacific stock closed up 25 cents at $21.
Clayton, Mo.-based Jefferson Smurfit Corp. posted net income of $14 million, or 13 cents a share, for the fourth quarter, down from $64 million, or 57 cents a share, a year earlier. Sales for the quarter were $816 million, compared with $973 million.
For the full year the company earned $112 million, or $1.01 a share, compared with $243 million, or $2.19 a share. Sales fell to $3.4 billion from $4.1 billion in 1995.
Company president and chief executive officer Richard Graham said inventories in containerboard and newsprint have declined steadily over the past several months, promising some relief to the weak pricing environment.
""Given continued economic expansion, we could see a recovery in the company's principal markets during the second half of 1997,"" he said.
Jefferson Smurfit fell 43.75 cents to close at $15.06 on Nasdaq.
",31
"Boeing Co. stock surged Tuesday after the company decided to mothball plans to build a costly stretch version of its 747 jumbo jet.
Boeing shares jumped $6.875 to a record $113.375 on the New York Stock Exchange, accounting for much of the rise in the Dow Jones industrial average. Boeing is one of 30 stocks in the index of blue-chip companies.
Industry analysts estimated the move by the world's largest aircraft manufacturer, announced late on Monday, could reduce Boeing's expenses by more than $2 billion over the next five years and boost annual earnings by as much as $1 a share.
NatWest Securities analyst Nick Heymann said the decision not to proceed with the risky project removed a cloud of uncertainty over Boeing as it boosts production to meet rising demand and prepares to complete its planned $14 billion purchase of McDonnell Douglas Corp.
""It's fantastic news,"" he said.
While officials at Boeing rival Airbus Industrie said the European consortium would go ahead with plans for an all-new superjumbo jetliner called the A-3XX, Heymann said he thought that project was dead.
""Airbus never really had the resources to go ahead with their aircraft,"" Heymann said.
He said it was even less likely the consortium could raise the funds now that Boeing had talked with the same potential customers and determined market conditions did not justify the investment needed for a new big jet.
Boeing said it would cost more than $7 billion just to develop a new wing and make other changes needed to produce two new versions of the 747 that would add range and capacity.
Analysts noted that the estimated cost of developing the so-called 747-500X and 747-600X had ballooned over the past two years from as little as $3 billion as prospective customers such as British Airways Plc and Singapore Airlines Ltd. demanded more features.
In the end, only Thai Airways International Ltd. and Malaysian Airline System committed to ordering the proposed new jumbo.
Boeing executives said the projected demand for fewer than 500 very large jets over the next 20 years was not enough to generate a sufficient shareholder return.
""Sufficient market demand has not yet developed to justify committing the significant investment required to develop larger versions of the 747,"" Ron Woodard, president of the Boeing commercial airplane group, said in a statement.
While most of the 1,000 Boeing employees working on the 747-X project will be shifted to other planned derivatives, Woodard said Boeing would continue studying the possibility of a jet bigger than the current-generation 747-400.
Airbus, which projects a far bigger market for jets that can seat more than 500 passengers, has said it can develop an all-new jet for $8 billion, but analysts peg the total cost at closer to a whopping $15 billion.
Analysts said Airbus could develop an attractive airliner to alleviate congestion at the world's biggest airports and on heavily travelled routes, but they were sceptical about the consortium's ability to keep costs down.
""At the end of the day it's going to come down to the cost of building the airplane,"" said Byron Callan of Merrill Lynch. ""This only increases the pressure on Airbus to restructure and restructure quickly.""
He and other analysts said Airbus now might be more willing to take the risk needed to launch a new large jet to break Boeing's monopoly on the lucrative top end of the market.
Citing increasing ""route fragmentation,"" especially across the Pacific Ocean, Boeing said it plans to focus its development efforts on new versions of the medium-sized 767 and 777 twin-engine models.
Boeing already has begun offering an increased-capacity version of the 767 that could be launched with an initial order in the next few months.
Boeing also is considering new versions of the 777 that would add both capacity and range.
",31
"Microsoft Corp on Monday plans to announce a version of its Windows 95 operating system for hand-held consumer devices that will be available this year, according to sources familiar with the company's plans.
The Windows CE system for consumer electronics comes two years after Microsoft scuttled a similar project known as Winpad because its intensive memory requirements would have made the hardware too costly.
Since then the explosive growth of the Internet has expanded the market possibilities for small wireless devices, while Microsoft rival Oracle Corp has popularised the concept of a $500 consumer device for accessing the Internet.
Microsoft officials declined to comment, but the company said it would have an announcement on Monday on ""a significant addition in the area of Microsoft Windows platform software.""
Microsoft executives previously had disclosed plans to supply a system for hand-held devices in time for the holiday season.
The devices, ranging from a ""smart"" wireless telephone to personal organisers with communcations capabilities, will be marketed by eight computer and consumer electronics companies including Hewlett-Packard Co., Casio Computer Co. Ltd., and Philips Electronics NV, industry analysts said.
The operating system will include stripped-down versions of Microsoft's Word and Excel applications and are likely to have some ability to get information off the Internet's World Wide Web.
But with their tiny, monochrome screens, analysts believe they will be used at first largely for accessing electronic mail and personal information such as telephone numbers and appointments.
""The Web doesn't look good on a 4-inch screen,"" said analyst Mike McGuire of Dataquest. ""What this is about is Internet transactions and communications.""
While hand-held ""personal digital assistants"" such as Apple Computer Inc.'s Newton have been available for several years the products have failed to grow beyond a niche category in part because of the difficulty of swapping information between them and desktop computers, analysts say.
Microsoft aims to break that logjam with its new system, built for RISC microprocessors from Hitachi and others rather than the Intel Corp. processors used for most Windows-based computers.
But at $500 -- or close to $1,000 for a machine fully loaded with communications accessories -- price will continue to be an obstacle, said analyst Rob Enderle of Giga Information Group, who said the ""sweet spot"" for small devices was about $300.
""I don't really think the market is going to really jump off in big number until next year,"" he said.
McGuire of Dataquest estimated worldwide shipments of hand-held devices would rise to at least five million units a year by the end of the decade from the current one million.
While that's still relatively small compared with a personal computer market of about 60 million units annually, Microsoft needs to protect its Windows franchise from any potential incursion, said analyst Scott McAdams of Ragen MacKenzie.
""If you let someone else get that operating system, over time someone could start working that system upmarket,"" he said. ""Microsoft needs to be a player here.""
Microsoft move into hand-held systems could pose a threat to U.S. Robotics Corp. and Britain's Psion Software Plc, two of the most successful marketers of proprietary hand-held products.
The Windows CE system also could be licensed for use with a rival to Oracle's  Network Computer, analysts said.
",31
"The Japanese aerospace industry is likely to become the largest international supplier of structural parts for the planned next-generation Boeing 747 jumbo jet, officials of the manufacturer said Thursday.
Discussions between Boeing and Fuji Heavy Industries Ltd, Kawasaki Heavy Industries Ltd and Mitsubishi Heavy Industries Ltd are aimed at significantly expanding the role of the Japanese manufacturers in producing two planned ""stretch"" versions of the 747, officials of the Seattle-based company said.  
""The discussions will go on until later in the year, but it is likely the Japanese industry will end up being the largest international supplier of parts for the 747-500x and -600x,"" said Susan Davis, a Boeing spokeswoman.
While the three Japanese manufacturers provide structural parts for most Boeing models, they do not rank among the top 10 suppliers for the current-generation 747, another Boeing official said.  
The 500x currently being offered to airlines would hold 462 passengers in a typical three-class configuration and have a range of 10,000 miles, compared with 416 passengers and 8,400 miles for the 747-400. The 600x would hold 548 and have a range of 8,900 miles.
The three so-called Japanese ""heavies"" already are significant Boeing partners, building about 20 percent of the structural parts for the new 777 as well as wing components and other parts for the current 747 jumbo.  
The Japanese manufacturers likely will produce 747 wing flight-control surfaces and landing-gear doors as well as fairings that join the wings to the body.
The components under discussion are provided by outside suppliers for the current 747 model with the exception of the fairings, which are made at Boeing's plant in Winnipeg, Manitoba, the site of a recent five-week strike.
In remarks last week to a group marking a century of trade between Japan and Seattle, Boeing chief executive Phil Condit said Japan Airlines Co Ltd is the company's biggest customer for 747s, having taken delivery of 96 since 1970.
""We strongly believe that strengthening of ties between our two countries remains crucial for the future,"" he said.
Boeing hopes that by increasing the participation of Japanese manufacturers, the company will increase its chances of landing future orders from that country's airlines, although Davis noted that there was ""no guarantee.""
""They provide high-quality parts at competitive prices,"" she said. ""If it does happen to increase sales, it increases the work here in the U.S. too.""
-- Seattle bureau 206 386-4848
",31
"Itron Inc shares fell more than 25 percent after the company warned for the second quarter in a row that its results would fall short of expectations.
Itron was off 8-1/2 at 20-1/2 after the company said it expected to post a loss in the current quarter rather than $0.18 a share profit that analysts had expected on average.
The company blamed a utility industry slowdown in the pace of adopting its automated meter reading systems.  
""We believe the market slowdown is temporary as market forces will increasingly compel utilities to become more efficient providers,"" President and Chief Executive Officer Johnny Humphreys said in a statement.
Itron stock peaked at a record 60 in late April but then plummeted after the company warned that second- and third-quarter earnings would fall short of expectations due to aggressive price competition.  
In a conference call with analysts Wednesday, monitored on a tape-delayed basis, company executives said Itron could lose $0.10 to $0.20 a share in the current quarter, resulting in net income for the year in the $0.40 a share range, compared expectations of about $0.83.
And executives said net income next year likely would rise only to about last year's level of $0.78 a share, rather than the $1.29 a share analysts had expected on average, according to IBES.  
""The utilities that I've talked to all tell me it's a very good system,"" said John Rogers of Jensen Securities. ""The question is when do they want to invest in it, and they have yet to make a complete commitment to it.""
Humphreys said in the conference call that the company had been investing heavily in its ""fixed network"" line of products, which is not expected to become profitable until 1998.
Itron's current line of products allow utility workers to read meters simply by walking or driving down the streets where the devices are installed and collecting the information sent out by radio signal.
The network systems being tested include automated collection devices mounted on utility poles that would sned the information to a central point, virtually eliminating meter readers.
While Spokane, Wash.-based Itron is the leader in the industry, the company faces competition from  CellNet Data Systems Inc, which has filed for an initial public offering of stock and has just begin the process of meeting with potential investors, analysts said.
""It's definitely a short-term setback, and it probably means that next year's numbers are going to have to come down, but I think its a compelling long-term story,"" said analyst Rick Owens of Pacific Crest Securities, which downgraded its rating on the stock to ""hold"" from ""buy.""
He and other analysts said Itron had been expecting major utility orders for its meter-reading systems that repeatedly had been pushed into the future. 					-- Seattle bureau 206-386-4848
",31
"Microsoft Corp.'s 4-month-old Expedia Internet travel service sold more than $1 million in travel tickets this week, its best ever, executives said Friday.
Josh Herst, lead product manager for Expedia, said business has been building but enjoyed a flurry of sales this week when American Airlines launched a fare war after President Clinton blocked a strike by its pilots.
""We had a nice spike,"" he said. ""If they wanted to have more of those, we wouldn't complain.""
Herst said Microsoft is investing heavily in the travel arena, seen as a potentially lucrative form of electronic commerce.
Forrester Research analyst Bill Bass said travel generated $126 million in retail sales over the Internet in 1996, second only to computer software and hardware, which generated $140 million.
By 2000, the travel industry will generate $1.6 billion in annual sales over the Internet, Forrester estimates.
""Airline tickets are a great thing to be able to buy online,"" Bass said. ""You don't have to hold it -- it's not like clothes, where it helps to be able to see it and touch it.""
Bass also said travel sites on the Internet are able to include related information such as maps and hotel listings that would be impossible to provide over the telephone.
Microsoft is far from the only company seeking a piece of the Internet travel market, but analysts give Expedia high marks so far and say Microsoft is likely to remain one of the major players.
Other online travel agencies include Travelocity, operated by American Airlines' parent company AMR Corp., Preview Travel and Internet Travel Network.
Airlines themselves also operate sites, which have proven to be an excellent way to sell seats that would otherwise go empty, Bass said. American Airlines has sold $10 million in tickets in the past year through a weekly electronic mail bulletin offering discount seats for weekend travel on lightly booked flights, he said.
Herst said Microsoft has about 100 people working on Expedia, including journalists building a database of information about destinations. The service plans to add several ""big-name columnists"" soon, said Erik Blachford, Expedia product manager.
Microsoft is believed to keep slightly less than the usual 10 percent travel agent's commission, and it has a relationship with Worldspan Travel Partners in Atlanta to print and mail tickets and provide 24-hour telephone support for travelers.
Microsoft also expects to generate substantial advertising revenue, Herst said.
While Expedia is designed for individuals and small businesses, Microsoft also is working with American Express Co. on a related project to develop a corporate travel application.
Expedia can be found at http://expedia.msn.com/.
",31
"Microsoft Corp. Monday plans to announce a version of its Windows 95 operating system for hand-held consumer devices that will be available this year, according to sources familiar with the company's plans.
The Windows CE system for consumer electronics comes two years after Microsoft scuttled a similar project known as Winpad because its intensive memory requirements would have made the hardware too costly.
Since then the explosive growth of the Internet has expanded the market possibilities for small wireless devices, while Microsoft rival Oracle Corp. has popularised the concept of a $500 consumer device for accessing the Internet.
Microsoft officials declined to comment, but the company said it would have an announcement early Monday on ""a significant addition in the area of Microsoft Windows platform software.""
Microsoft executives previously had disclosed plans to supply a system for hand-held devices in time for the holiday season.
The devices, ranging from a ""smart"" wireless telephone to personal organisers with communcations capabilities, will be marketed by eight computer and consumer electronics companies including Hewlett-Packard Co., Casio Computer Co. Ltd., and Philips Electronics NV, industry analysts said.
The operating system will include stripped-down versions of Microsoft's Word and Excel applications and are likely to have some ability to get information off the Internet's World Wide Web.
But with their tiny, monochrome screens, analysts believe they will be used at first largely for accessing electronic mail and personal information such as telephone numbers and appointments.
""The Web doesn't look good on a 4-inch screen,"" said analyst Mike McGuire of Dataquest. ""What this is about is Internet transactions and communications.""
While hand-held ""personal digital assistants"" such as Apple Computer Inc.'s Newton have been available for several years the products have failed to grow beyond a niche category in part because of the difficulty of swapping information between them and desktop computers, analysts say.
Microsoft aims to break that logjam with its new system, built for RISC microprocessors from Hitachi and others rather than the Intel Corp. processors used for most Windows-based computers.
But at $500 -- or close to $1,000 for a machine fully loaded with communications accessories -- price will continue to be an obstacle, said analyst Rob Enderle of Giga Information Group, who said the ""sweet spot"" for small devices was about $300.
""I don't really think the market is going to really jump off in big number until next year,"" he said.
McGuire of Dataquest estimated worldwide shipments of hand-held devices would rise to at least 5 million units a year by the end of the decade from the current 1 million.
While that's still relatively small compared with a personal computer market of about 60 million units annually, Microsoft needs to protect its Windows franchise from any potential incursion, said analyst Scott McAdams of Ragen MacKenzie.
""If you let someone else get that operating system, over time someone could start working that system upmarket,"" he said. ""Microsoft needs to be a player here.""
Microsoft move into hand-held systems could pose a threat to U.S. Robotics Corp. and Britain's Psion Software Plc, two of the most successful marketers of proprietary hand-held products.
The Windows CE system also could be licensed for use with a rival to Oracle's  Network Computer, analysts said.
",31
"Microsoft Corp, target of a long-running series of federal antitrust investigations, has been asked to provide documents for a new Texas state probe of the Internet market, officials said Tuesday.
Mark Murray, a spokesman for the computer software giant, said Microsoft received a ""civil investigative demand"" Monday from the Texas attorney general's office, and company lawyers expect to cooperate with state officials.
Texas officials are investigating ""the possibility of monopolization and other conduct in restraint of trade in the market for Internet software"" in violation of state antitrust laws, assistant attorney general Mark Tobey said in a letter to Microsoft.
Among the documents requested in the wide-ranging demand were licensing agreements, strategic plans, budgets and financial projections and all documents related to competition in the market for Internet or Intranet software.
""We've just received this letter,"" Murray said. ""We're in the process of reviewing it, and we'll be working closely with them to identify the documents that they're looking for and provide them.""
Microsoft's Internet software rival Netscape Communications Corp. received a similar demand more than a month ago and complied with it, said Gary Reback, attorney for the Mountain View, California, company and a prominent critic of Microsoft's business practices.
""I don't think Netscape was the target"" of the investigation, said Reback. ""It was pretty clear that they're not the target.""
Last year Reback led Netscape's successful efforts to get the U.S. Justice Department to reopen its investigation of Microsoft, which in 1994 agreed to settle antitrust charges to end a four-year federal probe.
Murray said the Justice Department is continuing the reopened investigation, which aims to determine whether Microsoft's Internet marketing practices violate the company's settlement agreement.
Murray said it was not clear what aspects of Internet competition Texas was investigating.
""We are confident that once they have examined the facts they will agree that consumers are benefiting from the intense and healthy competition in internet software,"" he said.
The letter from Tobey, chief of the antitrust section in Texas' consumer protection division, said the state was trying to determine whether there had been any violations of the Texas Free Enterprise and Antitrust Act of 1983.
Reback said it was not unusual for states to pursue antitrust actions separately from the federal government.
""It's not uncommon, and in the past the state attorneys general have been in fact relatively active in merger enforcement and in a variety of antitrust contexts,"" he said.
Texas officials could not be reached for comment.
",31
"Microsoft Corp. stock surged almost 10 percent Friday after the software giant reported an 85 percent increase in quarterly earnings, smashing Wall Street estimates.
Microsoft was up $9 at $107.125 in afternoon trading on Nasdaq and was by far the most active issue with 23 million shares changing hands.
While Microsoft keeps expectations low and then routinely surpasses them, analysts were stunned by the results reported late Thursday from the latest quarter, which included earnings that were 23 percent higher than estimates.
""I think it's the best quarter I've ever seen,"" said Scott McAdams, who has watched the company for years as an analayst at Ragen MacKenzie in Seattle. ""I was floored.""
As they always do, Microsoft executives warned they could not sustain the current pace, and analysts agreed growth will slow over the next five quarters, particularly when the company faces comparisons with the period that just ended.
But coupled with better-than-expected earnings from its hardware ally Intel Corp., Microsoft's results reflect fundamental strength in the personal computer industry, analysts said.
""The combination of very strong returns from Microsoft and very strong returns from Intel certainly indicates we're still in an upswing, and I dont believe we've hit the maximum level,"" said Rob Enderle, senior analyst with Giga Information Group.
He and other analysts said the strong sales were being driven by a shift to 32-bit operating systems and applications led by Microsoft's Windows 95 operating system and its Office 97 desktop programmes.
While Windows 95 has been on the market for 20 months, ""the original uptake was not that dramatic,"" particularly among corporate users, said Drew Brosseau of Cowen & Co.
He said only 20 percent of large organisations had moved to a 32-bit desktop from the older 16-bit DOS and Windows operating systems by the end of 1996.
But last year's release of Microsoft's Windows NT version 4.0 cleared a ""logjam"" and triggered the current sales surge by allowing corporate managers to make an informed choice between Microsoft's two main operating systems, Brosseau said.
""It's pretty clear that momentum is going to continue through the end of the year,"" Brosseau said.
Meanwhile Microsoft has another ace up its sleeve in its line of server software for corporate networks, led by the Windows NT Server operating system and the BackOffice group of applications.
Analyst Rick Sherlund of Goldman Sachs estimated sales of Microsoft's business systems would rise to $1.5 billion this year from $750 million last year.
Sherlund was among many analysts who raised Microsoft earnings estimates for the current quarter and the fiscal year that begins July 1.
For its fiscal third quarter ending March 31, Microsoft reported earnings of $1.04 billion or 79 cents a share, compared with $562 million or 44 cents a share a year earlier. Analysts on average expected earnings of 64 cents a share.
Revenue for the quarter rose to $3.21 billion from $2.21 billion, smashing estimates the company would bring in $2.9 billion in revenues.
",31
"Boeing on Monday scrapped plans to build a new, larger version of its 747 jumbo jet in the near future, saying market conditions do not currently justify the risk and expense, estimated at more than $7 billion.
Instead, the Seattle-based company plans to focus its development efforts at coming up with new versions of its medium-sized 767 and 777 twinjets, executives said.
The decision, announced late in the day, marks an end to more than three years of research that included a joint study by Boeing and partner companies in its European rival, Airbus Industrie into a double-decker jet with room for 600 to 800 passengers.
Boeing's move to sharply scale back its so-called 747-X program leaves Airbus alone in the market with a proposed all-new superjumbo plane that could seat 600 passengers, compared with 416 in a typical three-class configuration for the current-generation 747-400.
But analysts have expressed skepticism that Airbus would be able to raise the funding needed to build such a jet. Airbus executives say their superjumbo, dubbed the A-3XX, could be built for $7 billion, but industry sources put the cost at closer to $15 billion.
""If Airbus is going to launch a big airplane, they're going to have to fund it privately,"" said Bill Whitlow, an analyst at Pacific Crest Securities in Seattle. ""With Boeing throwing in the towel, it's going to make it that much more difficult for them to convince investors that it's worthwhile.""
In a news release, Boeing commercial airplane group President Ron Woodard said the manufacturer would leave some employees on the 747-X program to continue to study a possible larger version of the four-engine plane.
""This remains one of the priorities of our product development efforts,"" he said. ""When the market develops for such an airplane, we will be ready.""
John Hayhurst, vice president and general manager for the 747-X, said about 1,000 people had been working on the program, more than half of whom will be shifted into new 767 and 777 models.
Hayhurst said the decision to focus on the smaller wide-body jets reflects the company's conclusion that trans-Pacific air traffic increasingly will shift away from larger hub cities and toward more thinly traveled city pairs.
""We think there's going to be increasing fragmentation on long-haul routes, and less dependence on hubs,"" he said. ""That will require airplanes of the 767 and 777 size.""
Boeing market projections foresee a demand for no more than 470 jets with 500 seats or more over the next 20 years, which is unlikely to be sufficient to produce an acceptable return to shareholders on the investment needed to design a larger wing and make other changes for the proposed 747 derivatives, Hayhurst said.
Whitlow said Boeing could reduce the market demand for new large jets even further by enhancing its line of medium-sized jets.
For example, Boeing has announced plans for a stretched version of the 777 that would seat 400 people, nearly as many as the 747. Another version being proposed would have a range of 10,000 miles (16,000 km), more than any other commercial jet, allowing an airline to fly between city pairs such as Singapore and Los Angeles or Hong Kong and Chicago.
",31
"Teledesic Inc., the communications startup mostly owned by Seattle billionaires Bill Gates and Craig McCaw, Tuesday picked Boeing Co. to build and deploy its planned $9 billion satellite network.
Boeing also will invest up to $100 million in Teledesic, giving it a 10 percent stake in the privately-held company, which plans to launch 288 low-orbiting satellites by 2002 to form an ""Internet in the sky.""
Teledesic Chief Executive Officer David Twyver said the Kirkland, Wash.-based company talked to virtually all the world's major aerospace companies before settling on Seattle neighbour Boeing as prime contractor for the ambitious project.
""But let me say that no one company can do everything that has to be done here,"" Twyver said in an interview.
""We expect that most of the major aerospace and telecommunications companies if they're interested in being part of this will find room in it,"" he said.
The contract is a major victory for Boeing, which is counting on commercial ventures to provide growth for its rapidly expanding defence and space business
Boeing's partly-owned Sea Launch Co. is building a mobile, ocean-based satellite launch platform, and the aerospace giant is expanding its space business aggressively through the recently completed acquisition of Rockwell International Corp. units and the planned purchase of McDonnell Douglas Corp.
""Our relationship with Teledesic is the perfect catalyst for bringing together all of our historical investments in the space business with our recent and planned investments in Sea Launch, Rockwell and McDonnell Douglas,"" Boeing Chief Executive Phil Condit said.
Teledesic, initially formed by McCaw, a pioneer in the cellular telephone industry, and Gates, co-founder and chairman of Microsoft Corp., has scaled back its initial plans for a network of 840 small satellites more than 400 miles in the air, Twyver said.
Instead, the company now plans to provide the same international coverage with a network of slightly larger satellites orbiting about twice as high above the earth -- still far lower than current communications satellites launched into geosynchronous orbit 22,500 miles up.
Teledesic executives say their network will provide communication comparable to land-based fiber optics, including transmission of voice, data and video, between any two points on Earth equipped with the small dishes needed to link to the low-orbiting satellites.
Other satellite projects in the works, such as Motorola Inc.'s 66-satellite Iridium project, aim to provide voice and data links to mobile users, more like today's cellular telephones.
""We expect our customers to be companies rather than individuals, initially at least,"" Twyver said. ""Almost every company now is putting mission-critical internal applications on Internet-style backbones, and they'll need to get access to every one of their sites.""
Teledesic plans to market the service directly in the United States and is in talks with major telecommunications companies overseas for resale rights.
Twyver said Teledesic is ""very well funded"" now but will be looking for other industrial risk-sharing partners to build out the network.
Boeing likely will build the satellites at a cost of several million dollars each on a mass-production line in its current facilities.
Up to 16 satellites then will be packed onto each rocket for launch over an 18-month period beginning in 2001. Various launch vehicles are expected to be used.
Twyver said the production schedule allows for an 8 percent satellite failure rate, which he said was cheaper than insuring every satellite.
The final configuration will include 12 ""beaded necklaces"" of 24 satellites each orbiting the Earth in different planes, with the option of adding more satellites later.
With the Boeing investment, Gates and McCaw each will own about one-third of Teledesic. AT&T Co.'s AT&T Wireless, which bought McCaw's cellular business, owns about 10 percent of Teledesic, with venture capital investors owning the rest.
",31
"Struggling computer products retailer Egghead Inc. Friday said it would close 77 of its 156 stores to focus on its most profitable locations and Internet business with a new management team.
Egghead, which just last April sold the corporate sales unit that generated half its revenue, said it would take a $30 million charge against earnings in the current fiscal fourth quarter to pay for the latest restructuring.
Chief Executive Officer Terry Strom and senior vice presidents Kurt Conklin and Ron Smith will leave the company, and Chairman George Orban was appointed to replace Strom, who will continue to work as a consultant, Egghead said.
Egghead, which lost $10.7 million in fiscal 1996 on sales of $403.8 million and lost another $7.6 million in the first three quarters of fiscal 1997, said the reorganization would reduce its losses in fiscal 1998 by cutting almost $20 million from annual operating expenses.
""The actions approved by the board amount to a remaking of Egghead in a way that we believe should give us the opportunity to turn the company around,"" Orban said in a statement.
Egghead stock, which was at nearly $14 last June, fell 62.5 cents to close at $5.375 in Nasdaq trading.
Egghead, which began in 1984 as a single shop in suburban Seattle, once had more than 200 stores in a nationwide chain. But it has struggled for years as software prices have fallen and ""big box"" superstores have eaten into its market share.
""It's been one downsize after another now for as long as I can remember,"" said Scott McAdams, an analyst at Ragen MacKenzie.
He said it was far from clear whether Egghead, now based in Spokane, Wash., would succeed with its new strategy of concentrating on larger stores and hardware sales that would include computers and upgrade kits.
""I truly just don't know whether there's room in the world for this thing at all,"" McAdams said.
Egghead's announcement comes one month after Tandy Corp. said it would shut all 17 of its Incredible Universe megastores and 19 of its 108 Computer City Stores.
Egghead still faces enormous competitive pressure from giant chains like CompUSA Inc., Office Depot Inc. and even Wal-Mart Stores Inc. ,as well as catalogue dealers and other retail channels.
Egghead itself has begun selling and even delivering software over the Internet, although Orban acknowledged the business is ""in its infancy.""
CompUSA officials declined to comment on the Egghead news, but Chief Executive Jim Halpin said this week that the chain hopes to increase its market share by targeting as much as $2 billion in sales abandoned by the previously announced industry closures.
With $70 million in cash on its balance sheet, Egghead should be able to capture some of those sales as it opens 15 of its new, larger stores over the next year, McAdams said.
In an interview, Egghead Chief Financial Officer Brian Bender blamed the company's problems in part on an operation that was too dispersed. The store shutdowns over the next two months will reduce Egghead operations to 24 markets from 54.
Among the markets the company is exiting are Atlanta, Las Vegas, Miami, Philadelphia and San Diego. Egghead is closing 12 stores in the Los Angeles area and eight in Chicago.
Bender said more than 300 of the company's 1,800 employees would lose their jobs, including all employees at the Lancaster, Pa., distribution facility, which is being shuttered. The company also will sell its Spokane headquarters facility, which it moved into less than two years ago.
For the third quarter ended Dec. 28, Egghead reported net income of $1.5 million, or 9 cents a share, compared with a loss of $941,000, or 5 cents a share, in the year-ago quarter. Sales fell to $113.2 million from $121.7 million.
Egghead said sales from the 79 stores targeted to remain open accounted for 64 percent of its revenue in the first nine months of the fiscal year.
",31
"China marked on Saturday the first ""tombsweeping"" day since the death of Deng Xiaoping with few outward signs of remembrance for the late paramount leader.
Thousands of Beijing residents streamed through the gates of Babaoshan cemetery for the Qingming festival, traditionally the day for tidying ancestral graves.
But for the most part this was a family occasion, far removed from the political limelight that surrounded Deng during his lifetime.
""I have come here every year since my husband died in 1991,"" said a Beijing resident, holding the hand of her granddaughter as they left the cemetery.
""This is a family matter. There is no connection with any political leaders.""
A group of students from Deng's native province of Sichuan, all of them enrolled at a university in the Chinese capital, gathered at the cemetery gates. They too had a private reason for being there.
""We are helping a friend sweep his father's grave,"" said one of the students.
Deng died on February 19 aged 92. He was cremated at Babaoshan and his ashes scattered at sea in accordance with his wishes.
That has left the public with no specific place to honour the man who steered China away from the radical policies of Mao Zedong and onto the path of economic development, even if it meant adopting capitalist ways.
Those pragmatic policies raised living standards and turned a backward Stalinist state into an economic powerhouse.
Beijing's central Tiananmen Square has been one such place to honour the nation's fallen heroes but public displays of respect were not encouraged on this day.
Early on Saturday, as a group of secondary students walked towards the shrine to martyrs of the revolution at the centre of the square, they were quickly approached by security men.
After a brief discussion, they were allowed to bow and then told to leave, witnesses said.
China's communist leaders have traditionally planted trees on the Qingming festival and that was how the official media chose to remember Deng.
The People's Daily, the Communist Party newspaper, showed photographs of Deng planting trees over the years since 1979, when he began his programme of reforms that changed China's political landscape.
""Now these trees have grown tall,"" said the newspaper.
In the spirit of Deng's reforms, vendors of silk flowers were doing brisk business outside the Babaoshan cemetery.
Visitors queued up to buy wreaths similar to those that adorned grave sites inside.
Deng was in the thoughts of other Beijing residents, such as Bai Lansheng, a sculptor who is working on a bronze statue of the late leader.
""We are getting ready to ship the plaster mould to Shanghai now,"" he said from his Beijing workshop. ""There it will be cast in bronze.""
In June the six-metre (20-foot) statue will be shipped to the southern city of Shenzhen, which borders the British colony of Hong Kong.
Deng directed negotiations that led to the 1984 Sino-British accord under which the territory reverts to Chinese sovereignty on July 1.
Deng died before the colony's recovery but his statue will gaze across the border and ""witness"" the historic event.
",49
"China on Tuesday rejected Hong Kong Governor Chris Patten's criticism of its proposal to abolish a series of laws in the territory after it reverts to Beijing's control, saying it was an internal affair.
Beijing also angrily reminded Britain that China was no longer a weak, pre-revolutionary government, and said it would not tolerate other countries trying to impose their will on it.
""We cannot accept Patten's so-called statement,"" Foreign Ministry spokesman Shen Guofang said, referring to the governor's criticism of plans to abolish laws on democratic elections and civil liberties in Hong Kong after the transfer of power this year.
""I want to remind the British authorities in Hong Kong that the government of China today is not the pre-1949 government,"" he told reporters, referring to the year of the Communist revolution.
""We cannot accept any instances of others trying to impose their will on us.""
Patten had condemned a move by a China-appointed panel, known as the Preparatory Committee, to draw up a list of 25 laws and articles for repeal or amendment after the transfer of power at midnight on June 30.
After the handover, the territory that has been a British colony for more than 150 years will become a Special Administrative Region of China.
The Foreign Ministry spokesman said the Preparatory Committee had the authority to review existing Hong Kong laws to determine whether they were in conflict with the Basic Law, a mini-constitution drafted by China for the territory.
""This is entirely an internal matter for China,"" he said.
Shen also tried to play down the impact of the proposals, saying there basically would be no change to existing laws.
He called on the Hong Kong government to avoid making statements that ""misled the public or undermined morale in the territory"".
Patten had said the proposals, made at a committee meeting in Beijing on Sunday, struck at the heart of Hong Kong's civil liberties and appeared to be politically motivated rather than reflecting real inconsistencies with the Basic Law.
Among the laws to be diluted are Hong Kong's Bill of Rights, a 1992 election law, the Societies Ordinance which permits the formation of political parties and a 1995 Public Order Ordinance which allows peaceful demonstrations.
""Those laws which conflict with the Basic Law cannot continue as laws of the Special Administrative Region,"" Shen said.
He said that if the Preparatory Committee recommended the revision or abolition of these laws, it was reasonable and in the interests of a smooth transfer of power.
The spokesman also dismissed as groundless concerns over the independence of the judicial system under Chinese rule.
",49
"A top Chinese official for contacts with Taiwan ruled out an early resumption of talks on reunification because the island's leaders were pursuing ""splittist"" policies, the China Daily said on Tuesday.
It also quoted Tang Shubei, vice-chairman of the Association for Relations across the Taiwan Strait (ARATS), as saying that Taiwanese authorities did not want the handover of Hong Kong to go smoothly and might try to disrupt the transfer of power.
""In the long term the mainland and Taiwan should sit down at the negotiating table to discuss cross-straits issues under the 'one-China' policy,"" Tang was quoted as saying.
But he said the atmosphere for talks would not improve in the short term unless Taiwan's leaders, including its ""so-called"" President Lee Teng-hui, halted their ""splittist"" activities aimed at independence for the island.
China and Taiwan have been rivals since the Nationalist government fled to the island after its defeat by the communists in the Chinese civil war in 1949.
Beijing regards Taiwan as a renegade province and tries to isolate it diplomatically.
Talks between the two sides were broken off after President Lee made a landmark private visit to the United States in mid-1995, enraging Beijing.
""We have the patience to handle the issue of the peaceful reunification of the motherland,"" Tang said.
The newspaper also said Taiwan authorities would likely take measures to reduce the impact on the island from the success of China's policies towards Hong Kong, which reverts to Beijing sovereignty on July 1 after 150 years of British rule.
""According to Tang, there is information that Taiwan forces in Hong Kong are planning to cause trouble, such as demonstrations around July 1, when China resumes its exercise of sovereignty over the territory,"" the newspaper said.
Tang also repeated Beijing's long-held stance that the United States should halt arms sales to Taiwan.
The Chinese official's remarks were published by the English language newspaper as the exiled Tibetan spiritual leader, the Dalai Lama, was visiting Taiwan.
Beijing insists the 1989 winner of the Nobel Peace prize is waging a campaign for independence for Tibet.
Tang made no mention of Beijing's announcement last week that it would return a Taiwanese man suspected of hijacking a Taiwan passenger jet to mainland China.
Beijing wants Taiwan to return Chinese hijackers now in Taiwanese jails but so far it has been disappointed.
",49
"Three time-bombs planted on buses blew up in rapid succession in China's restive far west, killing at least four people and shattering the nation's calm in the delicate aftermath of the death of patriarch Deng Xiaoping.
Police patrolled streets and checked suspicious bags and packages on Wednesday in Urumqi, capital of the mainly Moslem region of Xinjiang, following the blasts in the city on Tuesday afternoon.
""I think at least four to five people were killed, including one child who died instantly,"" said a Xinjiang television station official, who declined to be identified.
The blasts, which officials said wounded at least 60, occurred within minutes in separate parts of the city, which is the centre of Chinese control over the region and its ethnic Uighur population.
""People are full of fear, and the city is on high alert,"" the TV station official said.
It was the first violence reported in Xinjiang, a region that Moslem separatists call East Turkestan, since anti-Chinese riots in Yining on February 5 and 6 left nine people dead.
No one has claimed responsibility for Tuesday's blasts. Xinjiang, bordering Afghanistan, Pakistan and three mostly Moslem Central Asian states, was shaken last year by attacks on officials and Moslem leaders regarded as pro-Beijing.
Chinese leaders have expressed concern over the threat from Islamic fundamentalism, visiting Israeli Foreign Minister David Levy said in Beijing.
""I think we have a very similar view on this,"" he said.
""Every attempt to turn religion into a weapon becomes extremely dangerous, it is something that knows no boundaries,"" Levy said. ""It is like sand, it can be transported by the wind from one place to to another.""
Tuesday's bombs exploded at around 6.40 p.m. (1040 GMT). ""People in Urumqi usually finish work at seven, so not too many people were injured or killed,"" the TV official said.
Urumqi residents recounted Tuesday's few minutes of terror.
""The Number 44 bus exploded near the agricultural bank,"" said a young Uighur woman. ""A trishaw driver was killed, he was lying on the ground covered with blood.
""All the windows of the bus were broken. Several minutes later, police sealed the spot. Policemen, riot police and armed police could be seen everywhere,"" she added.
""Residents were ordered to stay at home or at their (work) units. We are terrified. Many people go to work by taxi or buses provided by the units,"" she said.
Another bomb wrecked a Number Two bus, tearing off the roof. The third explosion was on a Number 10 bus, but no details were available.
""When I heard the explosion, I felt as if the sky had collapsed,"" said a Uighur witness. ""Many people in a store rushed out to look. I was too terrified to go out.
""Today buses are running again, but there are policemen at every station, they check people and bags,"" the witness said.
""I hate the people making the explosions. Our life is much better than before. I don't understand why they destroy stability and make trouble for ordinary people.
Number Two buses have been a target before.
""This kind of explosion happened in 1992, I think, as the Number Two bus runs on the major route through downtown,"" said a bus station worker.
The explosions occurred as final rites were being observed in far-off Beijing for Deng Xiaoping, the paramount leader who strictly enforced the integrity of China against separatist threats.
",49
"China's stock regulators are trying to reassert control over what they see as backdoor listings of Chinese companies in Hong Kong, market sources said on Thursday.
They said the new concerns were triggered by the listing this week of GITIC Enterprises, a Hong Kong company that is controlled indirectly by the Guangdong International Trust and Investment Corp (GITIC), based in the south China city of Guangzhou.
They said the problem was particularly sensitive because of the territory's return to Chinese sovereignty on July 1 under a Sino-British accord that promises a high degree of autonomy for 50 years after the transfer of political power.
""The (Chinese) authorities are certainly worried about this issue and we could see some guidelines emerge before too long,"" said a securities industry executive.
A foreign securities company executive agreed.
""China is worried that a number of good companies will inject mainland assets into Hong Kong companies and then take them public without their approval.""
Chinese companies that wish to list shares abroad, usually in Hong Kong, need clearance from a number of central government regulatory bodies, including the watchdog agency, the China Securities Regulatory Commission (CSRC).
Rules for Hong Kong companies controlled by Chinese interests are less clear, but recently many of these firms have first gained approval from Beijing.
GITIC Enterprises did not get prior clearance and regulatory objections are believed to have presented a last-minute hurdle.
The offer was allowed to proceed, however, and was a stunning success. The issue, nearly 900 times subscribed, finished its first day of trading on Wednesday at HK$4.375 compared with its offer price of HK$1.05.
""The company is listed now so there is no need to address the issue of whether the CSRC was involved,"" said an official of parent company GITIC, speaking by telephone from Guangzhou.
At least two more Hong Kong-registered companies controlled by Chinese firms from Beijing and Tianjin were preparing to offer shares in Hong Kong. They were likely to wait for Chinese regulatory clearance, sources said.
Another Guangdong company has postponed plans for an offer of shares by a Hong Kong company it controls because of the latest developments, said sources in Beijing and Hong Kong.
""The problem is mainly with Guangdong province,"" said a regulator in Beijing.
Guangdong, far from the reach of authorities in Beijing and backed by considerable financial muscle, has often been at odds with central government directives.
The scope of control over Hong Kong is even more sensitive.
The CSRC and other financial regulators have repeatedly said they would not interfere in supervisory matters in Hong Kong, in keeping with Beijing's promises for the territory after the handover.
An official at the CSRC was unable to clarify the extent of the agency's regulatory powers on this issue.
""I can't comment,"" said the official. ""It is too sensitive.""
Securities regulators in Guangdong underscored the problem of reaching agreement on the issue.
""When a company seeks permission from the CSRC we are usually aware of it,"" said a provincial regulatory official.
""But a Hong Kong-registered company does not necessarily have to go through the CSRC.""
",49
"U.S. computer software giant Microsoft Corp joined China's top personal computer maker on Tuesday in a licensing pact hailed by Beijing as proof it was serious about protecting intellectual property rights.
Under the agreement, China's Legend Group will be allowed to pre-install the Chinese-language version of Microsoft's Windows 95 software in its personal computers.
""This shows the Chinese government's resolve to protect intellectual property rights,"" said Yu Zhongyu, chief engineer at the Ministry of Electronics Industry, speaking at the signing ceremony in Beijing.
Other officials at the ceremony described the accord as one of the biggest signed since the United States and China reached an agreement last June on the protection of intellectual property rights, averting a trade war.
Beijing agreed to protect intellectual property rights by moving to stamp out piracy that American firms had alleged was costing them $2.3 billion a year in lost sales.
Computer software piracy figured prominently in last year's often heated Sino-U.S. discussions.
The licensing pact could mean payments of about 100 million yuan ($12 million) by Legend to Microsoft over the next two years, if the Chinese company meets its sales targets, officials of the two companies said.
Legend said it sold 200,000 personal computers last year and it is aiming to double that figure this year.
Chinese government officials have said that about 1.8 million personal computers were sold overall in China last year.
""This is the most significant agreement Microsoft has signed in the People's Republic of China,"" said Charles Stevens, Microsoft vice president, Far East.
The two companies described their agreement as part of a strategic partnership that pointed to further cooperation in future.
The Windows 95 software to be installed in the Legend computers employs the simplified Chinese characters used in mainland China.
Legend Group controls the Hong Kong-listed Legend. Legend officials said the income from the personal computers sold under the agreement with Microsoft would be largely reflected in the results of the Beijing operations.
",49
"An unemployed Taiwanese journalist on Monday doused himself with petrol aboard a Taiwan airliner and hijacked the plane to China where he requested political asylum, officials said.
The Boeing 757 airliner, carrying 150 passengers and six crew, was on its way back to Taiwan after landing safely in the southeastern city of Xiamen.
Chinese police said the suspect, identified by Taiwan as Liu Shan-chung, 45, was being held in Xiamen for questioning.
""The hijacker wants political asylum,"" an airport official said by telephone.
An executive of Far East Air Transport, the operator of the hijacked Taiwanese airliner, told reporters the man who forced Flight 128 to fly to China said he faced political repression in Taiwan.
""The hijacker told the captain 'I am a victim of political repression',"" said Lee Yun-ning, general manager of Far East Air Transport, speaking in Taipei.
Taiwan demanded China return the suspect, saying it had the right to put him on trial.
""We have legal jurisdiction,"" Taiwan Justice Minister Liao Cheng-hao said hours after the plane crossed the Taiwan Strait and touched down in Xiamen. ""The mainland authorities should return the hijacker immediately.""
Chinese officials did not say how they would deal with the suspect.
Hijacking is a capital offence but commandeering an aircraft from China's arch rival Taiwan would be determined by political considerations as well as legal guidelines, lawyers said.
China and Taiwan have been rivals since the end of the Chinese civil war in 1949 when the Nationalists fled to the island after their defeat on the mainland by the communists.
The Taiwan airliner was on a scheduled flight from the island's southern city of Kaohsiung to Taipei when it changed course and headed for the China mainland.
Liu had doused himself with petrol and forced the pilot to change course, Taiwanese authorities said.
Liu worked briefly as a journalist for the east Taiwan newspaper Lientung Daily after being fired a year ago from Kaohsiung's The Commons Daily for discipline problems, his former employers said.
In Taiwan, Defence Minister Chiang Chung-ling said four Taiwan fighters had scrambled into an escort formation and tailed the plane part of the way across the Taiwan Strait.
Taiwan defence officials decided not to intercept the flight to avoid a military ""misunderstanding"" with China's People's Liberation Army, a defence official told Reuters.
The last hijacking of a Taiwanese airliner to China was in May 1986, when the pilot of a Boeing 747 cargo plane owned by Taiwan's flag carrier China Airlines commandeered the jet and flew it to Guangzhou.
Beijing returned the plane and two crew members who did not want to stay in China after talks between the two rivals in Hong Kong.
China endured a rash of 12 hijackings in 1993 and 1994 by Chinese who ordered pilots to fly them to Taiwan for political asylum.
Air piracy fell off sharply after Beijing launched a major drive to improve what had been lax security at most airports.
",49
"A Chinese ideologue known for his strictly orthodox Marxist views denied on Tuesday that he was the author of two essays critical of China's reforms.
Deng Liqun, 81, a former Communist Party propaganda chief and secretary to Chairman Mao Zedong, said the author of two articles that have become known as ""The 10,000 Word Essay"" was Li Yanming.
""I didn't write the essay, it was Li Yanming,"" Deng told reporters. He did not further identify Li Yanming and gave no Asked whether he supported Li's views in ""The 10,000 Word Essay"" that has sparked widespread behind-the-scenes debate, he smiled and shrugged and said: ""He wrote what was on his mind.""
Deng was attending an economic summit in Beijing that was assessing the business climate in China, with a heavy emphasis on the successes of the reform programme launched in 1979 by Deng Xiaoping to eliminate stultifying Stalinist-style planning in favour of market forces.
Asked if he agreed with issues under debate at the conference, Deng adopted the officially-sanctioned public party line: ""Of course. China is a very big country, it has a lot of potential but it also has a lot of problems to be solved.""
Several of the speakers at the conference called for tougher efforts to reform China's ailing state-owned enterprises, which ""The 10,000 Word Essay"" warns are suffering at the expense of private enterprise.
China's propaganda tsars recently suspended a magazine and banned articles by a leading bankruptcy expert after a lengthy behind-doors debate on the essay erupted into the public eye.
The ban prompted an open letter by a writer in Beijing questioning whether China's propaganda officials were opposed to economic reform and whether they backed the leadership of state president and Communist Party chief Jiang Zemin.
The Press and Publications Administration, under the party's powerful Propaganda Department, suspended publication of the Economic Work Monthly, based in southwestern Guizhou province, in August, said sources familiar with the magazine.
The suspension followed the magazine's publication of an article critical of the privately circulated 10,000-word essay, which also urges a return to the class struggle espoused by Mao.
Western diplomats and Chinese analysts have described a literary and cultural freeze in recent months amid a crackdown by propaganda tsars on publications and authors that dare to break away from a stultifying diet of state-approved fare.
The president of the outspoken Beijing Youth Daily is to be replaced soon by a more conservative editor.
The clampdown has been fuelled by a call for ""spiritual civilisation"" -- a communist watchword for orthodox Marxist values -- as the theme for a party plenum scheduled for later this month, the analysts said.
Party chief Jiang is said to have distanced himself from the essay at the annual session of the National People's Congress, or parliament, last March, when he reportedly said: ""Some people say I support the 10,000-word essay, isn't that underestimating me too much?""
",49
"Premier Li Peng said on Friday China wanted a swift end to a crisis surrounding a senior North Korean defector sheltering in South Korea's mission in Beijing.
Li gave little hint as to how the month-long standoff would end, although he said stability on the tense Korean peninsula was a key consideration.
""I can tell you conditions are nearly ripe for solving this problem,"" Li told reporters when asked about progress in negotiations on the fate of Hwang Jang-yop, who has sought refuge in Seoul's Beijing consulate.
China wanted to ""appropriately solve this problem at an early date"", he told a news conference at Beijing's cavernous Great Hall of the People.
""On this question, China will exercise caution and we will handle the issue by proceeding from the maintenance of peace on the Korean peninsula,"" Li said.
""Of course, we will consider the positions of all sides,"" he said.
Hwang, a senior ideological theoretician and top aide to supreme leader Kim Jong-il, has been stranded in the consular compound since February 12 while China and North and South Korea negotiate his fate.
He is the most senior official to defect from the isolated Stalinist state.
He has said he wants to be allowed to go to South Korea and foreign diplomats have said that he would likely be allowed to leave for a third country first and then travel to Seoul.
The defection on Chinese territory has deeply embarrassed Beijing, forcing it to chose between its old communist ally of North Korea and its new capitalist friend in the South.
China and North Korea fought side by side in the 1950-53 Korean War but Beijing has drawn closer to South Korea as it pushes ahead with rapid development under market-style economic reforms.
Li repeated Beijing's position that it had jurisdiction since Hwang asked for asylum while he was in Beijing.
He said China would follow international practice in solving the dispute but he made the somewhat surprising remark that there was no automatic right to asylum as far as Beijing was concerned.
""China does not recognise the right of diplomatic asylum by foreign embassies or consulates in its territory,"" he said.
Beijing has, however, allowed asylum seekers to leave foreign embassies on its soil in the past.
Dissident Fang Lizhi sought shelter in the U.S. embassy in Beijing shortly after the army crackdown on dissent in June 1989. He was eventually allowed to leave for the United States.
",49
"China's offer to return a hijacker to Taiwan has raised hopes of an easing of tension between the two rivals but it is likely to be only a small step in closing their wide gulf, analysts said on Thursday.
They said Beijing has allowed itself flexibility by not saying when it would return the unemployed journalist who is alleged to have commandeered a Taiwan airliner 10 days ago.
Taiwan, which holds the trump cards in this round of their diplomatic game, may also be trying to use the issue to force a resumption of formal talks with China, broken off in mid-1995.
""It's an interesting and encouraging development in that they are still talking to each other on practical matters,"" said a Western diplomat with long years of China experience.
""But it's no major concession,"" he said. ""There's likely to be more people hijacking in the opposite direction.""
China on Thursday gave in to Taiwan's demands to repatriate Liu Shan-chung, but demanded the island send back 16 Chinese hijackers in return.
It did not give a date for the return of Liu, who is suspected of forcing a Taiwanese airliner to fly to China's southeastern city of Xiamen. The plane, crew and all other passengers were returned the same day but China has held the hijacker in custody.
""Liu Shan-chung... will be repatriated to Taiwan after necessary investigations are made,"" the official Xinhua news agency said, quoting China's Association for Relations Across the Taiwan Straits.
The semi-official association handles bilateral ties in the absence of formal links between Beijing and Taipei, rivals since the communists won the Chinese civil war and drove the defeated Nationalists into exile on Taiwan in 1949.
The association said China was repatriating the hijacker in line with an agreement reached in 1990, but which was never signed.
Taiwan has jailed 16 Chinese for hijacking 12 airliners to the island between April 1993 and June 1994. It has offered to return two of them.
""Beijing is more eager to see an end to hijackings,"" said another diplomat in Beijing. ""That gives Taiwan leverage on this issue.""
Taiwan welcomed Beijing's announcement but declined to signal any further response.
""This will be positive for our future talks on hijacker repatriation,"" said Jonathan Liu, a director of Taiwan's Mainland Affairs Council.
But he said Taiwan would wait for formal notification before it decided on its next move.
Taiwan has banned direct air and shipping with China for almost five decades, and insists such links must go through a third territory, mainly Hong Kong.
China has been pushing for direct trade and transport links though Taiwan has been using these as key bargaining chips on any talks on the future relations of the two rivals.
Taipei wants to see a resumption of semi-official talks, broken off by China after Taiwanese President Lee Teng-hui made a private visit to the United States in 1995. The visit angered China, which views the island as a renegade province that is not entitled to official contacts with other states.
Foreign analysts in Beijing said that the timing of the announcement on Liu's return to Taiwan had some additional political mileage for Beijing.
It was made shortly before the Dalai Lama, Tibet's exiled spiritual leader, starts a visit to the island.
China has warned Taiwan against using the visit to further its political ends.
",49
"China is on target with plans to to promote 100 large chemical groups by 2000 by tapping a $1.6 billion war chest, Minister of Chemical Industry Gu Xiulian said on Friday.
The industry hoped that 10 of the groups, which are being groomed to compete in the export market, could eventually list their shares either on domestic or foreign stock exchanges, she said.
""Currently, we have 13.6 billion yuan ($1.6 billion) to support development plans,"" Gu told reporters. ""Some of this was made available under the previous five-year plan (1991-1995). All of the money is to support development projects.""
China has been trying to promote big companies to give its ailing state sector a more competitive edge.
""One of the problems in the industry is that we've had too much small-scale production which was protected under central planning. But now we have a market economy,"" Gu said.
The government aimed to build up companies which could each export $10 million worth of chemicals a year. There were now 80 such companies, she added.
Asked about plans to publicly list the firms, Gu did not name any company or group but said the ministry's policy was to support companies ready to go public.
Listing plans would then require approval by the China Securities Regulatory Commission, China's top securities watchdog.
Chemical companies Tianjin Bohai Chemical Industry (Group) Co Ltd and Jilin Chemical Industry Co Ltd are some of the companies listed in China and abroad.
Gu said some of the state-run chemical companies were among the firms losing money, and that subsidiaries were needed to offset rising raw material costs. She did not mention any companies by name but said chemical fertilisers were one area where subsidiaries were necessary.
",49
"China published on Saturday a list of anti-dumping rules to protect local companies from unfair foreign competition.
Chinese economists said the rules would help domestic companies, many of them targets of similar dumping claims overseas, protect their share of the domestic market.
They also said the move appeared to be aimed at giving a legal framework to protection from unfair competition and clarifying procedures for its use.
""Many Chinese companies are unable to compete in the face of unfair trade practices,"" economist Cheng Xiusheng of the State Council (cabinet) development research centre told Reuters.
""Many other countries have imposed anti-dumping duties against Chinese products and China needs a system to regulate its own market and protect its companies,"" he said.
The rules, published in the official People's Daily, give the government the right to determine whether imported goods are aided by official subsidies and impose anti-dumping duties on foreign goods. Cash guarantees can be demanded to ensure payment.
Prices in the exporting country or third countries will be used to determine a fair price for goods in dispute and set a countervailing duty.
The rules also provide guidelines for domestic companies to file complaints about unfair competition and set a maximum length of 12 months for an investigation. Special cases are allowed to take 18 months.
The rules also empower the state to take retaliatory measures against countries that impose ""discriminatory"" countervailing duties against Chinese goods.
Beijing's official media have said the dumping of foreign goods on the domestic market had cost China some 10 billion yuan ($1.2 billion) a year and had caused the loss of hundreds of thousands of jobs.
Many domestic manufacturers were pressuring the government to take steps to offset these policies, newspapers have said.
Other economists said China was trying to codify the protection of its industries and bring its trade policies more in line with international practice.
They added that as China sought to join the World Trade Organisation it was being forced to make its polices more transparent.
",49
"The Communist Party boss of China's restive Xinjiang region said on Friday a tiny handful of separatists was behind a series of recent bombings but most had been caught and the region was stable.
He also denied that hundreds of people had been killed in unrest in Xinjiang.
""Only an extremely small number of people were involved in these acts of terrorism,"" said Xinjiang party chief Wang Lequan in response to a reporter's question on the unrest.
""Most of the criminals have already been caught.""
Wang, flanked by the entire leadership of the largely Moslem region, did not give any figures for the number of arrests or deaths.
Wang was speaking at a briefing for reporters and government officials on a trade fair planned for the far northwestern region later this year.
""This does not mean Xinjiang is not stable,"" he said. ""Investors should not be unduly concerned.""
Three bombs went off on public buses in the region's capital Urumqi last month in an attack apparently timed to coincide with funeral rites in Beijing for China's late paramount leader Deng Xiaoping.
Nine people were killed and 74 wounded.
Exiled ethnic Uighurs, who want to set up an independent state of ""East Turkestan"" in Xinjiang, have claimed responsibility for the bombings and vowed to stage more attacks until they had gained complete freedom for their homeland.
The Turkic-speaking Uighurs are Xinjiang's largest Moslem group. Relations with Han Chinese settlers have been uneasy and marked by sporadic outbreaks of violence. China is predominantly Han.
The bus bombings in Urumqi followed an anti-Chinese riot in early February in the city of Yining, about 50 km (30 miles) east of Xinjiang's border with Kazakhstan. Chinese officials said nine people were killed and 198 injured in that incident.
Wang described the Yining unrest as an act of subversion that also stemmed from a small group of people.
""This was quelled very quickly,"" he said.
Asked to comment on a report that hundreds of people, both Uighur and Han Chinese, had died in the aftermath of that incident, he said: ""There is no truth to this.""
Other officials said the incidents had not disrupted trade with neighbouring Central Asian states or other areas.
""The roads to Kazakhstan and other areas are open,"" said Li Donghui, Xinjiang's vice governor.
""Our trade overall was up 80 percent in the first two months of the year. Border trade rose 50 percent.""
Officials also said the incidents had not affected stability in other parts of the country.
Two bombs went off in Beijing last week. One of the attacks killed two people and wounded about 30, sources have said.
Police and other officials have said there was no evidence linking those bombings with unrest in Xinjiang.
But taxi drivers in the Chinese capital have said they were asked not to give rides to suspicious looking people from Xinjiang and to be especially cautious in neighbourhoods where many Uighur migrants live.
",49
"China has begun shipping corn from key growing areas in the north to other parts of the country, cutting northern stockpiles in a bid to keep weak prices there from falling further.
However, domestic corn prices, already under pressure, were likely to extend their slide, industry officials said on Tuesday.
Officials said last week that permission had been given to ship 1.5 million tonnes of corn from Heilongjiang and Jilin provinces to other parts of the country.
The government hopes to push up prices in growing regions to benefit farmers, analysts said. Farmers usually sell their crop close to where it was grown to a middleman, normally a state company, they said.
Some shipments had already begun, officials said.
""These shipments should not have too much of an effect on prices,"" said an official at the information centre of the State Grain Reserve Administration.
""Overall there is excess supply and the price of corn is expected to remain under pressure this year,"" he said, adding that weak demand from the domestic feed industry is also contributing to sluggish prices.
Heilongjiang provincial grain authorities told Reuters by telephone there had been little impact so far on prices in the region.
Domestic corn prices have slid more than 30 percent since early last year.
Two years of bumper harvests and curbs on exports have led to rising stockpiles and falling prices.
China has estimated its corn output at 118.5 million tonnes in 1996, up from 106 million in 1995.
The China Grains, Oils and feeds newsletter has projected corn production at 122.5 million tonnes this year.
China has made public figures of its overall grain reserves but it has not given a breakdown of specific crops.
The domestic media have said stockpiles were forcing the state to look for additional space to store excess grain.
The China Grains, Oils and Feeds newsletter said market prices in Jilin and Heilongjiang were 1,130 yuan ($136) and 1,050 yuan per tonne, though some analysts say that prices have fallen through the 1,000-yuan level.
Prices had been around 1,300 to 1,400 yuan per tonne last spring, they said.
Analysts said that despite the downward pressure on prices, China was unlikely to remove its controls on exports -- which were imposed in December 1994 on fears of domestic shortages and inflationary pressure.
""The main concern is still inflation,"" an analyst said. Even the potential windfall from large-scale exports would not be enough to justify abandoning checks on inflation, although inflation remained largely under control, he added.
The State Grain Reserve Administration official agreed.
""We are not really looking to make money at this,"" he said in a reference to exports. ""We are just making some small adjustments in the overall picture.""
China exported 150,000 tonnes of corn in the first 11 months of last year, up 36.2 percent from the same period of 1995. The 1995 figures were well below the previous year levels.
A farm analyst said China's prices were still substantially above world levels and unlikely to interest buyers, even if Beijing decided to relax its stance on exports.
""We won't see more than one million tonnes out of China this year,"" he said.
",49
"In China's headlong rush to develop, first in its fanatical leftwing past and then in the get-rich-quick days of reform, it has hacked or bulldozed away much of its architectural heritage.
Graceful old courtyards of Beijing have fallen victim to the development onslaught in recent years, crumbling alongside one of the earliest casualties -- the once majestic Beijing city wall.
Built to ward off invaders centuries ago, the wall was unable to withstand the inroads of its own people bent on discarding what was considered out of date.
But China's capital is trying to make amends for some of its past excesses by restoring a small portion of the wall that encircled the city until it was dismantled in the years after the communist takeover in 1949.
Residents of Beijing have been answering a public call to return city wall bricks to help rebuild a small section of the structure.
Bricks once buried in courtyards, kept as household ornaments or used as building materials have been handed over to a group restoring the wall under the direction of the Beijing city government.
""We hope to have about 115 metres of the wall restored this year,"" said Li Yancheng of the Beijing Historical Relics Construction Co of the municipal government.
MING DYNASTY KILNS
Some 30,000 bricks from the old wall have been donated to the project and now sit stacked on a city lot where they will be used in the restoration effort.
Workers chip off hardened soil, revealing the names of Ming dynasty kilns (1368-1644 A.D.) where the bricks were fired.
""As a child I remember helping take down part of the wall,"" said Li. ""Adults were doing it so I joined in. Now I have a chance to put some of the wall back together.""
The wall, which stood 12 metres (39 ft) tall and 16 metres wide (52 ft) in some places, was built largely in the Ming dynasty, although some parts dated back to the Yuan dynasty (1279-1368 A.D.), a period of Mongol rule.
CITY WALL CLEARED TO MAKE ROOM FOR TIANANMEN SQUARE
Large chunks of the wall were pulled down in the 1950s when Beijing's communist leaders created Tiananmen Square.
More was torn down in the 1960s and 1970s for the construction of one of the city's main roads and for the subway.
Many of the city gates were left standing, although what had been the Zhonghua Gate is now the site of the mausoleum for late revolutionary leader Mao Zedong in the centre of Tiananmen Square.
In more recent years, market-style economic reforms have sent real estate values soaring, leading to the wholesale clearing of older buildings to make way for sleak new office towers.
One such real estate project has led to the demolition of homes that had been built up against the wall. The outline of those homes is still visible on the section being restored.
The redevelopment has also revealed a bomb shelter, built nearby during tension with the former Soviet Union in the 1960s and using city wall bricks.
RETIRED SHOEMAKER ANSWERS STATE'S CALL FOR HELP
Hai Changhai, a 71-year-old retired shoemaker, is one of the Beijing residents who answered the state's call to bring back bricks taken home when the wall was demolished.
""They were in our yard and weren't doing anyone much good,"" he said after pedalling his tricycle across town to make a donation. ""Now the state can make use of them.""
Some Beijing residents point an accusing finger at the state -- and the ruling Communist Party -- for all the destruction of the past.
""None of the communist leaders wanted to protect these things,"" said Dai Qing, a dissident writer who has been active in preserving historical relics. ""None of them spoke up.""
One of the few people who did speak out was Liang Sicheng, the head of prestigious Qinghua University's construction department in the early days of communist rule.
""He was very critical of the development plans,"" said Cheng Zhihua, a professor at the same department at Qinghua today.
""But he had little influence because the official media did not publish his views,"" said Cheng.
What Liang had to say was dangerous then, and he was persecuted for his views during the Cultural Revolution, a decade of leftist fanaticism that began in 1965.
Beijing officials say there is a growing awareness of the need to preserve the past. Some residents say that may be because so much of the city's heritage has already disappeared.
Some say other factors may also play a role.
A museum may be built near the wall when it is restored and city planners soon will have another tourist attraction.
",49
"China's President Jiang Zemin granted a rare meeting to members of the U.S. House of Representatives on Tuesday in a campaign aimed at boosting ties with the American Congress.
A beaming Jiang was shown on state television receiving the 22 representatives -- the biggest U.S. congressional delegation ever to visit China.
""Improving Sino-U.S. relations and developing them on a healthy basis is in the interests of both countries,"" he said. ""I had very good discussions with President (Bill) Clinton in Manila in November and we reached some important understandings.
""The Chinese side is willing to grasp the present opportunities and, along with the United States, to reduce difficulties between our two countries.""
Beijing and Washington have been trying to mend ties that were badly strained by a series of disputes over the past two years ranging from Taiwan to trade and human rights.
In Manila, Jiang and Clinton agreed on an exchange of presidential visits in 1997 and 1998 that would be the first since President George Bush came to China in early 1989.
Analysts said China's communist leadership -- and Jiang in particular -- were eager to boost ties with the Congress, fearing that Beijing had suffered by relying too heavily on its links to the U.S. administration in the past.
They noted that the Beijing believes it was led astray by administration assurances that Taiwan President Lee Teng-hui would not be permitted to visit the United States in 1995.
Congress pushed hard for Lee and the landmark private visit was eventually allowed to proceed, a decision that enraged Beijing.
China turned its anger on the island, which it considers a rebel province, first breaking off a semi-official channel for talks with Taipei and later holding missile tests near the island in March last year.
Jim Kolbe, the Arizona Republican who is leading the congressional delegation, told reporters shortly before his meeting with Jiang on Tuesday that Chinese leaders had recognised the need for contacts with Congress.
""The Chinese are becoming much more skilled and have much more contact"" with Congress, he said.
Members of the congressional group told reporters that human rights had come up in discussions with other Chinese officials and would be raised during the meeting with Jiang.
Jiang met a U.S. Senate group led by minority leader Tom Daschle last November.
Jiang, who is known to be fond of Western pop songs, was said to have entertained that group with some of his repertoire. It was unknown if the Kolbe delegation would be treated to the same welcome.
",49
"China's President Jiang Zemin used his eulogy for Deng Xiaoping on Tuesday to hail the late leader's guidance in the recovery of Hong Kong and pledge peaceful reunification with Taiwan.
Jiang told 10,000 Communist Party luminaries and other guests at the funeral rites for the late leader that Deng's great creation was the ""one country, two systems"" formula of allowing capitalist and socialist systems to coexist side by side in one country.
""The complete reunification of our motherland is the common aspiration of the entire Chinese nation,"" said Jiang, Deng's hand-picked successor, in a speech delivered at Beijing's Great Hall of the People and televised around the country.
""Using the formula of 'one country, two systems' to realise peaceful reunification is Comrade Deng Xiaoping's great creation,"" he said.
Deng guided the negotiations with Britain that eventually led to a 1984 accord under which the colony is to be returned to Chinese rule at midnight next June 30.
Under that agreement, Beijing pledges to allow the colony to retain its capitalist system and a ""high degree of autonomy"" for 50 years.
The nearby Portuguese enclave of Macau reverts to China in 1999, leaving Nationalist Chinese-ruled Taiwan as the last territory Beijing must recover to achieve its dream of reunification.
Deng died last Wednesday before seeing the recovery of any of these territories but Jiang said the Communist Party should carry out the late leader's mission.
""We must act in accordance with the teachings of Comrade Deng Xiaoping, striving to attain the objective of the motherland's reunification,"" Jiang said, speaking in front of a huge portrait of Deng draped in black ribbons and surrounded by bouquets of flowers.
""In accordance with the Sino-British and Sino-Portuguese agreements, Hong Kong will return to the embrace of the motherland soon and Macao will return to the embrace of the motherland in 1999,"" he said.
""The Taiwan question will be settled eventually and the complete reunification of the motherland will certainly be achieved,"" he said confidently.
Among the invited guests in the cavernous auditorium were supporters of Beijing from Hong Kong and Macau, most of them prominent businessmen, as well as Tung Chee-hwa who has been chosen to take over as Hong Kong's chief executive on July 1.
Despite its pledge of autonomy for Hong Kong, Beijing has already decided to scrap some civil liberties and replace the territory's elected legislature with an appointed one after the transfer of power.
That has raised concerns in Hong Kong as well as the United States and Britain.
Taiwan, which has been separated from China since the end of a civil war in 1949, says it too wants to reunify with the mainland but under very different terms than those offered by Beijing.
",49
"China vowed on Friday to get tough in its drive to keep banks out of the stock market and accused big financial institutions of fuelling a speculative bubble on the nation's bourses.
State media quoted China's top economic policy maker, Vice Premier Zhu Rongji, as warning bankers that they could go to jail for diverting funds into the stock market.
""We will vigorously seek to uncover any use of funds that are not in company accounts or the use of bank credits for stock market speculation,"" Zhu told a national banking conference in Beijing on Thursday.
""Those in positions of responsibility will be sacked and in criminal cases we will pursue the offenders under criminal law,"" he said.
In a commentary alongside the reports of the meeting, the Financial News, a daily published by the central bank, blamed a big rise in share prices last year on institutional speculation.
""Most people believe that a speculative bubble emerged (in the nation's stock markets) at the end of last year,"" it said.
It blamed this on a diversion of funds from the banking system into the stock market, and added that it was clear this had involved institutional money.
Beijing moved to cool off the heated stock market speculation -- which had pushed one of the main indices up as much as 360 percent -- by warning investors that what goes up must come down, and reminding them that the state would not step in to bail them out.
China also has been trying to keep its state-run banks from fuelling stock market speculation, first by severing their ties to trust companies -- which can put funds in the stock market -- and by making it harder for them to finance stock speculation.
Securities industry officials said the aim was to insulate the banking system from any major setback for the stock market.
""This is aimed at protecting the banking system,"" said Wang Yun, general manager of the Shanxi Securities Trading Centre in Taiyuan, a regional trading centre for the main bourses in Shanghai and Shenzhen.
""Central government authorities would also prefer to see these funds go to state enterprises,"" he told the China Securities Bulletin, a Hong Kong-based publication.
But brokers said that while ensuring the health of the banking system was a noble goal, authorities should not drive all institutional money away from the market.
""China now has more individual investors than it had in the past, but the main investors are institutions,"" said a Beijing-based broker. ""If they are driven away, there won't be much turnover left in the market.""
",49
"China published on Saturday a list of anti-dumping rules to protect local companies from unfair foreign competition.
Chinese economists said the rules would help domestic companies, many of them targets of similar dumping claims overseas, protect their share of the domestic market.
They also said the move appeared to be aimed at giving a legal framework to protection from unfair competition and clarifying procedures for its use.
""Many Chinese companies are unable to compete in the face of unfair trade practices,"" economist Cheng Xiusheng of the State Council (cabinet) development research centre told Reuters.
""Many other countries have imposed anti-dumping duties against Chinese products and China needs a system to regulate its own market and protect its companies,"" he said.
The rules, published in the official People's Daily, give the government the right to determine whether imported goods are aided by official subsidies and impose anti-dumping duties on foreign goods. Cash guarantees can be demanded to ensure payment.
Prices in the exporting country or third countries will be used to determine a fair price for goods in dispute and set a countervailing duty.
The rules also provide guidelines for domestic companies to file complaints about unfair competition and set a maximum length of 12 months for an investigation. Special cases are allowed to take 18 months. The rules also empower the state to take retaliatory measures against countries that impose ""discriminatory"" countervailing duties against Chinese goods.
Beijing's official media have said the dumping of foreign goods on the domestic market had cost China some 10 billion yuan ($1.2 billion) a year and had caused the loss of hundreds of thousands of jobs.
Many domestic manufacturers were pressuring the government to take steps to offset these policies, newspapers have said.
Other economists said China was trying to codify the protection of its industries and bring its trade policies more in line with international practice.
They added that as China sought to join the World Trade Organisation it was being forced to make its polices more transparent.
",49
"China may need to adjust the mix of its treasury debt next year to ensure an active response from domestic institutions, analysts said on Friday.
Finance ministry officials were meeting in Beijing on Friday to discuss bond market trends and the issue of China's debt mix could be a focus of the talks, the analysts said.
""There is too much of the non-tradeable type of debt,"" said a Shenzhen analyst. ""It is not really attractive to institutions or individual investors.""
China is issuing about 250 billion yuan ($30.1 billion) of state debt this year -- most of it domestic. More than half of the total is for non-tradeable voucher or certificate type treasury debt.
In return for their funds, investors receive a certificate that can be redeemed before maturity. But this type of debt is not listed on either of the nation's stock exchanges in Shanghai or Shenzhen and no active secondary trading exists.
Last year, this non-tradeable type of debt accounted for only about one-tenth of total government debt issued, bond traders said.
""Last year the focus was on the secondary market,"" said a trader with J&A Securities in Shenzhen. ""Most of the debt was tradeable on the nation's exchanges.""
Other securities firms agreed the response so far this year had been less than enthusiastic.
""There is not that much interest in the (non-tradeable) offer this year,"" said an official at China Southern Securities. ""I am not very optimistic about the outcome.""
A Finance Ministry official denied there were problems with the sales, which began on March 1.
""I am satisfied with the outcome so far,"" the official told Reuters. ""We have until October to complete the sales.""
The bonds are offered through bank underwriting syndicates, and analysts said that if the banks have to keep too much of the debt on their own books, they are unlikely to be enthusiastic about next year's issue.
The trend was particularly marked in southern China where economic development has outpaced the rest of the country, giving investors more types of investment vehicles to choose from.
An official at the state-run Industrial and Commercial Bank of China's Shenzhen branch described the response to the offer in the special economic zone bordering Hong Kong as poor.
Some analysts said the problem lay elsewhere. ""The interest rate is the real problem,"" said Zhao Xiaoyun, an analyst at China Securities Co.
Zhao said bond interest rates were unable to match the returns available on the stock market. Domestic A shares in Shanghai have gained 40 percent since the start of the year.
The 1997 state offer includes two-, three- and five-year debt carrying interest of 8.64 percent, 9.18 percent and 10.17 percent. This is 0.72, 0.92 and 1.17 percentage points higher than the interest paid on bank time deposits of corresponding periods.
In the recent past, interest on bonds has been 1.5 to two percentage points higher than equivalent bank rates. But analysts said China may not want to widen the spread between time deposits and bonds too much. The banks may underwrite the debt but they are not eager to see their deposits drawn away by higher interest bonds.
That could mean the best option for the state is to issue debt that can be traded and attracts institutional investors.
",49
"China called on Japan on Thursday to stop encouraging right-wing activities on disputed South China Sea islands or risk an escalation of the diplomatic row.
However, it stopped short of spelling out what action it would take over the islands -- claimed by Beijing, Tokyo and Taipei -- adding that it would exercise restraint.
""Japan should recognise the seriousness of the matter and take actions to stop these...illegal activities,"" Foreign Ministry spokesman Shen Guofang told a regular news briefing.
""If Japan continues to encourage them the situation will be even more serious,"" he said of the right-wing activists. ""The ball is in Japan's court.""
A long-dormant dispute over the islands, called the Diaoyus in Chinese and the Senkakus by Japan, erupted in July after the right-wing Japan Youth Federation erected a lighthouse on one of the islets.
Friction mounted earlier this month after Japanese coast-guard ships barred private Taiwan boats from reaching the area while the rightist group repaired the typhoon-damaged structure.
Beijing and Taipei have assailed Japan's protection of the rightists' activities and ordered Tokyo to keep people away from the islands that lie east of China's southeastern Fujian coast, west of Japan's Okinawa island and northeast of Taiwan.
Chinese in the British colony of Hong Kong have also closed ranks, ignoring other political disputes and voicing support for Beijing's claim to the islands.
On Tuesday, Beijing lodged a strong protest with Tokyo and called in the charge d'affaires in Beijing, warning of serious damage to ties if Japan failed to stop right-wingers from setting foot on the islands.
Asked by reporters whether Beijing would consider stronger measures, Shen said: ""We hope this issue will be handled with restraint.""
Japan on Thursday urged China, Taiwan and Hong Kong to deal calmly with the territorial dispute.
A group of more than 100 Chinese nationalists on Wednesday urged China's top military brass to send warships to the disputed Diaoyu islands to tear down structures built by Japanese rightists.
The response of China's military commission, which is headed by Communist Party chief and state president Jiang Zemin, was not immediately available.
Hong Kong activists, members of the pro-democracy Association for Democracy and People's Livelihood, were in Beijing to present to Chinese authorities a petition signed by 17,000 people urging the government to get tough on Japan's claim to the islands.
In Taiwan on Thursday, fishermen hurled rotten fish at Japan's Taipei visa office in protest over Tokyo's actions in the dispute.
",49
"China has scored new successes in its fight against inflation and economists said on Friday that price rises this year could be well below target.
Some economists say inflation had been squeezed out of the economy with only a modest impact on growth as economic expansion continued at a fairly rapid pace.
""This is better than expected,"" said Chen Dezun, head of the price research institute of the State Planning Commission.
""We could see inflation of between three and four percent this year,"" he told Reuters.
The benchmark retail price index rose a meagre 1.7 percent in March and 2.6 percent for the first quarter of the year, the State Statistical Bureau said on Thursday.
China forecast a 6.0 percent rise in retail prices this year after a 6.1 percent increase last year. That was already well below the 14.8 percent recorded in 1995 and a communist-era high of 21.7 percent in 1994.
China's economic growth is expected to top 10 percent this year after a solid 9.7 percent in 1996.
The inflation figure for the first quarter was also below an estimate by Premier Li Peng this week that retail price inflation would average 3.0 percent in the January-March period.
Chen said good weather had been a factor, ensuring steady supplies of agricultural goods and keeping prices down.
What China officially refers to as ""appropriately tight"" monetary policies had also been a crucial factor, he said.
""The appropriately tight monetary policies are now showing results,"" he said.
China has kept controls on fixed asset investment, keeping government spending down, and that has kept a cap on the demand for goods such as construction materials.
After adjusting for inflation, the real rise in fixed asset investment last year was a fairly modest 11.5 percent.
""The key has been control over fixed asset investment,"" said Zhong Jiyun, an economist at the state think tank, the Chinese Academy of Social Sciences.
Some economists have argued that with the battle against inflation proceeding favourably, China can now afford to ease its monetary policies.
Many inefficient state-run enterprises are swimming in red ink and saddled with debt they cannot repay.
Managers of these companies and their local government officials have called for easier credit to help to reduce their heavy financial burden.
But Zhong is among the economists who believe that China is not yet able to declare the war on inflation over.
""I believe we still need to keep the controls on,"" he said.
",49
"The death of Deng Xiaoping has deprived China of the architect of reform but it has left his successor in charge of an economic powerhouse in its best shape in years, economists said on Friday.
China has attained a track record that many countries would envy -- strong economic growth, inflation in check, mounting foreign exchange reserves and a stable currency.
""I am optimistic on the economy,"" said Lin Qingsong, an economist at the Chinese Academy of Social Sciences, a government think tank.
""Overall, we are in a very good situation economically.""
Foreign economists agreed.
""It sounds awful, but Deng couldn't have died at a better time,"" said a Western economist.
""They (China's leaders) are in an enviable position.""
Deng died on Wednesday aged 92, leaving his hand-picked successor President and Communist Party chief Jiang Zemin in charge of this nation of 1.2 billion people.
It was Deng who helped steer China on its current economic course, wrenching it from purist Marxist policies that had brought the nation to the brink of starvation and industrial collapse in 1960.
The Deng reforms, adopted in 1978, allowed private enterprise and relied on market forces instead of Stalinist central planning.
Eventually, the scope of change became even more sweeping, embracing stock and futures markets and breeding a new generation of ""red capitalists"" known for their millionaire lifestyles.
China chalked up economic growth of 9.7 percent last year as it held its once troublesome inflation rate to a shade over 6 percent, well below target and down sharply from more than 14 percent in 1995.
The nation has become a magnet for foreign investment, with many of the West's biggest corporations queuing up in the search for a share of this rapidly expanding market. In the process, China has amassed foreign currency reserves of $105 billion.
Economists said remnants of the centrally planned economy still needed overhauling before communist leaders could rest easy.
""There are still many economic issues to be addressed and one of them is the state sector,"" said Lin of the Chinese Academy of Social Sciences.
""State companies need fundamental change.""
While many of China's private and foreign-invested companies are chalking up profits, an inefficient state sector has been unable to match those results.
About 75 percent of China's more than 100,000 state firms lost money last year. Total losses in the state sector were up 45 percent to 69 billion yuan ($8.3 billion) in the first 10 months of last year.
Economists said state enterprises were grossly overstaffed and needed to trim bloated payrolls while some companies would never make money and would have to be shut.
But layoffs and bankruptcies are seen as a threat to stability and Beijing is moving ahead cautiously on this issue.
Before surplus workers can be told to find new jobs there must be a real social safety net in a country that has neither a national pension scheme nor unemployment insurance.
Other economists said reforms were unlikely to gather pace in the months ahead as Jiang Zemin and other communist leaders look ahead to a key party congress scheduled for later this year. The meeting will make top personnel changes and chart policies for the next five years.
But economic analysts said China now has enough of an economic cushion that it can take its time and examine further reform carefully.
""The Chinese have the luxury of being able to go ahead slowly,"" said an economist.
",49
"China hit back on Tuesday at U.S. accusations of human rights abuses, saying Washington was distorting facts while turning a blind eye to problems in its own back yard.
In a lengthy riposte to U.S. State Department criticism of China in its annual report on human rights, Beijing described the United States as a land of guns, terrorist bomb attacks and racial discrimination.
China's angry attack, carried by the official Xinhua news agency and titled: ""A Look at the U.S. Human Rights Record"", also said American-style political democracy was a game of the rich and faulted the U.S. constitution for providing inadequate guarantees.
The U.S. report, released in January, accused Beijing of effectively silencing public dissent in 1996 through jailings, intimidation or exile.
China said the State Department was ""once again distorting and attacking at length the state of human rights in China and more than 190 other countries and regions"".
""The U.S. government, posing as the 'human rights judge of the world', turned a blind eye yet again to the serious human rights problems in its own country,"" Xinhua said.
""There are 220 million firearms in private hands, which translates into nearly one gun per person,"" it said. ""Armed criminals are on the rampage, shootings are non-stop and a large number of innocent people have fallen prey to violence.""
Xinhua cited the deadly 1993 World Trade Centre bombing in New York, the 1995 bombing in Oklahoma City and the explosion during the Olympic Games in Atlanta last year as symptoms of America's deep-rooted problems.
""It is not accidental that terrorist bomb attacks continuously occur in the United States, an excessively violent country where terrorism is deeply rooted in society.""
The news agency said the United States had one of the world's largest police forces relative to its population and the largest prison population.
The report described crowded U.S. prisons as places where ""prison guards mounted on horseback keep watch on inmates as though they are herding animals"".
""Inmates are sometimes forced to fight among themselves and are whipped"".
It condemned pervasive racial discrimination, saying blacks and other ethnic minorities had always been second-class citizens.
The agency went on to say the United States had a less than exemplary record abroad, inflicting human rights violations on other nations through wars and acts of aggression throughout its history.
""We strongly advise the U.S. government to put its own house in order before pointing its finger at other countries,"" it said.
",49
"Boeing Co on Tuesday signed a $685 million contract to sell jets to China with Vice President Al Gore on hand, signalling a boost in business relations after Beijing only a year ago had turned to European rival Airbus.
Boeing and Chinese aviation officials inked a contract for five 777-200 jets in a ceremony at the cavernous Great Hall of the People, also attended by Chinese Premier Li Peng.
Under the accord, Chinese state-run international carrier Air China will take delivery of the planes in 1998 and 1999.
""Air China's order is a vote of confidence in the world's best-selling airplane in its market,"" said Ronald Woodard, president of Boeing Commercial Airplane Group.
Woodard told reporters both sides had reached basic agreement a year ago, but signing faced lengthy delays because of political differences between China and the United States.
""There is no doubt the contract was not executed when it was ready because of tension between the U.S. and China last year and the year before,"" he told reporters at a news briefing after the ceremony.
""There are times when politics are involved,"" he said.
A year ago, China and the United States were at odds over a range of issues from trade and human rights to Beijing's sabre-rattling over Taiwan.
Chinese Premier Li Peng was also on hand when Beijing turned to the European consortium Airbus Industrie in April last year, buying 30 airliners in a $1.5 billion deal.
Since then, Sino-U.S. tensions have eased as the two sides have made painstaking efforts to patch up their differences.
The Gore visit is aimed at ensuring that trend continues.
Gore is the most senior U.S. official to visit China since then-president George Bush travelled to Beijing in early 1989 -- just months before a crackdown on democracy protests in the Chinese capital's Tiananmen Square.
Boeing officials tried to play down last minute questions about whether Gore would attend the signing ceremony, saying there never was any doubt.
""I was told he'd be there and he was,"" said Woodard.
U.S. officials and Boeing were non-committal as late as on Monday about Gore's plans.
The Clinton administration has been on the defensive over accusations of illegal Chinese contributions to the Democratic Party.
China has angrily denounced the allegations, insisting that it did not make any payments and saying that rival Taiwan may be behind its current difficulties.
The Washington Post has said the Federal Bureau of Investigation warned six members of Congress last year that they had been targeted by China to receive illegal campaign contributions from foreign corporations.
Boeing officials said they hoped the United States would take further steps to keep the relationship healthy.
""We strongly and fully support granting China permanent Most Favoured Nation status and China's accession to the World Trade Organisation. Both are critical to achieving normalised world trade,"" Woodard said.
China has sought permanent preferential trade status from the United States to avoid an annual review.
It has also pushed for entry into the global trade body, but Washington has insisted that Beijing agree to liberalise more of its trade policies first.
Boeing walked away from the latest contract signing ceremony with a bit less than it wanted.
Company officials said they had been hoping to sell 10 of the 777s to China. They said, however, this was a commercial decision and they were hopeful of further orders in the future.
",49
"The United States and China may not be on the verge of a breakthrough in often testy ties, but both sides can claim gains from visits by U.S. Vice President Al Gore and House Speaker Newt Gingrich, analysts said on Monday.
The key objective for the two sides was to ensure they moved closer to the goal of an exchange of presidential visits, putting the final seal on efforts to repair damaged relations.
""Gore's visit took them one step closer to that goal,"" said a foreign diplomat in Beijing.
Gore reassured the Chinese that Washington remained committed to an exchange of visits by U.S. President Bill Clinton and China's President Jiang Zemin, telling reporters that officials from both countries were working on specific dates.
The United States and China have been moving painstakingly to ease strains over disputes ranging from Taiwan to trade and human rights.
Gore, the most senior U.S. official in Beijing since the 1989 crackdown on student demonstrations in Tiananmen Square, said his talks with Chinese leaders last week touched on the key areas of disagreement but he described China's reaction as milder than in the past.
While the speaker of the House of Representatives had somewhat tougher talk in public for his Chinese hosts, pointedly referring to Beijing's policies on human rights and Taiwan, the content was not unexpected.
""He is a bit less constrained in what he can say,"" said a Chinese journalist who covers foreign affairs. ""China recognises this.""
More importantly for China's leaders, the visit by the key Republican and other members of a bipartisan congressional delegation presented an opportunity for Beijing to make a personal pitch on major issues such as Taiwan.
Jiang used his meeting with Gingrich on Friday to note how pleased he was that more congressmen were visiting China to see first hand the importance of the Taiwan issue to Beijing.
China and Taiwan, rivals since the end of the Chinese civil war in 1949, are vying for the sympathies of American policymakers and the public.
The United States recognises China but has strong commercial and other unofficial ties with the island that Beijing views as a renegade province.
Beijing believes it was misled by Washington over the landmark 1995 visit to the U.S. by Taiwan President Lee Teng-hui. The administration assured Beijing that no visit would be permitted but the trip was allowed to proceed under pressure from Congress.
Both Washington and Beijing struggled to ensure that accusations of illegal Chinese funding for the Democratic Party did not overshadow the Gore visit.
Gore reassured Beijing that unless there was firm evidence of illegal payments, the issue would not affect U.S. policy.
The visit also underscored Washington's hopes that no one issue be allowed to dominate the Sino-U.S. relationship.
""Trade issues as well as human rights will all remain on the table for discussion in the future,"" said another diplomat. If there was any one area where specific progress could be expected soon, perhaps it was trade, another diplomat said.
American figures put the U.S. trade deficit with China at about $40 billion last year, and Washington has been pushing for greater access to the China market to narrow the gap.
Chinese officials have conceded they are concerned over the trade issue.
During the Gore visit, U.S. aircraft maker Boeing nailed down a $685 million jet sale and General Motors gained clearance for a long-stalled car venture.
""We may see more such big contracts in the coming months,"" said a diplomat. ""But a $40 billion (U.S.) trade deficit is not going to go away overnight.""
",49
"China has assembled a virtual ""who's who"" of its Communist leaders to arrange Deng Xiaoping's funeral next week in what analysts described as a show of unity for his chosen successor.
Diplomats in the capital also said the 459-member group would draw a veil over the Communist Party's internal politics ahead of a key party congress where decisions on top jobs and future policies would be made later this year.
""This is obviously too big a group to make funeral arrangements,"" said a Western diplomat on Friday. ""Not everyone will be making decisions.""
Deng died on Wednesday aged 92. China will hold the funeral for its paramount leader next Tuesday in the cavernous Great Hall of the People in Beijing.
The ceremonies -- unlike those for revolutionary leader Mao Zedong in 1976 -- will not include a lying in state with a mourning public allowed to file past.
In accordance with his wishes, Deng's body parts will be donated to science and his ashes will be scattered at sea.
Deng's anointed successor, Commmunist Party chief and state President Jiang Zemin, is chairman of the funeral committee that includes all members of the 18-man Politburo and veterans of the communist revolution such as former president Yang Shangkun, 89, and ex-parliament chairman Peng Zhen, 95.
The list also includes Hua Guofeng, Mao's chosen successor until he was toppled by Deng.
""It is meant to be a sign of great unity and stability,"" said another foreign envoy.
Diplomats said the inclusion of the elder statesmen in the group aimed to lend legitimacy to the current leadership, providing a link to the party's revolutionary roots.
""This gives them some continuity with the first generation of the leadership,"" said a European diplomat.
But it also helps conceal the inner workings of the party as key figures jockey for position before the 15th party congress.
Broad decisions on political and economic strategy are likely to be taken at the meeting, held every five years.
Political analysts said the creation of a smaller group to direct the funeral arrangements might give too much information to the public which is normally kept at a safe distance from the party's internal workings.
The tighter the group, the easier to identify the main players, they said.
""They (party leaders) don't want to reveal too much before the congress,"" said the European diplomat.
",49
"China said on Friday it was concerned its trade surplus with the United States might affect ties and released a White Paper in defence of its policies.
Vice Minister of Foreign Trade and Economic Cooperation Sun Zhenyu said Beijing was taking steps to trim the surplus but action was also needed by the U.S. government and American industry.
""The issue has become such a general concern to American people from all walks of life that failure to handle the issue properly could hold up the normal development of the economic and trade relations between the two countries,"" Sun said in a statement given to reporters.
The statement was one of the most visible signs that Beijing policymakers were looking for ways to head off possible U.S. measures to curb China's sales to that market.
Sun expressed hope that the visit next week by U.S. Vice President Al Gore would help develop mutual trust, and he hinted the trip might coincide with the signing of some major contracts.
""I would not exclude the possibility of the signing of some contracts,"" he told reporters.
He added that a deal for the sale of Boeing aircraft to China was among the possibilities though the companies involved needed to agree on terms.
""We will continue to encourage our enterprises to expand imports from the United States,"" Sun said.
He made his remarks one day after Washington announced China's trade surplus with the United States rose to $3.72 billion in January from $2.74 billion in January last year.
Washington says China had a surplus of nearly $40 billion with the United States for all of last year while Beijing puts the figure at $10 billion.
China does not count shipments through Hong Kong and the White Paper addressed this issue by saying that both American and Chinese experts agreed those goods had an average of 40 percent added value in Hong Kong.
That meant the U.S. version of the trade imbalance was overstated, according to the White Paper.
The paper pointed out that much of the trade surplus was from China's processing of raw materials from other regions, meaning that other countries were in fact benefiting from the trade as well.
China was also providing low-cost production that had been done in Taiwan, South Korea and Hong Kong in the past, and was not taking jobs away from American workers.
Sun said U.S. companies had lost out on major infrastructure contracts, particularly in the electric power sector, because of a lack of government export financing, and he called for more support from the U.S. Export-Import Bank.
Washington had thwarted its own prospects in the nuclear power sector because of restrictions on nuclear technology exports to China.
""The U.S. export control policies and lingering sanctions against China have greatly restricted U.S. exports to China as well as U.S. investments in high-tech sectors,"" the White Paper said.
Sun noted that China had reduced its import duties sharply in recent years and that further cuts would bring the average rate to 15 percent by the year 2000 from 23 percent now.
",49
"China issued more tough warnings on curbing risk in the financial sector on Thursday, fresh on the heels of the failure of one of its big trust companies.
It also accused some officials of ignoring past warnings and covering up problems.
""There are all sorts of serious financial crimes now and if these problems are not earnestly addressed, this could greatly weaken the payment system and damage the good reputation of our socialist financial system,"" said the official Financial News in a front-page commentary.
""The biggest problem is that some officials look but fail to see the problems in their own regions or departments,"" it said. ""When they see the problems they fail to check on them and in some cases they cover up and encourage such actions.""
The newspaper, published by the central bank, said failure to tackle the problems would exacerbate the nation's deficit and lead to unwanted growth in the money supply.
The central bank announced this month the closure of the big China Agribusiness Development Trust and Investment Corp (CADTIC), an investment house under the Ministry of Agriculture, because of serious illegal and irregular practices.
CADTIC's management was taken over by the state-run China Construction Bank while its foreign business was handed over to the Bank of China.
China has been trying to separate trust firms from state banks, fearing that trust failures could drag down the banking system and lead to social unrest.
China has no bank deposit insurance system and would probably have to step in to support a bank that went into default, banking officials said.
Its willingness to prop up trust companies is somewhat less certain.
U.S. rating agency Moody's Investors Service issued a report this month saying that central authorities might not rush to support troubled trusts. Repayment of foreign lenders in the event of future closures was not guaranteed, it said.
The Financial News said a planned separation of banks from trust companies -- originally set for completion at the end of last year -- had to be finished in the first half of this year.
Banking industry officials have said that the huge problems of the China Agribusiness Development Trust, while known to regulators for some time, were a ""wake-up call"" that foreshadowed more problems throughout the financial system.
The latest round of warnings followed a national banking conference that focused on excess financial risk in the banking system.
",49
"China's economic tsar has called for tougher controls on financial risk to protect the nation's banking system and set strict guidelines for trimming its huge pile of bad debt.
Vice Premier Zhu Rongji said state banks, struggling with loans they may never recover, needed to cut bad debt by two percent a year or their top managers could be sacked, the official People's Daily said on Thursday.
""The financial system must make a major push in 1997 to restore financial order and reduce risk,"" Zhu told delegates to the nation's parliament.
""We must seek to reduce the rate of bad loans by two percent annually over the next few years,"" he said. ""We will hold accountable the leaders of those banks that cannot meet the standards.""
Zhu, former head of the central bank, has been pushing to insulate banks from speculative investments in real estate as well as the nation's volatile stock and futures markets.
He has ordered banks to divorce themselves from trust company subsidiaries that can invest in more speculative markets.
He has also pushed hard for banks to extend loans based on the creditworthiness of their customers.
Many local governments pressure state banks to lend money to key enterprises that are major employers -- even when they are unlikely to repay.
Zhu reminded government officials that the commercial bank law bars local governments from interfering in bank operations.
Central bank officials have said as much as 13-14 percent of all loans extended by state-run banks were non-performing.
Some big banks might be insolvent if their bad loans were written off, financial analysts say.
In January, China announced it had shut the China Agribusiness Development Trust and Investment Corp (CADTIC), major trust firm, for unspecified irregularities.
On Thursday, official newspapers reported that the state would stand behind the debts of CADTIC, repaying principal though it would not pay interest.
",49
"China's state-run steel companies must trim their bloated payrolls but they are nimble enough to survive in the fiercely competitive marketplace, top officials said on Monday.
They also pledged that big steelmakers now preparing to float their shares -- like Anshan Steel and Chongqing Iron and Steel -- would not disappoint shareholders.
""We have confidence in the state enterprises in our industry,"" said Liu Qi, minister of Metallurgial Industry. ""They can adapt to market conditions.""
Liu and other senior ministry officials told reporters that many companies in the sector had already begun trimming staff and the trend would continue in the years ahead.
""We have made a good start to restructuring,"" he said, adding that reforms would continue.
Many of China's big state industries are grossly overstaffed and unable to compete with more efficient foreign competitors.
Senior ministry officials said they wanted to see only about 800,000 workers producing steel by the turn of the century. The industry employs 4.5 million people now, but that includes many workers not directly engaged in production as well as those at associated companies.
Liu said that Anshan Steel, one of three companies cleared late last year to list its shares abroad, had 190,000 employees but only 70,000 were producing steel.
The others were at affiliated companies that were operating independently, he said.
Liu cautioned, however, that many of them would not be out on the street as companies would try to find some form of work for them.
""Restructuring does not mean large numbers of people thrown out of work,"" he said.
Liu said that while steelmakers tried to streamline their operations they were also incorporating new technology to help cut production costs.
Other officials defended the track record of steel companies that have already offered shares, such as Hong Kong-listed Maanshan Iron and Steel, which has struggled with profits.
""Maanshan is a good company with excellent products and equipment,"" said vice minister Wang Wanbin.
""Maanshan has had problems but it will achieve better results in future,"" he said, adding that other steelmakers would also perform well in future.
Other officials said that China's had 107 large and medium-sized steel making companies and that 70 percent of them made were profitable last year.
They earned a net 5.1 billion yuan last year with gross profits of 7.4 billion yuan, partly offset by losses of 2.3 billion from those operating in the red.
They added that nearly half of the smaller companies were losing money though and that economies of scale had to be raised.
Panzhihua, a big steelmaker in Sichuan, is also planning to list shares abroad, while Benxi Steel and Hubei Daye Specialty Steel are among those planning offers for foreigners on the domestic B share market.
",49
"China moved ahead on Wednesday with plans to host U.S. Vice President Al Gore, the most senior American visitor in eight years, ignoring a flap over alleged Beijing funding for the United States Democratic Party.
A Chinese Foreign Ministry spokesman denied the funding allegations and said they would not affect this month's visit which both sides have portrayed as part of efforts to mend damaged ties.
""The Chinese and American sides are actively preparing for the visit,"" a ministry spokesman told Reuters on Wednesday.
The allegations of Chinese assistance to the Democrats were made by ""people with ulterior motives"", the spokesman said.
The Washington Post reported on Sunday that the U.S. Federal Bureau of Investigation had warned six members of Congress last year that they had been targeted by China to receive illegal campaign contributions from foreign corporations.
U.S. investigators had found what officials called conclusive evidence that Chinese government funds were funnelled into the United States in 1996, the newspaper said.
China and the United States have been hoping to use Gore's visit, scheduled for March 24-28, to help restore ties strained in recent years by a host of issues ranging from Taiwan and trade to arms and human rights.
Gore would become the most senior U.S. official to visit China since then-President George Bush toured Beijing in early 1989. That trip was marred by a flap over a U.S. decision to invite a prominent dissident to a banquet in honour of China's leaders.
Chinese and American officials have given few details of Gore's trip, though an advance team is expected in Beijing this week to make final preparations.
The vice president's visit is expected to pave the way for an exchange of summits between Chinese President Jiang Zemin and U.S. President Bill Clinton.
Beijing has been angered by the allegations that it made illegal contributions to the Democrats, saying it had neither the interest nor the financial ability to make such payments.
""We do not have the money to support U.S. political parties,"" a ministry spokesman told reporters on Tuesday.
A U.S. congressional committee investigating campaign funding abuses has issued subpoenas to the White House and Justice Department for information on any alleged Chinese government involvement in funnelling money for the 1996 U.S. presidential election.
A senior Chinese foreign ministry official had made serious representations to the U.S. charge d'affairs in Beijing over the accusations of illegal donations, the official Xinhua news agency said on Monday.
Clinton's Democratic Party has already returned $3 million in questionable cash to various donors, most of them with Asian ties.
Gore himself has been tarred with allegations by Republicans that he may have violated the law by pressing for contributions to the Democratic Party during the 1996 election campaign. He has insisted he broke no laws.
Clinton has used the issue to renew an appeal for reform in U.S. campaign financing laws.
The U.S. Senate voted on Tuesday to expand its investigation of campaign fundraising abuses from just illegal actions to illegal and improper activities.
While diplomats say Beijing and Washington are determined to prevent their many differences from outweighing areas of common interest, frosty exchanges have remained a frequent feature of the Sino-U.S. diplomatic dialogue.
In its annual report on human rights, the U.S. State Department accused Beijing of effectively silencing public dissent in 1996 through jailings, intimidation or exile.
On Wednesday, China's official Legal Daily repeated Beijing's response to the U.S. report, saying it had interfered in the internal affairs of other countries and had aroused objections around the world.
",49
"China has made a gesture to the United States by ordering Boeing jets but it has left the door open to the aircraft maker's European rival in a thinly veiled mix of politics and commerce, analysts said on Tuesday.
They said improving Sino-U.S. ties, highlighted by the visit of U.S. Vice President Al Gore, had enabled Boeing Co to sign a pact to sell five 777s to Air China for $685 million.
But Beijing was holding back orders for planes it clearly needed, keeping a close eye on the progress of Sino-U.S. ties and squeezing maximum concessions from Washington on a range of trade issues, they said.
""This is a very political game,"" said a foreign diplomat.
""The Chinese are moving ahead cautiously. The decisions are made by (Premier) Li Peng himself.""
Diplomats said new deals for Boeing or rival Airbus Industrie could be linked to China's campaign to join the World Trade Organisation.
The United States has been the most vocal advocate of wresting further concessions from China in liberalising its domestic market before it is allowed to join the trade body.
Beijing may also be hoping to make progress in its bid to persuade Washington to grant it permanent most favoured nation trading status to avoid an annual review.
Boeing officials said they had been looking to sell 10 of their twin-engine 777s to Air China, the main Chinese international carrier.
They insisted the smaller-than-hoped-for order, delayed by more than one year by Sino-U.S. friction, was a commercial decision and they were confident of making more sales for the same type of plane in future.
China often assails the West for mixing trade and diplomacy.
But the political drama behind the Boeing deal was highlighted by the signing ceremony in the Great Hall of the People as both Gore and Premier Li looked on.
Gore is the most senior U.S. official to visit China since then-president George Bush travelled to Beijing in early 1989 -- just months before a crackdown on democracy protests in the Chinese capital's Tiananmen Square.
""Airbus will be disappointed at today's order,"" said a another Western diplomat.
""They were looking to sell the A330-300,"" a twin-engine jet that Airbus says it has not yet sold in China.
But Boeing has hardly dealt its key rival a knockout blow.
""This is not a mega-order,"" said an industry analyst.
The next sign of how political ties translate into contracts could emerge at the forthcoming visit by French President Jacques Chirac.
Analysts said they would watch closely to see whether new plane orders go to Airbus Industrie and how many planes were purchased.
China has said it will put in service some 240 more planes during the current five-year plan ending in the year 2000 to keep up with rising demand for domestic and international air travel. Most of those planes have yet to be ordered.
Boeing officials, quoting Chinese data, said they were well ahead in the China market so far with some 216 planes in service against 29 for Airbus.
But Boeing underwent a dry spell in 1996, notching only a handful of sales in a year in which Sino-U.S. ties were rocked by Beijing's sabre-rattling aimed at Taiwan as well as disputes over trade, arms control and human rights.
Airbus signed a pact for 30 of the Airbus A320 narrow body jets in April last year in a deal worth $1.5 billion.
Those planes compete with Boeing's smaller 737 jets.
Boeing officials said that with some of the political friction out of the way, they expect more market inroads, and note the latest deal brings this year's sales to $1.2 billion.
But analysts cautioned that despite the improvement in Sino-U.S. ties, issues between the two states were unlikely to be resolved soon and would add a political tint to future commercial deals.
",49
"China blamed criminal elements on Sunday for a bomb that ripped through a rush-hour bus on a busy Beijing street, and offered a big reward for help in solving the case.
Exiled Uighur separatists claimed responsibility for Friday's deadly blast, and vowed to stage more attacks until they had gained ""complete freedom"" for China's far western region of Xinjiang.
Local Beijing newspapers said in a brief but prominent announcement that ""criminal elements had used a homemade explosive device"" in the attack.
The bomb went off on a Number 22 bus as it trundled through Beijing's western Xidan district during the evening rush hour. China's state-controlled media have said no one died but sources said the blast killed at least two people and injured 30.
The semi-official China News Service quoted Beijing Mayor Jia Qingling as saying another smaller bomb went off earlier last week elsewhere in the Chinese capital. No one was hurt in that incident.
The Beijing blasts followed a string of bus bombings in Urumqi, capital of the restive Moslem region of Xinjiang.
Exiled ethnic Uighurs, who want to set up an independent state of ""East Turkestan"" in Xinjiang, claimed responsibility for those attacks which killed nine people and injured 74.
""The bus explosion in Beijing city ...is the only way for the Xinjiang Uighur people to take revenge against communist China's oppression,"" Taiwan's state-run Central News Agency said in a report quoting the Turkey-based Organisation for Turkestan Freedom.
China's national media have ignored the bombings in Beijing and Xinjiang.
On Sunday, however, local Beijing newspapers published a police notice calling on the public, and passengers on the Number 22 bus in particular, to come forward with any information that could aid the investigation.
""Those who provide important information will be given a substantial reward,"" the notice said.
Police were unwilling to go beyond the brief official statements. ""We cannot offer any details of progress in the case,"" said one official.
The media reports made no mention of a motive.
Three bombs blew up within minutes of each other on February 25 in Urumqi in attacks apparently timed to coincide with memorial rites in Beijing for China's paramount leader Deng Xiaoping. Deng died on February 19 aged 92.
Beijing taxi drivers said their employers had warned them last week not to give rides to any suspicious-looking people from Xinjiang and to be especially cautious in areas where many Uighur migrants live.
""They said that if we give a Xinjiang person a ride we should check the cab for bombs after he gets out,"" said one taxi driver, who declined to be identified.
Other sources said a bomb warning had been telephoned to Beijing police before the explosion, but added that the caller had named another area in the capital.
Those behind the latest bombing may have been trying to make a more dramatic statement with their attack, sources said.
The Beijing bus targeted on Friday snakes its way through the Xidan shopping district, then passes the Zhongnanhai compound of China's ruling elite and the vast Tiananmen Square, both of them symbols of communist rule.
",49
"China has scored new successes in its fight against inflation and economists said on Friday that price rises this year could be well below target.
Some economists say inflation has been squeezed out of the economy with only a modest impact on growth as economic expansion continued at a fairly rapid pace.
""This is better than expected,"" said Chen Dezun, head of the price research institute of the State Planning Commission.
""We could see inflation of between three and four percent this year,"" he told Reuters. The benchmark retail price index rose a meagre 1.7 percent in March and 2.6 percent for the first quarter of the year, the State Statistical Bureau said on Thursday.
China forecast a 6.0 percent rise in retail prices this year after a 6.1 percent increase last year. That was already well below the 14.8 percent recorded in 1995 and a communist-era high of 21.7 percent in 1994.
China's economic growth is expected to top 10 percent this year after a solid 9.7 percent in 1996.
The inflation figure for the first quarter was also below an estimate by Premier Li Peng this week that retail price inflation would average 3.0 percent in the January-March period.
Chen said good weather had been a factor, ensuring steady supplies of agricultural goods and keeping prices down.
What China officially refers to as ""appropriately tight"" monetary policies had also been a crucial factor, he said.
""The appropriately tight monetary policies are now showing results,"" he said.
China has kept controls on fixed asset investment, keeping government spending down, and that has kept a cap on the demand for goods such as construction materials.
After adjusting for inflation, the real rise in fixed asset investment last year was a fairly modest 11.5 percent.
""The key has been control over fixed asset investment,"" said Zhong Jiyun, an economist at the state think tank, the Chinese Academy of Social Sciences.
Some economists have argued that with the battle against inflation proceeding favourably, China can now afford to ease its monetary policies.
Many inefficient state-run enterprises are swimming in red ink and saddled with debt they cannot repay.
Managers of these companies and their local government officials have called for easier credit to help to reduce their heavy financial burden.
But Zhong is among the economists who believe that China is not yet able to declare the war on inflation over.
""I believe we still need to keep the controls on,"" he said.
",49
"China's central bank, stung by the collapse of a major trust company, is looking warily at the nation's financial system, warning of dangers to Beijing's prestige and social stability.
The failure of the China Agribusiness Development Trust and Investment Corp (CADTIC) because of ""serious illegal and irregular practices"" was deeply embarrassing for China's financial regulators, bankers said.
But it was a vindication of sorts for those who have been trying to make the People's Bank of China more like its Western counterparts, boosting the central bank's ability to detect problems in the financial sector, they said.
That eventually could help to give it more independence from the nation's political decision-makers, bankers said.
Under a three-year, World Bank-sponsored programme, the central bank enlisted the help of big accounting firm Price Waterhouse to strengthen its accounting and supervisory abilities.
""They (central bank officials) recognised they had to improve the quality of the information they had,"" said J. Thomas Macy, who headed up the Price Waterhouse team working with the central bank.
""You can't make good decisions if you don't have good data,"" he told Reuters in an interview.
LOANS OFTEN NOT REPAID
The People's Bank of China was once seen as merely the financial arm of the government, ensuring that money allocated for lending went to the right place. Whether borrowers ever repaid was less important.
China's four, main state-run banks have a combined 134,000 branches and each branch reported to the central bank independently. That gave the central bank a huge flow of uncoordinated and often not very useful information.
A Western diplomat who viewed such reports piled up at the central bank said he asked a bank employee several years ago what the central bank did with the data and was told earnestly: ""We add the numbers up.""
""The data gave no idea of the state of health of the financial system,"" said Price Waterhouse's Macy.
That is clearly changing.
A computer system was designed for the bank's reporting purposes and a risk-based aproach to financial examination is being introduced.
Macy said an 800-page examination manual would be given to some 10,000 bank examiners.
CENTRAL BANK TIGHTENS GRIP ON SECTOR
Chinese bankers say the central bank is already tightening its grip on the financial system.
""They are checking much more closely now,"" said a Chinese banker in Shenzhen near Hong Kong. ""They are keeping a close eye on the commercial banks.""
Many foreign bankers agree there has been a marked change.
""The data collected is getting much better,"" said a Japanese banker.
""But more work on technical inspections is needed to bring them (central bank operations) up to international levels,"" he said.
Others argue that such skills are not learned overnight.
Bankers said problems similar to those that forced the closure of CADTIC this month still lurk elsewhere in the financial sector. Smaller trust companies set up by regional or local governments are particularly vulnerable.
CENTRAL BANK SOUNDS ALARM BUT LACKS INDEPENDENCE
Central bankers have been sounding the alarm over financial risk, bringing up the theme repeatedly at a recent national banking conference.
They pushed home the need for a separation of trust companies -- like CADTIC -- from banks so that banks and their depositors would be insulated from problems at trust firms.
They also made their case for keeping bank funds out of the volatile stock and futures markets.
If the central bank can demonstrate that it has taken charge of financial supervision it might find it has more room to manoeuvre in the policy-making area, bankers said.
Economic issues such as money supply targets -- or even the decision to let foreign banks conduct local currency business -- are highly politicised in China. The central bank ultimately must listen to the views of the State Council, or cabinet.
While this may be politically necessary now, bankers said they would like to see the government give the central bank a vote of confidence by granting it more decision-making authority.
",49
"China gave new details on Wednesday of the failed launch of a satellite aboard its Long March 3B rocket in February, confirming that the cause lay with the new generation launcher.
The report concluded that the failure of the Long March 3B was due to an electrical problem in the power module of the ""inertial platform"" that operated the rocket's direction controls.
""There was no electric current output from the power module in the servo-loop on the follow-up frame of the inertia platform,"" a spokesman for the China Great Wall Industrial Corp, which handles China's launches, quoted the report as saying.
""All other systems operated normally,"" the report said.
The initial report had said briefly that the problem was a failure of the rocket's inertial platform.
The Long March 3B, which was being used in a launch for the first time, veered wildly seconds after lift-off from the Xichang satellite centre in southwestern Sichuan province.
It ended its flight in a spectacular explosion that destroyed the rocket and the U.S.-made Intelsat satellite it was carrying.
The latest report said the rocket smashed into a hillside 1.85 km (1.2 miles) from the launch site.
Official reports said six people were killed and 57 injured, although a video smuggled out by an Israeli scientist showed extensive damage to buildings in the area, suggesting that the number of casualties might have been considerably higher.
The final report said that because of the severity of the explosion, no large pieces of wreckage of the satellite or the rocket remained.
The report's conclusions were drawn largely from film of the launch and data from remote testing.
China's space programme once had a reputation for dependability, but has been marred by a string of recent failures.
It suffered a blow to its hopes to capture a significant share of the commercial satellite launch market when a Long March 3 rocket failed to lift a U.S.-built satellite into proper orbit last month.
The preliminary conclusion blamed the failure on a problem with the third-stage booster of the Long March 3 rocket, which is supposed to be one of China's most reliable launch vehicles.
China has come under pressure from potential foreign customers as well as the insurance industry to disclose more information on the problems with its launches so far.
In January 1995, a Long March rocket blew up, destroying the Apstar 2 satellite and killing six people on the ground.
However, China successfully launched Hong Kong's Apstar 1A telecommunications satellite in July after delaying the launch following last February's Long March 3B explosion.
",49
"The CITIC Industrial Bank, financial arm of China's CITIC conglomerate, said on Monday it expected solid profit growth this year despite mounting competition and a key goal of limiting risk.
""Stable development is more important than a big profit rise,"" said Zhang Jian, deputy general manager and economist.
The bank has set a target of pre-tax profits of at least 1.8 billion yuan ($217 million) this year compared with 1.58 billion in 1996 and 1.01 billion in 1995.
The bank is a major profit contributor to the China International Trust and Development Corp, or CITIC, which has interests from telecommunications to real estate and manufacturing. The CITIC group announced overall earnings of 2.478 billion yuan last year.
China's economic tsar Vice-Premier Zhu Rongji has pushed for more discipline in the financial sector, particularly following the failure in January of the China Agribusiness Development Trust and Investment Corp. That sent shock waves through the financial community, and Zhu has warned that state banks overall need to cut bad debt by two percent annually over the next five years.
CITIC Industrial Bank has been one of the stronger players in the financial sector, however.
Unlike the main state-run commercial banks, it does not have to make loans to aid government policy, regardless of whether the borrower can repay.
But Zhang said top management at the bank was focusing on tightening risk controls.
""Enhancing (asset) quality and the assessment of risk"" were two key goals for the bank this year, he said in an interview.
CITIC's customers for the most part were profitable state industrial companies and government corporations engaged in foreign trade. Most of the bank's loans were short term, usually for less than 180 days, Zhang said.
That has made it difficult for the bank to move into new areas of business such as home mortgages or car financing, two areas where China is likely to see substantial growth in the years ahead.
CITIC is also facing an increasingly crowded banking sector as new domestic banks emerge and more foreign banks enter the local market.
Zhang said CITIC had begun private banking operations at its branch in the southern city of Guangzhou to try to expand business.
It is experimenting with ways to boost service to its big corporate clients, such as extending banking hours and installing computers at customer offices and linking them to its own network to make banking easier.
CITIC had total assets of 108 billion yuan at the end of last year compared with 86 billion at the end of 1995.
Deposits reached 87 billion yuan last year, up from 67 billion in 1995, despite two reductions in domestic interest rates by the central bank last year.
Zhang said he believed further cuts in interest rates would make it difficult for the nation's banks to attract deposits.
""I don't think there can be another interest rate cut this year,"" he said. ""If you want investment, you need savings to support it.""
($1 = 8.3 yuan)
",49
"China's Foreign Minister Qian Qichen on Friday dismissed British opposition to Beijing's plans to disband Hong Kong's legislature and said it would not affect the smooth transfer of power in the territory this year.
""The British side's opposition to this is an overreaction and unreasonable and unnecessary,"" Qian told reporters.
""... if they (British authorities) continue to voice their opposition to the operation of the provisional Legislative Council I don't think it will have any impact on the smooth transition of Hong Kong,"" he said.
Hong Kong reverts to Chinese rule at midnight on June 30, becoming a Special Administrative Region of China after 150 years of British rule.
Beijing has pledged to allow Hong Kong a high degree of autonomy for 50 years after the transfer of power.
China has said it will scrap Hong Kong's existing elected Legislative Council and install an appointed provisional body in a move opposed by Britain as well as the United States.
Qian, who is also a vice-premier, conceded that foreign countries had commercial interests in Hong Kong but that did not give them the right to inferfere in the territory's affairs after the handover.
""No foreign country has the right to interfere in the affairs of the Hong Kong Special Administrative Region,"" he said, repeating Beijing's long-standing position.
Qian also held out the prospect of legislators who lost seats in Hong Kong being able to run for posts in China's parliament, the National People's Congress.
He said, however, they would have to recognise the Chinese constitution and accept China's procedures for choosing delegates.
China's parliament has little real power and its main task is to approve laws drafted by the Communist Party.
It has nearly 3,000 delegates and Hong Kong will be entitled to only 36 of those seats next year.
",49
"At least two bombs rocked the western Chinese city of Urumqi on Tuesday, killing one person and injuring at least 60, officials and residents said.
The blasts, on the day that China held memorial rites for its late paramount leader Deng Xiaoping, occurred on city buses in at least two separate incidents in the capital of the mainly Moslem region of Xinjiang at about 6.30 p.m. (1030 GMT).
Deng died last Wednesday aged 92 and Tuesday was the final of six days of mourning for him.
""At least 60 people were killed or injured,"" a local government official, who declined to be further identified, said.
He did not say how many were killed.
But a resident of the city said a trishaw driver was killed in one incident when a passenger in a bus found a bomb under a seat and threw it out of the window. The number of injuries from that explosion was not known.
There were conflicting reports of a third bomb.
A police officer at a centre handling the incidents declined to give further details, saying only: ""The situation is very tense.""
An official at the Military Region General Hospital in Urumqi, capital of the restive western region of Xinjiang, said at least 37 injured had been admitted after the bomb blasts. She gave no further details.
At another hospital in Urumqi, an official said two people who had been slightly injured had been treated and released.
A woman working at a hotel near one explosion said the blast ripped apart a bus and sent bits of metal flying through the air.
Police arrived shortly afterwards and cordoned off the area. Soldiers on trucks were later brought into the city, she said.
One explosion occurred on Northwest Road, involving a vehicle believed to be a minibus, a worker at a nearby hotel said.
Asked if anyone was killed, the worker said: ""What do you think? With many people on the bus the chance is very high.""
Nearby residents contacted by telephone said traffic was snarled along the road for about one hour and that people were being advised to avoid the area.
The explosions were believed to involve time-bombs, possibly set by members of the ethnic Uighur minority, officials said.
""We suspect that these incidents involve splittist elements,"" said one official, referring to pro-indepenence activists among Xinjiang's native Uighur population.
""These people want to disrupt the atmosphere during the memorial ceremonies for comrade Deng Xiaoping,"" said another official, referring to final rites held in Beijing on Tuesday morning for China's late paramount leader.
No arrests had yet been made, officials said.
""People have been warned not to go outside,"" one resident said.
It was the first violence reported in Xinjiang since anti-Chinese riots in the far western region's town of Yining on February 5 and 6 left nine people dead and 198 injured.
Chinese police arrested up to 300 people after that riot in Xinjiang -- a region that Moslem separatists call East Turkestan -- but many have been released after interrogation.
About 1,000 people, mostly Uighur farmers or unemployed young men, rioted in Yining in one of the largest and most violent demonstrations for independence in Xinjiang -- which means New Frontier in Chinese -- since the communist takeover in 1949.
Xinjiang, bordering Afghanistan, Pakistan and three mostly Moslem Central Asian states, was shaken last year by bombings and assassination attempts on officials and Moslem leaders regarded as pro-Beijing.
",49
"The Australian stock exchange on Tuesday used the China visit of Prime Minister John Howard to make a high profile sales pitch for Chinese companies to list shares on Australia's stock market.
The Australian prime minister, before meeting China's President Jiang Zemin, found time to open a seminar for China's market regulators and top-level managers of its state-run companies designed to show them why they should look to Australia to raise capital.
Senior officials from the Australian Stock Exchange as well as brokerages and legal firms delivered the message that Australia had much to offer.
""Cross-border equities trading now amounts to around $4 trillion a year, which no stock market can afford to ignore,"" Australian Stock Exchange chairman Maurice Newman told the seminar.
""I hope that one day we may be able to welcome you to our market.""
Most Chinese companies that have listed their shares abroad have chosen Hong Kong where investors have been snapping up China-related stocks.
One recent listing of a China-linked company was nearly 900 times oversubscribed, and Australia may find it difficult to generate that kind of interest.
Newman later told reporters that 19 of 31 Asian-owned companies on the Australian exchange already had a China connection. These companies have often used a corporation not based in China to make the listing, in effect sidestepping regulatory curbs in their home country.
Trading in some of those issues has not been active.
""The liquidity of those companies is mixed,"" said Newman. ""As a group we would prefer that it were greater.""
Australia may soon get its first direct Chinese listing.
Taihang Cement, a cement producer based in the northern province of Hebei, has already gained approval from Chinese regulatory authorities for a foreign listing.
Company officials told reporters they hoped to list their shares in Australia by the year-end.
""We chose Australia because we have a foundation there,"" said Zhang Zhixian, Taihang's manager of investment development, noting that the company exports cement to Australia.
Company officials said the exact size of the offer had not been set but would range between 100 and 200 million yuan ($12-24 million).
Other participants at the seminar said Australia might target its efforts at sectors where Australia is already strong, such as in natural resources.
""Australia would have a natural advantage in infrastructure and resource-based companies,"" said Tony Greenwood, of law firm Blake Dawson Waldron, noting the heavy weighting of such stocks in Australia.
One area of concern for Chinese companies will be financial transparency, which has posed a problem for them in the past.
Some Chinese companies have had trouble complying with domestic regulations and others have come under criticism in Hong Kong for lack of transparency.
""Our concern must also be the integrity of our market,"" said Newman.
""It is important that companies are familiar with our listing requirements and they observe them faithfully.""
",49
"China will aim to show U.S. Secretary of State Madeleine Albright that improving Sino-American ties will not be harmed by the death of Deng Xiaoping, analysts said on Sunday.
They also said Albright, who arrives in China on Monday for a brief stopover on her nine-nation tour, would likely focus on maintaining momentum in the once-stalled ties, looking ahead to exchanges of senior level visits.
""China will want to make the point that it is stable after Deng's death,"" said Niu Jun, a specialist in U.S. policy issues at the Chinese Academy of Social Sciences, a government think-tank.
""It will want to demonstrate that there is no change in Sino-U.S. relations,"" he said.
Deng, architect of sweeping economic reforms that have embraced capitalist-style economic policies, died on Wednesday aged 92.
Albright will arrive in Beijing during a six-day mourning period for the nation's paramount leader and one day before the funeral. Chinese leaders have been eager to show that affairs of state will continue as usual.
Deng's hand-picked successor, President and Communist Party chief Jiang Zemin, has vowed to push ahead with Deng's programme and even outdo him.
Jiang has been in power since he was propelled to the top party post in 1989, when Deng abandoned his old ally Zhao Ziyang in a dispute over the use of force against students pushing for But Jiang now must fend off other contenders for power without the helping hand of his benefactor.
Albright, on her first trip overseas since becoming America's top diplomat last month, will meet Jiang as well as Premier Li Peng and Foreign Minister Qian Qichen.
Western analysts said Albright would not shrink from contentious issues like China's human rights record, but would chart a steady course in the vital Sino-U.S. relationship during President Bill Clinton's second term.
""The U.S. wants to ensure that its China relations are no longer scraping along the bottom,"" said a Western diplomat.
U.S.-China ties had stumbled badly over a range of issues including Taiwan, trade, arms proliferation and human rights.
A long-delayed visit to Beijing in November by Albright's predecessor Warren Christopher paved the way for the renewed push to put differences aside.
That new approach was endorsed at a meeting between Jiang and Clinton at the Asia-Pacific Economic Cooperation forum in Manila later that month.
U.S. Vice President Al Gore will travel to China next month and Clinton and Jiang are expected to exchange visits over the next year.
Albright may be compelled to touch on human rights during her talks with Chinese officials as the United States plans to co-sponsor a resolution critical of China at the United Nations Commission on Human Rights in Geneva.
Washington may also be looking to show at least some measure of toughness towards Beijing to allay domestic concerns following allegations of Chinese contributions to Clinton's re-election campaign.
But Albright and other U.S. officials have said no one issue should dominate the relationship.
Analysts said that probably means that as for the more difficult problems, the two sides will have to agree to disagree.
",49
"China is expected to unveil a cautious budget this weekend, avoiding bold but risky moves in 1997, the crucial year of the recovery of Hong Kong and a major meeting of the Communist Party elite, economists said on Friday.
The 1997 budget would again show a hefty deficit although it could be smaller than the 61.442 billion yuan ($7.4 billion) estimate for 1996, they said.
""This should be a year for a steady-as-she-goes budget,"" said a foreign diplomat who follows economic issues.
Finance Minister Liu Zhongli is expected to announce the budget to the National People's Congress, or parliament, on Sunday or Monday.
The recovery of the British colony of Hong Kong at midnight on June 30 and the scheduling of the Communist Party congress for later in the year will most likely ensure cautious fiscal policies, economists said.
Beijing wants to see the Hong Kong handover proceed smoothly and its leaders have little inclination to take risks ahead of the congress which will set policies and decide who gets the top jobs for the next five years. Beijing's leaders also have an added reason for caution as they can no longer rely on the steadying hand of paramount leader Deng Xiaoping, who died this month.
""I am not looking for anything startling in the budget,"" said another foreign diplomat.
Even if the deficit is not reduced this year, it will still be manageable. Last year's deficit was only 0.99 percent of estimated 1996 gross domestic product.
Economists said they expected to see higher tax revenues this year as China's economy grows at a steady pace and tax collection improves.
China has already forecast economic growth of 10.5 percent for the year, up from 9.7 percent recorded in 1996. Premier Li Peng on Saturday is to set a yet more cautious goal of 8.0 percent growth.
State revenues expanded 18.1 percent in the first 11 months of last year, and economists said more efficient tax collection and better management of state finances were key factors.
Inflation will also be relatively modest this year, limiting upward pressure on government spending. Retail price inflation is forecast at less than the 6.1 percent of 1996.
Despite lower interest rates, Beijing will need to meet increased payments of interest and principal on past debts, said economist Li Yang, of the Chinese Academy of Social Sciences.
""This will mean more bonds will be issued this year,"" he said.
Economists said, however, this was not a major concern as it was largely in line with China's efforts to issue more tradeable debt to create an active secondary market and strengthen its financial sector.
But a cautious budget will mean China cannot afford to make deep cuts in subsidies to ailing state industry in 1997.
Many overstaffed state companies badly need to shed workers from their payrolls but Beijing's leaders are fearful this could lead to social unrest.
Economists will also be watching the military budget closely, where further increases in spending are expected.
Deng's chosen successor, President and Communist Party chief Jiang Zemin, needs the support of the army to retain his grip on power.
In his eulogy for Deng, Jiang referred to the army as the ""pillar of the state"".
China has said it wants to reduce the size of its three-million-strong army but it is likely to more than offset savings with stepped up spending on advanced weaponry, analysts said.
",49
"China's major state banks reported profits last year -- some sharply higher than in 1995 -- and analysts said on Monday this showed they were beginning to act like commercial banks elsewhere.
Fees from credit cards and electronic banking services were drawing in new income while loans were being extended with greater care in limiting risk, they said.
However, the results probably disguised the banking system's huge pile of bad debts from past loans, and writeoffs -- either by the banks or the state itself -- were likely in the years ahead, they said.
""The big banks are gradually being turned into real commercial banks and making loans on a commercial basis,"" said an official at the Industrial and Commercial Bank in Shenzhen.
""There is a gradual reduction in (lending) risk,"" he said, adding that banks were also cutting costs through electronic payment systems and looking for new sources of income.
That view was shared by other Chinese bankers.
""There are more controls on lending throughout the banking system,"" said an official with the Everbright Bank.
China's banks once were viewed more as the financial arm of the government, extending loans to enterprises that needed funds regardless of whether they would ever repay.
Banks are now encouraged to make loans that will return a profit while state development banks have been set up to help sectors seen as vital to government interests.
The Industrial and Commercial Bank of China -- the bank with the widest exposure in domestic industry -- said its profits surged to 14.5 billion yuan ($1.7 billion) last year from 4.6 billion yuan in 1995.
The Bank of China earned 8.2 billion yuan and the China Construction Bank made 2.76 billion yuan, although neither gave comparative figures. The Agricultural Bank said it had a sharp rise in rise in profits in percentage terms.
Bankers said the removal of an interest rate subsidy on long-term deposits and two interest rate cuts during the year fuelled bank profits.
The rate cuts not only helped ailing state companies to repay loans that had already been extended but they widened the spread between the cost of funds and the interest earned on loans.
""The spread has widened to about three percentage points from less than one point,"" said Beijing University economist Xiao Zhuoji.
""This has also helped the state banks.""
But foreign financial specialists said there was still a relatively low return on assets and one of the key concerns was the extent of the bad loans of the past.
""No one really knows the extent of the bad debts in the banking system,"" said a foreign financial specialist in Beijing.
The U.S. based rating agency Moody's Investors Service said in a report at the weekend that the banks would be insolvent if their loan values were written down to reflect repayment problems, but resolution of the issue would require a complete restructuring of state industry and recapitalistion of the banks.
($1 = 8.3 yuan)
",49
"With just 100 days before China regains its coveted prize of Hong Kong, Beijing has sidestepped the colony's departing British masters and made sure new local leaders know where to take their cue.
China has made clear its intention to mould the territory's politics more in its own image, mapping plans to dismantle the elected legislature and water down civil liberties laws while telling Britain that objections were pointless.
""China is firmly in charge,"" said a Beijing-based diplomat.
Chinese Premier Li Peng has brushed aside London's hopes of monitoring the 1984 Sino-British agreement on Hong Kong after the handover, proclaiming that Beijing would implement the accord as it saw fit.
""I think this is unrealistic,"" Li said when asked about British plans to review the pact's implementation after the transfer of power. ""After July 1, Hong Kong's sovereignty returns to China.""
Under the 1984 accord, China has pledged to give Hong Kong a high degree of autonomy for 50 years after the handover.
Beijing has also ensured that the future administrators of the territory are firmly in its camp.
Since his selection by a group of 400 people vetted by Beijing, Hong Kong's leader-in-waiting Tung Chee-hwa has shown little enthusiasm for staking out positions differing from China's official party line.
BEIJING LIKES WHAT IT HEARS
The shipping tycoon-turned-politician, who has shuttled between Hong Kong and Beijing since he was named chief executive-designate last December, has echoed China's views on issues ranging from the territory's future legislature to civil liberties and textbook revisions.
He has also hurled barbs at Hong Kong democratic activists who have been critical of China.
Beijing has responded by showing its pleasure.
The official media have described Tung in a somewhat more flattering fashion than that reserved for the territory's current and last colonial governor, Chris Patten, who has clashed repeatedly with Beijing over his efforts to expand democratic institutions in the final years of British rule.
In a sign of official favour, cameras of China's national television lingered on Tung when he attended funeral rites last month for late paramount leader Deng Xiaoping, the man credited with directing the strategy that enabled Beijing to recover sovereignty over Hong Kong.
""Mr Tung knows that if he doesn't carry out Beijing's wishes, someone else will,"" said a Western diplomat in Beijing.
Other analysts in Beijing are willing to wait before making a judgment on Tung.
""He has to establish his credibility with the Chinese,"" said a foreign diplomat in Beijing who follows Hong Kong affairs.
WILL TUNG STAND UP FOR HONG KONG?
""The question is, will he stand up for Hong Kong's interests in the future?""
Some people are not so sure.
""That is the charitable assessment,"" said one foreign diplomat in Hong Kong.
He and other analysts suggest that Tung may be more like many of Hong Kong's business leaders who are often reluctant to confront Beijing in public, whatever the issue.
The analysts note opposition can be costly.
Jardine Matheson, one of the colony's oldest trading houses, was publicly vilified by Beijing after its directors supported political reforms proposed by Patten. It has since worked hard to mend its relationship.
Businessman Jimmy Lai printed vitriolic comments about China's premier in his Next magazine in 1994. Lai's Giordano clothing outlets ran into problems with authorities in China and he eventually sold his share in the firm.
Many businessmen would probably prefer to see their names linked to more soothing comments to Beijing's ears, such as those of Hong Kong tycoon Li Ka-shing, on the contribution of China's late leader Deng Xiaoping.
An article by Li that was published prominently in the Communist Party newspaper, the People's Daily, praised the late party patriarch, his chosen successor and the future system for Hong Kong, all making deft use of communist jargon.
But diplomats said that for political leaders such as Tung, there is a considerable risk in being perceived as too willing to speak out on behalf of Beijing.
China wants a popular leader who can rally the territory's 6.4 million people to Beijing's cause, they said.
If its interests clash with those of Hong Kong, and Tung is perceived merely as Beijing's willing tool, the future leader risks losing his still high popular support.
""China chose him because he was acceptable to many people and would do its bidding,"" said a diplomat. ""If he loses popularity in Hong Kong, that complicates matters for Beijing.""
",49
"China said on Monday it had not made contributions to the U.S. Democratic Party to influence American policy and the visit by U.S. Vice President Al Gore had no link to improper payments.
The official People's Daily also pointed an accusing finger at Taiwan for stirring up accusations of Chinese involvement to try to shift blame from itself.
""The Chinese government is not involved in the so-called 'political contributions scandal' in the slightest way and is entirely free of guilt,"" said the newspaper in a signed commentary.
The Washington Post has reported that the Federal Bureau of Investigation warned six members of Congress last year that they had been targeted by China to receive illegal campaign contributions from foreign corporations.
""The development of Sino-U.S. relations is based on principles,"" the People's Daily said.
Gore is scheduled to arrive in Beijing later on Monday, making him the most senior U.S. official to visit in eight years.
His trip is aimed at healing ties that had been badly strained by disputes ranging from human rights to trade and Taiwan.
It is also intended to pave the way for an exchange of visits by U.S. President Bill Clinton and Chinese President Jiang Zemin.
""The continuation of high level visits, such as the visit of U.S. Vice President Gore and others, is due to the efforts of the two governments and their peoples,"" the newspaper said.
""To insist that this is linked to the so-called contributions scandal is ridiculous,"" it said. ""It is a complete fabrication to allege that the improvement in Sino-U.S. relations is due to any improper payments by the Chinese government.""
The People's Daily commentary condemned Taiwan as well as news organisations from the island for the storm of criticism that has engulfed China.
""It is widely known that the 'political payments case' stems from Taiwan,"" the newspaper said.
It referred to a report last year by a Hong Kong publication, the Chinese language edition of Asiaweek magazine, that said Liu Tai-ying, head of the business management committee of Taiwan's ruling Nationalist Party, had expressed a willingness to contribute $15 million.
The People's Daily did not mention that Taiwan has denied the allegations and has sued the magazine.
""For some Taiwan politicians it appears that the best way out of their troubles is to put the blame elsewhere,"" said the newspaper.
Taiwan and China have been rivals since the Nationalists fled to the island after their defeat on the mainland by the communists in 1949.
The United States formally recognises China but maintains trade and other unofficial ties with Taiwan.
Washington sent warships near Taiwan in a show of support when Beijing staged war games and missile tests to intimidate the island early last year.
",49
"U.S. Vice President Al Gore arrived in Beijing on Monday to heal Sino-U.S. ties and pave the way for an exchange of presidential visits amid controversy about possible Chinese efforts to influence U.S. elections.
Gore told reporters before he left Tokyo for Beijing that he would not shy away from issues such as human rights in talks with Chinese leaders during his four-day visit, but had no plans for specific meetings with human rights activists.
Speaking after a 24-hour stay in Tokyo Gore said, however, that he could not rule out talks with activists at U.S. embassy functions while he was in China.
The controversy over U.S. accusations that China may have made illegal contributions to the Democratic Party cast a cloud over the four-day visit aimed at healing ties damaged by disputes ranging from human rights to trade and Taiwan.
The official People's Daily said on Monday the Chinese government had not made any payments to the Democratic Party and that an improvement in Sino-U.S. ties was due to efforts by the two governments and their people.
Asked what U.S. concerns he would raise in Beijing, Gore replied: ""I will, of course, discuss human rights in my meetings with the leadership of China, nor will it be a surprise to them to hear these matters raised.""
But he added: ""I have no specific meeting of that kind (planned with human rights activists).""
Human rights abuses in China have long been a sore spot in Sino-U.S. relations, particularly since China called in the army to crush a student-led democracy movement in Beijing in 1989.
Gore is the most senior U.S. official to visit China since then President George Bush, who toured China just months before the 1989 crackdown that sent Sino-U.S. ties into a tailspin.
In its annual report on human rights, the U.S. State Department accused Beijing of effectively silencing public dissent in 1996 through jailings, intimidation or exile.
Sino-U.S. relations had been strained by disputes ranging from human rights to trade and Taiwan, but Washington and Beijing have worked hard to improve ties in recent months.
Gore's trip to China, part of an Asian tour that includes South Korea, is aimed at paving the way for an exchange of visits by U.S. President Bill Clinton and Chinese President Jiang Zemin over the next year.
The sister of China's most prominent dissident has appealed to Gore to ask Beijing to free him from a 14-year jail term when he meets China's leaders on Tuesday and Wednesday.
The health of veteran dissident Wei Jingsheng was deteriorating in a Chinese jail and his requests for medical care had been ignored by prison authorities, a U.S.-based human rights group quoted his family as saying after a recent visit.
In a letter to Gore, Wei's sister called on the U.S. vice president to use the opportunity of his meetings this week with Chinese leaders to appeal for the release of her brother.
""I ask you to appeal to the Chinese government for my brother's prompt release and, until prior to his release, for his parole for medical treatment,"" wrote Wei Shanshan in a letter dated March 4, a copy of which was made available by the New York-based group Human Rights in China.
Although U.S. officials were negotiating with their Chinese counterparts to try to hammer out various agreements in time for Gore's trip, no dramatic breakthroughs are expected.
In fact, Gore's advisers had a debate over whether he should even participate in a signing ceremony in which China plans to order new aircraft from Boeing Co, a move that will generate jobs and benefit the U.S. economy.
Although officials said there was no doubt Gore would participate in such an event if a final contract was reached, the fact there was any question underscored the sensitivity of the political funding issue.
",49
"China trumpeted the 100-day mark for the recovery of Hong Kong on Sunday and hailed late leader Deng Xiaoping for his guiding role in bringing more than a century of colonial shame to a close.
Hundreds of people gathered at midnight near Tiananmen Square in the heart of Beijing to watch a huge electronic countdown clock as it flashed only 100 days to go before the British colony reverts to Chinese rule on July 1.
Official newspapers covered their front pages with reports of the impending end of British colonial rule as called for under a Sino-British accord signed in 1984.
""We have endured 100 years of shame, 100 years of resistance and 100 years of waiting,"" said the Guangming Daily.
""Now in another 100 days, the hopes of generations will be realised.""
The Communist Party newspaper, the People's Daily, devoted much of its front page to the historic occasion and the role played in it by the nation's paramount leader Deng Xiaoping, who died last month aged 92 before he could see his dream fulfilled.
Deng guided China's negotiations with Britain and is credited with devising the formula of ""one country, two systems"" that allows Hong Kong to keep its capitalist system and a ""high degree of autonomy"" for 50 years.
""At this moment we think even more fondly of Deng Xiaoping,"" said the party newspaper.
""It was he who proposed the great formula of 'one country, two systems' that allowed us to peacefully resolve a thorny question left over from history and realise the complete reunification of our country...""
That praise was echoed by some of the hundreds of people who braved Beijing's chilly night air to watch the countdown clock mark the last 100 days before the transfer of power in Hong Kong.
""This is Deng's contribution,"" said a retired office worker surnamed Chang. ""I am overjoyed.""
A huge roar erupted from the crowd at midnight as students waved banners saying, ""China takes the road to strength"" and chanted ""Hong Kong comes home"".
""I'm thrilled,"" said An Na, a student at the Chemical Industry Institute. ""I wish I didn't have to wait 100 days.""
China ceded Hong Kong island to Britain in 1842 under the Treaty of Nanjing following the Opium War, and Britain later added to its holdings in the area.
While China hailed the impending recovery of Hong Kong, it had barely a passing word for the British government that decided to hand back the colony peacefully rather than contest its claim to the territory.
The official media also had little to say about China's pledges of a ""high degree of autonomy"" under the joint accord, though it hinted at concerns in Hong Kong and elsewhere.
The Shenzhen Special Zone Daily, published in the border boom town of Shenzhen near Hong Kong, tried to reassure residents of Hong Kong about a report on the Chinese army garrison that will be stationed in the territory.
""Don't worry, dear compatriots,"" it advised its readers, without saying what they might have to worry about.
The People's Daily similarly sought to deflect concerns.
""More and more people are coming to the belief that the Chinese government is reliable and capable and will faithfully carry out its promises,"" it said.
",49
"Farmers near Beijing marked the death of Deng Xiaoping quietly on Thursday, putting the hard task of making a living above memorials for the man whose reforms raised rural incomes dramatically.
Some people in this rural county in municipal Beijing offered a private word of thanks to China's paramount leader, who helped steer the nation on a pragmatic course until his death at the age of 92 on Wednesday.
Some shrugged and said they were more concerned with putting food on the family table, while others said they had not even heard the news.
""Is it true?"" asked one young man as he unloaded coal from a truck, heaping it beside a small hotel run by farmers who could no longer find work on the land.
""I hadn't heard this. It's a great loss for the nation of course, but for me the main concern is making a living,"" he said.
Chinese state media announced Deng's death to the nation early on Thursday.
Deng, who told his countrymen that to get rich was glorious, may not have made every farmer wealthy but his policies have clearly made life easier for most.
""We owe him a debt of gratitude,"" said Shi Huaiqing as he leaned against a tree beside a frozen fishpond and watched his flock graze in a pastoral scene topped by a distant view of the Great Wall.
""My life is much better than it was years ago,"" said the 45-year-old, who thanks to policies introduced by Deng can now raise and sell his sheep privately without being branded a traitor to communism.
""Before I couldn't sell these sheep on my own,"" he said. ""Now I earn a good living.""
Down the road from this village, a 70 year-old retired farmer surnamed Zhao echoed those sentiments.
""We are much better off than before,"" he said, smiling a toothless grin as he sifted through a road-side rubbish dump looking for scrap plastic.
""In the old days we all ate together and worked together in the production brigades. None of us had any money but now I have enough to get by with a little help from my sons,"" he said.
The one-time farmer said that in the 1950s Deng had visited a village not far from where he was standing and had expressed his disgust at the harsh conditions of rural life at that time.
""He at least was concerned with our welfare,"" said Zhao.
But some people said they were disappointed that incomes had not grown faster and expressed disdain for a surge in corruption unleashed by Deng's economic reforms.
""Deng may have been concerned for our welfare, but many local officials still exploit us,"" said a farmer named Du as he sold fruit at a roadside stall near an apple orchard he tended.
""The police always come along and chase us away and sometimes throw my apples on the ground,"" Du said.
""I may be better off now than I was but it is still hard to make a living,"" he said. ""We still have a long way to go.""
",49
"Citizens spilled into public places across China on Saturday to mourn the late leader Deng Xiaoping, acting spontaneously in the face of a lack of official memorial activities.
State television has been running endless official paeans to Deng and showing formal mourning activities organised by Chinese officials in Hong Kong, Washington and other foreign cities.
But in China itself, and especially the capital Beijing, the state has done little to encourage public shows of mourning, leaving the citizenry to do things themselves.
In Deng's home village of Paifang in southwestern Sichuan province, tens of thousands of mourners have thronged to the courtyard of his birth since the community's favourite son died on Wednesday night.
In the Sichuan capital Chengdu, people poured into People's Square on Thursday and by nightfall the crowd swelled past 10,000, many carrying candles, witnesses said by telephone.
In the absence of a Deng portrait, people gathered round a statue of China's revolutionary leader Mao Zedong.
""For us here it's tumultuous,"" a worker at a hotel on the square told Reuters. ""Not only in Chengdu but all across Sichuan province, it's tumultuous.""
The crowds thinned on Friday and Saturday, but officials were tolerating the square's use as a centre for mourning and many people were weeping openly over Deng's death. Many came on outings organised by their work units.
""There are several hundred police, traffic police and People's Armed Police to maintain order and prevent people getting hurt,"" the hotel worker said.
In the southern boomtown of Shenzhen, a special economic zone near Hong Kong that was Deng's earliest reform brainchild, hundreds of people filed past a giant Deng billboard which had been turned into a makeshift shrine.
The billboard stands in a square beside one of Deng's most stunning innovations, the Shenzhen Stock Exchange, which Deng said proved that markets were acceptable not only in capitalist societies but also under socialism.
Mourners placed wreaths of white and yellow chrysanthemums below the billboard, some draped with white streamers bearing Deng's reformist slogans or newspaper clippings about a 1992 visit Deng made to Shenzhen to jumpstart his stalling reforms.
""We wish you heavenly peace,"" read one streamer. Said another: ""Thank you for the reform and opening up.""
""There's no public organised mourning of Deng, but I think this is better because people who come to mourn for Deng do it from the bottom of their hearts,"" said a policeman named Chen.
At Shenzhen's botanical garden, someone had hung a black and white portrait of Deng from a banyan tree that Deng planted in 1992. Scores of people burned incense and bowed three times in the traditional Chinese form of mourning.
""Uncle Deng, we miss you!"" wailed a kneeling man surnamed Jin who had brought his year-old child. ""Come child, pay your respect to Uncle Deng.""
""I was shattered by the news of his death,"" Jin said later. ""He has done simply too much for us. I can find no words to express my grief and can only repay him by working harder.""
Deng's legacy of markets was quietly thriving at a nearby private floral shop, whose owner was doing brisk business selling a fresh shipment of flowers.
""Of course I'm happy. I've sold more than 10,000 yuan (US$1,200) worth of chrysanthemums today,"" she said.
",49
"No roads link Russia's Arctic city of Norilsk to the rest of the world. A flight across the Siberian tundra or a trip across the frozen Kara Sea are the only ways to reach this gigantic mining and smelting centre.
A lone highway from Norilsk airport to the company town winds across blinding, snow-blanketed tundra, across which locals say lurk an array of nuclear missiles primed to strike.
After an hour's bumpy ride, the Arctic sun struggles behind a pall of filth and Norilsk, one of the world's biggest metals combines and a monument to Soviet industrial might, rises menacingly from a gruesome, gritty blanket of smelter fumes.
The dark air here is so polluted that for the average local resident, life ends at 50.
Apartment hallways can be covered in blue ice when temperatures drop below minus 50 Celsius (-58 Fahrenheit) in winter.
""Norilsk was built for working, not living,"" said Andrei Samokhin, spokesman for Norilsk Nickel, the company that effectively is the town. ""There's nothing to do but work.""
DEADLY PAST, POISONED FUTURE, LITTLE GOLD FOR WORKERS
Norilsk pulses with the ghosts of at least 100,000 political prisoners whom Soviet dictator Josef Stalin exiled to this forsaken spot in the 1930s and 40s to work one of the planet's richest, but most desolate, sites for turning mineral deposits of nickel, platinum, gold and other ores into pure metals.
For Mitrofan Rubeko, a rare 85-year-old survivor of Stalin's purges, Norilsk, 200 miles (320 km) north of the Arctic Circle, is an outpost of outrage. ""None of the young want to remember the history of Norilsk,"" he said in his spartan apartment.
Norilsk has no monument to the innocent victims of forced labour, no mention of them in the town museum and no talk of one of the most prominent episodes in the Soviet Union's climb to a communist industrial heaven. Not one book has been published in Russia on the town's real history. Company officials have ignored Rubeko's request to erect a monument.
Norilsk does have a monument to the town's first ""engineers"". Most were officers in the secret police that later became the KGB. They supervised thinly clad prisoners labouring in the open air and sleeping in wooden barracks with ice floors.
Norilsk now has three nickel and copper smelters, two of them skeletal dinosaurs belching poisonous gases. It has metals processing and enriching plants and some of the world's richest mines of nickel, platinum, palladium, cobalt, copper and gold.
The new generations of Norilsk's 300,000 residents -- some descendents of Stalin's victims, others children of later, hardy souls who headed north decades ago for higher wages -- are miners and metalworkers who look a decade older than they are.
""It's so ecologically dangerous in Norilsk, you aren't even supposed to give birth here,"" said Sergei Yurshov, director of the main nickel plant's electrolysing unit.
Norilsk says it is in the throes of financial crisis -- but its streets are literally paved with gold.
Tonnes of filthy cancer-inducing black slag, sparkling with precious metals, are collected from the smelters and sifted over streets to keep them from freezing.
""The state sees the bullion, but this is all we see,"" said Boris Degtyarov, an official at the main trade union.
There is more beautiful poison at the electrolysing plant, where luminous, lime-green liquid nickel, laced with electricity, is processed from matt black slabs glinting with the earth's most prized metals.
The dark cobbled floors and 1940s technology, exposing steel entrails and frames of processing lines, have a mediaeval air.
Concentrations of carcinogenic nickel in the air are 200 times Western norms and 20,000 times the worthy but never attained Soviet standard.
In Norilsk, women retire at 40, men at 45. Degtyarov says 90 percent of newborn babies have serious illnesses or handicaps. An aura of illness pervades everything here. One mine, Keyerkan, means Valley of Death in the language of the local Dolgan people.
Despite the richness of its ore mines, Norilsk has not created wealth for its workers.
Difficulties in keeping tabs on just who exports its multi-billion dollar output, and vast tax arrears have not helped the labour force, whose wages are two months behind.
""Where's the money for the metals going?"" asked Rubeko, shaking his silver-haired head. ""That I cannot understand.""
A FROZEN, UNDERGROUND HELL
Deep in the Taimyr mine, 1.5 km (one mile) below the permafrost, is a darker world, where miners labour round the clock in shifts and cavernous tunnels worm through the earth.
Get lost and you are in severe danger -- engineers daily blast out new galleries with dynamite. The rule for finding the way out -- hold up a wet finger and sense the faint breeze from the ventilation shaft.
The lift, a 15 minute or so ride, rumbles like a distant rocket's afterburners.
""The lift cables are rusted,"" said duty operator, Sergei. ""But we love our jobs,"" he added, inciting laughter from miners waiting to be ferried down into the bowels of the Arctic.
The Soviet authorities saw Norilsk as the embodiment of the socialist city-factory and as an organising principle for society. Now the remains of that vision are being tested by new market forces. Already hundreds of homeless live in the town's boiler plants.
Company officials speak of uprooting pensioners to warmer climes, where they would cost less to support, and of the need to trim a bloated workforce.
The plans have made Norilsk a barometer of the troubles faced by Russian industries in casting off their Soviet legacy. But they are hotly contested.
""You'd need two Kalashnikovs for every policeman if you had a load of unemployed wandering these streets,"" Degtyarov said.
Rubeko, dragged to Norilsk in 1938 after a midnight knock at his door in southern Russia, despairs at the thought of a second exile. ""You can't resettle an 85-year-old man,"" he said.
After working at Norilsk for 66 years, Rubeko, now head of the local chapter of the Society for the Defence of the Victims of Stalinist Repressions, cannot even afford new shoes.
When asked what Norilsk was for him, he answered, ""a grave"".
But he is not a dead soul.
""People related better to each other in the old days -- they were kinder and more spiritual.
""Everyone thought Stalin would die and we would survive this,"" he said with a smile. ""And that is what happened.""
",28
"Russian oil producers have seen limited benefit from a rise in world crude prices over the past 12 months, as their costly transformation into capitalist companies sucks up extra cash, energy analysts said on Friday.
""To a certain extent, you can say they have benefited,"" said Peter Houlder, head of the CentreInvest group consultancy and an energy specialist. ""But the tax system has been pretty efficient in catching up with a lot of this increased revenue.""
Oil prices currently stand about $5 a barrel above levels seen this time last year, defying analysts' predictions of weaker oil on what was expected to have been an easing of the United Nations' Gulf War ban on Iraqi oil sales this year.
Analysts said that Russia, the world's third largest oil producer, would in theory have earned an extra $2 billion or so from its exports of about 96 million tonnes of crude to cash-paying, mostly Western countries over the past 12 months.
But the unexpectedly bullish market has not directly translated into fistfulls of cash as it did for the Soviet Union in the 1970s and 1980s, when output peaked at 570 million tonnes after world oil prices rose to nearly $50 a barrel.
""Russian exports are not just a question of profits, but of liquidity,"" said Catherine MacDougall, Russia analyst at Kleinwort Benson in London, referring to producers' need for cash to keep operations going. ""If you take excise and other taxes, there has been limited benefit to Russian producers.""
Russian oil companies are seeing higher world oil prices for the first time since being spun off from the state into privatised, vertically-integrated companies -- and are using export cash as working capital to keep output flowing.
Crude exports now carry big pipeline and transit fees. Companies pay an output duty as well as an export duty, currently about 51,000 to 83,000 roubles ($9.50 to $15.46) a tonne.
Corporate taxes are revenue, not profit, based, with the average company in a 70 percent bracket but paying only 30 percent to keep cash on hand.
Gennady Vasilyev, an independent energy consultant for the World Bank, said Russian producers had earned more from exports this year -- but that they also had bigger debts.
""Of course they have earned more, but they are also restructuring and consolidating and trying to clear out their debts,"" he said.
In the 1970s, when Organisation of Petroleum Exporting Countries (OPEC) members sent the price of oil soaring, the Soviet Union cashed in with windfall petrodollar profits that built up its mighty military machine.
The exports gave the Soviet economy tens of billions of extra dollars, and production associations, the precursors of Russia's privatised oil majors. They paid small taxes and adhered to communist accounting practices which did not account for costs.
MC Securities, in a report on LUKoil, Russia's top oil producer, said the company boosted upstream revenues and net profits 30 percent in the first half of this year, with exports benefiting from higher world prices.
Pyotr Neyev, LUKoil spokesman, said the company's average exports of one million tonnes a month had helped, but not as much as might be expected, partly due to the failure of some customers to pay their bills.
Total Russian crude exports to solvent customers rose nearly 7.5 percent last year, while shipments to former Soviet countries slipped nearly 20 percent, according to fuel and energy ministry figures.
""With our debt situation, the word 'profit' must always be put in quotation marks,"" LUKoil's Neyev said. ($1=5367 Rouble)
",28
"Russian demand for imported sugar has picked up earlier than usual on the eve of the beet harvest, and traders said less price volatility and more consolidation were adding stability to the domestic market.
""Demand is normal, prices are stabilising,"" said a senior trade source. ""There's sugar coming into the ports and demand is good.""
He said raws would need to arrive by mid-July to be processed at domestic refineries before the Russian beet crop supplanted them as a feedstock.
""The (Russian) market is strong at the moment,"" said a second senior trade source. ""You are seeing demand for sugar at the moment. There is some pretty intensive importing of raws right now -- the price structures make tolling profitable.""
Traders debated market talk of sugar backlogs at the Black Sea port of Novorossiisk and whether Russia could soak up any unplaced cargoes looking for homes.
""If you have raws arriving in the Black Sea in July, you'll be pressed,"" said the first source, adding that refineries needed 14-21 days for processing and that they would be less keen to contract for raws as the beet harvest approached.
Recent market talk that around 250,000 tonnes of raws, possibly Brazilian, could be expected later this summer in Novorossiisk or the Baltics was still speculative, traders said.
A Novorossiisk port source said that a backlog of Cuban raws at the outlet had edged down only slightly to 80,700 tonnes from around 90,000 tonnes last week because the Russian receiver was not ready to take delivery.
He said the port expected to receive around 200,000 tonnes of raws, probably of Cuban origin, this summer, including 70,000 tonnes of unknown origin before June.
Indian refined white sugar stocks in port warehouses were around 400,000 tonnes, the port source said, but the senior trade sources said it was overblown by a factor of ten or more.
Russia is heading into its traditional jam-making season, a major factor that spurs a rise in refined sugar imports.
""People are preempting a little, because demand doesn't normally pick up until end-June,"" said the first trade source, adding, ""the high-quality sugar market is much stronger -- you're seeing significant demand, especially at the Western (beverage) bottlers (with Russia operations).""
Sources said domestic sugar reserves were being drawn down but that a fundamental, long-term pick-up in consumer demand had yet to materialise. Some traders see Russian demand as fairly price inelastic and relatively steady despite economic decline and tight disposable income.
Russian consumption is about five million tonnes a year.
There is less room for European sugar in Russia, which meets most of its needs by importing whites from Ukraine and refining Cuban raws and its own sugar beets.
But the structure of the Russian market is changing.
""The market is consolidating -- it's a natural market development,"" said the first source, adding that the days of suppliers having to leap over three or four middlemen to get to buyers were gone.
""You're getting directly at the refiners, and you're cutting out the wild (price) swings,"" he said.
A big glut in 1995, in which buyers imported too much and demand failed to take off as hoped, forced changes in distribution networks that were now consolidating the market.
""The domestic market will remain strong but it won't go crazy,"" said the first trader. ""But hopefully this will establish a pattern.""
--Moscow Newsroom, +7095 941 8520
",28
"Russia's upcoming harvest will barely top last year's poor level, but peasants in this vast agricultural country see that they have no choice but to adopt efficient ways, the agriculture minister said on Tuesday.
Viktor Khlystun repeated earlier government statements that Russia would produce at least 70 million net tonnes of grain and that Moscow would not need to import wheat this year.
""Seventy million tonnes is the prediction, and this is realistic,"" Khlystun told a news conference. ""But I hope it will be bigger.""
But as he called for a rejection of Soviet-style cheap state credits and handouts of goods to finance food production, he admitted that 70 percent of Russian farms verged on collapse.
Khlystun, just appointed a deputy prime minister and now the beleaguered farm lobby's top cabinet voice, promised to give his all to implement a government programme aimed at stabilising and modestly reforming the sector.
""It's completely obvious the time has come when we cannot just look calmly at a situation in which many farms are falling apart,"" he said, adding that 10-15 percent of farms were chronically broke, lazy and without any vision of the future.
But he said some key changes in Russia's agriculture sector, still one of the world's most inefficient, were in motion.
""A root change has taken place -- peasants now see that selling output is more important than producing it,"" he said, adding that most farms were now joint stock companies and that 30 percent of them were thriving.
Russian grain output has contracted by around 40 percent from earlier peak levels of 115 million tonnes and more, and imports now supply up to half the food market.
But banks are unwilling to lend to farms, which in turn have no money to invest in output as state credits dry up.
Khlystun, saying farmers wanted to sell grain but did not know how, said Moscow would set up a marketing agency to bring suppliers and sellers together to redress a big problem that has fuelled smaller private imports -- regional supply imbalances.
""There can be no return to credits in kind,"" he added, referring to government handouts of inputs to farmers. ""I really hope 1997 will be the year we succeed in setting up a (private) credit system for the agricultural sector.""
But he did not say how troubled plans to introduce a land market -- crucial if farms are to receive commercial bank credits requiring property or other assets as backing -- could win the consent of conservative parliamentary deputies.
When asked about Russia's grain import needs this year, Khlystun said, ""We will not do centralised (government) imports."" Russia would have enough food wheat but private sector purchases of maize would continue.
Russia's net grain harvest last year was 69.3 million tonnes, the second worst on record in three decades and only a notch below Khlystun's output forecast for this year.
Private commodities houses have been importing some grains as the government loosens its grip on the market and Moscow has sought to procure for the army and far-flung regions on a competitive basis.
But some reform efforts, most notably the Federal Food Corporation state buying agency, have flopped in the face of charges of misuse of funds and inefficiency.
",28
"Russia's hot new reformer, Boris Nemtsov, is sparking changes at the Fuel and Energy Ministry he now heads, revamping the grey body in ways which could reshape output and exports by the world's third largest oil producer.
Industry sources say Nemtsov, who is trimming the ministry's bloated staff and reorganising the Soviet-era institution to deal with new market realities, is moving to make Russian oil exports to Western markets more transparent.
But Nemtsov also wants to keep Russia well supplied with oil products and prevent regional deficits which have arisen over the past year as producers boost exports at the expense of supplying domestic refineries.
The streamlining envisaged by Russia's golden boy of reform includes fairer access to stretched-to-capacity export pipelines -- first-quarter oil exports outside the Commonwealth of Independent States were up 7.2 percent from year-ago levels at 2.0 million barrels per day.
""The big question is 'Who will control access to export pipelines?'"" asked a senior Western oil industry source in Moscow. ""Moving administration of the pipeline system to a regulatory body is not a bad thing.""
But Nemtsov, who is also a first deputy prime minister in charge of restructuring natural monopolies, including the Transneft oil pipeline outfit, is mindful of domestic needs.
His hand-picked protege, Sergei Kiriyenko, a young banker brought on board as first deputy fuel and energy minister, said the ministry had a duty to keep everyone from domestic power plants to farmers adequately supplied with oil products.
""You can influence the producers only by creating specific stimuli, not by government telegrams,"" Kiriyenko told Wednesday's edition of the Kommersant business daily.
""Of course, there are coercive methods, like access to export pipelines. If we see Russia does not have enough oil products, then the volume of exported oil will be limited.""
Kiriyenko said the ministry's priority was to bring balance into the domestic fuel and energy market and create desirable conditions for companies at home.
Nemtsov, 38, was appointed Fuel and Energy Minister in April, taking responsibility for one of Russia's most strategic and highest-earning sectors under sweeping changes which put reformers in charge of the government.
In a big overhaul, he divided the Fuel and Energy Ministry into two sections -- one in charge of operations, headed by Kiriyenko, and one dealing with investment, headed by Viktor Ott, a ministry old-timer liked by Western energy executives.
Ott will deal with development licences and a supervisory body handling domestic fuel supply issues.
Kommersant quoted Kiriyenko as saying the new team would change ""the obsolete position of the ministry"".
The ministry's old way of functioning includes forcing oil producers to supply regions with oil products essentially for free and deciding how much oil companies can export.
""I can't say we've yet felt the effect of his changes, but it's fairly clear that when the process is over, the ministry will be vastly different than what it was before,"" said the Western executive.
Kiriyenko said the ministry was in no position to lead Russia's newly privatised oil companies but should play a role in managing state shares in the new majors.
Nemtsov, who met Western oil executives at the influential Moscow International Petroleum Club on Tuesday, was quoted by Kommersant as saying no single Russian oil producer would be allowed to account for more than 25 percent of total oil output.
Western executives at the meeting said Nemtsov would fire half of the ministry's 800 or so bureaucrats, stripping away legions who delayed everything from talks for joint ventures to approval for exploration licences.
""We're going to create more attractive conditions for you,"" Kommersant quoted Nemtsov as telling the executives.
",28
"Russia's net grain harvest will probably fall below official forecasts of 75-77 million tonnes, leading independent industry sources in Moscow said on Monday.
Andrei Sizov of private agricultural consultancy SovEcon Ltd said he had revised his forecast down to about 68 million tonnes from a previous 70 million.
""Russia lost 2.9 million hectares to drought, and since it will cost more to harvest this grain than it is worth, it is likely this area will not be harvested at all,"" he said, adding that the government would be unwilling to spend money on tractor fuel for crops that were essentially already lost.
""The Western Siberian harvest is mixed -- you've still got good quality there for the time being, but it's a very slow harvest,"" Sizov said, adding that he saw output there at 9.3 million tonnes.
He said it was likely the region would not be fully harvested and that some crops would be left to rot.
However, a senior Western grains source said the government would probably declare the net grain harvest at 72 million tonnes, but that it could in reality turn out to be several million tonnes higher.
""They'll declare 72, but remember that they've under-reported the actual total for the last two years,"" the source said.
A lot would depend on how heavy rains in Siberia affect yields, the source said, adding, ""Some of this stuff is not going to be of very good quality.""
A source at the State Meteorological Service said government officials were constantly revising their estimates based on recent weather trends but that they were not making the new forecasts public.
An Agriculture Ministry spokeswoman said the ministry was sticking to its forecast of 75-77 million tonnes but said officials would meet Thursday to discuss the pace of the harvest and that the forecast could be revised downwards.
A source at Rosselkhozakademiya, the state agricultural institute, said the harvest would be slightly below the government forecast, but he declined to give a concrete figure.
""It will be a little bit below 75 million tonnes, because it's a very tough harvest in Siberia,"" said the source, who declined to be named.
Arkady Blyumin, head of Informzerno, a grain market research group, said output could be as a low as 70 million tonnes or as high as 75 million. ""Nature may give us something, or it may take it away, and that's where the difference will be,"" he said.
The Centre for Economic Trends, an influential institute set up by the government, on Friday forecast Russia's 1996 net grain harvest at 69 million tonnes.
One analyst who saw output higher was Boris Chernyakov, head of agriculture at the U.S.-Canada Institute in Moscow. He forecast net grain output at 80 million tonnes, saying producers were hiding how much they had already harvested.
Last year's grain output was officially 63.4 million tonnes, the worst in three decades.
The harvest in parts of Siberia has largely ground to a halt as heavy rains keep crops too wet for reaping, while drought hit sections of the main grain producing areas in the Northern Caucasus and Central Russia earlier in the summer.
--Moscow Newsroom +7095 941 8520
",28
"Russia will be a big buyer of Iraqi oil once again as Baghdad gears up to export more crude to raise much-needed cash for food and medicine, Russian officials said on Thursday.
""We're aiming for as much this time as we had last time,"" said Yuri Agababov, deputy general director of Zarubezhneft, the Moscow-based firm coordinating Russian contracts for Iraqi oil under the United Nation's oil-for-food deal.
The United Nations renewed a $2 billion, 180-day programme on Wednesday under which Iraq will export oil to raise cash for humanitarian needs and to pay reparations to Gulf War victims after Baghdad's 1990 invasion of Kuwait.
Russian companies bought nearly 28.54 billion barrels of Iraqi oil under the first 180-day programme, or a whopping 23.4 percent of the 121.6 million or so barrels Baghdad was permitted to export under that first deal.
""We're hoping to do this much again,"" Agababov said in a brief telephone interview. ""But it will all depend on how the commercial terms of our talks proceed. Let's not jinx it by talking about it before it happens.""
The U.N. resolution renews the programme from June 8, right after the first deal expires, and Agababov said he would head a delegation of Russian companies to Baghdad next week to begin negotiating contracts with Iraqi state oil firm SOMO.
He said talks had not yet taken place and declined to say whether contracts had been pre-negotiated in principle.
""Those firms which participated will do so again, and there may be some new players,"" Agababov said, adding that Russian companies lifted their last loading of crude on May 22-25.
Russia has an inside track to Iraq, its Soviet-era trading partner and geopolitical ally, and is keen to see Baghdad flush with cash to repay the $7 billion it owes Moscow.
Russia's -- and one of the world's -- largest oil companies, LUKoil, has a 52.5 percent stake in a $4 billion, 23-year production-sharing project in Iraq's Western Qurnah oil field.
Other Russian firms, including Mashinoimport, have supplied Baghdad with oil equipment, and organisations close to the Foreign Trade Ministry sent wheat, sugar, vegetable oils and other foodstuffs.
But Agababov said commerce, not politics, was at work in the oil-for-food deal. ""We'll participate on the same level and terms as others,"" he said. ""It all comes down to the terms of the contracts.""
He declined to say how the terms had been attractive to the eight Russian oil-producing and trading companies which had contracts under the first deal.
Benchmark Brent Blend's nearby contract, a benchmark for valueing Iraq's exports and thus their quantity, was around $18.74 a barrel in early London futures trade.
That was more than $5.00 below the December 10, 1996 nearby-contract level when Iraq first returned to world oil markets under the first U.N. programme.
But Russian traders, who are finding it tougher to win access to tight domestic export pipelines, are keen to get their hands on any oil they can.
Vladimir Bjedougov, deputy head of major trader Alfa-Eko's international section, which had a big contract under the first programme, said lifters had taken a hit from what he called the failure of the U.N.-Iraqi price formula to reflect the market.
""Prices fluctuated fairly sharply for a while and the formula didn't reflect the difference -- but I wouldn't say this experience would have any effect on our next talks,"" he said.
""On the contrary, it will make things easier. The first contract went well, even though in any deal, there are always technical problems -- but none of them were critical.""
",28
"The world's second largest nickel producer, Russia's Norilsk Nickel, averted a dockworkers' strike on Monday but spoke of its dire financial straits and told employees to steel themselves for cutbacks.
A group of workers at Norilsk, a town built by Soviet-era forced labour in the Arctic Circle, called off their threat to stop loading metals for export from the port of Dudinka, Norilsk spokesman Sergei Vetchinin said.
But he said the company was in deep financial trouble -- surprising analysts who had thought RAO Norilsk Nikel's new majority shareholder, Uneximbank, was closer to turning the giant nickel, copper and precious metals producer around.
""There is an appalling collapse at Norilsk,"" said metals trader Ruslan Fedorovsky of Barclays Physical Trading Ltd in London. ""It's a complete breakdown and there is little control over the situation.""
Vetchinin said lay-offs could hit 80,000 non-production employees at Norilsk's flagship combine. ""You would think this is a construction outfit, not a mining and metallurgy plant,"" he said, referring to the number of ancillary workers.
""We've described the depths of our financial crisis and they understand,"" he said, adding that 800 billion (Corrects from 800 million) roubles ($150 million) of delayed wages would be paid off by November.
But Norilsk workers, once laid off, have nowhere to go -- leaving markets to wonder how labour unrest and sluggish cash flow could affect the company's production and exports.
""A number of us were surprised by the depth and severity of the problems there,"" said metals analyst Raj Kohli of MC Securities in London. ""There will be some ongoing disruptions.""
Norilsk is looking to state bail-outs and a share issue to pay off its total 13 trillion rouble ($2.3 billion) debt and plans a new financial austerity programme by November as part of its restructuring scheme, Vetchinin said.
But he said Uneximbank, a big commercial bank whose founders include Soviet-era state commodities exporters, had no more cash to pump into Norilsk.
Norilsk, which has long said it is revamping the way it exports metals abroad, said it would focus on selling to end-users like German stainless steel group Krupp Thyssen Nirosta GmbH (KTN), which groups Fried Krupp AG Hoesch-Krupp and Thyssen AG.
The move could leave Western commodities houses fighting over fewer contracts.
Metals analysts are surprised that Norilsk's strong 1995 pre-tax profit of nearly 5.5 trillion roubles ($1 billion) (Corrects dollar conversion of rouble figure from $95 billion) has not translated into enough cash to meet immediate needs like overdue salaries and back taxes.
Vetchinin said that softer world metals prices meant that even exporters who pre-paid were not providing enough cash.
Norilsk produced 180,100 tonnes of nickel in 1995, up 11 percent on 1994, and sees 1996 production rising three percent.
""The more major issue is how much longer it can go without big investments in its fixed assets,"" Kohli said, adding that around $1 billion was a ballpark figure needed.
""But we're optimistic, because as an ore body it's extremely wealthy and can produce large volumes at relatively low cost.""
Still, others expect possible volatility in Norilsk's production and exports. ($1 = 5,376)
",28
"Russia, expecting an increased grain harvest but lower carryover stocks this year, is unlikely to go on a shopping spree soon despite government talk of imports, industry sources said on Friday.
""Soy and maize buying is a real possibility for Russia, but I wouldn't start to talk about any volumes,"" said Arkady Zlochevsky, head of the OGO commodities trading company. But he said he had been buying some Brazilian and Argentine soymeal.
Farm Minister Viktor Khlystun has said Russia may import 4.0-4.5 million tonnes of maize and soymeal plus 500,000 tonnes of food wheat to supplement the 1996 harvest and a very low carryover from last year.
While other grain sources also talk big numbers, they say Russia's grain needs do not always mean imports will take place.
""They do not yet have sufficient information to interpret their grain needs,"" said a senior Western grains source, referring to Khlystun's figures.
Russian 1996 net grain harvest predictions range from 69 to 75 million tonnes.
Sources say Khlystun has not approached major Western grains exporters in Moscow about any possible buys.
""He hasn't come to us,"" said one Western grains source.
Others say Khlystun, who gave no specific time-frame for possible buying, may be waiting for international prices to slip on the back of better harvests around the world.
""No, no -- no buying right now,"" said Andrei Ambartsumyan of grain trader Exportkhleb. ""But in January, when domestic maize prices could peak, who knows?""
But Eduard Baranov, deputy head of the Centre for Economic Trends, an institute set up by the government, said Russia could be a buyer as it had used most of the carryover from 1995.
""Khlystun's (import) numbers are probably close to the truth,"" said Baranov, whose centre sees net grain output at 69 million tonnes, below official forecasts of 75 million tonnes but still above last year's drought-hit 63.4 million.
The Western source said Russia's total grain imports last year, with flour converted to grain equivalent and pasta buying included, were 5.5 million tonnes.
""The cash and the need are there,"" said a Canadian source, ""but the (Russian) government will not fund the whole amount.""
The source said many small, private Russian traders had turned to Canadian agriculture officials but that no big requests had come from the state or from former state buying agencies like Roskhleboprodukt.
Andrei Sizov of private agricultural consultancy SovEcon Ltd said he thought Russia's total imports of all types of grain from all sources over the 1996/97 crop year could be six to seven million tonnes, including 3.5-4.0 million tonnes of wheat and wheat flour, 1.5 million tonnes of barley, 200,000-300,000 tonnes of rye and 300,000 tonnes of rice.
But doubts remain. ""I've got a lot of interest and requests from the Russian side, but it's hard to say how legitimate it all is,"" the Canadian source said.
--Moscow Newsroom +7095 941 8520
",28
"Russia's LUKoil said on Monday a new reserves audit made it the world's single largest oil firm, but energy analysts said LUKoil was not the grand dame of the seven sisters' club of international oil producers.
NK LUKoil said in a statement, based on an audit by U.S. engineers Miller & Lents, that its total proven oil reserves in Russia, including unspecified amounts of gas, were 10.7 billion barrels.
This was above the 10.5 billion it said it had in 1996 after a similar audit.
""It puts them basically at the top of the list for publicly-traded oil companies,"" said energy analyst James Bunch at Renaissance Capital brokerage in Moscow.
""It puts it in the company of the big sisters, but by no means is it larger than the big sisters.""
Energy analysts said LUKoil, already Russia's largest vertically-integrated oil company in terms of reserves, had jumped the gun in saying that, in terms of reserves, it was the queen of the seven sisters -- the world's biggest oil companies.
The Seven Sisters, a term coined in the 1950s and popularised two decades later, refers to Royal Dutch/Shell, British Petroleum, Exxon, Texaco, Chevron, Mobil and Gulf Oil Corp, now owned by Chevron.
The world's single largest oil company is private Saudi Aramco, the state oil company of Saudi Arabia, the world's single biggest oil producing and exporting country.
But even LUKoil's listed international competitors have reserves and oil reserves equivalents that make them outshine Russia's star oil firm.
""There's a slight bit of being, how shall we say it, economical with the truth,"" said Stephen O'Sullivan, director of oil and gas at MC Securities in London, adding that Exxon had larger reserves than LUKoil when its natural gas was converted to oil equivalent in barrels.
Shell had about eight billion barrels of oil reserves, but also an equal amount of natural gas equivalent to barrels -- putting it head and shoulders above LUKoil.
""Certainly if you're LUKoil, 99 percent of your value is in oil, whereas if you're BP or Exxon, you have an awful lot of value in your gas, which is a very valuable commodity,"" O'Sullivan said.
Russia's Gazprom natural gas monopoly controls all the transport of Russian gas to world markets, leaving a question mark over the production and transport of any gas in LUKoil's reserves portfolio.
LUKoil said it had arrived at the new reserves total after an audit of its reserves in what Russia calls its European part, where some LUKoil production units are based.
The statement gave no information on the degrees to which the total reserves were commercially recoverable -- a key for any shareholder wondering how big oil in the ground translates into equity benefits.
LUKoil's reserves, at the company's 1996 production rate of about 58 million tonnes, would mean it had 26 years' worth of output -- a period of time that, coupled with the cost of extracting oil in Siberia, could be a burden, not a blessing.
""After 10 years, the net added value of those reserves, discounted at 15 percent, is nothing,"" said Peter Houlder, managing director of CentreInvest consultancy in Moscow and an energy specialist.
""They're the largest development driller and exploratory driller in Russia -- and you have to ask, why?"" said Houlder, citing the vast costs of tapping remote oil in Siberia, where the majority of LUKoil's oil is located.
One Western analyst joked that the cost of producing Siberian oil was so great compared to North Sea or Alaskan oil that Russian oil firms with remote reserves were the six ""babushkas"", or grandmothers, to the world's top six producers.
",28
"Russia's plans to cut electricity tariffs for good payers could jolt its giant aluminium industry, the world's largest exporter of the non-ferrous metal, into bigger profits, officials and analysts said on Monday.
But not all plants, they said, would benefit equally.
""Well, this is certainly a pretty good development,"" said Galina Stelmakova, deputy director for development and investments at Kontsern Alyuminiy, the Russian producers' group. ""It will streamline the economic situations at smelters.
Fuel and Energy Minister Boris Nemtsov, in charge of revamping natural monopolies in the energy and transport sectors, said earlier that electricity tariffs for domestic industry would drop by up to 30 percent from July.
Nemtsov said only users which paid on time for supplies would be eligible for the lower tariffs -- a condition many, but not all, Russian smelters meet.
Industry officials said that with electricity accounting for about 25 percent of the cost of producing a tonne of primary aluminium in Russia, lower power tariffs could help profits.
Yuri Shlaifshtein, a board member at Bratsk, the world's largest primary aluminium smelter, said leaner tariffs could help the Siberian plant's longterm plans to attract foreign investment for modernisation.
""I can only welcome this decision,"" he said by telephone, adding Bratsk always paid on time, in cash, for its electricity supplies. ""This won't affect our general production levels but it will make them more stable over the longterm.""
Russia, home to the world's largest smelters, exported 2.44 million tonnes of primary aluminium last year, the most of any producing country. Its total output was 2.87 million tonnes.
The reduction in power costs are not likely to be felt evenly, since different regions have different rates. The so-called European part of Russia, where only about 15 percent of Russia's aluminium is produced, pays the highest tariffs.
Irkutsk, another large East Siberian smelter, pays about 10 percent of its per-tonne production cost of $1,200 for electricity. In sharp contrast, the European smelters pay up to $600 for electricity for each tonne.
Boris Arlyuk of St Petersburg, Russia-based Alumconsult said the rate cuts would help the Kandalaksha, Nadvoisky and Volgograd smelters in the European part of Russia most of all, since those plants had the highest energy costs.
But they were also the least solvent, paying for electricity with metal or promissory notes, and might not be able to produce cash up front as Nemtsov wanted, he said.
Russian smelters are struggling to secure longterm electricity supply contracts to increase profits and plan for the future.
Nemstov's rate cuts are part of a wider drive by Moscow to spark life into industrial output in general, which has plummeted in the years since the breakup of the Soviet Union.
Ironically, electricity rate cuts could benefit the Siberian smelters the least, since some of them may have already secured longterm supply contracts with regional hydroelectrical plants.
""Now if we can just get the government to agree to a lower tariff for three years,"" Shlaifshtein added. ""And then get it to do the same thing for railway tariffs.""
Nemtsov, a young reformer who is also a first deputy prime minister, has also promised to cut rail tariffs -- a move the smelters would welcome.
Industry officials have said the cost of transporting Russian metal to world markets is more than twice the Western industry average of around 24 percent.
Kontsern Alyuminiy said in March that average Russian smelter profit margins had fallen to one percent in 1996 from 16 percent two years before.
--Moscow Newsroom, +7095 941 8520
",28
"Russian oil-for-sugar barter deals with Cuba, a staple of trade between the two countries since Soviet times, have soured as market economy principles intrude upon leftover communist-era practices.
Once a swap unencumbered by inconveniences like volatile commodities prices and competitive supplies from other countries, the practice has come up against cold realities that have stalled old deals and raised questions about how new ones will be implemented.
Players on the Russian side said on Wednesday that the last barter arrangement for 1996 had yet to be completed, and that one of the Russian commodities houses implementing the old deal had lost money on it and would likely not do future deals.
""We are not talking now about new deals. No way,"" said a source at Alfa-Eko, which with Menatep-Impex, another Russian powerhouse commodities trader, is implementing the 1996 deal.
The Alfa-Eko source said the only talks taking place were on how to resolve sticky issues left over from the 1996 deal, which has carried into 1997 due to disputes stemming from high world oil prices and low prices for refined sugar in Russia.
He said Alfa-Eko still owed Havana about 200,000 tonnes of oil and was owed about half as much cane sugar.
""The talks are about whether we should go ahead and deliver or just settle the matter amicably,"" he said.
The barter practice goes back to the 1960s, when Soviet Moscow sold cheap oil to Havana, bought a major portion of the Cuban sugar cane crop at wildly-inflated prices, and even picked up Cuba's bad credits when poor harvests sent Havana scrambling onto world markets in search of supplies.
Today, the game is no longer about helping the communist holdout in the Carribean, but about making money.
Havana resells the crude oil on world markets, while Russian sugar refineries get a steady feedstock.
The deals are carried out according to ratios linked to world commodities prices, and private Alfa-Eko and Menatep have replaced the Russian government in carrying out the schemes.
""It's all about the ratios, which are linked to world prices for oil and sugar,"" said a senior Menatep-Impex source, adding that the ratio formulas were a commercial secret.
Menatep said it would complete its portion of the 1996 deal, under which it owes several hundred thousand tonnes of oil and will get about half as much sugar, in the first quarter of 1997.
But it has not been easy.
Cheap Ukrainian refined sugar has flooded into Russia, creating a glut that has pressured prices and forced Alfa-Eko and Menatep to rethink how they can make money on the schemes.
""Honestly, we still have sugar in storage, and the fees are killing us,"" said the Alfa-Eko source. ""We're not doing anything right now -- the market is not favourable.""
The Menatep source said Menatep would do all of the 1997 deals and that Alfa-Eko was quitting the business.
The two sides already have a three-year arrangement covering 1996-1998 that Moscow and Havana signed in 1995. That is in addition to the separate 1996 deal still being carried out.
According to Interfax news agency last year, the three-year deal envisaged Russia selling Cuba 2.1 million tonnes of oil in 1996, 3.9 million in 1997 and 4.5 million in 1998. In return, Russia would get 750,000 tonnes of Cuban raw sugar for 1996, 1.5 million in 1997 and 1.75 million in 1998.
With oil prices at highs and Russian refined sugar prices at lows, the ratios will likely change, leaving somebody in tears.
But even with volatile prices, some things have not changed.
""The deals are still relevant,"" the Menatep source said. ""Russia needs this sugar, which is tough to get in these volumes on the free market, where certain traders have dug in.
""Cubans as trading partners are a very particular type. We're used to them. We've got all sorts of Soviet-era specialists working for us. Alfa-Eko has more of a Western mentality -- and that is why they have lost.""
",28
"The newest challenge for Russia, now that it has lumbered over the hurdles of privatisation and market liberalisation, is reforming its giant natural monopolies to underpin long-term economic growth, analysts said on Tuesday.
But reforming prices and boosting competition in the gas, electricity and railway monoliths -- as well as tackling the most resilient leftovers of the Soviet planned economy -- could be the toughest economic task yet in this vast country.
The monopolies are the government's newest makeover target, castigated for functioning largely as they did in Soviet days, when production costs were irrelevant, competition non-existent and prices bore no relationship to reality.
Prices for industrial consumers have risen astronomically as Russia's markets take hold, but the new pricing -- domestic customers pay a fraction of real costs -- does not reflect market principles.
Analysts said price distortions were hurting the economy, with far-reaching effects ranging from consumers not paying for supplies to shortfalls in budget revenue and commodities houses unable to import grain because of high domestic rail tariffs.
""The theoretical principle is very simple,"" said Jochen Wermuth, an economist and adviser at the Finance Ministry. ""If you abolish cross-subsidies and introduce territorially differentiated price structures, you'll see more competition.""
But Russia's monopolies can see only fine-tuning, rather than the major overhaul the International Monetary Fund wants as a condition of its $10 billion, three-year loan to Moscow.
Each monopoly faces similar problems, but all drag their feet and need prodding from the Kremlin to change old ways.
Gazprom  GAZP.RTS, the natural gas monopoly and the world's largest gas company, needs to release its stranglehold on production and distribution.
""To a certain extent Gazprom is pretending to talk about restructuring,"" said Renaissance Capital oil and gas analyst Alexei Kokin. ""It may help it work more efficiently but it won't introduce competition (in gas distribution).""
National electricity firm UES  EESR.RTS, both a producer and a transmitter, must create a wholesale electricity market and allow regional producers to sell directly to end-users.
But the tightly-integrated system was set up so that regional generators could send excess supplies to areas needing more, and some analysts said giving the regional ""energos"" a free rein could wreak havoc in the short-term.
""If consumers could chose their own providers, they would go for the cheapest supplies, which would lead to no demand at other producers and shortages in certain areas,"" said Marina Oganesian, energy analyst at Troika-Dialog in Moscow.
Analysts said the railways monopoly, still a ministry, must stop subsidising passengers with prices many times lower than commercial rates that have influenced the economics of everything from oil exports to grain imports.
Russia's newest economic whiz kid, First Deputy Prime Minister Boris Nemtsov, wants UES to lower prices and allow competition among producers, but he and Prime Minister Viktor Chernomyrdin have ruled out breaking up either UES or Gazprom.
The three monopolies, coupled with the oil pipeline export network, account for 40 percent of budget revenues but are a main source of a nonpayments crisis crippling Russian industry.
Just 10 percent of electricity consumers pay their bills in cash, while UES, Gazprom's biggest domestic client, owes the gas giant billions. UES collects only half of what it is owed.
""Clearly, if you keep having a distorted price structure, it's not good for long-term growth,"" Wermuth said, adding he expected major changes this year but that they would be painful.
The biggest beneficiaries of monopoly restructuring would be industrial enterprises, whose output contracted an average six percent in 1996, and the monopolies themselves, which would find it easier to collect for supplies delivered.
The scale of monopolies whose gas pipelines, powerlines and railroads cover tens of thousands of km (miles) makes restructuring both urgent and difficult. ""It's a big advantage for Russia to be so big -- the hugeness is in fact the argument for efficiency of the energy system,"" Wermuth said.
",28
"Russian refineries, pressured by growing domestic demand for transport fuels and cleaner specifications in export markets, are nonetheless a long way from producing lighter products, analysts said.
""You should not expect any significant changes in the composition of the Russian barrel in the next three to five years,"" said Pavis Shahidi, a refining expert at  Bechtel International Inc in London.
""All the upgrading projects are still awaiting financing.""
Russia's 28 major refineries have plans to install conversion systems and some are in talks with international lending institutions on multi-million dollar financing. But none of the major proposals, whose total cost will ring in at around $12 billion, are truly off the ground.
""It requires a lot of money, and investment is hard to get in this country,"" said Peter Lukyanov of Universal Oil Product in Moscow. ""But it is a priority for Russian producers, because it's a big (financial) loss to do heavy fuel oil instead of lighter products.""
Conversion levels at Russian refineries are 50-55 percent, with fuel oil comprising the balance of output, compared to 75-80 percent conversions at leading foreign facilities.
Deeper treatment technologies are in use in only 10 percent of current refining capacity and Russia has not one single hydrocracker, analysts said.
One result is that Russia will continue to produce vast quantities of heavy fuel oil, or mazut, with the sludgy, heavy product now comprising 40 percent or more of oil product output.
Liz Barrett, an energy specialist at CentreInvest Group consultancy in Moscow, said another factor stymieing efforts by refineries to finance conversion technologies was the focus of top managers at the new vertically integrated oil firms on upstream, not downstream, projects.
""Most of the refineries are looking at hydrocrackers (as opposed to less costly but less flexible catalytic crackers) because they want low sulphur diesels,"" she added.
Russia's Soviet-era refineries were designed three and more decades ago to serve a domestic planned economy, and many, especially those clustered in the Volga-Urals region, may not have good export marketing potential.
""The Russian refineries are positioned to supply local markets, and with export and transport costs expensive, it makes it difficult to arrange financing for upgrades,"" Shahidi said.
But under-utilisation -- Russian plants operate at an average 55 percent of their 6.8 million barrels per day capacity -- has meant some refineries run reforming units more severely and in greater volumes, creating more material for desulphuring diesel.
""This is actually how the Russians are making more low-sulphur material,"" Barrett said.
Russia turns out some cracked product but it is not high quality. ""The product is not upgraded -- it's not the result of new conversion processes,"" Lukyanov said, when asked why some Western traders might be seeing more cracked material.
In spite of the lack of changes in refining technologies here, fuel oil output has dropped this year on the back of higher crude oil exports and, some analysts say, scaled-back use at bankrupt domestic military-industrial plants.
Russia produced 21.9 million tonnes of heavy fuel oil in the first four months of the year, down four percent from the same year-ago period, State Statistics Committee figures show.
This represented 38 percent of total refinery throughput of 57.7 million tonnes in the first four months.
-- Moscow Newsroom, +7095 941 8520
",28
"Pinning down the size of Russia's grain harvest is proving a problem for analysts and traders due to widely differing estimates from official and trade groups.
Various government and private-sector predictions put Russia's net grain output at anywhere from 70 to 80 million tonnes -- a range which could leave Moscow with one of its worst harvests ever or give it a more comfortable margin.
""The situation is still tense and serious,"" said independent agriculture specialist Andrei Sizov of SovEcon Ltd consultancy on Friday, citing miniscule stocks from last year's harvest.  
But Arkady Zlochevsky, president of the OGO grain and food trading company, one of Russia's largest, saw net grain output at 80 million tonnes. ""We are not optimists, we are realists -- we know how much peasants and regional administrations water down the real figures,"" he said.
The various numbers see output recovering anywhere from 11 to 21 percent from last year's drought-hit 63.4 million tonnes.
Agriculture Minister Viktor Khlystun said in June, his last public forecast, that he saw output at 70 million tonnes, while Deputy Prime Minister Alexander Zaveryukha, who is in charge of the harvest, put the figure this week at 75-77 million tonnes.  
In a separate estimate, the state statistics committee sees output at 71-72 million tonnes.
Sizov said he saw net output at 70 million tonnes.
A Russian source at a Western industry organisation put it at 74-75 million tonnes, based on recent talks with other trade sources in Moscow and abroad. ""These are the figures we've got right now,"" the source said. ""I think they're realistic.""
The state meteorological service, which bases its forecasts on weather conditions only, and not on factors like tractor availability, sees output in the 71-75 million tonne range.  
The International Grains Council sees the crucial Russian wheat harvest alone rising to 34 million tonnes, while Zlochevksy sees 37 million tonnes.
The lower-range net output numbers still mean the 1996 harvest could be one of the worst three since 1965.
The Russian government will not issue a final figure until at least the first two weeks of October, when the harvest officially ends -- leaving trade sources now to watch the all-important Siberian harvest, key to regional supplies.  
""The harvest in the European part of Russia is nearly over and pretty much a known entity -- the focus right now is Western and Eastern Siberia,"" Sizov said.
In Siberia, farmers are battling weeks of rains that have moved the harvest closer to the date of the first snow, which can come as early as the end of the month.
""I think they could lose three or four million tonnes there,"" due to the weather, one trade source said. --Moscow Newsroom, +7095 941 8520
",28
"The titans of Russia's aluminium sector said there were few chances of output disruptions to the world's largest exporter as a result of a row over Western participation in the industry
Asked if Moscow could renationalise the sector, a senior official close to the Bratsk smelter -- Russia's and the world's largest -- said, ""I can't say that it's impossible.""
But he added, ""All the smelters have a unified position of solidarity. The enterprises will win this argument and output will not be affected.""
Oleg Presman, deputy chief executive of the Krasnoyarsk smelter, Russia's second largest, said in a telephone interview that Russia's top aluminium executives were drafting a letter to Interior Minister Anatoly Kulikov to address his concerns about foreign presence in the sector.
Kulikov stepped up a war of words with London-based Trans-World Group -- a commodities giant working closely with Russian smelters -- saying on Tuesday that a probe into what he called crimes in Russia's aluminium sector was justified.
Kulikov, in a letter to Trans-World executive chairman David Reuben, a copy of which the ministry faxed to Reuters, said domestic producers needed protection from foreign metals companies to compete and survive.
Among other stakes, Trans-World has about 30 percent in Bratsk, 11 percent of voting shares in Krasnoyarsk and a non-controlling stake in the smaller Novokuznetsk smelter.
But domestic aluminium executives defended the presence of foreign companies like Trans-World on the Russian market, saying that they had saved Russian plants with tolling arrangements.
""If Kulikov puts an end to tolling, he'll put an end to the Russian aluminium sector,"" the senior official said.
""Where is he going to get $2 billion?"" he said, referring to the cash smelters would have to raise if they severed links with suppliers like Trans-World and bought their own raw materials to produce primary aluminium.
Russian primary aluminium exports last year were the world's largest at 2.44 million tonnes out of total domestic output of 2.87 million tonnes.
Kulikov said there was no question of confiscating property -- which Trans-World said was reassuring.
But Kulikov said tolling -- in which commodities companies import alumina, give it to smelters to make primary aluminium and then take the product back for export -- had deprived smelters of earning more money from exports.
But smelters said they also make money on the arrangement.
""If tolling were not advantageous for us, we wouldn't do it,"" Presman said.
Igor Prokopov, chief executive of the Kontsern Alyuminiy producers' group, said that a group letter being drafted would deny that Russian aluminium was a dirty business.
""We are not in any way involved in criminal deals,"" he said.
The Prosecutor-General said last Friday that it was activating an investigation originally started by the Interior Ministry into what it called crimes in the aluminium sector.
""It's unpleasant when a factory is under pressure,"" Presman said, referring to the probe. But when asked if the quarrel could hit output or exports, he said, ""I don't think so.""
The stepping up of the probe came days after Reuben, in commentaries and advertisements in international newspapers, said Moscow was smearing him for his business in Russia.
""There are some normal questions and some incorrect ones,"" said Presman, referring to materials Kulikov had on the sector.
""Maybe the materials Kulikov was given (to examine) were true, but some of the conclusions about those materials are incorrect,"" he said, adding that Kulikov's call for tariffs on alumina imports were damaging.
When asked if tolling in Russia would continue, he said, ""I think yes -- as long we still need it economically.""
--Moscow Newsroom, +7095 941 8520
",28
"Russia's Norilsk Nickel mining and smelting company said on Thursday a cash crisis could tarnish its plans to become the world's top nickel producer in 1997.
The company had to cut costs, and to do that successfully it needed the government's cooperation.
Norilsk, previewing of one of the puniest payouts yet seen in Russia's emerging market, also said its board would recommend at an annual shareholders meeting on Friday a 1996 privileged share dividend of just two roubles -- an infinitesimal sum in dollar terms and way below 1995's 438 roubles.
Norilsk is a leading global producer of nickel and metals such as platinum and palladium. It aims to boost nickel output by 20 percent this year to 213,000 tonnes, taking advantage of idled capacity to become the world number one.
But Norilsk spokesman Sergei Vetchinin said the firm could be frustrated by cash problems that are reflected in a dividend structure which recommends no payout on ordinary shares for the second year running.
""Realisation of the 1997 production plan strongly depends on the decisions of the government with regard to our needs to cut costs,"" he said.
Norilsk's production north of the Arctic Circle is profitable but vast expenses are pushing it into the red.
""We have a plan,"" Vetchinin said. ""We're not just crying...We are working to improve things.""
But he added, ""If our costs do not come down, and that will take place by the state taking responsibility for our social costs, things may change.""
The state holds 51 percent of voting shares in Norilsk, a stake entrusted temporarily to commercial bank Uneximbank, which is trying to revamp everything from Norilsk units' finances and export revenue flows to the cost of supporting pensioners.
Vetchinin said the board would vote on items that could affect the company's charter and Uneximbank would vote according to State Property Fund instructions, but he gave no details.
At the end of 1996, RAO Norilsky Nikel was owed 6.9 trillion roubles ($1.2 billion). It owed, through tax and other arrears, 16.9 trillion roubles, Vetchinin said.
This has helped make its flagship mining and metallurgical complex one of Russia's top debtors and a source of labour unrest that has in the past sent world metals markets gyrating.
But a company statement said workers were satisfied management was making progress in paying off wage and other arrears, which had been halved to six weeks, and that under a deal ending July 1, output would not be disrupted.
""The downhill slide has been halted and the proof is thus -- we have a team of managers, a programme and real resources for production,"" Vetchinin said, adding the government could sign a decree restructuring the company's debt as soon as next week.
Norilsk, which has said it could be near bankruptcy after 1996 consolidated losses of 3.29 trillion roubles according to Russian accounting standards, likes to describe its problems as social and political, not economic and financial.
But some of its problems stem from market, not state, relations. Vetchinin said Norilsk wanted its natural gas supplier to cut its rates, not supplies, as it has since early June, forcing Norilsk to run partly on heavy fuel oil.
Russia also accounts for about 60 percent of the world's palladium supply and around 20 percent of platinum deliveries, with Norilsk accounting for most of Russian production.
""If you look at our production as separate from our other costs, it's profitable,"" Vetchinin said. The main complex's profit margins on nickel, used to manufacture stainless steel, were 18 percent, he added.
""But we want to tell our own state that if we don't get rid of our expenses, then our metal will cease to be competitive on world markets after 2000."" ($1 = 5,760 roubles)
",28
"Russia's new oil majors want to wrest crude oil exports market away from traders in a battle for control over one of the country's most lucrative businesses.
Domestic oil producers, who export about one third of their total output of 5.86 million barrels per day, are fighting for control over a chunk of these exports known as the federal programmes market.
""Producers are trying to oust the trading companies from the business of implementing these programmes,"" said a senior source at Alfa-Eko, one of Russia's biggest oil exporters with no oil production facilities. ""It would mean that we have no job.""
Under so-called federal programmes, the government signs decrees every year authorising companies to export certain amounts of crude oil to finance state investment programmes.
The amounts are getting bigger, making federal programmes a huge business for companies which see dancing dollar signs in strong world oil prices.
About 20 decrees call for federal programme oil exports to soar to 60-70 million tonnes in 1997 -- representing 60-70 percent of Russia's total oil exports.
The programmes are used by the Kremlin to finance everything from space shuttle lift-offs from the Baikonur cosmodrome to building baby-food factories.
Federal programme exporters -- most of them trading firms rather than producers -- keep some of the proceeds, getting rich on the difference between domestic and world oil prices.
Traders say that if they are squeezed out of this lucrative niche, they could be put out of business.
Fuel and Energy Minister Pyotr Rodionov told Russian oil executives in Siberia last week that the government was preparing to limit the number of companies exporting oil.
The president of Russia's largest oil company LUKoil, Vagit Alekperov, was quoted by Interfax news agency as saying producers, not traders, should deliver oil abroad.
""I guess they just don't like all of the MESs and Alfa-Ekos of the world making such huge margins,"" said the head of a small European trader, referring to two of Russia's most prominent independent oil exporters who thrive on federal programmes.
Russian crude oil prices were 70 percent of world prices before international markets began their rally.
Benchmark Brent blend crude oil has been near six-year highs for weeks and, at an average $20.30 a barrel during 1996, was up 20 percent last year from 1995.
With that in mind, Russia's new vertically-integrated oil majors wrote to Prime Minister Viktor Chernomyrdin last month pleading that they, not traders, be allowed to carry out the federal programmes and asking for more commercial exports.
Federal programme exports in 1996 -- originally targeted by the government at 71 million tonnes, were eventually scaled back to 27.5 million tonnes. Domestic oil producers did less than 20 percent of that volume, or around 5.3 million tonnes.
Even powerhouse Alfa-Eko had to fight for export pipeline space for its 1996 allotment of four million tonnes.
""We couldn't fulfil our allocation because there was no pipeline space -- we couldn't get it,"" said the Alfa-Eko source, adding that the firm eventually shipped only 1.1 million tonnes.
Russia's 13 crude oil producers -- most of them vertically integrated firms with their own trading arms -- already have a head start on traders in that the biggest of them ""coordinate"" oil exports and have the power to allot precious pipeline space.
This year's programmes will probably be trimmed, but they will still be a big cash earner for whoever gets the business.
""There's probably a desire in the Fuel and Energy Ministry to squeeze out the traders,"" said a Nafta-Moskva source. ""After all, we're not part of their organisation anymore.""
--Moscow Newsroom, +7095 941 8520
",28
"A battle is shaping up for control of Russia's Fuel and Energy Ministry after the minister resigned, and the losers are likely to be Western firms eyeing deals in the lucrative Russian oil sector, industry sources said on Monday.
The Kremlin has not yet named a replacement for Pyotr Rodionov, who tendered his surprise resignation on Friday, leaving almost no record of substantial achievements after eight months in the job.
But the sources said Moscow, abuzz with talk of possible replacements, was likely to install a person whose priority was domestic oil producers, not Western joint ventures or output-sharing deals dominated by energy multinationals.
""Rodionov didn't have any real feel for the oil sector,"" said one Western source. ""He wasn't a plus or a negative -- he was a nonentity.""
Russian news agencies tipped Alexander Samusev, vice-president of Rosprom-YUKOS, Russia's second largest oil producer, and a former deputy minister in the Fuel and Energy and Finance Ministries, as the likely replacement.
YUKOS and its shareholder, Bank Menatep, declined to comment. Rosprom is an industrial holding firm attached to Menatep.
Sources said First Deputy Prime Minister Boris Nemtsov, a new cabinet reformist in charge of natural monopolies and energy issues, wanted his own unnamed choice in the post.
Either option would install a candidate with market economy sensibilities but also a keen desire to make Russian oil firms the dominant players in the world's third biggest crude producer.
""Having somebody from Menatep run the energy ministry wouldn't be particularly good news for Western companies,"" said a European industry executive.
""I would expect him, if he gets the job, to take a tough line in terms of favouring Russian commercial banks.""
Samusev, seen as a reformer and experienced in the state and private sectors, played a key role in winning oil export tax exemptions for joint ventures in the early years of reform.
But that was years ago when domestic oil firms were just beginning to privatise and integrate with refining and marketing units and were in no shape to finance anything on their own.
Russian companies now want controlling stakes in production sharing deals and are upset that they must pay taxes on some oil produced by ventures for which their partners are exempt.
""There is a concern that the Russian producers want to go it alone,"" said the Western source, adding that whoever headed the ministry could make terms tougher for Western oil companies.
Samusev is a key link between YUKOS and Menatep in their stalled production-sharing talks with U.S.-based Amoco Corp on the $52 billion Priobsk field. The talks have faltered because the Russian side wants greater leverage and ownership in the deal.
Rodionov, appointed in August 1996, was previously director of Lentransgaz, the St Petersburg-based transport unit of Russian natural gas monopoly Gazprom  GAZP.RTS.
He left the oil sector entirely to his deputies, leaving Western oil firms -- which are ready to invest tens of billions of dollars if Moscow passes the necessary laws -- wondering whether Moscow had fundamentally changed its once more welcoming attitude towards outside participation in the energy sector.
Western firms have long said they can secure the financing to reverse lower output, which has almost halved in the last 10 years and was 6.03 million barrels per day in 1996. But that may change now that Russia has a sovereign debt rating.
""It looks like Russian oil companies and banks are beginning to land financing that they couldn't have a year-ago,"" said the European source, adding that domestic commercial banks could be seeking to exert more leverage over the sector.
",28
"Russian oil producers are striving to seize control of a chunk of the country's crude oil exports, leaving traders wondering if their glory days in the world's third largest oil producer could be turning sour.
Russia's newest oil majors, racing to integrate vertically and to exert more control over deliveries abroad, say they need the profits that traders earn on state-sponsored exports to invest in production and expansion at home.
Russian and Western traders say they are more experienced on logistical matters like contacts with Western buyers and better able to deal with constant revisions in the export schedule set by oil pipeline monopoly Transneft.
""You can't just call Russian oil companies producers any more -- they're all trying to get control of exports as part of their integration processes,"" a Russian trader said.
The battle is for state-sponsored exports called federal programmes which aim to help raise cash for state projects. Worth $2-$3 billion a year, the programmes let companies buy oil at home, send it abroad and pay less in taxes and tariffs.
Traders dominate exports for state needs, which comprised 23 percent of Russia's two million barrels per day (bpd) oil exports outside the Commonwealth of Independent States last year. Russian output totalled 6.03 million bpd.
But producers, backed by the Fuel and Energy Ministry, want this to change -- and they may be seeing first signs of victory.
""Oil companies, against the backdrop of more solvent domestic consumers, have succeeded in restricting sales of their resources to trading companies which export for state needs,"" wrote the Fuel and Energy Ministry's InfoTEK agency in its latest monthly bulletin.
""As a result, the majority of traders have not been able to export the oil they planned to for state needs. But the results for oil companies which export for state needs are quite different,"" it said, citing smooth deliveries by producers over the first two months of this year.
A second Russian trader said producers were offering crude oil to traders at increasingly high prices, which was cutting into profits and making state exports less attractive.
InfoTEK said oil trading company Nafta-Moskva could not get any of the oil it was to export under federal programmes in January or February, but a Nafta-Moskva source said the firm had managed to secure 230,000 tonnes for state exports in March.
A Western oil trader said the fight could soon get even hotter, citing market rumours that Prime Minister Viktor Chernomyrdin could sign an order cutting federal programmes.
Traders are lesser but still significant players in commercial exports, which account for about three-quarters of Russia's $13 billion a year oil exports. But producers are also seeking an even bigger role in these deliveries.
LUKoil, Russia's largest oil producer, said it was building a fleet of 10 river vessels with a total deadweight capacity of 66,100 tonnes to move its oil and products better. It also said it was planning a fleet of sea going tankers.
""This is part of our strategy to make oil exports more optimal,"" said LUKoil spokesman Pyotr Neyev.
Mini-major Sibneft, which accounted for nearly five percent of Russia's total crude exports last year, said earlier this week it would handle its own oil exports from April.
The struggle to control the flow of oil is also affecting Russia's refining industry, with traders saying producers are increasingly unwilling to sell oil to outsiders for processing.
""We tried to get oil to supply refineries, but it's very difficult to make a lot of money doing that,"" said a second Russian trader, adding that low utilisation rates boosted costs.
Producers on average supply refineries with two thirds of the oil they process each year and the rest is from traders.
Integrated oil companies own only 19 of Russia's 28 major refineries. They have a total capacity of 4.6 million bpd, or 75 percent of Russia's total capacity, but processed 2.5 million bpd last year, working at an average 56 percent of capacity.
--Moscow Newsroom, +7095 941 8520
",28
"Russia's delays in exporting platinum metals to an increasingly tight and edgy world market stem from a volatile cocktail of internal power struggles and bureaucratic foul-ups, industry sources said on Friday.
Few Western traders and analysts believed Moscow was intentionally withholding supplies in order to boost the market, which earlier this month saw palladium prices at 17-year highs and platinum at a seven-year peak.
Most Russian sources have said the delays in deliveries from the world's biggest supplier of palladium and second largest of platinum are due to problems with red tape in Moscow, and that no larger issues are at play.
But Western industry analysts say in-fighting among state bodies for control over Russia's multi-billion-dollar white metal exports is probably a major factor.
""I believe it started out as a power struggle and has been considerably exacerbated by red tape,"" said Rhona O'Connell, precious metals analyst at T Hoare & Co in London.
Two other Western analysts said it was unlikely Russia had left the market just to boost prices, as it did in the 1970s.
""They understand what can happen when you meddle in the market,"" said one London analyst, referring to a time when Russian supply delays backfired because Western electrical companies simply turned to silver instead.
Russia's senior metals officials have taken refuge behind a wall of silence on the delays, now running at five months.
Russia accounts for nearly two thirds of the world's palladium supply and around 20 percent of platinum deliveries. At one point this year prices for palladium, used in catalytic converters, electronics and dentistry, doubled to $240.00 an ounce.
Sister metal platinum rose 20 percent in the first week of June to around $500.00 an ounce but have since slipped back to around $416.
""There was a period, after the reorganisation of (state strategic reserve) Gokhran and the functions of the Economy Ministry in this area, when it took time to sort out quota and licensing procedures,"" said a source at Almazjuvelirexport, the state agency exporting the metals.
Almaz completed talks in mid-June with buyers in Japan, the world's largest consumer of platinum and palladium. But after quoting Japanese buyers various possible dates for the resumption of exports and leaving markets guessing on when it would start deliveries, Almaz has clammed up.
""Mr Berlin does not wish to give any comments on the situation,"" said an employee, referring to Vitaly Berlin, the head of Almaz's platinum unit.
One Almaz source again cited red tape, saying, ""It would be fair to say technical, bureaucratic procedures are to blame.""
The Russian institutions involved in precious metals have undergone major changes in the past 12 or so months. Gokhran, now GosFond, is no longer under the aegis of Roskomdragmet and is administered by the Economy and Finance Ministries.
Roskomdragmet, the former state committee for precious metals and precious stones, was disbanded in mid-1996. A sweeping government reshuffle in March in effect disbanded the Industry Ministry, which had jurisdiction over precious metals output.
But one official disagreed with the red tape theory.
""This is disinformation -- Almaz has no bureaucratic problems,"" said Yuri Boikin, deputy head of the Foreign Economic Relations Ministry's foreign economic activities department.
""Almaz has a government order to sell -- when it does that is its problem. They can do it whenever they want. On the second day after getting the quota they can get a general licence. Why they haven't prepared documents and contracts is their problem.""
Western markets also question how much Russia's stockpiles have dwindled in the past three or four years on strong exports.
""The general sense is that they've got plenty of palladium but that platinum could be running short,"" one source said, quoting a second trader who thought Russia had only six months of platinum left.
One London trader said Almaz was ready to export in March but that President Boris Yeltsin disbanded the Industry Ministry that month and that the central bank may have heated up the campaign for control over the marketing of Russia's white metals.
",28
"Russia's Norilsk Nickel, created by Stalin using forced labour, still operates under Soviet-style business practices.
But post-Soviet Norilsk epitomises the new corporate Russia, where battles for control over exports and manoeuvering for influence in Kremlin circles have made this Arctic outpost a centre of Russia's debate over how to restructure its firms.
Built on the blood and bones of prisoners forced to mine perhaps the world's richest ore, Norilsk is battling to restructure costs, resettle legions of workers and pensioners and clean up its image.
Corporate change would be as dramatic as Soviet dictator Josef Stalin's 1935 decision to exile hundreds of thousands of prisoners to establish this powerhouse industrial town 200 miles (320 km) north of the Arctic Circle.
""We built such a beautiful socialist city,"" sighed Mikhail Steklov, director of Norilsk's flagship nickel smelter. ""Now the market is telling us we must change.""
FROM SOVIET INDUSTRIAL CONCEPT TO MODERN COMPANY
Norilsk's new managers from its shareholder Uneximbank, a big bank with 51 percent of Norilsk voting stock, see a bright future in RAO Norilsky Nikel, the parent of the head complex.
The Norilsk group is a stunningly powerful producer. It sits on 55 percent of world palladium reserves, 20 percent of platinum and 35 percent of nickel reserves.
Its annual nickel output accounts for 20 percent of world supply, platinum for 23 percent and palladium for 60 percent. It also mines cobalt, copper and some gold.
But functioning as a company -- not a Soviet industrial mega-concept -- is easier said than done in this polluted Siberian company town.
Norilsk, where the Soviet taboo on discussing precious metals still exists, can make Western metals markets tremble with its secrecy, strikes and chaotic export business.
But it has extracted some lessons from the past.
""The disaster of the early 1990s when we dumped metal and prices crashed are over,"" Steklov said. ""We won't do it again."" RESTRUCTURING
Now Norilsk wants to regroup into one company focused on maximising output and profits.
Suppliers -- who drag goods up the Yenisei river during the two months of the year when it is free of ice -- would form another.
Mines and construction outfits would make a third.
""The main task is to stabilise output so that we don't have jumps,"" said Oleg Budargin, a deputy general director at Norilsk's mining and metallurgical complex, which groups the three gigantic smelters, mines and other subsidiaries. ""But it's hard to restructure and boost output simultaneously.""
SOCIAL COSTS
Norilsk wants to maximise export profits, tainted in recent years when export licences were sold under the table and many deliveries were never paid for. It wants billions of dollars in cash and credits to resettle pensioners and support social costs.
The flagship complex has 120,000 on the payroll but supports a town of nearly 300,000, including 40,000 pensioners costing 12 times what they would if they were not in Arctic Siberia.
Norilsk spends 40 percent of revenue on worker housing, pensions and Soviet-era benefits.
The costs were immaterial to the Soviet management, whose slogan was ""Metal at any cost"", but they are sucking modern Norilsk dry.
The calls for change have caused tension verging on a standoff between Moscow-based Uneximbank and workers, unions and some managers. Few at Norilsk seem to understand what restructuring is or how it will be paid for.
""We will be the first big Russian enterprise to really restructure,"" Budargin said. ""But I can't yet say that the final plan has been worked out.""
STATE OF CONFUSION
""We've blocked the retructuring order,"" said Boris Degtyaryov, deputy head of the main trade union. ""It's a very debatable plan and must have board and shareholder approval.""
An internal document, saying the firm was in crisis, said Norilsk had to adapt to market terms and revamp its operations.
The memo called for a hearts and minds campaign so that a strike threat which arose in March would not be repeated.
Sergei, 38, a nickel cleaner, said workers had calmed down but that wages were still delayed by two months.
""Market relations make restructuring indispensible,"" Steklov said. But he added: ""We have such complex output that you can't just cut 100,000 people, which is what we need to do.""
Budargin said that resettling pensioners was the responsibility of the local authorities, not the company. ""We still work as under socialism. Workers want things for free.""
But the memo admitted defeat in efforts to restructure, saying the plan was unclear and poorly understood.
""I don't understand what they mean by restructuring,"" said Sergei Yershov, director of the nickel smelter's huge electrolysing plant, referring to plans to corporatise units.
NOT JUST AN ENVIRONMENTAL MESS
Norilsk, with output worth billions of dollars a year, is not poor but its accounts and practices are a mess.
Norilsk complex sales of 10.8 trillion roubles in 1996 translated into only 100 billion roubles accruing to the complex, sparking an arrears crisis that fuelled strike fever.
It owes around 1.2 trillion roubles to various budgets because of a lack of adequate cash flows from its exports. Wage arrears as of April were around 900 billion roubles.
A midnight flight from Moscow to Norilsk spoke volumes. Passengers included a Chechen refugee seeking company-subsidised housing and a load of ""New Rich"" Russians out to snap up company shares and the metal export business.
""There's an element of metals theft here,"" Budargin said. ""All possible elements, including criminal ones, are here.""
One source said the tax police regularly detain a third of Norilsk's nickel and cobalt output each month, store it, wait for ships to arrive at Dudinka and then release it for loading.
Stolen metals end up on Western markets but hurt Norilsk's cash flows, leaving less money for wages, taxes and investment.
Degtyaryov cited missing export revenues as a core crisis, offering one 1994 example in which the Foreign Trade Ministry received $200 million worth of metals but never paid for them.
Norilsk, strengthening its state ties while seeking to be more market-nimble, will double the capital of its flagship complex and give the new controlling stake to the government.
Former Uneximbank head Vladimir Potanin, ousted as first deputy prime minister but heading back to the bank, is seeking permission for Norilsk to export all its precious metals to boost profits, instead of selling via the state agency.
Even former Norilsk chief executive Anatoly Filatov, sacked by the Kremlin in 1996 under a cloud after decades in power, still lurks about Norilsk with his own mining firm.
""Restructuring is in principle very correct, but it takes money,"" Degtyaryov said. ""In practice, in Russia, if you destroy one thing, the whole house can come tumbling down.
",28
"Russian economic crime officials said on Thursday they were investigating the head of Russia's second largest aluminium smelter.
Company and ministry officials said Yuri Kolpakov, general director of Krasnoyarsk, the second biggest aluminium smelter in the world, was under investigation over the alleged failure to repatriate $20 million from contracts for raw materials supplies.
Olga Semenyaka, a member of an Interior Ministry investigative committee dedicated to the crackdown on crime in industry, told Reuters by telephone from the south Siberian city of Krasnoyarsk that she had personally opened the investigation on Monday.
""I think I have told you enough,"" Semenyaka said. She declined to give further details.
Interior Minister Anatoly Kulikov is locked in a battle against what he has described as the ""crime-ridden"" world of Russia's aluminium industry, which last year was the world's biggest exporter of primary metal.
Gennady Druzhinin, Krasnoyarsk's board chairman, confirmed by telephone from Krasnoyarsk that a probe had been launched against Kolpakov, but also gave no details.
Asked if output or exports would be affected, he said, ""No.""
Krasnoyarsk produced 770,000 tonnes of aluminium last year, 27 percent of Russia's 2.87 million tonne output.
Andrei Grigoryev, head of the smelter's information section, said he did not know of the charges and said Kolpakov was out of town. Reuters could not contact him.
Interior Ministry officials in Moscow could not be reached for immediate comment.
Kulikov has never said what kind of crimes he believes take place in the domestic metal industry, but Russian aluminium officials have in the past been the target of death threats and contract killings.
Industry sources said the investigation of Kolpakov concerned a tolling deal -- under which a trading company supplies a smelter with raw materials for processing and then exports the finished metal -- with an offshore concern identified by the sources as Leo Trust Company.
Krasnoyarsk, also known as KrAZ, does much of its tolling business with Glencore AG of Switzerland, which has a stake in the smelter and a joint venture called Krazpa Metals NV. There is no suggestion Glencore is linked in any way to the investigation.
""If it weren't for Glencore, we wouldn't be working right now,"" said a Krasnoyarsk source. --Moscow Newsroom, +7095 941 8520
",28
"Russia's Gazprom, the world's largest gas company and a corporate empire with the power of a state, has not seen big economic troubles at home hurt its ability to raise money abroad.
Energy analysts, speaking on Friday one day before RAO Gazprom holds its annual shareholders' meeting, said Russia's arguably most powerful company would use the event to declare an end to a tussle with the government over the company's role in the economy and to solidify investor confidence.
""Nonpayments problems depress Gazprom's collection rate and undermine its overall profitability,"" said analyst Yuri Butayev of Renaissance Capital. ""But the company is attractive, regardless,"" he said, citing its huge reserves and exports to Europe. ""It's absolutely unique.""
Gazprom, struggling to emerge from a severe nonpayments crisis which has left most Russian enterprises crippled, goes into the meeting on the heels of major capital raising plans and a clean slate before tax authorities.
The company faces a major problem in getting domestic customers to pay.
But some analysts said the problem had still not dented the company's fundamentals and cash flows from exports were strong.
""It's raised more capital abroad than any other Russian company,"" said energy analyst Ivan Mazalov of CentreInvest Group consultancy in Moscow, adding Gazprom's reserves and exports were the company's top positive factors. ""Foreign credit institutions are very confident of Gazprom's ability to repay.""
The monopoly is a corporate and political force in Russia, where it accounted for a vast 26 percent of the country's 1996 tax revenues and heats a nation of voters.
But Gazprom, once a ministry and once run by Prime Minister Viktor Chernomyrdin, faced attacks earlier this year by cabinet officials, who were once the company's unquestioning supporters but are now desperate for cash to plug the deficit.
Gazprom's biggest problem is that it gets paid for only 60 percent of the gas it sells at home, and then mostly by barter.
The low rate made it fall behind in its tax payments, but it finally paid off its final $608 million in tax arrears this week and can now try to raise more money abroad for costly production and export projects.
But how Gazprom's international auditor Price Waterhouse will value the barter, and thus the company, which had 1996 pre-tax profit of 45 trillion roubles ($7.8 billion), is unknown.
""It's difficult to say what the company will be worth,"" said Butayev. ""There exist big discrepancies with the collection rate and how you convert barter into cash.""
Analysts said Gazprom was unlikely to use the annual meeting to announce radical changes to its strategy.
""The one significant piece of information we're waiting for is the international accounts standards, "" said Butayev, referring to the question of just how rich the wealthy company is. ""But I don't think they'll release them at the meeting.
""Otherwise, there will be no big surprises as far as the fundamentals are concerned.""
The fundamentals for Gazprom, which has 34 percent of world gas reserves, 27 percent of annual global output and accounts for 60 percent of Europe's gas imports, are good.
Gazprom plans to issue two $1 billion Eurobonds and a $1 billion convertible bond by early 1998. It plans a second tranche of its wildly-successful American Depositary Shares (ADSs) next year and has mandated Credit Lyonnais and Dresdner Kleinwort Benson to organise a bridging loan of $1.2 billion and medium term credits of $2.5-$3.0 billion.
Gazprom, 40 percent state-owned, plans to offer nine percent of its equity to foreign investors. Gazprom's market capitalisation has doubled this year to $16.5 billion.
Ekho-Moskvy radio said influential financier and politician Boris Berezovsky, a force in Russia's oil sector and member of the Security Council, was lobbying to join Gazprom's board.
Abroad, Gazprom is looking to double its gas exports to Europe by 2010 via its $40 billion Yamal production and pipeline project -- plans requiring financing which in turn requires Gazprom not bicker with the government about taxes.
""Gazprom is a state within a state, and it's in its best interests to cooperate with the government,"" Butayev said. ""The company is a pragmatist.""
",28
"Russia's Norilsk Nickel, an arctic industrial metals behemoth built on slave labour but now struggling to slim its workforce and cut costs, said on Thursday it would take up an offer by thousands of workers to quit.
Oleg Budargin, a deputy director of the flagship Norilsk mining and metallurgical complex, said in an interview that 10,000 employees -- around eight percent of the workforce -- who had applied to leave would be let go this year and not replaced.
Norilsk, a major non-ferrous and precious metals producer built in 1935 out of a forced-labour gulag at the beginning of an era of Soviet repression, is struggling in the new marketplace to scrap its planned economy legacy and cut costs.
In part this is being achieved by trimming its workforce and resettling employees.
""The main problem is to change the psychology of the Norilsk worker,"" Budargin said. ""He's used to thinking that the state will wake him up, feed him and tuck him into bed.""
The Norilsk Nickel group is the world's second largest supplier of refined nickel, a key ingredient in stainless steel. It is also one of the world's biggest platinum and palladium producers.
Losing the workers would save the RAO Norilsky Nikel group one trillion roubles ($175 million) a year in salaries and benefits.
Budargin said that some of the workers were in the mining, enriching and metals processing sectors -- the heart of this filthy industrial town.
But a senior trade union official said the company should not expect fast or easy savings from the job cuts, adding that the move would cost Norilsk -- which does not want pensioners -- many more trillions of roubles in benefit and resettlement costs.
""These people have said that they want to go of their own free will, but it will cost seven trillion roubles to resettle them and to pay the various benefits to which they are entitled,"" said Boris Degtyarov, deputy chairman of Norilsk's United Trade Union Committee.
Tens of thousands of political prisoners were forcibly resettled to Norilsk in the 1930s and 1940s and died in this barren, polluted town, which is so ecologically poisoned that the average life expectancy here is a miserable 50 years.
But the town became so well known for its generous pensions and benefits that it now even boasts Chechen refugees and homeless people living in boiler plants and cloakrooms.
Some of those people receive miniscule benefits subsidised by Norilsk. Those costs, and the much heavier burden of supporting an entire industrial town, are expenses the company is eager to shed. But it is finding it tough to raise the cash.
Norilsk averted a strike threat earlier this year when it made peace with workers who, upset over salary arrears, pensions and benefits, agreed not to disrupt output before July 1.
But Degtyarov said that shedding 10,000 employees without paying them adequate pensions and benefits or resettling them to warmer climates could open old wounds.
""It could cause a problem with the protocol if the (benefits) obligations are not met,"" he said, referring to the deal signed by management and labour in March.
The Norilsk mining and metallurgical complex has 120,000 people on its payroll, including 15,000 miners, 20,000 metallurgists and 15,000 metal enrichers.
The remaining 70,000 are in auxiliary jobs or are retired and Norilsk has said that it cannot support non-core expenses not related to production.
The restructuring is the brainchild of Norilsk's main shareholder, commercial bank Uneximbank, which controls 51 percent of voting shares in the powerful metals producer.
The director of the complex's nickel plant, Mikhail Steklov, who is part of a committee looking at ways to revamp the industrial giant, said that getting rid of what he called non-effective production was the only solution.
""Uneximbank is our master and maybe they can make us more profitable,"" he said, adding that the town of Norilsk and its suburbs needed to get rid of about one third of its 300,000- strong population.
Budargin complained that Norilsk spent 800 billion roubles last year supporting the city and its non-core enterprises, which range from bakeries to housing construction outfits.
""We will be the first big enterprise in Russia to really restructure,"" he said. ""But I can't yet say that the final plan has been worked out."" ($ = 5749 Russian Roubles) --Moscow Newsroom, +7095 941 8520
",28
"Russia's energy sector will soon have fewer domestic players as newly-privatised oil companies eye domestic mergers and acquisitions to improve production and refining margins, industry sources said on Monday.
Producers -- eager to cash in on higher refined oil products prices abroad and at home and to replenish books with cash for big-ticket production projects -- were beginning to eye downstream and upstream consolidation, analysts said.
While it was early for formal mergers, they said Russian companies were beginning to lay the groundwork for acquisitions and a shakeout of the sector's dozen or so vertically-integrated companies and eight independent firms was inevitable after 1998.
""Undoubtedly we will see a winnowing,"" said Stephen O'Sullivan, director of oil and gas at MC Securities in London.
""There are too many oil companies and not all can survive.""
Moscow has transformed its old Soviet production associations into vertically-integrated companies, but the process left most firms with major imbalances between production and refining.
Russia is awash in refining overcapacity, which, at 6.8 million barrels per day, far outstrips current output of around 5.8 million bpd -- making refineries prime takeover candidates.
""Yes, I see consolidation,"" said Dan Lubash, managing director of Emerging Markets Europe at Merrill Lynch in London. ""Margins in a market in transition tend to move very quickly.""
In one example of the slimming awaiting the world's third largest oil producer, Russia's LUKoil -- one of the world's largest oil companies by reserves -- said on Monday it would seek to acquire Norsi-Oil, an independent refiner with marketing units and no production facilities.
""This is not a hostile takeover, but rather two companies working together,"" said LUKoil spokesman Pyotr Neyev, adding LUKoil would seek a major equity stake in the plant.
Analysts said producers were increasingly annoyed at seeing lower profits from refineries where they conducted tolling operations -- supplying crude oil for processing at plants they do not own and then taking it back for resale.
In a second takeover battle, an industry source said oil major SIDANCO and mini-major Sibneft were tussling for Rosneft, the state oil holding firm which holds the government's stake in production-sharing deals and is slated for privatisation.
Analysts said a third shakeout could see Sibneft making a play for the East Siberian Oil and Gas exploration company.
""Downstream in Russia, something has to happen,"" said a senior Western consultant. ""The money's not coming back to the producers, and something has to be consolidated.""
But upstream consolidation is also inevitable, since the future of Russian oil is in hard-to-recover, remote, expensive reserves requiring a pooling of cash and technical expertise.
""If you're aiming at economies of scale in five years, you've got to start the (consolidation) process now, and that's what we're seeing"" said the Western consultant.
One such deal tried and failed last year, when former Fuel and Energy Minister Yuri Shafranik tried to create a giant oil corporation by merging four companies -- the Tyumen Oil Company, ONAKO, the Eastern Oil Company and Slavneft.
""The general feeling is that only those strong enough in terms of corporate structures and centralised cash flows will be looking to pick up assets in the upstream business,"" said a Russian energy analyst at a Western investment bank in Moscow.
But analysts said mergers were already on many companies' agendas.
""There are two driving forces here,"" said O'Sullivan. ""A desire to move into downstream, and a drive by existing companies to consolidate their existing holdings fast.""
-- Moscow Newsroom, +7095 941 8520
",28
"Russia's powerful Gazprom GAZP.RTS pushed back a plan on Wednesday to issue more share look-alikes for foreigners, saying it needed time to clear out its massive debts to give its stock time to appreciate.
But the company also issued a challenge to the government to meet it half way as it struggles to make tax and other payments which are crucial to the functioning of Russia's economy.
Eduard Ivanov, director of securities at the world's largest natural gas producer, told a news conference RAO Gazprom planned to issue a second tranche of its American Depositary Shares (ADS) next year, not this year as previously planned.
""We consider it expedient to place this tranche in 1998... However the exact timing has not yet been set,"" he said.
He said Gazprom still planned to start issuing convertible bonds this year and that the ADSs would be sold on U.S. markets.
But company officials said one reason for the ADS delay was Gazprom's tortuous efforts to find a common language with the government -- once its unquestioning supporter -- on payments by the giant company into the budget and state funds.
Much is at stake. Gazprom accounted for 26 percent of Russia's 1996 tax revenue -- a whopping figure which underscores the wealth of the company and its key role in Moscow's efforts to plug the budget deficit and keep market reforms on track.
Gazprom, with a market capitalisation of $16.5 billion, accounts for over one-third of global gas reserves, 95 percent of Russian gas output and 39 percent of the world's gas trade.
""We are taking the responsibility to pay our debts,"" Pyotr Rodionov, deputy chairman of Gazprom's board and a former energy minister, said. ""But we also demand the government take steps to meet us halfway, especially in planning the 1998 budget.""
""It's time for the state to conduct itself correctly with regard to payments from energy companies,"" he said, referring to what he thought were unrealistic state revenue targets.
Gazprom has been the target of attacks by the cabinet's fresh-faced reformers, who have promised the giant will not be broken up but want it to pay its corporate and other debts.
Gazprom argues that its consumers -- mostly gas-fired power plants and industrial enterprises -- are late payers fuelling a payments crisis whose blame is laid at Gazprom's door.
The company -- once a ministry, once headed by Prime Minister Viktor Chernomyrdin and now quite coveted by foreign investors -- took pains last month to say peace had broken out in talks with the cabinet on its arrears.
Gazprom said it still owed 3.5 trillion roubles ($608 million), down from an estimated 14.8 trillion ($2.6 billion).
But Rodionov said the two sides needed common understanding.
""We must first sort out our relations to the state,"" he said, describing what needed to happen before Gazprom offered more of its equity to foreign investors. ""That is the element which will facilitate growth in our share price.""
In a sign the government is still sympathetic to Gazprom's problems, a senior official said on Tuesday one option would be to transfer assets of indebted power companies to Gazprom. Gazprom's first tranche of ADSs, issued in October 1996 and listed in London, set foreign investors drooling. The company plans to make nine percent of its capital available to foreign investors -- who currently own less than two percent.
It accounts for 60 percent of Europe's gas imports but plans to sell even more by raising capital abroad for its $45 billion Yamal project linking Arctic gas fields to Western consumers.
Some of the money will come from the ADSs; other from a bridging loan of $1.2 billion and medium term credits of up to $3 billion dollars, for which Gazprom has mandated banks Credit Lyonnais and Dresdner Kleinwort Benson.
A Gazprom official who declined to be identified said ABN-Amro and Goldman Sachs -- which were awarded but lost the mandates -- would probably still arrange Gazprom's planned Eurobond.
""Every bank wants to work with us,"" Rodionov said. ""Of course it's a competitive battle.""
Gazprom has a strictly-divided share structure separating paper available on the Russian market from that on foreign markets, where ADSs effectively cost three times as much as Russian paper. But Rodionov said this could be tough.
""A lock on a door won't stop a cheater,"" he said.
",28
"Russia, the world's top aluminium exporter, is also its least competitive and alleged corruption may scare off badly-needed foreign investors, top industry sources said on Friday.
But the key to success was not in government intervention in the running of the industry. It should, instead, help by reducing heavy energy and transport costs, leaving it to shareholders to improve quality and expand production, they added.
Aluminium luminaries, speaking at a metallurgy conference, stepped delicately around a controversy over alleged crime in the sector. But they warned that the scandal could keep Russia's industry from becoming more competitive by discouraging investors from pumping cash into the world's largest smelters.
Igor Prokopov, executive chairman of the Kontsern Alyuminiy producers' group, said the crime allegations were not helping matters, adding, ""it reflects negatively on our situation on world markets and puts off investors.
""I'll give you an example: Alcoa is buying companies in Italy and Spain but hasn't invested a copeck in Russia.""
Comments by Interior Minister Anatoly Kulikov earlier this month that Russian aluminium was plagued with corruption and that a formal probe was gathering pace come just as smelters confront the problem of how to boost profits.
Smelter profit margins were 16 percent over 1992-1994 but had fallen to one percent in 1996 and were as low as minus 14 percent in the final quarter of last year, Prokopov said.
Limp world prices, stagnant domestic consumption of barely three kgs per capita and soaring energy and rail tariffs -- a major component of production costs -- were to blame.
""Russia's aluminium sector is on the verge of crisis -- we need measures to remain competitive,"" Prokopov said.
""We're barely competitive on world markets. Our production costs are higher than virtually anywhere else in the world.""
But he said shareholders would solve the crisis, not the government.
Vsevolod Generalov, chairman of the Metal Exporters Union and board chairman of the Norilsk Nickel metals group, said that raising output and exports was the way out of financial crisis at aluminium and other metals enterprises.
Russia was the world's biggest primary aluminium exporter last year, with deliveries of 2.44 million tonnes. It has kept output rising steadily and forecasts growth of up to three percent this year.
But all is not well, with transport costs, for example, accounting for 53 percent of output costs, compared with 24 percent in the West.
Prokopov blamed five-digit increases in energy and transport tariffs since 1991, problems in recouping a 20 percent value-added tax and high taxes, which he said consumed money needed for investment and modernisation.
The Bratsk smelter in Siberia, the world's largest, paid 526 billion roubles ($92.2 million) to the budget last year on gross profits of 300 billion roubles, according to a Bratsk release. Profits were down sharply from 1995's 1.19 trillion roubles.
Russian smelters also need foreign money to secure longterm electricity and transport contracts, and to integrate vertically with power generators and raw materials plants.
Tolling, in which foreign commodities houses import raw materials, send them to smelters for processing and take the metal back for export, had attracted $1.5 billion in short-term investments, the International Metallurgists Union said.
While much more is needed to improve the quality of Russia's output, industry sources said the goverment was scaring off investors who were active in tolling but who might be interested in more direct investments.
""Some federal structures continually create artificial barriers to the adoption of this practice (tolling) which may not only undermine export possibilities but also significantly worsen the situation of the Russian raw materials base,"" a Metallurgists Union letter to President Boris Yeltsin said.
""Western companies who do tolling have a highly organised system of marketing and transport,"" Prokopov said, adding that tolling had saved smelters from complete collapse in recent years when they had no cash of their own to buy raw materials.
While aluminium officials spoke of the need for investment, they were hesitant to slam Kulikov's comments.
""Kulikov's address has both positive and negative moments, and we're very attentively watching it and will send a letter (to him) soon,"" Prokopov said.
Yuri Shlaifshtein, a Bratsk board member, said there was no crime whatsoever at the Siberian giant and added, ""it's very hard to say things about the whole thing because Kulikov is a deputy prime minister and the state has strategic interests."" ($ = 5706 Russian Roubles)
",28
"Russia admitted on Tuesday it had missed its chance to be the top dog in Caspian oil projects, but said it had ambitions in the Mideast Gulf after signing giant deals with Iraq.
Fuel and Energy Minister Pyotr Rodionov said Iraq, with which Russia signed two oil deals last week, was a natural choice since Moscow had missed the investment chances in its own backyard.
""We of course missed our chances in the Caspian, a lot of chances,"" he told a news conference. He was referring to a host of multi-billion dollar oil deals in Azerbaijan and Kazakhstan, where Russian companies play a minor role to the leading parts of the world's oil majors.
""We're ready to look at any projects in Iraq that are commercially viable and open,"" he said.
Russia and Iraq signed last Friday a 23-year deal to develop seven to eight billion barrels of oil reserves in southern Iraq's Qurana oilfield once sanctions imposed by the United Nations after Iraq's 1990 invasion of Kuwait are lifted.
Iraqi officials said earlier that the deal would give Baghdad $70 billion in revenue -- more than enough for Baghdad to repay Moscow $7 billion in Soviet-era debt.
Officials stressed that none of the deals would violate the U.N. sanctions, which place a blanket ban on investments, and that only preliminary feasibility and financing work would begin now.
But they said Russia was keen to get down to business in the Gulf once the curbs were removed.
""I would like to underscore that we firmly support international laws,"" Rodionov said. ""But at this stage, we will only do serious preparatory work. We estimate that it will take a bit of time. None of this is against the U.N. sanctions, which we are observing and will observe.""
Russia's largest oil company LUKoil has a majority 52.5 percent stake in Qurana, in which Iraq has 25 percent, and two other Russian oil firms, Zarubezhneft and Mashinoimport, have the rest.
Rodionov said Russian state oil holding firm Rosneft and Zarubezhneft had signed a separate deal to set up an oil drilling enterprise to carry out work in Iraq.
Oleg Popov, executive chairman of Zarubezhneft, said a deal to hasten the drilling of 100 wells in Iraq would be speeded up but would not violate the U.N. curbs.
LUKoil Executive Chairman Vagit Alekperov said the deals were good news for Russia, which is the world's third largest oil producer but is smarting at its loss of control over reserves in the former Soviet republics.
""Russian work will not violate the sanctions,"" Alekperov said. ""The Russian profits from this project are quite large and we've taken the right step.""
Officials said Qurana envisaged first stage capital expenditure of $4 billion and output of 660,000 barrels per day.
""When the sanctions end, we'll be in the starting blocks and ready to go,"" Popov said, adding that Russia would like to work with other international oil majors in the Gulf.
Moscow is still a close ally of Baghdad and Foreign Minister Yevgeny Primakov, a Middle East specialist, has called Iraqi Deputy Prime Minister Tareq Aziz his ""old comrade"".
Russian oil companies already buy about one quarter of Iraq's limited oil exports under the U.N.'s $2 billion oil-for-food programme, which permits Baghdad to pump oil to raise money for humanitarian needs.
While Russia supported the U.N.'s stringent sanctions, it is now eager to see them lifted.
Rodionov said he was eyeing more Iraqi oil deals and advised Russian oil independent Tatneft to pool its brains and finances with other firms to get in on the Gulf act.
""We must do this because of our longterm national security interests,"" Rodionov said, adding that other companies, known to be French and Chinese, were also eyeing post-sanction deals.
""Maybe after all of Iraq's oil reserves are explored and proven, it will become the world's largest oil country,"" he said, adding that Russian firms would already be there.
--Moscow Newsroom, +7095 941 8520
",28
"The struggle by Russia's Norilsk Nickel to climb out of debt may leave workers unwilling to bite the only hand that feeds them by staging a serious strike, Russia-based analysts said on Wednesday.
But efforts by Norilsk's main shareholder to restructure the key metals producer will not bring quick results, which could mean labour unrest and possible output disruptions in the future.
Some analysts have focused on the chances of Norilsk winning state aid as the key to quelling labour unrest that has led union leaders to call for strikes over wage and holiday arrears on March 27 and April 2 at Norilsk's flagship plant.
""Tax holidays have been handed out in the past,"" said a Western economist who is familiar with Norilsk and its pleas for a state bailout.
""But if you give Norilsk a break, you've got dozens in the queue right behind it. Then you get YUKOS (Russia's second largest oil producer) saying, 'What about us?'""
Sergei Pavlenko of the Moscow-based Centre for Economic Reform said Norilsk's ability to find 900 billion roubles for overdue salaries depended less on its main shareholder Uneximbank's cash in hand and more on regional budget politics.
""Restructuring Norilsk is not so much a question of cash as of budget politics,"" he said, adding Norilsk was trying to force its administrative district, the vast Krasnoyarsk region, to shoulder the cost of supporting social infrastructure and other non-metals industries.
A Western fund manager in Moscow who follows Norilsk said he thought a government decree restructuring Norilsk tax and budget arrears was likely, given the strategic importance of Norilsk's nickel and precious metals exports to the economy .
Key to Norilsk's efforts to boost revenues and pay off arrears is a plan to transfer the huge cost of social infrastructure in its Arctic towns to the regions.
Norilsk supports 60 percent of the regional budget of Krasnoyarsk, which runs from the Arctic down to the southern Siberian steppes. It says it cannot support the region's farmers and other workers.
But many analysts do not expect fast government aid for Norilsk, which in addition to two to three months in back salaries owes 1.2 trillion roubles to various budgets -- a burden it says has cut into wage payments.
Norilsk says it spent nearly 42 percent of its 1996 revenues on social costs.
While Norilsk's main shareholder commercial bank Uneximbank is well connected -- First Deputy Prime Minister Vladimir Potanin is the bank's former head -- it is only one of many powerful Russian firms in need of state handouts.
""To pay for transferring social costs, the regions will have to raise taxes -- and that is going to be paid for by the company,"" said the Western economist.
Western traders are sceptical of serious supply disruptions at Norilsk, but they are not discounting the possibility that a protracted financial crisis and arrears could affect output at one of the world's biggest nickel and precious metals producers.
But Pavlenko said no Russian industrial strike in recent history had ever cut into output significantly.
""Russian workers know how to do one thing -- work,"" he said, adding, ""The Norilsk trade union is multifaceted and complex.""
Other analysts said they doubted a serious strike would materialise while debt restructuring was being carried out.
""I think people are seeing the seeds of a solution there,"" said Grant Sinitsyn, metals equity analyst at United City Bank in Moscow.
""It's been a lot of posturing on the part of the union. We've seen plenty of strike action at Norilsk in the past, and the net effect on their total yearly output is basically nil.""
--Moscow Newsroom +7095 941 8520 ($1 = 5,689 roubles)
",28
"Russian natural gas giant Gazprom announced restructuring and cost-cutting plans on Tuesday, but the world's biggest gas producer downplayed discord with the government over its fate and said it would stay intact.
Gazprom board chairman Rem Vyakhirev said the company -- one of Russia's most powerful entities but increasingly under government scrutiny -- had mostly resolved a row with ministries and property officials over restructuring.
He told a news conference the firm would shed 100,000 jobs this year -- a massive 26 percent of the workforce.
But Vyakhirev said Gazprom would remain a monopoly and would not be split up.
""All of the internal blocs will remain within the Gazprom organisation,"" he said, referring to internal restructuring which would create up to half a dozen units within the monopoly for output, marketing, transport, finance and other issues.
Gazprom is one of Russia's most politically influential and well-connected companies, but it has come under attack by the International Monetary Fund and some government officials over its opaque financial books and strict control over access to its pipelines.
But Vyakhirev sought to paint a picture of accord between Gazprom and the government, whose prime minister, Viktor Chernomyrdin, once headed Gazprom but who has been conspicuously absent from recent public debate over the company's fate.
He said that he, First Deputy Prime Ministers Anatoly Chubais and Boris Nemtsov and Chernomrydin were all carrying out state duties in examining Gazprom activities.
""I think all four of us will reach agreement. I have a creed -- Russia and Gazprom are family. There will be no quarrels.""
Vyakhirev, displaying none of the fear other executives show at the prospect of shedding jobs, said the leaner workforce would save Gazprom three trillion roubles ($520 million) a year.
Russia accounts for 34 percent of world gas reserves and 27 percent of output; Gazprom produces nearly all of Russia's gas.
Analysts say that the company, which was once an entire ministry, is immensely rich from exports -- heating about one third of Europe -- but that it faces serious problems in collecting debts in the former Soviet Union for unpaid supplies.
Even the profit figures are open to doubt.
""When we worked with our auditors (Price Waterhouse), we saw our profits weren't accurately reflected, that our expenditures didn't always have something to do with output,"" Vyakhirev said.
""There are many unnecessary expenditures. We're cleaning out all our basic production spheres -- that means getting rid of anything that we don't need.""
But he said Gazprom was rich enough to pay seven trillion roubles ($1.2 billion) to state coffers by June 10 to help President Boris Yeltsin meet a promise to pay pension arrears.
Nemtsov has put Gazprom's debts to the federal budget at a whopping 14.8 trillion roubles ($2.6 billion), while Gazprom says it is owed a dizzying 64 trillion roubles ($11.2 billion).
The state has a 40 percent stake in Gazprom, seven eighths of it personally managed in trust by Vyakhirev. Last week, after a row between Vyakhirev and ministers, Privatisation Minister Alfred Kokh said the government would review the arrangement.
Government officials said this week they had lost the document outlining the deal. Vyakhirev said they later found it and that the scheme would stay, but with some changes.
Nemtsov, a reformer entrusted with restructuring Russia's natural monopolies, including Gazprom, has long said the monopoly will not be broken up into separate output and transport companies. ""Only a nut would destroy Gazprom,"" Nemtsov was quoted by Interfax news agency as saying.
The company operates a strict separation between its domestically-traded shares and those covered by its ADSs in London.
Gazprom was trading at $0.665 on the Russian Trading System at 1230 GMT versus $0.620 on Monday. The ADSs, covering 10 underlying shares, were at $16.45 in London versus Monday's close of $16.30.
",28
"Western oil joint ventures in Russia, their hands tied by myriad taxes and the unknown policies of a new energy minister, are finding it tougher than ever to make money, industry sources said on Friday.
""Nothing's really happening on the jv side because they (the Russians) don't have a good investment vehicle,"" said an independent U.S. energy consultant in Moscow. ""And I don't see anything that would suggest a quick turnaround.""
Zarko Stefanovski, an oil analyst at T. Hoare & Co brokerage in London, estimated net revenue on each barrel of oil produced and exported from Russia by joint ventures at about $4.40.
That is after current per-barrel costs of about $2.70 for operations, $2.75 for transport, $2.00 in excise duty on output, $0.65 in pipeline tax, mineral royalties of $1.30 and road and housing taxes of $0.35.
Then comes Russia's 35 percent profits tax, which is revenue, not profit, based.
""The biggest nightmare is having to adjust the budgets meeting after meeting after meeting,"" said a Western oil man, complaining that Russia's taxes changed constantly. ""Morale in the company then falls because we don't get the money to do what we need because the economics are skewed.""
About 40 Western ventures produce and export Russian oil -- but their output, at about 250,000 barrels per day (bpd), is a drop in the bucket of Russia's total 6.2 million bpd.
""The export tax is gone, but these other taxes have more than made up for it,"" added a Western energy consultant in Moscow who works with major U.S. oil companies. ""You can't say across the board everyone's making a profit.""
Joint ventures were thought to be a cheaper, easier and faster way than more complex production-sharing contracts to access Russia, the world's third-largest oil producer, which could hold five percent of the world's proven reserves.
""They have a potential to be a success long-term,"" said Brian Leonard, first deputy director of KomiArcticOil, which groups British Gas Plc with Russia's Komineft and a local geological outfit.
But Zarko said joint ventures would take off only when their bigger cousins, multi-billion dollar production-sharing contracts undertaken by Western majors, get to the output phase -- at least several years down the line.
In the absence of an acceptable legal framework, many ventures plead for Kremlin favours to secure special deals.
Western oil men bow and scrape before ministries and the cabinet on two fronts, the Petroleum Advisory Forum and the Moscow International Petroleum Club, which includes Russian industry executives.
The policies of new Fuel and Energy Minister Pyotr Rodionov remain unclear to oil men and tax changes from other officials have not been forthcoming.
A new threat comes from Russia's State Customs Committee, which says prominent ventures should pay millions of dollars for ""excess"" exports -- including White Nights, a 50-50 venture between Phibro Energy Production Inc and Russian Sidanko's Varyoganneftegaz, and KomiArcticOil.
""We think it's absolute nonsense and are hoping for a resolution to the situation,"" a senior oil executive said.
In the meantime, corporate budgets are constantly revised and oil men are discouraged.
""The environment is certainly very tough and it hasn't gotten any easier,"" said one of the Western consultants.
""A lot are hanging on, hoping to get a stake in the market to get better terms when things change.""
",28
"Russia's oil sector, fresh from its smallest fall in output after a decade of plunging, may find it tough to keep up the momentum in the coming years, officials and analysts said on Thursday.
""Analysts' consensus is that production will not pick up before 1999 or 2000,"" said Elena Merkoulova, Russian energy analyst at Salomon Brothers in London.
Output fell two percent to 6.03 million barrels per day last year, its lowest level in three decades, although the drop in percentage terms was the smallest since 1987.
But output from the world's third largest oil producer has fallen again in the first two months of this year to an average 5.60 million bpd. This is two percent lower than year-ago levels.
Some producers have said that total output could be halved by the year 2000 under existing tax regimes.
Analysts believe this is highly unlikely and the era of steep declines appears to be over. But they say the upturn will be rocky and that slippage will continue.
""The drop we saw at the beginning of the year won't continue through the rest of the year,"" said Sintez energy analyst Gennady Vasilyev. He forecast that total 1997 output would edge down one percent from 1996.
But the Fuel and Energy Ministry, citing increasingly scarce cash, high taxes and ageing, less productive wells, fears that stagnation could follow the steep decline.
""In these conditions, the relative stabilisation in energy output achieved in 1996 is only a temporary phenomenon,"" the ministry said.
""It does not offer hopeful grounds for strengthening the slowdown in the rate of decline needed for the short term development programme to 2000,"" it said in its latest InfoTEK bulletin.
Around 26 percent of Russia's 139,000 wells are not operating and existing tax regimes make many of them unprofitable to rehabilitate. Exploration drilling fell by a third in 1996.
""Such cuts in the sector's production potential pose a threat to the medium-term stabilisation programme to 2000,"" the ministry said.
Analysts said producers saw few reasons to invest what little cash they had in production when the government was pushing them to supply more crude to domestic refineries and to deliver oil products to the ailing farm sector.
Investment by oil firms in production shrank 26 percent last year, with YUKOS, Russia's second largest oil producer, cutting investment by half. A third of oil companies finished 1996 in the red.
Russia's draft Tax Code may make special provisions for producers, who pay around 53 percent of the wholesale price of each barrel of oil in taxes and tariffs. Boosting output depends upon lower taxes and tariffs, they say.
""The easy-to-recover reserves have been depleted, and it is going to take a lot of money and technology to get the other reserves,"" Merkoulova said. ""No one wants to produce a lot until the excise tariff on production is resolved.""
--Moscow Newsroom, +7095 941 8520
",28
"Russian oil barons are battling for control of Rosneft, one of the last big energy firms not yet privatised, in a tussle that could alter Western investments in this energy frontier, industry sources said on Monday.
The sources, who asked not to be named, said rival Russian oil company Sibneft, widely known to be controlled by prominent financier and politician Boris Berezovsky, was making a play for Rosneft, the rough diamond of the Russian energy sector.
""Berezovsky plans to merge the two companies,"" said a highly placed Russian energy official close to the matter. ""It's part of a plan to control revenue flows from (Rosneft's) exports.""
Sibneft spokesman Filipp Murashkov said Rosneft was one of six energy companies Sibneft was considering acquiring but would not say whether the mini-major would actually make a play.
""The company's (Sibneft's) management is analysing the possibility of acquiring one of these oil companies and is assessing its overall needs,"" he said by telephone. ""What that will result in, I cannot tell you now."" He said Sibneft's board would take a decision in coming weeks.
Russia's former oil production associations are now independent companies, most of them privatised and many of them among the world's largest in terms of oil reserves.
Rosneft's key draws are its status as the recipient of state offtake in all production-sharing deals and its significant equity stakes in $40 billion worth of energy projects with foreign oil companies.
But the company has many deadweight liabilities, including dozens of research institutes and defunct equipment producers.
Still, Rosneft is part of three deals off Russia's Far East island of Sakhalin requiring total investments from Japanese and U.S. partners of around $22 billion. In Sakhalin-I, due to begin output right after the turn of the century, one Rosneft unit has a 17 percent interest while a second affiliate has 23 percent.
Rosneft also has a 7.5 percent stake in the $2 billion Caspian Pipeline Consortium, which will build a new oil export pipeline from Kazakhstan to Russia, and a 20 percent stake in the $20 billion international Timan-Pechora Company project.
""This is more than just a corporate battle,"" said one of the Russian sources. ""Rosneft is going to start reeking of money very soon, and Sibneft's owner senses this.""
Rosneft's privileged position could introduce a new variable into the tortuous negotiations foreign energy firms go through to try to get oil deals in Russia off the ground.
A senior Western energy executive said Rosneft's status as representative of the government in output-sharing deals was unclear and he was unsure of its effect on stalled projects.
One of the Russian sources said Rosneft had once been in preliminary talks with Exxon Corp, Amoco Corp and Total of France on possible strategic alliances but that talks could not proceed until Rosneft's fate was decided.
""For the (international) majors, Rosneft is not a hypothetical partner now,"" the source said.
Berezovsky, through Rosneft's new, government-appointed president, Yuri Bespalov, has undertaken a sweeping overhaul of Rosneft managers, replacing half a dozen powerful department heads, including Valentin Zlatov, who oversaw exports. Rosneft vice-presidents and deputy chairmen are no longer empowered to conduct negotiations with foreign partners or to sign contracts.
Sources said Sibneft, whose main production unit is Noyabrskneftegaz, was positioning, possibly through an unknown affiliate, to place a winning bid for Rosneft in a forthcoming auction of the company's shares.
""I keep hearing from many Russians that Berezovsky is definitely going for Rosneft,"" said the Western oil executive. ""There is a sense now that it's much more certain.""
Moscow has held sales of prize stakes in privatised oil companies but nearly all of them have been won by what appear to be pre-determined winners allied with the company being sold.
The original privatisation plan for Rosneft, Russia's 10th largest producer with 1996 output of 262,000 barrels per day, calls for 47 percent to be auctioned off. The state would retain 51 percent while workers would get two percent.
Rosneft, which Moscow once envisioned as Russia's national oil company, has wanted to emulate the success of its private competitors, like LUKoil. Senior Rosneft officials once begged to be described as a private oil company, even though it is still 100 percent state-owned.
",28
"Russian Norilsk Nickel's poor 1996 financial results have tarnished plans to issue corporate paper for trading overseas, but the key metal producer has profitable, stable output and may be crying wolf, analysts said on Monday.
""We don't think the (financial) figures will affect output,"" said Dmitry Chernak, metals analyst at ING-Barings in Moscow.
He said Norilsk -- one of the world's top producers of nickel and platinum group metals -- might be fudging the figures to attract government attention to its crippling social costs.
Company officials and analysts said Norilsk's 1996 consolidated loss of 3.29 trillion roubles ($572 million), which RAO Norilsky Nikel reported last Friday, did not mean the Arctic industrial behemoth had no cash to finance output.
""There is and will be absolutely no effect on production or exports,"" said Alexei Parshikov, director of Interrosimpex, which handles some of the Norilsk group's exports.
He said wage arrears to workers were down to less than two months and workers had no inclination to strike as they did earlier this spring before a deal with management was reached.
But Norilsk spokesman Sergei Vetchinin said the company's financial picture was nonetheless unattractive.
""It's a paradox -- the production of metals is profitable, but then the profits get spent on social costs, which in theory the state, not we, should be supporting,"" he said, adding that Norilsk made money on output but subsidiary costs sucked up over 40 percent of annual revenues.
The London Metal Exchange was closed on Monday for a bank holiday and most traders there were not available for comment.
Norilsk is the world's second largest producer of nickel, a key component of stainless steel. It is the world's largest producer of palladium and one of the world's top three producers of platinum -- used in catalytic converters and jewellery.
Chernak said Norilsk had better operating margins than its Western competitors but that rising output costs at the company would take their toll on 1996 margins.
He said Norilsk's 1995 gross operating margin for nickel output was a robust 36 percent, and 34.8 percent for copper, compared with a Western metals industry average of 31.7 percent.
Chernak said higher input costs would reduce Norilsk's margin to 23.0 percent for 1996, but he expected its 1996 net loss to ring in at $120 million equivalent -- far below the figures Norilsk announced.
Norilsk's Vetchinin said the reported 1996 loss figure was calculated on an accruals basis, which meant it was not distorted by figures reflecting non-payment for goods or services, a problem plaguing Russian industrial companies and distorting balance sheets.
But Chernak said Norilsk's loss was misleadingly bloated because it included, among other things, allocations to capital expenditure funds.
A senior Norilsk official told Reuters the 1996 loss meant plans to issue American Depositary Receipts -- paper allowing shares in foreign companies to be traded on world exchanges and avoiding settlement hassles -- were on the backburner.
""That such a possibility (postponing the issue) is being examined is unquestionable,"" said Yuri Kaluzhsky, Norilsk's head for projects and corporate finance, who had told Reuters one month earlier that Norilsk planned to issue the paper by July.
His statement sent Norilsk shares crashing by over 11 percent, and Norilsk ordinaries traded at $6.60 at 1320 GMT on the Russian Trading System. The paper rose 12 percent when the financially troubled company announced the issue.
Norilsk is struggling to enact a restructuring plan in which it hopes the state will assume responsibility for financing its vast social infrastructure, including resettling tens of thousands of pensioners.
Parshikov said efforts to push through restructuring would intensify. But Norilsk officials have been unable to say whether a recent board meeting had approved the plan. ($1 = 5,756 roubles)
-- Moscow Newsroom, +7095 941 8520
",28
"Western mines and financiers have not taken a shine to Russia's big gold reserves, saying it will be some time before the world's third-largest gold producer attracts significant foreign investment.
""A lot of companies have come, looked and are here to look again, but it's going to be slow, very slow,"" said Ted Reeve, gold equity analyst at Toronto-based Scotia Capital Markets.
""There's competition for exploration and investment dollars, and Russia is certainly not getting her share of them,"" he said, speaking on Tuesday at a Russian-Canadian industry seminar.
Russia ranks third in the world in terms of gold reserves, but only fifth in output and far lower in outside investment.
Industry sources said not one of the dozen or so top joint ventures in Russia had produced even one tonne of gold since launching operations in recent years.
""It's too early,"" said Pas Gido, a board member of Baleyzoloto, a Canadian-Russian project near Chita in Siberia, adding that the lead time for gold projects here was five years.
Viktor Gritsayev, a deputy head of the state committee for precious metals and stones (Komdragmet), whose functions are being transferred to other state entities, said Russia had targeted $6 billion in investment for its gold sector by 2000, with 43 percent of the total to come from foreign investors.
But if last year is any sign of things to come, the short-term outlook is not good.
Industry sources said a mere $45 million was invested in Russian gold projects last year -- a tiny fraction of the total $3.6 billion spent last year by global investors, half of them Canadian or U.S., on gold projects around the world.
Sergei Kyshtymov, head of the central bank's precious metals department, said 108 domestic banks had licenses to finance gold output. But industry sources said only eight banks can take gold out of the country as collateral to finance projects and that domestic financing had yet to increase output.
""Unfortunately, there really have not been any significant structural changes in financing,"" said Mikhail Katsman, executive director of Russia's Union of Gold Producers, a non-government organisation.
About 85 percent of all gold mined in Russia last year was from above-ground alluvial, or placer, deposits, as opposed to below-ground ore deposits. But since 80 percent of Russia's known gold reserves are in the ground, big investment dollars will be needed soon if output is to increase significantly.
Output last year fell to about 122 tonnes, largely because alluvial reserves are being depleted, taxes hit producers at 60 percent of revenues and state funding has declined.
State forecasts say 1996 output is likely to slip further.
Nearly two thirds of the country's gold is mined in Russia's Far East, a quarter comes out of Eastern Siberia and 12 percent out of the Urals, with small cooperatives, known as artels, accounting for about 60 percent of output.
In one of Russia's best-known projects and the one analysts say is the furthest along, Cyprus Magadan Gold, a unit of Amax Gold Inc, owns a 50 percent stake in the Omolon Gold Mining Company project to develop the Kubaka reserve in the Far Eastern Magadan region.
Output, expected to begin in 1997, is targeted at an annual average rate of 310,000 ounces of gold and 235,000 ounces of silver over seven years.
But other projects have stumbled or worse.
Britain's RTZ Corp Plc pulled out of its only Russia project in May over royalty and tax squabbles with Moscow.
""If I were a foreign company, I would see a tonne of problems to foreign investment in Russian gold,"" Katsman said.
-- Moscow Newsroom, +7095 941 8520
",28
"Russia sold platinum, palladium and diamonds in 1995 and 1996, apparently to save its economy from ruin, but the near-depletion of strategic gold stockpiles does not point to big bullion exports, officials said Friday.
The sales were well above planned levels, but the news has not shed much light on the exact size of secret stocks of precious metals and diamonds in Russia, which holds the key to world markets and is a major supplier.
But a Central Bank official said gold had not been exported. ""Gold is not leaving the country,"" deputy press director Natalya Khomenko said.
She said strategic reserves were nearly empty, not because they had been exported, but because the bank had bought them.
The bank's gold reserves, used to defend the ruble and kept separately from strategic stocks, were 400 tons, she said.
The size of Russia's precious metals stockpiles, especially platinum, is of major interest to world metals markets, and Moscow's gold sales have in the past moved prices furiously.
But platinum, palladium and diamond reserves are a fiercely guarded state secret, so clues are welcome.
A senior source at Russia's Audit Chamber said Russia sold gems and precious metals in higher than planned quantities in 1995 and 1996. The source told Reuters that 1995 exports of precious metals and diamonds were 50 percent above the 4.6 trillion rubles ($1 billion at end-1995 exchange rates) planned in the budget.
He said 1996 sales were twice the planned level of 4.5-4.6 trillion rubles (then worth about $800 million).
""They would seem to be pretty authoritative numbers, given that they're coming from the audit office,"" said one European metals analyst.
Andy Smith of UBS in London urged caution. ""Confusion, uncertainty, grain of salt -- those are the key words. Again, we don't know what the starting point was, truth be told.""
The Audit Chamber is a little-known, powerful independent body responsible for checking how revenue and expenditure targets in the budget and at state organisations are met.
""What it boils down to is that the sales are probably not great news for the government, because it shows that they need to find all the cash they can get,"" said mining specialist Raj Kohli at Paribas Capital Markets in London.
Russia is one of the world's top producers of platinum and its sister-metal, palladium. Its gold reserves in the ground are the world's third-largest, while its rough diamonds accounted for about one-quarter of De Beers annual sales of rough gems.
A second Audit Chamber source said Russia's diamond stockpile could run out between March 1998 and September 1998 unless it were replenished.
Russia's gem mines require vast investment.
The extra gem and metals sales in 1995 and 1996 took place as Russia, struggling to revive its economy and breathe life into market reforms, sought to cover budget revenue shortfalls. Metals analysts in London and Johannesburg have long believed that Russia has been selling platinum and palladium stockpiles to earn much-needed foreign currency.
",28
"The world's second largest nickel producer, Russia's Norilsk Nickel, averted a dockworkers' strike on Monday but spoke of its dire financial straits and told employees to steel themselves for cutbacks.
A group of workers at Norilsk, a town built by Soviet-era forced labour in the Arctic Circle, called off their threat to stop loading metals for export from the port of Dudinka, Norilsk spokesman Sergei Vetchinin said.
But he said the company was in deep financial trouble -- surprising analysts who had thought RAO Norilsk Nikel's new majority shareholder, Uneximbank, was closer to turning the giant nickel, copper and precious metals producer around.
""There is an appalling collapse at Norilsk,"" said metals trader Ruslan Fedorovsky of Barclays Physical Trading Ltd in London. ""It's a complete breakdown and there is little control over the situation.""
Vetchinin said lay-offs could hit 80,000 non-production employees at Norilsk's flagship combine. ""You would think this is a construction outfit, not a mining and metallurgy plant,"" he said, referring to the number of ancillary workers.
""We've described the depths of our financial crisis and they understand,"" he said, adding that 800 million (corrects from 800 billion) roubles ($150 million) of delayed wages would be paid off by November.
But Norilsk workers, once laid off, have nowhere to go -- leaving markets to wonder how labour unrest and sluggish cash flow could affect the company's production and exports.
""A number of us were surprised by the depth and severity of the problems there,"" said metals analyst Raj Kohli of MC Securities in London. ""There will be some ongoing disruptions.""
Norilsk is looking to state bail-outs and a share issue to pay off its total 13 trillion rouble ($2.3 billion) debt and plans a new financial austerity programme by November as part of its restructuring scheme, Vetchinin said.
But he said Uneximbank, a big commercial bank whose founders include Soviet-era state commodities exporters, had no more cash to pump into Norilsk.
Norilsk, which has long said it is revamping the way it exports metals abroad, said it would focus on selling to end-users like German stainless steel group Krupp Thyssen Nirosta GmbH (KTN), which groups Fried Krupp AG Hoesch-Krupp and Thyssen AG.
The move could leave Western commodities houses fighting over fewer contracts.
Metals analysts are surprised that Norilsk's strong 1995 pre-tax profit of nearly 5.5 trillion roubles ($95 billion) (corrects dollar conversion from $1 billion) has not translated into enough cash to meet immediate needs like overdue salaries and back taxes.
Vetchinin said that softer world metals prices meant that even exporters who pre-paid were not providing enough cash.
Norilsk produced 180,100 tonnes of nickel in 1995, up 11 percent on 1994, and sees 1996 production rising three percent.
""The more major issue is how much longer it can go without big investments in its fixed assets,"" Kohli said, adding that around $1 billion was a ballpark figure needed.
""But we're optimistic, because as an ore body it's extremely wealthy and can produce large volumes at relatively low cost.""
Still, others expect possible volatility in Norilsk's production and exports. ($1 = 5,376)
",28
"Russia's Norilsk Nickel, one of the world's largest nickel producers, kept metals traders on guard on Thursday after a short strike by unpaid workers raised long-term questions over future output and exports.
Interfax news agency said workers at some Norilsk Nickel metals group plants struck for two hours on Thursday over wage arrears, temporarily halting output.
The strike, the second at the company this year, unnerved industry players, who said Norilsk could either increase exports to generate cash to pay overdue salaries or cut back output and exports because of labour unrest.
""It's a minefield,"" said a nickel trader at a major Western commodities house.
""If you deal with these people very carefully, things will be okay -- but only if,"" the source said, adding that instability in Russia's coal industry could spread to Russia's non-ferrous metals sector.
Interfax said Norilsk workers would refuse to load metals for export from September 16 unless an agreement was reached with management over 800 billion roubles ($148.7 million) in wage arrears.
""The problem is serious and possibly long-term,"" said Ilya Korotkov, product manager at Russian metals exporter European Materials Agency, which exports small amounts of Norilsk output.
""They will try to export more to pay off salaries,"" he said, adding that exports could rise 10-15 percent in the second quarter of 1996. ""They don't have many other choices.""
Russia is the world's largest miner of nickel ore and concentrate, and Norilsk, whose exports are key to balance in the market, is the world's second largest producer of refined nickel, a key ingredient in stainless steel.
The company also produces huge quantities of copper, cobalt, platinum and platinum group metals.
""They really have some severe problems with cash flows,"" said Olga Vinogradova, a metals analyst at United City Bank in Moscow, adding she had heard of some export delays, which traders had reported earlier this week. ""This strike is not going to have a positive impact on clients.""
Sources said Norilsk was moving from pre-financing to Western export credits to boost profitability.
Benchmark nickel contracts on the London Metals Exchange are at around $7,530 a tonne, down from September highs of $7,850.
Sources said Norilsk, which reported a net profit for 1995 of 138 billion roubles and debts of 6.8 trillion roubles, all under Russian accounting standards, was facing one of its first major financial tests since privatisation.
Norilsk director Alexander Khloponin has said he wants to turn the company around and Interfax quoted him as saying he saw several ways to raise cash to pay salaries, including asset sales, more effective exports and more efficient production.
Norilsk produced 180,100 tonnes of nickel in 1995, up nearly 11 percent from 1994, and it expects 1996 production to rise by three percent.
But Russian nickel output, most of it at Norilsk, fell seven percent in August on July levels, according to state figures.
Trade sources said Norilsk, built in 1935 on a swamp 200 km (130 miles) north of the Arctic Circle, was strugging with its status as a cash-sucking firm that must fly in food and soap for workers.
""Workers don't have much there, and the least they expect is their salary,"" said a Russian metals source. ""But turning that place around is easier said than done.""
($1=5379 Rouble)
",28
"Russia's LUKoil, one of the world's biggest oil companies, will increasingly take its upstream business out of Siberia and into the Caspian and Gulf, in a move reflecting the tough economics of production at home.
LUKoil's strategy underscores the problems of producing oil in Russia, where expensive, hard-to-recover reserves, limp domestic demand and a struggling economy make exports and foreign projects the only ways to earn substantial profits.
""I can tell you we're not really interested in raising our oil output in Russia, and for three reasons -- pipeline capacity limits, small export terminals and low domestic demand,"" LUKoil spokesman Pyotr Neyev said in a brief telephone interview.
LUKoil heads into its shareholders' meeting on Thursday ready to put what Neyev said were net cash profits according to Russian standards of 3.87 trillion roubles ($673 million) to work on projects in Azerbaijan, Kazakhstan and Iraq.
A second spokesman, Alexander Vasilenko, said LUKoil -- which says it has the most crude oil reserves of any traded oil company in the world -- aimed to produce at least one quarter of its oil outside Russia at the beginning of the next millenium.
""LUKoil does admit they're not investing much in their West Siberia operations,"" said Renaissance brokerage energy analyst Alexei Kokin. ""They have too many undiversified costs there, and they're relocating fronts.""
Among LUKoil's major non-Russia projects are a 52.5 percent stake in a $4 billion, 23-year production-sharing project in Iraq's Western Qurnah; a 12.5 percent stake in an $8 billion international Azeri Caspian project that is the largest foreign investment deal in the former Soviet Union; and significant stakes in two other Azeri projects.
It is set to receive a five percent stake in Chevron Corp's and Mobil Corp's Tengiz project in Kazakhstan, and has a $5.2 billion, 18-year joint venture agreement with Atlantic Richfield (ARCO), which owns eight percent of Russia's largest vertically-integrated oil firm.
It is also eyeing Algeria, and has a deal with Italy's Agip Spa to look at North African projects.
""I think the strategy is a correct one -- but it's not an easy one to copy,"" said a Western energy consultant, adding that LUKoil President Vagit Alekperov, half-Azeri and born in Baku, had connections to Caspian oil that other oil bosses did not.
Russian oil producers make no money on domestic production not exported and by some estimates earn 80-90 percent of their profits from sales abroad and the remainder from regional sales of refined oil products.
Output and transport costs for Western Siberia, where three-quarters of LUKoil's 10.7 billion barrels in proven reserves are located, are about $6 per barrel, Kokin said, compared to estimates of $2 per barrel in the Caspian.
""Generally, the domestic Russian oil business is loss-making,"" said the Western analyst. ""You get some earnings in regional distribution (of refined products like gasoline). But selling crude to Russian refineries or on the Russian spot market is loss-making.""
Despite an aggressive expansion programme, LUKoil, which accounted for nearly 20 percent of Russian oil production last year with output of 1.16 million barrels per day, sees home production rising by 2.4 percent this year.
Most Russian oil companies face similar problems, and are struggling to turn the tide against output declines while calculating the value of increased output against export pipelines already filled to the limit.
But LUKoil, a favourite among foreign portfolio investors, in part due to its success in consolidating control over its production units, refiners and distributers, is the exception, not the rule, among Russia's newly-privatised oil companies.
""LUKoil's move abroad is correct,"" said the Western analyst. ""But its Russian competitors will not be able to do the same.""
",28
"Russia, taking a bold step in its troubled relationship with De Beers, said on Tuesday that Moscow was mulling export quotas on gems and some analysts said such curbs could put more order into world gem markets.
The Almazy Rossii-Sakha (ARS) monopoly diamond producer, which drew up a draft export agreement with De Beers last year, said the Industry Ministry was considering quotas on the volumes of rough diamonds available for export.
""We could see Russian gem sales down 25 percent,"" said Charles Kernot, mining analyst at Paribas Capital Markets.
""It would be good news as far as the international diamond market is concerned,"" he said, adding that large leakages of Russian gems outside previous trade agreements with De Beers had upset markets in the past.
Kernot also said the terms of the stalled draft deal between Russia and the South African company -- the world's two diamond powerhouses -- would probably be amended.
""I think they will have to be,"" he said.
Roger Chaplin, mining analyst at T. Hoare & Co in London, said quotas would essentially correspond to the terms of the draft deal, which envisioned setting aside rough gems for Russia's nascent cutting and polishing industry.
""The general impression is that Russia is backpedaling,"" Chaplin said. ""To actually get financing (to mine gems), they need to have in place a solid marketing agreement. It's getting to look more like you're going to have a trade agreement signed.""
But he counseled caution.
""There's always been a problem in Russia as to actually who controls the diamond industry,"" he said. ""Anything you read has got to be in the context of that particular struggle.""
A frustrated De Beers stopped buying Russian diamonds at the end of last year, cancelling an interim arrangement after Moscow failed to give word on a new trade deal.
Finance Minister Alexander Livshits told a news conference on Tuesday that Russia still wanted to sign a gem export deal with De Beers -- but he declined to answer questions on whether the draft agreement would be amended.
ARS said it would cooperate closely with the Industry Ministry to enliven Russia's diamond industry by helping to win financing to boost output and license sales.
It said cooperation would help ""strengthen the position of Russian producers of rough and polished diamonds on world markets."" But the firm's vision of the Russian gem industry made no mention of De Beers.
Analysts said they thought Russia was slowly coming around to accepting the need for a trade deal with the South African giant, but they declined to predict when it might be signed.
Russia accounted for 26 percent of De Beers' total worldwide sales under the previous contract, a deal worth about $1.2 billion a year to Russia.
But gems leaked abroad outside that contract, and Chaplin put total Russian gems sales at around $2 billion a year.
One analyst said leakages at the end of 1996 were as high as $80-$100 million a month, and analysts said up to 70 percent of gems set aside for home use ended up being exported as roughs.
De Beers has always said that its draft agreement with ARS makes provision for an adequate supply of stones for Russia's new cutting and polishing industry but that it wants to put a lid on unauthorised exports.
Kernot said quotas, coupled with Russia's dwindling diamond stockpile, could do just that.
A source in Russia's Audit Chamber said last Friday that Russia's diamond stockkpile could run out between March 1998 and September 1998 unless it were replenished.
""It's a complicated situation as far as all the different players in Russia are concerned,"" said Kernot.
",28
"Russia's reformist cabinet may give a new thrust to economic changes, but Western oil investors said on Wednesday the new government was not a knight in shining armour ready to go into battle for stalled oil deals.
The appointment of reformers may cheer economists worried about Moscow's stalled market economy transition. But foreign oil majors, with energy deals already mired for years by political bickering, said they were unlikely to see direct benefits soon.
""Reforms to other sectors will be tardy in hitting the fuel and energy sector,"" said a senior Western energy executive. ""It's probably due to the value and strategic significance of the sector. They may want to leave well enough alone.""
Western and Asian oil companies plan around $60 billion in direct long-term investments in greenfield projects in Russia, the world's third largest crude oil producer.
But the deals hinge upon the unruly parliament, or Duma, which has blocked essential legislation, not on the cabinet.
""The cabinet would not appear to be the block at the moment,"" said Martin Cocker, a partner in consultancy Ernst & Young's World Energy Group. ""Until the enabling legislation is through the Duma, it seems unlikely that the majors will want to invest in a major way.""
Russia has had a production-sharing law -- the legal linchpin for outside energy investment in risky countries -- for more than 15 months, but most major deals are not yet off the ground.
That is because the law, trimmed to appease conservatives before it was finally approved, still lacks elements required to make it function. Russia has also not decided which reserves it will open to production-sharing deals.
Both gaps have left foreign oil investors in the lurch.
""The government still can't really influence parliament, and that's where all the oil legislation is,"" said Eugene Khartukov of Moscow's International Centre for Petroleum Business Studies.
Oil executives are gloomy despite the appointments of reformers who will dominate government economic departments.
Anatoly Chubais, who masterminded Russia's privatisation programme and is now First Deputy Prime Minister in charge of the economy, also takes on the post of Finance Minister.
Boris Nemtsov, head of the reform showcase Nizhny Novgorod region, will work alongside Chubais and hold the same rank. Nemtsov's brief includes reform of natural monopolies such as gas and electricity.
Still, the dramatic Kremlin reshuffle has not completely left foreign oil companies out in the cold.
Chubais was the brain behind the Federal Energy Commission, a reform-minded regulatory body that has yet to get off the ground but seeks to inject market-economy principles into the energy sector, like fair access to oil export pipelines.
""Probably the FEC will come more to life,"" the first Western executive said. ""That's the sort of institution that gives some comfort to investors. Existing operations are very concerned about the pipeline access issue -- they never know how much they'll be exporting from month to month.""
The Fuel and Energy Ministry, at loggerheads with the Commission, survived the Kremlin reshuffle, possibly because Prime Minister Viktor Chernomyrdin, the former gas minister, made its preservation a condition of staying in the government, an oil industry source said.
But Chernomyrdin, who helped foreign oil companies through the Kremlin power corridors in recent years, may have less of an ear for Western oil companies.
There may not be help either from Fuel and Energy Minister Pyotr Rodionov, whose earlier job was in the gas sector.
""My drift is that he's not particularly interested in oil,"" the second source said.
",28
"Chechnya's main oil refinery once sent popes the finest paraffin wax they needed for the Vatican's holy candles. Now the shell-scarred plant barely flickers with activity, wasting away after two years of war.
Russian bombs no longer fall on the mainly Moslem region's capital Grozny. But the aftermath of the independence struggle with Moscow has left the century-old refinery to battle an army of Chechens who steal its oil to make illicit petrol.
It is a wild, bootleg industry unmatched anywhere else in the world. Legions of local people eke out a living by scooping up crude oil from idled wells across the republic and making what must be the world's worst gasoline.
It is a windfall for some of Chechnya's million-strong population, left destitute by the fighting which ended last year. But it deprives the refinery of badly-needed supplies and is holding back the reconstruction of an oil industry that was the mainstay of the economy in Soviet times.
The illicit trade is not the oil-riches dream that rebel leader Dzhokhar Dudayev promised Chechens, who sit on only small oil reserves but control a key pipeline route in the North Caucasus.
""Dudayev said that after we built a new pipeline, we'd all live in houses with gold-plated taps flowing with camel's milk,"" said a young Chechen who would give only his nickname, 'Cyclone'. ""He promised people gold roofs, too.""
There is little gold yet in Chechnya, where there is virtually no infrastructure or real economy. Roads resemble the surface of the moon. Every man seems to have a loaded sub-machinegun and a jar of home-made petrol to sell but no obvious job.
ILLEGAL REFINING ONE OF FEW SOURCES OF INCOME
Black-market refining, begun as a wartime necessity, is now one of Chechnya's few sources of income. The simple chemistry requires little more than stolen crude oil, bath-like containers, siphoned natural gas, water, and, for a dash of colour, powdered drink mix.
Wartime leader Aslan Maskhadov was elected president a month ago after the Russian army finally quit the region, and promised to consolidate Chechnya's de facto independence by rebuilding the economy. He has vowed to end the bootlegging.
But everybody's doing it. There is little work in Chechnya. According to official figures, nearly 90 percent have no job. As many as one in four Chechens may be involved in the illegal petrol trade, officials say.
LOW OCTANE BUT FULL OF ""EVIL""
The bootleggers tend to work stealthily at night, raiding idle oil wells under the cover of darkness.
In Tsotsin-Yurt, a tiny village 35 km (20 miles) southeast of Grozny, 23-year-old Lyomi, a tomato grower before the war, stood knee-deep in mud, refining petrol.
Thick black smoke billowed in the barren distance on the foothills of the snow-capped Caucasus mountains, marking the well from which Lyomi steals his suuplies.
Driving the oil across a landscape of mud and snow, he dumps it into a boiler heated with natural gas siphoned from a nearby pipeline. It is then piped to a pit under which lies a cistern -- also purloined -- that is cooled with water.
Then it trickles over to another cistern. That's it. First he gets acetone, then gasoline, then diesel and then paraffin.
The product is put into three-litre (one gallon) glass jars and sprinkled with a packet of Turkish-made soft drink mix for a pale lemon-green tint, mimicking the real thing.
The low-octane petrol, sold on streets and country roads across Chechnya, wrecks engines, does few kilometres to the litre (miles to the gallon) and has spawned an active, if ultimately futile, car repair business.
""There's no other work,"" Lyomi said, wiping his smudged face. ""It's not worth shutting down. There are no other jobs.""
BATTLE AGAINST BOOTLEGGERS
Back in Grozny, Khozhakhmed Yarikhanov, president of the Southern Oil Company, or YUNKO, and Chechnya's highest oil official, told Reuters that operations like Lyomi's must be closed so that the real refinery can have enough oil to process.
""Today, oil is the only source of income for the republic,"" he said at his spartan office. ""It was my idea to close down the home refineries and we will do it."" He knows it will be tough.
Bootleggers greatly upset refinery director Baudin Khamidov, who fears his chances to renew supplies to the Pope and make top-flight lubricants for military jets are slipping away.
""If we took the 4,000 tonnes a day that the bootleggers are stealing from the wells, we could solve our economic problems,"" he said at the main refinery, the Grozny Oil-Refining Combine.
""This is the very greatest evil in the republic.""
The plant was built by the British during the first Caucasus oil boom of the 1890s. In Soviet times it processed oil brought in from Siberia. With foreigners rushing to open up vast reserves in the landlocked Caspian, Grozny hopes to cash in on a new flow of oil across its territory to Black Sea ports.
But for now, the refinery shows only faint signs of life. A mangy but well-fed dog slept in the sun next to hissing pipes, and wisps of steam curled lazily in the crisp winter air.
""Our paraffin was considered the best in the world,"" sighed Viktor Petrov, deputy director and former papal supplier.
""We were pretty badly hit during the war,"" Khamidov said.
Out of action most of last year, the plant has begun processing tiny amounts of oil. But against battalions of bootleggers it is losing the battle for local crude supplies.
""We have no feedstock (supplies),"" Khamidov said, complaining that Moscow had ceased sending Siberian oil.
""You don't see this anywhere else in the world.""
",28
"Russia removed a layer of secrecy from its huge Sukhoi Log gold field and invited investors on Thursday to tap the Siberian El Dorado, which could significantly boost Russian gold output for years to come.
But there was little chance that developing the vast field would flood markets with Russian gold, even if the long-stalled, long-delayed billion-dollar project gets off the ground soon.
""Sukhoi Log may be the biggest hard-rock reserve, but Busang in Indonesia, which is open-pit, has 75 million ounces and rising,"" said Andy Smith of UBS in London, discounting Russian talk that Sukhoi Log was the world's largest untapped gold field.
An aide at the Natural Resources Ministry said domestic miner Lenzoloto would tender next month a 49 percent stake in one of its units which holds the right to develop Sukhoi Log.
Small Australian miner Star Mining Corporation NL, with nominally 31 percent of Lenzoloto, was the preferred bidder, Lenzoloto board secretary Alexei Mikhailov said.
Sukhoi Log -- which means Dry Ravine in Russian -- is in southeastern Siberia's remote Irkutsk region and has gold reserves of about 35 million troy ounces, Mikhailov said.
Lenzoloto produced about five tonnes of gold last year, a drop in the bucket of Russia's 1996 total of 124 tonnes.
Mikhailov said Sukhoi Log's peak output could reach 60 tonnes a year (nearly two million ounces) in the next millenium -- a figure which did not make analysts jump.
""Sixty tonnes of output can be bought in five minutes by a fund,"" Smith said, adding that mine supply variations had not really affected gold prices in the past year and the chances of Russia flooding the market with Sukhoi Log gold were ""nil"".
Prime Minister Viktor Chernomyrdin ordered last year that Russia stop hiding how much gold Sukhoi Log might have, saying decades-long Soviet secrecy on the giant field would do nothing to attract the vast amount of capital needed to tap it.
Mikhailov said platinum reserves there could be as high as gold reserves but said it was unclear if they could be commercially developed.
A feasibility study of Sukhoi Log has been completed but Mikhailov said Lenzoloto had not yet seen the document. The study details gold-recovery grades ascertained by Russian geologists and guarded as a secret by the Soviet Communists.
""We have 51 percent of the shares (in Lenzoloto unit Sukhoi Log that will tap the field) and fully control the situation,"" Boris Yatskevich, First Deputy Natural Resources Minister and Lenzoloto board chairman, told the Sevodnya daily.
""They will pay money, and we will control things.""
That could be wishful thinking, given Russia's track record in attracting foreign investment to its flagging gold sector.
""The lack of investment in the area is quite incredible at the moment,"" said bullion analyst Andrea Hotter of Metal Bulletin Research in London.
One reason is that Russia has made it tough to export gold.
""The issue of exporting gold has not yet been resolved by the government, but they are working to liberalise the market,"" Mikhailov said, adding that the government buys gold from domestic mines at international prices but pays in roubles.
Sukhoi Log could be worth $12.4 billion at current world gold prices -- but small Star Mining will have to cough up plenty to turn it into a silk purse.
Lenzoloto wants the tender winner to pay a $60 million signing bonus, $200 million for the equity stake and provide $500 million in bank-guaranteed financing. Mikhailov estimated the project's total cost at $1.5 billion.
Star Mining signed a memorandum last year with South African mining group JCI Ltd for JCI to acquire an option for shares in Star unit Star Technology Systems Ltd that would give JCI an economic interest of up to 30 percent in Sukhoi Log.
""Sukhoi Log was the jewel,"" Smith said. ""But tenders have been known to be postponed. It seems to be a very slow project in getting started up.""
",28
"Russia's top aluminium smelters said on Monday attempts to fix contracts with Ukraine's main raw materials supplier had met with no success and Ukraine was instead courting a rival smelter in Tajikistan.
Russia, chronically short of supplies of alumina, has been seeking supply contracts from Ukraine's Mykolayivsky Hlynozemny plant, with an eye to securing nearby raw materials at attractive prices.
But Russian metals officials said Mykolayivskiy had been reluctant so far, leaving Russia's giant Bratsk and Krasnoyarsk smelters with no alumina supplies this year from Ukraine.
""We have reached no agreement with Mikolayivskiy over supplies,"" said Yuri Shlaifshtein, a board member at Bratsk, the world's largest smelter.
""They're asking prices above world levels -- they can't go on like this much longer.""
Mikolayivskiy's deputy commercial director, Hennady Bushtruk, earlier told Reuters in the southern Ukrainian town where the plant is based that it planned to sell 90 percent of its 1997 output to Russia but no contracts had yet been signed.
He declined to name prices.
But Shlaifshtein said the plant was asking around $270 per tonne, above world levels, and wanted to sell the bulk of its supplies to Tajikistan's Tursunzade smelter.
Mykolayivskiy is one of the largest plants of its kind in the region, with a production capacity of one million tonnes a year.
It takes about two tonnes of alumina to produce one tonne of primary aluminium, making Mykolayivskiy capable of supplying enough alumina to account for nearly 20 percent of Russia's 1996 output of 2.87 million tonnes.
Russia has only two functioning alumina plants which can meet only 30 percent of smelters' demand.
The lack of raw materials and tight finances have given tolling a key role in the Russian aluminium industry.
Under tolling, smelters import raw materials, usually through international commodities houses, process them and then export them, paying back the houses with some of the proceeds.
Shlaifshtein said even Mikolayivskiy wanted to toll alumina at places like Bratsk and Krasnoyarsk rather than sell outright to Russian plants.
Mikolayivskiy, which supplied 800,000 tonnes to Russia in 1994, according to Russian news agencies, was now selling most of its supplies to Tursunzade, officials said.
Krasnoyarsk board chairman Gennady Druzhinin and Shlaifshtein said recent talks with Mikolayivskiy had come to naught, but Bratsk and Kranosyarsk had already covered most of their alumina supplies for production this year.
""Their prices are too high,"" said Druzhinin.
Russian plants usually complete talks for alumina supply contracts in December of the preceeding year.
""We've basically covered our supplies for the year,"" Druzhinin said. ""Bratsk has Pavlodar (the big Kazakh alumina plant), so it's easier for them.""
He said Krasnoyarsk was working with London-based Trans-World Group to invest in the financially troubled Achinsk plant to boost alumina output to 700,000 tonnes this year and to have a more secure source of supplies.
--Moscow Newsroom, +7095 941 8520
",28
"Russia's powerful Gazprom pushed back a plan on Wednesday to issue more share look-alikes for foreigners, saying it needed time to clear out its massive debts to give its stock time to appreciate.
But the company also issued a challenge to the government to meet it half way as it struggles to make tax and other payments which are crucial to the functioning of Russia's economy.
Eduard Ivanov, director of securities at the world's largest natural gas producer, told a news conference RAO Gazprom planned to issue a second tranche of its American Depositary Shares (ADS) next year, not this year as previously planned.
""We consider it expedient to place this tranche in 1998... However the exact timing has not yet been set,"" he said.
He said Gazprom still planned to start issuing convertible bonds this year and that the ADSs would be sold on U.S. markets.
But company officials said one reason for the ADS delay was Gazprom's tortuous efforts to find a common language with the government -- once its unquestioning supporter -- on payments by the giant company into the budget and state funds.
Much is at stake. Gazprom accounted for 26 percent of Russia's 1996 tax revenue -- a whopping figure which underscores the wealth of the company and its key role in Moscow's efforts to plug the budget deficit and keep market reforms on track.
Gazprom, with a market capitalisation of $16.5 billion, accounts for over one-third of global gas reserves, 95 percent of Russian gas output and 39 percent of the world's gas trade.
""We are taking the responsibility to pay our debts,"" Pyotr Rodionov, deputy chairman of Gazprom's board and a former energy minister, said. ""But we also demand the government take steps to meet us halfway, especially in planning the 1998 budget.""
""It's time for the state to conduct itself correctly with regard to payments from energy companies,"" he said, referring to what he thought were unrealistic state revenue targets.
Gazprom has been the target of attacks by the cabinet's fresh-faced reformers, who have promised the giant will not be broken up but want it to pay its corporate and other debts.
Gazprom argues that its consumers -- mostly gas-fired power plants and industrial enterprises -- are late payers fuelling a payments crisis whose blame is laid at Gazprom's door.
The company -- once a ministry, once headed by Prime Minister Viktor Chernomyrdin and now quite coveted by foreign investors -- took pains last month to say peace had broken out in talks with the cabinet on its arrears.
Gazprom said it still owed 3.5 trillion roubles ($608 million), down from an estimated 14.8 trillion ($2.6 billion).
But Rodionov said the two sides needed common understanding.
""We must first sort out our relations to the state,"" he said, describing what needed to happen before Gazprom offered more of its equity to foreign investors. ""That is the element which will facilitate growth in our share price.""
In a sign the government is still sympathetic to Gazprom's problems, a senior official said on Tuesday one option would be to transfer assets of indebted power companies to Gazprom. Gazprom's first tranche of ADSs, issued in October 1996 and listed in London, set foreign investors drooling. The company plans to make nine percent of its capital available to foreign investors -- who currently own less than two percent.
It accounts for 60 percent of Europe's gas imports but plans to sell even more by raising capital abroad for its $45 billion Yamal project linking Arctic gas fields to Western consumers.
Some of the money will come from the ADSs; other from a bridging loan of $1.2 billion and medium term credits of up to $3 billion dollars, for which Gazprom has mandated banks Credit Lyonnais and Dresdner Kleinwort Benson.
A Gazprom official who declined to be identified said ABN-Amro and Goldman Sachs -- which were awarded but lost the mandates -- would probably still arrange Gazprom's planned Eurobond.
""Every bank wants to work with us,"" Rodionov said. ""Of course it's a competitive battle.""
Gazprom has a strictly-divided share structure separating paper available on the Russian market from that on foreign markets, where ADSs effectively cost three times as much as Russian paper. But Rodionov said this could be tough.
""A lock on a door won't stop a cheater,"" he said.  REUTER
",28
"The former Soviet Union will probably see grain output increase this year after last year's drought-hit disaster, industry officials said on Friday.
But unpredictable weather in Russia, Kazakhstan and Ukraine, the region's biggest grain producers, could still hit volume and quality levels.
""Ukraine was very bad last year, Russia was quite low and Kazakhstan was below average,"" said Andrei Sizov of SovEcon Ltd, a private agricultural consultancy in Moscow, referring to 1996 output levels that were among the worst in three decades.
""This year, weather conditions have so far been better for all three. But 'better' is in comparison to what was last year's really bad situation.""
Kazakhstan and Ukraine export much of their surplus grain to Russia and other former Soviet republics, as well as to Eastern and Central Europe. Kazakhstan accounted for up to three quarters of Russia's wheat and wheat flour imports last year.
Sowing in the three countries is nearly complete, and industry sources said the weather, not low agricultural inputs, was the main factor -- and the main unknown.
""I think we can definitely say output in all three countries will improve on last year, but it's all still unpredictable because the weather is unpredictable,"" said Vladimir Totsky, deputy director of Russia's Grain Union, a private grouping of traders and producers.
Russia may finally reverse a five-year trend of declining grain area, with around 30 million hectares sown, not including maize, on public-sector farms.
""This is more than enough for Russia to meet its needs,"" Sizov said, forecasting net wheat output of 35-38 million tonnes compared with last year's 35 million. ""Imports will fall and there may be material for export.""
Officials have forecast net grain output of at least 70 million tonnes after last year's 69.3 million, which was the second worst crop in three decades.
Average temperatures in the European part of Russia were five to six degrees Celsius lower than normal at the end of May, Viktor Trenin of the State Meteorological Service said, adding the cold had not seriously hurt crops.
But Siberia and the Urals had the most unusual weather in a century, he said, adding that very hot, dry temperatures in recent weeks made crops grow too fast and sucked moisture away.
An expected cold snap with possible frosts could further hurt plantings, he said, adding, ""We haven't seen fluctuations like this in 100 years. It's dangerous."" He said it was too early to predict weather patterns in the coming months.
An Agriculture Ministry official said Russian winter grains were in good condition, with winterkill losses the lowest in five years at five percent, compared with last year's eight to 11 percent.
In Ukraine, crops were planted two weeks late and experienced a cooler, wet spring. Totsky said yields were below 1996 levels.
Ukrainian officials have declined to forecast summer weather conditions, but Sizov said net grain output in the former breadbasket would rise to 31-33 million tonnes from last year's paltry 25.4 million. The government has forecast 35 million tonnes.
In Kazakhstan, the most secretive of the big former Soviet producers, officials have declined to forecast publicly how output might improve on last year's official, drought-hit 11.6 million tonnes. Almaty's Agro-Industrial Exchange sees output at a net 14 million tonnes.
""They had some problems with their sowing campaign,"" said Totsky, referring to official figures showing the area sown to grain down to 14.5 million hectares from 1996's 16.1 million.
The giant Central Asian state saw an early spring with heavy rains. Sizov said the weather was a big factor in northern Kazakhstan, where drought often mixes with downpours and snows during the autumn harvest.
""Every year, we have to wait and see what cards the weather deals us,"" said Totsky. ""This year will be better, but there's still an element of unpredictability.""
--Moscow Newsroom, +7095 941 8520
",28
"Russian oil refiners are eyeing costly upgrades to make the lighter products that export markets favour, but they may find it hard to find the cash.
Hydrocrackers and fluid catalytic crackers -- expensive, sophisticated plants that produce lighter material like gasoline, naphtha, diesel and jet fuel -- are rare in Russia, where heavy fuel oil makes up around 40 percent of output.
Most Russian refiners use less sophisticated processing technologies, and only three percent of capacity comes from cracking processes, well below Western levels.
""There's just a screaming need for secondary capacity,"" said a senior Western energy consultant in Moscow. ""But who's willing to invest in a Russian refinery?""
Boston Consulting Group says that by 2000, new capacities in Russia could include 254,000 barrels per day (bpd) of catalytic cracking and 131,000 bpd of hydrocracking, both used to produce expensive, high-octane fuels.
The increases, and boosts to other processes, could bring Russia's products output to 5.9 million bpd by 2000 from a current 5.2 million -- but the analysts said they would not mean heavy product output falls by the wayside.
""You will clearly increase light products capacity, but you also at least maintain the heavy products,"" said Boston Consulting Group Vice-President Charbel Ackermann. ""It's not a substitution or reduction for heavy capacity.""
Oil sources said Russia's 28 major refineries had collectively put in 28 formal requests to international lenders and banks for loans for upgrades -- but money has not flowed in.
""Lots are talking about it, but few are actually doing it,"" said Bechtel International Inc. Vice-President Robert Parker.
In one of many plans dependent on full financing, Russia's Kirishi refinery has said it hopes Chevron will help install a $750 million hydrocracker.
The Yaroslavl refinery, north of Moscow, is getting a $60 million catalytic cracking unit to boost gasoline output, while the Angarsk refinery in Siberia is working with M. W. Kellogg on a $70 million plan for a fluid catalytic cracking unit.
The Fuel and Energy Ministry said the Omsk refinery, in Siberia, would get a catalytic reforming plant by 2000, and that ABB Lummus Global was working on plans to help the Perm, Samara, Angarsk and other refineries install catalytic crackers.
Rif Usmanov, chief engineer at the Ufa refinery in southern Russia, said the plant's catalytic cracking facility, completed in March, would produce two million tonnes of gasoline and diesel a year (about 40,000 bpd).
An engineer at the Ryazan refinery south of Moscow said revamping of a catalytic cracking unit to raise capacity to 24,000 bpd would continue into 1997.
""A lot of projects are merely adjusting the heights of the columns and tinkering with other things,"" said energy specialist Peter Houlder at CentreInvest consultancy in Moscow. ""But most of these are not $200-$300 million projects.""
Some question the timing of the proposed upgrades, saying transport costs to Europe will squeeze margins too much.
""A lot of ambition is geared on the basis of exporting product to Europe, which I don't think is that logical,"" Parker said. ""Continental Europe is surrounded by state-of-the-art, high-tech refineries and sophisticated distribution.""
But the economy in Russia's Volga and Urals regions, where heavy industry is in steep decline, is not picking up quickly and may not be able to absorb new products output soon.
""With the domestic market's limited absorption capacity, you'll still see an inclination to export heavy,"" Ackermann said.
",28
"Russia's troubled Norilsk Nickel plant has vowed to keep output steady while it seeks a solution to its financial woes, company officials said on Thursday.
But the struggle to make the enterprise leaner and more competitive has forced the flagship producer to modify long-term plans to boost profitability.
Valery Alfimenko, director of the Norilsk combine's information section in Norilsk, said January output was slightly higher than planned levels but that the enterprise was not working at 100 percent of capacity.
""The main task is not to produce less than we did last year,"" he said. ""It will all depend on the market. If prices go up, we'll produce more; if not, less.""
He said the plant's financial crisis had not affected mining operations but that supplies of materials secondary to production, like salt, could run low.
The Norilsk complex, Russia's biggest producer of nickel, copper and cobalt and a major world producer of platinum and palladium, is the flagship plant of the RAO Norilsky Nikel metals group.
Plant workers have given management until February 20 to pay off three months of salary arrears and Alfimenko said a Norilsk delegation would arrive in Moscow on Sunday for more talks aimed at resolving the crisis.
Leonid Binder, in charge of restructuring Norilsk, said output was steady but declined to give concrete figures.
""There are various ways of resolving the matter (financial crisis),"" he said, adding, ""Maybe we don't need to increase output, but to change the structure of our production."" He declined to be more specific.
Plant workers passed a vote of no-confidence in management earlier this week to protest against wage arrears of around one trillion roubles and to demand higher salaries that one official said would cost Norilsk an extra 70 billion roubles a month.
The crisis has meant that Norilsk, which revamped its export strategy last year in a bid to cut out intermediaries, has been unable to fully cut ties to Russian and international commodities trading houses.
""We try to go to the end users, but if traders offer more acceptable terms, then we go to them,"" said Marina Nefyodova, first deputy director in charge of finance at Interrosimpex, the exclusive distributor of Norilsk output. ""When financing problems exist, we choose conditions that are better for us.""
She said an analysis of the effect of restructuring on exports had not yet been carried out and declined to comment on how sales volumes abroad might be affected by restructuring.
The task of restructuring Norilsk has fallen on commercial bank Uneximbank, which owns a 38 percent share in the group, acquired through a 1995 government shares-for-loans auction.
Workers have said they will ask the government to strip Uneximbank of its shares if their demands are not met. But a bank official saw no grounds to force shares to change hands.
""I don't see any real mechanism for them to realise this,"" said Uneximbank spokesman Modest Kolerov. ""They are upset because they want to live -- but there is no legal mechanism for them to force us to give up these shares -- we have the full right to do as we wish with these shares on the open market.""
The Norilsk group is the world's second largest producer of refined nickel, and the flagship combine produced 100,000 tonnes of nickel in 1996, a company official said earlier.
Binder said the firm faced pressing financial burdens to carry out mining, smelting and social support operations north of the Arctic Circle, where Norilsk supports entire towns.
""Not one metals enterprise could have carried this burden alone - the exploration, mining, production, transport of food and goods to the North,"" Binder said. ""It is a colossal burden.""
--Moscow Newsroom, +7095 941 8520
",28
"Russia's Norilsk Nickel metals group said on Thursday that it wanted to be a competitive company and not a financial wet nurse to the Arctic, in a strong challenge to the costly Soviet legacy of firms supporting towns.
RAO Norilsky Nickel spokesman Sergei Vetchinin said the burden of supporting the northern town where Norilsk's main plant is based was sucking the company dry of resources needed to emerge from financial crisis and boost production.
""Capitalists don't support cities,"" he said. ""The city was created for the company. Now some of the town is not related to us. But the company still supports the whole town.""
It will be difficult for Norilsk, a key producer of nickel and precious metals based 200 miles north of the Arctic Circle, to shatter one of the Soviet Union's most enduring and costly legacies -- that of production no matter what the costs.
Production costs are precisely what matter now that Norilsk, one of the world's biggest nickel, platinum and palladium
",28
"Hong Kong's Democratic Party leaders, often seen as the arch-foes of Beijing, launched a marathon mission to North America and Europe on Wednesday to brief the West on the territory's plight as China takes over.
Britain hands the colony for over 150 years back to Beijing at midnight on June 30, and the Democratic Party has been in the forefront of political clashes with China over Chinese plans to curb democracy and civil rights laws in Hong Kong.
Party leader Martin Lee and his deputy Szeto Wah, a leading anti-communist activist, would lead the mission to the United States, Canada and the United Nations offices in Switzerland. Fellow legislator Andrew Cheng would also be going.
The three will speak to audiences in Seattle, Vancouver, Calgary, Los Angeles, Sacramento, San Francisco, Boston, Chicago, Toronto, Washington, New York, Ottawa and Geneva.
The tour is the biggest ever undertaken by the Hong Kong democratic movement's beacon organisation to convince Western opinion of the need to help safeguard the territory's basic freedoms after communist-ruled China takes over.
Lee is sharply at odds both with China and with its pick for Hong Kong's future leader, Tung Chee-hwa. Tung has accused Lee of being ""anti-China"" and of ""badmouthing Hong Kong"" by spreading doom scenarios about the territory's furture.
""Our goal is to emphasise the vital importance of Hong Kong as the economic and trade centre of the Pacific Rim,"" Lee said as he left Hong Kong for Seattle late on Tuesday.
""We will detail latest developments in Hong Kong and their implications for the future. I intend to give a clear, realistic picture of the situation here and encourage the American and Canadian people to take a close interest now and in the future.""
In a move certain to anger China, Lee will testify to the United Nations Human Rights Commission in Geneva on April 7, where he said he plans to discuss ""the threats to freedom, civil rights and the rule of law in Hong Kong"".
China plans to roll back liberal laws on the freedom of association, which includes rules on forming political parties, and on freedom of assembly, which covers rules on political demonstrations, as well as Hong Kong's Bill of Rights.
Beijing says the moves are needed because the liberalisation of the political scene in recent years breaches understandings reached with Britain and formal agreements on the handover.
Lee said he would also raise China's plan to dissolve Hong Kong's elected Legislative Council upon the handover and replace it with an appointed body composed of pro-China politicians.
He would argue that Hong Kong's continued economic success and freedoms were inseparable from its political freedoms.
With 19 seats, Lee's is the largest party in the 60-member legislature. It was in the vanguard of a victory for democratic groups who took 70 percent of the vote in free democratic polls in 1995. Pro-China parties were rejected at the polls.
Lee said he would also lobby Washington to renew China's most favoured nation trading status when it comes up for review this year. Hong Kong benefits substantially from China's trading privileges because the bulk of the trade goes via Hong Kong.
In Washington on April 1-2, Lee will address the Senate Foreign Relations Committee and governmental and congressional leaders and he would lobby for visa-free access to the United States by Hong Kong people after the Chinese takeover. The mission was also intended to raise funds for the Hong Kong Democratic Party -- in what may be the last year when this is legally possible if China goes ahead as it intends and bans links between Hong Kong parties and overseas organisations.
The party would address overseas Chinese communities, think tanks, business leaders and legal and human rights groups.
After visiting Geneva Lee will return in Washington on April 9 to receive one of the country's most prestigious political awards, the National Endowment for Democracy's 1997 Democracy Award.
Previous recipients include Czechoslovak dissident-turned- President Vaclav Havel and rights campaigner Yelena Bonner, the wife of late Soviet dissident Andrei Sakharov.
",37
"A leader of the crushed 1989 democracy movement in Beijing's Tiananmen Square predicted on Thursday there would be no similar crackdowns in China or Hong Kong under Chinese rule, but there would be pressure to conform.
Han Dongfang, a former railwayman who formed a free trade union in the 1989 student-led democracy movement, said China's leaders had learned lessons from ""this historical misunderstanding"" and would not use the army this way again.
In June eight years ago China's communist rulers sent the People's Liberation Army into Beijing and ruthlessly put down the movement with heavy loss of life.
In Tiananmen Square, the hub of the protests, it was as though hungry children were tempted by a green unripe apple of democracy, the 34-year-old dissident, now living in exile in British-ruled Hong Kong, said in an interview.
""They reached up and ate it, and suddenly they realised it tasted very bad,"" Han said.
""You cannot blame those hungry children, and you cannot blame the apple for being so green. So June 4, 1989, was a big historical misunderstanding,"" he said.
""I don't think anybody can use tanks and machineguns again to crack down on a social movement.""
China's next social upheaval, if it happened, was likely to involve workers and farmers complaining they had no food or money.
""Do you think machineguns and tanks can crack down on such hungry, angry people if they are going to die of hunger anyway?""
Many of Hong Kong's 6.4 million people have been worried that China will break its hands-off promise and introduce repressive rule in the territory.
Beijing has already unveiled plans to repeal some Hong Kong legislation protecting civil rights when Britain hands the colony back on July 1 -- ordinances it has said violated the territory's future China-designed constitution.
China also plans to dissolve the elected legislature, saying the council was elected under reforms enacted over its objections.
Han said that after the death of paramount leader Deng Xiaoping last month, President Jiang Zemin's ruling group was too busy with internal problems to crack down on Hong Kong.
""They face very, very big problems in the villages, unemployment in big state enterprises, which are to be reformed, and in the ethnic minority areas,"" Han said.
Han said Hong Kong was a goldmine for China.
""Chinese leaders will only break the golden egg if Hong Kong becomes a very big danger to their power. I don't think that will happen,"" Han said, speaking a day after Hong Kong announced record fiscal reserves of HK$330 billion (US$42.3 billion).
Beijing has promised the territory will retain a high degree of autonomy and its capitalist system for 50 years.
Han spent two years in jail for ""counter-revolutionary acts"" after Tiananmen, and was then released and allowed to go to the United States for medical treatment.
When he tried to return to China in 1993, his passport was cancelled, forcing him into exile in Hong Kong.
Asked if he thought China would crush the Hong Kong democracy movement after the sovereignty change, Han said Beijing would be more subtle than in 1989.
He said China would try to influence Hong Kong through prods and whispers to its new legislators and leaders -- all of whom have been screened by Beijing before the handover -- and that the business community would support curbs on democracy.
""The Chinese leaders have gained a lot of experience since 1989 inside China. They welcome businessmen and tell them they will have better conditions for their business than before, in a society with no social movements, no trouble for business.""
Han said he trusted Hong Kong's future leader, Tung Chee-hwa, who was selected by a Beijing-backed committee.
""He is not a bad person. I don't think he'll send protesters to jail. He's not going to wear the same trousers as the Chinese government.""
(US$1=HK$7.8)
",37
"Hong Kong's chief judge came under intense pressure to quit the judiciary on Wednesday after stoking the political fire with a bid to become the territory's leader after Britain hands the colony back to China in 1997.
Politicians and legal experts said Tuesday's declaration by 67-year-old Chief Justice Sir Ti Liang Yang that he would be a candidate created a conflict of interest and raised a question mark over his role in the British-style judiciary.
""It is important to give people the confidence that Hong Kong's judiciary is independent,"" said lawyer Martin Lee, leader of the colony' biggest political party, the Democratic Party.
Lee's view was echoed by prominent pro-democracy legislator Emily Lau, and even by some members of the pro-Beijing camp.
Pro-China politician Tsang Yok-sing said Yang should resign as top judge but welcomed his bid, saying it was good to have more candidates, and especially one who was ""politically neutral and without any business connections"".
""He should consider stepping down from his position as Chief Justice. That should happen as early as possible,"" Tsang said, speaking to Hong Kong radio from Beijing.
""It will be seen by the public, by people in the legal profession, that there may be a conflict of interests.""
Nihal Jayawickrama, a law professor at Hong Kong University, said China-born, British-trained Yang had a right to bid for the leadership, but having entered politics he should now resign.
""It's not possible for him to hold the office of Chief Justice any longer. It's quite incompatible,"" Jayawickrama said.
There are just 300 days before this bustling capitalist territory of 6.2 million people reverts to communist-ruled China, ending a century and a half of British rule.
Now that Yang's hat is in the ring, with pro-Beijing publisher Xu Simin pledging to nominate him, the leadership stakes have been injected with a new element of competition.
Other names touted as possible candidates include Patten's Chief Secretary Anson Chan, shipping tycoon Tung Chee-hwa and a former Hong Kong cabinet member, lawyer T.S. Lo. But Chan is widely believed to be unacceptable to China, Tung has not made clear his intentions, and Lo has no proposer yet.
A 400-member Selection Committee which will pick the leader and the new legislature is gradually taking shape.
Yang, widely seen as a neutral, independent figure because of his judicial career and as a possible compromise candidate, has said he will resign as chief justice if he is formally nominated.
But the earliest Xu can formally propose his nomination is when the Selection Committee is constituted in November and critics say he cannot be chief judge and a politician at the same time and therefore should step down ahead of any formal nomination.
The latest twist comes amid signals from Beijing that China is setting aside its bitter quarrels with Britain and possibly with Hong Kong's democrats for the sake of a smooth handover.
China's Hong Kong policy boss Lu Ping said in Beijing on Tuesday he accepted that Britain and China might not settle all disagreements by the time of the midnight June 30 handover.
""We shall try our best to resolve minor differences before July 1, 1997. If we fail, we can put them aside,"" Lu said.
He added that he was willing to shake hands on that day with his arch-rival, Hong Kong's colonial governor Chris Patten.
The handover negotiations have been a thorny process. Patten and pro-democracy groups have been quick to dub most of China's moves as anti-democratic in recent years, especially its plan to scrap the elected legislature for an appointed provisional body.
",37
"China is pressing ahead with a controversial plan to roll back civil rights and democracy in Hong Kong, with its tough line on the territory unshaken by the death of leader Deng Xiaoping.
Deng, who died last week, was the architect of the ""one country two systems"" formula for the conversion of Hong Kong into a special, autonomous capitalist zone of China when British rule ends at midnight on June 30.
Despite widespread misgivings about China in this bustling territory of 6.4 million people, thousands of residents paid respects to Deng for the fourth day on Monday in a mourning ceremony at China's official mission.
On Sunday night, China's parliament approved a plan to throw out or amend a clutch of Hong Kong laws, including those that provide for democratic elections and protect civil liberties.
The plan trims back a bill of rights, a law on forming political parties and another on free association which takes a liberal approach to public protests and demonstrations.
The laws were part of London's effort to create a democratic framework in Hong Kong in the twilight of more than 150 years of British rule.
Beijing has justified its onslaught against Hong Kong's fledgling democracy by accusing Britain of treaty violations with Hong Kong's recent democratic reforms.
""China's latest move means the die is now very much cast,"" a spokesman for the Hong Kong Democratic Party told Reuters in reference to the National People's Congress's (NPC) Sunday decision.
""China has shown it is not going to respect the will of Hong Kong people. The NPC is a political body making a decision that will remake Hong Kong in blatant breach of handover agreements which say Hong Kong's laws shall remain unchanged.""
He said the move violated both the internationally registered 1984 Sino-British handover treaty, known as the Joint Declaration, as well as Hong Kong's future constitution, the Basic Law.
Beijing's move to crimp basic freedoms flies in the face of official protests by Britain.
London has challenged China to go to the World Court to seek a ruling on the legality of Beijing's plan to replace Hong Kong's elected Legislative Council with an appointed provisional legislature.
In a related development, a leading Hong Kong member of the Preparatory Committee on the handover told reporters Hong Kong would not be allowed to amend new election rules that the panel was preparing for the territory.
Neither Hong Kong's leader-in-waiting, Tung Chee-hwa, the provisional legislature, nor the post-colonial government, could change the rules, Lau Siu-kai said.
Slightly over half of Preparatory Committee members are from Hong Kong and the rest are from the mainland. Its decisions generally echo policy statements by senior Beijing officials.
The rules would govern the first election of a long-term legislature some time in 1998 to replace a provisional body that China has appointed to make laws from July 1.
It had not been clear how much say Hong Kong people would have in setting the rules.
A Hong Kong business leader and pro-China politician set to join Tung's Executive Council said the cabinet would play a much greater role in policy making than it had done under outgoing colonial Governor Chris Patten.
But the businessman, Henry Tang, head of the Federation of Hong Kong Industries, also said he expected no big policy changes under Tung, a Shanghai-born shipping billionaire.
",37
"Chinese officials sent out positive signals about Beijing's future handling of Hong Kong on Friday, and diplomats indicated China and Britain had agreed on a VIP guestlist for a grand handover party.
Hong Kong reverts to communist-ruled China at midnight on June 30 after a century and a half as a British colony, and is to retain its separate capitalist system for 50 years.
Chinese officials attending a seminar on the transition sought to assure Hong Kong there will be no influx of mainland Chinese and that the future garrison will not misbehave.
They also tried to ease fears that the economy in the capitalist enclave of 6.4 million people will suffer and stressed the need to allow Hong Kong businessmen to travel.
Wang Fengchao, deputy head of Beijing's Hong Kong and Macau Affairs Office, dismissed fears that China would open the flood gates to migrants cashing in on Hong Kong's economic miracle.
He said there were strict rules on entry into Hong Kong, and children of illegal immigrants would not be allowed in. ""These provisions...will have a deterrent effect,"" he said.
The general who guards the political purity of China's future Hong Kong garrison said the People's Liberation Army (PLA) would not meddle in local government or business affairs.
""The Hong Kong garrison and government will be independent military and administrative systems with no affiliate relationship and will not interfere with each other,"" said the garrison's political commissar, Major-General Xiong Zi Ren.
""I can categorically tell you that we resolutely will abide by all regulations set out in the law,"" Xiong said.
""We have already set a rule that bans involvement in production business,"" he said.
Tackling another issue worrying Hong Kong emigrants around the world, Wang announced a grace period for them to return to the territory if they want to keep permanent residency rights.
An estimated 750,000 of Hong Kong's 6.4 million people have foreign citizenship. The bulk have made Canada, Australia, Britain or the United States their adopted homes.
If they are abroad for long after July 1 they might lose their Hong Kong permanent residency.
Wang said China was prepared to allow them a grace period, but the length of time would be set by the post-handover Hong Kong Special Administrative Region (SAR).
""As to the length of time they are allowed to stay outside Hong Kong, this is for the SAR to decide,"" he said.
Tam Yiu-chung, a member of the future cabinet of Hong Kong Chief Executive-designate Tung Chee-hwa, said he believed the period would be up to three years.
Britain, meanwhile, signaled it had agreed with China on the broad outlines of a guest list for the joint celebration of the handover to China three months from now.
A British official told Reuters the two sides would invite a total of about 3,200 guests to the event.
About 400 ""international guests"" would be included. Some would be government ministers and the heads of international organisations, said the official, who asked not to be named.
But China and Britain did not expect heads of government or heads of state. One diplomat said this was a sign China had won in its efforts not to give Britain too glorious a send-off.
Hong Kong's colonial Chief Secretary Anson Chan, who is keeping her job under Tung, said in Canada on Thursday China was fully committed to granting Hong Kong a high degree of autonomy.
""It is clear the Chinese leaders are fully committed to the faithful implementation of the late Deng Xiaoping's visionary concept of 'one country, two systems' and Hong Kong people ruling Hong Kong,"" Chan said.
""There is a clear appreciation that only in this way can Hong Kong best serve the interests of China,"" she said.
However, the United States said on the same day that China had sent mixed and sometimes disturbing signals on the future of Hong Kong's legislature, human rights and press freedom after Beijing takes control on July 1.
""Over the past year, developments in Hong Kong have sent mixed signals about some aspects of the change in sovereignty,"" the State Department said in a report to Congress.
""There have been significant positive developments since March 1996,"" it said. But ""China's actions regarding the future of the legislature and the laws governing human rights and civil liberties in Hong Kong have been disturbing and have caused concern in both Hong Kong and the international community.""
China has set in motion plans to replace Hong Kong's elected legislature with an appointed body and to water down liberal laws protecting civil liberties and democracy.
",37
"China plans to abolish a raft of Hong Kong laws that allowed for democratic elections and shielded human rights in the British colony, which is set to revert to communist-ruled Beijing's control on July 1.
A legal panel of the China-controlled Preparatory Committee, meeting in Beijing, on Sunday decided to repeal or amend 25 laws and articles, some the product of recent reforms and others the outdated trappings of the colonial era.
Listing the planned changes, China's official Xinhua news agency said recent reforms in Hong Kong had been an attempt to apply British constitutional principles in violation of the 1984 Sino-British treaty and the 1990 Basic Law governing the territory's handover.
Pro-democracy groups and the colonial government described the Preparatory Committee's move as a blow to democracy and human rights that would dent international confidence in post-1997 Hong Kong.
""These recommendations are sadly predictable and a retrograde step which will deal a body blow to human rights protection in Hong Kong,"" a government spokesman said.
The territory, under the British flag for more than 150 years, is being handed back to China at midnight on June 30.
The handover treaty promises the territory of 6.3 million people a high degree of autonomy and allows it to retain its freewheeling capitalist system.
But China has long indicated it will dismantle the reforms of British Governor Chris Patten, who expanded democracy in Hong Kong against China's wishes after he took office in 1992.
Beijing has already appointed a provisional legislature to supplant the elected Legislative Council on July 1.
It is that new lawmaking body, which holds its first formal session this Saturday in the Chinese city of Shenzhen just over the border from Hong Kong, that will repeal the laws and introduce new ones.
Many in Hong Kong fear the new laws will be draconian and repressive. China says the changes are necessary because Britain has introduced laws in Hong Kong that clash with the territory's post-1997 mini-constitution, the Basic Law.
Among the laws to be scrapped or amended are Hong Kong's Bill of Rights, the 1992 election law and the Societies Ordinance under which political parties are allowed and the 1995 Public Order Ordinance which allows peaceful demonstrations.
Also to be rolled back are some colonial-era laws such as those regulating the British military, immigration, nationality status, extradition and colonial armorial bearings.
The changes largely echo proposals made two years ago by one of the early China-controlled panels that deliberated on the future political set-up, the Preparatory Working Committee.
The 150-member Preparatory Committee assembles mainland officials and pro-Beijing politicians from Hong Kong and reports to the Chinese central government.
The body, chaired by Chinese Foreign Minister Qian Qichen, has mapped out the contours of the post-1997 Hong Kong regime.
It elected a Selection Commitee that last month appointed shipping tycoon Tung Chee-hwa as the territory's post-colonial leader and the 60 members of the new legislature.
",37
"Hong Kong's finance chief Donald Tsang on Wednesday hammered home a message of fiscal independence when he presented the last budget under British rule, even though he had China breathing down his neck.
The Financial Secretary hailed cooperation with Beijing, which helped draft the budget that will straddle Britain's handover of Hong Kong to China on July 1.
But he peppered his speech with reminders -- to listeners in the territory's Legislative Council that China plans to dissolve this year -- that Hong Kong will remain financially independent of Beijing.
Tsang stressed that China had chiselled this autonomy in stone in the Basic Law, which will be Hong Kong's constitution after the sovereignty change.
Many in Hong Kong have worried that China will try to milk Hong Kong of its wealth, but Beijing has said it will not remove a cent in taxes from the territory.
""It's so obvious that Hong Kong will be worth more to China as a going concern than for a one-off raid on the pot of gold,"" said an analyst with a major securities house.
The Basic Law says the territory will maintain independent finances, manage its own economic policy and keep free trade.
""These articles have a clear message. The resources of Hong Kong are to be managed separately and independently -- they are to be used exclusively for the benefit of Hong Kong people,"" Tsang said in his speech.
""Financial and monetary affairs shall be determined exclusively by Hong Kong law...trade and investment shall continue to enjoy freedom of movement and freedom of markets.""
Because the budget for the year starting April 1 straddles the handover at midnight on June 30, it was crafted jointly with Beijing through the Sino-British Joint Liaison Group responsible for settling handover details.
But there will be no repeat. Beijing had stated that from July 1, preparation of Hong Kong budgets would be Hong Kong's business alone, Tsang emphasised.
""He seemed very keen to remind China of all those things, and I think he is very right to do so,"" said pro-democracy legislator Emily Lau, a strong critic of China's communist leadership.
During budget negotiations a Chinese negotiator, Chen Zuo'er, complained that Hong Kong's spending was speeding out of control, like a racing car.
Lau told Reuters: ""I'm quite sure everybody knows there has been a lot of pressure on him (Tsang) and on the government with all these public scoldings by Chinese officials about the racing car running out of control and killing everybody.""
The budget that was agreed was moderate on the expenditure side and China appeared pleased with it.
But some analysts said Tsang's speech highlighted concerns that China might meddle in Hong Kong's economy.
""He tries to assure Hong Kong the autonomy of the government has not been affected, but the reality is that the budgetary autonomy of the Hong Kong government has been affected in the negotiations,"" said political analyst Sunny Loh.
Another analyst at a fund management house said there were doubts about how long China would allow Tsang to stay in his job after a recent speech in which he warned that China's plans to slash civil liberties could scare away investors.
",37
"China and Hong Kong headed for a showdown on Tuesday as the leader of Hong Kong's democrats said he would fight in court Beijing's plan to ram through laws against civil rights before this year's sovereignty change.
A new row was also brewing between London and Beijing after Chinese Foreign Minister Qian Qichen called for a rewrite of textbooks in Hong Kong schools to conform with China's principles and history.
Hong Kong was prised from China by Britain in the 19th century opium wars and reverts to Beijing on July 1.
Pro-China politician Chung Sze-yuen, mentor and adviser to Hong Kong's future leader, Tung Chee-hwa, told reporters late on Monday the China-appointed shadow legislature could pass laws before midnight on June 30.
The legislature will replace Hong Kong's elected chamber after the handover.
Other pro-China politicians promptly contradicted earlier remarks and said the legislature should adopt ""vital laws"" before the sovereignty transfer, including the budget law and those reducing civil liberties.
Martin Lee, chairman of Hong Kong's Democratic Party said on Tuesday his party would immediately take the handover legislature to court if it went ahead and made laws.
""We will act according to the provisional legislature's decision,"" Lee told reporters.
""One way is for somebody to go to the court as soon as they have begun to purport to legislate,"" Lee said.
Britain, the pro-democracy camp and major law organisations oppose the provisional body as an institution designed to snuff out democracy. They say Hong Kong's constitution allows only one legislature, the current Legislative Council, to operate.
Lee and fellow lawyers argue it would be illegal if the provisional body passes laws, holds meetings or opens offices in Hong Kong before July 1. So far, it has only met in China.
An influential independent Hong Kong business newspaper also warned the provisional legislature was about to set a dangerous example.
The Economic Journal said on Tuesday the body was about to ""set the precedent of making law without upholding to the law, with a great effect on the future reputation of Hong Kong"".
It said minister Qian had broken a promise he made last April that the body would pass no laws before the handover.
The leader of Hong Kong's biggest pro-China party, Tsang Yok-sing, said China's parliament had now given the green light for the shadow legislature to pass laws before handover, but he said it should use this power sparingly.
""The provisional legislature must be able to do so but it will only use the power when it is absolutely necessary. It will pass bills before July 1 if it is necessary,"" Tsang said.
Colonial governor Chris Patten lashed out on Monday at China after Qian said in Beijing that schoolbooks should be revised.
Patten said the proposal was out of line with the treaty on Hong Kong's handover and its post-colonial constitution, the Sino-British Declaration and the Basic law.
""The Joint Declaration and the Basic Law guarantee Hong Kong's autonomy in educational matters after 1997,"" he said.
""They are clear that educational policies are to be set by the (Hong Kong government), and not to be vetted for political correctness by Chinese officials,"" Patten said.
Qian had said Hong Kong schoolbooks did not conform with the ""one country two systems"" policy for reunifying China.
""The contents of some textbooks currently used in Hong Kong do not accord with history or reality, are not suited to the changes after 1997...and must be revised,"" Qian said.
Patten countered: ""Naturally, schoolchildren need to be taught after 1997 about their new sovereign power... This has already begun... But if Mr Qian is suggesting more than this, his statement raises some disturbing questions.""
",37
"A low-profile shipping tycoon, tipped as Beijing's favourite to govern Hong Kong after it returns to China in 1997, took an apparent step on Tuesday to smooth the way for his widely expected leadership bid.
Magnate Tung Chee-hwa's Orient Overseas (International) Ltd posted a detailed legal notice in Hong Kong papers announcing it was seeking shareholder approval for deals linked to companies controlled by Tung's brother-in-law.
Hong Kong's business press pounced on the announcement, declaring it a clearing of the decks before Tung can publicly step into the leadership contest.
The disclosures were ""probably Tung's final preparation for his candidature for the post of Chief Executive,"" the Hong Kong Economic Journal said.
Analysts writing for the journal and the Hong Kong Economic Times said the notice was unusually detailed.
""Today's notice has the aim of justifying some business circumstances that could lead to a challenge or a reproach, and to remove any future political pressure or doubts about his integrity,"" wrote the Hong Kong Economic Times' political editor, Yau Shing-mo (corrects name of newspaper from Journal).
Tung is Orient's chairman, and his firm's purchase of shipping containers from brother-in-law John Peng's companies could have become a target for a media smear, they said.
Tung was not available to comment on the notice but political analysts said it could help ward off any speculation that might be used against the 59-year-old billionaire.
""There are segments of the Hong Kong media with a hunger for dirt on the leadership candidates, and this may turn out to be a smart move ahead of his bid,"" one analyst said.
The press has probed for compromising weaknesses in the three other unofficial candidates for the leadership -- Chief Secretary Anson Chan, former Hong Kong cabinet member Lo Tak-shing and Chief Justice Sir Ti Liang Yang.
Tung is a frontrunner because he is not only known to be admired by the departing colonial sovereign, Britain, but is also believed to be highly regarded by China.
Many in Hong Kong believe Beijing signalled it favoured Tung in January when President Jiang Zemin singled him out from a group of Hong Kong advisers and pointedly shook his hand.
The magnate has raised expectations he will soon announce his readiness to be a candidate by meeting pro-democracy and pro-China politicians to tap their views on grassroots issues.
No candidates are official yet. They can be named formally once a China-controlled Selection Committee is formed in November. Nominations for committee seats close on September 15.
Tung resigned from Governor Chris Patten's inner cabinet three months ago to avoid a clash of loyalties.
The magnate is also vice-chairman of a China-controlled panel crafting the post-handover administration.
He differs starkly from the other three favourites in that he avoids publicity or high-profile activities, and has not gone public with his views on any policy issues. His low-key approach has kept him out of sniping range of possible enemies.
One of Tung's likely proposers, tycoon Li Ka-shing, head of the Hutchison and Cheung Kong group of companies, also signalled on Tuesday that a formal Tung leadership bid was imminent.
Brushing aside public criticism that it would be improper to have a businessman as leader, Li told reporters:
""Having a businessman as the Chief Executive has its benefits, because he or she understands the economy. Prosperity and stability can't be separated from the economy.""
But one Hong Kong newspaper, citing internal Chinese documents, said on Tuesday that China had not yet made up its mind who it would like to see in the saddle in Hong Kong.
",37
"Hong Kong's popular Democratic Party on Thursday welcomed a pledge from the territory's future leader, Tung Chee-hwa, that people would keep their basic freedoms after China takes over on July 1.
But some activists staged a noisy protest disrupting a meeting staged by Tung's aides to tap the public's views on his controversial plan to whittle down civil liberties.
A new opinion poll, meanwhile, indicated nine in 10 of Hong Kong students do not believe China will really allow the territory its promised autonomy after Britain hands it back.
Fears have been rising in Hong Kong, a British colony for more than 150 years and now with 6.4 million people, that the territory will suffer a loss of freedom after the handover.
Tung on Wednesday vigorously defended proposed curbs on the right to demonstrate and on foreign funding of political groups, saying laws in the United States were much tougher.
""The majority of cities in North America, including New York, Washington and San Francisco, all require police permission before demonstrations can be held,"" he said.
""Let me assure you the (future) government has the strongest determination to preserve the freedoms that the people of Hong Kong currently enjoy,"" Tung said in a dinner speech.
""Peaceful and lawful demonstrations can and must be allowed to continue. I see public demonstration as a way for people to express their views, and public demonstrations are now a part of Hong Kong culture,"" he said.
Anthony Cheung, vice president of the Democratic Party cautiously welcomed Tung's assurances, the first public comment Tung has made on the proposals launched last week.
""We welcome this pledge that the right to protest, the right to demonstrate, the freedom of assembly and association, all of these are people's rights and should be part of Hong Kong's political culture,"" Cheung told Hong Kong radio.
""But we question a lot of the substance of Mr Tung's proposals on how to amend the Societies Ordinance and the Public Order Ordinance,"" he said. ""Some of these proposals have in fact infringed the rights that Mr Tung was talking about.""
About 16 pro-democracy councillors waved banners and shouted slogans, disrupting a public consultation on the plan at Hong Kong's Space Museum on Thursday. They then walked out of the meeting, attended by 50 members of local councils.
""We believe this is a fake consultation,"" said councillor Ng Wing-fai. ""The members of the future government already have a basic line and the basic principles will not be changed.""
Colonial Governor Chris Patten made clear on Wednesday that Britain would not back down on an issue at the heart of handover quarrels with China -- a shadow legislature that China has appointed to replace the current, elected Legislative Council.
Patten opposed calls to allow the China-appointed body to pass a law on residency rights before the hand-back to China.
His comment followed a row this week when China announced rules on who would qualify for ""right of abode"" -- permanent residency -- in Hong Kong after the handover.
But a pro-China group on Thursday marched to Government House, Patten's residence, to rebuke the government for not cooperating with the future administration, the local Pearl television station reported.
Brandishing banners and chanting slogans, members of the Democratic Alliance for the Betterment of Hong Kong said they wanted the interim chamber to pass the right of abode bill.
Beijing plans to submit the bill before June 30 to its Hong Kong provisional legislature.
The government said if the bill were to be handled before July 1 by the interim body it would be legally challenged.
",37
"A vow by future leader Tung Chee-hwa that there will be no ""Tiananmen"" crackdowns in Hong Kong after China takes over drew a muted welcome on Wednesday from the territory's leading democracy advocate.
But Martin Lee, leader of Hong Kong's Democratic Party, urged Tung to match words with deeds.
Tung vowed on the U.S. ABC News ""Nightline"" television programme on Tuesday to protect the right to protest and said no such repression as occurred in Beijing's Tiananmen Square in 1989 would happen in Hong Kong under his leadership.
The British colony reverts to China at midnight on June 30, and the memory of the Tiananmen massacre, when Chinese tanks crushed a student-led democracy movement in 1989, remains vivid for Hong Kong's 6.4 million people.
Tung's remark came on the last day of a pulse-taking exercise in which the public has been consulted on his plan to curb freedoms, such as the right to protest.
Asked if the Tiananmen Square crackdown could be repeated in Hong Kong, Tung said: ""No, it can't happen here. It will not happen here. I will not allow it to happen here.""
""Demonstration is part of our culture, demonstration is part of life...they will be free to demonstrate as they please, but I would hope they would abide by the laws of Hong Kong if they wish to do so,"" Tung said.
Lee welcomed the pledge but said words were not enough.
""My Democratic Party colleagues and I await Mr Tung's matching words with action and leaving Hong Kong's laws on assembly and other freedoms intact,"" Lee told Reuters.
Lee said Tung's comment contradicted the essence of Tung's plans to curb civil rights after China takes over.
""This is an encouraging statement from our Chief Executive-designate Mr Tung Chee-hwa which recognises the reality that Hong Kong is a free society where people regularly exercise their right to demonstrate peacefully within the law,"" Lee said.
""But there is a significant discrepancy between what Mr Tung is saying...and what he has proposed doing.""
China's parliament has declared null and void Hong Kong's existing laws on public order and lawful assembly, once the flag is changed at midnight on June 30.
Tung's civil liberties plan includes slapping a ban on foreign funding of political groups and making it obligatory to obtain police permission to stage protests.
Pro-democracy parties, lawyers, human rights groups, unions and churches have vigorously objected to Tung's plan in written submissions. Washington and London have also criticised it.
But groups representing industry, commerce, pro-China parties and pro-Beijing trade unions support the plan.
In a separate development, China's Foreign Minister Qian Qichen issued assurances on Tuesday that Hong Kong would retain great autonomy ""unmatched in the world"".
""The Hong Kong Special Administrative Region will enjoy a high degree of autonomy, including the executive power, legislative power and independent judicial power and the power of final trial,"" Qian said during a visit to Washington.
The Hong Kong government applauded Qian's remark. ""The government welcomes this reassurance,"" a spokeswoman said.
An official of China's Hong Kong And China Macau Affairs Office in Beijing declined to comment on Tung's pledge to protect civil rights in the territory after the handover, saying such matters were none of Beijing's business.
""Beijing is responsible for the defence and foreign affairs of Hong Kong after it returns to Chinese rule,"" he said.
""Everything else is the responsibility of the government of the Hong Kong Special Administrative Region.""
",37
"A Hong Kong legislator will present the government on Wednesday with a demand to press China to clarify the role of the Communist Party in Hong Kong after this year's handover.
The question of Communist Party activity, a taboo subject for decades, would be raised at a session on Wednesday of the Legislative Council by independent democrat Christine Loh.
Loh's question, published in advance by the council, will ask the government to press Beijing and Hong Kong's leader-to-be Tung Chee-hwa on how the party will be represented, what its role will be, what channels of communication it will have with the Tung government, and the limits on this liaison.
Loh wrote in an article supporting her latest move that she hoped to break down the ""wall of silence"" about the party.
""Past efforts to broach the subject publicly have been greeted not only with stony official silence from the Hong Kong government, but with dismay and anger in other quarters that sometimes verged on the hysterical,"" she said.
""How can we possibly still pretend that the Chinese Communist Party doesn't matter in Hong Kong? The most dire speculation is that it will operate in Hong Kong after 1997 much as it does in China,"" she said. ""Such political arrangements would be disastrous.""
The territory is set to revert to China on July 1 after a century and a half as a British colony. When the flag changes, it is to become a highly autonomous Special Administrative Region (SAR) of China, with its own distinct capitalist system.
But Beijing's plans to slash civil liberties and democracy, and the constant involvement of Chinese government officials in crafting the incoming government, have cast doubts on this autonomy and left many in Hong Kong fearing communist-style controls.
The British, Chinese and Hong Kong governments have largely avoided discussing the presence in Hong Kong of the ruling Chinese Communist Party, which took power in China in 1949.
It is an open secret that party authority is represented by the de facto Chinese embassy, the Xinhua News Agency branch, headed by senior Communist official, Zhou Nan, effectively the party's ""First Secretary"" in the territory.
The party's operation working out of the Xinhua office is known as the Hong Kong and Macau Work Committee.
But the party has operated in an underground way for decades. Its cells have been linked to anti-British riots in the 1960s during China's radical Cultural Revolution.
Tung said last year he would legalise the Communist Party after he becomes the territory's chief executive on July 1, if asked to do so, equating it with any other political party.
The remark raised eyebrows among Hong Kong's 6.4 million people because the party in China wields absolute power and permeates every layer of civil and military organisation.
So far, China has indicated Beijing's most senior officials in Hong Kong will be a top diplomat, expected to be China's current ambassador in London, Jiang Enzhu, and the garrison commander, General Liu Zhenwu.
",37
"A page of history is set to turn when Chinese troops enter Hong Kong on Monday to prepare for the arrival of the People's Liberation Army (PLA) after Britain marches out of the territory in July.
The 40-strong advance party led by Major-General Zhou Borong will arrive in the colony on British Queen Elizabeth's birthday. They will drive into Hong Kong from China's Shenzhen region in full uniform but unarmed.
The PLA advance guard will be the first Chinese troops ever to be stationed on Hong Kong island.
Eight PLA staff cars and trucks will enter at the Lok Ma Chau land crossing at around lunchtime (0500 GMT).
They will drive the 30 km (19 miles) to the Prince of Wales Barracks in downtown Hong Kong, arriving soon after British troops fire a 21-gun salute marking the Queen's birthday.
The advance party will be the first of up to 10,000 PLA troops who will form the Hong Kong garrison after Britain returns its last Asian colony -- a bustling capitalist outpost of 6.4 million people -- to Communist-ruled China at midnight on June 30.
Up to 200 advance troops are expected to arrive before the handover. By that day, Britain will have phased out its garrison forces, which were once 10,000-strong in the territory.
The last of the famed ""Black Watch"" highlanders regiment will depart just after the midnight flag change.
""This is an historic event,"" Edward Ho, a legislator of the relatively pro-China Liberal Party, told reporters.
But the anti-Communist Democratic Party, which received the largest number of votes in the 1995 elections, disagreed.
""This entry has little significance or excitement. The soldiers will keep a very low profile,"" said the party's security spokesman James To.
It will be the first quasi-sovereign presence China has been allowed in the transition towards handover.
Beijing is currently represented in Hong Kong by its Xinhua News Agency, by a diplomatic establishment known as the Joint Liaison Group, and by a large array of mainland companies.
British authorities said the PLA group will get no special treatment at the frontier. They will go through normal customs and immigration controls and then find their own way from the border to the Prince of Wales Barracks, where 28 of them will be billeted. Twelve will stay on nearby Stonecutters Island, where Britain recently closed its Tamar Naval base.
""The soldiers will be unarmed and are here to carry out practical preparations for the PLA to take over responsibility for the defence of Hong Kong on July 1,"" British armed forces spokesman Roger Goodwin told Reuters.
General Zhou will be greeted at the barracks by British garrison commander, Major-General Bryan Dutton.
""They will be greeted with normal courtesies, handshakes and salutes,"" Goodwin said.
""It is in the best long-term interests of the people of Hong Kong that there should be a smooth transfer of defence responsibilities to the PLA,"" he said.
""The British garrison looks forward to working with the advance party to help ensure a successful transfer. The future PLA garrison inherits a proud tradition from the British Hong Kong garrison, a success story which we will do everything to help them continue.""
Many of Hong Kong's people are disturbed by the imminent arrival of an army whose tanks crushed the student-led democracy movement in Beijing's Tiananmen Square in 1989.
China has gone to pains in recent months to soothe those anxieties with a PLA campaign at their interim base over the border in Shenzhen, parading elite troops and stressing their qualities of virtue, discipline and high education.
",37
"When Britain hands its Asian pearl Hong Kong back to China in less than 100 days, it will end a century and a half of colonial rule and a century and a half of Chinese national shame.
It will also spark the party of the century, a two-day holiday binge marked by fireworks and gun salutes, popping champagne corks and clinking glasses.
At midnight on June 30 in Hong Kong -- afternoon teatime half a world away in London where Big Ben will be striking five -- the sun will set on Britain's once-global empire.
Hong Kong's 6.4 million people will cheer, weep or sigh as the Union Jack comes down and Communist China's red flag goes up.
Prince Charles and Chinese President Jiang Zemin will be in Hong Kong. So, too, will be former British Prime Minister Margaret Thatcher, who negotiated the handover, and Lee Kuan Yew, who steered Singapore to prosperity after the city state's independence from Britain three decades ago.
Britain and China are still arguing about the guest list.
But the man who set the stage, who opened up the world's most populous nation and began to reshape it in the image of Hong Kong's freewheeling, money-spinning economy, will be absent. China's paramount leader Deng Xiaoping died last month.
HANDOVER PARTYGOERS WILL HAVE STUNNING HARBOUR VIEW
Builders are hurrying to finish the venue where the joint handover ceremony, centrepiece of the party, will unfold.
At China's insistence it will be indoors in a huge HK$4.8 billion (US$615 million) extension of Hong Kong's Convention Centre. Would-be protesters will be unable to disrupt it.
The steel and glass building rises from a man-made island off the Wanchai waterfront with stunning views of Victoria Harbour, Hong Kong Island, and the New Territories mountains.
The 4,000 guests at the ceremony will be seated in the column-free Grand Hall attached to the foyer with a view of the necklace of glittering skyscrapers that frame the harbour.
""It's fantastic for us that our opening is going to be a historic event,"" said Niels Kransoe, chief executive of the construction project. ""I am thrilled to bits.""
PRINCE CHARLES TO GIVE HONG KONG AWAY
There will be three phases -- eve-of-handover pageantry staged by the departing British, a joint handover ceremony, and post-handover revelry organised by the post-colonial regime.
Hong Kong's Chief Executive-designate Tung Chee-hwa, appointed by China, led 20,000 people this month on a charity walk to raise HK$17 million for the post-handover parties.
Prince Charles will represent Queen Elizabeth, along with Britain's Foreign Secretary. ""The Queen never gives territories away,"" a colonial official commented.
Just before six in the evening, Governor Chris Patten will bid farewell to Government House, on Hong Kong Island's Upper Albert Road, the seat of colonial power.
Around 6 p.m., Patten and Charles will inspect the troops and preside over a farewell to the British administration at military headquarters on the Hong Kong waterfront. At midnight China's People's Liberation Army troops assume military duties.
The Queen's royal yacht Britannia will be moored in Victoria Harbour as the backdrop for the sunset parade. The frigate Chatham will also be on the water nearby, part of a Royal Navy task force cruising Asian waters this year to wave the flag.
4,000 VIP GUESTS AT BANQUET FIT FOR A KING
At 9 p.m. 4,000 VIPs from Britain, China, Hong Kong and much of the rest of the world, armed with cutlery or chopsticks, will tuck into the biggest banquet in the history of Hong Kong.
Up to 600 waiters will ferry 20,000 to 40,000 pieces of chinaware and glassware around, caterers say.
The midnight handover ceremony in the Grand Foyer hall will be a spectacle of flag changing, national anthems and speeches.
""Maybe some politicians in Britain hope the handover ceremony can symbolise the glorious or honorable withdrawl of Britain from Hong Kong. We have no objection to that because that means we can take over in a dignified and honorable manner,"" Chinese Premier Li Peng said of the handover fiesta.
Jiang is expected to receive Hong Kong back into the Chinese fold as the midnight ceremony is beamed on to a giant screen at the military parade ground and to homes across the world after a variety show and a ballet about China's last emperor.
BRITISH LEADERS WILL SAIL INTO THE SUNSET
Prince Charles and Patten will sail from Hong Kong on what is likely to be Britannia's final cruise before decommissioning. Their first port of call is likely to be the Philippines, one day's sail away, or the former British colony of Singapore.
Hong Kong taxpayers will foot the HK$233 million bill for the extravaganza. The grand banquet and reception will cost a tidy $HK6.5 million, Hong Kong's most expensive dinner party.
Another HK$85 million is being spent on building a huge press and broadcasting centre for 6,000 journalists.
""It is Hong Kong's responsibility to pay... because it is our historic moment and we should show the world that we will have a bright future,"" said Home Affairs Secretary Michael Suen.
""We estimate the event will bring in four hundred to eight hundred million dollars (US$102.5-205 million) to Hong Kong's economy,"" said Suen.
(US$1 = HK$7.8)
",37
"British Foreign Secretary Malcolm Rifkind flies into a political quarrel this weekend over the future of Hong Kong's democratic elections and human rights laws, which China plans to roll back after taking over in July.
Tempers flared this week as Tung Chee-hwa, Hong Kong's future leader appointed by China, attacked the territory's Democratic Party, which he said had blackened Hong Kong's name by spreading doomsday forecasts.
Rifkind is due to arrive on Saturday night for what may be his last visit before Britain hands the territory back to China. He will meet Tung and lawmakers during his three days in the colony, placing himself in the crossfire but possibly taking sides versus Tung.
Public opinion has been turning against Tung due to his increasingly authoritarian policy statements.
Though highly popular immediately after his December appointment, a poll last week showed his approval rating had shrunk to 58.5 percent from 64.6 percent a month earlier, falling behind colonial Governor Chris Patten, who scored 59.1 percent.
""There has been a palpable shift in the public mood,"" the Far Eastern Economic Review noted in an editorial.
""Not only is there public disquiet and growing unease about him in the public service, but doubts are now simmering among foreign businessmen based in Hong Kong about the way the place is to be run from July,"" said the Economist magazine.
""This is just the beginning. The way things are going, Tung Chee-hwa and his government-in-waiting will be running out of popularity long before July 1,"" pro-democracy lawmaker Margaret Ng wrote in a newspaper column on Friday.
""Mr Tung's ship of state is charting a decidedly retrogressive course,"" she wrote. ""Confidence may yet be restored provided this paranoia about democracy is put aside.""
Tung's recent endorsement of a Beijing-backed move to dilute civil rights freedoms in Hong Kong was likely to incite protests, said political analyst Andy Ho. ""Some back-peddling on the part of Mr Tung...may well be the best dose of medicine to defuse current political tension.""
In Singapore on Thursday, Rifkind lashed out at China's plans to install an appointed legislature in place of the elected Legco, and the steps to whittle down civil liberties.
""People have enjoyed a wide range of basic political rights. Any diminution of these rights will...have significant consequences for the confidence in the territory and for its economic success,"" Rifkind said.
Last year British officials, praising Tung's integrity, viewed him as a benign choice to lead the bustling capitalist territory of 6.3 million people and hoped he would form a ""dream team"" with popular incumbent civil service chief Anson Chan.
""But now, with all his support for authoritarian changes, they must be wondering, almost aloud, if Mr Tung isn't going to be a nightmare,"" a political analyst said.
Tung's attacks on Democratic Party leader Martin Lee provoked critical editorials in Hong Kong daily newspapers.
The independent Ming Pao said Lee, on a tour of Europe to lobby for support against China's planned rollback of Hong Kong freedoms, had been forced to go to the West for support.
It said Tung had ostracised Lee's party -- Hong Kong's most popular -- and that if he didn't want Democrats to voice their views abroad, he should include them in more of the decision-making on the territory's future.
The popular Apple Daily said Tung was trying to mimic authoritarian Singapore Senior Minister Lee Kuan Yew and it asked why Tung was so afraid of criticism.
But the daily Wen Wei Po, a local mouthpiece for Beijing's Communist Party, applauded Tung and said freedom of speech should not extend to opinions that harm Hong Kong's interests.
",37
"An American businessman is plotting a marketing revolution in the hospitality sector and aims to house U.S. pioneers in the China market.
Corporate housing specialist Howard Ruby says he aims to turn the business of letting serviced apartments into a full-fledged industry that will provide everything from Internet terminals in the home to child care and jobs for expatriate spouses.
FROM POOR COUSIN OF HOTELS TO A GLOBAL SERVICE
Until recently the sector providing ready-to-live-in, service-provided, short-term apartments was a poor cousin of hotels, and in many cities of the world it still is.
""This whole industry has been below the radar screen over the last twenty years, being done by a mama and papa, or a small operator that operates one building at a time,"" said Ruby.
""And now we're seeing an industry evolve because of the needs of corporate clients as business globalises around the world,"" the head of Los Angeles-based Oakwood International said in an interview at a recent hotel industry conference.
EYES ON ASIA AND CHINA MARKETS
Ruby's group recently launched a joint venture with a subsidiary of Australia-listed Lend Lease in Singapore with plans to provide 10,000 serviced apartments in Asia, and intends to take aim at London during the next year.
Ruby foresees large-scale expansion in the sector in the Far East, especially in China, with much of American industry abuzz with plans to move people into the region.
Chinese cities such as Beijing, Shanghai and Guangzhou have large expatriate populations as well as large numbers of home-grown professionals moving around the country on assignment who need temporary serviced housing.
""I just finished a tour of major client companies in the United States. Every single one is planning an expansion into the Far East, with most of them talking about China.
""Telecommunications, software companies, all the way through to clothing and furniture manufacturers. They're all talking China right now. Whereas a company might have sent 10 people last year, they're expecting to send over 20 people this coming year,"" he said.
The serviced apartment industry is starting to break away from the niche market identity and family-style business of old into a multifaceted service industry, Ruby believes.
CORPORATE RELOCATIONS PROVIDE HUGE MARKET POTENTIAL
Oakwood is the largest national provider of serviced apartments in the United States, with offices in 60 cities, more than 17,000 apartments and 25,000 clients including 400 of the Fortune 500 companies and 75 of the world's top multinationals.
The potential of the business is highlighted by one client that carries out 50,000 relocations of staff a year, with an average three months stay in temporary housing, Ruby said.
A company like General Motors, for example, might need help with relocation or temporary housing for staff moved around on training, special projects like setting up new production lines and might put out 25,000 apartment requirements a year.
Ruby started out catering to the niche market of new college graduates three decades ago -- apartments for baby boomers.
He moved on to corporate housing when companies asked for more services, such as maid service and taking care of bills.
SERVICED APARTMENTS TO BECOME MULTIFACETED SERVICE
He sees the business progressing to include video conferencing, Internet hookups, sports and recreation facilities, orientation tours, child care and job search agencies for spouses.
""This way a serviced apartment offers a branded service dedicated to the needs of the corporate customer. They are not just a physical facility, but a service provider,"" he said.
""Companies do not want staff transfers to end in failure because of a dissatisfied spouse. So we want to provide a service that makes a transfer a success.""
With an increasingly cluttered market, customers looked now to a reputable brand as their one point of contact, Ruby said.
DEALS IN THE PIPELINE IN ASIA
In the Far East, Oakwood and partners are working on deals in Hong Kong, Shanghai, Manila and Bangkok.
The first Asian project to go onstream will be Oakwood Premier, a serviced apartment scheme in Shanghai's historic Xuhui district, where the French concession was located in pre-revolutionary times. The property, owned by a Hong Kong family, will open later this year.
""As the industry matures in Asia, dedicated service companies will be the providers of choice for the corporations leasing the majority of serviced apartments,"" Ruby said.
",37
"Political controversy struck Hong Kong on Thursday when future leader Tung Chee-hwa lashed out at critics who tarnished Hong Kong's image, and Britain attacked China's plans to roll back democracy and human rights.
""Recently, some well-known people, including the Democratic Party, have blackened the reputation of Hong Kong overseas... giving the impression that Hong Kong is collapsing,"" Tung said.
""Is there the need to go abroad to blacken the name of Hong Kong? Is there the need for foreigners to come to Hong Kong and tell us, the Hong Kong people, what to do in the future?"" Tung told reporters as he opened offices that will be his base until Britain hands the colony back to China at midnight on June 30.
The former shipping magnate's attack on those who ""talk down"" Hong Kong and frighten investors was directed primarily against Martin Lee, leader of the popular Democratic Party, which is campaigning against a new legislature appointed by China.
Lee, rounding off a 10-city tour of Europe, told Hong Kong radio after hearing Tung's remarks that Tung must do more to defend the territory of 6.3 million people against Beijing's Communist rulers.
""We want Mr Tung to change the unhappy fate that awaits Hong Kong...talk to the Chinese leaders, get them to wind up that appointed illegal legislature.
""Then our worries will be over and overseas investors will be very happy to come to Hong Kong and invest more,"" Lee said.
Tung said there were different views about the ""need for balance between individual rights and order in society"".
""But in future, I hope our friends will sit down here in Hong Kong and talk things through,"" said the post-colonial ""Chief Executive"", who was appointed by a China-controlled committee.
British Foreign Secretary Malcolm Rifkind, who is in Singapore for talks with Chinese Foreign Minister Qian Qichen and will visit Hong Kong this weekend, again condemned Beijing's plan to install a ""provisional legislature"" in place of Hong Kong's elected Legislative Council on July 1.
He said it clashed with a 1984 handover treaty and with the constitution covering Hong Kong's handover.
""We believe the establishment of the provisional legislature certainly goes against the spirit and indeed may be a severe breach of the Joint Declaration and the Basic Law.""
The European Union's envoy in Hong Kong said negative press coverage of Hong Kong had created a misconceived ""doom and gloom"" scenario.
""This is a public relations disaster,"" envoy Etienne Reuter told reporters. ""They believe that after July 1 there will be no freedoms and human rights in Hong Kong.""
The president of the shadow legislature, Rita Fan, sought to reassure Hong Kong people this week they had nothing to fear when the territory becomes a ""Special Administrative Region"" of China. Under the handover treaty, China has promised wide-ranging autonomy and 50 more years of freewheeling capitalism.
""To be fair to ourselves we should give ourselves a chance and stay put and see what happens,"" Fan told Reuters.
""I personally am very confident and convinced that we will have our lifestyle and our freedom as we have enjoyed all these years,"" she said.
Tung said that in the next few days he would announce his team of top officials to head various policy branches, the equivalent of ministers in the government of a country.
Speculation is intense on who will be kept from the present government. Tung has already said he will retain the head of the administration, Chief Secretary Anson Chan, a fellow-Shanghainese, who has agreed to stay on.
But even after he has cobbled together a government-in-waiting, he faces enormous political challenges.
His advisory cabinet, the Executive Council, which will meet in the offices he opened on Thursday, has been attacked by democrats as too pro-Beijing, and he is constantly assailed for unswervingly echoing China's autocratic, anti-democratic views.
But on a more positive note, a Sino-British negotiating team hammering out details of the sovereignty transfer, announced on Thursday they were zeroing in on an accord on a 1997/98 budget for Hong Kong that would straddle the handover.
",37
"Its tough line unshaken by the death of leader Deng Xiaoping, China pressed ahead on Monday with a controversial plan to roll back political freedoms in Hong Kong, drawing a rebuke from colonial Governor Chris Patten.
Deng, who died last week, was the architect of the ""one country two systems"" formula for the conversion of Hong Kong into a special, autonomous capitalist zone of China when British rule ends at midnight on June 30.
Despite widespread misgivings about China in this bustling territory of 6.4 million people, thousands of residents paid their respects to Deng for the fourth day on Monday in a mourning ceremony at a shrine inside China's official mission.
On Sunday night, China's parliament approved a plan to throw out or amend a clutch of Hong Kong laws, including those that provide for democratic elections and protect civil liberties.
The plan trims back the bill of rights, the law on forming political parties and another on free association which takes a liberal approach to public protests and demonstrations.
The laws were part of London's effort to sow the seeds of democracy in the twilight of more than 150 years of British rule. China has accused Britain of violating the 1984 Sino-British handover treaty.
Patten accused China's National People's Congress of turning a deaf ear to the wishes of most Hong Kong people.
""(Sunday's decision) casts doubt on the freedoms and autonomy which have been promised to Hong Kong and the rule of law on which they are based... It will cause legal confusion and invite legal challenge,"" Patten said.
""It is already crystal clear that what the community wants to see is the preservation of Hong Kong's current civil liberties...""
Sunday's decision was also attacked by Hong Kong's Democratic Party, the largest in the territory's legislature.
""China's latest move means the die is now very much cast,"" a spokesman for the party told Reuters.
""China has shown it is not going to respect the will of Hong Kong people. The NPC is a political body making a decision that will remake Hong Kong in blatant breach of handover agreements which say Hong Kong's laws shall remain unchanged.""
He said the move violated the internationally registered 1984 Sino-British handover treaty, called the Joint Declaration, and Hong Kong's future constitution, the Basic Law.
Beijing's move to crimp basic freedoms flies in the face of official protests by Britain.
London has challenged China to go to the World Court to seek a ruling on the legality of China's plan to replace Hong Kong's elected Legco with an appointed provisional legislature.
In a related development, a leading Hong Kong member of the Preparatory Committee on the handover said Hong Kong would not be allowed to amend new election rules that his panel was preparing for the territory.
Neither Hong Kong's leader-in-waiting, Tung Chee-hwa, the provisional legislature, nor the post-colonial government, could change the rules, Lau Siu-kai said.
Slightly over half of Preparatory Committee members are from Hong Kong and the rest are from the mainland. Its decisions generally echo policy statements by senior Beijing officials.
The rules would govern the first election of a long-term legislature some time in 1998 to replace a provisional body that China has appointed to make laws from July 1.
",37
"Anti-Japanese sentiment is surfacing in Hong Kong, fuelled by a row over a group of South China Sea islands and a wave of nationalist feeling in China.
Activists and World War Two survivors with bitter memories of atrocities committed by Japan have staged a spate of anti-Japanese protests over the past month in the British colony, set to revert to Chinese sovereignty next July 1.
The latest protest on Friday highlighted how anger against Japan is uniting Chinese in Hong Kong, China and Taiwan -- pulling together even groups whose political differences usually keep them at loggerheads with each other.
For the first time, China's mission in Hong Kong opened its doors to its arch-foes the Democratic Party, who handed over a petition calling for Beijing to take action against Japan. The democrats arrived at the door soon after a pro-Beijing group.
Anti-Japanese editorials appeared in nearly all Hong Kong newspapers on Friday attacking Japan's claim to the Diaoyu Islands, which are also claimed by Beijing and Taipei.
Anti-Japanese demonstrations have become practically a daily occurrence, and local activists are trying to organise a ship to take them to the islands next month to demolish a lighthouse and war memorial erected by Japanese rightists.
The English-language Hong Kong Standard lauded the activists' ""courage, determination and optimism.""
""Their cause is a just one. These islands have been Chinese territory since 1534,"" it said.
On Thursday, demonstrators handed over a protest note at the Japanese consulate, but Consul-General Hideaki Ueda said they were making a mountain out of a molehill.
""I sincerely hope that the concerned people do not make this issue an artificially big issue,"" Ueda said.
He said Japan's navy would take the ""necessary measures"" to halt anybody trying to land on the islands, which Japan calls the Senkakus.
The Chinese-language Ming Pao, recalling Japan's past imperialism, said China's history was a stark reminder that tolerating invasion only encouraged worse aggression.
""If Japan did not change its attitude on the islands, it would become the biggest threat to the security of Asia in the 21st Century,"" the paper said.
A Taiwan group said on Thursday that they would sail a private fishing boat to the islands, while 31 Chinese journalists in Beijing demanded Tokyo tear down the lighthouse.
But the Hong Kong Economic Journal, published in Chinese, said Hong Kong people showed more patriotic fervour on the issue than the communist government in Beijing, which it said offered only rhetorical condemnation.
""It is clear China has no intention of taking any action against Japan to reassert its sovereignty over the islands, as this might jeopardise vital Japanese investment,"" it said.
Other newspapers recently published exhortations to China to send in its navy to assert sovereignty over the islands.
Over the past few months, several articles also appeared in Hong Kong media recalling Japan's World War Two occupation of Hong Kong and war atrocities committed by Japanese imperial forces against the Chinese population on the mainland.
The prospect of British-ruled Hong Kong returning to China next year and Portuguese-run Macau two years later is a point of patriotic pride on the mainland. Hong Kong people talk of this with pride, too, despite some anxiety about becoming subjects of communist Beijing.
",37
"Rights groups and academics warned of threats to freedom in Hong Kong on Tuesday, while a pro-China politician denied that proposed curbs to civil liberties would strangle the territory after Beijing takes over.
Hong Kong's 156 years under the British flag come to an end when the territory reverts to Chinese rule at midnight on June 30 and, with 63 days to go, the pace of political debate is quickening.
Human Rights Watch/Asia said changes to China's criminal code had made it easier for Beijing to stifle dissent, and Hong Kong people might even be put on trial in China.
A public consultation on the future of political freedom in the colony ends on Wednesday, and the bustling capitalist outpost's 6.4 million people are sharply divided.
The pulse-taking, launched by Hong Kong's future leader Tung Chee-hwa, asks members of the public and organisations to submit views on his plan to ban foreign funding of political groups and curb the right to protest in the interests of ""national security"".
Hong Kong academics waded into the fray on Tuesday by saying the proposed rules on political groups posed a threat to freedom of association, the interpretation of foreign meddling was flawed and too much interpretation was left to authorities.
""This is tantamount to opening the door to abuse in the future,"" the statement, signed by 150 scholars, said.
Pro-democracy parties, the legal profession, human rights groups, Western-style trade unions and churches have objected to Tung's plan in written submissions, and there has been loud criticism from London and Washington.
But organisations representing industry, commerce, pro-China political parties and pro-Beijing trade unions support the plan, which was forced on Tung by a Chinese parliamentary resolution.
Pro-China politician Maria Tam told a business audience on Tuesday that Tung's proposal to curb civil and political liberties was not an attack on human rights.
""Tung Chee-hwa is not trying to strangle human rights here,"" Tam told the Hong Kong General Chamber of Commerce in a speech.
Tam, a leading member of China's Preparatory Committee, which is charged with setting up the post-handover political system, said similar restrictions existed in the United States, Canada, Australia and other Western states.
In the latest twist, a powerful pro-Beijing labour group, the Federation of Trade Unions, called for a widening of definitions of political groups covered by the curbs.
But in an unusual move, the federation also called for a ban on funding from China's ruling Communist Party to local political groups to be added to the restrictions. The move would ""avoid disputes and criticisms"", union boss Cheng Yiu-tong said.
Pro-democracy trade union federation leader Lee Cheuk-yan attacked the bid to widen the net.
""(It) is a step backward, because they want to have more organisations defined as political groups,"" Lee told Reuters. ""They want to pressure these organisations to depoliticise.""
Human Rights Watch/Asia said in a report on Tuesday that China's striking of the term ""counterrevolution"" -- the communist code for subversion -- from the law books in March did not mean easing political controls. Quite the opposite.
""China has merely replaced the term 'counterrevolution' with the equally elastic notion of 'endangering state security' and has, in the process, actually broadened the capacity of the state to suppress dissent,"" the report said.
Hong Kong people, who China has vowed can keep their legal system and way of life for 50 years, could suffer, it said.
""Despite Hong Kong's separate legal system, Beijing may have the power to bring Hong Kong people to face trial in mainland courts,"" it said.
",37
"Planned curbs on Hong Kong civil liberties, justified by the future government on grounds of national security, would cut chances of the territory being used to subvert communist China, analysts said on Thursday.
But the proposals, launched on Wednesday and offered to the public for three weeks of feedback, drew a torrent of criticism for being retrograde and open to abuse.
Citing the risk to ""national security"" posed by foreign forces, the future leader Tung Chee-hwa proposed to tighten the screws through two key laws -- the Public Order Ordinance and the Societies Ordinance -- after China takes over the British colony on July 1.
The changes would bar overseas funding of local political groups and grant police sweeping powers to ban demonstrations.
Currently, people ""notify"" police about planned protests. In future they would need permission, and police could refuse it.
Sunny Loh, a political analyst at Hong Kong University, told Reuters the biggest impact would be the ban on foreign funding for Hong Kong political organisations, many of which, such as the popular Democratic Party, raise money abroad.
""It's a retrograde step... Local groups will have to deal with their relations with foreign countries very carefully,"" he said. ""There will be more sensitivity to demonstrations, protests and petitions because they will be seen to affect national security.""
This would cut the risk of foreign groups using Hong Kong as a base to subvert China, Loh said. Behind China's concern is a long history of groups doing just that.
Law professor Nihal Jayawickrama said China wanted to keep a close eye on pro-democracy parties in Hong Kong, and the changes would lead to inspections of their accounts for foreign links.
""How do you make sure they are not being influenced in their thinking by foreign forces? ...They'll have to scrutinise the parties' accounts for foreign funding,"" he said.
In the late 19th century Hong Kong became a base of the nationalist revolutionaries who plotted and overthrew the last imperial dynasty in 1911, creating China's first republic.
Even the Communists, before they came to power in 1949, sometimes used Hong Kong as an offshore venue for meetings beyond the reach of Chiang Kai-shek's Nationalist regime on the mainland.
China also has vivid memories of the 1989 democracy movement which its tanks bloodily crushed in Beijing's Tiananmen Square.
The movement received material support from Hong Kong political and business groups, as well as information support through a ""fax war"" from groups based abroad. Some of the activists who fled that crackdown live in exile in Hong Kong.
China also fears that Taiwan, its arch-foe and the base of the remnant Nationalist regime which fled the mainland in 1949, will finance and organise anti-Beijing movements in Hong Kong.
After the three week pulse-taking on the plans, a China-backed interim legislature, which will replace the elected Legislative Council, will draft the relevant legislation.
The changes will take effect on July 1 when China resumes sovereignty after 156 years of colonial rule and makes Hong Kong into a quasi autonomous ""Special Administrative Region"".
Tung's plans were lashed by the democracy movement, pressure groups, departing colonial Governor Chris Patten, and a raft of editorials in the Hong Kong press.
""It is not as if we are on the verge of civil chaos -- in theory, at least, trouble could be made more likely by restrictive measures,"" said the South China Morning Post.
""The net has been spread so wide that human rights groups, unions, and environment protection groups may also be suppressed if they have political views,"" said legislator Albert Ho.
Analysts said the plan raised queries as to whether foreign groups such as Amnesty International, which has its main Asian office in Hong Kong, could continue operating there.
Trade unions and church groups, which receive foreign financial support, could also easily be viewed as political.
""How are we supposed to survive if we are banned from taking subsidies from international labour groups?"" said Leung Yiu-chung, who runs a neighbourhood labour group.
",37
"Moslem unrest in its far-west region does not augur an ethnic breakup of China similar to that which befell the Soviet Union or Yugoslavia, but more violence is possible and Beijing will respond in kind, China experts say.
Urumqi, capital of China's Xinjiang province, was hit on Tuesday by three bus bombs that killed at least four people and were believed to have been carried out by Moslem separatists.
Xinjiang is populated by Moslem minority groups such as the Uighurs.
The bloodshed came on the same day China held the funeral of its leader Deng Xiaoping and just two weeks after at least 10 people were killed and hundreds of Moslems arrested in bloody riots in the Xinjiang border town of Yining.
On Thursday, China's communist government responded to the bombings by ordering controls on explosives. China had tightened curbs in the region last year after a spate of assassinations.
""There's not much you can do about it... Even with a very heightened police protection, as seen, for example, from Israel, if someone wants to smuggle a bomb onto a bus, they are going to be able to do it,"" American academic Barry Sautman told Reuters.
Sautman, an expert on Chinese politics and ethnic relations at the Hong Kong University of Science and Technology, said: ""I think there will continue to be very heavy use of armed force against people who engage in pro-independence activity. They'll go to prison or they'll be killed. The Chinese army is a very large one, so it can bring a great deal of force to bear.""
But most experts believe Moslem separatism in Xinjiang does not pose a serious threat to China's territorial integrity.
""Whether it can lead to a fragmentation of the state and a breakdown like the Soviet Union is still not clear,"" said Don McMillen, an expert on Chinese politics and ethnic problems from Australia's South Queensland University.
""I doubt the groups that would be interested in creating independent states are coordinated enough. They tend to have differing opinions, factional differences, that have prevented them cooperating with each other,"" McMillen told Reuters.
He said neighbouring Moslem states in central Asia were also not prone to back the Xinjiang separatists.
""The governments of the Central Asian states are officially unwilling to provide support for such activity, although there is a fair bit of sentiment in these states' leaderships for letting these people do their thing,"" McMillen said.
Sautman said travelers returning from Xinjiang spoke of great unease among ethnic Chinese there.
But he said a breakup was unlikely because many Moslems backed China's ethnic policies, the Chinese army was ready to crush rebellions, local leaderships were loyal to Beijing, and most countries would not sympathise with the separatists.
""I don't think there's an increased threat of the breakup of China along ethnic lines, despite the fact that there is a (leadership) transition going on,"" Sautman said.
""They've carried out...preferential policies. They carry out positive discrimination to attract the best and brightest among minorities to work for the government or improve their economic opportunities. This has actually had some effect,"" he said.
""Plus, the government is very well prepared in terms of repressive force against anyone who would try to split off parts of China, such as Xinjiang or Tibet.
""There are certainly tens of thousands of soldiers of the People's Liberation Army in these border areas,"" Sautman said.
""That's quite a different situation than has existed in some other parts of the world where countries have splintered along ethnic lines,"" he said.
Leaders in the Soviet republics had big differences with Moscow before the breakup, experts also noted. ""That is not the case in China. So I think it is very much less likely that China will disintegrate along ethnic lines,"" one expert said.
He said the separatists were a small minority of Xinjiang's Moslem population. ""The bulk of the Moslems of China consider themselves to be Chinese.""
",37
"Hong Kong's chief judge came under intense pressure to quit the judiciary on Wednesday after stoking the political fire with a bid to become the territory's leader after Britain hands the colony back to China in 1997.
Politicians and legal experts said Tuesday's declaration by 67-year-old Chief Justice Sir Ti Liang Yang that he would be a candidate created a conflict of interest and raised a question mark over his role in the British-style judiciary.
""It is important to give people the confidence that Hong Kong's judiciary is independent,"" said lawyer Martin Lee, leader of the colony' biggest political party, the Democratic Party.
Yang dodged suggestions he should quit and told a Hong Kong television station he wanted to tap public opinion first.
""Whether I should resign is not a question for me, but rather for the executive, for society and the government, for the Chinese side, and for the public, what are their views on this?"" he said.
But the resignation calls came even from some members of the pro-Beijing camp.
Pro-China politician Tsang Yok-sing said Yang should resign as top judge but welcomed his bid, saying it was good to have more candidates, and especially one ""politically neutral and without any business connections"".
""He should consider stepping down from his position as Chief Justice. That should happen as early as possible,"" Tsang said, speaking to Hong Kong radio from Beijing.
""It will be seen by the public, by people in the legal profession, that there may be a conflict of interests.""
Nihal Jayawickrama, a law professor at Hong Kong University, said China-born, British-trained Yang had a right to bid for the leadership, but having entered politics he should now resign.
""It's not possible for him to hold the office of Chief Justice any longer. It's quite incompatible,"" Jayawickrama said.
There are just 300 days before this bustling capitalist territory of 6.2 million people reverts to communist-ruled China, ending a century and a half of British rule.
Now that Yang's hat is in the ring, with pro-Beijing publisher Xu Simin pledging to nominate him, the leadership stakes have been injected with a new element of competition.
Other names touted as possible candidates include Patten's Chief Secretary Anson Chan, shipping tycoon Tung Chee-hwa and a former Hong Kong cabinet member, lawyer T.S. Lo.
Chan is widely believed to be unacceptable to China, Tung has not made clear his intentions, and Lo has no proposer yet.
A 400-member Selection Committee which will pick the leader and the new legislature is gradually taking shape.
Yang, widely seen as a neutral, independent figure because of his judicial career and as a possible compromise candidate, has said he will resign as chief justice if formally nominated.
But the earliest Xu can formally propose Yang's nomination is when the Selection Committee is constituted in November. Critics say he cannot be chief judge and a politician at the same time and should step down ahead of any formal nomination.
The latest twist comes amid signals from Beijing that China is setting aside its bitter quarrels with Britain and possibly with Hong Kong's democrats for the sake of a smooth handover.
China's Hong Kong policy boss Lu Ping said in Beijing on Tuesday he accepted that Britain and China might not settle all disagreements by the time of the midnight June 30 handover.
""We shall try our best to resolve minor differences before July 1, 1997. If we fail, we can put them aside,"" Lu said.
He added that he was willing to shake hands on that day with his arch-rival, Hong Kong's colonial governor Chris Patten.
The handover negotiations have been a thorny process. Patten and pro-democracy groups have been quick to dub most of China's moves as anti-democratic in recent years, especially its plan to scrap the elected legislature for an appointed provisional body.
",37
"The red Communist flag of China is already flying in Hong Kong.
Not just one flag. Thousands of them. Like a red forest, as if the territory's handover to Beijing had already taken place.
Beijing recovers sovereignty over the colony that Britain prised from it a century and a half ago at midnight on June 30, 1997.
More than five months before the historic handover, red Chinese flags with their five golden stars are fluttering over the villages of Kam Tin district in the rural New Territories.
Dozens of red flags with Hong Kong's future floral emblem the purple bauhinia, or tree orchid, have also been raised.
""Hong Kong is departing from British rule after 150 years, so we've hung these flags to celebrate,"" Tang Wing-yuen, the organiser of the tribute to the coming handover, told Reuters.
Kam Tin's main street is a riot of colour. Long strings of bunting with thousands of small Chinese flags attached are slung between lamp posts parallel with the lines of washing on apartment balconies.
The flags fly from almost every building -- offices, homes, village stores and supermarkets, and the Kam Tin rural council building looks like a Communist Party headquarters in a mainland village.
A huge red banner is also strung across the building with gold Chinese lettering carrying the words ""Kam Tin community warmly welcomes Hong Kong's 1997 reversion to China"".
Most buildings in Hong Kong are still flying Britain's Union Jack, although the bauhinia flag has also begun sprouting in various places.
KAM TIN - A BASTION OF RESISTANCE TO BRITISH RULE
The Kam Tin area is the home of the powerful Tang clan and has been a bastion of nationalist sentiment and resistance to colonial rule ever since the British marched in brandishing a 99-year New Territories lease extracted from imperial China.
That lease expires this year, and at midnight on June 30 Britain hands back to China not only the New Territories but the entire colony of Hong Kong, with its 6.3 million people.
""We in the New Territories, which has been under the rule of foreigners, are now free. Hong Kong and the New Territories are part of China so we support China,"" said Tang, the son of clan leader Tang Che-leung, the head of Kam Tin's Rural Council.
""It is a humiliation for Hong Kong to have been ruled by foreigners. Now, with its return to China, it should be celebrated by Chinese all over the world. We of course welcome our sovereign. We don't care about anything else.""
The Kam Tin community decided to raise the flags from New Year's Day onwards as a mark of patriotism.
""WE SHOULD PAINT THIS CITY RED WITH CHINESE FLAGS..."",
""This is what the whole of Hong Kong should look like on July 1. We should paint this city red with Chinese flags,"" said Jimmy Tang, a youth chatting to friends outside Kam Tin's famed walled village.
The walled village, a traditional structure in the New Territories and across the border in south China's Guangdong Province, is also decked with flags.
The village, whose outer walls and battlements are surrounded by a moat, rises fortress-like from the Kam Tin plain, surrounded by productive farmland that has now given way to modern-day automobile scrapyards and freight container dumps.
Timothy Wong, an academic at the Chinese University of Hong Kong, said the show of Chinese red flags was also a sign of disillusionment towards the government of the Chinese Nationalist Party on Taiwan.
Taiwan previously had a big following in many Hong Kong villages, which flew its flags.
But the tide has been turning as Beijing's takeover has neared.
""They are more or less disenchanted by Taiwan's actions, but their nationalism is still there. With this sudden change, they are filling the nationalist gap by shifting their identification from Taiwan to the People's Republic of China,"" Wong said.
He said the flags were also a way of protecting local rights and privileges unique to the rural area. Beijing has promised to preserve the traditions of the area's rural dwellers.
KAM TIN'S PATRIOTISM HAS FAIRY TALE ROOTS
The village is proud of its historical patriotism.
In the 12th century, when Mongol armies captured the Chinese emperor Gao Zong and his family, his 10-year-old daughter managed to escape.
The ladies of the court fled with the girl to the south and took refuge in Kam Tin where the Tang clan militia protected the little princess.
She later fell in love with her rescuer's son and married him. When she died, she was buried on Hong Kong's Lion Hill.
In 1898, when British troops marched in, Kam Tin raised armed militias to resist but was eventually suppressed with heavy casualties in the Battle of Tai Po.
""We villagers opposed the British, but we couldn't fight them off and some of our people were killed,"" said Tang.
""The British occupied our place in the New Territories and robbed us of our metal gates and took them back to Britain,"" Tang said. The gates were later found in Ireland and returned.
The walled village is a tourist attraction nowadays. The elder women of the village dress in the costume of Chinese peasants who speak the Hakka dialect, characterised by ring-shaped straw hats with a deep, black cloth fringe.
Some sit in the fortress doorway playing the Chinese gambling game of mahjong to while away the hours, while others run souvenir stalls in the narrow alleyways.
""Where you from?"" asked one wrinkled woman as she demanded the ritual one dollar entrance fee to a visitor who crossed the threshold. ""You from England? A-ha, your time finished now.""
",37
"The United States signed an important air services agreement with Hong Kong on Monday, guaranteeing its future aviation links after the British-ruled territory's return to China later this year.
But Washington voiced concern about a big rise in landing fees which has dismayed airlines planning to use Hong Kong's new airport at Chek Lap Kok, due to open a year from now.
The territory's airport authority chief said the door was still open for discussions with the airline industry.
Signing Hong Kong's 19th air accord with foreign countries, U.S. Consul-General Richard Boucher said Washington was concerned levies for landing and parking at Chek Lap Kok would be too high, and he called for competitive rates.
""This is something that our firms are primarily concerned about, that they raised with us, and yet it is something that we in the government are concerned about, and we want to talk to the relevant authorities on the Hong Kong side,"" Boucher said.
""We have (talked) in the past and we will continue to talk to them, as our companies have, to try to work out this problem, so that Hong Kong has efficient, competitive and commercially reasonable rates and a setup here that works both in a commercial sense and in terms of a competitive sense as well.""
Airlines have said recently landing costs could be three to four times higher than at the present Kai Tak airport, and even the airport authority has said overall fees may nearly double.
Industry Analysts and some airlines, such as Taiwan's China Airlines, have said the rises could hurt their profit margins, push up ticket prices, or force traffic to other airports at nearby Macau or China's Zhuhai and Shenzhen.
Hong Kong Secretary for Economic Services Stephen Ip said airport officials were still consulting the airlines.
""The Airport Authority will certainly listen to the viewpoints expressed by the airlines, and I don't think a final decision has been taken. And that's the whole purpose of having consultations with the airlines,"" Ip told reporters.
Monday's agreement opened the way for new routings and services, giving the United States the right to select carriers to provide non-stop services from three additional gateways.
So far, Chicago and Detroit have been picked in addition to existing gateways of New York, Los Angeles, Seattle and San Francisco.
The agreement provided for the preservation of open competitive entry and unrestricted service offerings from all U.S. points, and preservation of the U.S. ""round the world service"" run by United Airlines.
It provided ""fifth freedom rights"" between Hong Kong and points in the Philippines, South Korea and Thailand. The United States has chosen flights between Hong Kong and Subic Bay and between Hong Kong and Manila under this provision.
Under the accord, Hong Kong received new gateways in the United States for passenger and all-cargo services, choosing New York and Chicago for this provision. New fifth-freedom rights were also awarded to Hong Kong, but have not yet been taken up.
Nine U.S. airlines operate about 84 passenger and cargo services per week to Hong Kong. In 1996, they carried 920,000 passengers and 147,000 tonnes of cargo on direct services between Hong Kong and the United States.
Cathay Pacific Airways Ltd and Air Hong Kong operate about 21 services per week between Hong Kong and the United States. In 1996, they carried 315,000 passengers and about 42,000 tonnes of air cargo.
",37
"China's People's Liberation Army (PLA), poorly regarded by many in Hong Kong, will send an advance party into the territory next Monday, more than two months before Beijing formally resumes sovereignty.
Hong Kong unexpectedly announced an accord on the troop movement on Tuesday, ending months of deadlock over the size and role of a PLA advance guard, and whether they would bear arms.
""The two sides of the Sino-British Joint Liaison Group have reached agreement on the arrival of 40 advance personnel of the future Garrison in Hong Kong from April 21,"" said a Hong Kong government spokesman.
""They will not be armed and will not enjoy any special legal status or...privileges and immunities,"" the spokesman said.
""This agreement provides a firm basis for the smooth transfer of defence responsibilities.""
But the PLA advance guard will have no defence or security role and their work will not affect the British troops who will garrison Hong Kong up to the handover at midnight on June 30.
It was the first positive news after weeks of wrangling between Britain and China over a controversial shadow legislature, Beijing's plans to curb civil liberties, and China's move to set its own rules on Hong Kong residency rights.
The PLA advance guard will prepare the facilities for the PLA garrison due to take over defence duties from the British army's ""Black Watch"" regiment on July 1. The PLA garrison might eventually be up to 10,000-strong, military sources say.
""The duties of advance personnel are to make practical preparations for the PLA to take over the responsibility for the defence of Hong Kong, including familiarisation with military sites, liaison with British forces and the Hong Kong government, and coordination of communications support,"" the spokesman said.
The group will be led by a deputy commander of the future Garrison, an officer of the rank of Major General.
A 28-member liaison group led by the deputy commander will be located with British forces at the Prince of Wales Barracks in Central Hong Kong. The other 12 will be billeted with the British garrison on Stonecutters Island in Hong Kong harbour.
The PLA troops would wear uniforms within the barracks but civilian clothing outside military sites.
""They have to strictly abide by all Hong Kong laws,"" the spokesman said in an effort to allay fears among Hong Kong's 6.4 million population that the PLA would put itself above the law.
The PLA has a bad name in Hong Kong, where many people vividly remember how the Chinese army sent tanks into Beijing's Tiananmen Square and bloodily crushed a student-led democracy movement with a heavy loss of life.
China has reinforced those fears and memories with a series of moves designed to trim democracy and civil liberties in Hong Kong after the sovereignty change this year.
It has overridden British objections and appointed a new interim legislature to replace the elected Legislative Council on July 1, when 156 years of British rule come to an end and Hong Kong becomes a semi-autonomous capitalist region of China.
It has also launched moves to roll back laws on the freedom to demonstrate and form political parties, as well as democratic elections introduced by London in recent years.
The latest breakthrough came just as the mood was growing bleak in Sino-British handover negotiations.
A move by Beijing on Monday to set the rules on who is entitled to permanent residency in Hong Kong after it reverts to China had stirred up a bitter quarrel.
""It's our domestic affair. We don't need the British to tell us who is a Chinese national,"" China's Hong Kong policy boss Lu Ping said. Britain promptly accused China of going it alone on an issue that should have been settled diplomatically.
",37
"Hong Kong's Finance Secretary Donald Tsang, set to unveil the annual budget under China's watchful eye, is a man of conservative pedigree when it comes to economics but an outspoken liberal in the political arena.
Tsang, who appears in hallmark striped business shirts and colourful bow-ties, broke a 153-year colonial mould by becoming Hong Kong's first non-British financial secretary in 1995, crowning a 30-year career in the civil service.
So far, he has made no stunning changes to the cautious budget policies that have made Hong Kong rich, a posture that should endear him to Hong Kong's soon-to-be sovereign power, China.
The 52-year-old staunch Roman Catholic minces no words when he advertises his cautious, conservative economic approach.
""My policy is not to create excitement in the management of our public finances, nor do I have any appetite for thrills and spills,"" Tsang said when he took on the job.
Last week Tsang dismissed accusations that the government was acting like a miser sitting on a cash mountain while holding back welfare spending.
But he was also quick to dismiss accusations that China, due to take back the territory from Britain on July 1, had put the brakes on social spending.
""In formulating our expenditure programme we had not been overly influenced, we have not been affected, by whatever they call political pressure,"" he told a meeting of central bankers.
The budget to be unveiled on Wednesday has for the first time been worked out in hand with Chinese experts. It was part of the Sino-British negotiations on details of the sovereignty change, and came against the political backdrop of sour relations between London and Beijing.
Since he delivered his maiden budget a year ago, Tsang has landed himself in political controversy.
He has spoken out against China's plans to roll back key clauses in some of Hong Kong's civil liberties laws -- putting himself at odds with Hong Kong's future leader.
""If you can't convince the people of Hong Kong, people may take to the streets, some may keep their frustration in their hearts, some in the civil service may quit. Some may emigrate.
""Investors are similar. They talk about substance (of the laws). If they are happy with it, they will invest more. If they aren't, they will leave,"" Tsang said in a newspaper interview.
A recent newspaper report said leader-to-be Tung Chee-hwa, who has retained Tsang for the post-colonial government, now plans to sack him because he had upset China.
Tsang has declined to comment on the report.
In the 1997/98 budget, Tsang has made one departure from past practice by announcing some of the key data in advance.
But he has not commented on experts' predictions of a fiscal surplus of as much as HK$25 billion, far higher than the government's previous forecast of HK$1.6 billion.
Hong Kong-born Tsang sits atop one of the world's richest low-tax economies. In gross domestic product terms, it is equal to one-fifth of China's economy, though Hong Kong has only 6.4 million people to China's 1.2 billion.
At US$66 billion, Hong Kong has the second highest foreign exchange reserves per head on the planet, and it is the globe's eighth-largest trading economy.
",37
"World bankers and economic chiefs held Hong Kong up as a financial showcase with a rosy future on Friday but a clash of views between Britain and China over democracy augured a politically bumpy ride.
Finance ministers and central bankers gathered in the glitzy Grand Hyatt Hotel beside Hong Kong's famed ""Fragrant Harbour"", boosting the morale of the financial sector less than four months before China takes over the British-ruled territory.
At the same time, tearful colonial expatriates were about to set sail or were already on their way home on two of the world's greatest cruise liners, the QE2 and the Oriana, a dramatic reminder that an era is ending and that Hong Kong itself will soon be sailing in uncharted waters.
China is taking back the territory of 6.4 million people, which has prospered under the British flag for more than 150 years, at midnight on June 30.
China, in the 1984 Sino-British Joint Declaration, promised the outpost great autonomy and a free rein to capitalism -- hailed by the financial community as a harbinger of stability and further prosperity.
But much of that stability depends in large measure on the outcome of clashing views over how much democracy there should be. China plans to scrap -- at least temporarily -- Hong Kong's elected legislature and roll back civil liberties.
The titans of the financial world were treated to a taste of the future on Friday, as democracy activists protested outside the nearby police headquarters to demand prosecution of a pro-China politician for setting up an ""illegal"" office.
And in Beijing, China's foreign minister issued a snub to Britain, dismissing London's opposition to a plan to disband Hong Kong's legislature, saying this would not affect the smooth transfer of power.
International Monetary Fund (IMF) chief Michel Camdessus voiced confidence that Hong Kong, one of the world's richest cities, would keep its financial autonomy under Chinese rule.
Camdessus held up Hong Kong as a shining example of fiscal success thanks to prudent monetary and exchange rate policy.
He told the IMF-Hong Kong Monetary Authority conference China had a stake in preserving that success.
""History, geographic location, openness in trade and importance as a financial centre all point to its critical interest in continued global integration, an interest that is shared in China, in the region and in the rest of the world,"" he said.
But colonial Governor Chris Patten warned that the Hong Kong miracle was due to increasingly democratic government, and that freedom should not be tampered with.
""Democracy, as promised and pledged in the Joint Declaration and in the Basic Law (mini constitution), has taken root and started to flourish here. This has strongly underpinned Hong Kong's economic prosperity and Hong Kong's social stability,"" Patten said.
China's central bank governor Dai Xianglong took a different view. Hong Kong's prosperity depended on China.
""As China moves ahead in its modernisation drive, the prosperity of Hong Kong will be even more secure,"" he said.
Pledging that London would keep a close eye on basic freedoms in Hong Kong after the handover, Britain's Chancellor of the Exchequer Kenneth Clarke said Hong Kong's prosperity hinged on the survival of its British-based rule of law, wise economic policies and transparent government.
""As a signatory of the Joint Declaration, we will continue to take a close interest in ensuring that Hong Kong's economic achievements, and the rights and freedoms which underpin them are fully preserved,"" he said.
Qian signalled China would not budge from its plan to install a legislature in place of the elected Legco and said foreign countries should not meddle in post-colonial Hong Kong.
""If they (British authorities) continue to voice their opposition to the operation of the provisional Legislative Council I don't think it will have any impact on the smooth transition of Hong Kong,"" he said.
""No foreign country has the right to interfere in the affairs of the Hong Kong Special Administrative Region.""
Most Hong Kong expatriates leaving on the cruise liners, cutting careers short due to ""localisation"" of top government jobs, said they did not expect to be coming back.
""There will be tears at leaving my second home,"" said senior law draftsman Royston Griffey, who helped draft Patten's democratic reforms. ""But I will probably wave a fist at the government for treating an overseas officer so disgracefully.""
""It's like leaving an old friend when you are not sure when you are going to see them again,"" said former welfare director Ian Strachan.
""Hong Kong has been such an important part of my life.""
",37
"Hong Kong's democracy movement on Friday likened Beijing's plans to curb civil liberties in the territory to the brutal purges of China's radical 1966-76 Cultural Revolution.
The pro-democracy camp staged a small but noisy protest on Friday morning at the office of post-colonial leader Tung Chee-hwa, who will succeed British Governor Chris Patten after the handover at midnight on June 30.
""Protect freedom of assembly. Protect freedom of association,"" they shouted. ""Human rights cannot be infringed upon.""
A handful wore tall hats and hung labels around their necks, harking back to the Cultural Revolution when those who were politically persecuted were forced to wear dunce caps and hang boards around their necks with their names crossed out. They were paraded through the streets and beaten. Many died.
Pro-democracy activists are campaigning against plans to scrap or amend 25 Hong Kong laws, some of them crucial to civil liberties, on July 1.
Laws facing the axe include parts of the Bill of Rights and laws allowing freedom of assembly and association.
The Hong Kong group called for an all-night sit-down protest outside China's de facto embassy, the Xinhua News Agency branch office, opposite the Happy Valley race course. Other protests were planned for Sunday.
""I don't think we can be masters of our own house,"" Yeung Sum, deputy leader of the Democratic Party, told reporters when asked what the latest developments boded for the autonomy that China has promised Hong Kong after the handover.
""The Chinese Communist Party is master of the house, and Mr Tung is the servant of the Chinese Communist party,"" he said.
Democratic Party leader Martin Lee called a news conference for later in the day and was due to set off on an eight-nation tour of Europe on Sunday to lobby for support for human rights, freedom and democracy in post-handover Hong Kong.
The reduction of civil liberties was proposed by a China-controlled committee last Sunday and would be implemented by a provisional legislature that China is installing in July to replace the elected Legislative Council.
The provisional body was to convene for its first sitting across the border in the Chinese city of Shenzhen on Saturday, when it is to elect its president and set rules of procedure.
Britain is handing Hong Kong back to China, after more than 150 years of colonial rule, under a 1984 treaty in which China promised to preserve the territory's capitalist system and freewheeling way of life for a further half century.
Hong Kong's leading English-language newspaper, the South China Morning Post, voiced concern that the changes would scrap a habeas corpus law that curbs police rights to detain people.
""It prevents people from being arbitrarily arrested and held without trial, or detained without good reason,"" the newspaper said. ""Habeas corpus is one of the greatest safeguards to individual liberty in the canon of law.""
Tung and Patten duelled verbally on Thursday. Tung defended the changes, saying they were necessary to strike ""the right balance between individual rights and social order"".
Tung said other states required permits for demonstrations and set limits on the overseas links of political groups, two of the changes that are worrying the pro-democracy camp.
Patten heaped scorn on the proposals, which have drawn Britain and the United States into a new diplomatic quarrel with Beijing. China has rejected their protests as ""unwise"".
",37
"Britain and China moved ahead on Wednesday to resolve outstanding details of Beijing's recovery of sovereignty over Hong Kong this year.
Just a day after they had agreed on a budget to straddle the handover, the two sides announced a breakthrough allowing Hong Kong a free hand to organise media coverage of the historic event on June 30 without China's interference.
And Britain's chief diplomatic negotiator said he thought there would soon be an agreement on one of the last burning issues -- the right of abode in the territory.
The latest progress comes just four months before Britain ends a century and a half of colonial rule and hands the territory of 6.4 million people back to communist-ruled China.
But a possible political bombshell lurked in the background as a prominent pro-democracy legislator prepared to ask the government to press China on the role of the Chinese Communist Party in Hong Kong after the change of flag.
On the media accord in the Sino-British Joint Liaison Group (JLG), Britain's negotiator Hugh Davies said: ""We very much look forward to as many as possible of the international press, the local press being interested in participating and recording and reporting on the handover ceremony.""
Human rights and democracy activists had voiced fears that China would not consent to a media invasion without the right to vet which journalists come to the event.
""The two sides have agreed to entrust the Hong Kong government to receive and process applications from journalists, as well as handle and arrange other matters relating to media coverage of the handover ceremony,"" the two sides said.
""There will be no criteria applied...provided you don't turn out to be a terrorist,"" Davies told reporters.
It was the second positive turn in the JLG talks in as many days. On Tuesday Britain and China struck a deal on Hong Kong's 1997/98 fiscal year, starting April 1 and covering the handover year. Finance Secretary Donald Tsang will read the budget to the legislature on March 12.
""We are convinced it will be welcomed by society,"" said Chinese representative Chen Zuo'er, adding that the budget would stick to Hong Kong's ""prudent and moderate"" tradition.
Davies said after that deal that he was hopeful a deal could soon be done on right of abode, covering who would have residence rights in Hong Kong and on what terms.
""I hope major progress can be made on those matters which are not yet resolved,"" his Chinese counterpart Zhao Juhua said. The two sides also still have to work out an agreement on details of the People's Liberation Army garrison that China plans to install in Hong Kong, as well as a guest list for the handover ceremony, and a string of air services agreements.
Meanwhile, Hong Kong's post-colonial leader-to-be Tung Chee-hwa saw his fortunes climb in the opinion polls as the latest survey showed more than three quarters of people felt confident he would do a good job as Hong Kong's Chief Executive.
But Tung remained under pressure from Hong Kong critics and foreign governments concerned about his support for Beijing's plan to roll back democratic freedoms in the territory.
The United States, European parliament members, as well as newsaper editorial writer, have urged Tung and China this week to realise that political and economic freedoms go hand in hand, and that a cut in basic rights could hurt the economy.
A group called the United Front Against the Provisional Legislature, on Wednesday condemned the opening of a liaison office for the shadow legislature that China plans to install on July 1, dissolving the present elected Legislative Council. It urged the Hong Kong government to seek a court injunction against the move.
",37
"Human rights and political liberty took centre stage in Hong Kong on Tuesday as human rights watchdogs said China was making it easier to crush dissent, boding ill for the territory after Beijing takes over.
After 156 years under the British flag, Hong Kong reverts to Chinese rule at midnight on June 30 -- 63 days away -- and the pace of politics is quickening.
The watchdog Human Rights Watch/Asia said changes to China's criminal code had made it easier for Beijing to stifle dissent, and Hong Kong people might even be put on trial in China.
In Washington, Secretary of State Madeleine Albright and Chinese Foreign Minister Qian Qichen held talks on contentious issues but there was no shift in views on human rights or the future of Hong Kong, a Chinese spokesman said.
A major ""public consultation"" on the future of political freedom in the colony ends on Wednesday, and the bustling capitalist outpost's 6.4 million people are sharply divided.
The pulse-taking launched by future leader Tung Chee-hwa asks members of the public and organisations to submit views on his plan to ban foreign funding of political groups and curb the right to protest in the interests of ""national security"".
Pro-democracy parties, the legal profession, human rights groups, Western-style trade unions and churches have all vigorously objected to the plan in written submissions, and there has been loud criticism from London and Washington.
But organisations representing industry, commerce, pro-China political parties and pro-Beijing trade unions support Tung's plan, which was forced on him in March by a Chinese parliamentary resolution.
In the latest twist, a powerful pro-Beijing labour group, the Federation of Trade Unions, urged a widening of definitions of political groups covered by the curbs.
But in an unusual move, the federation also called for a ban on funding from China's ruling Communist Party to local political groups to be added to the restrictions.
""This will avoid disputes and criticisms. Hong Kong's political groups should stand on their own feet to fight for their beliefs,"" said the union's boss, Cheng Yiu-tong.
Cheng's rival, pro-democracy trade union federation leader Lee Cheuk-yan, attacked Cheng's bid to widen the net.
""(It) is a step backward, because they want to have more organisations defined as political groups,"" Lee told Reuters. ""They want to pressure these organisations to depoliticise.""
Tung's future Justice Secretary, Elsie Leung, said she was willing to consider calls for a ban on mainland funding.
Such funding had not originally been mentioned because it was considered that the national security interests of Hong Kong and mainland organisations converged.
""But we will consider this proposal as so many people have raised it,"" she said at a function on Monday.
Human Rights Watch/Asia said in a major report on Tuesday that China's striking of the term ""counterrevolution"", the communist code for subversion, from the law books in March did not mean easing political controls. Quite the opposite.
""China has merely replaced the term 'counterrevolution' with the equally elastic notion of 'endangering state security' and has, in the process, actually broadened the capacity of the state to suppress dissent,"" the report said.
Hong Kong people, who China has vowed can keep their legal system and way of life for 50 years, could suffer, it said.
""The new security provisions will facilitate the labelling of all domestic critics as tools of 'hostile foreign forces',"" it said. ""Despite Hong Kong's separate legal system, Beijing may have the power to bring Hong Kong people to face trial in mainland courts.""
",37
"A Hong Kong human rights group reacted with scepticism on Tuesday to China's declaration that it would subscribe to a United Nations' human rights convention.
China, embroiled in controversy over its human rights record, said on Monday it will sign the U.N. International Covenant on Economic, Social and Cultural Rights before the end of 1997.
Paul Harris, who heads the Hong Kong Human Rights Monitor and closely watches rights developments related to Hong Kong, said the move seemed to be a bid to dodge international censure in a debate at the U.N. Human Rights Commission in Geneva this week.
""I'm unimpressed,"" Harris told Reuters.
""The timing is obviously designed to reduce the risk of China being condemned in the debate at the United Nations.
""I'm very sceptical whether it will be carried out,"" Harris said of Beijing's avowed intention to sign the convention.
He said Monday's pledge by President Jiang Zemin to visiting French Defence Minister Charles Millon did not make clear if Beijing would go all the way and ratify the covenant in full.
Once the Geneva debate had blown over, China would probably just ""forget about it"", Harris said.
He questioned why China, in its latest move, had referred only to the so-called ""ECOSOC"" human rights covenant, and not to the other more important U.N. convention, the International Covenant on Civil and Political Rights (ICCPR).
China has in the past resisted making any commitment to observe international human rights standards and rarely submits reports on the human rights situation on its own turf, where hundreds of dissidents languish in jail.
China also resists the notion of submitting human rights reports on Hong Kong, a British colony that reverts to Beijing's control on July 1, under an international treaty that requires ICCPR human rights standards to be applied in the territory.
Both U.N. covenants would require China to submit regular reports on compliance with standards laid down in the documents, but membership could also give China a voice on the international committee monitoring the accords.
Harris said there had been no signs of any liberalisation in China's attitude toward dissent in recent months.
",37
"A dispute over the future of civil liberties in Hong Kong moved into the diplomatic realm with Britain and the United States warning China to respect a treaty pledge to preserve basic freedoms.
The quarrel flared after a Beijing-controlled panel last Sunday proposed scrapping Hong Kong laws on civil liberties and elections, including part of its Bill of Rights, when China takes over Britain's last important colony five months from now.
London and Washington issued stern warnings to Beijing, while China declared it was an internal affair and Hong Kong's future leader attempted to dampen the dispute.
The controversy is the latest over Chinese plans to scrap liberal political arrangements that Britain has introduced in Hong Kong in recent years.
China is also moving to install an appointed provisional legislature in place of the elected Legislative Council on July 1, and to block a lenient British law that would exclude China-style crackdowns on peaceful dissent and protests.
China's opponents say these steps fly in the face of commitments on allowing Hong Kong to keep its freedoms after it becomes a Special Administrative Region (SAR) of China.
The United States said on Tuesday it was deeply concerned about attempts to water down civil liberties in Hong Kong, and it called for reconsideration.
""We are deeply concerned over any attempt to weaken civil liberties and basic freedoms in Hong Kong,"" State Department spokesman Nicholas Burns said.
Hong Kong's post-colonial leader, Tung Chee-hwa, who takes over from Governor Chris Patten on July 1, called for calm.
""I think we are being too dramatic,"" Tung told Hong Kong radio. ""It is a very complex issue,"" he said, adding that he would make a fuller statement on the affair on Thursday.
Britain's minister for Hong Kong, Jeremy Hanley, summoned the Chinese ambassador in London to protest. A Foreign Office spokesman said the proposals were without justification.
He said the Bill of Rights was consistent both with the 1984 Sino-British Joint Declaration, which is the treaty governing Hong Kong's handover, and with the Basic Law, the territory's post-handover constitution promulgated by China.
The issue was being hotly debated in Hong Kong newspapers, where some analysts predict a backlash if China rolls back basic freedoms in the capitalist territory of 6.3 million people.
""The Preparatory Committee's decision, if carried through, will certainly add to the number of political trials that greet the birth of the SAR,"" wrote political analyst C.K. Lau in the South China Morning Post.
""Should the outcome of those trials be politically unpopular, more and not fewer demonstrations and rallies are likely. This will be bad for Hong Kong's international image at a critical time.""
",37
"Britain's minister handling Hong Kong's 1997 transfer to China will confer with London's colonial governor and other officials this weekend after opening the way to a breakthrough in handover arrangements with Beijing.
Jeremy Hanley, Minister of State at the Foreign and Commonwealth Office, arrives in Hong Kong on Friday night to discuss the state of play in negotiations following his recent visit to Beijing, which was marked by a warming of relations.
Hanley, wrapping up a tour of Asia, will meet Governor Chris Patten and the territory's quasi cabinet, the Executive Council, to brief them on his recent talks with China's Hong Kong policy supremo Lu Ping.
They would also discuss how Foreign Secretary Malcolm Rifkind would handle his next meeting with China's Foreign Minister Qian Qichen, likely to take place at the United Nations General Assembly session in New York later this month.
A well-placed western diplomatic source said Hanley's talks in China had produced progress on the long-stalled and thorny issue of a joint handover ceremony when a century and a half of British rule ends, at midnight next June 30.
""The main thing was that he made good progress on the handover ceremony, and an announcement on this could come quite soon,"" the diplomatic source said.
A deal on the ceremony in 291 days' time to mark this closing chapter of Britain's empire was now very close, the source said. He added that there was some hope that Britain's Prince Charles might attend.
A government spokesman said Hanley's visit to Hong Kong was a ""pulse-feeling mission"" and that Patten was keen to hear first hand about the latest contacts with Lu Ping.
Hanley arrives in Hong Kong on the eve of the departure of Britain's diplomatic negotiating team to Beijing for a session of the Joint Liaison Group forum haggling over the handover.
This year had seen a significant shift to cordial relations between Britain and China, the diplomatic source said.
Progress was made on ""substantive economic issues"", although on the political front less had been achieved, he said.
London and Beijing have long bickered over the transition, with discord over the handover ceremony once so entrenched that prospects of a joint ceremony seemed in doubt. China, infuriated by Patten's expansion of democracy in the colony, was once said to have insisted that he should not attend.
But Lu told Hanley in Beijing he would seal the handover next year in a ceremonial handshake with Patten.
Another obstacle has been China's plan to dissolve Hong Kong's elected Legislative council and supplant it with an appointed ""provisional legislature"", which Britain opposes.
""China has managed to change the tone of its approach to Hong Kong without shifting its stance on the provisional legislature,"" the diplomatic source said.
Recently political analysts have noted softer Chinese policy utterances on Hong Kong, including offers of dialogue with the Democratic Party, long a fierce critic of Beijing, and an attempt to inject more candidates into the contest for the territory's first post-colonial leader, or Chief Executive.
An unprecedented exchange of letters between the Democrats and China this month came after the British side encouraged the party to open a dialogue with the Chinese and China to be more receptive to the group, a Hong Kong official said on Friday.
China has promised Hong Kong a high degree of autonomy under the handover treaty with Britain, and no change to the colony's freewheeling capitalist system for 50 years under a ""one country two systems"" policy aimed at reunifying Chinese territories.
",37
"Tung Chee-hwa, Hong Kong's chief executive-designate, is a Confucian who loves to preach on the need for harmony and order as he shepherds this bustling capitalist territory from British to Chinese rule.
On Thursday he showed off his new offices, which boast a soothing view over a waterfall tumbling from the lush green tropical slopes of Hong Kong Park.
The seventh floor suite will be his base at least until the Union Jack is furled and China's red flag hoisted at midnight on June 30, marking the end of more than 150 years of colonial rule.
He won't be able to practise his Chinese ""tai chi"" exercises on the rooftop as he once did at his offices at the Orient Overseas shipping company, where he quit as chairman last year in order to become Hong Kong's future leader.
But the view should help when he meditates on the growing political rifts and the anxiety about lost freedoms that are prefacing the transfer of sovereignty.
As he looks out of the window he will be facing east and conveniently turning his back on Government House, seat of the departing British Governor Chris Patten.
Mobbed by journalists as he put his offices on display, Tung lambasted critics, particularly the popular Democratic Party, who have been lobbying the West against China's plans to roll back Hong Kong's democracy and human rights.
""There are people from Hong Kong including the Democratic Party who are overseas talking down Hong Kong as though the world will come to an end here,"" Tung said, referring to a current European tour by Democrat leader Martin Lee.
The quarrel underlined the political tension that Tung has to contend with in his new office in the coming months as Hong Kong prepares to become a Special Administrative Region of China.
The skyscraper rises in a prime commercial district in one of the world's most expensive cities, and his neighbours in the building include Hong Kong's Futures Exchange and a clutch of big name international brokerage houses.
Staff from some of these companies told reporters on Thursday they did not welcome the likely disturbance whenever Hong Kong's news hounds pour into Tung's 11th floor press centre. ""That's not what we expect to put up with when we pay these high rents,"" one executive said.
Tung, 59, has already signalled he does not intend to move into Government House, a luxurious mansion with a rich history, citing bad ""fung shui"", Chinese parlance for an inauspicious relationship with nature but a remark interpreted by many in Hong Kong as an oblique attack on British rule.
Visitors to Tung's office will find a bright welcome in a reception area with ""People's Republic of China SAR Chief Executive's Office"" in gold lettering on the wall, topped in red with Hong Kong's new emblem, the tropical bauhinia flower.
His advisory cabinet, the Executive Council, which he has filled with politicians and businessmen approved by Beijing, will meet in an adjacent conference room around a long oval table, resembling the board room of a blue chip company.
",37
"Hong Kong's future government has hit a new snag, with a shortage of trained staff forcing it to cancel a sitting of a controversial legislature preparing new laws ahead of the territory's handover to China.
It is the latest in a series of difficulties facing Tung Chee-hwa, the China-backed shipping magnate who will rule Hong Kong after the British pull out at midnight on June 30.
Tung's office said on Wednesday that this Saturday's session of the provisional legislature, which had been scheduled to deal with a draft law on new flags, had been dropped from the diary. Just a briefing would take place.
""The draft bills aren't ready because there aren't enough people,"" Bob Howlett, a spokesman for Tung's office, told Reuters. He said Tung's coordinator, Michael Suen, concluded the office did not have enough draftsmen to prepare planned laws.
""He doesn't want to see a rushed job done on anything,"" Howlett said.
But Tung's office issued a statement saying the bills would be passed in good time before the July 1 handover.
""We are doing the best we can with our limited resources. We are firmly committed to completing the drafting of all essential bills in good time for their passage by the Provisional Legislature Council before July 1.""
British Governor Chris Patten has refused to second more staff to the Tung office from the Hong Kong civil service to help the future government ready itself for the handover.
The office has only two law drafters on its staff.
Communist-ruled China resumes sovereignty over Hong Kong, a British colony for the last 156 years, under a 1984 treaty that allows the territory virtual autonomy for another 50 years.
China, angered by democratic reforms introduced by Patten in the twilight years of British rule, set up the provisional legislature in December to replace the democratically elected Legislative Council (Legco).
Many of China's critics consider the interim body unconstitutional.
""I think it's a good thing there's now no legislation going forward this week, and it would be even better if no legislation goes forward at any time, because anything they do handle between now and June 30 is vulnerable to legal challenge after the first of July,"" said Patten's spokesman, Kerry McGlynn.
""That can't be in anybody's interests. We've always made it perfectly plain, and will continue to do so up to June 30, that we'll do nothing to undermine the credibility and legitimacy of the current Legco by providing any kind of assistance to the provisional legislature,"" McGlynn told Reuters.
A spokesman for the provisional legislature said the body would now organise a briefing on Saturday on the planned civil rights curbs, instead of a full-fledged legislative session, at its base in the Chinese border town of Shenzhen.
Tung's run-up to his new job as Hong Kong chief executive has been a bumpy one.
Sino-British disputes were stoked this month after Tung launched a plan to curb political liberties such as the right to protest and the right of political groups to receive foreign funds. He provoked a domestic and international outcry.
Last week he admitted to the media that he had donated 50,000 stg ($81,500) to the ruling British Conservative Party in 1992, sparking cries of hypocrisy.
",37
"The death of Chinese leader Deng Xiaoping has had an impact in Hong Kong unseen since the 1976 passing of Mao Zedong, founder of communist China.
But it pales in comparison to the outpouring of grief that followed Mao's death, long-term residents say.
An estimated 50,000 people have visited China's official mission in Hong Kong, the Xinhua news agency building, to pay their respects at a Deng shrine in the five days since the Chinese patriarch's death last Wednesday.
Some segments of the British-ruled community of 6.4 million people also saluted Deng with gestures of mourning at the moment of his official Beijing funeral on Tuesday.
Ships blasted their horns, buses trailed black ribbons, train stations broadcast dirges, flags flew at half mast, and schoolchildren stood at attention in respectful silence.
Deng, purged by Mao before becoming China's unquestioned leader in 1978, orchestrated China's opening to the West and its economic reforms, as well as Beijing's blueprint for taking back Hong Kong from Britain on July 1.
Mao died in 1976 after a rule marked by numerous purges of the communist leadership and revolutionary upheavals climaxing in his disastrous 1966-76 Cultural Revolution.
Still, hundreds of thousands in Hong Kong mourned his passing, long-term residents said.
""With Mao, huge numbers of people poured into a hall crying. It was very mournful,"" said Hong Kong politician Elsie Tu.
""It brought tears to our eyes as we felt the end of an era,"" said the 83-year-old Tu, a former missionary in China.
Long-term resident and former China-watcher John Dolfin said the turnout for Mao was massive and the salutes ear-splitting.
""The lines curled three abreast around the Bank of China building, and all through the park. There must have been thousands in the line at any given time. It took an hour and a half to get in,"" said Dolfin.
""The line was much smaller for Deng. It was very quick. And there wasn't much emotion,"" Dolfin said.
""For Mao every boat in the harbour stopped and blew their whistles. It was deafening. But today the harbour was virtually empty when the whistles were blown.
""Chairman Mao very much still held authority when he died, unlike Deng, who frankly was not really the 'paramount leader' for a number of years and held no official positions of power when he died,"" Dolfin said.
Szeto Wah, a pro-democracy politician and critic of Beijing, recalled Mao's mammoth personality cult.
""The reaction for Mao was much stronger than for Deng because he was like a god. It was like the death of a god. All of China felt helpless,"" said Szeto.
""People went to mourn Mao at the Bank of China building. The atmosphere was very grievous but also very nervous because the Cultural Revolution had not yet finished,"" he said. ""An important difference was that there had not been any news about Mao's condition, whereas Deng's condition has been frequently reported before he died.""
Arthur Hacker, a long-term Hong Kong resident and former government information officer, recalled 1976.
""They dismantled the enormous sign on the top of the Bank of China building which said 'Chairman Mao Lives Forever',"" he said.
""Everybody went to the Bank of China, opposite the old cricket club. Xinhua was very invisible in those days,"" Hacker said. ""There were wreaths all over the bank's wall, and queues of people. There were red flags all over the place.""
",37
"Hong Kong's 250,000-strong Catholic community looks ahead with confidence to Chinese rule but is treading cautiously in its relations with Beijing, church sources said on Tuesday.
The sources said a statement from Pope John Paul on Monday that the Vatican would closely watch how Catholics fare in Hong Kong after the British colony's handover to China in mid-1997 was a necessary expression of concern.
They believed the church would remain free after 1997.
But one said: ""Probably our future is like a lame duck -- still alive but unable to do very much. We will have to obey and stay within our political border -- Hong Kong.""
Some Catholic agencies are quitting Hong Kong in order not to endanger the community after the Chinese red flag is raised.
Hong Kong's Roman Catholics, most of them ethnic Chinese. amount to four percent of the capitalist territory's 6.3 million population.
Speaking in his annual ""state of the world"" address, the Pope said: ""By reason of the size and vitality of the Catholic community in the territory, the Holy See will follow with particular interest this new state.""
""The Pope's concern is necessary because this is the biggest Chinese diocese in the world,"" Anthony Lam, executive director of the Holy Spirit Study Centre, told Reuters.
""The relationship between the Hong Kong government and the diocese is harmonious,"" he said. The community and China must work to maintain that harmony after 1997.""
Hong Kong has been a base of missionary activity aimed at China's teeming millions since its inception as a British colony in the gunboat diplomacy of the mid-19th century.
This fact has made Beijing's Communist rulers view Hong Kong with suspicion since they took control of the mainland in 1949.
Many local Catholics have risen to senior official rank or political prominence. These include a vocal critic of the Beijing government, Democratic Party leader Martin Lee, as well as Financial Secretary Donald Tsang and anti-corruption chief Michael Leung.
Other prominent Catholics in Hong Kong include the British governor Chris Patten and Leo Goodstadt, who is an adviser to both Patten and Catholic Cardinal John Wu.
Highlighting the very different position of the church in Hong Kong from the church in China, Wu presided over a colourful annual pageant of judges in the Catholic Cathedral on Monday.
On the mainland, churches are tightly restricted through ""patriotic associations"", the Vatican is banned from appointing bishops, and China often jails dissident priests for organising religious activity outside state control.
However, church sources in Hong Kong said they believe the territory will not suffer the same fate because China pledges to allow religious freedom in the territory under its Basic Law.
""The church will stay in Hong Kong and will take a positive view towards the political transition,"" Lam said.
But one church source said: ""We've seen China reinterpret the Basic Law to suit itself. This does not bode well for freedom. They've said we can speak only about Catholics in Hong Kong, not those in China, who we care about,"" he said.
Mary Seung, director of the Catholic Social Communications Office, which acts as a spokesman for the diocese, sounded a more upbeat note, saying:
""We've had contacts with the Chinese authorities and they've guaranteed that the Catholic community can continue its work in social services and the schools.""
Hong Kong has over 300 Catholic schools at various levels.
The 1997 handover has forced churches in Hong Kong to search their political souls over the past year, with the religious community split over how much to cooperate with China.
Eight Catholics sit on the Selection Committee, a China- appointed body crafting new Hong Kong power structures.
But the church allowed them to participate only in their personal capacity, not as its official representatives.
",37
"A dispute over the future of civil liberties in Hong Kong has prompted Britain and the United States to issue stern warnings to China to respect a treaty pledge to preserve basic freedoms.
The quarrel flared after a Beijing-controlled panel last Sunday proposed scrapping Hong Kong laws on civil liberties and elections, including part of its Bill of Rights, when China takes over Britain's last important colony on July 1.
As London and Washington aired their warnings, China said it was an internal affair and Hong Kong's future leader tried to dampen this latest controversy over Chinese post-handover plans.
China is moving to replace the elected Legislative Council with a provisional legislature and to block a lenient British law that would exclude China-style crackdowns on dissent.
China's opponents say these steps fly in the face of vows that allow Hong Kong to keep its freedoms after it becomes a Special Administrative Region (SAR) of China.
The United States said it was deeply concerned about attempts to water down civil liberties in Hong Kong, and called for reconsideration.
""We are deeply concerned over any attempt to weaken civil liberties and basic freedoms in Hong Kong,"" State Department spokesman Nicholas Burns said.
Hong Kong's post-colonial leader, Tung Chee-hwa, who takes over from Governor Chris Patten on July 1, called for calm.
""I think we are being too dramatic,"" Tung told Hong Kong radio. ""It is a very complex issue,"" he said, adding that he would make a fuller statement on the affair on Thursday.
Patten, however, continued the war of words. He said the ""ill-considered recommendations"" would be ""deleterious for our economic success and social stability"".
""For those two qualities are intimately related to our civil liberties, each nourishing the other,"" he told a gathering of ethnic minorities.
Britain's minister for Hong Kong, Jeremy Hanley, summoned the Chinese ambassador in London to protest. A Foreign Office spokesman said the proposals were without justification.
He said the Bill of Rights was consistent with both the 1984 Sino-British Joint Declaration, which is the treaty governing Hong Kong's handover, and with the Basic Law, the post-handover constitution promulgated by China.
The issue was being hotly debated in Hong Kong, with some analysts predicting a backlash should China roll back basic freedoms in the capitalist territory of 6.3 million people.
""The Preparatory Committee's decision, if carried through, will certainly add to the number of political trials that greet the birth of the SAR,"" said political analyst C.K. Lau.
""Should the outcome of those trials be politically unpopular, more and not fewer demonstrations and rallies are likely. This will be bad for Hong Kong's international image at a critical time.""
A leading law expert, Nihal Jayawickrama of Hong Kong University, said the proposals would restore old laws, which had once been applied by colonial authorities against China's supporters, to crack down on China's opponents.
""I think the intention is to use this against elements that have emerged in Hong Kong in the recent past...It will be used to control public expression,"" Jayawickrama told Reuters.
He said that by restoring the old Societies Ordinance and the Public Order Ordinance that imposed restrictions on the freedom of association, China would be turning back the clock in Hong Kong by two or three decades.
",37
"China's People's Liberation Army (PLA) plans to use its presence in Hong Kong after Britain pulls out as a showcase to shed the bad image it acquired in the 1989 anti-democracy crackdown in Beijing's Tiananmen Square.
The future Hong Kong garrison commander Major-General Liu Zhenwu revealed the plan in a recent conversation with British commander Major-General Bryan Dutton, who will hand the defence of Hong Kong to the PLA at midnight on June 30, British armed forces spokesman Roger Goodwin told Reuters on Wednesday.
Liu and Dutton have been in contact over the handover of defence responsibilities linked to the sovereignty change, which will end more than 150 years of British colonial rule.
""What he said to Bryan Dutton was, 'Have you heard of Tiananmen Square?' Bryan Dutton admitted, yes, he had. And General Liu went on to say, 'Well, that this is the image that the world has of us, it is not a correct image of the PLA today',"" Goodwin said.
Hong Kong is reverting to China under a ""one country, two systems"" formula designed by Chinese paramount leader Deng Xiaoping, who died a week ago.
The arrangement, chipped into a 1984 treaty with Britain, allows Hong Kong to keep its free-wheeling capitalist system for the next 50 years.
Goodwin said General Liu went on to tell Dutton, ""We wish to change the image, and we see Hong Kong as the opportunity to do so because Hong Kong is a window on the world"".
""This is positive stuff,"" Goodwin said of the discussions.
But Goodwin, speaking ahead of a visit to Hong Kong by British Defence Secretary Michael Portillo, cautioned it would be stretching things to interpret Liu's remarks as an admission that the PLA did wrong in causing the large number of deaths in and around Tiananmen Square in June 1989.
""There was no suggestion of that at all,"" Goodwin said.
It is unclear how many PLA troops Beijing will station in Hong Kong, although China has signalled it may deploy as many as the British garrison had at peak strength in the 1980s -- about 10,000 personnel from all branches of the armed services.
There have been jittery reactions to the imminent presence of the PLA among Hong Kong's 6.4 million people, whose impressions of the Chinese army are indelibly marked with the images of the bloodshed in Tiananmen eight years ago.
At that time, one million Hong Kong people poured onto the streets to protest against the crackdown and support the student-led democracy movement in China.
Many in Hong Kong, citing the PLA's involvement in business on the mainland and abroad, have also voiced concerns that the PLA would get involved in corrupt activities in Hong Kong and that its troops will be above the law.
China, however, has been at pains over the past year to portray the future garrison as a model of high morality, including inviting journalists to tour the unit's training base across the border in Shenzhen.
Dutton had revealed the content of his conversation with General Liu to a group of visiting British reporters to show that the PLA had good intentions in Hong Kong, Goodwin said.
""The reason Bryan Dutton talks about that particular exchange is to demonstrate that the PLA generally do want to make it work in Hong Kong,"" he said. ""They have created a corps d'elite. They are specially selecting people for the garrison.""
",37
"Hong Kong's ride to Chinese rule hit a new bump on Wednesday when future leader Tung Chee-hwa put on hold a trip to the United States during which he had planned to calm fears over the British colony's handover.
Tung's move came as the man who will effectively face him as opposition leader, Martin Lee, became the focus of media attention in the United States on a tour in which he has issued gloomy warnings of a Chinese crackdown in Hong Kong.
Tung, who will be Hong Kong's chief executive, said he was too busy at home, where there are 76 days left before Britain leaves and China's red flag is hoisted at midnight on June 30.
""The chief executive believes his focus must be in Hong Kong,"" Tung said in a statement.
Selected by a China-controlled committee in December to run Hong Kong after Beijing resumes sovereignty, Tung had planned a pre-handover visit to the United States to soothe anxiety there about planned curbs on Hong Kong's political liberties.
The cancellation comes despite calls by U.S. executives in the territory, worried that excessive gloom about Hong Kong could harm business ties, for Tung to go to Washington.
A spokesman for his office said Tung set great store on Hong Kong's ties with Washington and would try to make the visit by the end of this year.
He denied the postponement was linked to the visit by Lee, leader of the popular Hong Kong Democratic Party, who is meeting President Bill Clinton at the end of the week.
""He's just too busy,"" the spokesman said.
Lee has dominated headlines about Hong Kong lately as he toured Europe and North America, warning of China's plans to curb protests and foreign funding of political groups, and to replace the elected legislature with a handpicked body.
In New York, Lee said at the United Nations that the West was morally obliged to make sure China keeps its 1984 treaty promises that Hong Kong will remain a free capitalist society.
""It becomes the moral obligation of every government that supported the (treaty) at least to ensure that China will adhere to her promises made in 1984 and keep Hong Kong free,"" he said.
Secretary of State Madeleine Albright said after meeting Lee that she plans to attend the Hong Kong handover ceremony this year, and warned that Washington was watching.
""I will emphasise America's continued involvement in protecting our interests and supporting Hong Kong's people as they enter the Chinese nation,"" she said.
Meanwhile, the pace of politics in Hong Kong was quickening.
On Tuesday, the two countries clinched an agreement to let China's People's Liberation Army send 40 troops into Hong Kong next Monday to start getting facilities ready for the future Chinese garrison.
On Wednesday, the two sides agreed to sell 98 hectares of government land to boost the supply of development land, which should help to ease a chronically tight housing supply.
Police forces in Hong Kong and China also agreed to step up joint efforts to combat a tidal wave of illegal immigration into the territory involving mainly children and pregnant women.
But on Monday, China angered Britain by unilaterally setting rules on who will have permanent residency rights in Hong Kong after July 1. Britain said the ""right of abode"" decision should have been taken jointly through diplomatic negotiations.
Beijing wanted to force Britain to recognise a China-appointed legislature by agreeing to let the body process the new residency law, senior officials told Reuters.
",37
"An overture by China to bring its critics into the team picking Hong Kong's future leadership shows openness but might split the democratic camp in the British colony, analysts said on Tuesday.
Foreign Minister Qian Qichen said this month the 400-member body that will choose the chief executive and legislators who will run the territory after its July 1, 1997, transfer to China could include people with divergent views on democracy.
His remark at a Beijing meeting was taken in the colony as an olive branch towards Hong Kong's popular Democratic Party, which so far has been excluded from transition arrangements.
Although pegged to the acceptance of China's plan for an appointed ""provisional legislature"" to replace the current fully elected council, the remark was in stark contrast to China's harsh invective against the party over the past year.
The gesture is also fuelling heated discussion in local political circles and newspaper columns about China's motives.
""It might be an attempt to split the democrats, but more probably Beijing has realised that they've failed to split them so far and it's time to get them on board,"" Hong Kong University political analyst Nihal Jayawickrama told Reuters.
""I'm sure there are elements in the Democratic Party who will feel the urge to respond positively,"" he said.
But Democratic Party leader Martin Lee last weekend rejected the idea of joining the Selection Committee, saying that would amount to recognition of an illegitimate body.
The party argues that China's plan to scrap the present legislature and appoint a new ""provisional"" one has no basis in law or in the handover treaties with London.
""So long as China insists that any participant must assist in both selection processes -- Hong Kong's future chief executive and the provisional legislature -- I can't see how they can get the democrats on board,"" Jayawickrama said.
But he said it was likely the temptation would prove strong for some of Lee's associates and that they would quit the party.
China is very eager to give the Selection Committee a greater air of legitimacy by including some democrats, some China analysts in Hong Kong believe.
""At the end of the day, it's a question of who gets into the committee. And I don't think people like Lee or (deputy party leader) Szeto Wah would get in even if they are nominated,"" political commentator Andy Ho told Reuters.
The leaders of the party, the biggest in this territory of 6.2 million people, have drawn Beijing's wrath since 1989 when they sided with the student-led, pro-democracy movement that Chinese army tanks crushed in Tiananmen Square.
""We shouldn't jump to the conclusion that China has changed its position towards the Democratic Party,"" Ho said. ""It just wants to create an impression of openness.""
Some of China's Hong Kong advisers differ in their view of Qian's remarks. Tsang Yok-Sing, a pro-Beijing politician, has said he did not see them as an invitation to the democrats.
Emily Lau, an outspoken independent democrat who has often riled China's communist rulers, interpreted Qian's comment as a brazen effort to drive a wedge into the democratic movement.
Qian had divided the pro-democracy camp into ""people who are prepared to compromise their principles and those who will stand firm"", Lau wrote in a column in the South China Morning Post.
""With the scramble for seats on the Selection Committee having begun in earnest, it will rapidly become clear that some members of the pro-democracy camp are eager for a place... These people have long been itching to open dialogue with Beijing and are now only too eager to be given recognition,"" Lau wrote.
",37
"Tsang Yok-Sing, the leader of Hong Kong's biggest pro-China party, had his baptism of fire in the violent riots that shook the territory during China's Cultural Revolution of the 1960s.
Tsang was out on the streets during Hong Kong's 1967 riots, waving Chairman Mao Zedong's ""Little Red Book"", distributing leaflets and marching in the frontline of anti-British demonstrations.
Tsang, a bright light in the new political regime that will replace British colonial rule in Hong Kong on July 1, was shaped by the indignity he felt about the Chinese not being masters of their own home in the territory for more than 150 years.
The 49-year-old school headmaster makes no bones about the real quarrel between Britain and China over Hong Kong's return to Beijing's control. It's not the widely publicised polemics or legal wrangles about human rights and democracy, he says.
For Tsang, it's ""the end of British rule -- the end of the institutions elected under the British constitution"".
CULTURE CLASH
It's a culture clash, the clashing of national prides.
The Chinese are fired by the desire to shake off the last vestiges of an imperialist, colonial yoke, while the British rue their loss of an empire on which, once, the sun never set.
""The Chinese government has never really believed the British were happy to return Hong Kong to China,"" Tsang told Reuters in an interview.
""Most people in Hong Kong believe Hong Kong is part of China, that the territory should return to China, that British colonial rule should come to an end.""
And end it will, at midnight June 30, when the Union Jack is furled and China's red flag is raised over a capitalist Special Administrative Region (SAR), to which China has promised a high degree of autonomy under a ""one country two systems"" principle.
Tsang Yok-sing is a man of humble working-class origins and a solid leftwing family. His parents moved to Hong Kong in 1949 as the Communists swept to power in a civil war in China. His brother, Tsang Tak-Sing, is the editor of China's propaganda mouthpiece in Hong Kong, the daily Ta Kung Pao newspaper.
Tsang is the principal of the Pui Kiu leftwing junior school in Hong Kong's North Point, once a bastion of leftwing ferment.
He is chairman of the Democratic Alliance for the Betterment of Hong Kong (DAB), which lost heavily to the immensely popular pro-democracy Democratic Party in legislative elections in 1995.
The DAB holds six seats in the elected 60-member Legislature but has scored nine seats in a provisional legislature which China plans to install on July 1 in place of the current chamber. The new body is packed with pro-China party members.
BROTHER, SISTER JAILED DURING RIOTS
Tsang recently wrote a graphic account of his early life including his involvement in the political mayhem that rocked Hong Kong during China's Cultural Revolution.
""When the 1967 riots broke out I was already a committed Marxist and I was in total sympathy with the workers who were only protecting themselves against the oppressive colonial government of the time,"" Tsang wrote.
""I was deeply affected by the dramatic events of '67. My brother, aged 18, was arrested during the riot and locked up in Stanley Prison for two years, and my sister was imprisoned for a month, aged only 15. Don't talk to me about human rights.""
""My experiences drove me more to the other side. I worshipped Mao Zedong and he became my idol.""
Tsang made secret visits to China via Macau during those years and developed contacts on the mainland. He then abandoned a plan to study in the United States and went to work instead in the leftwing school where he is now principal.
MAO'S DEATH DIMS YOUTHFUL REVOLUTIONARY SPARK
But the spark of revolutionary youth dimmed when Mao died and his associates were arrested in 1976.
""I and my colleagues at the school felt very cheated after the fall of the Gang of Four...The Mao craze died down.""
But patriotic leftwing feeling was rekindled as China opened up in recent years, and as interest grew in the approaching return of Hong Kong to the motherland.
The 1989 Tiananmen square pro-democracy protests in China drew one million sympathisers on to the streets in Hong Kong.
Tsang joined in the protests against the Chinese government, ""but I still believed we could maintain a dialogue with the Chinese authorities.""
TIANANMEN TURNING POINT
It was in the wake of Tiananmen that Tsang and colleagues decided to form his political party, one which would help promote ""one country two systems"", without hostility to China.
He has shoved his Marxist-Leninism onto the backburner and argues China's ongoing remaking of itself and its transformation into a market economy bode well for Hong Kong.
""I cannot see any reason to be pessimistic about Hong Kong's future. We can't convert the pessimists, but we can let history prove itself.""
",37
"Western countries are geared up to quietly grant asylum in the coming months to around 40 Chinese dissidents and their families who are living in exile in Hong Kong, human rights sources said on Tuesday.
The plan has been worked out by a number of countries which fear the dissidents may face persecution by Beijing's Communist rulers after China takes Hong Kong back from Britain on July 1, the sources said.
The fears of the exiles have grown over the past year as China unveiled plans to roll back democracy and human rights legislation introduced in Hong Kong under British rule and vowed not to allow ""anti-constitutional"" activities there.
Anxiety has been further stoked by China's renewed crackdown on dissenters, many of whom have been jailed over the past year.
""There is a general feeling of relief because they are going to be resettled. But they won't feel safe until they are on the plane,"" the source, a well-informed veteran human rights campaigner, told Reuters on condition of anonymity.
Hundreds of Chinese dissidents and pro-democracy activists fled after army tanks thundered into Beijing's Tiananmen Square in June 1989, crushing a student-led democracy movement.
Scores of the fugitives -- the exact number has not been officially made public -- found sanctuary in Hong Kong. A source from a dissident support group said there were between 100 and 200.
A source from a dissident support group, the Hong Kong Alliance in Support of Patriotic Democratic Movements in China, said word was circulating among activists that London had secretly promised dissidents they could settle in Britain if no other western country gave them sanctuary before the handover.
He said some dissident families had already been discreetly resettled in Western countries last year.
The territory has been a refuge since the late 19th century for Chinese dissenters and revolutionaries, who often exploited the shield provided by British colonial rule. These included the revolutionaries led by Sun Yat-sen, the founder of China's first republic, who plotted against China's last imperial dynasty, the Qing, and toppled it in 1911.
Many of the present dissidents-in-exile fled to Hong Kong along an elaborately organised secret escape route nicknamed ""Operation Yellow Bird"", with the help of Hong Kong activists and companies. To Beijing they are ""wanted criminals"".
Some were were whisked out in speed boats and others were smuggled into Hong Kong in ships or trucks, activists say.
The Hong Kong government has always declined to comment on asylum seekers out of fear of jeopardising their safety by drawing Beijing's attention to their whereabouts or of stirring up a quarrel, Western diplomats said.
The human rights source declined to name the countries involved in the 1997 rescue plan or when the dissident families would be leaving. ""We don't know when they will leave. We don't know where they will be going,"" he said.
Western countries, wary about upsetting Beijing, have remained tightlipped in reaction to Hong Kong newspaper reports about a mass resettlement plan for the dissidents.
A well-known Chinese dissident in Hong Kong, labour activist and Tiananmen veteran Han Dongfang, told Reuters that Hong Kong would be unsafe for many dissidents after the handover.
""I cannot say 100 percent China is going to arrest them. But it is a concern,"" Han said. But he planned to stay regardless.
""I have to stay here to see what is going to happen,"" he said. ""I may leave if things go wrong.""
",37
"Hong Kong's popular Democratic Party on Thursday welcomed a pledge from the territory's future leader, Tung Chee-hwa, that people would keep their basic freedoms after China takes over on July 1.
But some activists staged a noisy protest disrupting a meeting staged by Tung's aides to tap the public's views on his controversial plan to whittle down civil liberties.
A new opinion poll, meanwhile, indicated nine in 10 of Hong Kong students do not believe China will really allow the territory its promised autonomy after Britain hands it back.
Fears have been rising in Hong Kong, a British colony for more than 150 years and now with 6.4 million people, that the territory will suffer a loss of freedom after the handover.
Tung, set to become Hong Kong's first post-colonial leader, on Wednesday vigorously defended proposed curbs on the right to demonstrate and on foreign funding of political groups, saying laws in the United States were much tougher.
""The majority of cities in North America, including New York, Washington and San Francisco, all require police permission before demonstrations can be held,"" he said.
""Let me assure you the (future) government has the strongest determination to preserve the freedoms that the people of Hong Kong currently enjoy,"" Tung said in a dinner speech.
""Peaceful and lawful demonstrations can and must be allowed to continue. I see public demonstration as a way for people to express their views, and public demonstrations are now a part of Hong Kong culture,"" he said.
Anthony Cheung, vice president of the Democratic Party, which believes China would like to snuff out democracy in Hong Kong, cautiously welcomed Tung's assurances, the first public comment Tung has made on the proposals launched last week.
""We welcome this pledge that the right to protest, the right to demonstrate, the freedom of assembly and association, all of these are people's rights and should be part of Hong Kong's political culture,"" Cheung told Hong Kong radio.
""But we question a lot of the substance of Mr Tung's proposals on how to amend the Societies Ordinance and the Public Order Ordinance,"" he said.
""Some of these proposals have in fact infringed the rights that Mr Tung was talking about.""
About 16 pro-democracy councillors waved banners and shouted slogans, disrupting a public consultation on the plan at Hong Kong's Space Museum on Thursday. They then walked out of the meeting, attended by 50 members of local councils.
""We believe this is a fake consultation,"" said councillor Ng Wing-fai. ""The members of the future government already have a basic line and the basic principles will not be changed.""
Colonial Governor Chris Patten made clear on Wednesday that Britain would not back down on an issue at the heart of handover quarrels with China -- a shadow legislature that China has appointed to replace the current, elected Legislative Council.
Patten opposed calls to allow the China-appointed body to pass a law on residency rights before the hand-back to China.
""That is our position, our position is not going to change.""
His comment followed a row this week after China announced rules on who would qualify for ""right of abode"" -- permanent residency -- in Hong Kong after the handover.
Beijing plans to submit the bill before June 30 to its Hong Kong provisional legislature.
The government said if the bill were to be handled before July 1 by the interim body it would be legally challenged.
",37
"Pro-Beijing politicians have defeated two motions in Hong Kong's legislature that threatened to exert new pressure on China over human rights and the future role of the Communist Party after Britain quits the territory.
The China camp defeated Wednesday night's motion brought by pro-democracy legislator Christine Loh, who urged the Hong Kong government to press China on the role of the Communist Party after Beijing takes back the territory from Britain on July 1.
Legislative Council (Legco) Chairman Andrew Wong, who recently defected to the China camp departing from a tradition of house speaker neutrality, broke a 25-25 tie by casting a decisive vote in favour of the status quo.
Loh had sought clarification on how the Chinese party would be represented, what its role would be, what channels of communication it would have with post-colonial leader Tung Chee-hwa and the limits on this liaison.
""The official silence that envelops the Chinese Communist Party in Hong Kong is a colonial relic,"" she said.
""But as the colonial era ends, and we prepare to reintegrate this society into China, how can we possibly still pretend the Communist Party does not exist and does not matter in Hong Kong?"" Loh told Legco.
""The greater the transparency of the activities of the party, the better,"" argued Anthony Cheung of the Democratic Party, supporting the motion.
""The Communist Party has no special status in Hong Kong. It's not necessary to seek clarification,"" countered Ip Kwok-him of a pro-China alliance.
It is an open secret that party authority is represented by the de facto Chinese embassy, the Xinhua News Agency branch, headed by the hawkish senior Communist official Zhou Nan, who is effectively the party's ""First Secretary"" in the territory.
Xinhua's deputy director Zheng Guoxiong told reporters on Wednesday Xinhua would still exist after the handover, with ""adjustments to some functions"". He gave no further details.
A separate Legco motion brought by the Democratic Party's John Tse, urging China to sign on to two key international human rights pacts, was also defeated on Wednesday night by 26 votes to 24.
Tse had argued that Beijing should guarantee people in Hong Kong and China the rights covered by the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights.
""The people of Hong Kong's hearts will be at ease over their human rights protection if China enters into these international treaties,"" Tse said.
But opponents said the chamber had no right to meddle in China's affairs. China has said it is considering signing the covenants, which would allow international monitoring.
Over the past year many independents in Legco have fallen in behind the pro-Beijing camp, making it harder for the pro-democracy lobby to launch anti-Beijing initiatives.
The China camp hold dual membership in a shadow legislature that China has appointed to replace the elected Legco on July 1.
China and Britain progressed this week on remaining details of the flag change by announcing a deal that Hong Kong could freely organise media coverage of the event, ending fears that China would restrict media access, and a deal on the budget.
But China and Tung remain under pressure from local critics and foreign governments concerned about Beijing's plan to roll back the democratic freedoms of Hong Kong's 6.4 million people.
",37
"Beijing is moving rapidly to roll back Hong Kong's democratic and human rights safeguards, sending a chill through the territory five months before it returns to Chinese rule.
On Sunday, China dealt a blow to the democratic changes of recent years that included Western-style human rights guarantees and moves to expand direct elections in the British colony.
The China-controlled Preparatory Committee, meeting in Beijing, listed 25 laws including the Bill of Rights and key electoral statutes that will either be axed or diluted when sovereignty over Hong Kong reverts to China at midnight on June 30.
""These proposals are a great blow to freedom after 1997. It is a black day for human rights in Hong Kong,"" said James To, legal affairs spokesman of the Democratic Party.
The party, Hong Kong's largest, won the lion's share of votes in 1995 legislative elections, making it the greatest beneficiary of colonial Governor Chris Patten's reforms while pro-China parties were the biggest losers at the ballot box.
China's Xinhua news agency said the laws were ""formulated by the British Hong Kong authorities in an attempt to apply its constitutional bill in violation of the Sino-British Joint Declaration on Hong Kong"", the 1984 treaty on the handover.
It said Britain had introduced ""principles which contravene the Basic Law and agreements reached by the two governments"". The Basic Law is Hong Kong's post-handover constitution.
China's move was the latest in a string of setbacks for democracy. Last month China appointed a provisional legislature to replace the elected Legislative Council.
The new body is full of pro-China politicians, many of whom lost to democrats at the ballot box in 1995. It will handle law-making in Hong Kong from July 1 onwards.
Top Chinese officials have also said the media will not be free to air ""anti-constitutional"" ideas after the handover, and have said they will not allow Chinese dissidents or foreign powers to use Hong Kong as a base for ""subverting"" China.
In another sign of conservative times ahead, pro-China politicians said on Monday the new legislature's first session this Saturday will not be open to the general public, as previously promised, blaming the change on a shortage of space.
The assault on Hong Kong's laws has dismayed the democratic camp.
""These recommendations are thoroughly bad. They will do grave damage to the already fragile public confidence in the handover,"" said Democratic Party leader Martin Lee.
Lee, heading for Europe next weekend to woo support for basic freedoms in Hong Kong, said the changes would ""do away with most of the existing legal protections for human rights and civil liberties in Hong Kong"".
He urged post-colonial leader Tung Chee-hwa and the Chinese government to repudiate proposals ""which can only further erode confidence in Hong Kong's future under Chinese rule"".
""These recommendations will be a body blow to human rights protection in Hong Kong,"" a government spokesman said, and they would ""send a most worrying signal to the people of Hong Kong and the international community.""
""I believe this totally violated the judicial spirit of Hong Kong and our concept of respect for human rights and freedom,"" said legislator Emily Lau.
Nihal Jayawickrama, a law professor at Hong Kong University, said Beijing's decision would sow confusion and chaos.
""The Bill of Rights created a right to assemble peacefully and a right to associate with others for legislative purposes. A right is inconsistent with now having to go to the police and ask for permission to hold a demonstration, permission to set up associations,"" he said. ""I think it's a very retrograde step.""
The Bill of Rights, based on international standards, says any other laws inconsistent with it should be repealed. Beijing says this is unacceptable because the bill places itself above all other laws, including the Basic Law.
Two other laws facing drastic change are the Societies Ordinance, which allows free establishment of political parties, and the Public Order, law which allows demonstrations.
",37
"Hong Kong's future government has hit a new snag, with a shortage of trained staff forcing it to cancel a sitting of a controversial legislature preparing new laws ahead of the territory's handover to China.
It is the latest in a series of difficulties facing Tung Chee-hwa, the China-backed shipping magnate who will rule Hong Kong after the British pull out at midnight on June 30.
Tung's office said on Wednesday  thatthis Saturday's session of the provisional legislature, which had been scheduled to deal with a draft law on new flags, had been dropped from the diary. Just a briefing would take place.
""The draft bills aren't ready because there aren't enough people,"" Bob Howlett, a spokesman for Tung's office, told Reuters. He said Tung's coordinator, Michael Suen, concluded the office did not have enough draftsmen to prepare planned laws.
""He doesn't want to see a rushed job done on anything,"" Howlett said.
British Governor Chris Patten has refused to second more staff to the Tung office from the Hong Kong civil service to help the future government ready itself for the handover.
The office has only two law drafters on its staff.
Communist-ruled China resumes sovereignty over Hong Kong, a British colony for the last 156 years, under a 1984 treaty that allows the territory virtual autonomy for another 50 years.
China, angered by democratic reforms introduced by Patten in the twilight years of British rule, set up the provisional legislature in December to replace the democratically elected Legislative Council (Legco).
Many of China's critics consider the interim body unconstitutional.
""I think it's a good thing there's now no legislation going forward this week, and it would be even better if no legislation goes forward at any time, because anything they do handle between now and June 30 is vulnerable to legal challenge after the first of July,"" said Patten's spokesman, Kerry McGlynn.
""That can't be in anybody's interests. We've always made it perfectly plain, and will continue to do so up to June 30, that we'll do nothing to undermine the credibility and legitimacy of the current Legco by providing any kind of assistance to the provisional legislature,"" McGlynn told Reuters.
A spokesman for the provisional legislature said the body would now organise a briefing on Saturday on the planned civil rights curbs, instead of a full-fledged legislative session, at its base in the Chinese border town of Shenzhen.
Tung's run-up to his new job as Hong Kong chief executive has been a bumpy one.
Sino-British disputes were stoked this month after Tung launched a plan to curb political liberties such as the right to protest and the right of political groups to receive foreign funds. He provoked a domestic and international outcry.
Last week he admitted to the media that he had donated 50,000 stg ($81,500) to the ruling British Conservative Party in 1992, sparking cries of hypocrisy.
""They seem they can't get their act together,"" a government official said of the latest setback. ""Tung's office is finding it nigh impossible to do the drafting, even though they still seem determined to go head with it.
""The Chinese side has painted itself into a corner with the provisional legislature. They've got themselves into a real pickle.""
",37
"In the smoke-filled rooms of Macau, Edmund Ho, banker, community leader, philanthropist and the man tipped to lead the gambling mecca after China takes over, is playing his cards close to his chest.
""I am not the sort of person to spend time thinking about what greatness I might achieve in the future,"" said Ho modestly, stubbing a deluxe cigarette into a solid silver ashtray.
""I am afraid that by thinking about something like that I would turn myself into a different person than what I am,"" Ho said in an interview with Reuters at the Tai Fung Bank, Macau's second-largest bank, where he is executive director.
A copy of James Clavell's novel ""Noble House"", an epic tale of intrigue that shows how the great trading houses created what is now Hong Kong, sits on the shelf behind Ho's conference table in an office decorated with silverware and Chinese art.
This is the headquarters of a 42-year-old tycoon who is tipped widely by the politically informed in Macau to become the territory's chief executive when Portugal hands it back to China in 1999, ending a four-and-half century presence.
The job would be similar to that which China recently gave Hong Kong shipping billionaire Tung Chee-hwa, who succeeds Britain's colonial governor there on July 1.
""He is the best known local public figure in Macau. He's long been regarded as the candidate even though he denies it,"" said a well-placed source. ""He has good relations with everybody. He is a true community leader.""
HO SEES MACAU FUTURE AS SERVICE CENTRE
Macau is a sliver of territory with just 450,000 people, economically dwarfed by nearby Hong Kong. It claims a per capita gross domestic product (GDP) of US$17,000, although economists say this figure is severely distorted by high casino earnings. The average wage is about 5,000 patacas (US$625) a month.
But it occupies a strategic trading-post location on the western lip of the Pearl River delta, a region that is rocketing ahead on the back of China's staggering economic development.
Ho has no illusions that Macau can ever rival British-ruled Hong Kong, which has 6.3 million people, a per capita GDP of more than US$25,000 and is the eighth largest trading economy in the world.
""I don't see Macau as a poor man's version of Hong Kong, although I agree Macau will never be Hong Kong. Macau will learn from Hong Kong but Macau will always be different. At the same time Macau can always benefit from Hong Kong, for example from Hong Kong being an international financial centre,"" Ho said.
Hong Kong for a while became a thriving light industrial centre, but Macau, which counts on tourism, casino revenue and a small volume of textiles for its income, is unlikely to take that route now that China has become an alternative centre of cheap factory labour.
""Macau will have to remain a service centre with a strong tourism presence. We'll have some industries, but Macau will have no conditions to develop a full industrial base,"" Ho said.
Macau's sluggish economy has been slowed in the past few years by a collapse in the property market. But Ho sees new spinoffs from China's development, such as the emergence of merchant banking business in Macau for China's neighbouring Zhuhai city, and eventually the public flotation of Macau companies.
RANGE OF BUSINESS, POLITICAL INTERESTS
Ho occupies a string of business directorships, heads a clutch of local charities and sporting associations, and is a dominant figure on Macau's banking scene, as chairman of the local banking association.
His business interests span banking and financial services, family businesses including transport, restaurants, cinemas and real estate, and personal investments in property and mainland China enterprises, he says.
He is a rarity among Macau community tycoon-cum-politicians by not being involved in the casino tourism industry, which employs half the workforce. He is often confused by outsiders with Macau casino king Stanley Ho but is no relation.
Ho is a legislator and vice-president of Macau's Legisative Assembly, head of a Macau land commission set up by China, and a member of the Standing Committee of China's parliament, the National People's Congress.
He has played a leading role in drafting Macau's Basic Law, the mini-constitution by which the territory will be governed as a capitalist Special Administrative Region of China from December 20, 1999, under a ""one country two systems"" policy.
Ho acknowledged differences in the transitions of Hong Kong and Macau to Chinese rule. Sino-British quarrels over democracy and human rights in Hong Kong have run rampant.
""There are many reasons. The history of Macau itself, the perception of the Portguese government on the Macau question and the philosophy of the solution of ther Macau question are rather different from what the British did in Hong Kong,"" he said.
""Even being not so much an international city as Hong Kong has also been a part of the reason (for Macau to do better).""
Portugal has pointedly avoided laying down demands or upsetting China as it tries to work out a deal with China that will leave Lisbon's last Asian outpost as a model of amity.
FORESEES TOUGH TIME DEALING WITH TRIADS
Educated in business in Canada, Ho displays a westernised exterior and a North American wit, and switches easily between English, Cantonese and Mandarin, but, like most of Macau's predominantly ethnic Chinese community, speaks no Portuguese.
He leaves the impression of a presidential man but one who is accessible, who shows the common touch, involved in hospital charities and local sports clubs.
Whoever governs Macau, Ho admits, will have a tough time sprucing up its image as a ""Chicago of the East"" gangster city.
Macau has been plagued by Chinese ""triad"" crime gangs, mostly linked to casino protection rackets and loansharking. Bombings and shootings are commonplace, and recently there have been signs of links with crime gangs on the mainland.
""In the old days members of triad societies were ashamed to disclose they were members, but now it's like holding an OBE, it's something to be proud of. In that atmosphere what can you do?"" Ho asked.
He said the image was exaggerated because Macau was so small, but that organised crime in fact was no worse in Macau on a per capita basis than it is in other places, not least the notorious Mong Kok district of Hong Kong.
""In Macau if some groups are fighting with knives it gets on the front pages, but in Mong Kok it happens several times a night.""
",37
"Governor Chris Patten on Monday urged Beijing, which just released a Hong Kong reporter after three years in jail, to let reporters in the territory write without fear after it reverts to China in July.
China released prominent Hong Kong journalist Xi Yang, 40, last Saturday after he served three years of a 12-year prison term on spy charges.
""We have our own system, and journalists in our system are not put in prison for embarrassing the government by revealing things the government might not wish to have revealed,"" Patten told a conference of the Commonwealth Journalists Association.
""If it were other than that in Hong Kong, there would not be many journalists free on the streets,"" Patten said.
""The important thing is that our system, under which journalists can write without fear or favour, should continue.""
Analysts have been wondering if Xi's sudden release was an attempt by China to calm a heated debate over its plan to roll back civil liberties in Hong Kong when the territory reverts to its control at midnight this June 30.
A China-controlled panel last week listed a string of laws for repealing, including parts of the Bill of Rights and two Hong Kong laws that allow political demonstrations and the free association of groups such as political parties.
The plan has earned China rebukes from Britain, the United States and pro-democracy parties in Hong Kong.
China also plans to scrap Hong Kong's elected legislature.
On Monday, Hong Kong democracy activists staged a small but noisy protest outside China's de facto embassy to demand the release of at least 13 dissidents recently reported to have been jailed or arrested in southwestern Guizhou province.
The dissidents had been accused of counter-revolutionary activities linked to their pro-democracy campaigning.
""We are afraid that our freedoms and liberties will be infringed in the future,"" said activist Andrew To, who led the demonstration outside the Xinhua News Agency office.
About 20 members of a Hong Kong alliance supporting China's beleaguered democracy movement organised the protest.
With shouts of ""set free the dissidents"", some 20 activists waved a banner with the slogan, ""oppose Chinese communists jailing dissidents"", as police watched.
A protest organiser, Lau Shan-Ching, said China's release of Xi was marred by the latest news about jailed dissidents.
""We see China release Xi Yang, but then we see China has arrested 13 dissidents. So we see China does not change its attitude on human rights,"" Lau said.
""After the handover, there may be some dissidents in Hong Kong put into jail,"" he said.
Patten, meanwhile, said censorship was an even bigger threat to the press than the danger of being locked away, and he hoped Beijing would notice the reaction to Xi's release and the value Hong Kong people place on freedom.
""Self-censorship or censorship at the news editor's desk is probably more of a realistic threat in tomorrow's world -- I don't say necessarily in Hong Kong -- than handcuffs and barred windows,"" he said.
Britain and China also ran into another snag on Monday on details of the handover, failing to agree on the size and timing of the advance party of People's Liberation Army troops that China wants to send to Hong Kong before July 1.
""The main issue, I suppose, is that we pointed out to the Chinese side that their proposals for the numbers of advance personnel are too high and timing of their arrival is too early,"" said Alan Paul, British representative at the talks.
""So we put forward a proposal of our own which we regard as reasonable, one which we hope they will consider positively and give us a positive reply at today's meeting,"" Paul said.
",37
"The federal government is expected to release the Wallis Inquiry's report into Australia's financial system later this week and respond to some parts of the report.
The five-person inquiry, set up in June last year and chaired by businessman Stan Wallis, canvassed various options for reform in its 415 page discussion paper released in late November.  
The Inquiry's report, presented to the government last month, will make recommendations about the following options;
MERGERS
* Whether the government should abandon the current ""Six Pillars"" policy stopping mergers between the four major banks and the two major life insurance and superannuation groups. These six pillars are Westpac Banking Corp, National Australia Bank Ltd, Commonwealth Bank of Australia, Australia and New Zealand Banking Group Ltd, National Mutual Holdings Ltd and Australian Mutual Provident (AMP) Society.
* Whether the anti-monopolies body, the Australian Competition and Consumer Commission (ACCC), and the Treasurer should both continue to have the power to reject or approve a bank merger. This system is known as ""dual assessment.""
Wallis stated his preference for treating the financial sector in the same way as any other on competition policy, implying the ""Six Pillars"" policy and ""dual assessment"" policies were unnecessary.  
FOREIGN INVESTMENT
* Whether the current ban on foreign takeovers of the big four banks should be scrapped.
OWNERSHIP OF BANKS
* Whether to scrap the current 10 percent limit on equity ownership by a single individual or group in a bank.
PRUDENTIAL REGULATION  
* Whether to combine the functions of the four regulatory bodies currently operating into a single body that provides prudential regulation and consumer protection regulation for all financial institutions. This is the ""mega-regulator"" option.
Currently the Reserve Bank of Australia (RBA) regulates banks, the Insurance and Superannuation Commission (ISC) regulates life and pension groups, the Australian Financial Institutions Commission (AFIC) regulates building societies and credit unions and the Australian Securities Commission (ASC) regulates companies generally and markets in particular.
* Whether to have a single national prudential regulator of deposit taking institutions (DTIs) including banks and credit unions, and a separate regulator for insurance companies and superannuation funds, or,
* a single prudential regulator covering both DTIs, insurance companies and pension groups, but not consumer protection regulation, or,
* to keep the current four-pronged system.
DEPOSIT INSURANCE
* Whether banks, other DTI's and the government should make more explicit to consumers that their deposits are in fact not government guaranteed, and,
* Whether a U.S.-style compulsory deposit insurance scheme should be set up to cope with depositer claims in the event a bank collapses.
BANK PAYMENTS SYSTEM
* Whether to open up access to the payments and clearing systems to non-banks, allowing them to have an account with the Reserve Bank, issue cheques and operate digi-cash, automatic teller machine and EFTPOS (Electronic Funds Transfer at Point of Sale) systems.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australian Treasurer Peter Costello's construction of a road-block in front of National Australia Bank Ltd's takeover plans has paradoxically made the bank look more attractive, analysts said on Wednesday.
But they said Costello's announcement that he would not allow a big bank merger until parts of the sector became more competitive tarnished the takeover premium built into Westpac Banking Corp's share price in particular.  
Investors who had expected National Australia Bank (NAB) to be given the green light to go on the big bank merger warpath pushed NAB's share price 2.5 percent higher, happy for now it will not have to make a big share issue to finance a takeover.
""The price movement in NAB is a reflection in the short term that the market sees it as a positive NAB won't be an acquirer because of the potential dilution of a share issue to fund such a takeover,"" said one senior Sydney bank analyst.
""NAB was underpriced and to the extent that a big rights isuse was hanging over the market, it makes sense for it to kick up a bit,"" said Macquarie Equities analyst Graham Maloney.  
NAB closed up 39 cents at A$16.11 after Treasurer Costello ended the ""Six Pillars"" policy banning mergers between the four major banks and two major life groups, but said the four majors would have to wait for stronger competition before merging.
Westpac Banking Corp, seen as the most vulnerable to takeover, closed down 20 cents at A$6.67, while ANZ Banking Group Ltd closed down 11 cents at A$7.89.
""There was a margin of acquisition premium there, particularly in Westpac. Now that it appears that there's unlikely to be an acquisition, it makes sense to mark it back,"" Maloney said.  
Analysts said however that Costello's comments about ending the current blanket ban on foreign takeovers of the major banks could offset some of the sector's disappointment.
""The equity markets are a little bit disappointed that the 'four pillars' effectively remain, but at the end of the day there is a potential for foreign takeover,"" said J.B. Were, head or research at Craig Drummond, adding that Westpac and ANZ were not expensive banks by global standards.
""The only risk is that there are major foreign holders that bought into both of those banks in the expectation that there could be a major bank merger,"" Drummond said.  
""Some traders could still cause Westpac and ANZ to be weak in the short term.""
Brokers said NAB's share price appeared also to benefit from the potential for a takeover bid by a foreign group.
""(The Wallis report) hasn't ruled out the possibility of allowing a foreign bank to take over any of our banks -- it seems to strengthen NAB's position and also the Commonwealth's (Bank of Australia ) position,"" said Kevin Lourey, a dealer at Melbourne broker, Peake Lands Kirwan.
CBA's shares rose 28 cents to A$12.98.  
Longer term, analysts said the Wallis Inquiry's recommendations on freeing up access to the banking sector and allowing non-banks access to the payments system would sharpen competition and eventually put profit margins under pressure.
""Opening access to the payments system, I see that as critical,"" said Morgan Stanley banking analyst John Hobson.
""The capacity of someone like a GE Capital to have access to the payments system is a fairly important increase in competition,"" he said.
-- Sydney Newsroom 61-2 9373-1800
",4
"The consortium building the 2000 Olympic Stadium in Sydney has sought permission from the International Olympic Committee to sell Games tickets overseas after struggling to find local buyers for its financing scheme.
The Stadium Australia group -- hoping to ride the coat-tails of Atlanta Games enthusiasm -- said in October it wanted to raise A$364.4 million (US$282.4 million) by selling packages of Olympic tickets, equity and stadium memberships.
But a lack of local buyers for the 34,400 packages, which sell for A$10,000 each, has twice forced underwriters to extend their deadline for the novel Olympic float.
As a result of the slow demand, Stadium Australia want to sell the ticket component of the package separately to overseas buyers after originally restricting the scheme to the domestic market.
""We are in negotiation with the International Olympic Committee (IOC). We are also talking to the Olympic committees in the U.S., U.K. and several other countries,"" a Stadium Australia spokeswoman told Reuters.
The underwriters must fund the project regardless of whether all the packages are sold, thus guaranteeing the completion of the 110,000-seat stadium, which is due to open in 1999 at a cost of A$660 million.
Each ""Gold"" package includes one seat at each of the stadium sessions during the Olympics, a seat at most sporting events at the stadium until 2029 and 1,000 shares in the Stadium company.
But city brokers said on Friday only about one third of the packages had been sold as Olympic enthusiasm in the wake of Australia's record medal haul at Atlanta had waned and the local economy had slowed.
""There's just not much demand for them and the talk around is only about 30 to 40 percent are spoken for,"" one Sydney broker said.
Other brokers said repeated attempts to interest private clients had met with little success.
If the brokers are correct and the consortium fails to raise any further finance, the stadium's underwriters could be exposed to a shortfall of about A$240 million when the share and ticket offer closes on March 27.
The Stadium Australia spokeswoman said the offer was not in trouble and there was enough time to raise the capital, adding that ""considerably more than one third"" of the packages had already been sold.
""The demand has not been as great as originally anticipated locally but we have experienced the reverse internationally,"" the spokeswoman said. ""It is a question not of whether we are going to sell them but who we are going to sell them to.""
The four underwriters are ANZ Securities, Deutsche Morgan Grenfell, Macquarie Bank Ltd, and ABN Amro Hoare Govett.
(A$1 = US$0.7750)
",4
"Newspaper, magazine and radio group Rural Press Ltd said on Thursday that it was not confident of the economic turnaround needed to increase its profit for the full year to June 30, 1997.
""My personal view is that we're some time away from some significant turnaround ... in the consumer markets and in real estate,"" managing director Brian McCarthy told Reuters.
""I can't see much improvement up to the middle of the year at the earliest,"" McCarthy said in an Interview.  
Earlier Rural Press announced a four percent rise in net profit for the six months to December to A$16.96 million and set an unchanged dividend of four cents per share.
But Rural Press also warned that trading in the first five weeks of the second half had been below last year and that it needed an improvement in the economy to continue its history of profit rises for the full year.
McCarthy said earnings before interest and tax would have fallen marginally in the half year if they had been compared on a like-for-like basis before the effects of acquisitions.  
McCarthy said the slight profit fall on a like-for-like basis was a reflection of weak real estate and retail sectors, which provide the bulk of Rural Press' advertising income.
""The retailing industry is very flat to the point of depressed. There's not a lot of activity in the real estate sectors and they are our key sources of revenue,"" he said.
""We think we're doing all of the things that have to be done internally, but it's a very hard external environment that we're looking at today,"" he added. ""In the framework in which we operate, we don't see it as a disappointing result.""  
McCarthy said that given the tough economic outlook, there was not going to a major second half recovery in Rural Press' revenues.
He said it was unlikely that Rural Press' final dividend would fall.
However Rural Press, despite the operational pressure, remained keen to acquire new businesses, McCarthy said.
""We're still very, very keen to keep growing and acquiring,"" he said, adding that Rural Press had facilities in place to allow acquisitions worth up to A$50 million.  
Rural Press' share price closed unchanged at A$4.10, despite the market's one percent rise overall to a record high.
-- Sydney Newsroom 61-2 9373-1800
",4
"The Australian government will release the Wallis Inquiry's report into Australia's financial system on Wednesday at midday (0200 GMT) and is expected to respond to some parts of the report.
The five-person inquiry, set up in June last year and chaired by businessman Stan Wallis, took 268 submissions from the financial sector's main players about various options for reform.  
These players' views on various reforem options were detailed in the inquiry's 415 discussion paper released in late November.
Their positions and views on the various options follow.
SCRAPPING THE 'SIX PILLARS' MERGER POLICY
IN FAVOUR - National Australia Bank Ltd, Australia and New Zealand Banking Group Ltd, Westpac Banking Corp Ltd, Commonwealth Bank of Australia, St George Bank Ltd and Australian Mutual Provident Society (AMP) and the Australian Competition and Consumer Commission (ACCC) said bank mergers should be judged in the same way as other sectors -- by the ACCC on competition grounds alone.
They said big bank mergers would not necessarily harm competition because of new technology and global competition. Such mergers would create efficiencies, lower costs and could create Australian banks big enough to compete overseas.
AGAINST - Finance Sector Union (FSU), National Farmers Federation (NFF) and Australian Consumer Association (ACA) said big bank mergers would concentrate too much 'economic power' in too few hands.
EQUIVOCAL - The Federal Treasury said it was also concerned about the concentration of economic power, but did not explicitly favour the retention of ""Six Pillars"". The Reserve Bank of Australia (RBA) said one merger of the big four into three would not create prudential risk problems, but a cut to two banks would.
ALLOWING BIG BANK TAKEOVERS BY FOREIGNERS
IN FAVOUR - The Treasury, ACCC, St George Bank and Citibank argued foreign investment in and takeovers of big banks should be allowed because it created extra competition. The Department of Foreign Affairs and Trade said globalisation and liberalisation of trade meant the removal of such restrictions was inevitable.
AGAINST - ANZ said foreign takeovers may see head offices shifted and create brain drain, citing the New Zealand example. Life office Colonial Ltd and Westpac noted community concern over need for Australian ownership and control of key assets.
SCRAPPING RULES LIMITING EQUITY STAKES IN BANKS TO 15 PCT IN FAVOUR - Treasury, ACCC, life office National Mutual said restrictions on industrials and other corporates owning 10 percent of a bank (or 15 percent with government approval) should be removed to open banks up to normal competitive pressures of having strong shareholders and allow better access to capital markets.
AGAINST - Life office and insurer MLC Life questioned logic of allowing anyone to buy a big stake in a bank, saying it may lead to investors pulling out in times of crisis, weakening safety of banking system.
CREATION OF A MEGA-REGULATOR, REMOVAL OF RBA'S PRUDENTIAL SUPERVISORY ROLE
IN FAVOUR - AMP, National Mutual, Colonial Mutual, NAB and the Treasury said mega-regulator would be more efficient, help break down barriers to competition and remove moral hazard problem for government of government-owned RBA being responsible for stopping banks from falling over. They also said prudential regulation and monetary policy conduct by RBA may create conflict of interest.
AGAINST - Most banks, the RBA and ISC said the RBA should keep prudential powers over banks as RBA was the only entity able to inject liquidity to save banks in crisis and had market knowledge and skills to monitor bank's prudential safety levels.
CLARIFICATION OF NON GOVERNMENT-GUARANTEE
IN FAVOUR - RBA, Treasury, Westpac, National Mutual said the current situation where deposits are not government guaranteed should be clarified so depositors know RBA will try to ensure deposits are repaid, but cannot guarantee deposits. The current implied government guarantee also favoured banks over other competitors, they said.
DEPOSIT INSURANCE SCHEME
AGAINST - Most submissions opposed deposit insurance, saying it increased moral hazard problem and penalised bank deposits in favour of mutual funds, who do not have deposit insurance.
OPENING UP ACCESS TO THE BANK PAYMENTS, SETTLEMENTS SYSTEM
IN FAVOUR - NAB, Treasury, National Mutual, Aussie Home Loans and various Credit Unions said access should be opened up to non-banks and life groups to increase competition, so long as deposit-taking institutions meet minimum capital requirements and were overseen by RBA as banks are now.
AGAINST - RBA, CBA, ANZ, Westpac, St George Bank and Colonial said the payments system was so crucial to overall health of economy, it should only be open to banks.
-- Canberra bureau 61-6 273-2730
",4
"Papua New Guinea's (PNG) Australian-listed stocks slumped five to ten percent on Monday as international investors fearful of a law and order meltdown reacted to the army's attempt to force the PNG government aside.
Orogen Minerals Ltd, which is 51 percent owned by the PNG government, was one of the hardest hit, slumping seven percent or 24 cents to A$3.20. 
Other stocks jagged as much as ten percent lower in increasingly hectic afternoon trade as reports emerged that the head of the army and the police commissioner had told Prime Minister Julius Chan to resign or be forced aside in two days.
The army and police are angry the government has employed mercenaries to help the armed forces subdue seccessionists on Bougainville Island.
Brokers and analysts said investors feared an army mutiny and possible civil unrest in the capital Port Moresby would spread to the remote areas where most of PNG's huge gold mines and oil projects are located.  
""The danger is if any local tribes use this dispute as an excuse to act up and this would affect local mining operations,"" said Shaw Stockbroking research director Michael Heffernan.
Major mining projects in Papua New Guinea's rugged hinterlands like the giant OK Tedi project, controlled by the Broken Hill Pty Co Ltd, are often in dispute with local tribal groups.
Analysts said investors' need look no further than the now-dormant copper project on Bougainville to see what happens when the central government and armed forces lose control.  
The Bougainville Copper mine was shut down in 1989 when rebellious landowners who wanted bigger returns from the project sabotaged the mine and began the current recessionist revolt.
""There's always a certain amount of civil unrest, but if the more militant groups in the regions use this as an excuse to party as it were, it could disrupt operations,"" Heffernan said.
Local brokers became increasingly pessimistic through the afternoon, moving in anticipation of an expected selloff by overseas institutional investors.  
""I don't know what the outcome of that (situation) is going to be but it seems to me to be very dismal,"" said broker Kevin Lourey of Melbourne-based brokerage, Peake Lands Kirwan.
""The international reaction to this sort of situation is usually very negative,"" said resources analyst David Walker at broker ABN AMRO Hoare Govett
""The fear is that tonight, particularly on the London exchange, where most of the resource investment in this part of the world comes fron, there will be a strong negative reaction,"" Walker said.  
The worst-affected stock in the afternoon rout was oil producer and explorer Oil Search Ltd, which fell 8.5 percent or 24 cents to A$2.60.
Bougainville Copper Ltd, which is controlled by RTZ Corp Plc-CRA Ltd fell five cents to 55 cents.
Analysts said the government's moves over next day or two would be crucial in limiting any further damage. Prime Minister Chan had yet to respond to the army ultimatum by 0820 GMT.
""The next 24 hours is crucial for the Chan government and also for the value of these investments,"" Walker said.  
""It's important that the situation becomes as clear as it can very quickly in order not only for the stability of the country, but for the value of the investments.""
-- Sydney Newsroom 61-2 9373 1800
",4
"Australia's largest shopping mall owner, Westfield Holdings Ltd, announced on Wednesday its U.S. arm would list on the New York Stock Exchange in May and raise US$400 million in an initial public offering.
Westfield America Inc would then use the proceeds to go on a US$500 million shopping spree around the United States, buying out Westfield's partners in the shopping malls it already owns and buying new malls.
The resulting group would then be the fourth largest listed shopping mall owner in the United States, Westfield Holdings chairman Frank Lowy said.
""We opened a little door before and now we're opening a huge door for us to expand our business in the United States,"" Lowy told a news conference.
Lowy said Westfield America Trust would list its U.S. vehicle, CenterMark Properties Inc, as Westfield America Inc, diluting its 67.2 percent stake in CenterMark to about 50 percent.
Westfield America would then first buy Westfield Holdings' 50 percent stake in the Garden State Plaza shopping centre in New Jersey for US$145 million.
About US$210 million would then be available to buy out Westfield America's partners in shopping malls it already partly owns and to buy up new malls.
Lowy told the news conference the US$210 million of equity would be combined with debt to buy out partners and new malls.
""We see borrowings of maybe US$150 million to US$200 million, which gives us an opportunity to consider acquisitions of about US$350 million altogether,"" Lowy said.
Ownership of U.S. shopping malls was increasingly transferring from private or family companies into listed public companies, and Westfield's U.S. listing would help accelerate the process, he said.
Lowy said many of Westfield America's partners were family concerns or closed-end funds, many of which wanted to cash in their stakes. Closed-end funds must cash in their investments after a certain period.
Some were also unable to inject the extra capital needed to continually re-develop or expand the shopping malls, Lowy said. ""Some of our partners just do not have the cash, and now they have the option of watering down (their holdings) or selling out,"" Lowy said.
Westfield had said last year when listing the Australian unit trust vehicle for Centermark, Westfield America Trust, that it planned to list CenterMark in the United States within five years. Lowy said strong U.S. market conditions had led to the earlier than expected listing.
The offering is planned for May and is being underwritten by Merrill Lynch & Co, but Lowy said the timing may change if the U.S. market slumps before then.
""If conditions change, we'll have to reassess,"" he said.
Westfield officials said the U.S. listing gave the Australian-based company more flexibility when acquiring shopping malls in the United States, as it opened up access to the U.S. debt markets.
The ability to offer U.S. listed shares to shopping mall owners instead of cash would also open up a new range of acquisition opportunities, as many sellers preferred shares to cash for tax reasons, they said.
",4
"Australia's largest locally-owned investment bank posted a stronger than expected annual profit on Monday, citing bullish investment markets and steady flow of corporate advisory work as the driving factors.
Macquarie Bank Ltd's net profit for the year to March 31 rose 25.4 percent to A$116.94 million, producing a return on average shareholder funds or equity of 25.2 percent.
Macquarie raised its annual dividend to 43 cents from 36 cents a year earlier on an earnings per share rise to 74.9 cents per share from 61 cents per share.  
Analysts had forecast a net profit of around A$105 million.
""All five major business groups performed well,"" Macquarie Bank Managing Director Allan Moss told a news conference.
""We were assisted by by favourable market conditions, with a good level of corporate activity and fairly strong security markets,"" he said.
The Australian stock market rose 8.7 percent over the year to March 31 and 10 year bond yields fell to 8.16 percent from 8.81 percent.  
Macquarie's Corporate Advisory division, which advises companies on takeovers and mergers, benefitted from an active year of corporate plays and had 130 advisory mandates, up significantly from 1995/96.
Among others, Macquarie advised Placer Dome Inc on its takeover of Highlands Gold Ltd and TNT on its response to a bid by Dutch postal and telecoms group KPN NV.
However, Macquarie's advisory work with TNT produced the bank's one major hiccup for the year.  
One of Macquarie's most senior corporate advisory executives, Simon Hannes, was charged with insider trading last month after he allegedly bought TNT options before KPN's takeover bid and made a notional profit of A$2 million.
Hannes, who was not working on the TNT project, allegedly had access to TNT documents at Macquarie.
His lawyers have said he would be pleading not guilty.
Moss said the Hannes matter had not affected corporate advisory work and was not expected to in the current year.  
""Our perception is that flow of business was unaffected by the Hannes matter, because our clients recognise this matter relates to an individual and not the bank as a whole,"" he said.
Meanwhile, Moss and analysts said the outlook for Macquarie was as bullish as that for the market overall, due in large part to low interest rates.
""With interest rates continuing to be low and perhaps going down a little bit further, there's every prospect for a reasonably good year in equity markets and we're also seeing quite a good flow in corporate activity,"" he said.  
Australian stocks have risen another eight percent since balance date, while bond markets have also strengthened further.
Analysts said the result was stronger than expected. ""It's all looking fairly healthy, given the outlook for the market in general,"" said a Sydney analyst who had forecast A$110 million.
Investors welcomed the result and talk of an eventual capital return, boosting Macquarie's stock four cents to A$9.50 at the close, near its A$9.60 all-time high.  
Moss said an expected change to the way Macquarie's capital adequacy ratio was calculated was likely to boost its ratio to 16 percent in coming years from its current 13.2 percent, raising the possibility of a capital return through a share buy back or higher dividend payout ratio.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australian television network, The Seven Network Ltd, is expected to report a 25-30 percent higher pre-abnormal annual net profit on Monday, but analysts said this rise was likely to disguise a second half profit slowdown.
""Second half sales growth is going to be quite modest because the Ten Network and Seven lost to Nine,"" said one Sydney analyst.
""And post-Olympics the group hasn't bounced back,"" he said.
Seven had the Australian TV rights to the Atlanta Olympic Games, after it closed its books on June 30.  
The median forecast in BZW Australia's Barceps survey of analysts was for a pre-abnormals net profit for the year to June 30 of A$114 million.
Forecasts range from A$105 million to A$120.7 million and compares with the A$88.5 million posted in 1994/95.
But that 1994/95 figure was cut heavily by a bungle over discounted advertising rates, which cost Seven A$20-30 million and which has been reversed.
A A$114 million net profit would also represent slow growth from the already booked first half profit of A$91.88 million.  
Seven managing director Gary Rice said in April he expected a better second half in 1995/96 than for the discounting-affected second half of 1994/95.
Seven has also said it expected advertising sales in 1995/96 would be six to seven percent higher for the year, after sales growth of 7.5 percent in the first half of 1995/96.
Analysts said ratings losses to the dominant Nine Network, owned by Kerry Packer's Publishing and Broadcasting Ltd, had softened advertising sales. The Ten Network, majority owned by Canada's Canwest, had also been hit by Nine's strength, they said.  
Some said higher costs linked to an expansion of news and current affairs programming may also restrain second half profits.
""Most people will be looking out to see that the move to more news and current affairs will not have caused a blowout in costs,"" said Burdett, Buckridge and Young media analyst Vince Pepe.
""They'll also be looking for Seven's future strategy in relation to news and current affairs, given the existing strategy appears to have floundered in some time slots,"" Pepe said.  
Seven recently cancelled a new 5.00 p.m. national news programme after a short trial because of poor ratings and the recently launched Witness flagship current affairs programme has not been a runaway ratings hit.
Other analysts said Seven may have contained its costs.
""Costs have been pretty well contained in the four to five percent industry range, by dropping costs and laying off people quietly to accommodate the extra news and current affairs push,"" said a Sydney media analyst.
Analysts would also focus on further details about the future of Hollywood film studio, Metro-Goldwyn-Mayer.  
Seven and Kirk Kerkorian's Tracinda Corp agreed in July to pay US$1.3 billion for the studio.
""We'll be looking for any further indications on MGM because when the actual transaction has been completed I believe the business plan there will have changed quite considerably,"" said Pepe.
Seven itself is 15 percent owned by News Corp Ltd and about 20 percent owned by Seven chairman Kerry Stokes.
Seven's shares were down five cents at A$3.80 at 2.15 p.m. (0415 GMT).
-- Sydney Newsroom 61-2 9373-1800
",4
"Macquarie Bank Ltd, Australia's largest locally-owned investment bank, posted a stronger than expected annual profit on Monday, citing bullish investment markets and a steady flow of corporate advisory work as the driving factors.
Macquarie's net profit for the year to March 31 jumped 25.4 percent to A$116.94 million (US$88.87 million), producing a return on average shareholder funds or equity of 25.2 percent.
Macquarie raised its annual dividend to 43 cents from 36 cents a year earlier on an earnings per share rise to 74.9 cents a share from 61 cents a share.
Analysts had forecast a net profit of around A$105 million.
""All five major business groups performed well,"" Macquarie Bank managing director Allan Moss told a news conference.
""We were assisted by favourable market conditions, with a good level of corporate activity and fairly strong security markets,"" he said.
The Australian stock market rose 8.7 percent over the year to March 31 and ten year bond yields fell to 8.16 percent from 8.81 percent.
Macquarie's Corporate Advisory division, which advises companies on takeovers and mergers, benefitted from an active year of corporate plays and had 130 advisory mandates, up significantly from 1995/96.
Among others, Macquarie advised Placer Dome Inc on its takeover of Highlands Gold Ltd and TNT on its response to Dutch postal and telecoms group KPN NV's takeover bid.
However, Macquarie's advisory work with TNT produced the bank's one major hiccup for the year.
One of Macquarie's most senior corporate advisory executives, Simon Hannes, was charged with insider trading last month after he allegedly bought TNT options before KPN's takeover bid and made a notional profit of A$2 million.
Hannes, who was not working on the TNT project, allegedly had access to TNT documents at Macquarie. His lawyers have said he would be pleading not guilty.
Moss said the Hannes matter had not affected corporate advisory work and was not expected to in the current year.
""Our perception is that flow of business was unaffected by the Hannes matter, because our clients recognise this matter relates to an individual and not the bank as a whole,"" Moss said.
Meanwhile, Moss and analysts said the outlook for Macquarie was as bullish as that for the market overall, due in large part to low interest rates.
""With interest rates continuing to be low and perhaps going down a little bit further, there's every prospect for a reasonably good year in equity markets and we're also seeing quite a good flow in corporate activity,"" he said.
Australian stocks have risen another eight percent since balance date, while bond markets have also strengthened further.
Analysts said the result was stronger than expected.
""It's all looking fairly healthy, given the outlook for the market in general,"" said one Sydney analyst, who had forecast a A$110 million profit.
Investors welcomed the result and talk of an eventual capital return, boosting its stock four cents to A$9.50 at the close, near its A$9.60 all-time high.
Moss said an expected change to the way Macquarie's capital adequacy ratio was calculated was likely to boost its ratio to 16 percent in coming years from its current 13.2 percent, raising the possibility of a capital return through a share buy back or higher dividend payout ratio.
(A$1 = US$0.76)
",4
"The Sydney 2000 Olympics does not appear to be generating the economic bonanza many had hoped for and will not boost Sydney house prices, two construction and real estate forecasters said on Tuesday.
""The impact of the Olympics hasn't been as great as we'd been led to believe,"" Knight Frank Independent director Philip Ragan told a Committee for Economic Development of Australia (CEDA) seminar.
Construction of the games facilities and preparations for the games were in full swing, but were not yet adding significantly to the economy, Ragan said.
In 1993, when the Sydney was awarded the games, analysts forecast that the extra construction, tourism and jobs generated by the games would cumulatively add A$7 billion (US$5.3 billion) to A$8 billion to gross domestic product by 2001.
Ragan said the cumulative economic effect was likely to be closer to A$3 billion because of cost over-runs, lower revenue projections and the leakage of sponsorship revenues offshore.
""The outcome is coming in at the low end of expectations, in fact, significantly lower,"" Ragan said.
Olympics-related job creation had originally been estimated at about 150,000, but only 800 specific jobs had been created so far and only about 2,800 temporary jobs were seen in 2000, he said.
The state government and various private consortia are expected to spend about A$3.2 billion building new facilities.
But Ragan said this amount spent over four years was not a major increase on the A$10 billion spent each year on such construction in Sydney.
An expected nine percent rise in state government revenues and a trend towards higher savings would also swamp the Olympic-led boost to the local economy, he said.
""The effect of the Olympics is being more than overshadowed by other changes happening in the economy,"" he said.
BIS Schrapnel building and construction director Robert Mellor said he expected Sydney property prices to rise almost 40 percent in the lead up to the year 2000 and then slide in the years immediately after the Olympics.
But Mellor said this would have happened regardless of Sydney having the Olympics.
""It's got nothing to do with the Olympics. I don't see it having any effect,"" Mellor told the CEDA seminar.
""The positives may not be as great as the econometric models may indicate,"" he said.
The Atlanta Olympics had shown retailers and street traders had not done nearly as well as expected, Mellor said.
He pointed to the recent rash of legal actions by Atlanta's Olympic vendors against organisers for promising unrealistic likely incomes.
Those residential areas very close to the games site at Homebush Bay in Sydney's Western Suburbs may benefit from the new recreational facilities built there, but the bulk of Sydney's housing market would not notice.
He said the prospect of some home owners being able to rent out their homes for A$1,000 or A$2,000 for two weeks was unlikely to provide a general boost to the market.
""It just doesn't change the fundamental reason for buying a house in Sydney,"" he said.
(A$=US$0.7590)
",4
"Underwriters to the heavily under-subscribed Stadium Australia float would not seek to cut their losses and sell the unbought passes at a discount ahead of the Sydney 2000 Olympic Games, Stadium Australia chairman Peter Ritc hie said on Wednesday.
Ritchie told Reuters the underwriters would seek to sell the approximately A$200 million worth of unsold passes over the next couple of years at prices above the float's offer prices.
""They have a couple of years and they're super-confident that they'll sell them and maybe even get more for them between now and the Games,"" Ritchie said in an interview.
""Our existing gold members are of course concerned that they (the passes) may be discounted and I can assure them that that won't happen because as the Games get closer there'd be more recognition that the prime seats that go with the gold packages wi ll get more and more valuable,"" he said.
Earlier, Ritchie confirmed market speculation of a A$200 million-plus shortfall in the A$364.4 million float of Stadium gold and platinum passes.
The 35,000 passes offered included packages of main stadium tickets to the 2000 Olympics, a 30-year stadium membership and an equity stake in the stadium itself.
""My rough top-of-the-head calculation is that it is about 40 percent (sold),"" he said.
The underwriters, ANZ Securities, Deutsche Morgan Grenfell, Macquarie Bank Ltd and ABN AMRO Hoare Govett, are not due to announce the exact results of the float until this Friday.
They must fund the project regardless of whether all the packages are sold, thus guaranteeing the completion of the 110,000-seat stadium, which is due to open in 1999 in time for a season of pre-Olympic competitions.
The Stadium Australia float, which closed last Thursday, had been open for almost six months, more than twice as long as most share offers.
Its offer of 34,400 gold packages at A$10,000 each and 600 platinum passes at A$33,000 each opened on October 7 and its closing date has been extended twice due to lack of demand.
Brokers said the float had been too complicated for investors to generate enough enthusiasm. Ritchie acknowledged the underwriters had been over-confident and that its structure may have been difficult.
He said the underwriters were targeting a sharemarket listing for the stapled stadium shares and memberships around April 11.
Once the stadium was opened in 1999 however, the stadium shares and the stadium memberships would be unstapled and be traded separately.
Ritchie said the stadium would manage a private market for the stadium memberships, similar to those managed for other Australian stadiums like the Melbourne and Sydney Cricket grounds.
He said he expected the new Sydney stadium memberships would be worth more than those for these other grounds.
""There's no reason to think that our memberships won't sell for more than their's because our facilities are so much better and we'll know then who the hirees (sporting group users) are.""
He said Stadium Australian already had strong expressions of interest from the Australian Football League (AFL) which runs the Victorian-based Australian rules competition.
""Strangely enough when it's not really their territory, they've been the most enthusiastic and then we'd have to reconfigure the stadium specification for an oblong field.""
Ritchie said the stadium would be designed with mobile stands so after the Olympics the stadium could be converted into an oval easily.
""You put the big stands on wheels and you roll them back for the oval."" Stadium Australia had also had talks with the major winter sporting codes in New South Wales, Rugby Union and Rugby League.
-- Sydney newsroom 61-2 9373-1800 (c) Reuters Limited 1997
",4
"Australia's largest banks, under increasing political pressure to pass on all of an official interest rate cut to their customers, hit back on Wednesday at government comments they described as ""bank-bashing.""
Australia and New Zealand Banking Group Ltd (ANZ) chief executive Don Mercer said government criticism of the major banks in general was unfair and irresponsible.
""I'm very, very disappointed with this bank-bashing,"" Mercer told a news conference where he had just announced an 18-percent rise in ANZ's first-half net profits.
""I'm tired of it,"" he said.
Mercer said the Australia's major banks had cut variable mortgage rates by 330 basis points since the middle of last year while official rates had been cut by only 200 basis points.
""We have passed on more than the reductions in the cash rate,"" Mercer said. ""It really isn't fair.""
Mercer said banks had become easy targets for politicians wanting to earn easy political support.
""We're a free kick. Any time a politician wants a free kick, they just bash the banks. You can't lose,"" Mercer said.
The four major banks cut their variable mortgage rates by 35 basis points on Friday after the Reserve Bank's 50 basis point cut in official interest rates, sparking a round of criticism from government and consumer groups who claimed the banks had taken the opportunity to bolster their profits.
Australia's anti-monopoly watchdog is investigating allegations of collusion between the big four.
Treasurer Peter Costello, Prime Minister John Howard and various opposition politicians have attacked most of the banks' decision not to pass on all of the latest cut.
Costello again on Wednesday accused the major banks of profiting at the expense of consumers.
""The rate cuts were for consumers. That cut (on Friday) was not done for the benefit of the banks,"" Costello said in a radio interview on Wednesday.
""It wasn't done so that the banks could do a bit of price taking along the way,"" he said.
Costello went on to recommend consumers shift to those smaller banks and non-banks which had passed on all of the cut.
Ironically, Mercer's comments came after Costello praised ANZ's decision on Monday to again lower its standard variable rate. ANZ has now cut its key mortgage rate to 6.99 percent from the 7.55 percent before Friday's official rate cut.
None of the other three major bank have followed the ANZ.
""The ANZ is now the most competitive bank on home rates of the majors,"" Costello said.
Mercer was later joined by fellow major Commonwealth Bank of Australia (CBA) in hitting back at Costello's comment.
CBA released a statement challenging what it said were ""uninformed comments"" and a ""misapprehension"".
CBA also took out full-page advertisments in national newspapers advising Costello to take out CBA's no-frills home loan, which has a 6.7 percent rate.
""If you really want to save on a home loan Mr Costello, we'll tell you where to go,"" the advertisment read.
",4
"Bank of Melbourne Ltd announced on Thursday it had agreed to a A$1.435 billion takeover bid by Westpac Banking Corp that valued the Victorian-based bank at 2.1 times net assets.
The two banks said they would merge their retail operations in Victoria and trade under the Bank of Melbourne brand name with local management, subject to the approval of Treasurer Peter Costello and the Australian Competition and Consumer Commission (ACCC).  
Westpac said it would offer A$9.75 for each Bank of Melbourne ordinary share, including a full franked 90 cent per share special dividend.
Shareholders had a choice of receiving the A$8.85 balance in cash or in the form of one Westpac share plus up to A$1.85 in cash, it said.
Westpac would offer A$15.36 in cash for each converting preference share or a combination of Westpac shares and cash to a maximum of A$1.36.
The offer represented an earnings multiple of 15.2 times 1997 prospective earnings as forecast by Barceps.  
""This represented 2.1 times net assets which was comparable to the 2.1 times net assets paid by St George Bank for Advance Bank and the 2.1 times net assets paid by Westpac to Challenge shareholders,"" Bank of Melbourne said.
Bank of Melbourne and Westpac, who must convince the ACCC that their merger does not lessen competition in Victoria, said they would present a strong pro-competitive case to the ACCC.
""Our regional banking approach will ensure Bank of Melbourne becomes a stronger competitive force in Victoria and retains its local indentity,"" Westpac Managing Director Bob Joss said.  
""This approach which was established in Western Australia and New Zealand will provide the framework for Victoria in delivering local product and marketing discretion, local credit decision making with Westpac's overall credit policy guidelines, local personnel management and local community sponsorship,"" Joss said.
The ACCC has previously said it would not allow a merger that left a state market without a significant regional bank and the ACCC reportedly rejected an informal merger approach by the two banks two years ago. The ACCC said they would carefully examine the latest merger proposal over the next several weeks.  
Meanwhile, the Treasurer Peter Costello said he would not even consider the merger application until he had released the official Wallis Inquiry into financial market regulation and the government had considered its response. This could take months.
""Any application for a merger between Westpac and the Bank of Melbourne will be determined in accordance with that policy, policy as announced in response to the Wallis report,"" Costello told reporters in Canberra.
""The application will not be dealt with until that policy is announced and it will be determined in accordance with that policy.""  
Market reaction to the merger deal was mixed, but analysts said it appeared fair and was likely to succeed.
""I think they would have both done their homework beforehand and I think it will be successful,"" said Merrill Lynch Australia bank analyst Hayden Aspinall.
Bank of Melbourne shares jumped 95 cents to A$9.75 as soon as trade started but had drifted back to A$9.44 by 3.30 p.m. (0530 GMT). Westpac's shares initially jumped nine cents to A$6.96, but has since settled to be two cents down at A$6.85.  
Late on Thursday, Standard and Poor's Corp said it had affirmed the AA-minus long term and A1 plus short term counterparty ratings for Westpac and placed the A-minus long term and A2 short term counterparty ratings for the Bank of Melbourne on creditWatch positive.
-- Sydney Newsroom 61-2 9373-1800
",4
"Seven Network Ltd chairman Kerry Stokes attacked Prime Minister John Howard on Friday, accusing him of having done a ""disgraceful"" deal to deliver newspaper publisher John Fairfax Holdings Ltd to billionaire Kerry Packer.
Stokes told Reuters in an interview Howard had no right to negotiate any deal on Seven's ownership as part of a larger plan to ensure a Packer takeover of Fairfax.
""Who the hell does the Prime Minister think he's representing?"", Stokes said.  
""For the Prime Minister to play king-maker revisits the darkest days of the Labor Party's deal-making with its mates,"" he said.
Earlier on Friday the Australian Financial Review newspaper reported Howard had offered to do a deal with Rupert Murdoch's News Corp Ltd whereby News would be allowed to raise its stake in the Seven Network if News supported an easing of cross-media rules to allow a Packer takeover of Fairfax.
The Financial Review said Howard's plan fell through last week when News rejected one part of it which would have seen News sell some of its Australian newspapers to a new owner.  
Stokes said the reported deal showed Howard had done a deal with Packer.
""He has made a commitment ... done a deal with Packer. There's no other reason for the change,"" Stokes said.
""It's obviously to deliver Fairfax to Packer,"" he said.
""It shows a disgraceful disregard for the public interest.""
Stokes said such a deal meant the public would be robbed of an opportunity to have a say on media policy in Australia.
Stokes' Australian Capital Equities currently owns 26 percent of Seven while News owns about 14 percent.  
News, which is classified as a foreign shareholder because of Murdoch's U.S. citizenship, cannot own more than 15 percent of Seven under current foreign ownership rules.
Howard would have to grant an exemption.
The conservative Liberal-National government is currently reviewing the cross-media rules set up by the former Labor government prevent television station owners from owning a major newspaper in the same city or vice versa.
These rules stop Packer's Publishing and Broadcasting Ltd increasing its 12 percent Fairfax stake beyond 15 percent while it owns the top-rating Nine television network.  
The government is widely expected to drop the cross-media rules, allowing Packer to launch a takeover bid for Fairfax, which publishes the Sydney Morning Herald, The Australian Financial Review and The Age newspapers.
Some commentators have said the government's decision to drop the cross-media rules had come after Packer endorsed Howard in a television interview before the 1996 election campaign.
The Financial Review report earlier on Friday said Howard had attempted to arrange the deal so as to mute mounting criticism about a lack of media diversity should Packer take over Fairfax.  
Packer was forced to withdraw from a consortium bidding for Fairfax in the the early 1990s after a public outcry led by former Prime Ministers Gough Whitlam and Malcolm Fraser.
Prime Minister Howard was not available to respond to Stokes specific comments, but his office said earlier comments made by Howard rejecting accusations of such a deal still stood.
Howard said late on Thursday he had opposed the cross-media rules for a long time and his views had nothing to do with Packer's support for him in the election campaign.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australian-based soft drink bottler Coca-Cola Amatil (CCA) Ltd announced on Wednesday it had settled the final details of its share swap deal with San Miguel Corp to create the world's second largest Coca-Cola bottler.
CCA announced the deal in April but was forced to look again at its details after some San Miguel shareholders protested that San Miguel would not have enough board-room influence and had given away strong cashflows too cheaply.  
CCA said on Wednesday the initial terms of the deal had been confirmed, with CCA buying San Miguel's stake in a soft drink bottling joint venture in the Philippines in exchange for issuing San Miguel a 25 percent stake in CCA.
CCA's parent group The Coca-Cola Co, which had owned 30 percent of the joint venture with San Miguel, will have its shareholding in CCA diluted to 33 percent from 36 percent.
The A$3.7 billion deal creates a company with annual sales of almost A$4 billion, production of over one billion cases of soft drink and profits of almost A$300 million.  
But CCA said the number of San Miguel represenatives on the CCA board would be increased to four from the initially agreed three, helping to allay some San Miguel shareholder concerns.
""This development will broaden and deepen the pool of experience and advice available to management and shareholders as CCA expands its business both in the Philippines and world-wide,"" CCA chairman Dean Wills said in a statement.
CCA shareholders welcomed the confirmation of the deal, initially bumping CCA's shares up 62 cents or about four percent to a new 1997 high of A$16.02 as lingering concerns about a renegotiation were wiped away.  
CCA however eased back to A$15.85 near the close after some profit-taking and some analysts' comments that the deal's confirmation was no surprise.
""The deal to all intents and purposes was done. The only fiddling was at the margins,"" said a Sydney analyst who asked not to be identified. ""It just means they're going to have to build a very big board table,"" the analyst said.
Initial news of the deal in March pulled CCA's share price out of a five month-40 percent slump brought on by a profit downgrade. ""It buys them time and strengthens their cash flow,"" said another Sydney analyst.  
Investors in the Philippines were however less impressed.
San Miguel's A shares were down a full peso at 49 pesos in late trade as Philippines digested the news that San Miguel would not get a higher proportion of CCA.
""It is good news but in terms of bottom line, San Miguel did not get an additional stake, just an additional vote,"" said Noel Reyes, research head at Anscor-Hagedorn Securities.
""The impact is not that positive. They have just given up control of a major cash cow, it is as simple as that,"" said Helen Alvarez, research director at All Asia Securities.  
The deal will be put to put to CCA shareholders within the next month for formal approval.
CCA already operates 43 bottling plants in 17 countries in Australasia, Asia and Eastern Europe and will be second only to its The Coca Cola Co parent as a Coca-Cola producer.
-- Sydney Newsroom 61-2 9373-1800
",4
"Analysts said on Wednesday they would increase their forecasts for the Commonwealth Bank of Australia's (CBA) year net profit by about A$50 million to A$1.15 billion after a surprisingly strong first half result.
CBA posted a net profit for the six months to December 31 of A$602 million, up 11 percent from A$542 million in the previous comparable half and well above analysts' expectations of A$535 million to A$560 million.
But analysts said the CBA's announcement of another round of unprompted mortgage rate cuts had dampened their enthusiasm.  
""I'll have to push my numbers up a bit. It just depends on the effect of that rate cut today,"" said Macquarie Equities banking analyst Graham Maloney said.
CBA announced that it would cut its main variable mortgage rate to 7.55 percent from 8.25 percent and would cut its 'no frills' Economiser variable rate to 6.95 percent from 7.35 percent from March 27 for existing customers and February 13 for new customers.  
The rate cut is seen ebbing further away at CBA's margins because of CBA managing director David Murray's comments that the cut was for competitive reasons, not in advance of another cut in official cash rates.
ABN AMRO banking analyst Michael Pulman said he had increased his forecast for CBA's full year net profit post goodwill to about A$1.158 billion from about A$1.1 billion before the result.
Pulman said the new rate cut would further cut margins, but that it may not be as much as in the past.  
Analysts said the increasing size of the CBA's commercial lending portfolio and its overseas portfolio meant the rate cut would have a proportionally lower effect.
The competitive benefits and the resultingly stronger lending growth also dampened the effect of the cut on margins, they said.
""It's not huge at the end of the line,"" said Pulman.
""They said last year that for every 10 basis point cut in the fully variable rate, you can cut A$12 million from the profit immediately and A$5 million over time,"" he said.
""I think it will be less than that this time.""  
CBA's commercial lending approvals rose 33 percent in the first half and new equipment finance rose 30 percent.
CBA said the launch of its Business Asset Finance and Capital Business Card products in July and October 1996 had attracted significant new business.
Housing loans rose 14 percent to A$36.63 billion in the first half and the CBA's share of total new home loan approvals continued to run ahead of its share of the total existing home loans.  
BNP Equities analyst Linda Lyon said she wouldn't be surprised if CBA's second half profit was actually lower than in the first half.
""There's this continual slicing into the margins,"" Lyon said. ""I would be looking at a flat second half,"" she said.
Share traders however were much more ebullient, shunting CBA stock to a new all time high of A$14.00 in late afternoon trade, before it eased back to close 50.1 cents higher at A$13.911.
CBA's surge led the All Ordinaries index overall to a record closing high of 2,473.5, up 25.4 points.
-- Sydney Newsroom 61-2 373-1800
",4
"Australian Treasurer Peter Costello on Wednesday announced the biggest financial reforms the country has seen since 1983, loosening restrictions on bank and life office mergers and foreign takeovers of banks.
But Costello stopped short of allowing mergers between Australia's big four banks -- Westpac, Australia and New Zealand Banking Group (ANZ), National Australia Bank (NAB) and the Commonwealth Bank of Australia.
""Today I announce the 'Six Pillars' policy is abolished,"" Costello told a news conference.
The ""Six Pillars"" policy, introduced by former Labor treasurer Paul Keating, prevented mergers between Australia's major banks and the two largest pension and life insurance groups, Australian Mutual Provident Society and National Mutual.
""The Treasurer will retain powers to reject mergers under relevant banking and insurance laws,"" said Costello, adding the major domestic banks would not be allowed to merge at this time.
""This will be reviewed when the government is satisfied that competition from new and established participants in the financial industry...has increased sufficiently to allow such mergers to be considered,"" he said.
Shares in Westpac and Australia and New Zealand Banking Group fell by around three percent as the two, previously seen as takeover targets, lost some of their sheen.
In contrast, NAB and Commonwealth Bank shares both rose as the market decided that they could fall prey to foreign predators. NAB had been seen as likely to mount a bid for Westpac and its price rise was also seen as a sign of relief that no such bid would happen.
Costello also announced the end to an outright ban on foreign takeovers of Australian banks.
""The government has decided to reverse the blanket prohibition on foreign takeovers of any of the major banks,"" he said.
But Costello said any large-scale transfer of Australian ownership of the financial system to foreign hands would be contrary to the national interest.
""It can move off zero, but we won't allow it to go to sustantial foreign ownership,"" Costello said.
""We certainly would not allow it go as high as foreign ownership in the print media,"" Costello said. Foreign ownership of the print media was currently around 60 percent.
Costello was responding to a government-appointed inquiry into the Australian financial system, which released its report on Wednesday recommending the biggest reforms in Australian financial industry since 1983, when the dollar was floated.
Further deregulation followed in 1984, when the government first allowed foreign banks to enter Australia.
Australia's year-old conservative government set up the Financial System Inquiry last June to boost competition.
",4
"Analysts expectations that New Zealand-based whitegoods manufacturer Fisher and Paykel Ltd would post a slightly lower profit in 1996/97 were about right, chief executive Gary Paykel said on Thursday.
""I've been reading some of the local analysts reports and I think they've got it pretty right,"" Paykel told Reuters in an interview while in Australia opening an expanded factory.
He said was referring to research reports from J.B. Were, Hendry Hay McIntosh and others forecasting a lower profit in the year to March 31.  
""They're not far off the mark,"" he said.
""They're just saying that with the tough trading conditions it does look as if it will be a little bit less than probably last year.""
He said Fisher and Paykel itself could not make a forecast, but that the analysts were about right.
Some analysts have forecast Fisher and Paykel's full year net profit would fall to about NZ$38 million from the NZ$39.25 million posted in 1995/96.  
Fisher and Paykel reported a first half net profit of NZ$19.2 million in early November and forecast then that full year profits would similar to or slightly better than in 1995/96.
Paykel said that New Zealand market conditions were tough and Fisher and Paykel had been hurt by the loss of an exclusive distribution agreement with appliance retailer Noel Leeming.
""That is impacting on sales -- not to the extent that we thought it would -- but obviously they were about 15 percent of sales in New Zealand and that takes some time to make up,"" he said.  
Fisher and Paykel had signed an exclusive distribution agreement with Australian-based retailer Harvey Norman Holdings Ltd for their yet-to-be opened New Zealand stores and was hopeful this would prove successful.
""It (the New Zealand market) is very tough now and I don't see the market coming back too much this calendar year, but the NZ fundamentals are still good and things will pick up gradually -- but not this year.""
Conditions in the Australian whitegoods market, where Fisher and Paykel has a market share in the low 20 percent range, were looking better, he said.  
Fisher and Paykel was strongest in the higher quality washing machine market sectors in Australia, where it currently had a 40 percent share, Paykel said.
It was weaker in the oven, refrigeration, dishwashing and budget washing machine parts of the market, where it had generally had less than 20 percent market share.
But Paykel said the opening of an expanded factory in Brisbane and the launch of several new products in Australia would boost its market share in these sectors.
He said Fisher and Paykel had just launched a budget model washing machine in Australia retailing for about A$649 each.  
""It's a real competitive, agrressive move and let's see what our competitors do,"" he said.
Fisher and Paykel's major Australian competitors, Email Ltd and Southcorp Holdings Ltd, offer models with prices of A$499 to A$599.
""We think they're (prices) as low as they can go, and if that's the case we'll see a lot of volume given its features,"" he said, adding he hoped Fisher and Paykel could raise its share of the budget market to 40 percent.
Fisher and Paykel's share price closed unchanged at NZ$5.15 on Thursday. -- Sydney Newsroom 61-2 9373-1800
",4
"Australia's Westpac Banking Corp, struggling like its fellow major banks to cope with a savage interest margin squeeze, surprised analysts on Wednesday by posting a strong profit rise in the first half year.
Higher income from bank account and transaction fees and a series of property sale profits more than offset the squeeze on home lending margins, boosting net profit for the six months to March 31 by 12.9 percent to A$638 million (US$496 million).
Westpac increased its interim dividend to 19 cents from 16 cents after earnings per share (EPS) rose to 34.4 cents from 29.2 cents. The EPS rise was helped by a share buy-back.
Analysts had expected a profit of about A$610 million after Westpac warned late last year about the margin squeeze and foreshadowed flat profits.
The market however had in recent weeks has taken a more optimistic view of the likely profit result than the analysts, boosting Westpac's share price 16 percent in the last month.
""That's why the stock hasn't bounced as much as you'd expect it to,"" Macquarie Equities banking analyst Graham Maloney said.
Westpac's shares closed down five cents at A$7.45 after a rise straight after the result to A$7.60.
Westpac Managing Director Bob Joss welcomed the profit rise as a solid result, but said it would be difficult to repeat the 12.9 percent rise in the second half because of what he said was a tremendous squeeze on lending margins.
""I think that it will be very hard to do in the second half given the margin pressures that we're seeing through all parts of our product range,"" Westpac Managing Director Bob Joss told a news conference.
Joss said however he expected the full year profit for the year to September 30 would be higher than the A$1.132 billion posted in 1995/96.
Australia's major banks have been forced in the last year to cut about 150 basis points off their home lending margins by red hot competition from non-banks that are funded by mortgage origination. These mortgage originators have snared about 10 to 12 percent of the Australian market in the last three years.
Westpac's group net interest margin fell to 3.55 percent in the six months to March 31 from 3.75 percent in the six months to September, which cost Westpac about A$88 million in the half.
Westpac's increases in bank fees and charges had not fully offset the effect of this margin squeeze, Joss said. Westpac's accounts showed Westpac's account keeping and transaction fee income rose to A$379 million from A$306 million a year earlier.
""There's constant pressure on margins so there's a test to do the best we can on fees, on lowering costs and increasing efficiencies,"" Joss said.
(A$ = US$0.7775)
",4
"Building materials and energy group Boral Ltd reported a lower net profit for the first half year on Wednesday, but said it was poised to take advantage of a long awaited upturn in the house building sector.
""The building materials division is now in a position to exploit the upturn,"" Boral managing director Tony Berg told reporters after announcing the profit fall.
""The upturn will bring profit leverage from improved margins and price improvements and further leverage will come from lowering costs,"" Berg said.  
Earlier, Boral reported a A$93.16 million net profit for the six months to December 31, down from A$169.71 million in the same period a year earlier. This was due in large part to a A$49.5 million abnormal profit booked from an asset sale in the previous comparable period.
Net profit pre-abnormals fell to A$96 million from A$120 million the previous year and compared with market expectations for a pre-abnormals net of about A$90 million.
Analysts said the result was a touch above expectations, largely because of a much stronger result from Boral's U.S. building materials operations.
",4
"HSBC Holdings Plc, Citicorp and Standard Chartered Plc are seen as the hungriest of the predators eyeing Australia's major banks now a ban on takeovers by foreigners has been lifted, analysts said on Thursday.
Treasurer Peter Costello announced on Wednesday the end of a former Labor government's blanket-ban on takeovers of Australia's four largest banks by foreigners.  
The weakest of the four majors, Australia and New Zealand Banking Group Ltd and Westpac Banking Corp, are considered the juiciest prey for the foreign banks.
""HSBC is regarded is as perhaps the number one predator,"" said ABN AMRO banking analyst Mike Pulman.
""After that Lloyds TSB or ABN AMRO or Citicorp or Deutche Bank are the most likely,"" Pulman said.
However analysts said HSBC was unlikely to be closely eyeing ANZ because of ANZ's strong presence in Asia through its Grindlays unit, which would simply create duplication.  
National Australia Bank Ltd, the strongest of the big four, is seen as the least likely of the takeover targets because of its hefty overseas assets and its sheer size.
""They (NAB) don't provide purely an Australian exposure and they carry some foreign assets which might not be attractive to a bidder, particularly if you're already in that market,"" said Shaw Stockbroking banking analyst Anusha Srinivasan.
NAB owns Britain's Yorkshire Bank and Clydesdale Bank, the National Irish Bank and Michigan National Corp.  
""ANZ carries with it the same sort of caveat, do you want exposure to this Asian distribution they've got?"" Srinivasan said.
""ANZ argues it would be the least attractive to HSBC because of its Asian operations and the duplication aspect,"" Pulman said.
However, other analysts said ANZ's Asian connection may prove an attraction rather than a deterrent to those European and U.S. banks that don't have an Asian presence.  
Westpac, which does not have the same overseas assets, is therefore seen as the most likely of the weaker two banks to be taken over by a foreign bank. It is also seen most willing.
""Westpac is possibly the most likely, more because of the attitude of Westpac management which might be the most receptive to a bid,"" Pulman said.
Westpac's chief executive Bob Joss is an American seen more focused on maximising value for shareholders than keeping the bank Australian-owned.  
Standard Chartered Plc is seen first in line for Westpac, having already formed an alliance with Westpac to provide banking services to Westpac customers in Asia.
The recently privatised Commonwealth Bank of Australia, the final member of the big four, is the dark horse in the race, analysts said.
CBA is heavily exposed to the ultra-competitive home loan market, making it attractive to some who want a strong home loan book, but tarnishing it for others more interested in higher margin activities.  
But any budding foreign acquirer will have to move fast because the first takeover of a four major banks may well be the last to get through before the doors are slammed shut again, the analysts said.
Costello's announcement on the end to the foreign takeover ban went with the caveat that any large scale transfer of bank ownership to foreigners would not be allowed.
Costello did not say how many bank takeovers would be too many, but the official Wallis Financial Inquiry has said any more than one takeover would be a problem.  
""If that is correct, whoever makes their move from offshore is going to have to do it pretty smartly,"" Srinivasan said.
""If a takeover bid for one of the majors by a foreign bank is successful, then consequent bids might not be,"" she said.
",4
"Australian-based soft drink bottler Coca-Cola Amatil Ltd (CCA) announced on Wednesday it had settled the final details of its share swap deal with San Miguel Corp of the Philippines to create the world's second largest Coca-Cola bottler.
CCA originally announced the deal in April, but was forced to look again at its details after some San Miguel shareholders protested that San Miguel would not have enough boardroom influence and had given away strong cashflows too cheaply.
CCA said on Wednesday the initial terms of the deal had been confirmed, with CCA buying San Miguel's stake in a soft drink bottling joint venture in the Philippines in exchange for issuing San Miguel a 25 percent stake in CCA.
CCA's parent group, The Coca-Cola Co, which had owned 30 percent of the joint venture with San Miguel, will have its shareholding in CCA diluted to 33 percent from 36 percent.
The A$3.7 billion (US$2.8 billion) deal creates a company with annual sales of almost A$4 billion, production of over one billion cases of soft drink and profits of almost A$300 million.
But CCA said the number of San Miguel represenatives on the CCA board would be increased to four from the initially agreed three, helping to allay some San Miguel shareholder concerns.
""This development will broaden and deepen the pool of experience and advice available to management and shareholders as CCA expands its business both in the Philippines and world-wide,"" CCA chairman Dean Wills said in a statement.
CCA shareholders welcomed the confirmation of the deal, initially bumping CCA's shares up 62 cents or about four percent to a new 1997 high of A$16.02 as lingering concerns about a renegotiation were wiped away.
CCA however eased back to A$15.85 near the close after some profit-taking and some analysts' comments that the deal's confirmation was no surprise.
""The deal to all intents and purposes was done. The only fiddling was at the margins,"" said one Sydney analyst who asked not to be named. ""It just means they're going to have to build a very big board table,"" the analyst said.
Initial news of the deal in March pulled CCA's share price out of a five month 40 percent slump brought on by a profit downgrade.
""It buys them time and strengthens their cash flow,"" said another Sydney analyst.
Investors in the Philippines were however less impressed.
San Miguel's A shares were down a full peso at 49 pesos in late trade as Philippines investors digested the news that San Miguel would not get a higher proportion of CCA.
""It is good news but in terms of bottom line, San Miguel did not get an additional stake, just an additional vote,"" said Noel Reyes, research head at Anscor-Hagedorn Securities.
""The impact is not that positive. They have just given up control of a major cash cow, it is as simple as that,"" said Helen Alvarez, research director at All Asia Securities.
The deal will be put to put to CCA shareholders within the next month for formal approval.
CCA already operates 43 bottling plants in 17 countries in Australasia, Asia and Eastern Europe and will be second only to its Coca Cola Co parent as a Coca Cola producer.
(A$ = US$0.76)
",4
"Papua New Guinea's Australian-listed stocks rallied in active trade on Thursday as foreign investors breathed a sigh of relief at the peaceful resolution of the Pacific nation's 10-day political crisis.
Analysts and brokers said investors welcomed Prime Minister Sir Julius Chan's decision late on Wednesday to step aside, which appeared to have calmed an explosive situation and would allow a peaceful transition to a new government.  
""Everyone is relieved that the parliamentary process actually worked and that we didn't go into a period of military control,"" said ABN AMRO Hoare Govett Head of Mining Research David Walker.
""The expectation that the mid-year elections can be brought forward and that there can be an orderly resolution of the impasse has been accepted well,"" Walker said.
Chan stood down on Wednesday under widespread pressure to quit for his hiring of mercenaries to crush an uprising on copper-rich Bougainville island.  
Mining investments group Orogen Minerals Ltd, which is owned 51 percent by the PNG government, closed up eight cents at A$3.10. Oil producer and explorer Oil Search Ltd, which is the largest of the pure Papua New Guinea stocks listed in Australia, closed up 13 cents at A$2.70.
The developer of the one of the world's largest gold deposits at Lihir in PNG, Lihir Gold Ltd, rose two cents to A$2.15. Papua New Guinea retailer and trader, Collins and Leahy Ltd closed up 25 cents at A$3.50 while Bougainville Copper Ltd closed up five cents at 60 cents.  
Papua New Guinea does not have its own stock market, with most large public companies listing on Australia's exchange.
However, analysts said PNG stocks were unlikely to recover all their losses of the past ten days because investors remained somewhat wary of the resource-rich South Pacific nation while the makeup and policies of its new government were undecided.
""It's positive that Chan's (stepped aside) and it should calm the situation up there somewhat,"" said ANZ Securities gold analyst David Kauler.  
""However, it's clear PNG is now in election mode and there's still a period of three to six months of uncertainty ahead ... but it is a cheap time to be buying some of those PNG stocks, particularly Lihir on the gold side,"" Kauler said.
Investor confidence remained bruised by images of street riots and the tense standoff between the army and government.
""It's going to be a difficult, volatile period for investment in the country,"" Kauler said.
""You're going to see a fight between people who see a cheap buying opportunity and other people saying we don't know what the policy is going to be for six months, so let's steer clear.""  
Analysts also said the resolution of the political crisis could bring higher taxes for foreign miners, although any new government was unlikely to restrict entry to resource groups.
ABN AMRO's Walker said the new government would have to look at raising taxes, possibly even the 1.25 percent mining royalty to solve its chronic budget deficits problem.
However, the return to stability in Papua New Guinea at the same time as the controversy over the supposedly huge Busang gold deposit in nearby Indonesia had also created a window of opportunity for extra resource investment, analysts said.  
""PNG, having overcome its immediate problems, has really got to settle down and project an image of stability, because there will be capital funds coming out of Indonesia potentially available for PNG projects,"" Walker said.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australia's largest banks and insurance groups, impatient to go on the merger and acquisition warpath, have had to sit on their expansion plans over the last year while they waited for the ""Wallis report"".
Now their wait is almost over.
The Financial System Inquiry set up in June last year by the then newly elected Liberal/National government and chaired by businessman Stan Wallis will release its report at noon (0200 GMT) on Wednesday.
Analysts expect Wallis will recommend an easing of current restrictions on mergers between Australia's six largest financial groups, unleashing acquisitive banks like National Australia Bank (NAB) to go hunting for the smaller majors like Westpac Banking Corp and ANZ Banking Group Ltd.
The waiting has already proved too much for one bank, which jumped the gun last week and announced it had agreed to take over another smaller regional bank.
Treasurer Peter Costello, who is releasing the Wallis report, pointedly said he would not approve Westpac's plan to take over Bank of Melbourne until he had considered Wallis' recommendations.
Wallis is also expected to ease rules governing foreign takeovers of Australia's largest banks and revolutionise its systems for prudential supervision.
""The expectation in the marketplace is that Wallis will lead to an easing of the rules on mergers -- that's the key issue,"" said Craig Drummond, head of research at one of Australia's largest brokers, J.B. Were.
Share prices of Australia's banks, and particularly those seen as most vulnerable to takeover, have rallied in recent months in expectation of an easing of the former Labor government's ""Six Pillars"" Policy.
Then Labor Treasurer Paul Keating instituted the ""Six Pillars"" policy in 1990 to stop mergers between any of Australia's big four banks, ANZ, Westpac, NAB and Commonwealth Bank of Australia and the two largest pension and life insurance groups, Australian Mutual Provident Society and National Mutual.
Wallis said in November his inquiry would look at recommending ""Six Pillars"" be scrapped, leaving any judgement on a bank or life group merger to the anti-monopolies regulator, the Australian Consumer and Competition Commission (ACCC).
Those arguing for an end to ""Six Pillars"", including NAB, have said global competition and new technology like Internet banking meant big bank mergers would not reduce competition.
Wallis is also widely expected to cut back the number of regulators which currently monitor the prudential health of banks, credit union, insurance groups and superannuation funds.
Wallis may even remove the Reserve Bank of Australia's powers as the prudential supervisor to banks, leaving it to concentrate on operating monetary policy.
One other option being considered that could transform the big banks' share registers is a relaxation of laws which currently stop industrial companies and other non-banks from owning more than 10 percent of a bank.
The rule is supposed to stop a bank being weakened by one of its owners, if perhaps a more risky company went bankrupt.
Wallis has said he wants to foster competition and lower the barriers to ownership and participation in the banking system, possibly allowing telecommunciations groups and others to buy into banks or operate their own banks on the Internet.
",4
"Commonwealth Bank of Australia (CBA) managing director David Murray, buoyant after a surprisingly strong profit result, said on Thursday that CBA had decided to expand its presence in Asia and New Zealand.
Murray also said CBA had submitted a first-round non-binding bid to buy Axiom Funds Mangement, which manages A$17 billion of funds and is being sold by the New South Wales state government.  
""We've already expanded our presence in Asia and we're about to start our joint venture bank in Indonesia, but I think there's more up there for us to do and we've decided to seek out some fresh opportunities,"" Murray told reporters after addressing a Securities Institute function.
""Our focus has been Indonesia, China, Vietnam and India because they are countries whose financial systems are still evolving because the Australian system, which is one we know very well, is quite mature,"" he said.  
""We're looking in each of those countries for joint venture opportunities,"" he said, adding such joint venture arrangements would not require significant capital injections from CBA.
CBA announced an 11 percent rise in net profit for the six months to December 31 to A$602 million and increased its interim dividend by seven cents to 45 cents per share.
The result was well above expectations and fired a four percent rally in CBA's share price to A$13.90. The stock closed up two cents at A$13.93 on Thursday as the overall market rallied another one percent to an all-time high.  
Murray said CBA was looking to diversify and expand in New Zealand as well as Asia, and was examining acquisition opportunities and the potential for organic growth of its ASB Bank unit there.
He said CBA had been successful in New Zealand with ASB Bank, but that it still had only a relatively small presence.
""So if we had any opportunities to expand any further, we'd like to take them, because we know the market and we think we could provide a pretty good service there,"" he said.  
Murray agreed that the only large bank in New Zealand not already owned by CBA or its Australian competitors was the National Bank of New Zealand Ltd, which is owned by Lloyds TSB Group Plc.
Murray said CBA had enough capital on hand to handle routine expansion and therefore would continue with its current high dividend payout ratio. CBA would go back to shareholders either to adjust its dividend payout ratio or to raise capital through a share issue if it wanted to make a larger than routine acquisition, Murray said.
He would not specify how big a war-chest CBA had.  
Meanwhile, Murray said the squeeze in home loan margins from about 300 basis points early last year to about 150 basis points now may have reached its limit.
CBA stunned the home lending market on Wednesday when it cut its key variable home mortgage rate to 7.55 percent from 8.25 percent, its second unilateral rate cut in less than a year. A similar sized unilateral cut in May last year was seen as the catalyst to a significant cut in big bank home loan margins.
""We're either at or fast approaching a margin which is very competitive in world terms for home mortgages,"" Murray told reporters.  
""I therefore believe that the process from here will be incremental.""
Murray also took the opportunity to dismiss speculation that CBA was about to securitise its entire home loan portfolio and return the then un-necessary capital to shareholders.
He said the global trend  mutual funds would increase the pressure for funding mortgages through securitisation.
""This does not mean that we are going to run out tomorrow and securitise our whole home loan book because there is not enough buyers out there and enough funds to take it because of their asset allocations,"" he said.  
-- Sydney Newsroom 61-2 9373-1800
",4
"Transport equipment hire and logistics firm Brambles Industries Ltd said on Friday that it was on track to achieve current market expectations for a full year net profit of about A$240 million.
Brambles chief executive John Fletcher told Reuters in an interview that analysts should not extrapolate the stronger than expected first half profit growth into the full 1996/97 year.
""The message is that the existing market expectations for the full year that were there before this announcement, they're still looking O.K,"" Fletcher said.  
He said the average of the Barceps survey of analysts' forecasts for the 1996/97 year to June 30 was A$240.3 million.
This would be a near 12 percent rise for the full year on the A$214.8 million pre-abnormal net profit posted in 1995/96.
Earlier, Brambles reported its first half net profit rose 14.3 percent to A$117.2 million. There were no abnormals. Pre-abnormal profit rose almost 15 percent to A$117.2 million.
But Brambles warned in its profit statement that it expected the rate of improvement evident in the first half to slow in the second half because of difficult trading conditions in Australia and Europe and a smaller boost from lower net interest costs.  
Fletcher said economic conditions in Australia remained subdued in the transport and logistics sectors and were likely to stay that way for the remainder of the 1996/97 year.
""Volumes are flat and the unions are looking for five to six percent per annum wage increases,"" he said.
He said Brambles and others servicing the manufacturing sector, which was under intense price pressure from imports, were stuck between union demands for higher wages and the inability to pass higher costs in the form of higher prices.
""I don't think we're in a position to look for wage increases of four to five percent,"" he said.
",4
"Australian-based pallet hire and logistics group Brambles Industries Ltd loaded up another strong first-half profit rise on Friday, but was quick to warn investors not to expect such strength in the second half.
Brambles chief executive John Fletcher said slow European and Australian economies, along with a smaller boost from lower net interest costs, would slow growth in the second half.
Fletcher told Reuters analysts should not get too excited by a better-than-expected first-half result and should hold on to the full-year profit forecasts they made before the result.
""The message is that the existing market expectations for the full year that were there before this announcement, they're still looking okay,"" Fletcher said.
He said the average of the Barceps survey of analysts' forecasts for the 1996/97 year to June 30 was A$240.3 million (US$186.2 million)
This would be a near 12 percent rise for the full year on the A$214.8 million pre-abnormal net profit posted in 1995/96.
Earlier, Brambles reported its first-half net profit before abnormals rose 14.8 percent to A$117.2 million.
There were no abnormal profits or losses in the period.
Brambles also raised its dividend to 35 cents a share from 34 cents.
Fletcher said the higher profit reflected strong growth in North America and higher earnings despite difficult conditions in Australia and Europe.
Revenue fell A$145 million to A$1.454 billion in the half.
""Lower net interest resulting from the proceeds of the sale of under-performing activities in Australia and Europe, and lower interest rates, also contributed to the overall improvement,"" Fletcher said.
Net interest expenses fell to A$22.3 million from A$32.3 million in the half because debt was repaid after asset sales.
Brambles said its Australian units continued to perform sluggishly overall, ""with little evidence of an improvement in those areas of the economy in which the company operates"".
Subdued economic conditions in continental Europe continued to affect growth from Brambles' European activites, it said.
""But this was offset by the good gains achieved by the CHEP (pallet hire) and Cleanaway joint ventures,"" Brambles said.
Brambles' CHEP joint venture is with Britain's GKN Plc.
Brambles said it experienced good profit growth from its U.S. activities.
Earnings before interest, tax and abnormals at U.S. operations rose to A$26.2 million in the half from A$17.8 million in the same period a year earlier.
""If only I had three Americas,"" Fletcher said.
Brambles said it was talking to General Electric Capital and General Electric Plastics about the supply and leasing of plastic pallets in the United States and Europe.
It said it had worked with various parties on the development of a plastic pallet, but had yet to find a pallet as strong, durable or cheap as wood.
Fletcher told Reuters that Brambles was a lot closer to finding an acceptable plastic pallet this year than in previous years. ""We could be within 12 months of finding something,"" he said.
Brambles shares closed unchanged on Friday at A$21.70, after having earlier risen to an intra-day high of A$21.94.
(A$ = US$0.77)
",4
"Australia's anti-monopolies watchdog, examining claims of collusion against the four major banks, has asked them to explain why they all cut their mortgage rates by the same amount within hours of each other.
Australian Competition and Consumer Commission (ACCC) Chairman Allan Fels said it was unusual that the banks would all move so quickly to cut their rates by the same amount.
""We don't claim to have evidence of collusion. What we are doing is seeking an explanation from the banks,"" Fels said in a radio interview broadcast on Monday.
National Australia Bank, Australia and New Zealand Banking Group Ltd, Commonwealth Bank of Australia and Westpac Banking Corp all cut their standard variable mortgage rates by 0.35 percent to 7.2 percent on Friday, hours after the Reserve Bank cut official rates by 0.5 percent to 5.5 percent.
Government and opposition politicians and consumer groups have since suggested the banks colluded to ensure they did not pass all of the official rate cut on to their customers.
Fels said the commission would ask for details of any communications between the banks on Friday and whether there had been any previous discussion about their approach to possible official rate cuts.
""The reason why we're seeking an explanation from the banks is that it is unusual for them all to have moved so quickly within a few hours of one and other and to have reduced their rates by the same limited amount of 0.35 (points) as against a Reserve Bank reduction of 0.5,"" Fels said.
""Occasionally, one player will do something a bit different,"" Fels said.
""But in this case the four big players, all of them, moved by exactly the same amount, despite having told so many of us over time that their circumstances, their costs and their strategies all differ.""
Commonwealth Bank of Australia, the first big bank to cut mortgage rates after Friday's official rate cut, denied on Monday that it had colluded with the other major banks.
""I haven't discussed interest rates with the other banks,"" CBA Managing Director David Murray said.
""We have a very careful discipline within the bank, because we don't believe in collusion, we believe in competition,"" Murray said, adding he would cooperate fully with the ACCC.
Australian Prime Minister John Howard on Friday questioned the level of competition amoung the banks.
""It is pretty hard to believe we have a highly competitive banking system at the present time when there can be delays of the kind that we are apparently about to witness in the passing on in the reduction in official interest rates,"" Howard said.
Opposition politicians also criticised the banks, who have also come under heavy public fire this year for increasing bank fees to offset a squeeze on home lending margins.
Opposition Treasury spokesman Gareth Evans said it was hard to believe the banks were not colluding on rates. ""It's a little like a line of chorus girls, all with impeccable timing raising their leg exactly so high,"" Evans told reporters.
",4
"If there was any doubt that Prime Minister John Howard's government is obsessed with keeping the ""battlers"" happy, then Treasurer Peter Costello wiped those out on Wednesday.
Costello could have simply given up his veto on big bank mergers, passing on any bank merger judgement to the Australian Competition and Consumer Commission (ACCC) if, as he said, his primary concern was to make the banks more competitive.
The Wallis Inquiry, which Costello set up, recommended he do just that.
Instead he kept the veto and made up his own mind about how competitive the banks are now by telling the big four they could not merge until they become more competitive.
It's the ACCC's job to judge if a merger reduces competition and Costello is happy to let them pass jugdement in every other sector of the economy, so why not let ACCC Chairman Allan Fels decide on the banks?
The answer became clear when Costello was asked just this question in his news conference on Wednesday. Here's his reply.
""We are a government. We are elected. We are going to account to the Australian people and we have reserved to ourselves, at this stage, the decision that there will not be mergers between the four majors, and we have reserved to ourselves the decision to ensure that the Australian financial system still has healthy Australian ownership.
""We consider that a matter of public policy.""
Costello's motivation becomes even clearer when you look at his reasoning for keeping a 'four pillars' policy.
""We do not have a competitive enough access for small business to financial services,"" he said.
""One of the things that we would be interested in seeing is new entrants, non-bank institutions, starting to develop widely used financial lending practices, in relation to small business.""
For small business, read 'battlers'.
The same battlers John Howard has pledged to serve again and again since his election on March 3 last year.
Howard knows the battlers at least dislike the large banks and that they fear what the banks might do to bank fees and charges if they were allowed to get even more powerful.
Even the banks' own consumer surveys show they are very unpopular.
The last thing Howard wants is the ACCC telling him a bank merger is all right and being forced to swallow it.
The battlers, and therefore Howard, know better.
The prognosis for a change of heart is not good.
If the government cannot ignore the politics of bank mergers when it has a massive majority in the lower house, is two years out from the next scheduled election, and is in its first term of government, then when will it?
Some bank analysts expect a change of heart after the inevitable election win in 1999.
Don't bet on it while Costello and Howard are bowing to the battlers.
-- Canberra bureau 61-6 273-2730
",4
"Investment bank Natwest Markets Australia Ltd said on Tuesday it aimed to hold on to its leading market share in equities broking in Australia in 1997 but would stay clear of the burgeoning mortgage securitisation sector.
""The first thing is to make sure we maintain our market position,"" Natwest Markets Australia Ltd chief executive Peter St George told Reuters in an interview. ""We want to broaden and deepen our penetration of the market,"" St George said.  
Natwest Markets currently leads the rankings of equities brokers in Australia as measured by the latest Australian Stock Exchange data with a 9.8 percent market share.
St George said Natwest would need to widen its research and distribution activities to keep up with the likely changes in the Australian stock market over the next two to three years.
The impending privatisation of Australia's largest telecoms group, Telstra Corp, as well as the sale of government-owned airports and the demutualisation of Australia's largest insurance and investment group, The Australian Mutual Provident Society, would change the shape of the market overall, he said.  
""If you look on a two to three year horizon you should see big movements in the market in telecoms, infrastructure and insurance,"" St George said.
""These are some changes for people to get their research capabilities and international delivery mechanisms in place for,"" he said.
Earlier on Tuesday Natwest Markets Australia, a unit of National Westminister Bank Plc, reported a 40 percent rise in operating profit before tax to A$70.5 million for calendar 1996.  
""The areas we will focus on in terms of the equities business are advancing some of the work we've been doing in the structured products and derivatives products,"" St George said.
Natwest's debt and corporate finance divisions would aim to extend non-government debt operations but would stay away from the structuring of securitised mortgage deals for now, he said.
""In the debt markets, we're getting away from some of the meatier bonds like government bonds and looking into some of the other areas, like corporate bonds and infrastructure financing,"" he said.  
St George said Natwest Markets was involved on a large scale in the mortgage securitisation market in the United States and elsewhere but would concentrate on the wholesale sector in Australia.
""It's quite labour intensive. It hasn't been attractive to us because we don't think the profits are there,"" he said.
""I wouldn't particularly think we're going to make a big move in there at this point in time.""
Natwest Australia Corporate Finance currently manages the wholesale securitised vehicles, Prime Asset Vehicle (PAV) 1 and PAV 2.  
""They take really high quality paper and recyle those into the United States and international markets,"" he said.
""We're not aiming at that same segment of the market as Macquarie does from Australia,"" he added.
Fellow investment bank and broker Macquarie Bank Ltd has dominated the burgeoning mortgage securitisation market in Australia in recent years.
Macquarie's PUMA Management Ltd plans to raise A$3 billion in 1997 to fund securitised mortgages, having raised A$3.508 billion since its first bond issue in June 1993.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australian Competition and Consumer Commission (ACCC) chairman Allan Fels said on Thursday that he had a neutral attitude about Westpac Banking Corp's A$1.435 billion bid for Bank of Melbourne Ltd.
Fels also confirmed that he had told Westpac informally two years ago that the anti-monopoly regulator would be hesitant to allow a Westpac takeover of the smaller regional bank.
However, he said that the ACCC acknowledged then that structural change may occur to allow such a takeover at a future date.  
""We have a neutral attitude,"" Fels told Reuters in an interview.
""We look at mergers on a case-by-case basis at the time they happen. We're awaiting a submission on it and we'll be doing market inquiries,"" Fels said.
Fels said the earlier informal talks occurred in September 1995 when Westpac sought ACCC for approval for its takeover of Perth-based Challenge Bank.  
""During that time we discussed with Westpac wider issues about regional mergers in general. Obviously that touched on wider possibilities then just Westpac-Challenge,"" Fels said.
""We then issued a statement which by implication made it look as if we would have quite a bit of hesitation about Westpac-Bank of Melbourne, however there was no formal proposal put to us,"" he said.
""At that time we would have been hesitant had a formal proposition been put.""  
Fels said, however, the commission took the unusual step of saying that this hesitation about Westpac-Bank of Melbourne only applied at that time.
""We did say at the time very explicitly that this was our view at THAT time,"" he said.
""We said that a couple of times, we don't normally say that sort of thing.
""We were signalling that we were aware that this matter would at some point have to be looked at again because people keep arguing that there's been structural change in the market.""  
Fels was careful not to state whether he thought there had been structural change since 1995.
""That's what's been put to us by the parties,"" he said.
""There've been changes (generally), but we haven't really evaluated their impact,"" he said, adding he remained neutral on the question of structural change.
But later he told ABC radio he did not agree currently with those arguing there had been relevant, significant structural change in the regional banking sector.
""The question is: has there been a change of circumstance.  
""The parties argue 'Yes.' We haven't, certainly, taken that view at this time but we will look at their submissions,"" he said.
Fels said it would take the ACCC at least a month to make its decision and would take the Wallis inquiry's report into account, but would not be bound by it.
Earlier Westpac said it would present a strong case that the takeover was pro-competitive.
The two banks said they would merge their retail operations in Victoria and trade under the Bank of Melbourne brand name with local management.  
-- Sydney Newsroom 61-2 9373-1800
",4
"Solid growth in the Commonwealth Bank of Australia's (CBA) home loan portfolio has brightened its profit outlook slightly and should underpin its half year result due for release on Wednesday, analysts said.
The bank is expected to report a profit rise of about one percent for the six months to December 31.
CBA itself has been warning since early 1996 that margin pressure would ensure flat profits for the year to June 30.
But some analysts said CBA has been privately more bullish in recent months.
""It's been outlined by the bank that trading conditions have been reasonable and may be slightly better than expected, given the price war last year,"" said one Sydney banking analyst.
""Given some of the statements coming out of the banks, if the result's not going to be flat then it's going to be higher rather than lower,"" said ABN AMRO banking analyst Michael Pulman.
Analysts are forecasting a net profit before abnormals for the six months of between A$535 million and A$560 million compared with A$541.9 million in the first half o 1995/96, but below the second half's A$577 million.
""I think you'll see a lot of volume in housing coming through which will be enough to maintain their net interest revenue,"" said the Sydney analyst.
Reserve Bank of Australia figures show CBA's home loan portfolio grew 10.3 percent to A$28.8 billion in the year to November, while home lending growth by all banks rose just 7.5 percent.
The CBA's share of home lending by banks, which does not include lending by the burgeoning non-bank mortgage originators, rose to 22.3 percent from 21.7 percent during the year.
""They do have a strong focus on the need to keep their share of housing and they've kept their share rolling along better than some of the other banks,"" said Macquarie Equities banking analyst Graham Maloney.
Analysts also said CBA's bad debts and provisioning were unlikely to drag profits any lower than in previous years.
""Provisioning will be fairly benign. We think that provisioning is at a trough and will stay in it for a few more results, particularly for CBA which is loaded up with housing more than some other banks,"" said Macquarie's Maloney.
Market attention is likely to focus on just how much CBA's pre-emptive cut in its key variable mortgage rate last year, which effectively forced a 75 basis point cut in big-bank home loan margins, has cut its overall margin.
CBA's group interest margin fell to 4.1 percent from 4.3 percent in the 1995/96 year, but this was before the home loan rate cuts of late 1996. CBA's containment of costs and what has happened to its cost to income ratio will also be of interest.
Analysts said CBA appeared to have kept costs down well, although it was unlikely to have made big inroads into staff and branch numbers.
Analysts expect CBA to declare a dividend of about 42 cents to 44 cents, up from the 38 cent interim dividend set in the first half of 1995/96.
CBA shares closed 15 cents up at a record A$13.50 on Friday.
There has been talk for some time that the bank has plans for a special dividend.
-- Sydney Newsroom 61-2 373-1800
",4
"Retailing group Coles Myer Ltd is expected to report its first profit rise in almost two years on Thursday, with improved margins helping to offset sluggish sales growth and boost first half profit by about five percent.
Analysts said they expected Coles Myer to report a net profit before abnormals in the 26 weeks to January 26 of about A$200 million to A$205 million, up from the A$194.5 million in the first half of 1995/96.  
This would be Coles' first profit rise since 1995 and follows a two-year horror run of board turmoil and controversy over corporate governance.
Analysts said they expected margins to have improved most at Coles' K-Mart discount department store chain in pre-Christmas trading, thanks to a refusal to discount heavily.
They said the strong margins evident at K-Mart's major competitor, Woolworth Ltd's Big W, were a good indicator.  
""Kmart was a disaster last year and given Big-W had a good result in the first half in a difficult environment, people are expecting Kmart to have improved as well,"" said Macquarie Equities analyst Simon Shakesheff said.
""It's just a question of how much,"" he said. Shakesheff is forecasting a A$200 million net profit for the half year and a A$319 million profit for the full year.
Kmart produced earnings before interest and tax (EBIT) of A$50.6 million in the first half of 1995/96, down from A$93.2 million the previous comparable half.  
Savage pre and post-Christmas discounting in 1995 cut the EBIT margin during the half to 2.9 percent from 5.5 percent.
Analysts said they also expected a slight margin improvement to boost performance at Coles' Myer-Grace department store chain, although not to the same extent as KMart.
""They look like they (the Coles group) are recovering,"" said one retail analyst, who was forecasting a A$205 million net profit for the half and A$302 million for the full year.
""Their Christmas trading has been better and they've done better in department stores than some of the others like David Jones,"" the analyst said.  
Coles' supermarket division was also seen improving as sales have held up in the food sector at the expense of the wider apparel and merchandise sectors.
The Coles group has already posted its sales result for the six months to January 26, showing overall sales growth of 5.4 percent to A$9.945 billion. This compared with 8.6 percent sales growth in the first half of 1995/96.
Analysts also said profits from property sales in the first half would help boost the pre-abnormal profit as Coles puts property sales profits above the line.  
Coles said in December it would settle about A$705 million of property sales in the first half of 1996/97, having sold around A$830 million worth of property since July 1996.
Analysts expect Coles' slight improvement from its low base to continue in the second half year, with forecasts for the full year ranging from A$285 million to A$350 million and averaging A$309.7 million.
This compares with the A$302 million net profit before abnormals posted in 1995/96, which was itself down 28 percent on 1994/95.  
Brierley Investments Ltd, through its Australian unit Consolidated Investments Ltd, owns 7.4 percent of Coles Myer.
-- Sydney Newsroom 61-2 9373-1800
",4
"A 22 percent rise in fee and other non-interest income boosted Westpac Banking Corp Ltd to a surprisingly strong first half profit result on Wednesday, more than offsetting the effect of a squeeze on interest margins.
Westpac announced a net profit of A$638 million for the six months to March 31, up from A$565 million in the same period a year earlier.  
Analysts said this was about A$20 million to A$30 million above their expectations, but had not shocked those in the market who had pushed Westpac's share price higher in recent weeks in anticipation of very strong result.
""That's why the stock hasn't bounced as much as you'd expect it to,"" Macquarie Equities banking analyst Graham Maloney said.
Westpac's shares were down five cents at A$7.45 at 3.40 p.m. (0540 GMT), having earlier jumped to a A$7.60 high.  
The profit jump was due largely to non-interest income rising to A$869 million from A$714 million, underpinned by rising account fees and some profits from the sale of property and closed branches.
The boost from fees more than offset sluggish growth in interest income as Westpac, like Australia's other major banks, battled a 150 basis point squeeze in home lending margins.
Westpac's group net interest margin fell to 3.55 percent in the six months to March 31 from 3.75 percent in the six months to September.  
Non-bank competitors funded by mortgage origination have snared more than 10 percent of the home mortgage market in the past three years, forcing banks to cut their home loan margins by about 150 basis points to about 100 to 150 basis points.
""Features of the first half financial results were non-interest expense control, continued improvement in asset quality, improved staff productivity, and higher non-interest income reflecting: growth in commissions and fees, higher financial markets income and benefits from the sale of equity investments,"" Westpac managing director Bob Joss said in a statement.  
""These results were achieved against a background of reduced interest margins and continued investments in strategic capabilities designed to enhance future prospects,"" Joss said.
Westpac's net interest income fell to A$1.695 billion in the six months ended March 31 from A$1.705 billion in the six months to September 30 last year, but was up on the A$1.549 billion in the year-ago period.
Income from fees and commissions rose to A$592 million from A$532 million in the year-ago first half.
Other income, which included the sale of equity investments, rose to A$142 million from A$68 million a year earlier.  
Westpac also announced it planned to raise up to A$500 million through a preference share issue after its merger with Bank of Melbourne Ltd.
Westpac said it would issue up to 20 million non-cumulative converting preference share at an issue price of A$25 each. The money raised would be used to fund the cash component under the Bank of Melbourne merger scheme, it said.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australia's largest home mortgage lender warned on Wednesday that a proposed change to Australia's system of prudential regulation could lead to huge collapses like those seen in the U.S. savings and loan system.
Commonwealth Bank of Australia Managing Director David Murray said proposals by a government-sponsored inquiry into the financial system to regulate banks, pension funds, insurers and other non-banks within the same prudential system was too risky.
Murray told an audience of bankers and economists the proposal would create a system similar to that which regulated the U.S. savings and loan sector before widespread collapses in the 1980s.
""These proposals do take us into uncharted waters which set up for Australia a savings and loans system that cost the citizens of the United States an awful lot of money,"" he said.
Murray's criticism of the plan to open up the banking payments system to greater competition and strip the Reserve Bank of Australia of its prudential supervision role is the first major attack on the official Wallis' report on the financial system since its release last week.
The conservative Liberal/National government, which set up the Wallis Inquiry soon after its election last year, is currently considering Wallis' recommendations and is expected to make its recommendations later this year.
Murray's broadside was immediately attacked by one of his audience at a Committee for Economic Development (CEDA) luncheon as emotive scare-mongering.
Replying to a question from the floor, Murray said he would not back away from his comments, adding a bank or fund failure was too was too dangerous to risk changing the current system.
He said the time was right to debate Wallis' plan and others should not shy away from being critical.
At the moment, the Reserve Bank requires banks and others with banking licences to meet strict prudential requirements on capital reserves and stops non-banks from issuing cheques or allowing them access to the overnight payments system.
The inquiry, headed by businessman Stan Wallis, recommended that non-banks such as pension funds, building societies and even telecommunications groups be allowed access to the payments system and be covered by a single new body called the Australian Prudential Regulation Commission.
""I would prefer that the Reserve Bank remain the prudential supervisor,"" Murray said.
Later, Murray rejected the claim that he was scaremongering.
""More Australians have chosen to bank with us than any other financial institution. We're probably better aware of what is scaremongering and what is proper community debate than anybody else,"" he told reporters after his luncheon address.
Commonwealth Bank which was government-owned until last year, has the largest number of retail savings and other accounts of all of Australia's banks.
""It's a matter of fact that the S&L system in America cost their community A$110 billion (US$86 billion),"" he said.
""Why should I therefore condone a supervisory system that appears to be built that way,"" he said.
""(Wallis) has deliberately overlaid a number of deposit-taking institutions into one supervisory system. That's what the American system did and they got the S&L problem.
""I see that potential here and I hope that it doesn't happen,"" he said.
",4
"The U.S.-Australian development of the giant Bayu-Undan gas field in the Timor Sea cleared its biggest hurdle on Wednesday when BHP Petroleum and Phillips Petroleum agreed that BHP should be the sole operator.
Joint venture participants said the agreement meant they could now consider exactly how to develop the A$4 billion field and whether to build a liquified natural gas (LNG) processing plant onshore near Darwin in the Northern Territory or build such a floating plant.  
""This agreement is the most fundamental development in terms of defining the project,"" said Petroz NL Finance Manager Rob Crook.
The field, which was last estimated to have proven and probable reserves of 3.1 trillion cubic feet (tcf), is straddled by two joint venture groups.
""It's a very, very large world-scale discovery,"" said Petroz' Crook.
Getting the two groups to agree on who would operate the facilities needed to jointly exploit the field and how the proceeds would be divided up was a crucial step, Crook said.  
The ""Bayu"" side of the field is covered by the Zone of Cooperation Agreement (ZOCA) 91-13 is owned by a Phillips-led joint venture that includes Oryx Energy Co of the U.S. with 25 percent and Britain's Hardy Oil & Gas Plc with 15 percent. Phillips has 60 percent.
The ""Undan"" side of the field covered by ZOCA 91-12 is owned by a BHP-led joint venture which includes Petroz with 13.371 percent, Santos Ltd with 21.426 percent and Indonesia's Inpex Sahul with 21.21 percent. BHP has 42.417 percent.  
The ZOCAs were made possible by a treaty between Australia and Indonesia and are a key factor in the relatively warm diplomatic ties between the two neighbours.
BHP said meetings of joint venture participants in Melbourne late last week had selected BHP Petroleum as the unit operator of the field. BHP Petroleum is a unit of the Broken Hill Pty Co Ltd, Australia's largest company and the half-owner of the Bass Strait oil fields off the Victorian coast.
""The single field extends across both contract areas and any development will be carried out under the framework of a unitisation agreement and utilise shared facilities,"" BHP said.  
Petroz said in a separate statement the joint venturers had decided on the upstream liquids and condensate phase of the project, but had yet to decide on where the downstream LNG plant would be located.
""The upstream phase of the project consists of a liquids stripping/gas recycling operation whereby condensate and LPG (Liquid Petroleum Gas) are separated from the gas stream offshore and transported by tankers to market,"" Petroz said.
""It is expected that the offshore liquids recovery project will be integrated with an LNG production facility,"" it said.  
""Both offshore and onshore locations for the LNG facilities are under consideration,"" it said.
The development of the field was expected to start in 1998, leading to the first production of condensate and LPG in 2001.
Petroz's Crook said the upstream condensate and LPG facility already decided on had been estimated to cost around A$1.5 billion to build. He said it was envisaged the field would produce about 3-4 tcf, 230 million barrels of gas condensate and 130 million barrels of LPG.
The field is split about 60-40 percent in favour of the BHP-led joint venture, he said.  
Northern Territory ministers are confident that BHP and Phillips will choose an onshore LNG plant with a 470 km pipeline to bring the gas from the Timor Sea. Reports have put the cost of such a plant at between A$1 billion to A$1.9 billion.
Phillips is seen favouring an onshore plant while BHP has favoured an offshore plant. An onshore plant would produce an estimated three million tonnes of LNG a year.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australia's largest shopping mall owner, Westfield Holdings Ltd, announced on Wednesday its U.S. arm would list on the New York Stock Exchange in May and raise US$400 million in an initial public offering.
Westfield America Inc would then use the proceeds to go on a US$500 million shopping spree around the United States, buying out Westfield's partners in the shopping malls it already owns and buying new malls.  
The resulting group would then be the fourth largest listed shopping mall owner in the United States, Westfield Holdings chairman Frank Lowy said.
""We opened a little door before and now we're opening a huge door for us to expand our business in the United States,"" Lowy told a news conference.
Lowy said Westfield America Trust would list its U.S. vehicle CenterMark Properties Inc as Westfield America Inc, diluting its 67.2 percent stake in CenterMark to about 50 percent.  
Westfield America would then first buy Westfield Holdings' 50 percent stake in the Garden State Plaza shopping centre in New Jersey for US$145 million.
About US$210 million would then be available to buy out Westfield America's partners in shopping malls it already partly owns and to buy up new malls.
Lowy told the news conference the US$210 million of equity would be combined with debt to buy out partners and new malls.
""We see borrowings of maybe US$150 million to A$200 million which gives us an opportunity to consider acquisitions of about US$350 million altogether,"" Lowy said.  
Ownershiop of U.S. shopping malls was increasingly transferring from private or family companies into listed public companies and Westfield's U.S. listing would help accelerate the process, he said.
Lowy said many of Westfield America's partners were family concerns or closed-end funds, many of whom wanted to cash in their stakes. Closed-end funds must cash in their investments after a certain period.
Some were also unable to inject the extra capital needed to continually re-develop or expand the shopping malls, Lowy said.  
""Some of our partners just do not have the cash and now they have the option of watering down (their holdings) or selling out,"" Lowy said.
Westfield had said last year when listing the Australian unit trust vehicle for Centermark, Westfield America Trust, that it planned to list CenterMark in the United States within five years. Lowy said strong U.S. market conditions had led to the earlier than expected listing.
The offering is planned for May and is being underwritten by Merrill Lynch & Co, but Lowy said the timing may change if the U.S. market slumps before then.  
""If conditions change, we'll have to reassess,"" he said.
""It would have to be a significant change.""
Westfield officials said the U.S. listing gave the Australian-based company more flexibility when acquiring shopping malls in the United States, as it opened up access to the U.S. debt markets.
The ability to offer U.S. listed shares to shopping mall owners instead of cash would also open up a new range of acquisition opportunities as many sellers preferred shares to cash for tax reasons, they said.  
Westfield America Trust units closed up one cent at A$1.14 and Westfield Holdings shares closed up ten cents at A$19.80 against a flat market overall.
Westfield Holdings has about 30 percent of Westfield America Trust units.
-- Sydney Newsroom 61-2 9373-1800
",4
"Treasurer Peter Costello on Wednesday announced the biggest financial reforms Australia has seen since 1983, loosening restrictions on bank and life office mergers and foreign takeovers of banks.
But against market expectations, Costello stopped short of allowing mergers between Australia's big four banks -- Westpac, Australia and New Zealand Banking Group (ANZ), National Australia Bank (NAB) and the Commonwealth Bank of Australia.
He also warned foreigners they would not be allowed to buy too big a chunk of Australia's banking sector.
""Today I announce the 'Six Pillars' policy is abolished,"" Costello told a news conference as he released the official Wallis Financial System Inquiry.
The ""Six Pillars"" policy, introduced by former Labor treasurer Paul Keating, prevented mergers between Australia's major banks and the two largest pension and life insurance groups, Australian Mutual Provident Society and National Mutual.
Costello's conservative Liberal/National coalition was elected in March last year and set up the Wallis Inquiry three months later to look at reforming Labor's policies.
Chairman Stan Wallis' brief was to set the next generation of financial reforms to follow those started in 1983 which floated the currency and removed interest rate controls.
Costello's dumping of the 'Six Pillar' policy means life insurance groups will be able to merge with the big banks and others.
But he did not let the banks off the leash.
""The government has further decided that mergers among the four major banks will not be permitted at this time,"" he said.
This surprised pundits and banks alike, who have waited eagerly for Costello to give the green light to big mergers.
""This (four pillars policy) will be reviewed when the government is satisfied that competition from new and established participants in the financial industry...has increased sufficiently to allow such mergers to be considered.""
Brokers and analysts said this merger road-block would disappoint those who had built takeover premiums into the share prices of Westpac and ANZ, seen the likely takeover targets.
But they said the potential for foreign takeover was likely to soothe some of that disappointment.
""The equity markets are a little bit disappointed that the 'four pillars' effectively remain, but at the end of the day there is a potential for foreign takeover,"" said J.B. Were, head or research at Craig Drummond, adding that Westpac and ANZ were not expensive banks by global standards.
Westpac's shares closed down three percent down while ANZ fell one percent.
In contrast, the bank seen as the most likely predator in a liberalised regime, NAB, jumped 2.5 percent as the market decided it could be the juiciest target for a foreign player.
Investors were also relieved NAB would not have to make a hefty share issue soon to fund a domestic takeover.
Costello was quick however to dampen excitement about the prospect of takeover spree by foreigners, saying he would not allow them to take over as much as 60 percent of the sector.
""It can move off zero, but we won't allow it to go to sustantial foreign ownership,"" Costello said.
""We certainly would not allow it go as high as foreign ownership in the print media,"" Costello said. Foreign ownership of the print media was currently around 60 percent, he said.
",4
"Australia's largest home mortgage lender, the Commonwealth Bank of Australia (CBA), announced a surprisingly strong 11 percent surge in first half 1996/97 profits on Wednesday, despite erosion of its interest margins.
CBA said good cost control and a 33 percent surge in business lending more than offset a further squeeze in home loan margins.
""Business volumes during the first half of 1996/97 were pleasing, leading to a better than expected interim result,"" CBA managing director David Murray told a news conference.
""This is likely to lead to a slightly better than expected full-year result,"" Murray said.
CBA's net profit for the six months to December 31 rose to A$602 million (US$455 million) from A$542 million in the comparable period a year earlier.
CBA had itself been saying until now that it expected hot competition in its key home loan market would squeeze margins and keep profits flat in the year to June 30, 1997.
Analysts too had expected a subdued profit performance, forecasting a profit of between A$535 million and A$560 million.
CBA's shares rallied sharply on the profit and on news of a interim dividend of 45 cents per share, up seven cents on the previous interim dividend.
CBA's shares closed up 50.1 cents at A$13.91, having climbed in afternoon trade to a record high of A$14.00. CBA's surge led the All Ordinaries index overall to a record closing high of 2,473.5, up 25.4 points.
""Obviously the market liked it. The profit was probably about A$50 million above expectations and there was a nice increase in the dividend,"" said Lance Jones dealer Hamish Dee.
Analysts later said they would increase their forecasts for CBA's full-year profit by about A$50 million to A$1.15 billion.
But CBA dampened optimism about its business lending boom on Wednesday by cutting its key varible home mortgage rate to 7.55 percent from 8.25 percent, ensuring further margin pressure.
CBA's group net interest margin fell to 3.71 percent in the first half from 4.12 percent in the first half of 1995/96 and Murray said the latest cut would further erode margins.
This is CBA's second unilateral home loan interest rate cut in less than a year. The bank cut its key variable home loan rate to 9.9 percent from 10.5 percent in May.
That cut triggered a round of mortgage rate cuts by the other major banks and was generally seen as the catalyst to a 50 to 75 basis point cut in big bank home loan margins.
But CBA's pre-emptive strike was also popular with home lenders, who increased their lending from the bank by 14 percent in the half.
Murray said the latest home loan cuts had more to do with increasingly aggressive competition in the home loan market than with any pre-emption of another cut in official cash rates.
Non bank lenders like Aussie Home Loans have snared about 10 percent of the home loan market in the last three years with cheap loans funded by securitised bond issues.
CBA also said its efforts to control costs and increase productivity were a factor in the better than expected profit.
Meanwhile, CBA confirmed that it was looking closely at securitising some of its mortgage portfolio and that it was not looking at issuing a special dividend, contrary to speculation.
(A$1=US$0.75)
",4
"New Zealand-based investment group Brierley Investments Ltd on Tuesday called on the Australian government to relax its investment rules so that New Zealand companies are treated the same as Australian ones.
Brierley chairman Bob Matthew said Australia should change its rules to let New Zealand investment into Australia in the same way that trade between the trans-Tasman neighbours is now unhindered under the Closer Economic Relations agreement.  
""Certainly in the context of Australasia, there seems to be no merit whatsover in having one market for trade purposes and two distinct markets for investment,"" Matthew told Reuters in an interview.
""Australian business has had the benefit of entirely free investment environment in New Zealand and it's not possible to conceive an effective single market for trade when there's inhibitions as to where one can exploit capital,"" he said.
Brierley Investments has in the last two to three years made major investments in Australian groups.  
It has bought 28 percent of building materials group James Hardie Industries Ltd, 7.4 percent of retailer Coles Myer Ltd and 19.9 percent of publisher John Fairfax Holdings Ltd.
But this investment push, which sees the New Zealand-based Brierley now with A$1.8 billion invested in Australia and A$1.6 billion in New Zealand, has stalled this year as it came up against various rules restricting its investments.
Brierley was stopped from buying more of Fairfax by rules which force anyone holding more than 19.9 percent to make a full takeover bid or slowly increase their bid.  
Brierley would in any event be stopped from raising its stake any higher than 25 percent because of rules controlling foreign ownership in the media.
Foreigners are also stopped from buying more than 25 percent of telecommunications groups, which effectively stops Telecom Corp of New Zealand from taking a major role in Australia.
But Matthew said he was not overly hopeful the Australian government would kick its dependency on the ""regulation habit"", particularly when it had an uncooperative Senate.  
""I recognise that slender majorities tend to dampen achievement levels,"" he said.
Matthew said Australia should also drop its takeover rules and adopt those used in New Zealand which do not place the same restrictions on companies holding stakes over 19.9 percent.
Matthew, who is also Air New Zealand Ltd chairman, said he was optimistic that Australia would look at granting the airline further ""beyond rights"".
These rights allow Air New Zealand to stop over in Australia, pick up Australian customers and fly them to a third destination other than New Zealand.  
Australia's refusal to grant Air New Zealand further ""beyond rights"" has been a festering sore in diplomatic and business relations in the last two years.
Matthew said he expected the respective aviation ministers to meet again in May to discuss the issue.
""We consider it well and truly overdue,"" he said of the granting of the further rights.
Matthew also repeated comments by Brierley executive director Rod Price that Brierley had not spoken to Australian media mogul Kerry Packer about selling Brierley's Fairfax stake to Packer's Publishing and Broadcasting Ltd.  
""No. We aspire to be a long term and increasing shareholder in the Fairfax group,"" he said.
Packer has said he wants to increase his 11.8 percent stake if the government relaxes rules currently stopping television station owners from owning major newspapers at the same time.
The government is expected to ease these rules set up by the previous Labor government.
Brierley's shares closed unchanged at NZ$1.26 on Tuesday.
-- Sydney Newsroom 61-2 9373-1800
",4
"Global media group News Corp Ltd told analysts in a telephone briefing on Thursday that it still expected 20 percent profit growth for the 1996/97 year, despite a below-expectations first half profit result, analysts said.
""They did say that they're still on track for the 20 percent growth,"" one senior Sydney media analyst said after the morning teleconference briefing between company officials and U.S. and Australian analysts.  
Another senior media analyst, who also asked not to be named, said News had repeated its August 1996 forecast of 20 percent profit growth in the teleconference.
""Yes. They've got no worries about reaching that one,"" the analyst said.
Earlier on Thursday, News Corp posted a A$731 million net profit before abnormals for the six months to December 31, up 10.3 percent on the same period a year earlier.
But this was below analysts expectations of a pre-abnormals net profit for the half of A$735 million to A$775 million.
",4
"The Commonwealth Bank of Australia (CBA) announced a surprisingly strong 11 percent rise in first half profits on Wednesday as a 33 percent surge in business lending more than offset a further squeeze in home loan margins.
""Business volumes during the first half of 1996/97 were pleasing, leading to a better than expected interim result,"" CBA managing director David Murray told a news conference.
""This likely to lead to a slightly better than expected full year result,"" Murray said.  
CBA's net profit for the six months to December 31 rose to A$602 million from A$542 million in the comparable six months a year earlier.
CBA had itself been saying until now that it expected competition in its key home loan market would squeeze home loan margins and keep profits flat in the year to June 30, 1997.
Analysts too had expected a subdued profit performance, forecasting a profit of between A$535 million and A$560 million.
CBA's shares rallied sharply on the profit and on news of a interim dividend of 45 cents per share, up seven cents on the previous interim dividend.  
CBA's shares were up 47 cents at A$13.88 at 3.50 p.m. (0450 GMT), helping to drive the share market overall to a new record high. ""Obviously the market liked it. The profit was probably about A$50 million above expectations and there was a nice increase in the dividend,"" said Lance Jones dealer Hamish Dee.
CBA said the launch of its Business Asset Finance and Capital Business Card products in July and October 1996 had attracted significant new business.  
But CBA dampened optimism about its business lending boom by cutting its varible home mortgage rates by up to 0.7 of a percentage point, ensuring further margin pressure on Australia's largest home lender.
""It will narrow the margins further,"" Murray said.
CBA's group net interest margin fell to 3.71 percent in the first half of 1996/96, compared with 4.12 percent and 4.10 percent respectively in the first and second halves of 1995/96.
This is CBA's second unilateral home loan interest rate cut in less than a year. The bank cut its key variable home loan rate to 9.9 percent from 10.5 percent in May.  
That cut triggered a round of mortgage rate cuts by the other major banks and was generally seen as the catalyst to a 50 to 75 basis point cut in big bank home loan margins.
It cut its key variable rate to 7.55 percent on Wednesday.
Murray was reluctant to predict that the CBA would sustain the 11 percent profit rise through the full year because of the expected margin squeeze, saying only that 1996/97 was likely to be a little better than the previously expected flat result.
He said the latest home loan cuts had more to do with increasingly aggressive competition in the home loan market than with any pre-emption of another cut in official cash rates.  
""It's true that this move has got more to do with the structure of home loan interest rates in Australia than it has to do with our view about monetary policy,"" he said.
CBA also said its efforts to control costs and increase productivity were a factor in the the better than expected profit. CBA's cost to income ratio fell to 60.3 percent from 60.9 percent and would have been 59.5 percent if not for CBA's buy-back of 10 percent of its shares from the government.
Meanwhile the CBA confirmed that it was looking closely at securitising some of its mortgage portfolio and that it was not looking at issuing a special dividend.
",4
"Rupert Murdoch's News Corp Ltd is expected to report on Thursday a stagnant net profit for the year to June 30, held back by soaring newsprint costs and losses from its burgeoning Star TV operations, analysts said.
The median forecast in BZW's BARCEPS broker survey is for a A$1.343 billion net profit before abnormals for the year, a virtual replica of the A$1.342 billion profit posted in 1994/95.
Analysts said News may even struggle to match last year's result, particularly given its lower than expected third quarter result.  
""It's got to be a reasonably strong last quarter to match that (1994/95) figure,"" said ABN AMRO Hoare Govett media analyst John Bell.
""I doubt there'll be many surprises on the upside,"" he said.
News posted a A$281 million net profit before abnormals in the third quarter, below expectations of about A$300 million and taking profits for the first nine months of the year to A$944 million.
The result is expected around 8.30 a.m. Australian time on Thursday (2230 GMT Wednesday).  
Analysts said News' 1995/96 profits had been restrained generally by the higher paper costs, a U.K. cover price war and continued losses from its Star TV operation in Hong Kong.
""People will look at newspapers because that will reflect higher newsprint prices and the impact of the newspaper price war,"" said one Melbourne media analyst.
Margins on News' British newspapers were seen pressured in the final few months of the year by cover price discounts ahead of the Olympics.
""There was a little bit of renewed competition on the Monday cover prices pre-Olympics,"" Bell said.  
""Margins may have slipped a little bit in the last few months of the year,"" he said.
Star TV was seen pumping out another US$90 million to US$100 million of losses for the year as it establishes itself in the potentially lucrative Asian satellite television markets.
""I would expect a full year loss of US$90 million given what we've been told so far and I've seen nothing to change that,"" the Melbourne analyst said.
""I would see it somewhere in excess of of US$100 million,"" Bell said.  
Continued strong earnings from U.S. television and films are seen offsetting somewhat the newsprint and Star TV losses.
Looking ahead however, analysts are confident News' profits can start growing again in 1996/97, boosted by potentially lower newsprint prices and an earnings surge from the hit U.S. special effects movie, ""Independence Day"".
""'Independence Day' could add up to US$200 million to the bottom line,"" said Bell, who forecast net profit rising to A$1.5 billion in 1996/97.  
""The 1996/97 result will show some clear profit growth as much as anything because of paper prices and 'Independence Day',"" the Melbourne analyst said, who forecast a A$1.6 billion net profit.
News' share price was down one cent at A$6.49 at 2.00 p.m. (0400 GMT).
-- Sydney Newsroom 61-2 9373-1800
",4
"Australasian-based building products group James Hardie Industries Ltd posted weaker annual profits on Wednesday, but forecast its expanding U.S. fibre cement and gypsum units would drive a profit surge in 1997/98.
""For the first time in several years we have the production capacity to meet U.S. market demand,"" James Hardie managing director Keith Barton said.
""If current trading conditions prevail, we expect very strong growth in (U.S.) sales and earnings to continue in the year ahead,"" Barton told a briefing for analysts and reporters.
""(Group) operating profit after tax for the current year will improve significantly compared to the past year,"" he said.
James Hardie's net profit jumped to A$83 million (US$63 million) in the year to March 31 from A$32.2 million in 1995/96, but this was due largely to a A$31.7 million abnormal profit from asset sales.
Profit before abnormals fell 12.3 percent to A$51.3 million because of sharply lower Australasian buliding materials profits and this was in line with expectations.
But Barton's comments at the briefing about continuing weakness in the Australian and New Zealand building materials markets prompted some analysts to downgrade their forecasts for the 1997/98 year.
James Hardies' Australian operations, hit by a 12 percent fall in home construction, slumped to a A$800,000 pre-tax loss in 1996/97 from a A$33.8 million profit in 1995/96.
New Zealand profits fell eight percent to A$31.9 million.
Barton said competition in Australia and New Zealand remained intense and would continue to slice away at sales, margins and profits in 1997/98.
""The modest recovery in Australian housing construction will not be sufficient to offset the impact of growing competition on our Australian fibre cement business,"" Barton said.
Increased imports would pressure margins and volumes in New Zealand, he said.
Barton also told the analysts briefing that new competition coming on stream in the United States and James Hardie's drive to increase market share there would pressure prices down.
""We may have to discount ... be more aggressive against engineered wood products and against PVC,"" he said.
""But that doesn't necessarily mean a reduction in margins,"" he said, adding sales volumes would continue to grow and economies of scale were still to be obtained, Barton said.
Some analysts said Barton's comments about Australasian weakness and U.S. price pressure would force them to downgrade their 1997/98 pre-abnormal profit forecasts to about A$80 million to A$85 million from A$90 million to A$90 million before the results.
ABN AMRO Hoare Govett building materials analyst Fabian Babich said he would keep his 1997/98 forecast at A$80 million.
Hardie kept its final dividend for 1996/97 unchanged at 6.5 cents per share, taking full year dividends to an unchanged 13.0 cents per share.
Hardie is about 28 percent owned by Brierley Investments Ltd.
Hardie's shares closed down 15 cents at A$4.05.
(A$1 = US$0.76)
",4
"Brokers Were Stockbroking and ABN AMRO Hoare Govett had placed all of The Broken Hill Pty Co Ltd's 616.6 million Foster's Brewing Group Ltd shares with institutions and private clients by early on Friday, Were said.
Retail investors bought about A$150 million of the A$1.535 billion package of shares, with about 55 percent of the remainder being sold to overseas institutional investors and about 45 percent sold to local institutions, Were Stockbroking managing director John Paterson said.  
Paterson pointed to a A$2.5 billion-equivalent placement of three percent of The British Petroleum Co Plc shares in May as possibly the largest such placement this year.
The Kuwait Investment Office sold three percent or 170 million of BP's shares through Goldman Sachs in mid-May this year for about 7.0 stg per share.
Paterson said the two brokers began placing the stock at about 3.30 p.m. (0530 GMT) on Thursday after Foster's announced the buy-back of 13.0 percent of its capital from Asahi Breweries Ltd and BHP's placement of 616.6 million Foster's shares. The buy-back and placement were at A$2.49 per share.  
Were and ABN AMRO's Australian offices worked until very late on Thursday night before handing it over to their New York and European offices.
Paterson said the buy-back was completed at about 9.00 a.m. (2330 GMT).
""We had strong institutional support in Australia, similarly in London and Europe, particularly London, and in the United States,"" Paterson said.
Private client support from Were's New Zealand and Australian clients was also strong, he said.  
""The other satisfying fact is you tend to assume after one of these deals that you've exhausted the demand in the market place, but with the stock trading up at A$2.55 against the placement price of A$2.49, it says there's still quite a lot of untapped demand out there,"" he said.
Foster's shares were down five cents at A$2.55 at 1.40 p.m. (0340 GMT) on 675 million shares put through the market.
Foster's said on Thursday it expected foreign investors to hold about a third of its shares after the reconstruction.  
Foster's said BHP had agreed to limit individual investors to parcels of no more than five percent of BHP's Foster's shares.
Paterson said the successful completion of the deal was satisfying for Were and ABN AMRO Hoare Govett and they were now looking forward to a rest.
""I won't mind having a three day weekend,"" he said.
Monday is the Queen's Birthday holiday in Australia.
-- Sydney Newsroom 61-2 9373-1800
",4
"The Australian government ordered a Canadian television group to reduce its stake in an Australian television network on Friday, reflecting a strengthening in Canberra's opposition to more foreign ownership of local media.
Treasurer Peter Costello ruled that Canwest Global Communications Corp, controlled by Canadian Izzy Asper, must cut its stake in the Ten television network back to its previous 57.5 percent level from its current 76 percent.
Canwest raised its stake earlier this year through associated local companies, but a government authority said the increased ownership broke foreign control rules.
Costello's ruling came as Prime Minister John Howard, in his clearest statement yet, said he did not want foreign investment in the Australian media to go any higher.
""In the media for example, which is in the news at the moment, we've made it clear we don't want foreign investment to go any higher,"" Howard said in a radio interview after meetings with major media owners in recent weeks.
The government is reviewing cross-media ownership rules set by the former Labor government which stop television station proprietors from owning a major newspaper in the same city or vice versa.
The government is expected to drop these cross-media ownership rules, allowing local television and magazine mogul Kerry Packer to launch a takeover bid for newspaper publisher John Fairfax Holdings Ltd.
Howard also said a proposal by Rupert Murdoch's News Corp Ltd to increase its Australian television holdings had collapsed because Murdoch would not give up some of his newspapers to leave his total media holdings unchanged.
But Howard's determination to block foreign investors like Izzy Asper has unleashed a fierce debate about whether he was favouring Packer in his review of media laws.
Another of Australia's major media owners, Seven Network Ltd chairman Kerry Stokes, accused Howard of having done a ""disgraceful"" deal to deliver Fairfax to Packer.
Some commentators have said Packer's support for Howard ahead of last year's election has been a factor in Howard's opposition to the cross-media rules, which he says are outdated.
""For the Prime Minister to play king-maker revisits the darkest days of the Labor Party's deal-making with its mates,"" Stokes told Reuters.
Labor Prime Minister Bob Hawke was seen as close to Packer during the 1980s, before his successor Paul Keating fell out with Packer ahead of his 1996 election rout.
""He (Howard) has made a commitment...done a deal with Packer. There's no other reason for the change,"" Stokes said, commenting on an Australian Financial Review article which said Howard planned to arrange for Murdoch to support a Packer takeover of Fairfax.
A clearly stung Howard rejected Stokes' claim.
""I reject completely any suggestion of a deal as a silly, erroneous and quite dishonourable claim,"" Howard told a news conference in Sydney.
""I'm on the record over a period of 10 years as being opposed to the cross-media restrictions,"" Howard said, pointing out his views preceded Packer's support for him in 1996.
",4
"Local billionaire Kerry Packer faces an uphill battle to overcome political opposition and a high asking price if he wants to take over Australia's oldest publisher, John Fairfax Holdings Ltd.
Speculation has simmered for months that Australia's biggest television station owner will launch a takeover bid for Fairfax as soon as the government eased cross-media rules set up by the former Labor government.
Comments by Prime Minister John Howard last week that Fairfax needed an owner like Packer fanned that speculation into talk of an imminent easing of the rules and an inevitably successful takeover bid.
Analysts said on Tuesday however that a successful Packer bid for Fairfax, which publishes three of Australia's most profitable daily newspapers, was not such a sure thing.
Growing political opposition from within Howard's conservative Liberal-National coalition and a hostile Senate have made any Howard plan look more fragile.
""There's a few more hurdles to overcome yet,"" said ABN AMRO Hoare Govett senior media analyst Vince Pepe.
""Getting (Prime Minister John) Howard to introduce legislation is one thing, but getting it through parliament while keeping his backbench appeased is another thing,"" Pepe said.
""The amount of political fallout that's beginning might see him wondering whether it is such a clever thing after all.""
Howard's cabinet was considering on Tuesday changes to the cross-media rules that stop television station owners like Packer from buying a major newspaper group like Fairfax.
Howard has already said the rules are outdated and his government is widely expected to drop them, allowing Packer to use his current 15 percent stake as a beachhead for a full scrip-based takeover bid.
But Howard's position has come under increasing fire in recent days after Seven Network Ltd Chairman Kerry Stokes accused Howard of having done what he called a disgraceful deal with Packer that would concetrate media ownership into the hands of just two men.
A successful Packer takeover of Fairfax would mean Australia's major newspapers would be divided between Packer and Rupert Murdoch's News Corp Ltd.
A controversial independent senator, Mal Colston, threw up another roadblock in front of any media law changes earlier on Tuesday, threatening to vote against the government.
The fine balance in the Senate means if Colston votes against the government, the balance of power transfers to the left-leaning Democrat and Green senators, who have said they oppose any further concentration of media ownership.
Analysts also said Packer may baulk at having to pay the A$3.0 billion (US$2.35 billion) needed to convince some large entrenched shareholders to bail out Fairfax.
Packer may also struggle to convince his fellow shareholders in the bid vehicle, Publishing and Broadcasting Ltd, to swallow the earnings dilution such a bid would create.
""Despite Packer's apparent obsession for Fairfax, he's not going to pay a stupid price for it and some people in the market are expecting a stupid price,"" said another analyst.
""I'd be a pretty disappointed PBL shareholder if he was prepared to pay more than A$3.40 (a share) for it,"" the analyst said, adding that a A$3.40 price would be earnings dilutive given Fairfax's forecast earnings. Fairfax's shares closed down two cents at A$3.23 on Tuesday.
(A$ = US$0.78)
",4
"The federal government will release the Wallis Inquiry's report into Australia's financial system on Wednesday at midday (0200 GMT) and is expected to respond to some parts of the report.
The five-person inquiry, set up in June last year and chaired by businessman Stan Wallis, canvassed various options for reform in its 415 page discussion paper released in late November.
The Inquiry's report, presented to the government last month, will make recommendations about the following options;
MERGERS
* Whether the government should abandon the current ""Six Pillars"" policy stopping mergers between the four major banks and the two major life insurance and superannuation groups. These six pillars are Westpac Banking Corp, National Australia Bank Ltd, Commonwealth Bank of Australia, Australia and New Zealand Banking Group Ltd, National Mutual Holdings Ltd and Australian Mutual Provident (AMP) Society.
* Whether the anti-monopolies body, the Australian Competition and Consumer Commission (ACCC), and the Treasurer should both continue to have the power to reject or approve a bank merger. This system is known as ""dual assessment.""
Wallis stated his preference for treating the financial sector in the same way as any other on competition policy, implying the ""Six Pillars"" policy and ""dual assessment"" policies were unnecessary.
FOREIGN INVESTMENT
* Whether the current ban on foreign takeovers of the big four banks should be scrapped.
OWNERSHIP OF BANKS
* Whether to scrap the current 10 percent limit on equity ownership by a single individual or group in a bank.
PRUDENTIAL REGULATION
* Whether to combine the functions of the four regulatory bodies currently operating into a single body that provides prudential regulation and consumer protection regulation for all financial institutions. This is the ""mega-regulator"" option.
Currently the Reserve Bank of Australia (RBA) regulates banks, the Insurance and Superannuation Commission (ISC) regulates life and pension groups, the Australian Financial Institutions Commission (AFIC) regulates building societies and credit unions and the Australian Securities Commission (ASC) regulates companies generally and markets in particular.
* Whether to have a single national prudential regulator of deposit taking institutions (DTIs) including banks and credit unions, and a separate regulator for insurance companies and superannuation funds, or,
* a single prudential regulator covering both DTIs, insurance companies and pension groups, but not consumer protection regulation, or,
* to keep the current four-pronged system.
DEPOSIT INSURANCE
* Whether banks, other DTI's and the government should make more explicit to consumers that their deposits are in fact not government guaranteed, and,
* Whether a U.S.-style compulsory deposit insurance scheme should be set up to cope with depositer claims in the event a bank collapses.
BANK PAYMENTS SYSTEM
* Whether to open up access to the payments and clearing systems to non-banks, allowing them to have an account with the Reserve Bank, issue cheques and operate digi-cash, automatic teller machine and EFTPOS (Electronic Funds Transfer at Point of Sale) systems.
-- Sydney Newsroom 61-2 9373-1800
",4
"A successful bid by local billionaire Kerry Packer for publisher John Fairfax Holdings Ltd is not the sure thing many market players and media commentators believe, analysts said on Tuesday.
Before Packer can launch a bid for Fairfax, the government would have to first decide to drop the current cross-media rules and then pass any legislation through a hostile senate.  
Packer would then have to offer a takeover premium on top of an already high Fairfax share price that was both tempting to existing shareholders and not too dilutive for Packer's fellow Publishing and Broadcasting Ltd shareholders.
""There's a few more hurdles to overcome yet,"" said ABN AMRO Hoare Govett senior media analyst Vince Pepe.
""Getting (Prime Minister John) Howard to introduce legislation is one thing, but getting it through parliament while keeping his backbench appeased is another thing,"" Pepe said.  
""The amount of political fallout that's beginning might see him wondering whether it is such a clever thing after all,"" he said.
Howard's cabinet was considering on Tuesday changes to the cross media rules set by the former Labor government that stop television station owners like Packer from buying a major newspaper group like Fairfax.
Howard has already said the rules are outdated and his government is widely expected to drop them, allowing Packer to use his current 15 percent stake as a beachhead for a full scrip-based takeover bid.  
But Howard's position has come under increasing fire in recent days after Seven Network Ltd Chairman Kerry Stokes accused Howard of having done what he called a disgraceful deal with Packer and of playing king-maker.
Former conservative Prime Minister Malcolm Fraser wrote to Howard on Monday, calling on him not to lessen media diversity and Fairfax journalists went on strike on Tuesday morning to protest any government move to drop cross-media rules.
A successful Packer takeover of Fairfax would mean Australia's major newspapers would be divided between Packer and Rupert Murdoch's News Corp Ltd.  
Government back-benchers have also written to Howard expressing their concern about the way changes are being considered.
Controversial independent senator Mal Colston threw up another roadblock in front of any media law changes earlier on Tuesday, threatening to vote against the government.
The fine balance in the senate means if Colston votes against the government, the balance of power transfers to the left-leaning Democrat and Green senators, who have said they oppose any further concentration of media ownership.  
""All the arrows are pointing in the right direction (for a takeover), but I wouldn't say it's a fait accompli,"" said a senior media analyst.
""It's (cross-media reform) got to get through the senate and the price has got to be reasonable,"" the analyst said.
Packer and PBL, which would be the vehicle for the scrip-based bid that Packer foreshadowed last year, would have to pay the equivalent of at least A$3.50 for each Fairfax share, analysts said. Fairfax's shares were unchanged at A$3.25 at 1.30 p.m. (0330 GMT).  
That price may prove too painful for Packer and his fellow shareholders, who would be concerned about earnings dilution and would have to approve any deal, analysts said.
""Despite Packer's apparent obsession for Fairfax, he's not going to pay a stupid price for it and some people in the market are expecting a stupid price,"" said a Sydney media analyst.
""I'd be a pretty disappointed PBL shareholder if he was prepared to pay more than A$3.40 for it,"" the analyst said, adding that a A$3.40 price would be earnings dilutive given Fairfax's forecast earnings.
""At A$3.50 to A$3.60 it becomes pretty savagely dilutive.""  
Analysts said the final roadblock to a successful Packer bid would be dislodging major Fairfax shareholders Brierley Investments Ltd, with about 20 percent, and Bankers Trust Australia with about 13 percent.
Brierley in particular has said often and loudly that it is a long term shareholder with ambitions of its own to take a higher stake and has in recent years held onto its investments for long periods. Packer may also have competition.  
The Australian newspaper reported earlier on Tuesday that British publisher Pearson Plc was part of consortium called Australian Independent Newspapers (AIN) that was considering bidding for all or part of Fairfax.
-- Sydney Newsroom 61-2 9373-1800
",4
"A top Indonesian mining official said on Tuesday that the recent battle over the huge Busang gold deposit has caused some uncertainty among foreign investors in Indonesia.
""We realize...that successes in the mineral sector were overshadowed by the Busang controversy which caused some uncertainty within the international mining community and questions (about) the integrity of Indonesia's mining policy, particularly with regard to the security of foreign investment,"" Rozik B. Soetjipto, head of mining industry development at Indonesia's Directorate General of Mines, told a mining conference in Toronto.
The Busang deposit was the subject of an intense bidding war with several mining companies trying to woo the Indonesian government to take control of possibly the biggest gold find of the century. Busang contains at least 71 million ounces of gold, valued at about US$25 billion.
He said the Indonesian government was working to improve the contract of work (COW) system, but Soetjipto added foreign companies also have to do a better job of understanding the country's mining policy.
""If you are looking to invest or explore in Indonesia, then you have to be sure that you have a contract of work. As long as you have the contract, you are secure to do the exploration and investment,"" he told reporters after delivering a speech to the Prospectors & Developers Association of Canada annual convention.
Although finding a local partner is not necessary to do business in Indonesia, Soetjipto said: ""In some cases it might be better to have a local partner to know how to do business in Indonesia because it's a different culture (and) that has created problems.""
Toronto-based Barrick Gold Corp initially dominated the negotiations for control of Busang, which was discovered by Calgary-based prospector and Bre-X Minerals Ltd.
But Barrick's inside track ended when the government of President Suharto brought in Indonesian businessman Muhammad ""Bob"" Hasan in January.
Hasan subsequently brokered a deal that gave New Orleans-based Freeport McMoRan Copper & Gold Inc 15 percent of Busang and the right to mine the deposit. The arrangement left Bre-X with 45 percent and the rest to the Indonesian government and to two Indonesian companies.
Bre-X's shares have been under pressure amid investor confusion over the company's stake in Busang. Bre-X has said the company did not originally own 90 percent of the discovery and investors were mistaken to believe otherwise.
Bre-X and its partners are waiting for the Indonesian government to issue a contract of work before mine construction can begin. Bre-X has said a contract of work is expected during March.
Bre-X's stock fell 0.25 to close at 17.75 on 716,000 shares on the Toronto Stock Exchange on Tuesday.
((Reuters Toronto Bureau (416) 941-8100))
",6
"Bre-X Minerals Ltd. chief geologist Michael de Guzman, who co-discovered the richest gold find this century, may have committed suicide when he fell out of a helicopter on Wednesday, a company spokesman said on Thursday.
Rescue crews were still searching the dense Borneo rain forest for de Guzman's body after he plunged 800 feet from a helicopter en route to the Busang site in Indonesia's East Kalamantan province.
Bre-X spokesman Steve McAnulty said company officials obtained a copy of an apparent suicide note found by Indonesian police among de Guzman's belongings.
""Mike did leave a note. Basically the upshot of it is Mike had just learned that he had hepatitis B. The prognosis was not good due to the fact that he had suffered many bouts of malaria which had weakened his system over the years,"" McAnulty said in a telephone interview.
""We understand the prognosis was not good for recovery and apparently there was a lot of pain involved and he decided he did not want to go through that,"" McAnulty said.
He added that foul play was not suspected and Indonesian police were treating his death as suicide.
The 40-year-old Filipino geologist was a key member of the team that discovered Busang a few years ago.
Calgary, Alberta-based Bre-X has agreed to develop the Busang site, valued at $25 billion, with U.S.-based Freeport-McMoRan Copper and Gold Inc. and Indonesian partners.
De Guzman, a 20-year mining industry veteran, was also credited with co-discovering the large Dizon copper-gold deposit in the Phillipines.
John Felderhof, Bre-X's senior vice-president of exploration, was traveling to Indonesia to replace de Guzman at scheduled meetings with Freeport-McMoRan.
The incident was the latest tragedy involving Canadian mining companies in far-flung corners of the world.
In October 1995, nine employees of Saskatoon, Saskatchewan-based Cameco Corp. were killed in a helicopter crash in the former Soviet republic of Kyrgyzstan.
The Kyrgyzstan Air helicopter, chartered by a Cameco unit, was en route from the Kumtor gold mine when it went down.
The families of the nine Canadians killed in the crash have filed a C$20.7 million ($15.1 million) lawsuit alleging Cameco and other defendants were negligent.
In September 1996, Falconbridge Ltd. Chief Executive Franklin Pickard died of a heart attack when visiting the Toronto-based company's copper site high in Chile's Andes Mountains.
Bre-X's stock rose C20 cents to C$17.45 on the Toronto Stock Echange on Thursday.
",6
"A monster shakeup of Canada's biggest city, Toronto, has sparked a citizens revolt against Ontario's ruling Conservatives and raised eyebrows among those who do business in the country's financial capital.
This clean, peaceful city -- sometimes dubbed ""New York run by the Swiss"" -- recently has become a battleground in the so-called ""Common Sense Revolution"" initiated by Ontario's Conservative Premier Mike Harris.
Promising leaner, cheaper government, Harris wants to merge Toronto and six neighboring municipalities into a single ""megacity"" of 2.4 million people. The new city would hold about 8 percent of Canada's 30 million people and dwarf all but three of Canada's ten provinces.
Harris also plans a fundamental shift in how public services -- everything from education to welfare -- are delivered and paid for.
Opponents fear the municipal reform blitz will drive up taxes and lead to the kind of urban decay witnessed in many major U.S. cities just across the border.
The threat of such wrenching change being rammed through without a binding plebiscite has outraged citizens and prompted accusations of tyranny and fascism.
""Government is not elected for the politicians. It is elected by the people for the people,"" Toronto mayor Barbara Hall told a crowd after residents in the seven affected areas voted three to one against a merger in a referendum this week.
The vote was not binding on Ontario's government, which has vowed to press ahead with its plan.
The referendum capped a raucus campaign which saw an Ontario cabinet minister likened to Adolf Hitler, bomb threats against a polling firm, and thousands of protesters marching in the streets in a re-enactment of a civic rebellion in 1837.
Harris has held firm. ""I don't think we can withdraw the need for change,"" he said this week, adding that there may be amendments when the legislation is introduced this spring.
The ""megacity"" revolt has grabbed headlines across the country and overseas, even prompting some foreign consulates to keep a wary eye on the political wrangling.
""There is some interest, but it's purely because it has appeared in the (British) papers,"" said Terry Curran, the British Consul in Toronto.
Meanwhile, high-profile Canadian business leaders, politicians and artists have joined to oppose the merger plan.
They include film director Norman Jewison, Molson Cos. Ltd. CEO Norman Seagram, and author Margaret Atwood who compared the megacity's architects to the Three Stooges.
The ""No"" side captured 75 percent of the votes in the referendum, but the process was flawed and turnout was low.
Under draft legislation, known as Bill 103, the seven city halls and 106 politicians that now govern the Greater Toronto Area will shrink to one elected mayor and 44 councillors.
The government also plans to overhaul property taxes, eliminate more than half of the province's school boards, seize control of education funding and download a bigger share of social program costs onto the municipalities.
Harris has said the reforms are revenue neutral, but critics say municipalities may be forced to raise taxes.
They fear welfare rolls could soar and one of the hardest hit communities would be Toronto, which has a heavier welfare caseload and nearly half of the province's social housing.
""You're doing something that is very volatile and on a tax base which has very little flexibility,"" said George Fierheller, president of Toronto's Board of Trade.
Over 75 percent of the board's members favor reducing the size of government through a merger But nearly half worry about dumping such heavy responsibilities onto municipalities.
""As a Torontonian and a businessman responsible for a large company, I'm wary of abrupt change without making sure you've thought it through,"" said Peter Godsoe, chairman of Canada's fourth-largest bank, Bank of Nova Scotia.
The influential debt rating agency, Moody's Investors Service, has warned ""the very nature and scale of the reforms...create new challenges that could affect the credit quality of some municipalities.""
The downloading trend has been a feature of government at all levels in Canada as they struggle with budget deficits.
Canada's ruling Liberal Party in Ottawa has dumped responsibility for public services onto the provinces in recent federal budgets. Now the cash-strapped provinces are the doing the same to municipalities.
The autonomy of municipalities is severely restricted. They have the power to tax and legislate, but their powers are drawn from provincial law which can be changed by a majority vote in the legislature.
Ontario is in a tougher bind than most. Faced with a huge C$10 billion deficit when they came to power in 1995, the Conservatives slashed spending and cut the deficit to C$7.7 billion in 1996/97, while easing some taxes.
The Harris revolution has kept the government high in opinion polls, but public support has slipped recently, with backing for the Conservatives down to 37 percent in Metro Toronto, compared to 41 percent for the opposition Liberals.
""My sense is they cannot ignore the referendum results,"" said University of Toronto political scientist Graham White. ""Now that doesn't mean they will abandon the bill or even change it in a substantive way. There is not a lot of room for tinkering,"" White said.
",6
"The big U.S. mining company Freeport-McMoRan Copper & Gold Inc. pulled out of the now worthless Busang gold project on Monday as Canada's mining community reeled from the biggest fraud in mining history.
The Busang discovery  -- touted by Calgary, Alberta-based Bre-X Minerals Ltd. as the richest find of the century -- was falsified on a scale ""without precedent in the history of mining,"" according to a report issued late on Sunday by consultant Strathcona Mineral Services Ltd.
New Orleans-based Freeport said the report confirmed its own poor test results from the site.
""Consequently, (Freeport) will notify Bre-X that it is withdrawing from the Busang project pursuant to the terms of its contractual agreement,"" the company said in a statement.
For his part, Bre-X Chief Executive David Walsh vowed investigators would ""get to the bottom"" of the scandal.
Strathcona said it found evidence of tampering with Bre-X's core samples and that Strathcona's own tests discovered only trace amounts of gold at the Busang site where Bre-X claimed to have found 71 million ounces of gold.
The report said a gold deposit worth mining was unlikely to be found at the site.
""We are very disappointed that the apparent opportunity for (Freeport) to develop the Busang property has been eliminated by (our) findings ... as now confirmed by the Strathcona audit report,"" said Freeport Chief Executive Jim Bob Moffett.
In Jakarta, Nusamba Group -- an Indonesian company linked to President Suharto -- said it was withdrawing from the Busang project. Analysts said the scandal embarrassed the Indonesian government in the midst of an election campaign.
Bre-X has hired accounting firm Price Waterhouse, Forensic Investigative Associates and other advisers to find out how the data could have been falsified.
""Investigators will get to the bottom of this,"" Walsh told reporters before entering the company's headquarters in Calgary on Monday. He had no further comment.
The Royal Canadian Mounted Police (RCMP) said investigators from its commercial crime unit are studying the Strathcona report.
""Bre-X has given us a copy of the report and our investigators are reviewing that (report),"" RCMP spokeswoman Deleen Schoff said in a telephone interview.
""I can't speculate on what they're going to do after they read the report,"" Schoff said.
In a separate statement, Bre-X's chief of exploration, John Felderhof, said he was shocked by the Strathcona report.
""I know that I was not involved in a fraud. I also find it very hard to believe that anyone on my staff was involved in a fraud,"" Felderhof said in a statement faxed from the Cayman Islands late on Sunday.
Rumors about Busang began to circulate in March when Michael de Guzman, Bre-X's chief geologist at the site, allegedly jumped to his death from a helicopter on March 19 while en route to a meeting with Freeport officials in Indonesia.
On March 26, Freeport said that its preliminary tests found ""insignificant"" amounts of gold.
After the Freeport announcement, Bre-X immediately hired Strathcona to review its Busang project.
The announcements sparked panic selling of Bre-X shares, wiping almost C$3 billion ($2.1 billion) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around C$15 ($11).
Freeport and Bre-X agreed to develop the Busang site in January after an intense bidding war by several big mining companies for control of the project.
The Bre-X fiasco has tarnished Canada's mining reputation at home and abroad. But Canadian Prime Minister Jean Chretien said it should not be judged by the actions of one company.
""There might have been a bad situation in the case of Bre-X ... but the Canadian mining sector is considered the most capable and most competent in the world,"" Chretien said on Monday while campaigning during Canada's federal election.
Bre-X's stock was halted on the Toronto Stock Exchange on Monday, but shares in other small Canadian miners tumbled as the Bre-X scandal reverberated through the mining community.
""I would say this year is largely a writeoff in terms of an overall junior resource bull market,"" said John Kaiser, editor of the Kaiser Bottom-Fishing Report, a mining newsletter.
Meanwhile, the mystery of what happened remained.
The reports of a huge gold find came from samples submitted by Felderhof and his team of geologists, including de Guzman. The last estimate of 71 million ounces of gold was calculated by assay firm Kilborn SNC Lavalin, which has already said it was not responsible for sampling.
""I personally still believe that there are significant amounts of gold at Busang,"" Felderhof said in his statement.
Disgruntled shareholders have launched at least eight class-action lawsuits against Bre-X and the Ontario Securities Commission (OSC) said on Monday it would continue probing Bre-X for possible violations of trading and disclosure laws.
",6
"The saga of Bre-X Minerals Ltd. and its rich Indonesian gold discovery took another twist on Friday as doubts about the Busang deposit and the mysterious death of its chief geologist pushed investors to dump the stock.
Shares in the Calgary, Alberta-based prospector were initially halted on the Toronto Stock Exchange after an Indonesian newspaper said a review by Busang partner Freeport-McMoRan Copper & Gold Inc. ) showed the deposit was smaller than Bre-X's estimate of 71 million ounces.
New Orleans-based Freeport said on Friday its due diligence of the site was not finished. But that failed to appease skittish investors when the stock resumed trading.
Bre-X shares sank to a 52-week low of C$14.25 in frenzied afternoon trading. It closed down C$2.25 at C$15.20 on 9 million shares, the most active trader in Toronto.
On Nasdaq, Bre-X fell $1.625 to $11 on 1.6 million shares after earlier hitting a low of $10.25.
Freeport shares fell $1 to $30.375 on the New York Stock Exchange.
""I've concluded the only person who could ever make a movie out of this is Alfred Hitchcock. It's become so bizarre that people have lost any tolerance for staying in,"" Goepel Shields analyst Rick Cohen said in a telephone interview.
Adding to the uncertainty was the death of Bre-X chief geologist Michael de Guzman, a co-discoverer of the Busang gold deposit.
De Guzman, who fell out of a helicopter on Wednesday while flying to the gold site in Indonesia's East Kalamantan province, was ill and may have committed suicide, Indonesian officials said. De Guzman's body has not been found.
""Obviously, one of the reasons the stock has been under a lot of pressure is because of this mystery of the man's death. He was their chief on-site exploration guy...which cast some doubt on the stock,"" said PaineWebber analyst Marc Cohen.
Analysts predicted rumors would swirl around Busang until Freeport issued a statement after completing its review.
Citing unnamed sources, Indonesia's Harian Ekonomi Neraca newspaper reported on Friday that Freeport's test results did not match Bre-X's estimates.
""It is possible that the deposit is not as big as it has been mentioned before. It could be that it is not viable to mine this deposit,"" the newspaper said, quoting the source.
But a Freeport official said on Friday the company would not comment until its review was finished.
This week's intrigue added to an already suspenseful tale surrounding the fabulous gold deposit deep in the rain forest of Indonesia's Borneo island.
Several months ago, the Busang deposit was the subject of a bidding war in which several mining companies wooed the Indonesian government for control of what has been called the biggest gold find of the century.
Toronto-based Barrick Gold Corp., armed with a high-powered advisory board led by former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, initially dominated the negotiations for control of Busang.
But Barrick's inside track ended when the government of President Suharto brought in Indonesian businessman Muhammad ""Bob"" Hasan in January.
Hasan brokered a deal that gave Freeport, a veteran mining player in Indonesia, 15 percent of Busang and the right to mine the project.
The arrangement left Bre-X with 45 percent, down from an original 90 percent, and the rest to the Indonesian government and two Indonesian companies.
",6
"Canadian police said on Thursday they expected more charges in a widening sex abuse scandal involving young boys at Maple Leaf Gardens, the fabled home of the Toronto Maple Leafs hockey club.
Police have identified at least a dozen more victims of a former Gardens employee who was charged this week with alleged sexual abuse of a teen-age boy almost two decades ago.
Gordon Stuckless, a former backstage helper for concerts and hockey games, will appear in a Toronto court on Tuesday to face charges of indecent assault and gross indecency.
Stuckless, 47, is alleged to have lured young boys to the Gardens with promises of free tickets, hockey sticks and autographs. Police said the abuse took place in back rooms of the arena.
""He would sneak them in and let them watch and get autographs. Things that little boys would love,"" Toronto police sergeant Marilyn McCann said in a telephone interview.
McCann said police have identified 12 more victims who have alleged abuse at the hands of Stuckless. She said more charges were expected by next week.
Martin Kruze, 34, has alleged that the sexual abuse started in 1975 when he was 13 and continued for seven years.
""Maple Leaf Gardens was a sex haven of abused boys, tons of them. They would lay down blankets and they would get us naked and have group sex,"" Kruze said this week.
Kruze filed a lawsuit against Maple Leaf Gardens in 1993 that was settled out of court for about C$60,000. Neither Kruze nor Gardens' management informed police of the alleged sexual abuse. However, Kruze said a decade of counseling gave him the courage to step forward.
The abuse allegations have grabbed headlines across the country, mainly because it involves the cherished home of one of Canada's oldest hockey clubs. It is also the latest sex scandal to hit Canada's national sport this year.
Graham James -- one of Canada's most successful junior hockey coaches -- pleaded guilty in January to sexually assaulting two former players in the 1980s and was sentenced to 3-1/2 years in prison.
James, a former coach in the Western Hockey League (WHA), admitted to over 300 instances of sexual assault over six years against Boston Bruins player Sheldon Kennedy, who was 14 when the assaults began in 1984.
The other player was assaulted more than 50 times over a period of 1-1/2 years.
Since the James case, a minor league hockey coach in Calgary has been charged with sexually assaulting a player at a summer camp and a community club hockey coach in Winnipeg has been suspended after a former player alleged sexual abuse.
",6
"David Walsh, the maverick Canadian bankrupt turned gold prospector now embroiled in a worldwide mining controversy, always dreamed of striking it rich.
Walsh, 51, has made millions of dollars and appeared on the covers of national magazines since his exploration company, Bre-X Minerals Ltd., made its fabulous Busang gold discovery in Indonesia.
""I'm nuts. I'm looking for the bucket of gold at the end of the rainbow,"" the beefy stock promoter who lives in the Bahamas, told a Canadian magazine recently.
The bubble burst on Wednesday when Calgary, Alberta-based Bre-X admitted that the find in Indonesia once thought to be the richest this century, might not even be economically viable.
""I would really be shocked if we find out that there is any funny business,"" said Jim Bentein, a veteran Calgary journalist who has covered Walsh since Bre-X's early days as a penny stock on the Alberta Stock Exchange.
He described Walsh as ""a sophisticated trucker,"" who is as comfortable having a beer and a smoke in a bar as he is in financial circles.
""Don't misunderstand me. This is a sharpy. This is a guy who has been a broker and tried to run up penny stocks before. We're not talking about a babe in the woods here, but he strikes me as a straight shooter,"" Bentein said in a telephone interview.
As regulators sifted through the tangled Busang saga and jittery shareholders dumped the stock, Walsh defended the company's claims on Thursday and urged shareholders to ride out the storm.
""Like all the other trials and tribulations that we've gone through since discovering (Busang)...we'll be exonerated and the property will stand as we've indicated,"" he told reporters outside the company's head office in a toney section of Calgary.
Walsh rose from rags to riches in less than four years.
Raised in a wealthy suburb of Montreal, Walsh followed his father and grandfather into the stock business.
He joined a small trust company shortly after graduating from high school. In 1976, he moved to brokerage Midland Doherty Ltd. (now Midland Walwyn Capital Inc.) and rose to vice-president in its institutional equity sales department.
In the 1980s, Midland moved Walsh to Calgary, but he left the company shortly afterward to set up his own company, Bresea Resources Ltd.
After dabbling unsuccessfully in oil and gas, Walsh created Bre-X Minerals Ltd in 1989 and ventured into mining. But by 1993, his exploration efforts had dried up.
He and his wife declared bankruptcy in 1993 after they had accumulated almost C$60,000 ($43,800) in debt on 15 credit cards.
""We had these claims which were worthless, and no money,"" Walsh told Reuters in an interview earlier this year.
Almost broke, he scraped together C$10,000 ($7,300) to start exploring in Indonesia, pursuading friends to invest C$200,000 ($146,000) for a stake in the area now known as the central Busang in Indonesia's East Kalamantan province.
Walsh hit the jackpot with Busang and Bre-X quickly became the darling of the world's mining community. ""There's nothing like success. Our other explorations have been zero. I had never imagined it would be this big,"" he said.
Walsh, his wife and other company officials added more than C$37 million ($27 million) to their bank accounts after they sold Bre-X shares at prices ranging from C$24.40 to C$28.40 between August and October.
But the sales were controversial because they occurred shortly after Bre-X learned that its preliminary license had been canceled by the Indonesian government, a development Bre-X did not reveal publicly until last October.
Last year, Bre-X was the target of an intense bidding war as several heavyweight mining firms battled for control of possibly the world's richest gold discovery.
Toronto-based Barrick Gold Corp., armed with an advisory board that included former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, initially dominated the negotiations.
Barrick's inside track ended when the government of President Suharto brought in Indonesian businessman Muhammad ""Bob"" Hasan in January.
Hasan swiftly brokered a deal that gave New Orleans-based Freeport McMoRan Copper & Gold Inc. 15 percent of Busang and the right to mine the project.
The arrangement left Bre-X with 45 percent, down from an original 90 percent stake, and the rest to the Indonesian government and two Indonesian companies.
Investors complained that Bre-X received nothing for surrendering 45 percent of Busang, but Walsh said Bre-X never owned 90 percent and shareholders were wrong to believe so.
Shortly afterward, Bre-X's stock started a downward spiral as rumors swirled around the company and its grip on the discovery.
The stock sank to an all-time low last week after an Indonesian newspaper report said Freeport had doubts about the size and viability of the deposit.
The rumors were fanned to fever pitch by the death, billed as a suicide, of Bre-X chief geologist Michael de Guzman, who fell from a helicopter en route to Busang last Wednesday.
Meanwhile, Walsh hinted on Thursday that the chaos engulfing his company may have some other explanation.
""I personally believe there has been a hidden agenda coming up for about 10 months now and I guess we'll just have to play this out,"" he said.
",6
"Canadian gold producer Barrick Gold Corp., the world's second largest gold producer, said on Monday that higher production in this year's second half would boost earnings after a weak first quarter.
Toronto-based Barrick reported net income fell to $55 million or $0.15 a share in the first quarter from year earlier $72 million or $0.20 a share.
Gold production from the company's 10 producing mines in Canada, the United States and Chile fell by 88,147 ounces to 712,368 ounces in the first quarter of 1997.
""Production will be substantially higher in the second half, allowing us to achieve our production target for the year of over 3 million ounces,"" President John Carrington said in statement. ""With this level of production, we expect 1997 earnings to be compatible to 1996 and cash flow to rise to about a half-billion dollars.""
Barrick's gold production was 3,148,801 ounces last year. Its 1996 earnings were $218 million or $0.60 a share, including writedowns.
Midland Walwyn analyst Michael Jalonen said he expected Barrick to earn about $0.70 a share in 1997, in line with its 1996 results when writedowns were excluded.
""Everything looks good so far. There's no surprise (in the first-quarter results). I think everybody expected what they got,"" Jalonen told Reuters.
He said Barrick's production and financial performance should improve in coming quarters.
Barrick said its Goldstrike property in Nevada would post significantly higher production in the second half of 1997.
First-quarter cash operating costs rose to $196 per ounce from $179 in the same period for 1996.
For the full year, cash operating costs were estimated at at $190 per ounce, compared to $193 in 1996.
Barrick stock rose C25 cents to C$32.85 on the Toronto Stock Exchange on Monday. It was up 25 cents to $23.50 in New York.
",6
"David Walsh, the maverick Canadian embroiled in world's biggest gold fiasco, always dreamed of striking it rich.
Under siege since doubts about Busang deposit surfaced in late March, Walsh had dismissed the conspiracy and tampering theories that have dogged his company Bre-X Minerals Ltd. -- until now.
""We share the shock and dismay our of shareholders and others that the gold we thought we had at Busang now appears not to be there,"" Walsh said after his company released a devastating report on Busang on Sunday.
In an interim report to Bre-X, consultant Strathcona Mineral Services Ltd. said the company's data on Busang was falsified on a scale ""without precedent in the history of mining anywhere in the world.""
It is a stunning conclusion to a mystery that has gripped the world mining community in recent months.
Walsh, 51, has made millions of dollars and appeared on the covers of national magazines since his Calgary, Alberta -based exploration company announced its 1993 Busang gold discovery in Indonesia.
""I'm nuts. I'm looking for the bucket of gold at the end of the rainbow,"" the beefy stock promoter, who lives in the Bahamas, told a Canadian magazine earlier this year.
Veteran Calgary journalist Jim Bentein, who covered Bre-X since its early days on the Alberta Stock Exchange, has described Walsh as ""a sophisticated trucker,"" who is as comfortable having a beer and a smoke in a bar as he is in financial circles.
After the Strathcona report, some Bre-X shareholders who stood by the company during the turmoil now blamed Walsh.
""He should be prosecuted to full extent of the law,"" Chris Laughren, a  construction worker, told Reuters on Sunday as he waited anxiously outside Bre-X's headquarters in Calgary.
Laughren said he has lost C$7,500 ($5,400) on Bre-X stock, or ""three months work down the drain.""
Walsh said on Sunday he would do all he could to protect Bre-X's assets ""for the benefit of the shareholders.""
Raised in a wealthy suburb of Montreal, Walsh followed his father and grandfather into the stock business.
He joined a small trust company shortly after graduating from high school. In 1976 he moved to brokerage Midland Doherty Ltd. (now Midland Walwyn Capital Inc.) and rose to vice president in its institutional equity sales department.
In the 1980s Midland moved Walsh to Calgary, but he left the company shortly afterward to set up his own company, Bresea Resources Ltd.
After dabbling unsuccessfully in oil and gas, Walsh created Bre-X Minerals Ltd. in 1989 and ventured into mining. But by 1993 his exploration efforts had dried up.
He and his wife declared bankruptcy in 1993 after accumulating almost C$60,000 ($43,800) in debt on 15 credit cards.
""We had these claims which were worthless, and no money,"" Walsh said in an interview earlier this year.
Almost broke, he scraped together C$10,000 ($7,300) to start exploring in Indonesia, pursuading friends to invest C$200,000 ($146,000) for a stake in the area now known as the central Busang in Indonesia's East Kalamantan province.
Walsh hit the jackpot with Busang, and Bre-X quickly became the darling of the world's mining community.
""There's nothing like success. Our other explorations have been zero. I had never imagined it would be this big,"" he said.
Walsh, his wife and other company officials added more than C$37 million ($27 million) to their bank accounts after they sold Bre-X stock at prices ranging from C$24.40 ($17.81) to C$28.40 ($20.73) between August and October 1996.
But the sales were controversial because they occurred shortly after Bre-X learned its preliminary license had been canceled by the Indonesian government, a development the company did not reveal publicly until October 1996.
As the fallout from Sunday's announcement reverberated through the world mining community, Walsh had little to say to reporters as he sped away from Bre-X's Calgary headquarters.
""I think our press release says it all for now,"" he said.
",6
"David Walsh, the maverick chief executive of beleaguered Canadian gold prospector Bre-X Minerals Ltd., said on Thursday Bre-X has the money to weather the storm over the Busang gold discovery and vowed an audit will prove he made the century's richest gold strike.
Under siege since last month's stunning news that Busang may be a bust, a plainly fatigued Walsh dismissed the conspiracy and tampering theories that have dogged the Calgary, Alberta-based company. He rejected fresh reports about the mysterious death of its chief geologist at Busang.
While Canadian regulators probe Bre-X and its top officials for possible violation of insider trading and disclosure laws, lawyers in Canada and the United States are forging ahead with at least eight class action lawsuits.
""The last two weeks have been an unprecedented bout of stress and workload. I don't thing anyone in this company has been under the microscope like this,"" said Walsh, who needed occasional prompting from Bre-X officials during a telephone interview with Reuters.
""We have more than sufficient resources to weather the storm,"" Walsh said.
Bre-X has been in the eye of the storm since preliminary tests by its partner Freeport-McMoRan Copper & Gold Inc on the Busang gold property indicated the deposit may contain ""insignificant"" amounts of gold.
The announcement prompted panic selling of Bre-X shares last month, lopping almost C$3 billion ($2.2 billion), or more than 80 percent, from the company's stock market value.
Bre-X firmed C40 cents to close at C$2.67 on the Toronto Stock Exchange on Thursday,
Walsh said an independent audit of the Busang project by Toronto-based Strathcona Mineral Services Ltd. would confirm Bre-X's estimate of 71 million ounces of gold, potentially the richest in the world.
""We're sticking by our numbers that we have announced so I don't really want to speculate. What happens if they come in at 80 million (ounces of gold)? I'm not really going to speculate on that,"" he said.
Walsh declined to confirm reports that the Busang partners would receive the test results on April 29. ""We're saying hopefully the first week of May. So we're splitting hairs. I don't think one can be given an exact date because of the procedure Strathcona is going to be utilizing.""
The newly drilled core samples to be used in the audit are under tight security and will transported to Perth, Australia by chartered jet, Walsh said. Three independent labs will conduct tests of the core samples in three countries.
Strathcona was hired by Bre-X immediately after it received the preliminary findings from Freeport.
Bre-X's chief Busang geologist, Michael de Guzman, was en route to a meeting with Freeport officials on March 19 when he fell out of a helicopter in an apparent suicide.
The death of a co-discoverer of Busang, coupled with leaked reports in the Indonesian press about Freeport's findings, sparked a selloff in Bre-X shares the following day.
The geologist's death has been the subject of wild rumors and media reports, including an Indonesian newspaper article on Thursday suggesting the corpse buried at de Guzman's funeral last week in the Philippines was not de Guzman.
Walsh said he still believed de Guzman committed suicide. But he added: ""We have not received official autopsy reports and we have no comment on Mike's tragic death.""
Bre-X's head of exploration, John Felderhof, has assumed de Guzman's responsibilities at Busang, but the company officials in Calgary have had trouble communicating with him.
""We've had very little communication with him. For some reason our satellite communication is not functioning properly and faxes that come out are garbled,"" Walsh said.
With billions of dollars in limbo and Strathcona's report weeks away, financial markets have been awash with theories that tampering occurred with the Busang drilling samples.
But Walsh said a step-by-step report of Bre-X's sampling and assay methods released on Wednesday would quash speculation that the samples were tampered with at the site.
But some analysts said the focus was shifting toward the assay method used.
""That is highly unlikely considering the credibility of the lab (PT Indo Assay), which has been in existence for a number of years and used by major mining companies in the country,"" Walsh responded.
He declined to comment on increasing attention being paid to personal trades by himself, his wife and other company officials, which netted them about C$77 million ($55 million).
The Ontario Securities Commission is probing Bre-X for possible violations of insider trading and disclosure laws.
Some trades by Walsh and others in 1996 were controversial because they occurred shortly after Bre-X learned that its preliminary license had been canceled by Indonesia, something the company did not make public until last October.
Walsh said he considered the revoked license ""non-material information"" because Bre-X's claim to Busang was in good standing. ""At no time was the ground not legally held and the revocation was a non-material fact,"" he said.
The Indonesian military is closely watching the testing at Busang and the government has announced plans to investigate.
Walsh said the controversy would not threaten Bre-X's 45 percent stake in the project because it has a binding agreement with its partners. ""We see absolutely no reason for any further changes. What's going right now is not of our making and there is no reason there would be any changes to the binding agreement,"" he said.
",6
"Canada's top securities regulator said on Thursday it is probing whether Bre-X Minerals Ltd, mired in controversy over its Busang gold find in Indonesia, breached insider trading and disclosure laws.
The Ontario Securities Commisson said the Calgary-based gold prospector has been under investigation since the end of 1996. But it did not reveal details of the probe until today.
""The OSC can confirm that the investigation relates to whether there has been a breach of continuous disclosure requirements or insider trading provisions,"" the regulator said in a statement.
The OSC said it has not determined whether there is enough information to begin formal proceedings against Bre-X, but the investigation is focusing on whether there were breaches of Ontario's Securities Act.
The regulator's announcement was among several fresh twists in the Bre-X Minerals saga.
A group of Canadian Bre-X shareholders launched a class action lawsuit on Thursday, adding to the five court actions the company already faces in the United States.
Frantic trading in Bre-X shares handcuffed the Toronto Stock Exchange once again on Thursday -- the third time this week that the TSE has stopped Bre-X due to heavy order volumes and a creaky computer system.
A much-anticipated report on Bre-X's assay program at Busang confirmed the company's orginal findings on Thursday. But analysts said the highly technical report by Kilborn SNC Lavalin Inc also raised new questions about the controversial gold project.
Bre-X has been under seige since last week when its partner in Indonesia, Freeport-McMoRan Copper & Gold Inc., revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up only tiny amounts of gold.
Panic selling lopped nearly C$3 billion off the company's market value last Thursday and the stock has since played havoc with the TSE's old computer trading system.
Bre-X climbed C23 cents to C$3.34 on brisk turnover of 5.02 million shares before the Toronto exchange was forced to stop trading at 1243 EST/1743 GMT on Thursday.
The TSE again cited ""systems problems caused by high levels of order flow in (the) company's stock.""
The trading problems irritated investors and further embarrassed the exchange, which has been the butt of jokes recently on the U.S. financial news television channel CNBC.
The stock continued trading on the Nasdaq, Montreal and Alberta exchanges. The TSE said it will resume trading at 0930 EST/1430 GMT on Friday.
Kilborn, a unit of engineering firm SNC-Lavalin Group Inc performed the original resource calculations on Busang showing it contained an estimated 70.95 million ounces of gold.
The firm confirmed its findings on Thursday, based on assay samples provided to it by Bre-X.
""The standard deviation and variance observed in the analysis of the database is consistent with previous test work done on Busang samples...,"" said the report, which was released by the Toronto Stock Exchange and the OSC.
Bre-X chief executive officer David Walsh promised on Monday the report would shed light on Bre-X's testing methods. But Bre-X told the TSE and OSC on Thursday that the report contained no new material information.
""Our view is investors should have as much information available to make their own decisions. We thought it should be out there,"" OSC chairman Jack Geller told Reuters.
Analysts said the Kilborn report does not resolve the controversy over Busang, but did provide a few details not known before.
The hammer mill process used by Bre-X ""can produce a non-reliable sample in the preparation process,"" a mining analyst said. ""If there is a problem here, it is in within the sample preparation. It is not in the assays, it's problem in the sample preparation.""
Bre-X has hired an mining consultant, Strathcona Mineral Services Ltd, to conduct an independent drilling program and audit of the Busang site. Strathcona is expected to deliver its report by early May.
""What everyone is waiting for is the actual independent drilling by Strathcona,"" said John Ing, president of Maison Placements Canada Inc.
",6
"Canada's top securities regulator said on Thursday it is probing whether Bre-X Minerals Ltd, mired in controversy over its Busang gold find in Indonesia, breached insider trading and disclosure laws.
The Ontario Securities Commisson said the Calgary-based gold prospector has been under investigation since the end of 1996. But it did not reveal details of the probe until today.
""The OSC can confirm that the investigation relates to whether there has been a breach of continuous disclosure requirements or insider trading provisions,"" the regulator said in a statement.
The OSC said it has not determined whether there is enough information to begin formal proceedings against Bre-X, but the investigation is focusing on whether there were breaches of Ontario's Securities Act.
The regulator's announcement was among several fresh twists in the Bre-X Minerals saga.
A group of Canadian Bre-X shareholders launched a class action lawsuit on Thursday, adding to the five court actions the company already faces in the United States.
Frantic trading in Bre-X shares handcuffed the Toronto Stock Exchange once again on Thursday -- the third time this week that the TSE has stopped Bre-X due to heavy order volumes and a creaky computer system.
A much-anticipated report on Bre-X's assay program at Busang confirmed the company's orginal findings on Thursday. But analysts said the highly technical report by Kilborn SNC Lavalin Inc also raised new questions about the controversial gold project.
Bre-X has been under seige since last week when its partner in Indonesia, Freeport-McMoRan Copper & Gold Inc. , revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up only tiny amounts of gold.
Panic selling lopped nearly C$3 billion off the company's market value last Thursday and the stock has since played havoc with the TSE's old computer trading system.
Bre-X climbed C23 cents to C$3.34 on brisk turnover of 5.02 million shares before the Toronto exchange was forced to stop trading at 1243 EST/1743 GMT on Thursday.
The TSE again cited ""systems problems caused by high levels of order flow in (the) company's stock.""
The trading problems irritated investors and further embarrassed the exchange, which has been the butt of jokes recently on the U.S. financial news television channel CNBC.
The stock continued trading on the Nasdaq, Montreal and Alberta exchanges. The TSE said it will resume trading at 0930 EST/1430 GMT on Friday.
Kilborn, a unit of engineering firm SNC-Lavalin Group Inc performed the original resource calculations on Busang showing it contained an estimated 70.95 million ounces of gold.
The firm confirmed its findings on Thursday, based on assay samples provided to it by Bre-X.
""The standard deviation and variance observed in the analysis of the database is consistent with previous test work done on Busang samples...,"" said the report, which was released by the Toronto Stock Exchange and the OSC.
Bre-X chief executive officer David Walsh promised on Monday the report would shed light on Bre-X's testing methods. But Bre-X told the TSE and OSC on Thursday that the report contained no new material information.
""Our view is investors should have as much information available to make their own decisions. We thought it should be out there,"" OSC chairman Jack Geller told Reuters.
Analysts said the Kilborn report does not resolve the controversy over Busang, but did provide a few details not known before.
The hammer mill process used by Bre-X ""can produce a non-reliable sample in the preparation process,"" a mining analyst said. ""If there is a problem here, it is in within the sample preparation. It is not in the assays, it's problem in the sample preparation.""
Bre-X has hired an mining consultant, Strathcona Mineral Services Ltd, to conduct an independent drilling program and audit of the Busang site. Strathcona is expected to deliver its report by early May.
""What everyone is waiting for is the actual independent drilling by Strathcona,"" said John Ing, president of Maison Placements Canada Inc.
",6
"The Busang rumor mill continued to churn on Wednesday as a jittery market weighed Freeport-McMoRan Copper & Gold Inc's move to extend its review of the controversial gold project.
Calgary-based Bre-X Minerals Ltd said on Wednesday that Freeport was granted an extension for its due diligence review of the Busang project until June 30.
New Orleans-based Freeport, a partner in the Busang find, requested the extension ""to allow for consideration of the findings of the Strathcona audit,"" Bre-X said.
Rumors have swirled around Busang since the century's biggest gold find was cast into doubt on March 26 when partneb Freeport-McMoRan said its preliminary due diligence tests found ""insignificant"" amounts of gold.
Panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) or 80 percent from the company's stock market value last month.
Toronto-based Strathcona Mineral Services Ltd is expected to deliver a key report on Busang to Bre-X on Thursday or Friday. Bre-X has said it will issue a press release on the report before North American financial markets open on Monday.
Freeport spokeswoman Kristin Lemkau said on Wednesday the request for the extension was made within the past week.
""The original agreement with Bre-X signed on February 26 said that FCX's due diligence expire on April 30. This is really just to announce that we had pushed that date to June 30 to allow time for completion of the independent audit by Strathcona,"" Lemkau said in a telephone interview.
Strathcona has said its final report to Bre-X would be delivered about six weeks after the interim report. Strathcona has said the principal conclusions in the interim report are not expected to differ from the final report.
Lemkau declined to comment when asked if Freeport planned any further drilling at Busang over the next two months.
Bre-X shares led heavy traders on the Toronto Stock Exchange on Wednesday, closing down C32 (US23) cents at C$3.48 ($2.52) on 9.7 million shares.
Some investors on an Internet chat page speculated on Wednesday that Freeport's extension was favorable to Bre-X. But mining analysts cautioned against reading too much into the announcement.
""I don't think we should read into the request, although obviously investors are,"" said John Ing, president of Maison Placements Canada Inc.
""Everybody is reading a lot into the rumors. But really they are just rumors right now,"" another Canadian mining analyst said.
An Indonesian newspaper, citing unnamed sources, reported earlier this week that leaked results of Strathcona's drill tests showed ""cheerful"" grades of gold.
But in a report in the Calgary Sun newspaper on Wednesday, Strathcona President Graham Farquharson said it was unlikely that his company's findings had been leaked.
""I still haven't seen the results myself -- the assays are still under way. So I have to doubt the claim,"" Farquharson said in the Sun report.
""To the best of my knowledge there've been no leaks,"" Farquharson said.
Strathcona said last week it would maintain tight security over the assaying of its core samples at laboratories in Canada, Indonesia and Australia.
Only one or two persons in management at each laboratory would have access to the final assays and the results would not be reported until all the lab work was finished.
",6
"Shares in Bre-X Minerals Ltd. dominated the actives list on the Toronto Stock Exchange on Friday as exchange officials said problems that have hampered recent trading in the stock were now fixed.
Bre-X finished its first full session since last week on the TSE -- Canada's biggest stock market -- closing down C25 cents at C$3.18 in massive turnover of eight million shares. On Nasdaq, Bre-X fell 25 cents to $2.375.
The stock earlier hit a session high of C$3.78 amid market rumors that early test results of the Busang gold site by an independent mining consultant looked positive.
""I heard it was rumors around Strathcona that got them up today, but those rumors petered out so that's why it is down,"" one analyst said.
Toronto-based mining consultant Strathcona Mineral Services Ltd. has remained silent since it was hired two weeks ago by Bre-X to conduct an audit of the Busang gold site.
The final results of Strathcona's review are not expected until early May.
Bre-X has been under siege since last week when its partner in Indonesia, New Orleans-based Freeport-McMoRan Copper & Gold Inc., revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up only tiny amounts of gold.
Frantic trading in Bre-X shares forced the TSE to stop trading in the stock on Thursday -- the third time this week that the TSE halted Bre-X because of heavy order volumes and an outdated computer system.
TSE President Rowland Fleming said on Friday that the exchange fixed the problem by rewriting a section of computer code.
""(It was) easily rectified. I'm confident we will not (have any more problems),"" Fleming told Reuters.
He dismissed suggestions that the TSE's reputation had been tarnished by the trading interruptions. ""Every exchange from time to time with this kind of sophisticated technology has difficulties,"" Fleming said.
He said the TSE was cooperating with the Ontario Securities Commission, which confirmed on Thursday that it has launched a probe into whether Bre-X violated insider trading and disclosure laws.
Bre-X Chief Executive David Walsh, his wife and other company officials added more than C$37 million ($26.6 million) to their bank accounts after they sold Bre-X stock at prices ranging from C$24.40 ($17.57) to C$28.40 ($20.45) between August and October.
The sales were controversial because they occurred shortly after Bre-X learned that its preliminary license had been canceled by the Indonesian government, a development the company did not reveal publicly until last October.
""Mr. Walsh and all of the others...are perfectly entitled to buy and sell their stock as they see fit, and make money or lose money as the case may be, as long as they do not do that using insider information,"" Fleming said.
He said there was no evidence to date that Bre-X officials had acted improperly.
",6
"David Walsh, the maverick Canadian embroiled in the world's biggest gold fiasco, always dreamed of striking it rich.
Under siege since doubts about Busang deposit surfaced in late March, Walsh had dismissed the conspiracy and tampering theories that have dogged his company Bre-X Minerals Ltd. -- until now.
""We share the shock and dismay our of shareholders and others that the gold we thought we had at Busang now appears not to be there,"" Walsh said after his company released a devastating report on Busang on Sunday.
In an interim report to Bre-X, consultant Strathcona Mineral Services Ltd. said the company's data on Busang was falsified on a scale ""without precedent in the history of mining anywhere in the world.""
It is a stunning conclusion to a mystery that has gripped the world mining community in recent months.
Walsh, 51, has made millions of dollars and appeared on the covers of national magazines since his Calgary, Alberta -based exploration company announced its 1993 Busang gold discovery in Indonesia.
""I'm nuts. I'm looking for the bucket of gold at the end of the rainbow,"" the beefy stock promoter, who lives in the Bahamas, told a Canadian magazine earlier this year.
Veteran Calgary journalist Jim Bentein, who covered Bre-X since its early days on the Alberta Stock Exchange, has described Walsh as ""a sophisticated trucker,"" who is as comfortable having a beer and a smoke in a bar as he is in financial circles.
After the Strathcona report, some Bre-X shareholders who stood by the company during the turmoil now blamed Walsh.
""He should be prosecuted to full extent of the law,"" Chris Laughren, a  construction worker, told Reuters on Sunday as he waited anxiously outside Bre-X's headquarters in Calgary.
Laughren said he has lost C$7,500 ($5,400) on Bre-X stock, or ""three months work down the drain.""
Walsh said on Sunday he would do all he could to protect Bre-X's assets ""for the benefit of the shareholders.""
Raised in a wealthy suburb of Montreal, Walsh followed his father and grandfather into the stock business.
He joined a small trust company shortly after graduating from high school. In 1976 he moved to brokerage Midland Doherty Ltd. (now Midland Walwyn Capital Inc.) and rose to vice president in its institutional equity sales department.
In the 1980s Midland moved Walsh to Calgary, but he left the company shortly afterward to set up his own company, Bresea Resources Ltd.
After dabbling unsuccessfully in oil and gas, Walsh created Bre-X Minerals Ltd. in 1989 and ventured into mining. But by 1993 his exploration efforts had dried up.
He and his wife declared bankruptcy in 1993 after accumulating almost C$60,000 ($43,800) in debt on 15 credit cards.
""We had these claims which were worthless, and no money,"" Walsh said in an interview earlier this year.
Almost broke, he scraped together C$10,000 ($7,300) to start exploring in Indonesia, pursuading friends to invest C$200,000 ($146,000) for a stake in the area now known as the central Busang in Indonesia's East Kalamantan province.
Walsh hit the jackpot with Busang, and Bre-X quickly became the darling of the world's mining community.
""There's nothing like success. Our other explorations have been zero. I had never imagined it would be this big,"" he said.
Walsh, his wife and other company officials added more than C$37 million ($27 million) to their bank accounts after they sold Bre-X stock at prices ranging from C$24.40 ($17.81) to C$28.40 ($20.73) between August and October 1996.
But the sales were controversial because they occurred shortly after Bre-X learned its preliminary license had been cancelled by the Indonesian government, a development the company did not reveal publicly until October 1996.
As the fallout from Sunday's announcement reverberated through the world mining community, Walsh had little to say to reporters as he sped away from Bre-X's Calgary headquarters.
""I think our press release says it all for now,"" he said.
",6
"Canadian brewing giant Molson Cos. Ltd., flush with cash from the sale of non-beer assets, said on Wednesday that it is seeking expansion opportunities in China and Latin America.
Despite shareholder pressure for a stock buyback, Molson said it wants to grow its core brewing business.
""We are looking strongly at Latin American and Chinese markets. Any sizable investment we would make would be with partners or as a joint venture,"" new President and Chief Executive Norman Seagram told reporters after the company's annual meeting in Montreal.
The meeting marked the launch of Seagram's bid to return to the company's 210-year-old brewing roots after a failed foray into speciality chemicals.
""J'aime la biere (I love beer),"" Seagram, a brewing industry veteran, told shareholders.
He said the board is not considering a share buyback, but will spend the next three months scouring the world for brewing opportunities.
Analysts and investors, worried about the company's spotty track record on acquisitions, fear Molson will pay too much.
""The question is, 'Can Molson invest the money more wisely than shareholders?' That's what we're trying to figure out,"" said Michael Palmer, an analyst with Toronto-based Equity Research Associates.
Molson's class A stock closed down C$0.30 (22 cents) at C$20.20 ($15) on the Toronto Stock Exchange on Wednesday. The stock has wallowed around C$20 ($15) since buyback speculation pushed the shares to C$25 ($18) earlier this year.
Last winter's sale of Diversey Corp., a speciality chemicals firm, was part of a wider restructuring that will add almost C$1 billion ($729 million) to Molson's coffers.
Molson is still looking for a buyer for its retail assets, which include stakes in Home Depot Inc..'s Canadian unit, and home improvement chain Groupe Val Royal Inc. Molson also owns Beaver Lumber Co.
The Toronto-based holding company will be left with a 40 percent stake in Molson Breweries, Canada's biggest brewer, which makes Molson Canadian, Golden and Red Dog.
It also owns the famed Montreal Canadiens of the National Hockey League and the Molson Centre in which the club plays.
Molson officials have expressed interest in buying a larger stake in Molson Breweries, which is also owned 40 percent by Australia's Foster's Brewing Group Ltd. and 20 percent by Philip Morris Cos. Inc.'s Miller Brewing unit.
But Seagram said ""Foster's has indicated no wish to change its 40 percent partnership in Molson Breweries and we continue to work with both Foster's and Miller.""
That leaves the international market, and analysts said quality brewing assets will fetch a high price.
China and Latin America are fast-growing beer markets compared with North America, where beer consumption has been flat for several years, said William Chisholm, an analyst with Deacon Capital Corp.
""There certainly is a lot of scope to put money in there, but whether you can make a worthwhile investment is another thing,"" he said.
Analysts said investors are nervous due to the experience of other Canadian brewers in foreign markets.
Molson's arch-rival, Labatt Brewing Co. Ltd., pushed into Mexico with much fanfare in 1994, acquiring 22 percent of FEMSA Cerveza, the brewing unit of food giant Fomento Economico Mexicano S.A. de C.V. for C$720 million ($512 million).
Soon afterward, a Mexican currency crisis forced a large writedown on Labatt's investment. The Mexican deal and other diversification moves angered Labatt's institutional shareholders.
The Canadian brewer subsequently lost its independence after Belgian brewer Interbrew S.A. won a takeover battle for Labatt last summer.
FEMSA Cerveza has since performed better and Labatt has opted for smaller investments through joint ventures.
In China, Canadian brewer Noble China Inc. brews one of the country's most popular foreign brands, Pabst Blue Ribbon, in a joint venture with the Chinese government.
But the company has been hurt by a legal dispute with a former executive and market share in China has dropped due to smuggling of bootleg Pabst beer.
",6
"Bre-X Minerals Ltd. said Wednesday it would consider merger offers at the right price, but was content for now to develop Busang -- the richest gold discovery this century -- with its existing partners.
""The 'For Sale' sign is not on the front yard,"" Bre-X Chief Executive David Walsh told analysts in a conference call. ""That is not to rule out discussions with a potential suitor if the price is right. The old expression 'everything has its price' must be taken into account here.""
His comments came after an agreement announced Monday on ownership of the Busang discovery in Indonesia. Under the deal, Bre-X would have 45 percent, with 15 percent to U.S.-based Freeport-McMoRan Copper and Gold Inc., 30 percent to Indonesia's PT Askatindo Karya Minerals and PT Amsya Lyna and partners and 10 percent to the Indonesian government.
Bre-X officials declined to speculate on potential bidders for their Calgary, Alberta-based company, which discovered the 71 million-ounce Busang gold find. Some Bre-X executives said the gold field, which was not yet fully explored, may contain as much as 200 million ounces of gold.
Walsh said Bre-X, which once owned 90 percent of the deposit, received no cash compensation for giving up a piece of Busang. But he said the Indonesian partners provided ""tangible value"" in developing the site.
""This relationship will ensure that things run smoothly. Without a good relationship, things can take years to get processed, and years of hold up for a 4 million ounce a year producer is very, very costly,"" Walsh told Reuters.
Vancouver-based gold miner Placer Dome Inc. said Wednesday its $5 billion offer to merge with Bre-X made before Monday's agreement was no longer feasible because Bre-X was now worth less. But Placer said it remained interested in the project and would like to hold talks with Bre-X.
Walsh said Bre-X would inform the Indonesian government if it agreed to a merger or sale of its Busang stake. But asked if a deal required government approval, Walsh replied: ""No.""
Walsh added that Bre-X's Busang partners did not have rights of first refusal if Bre-X received a third-party offer.
He said the Indonesian government indicated it would process contracts of work, known as COWS, for the Busang site as early as possible. ""I do know the government has a wish to process these very, very quickly. So I would not think that we would have to wait very long,"" said Walsh.
A feasibility study of the project should be completed later in 1997, with construction of the mine expected to begin in 1998. Capital expenditure is estimated at about $1.5 billion.
Production was expected to begin in 2000 at a rate of two million ounces annually and climb to four million ounces a year in 2002, said John Felderhoff, Bre-X's senior vice-president of exploration.
Bre-X's latest estimate for the Busang Two area was about 71 million ounces of gold, but Felderhoff said it could be much higher. ""If you would ask me what is the total potential, I would feel very comfortable with 200 million ounces,"" he said.
Bre-X's financial adviser, J.P. Morgan and Co. Inc., said Wednesday it would provide a fairness opinion on the agreement. ""We're very confident it provides very good value to the shareholders of Bre-X,"" said J.P. Morgan's Leslie Morrison, who is advising Bre-X on the deal.
Canadian newspapers reported Wednesday that Indonesian businessman Jusuf Merukh alleged that the deal with Freeport and the Indonesian interests was illegal and asked Indonesian President Suharto to cancel it.
Merukh is suing Bre-X for $2 billion in a Canadian court, alleging that his company was entitled to 30 percent of Busang. Bre-X has filed a motion to dismiss the suit. Bre-X topped Toronto Stock Exchange actives Wednesday, gaining C70 cents to C$21.50 on 7.7 million shares after falling sharply Monday and Tuesday on news of the deal.
",6
"Strippers can dance naked in Canada as long as they keep their distance from the customers.
Exotic dancers on Thursday cheered a Supreme Court of Canada ruling that bans lap dancing, but club owners warned it would turn off customers and put some establishments out of business.
""I think it's great. Dancing is for seeing, not touching,"" said a dancer at Filmores, a well-known Toronto strip club.
Canada's top court ruled on Wednesday that lap dancing -- sitting naked on a customer's lap and rubbing against him -- was indecent and a criminal act.
Andy, a lunchtime patron at the Zanzibar strip club on Toronto's seedy Yonge Street, said the court ban was unnecessary.
""The only thing criminal about it is if prostitution is involved. Some girls just take it too far,"" said the apprentice electrician as a dancer gyrated on the stage behind him.
Canada's lap-dance brouhaha began in 1994 when an Ontario judge ruled that a variety of sexual acts at a Toronto strip club did not offend community standards.
After the ruling, lap dancing quickly spread to other clubs across the country.
A former stripper, Katharine Goldberg, led a public crusade against lap dancing, arguing that some dancers were forced by club owners to masturbate customers and perform other acts.
""This should end the suffering of so many young women and protect the health and lives of many people,"" Goldberg said.
But Canadian newspapers have quoted other strippers who resented Goldberg's potrayal of them as sex slaves. Most customers obeyed the no-touch rule and it was more lucrative than table dancing, they said.
A lap dance can cost up to $20 each with some dancers taking home between $300 and $500 a night.
The Supreme Court upheld an appeal court decision that overturned the original 1994 court ruling. The appeals judge said lap dancing degraded dancers and encouraged clients to treat women as sexual objects.
",6
"Several days before a key report on the Busang gold controversy, a major partner confirmed on Thursday it had still not found significant gold at the site deep in the jungles of Indonesia.
Since it reported finding ""insignificant amounts"" of gold from preliminary tests of Busang last month, New Orleans-based Freeport McMoRan Copper & Gold Inc. has continued testing its original seven drill cores taken from the site.
""We have continued analysis of those same cores and our previously announced findings are unchanged. We have not done any additional drilling beyond those core holes,"" Freeport spokesman Kristin Lemkau told Reuters in a telephone interview.
Freeport mentioned the continued testing of the drill cores in its first-quarter results released on Tuesday, but gave no further details.
""They are probably making sure that they have turned over every stone to just establish if there is gold or not. They also may be getting variances and they're trying to clear that up,"" a Canadian mining analyst said.
Freeport's announcement on March 26 prompted panic selling of shares in Bre-X Minerals Ltd., which discovered the Busang site and heralded it as the century's biggest gold find.
Since losing almost C$3 billion ($2.2 billion) of its stock market value last month, Bre-X shares have traded on the wildest of rumors while investors await an audit from Toronto-based Strathcona Mineral Services Ltd.
Bre-X stock slipped C2 cents to C$3.60 in heavy turnover of 10.3 million shares on the Toronto Stock Exchange on Thursday.
The stock jumped to a high of C$5.75 on Wednesday amid incorrect rumors that Freeport Chief Executive Jim ""Bob"" Moffett resigned and that Freeport received preliminary results from Strathcona's audit of the Busang site.
The reports were quickly rejected by Bre-X and Freeport officials. Lemkau also declined comment on reports that Moffett was in Indonesia and had held meetings with President Suharto, saying that Freeport did not release the specific travel plans of its officials.
Analysts said Wednesday's rumors started on the Internet and quickly jolted Bre-X's stock out of its recent slumber.
""It amazes me that everyone is calling for higher forms of regulation and then everybody is relying on rumors and Internet chat lines. It's ridiculous,"" said John Ing, president of Toronto-based brokerage Maison Placements Canada.
Analysts expected more frenzied trading ahead of Freeport's annual shareholders meeting in New Orleans next Tuesday, April 29. Freeport has warned media that company officials would be reluctant to answer questions on the ""Bre-X matter"".
""Everybody is hoping that we'll have some information out around the Freeport annual meeting,"" another analyst said.
Some reports have suggested April 29 was also the date that Bre-X would receive Strathcona's report. But Bre-X has said it may not get the report until early May.
Whenever the Strathcona audit is released, analysts expect Freeport to follow quickly with a statement on its plans regarding the Busang project.
Meanwhile, officials with Barrick Gold Corp. and Placer Dome Inc. declined comment on reports that they were released from confidentiality agreements with Bre-X.
Some analysts have said Barrick and Placer -- once rival bidders for a share of the Busang site -- have information that could shed light on the mystery.
""We're not going to comment at all. All we can say is we would cooperate with any authorities investigating the matter,"" said Barrick spokesman Vince Borg.
The Ontario Securities Commission, Canada's top securities regulator, is probing Bre-X for possible violations of insider trading and disclosure laws.
The OSC also declined comment on the report.
",6
"Canadians were stunned on Sunday after a heartbreaking loss to the United States in the World Cup of Hockey dealt a crippling blow to the nation's pride.
Canada's ""dream team"" -- a galaxy of National Hockey League stars including Wayne Gretzky, Mark Messier and Eric Lindros -- fell to an upstart American squad in a gripping finale to the World Cup championship on Saturday.
Team USA, led by superb goaltending, defeated the Canadian squad 5-2 to win the best-of-three series in Montreal.
Canadians -- who consider hockey more of a religion than a sport -- mourned the country's worst loss in international play since 1981 when the Soviet Union handed Team Canada a crushing defeat in the Canada Cup -- the precursor to the World Cup.
Saturday night's loss has also rekindled fears of a further Americanisation of Canada's sacred game.
""I feel terrible, just terrible. That's why I'm here,"" Circiaco Deluca said as he quaffed a pint of beer in Wayne Gretzky's bar in Toronto, surrounded by mementos of past Canadian hockey glory.
Gretzky, known as the Great One, summed up the feelings of most of his countrymen after Saturday's game.
""This is a crushed locker room right now and probably a crushed country. It's devastating,"" Gretzky told reporters.
The disastrous outcome dominated the front pages of Canadian newspapers on Sunday.
""DAMN YANKEES,"" screamed the Montreal Gazette newspaper.
""AMERICA'S GAME,"" cried the Toronto Star, Canada's largest newspaper.
""The U.S. roared into Canada like a mayhem-minded mob of Hell's Angels and left with a major chunk of our national heritage,"" wrote Star hockey columnist Damien Cox.
The tabloid Toronto Sun featured a cartoon of the Statue of Liberty with a hockey stick in one hand and the World Cup trophy in another.
Canada's defeat comes at a time when many fans are lamenting the steady Americanisation of their game.
Computer-enhanced pucks, flashy uniforms with cartoon characters, and the NHL's expansion into non-traditional markets like Phoenix and Nashville have made hockey purists cringe.
A Canadian-based team has not won the NHL's championship Stanley Cup since 1993 and appears likely to extend the losing streak for another year.
Small market clubs in Calgary, Edmonton and Ottawa are struggling to stay alive in the face of skyrocketing costs. Quebec City and Winnipeg have already seen their franchises flee south to wealthier markets.
Frank Diponzio, a tourist from Rochester, New York, said hockey's future will depend on it growing in the bigger U.S. market.
""It's not as popular as baseball or football, but it's getting bigger. Beating Canada at home will help,"" he said in an interview.
Some Canadian fans were bitter that Canadian-born Brett Hull, the son of hockey legend Bobby Hull, scored twice in Saturday's game -- for the United States.
Hull, who has dual citizenship, played most of the game to chants of ""Brett Hull sucks"" from the partisan crowd in Montreal's Molson Centre.
""I think he should have played for Canada. It just shows a lack of respect for the country,"" said Trevor Murray, an 18-year-old student sporting a Toronto Maple Leafs sweater.
But others said the younger, faster U.S. team deserved credit for a gritty performance.
""It's not a national catastrophe. They played a great game and we'll be back,"" said Jack Porter of Sudbury, Ontario.
",6
"U.S. mining giant Freeport-McMoRan Copper & Gold Inc. has extended its review of a controversial Indonesian gold mining project until June 30, Canadian gold prospector Bre-X Minerals Ltd. said Wednesday.
New Orleans-based Freeport, a partner in the Busang project in Indonesia, requested the extension ""to allow for consideration of the findings of the Strathcona audit,"" Bre-X said in a statement.
Toronto-based Strathcona Mineral Services Ltd. is expected to deliver a key report on Busang to Bre-X on Thursday or Friday. Bre-X has said it will issue a press release on the report before North American financial markets open on Monday.
Rumours have swirled around Busang since what has been called the century's biggest gold find was cast into doubt on March 26 when Freeport-McMoRan said its preliminary tests found ""insignificant"" amounts of gold.
Bre-X has estimated Busang contains about 71 million ounces of gold, potentially the largest in the world.
Panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) from the company's stock market value last month, wiping out 80 percent of its market worth.
Freeport spokeswoman Kristin Lemkau said on Wednesday the request for the extension was made within the past week.
""The original agreement with Bre-X signed on February 26 said that FCX's due diligence expired on April 30. This is really just to announce that we had pushed that date to June 30 to allow time for completion of the independent audit by Strathcona,"" Lemkau said in a telephone interview.
Lemkau declined to comment when asked if Freeport planned any further drilling at Busang over the next two months.
Bre-X shares led fell 32 cents Canadian (23 cents) to C$3.48 ($2.52) in heavy trading on the Toronto Stock Exchange.
Some investors on an Internet chat page speculated that Freeport's extension was favourable to Bre-X, but mining analysts cautioned against reading too much into the announcement.
""I don't think we should read into the request, although obviously investors are,"" said John Ing, president of Maison Placements Canada Inc.
""Everybody is reading a lot into the rumours. But really they are just rumours right now,"" another Canadian mining analyst said.
An Indonesian newspaper, citing unnamed sources, reported earlier this week that leaked results of Strathcona's drill tests showed ""cheerful"" grades of gold.
But in a report in the Calgary Sun newspaper on Wednesday, Strathcona President Graham Farquharson said it was unlikely that his company's findings had been leaked.
""I still haven't seen the results myself -- the assays are still under way. So I have to doubt the claim,"" Farquharson was quoted as saying by the Sun. ""To the best of my knowledge there've been no leaks,"" he said.
Strathcona said last week it would maintain tight security over the assaying of its core samples at laboratories in Canada, Indonesia and Australia.
Only one or two persons in management at each laboratory would have access to the final assays and the results would not be reported until all the lab work was finished.
Strathcona has said its final report to Bre-X would be delivered about six weeks after an interim report.
",6
"Canadian gold prospector Bre-X Minerals Ltd said on Tuesday a key report on the Busang gold mystery will be released before North American financial markets open on Monday.
Strathcona Mineral Services Ltd., the consulting firm hired by Bre-X to audit the project, is expected to issue an interim report on its findings to Bre-X by Friday.
""Bre-X expects to release the interim report next Monday morning prior to the opening of financial markets in North America,"" Bre-X spokesman Richard Wool said in a telephone interview on Tuesday.
Wool said reports were wrong that Bre-X was preparing an elaborate press conference in Toronto for the announcement.
Rumors have swirled around Busang since the century's biggest gold find was cast into doubt on March 26 when partner Freeport-McMoRan Copper and Gold Inc. said its preliminary tests found ""insignificant"" amounts of gold.
Panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) or 80 percent from the company's stock market value. Since then investors have anxiously awaited Strathcona's findings from Busang, once estimated by Bre-X to contain 71 million ounces of gold.
Bre-X closed up C15 cents at C$3.80 on 5.6 million shares on the Toronto Stock Exchange on Tuesday.
Freeport chief executive Jim Bob Moffett said on Tuesday the U.S. mining giant is hoping the Strathcona report will ""add more light"" to the Busang mystery.
""Freeport's participation is predicated on the fact that we will go forward and join only if we can confirm an economic deposit,"" Moffett said during the company's annual meeting.
The meeting was held under tight security at Freeport's New Orleans headquarters, where shareholders were screened by metal detectors and reporters were sequestered in a seperate room to view the proceedings on closed-circuit television.
While all eyes are on tiny Toronto-based Strathcona, some analysts said its report may only lead to further drilling at the Busang site.
""For anything definitive, one would expect a due diligence process that would take more than just six holes drilled by Strathcona and the seven holes (by Freeport). A lot more will have to be done before one has an idea of what is there and what isn't there,"" said John Ing, president of Maison Placements Canada Inc.
Analysts were divided on whether the granting of Indonesian contracts of work (COW) to two companies related to Bre-X was a good omen for the embattled company.
Bre-X shares soared briefly on Monday after Bro-X Minerals Ltd and Bresea Resources Ltd signed contracts to develop two copper-gold projects.
The Indonesian government has put Bre-X's COW for Busang on hold until it completed a review of the company's drilling activities.
""I know a lot of people say its irrelevant, but I just can't believe that if the Indonesians felt there was a problem with Bre-X that they would have granted them (Bro-X and Bresea) contracts of work,"" said Norm Duncan, a broker with Vancouver-based C.M. Oliver and Co.
Analysts questioned the accuracy of an Indonesian newspaper report on Tuesday which said leaked results of Strathcona's drill tests showed ""cheerful"" grades of gold.
Strathcona said last week it would maintain tight security over the assaying of its core samples at laboratories in Canada, Indonesia and Australia.
Only one or two persons in management at each laboratory will have access to the final assays and the results would not be reported until all the lab work was finished, Strathcona said last Friday.
",6
"The big U.S. mining company Freeport-McMoRan Copper & Gold Inc. pulled out of the now worthless Busang gold project on Monday as Canada's mining community reeled from the biggest fraud in mining history.
New Orleans-based Freeport said a damning independent report on Busang released by Canada's Bre-X Minerals Ltd. late on Sunday confirmed its own poor test results from the site.
""Consequently, (Freeport) will notify Bre-X that it is withdrawing from the Busang project pursuant to the terms of its contractual agreement,"" the company said in a statement.
The Busang discovery  -- touted by Calgary, Alberta-based Bre-X as the richest find of the century -- was falsified on a scale ""without precedent in the history of mining"" according to the report by consultant Strathcona Mineral Services Ltd.
Strathcona said it found evidence of tampering with Bre-X's core samples and that Strathcona's own tests discovered only trace amounts of gold at the Busang site where Bre-X claimed to have found 71 million ounces of gold.
The report said a gold deposit worth mining was unlikely to be found at the site.
""We are very disappointed that the apparent opportunity for (Freeport) to develop the Busang property has been eliminated by (our) findings ... as now confirmed by the Strathcona audit report,"" said Freeport Chief Executive Jim Bob Moffett.
In Jakarta, an Indonesian company linked to President Suharto said it also was withdrawing from the Busang project. Nusamba Group, chaired by businessman Muhammad ""Bob"" Hasan, is 80 percent-owned by three charities headed by Suharto and 10 percent each by Hasan and Suharto's eldest son.
In a separate statement, Bre-X's chief of exploration, John Felderhof, said he was shocked and dismayed by the Strathcona report.
""I know that I was not involved in a fraud. I also find it very hard to believe that anyone on my staff was involved in a fraud,"" Felderhof said in a statement faxed from the Cayman Islands late on Sunday.
Felderhof's Busang staff included Michael de Guzman, a Bre-X geologist who allegedly jumped to his death from a helicopter on March 19 while en route to a meeting with Freeport officials in Indonesia.
On March 26, Freeport said that its preliminary tests found ""insignificant"" amounts of gold.
After the Freeport announcement, Bre-X immediately hired Strathcona, a well-respected Canadian mining consulting firm, to review its Busang project.
The announcements sparked panic selling of Bre-X shares, wiping almost C$3 billion ($2.1 billion) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around C$15 ($11).
Bre-X's stock was halted on the Toronto Stock Exchange on Monday after Sunday's stunning report. But shares in other small Canadian mining companies tumbled as the Bre-X scandal reverberated through the mining community.
Barry Allen, a mining analyst at Gordon Capital in Toronto, said investors would be very sceptical of future unproven discoveries by Canadian prospectors.
""Everyone will go back and re-value and re-look at everything, starting from the ground up,"" Allen said.
Freeport and Bre-X agreed to develop the Busang site in January after an intense bidding war by several big mining companies for control of the project.
In a deal brokered by Indonesian businessman Hasan, Freeport received a 15 percent stake and the right to mine the project. The arrangement left Bre-X with 45 percent, down from an original 90 percent stake, and the rest with the Indonesian government and the Indonesian companies.
Meanwhile, the mystery of what happened remains.
The reports of a huge gold find came from samples submitted by Felderhof and his team of geologists, including de Guzman. The last estimate of 71 million ounces of gold was calculated by assay firm Kilborn SNC Lavalin, which has already said it was not responsible for sampling.
""I personally still believe that there are significant amounts of gold at Busang,"" Felderhof said in his statement, adding he would cooperate with authorities investigating the case.
Disgruntled shareholders have already launched at least eight class-action lawsuits against Bre-X and the Ontario Securities Commission is investigating Bre-X for possible violations of trading and disclosure laws.
Several books are being written about the Bre-X saga and a movie is being planned.
",6
"A key consultant's report on Tuesday shed more light on how tampering occurred at the worthless Busang gold project in Indonesia, once touted by Canada's Bre-X Minerals Ltd. as the strike of the century.
While shareholders bailed out of the former stock market darling on Tuesday, investigators and analysts were trying to figure out how the country's biggest swindle could have happened.
Strathcona Mineral Services Ltd., the firm hired by Bre-X that delivered a devastating audit of Busang on Sunday, gave some clues in its full interim report released on Tuesday.
Strathcona said its experts initially found it hard to believe that tampering could have happened on such a grand scale. Bre-X's last resource estimate of 71 million ounces of gold at Busang was based on data pulled from 16,400 samples.
But after a month-long study, Strathcona said ""there appears to be little alternative but to conclude that virtually all the gold in the samples submitted by Bre-X for assaying has originated from some other source.""
Bre-X's storage warehouse near the Borneo town of Samarinda, where core samples were kept for a lengthy period of time, was the most likely spot for any tampering, the report said.
Under Bre-X's system, the core samples from the Busang site were shipped by boat to Samarinda and then trucked to Balikpapan for assaying. The samples spent several weeks at Samarinda before they were sent to Indo Assay Laboratories in Balikpapan.
Strathcona said the precision of tampering was impressive. It suggested those involved had detailed knowledge of the region and how to add the right amounts of gold to match the site's geology.
""We can only suggest that somewhere enroute, probably at Samarinda, there has been a laboratory or facilities established that have allowed very precise additions of the foreign gold,"" the report said.
The report also revealed that Bre-X officials had studies last November that showed serious abnormalities in its Busang gold find.
During its audit, Strathcona reviewed a feasibility review by Kilborn SNC-Lavalin Inc. and a metallurgical study performed by Australia's Normet Pty Ltd. Both studies were commissioned by Bre-X.
Strathcona said it was ""struck by"" Normet's statement that more than 90 percent of the gold in Bre-X's Busang samples were consistent with alluvial, or river, gold. Busang is considered a bedrock deposit.
Before Sunday's devastating news, Bre-X Chief Executive David Walsh had dismissed doubts about Busang that had dogged his company since March. He said he was shocked by Strathcona's report and vowed to find the culprits.
The Royal Canadian Mounted Police has investigators from its commercial crime unit studying the Strathcona report, but no formal probe had been launched, it said.
Rumours about Busang surfaced in March when Busang chief geologist Michael de Guzman allegedly jumped it to his death from a helicopter while flying to a meeting with Bre-X partner Freeport-McMoRan Copper & Gold Inc., a big mining company based in New Orleans.
Freeport had summoned de Guzman to explain why Bre-X's estimates of 71 million ounces of gold at Busang did not match Freeport's findings.
About a week after de Guzman's death, as rumours about Freeport's findings pounded Bre-X's stock, the Toronto Stock Exchange asked Freeport to issue a statement.
Freeport stunned investors on March 26 when the company said its preliminary tests found ""insignificant"" amounts of gold. Bre-X immediately hired Strathcona to audit the project.
The announcements sparked panic selling of Bre-X shares on March 27, wiping almost C$3 billion ($2.1 billion) from the company's market value in one day.
Freeport and an Indonesian company said on Monday they planned to pull out of the Busang project.
Bre-X's stock plunged C$3.17 to C6 cents in frenzied action after it resumed trading on the Toronto Stock Exchange (TSE) on Tuesday. Bre-X's stock value had once topped C$6 billion ($4.4 billion).
""Investors are very disenchanted. Very disappointed and they're selling it just to get it off their backs,"" Ira Katzin, an investment advisor with RBC Dominion Securities, said on Tuesday.
The legal fallout from the Busang bust continued on Tuesday with another class action suit filed against Bre-X Minerals, raising the number of suits against Bre-X to at least nine.
New York law firm Wechsler Harwood Halebian & Feffer LLP said it was seeking to recover damages for shareholders hurt by the Bre-X selloff.
",6
"Shares in Bre-X Minerals Ltd. soared on the Toronto Stock Exchange on Wednesday as rumors continued to swirl around the Busang gold deposit and analysts sifted through drill results from the site.
The Calgary, Alberta-based company's stock jumped C$1.22 to close at C$3.62 on massive turnover of 17 million shares on Canada's biggest stock market.
Frenzied late afternoon trading pushed the volatile stock to a session high of C$5.75.
Bre-X has been embroiled in controversy since preliminary tests by its partner, Freeport-McMoRan Copper & Gold Inc., on the gold property indicated the deposit may contain ""insignificant"" amounts of gold.
The announcement prompted panic selling of Bre-X shares last month, lopping almost C$3 billion ($2.2 billion), or more than 80 percent, from the company's stock market value.
Reports on Wednesday that Freeport recently received the first independent tests of the Busang deposit by a Canadian firm were challenged by Freeport and Bre-X officials.
The reports said Freeport received the tests while Freeport Chief Executive Jim Bob Moffett was in Indonesia and held meetings with President Suharto.
""The testing is still going on and Freeport has not been informed of any assay results,"" Freeport spokeswoman Kristen Lemkau told Reuters by telephone.
Bre-X commissioned Toronto-based Strathcona Mineral Services Ltd. last month to conduct an audit of its Busang project. The results are expected in early May.
""The audit was commissioned by Bre-X and it is going to be submitted to Bre-X,"" said Bre-X spokesman Richard Wool, adding that it was Bre-X that would release the audit results.
Bre-X late on Tuesday released drill results from 22 holes at the Busang property that were not included in its resource calculation of 70.95 million ounces of gold released on February 17.
Bre-X said 16 holes produced values ranging from 1.05 grams per tonne to 7.58 grams per tonne, while six holes showed no significant amount of gold.
""They were sort of old holes, but I think investors are taking it positively,"" said one mining analyst.
John Kaiser, editor of the Kaiser Bottom-Fishing Report, said the drill results released on Tuesday were positive, but not enough to quash the controversy surrounding Busang.
He said the final word on Busang was still up to two weeks away.
""We need to know what the numbers for this deposit run as produced by strictly controlled sampling, drilling and assaying procedures. Until we get a batch of results where we know that there is nothing screwy along the way, everything is uncertain,"" Kaiser said.
The Busang saga took another curious twist on Wednesday when an Indonesian company linked to President Suharto raised its stake in the Busang property.
Nusamba Group, 80 percent-owned by three foundations headed by President Suharto, raised its stake in the main Busang II section to 25 percent. Pt Askatindo Karya Minerals reduced its stake to five percent from 15 percent, said a spokesman for the family-owned company.
Bre-X has a 45 percent stake in Busang, Freeport has 15 percent and the Indonesian government 10 percent.
",6
"The saga of Canada's Bre-X Minerals Ltd. and its now-worthless Busang gold find adds another chapter to a Canadian mining history rich in wealth and fiascos.
Canada has seen its share of scandals over the years -- from the 1960s Windfall affair to recent smaller busts -- but Bre-X is the most devastating to date.
The Busang discovery  -- touted by Calgary, Alberta-based Bre-X as the richest find of the century -- was falsified on a scale ""without precedent in the history of mining,"" said a report by consultant Strathcona Mineral Services Ltd., released by Bre-X late Sunday.
""I think it's one of those things like Windfall. People will talk about it for years,"" veteran mine promoter Patrick Sheridan said in a recent interview.
Until now, Canada's biggest national mining scandal was the Windfall Oils and Mines Ltd. affair in the 1960s.
During a copper and zinc rush in northern Ontario, mining promoters George and Viola MacMillan acquired claims rumored to have tremendous potential.
Fueled by rumors, Windfall's stock soared to more than C$5 ($3.60) from pennies in less than a month. Authorities pressured the MacMillans to release their drilling results.
The results showed the grand deposit as a dud. The stock collapsed, and Canada's government launched a royal commission to investigate.
The Kelly Commission found no evidence the MacMillans, who carted the drill samples around in their Cadillac, were the source of the rumors. But their actions promoted a belief by investors that the samples were valuable, the commission said.
Viola MacMillan went to jail briefly for stock manipulation.
Sheridan said the panel came up with a good report on how another Windfall could be avoided. But, like many government reports, it was shelved.
The earliest dashed mining hope in Canada was in 1575 when English explorer Martin Frobisher found what he believed to be gold on Baffin Island in the far north.
When he returned to England with 1,500 tons of ore, the royal assayer told Frobisher he had worthless iron pyrites, also known as ""fool's gold.""
More recent mining embarassments involved Timbuktu Gold Corp. and Cartaway Resources Corp.
Last year, Timbuktu stock soared on a reported gold find in West Africa. But a new management team revealed the assays had been salted, or doctored, by unknown parties.
When investors got the news, the stock plunged around C$23 ($16) to C$1.75 ($1.27).
Cartaway stock skyrocketed in April 1996 after it announced a copper-nickel find in Labrador, Newfoundland.
The news came amid the fever over the huge Voisey's Bay nickel and copper find, which Canadian nickel giant Inco Ltd. acquired for C$4.3 billion ($3.1 billion).
Cartaway's report, however, was based on a visual inspection of just one core sample by a geologist at the site. The stock sank more than C$20 ($14) to about C$2.80 ($2).
Rich deals such as Inco's takeover of Diamond Fields Resources Ltd. and Barrick Gold Corp.'s $800 million acquisition of Arequipa Resources Ltd. fueled investor enthusiasm for mining plays. But analysts said it also might have impaired the market's judgment.
""It's a symptom of the times. There is a high degree of greed in the markets, not only in the mining industry but with regard to others, and investors tend to get complacent during these times,"" said John Ing, president of brokerage Maison Placements Canada in Toronto.
Another Canadian mining scandal eerily similar to Bre-X involved New Cinch Uranium Ltd. and its New Mexico gold find in the 1980s.
Willroy Mines Ltd. bid for New Cinch after its stock rallied on rich assays performed by a U.S.-based lab, Chem-Tec.
But rumors about poor test results by another assayer sent the stock on a wild ride. The mob-style murder of a former Chem-Tec employee added to the intrigue.
After a negative independent audit, New Cinch admitted the samples were contaminated and several lawsuits ensued. Willroy pulled out of the project.
Today, investigators are probing the Bre-X embroglio as Canada's mining community tries to repair its tarnished image at home and abroad.
Some said the past success of Canada's other mining companies should not be tarred by controversy about one small miner.
""Our mining industry is second to none,"" Peter Munk, chairman of Barrick, the world's second biggest gold miner, said recently. ""And no single rogue operation and no single deviant member can change these fundamentals.""
",6
"The saga of Bre-X Minerals Ltd. and its rich Indonesian gold discovery took another twist on Friday as doubts about the Busang deposit and the mysterious death of its chief geologist pushed investors to dump the stock.
Trading in shares in the Calgary, Alberta-based prospector was initially halted on the Toronto Stock Exchange after an Indonesian newspaper said a review by Busang partner Freeport-McMoRan Copper & Gold Inc. ) showed the deposit was smaller than Bre-X's estimate of 71 million ounces.
New Orleans-based Freeport said on Friday its review of the site was not finished. But that failed to appease skittish investors when the stock resumed trading.
Bre-X stock sank to a 52-week low of C$14.25 in frenzied afternoon trading. It closed down C$2.25 at C$15.20 on volume of 9 million shares, the most active trader in Toronto.
On Nasdaq, Bre-X fell $1.625 to $11 on 1.6 million shares after earlier hitting a low of $10.25.
Freeport shares fell 75 cents to $30.625 in consolidated trading on the New York Stock Exchange.
""I've concluded the only person who could ever make a movie out of this is Alfred Hitchcock. It's become so bizarre that people have lost any tolerance for staying in,"" Goepel Shields analyst Rick Cohen said in a telephone interview.
Adding to the uncertainty was the death of Bre-X chief geologist Michael de Guzman, a co-discoverer of the Busang gold deposit.
De Guzman, who fell out of a helicopter on Wednesday while flying to the gold site in Indonesia's East Kalamantan province, was ill and may have committed suicide, Indonesian officials said. De Guzman's body has not been found.
""Obviously, one of the reasons the stock has been under a lot of pressure is because of this mystery of the man's death. He was their chief on-site exploration guy ... which cast some doubt on the stock,"" said PaineWebber analyst Marc Cohen.
Analysts predicted rumours would cling to Busang until Freeport issues a statement after completing its review.
Citing unnamed sources, Indonesia's Harian Ekonomi Neraca newspaper reported on Friday that Freeport's test results did not match Bre-X's estimates.
""It is possible that the deposit is not as big as it has been mentioned before. It could be that it is not viable to mine this deposit,"" the newspaper said, quoting the source.
But a Freeport official said on Friday the company would not comment until its review was finished.
This week's intrigue added to an already suspenseful tale surrounding the gold deposit deep in the rain forest of Indonesia's Borneo island.
Several months ago, the Busang deposit was the subject of a bidding war in which several mining companies wooed the Indonesian government for control of what has been called the biggest gold find of the century.
Toronto-based Barrick Gold Corp., armed with a high-powered advisory board led by former President George Bush and former Canadian Prime Minister Brian Mulroney, initially dominated the negotiations for control of Busang.
But Barrick's inside track ended when the government of President Suharto brought in Indonesian businessman Muhammad ""Bob"" Hasan in January.
Hasan brokered a deal that gave Freeport, a veteran mining player in Indonesia, 15 percent of Busang and the right to mine the project.
The arrangement left Bre-X with 45 percent, down from an original 90 percent, and the rest to the Indonesian government and two Indonesian companies.
",6
"The Busang gold discovery in Indonesia -- touted by Canada's Bre-X Minerals Ltd. as the richest find of the century -- was falsified on a scale ""without precedent in the history of mining"" according to a report released on Sunday.
In a stunning report to Bre-X, consultant Strathcona Mineral Services Ltd. said it found evidence of tampering with Bre-X core samples taken from the Busang site, located deep in the jungles of Borneo.
""The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay values at Busang, is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world,"" the report said.
Strathcona said it did not find an economic gold deposit in the southeast zone of the Busang property, the area claimed by Bre-X to contain about 71 million ounces of gold. The report said an economic deposit was unlikely.
The Toronto Stock Exchange said on Sunday that it would halt trading in Bre-X shares on Monday ""in light of the extremely negative report from Strathcona.""
Bre-X's stock closed up 19 cents (14 cents) at C$3.23 ($2.34) on the Toronto Stock Exchange on Friday.
Bre-X chairman David Walsh, the maverick mining executive who gambled his last C$10,000 ($7,200) on finding Busang, said the company was ""devastated"" by Strathcona's findings.
""We share the shock and dismay of our shareholders and others that the gold we thought we had at Busang now appears not to be there,"" Walsh said in a statement on Sunday.
As the fallout from Sunday's announcement reverberated through the world mining community, Walsh had little to say to reporters as he sped away from Bre-X's Calgary headquarters where shareholders and reporters had gathered.
""I think our press release says it all for now,"" he said.
The report spells the end of Bre-X, said gold analyst John Ing of Maison Placements Canada in Toronto.
""Bre-X has got nothing, that's what it means,"" Ing said in a telephone interview. ""They've got nothing but lawsuits on their hands,"" he said.
With billions of dollars in limbo, nervous shareholders have traded rumors for weeks on Internet chat sites while they waited for the Strathcona report.
Some Bre-X shareholders who stood by the company during the recent turmoil now lay the blame at Walsh's feet.
""He should be prosecuted to full extent of the law,"" Chris Laughren, a  construction worker, told Reuters on Sunday as he waited outside Bre-X's headquarters.
Laughren said he has lost C$7,500 ($5,400) on Bre-X stock, or ""three months work down the drain.""
Walsh said in a statement on Sunday he would do all he could to protect Bre-X's remaining assets ""for the benefit of the shareholders.""
A penny-stock exploration firm before it discovered Busang in 1993, Bre-X quickly became the darling of the Toronto Stock Exchange amid glowing reports of Busang's potential.
But rumors began swirling around Bre-X and its Busang deposit after the March 19 apparent suicide of Bre-X's top geologist in Indonesia.
Michael de Guzman allegedly jumped to his death from a helicopter while en route to a meeting with officials at Freeport-McMoRan Copper & Gold Inc, one of Bre-X's partners in the Busang project.
A week later on March 26, New Orleans-based Freeport-McMoRan said that its preliminary tests found ""insignificant"" amounts of gold.
The reports of a huge gold find came from samples submitted by Bre-X's head of exploration John Felderhof and his team of geologists, including de Guzman. The last estimate of 71 million ounces of gold was calculated by assay firm Kilborn SNC Lavalin, a unit of Montreal-based SNC Lavalin Inc. Kilborn has already said it was not responsible for sampling.
After the Freeport-McMoRan report Bre-X immediately hired Strathcona, a well-respected Canadian mining consulting firm, to review its Busang project.
The announcements sparked panic selling of Bre-X shares, wiping almost C$3 billion ($2.1 billion U.S.) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around C$15 ($11).
A Freeport spokesman said on Sunday the company had no immediate comment, but would release a statement before North American financial markets opened on Monday.
""Our response is we're aware Bre-X has released a news release,"" spokesman Garland Robinette said.
Freeport said last month it would ""elect to participate in the Busang project only if development is, in (Freeport's) opinion, economically feasible.""
Disgruntled shareholders have already launched at least eight class action lawsuits.
The Ontario Securities Commission, Canada's top securities regulator, is investigating Bre-X for possible violations of insider trading and disclosure laws.
Increasing attention is being paid to personal trades by Walsh, his wife and other company officials in 1996, which netted them about C$77 million ($55 million).
Less than a year ago, Bre-X was the target of an intense bidding war as several heavyweight mining firms battled for control of possibly the world's richest gold discovery.
",6
"A monster shakeup of Canada's biggest city, Toronto, has sparked a citizens' revolt against Ontario's ruling Conservatives and raised eyebrows among those do business in the country's financial capital.
This clean, peaceful city -- sometimes dubbed ""New York run by the Swiss"" -- has recently become a battleground in the so-called ""Common Sense Revolution"" initiated by Ontario's Conservative Premier Mike Harris.
Promising leaner, cheaper government, Harris wants to merge Toronto and six neighbouring municipalities into a single ""megacity"" of 2.4 million people. The new city would hold about eight percent of Canada's 30 million people and dwarf all but three of Canada's 10 provinces.
Harris also plans a fundamental shift in how public services -- everything from education to welfare -- are delivered and paid for.
Opponents fear the municipal reform blitz will drive up taxes and lead to the kind of urban decay witnessed in many cities in the United States, just across the border.
The threat of such wrenching change being rammed through without a binding plebiscite has outraged citizens and prompted accusations of tyranny and fascism.
""Government is not elected for the politicians. It is elected by the people for the people,"" Toronto Mayor Barbara Hall told a crowd after residents in the seven affected areas voted three to one against a merger in a referendum last week.
The vote was not binding on Ontario's government, which has vowed to press ahead with its plan.
GOVERNMENT IS ADAMANT
The referendum capped a campaign which saw an Ontario cabinet minister likened to Adolf Hitler, bomb threats against a polling firm, and thousands of protesters marching in the streets in a re-enactment of a civic rebellion in 1837.
Harris has held firm. ""I don't think we can withdraw the need for change,"" he said, adding that there may be amendments when the legislation is introduced.
The ""megacity"" revolt has grabbed headlines across the country and overseas, even prompting some foreign consulates to keep a wary eye on the political wrangling.
""There is some interest, but it's purely because it has appeared in the (British) papers,"" said Terry Curran, the British Consul in Toronto.
Meanwhile, high-profile Canadian business leaders, politicians and artists have joined to oppose the merger plan.
They include film director Norman Jewison, Molson chief executive Norman Seagram, and writer Margaret Atwood who compared the megacity's architects to the Three Stooges.
The ""No"" side captured 75 percent of the votes in the referendum, but the process was flawed and turnout was low.
Under draft legislation, known as Bill 103, the seven city halls and 106 politicians who now govern the Greater Toronto Area will shrink to one elected mayor and 44 councillors.
The government also plans to overhaul property taxes, eliminate more than half of the province's school boards, seize control of education funding and download a bigger share of social programme costs onto the municipalities.
TAX FEARS
Harris has said the reforms are revenue neutral, but critics say municipalities may be forced to raise taxes.
They fear welfare rolls could soar and one of the hardest hit communities would be Toronto, which has a heavier welfare caseload and nearly half of the province's social housing.
""You're doing something that is very volatile and on a tax base which has very little flexibility,"" said George Fierheller, president of Toronto's Board of Trade.
More than 75 percent of the board's members favour reducing the size of government through a merger but nearly half worry about dumping such heavy responsibilities onto municipalities.
""As a Torontonian and a businessman responsible for a large company, I'm wary of abrupt change without making sure you've thought it through,"" said Peter Godsoe, chairman of Canada's fourth-largest bank, Bank of Nova Scotia.
The influential debt rating agency, Moody's Investors Service, has warned ""the very nature and scale of the reforms...create new challenges that could affect the credit quality of some municipalities.""
DOWNLOADING FEATURE OF GOVERNMENT AT ALL LEVELS
The downloading trend has been a feature of government at all levels in Canada as they struggle with budget deficits.
Canada's ruling Liberal Party in Ottawa has dumped responsibility for public services on the provinces in recent federal budgets. Now the cash-strapped provinces are the doing the same to municipalities.
The autonomy of municipalities is severely restricted. They have the power to tax and legislate, but their powers are drawn from provincial law which can be changed by a majority vote in the legislature.
Ontario is in a tougher bind than most. Faced with a huge C$10 ($7.38) billion deficit when they came to power in 1995, the Conservatives slashed spending and cut the deficit to C$7.7 billion in 1996/97, while easing some taxes.
The Harris revolution has kept the government high in opinion polls, but public support has slipped recently, with backing for the Conservatives down to 37 percent in Metro Toronto, compared to 41 percent for the opposition Liberals.
""My sense is they cannot ignore the referendum results,"" said University of Toronto political scientist Graham White. ""Now that doesn't mean they will abandon the bill or even change it in a substantive way. There is not a lot of room for tinkering."" ($ = 1.354 Canadian Dollars)
",6
"While Bre-X Minerals Ltd's maverick chief executive and senior geologist were crowned Canada's top prospectors in March, a major Busang partner got its first inkling that the gold find of century was bust.
The big U.S. mining company Freeport-McMoRan Copper & Gold Inc pulled out of the now worthless Busang gold project on Monday after a damning consultant's report concluded Busang was the biggest fraud in mining history.
New Orleans-based Freeport said the report confirmed its own poor test results from the site.
Freeport chief executive Jim Bob Moffett said on Monday the first sign that something was wrong at Busang came when its assay lab -- PT Indo Assay Laboratories in Balikpapan, Indonesia -- could not find significant amounts of gold in Freeport's samples.
""We had a preliminary indication from the Indo Assay labs that the samples were not checking out,"" Moffett said in a conference call with reporters on Monday.
Moffett said he tried to contact Bre-X Minerals Chief Executive David Walsh and the company's Chief of Exploration, John Felderhof. Both were in Toronto in mid-March to receive awards from their peers at a gala ceremony hosted by the Prospectors and Developers Association of Canada.
Bre-X's chief geologist, Michael de Guzman, also attended the conference in Toronto.
The Busang discovery  -- touted by Calgary, Alberta-based Bre-X as the richest find of the century -- was falsified on a scale ""without precedent in the history of mining,"" according to a report issued late on Sunday by consultant Strathcona Mineral Services Ltd.
""I notified them that they needed to get some senior people back out (to Indonesia) because we needed some help to try to understand what was going on,"" Moffett said.
De Guzman was en route to a meeting with Freeport officials in Borneo on March 19 when he allegedly jumped to his death from a helicopter. Rumors began to swirl around the Busang project after de Guzman's death.
""Mr. de Guzman was aware that there were problems with the assays. I don't know how much detail he was told,"" Moffett said.
About a week after de Guzman's death as rumors about Freeport's findings pounded Bre-X's stock, the Toronto Stock Exchange asked Freeport to issue a statement.
Freeport stunned investors on March 26 when the company said its preliminary tests found ""insignificant"" amounts of gold. Bre-X immediately hired Strathcona to audit the project.
The announcements sparked panic selling of Bre-X shares on March 27, wiping almost C$3 billion ($2.1 billion) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around C$15 ($11).
In its report, Strathcona said it found evidence of tampering with Bre-X's core samples and that Strathcona's own tests discovered only trace amounts of gold at the Busang site where Bre-X claimed to have found 71 million ounces of gold.
The report said a gold deposit worth mining was unlikely to be found at the site.
Moffett said Bre-X's warehouse near the Borneo town of Samarinda was the most likely spot for any tampering of Bre-X's core samples.
""We felt that way because those samples sat there for such a long period of time before they actually went to lab in Balikpapan,"" Moffett said.
""It appeared to us that the samples that went to Samarinda ended up with gold in them. The ones that didn't go to Samarinda ended up with no gold in them,"" he said.
Moffett said the theory about tampering at Samarinda is outlined in the full interim Strathcona report which will be released publicly on Tuesday.
He said it is up to authorities to discover who exactly tampered with Bre-X's samples.
Despite the fallout from the Busang debacle, Moffett said prospects for mining investment remain strong in Indonesia, where it has major operations.
""I have a lot of confidence that there is going to be other gold and copper found in the Pacific Rim, especially in the rest of Indonesia and into the Phillippines,"" he said.
",6
"A monster shakeup of Canada's biggest city, Toronto, has sparked a citizens' revolt against Ontario's ruling Conservatives and raised eyebrows among those who do business in the country's financial capital.
This clean, peaceful city -- sometimes dubbed ""New York run by the Swiss"" -- has recently become a battleground in the so-called ""Common Sense Revolution"" initiated by Ontario's Conservative Premier Mike Harris.
Promising leaner, cheaper government, Harris wants to merge Toronto and six neighbouring municipalities into a single ""megacity"" of 2.4 million people. The new city would hold about 8 percent of Canada's 30 million people and dwarf all but three of Canada's 10 provinces.
Harris also plans a fundamental shift in how public services -- everything from education to welfare -- are delivered and paid for.
Opponents fear the municipal reform blitz will drive up taxes and lead to the kind of urban decay witnessed in many cities in the United States, just across the border.
The threat of such wrenching change being rammed through without a binding plebiscite has outraged citizens and prompted accusations of tyranny and fascism.
""Government is not elected for the politicians. It is elected by the people for the people,"" Toronto Mayor Barbara Hall told a crowd after residents in the seven affected areas voted three to one against a merger in a referendum earlier this month. The vote was not binding on Ontario's government, which has vowed to press ahead with its plan.
The referendum capped a campaign that saw an Ontario cabinet minister likened to Adolf Hitler, bomb threats against a polling firm, and thousands of protesters marching in the streets in a re-enactment of a civic rebellion in 1837.
Harris has held firm. ""I don't think we can withdraw the need for change,"" he said, adding that there may be amendments when the legislation is introduced.
The ""megacity"" revolt has grabbed headlines across the country and overseas, even prompting some foreign consulates to keep a wary eye on the political wrangling.
""There is some interest, but it's purely because it has appeared in the (British) papers,"" said Terry Curran, the British Consul in Toronto.
Meanwhile, high-profile Canadian business leaders, politicians and artists have joined to oppose the merger plan.
They include film director Norman Jewison, Molson Cos. Ltd Chief Executive Norman Seagram, and writer Margaret Atwood who compared the megacity's architects to the Three Stooges.
The ""No"" side captured 75 percent of the votes in the referendum, but the process was flawed and turnout was low.
Under draft legislation, known as Bill 103, the seven city halls and 106 politicians who now govern the Greater Toronto Area will shrink to one elected mayor and 44 councillors.
The government also plans to overhaul property taxes, eliminate more than half of the province's school boards, seize control of education funding and download a bigger share of social programme costs onto the municipalities.
Harris has said the reforms are revenue neutral, but critics say municipalities may be forced to raise taxes.
They fear welfare rolls could soar and one of the hardest hit communities would be Toronto, which has a heavier welfare caseload and nearly half of the province's social housing.
""You're doing something that is very volatile and on a tax base which has very little flexibility,"" said George Fierheller, president of Toronto's Board of Trade.
More than 75 percent of the board's members favour reducing the size of government through a merger but nearly half worry about dumping such heavy responsibilities onto municipalities.
""As a Torontonian and a businessman responsible for a large company, I'm wary of abrupt change without making sure you've thought it through,"" said Peter Godsoe, chairman of Canada's fourth-largest bank, Bank of Nova Scotia.
The influential debt rating agency, Moody's Investors Service, has warned ""the very nature and scale of the reforms...create new challenges that could affect the credit quality of some municipalities.""
The downloading trend has been a feature of government at all levels in Canada as they struggle with budget deficits.
Ontario is in a tougher bind than most. Faced with a huge C$10 ($7.38) billion deficit when they came to power in 1995, the Conservatives slashed spending and cut the deficit to C$7.7 billion in 1996/97, while easing some taxes.
The Harris revolution has kept the government high in opinion polls, but public support has slipped recently, with backing for the Conservatives down to 37 percent in Metro Toronto, compared with 41 percent for the opposition Liberals.
",6
"Canadian gold miner William Resources Inc said on Tuesday it expects to ""easily achieve"" its goal of over 200,000 ounces of gold in 1997 and it has the financial resources to ride out a weak gold market.
In its outlook for 1997, the Toronto-based company said early tests of its Ballarat East project in Australia are promising, but its plans for Ruster's Roost are on hold.
William also gave a favorable update of its operations in Scandinavia and Brazil, but said its disappointing Mexican project is up for sale.
""We had stated that in 1997 we would do over 200,00 ounces at a cash cost under US$300 an ounce. We feel that we are going to easily achieve that goal,"" Bharti told analysts during a conference call on Tuesday.
Gold production in 1996 was an annualized 100,000 ounces of gold with an average cash cost of US$349 per ounce. William Resources made three acquisitions last year which pushed it into the ranks of intermediate gold producers.
The Bjorkdal mine in Sweden, acquired in December 1996, is expected to exceed 100,000 ounces in 1997 at a cash cost of US$216 per ounce.
In Brazil, the Jacobina project is forecast this year at 65,000 ounces of gold at a cash cost of US$285 per ounce.
Bharti said the current downturn in gold prices and depressed stock prices due to the Bre-X Minerals Ltd controversy has undermined investor confidence.
The Toronto Stock Exchange's gold index was off 233 points on Tuesday as COMEX gold futures sank over US$5 an ounce.
""We've got gold at US$345 (an ounce) this morning. Stocks with the Bre-X issue are really struggling. There's a huge malaise in the gold market where people are wondering if gold is a good investment,"" Bharti said.
But William Resources is in good shape with 90 percent of its gold hedged at over US$374 per ounce, he said.
Bharti added that cash flow from operations of US$25 million in 1997 gives the company the enough flexibility ""if this market gets any worse.""
He said the company could also defer some capital spending. About US$15 million of William's US$20 million capital budget in 1997 is discretionary.
Looking at individual projects, Bharti said bulk testing at the Ballarat East gold project in Australia should be completed by the end of this month.
""I can say the results to date...we're finding some very exciting nuggets in Ballarat that certainly we had not expected,"" Bharti said.
The outlook was less favorable for Ruster's Roost where a feasibility study indicated the project would need gold prices of around US$400 an ounce to be viable.
Bharti said plant construction would continue until July, but future spending would be deferred after that.
""We would really like to see in this present gold market what the price of gold is and how the overall market performs before we put the propellers on Ruster's Roost,"" he said.
In Mexico, the Velardena project is up for sale following a disappointing performance last year. William Resources took a C$3.5 million writedown on the project in the three months ended December 31, 1996.
""We've been approached by two or three companies that are focused on Mexico and interested in buying Valedania and we are in advanced negotiaitons with these companies,"" he said.
Earlier this week, the company said first quarter 1997 gold production exceeded 47,000 ounces at a cash cost of US$295 per ounce. The results were slightly under budget due to poor weather at Ruster's Roost in January, Bharti said.
He said financial results for the first quarter will be released before the company's annual meeting on May 14. At the meeting, shareholders will vote on a proposed one for three stock consolidation.
((Reuters Toronto Bureau (416) 941-8100))
",6
"Ontario Finance Minister Ernie Eves said on Thursday the government was ahead of its revised deficit target for 1996/97 and may balance the province's books before the turn of the century.
In a pre-budget interview, Eves said he did not feel obligated to speed up the timetable for the next stage of the government's planned 30 percent income tax cut.
The Conservative government will deliver on May 6 its second full budget since sweeping to power in 1995.
Last February, Eves revised the 1996/97 deficit down to C$7.67 billion from an original forecast of C$8.2 billion.
""We might be slightly better than that. The economy performed pretty well,"" Eves said.
He declined to comment on economists' predictions that the 1996/97 deficit would drop below C$7 billion. Some analysts have speculated that the government could wipe out the deficit by fiscal 1999/2000, one year ahead of plan.
""It's not impossible, but it isn't a slam dunk by any stretch of the imagination. There has to be some pretty significant growth,"" Eves said.  
In a pre-budget commentary on Wednesday, Toronto-Dominion Bank economists said Ontario could reach its deficit goal faster if the economy remained favorable.
Eves said it would be possible to balance the budget ahead of schedule if the economy grew around four percent annually for three straight years.
""If you had those types of growth numbers of around four (percent) or just under four (percent) for three consecutive years, I think it's possible that you could achieve that,"" he said.
But Eves said he would continue to use conservative economic forecasts in next week's budget.
""We would be more than happy to overachieve our targets and more than happy to get to our goal earlier than planned, but I'm not counting on it,"" he said.
Some economists have speculated that Ontario's stronger economy and improving deficit outlook might allow Eves to speed up delivering the next stage of a promised 30 percent tax cut.
About half the tax cut has been implemented, with the remaining 15 percent due by 1999.
""We said...we would provide half of the cut in our first budget and we did that. We (said) would provide for the next half over two years and I don't see any reason to change course,"" Eves said.
Since taking power in 1995 promising a ""Common Sense Revolution"", the Conservatives have outlined deep spending cuts through the end of the decade.
Eves said most of the cost-cutting had been put in place and Tuesday's budget would include spending on infrastructure and restructuring of public services.
""We always said -- in the the health care field especially -- that as we found savings and efficiencies, we would reinvest,"" he said.
Despite its deficit-cutting efforts, Ontario has not won a major rating upgrade from influential bond rating agencies.
""Sure you would like to see that recognition in the marketplace,"" Eves said, but he declined to comment when asked if Ontario deserved an upgrade.
""There have been a couple of upgrades in the Ontario's short-term ratings, but nothing substantial. Although we are borrowing money as if we had a better rating,"" Eves said.
((Reuters Toronto Bureau (416) 941-8100))
",6
"Canadians are experiencing a winter of dismay as their national religion -- ice hockey -- is shaken by sex scandals, fraud trials and the decline of their once dominant teams.
This year marks the 25th anniversary of Canada's greatest triumph on ice -- a last-minute victory in a series against the Soviet Union that whipped this placid country into a patriotic frenzy.
""It was the one time that we were distinctly Canadian,"" Paul Henderson, a journeyman player who achieved hockey sainthood for scoring the winning goal in the final game of the 1972 Summit Series, said in a recent interview.
But memories of past glory are tempered by fears that Canada is losing its grip on the game.
The current season began with the faith-shattering defeat of Canada by the United States in the final of the inaugural World Cup of Hockey.
And computer-enhanced pucks that leave bizarre colour trails on television screens, and the NHL's expansion into U.S. markets with little hockey tradition have left purists cringing at the Americanisation of their game.
The most disturbing recent blow has been a sex scandal involving young boys and Canada's oldest hockey shrine -- Maple Leaf Gardens, home of the Toronto Maple Leafs.
Canadian police have charged two Gardens' employees after uncovering a pedophile ring that allegedly lured teenaged boys to the arena with free tickets and autographs of their hockey heroes.
The sordid tale, which may involve up to 60 victims between the late 1960s and early 1990s, has grabbed newspaper headlines across the country.
""Maple Leaf Gardens was a sex haven of abused boys, tons of them. They would lay down blankets and they would get us naked and have group sex,"" one victim, 34-year-old Martin Kruze, has said of the abuse he says started when he was 13.
It's not the only sex abuse case to rock hockey this year.
Graham James, one of Canada's top junior coaches, pleaded guilty in January to sexually assaulting two players in the 1980s and was sentenced to 3-1/2 years in prison.
James admitted to more than 300 instances of sexual assault over six years against Boston Bruins player Sheldon Kennedy, who was 14 when the assaults began in 1984.
Since the James case broke, a minor league hockey coach in Calgary was charged with sexually assaulting a player at a summer camp, and a community club hockey coach in Winnipeg, was suspended after a former player alleged sexual abuse.
The revelations hit hard in a nation where it is traditional for parents of boys with pro hockey aspirations to turn their chidren over to the care of junior coaches, often far from home.
""The sex cases have made Canadians very uneasy. It speaks directly to this power relationship between adult coaches and the children in hockey,"" University of Toronto psychologist John Ferudy said.
Other criminal cases have also vied for space in the country's sports pages this winter.
Former hockey czar and player agent Alan Eagleson, architect of the 1972 matchup between Canada and the Soviet Union, faces fraud and theft charges related to the billing of clients and handling of funds from international tournaments.
The game's reputation for thuggery reared its ugly head again with a junior league brawl last month. Police in Halifax, Nova Scotia said criminal charges could soon come against a player who repeatedly punched an unconscious opponent who lay convulsing on the ice.
Canada's junior teams still dominate international tournaments, but critics argue their success is due more to a grinding physical style of play than to superior skills.
The influx of flashy Europeans into the NHL has also caused some concern in the game's homeland. Canadians now account for just 60 percent of NHL players, down from 76 percent a decade ago and 98 percent in 1968, and a Canadian has not led NHL rookies in scoring since 1988.
Meanwhile, the future of Canada's small-market clubs looks grim.
With the departure of the Winnipeg and Quebec teams to Phoenix and Denver, only six of the NHL's 26 clubs remain in Canada -- and all but one has a losing record this season.
To add further insult, the league's current expansion plans are focused far from hockey's roots in small frozen towns across Canada. Last week, Hamilton, Ontario's bid for an NHL franchise was rejected, while steamy Atlanta appears hot favourite to get the next NHL team.
""It's a slap not just in Hamilton's face, but in the face of all Canadians,"" said Hamilton bid organiser Gabe Macaluso.
Calgary, Edmonton and Ottawa are struggling to stay alive amid soaring costs.
The Ottawa Senators have warned fans to buy more tickets or face losing the team.
The Edmonton Oilers, who won five Stanley Cups in the 1980s before selling off their best players, plan to offer shares to the public this spring. ""I'm doing this to keep the team here,"" Oilers' owner Peter Pocklington said.
But this supposed effort on behalf of Edmonton will never buy Pocklington's way into hockey heaven.
He will forever be loathed for shipping Canadian national treasure Wayne Gretzky to Los Angeles.
",6
"Molson Cos Ltd will hold its annual shareholder meeting on Wednesday, under pressure for a stock buyback as the cash-rich Canadian beer giant searches worldwide for a brewing acquisition.
It also marks the debut of a new chief executive to lead the company's return to its 210-year-old brewing roots after a failed foray into specialty chemicals.
With the C$1 billion sale of its Diversey Corp chemicals unit almost completed, Molson is looking for overseas opportunities to expand its core brewing business.  
But some investors, worried that a deal would be too pricey, are pushing the brewer for a share buyback.
""We're getting answers from across the spectrum,"" Brian Crombie, senior vice president of corporate finance, said of Molson's recent talks with investors.
""You've got some institutions saying they would prefer that the company buy back shares. You've got other institutions saying that they are willing to give Molson time to consider its options,"" Crombie said in an interview.
Molson owns 40 percent of Canada's largest brewer, Molson Breweries, which makes Molson Canadian, Golden and Red Dog.  
The rest of Molson Breweries is owned 40 percent by Australia's Foster's Brewing Group Ltd and 20 percent by Philip Morris Cos Inc's Miller Brewing unit.
Molson has expressed interest in buying a bigger stake in Molson Breweries, but neither Foster's nor Miller appears ready to part with its stake, Crombie said.
Looking offshore, analysts said good brewing assets would likely command a high price. ""There's a lot of work going on, but I don't think they can make an acquisition at a reasonable price,"" said Mike Palmer, an analyst with Toronto-based Equity Research Associates.  
Jitters about what Molson will do with the Diversey proceeds has weighed on the brewer's share price. Molson class A stock hit a 52-week high of C$25.125 after it announced plans to sell Diversey last winter. The stock has since drifted down to about C$20.
Norman Seagram, Molson's new president and chief executive, is expected to outline his vision for the company when he addresses shareholders at the meeting in Montreal.
Seagram a former Molson executive with more than two decades of experience in the brewing industry, replaced Marshall Cohen who oversaw the company's troubled diversification.
-- Reuters Toronto Bureau (416) 941-8100
",6
"Canadians were stunned Sunday after a heartbreaking loss to the United States in the World Cup of Hockey dealt a crippling blow to the nation's pride.
Canada's ""dream team"" -- a galaxy of National Hockey League stars including Wayne Gretzky, Mark Messier and Eric Lindros -- fell to an upstart American squad in a gripping finale to the World Cup championship Saturday.
Team USA, led by superb goaltending, defeated the Canadian squad 5-2 to win the best-of-three series in Montreal.
Canadians -- who consider hockey more of a religion than a sport -- mourned the country's worst loss in international play since 1981 when the Soviet Union handed Team Canada a crushing defeat in the Canada Cup -- the precursor to the World Cup.
Saturday night's loss has also rekindled fears of a further Americanisation of Canada's sacred game.
""I feel terrible, just terrible. That's why I'm here,"" Circiaco Deluca said as he quaffed a pint of beer in Wayne Gretzky's bar in Toronto, surrounded by mementos of past Canadian hockey glory.
Gretzky, known as the Great One, summed up the feelings of most of his countrymen after Saturday's game.
""This is a crushed locker room right now and probably a crushed country. It's devastating,"" Gretzky told reporters.
The disastrous outcome dominated the front pages of Canadian newspapers Sunday.
""DAMN YANKEES,"" screamed the Montreal Gazette newspaper.
""AMERICA'S GAME,"" cried the Toronto Star, Canada's largest newspaper.
""The U.S. roared into Canada like a mayhem-minded mob of Hell's Angels and left with a major chunk of our national heritage,"" wrote Star hockey columnist Damien Cox.
The tabloid Toronto Sun featured a cartoon of the Statue of Liberty with a hockey stick in one hand and the World Cup trophy in another.
Canada's defeat comes at a time when many fans are lamenting the steady Americanisation of their game.
Computer-enhanced pucks, flashy uniforms with cartoon characters, and the NHL's expansion into non-traditional markets like Phoenix and Nashville have made hockey purists cringe.
A Canadian-based team has not won the NHL's championship Stanley Cup since 1993 and appears likely to extend the losing streak for another year.
Small market clubs in Calgary, Edmonton and Ottawa are struggling to stay alive in the face of skyrocketing costs. Quebec City and Winnipeg have already seen their franchises flee south to wealthier markets.
Frank Diponzio, a tourist from Rochester, N.Y., said hockey's future will depend on it growing in the bigger U.S. market.
""It's not as popular as baseball or football, but it's getting bigger. Beating Canada at home will help,"" he said in an interview.
Some Canadian fans were bitter that Canadian-born Brett Hull, the son of hockey legend Bobby Hull, scored twice in Saturday's game -- for the United States.
Hull, who has dual citizenship, played most of the game to chants of ""Brett Hull sucks"" from the partisan crowd in Montreal's Molson Centre.
""I think he should have played for Canada. It just shows a lack of respect for the country,"" said Trevor Murray, an 18-year-old student sporting a Toronto Maple Leafs sweater.
But others said the younger, faster U.S. team deserved credit for a gritty performance.
""It's not a national catastrophe. They played a great game and we'll be back,"" said Jack Porter of Sudbury, Ontario.
",6
"Shares in Canadian gold prospector Bre-X Minerals Ltd. resumed trading on Wednesday, but massive trading volumes again overwhelmed a creaky computer system on the Toronto Stock Exchange.
Bre-X's stock fell C65 cents to C$3.20 on the TSE on Wednesday before it was stopped in late morning due to heavy order volumes and ""technical difficulties,"" the exchange said.
Despite an abbreviated trading session, Bre-X dominated the market with turnover of 11.7 million shares.
The stock was halted all day on Monday and resumed trading in Toronto for 22 minutes on Tuesday before it collapsed the 20-year-old computer trading system and was halted.
""This is brutal. They are not going to come away untarnished as an exchange,"" one trader said.
Shares in the Calgary, Alberta-based firm have traded for just two hours on Canada's biggest equity market since investors lopped almost C$3 billion ($2.19 billion) off Bre-X's market value last Thursday.
Bre-X has been under heavy fire since last week when its partner in Indonesia, Freeport-McMoRan Copper & Gold Inc., revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up ""insignificant"" amounts of gold and ""visual differences"" from Bre-X's gold samples.
While the TSE experienced more computer headaches, Bre-X stock continued trading on Nasdaq and the Montreal and Alberta exchanges on Wednesday.
Bre-X closed down 19 cents at $2.315 on 9.4 million shares on Nasdaq. In Montreal, the stock fell C35 cents to C$3.15 on 6.2 million shares.
Analysts predicted more volatility. ""All I see happening in the market right now is the battle lines have been drawn between the believers and non-believers and the salting and non-salting crowd. At the end of the day we'll have to see if its zero or the moonshot,"" Merrill Lynch analyst David Christensen said.
Bre-X Chief Executive David Walsh has insisted tampering with core samples was impossible and an independent audit would prove the company's findings.
Bre-X has claimed Busang has an estimated 70.95 million ounces of gold worth $20 billion.
Strathcona Mineral Services Ltd., an independent mining consultant hired by Bre-X, was expected to begin analyzing its samples from independent drilling at Busang by mid-April, industry sources in Jakarta told Reuters.
""The (drilling) program should be finished by mid-April and the cores flown together to Perth (Australia) around 12 or 15 of April. Everyone is hoping for the results by the end of the month,"" one source said.
Meanwhile, Freeport said on Wednesday it would not comment on reports that its next round of Busang drilling results could be delivered to Bre-X soon.
""We just don't know what the timetable is,"" Freeport spokeswoman Kristen Lemkau said in a telephone interview.
",6
"Canadian police said on Wednesday that they laid more charges in the widening sex scandal involving young boys at Maple Leaf Gardens, the fabled home of the Toronto Maple Leafs.
Police on Wednesday filed 50 more charges of sexual abuse against Gordon Stuckless, 47, a former backstage helper at the Gardens.
Stuckless, whose bail hearing was postponed to March 27, now faces 52 charges of indecent assault, gross indecency and buggery.
Stuckless and another former Gardens' employee, John Paul Roby, allegedly lured teen-aged boys to the arena with free tickets and autographs of their hockey heroes.
Roby is currently facing 75 charges of sexual abuse.
Toronto police detective Dave Tredrea said the investigation was not over.
""If enough grounds come up and other suspects come up, then they will be charged accordingly,"" Tredrea said in a telephone interview.
Police have said the abuse took place in the back rooms of the arena, sometimes during hockey games or other events.
The sordid tale, which may involve up to 90 victims between the late 1960s and early 1990s, has grabbed newspaper headlines across the country.
The scandal surfaced after 34-year-old Martin Kruze came forward with allegations of sexual abuse. ""Maple Leaf Gardens was a sex haven of abused boys, tons of them,"" Kruze has said of the abuse he said started when he was 13.
Meanwhile, Gardens management has named a Toronto police veteran to review security at the arena.
Retired deputy police chief Walter Tyrrell has said his review will include how the company screens potential employees.
It's not the only sex abuse case to rock hockey this year.
Graham James, one of Canada's top junior coaches, pleaded guilty in January to sexually assaulting two players in the 1980s and was sentenced to 3-1/2 years in prison.
James admitted to more than 300 instances of sexual assault over six years against Boston Bruins player Sheldon Kennedy, who was 14 when the assaults began in 1984.
The revelations hit hard in a nation where it is traditional for parents of boys with pro hockey aspirations to turn their children over to the care of junior coaches, often far from home.
",6
"As mining officials the world over await test results that may solve the puzzle of an Indonesian gold deposit, reports Sunday suggested the news may be bad for Canada's Bre-X Minerals Ltd. and its controversial Busang find.
Calgary-based Bre-X is expected to release the long-awaited study by consultant Strathcona Mineral Services Ltd. before North American markets open on Monday.
But Bre-X officials on Sunday declined to comment on a report that the company will urge more tests to determine just how much gold is at Busang.
""Bre-X will argue that what's now needed is a large bulk sample from the Busang site for further testing,"" the Toronto Star newspaper quoted an unnamed Bre-X insider as saying.
""Any mining company in our position would want further testing,"" the source was quoted as saying.
A bulk sample would involve more extensive drilling, sampling and assaying of the site. Strathcona's report is based on samples from six holes drilled at Busang.
Some observers said talk of a bulk sample suggested the Strathcona report was negative for Bre-X, which has estimated Busang contains 71 million ounces of gold, potentially the richest site in the world.
""If the rumor is (Bre-X) needs a bulk sample, then that's because the small amount of sampling that has been done is disappointing,"" George Duncan, president of mining consultant Acurrassay Laboratories, said by telephone Sunday.
Duncan said Strathcona President Graham Farquharson is well regarded within the mining community and has a reputation for being conservative in his findings.
""Somebody once said he is a mine buster,"" Duncan said.
Bre-X hired Strathcona to review the project in March after doubts emerged over what has been called the gold find of the century.
Busang partner Freeport-McMoRan Copper and Gold Inc. said on March 26 that its preliminary tests found ""insignificant"" amounts of gold.
That same day, Strathcona told Bre-X the gold at Busang may have been overstated due to invalid procedures.
The announcements sparked panic selling of Bre-X shares, wiping almost C$3 billion ($2.1 billion U.S.) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around C$15 ($11).
Other analysts predicted the final word on Busang will only come after further drilling.
""This deposit is going to have to be drilled off,"" John Ing, president of Maison Placements Canada, said Sunday.
""My guess is that there is gold there, but what really made this deposit was the size and the higher grade. Presumably, the higher grade is not there,"" he said.
With billions of dollars in limbo, nervous shareholders have traded rumors for weeks on Internet chat sites.
Bre-X's stock closed up 19 cents (14 cents) at C$3.23 ($2.34) on the Toronto Stock Exchange Friday.
The TSE has set special trading rules for Bre-X shares on Monday to handle the huge volumes expected when the Strathcona report is released. Frantic trading after Freeport's announcement in March overwhelmed the TSE's computer trading system.
The Strathcona report will be closely watched by some shareholders who have launched class-action lawsuits against Bre-X and some of its key officials.
The suits charge that Bre-X executives gave inflated projections about the size of Busang's gold deposits so they could pump up the stock and sell it off for big profits.
The Ontario Securities Commission, Canada's top securities regulator, is currently probing Bre-X for possible violations of insider trading and disclosure laws.
Foreign investors are also monitoring the outcome of the Bre-X affair, which has tarnished Canada's reputation within the world mining community. Other major mining countries, particularly Australia, have criticized Canada for its lax regulation of smaller mining companies.
",6
"The fallout from the Busang gold controversy has tarnished Canada's junior mining sector and wiil scare off many investors in 1997, investment advisors said on Thursday.
But they predicted a healthier industry will emerge in early 1998 after the Bre-X Minerals Ltd meltdown has faded into history.
""The Busang bust, no matter what the outcome of the Strathcona report, has killed this particular junior resource market cycle,"" John Kaiser, editor of a financial newsletter, told a Toronto mining investment conference on Thursday.
If they have not already done so, fund managers will reduce their holdings of junior mining stocks in the wake of the Bre-X saga, said the editor of Kaiser's Bottom-Fishing Report.
""The juniors will face a funding drought that will likely last through the rest of the year. Retail investors will stick to the sidelines because they know this market cycle is over,"" he said.
But Kaiser predicted the bull market will return in 1998.
""By early 1998, the Canadian resource juniors will be ready to emerge from the bear market trough into which it is now sliding,"" he said.
Toronto-based Strathcona Mineral Services Ltd is conducting an independent audit of Bre-X's Busang project which was thrown into doubt last month.
Bre-X has heralded Busang as the gold find of the century, but preliminary tests by its partner Freeport-McMoRan Copper & Gold Inc indicated the deposit may contain ""insignificant"" amounts of gold.
The announcement prompted panic selling of Bre-X shares last month, lopping almost C$3 billion, or more than 80 percent, from the company's stock market value.
Bre-X firmed C13 cents to close at C$2.30 on the Toronto Stock Exchange on Thursday.
The Strathcona report is expected in early May.
Other investment gurus at the conference said Busang has not dealt a fatal blow to Canada's junior mining sector.
""I don't give it (the depressed market) much more that 90 days or 120 days. We'll be back in business after that,"" predicted Brian Fagan, editor of the Asian World Stock Report, a newsletter focused on the mineral exploration sector.
Last month's Busang-driven selloff in Canadian junior mining stocks has served up some bargains for investors. But they won't pay a high premium anymore.
""The companies are still good, but people are not willing to pay more for them,"" Fagan said.
James Dines, the California-based editor of The Dines Letter, admonished Canadian investors for turning sour on the gold sector as a whole.
The stampede to sell all gold stocks was just lemming like. There is nothing wrong with your gold industry. It will survive Bre-X,"" told the conference.
Kaiser predicted a more sophisticated investor will emerge when the junior mining cycle turns upward again. The Busang saga will also force analysts to take a more critical eye at junior mining companies and their projects.
""Dowm the road we will credit the Busang bust with launching a revolution in the way Canadian juniors get covered,"" Kaiser said.
",6
"Canada's top securities regulator and its biggest stock exchange said on Friday they are working on tougher rules for Canada's mining sector -- tarnished at home and abroad by the Busang gold saga.
The Ontario Securities Commission (OSC) and Toronto Stock Exchange have been under fire since news that Busang may not be the century's richest gold find, rocked the mining world.
In a joint statement, the OSC and TSE said a special task force would examine setting new standards for how companies conducted exploration programs and how the results were reported.
""We haven't concluded that (new standards are needed), but we feel it's appropriate at this stage to look at the situation,"" said OSC Chairman Jack Geller.
The TSE is also considering tightening procedures for listing new companies. Questions have been raised about the due diligence the exchange performed on Bre-X Minerals Ltd. before including it in the key TSE 300 and TSE 100 indices.
Critics say the controversy swirling around Calgary, Alberta-based Bre-X, the discoverer of Busang, has given Canada a black eye.
Bre-X has been under pressure since preliminary tests by its partner Freeport-McMoRan Copper & Gold Inc. on the Busang gold property indicated the deposit may contain ""insignificant"" amounts of gold.
The announcement prompted panic selling of Bre-X shares last month, lopping almost C$3 billion ($2.2 billion), or more than 80 percent, off the company's stock market value.
Bre-X has commissioned an independent audit of the Busang project and stood by its estimate of 70.95 million ounces of gold. While investors anxiously await the test results expected in early May, attention has turned to the personal stock trades of top Bre-X officials.
The OSC, which is probing Bre-X for possible violation of insider trading and disclosure laws, said on Friday that no Bre-X insiders reported trades last month when the stock collapsed. The Alberta Securities Commission on Friday also reported no activity by Bre-X officials in March.
As the OSC/TSE task force gets down to work with a report due in autumn, some foreign miners are already trying to distance themselves from Canada's tarred image.
In a statement issued shortly after the Bre-X selloff, U.S.-based Nevada Pacific Mining Co. Inc. said it ""wishes to advise that it has no association with any Canadian based brokerage house, investment bank, or mining analyst, no Canadian based shareholders on its share register, nor is it planning to list on any Canadian stock exchange.""
Australian mining officials said earlier this week the Bre-X situation may not have happened if Canada had adopted mining reporting standards similar to Australia's.
Canada was the only country ""dragging its feet"" in efforts to have it and the United States, Australia, South Africa and Britain adopt a uniform reporting code, Norman Miskelly, head of an Australian industry reporting standards committee, told Reuters on Tuesday.
The OSC's Geller said he doubted Australian standards would have prevented a situation like Bre-X, but acknowledged they needed improvement.
""They are somewhat out of date and they are being brought up to date,"" he said.
Geller rejected criticism that fragmentation among Canada's provinces has made it difficult to get an agreement between the country's five stock exchanges and several securities commissions. Canada has tried for several years to set up one national securities commission.
Meanwhile, the negative impact on Canada's reputation as an international mining finance center will be short, some analysts predicted on Friday.
""Certainly there will be a sting, but Canadian institutions and markets were doing well before Bre-X and they will do well after Bre-X,"" said John Ing, president of Maison Placements Canada in Toronto. ""That Australia is pointing the finger is more boosterism than anything else.""
Meanwhile, federal officials said there is no pressure for a federal inquiry into the Busang/Bre-X affair.
Canada's last major mining inquiry was a Royal Commission probe in the 1960s in which a mining promoter was jailed briefly for stock manipulation linked to worthless samples from a Northern Ontario drill site.
""There is absolutely no indication in any way that the federal government has started any investigation,"" said Dale Hull, a department of natural resources official.
",6
"The presumed death of geologist Michael de Guzman, who helped discover Indonesia's rich Busang gold site, on Wednesday shocked fellow prospectors and highlighted the dangers of their profession.
De Guzman, chief geologist for Calgary-based Bre-X Minerals Ltd, fell out of a helicopter as he was returning to the Busang mine site in Indonesia's East Kalamantan province.
Rescue crews were still searching the dense Borneo jungle for 41-year-old Filipino's body after he fell about 800 feet from the helicopter.
""It's very tragic and he will be remembered as a fine geologist,"" Bre-X Minerals chief executive David Walsh said in a telephone interview.
De Guzman was a key member of the team which discovered Busang -- the richest gold find this century -- a few years ago. Bre-X has since agreed to develop the Busang site, valued at US$25 billion, with U.S.-based Freeport-McMoRan Copper and Gold Inc and Indonesian partners.
""He (de Guzman) was a very respected geologist and well respected within the mining community,"" said Mario Steiner, president of Aerodat Inc, a geological survey company.
Bre-X's stock was halted for several hours on the Toronto Stock Exchange on Wednesday before Bre-X issued a statement.
The company's stock closed down 0.40 at 17.25 on volume of 5.2 million shares.
Bre-X senior vice-president of exploration John Felderhof, who is currently in North America, will return to Indonesia, Walsh said.
This is the latest tragedy involving Canadian mining and exploration companies in far-flung corners of the world.
In October 1995, nine employees of Saskatoon-based Cameco Corp were killed in a helicopter crash in Kyrgyzstan.
The Kyrgyzstan Air helicopter, chartered by a Cameco unit, was en route from the Kumtor gold mine when it went down.
The families of the nine Canadians killed in the crash have said they plan to file a C$20.7 million lawsuit alleging Cameco and other defendants were negligent.
Airborne surveyor Aerodat Inc has lost three aircraft since 1994, the latest in the dense eastern Amazon jungle of Peru.
In September 1996, Falconbridge Ltd chief executive Franklin Pickard died of a heart attack while visiting the company's copper site high in Chile's Andes Mountains.
""It puts you in circumstances that maybe other jobs wouldn't put you in, but the industry has very high safety standards,"" said Tony Andrews, executive director of the Prospectors and Developers Association of Canada.
""With the number of miles travelled and so on, there are bound to be accidents, but I don't think our industry is any different from others that are global in nature,"" he said.
((Reuters Toronto Bureau (416) 941-8100))
",6
"Canada's Bre-X Minerals Ltd. said on Friday it expected to receive a key report this weekend that may show just how much gold is in the controversial Busang find in Indonesia.
While the Calgary-based gold prospector said it still hoped to release the report's findings on Monday, the Toronto Stock Exchange (TSE) on Friday braced for the frenzied trading in Bre-X shares expected when the report is made public.
""We expect the report from Strathcona this weekend. We're not guaranteed that we are going to get, but we expect it,"" Bre-X spokesman Steve McAnulty said in an interview on Friday.
Bre-X hired consultant Strathcona Mineral Services Ltd. to review its Busang project after doubts emerged in March over what has been called the gold find of the century in March.
Busang partner Freeport-McMoRan Copper and Gold Inc. said on March 26 its preliminary tests found ""insignificant"" amounts of gold.
Bre-X has estimated the site contains about 71 million ounces of gold.
After Freeport's announcement, panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) from the company's stock market value.
McAnulty said Bre-X's plan to issue a news release on the report before North American financial markets opened on Monday will depend on when the company gets the report.
""As far as having something out on Monday, if we get the report in time and we're able to that, absolutely. But it's all dependent on when we get the report,"" McAnulty said.
While the mining world awaits Strathcona's findings, anxious investors on Friday placed their final bets on whether the Indonesian gold discovery is a bonanza or a bust.
""It all comes down to do they have the gold or don't they? And if so, how much? That basically are the two questions that have to be answered,"" said Ira Katzin, an investment advisor with Toronto-based borkerage RBC Dominion Securities.
Bre-X stock closed up 19 cents Canadian (14 cents) at C$3.23 ($2.34) in heavy turnover of 9.25 million shares on the TSE.
Analysts said the last flurry of trading before Monday's expected announcement was driven purely by rumors. ""Some investors are saying let's go to Las Vegas without taking a plane. That in essence is what they're doing,"" Katzin said.
Meanwhile, the TSE set special trading rules for Bre-X shares to handle the huge volumes expected next week.
Frantic trading in the days after Freeport's announcement in March overwhelmed the TSE's computer trading system, forcing embarrassed officials to shutdown the system on several occasions.
A typical active TSE stock trades up to 300 orders per day, but the highest daily order for Bre-X so far has been 5,300 orders.
To avoid another system meltdown, the TSE said on Friday brokers can only accept and enter day orders with no special terms. A day order is an order that is only valid for one trading day.
Also, orders entered by brokers that are well outside the quoted market may be canceled.
The TSE said the modified rules were necessary ""in anticipation of what could be an unprecedented number of orders following release of the ... interim report.""
",6
"The fallout from news that Bre-X Minerals Ltd.'s Busang gold discovery may be nowhere near as rich as it projected rocked the mining world and Canadian markets on Thursday, with securities regulators scrambling to investigate.
Gold shares on the Toronto Stock Exchange, Canada's biggest equities market, tumbled more than 300 points or almost 3.0 percent in frenzied trading on Thursday, dragging down the entire market.
Canadian regulators were working closely with Toronto exchange officials to unravel the biggest mining controversy in decades.
""We're working with the TSE on this matter. I don't know what will come of that. There really isn't more I can tell you,"" said a spokesman for the Ontario Securities Commission, the province's securities regulator.
While other small mining stocks were hammered, Bre-X remained halted in Toronto and on Nasdaq as huge questions loomed over its claim to have made the biggest gold discovery this century.
Bre-X, which soared to C$250 from mere pennies before a 10-for-1 stock split, last traded at C$15.50 before it was halted on Wednesday. The company was expected to issue a further news release on Thursday, the Toronto exchange said.
Several Canadian mutual fund managers planned to write down their Bre-X holdings, while market players speculated the stock could re-open below C$2.
""We have Canadian funds marking it at C$1, C$2. Two dollars is C$500 million ($365 million) in market cap -- that's still a lot of money,"" a New York arbritager said.
Calgary, Alberta-based Bre-X admitted on Wednesday that test samples from the Busang gold property on the island of Borneo may have been overstated.
The news came just one week after the mysterious death of Bre-X's chief Busang geologist, who plunged out of a helicopter into the jungle in an apparent suicide.
Bre-X Chief Executive David Walsh, who made millions from the discovery, is believed to have returned to the Bahamas where he now lives.
Walsh earlier this week complained about rumors that the find may be overstated and even threatened legal action ""against certain parties and publications.""
But he admitted on Wednesday that ""there appears to be a strong possibility that the potential gold resources on the Busang project in East Kalimantan, Indonesia have been overstated because of invalid samples and assaying of those samples.""
New Orleans-based Freeport McMoRan Copper & Gold Inc., Bre-X's partner in Busang, set off the alarm bells on Wednesday, saying that its own studies so far ""indicate insignificant amounts of gold.""
Shares in Freeport were up 50 cents to $30.125 on Thursday after sinking sharply on the New York Stock Exchange on Wednesday.
Toronto, Canada's financial capital, has been a major source of capital for small mining companies venturing abroad. Analysts predicted the Bre-X story would hurt Toronto's image and make it much harder to raise cash.
""No matter who ends up wearing the blame for Bre-X's woes...and there looks to be plenty of blame to go around...the integrity of all junior mining stocks has taken a serious hit,"" Toronto Globe and Mail columnist Andrew Willis wrote.
Bre-X earlier this year issued confirmed estimates that the Busang deposit held at least 71 million ounces of gold, worth about $20 billion at current gold prices.
At that level, Busang would be the most significant gold find since the discovery of the Witwatersrand goldfields in South Africa in the late 1800s.
Bre-X's head of exploration John Felderhof, who was recently honored at a mining conference in Toronto, asserted last month that Busang may contain up to 200 million ounces of gold.
Bre-X shares sank last week after an Indonesian newspaper report quoted unnamed sources as saying Freeport, which holds 15 per cent of Busang, had doubts about the size and viability of the deposit.
The rumors were fanned to fever pitch by the death, billed as a suicide, of Bre-X chief geologist Michael de Guzman, who fell from a helicopter en route to Busang last week.
Bre-X and its maverick chairman Walsh have been the envy of the international mining community since Walsh gambled the company's last C$10,000 ($7,280) in 1993 and struck gold in Indonesia's East Kalimantan province.
""There's nothing like success. Our other explorations have been zero. I had never imagined it would be this big,"" Walsh told Reuters in an interview last month.
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"The Busang gold mystery may be solved by late next week, Canadian gold prospector Bre-X Minerals Ltd. said on Friday, amid reports that its major partner may soon abandon the controversial project.
Bre-X said in a statement that Strathcona Mineral Services Ltd., the consulting firm hired by Bre-X to audit its Busang project, expected to issue an interim report on its findings by the end of next week.
Rumors have swirled around Busang since the century's biggest gold find was cast into doubt on March 26 when partner Freeport-McMoRan Copper and Gold Inc. said its preliminary tests found ""insignificant"" amounts of gold.
Panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) or 80 percent from the company's stock market value. Since then investors have anxiously awaited Strathcona's findings.
""Upon receiving and reviewing the interim report, Bre-X will be promptly issuing a press release relating to the interim report,"" Bre-X Chief Executive David Walsh said.
Confusion over Bre-X's announcement on Friday sparked a brief bout of heavy selling on the Toronto Stock Exchange. Bre-X sank to a session low of C$2.50, but recovered to finish down C35 cents at C$3.25 on 8.9 million shares.
Freeport's annual meeting next week was also expected to draw intense media and investor attention, analysts said.
Citing unidentified sources, Indonesia's Harian Ekonomi Neraca newspaper on Friday said Freeport was planning to pull out of Busang before Strathcona's results were released.
""At best, this way Freeport can avoid any possible (legal) suit that may arise. And this (suit) is quite possible "" the anonymous source told Neraca.
Freeport spokeswoman Kristin Lemkau said on Friday the firm had no comment beyond its earlier statements on participating in the Busang project.
""We're not going to comment. We will elect to participate only if the development is economically feasible,"" she said in a telephone interview.
Freeport's annual meeting is on Tuesday, April 29 in New Orleans.
Bre-X has a 45 percent stake in Busang, Freeport has 15 percent, the Indonesian government 10 percent and local companies the remaining 30 percent.
The Neraca report had little impact on Freeport's stock, which closed down 25 cents at $28.625 on the New York Stock Exchange. But some analysts said the report was interesting.
""My sense is there may be a kernel of truth in it,"" one U.S. mining analyst said of the Neraca report, noting other reports this week that Freeport Chief Executive Jim Moffett met with Indonesian President Suharto on a recent visit to Indonesia.
Freeport has not confirmed or denied these reports, saying it does not release specific travel plans of its officials.
The analyst also said that several days before Freeport's statement on March 26, Neraca cited unidentified sources as saying that Freeport did not get the same Busang results as Bre-X.
A Canadian analyst said Bre-X investors were divided into two camps heading into next week.
""One group thinks there is very little chance that the gold is anywhere near the amounts that Bre-X stated and the other group is firmly entrenched that this is all a grand conspiracy,"" the analyst said.
Meanwhile, Strathcona has promised tight security to prevent its findings from leaking out.
Assay labs in Indonesia, Canada and Australia will not report their results to Strathcona until all the labs have completed their work. Only one or two persons in management at each laboratory will have access to the final assays, Strathcona said.
The principal conclusions in the interim report are not expected to change when Strathcona releases its full report six weeks later.
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"Ontario Finance Minister Ernie Eves is expected to deliver more good news on the province's deficit when he delivers the 1997/98 budget next month.
Economists said on Monday a brighter fiscal picture may allow Eves to speed up implementing the second stage of a promised 30 percent income tax cut.
Eves earlier said the 1997/98 budget for the fiscal year ended March 31 will be released on May 6.
It is the ruling Conservatives' second full budget since they swept to power in Canada's most-populous province in 1995.
In February, Eves revised the 1996/97 budget deficit to C$7.67 billion, down C$508 million from his original budget forecast.
Economists said a strong economy and a C$650 million contingency reserve could lower the final 1996/97 deficit figure to around C$7 billion.
They said Eves should also better his C$6.6 billion deficit forecast for 1997/98.
""Given the strength we've seen in the economy in recent months and improved prospects for the rest of 1997. It may come in even below that (C$6 billion) level,"" said Nesbitt Burns senior economist Doug Porter.
The government's contingency reserve is used to reduce the deficit if it is not needed for unexpected spending needs.
Royal Bank of Canada economist Craig Wright said he also expected a deficit of around C$7 billion in 1996/97, falling to about C$6 billion in 1997/98.
""They have used relatively conservative economic assumptions and contingency reserves and it shouldn't be a problem hitting next year's target and maybe going lower,"" Wright said.
In his third quarter report last February, Eves said government revenues grew faster than projected due to a rebounding economy, almost C$1.2 billion higher than forecast.
He said the first stage of the government's 30 percent income tax cut had helped boost consumer confidence in Ontario. About half od the tax reduction has been implemented, with the remaining 15 percent due by 1999.
The province's improving finances has led to speculation that Eves may accelerate the timing of remaining tax cuts.
""Usually where there is smoke there is fire and they (the government) have certainly been quite forward talking about that possibility. It wouldn't be a big surprise if they did accelerate it,"" Porter said.
Wright said the government's negotiations with Ontario's municipalities on the funding of services may prevent a speedier tax cut.
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"A Canadian exploration company's claim to have made the biggest gold find this century were cast into doubt on Wednesday when its mining partner Freeport-McMoRan Copper & Gold Inc. ( ) said tests of the Indonesian deposit showed insignificant amounts of gold.
Calgary, Alberta-based Bre-X Minerals Ltd. admitted that the test samples of the deposit on the Busang gold property, deep in the jungles of Borneo, may have been overstated.
Bre-X Chief Executive David Walsh, who has made millions from the discovery and now lives in the Bahamas, said in a statement that ""there appears to be a strong possibility that the potential gold resources on the Busang project in East Kalimantan, Indonesia have been overstated because of invalid samples and assaying of those samples.""
Freeport said in a statement that analyses of its own drilling results so far ""indicate insignificant amounts of gold.""
The news caused pandemonium on the Toronto Stock Exchange, where Bre-X has been the hottest story for months. Traders said the share price, which was last quoted at C$15.50, could collapse to C$2. The stock was halted in Toronto until further notice, the exchange said.
Bre-X had issued confirmed estimates that the Busang deposit held at least 71 million ounces of gold, worth about $20 billion at current gold prices.
At that level Busang would be the most significant gold find since the discovery of the Witwatersrand goldfields in South Africa the late 1800s.
Bre-X officials had even asserted that Busang deposit could contain as much as 200 million ounces.
Bre-X shares, which had traded at an all-time high of C$28.65 after a 10-for-1 stock split, sank last week after an Indonesian newspaper report quoted unnamed sources as saying New Orleans-based Freeport, which holds 15 per cent of the Busang deposit, had doubts about the size and viability of the deposit.    The rumors were fanned to a fever pitch by the mysterious
death, billed as a suicide, of Bre-X's chief geologist Michael de Guzman, who fell to his death from a helicopter en route to the Busang site last Wednesday.
Bre-X said De Guzman was depressed because he was suffering from a serious illness.
The Bre-X board assured shareholders on Monday that it had ""absolute confidence in the integrity and accuracy of assay results and resource calculations.""
Traders have described the complex Bre-X saga as a ""soap opera"" and are wondering who or what to believe.
""I've concluded the only person who could ever make a movie out of this is Alfred Hitchcock. It's become so bizarre that people have lost any tolerance for staying in,"" Goepel Shields analyst Rick Cohen said last week.
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"Canada's Barrick Gold Corp, the world's second largest gold producer, said on Thursday Indonesia and Canada's mining sectors are innocent casualties of the Busang gold controversy.
Peter Munk, chairman of Barrick and a former bidder for Busang, said the saga of Bre-X Minerals Ltd and its Indonesian gold project has tarnished the reputations of both countries among foreign investors.
""This Busang affair. The Bre-X affair. Now more a soap opera belonging to the movies than to the boardrooms, has created an awful lot of backlash,"" Munk told the company's annual meeting in Toronto after returning to Canada from a recent business trip to Europe.
But Munk said the success of other Canadian mining companies should not be tarred by controversy swirling around one junior gold prospector.
""Our mining industry is second to none,"" Munk said. ""And no single rogue operation and no single deviant member can change these fundamentals.""
Later speaking to reporters, Munk said his ""rogue"" comment did not imply that he believed there was no gold at Busang.
Rumors have swirled around Busang since what has been called the century's biggest gold find was cast into doubt on March 26 when partner Freeport-McMoRan Copper and Gold Inc. said its preliminary due diligence tests found ""insignificant"" amounts of gold.
Bre-X, the discoverer of Busang, has estimated the site contains about 71 million ounces of gold, potentially the largest in the world.
After Freeport's announcement last month, panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) from the company's stock market value, wiping out 80 percent of its market worth. Shares in other Canadian gold miners plummeted as well.
Bre-X shares have continued to trade furiously as anxious investors await a key report due on Monday which may clear up the Busang mystery.
Bre-X has hired an independent consultant, Toronto-based Strathcona Mineral Services Ltd, to review the Busang project.
The stock closed down C44 (US32) cents at C$3.04 ($2.20) in heavy turnover of 7.1 million shares on the Toronto Stock Exchange on Thursday.
Munk, who lost a battle for control of the Busang site earlier this year, said he still had faith in Indonesia and its mining laws.
Let me tell you...that what happened in this fiasco, what happened in the publicity field is not the fault of Indonesia or Indonesian laws,"" he said.
Munk said Indonesia's economy is booming and Barrick will continue to seek gold projects in the country. He noted other major international firms, including Canadian nickel giant Inco Ltd, have operated in Indonesia for years ""within the law and protected by the law.""
Last year, Bre-X was the target of an intense bidding war as several heavyweight mining firms battled for control of the gold discovery deep in the jungles of Borneo.
Barrick initially dominated the negotiations, but it lost the inside track when President Suharto's government brought in Indonesian businessman Muhammad ""Bob"" Hasan in January.
Hasan swiftly brokered a deal giving New Orleans-based Freeport McMoRan 15 percent of Busang and the right to mine the project. The arrangement left Bre-X with 45 percent, down from an original 90 percent stake, and the rest to the Indonesian government and two Indonesian companies.
Munk said before Busang he had never expended more energy in pursuing an acquisition. But he lost interest in Busang when it became clear that Barrick could not get complete control of the project, a condition it considers critical for all its mining operations.
""You would not want us to have a billion or a billion and a half dollars in Indonesia or anywhere else -- outside of our control,"" Munk told shareholders.
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"Royal Bank of Canada said on Thursday it plans a massive share buyback to boost shareholder value and offset the dilutive impact of acquiring brokerage firm Richardson Greenshields of Canada Ltd.
Royal Bank, Canada's largest bank, said it may repurchase up to 10 percent of its 313 million outstanding common shares over the next 12 months.
The bank's stock soared C$1.05 (76 cents) to close at C$36.20 ($26.40) after earlier hitting a 52-week high of C$36.25 ($26.45) on the Toronto Stock Exchange.
Based on the current share price, the buyback is worth about C$1.1 billion ($800 million).
""Given the projections for internal capital generation going forward, we concluded that this was in the best interest of our shareholders,"" Matthew Frank, Royal Bank's manager of capital and term funding, said in a telephone interview.
Royal Bank recently surpassed the C$1 billion ($729 million) mark in net profit for the first nine months of fiscal 1996, putting it on track for a third straight year of record earnings.
It is the third major Canadian bank to announce a huge share buyback in the past year.
In July, Toronto-Dominion Bank, the country's fifth-largest bank, said it will repurchase up to 10 percent of its common shares, valued at C$720 million ($525 million).
Canadian Imperial Bank of Commerce, Canada's second-biggest bank, announced plans to buy back about 5 percent of its shares last November.
""I think it's possible that you will get additional buybacks,"" an industry analyst said, noting that all six major banks have posted record results this year.
Royal Bank said the share plan will offset any dilution arising from the bank's proposed C$480 million ($350 million) acquisition of Toronto-based Richardson Greenshields which is to close Nov. 1.
The bank is offering Richardson Greenshields shareholders up to C$240 million ($175 million) in cash with the balance payable in shares exchangeable for Royal Bank common shares.
Analysts said the share repurchase will more than offset the dilutive effect of the brokerage deal.
""It's a bit more than they need, but I guess if you're sitting on capital why not get a little more bang for your buck,"" another banking analyst said.
The big buyback will not affect the bank's future acquisition strategy, bank officials said.
Royal Bank, which listed its shares on the New York Stock Exchange last year, has said it is interested in a U.S. acquisition, but at the right price.
Last month, the bank was mentioned in U.S. media reports as a potential bidder for U.S. mutual and pension-fund manager Columbia Management Co.
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"Shares in Canadian gold prospector Bre-X Minerals Ltd. resumed trading on Wednesday, but massive trading volumes again overwhelmed a creaky computer system on the Toronto Stock Exchange.
Bre-X's stock fell C65 cents to C$3.20 on the TSE on Wednesday before it was stopped in late morning due to heavy order volumes and ""technical difficulties,"" the exchange said.
Despite an abbreviated trading session, Bre-X dominated the market with turnover of 11.7 million shares.
The stock was halted all day on Monday and resumed trading in Toronto for 22 minutes on Tuesday before it collapsed the 20-year-old computer trading system and was halted.
""This is brutal. They are not going to come away untarnished as an exchange,"" one trader said.
Shares in the Calgary, Alberta-based firm have traded for just two hours on Canada's biggest equity market since investors lopped almost C$3 billion ($2.19 billion) off Bre-X's market value last Thursday.
Bre-X has been under heavy fire since last week when its partner in Indonesia, Freeport-McMoRan Copper & Gold Inc. , revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up ""insignificant"" amounts of gold and ""visual differences"" from Bre-X's gold samples.
While the TSE experienced more computer headaches, Bre-X stock continued trading on Nasdaq and the Montreal and Alberta exchanges on Wednesday.
Bre-X closed down 19 cents at $2.315 on 9.4 million shares on Nasdaq. In Montreal, the stock fell C35 cents to C$3.15 on 6.2 million shares.
Analysts predicted more volatility. ""All I see happening in the market right now is the battle lines have been drawn between the believers and non-believers and the salting and non-salting crowd. At the end of the day we'll have to see if its zero or the moonshot,"" Merrill Lynch analyst David Christensen said.
Bre-X Chief Executive David Walsh has insisted tampering with core samples was impossible and an independent audit would prove the company's findings.
Bre-X has claimed Busang has an estimated 70.95 million ounces of gold worth $20 billion.
Strathcona Mineral Services Ltd., an independent mining consultant hired by Bre-X, was expected to begin analyzing its samples from independent drilling at Busang by mid-April, industry sources in Jakarta told Reuters.
""The (drilling) program should be finished by mid-April and the cores flown together to Perth (Australia) around 12 or 15 of April. Everyone is hoping for the results by the end of the month,"" one source said.
Meanwhile, Freeport said on Wednesday it would not comment on reports that its next round of Busang drilling results could be delivered to Bre-X soon.
""We just don't know what the timetable is,"" Freeport spokeswoman Kristen Lemkau said in a telephone interview.
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